TMI Tax Updates - e-Newsletter
May 6, 2016

Case Laws in this Newsletter:

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

TMI SMS

• A person making the payment cannot be saddled with TDS liability just because he did not approach the tax authorities u/s 195(2)

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• Finance Bill, 2016 has been passed by the Loksabha today (5-5-2016) with several amendments to the existing Clauses plus 3 new Clauses added

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News

1. Amendments to the Finance Bill, 2016 as moved by the Hon'ble Finance Minister Mr. Arun Jaitly - Loksabha Passed the Finance Bill, 2016 as on 05-05-2016

2. In order to bring about certainty and predictability regarding taxability of income arising from transfer of shares, CBDT gives directions to its field formations that the income arising from transfer of unlisted shares, irrespective of period of holding, would be taxable under the head ‘Capital Gain’ except in certain circumstances.

3. Jaitley warns of action against tax evasion

4. President of India confers Niryat Shree and Niryat Bandhu Awards at the Golden Jubilee celebrations of FIEO

5. Government takes strict action against defaulting/non performing tax officials/officers; For the First Time, 33 officials/officers including 7 Group ‘A’ officers prematurely retired for non-performance and 72 officers/officials including 6 Group ‘A’ Officers dismissed in other departmental / disciplinary actions in the last two years

6. As part of ease of doing business and reduction of Transaction Cost of the exporters, the Government decides to do away with the Landing Certificates required under Merchandise Export from India Scheme (MEIS) with effect from 4th May, 2015

7. Rejoinder to factually incorrect information circulated in the Social Media regarding the WTO Ministerial Conference held in Nairobi in December 2015

8. FM: Notwithstanding the global headwinds, India continues to maintain a high growth rate at 7.65 in 2015-16 compared to 7.2% in the previous year; Government is following the approach of ‘Reform to Transform’ through far-reaching structural reforms and has initiated several initiatives to boost investment climate and improve Ease of doing Business

9. RBI Reference Rate for US $

10. Memorandum of Understanding between Reserve Bank of India and Central Bank of United Arab Emirates on co-operation concerning currency swap agreement

Notifications

Companies Law

1. F. No. 3/516/2015-CL.II - dated 29-4-2016 - Co. Law

Central Government satisfied the delegates powers to appoint Inspectors for inspection of books and papers of a company

Customs

2. 64/2016 - dated 5-5-2016 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 06th May, 2016

3. 63/2016 - dated 4-5-2016 - Cus (NT)

Appoints the Commissioner of Customs, Raigad (Maharashtra)

4. 62/2016 - dated 4-5-2016 - Cus (NT)

Appoints the Commissioner of Customs, Raigad (Maharashtra)

5. 61/2016 - dated 4-5-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

FEMA

6. 363/2016-RB - dated 28-4-2016 - FEMA

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

SEZ

7. S.O. 1590(E) - dated 22-4-2016 - SEZ

Inclusion of new members in CSEZ Authority – Amendment in Notification Number S.O. 111 (E) dated 9th January, 2014

Circulars / Instructions / Orders

FEMA

1. 67/2015-16 [(1)/5(R)] - dated 5-5-2016

Foreign Exchange Management (Deposit) Regulations, 2016

DGFT

2. 7/2015-2020 - dated 4-5-2016

Services Exports from India Scheme (SEIS) –Appendix 3E notified

3. 6/2015-2020 - dated 4-5-2016

Merchandise Exports from India Scheme (MEIS)—Amendments in Table 2 [containing ITC (HS) code wise list of products with reward rates] of Appendix 3B

Customs

4. 15/2016 - dated 3-5-2016

Instructions on monitoring of pendency in disbursal of rewards to informers

Highlights / Catch Notes

Income Tax

• Donation to BJP Deemed Business Expense, Not Violating Section 37(2B) of Income Tax Act, and Allowable for Tax Purposes.

  Case-Laws - AT : Donation to Bharatiya Janata Party - The assessee has not given any advertisement in souvenir of the political party therefore not hit by the provisions of section 37(2B) - expenditure was incurred wholly and exclusively for the purpose of business and was not in personal nature, hence allowable - AT
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• Charitable Trusts Can Claim Depreciation on Capital Assets for Income Calculation u/s 11 of Income Tax Act.

  Case-Laws - AT : Depreciation to assessee trust - Depreciation is allowable on capital assets on the income of the charitable trust for determining the quantum of funds which have to be applied for the purpose of trusts in terms of section 11 - AT
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• Lump-sum lease charges contested; lease rentals recognized over term. Accounting method upheld, no tax avoidance found.

  Case-Laws - AT : Addition on account of lump-sum lease charges received - lease transaction does not give an absolute ownership or title as it can be cancelled and re-entered - assessee has been consistently following the accounting policy of recognizing the lease rental proportionate to the lease period and therefore the consistent accounting method followed by the assessee for a considerable long time cannot be disturbed when there is nothing on record to suggest that the accounting method followed by the assessee resulted avoidance of tax - addition deleted - AT
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• Transfer Pricing Adjustment: 0.5% Arm's Length Price Set for Notional Guarantee Commission to Associated Enterprises.

  Case-Laws - AT : Transfer pricing adjustment towards notional guarantee commission chargeable for the guarantee extended to its associated enterprises - commission chargeable for guarantee commission by the assessee to its associated enterprises should be taken at 0.5 per cent. as the arm's length price - AT
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• Reopening of Tax Assessment Invalidated Due to Mechanically Issued Notice u/s 148.

  Case-Laws - AT : Reopening of assessment - AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi - reopening is bad in law and deserves to be quashed. - AT
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• Disallowed Sum u/s 40A(7) Cannot Be Disallowed Again u/s 43B; Deemed Unjustified and Untenable.

  Case-Laws - AT : A sum which has already been disallowed u/s 40A(7) and as such any further disallowance u/s 43B is absolutely unjustified and untenable - AT
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• ESOP Market Value Difference Allowable as Revenue Expenditure u/s 37(1); No TDS Required on Expenditure.

  Case-Laws - AT : Amount of difference between the market value of the shares issue under ESOP allotted to the employees debited to the profit and loss account in accordance to SEBI guidelines is an ascertain liability and allowable as revenue expenditure u/s 37(1) - No TDS on such expenditure - AT
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• Non-Resident Assessee's Income from Indian Resellers Not Taxable Due to Lack of Permanent Establishment in India.

  Case-Laws - AT : Payment received from resellers in India for acquisition of computer software - Assessee who is a non resident does not have a permanent establishment and therefore business income of the Assessee cannot be taxed in India in the absence of a permanent establishment - AT
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• Double Taxation Avoidance Agreement Overrides Income-tax Act for Taxpayer Benefit.

  Case-Laws - AT : Provisions made under the DTAA will prevail over the general provision contained in the Income-tax Act to the extent that they are beneficial to the assessee - AT
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• India-Singapore DTAA: No Withholding Tax on 'Group Cost Recharge' as No Technical Services Under Article 12.

  Case-Laws - AT : TDS u/s 195 - remittance towards ‘group cost recharge’ to its associated enterprise(AE) in Singapore - impugned services rendered for which the payment was collected by Singapore entity through cost recharge mechanism is not assessable as ‘fee for technical services’ under Article 12 of India – Singapore DTAA when it does not ‘make available’ any technical knowledge, skill, experience, etc. - no legal obligation to deduct withholding tax on the impugned remittance - AT
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• Trust Can Claim Depreciation on Assets for Charitable Purposes; Section 32 of Income Tax Act Not Applicable.

  Case-Laws - AT : Allowance of depreciation to assessee trust - When the asset was used as tool for carrying out the object of the charitable institution, such activity cannot be construed as a business or profession of the assessee. Therefore, Section 32 is not applicable in this case - AT
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• Court Reviews Disallowance of Cash Payments u/s 40A(3); Assessee Argues Double Taxation and Business Necessity.

  Case-Laws - AT : Disallowance of cash payments u/s 40A(3) - making additions by invoking the provisions of section 40A(3) of the Act amounts to double additions which is not permissible under the law. There exists a business expediency in making the cash payments towards purchase of goods. The assessee was obliged to make the cash payments required by the suppliers - AT
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• Taxpayer Cannot Contest DCIT Jurisdiction Post-Assessment; Objections Must Be Raised During Process.

  Case-Laws - AT : Jurisdiction of DCIT - not only DCIT had the necessary jurisdiction to do an assessment on the assessee, but assessee by virtue of not objecting to such jurisdiction before the DCIT during the course of assessment cannot now turn back and say that the said officer was not having the necessary jurisdiction to assess it - AT
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• TDS u/s 195: Liability Arises Only If Income Recipient Has Tax Obligation; Payer Not Liable for Non-Consultation.

  Case-Laws - AT : TDS u/s 195 - applicability of TDS - incidence of tax unless the recipient of income has a tax liability in respect of such payments, the person making the payment cannot be saddled with the tax deduction liability just because he did not approach the tax authorities u/s 195(2) - AT
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• Registered Sale Deed Takes Precedence Over Notarized Agreement for Capital Gains Assessment Timing.

  Case-Laws - AT : Capital gain computation - year of assessment - no weightage can be given to a notarized agreement to sell executed between the parties in preference to registered sale deed executed by the assessee before registrar wherein it is stated that the possession is given along with the sale deed executed on that date - AT
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• Depreciation Disallowed for Primavera Software: Not Considered Part of Manufacturing Machinery, Used for Project Review by Management.

  Case-Laws - AT : Depreciation on software - “primavera” is not actually installed within any manufacturing machinery and is a web based tool for top management for review etc. and planner/scheduler. It is a tool like any other office equipment which helps assessee’s top management to manage project in a better way. It is not part of plant and machinery which is used in the process of manufacturing - Additional depreciation disallowed - AT
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• Hoarding Expenses Classified as Revenue Expenditure, Allowing Tax Deduction Benefits for Businesses.

  Case-Laws - AT : Allowance of hoarding expenses - capital expenditure or revenue expenditure - deduction on account of hoarding expenditure being in the nature of revenue expenditure allowed - AT
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• Advertising Hoarding Structures Classified as "Building" for Tax Depreciation: Eligible for 10% Rate.

  Case-Laws - AT : Depreciation on advertising hoarding structures - treated as permanent structures embedded in the building having foundation being erected and constructed by the assessee firm are in-fact ‘Building’ and the assessee firm is entitled for depreciation @ 10% - AT
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• Shrink Wrap Software Sale Not Taxed as Royalty; No Permanent Establishment in India Means No Tax.

  Case-Laws - AT : Income from sale of shrink wrap software - consideration received by the Assessee for software was not royalty. The receipts would constitute business receipts in the hands of the Assessee - Assessee cannot be taxed in India in the absence of a permanent establishment - AT
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• PMS Expenses Not Deductible from Full Value of Consideration on Sale of Securities u/s 48.

  Case-Laws - AT : PMS expenses paid to portfolio managers being management expenses incurred with respect to securities / funds of the assessee being managed by portfolio managers are not allowable as deduction u/s 48 from the full value of consideration on sale of securities received or accruing to the assessee - AT
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• Interest Liability for Non-Deduction of TDS Starts from April 1 if Tax Deductible u/s 192(3.

  Case-Laws - AT : Levy of interest under sec. 201(1A) - non deduction of tds u/s 192 - Liability to interest arises only, when such tax was deductible u/s 192(3) and not u/s 192(1) - interest u/s 201(1A) is payable from the 1st day of April of the subsequent year - AT
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• Profits Classified as Short-Term Capital Gains, Not Business Income, by Commissioner of Income Tax (Appeals) Decision.

  Case-Laws - AT : Short term capital gains OR business income - no transaction carried out in more than ½ of the relevant previous year - CIT(A) rightly treated assessee’s profits as short term capital gain and not business income - AT
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Customs

• High Court: Filing a Supreme Court review petition doesn't nullify current decision. Effective immediately.

  Case-Laws - HC : Mere filing a review petition before the SC cannot be held that the decision rendered are not valid as on date - HC
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• Penalties on firm owner deemed unwarranted; authority delegated to Manager. Owner potentially unaware of Manager's actions.

  Case-Laws - AT : Levy of penalty - The proprietor of the firm had given a Letter of Authority to the Manager to look after the day-to-day affairs. Therefore the penalties imposed on the proprietor seems to be unwarranted as he may have been kept in dark by the Manager and the same is liable to be set aside. - AT
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DGFT

• Indian Rupee payments for specific services qualify as Deemed Foreign Exchange under RBI guidelines, per FTP 2015-20 Para 3.08(c).

  Circulars : List of services where payment has been received in Indian Rupees which can be treated as receipt in Deemed Foreign Exchange as per guidelines of Reserve Bank of India in terms of Para 3.08(c) of FTP 2015-20 notified
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Bill

• Finance Bill 2016 Passed with Amendments to Key Clauses; New Clauses Introduced and Renumbering Implemented.

  News : Finance Bill, 2016 has been passed by the Loksabha today (5-5-2016) with several amendments to the Clauses 3, 7, 16, 19, 41, 43, 46, 49, 50, 52, 53, 60, 66, 81, 86, 96, 97, 112, 192, 218 and 219 - Three new Clauses as 29A, 47A and 106A added to the Finnace Bill, 2016, and accordingly clauses will be renumbered.
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Service Tax

• Section 11B Limitation Not Applicable to CENVAT Credit Refunds; Refund Denial on Limitation Basis Invalid.

  Case-Laws - AT : Period of limitation u/s 11B does not apply to refund of accumulated cenvat credit and therefore bar of limitation cannot be a ground to reject refund of cenvat credit to the assessee - AT
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Central Excise

• Court Extends Deadline for Deposit Due to Substantial Compliance and Legal Justification Under the Act.

  Case-Laws - HC : Relaxation in time for deposit of the amount is well deserving and also within the powers available under the Act, when there is substantial compliance of this court's order - HC
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VAT

• Authorities Can Seize Unsatisfactory Goods from Vehicles, Store Them, But Must Release Vehicle Afterward.

  Case-Laws - HC : Once the goods are found unsatisfactory in any vehicle, the authority may seize the goods after detaining the vehicle and such goods may be kept by the authority at any place where it is permissible, but the vehicle is required to be released thereafter - HC
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• GVAT Act Section 69: Penalty Up to 1.5x Tax for Vehicle Driver or Person in Charge for Breach.

  Case-Laws - HC : For breach of the provisions of section 69 of the GVAT Act, action can only be taken under that section whereby the concerned officer is empowered to levy penalty not exceeding one and one half times the tax as may be determined, against the driver or person in-charge of the vehicle - HC
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Case Laws:

• Income Tax

• 2016 (5) TMI 170
  Disallowance u/s.14A - Held that:- No infirmity in the order of CIT(A) for excluding the strategic investment made in the joint venture business projects while computing disallowance under rule 8D(ii).- Decided in favour of assessee Disallowance u/s.37(2B) - donation to Bharatiya Janata Party - Held that:- The assessee has not given any advertisement in souvenir of the political party therefore not hit by the provisions of section 37(2B). Since the expenditure was incurred wholly and exclusively for the purpose of business and was not in personal nature, there was no justification for disallowing the same. Accordingly, we confirm the order of CIT(A) on this issue. - Decided in favour of assessee Disallowance of interest - CIT(A) allowed the claim - Held that:- none of the borrowed funds have been utilized for giving interest free loans to either blood relative or friends. Whatever advances have been given were out of own capital. This fact is verifiable from the enclosed balance sheet of the assessee. The finding of fact recorded by CIT(A) are as per material on record, therefore, does not require any interference on our part. Accordingly, we confirm the action of the CIT(A) following the decision of jurisdictional High Court in the case of Reliance Utilities Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] - Decided in favour of assessee Adhoc disallowance on telephone expenses, vehicle expenses etc. - Held that:- We have considered rival contentions and found that personal element in such expenses cannot be ruled out. Therefore, keeping in view the totality of facts and circumstances of the case, we restrict the disallowance to the extent of 10% of such expenses. - Decided in favour of assessee partly Addition on account of alleged non-genuine purchases of the assessee - Held that:- All the materials were supplied at the site of the execution of work, payment of which were made by account payee cheque. We also found that when the work was being executed the site has been visited by the engineers of BMC to check the progress and validity of the work. The MCGM is also having its own inhouse vigilance department to check the quantity and quality of the work done. Only after satisfying with the quantity and quality of work done, the payment was made by the assessee, therefore, it cannot be said that assessee has not purchased the goods, because without purchase, it was not possible to execute work allotted. From the record we also found that assessee has appointed project manger for each site. As per the terms of the contract, assessee has to erect a readymade site office of for MCGM staff before commencing of the work and the has to set up a laboratory before commencing of work, for which quality control engineer has to be appointed. The assessee had also sent samples of all the materials received at site to municipal staff laboratory under sub engineers signature. The CIT(A) has dealt with great detail of the statement dated 2-5-2012 as recorded by the AO and reply filed by the concerned parties. After recording detailed finding the CIT(A) has applied the proposition of law laid down by various High Courts and came to the conclusion that assessee’s actual purchase of material by the assessee and disallowing the same was not justified. The detailed finding recorded by CIT(A) are as per material on record, which has not been controverted by ld. DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the finding recorded by CIT(A) resulting into deletion of addition on account of purchases. - Decided in favour of assessee

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• 2016 (5) TMI 169
  Payment received from resellers in India for acquisition of computer software - whether are royalty in nature and hence chargeable to tax in India @ 15% as per Double Taxation Avoidance Agreement between India and USA ? - Held that:- Having noted that there is no material difference in the facts of the case for this year vis-à-vis the facts of the immediately preceding assessment year discussed above, respectfully following the views of the coordinate benches, we uphold the grievance of the assessee. It is, therefore, held that the receipts on account of receipts for software are not exigible to tax in India. The consideration received by the Assessee for software was not royalty. The receipts would constitute business receipts in the hands of the Assessee. Admittedly the Assessee who is a non resident does not have a permanent establishment and therefore business income of the Assessee cannot be taxed in India in the absence of a permanent establishment. The Assessing Officer is, therefore, directed to delete the impugned addition - Decided in favour of assessee

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• 2016 (5) TMI 168
  Exemption under Section 11 - disallowance of claim as the assessee is hit by the proviso to Section 2(15) rws 13(8) - Held that:- We find that there is no change in the facts for the year under consideration as well as it was for the Assessment Year 2009-10. Accordingly, we hold that the provisions of proviso to Section 2(15) of the Act are not applicable in the case of the assessee. Though the assessee has contended that the surplus is arising only from the interest income and other income in the nature of penalty and other charges and not from the activity of acquisition of land and providing the infrastructure facilities for industrial development however, since the authorities below have not examined the issue from the point of the application of income in terms of Section 11 of the Act. Therefore, we direct the Assessing Officer to verify whether the assessee satisfies the provisions of section 11 so far as the application of income is concerned for availing the exemption under Section 11 of the Act. Addition on account of lump-sum lease charges received - Held that:- Assessing Officer did not accept the contention of the assessee and observed that the lease is for a long period which amounts to transfer of the land to the allottee and therefore the entire lump-sum lease rental received by the assessee during the year was considered as revenue receipt of the assessee. It is pertinent to note that the land allotted on lease is not a outright sale giving absolute title and ownership to the allottee. Only when a conveyance deed is executed on payment of unearned premium and until and unless the land is converted into freehold by executing a conveyance deed after payment of unearned premium the allottee gets absolute legal title of ownership of the land. The lease transaction does not give an absolute ownership or title as it can be cancelled and re-entered. Further the assessee has been consistently following the accounting policy of recognizing the lease rental proportionate to the lease period and therefore the consistent accounting method followed by the assessee for a considerable long time cannot be disturbed when there is nothing on record to suggest that the accounting method followed by the assessee resulted avoidance of tax. Accordingly, we set aside the orders of the authorities below qua this issue and delete the additions made by the Assessing Officer. - Decided in favour of assessee Disallowance of depreciation to assessee trust - Held that:- Depreciation is allowable on capital assets on the income of the charitable trust for determining the quantum of funds which have to be applied for the purpose of trusts in terms of section 11 of the Act. See DCIT Vs. Jyothi Charitable Trust [2015 (7) TMI 859 - ITAT BANGALORE] - Decided in favour of assessee

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• 2016 (5) TMI 167
  TDS u/s 195 - remittance towards ‘group cost recharge’ to its associated enterprise(AE) in Singapore was liable to TDS withholding tax - ‘make available’ - provisions made under the DTAA prevaling over the general provision contained in the Income-tax Act - Held that:- The impugned services rendered by INCAT group companies for which the payment was collected by Singapore entity through cost recharge mechanism is not assessable as ‘fee for technical services’ under Article 12 of India – Singapore DTAA when it does not ‘make available’ any technical knowledge, skill, experience, etc. To fit into terminology ‘make available’, the technical knowledge, skill, etc. must remain with the person receiving the services even after the particular contract comes to an end. The technical managerial services etc. offered may be the product of technology and technical knowledge, experience of the service provider would have gone into it but this is not enough to fall within the description of services which ‘make available’ to technical knowledge, etc.. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver of service so that the receiver can deploy the similar technology or techniques in future without depending upon the provider. Therefore, the assessee stands exonerated from its obligation to deduct withholding tax in view of non-application of Article 12 of the beneficial provisions of DTAA. The Hon’ble Supreme Court in the case of Union of India vs. Azadi Bachao Andolan (2003 (10) TMI 5 - SUPREME Court) relied upon by the assessee has upheld the proposition that the provisions made under the DTAA will prevail over the general provision contained in the Income-tax Act to the extent that they are beneficial to the assessee. We also refer to section 90(2) which provides that the provisions of DTAA would override the provisions of Domestic Act in cases where the provisions of DTAA are more beneficial to the assessee. Therefore, we find that the assessee was not under any legal obligation to deduct withholding tax on the impugned remittance. Therefore, we decline to interfere with the order of the CIT(A) and dismiss the appeal of the Revenue. - Decided in favour of assessee

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• 2016 (5) TMI 166
  Transfer pricing adjustment on account of notional interest on the loans and advances given to the associated enterprises - Held that:- We find that this issue had come for consideration before the Tribunal in the assessment years 2007-08 and 2008-09. The Tribunal had taken note of the fact that the assessee had also received loans/advances on which the assessee did not pay interest. For verification the matter was set aside to the Assessing Officer. Following the same reasoning, we also set aside the matter to the file of the Assessing Officer with a direction to decide this issue on similar lines Transfer pricing adjustment towards notional guarantee commission chargeable for the guarantee extended to its associated enterprises - Held that:- We find that this issue is permeating through in all the years. This fact has been noted by the Tribunal in its order for the assessment year 2008- 09, vide paragraphs 28 to 31, wherein after referring the Tribunal order in the assessee's own case right from the assessment years 2005-06 to 2007- 08, held that commission chargeable for guarantee commission by the assessee to its associated enterprises should be taken at 0.5 per cent. as the arm's length price. Thus, respectfully following the judicial precedence which is based on the same facts applicable in this year also, we direct the Assessing Officer to take 0.5 per cent. as guarantee commission to be chargeable from associated enterprise in computing the arm's length price. Disallowance under section 40(a)(ia) - Held that:- The payee has furnished the return of income under section 139 and has taken into account such sum for computing the income in such return of income and has paid taxes then, the assessee cannot be treated as assessee-in-default within the meaning of section 201(1) and, accordingly, the assessee shall be deemed to have deducted the tax and, accordingly, no disallowance under section 40(a)(ia) can be made. Such a provision has been brought in the statute to curb the mischief and, therefore, it has to be reckoned as curative in nature and should be given retrospective effect. Accordingly, the Assessing Officer is directed to clarify this issue and grant the relief to the assessee. On the second contention also, we agree with the learned counsel that if the assessee has not claimed any such as an expenditure, then there is no question of disallowance under section 40(a)(ia), the Assessing Officer shall also verify this contention and if it is found that no such expenditure has been debited then there is no question of any disallowance under this section. Disallowance under section 14A read with rule 8D - Held that:- There is no dispute that all the investments have been made in the subsidiary company as the strategic investment so as to get controlling interest in such subsidiaries. The investment was not made for earning of any dividend income. Besides this, the dividend income itself is 7,24,508, therefore, disallowance under section 14A cannot be more than the exempt income especially in view of the decision of the hon'ble Delhi High Court in the case of Cheminvest Ltd. v. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] wherein, the hon'ble High Court has held that, if there is no dividend income, then there cannot be any corresponding disallowance. On the same principle, if the dividend income is 7.24 lakhs, then the disallowance cannot be more than that. Accordingly, we hold that such a huge disallowance of 2,21,51,600 is uncalled for and therefore, we direct the Assessing Officer to restrict the disallowance to 7,24,508. - Decided partly in favour of assessee in part

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• 2016 (5) TMI 165
  Disallowance of depreciation to assessee trust - Held that:- In view of Section 11(4) & (4A) of the Act, if the property held under trust is a business undertaking, then the income of the business undertaking, which was so held as property held under trust, has to be computed by applying the provisions of Income-tax Act under Chapter IV. While computing income of the business undertaking, all expenditure, including depreciation, has to be allowed and the income of such business undertaking which was held under Trust has to be allowed as exemption under Section 11 on application and accumulation. In this case, as rightly submitted by the Ld. D.R., no business undertaking was held under trust as provided under Section 11(4) & (4A) of the Act. The assessee is claiming depreciation in respect of asset which was used as tool for carrying out charitable object of the institution. When the asset was used as tool for carrying out the object of the charitable institution, such activity cannot be construed as a business or profession of the assessee. Therefore, Section 32 of the Act is not applicable in this case. - Decided against assessee.

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• 2016 (5) TMI 164
  Addition u/s 68 - A.O. made additions solely on the ground that the trade creditors are not confirmed the transactions - Held that:- No addition can be made on trade creditors, when purchase has been accepted as genuine. The CIT(A) after considering the relevant details filed by the assessee has rightly deleted the additions made by the Assessing Officer. We do not find any error or infirmity in the order passed by the CIT(A). Hence, we inclined to uphold the order passed by the CIT(A) and reject the ground raised by the revenue. - Decided in favour of assessee Disallowance of cash payments u/s 40A(3) - Held that:- Assessing Officer has no reason to disallow cash payments by invoking the provisions of section 40A(3) of the Act, when he has not doubted the genuineness of the purchases. The assessee has made the cash payment against purchases. The assessee has reported the purchases and the Assessing Officer has accepted such purchases and computed the profit as per the financial statement filed by assessee. Under these circumstances, we are of the opinion that making additions by invoking the provisions of section 40A(3) of the Act amounts to double additions which is not permissible under the law. There exists a business expediency in making the cash payments towards purchase of goods. The assessee was obliged to make the cash payments required by the suppliers. Therefore, no disallowance can be made towards cash payments by invoking the provisions of section 40A(3) of the Act. The CIT(A) rightly deleted the additions. We do not see any error or infirmity in the order passed by the CIT(A). - Decided in favour of assessee

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• 2016 (5) TMI 163
  Reopening of assessment - reasons to believe - basis of information allegedly received by him from the Directorate of Income Tax (Investigation) - Held that:- After going through the reasons recorded by the Assessing Officer/DCIT, Circle 14(2), New Delhi for reopening and the approval thereof by the Ld. Addl. CIT, Range-14, New Delhi, we are of the view that AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Even otherwise, a perusal of the above demonstrates that the Addl. CIT has written “Yes, I am Satisfied” which establishes that he has not recorded proper satisfaction / approval, before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. - Decided in favour of assessee.

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• 2016 (5) TMI 162
  Jurisdiction of DCIT, Circle -1, Udupi, to assess the assessee - Held that:- There is no case for the assessee that DCIT was exercising jurisdiction over Udupi, without a direction or order issued under sub-sections (1) or (2) of Section 120. Assessee had never raised any objection before the DCIT during the course of assessment proceedings. In such a situation we are of the opinion that not only DCIT had the necessary jurisdiction to do an assessment on the assessee, but assessee by virtue of not objecting to such jurisdiction before the DCIT during the course of assessment cannot now turn back and say that the said officer was not having the necessary jurisdiction to assess it Addition u/s 68 - Held that:- Assessee has also filed affidavit of Shri. Shravan Nayak which say that he had requested Shri. Praveen Bhaskar Shetty to give the above money to the assessee on his behalf. But as mentioned by the Ld. DR why the assessee opted for a circuitous route for getting money from Shri. Shravan Nayak who was brother of one of the partners of the assessee, is something which require deep analysis. As mentioned by the Ld. AR it could be for a reason that Shri. Shravan Nayak was not readily having money with him for giving the loans. In any case what we find is that the AO had not examined Shri. Shravan Nayak nor Shri. Praveen Bhaskar Shetty. Though we cannot say that assessee had discharged its full onus with regard to the credits, it is a matter of fact that it had filed copies of bank accounts of Shri. Praveen Bhaskar Shetty and also affidavits of Shri. Praveen Bhaskar Shetty as well as Shri. Shravan Nayak. In such circumstances, we are of the opinion that the matter equires a fresh look by the AO. We set aside the orders of the lower authorities and remit the addition in so far as it relates to credit of 2 lakhs on 25.07.2008 and credit of 3 lakhs on 26.07.2008 and credit of 12 lakhs on 27.09.2008 back to the file of AO for consideration afresh in accordance with law Disallowance of interest - Held that:- Despite opportunities given by the AO and CIT (A) assessee was unable to show the business purpose of loans. Even before us Ld. AR was not able to produce any records which would show that the loans were for commercially expedient reasons. We therefore have no hesitation to uphold the disallowance made. Disallowane of ‘car expenses’ - Held that:- Disallowance was made for a reason that assessee could not produce any evidence for expenditure claimed. Even before us nothing was brought to show that the expenditure claimed was supported by any evidence. Hence we cannot find any fault with the AO disallowing 1/5th of the total claim. Disallowance u/s.40(a)(ia) - Held that:- Section 40(a)(ia) of the Act, could not have been applied only for a reason that there was short deduction of TDS. Only addition on professional fees totalling 2,60,000/- for Asbuilt drawings, on which no deduction of tax at source was made confirmed

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• 2016 (5) TMI 161
  Disallowance under section 40A(2)(b) - Held that:- There is categorical finding by the CIT(A) that the assessee and Walt Disney India are no covered by the definition of ‘specified person’ under section 40A(2)(b). Not only these two entities, i.e. the assessee and Walt Disney India, have no shareholdings in each other, directors of none of these companies hold any shares in any of these companies. There is no question of the requirement of holding at least 20% of normal dividend earning shares in the companies in which substantial interest can be said to have been held. These two companies are owned by different shareholders- while 100 % shareholding in the assessee company is held by Walt Disney Co (Southeast Asia) Pte Ltd Singapore, 99.99% of shares in Walt Disney India are held by a USA based company by the name of Disney Enterprises Inc, USA. The requirements of Section 40A(2)(b) is not fulfilled. TDS u/s 195 - applicability of TDS - incidence of tax - Held that:- Assessing Officer has not even disputed that the amounts paid by the assessee resulted in a taxable income in the hands of the recipient, but he has justified the disallowance on the ground that earlier the assessee was deducting tax at source from such payments and that the assessee did not obtain certificate under section 195(2). As for tax deductions at past, it is wholly irrelevant in examining legal obligations of the assessee. What is material is whether the assessee had the obligation to deduct tax at source or not, and unless the assessee had the obligations to do so, his actions as a measure of abundant caution in the past would not put him under obligation to do so in future as well. There is no estoppel against the statute. As for the question of approaching the tax authorities under section 195(2), the law is now well settled by Hon’ble Supreme Court in the case of GE India Information Technology Centre Pvt Ltd Vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA ] which holds that unless the recipient of income has a tax liability in respect of such payments, the person making the payment cannot be saddled with the tax deduction liability just because he did not approach the tax authorities under section 195(2). The grievances raised by the Assessing Officer are thus devoid of any legally sustainable merits. Disallowance with respect to distribution costs - CIT(A) delted the disallowance - Held that:- Learned CIT(A) rightly holds, in his well reasoned and speaking order, the mere fact of wrong characterization does not imply that no services were rendered by the respective vendors. The error committed by the assessee’s staff was of no consequences so far as deductibility of these amounts were concerned. The invoices have been wrongly characterized in the heads is more of a procedural mistake rather than a legally sustainable reason for resorting to disallowance of the expenses concerned Disallowance on account of non reconciliation of ITS details - Held that:- We are of the considered view that the matter is required to be remitted to the file of the Assessing Officer for adjudication de novo by way of a speaking order and in accordance with the law. The nature of ITS detail, which is not reflected in the books of the assessee, needs to be set out and the assessee be asked to explain the particular entries which are not so reflected in the books of accounts. The non reconciliation of ITS detail can only be a starting point of exploring the matter further with respect to making the additions in respect of the revenues which are not accounted for but just because there is some reconciliation difference, the amount of difference cannot be added to income of the assessee. In any event, these inputs are to be dealt with on merits of each input and the explanation of the assessee is to be taken into account for that purpose. Keeping in view these discussions, as also bearing in mind entirety of the case, the matter stands restored to the file of the Assessing Officer on this point. Disallowance of entire dubbing cost - Assessing Officer has virtually treated it as a deferred revenue expenditure by amortizing it over the period of licence of that program - ‘matching principle of income and expenditure’ - Held that:- While the argument of the learned counsel that there is no concept of deferred revenue expenditure, and, as such, once an expenditure is revenue expenditure, it should be allowed in the year in which the expense is incurred, does indeed seem very attractive at the first blush, it may not hold good in the present case. It is a case in which entire useful period, during which the assessee will reap the fruits for investment in the dubbing costs, is known at the point of time when expenses are incurred. The period for which the assessee holds the licence to use the program is known with precision. The benefit of dubbing the program will be available at least for this period. Period over which the benefits will be enjoyed by the assessee is clearly established. The dubbing costs should indeed be, therefore, amortized over this period. In this view of the matter, we see no infirmity in the stand of the authorities below. We confirm the order of the CIT(A) on this point and decline to interfere in the matter.

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• 2016 (5) TMI 160
  Capital gain computation - year of assessment - Held that:- In view of contradictory agreements/documents executed by assessee himself it would be always preferred to give credence to the document that has been submitted before the land revenue authorities. In this case, before land revenue authorities sale deed is executed where assessee has confirmed that possession of the property is given at the time of execution of sale deed. The other agreement which is agreement to sell, which is not registered with any statutory authority, but only between buyer and sellers which is notarized does not give any credence to the transaction entered by the assessee. Further, before the assessing officer and Commissioner (A) , it was never controverted by the assessee that why on the reverse of page 1 of the sale agreement fact of agreement without giving possession to the buyer is mentioned. In view of this facts, we confirm the order of CIT (A)’s and hold that the no weightage can be given to a notarized agreement to sell executed between the parties on 14th may 2007 in preference to registered sale deed executed by the assessee before registrar wherein it is stated that the possession is given along with the sale deed executed on that date. In view of this, we are of the view the capital gain is required to be assessed in assessment year 2009 – 10, and there is no error in the order of assessing officer as well as Commissioner of income tax (A). Cost of acquisition - Held that:- We could not find any ground taken by the assessee regarding adoption of the cost of acquisition and thereby determining the fair market value of the property on 1-4-1981. On reading order of the assessing officer, also we could not find any objection before the assessing officer on adoption of such rate. It is undisputedly concurrently before the lower authorities, the assessee has accepted the price, which has been determined by the assessing officer. However, rates adopted by the assessing officer of 70 per square yard did not have any basis. Similarly, the valuation report relied upon by the assessee of some other property belonging to somebody else cannot also be accepted. Therefore, in the interest of Justice We set aside this ground of appeal to the file of the assessing officer to determine a fresh the fair market value of the property as on 01/04/1981. That assessee may be granted proper opportunity of hearing and producing evidence-supporting value as fair market value of the asset as on 01/04/1981

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• 2016 (5) TMI 159
  Revision u/s 263 - taxability of incentive/subsidy - whether the assessee was entitled for deduction of sales tax subsidy as capital receipt and Assessing Officer had rightly allowed? - Held that:- Facts on record do not inspire credence with the angle that the Assessing Officer has conducted a proper inquiry before accepting the claim of assessee. It gives an impression that some piecemeal facts were placed on record, which have neither been considered and nor came to the notice of the Assessing Officer. In any case, it is not discernible that the Assessing Officer had applied his mind analytically and logically and thereafter he took one of the possible view. We further hold that CIT in his elaborate, lucid and eloquent order has pointed out vital flaws in the orders of assessment and has observed that there was no application of mind during the assessment proceedings on the issue of taxability of sales tax exemption. We entirely agree with the discussion in the order of the learned CIT. The Commissioner has not decided the issue on merit. He has remitted it to the file of the Assessing Officer for a fresh inquiry. In view of the above discussion, we do not deal into the arguments of merit in respect of claim of the assessee with the observation that same shall dealt in the appeal arising against the consequent assessment and thus, the grounds raised challenging the action u/s 263 of the Act on the issue of sales tax exemption/subsidy are dismissed. Difference under the head provision for “gratuity” between outstanding as per balance sheet and audit report - Held that:- Assessment order was erroneous and prejudicial to the interest of revenue in respect of omission to make an admitted disallowance of 88 lacs on account of provision for gratuity u/s 40A(7) read with section 43B of the Act. Thus action u/s 263 revising an order of assessment is held to be in accordance with law. Claim of additional deprecation on computer software - Held that:- It is held that here too there was no enquiry on the part of the AO in respect of claim of additional depreciation and therefore the CIT was justified to conclude that AO failed to carry out necessary and proper enquiry in respect of claim made by the appellant company. Even before us the learned counsel for the assessee has not placed on record any evidence in the shape of reply so as to show and establish that the issue was duly examined by the Assessing officer. The reply dated 12.7.2010 before the AO as highlighted, is a general reply and does not in any manner show that necessary and proper enquiries were made viz-a-viz the claim of the appellant. Mere disclosure in the return of income or the financial statements above does not show or demonstrate that there was due application of mind by the AO. On the contrary complete explanation alongwith invoices had been placed on record for the first time during the revision proceedings and not in the assessment proceeding and thus the assessment order is both erroneous and prejudicial to interest of revenue. Hence, even on this issue the claim of the appellant is not maintainable. Addition of sale tax subsidy - held to be trading receipt as against capital receipt claimed by the appellant company - Held that:- It is pertinent to state here that that prior to the year under consideration, the assessee used to treat the Central Sales Tax exemption amount as part of trading receipt in its books of accounts and for the purpose of computing income as per income tax, the assessee used to reduce the amount of CST exemption amount along-with Entry Tax and Electricity Duty exemption amount out of the income of the company at the stage of computation of profit and gains of the business treating the same as capital receipt not taxable but in the year under consideration, the assessee company changed the treatment of benefit of Central Sales Tax (CST) exemption in books of account. Thus rather than reducing such benefit from the profit and gain of the business, the assessee at the end of the previous year transferred the amount of sales tax benefit from the sales account to reserve and surplus account, holding the same as capital receipt not taxable. In the notes to account to the Annual Report, the assessee stated that this new treatment was to meet the compliance of Accounting Standard (AS-12) prescribed for Government Grants. But in respect of similar benefit of Entry tax exemption (Rs.17,28,48,148/-) and electricity duty exemption (Rs. 31,10,88,789/-) the Accounting Standard (AS-12) was not followed and those amount were reduced out of the profit and gain of business at the stage of computation of income only. In the year under consideration, total amount of both exemptions of the Entry Tax and the Electricity Duty of 48,39,36,937/- was reduced out of profit of the business at the stage of computation of income by the assessee, Thus we hold that the change in treatment alone cannot be a ground to contend that a sum otherwise taxable as income is not taxable or is a capital receipt and therefore following the aforesaid orders of the Tribunal in the case of assessee itself (supra), we sustain the addition made by the Assessing Officer and confirmed by the CIT(A) and grounds raised by the assessee are dismissed. Disallowance of additional depreciation claimed in respect of computer software ‘Primavera' - Held that:- It is apparent that installation of computers in the office cannot be made a basis to deny the claim of deprecation provided such office can on facts be taken as an “industrial premises” for the purpose of depreciation. In the instant case the finding of fact recorded both by CIT(A) and AO is that “primavera” is not actually installed within any manufacturing machinery and is a web based tool for top management for review etc. and planner/scheduler. It is a tool like any other office equipment which helps assessee’s top management to manage project in a better way. It is not part of plant and machinery which is used in the process of manufacturing. Having regard to the above we do not find any merit in the claim of assessee and hence the grounds of the assessee are dismissed. Addition on account of provision for gratuity - Held that:- From the facts mentioned above, we find that the sum of 1,37,41,850/- disallowed by the AO under section43B of the Act consist of two items. The first is the disallowance of Rs, 88,00,001/- admitted by the assessee as gratuity amount transferred to general reserve and was not offered in the return of income or in the original assessment under section 143 (3) of the Act. The 2nd item is a provision of gratuity of 49,41,850/-. So far as sum of 49,41,850/- is concerned the same has already been disallowed u/s 40A(7) of the Act by the assessee and as such any further disallowance u/s 43B of the Act is absolutely unjustified and untenable. Accordingly, the disallowance made of 49,41,850/- is thus deleted and grounds raised are allowed.

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• 2016 (5) TMI 158
  Grant of Depreciation on advertising hoarding structures - treated as‘Plant’ or ‘Building’ - Held that:- These hoarding structures which are permanent structures embedded in the building having foundation, which were constructed and erected by the assessee firm do not satisfy functional test and it cannot be said that these hoarding structures are tools or apparatus with which the assessee firm is carrying on the business rather these hoarding structures are building simplicitor which are constructed and erected by the assessee firm and which has been given for advertisement by the assessee firm to Creation Publicity Private Limited who in turn has given these hoarding structures to the entities for putting their advertisements on these hoarding structures. Thus, it cannot be said that these hoarding structures play any operative role as apparatus or tool in the carrying of the trade by the assessee firm or in the functioning of the assessee firm’s business but rather these hoarding structures constructed and erected by the assessee firm are building simplicitor constructed and erected for entities to put their advertisements and erected by the assessee firm for entities to put their advertisment. Thus, functional test also is not satisfied in the case of these hoarding structures and it cannot be treated as ‘Plant’ and are merely a ‘Building’ constructed and erected by the assessee firm which are given on commercial terms and conditions for ultimate user as a space by the entities who are desirous of putting their advertisement of products and / or services on these hoarding structures.Thus, in our considered view, these advertising hoarding structures which are permanent structures embedded in the building having foundation being erected and constructed by the assessee firm are in-fact ‘Building’ and the assessee firm is entitled for depreciation @ 10% Claim of interest by the assessee firm - Held that:- We have observed that the assessee firm has borrowed funds which were utilized for the purpose of its business. The assessee has made turnover of 54.23 lacs which was with respect to transactions with M/s Creations Publicity P. Ltd., assessee’s group concern and this is the only sale made by the assessee firm during the assessment year . The assessee firm stated that the said sale has been made based on commercial expediency. Thus we allow the claim of interest expenditure of the assessee company which was disallowed by the CIT(A) Allowance of hoarding expenses - treated as capital expenditure or revenue expenditure - Held that:- The assessee firm has undertaken repairs of the hoarding structures with respect to the existing structure. We find that the issue has already been decided in favour of the tax-payer by the co-ordinate Bench of this Tribunal in the case of Empress Advertising being sister concern of the assessee firm on identical facts and issue’s in the appeal to held the assessee is entitled to deduction on account of hoarding expenditure being in the nature of revenue expenditure.

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• 2016 (5) TMI 157
  Transfer pricing adjustment - Held that:- Appeal is allowed with a direction that overseas associated enterprises are accepted as ‘tested party’ being the least complex of the transacting entity for the year for comparability analysis of international Transactions of the assessee- appellant. As we have already decided the first step of comparability analysis in ground no 2.2 of the appeal we set aside othergrounds no. 2 to 7 except 2.2 to the file of TPO to compute ALP of the international transactions accordingly. Needless to say that ld. TPO/ AO shall give due weightage to the Advance pricing agreement signed by the assessee with CBDT on other issues also ( other than the issue of ‘ selection of tested Party’) for determination of ALP and in case of any divergent view, the assessee shall be granted an adequate opportunity to substantiate any claim/ arguments on the manner of determination of ALP. Disallowance being deferred employees compensation debited to the profit and loss account pursuant to company’s Employees’Stock Option Scheme - Held that:- The issue is now squarely covered in favour of the assesse by the decision of Honourable Madras high court in CIT Vs. PVP Ventures (2012 (7) TMI 696 - MADRAS HIGH COURT ) ,where in it is held that amount of difference between the market value of the shares issue under ESOP allotted to the employees debited to the profit and loss account in accordance to SEBI guidelines is an ascertain liability and allowable as revenue expenditure u/s 37(1) of the Act. Ld. AO has further held that even otherwise this deduction is hit by provision of section 40a (ia) of the act and as no tax is deducted on this payment it is disallowable. No such provision for deduction of tax at sources on this expenditure has been brought to our notice. Therefore we hold that provisions of section 40a(ia) does not apply to ‘payment of salaries’ for the year under appeal. Hence, this argument of the revenue is also rejected. - Decided in favour of assessee Disallowance of deduction of contribution to Ranbaxy Community Healthcare Society and Ranbaxy Science Foundation u/s 35/ 37 - Held that:- We reverse the decision of the AO and direct to delete the disallowance of 47 lacs and 1250000/- of contribution made by appellant to Ranbaxy Community Healthcare Society and Ranbaxy Science Foundation. Furthermore regarding failure to deduct tax on this sum, Ld. DR. could not point out particular section, which warrants deduction of tax at sources on this payment. Therefore, we also hold that in absence of specific section under which the tax is required to be deducted on such contribution without their being any service rendered by the recipient of the contribution disallowance u/s 40a(ia) also cannot be made. Disallowance u/s 14A by applying the formula prescribed under Rule 8D - Held that:- No disallowance over and above what is admitted by the assessee can be made. - Decided in favour of assessee Upward adjustment while computing the book profit u/s 115JB - AO has imputed the addition u/s 115JB of the Act as disallowance computed u/s 14A read with Rule 8D of the Income Tax Rule 1962 - Held that:- As we have already deleted the disallowance as per ground No.10 of the appeal wherein we have held that the amount of disallowance cannot be worked out by ld. AO without recording satisfaction on examination of books about the correctness of disallowance made by the assesse which in this case has been made by assessee of 3311708/-. We have also held that disallowance cannot exceed the amount of exempt income. Hence, now no disallowance survives u/s 14A of the act so far as normal computation of total incomeof the appellant. The AO has added to the book profit amount of expense disallowed u/s.14A applying rule 8D of the Income tax act. As per our considered view, no addition u/s.115JB is warranted for amount of disallowance u/s.14A of the IT Act. Disallowance of deduction u/s 80IB and 80IC - Held that:- As the deduction with respect to Goa Plant u/s 80IB which is in the 7th year of its claim out of 10 years, has earned eligible profit of 300682774/- and deduction thereon is claimed at the rate of 30% thereof amounting to 90204832/- and New Tablet Plant-I u/s 80IC for which this is the 4th year of the claim and assesse has claimed 100% of the eligible profit amounting to 220579510/- as deduction, cannot be disallowed in this year. Coming to the second argument that the revenue should follow the consistency and where position has been accepted and determined by the department after examination of the facts and where there is no change either in the facts or in law than the earlier decision taken by the revenue should be adhered to. Ld. DR did not point out any changes in the facts and/or law in the year in which deductions granted in earlier years with respect to impugned year. We have carefully considered the argument of the ld. AR and we do not see any dispute on the principle of consistency as it has already been propounded by Hon’ble Supreme Court and various other Hon’ble High Courts. Therefore, following this principal also we are of the view that deduction for the year claimed by the assesse with respect to itsGoa Unit and New Tablet Plant-I cannot be disturbed on the principle of consistency also. Further, this argument cannot be taken shelter regarding the claim of the assesse for New Tablet Plant-II, SGC Plant and New Tablet Plant-III. It is to be noted in present era of technological evolution that old age notions of the maintenance of accounts and business records do not survive and business entity today survives on real time information on each aspect of its business process. In this era when an entity maintains its accounting and business records on Enterprise Resource Planning system, which is a standard procedure or program to optimize all business processes including Sales, Logistics, Production, Quality, Finance of an entity and SAP is a name of software product and it's a company name too which a leading provider of these solutions, it is rather incorrect to say that separate books of accounts are not maintained by the assessee. Evidence led before ld. AO in the form of profit and loss accounts, before ld. DRP in the form of the profit and loss account and complete balance sheets of the undertaking, before ‘accountant’ who certified the deduction of the units, its balance sheet and profit and loss accounts and before us all these records are attached in the form of paper book which are quoted by us above. In view of such overwhelming evidence, we reject contention of ld. AO and Ld. DRP that assessee has not maintained separate books of accounts. We hold that assessee has maintainedseparate books of accounts from which correct profit can be deduced at any time of the each of the eligible undertaking. Coming to the computation of the eligible income of the assessee for all the eligible units, Ld. AO could not point out any error except dealt with by us which are not on the issue of facts of the case but all of them are on legal grounds, which we have answered in preceding paragraphs of this order. In view of claim of the assessee supported by the audited certificate as provide u/s 80 IA (7) of the act read with rule 18 BBB and supported by the profit and loss account and balance sheets of the assesse, allocation of all the expenses based on the accepted formula which the assessee is applying for last several years and which has also not been disputed by the ld. AO in past years and allocation key of ‘sales’ of the units is also not disputed, it deserves to be accepted. We are also of the view that allocation of the expenses are on rational basis and accepted by revenue in earlier years with respect to eligible units claiming deduction for those years. Therefore, along with the old units i.e. Goa Plant and new tablet plant –I of the assessee along with the new tablet plant No –II and III and new SCG plant deduction u/s 80 IB and 80 IC is allowable as computed by the assessee. Non adjudicating the claim of deduction u/s 35(2AB) of the Act on the cost of the assets provided to the employees working in approved R and if they are on capital account related to acquisition of asset then to grant depreciation thereon in accordance with the provisions of law. In case if this expenditure is found to be of revenue,nature then allows the same u/s 37(1) of the Act. Adjustment made u/s 115JB to the book profit by 9853213/- on account of provision for diminution in value of current investment return back - Held that:- We fully agree with the submission of ld. AR that when the provision was made in the last year which was added back to the book profit of that assesse for that year and when the same provision is reversed in the current year the amount of reversal which is credited to the book profit for this year cannot be taxed once again as it results into double taxation. In the result, we direct the AO to reduce the book profit u/s 115JB of the Act by the amount of reversal of the provision of 98.53 lacs, which was out of provision made of 23.9 crores added to the book profit in AY 2007-08.

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• 2016 (5) TMI 156
  Income from sale of shrink wrap software - taxability in India - nature of royalty under the provisions of Section 9(1)(vi) as well as article 12(3) of the Double Taxation Avoidance Agreement between India and USA - Held that:- Following the view expressed by the Hon'ble Delhi High Court in the case of DIT Vs. Ericsson AB, New Delhi (2011 (12) TMI 91 - Delhi High Court ), which is favourable to the Assessee, we hold that the consideration received by the Assessee for software was not royalty. The receipts would constitute business receipts in the hands of the Assessee. Admittedly the Assessee who is a non resident does not have a permanent establishment and therefore business income of the Assessee cannot be taxed in India in the absence of a permanent establishment. - Decided in favour of assessee

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• 2016 (5) TMI 155
  Disallowance of an amount being Management Expenses incurred for earning Short term capital gain - Held that:- PMS expenses paid to portfolio managers being management expenses incurred with respect to securities / funds of the assessee being managed by portfolio managers, being disallowed by the AO and confirmed by the CIT(A), are not allowable as deduction u/s 48 of the Act from the full value of consideration on sale of securities received or accruing to the assessee. - Decided against assessee.

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• 2016 (5) TMI 154
  Levy of interest under sec. 201(1A) - non deduction of tds u/s 192 - period of computation of interest - Held that:- A simple reading of sec. 192(1) makes it clear that it specified the manner and rates at which tax shall be deducted. Sub sec. (3) of sec. 192 provides for adjustment of excess or deficiency within the financial year, not only in the cases of short deduction and also for failure to deduct during the financial year. The object and purpose of Sub section (3) is to permit the deductor to adjust the short or excess deduction in the financial year. Therefore, sub sec. (3) abundantly makes it clear that if failure to deduct tax, the same can be deducted by way of adjustment during the financial year. Similarly, section 201(1A) provides for computation of income from the date it was deductible to the date of such deduction or payment as the case may be. A conjoint reading of sec. 192(1) and 192(3) along with section 201(1A) makes it clear that liability to interest arises only, when such tax was deductible as per sub sec. (3) of section 192 and not as per sub sec. (1) of sec. 192 of the Act. Therefore, we are of the opinion that, interest u/s 201(1A) is payable from the 1st day of April of subsequent year. - Decided against the revenue.

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• 2016 (5) TMI 153
  Short term capital gains OR business income - Held that:- The assessee has always valued its investments at cost price and not market price. Its short term capital gains read the impugned sums of 2,59,43,473/- comprising a sum of 2,95,48,114/- from a single scrip namely M/s. Reliance Natural Resources Ltd. purchased on 5th April, 10th May, 23rd May and 2nd July 2007 (this last day involves three transactions). This followed sale of the scrip involving all shares on 04-03-2008. The same makes it clear that the assessee’s holding period of these shares ranging from 8 to 11 months during which not even a single share was sold. If we exclude this scrip, what is left is net result of loss of 36 lacs approximately. We confronted the Revenue with all this factual evidence. It fails to controvert the lower appellate authorities’ findings that the assessee has always been treating its shares and mutual funds in question as investments by maintaining a separate account accepted for the last many years. This is not the Revenue’s case that assessee has been engaged in any intra-day sale/purchase transactions. We repeat that assessee has carried out 85 purchase transactions and 67 sale transactions during the relevant previous year. Meaning thereby that there is no transaction carried out in more than ½ of the relevant previous year. We conclude in these peculiar facts and circumstances that the CIT(A) has rightly treated assessee’s profits of 2,59,43,473/- a short term capital gain and not business income. - Decided against revenue

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• 2016 (5) TMI 152
  Disallowance of prior period expenses - Held that:- According to the assessee, it has recognized the contract receipts in the F.Y.2005-06, but could not realize the total receipts, and therefore, in the Asstt.Year 2008-09 i.e. F.Y.2007-08, he has reduced the sales. Had he claimed bad debts, there could not be any problem to the AO. In our opinion, instead of strictly going by the accounting treatment given by the assessee in the books, the ld.AO ought to have visualized the transaction itself and if a sale was recognized by the assessee and accounted in the books, on the basis of which, the total income was computed, but actually he failed to realize those sales, then, the unrealized amounts will be bad debt to the assessee or a business loss. That could be claimed by the assessee in subsequent period. The ld.AO has construed the transaction in different manner, as if assessee has claimed deduction of expenditure. In that context he made reference to the confirmation from ESSAR. He ought to have reconciled the contract receipt accounted by assessee on accrual basis and ultimately realized. It account has The ld.CIT(A) has considered this issue with this angle and deleted the disallowance. We do not find any error in the order of the ld.CIT(A) - Decided against revenue Disallowance of labour expenses - CIT(A) restricted it to 2% instead of 10% made by the AO - Held that:- has nowhere alleged the specific information which has disabled him to deduce the true income from the contract receipts of the assessee. What was the angle he wanted to inquire from the labourers ? The assessee has alleged that name, date of payment, site, designation of the workers i.e. carpenters, plumber, electrician etc. were disclosed to the AO. In spite of that, the AO simply disallowed 10% of the expenditure by observing that details were not submitted. The challenge of the assessee is which detail was not submitted to the AO. Before the ld.CIT(A) he had reiterated his contentions in the written submission. The ld.CIT(A), though concurred with the AO with regard to the submissions of the details, but scaled down the disallowance to 2% on adhoc basis. He made reference to his order in the Asstt.Year 2007-08 also. No doubt in the Asstt.Year 2007-08, the Tribunal has restored this disallowance to 10%, but reasons for such restoration was that no details were submitted by the assessee. It was an ex parte order. Had the assessee challenged the order of the ld.CIT(A), probably this 2% would have not remained there in this assessment year, because, in our understanding the AO has not made a case for adhoc disallowance at 10%. In view of the above discussion, we do not find any merit in these grounds of appeal.- Decided against revenue Non payment of employees’ contribution to the PF account within the time stipulated under the PF Act - AO has disallowed the claim - CIT(A) has deleted the disallowance - Held that:- This issue is squarely covered against the assessee by the decision of the Hon’ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation Ltd. [2014 (1) TMI 502 - GUJARAT HIGH COURT ] - Decided in favour of revenue

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• 2016 (5) TMI 151
  Depreciation on goodwill - Held that:- The issue whether goodwill is an capital asset coming within the term intangible asset as provided u/s. 32(1)(ii) of the Act is no more res integra in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT ), wherein after interpreting the explanation (3) to section 32(1) held that “goodwill would fall under the expression any other business or commercial right of a similar nature” and, hence has to be considered as a asset under Explanation (3b) to section 32(1). If we examine the facts of the case with reference to the terms of business transfer agreement it is to be seen that the net current asset value of Studio 18 at the time of sale as per the balance sheet was 2,36,64,152/- The value of fixed asset is 1,07,36,157/-. Thus, the balance amount of 69,53,343/- out of the total consideration paid by the assessee of 4,13,56,352/- is obviously on account of goodwill. Even accepting that such amount is a balancing figure but still it being in the nature of goodwill, the assessee is eligible to claim depreciation. Further it is also in accordance with the accepted accounting principle and Accounting Standard as brought on record by the learned counsel for the assessee. Even otherwise such balancing figure is on account of goodwill. - Decided in favour of assessee. Allowance of distribution expenses - non-deduction of tax u/s. 40(a)(i) - Held that:- On a perusal of the order passed by the co-ordinate Bench for A.Y. 2006-07 it is seen that as far as distribution expenses are concerned, at the time of hearing before the Tribunal the assessee made a specific claim that either they have to be allowed in A.Y. 2006-07 or in A.Y. 2008-09. Considering such claim of the assessee, the Tribunal remitted the matter back to the file of the AO for deciding assessee’s claim afresh by considering additional evidence brought on record. The learned counsel for the assessee had submitted before us that the amount claimed towards distribution expenses which are subject matter of ground nos. 2 2,75,75,739/-. In our view, this is not a valid ground to disallow part of the expenditure when the issue has been decided in favour of the assessee by the decision of the Hon’ble Jurisdictional High Court. It is mandatory principle of judicial discipline to accept the view of the Hon’ble Jurisdictional High Court, which is of binding nature. Accordingly, we do not find any infirmity in the order of the learned CIT(A) in allowing the assessee’s claim. - Decided in favour of assessee.

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• 2016 (5) TMI 150
  Addition u/s 68 - Held that:- After considering the necessary vouchers, confirmation of accounts, bank statements, we are of the opinion that addition made by the AO and confirmed by the CIT(A) is not justified. The AO without making any enquiry and exercising its power vested under the law, simply treated the sales as not genuine and bogus and added to the income effecting into treating the said sum of sales twice to income account once as sales and secondly as other income. Sales was already treated as income by the assessee company and again treating the said sum as income was not correct in facts and circumstances of the case. It is observed that the sale of 43,74,210/- has been made to M/s. Asia Trading. The details of payment by cheques, bank a/c. Address, etc. were already furnished to the AO by the assessee. In the facts and circumstances of the case, we are of the view that the addition made by the AO and confirmed by the CIT(A) is improper and unjustified - Decided in favour of assessee Disallowance of general charges - For non-production of proper bills and vouchers, the AO disallowed @20% of expenses - Held that:- It is observed that no defect whatsoever was pointed out by the Assessing Officer in the vouchers produced by the assessee in support of its claim disallowed by him merely on the ground that the vouchers produced by the assessee were only self made vouchers. Keeping in view the nature of the business of the assessee as well as the nature of general expenses incurred during the course of business , we are of the view that the claim of the assessee on account of general expenses, which were duly supported by selfmade vouchers as well as other details, ought to have been examined properly and there was no justification on the part of the authorities below to make a disallowance on account of general expenses incurred during the course of business without pointing out any material or specific defect in the self-made vouchers and other details produced by the assessee in support of its claim. - Decided in favour of assessee

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• 2016 (5) TMI 149
  Restrictions on transfer of immovable property - benefit of scheme called "Kar Vivad Samadhan Scheme, 1998" - immunity certificate in favour of the vendor towards full and final settlement of tax arrears - Held that:- A reply was sent by the vendor as well as the purchasers stating that each of the sale deed was executed in respect of the one-sixth of undivided share of the property for a consideration of 9,00,000. When the property purchased under each of the sale deed is 9 lakhs and it is less than 10 lakhs, they are not having any legal obligation to submit form 37-I of the Act. Conveniently, the Department has not taken any action on the basis of the reply submitted by the vendor as well as the purchasers to the show-cause notices issued by the Department till a certificate was issued to the vendor under the scheme. After eight months from the date of issuing the immunity certificate, prosecution came to be launched against the vendor and the purchasers. Therefore, it is very clear that the declaration, which has been filed by the vendor was in connection with and inclusive of the complaint complained in the show-cause notice, which emanated in the assessment proceedings, subsequent to the raid. When once the vendor submitted her application under the scheme and availed of the benefits thereof, including obtaining an immunity certificate, it also includes the violation which has been complained in the show-cause notice relating the the provisions contained under section 269UC of the Act. While so, is it not now open for the Department, at this stage, to say that the declaration is only pursuant to the order of assessment or payment of tax component and it does not form part of the declaration in so far as it relates to the violation under section 269UC of the Act. This court, in the writ petition filed by the vendor, has issued direction to the trial court to consider whether the immunity already granted to the vendor under the scheme was the subject matter of the complaint on its file or not. On such direction, the trial court rightly concluded that the immunity granted to the vendor covers the past transaction relating to the sale made by her which was the subject matter of the complaint before it. Further, this court once again directed the trial court by the order in the Criminal Original Petition once again directed the lower court to consider the petition filed by the respondents herein and to pass orders. Taking into consideration such direction issued by this court, the trial court passed the order under the direction and authority of this court. In any event, the trial court has rightly considered the issue as to whether the declaration also includes the proceedings contemplated under sections 269UC and 276AB of the Act and held in the affirmative. No reason to interfere with such well-considered order passed by the trial court.

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• 2016 (5) TMI 148
  Penalty u/s 271(1)(c) - additions made on account of Long Term Capital Gain - Assessing Officer has held that the assessee has failed to established the genuineness of the cost of acquisition adopted by him and claimed of unexplained transfer fees and thereby suppress the Long Term Capital - Held that:- The assessee filed the return for the A.Y. 1994-95 on 24.07.1995 declaring total income of 1,50,200/-. When the survey action u/s. 133A of the Act was taken at the residence of the assessee then it came into notice that the assessee received the sum of 1.36 crores on sale of flat which he had not offered for taxation in the A.Y.1994- 95 except this an amount of 2.13 crores was also found in his three bank accounts. Apparently the sale transaction of the sale of flat of the assessee was not offered as tax on Long Term Capital Gain / Short Term Capital Gain if any in the relevant assessment year. After the survey assessee offered the capital gain to the tune of 77,55,636/- on account of sale proceed received by him at 19,37,250/- in respect of residential flat. It is correct that if the case of assessee is based upon only on the facts that the demand of the valuation report can be treated levy the penalty. But in this case the facts are otherwise. It is clear case of concealment of particulars of his income received on account of above mentioned flat and furnishing inaccurate particulars by not disclosing the transaction in his return filed on 24.07.1995 declaring his total income to the tune of 1,50,200/-. Transaction was came in to the notice after the survey report. In view of the said circumstances we are of the view that it is not the case of assessment by the Assessing Officer on the basis of valuation report or market rate infact it is the case of concealment of particulars of his income and furnishing inaccurate his particulars. - Decided against assessee

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• 2016 (5) TMI 147
  Settlement commission - Validity of Sections 245 HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961, as amended by Finance Act, 2007 challenged - Time limits were set for completion of a particular stage of the proceedings - Held that:- In view of the law laid down in Union of India v. Star Television News Ltd. [2015 (4) TMI 19 - SUPREME COURT ] wherein held that the conclusion arrived at by the high court that fixing the cutoff date as 31st March, 2008 was arbitrary the provisions of Section 245HA(1)(iv) to that extent will be also arbitrary. Also held that it is possible to read down the provisions of Section 245HA(1)(iv) in the manner set out earlier. This recourse has been taken in order to avoid holding the provisions as unconstitutional, in our opinion this matter deserves to be remanded to the High Court. In the facts and circumstances of the case, the impugned order is set aside and the appeal is allowed. The matter is remanded to the High Court for a fresh decision on its merits in accordance with law.

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• 2016 (5) TMI 146
  Registration u/s. 12A denied - whether the activities carried out by the assessee are in nature of business ? - Held that:- The applicant-society’s main activity is to provide education in the field of welding which fully complies to the charitable purposes as per section 2(15) because poor and indigent people are allowed to participate in the course, training programmes free of cost for acquiring the skill and getting the employment indirectly improving their living standard; the school drop outs and youth or rural area below poverty line get free training in welding to bring them in the main stream of their life; special programme for disadvantaged women for their own livelihood for welder training. As per the Rules & Regulations of the society the main source of the Society is membership fee, donations, royalties, government grants, savings from conferences, workshops, seminar course fees and sale of publication etc. The income and property of the Society, however, derived, shall be applied towards the promotion of the objects subject nevertheless in respect of the expenditures of grants or donations made with any specific conditions as may be imposed from the donors. No portion of the income and property of the society shall be paid or transferred, directly or indirectly, by way of dividends, bonus or otherwise or by way of profits to any persons who at any time are or have been members of the society or to any of them or to any persons claiming through them or any of them provided that nothing herein contained shall prevent the payment in good faith of remuneration to any members or other persons in return for any services rendered to the Institute. In our opinion, the Society is doing its activities as per its aims and objectives and working for a good cause and not earning any profit. Thus the registration u/s. 12A granted to the Applicant forthwith. - Decided in favour of assessee

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• 2016 (5) TMI 145
  Transfer pricing adjustment - most appropriate method - Held that:- A purchaser of goods or of services is not concerned with the price at which its vendor of goods or supplier of services in turn acquired the same. This, at the highest, would be a factor while negotiating the purchase of goods or the acquisition of services. Even if the vendor or supplier acquired the assets or the know-how as a gift, it would be irrelevant as far as the onward sale thereof is concerned. The purchaser determines the price it is willing to pay for the goods or services independent of what the same cost its vendor/service provider. The TPO, therefore, proceeded on an entirely erroneous basis while computing the arm’s length price. We have with respect disagreed partly with the approach adopted and the legal principles applied by the authorities while computing the arm’s length price. We have also disagreed with Mrs. Suri’s contention that the TNM method ought to be applied to the various transactions merely because each of them aided and resulted in the manufacture of the assessee’s final product. It is not possible to assess the weightage given to each of these questions by the authorities while determining the arm’s length price. There is nothing on record that indicates the same. It is not necessary that each aspect would have been given the same weightage. Further, this would be so not merely in computing the quantum but also the very question as to whether the services were rendered by the AEs and availed of by the assessee. These are issues of fact which must, in the first instance at least, be determined by the authorities under the Act. As we are remanding the matter, it is not necessary to deal with the voluminous evidence produced and relied upon by the assessee. The authorities have come to the conclusion that the same did not reflect that any valuable services were in fact rendered. As we are remanding the matter, we do not wish to make any observation in this regard, least it prejudices either of the parties while considering the matter upon remand. Suffice it to state that the assessee has relied upon voluminous evidence which cannot be ignored. The same must be considered and analyzed. It cannot by any stretch of imagination be held that the evidence is irrelevant. For instance, the assessee has produced all the invoices and proof of payments including in respect of services rendered by the employees of the AE’s. The assessee has also established that such employees of the AE had actually visited India. Mrs. Suri also relied upon the tax structure in Germany and in India in support of her contention that the transactions were genuine. It is also difficult to understand the basis on which it was held that some of the services rendered were only shareholder activities. The nature of the services prima facie at least does not indicate that the said four transactions, which have been separated and segregated and the ALP whereof was determined by the CUP Method, were shareholder activities. In view of our findings on the questions of law in the assessee’s appeal, it would be necessary for the authorities to consider this matter afresh in the light of those observations as well. It would be necessary upon remand for the authorities under the Act to consider whether the transactions ought to be separately benchmarked or whether the TNM Method ought to be adopted in respect of the same as well.

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• 2016 (5) TMI 144
  Deduction under section 80 IB - effect of amendment - prospectively - Held that:- The prohibition against sale of more than one flat in a housing project to members of same family has been inserted specifically with effect from 1. 4. 2010 and the same cannot be treated with retrospective effect. A perusal of the provisions of Sec. 80IB(10) would show that it provides deduction for housing projects which are approved on or after 1. 10. 1998 and upto 31. 3. 2008. It also differentiates the projects approved between 1. 10. 1998 to 31. 3. 2004, 1. 4. 2004 to 31. 5. 2005 and 1. 4. 2005 to 31. 3. 2008. If the section is further analysed, it is based upon the approval of the project. If the project is already approved prior to 1. 4. 2005, any subsequent restriction brought in Sec. 80IB would have to be given perceptive effect - Decided in favour of assessee

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• 2016 (5) TMI 143
  Acquisition of agricultural lands acquired by the Haryana Urban Development Authority (HUDA) - appellant received enhanced compensation and interest - ITAT enhanced compensation again in the status of 'individual' even when the return was filed in the status of 'HUF' - Held that:- After hearing learned counsel for the parties, we find that the issue arising in this appeal raises mixed question of law and fact and, therefore, it is required to be remanded to the Tribunal to decide afresh in view of the submissions made hereinbefore. Accordingly, the impugned order dated 12.12.2008 (Annexure A-11) passed by the Tribunal is set aside and the matter is remitted to the Tribunal to adjudicate the same afresh after hearing learned counsel for the parties and by passing a speaking order in accordance with law. The appeal stands disposed of.

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• 2016 (5) TMI 142
  Deduction u/s 80HHC - Tribunal held that the 90% of the job work charges should not be excluded from the profit of the business in terms of Explanation (baa) to Sec. 80HHC - Held that:- Apex Court in K. Ravindranathan Nair (2007 (11) TMI 10 - Supreme Court of India ) had while considering Explanation (baa) to Section 80HHC of the Act held that independent income, which has no nexus with the export activity, then 90% of such independent income is required to be deducted from business profits. Thus, in the facts before it, it held that independent income like rent, commission etc. including processing charges were be reduced by 90% so as to arrive at the profit of the business in terms of Section 80HHC of the Act. In the present facts, we find that the respondent assessee is engaged not only in the business of manufacture and export of garments but also engaged in doing job work. There is nothing on record to indicate that the activity carried out on job work has nexus with the export earnings of the respondent assessee. In fact, the Assessing Officer has categorically given a finding of fact that job work charges received has no nexus to export. Substantial question of law raised for our consideration is answered in the negative i.e. in favour of the Revenue and against the respondent assessee. So far as the alternative submission of the assessee that while giving effect to this order, the Assessing Officer should exclude 90% of the net receipts on account of the job work charges while applying Explanation (baa) to Section 80HHC of the Act. We were not inclined to accept it as we find that both the Assessing Officer as well as the CIT(Appeals) have on facts found that the respondent assessee has not been able to establish that any expenses were incurred from the gross receipts so as to arrive at the net receipts. As it is a factual finding. In response to our above observation, it was pointed out that on the aforesaid finding of fact, the respondent assessee had filed an appeal to the Tribunal. However, the same being an alternative submission was not considered as the impugned order of the Tribunal decided the basic issue in its favour. In these circumstances, the petitioner's grievance on the above finding of fact was never considered by the Tribunal. Therefore, in the interest of justice, let the respondent assessee be given an opportunity to prove its case that net expenses are different from gross.

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• 2016 (5) TMI 141
  Show cause notice for enhancement of assessment - Held that:- In the show cause notice dated 6.11.2015, the respondent had called upon the petitioner to show cause as to why the amount of 96,60,000/- may not be disallowed as expenditure and added back to the petitioner's taxable income for the relevant year, which is under consideration. By the impugned show cause notice, the respondent had called upon the petitioner to submit his explanation on or before 18.11.2015. Since the petitioner have to explain as to why the said amount may not be disallowed as expenditure and added back to the taxable income of the petitioiner, they can very well submit their explanation and contest the same, on merits and in accordance with law befoer the CIT (Appeals). In these circumstances, do not find merits in the writ petition, which is liable to be dismised. However, give liberty to the petitioner to submit their explanation before CIT (Appeals) and make their submissions with regard to the query, raised in the impugned show cause notice dated 06.11.2015. After receiving the explanation and hearing the submissions on behalf of the petitioner, the CIT (Appeals) is directed to pass orders, on merits and in accordance with law.

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• 2016 (5) TMI 140
  Exemption under Section 10 (10C) denied - Held that:- The impugned order of CIT(A) is totally silent with regard to the communication dated 11th November, 2010 addressed by his office to Mr. Ravikant Shet – exemployee of SBI, similarly situated as the Petitioner, intimating to him that the benefit of exemption under Section 10(10C) of the Act is being extended. It is pertinent to note that the Commissioner of Income Tax, Thane who has passed the impugned order was the same person whose office had addressed the communication dated 11th November, 2010 and also passed the order dated 13th September, 2010 under Section 264 of the Act in respect of Shri Ravikant Shet. The impugned order dated 12th March, 2012 passed by the Commissioner of Income Tax, Thane is quashed and set aside. Respondents are directed to extend the benefit of Section 10(10C) of the Act to the Petitioner and grant the refund within eight weeks from today.

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• 2016 (5) TMI 139
  Adoption of method for valuation of stock - Held that:- The assessee was justified in adopting a new method for valuation of stock, we are of the opinion that the matter requires a fresh look by the Assessing Officer for verifying the correctness of the value arrived at by the assessee. We, therefore, set aside the orders of the authorities below and remit it to the file of the Assessing Officer for consideration afresh. The Assessing Officer shall also consider the view taken by him for the assessment year 1989-90 while disposing of the remitted issues.

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• 2016 (5) TMI 138
  Unexplained cash credits - Held that:- Opening cash balance - With the assistance of both the parties, it is noted by us that the assessee has shown the closing cash balance in the balance-sheet of the last year. These documents could not be controverted by the lower authorities as well as by the learned Departmental representative before us. Therefore, we direct the Assessing Officer to accept the opening balance of 3,86,222. Cash withdrawn from Axis Bank and from PMC Bank - The assessee has submitted detailed cash summary showing inflow and outflow of the cash for the entire year. In our opinion, the assessee cannot be directed to prove the negative. It is a burden upon the Assessing Officer to prove that cash has been utilised elsewhere by the assessee before he rejects the claim of the assessee. Unless any such contrary material is brought on record by him to prove that cash has been utilised elsewhere by the assessee, he should give benefit of cash withdrawn by the assessee from the bank account against the amount of cash deposit into the bank account of the assessee, especially when the cash has been withdrawn and deposited in the same financial year, even if the bank from where cash was withdrawn and bank where the cash was deposited are different. Thus, after considering entire facts and circumstances of the case, we direct the Assessing Officer to give set off of entire amount of cash withdrawn from the Axis Bank and PMC Bank. Friendly loans and Gift from mother and father - No serious arguments have been made by the assessee for explaining friendly loans. Rather at the conclusion of the hearing the learned counsel stated that he did not want to press this amount. Therefore, in the absence of proper details and expression we reject this claim of friendly loans Income from free lancing - With the assistance of both the parties, it is noted that this amount has been shown by the assessee as its income in the return filed which has been accepted and taxed by the Assessing Officer in the assessment order. Therefore, we direct the Assessing Officer to give credit of this amount also. Thus, this claim is accepted. - Decided partly in favour of assessee. Unexplained expenditure on account of foreign traveling - Held that:- On the basis of the submissions made during the course of hearing that the entire amount was spent by the assessee by cheque and for this purpose our attention was drawn on page 16 of the paper book wherein it was shown that entire amount has been spent by different cheques issued from the bank accounts of the assessee. The asses see has given item-wise details and particulars of cheque number of various amounts paid by the assessee for meeting the expenditure incurred on foreign travel. These details clearly reflect that the assessee had made payment by cheque to Super Travels Pvt. Ltd. and to M/s. Paul Merchant for foreign currency. It appears that the learned Commissioner of Income- tax (Appeals), misunderstood the facts and presumed that the entire expenses were incurred by the assessee in cash. The learned Departmental representative did not make any serious arguments to rebut the submissions of the learned counsel. We find the disallowance has been made by the lower authorities under wrong assumption of facts. In our view the entire payment has been made from bank accounts of the assessee. Thus, no disallowance or addition is called for - Decided in favour of assessee.

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• Customs

• 2016 (5) TMI 177
  Refund - Order passed beyond the scope of show cause notice and decided the appeal on altogether different ground of admissibility of refund whereas the the appeal was on the bar of unjust enrichment - Adjudicating authority has already sanctioned the refund but credited into Consumer Welfare Fund applying the provisions of unjust enrichment. Held that:- the refund is in respect of revenue deposit made by the appellant for provisional assessment of imports in terms of Section 18 of the Customs Act, 1962. It is clear that at the time of provisional assessment the bar of unjust enrichment in case of a refund arising on finalization of the assessment was not applicable. Therefore, the lower authority has wrongly credited the sanctioned refund in the Consumer Welfare Fund. As per the decision of Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. Vs. Union of India [1996 (12) TMI 50 - SUPREME COURT OF INDIA], the bar of unjust enrichment is not applicable in case of provisional assessment. Therefore, the impugned order is not sustainable and set aside. - Decided in favour of appellant

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• 2016 (5) TMI 176
  Claim of Exemption form CVD where the like products are not being manufactured in India - Held that:- concerned respondent authority is directed to finally assess the Bills of Entry, as mentioned in the chart, on the basis of the observations made by the Supreme Court in the judgment in the case of M/s. SRF Ltd. v. Commissioner of Customs, Chennai [2015 (4) TMI 561 - SUPREME COURT] and in the case of M/s. ITC Ltd. v. Commissioner of Customs (Import & General), New Delhi [2015 (4) TMI 561 - SUPREME COURT] and if distinguishable, give a decision in the matter, supported with cogent reasons. - Mere filing a review petition before the SC cannot be held that the decision rendered are not valid as on date - Petition disposed of

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• 2016 (5) TMI 175
  Imposition of penalties and confiscation of goods in lieu of redemption fine - Seizure of 13 vehicles - Smuggling of Betel Nuts of third country origin and Garlic of Chinese origin goods from Nepal into India - Held that:- there is no retraction of a confession statement. Appellants never asked for cross-examination of witnesses. None of the persons came forward to claim the ownership of seized goods of more than 2.00 Crore in value. The act of running away of Drivers from the place of interception is not disputed by Appellants. It cannot be imagined that the drivers who ran away would not have informed the masters that goods/trucks have been detained by some agency. There is thus a plethora of circumstantial evidences corroborating the relied upon statements of drivers and khalasi. As per Section 115 of the Customs Act, 1962 a driver has to be considered as an agent of the owner and accordingly knowledge of the drivers will have to be considered as the knowledge of the owners of vehicles. The argument of appellant that in the absence of test report of the samples sent, it cannot be said that the seized goods were of foreign origin and that even the department was not sure of that nature, can be taken by the owner of goods who produces some documents of licit acquisition of seized goods. Adjudicating authority has given a logical findings that Garlic of Chinese origin can be easily identified by its size. It is also a common experience that in Indian markets Garlic of Chinese origin is easily recognized from indigenous Garlic by its size. However, in the case of Appellants awaiting the reports of testing agencies are not relevant when the drivers/khalasi are themselves confessing to the fact that seized goods were brought from Nepal for the lure of money. Therefore, the penalties imposed upon the appellants and confiscation of vehicles under Section 115 of the Customs Act, 1962 are also upheld. Quantum of redemption fine - imposed upon the vehicles of the owners of the vehicles - Appellant contended that value of seizure is arbitrary and the quantum of redemption fine, nearly 50% of seized value, is very high - Held that:- there is substance in the argument of owner appellants that over the period the seized/confiscated vehicles must have deteriorated and that some of the vehicles have been disposed of without giving any intimation to the owners. It is observed that redemption fine imposed is nearly 50% of the seizure value of vehicles determined on 02.10.2009 which must have further depreciated till the date of adjudication. Therefore, imposing a redemption fine of nearly 50% of the seizure value of vehicles is excessive. In the interest of justice it will be appropriate to restrict the redemption fine to the extent of 25% of the auction price where vehicles have been disposed of by the Revenue in auction. Same ratio of seizure value vs. auction price of auctioned vehicles can be taken for the purposes of imposing redemption fine on vehicles released provisionally. - Decided partly in favour of appellant

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• 2016 (5) TMI 174
  Denial of ownership claim and imposition of penalty - Section 112(b) of the Customs Act, 1962 - Seizure of 7 gold bars concealed in the rectum - No foreign markings found on the seized gold bars - Appellant contended that the seized gold bars were made from the gold ornaments belonging to his family - Held that:- none of the seized gold bars bear any foreign markings. The method of concealment of the seized gold bars in the rectum of appellant is no doubt very suspicious, but that does not establish that seized gold bars are of foreign origin. Secondly the seizure of gold bars has also not been effected in a Customs area to shift the onus on appellants. Therefore, in view of the decision of Tribunal in the case of Nand Kishore Modi v. CC(Prev.), West Bengal [2015 (10) TMI 2132 - CESTAT KOLKATA], once appellant Shri Swadesh Ch.Paul has produced the evidence of licit acquisition of 7(seven) gold bars then an enquiry was required to be made at the end of Nantu Banik, Pinky Jewellary to refute the claim of the appellant Shri Swadesh Ch. Paul. In the absence of any such investigation claimant Shri Swadesh Ch.Paul has discharged his burden that 7(seven) gold bars seized from Shri Babul Roy belonged to him and are not of foreign origin. The only evidence in the form of first statement of Shri Babul Roy, which was also subsequently retracted, cannot be made as the sole basis to hold that the seized gold bars are of foreign origin and smuggled. - Decided in favour of appellant with consequential relief

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• 2016 (5) TMI 173
  Imposition of penalty - Smuggling of foreign branded cigarettes and liquor - brought in the guise of computer casing - falls under the category of lending of their IEC Code to Shri Sujit Satam - Held that:- the statement of Shri Kishore Shah clearly indicates that he was monitoring the activities and had allowed the use of IEC Code of M/s. Darshana Impex in collusion with Shri Sujit Satam. Shri Kishore Shah also had helped Shri Sujit Satam for arranging banker’s cheque or demand draft for the payment of duty on the mis-declared goods i.e. computer casing, in the name of one of the employees. These facts indicate that Shri Kishore Shah was aware of nefarious activity of Shri Sujit Satam as otherwise he would have issued demand draft of the firm M/s Darshana Impex. Since the consignment which is confiscated by the adjudicating authority is of M/s Darshana Impex and Shri Kishore Shah handling day-to-day activity of said firm he is liable for penalty under Section 112(a) of the Customs Act, 1962. The adjudicating authority while attributing the role of Shri Pravin Gada, has not indicated how Shri Pravin Gada is liable to be penalized under Section 112(a) of the Customs Act, 1962 as it is very clear that Shri Pravin Gada had given a Letter of Authority to Shri Kishore Shah as Manager to look after the day-to-day affairs. Therefore the penalties imposed on Shri Pravin Gada seems to be unwarranted as he may have been kept in dark by the Manager and the same is liable to be set aside. - Decided partly in favour of appellnat

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• Service Tax

• 2016 (5) TMI 180
  Refund claim - Rejected on ground of (a) invoices on which credit has been availed and refund claim pertaining to unregistered premises, (b) inputs invoice on which refund claimed does not pertain to the claim period and (c) ineligible input services - export of services - Cenvat credit in respect of unutilized input credit was accumulated in the record of the assessee and when refund thereof was claimed, the said was disallowed by the adjudicating authority. Held that:- there is no dispute that export of goods and services are not taxable and registration is not a criteria to allow refund when the output service is not liable to duty or tax. By following the decision of Hon'ble Karnataka High Court in the case of mPortal India Wireless Solutions P. Ltd. Vs CST Bangalore [2011 (9) TMI 450 - KARNATAKA HIGH COURT], limitation under Section 11B does not apply to refund of accumulated cenvat credit and therefore bar of limitation cannot be a ground to reject refund of cenvat credit to the assessee. Therefore, the appeal is allowed in so far as the aspect of additional premises is concerned. The submissions of both the sides, are at factual variance in as much as the appellant had contended that they had shifted their business premises to a new address and the respondent revenue contends that they had registered with the department only on 25-05-2010. The above stated judgment is wide enough to cover both the situations and therefore, whatever is the factual situation, that would not in any way alter the eligibility for refund. The pre-registration issue settled in favour of the appellant. Regarding the third issue of ineligible input services, it is found that the services have been received in respect of Customs Clearing Services received for the goods imported relating to their business and therefore qualify as an eligible input service for the purpose of availment of credit as the said services are for inward transportation of inputs. Therefore, the impugned order is set aside. - Decide in favour of appellant

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• Central Excise

• 2016 (5) TMI 179
  Seeking direction for deposit to be treated as regularised so that the appeal may be heard by the Tribunal which stands deferred on account of such default - Held that:- in view of sub-section (9) of Section 35G of the Central Excise Act, 1944 and the decision of Calcutta High Court in the case of Golab Chand v. Bahuria Ram Murat Koer, it is found that substantial compliance by the appellant of this court’s orders and consequently in the interest of revenue and to do substantial justice, the relaxation in time for deposit of the amount is well deserving and also within the powers available under the Act. - Application disposed of

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• 2016 (5) TMI 178
  Quashing of FIR - Demand set aside by CESTAT - High Court held that since petitioners have an alternate and efficacious remedy to seek discharge from trial court by urging the pleas taken herein, therefore, this Court is not inclined to exercise its inherent jurisdiction under Section 482 of Cr.P.C reported in [2015 (8) TMI 1127 - DELHI HIGH COURT] - Hon'ble Supreme Court has requested the Trial Court to take up the applications pending before it and decide the same as expeditiously as possible. - Apex Court dismissed the SLP

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• CST, VAT & Sales Tax

• 2016 (5) TMI 172
  Seeking direction for exemption of Entertainment Tax for the movie "bjwp" (Theri) - Appellant submitted that if the application of the petitioner is not processed and exemption is granted to the Tamil movie "bjwp" (Theri), the petitioner would be put to irrepairable loss and prejudice - Held that:- the respondents are directed to process the petitioner's application for the movie "bjwp" (Theri) for exemption of Entertainment Tax and pass orders, on merits and in accordance with law, on or before 13.04.2016. In the event of the respondents being satisfied that the movie "bjwp" (Theri) is entitled for exemption of Entertainment Tax, it is open to the respondents to get approval from the Election Commission of India for granting exemption of Entertainment Tax. - Petition disposed of

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• 2016 (5) TMI 171
  Validity of seizure memorandum - Truck detained and goods seized - Petitioner contended that the truck and goods could not have been seized for breach of the provisions of section 69 of the GVAT Act - Held that:- the sole ground for detention of the truck is that the driver or the person in-charge of the vehicle was not carrying a transit pass in Form 405. The provision for carrying a transit pass in Form 405 is relatable to section 69 of the GVAT Act, which bears the heading “Transit pass for transit of goods by road through the State”. Though the alleged breach is of the provisions of section 69 of the GVAT Act, the second respondent has resorted to the powers under subsection (4) of section 68 of the GVAT Act of seizing the goods and detaining the truck. It appears that since under Section 69 of the GVAT Act, the authorities under the said Act not empowered to seize the goods and detain the truck, the second respondent has resorted to the colourable exercise of powers under Section 68(4) of the GVAT Act, by seizing the truck and goods contained therein for the alleged breach of the provisions of section 69 of the GVAT Act. The action of the second respondent of resorting to seizure of the goods and the truck is, therefore, beyond the bounds of his authority inasmuch as for breach of the provisions of section 69 of the GVAT Act, the authorities under the said Act cannot resort to the provisions of Section 68(4) of the GVAT Act. The goods carried in the vehicle can be seized only if the requirements of Section 68(4) of the GVAT Act are not satisfied. However, for breach of the provisions of section 69 of the GVAT Act, action can only be taken under that section whereby the concerned officer is empowered to levy penalty not exceeding one and one half times the tax as may be determined, against the driver or person in-charge of the vehicle. With a view to have the seizure of the goods, vehicle can be detained but there is no power to seize the vehicle. The power given to detain the vehicle is to facilitate the seizure of the goods and it cannot be termed as the detention for an indefinite period. The reasonable interpretation would mean that once the goods are found in any vehicle and upon inquiry if it is found unsatisfactory, the authority may seize the goods after detaining the vehicle and after the seizure of the goods, the goods may be kept by the authority at any place where it is permissible, but the vehicle is required to be released thereafter. So, in the present case, not only have the respondent officers, in purported exercise of powers under Section 68(4) of the GVAT Act, wrongly seized the truck along with the goods that it was carrying, but despite the fact that Section 68(4) of the GVAT Act only permits the officer to detain the truck, till date they have not released the truck in clear violation thereof. The action of the respondent authorities, therefore, is in breach of the provisions of sections 68 and 69 of the GVAT Act. The impugned seizure memorandum, therefore, cannot be sustained and the respondent is directed to release the truck along with the goods contained therein. - Decided in favour of petitioner

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