TMI Tax Updates - e-Newsletter
May 9, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Demand confirmed invoking extended period of limitation for Amount collected in the name of service tax even though service was not taxable

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Articles

1. COMPUTATION OF BOOK PROFIT FOR INDIAN ACCOUNTING STANDARD COMPLIANT COMPANIES

   By: ARUN KUMAR V K

2. Video Presentation: Rate of interest on delayed payment & increase in period of limitation for non-fraud cases under ST, Excise & Customs

   By: Bimal jain

News

1. Insertion of Rule 141-A after Rule-141 in General Financial Rules (GFR), 2005 for proposed creation of One Stop Government e-Marketplace (GeM) by Directorate General Supply and Disposal (DGS&D).

2. Direct Cash Transfer

3. RBI Norms for Protecting Customers

4. Gold Monetization Scheme

5. Gold Monetization Scheme: Deposits by Temple/Religious Bodies

6. Unified Payments Interface: the product to enable money transfers – both ‘Push’ and ‘Pull’ through Smart Phones

7. Demand of Trained Corporate Social Responsibility (CSR) Professionals

Notifications

Income Tax

1. 31/2016 - dated 5-5-2016 - IT

Income-tax (12th Amendment) Rules, 2016 - Amends Rule 29B - Relaxation from one of the conditions - Application for certificate authorising receipt of interest and other sums without deduction of tax

2. 8/2016 - dated 4-5-2016 - IT

Procedure for submission of Form 15CC by an authorised dealer in respect of remittances under sub-section (6) of section 195 of the Income-tax Act, 1961 read with rule 37BB of the Income-tax Rules, 1962

3. 7/2016 - dated 4-5-2016 - IT

Procedure for online submission of declaration by person claiming receipt of certain incomes without deduction of tax in Form 15G/15H under sub-section (1) or under sub-section (1A) of section 197A of the Income-tax Act, 1961 read with Rule 29C of Income-tax Rules, 1962

4. 6/2016 - dated 4-5-2016 - IT

Procedure for online submission of statement of deduction of tax under sub-section (3) of section 200 and statement of collection of tax under proviso to sub-section (3) of section 206C of the Income-tax Act, 1961 read with rule 31A(5) and rule 31AA(5) of the Income-tax Rules, 1962 respectively

VAT - Delhi

5. F.3(11)/Fin(T&E)/2009-10/DS-VI/139 - dated 5-5-2016 - DVAT

Appointment of officers to assist the Value Added Tax, Govt. of NCT of Delhi

Circulars / Instructions / Orders

FEMA

1. Press Note No. 4(2016 Series) - dated 6-5-2016

Policy on foreign investment for Asset Reconstruction Companies-amendment of paragraph 6.2.18.1 of ‘consolidated FDI Policy Circular of 2015’

DGFT

2. 8/2015-2020 - dated 6-5-2016

Amendment in ANF-5A [Application for issue of EPCG Authorisation]; ANF 5B [Application for redemption of EPCG Authorisation]; ANF 5C [Application for Clubbing of EPCG Authorisations] and Appendix 5C [Format of Certificate of CA/ Cost Accountant / CS for redemption of EPCG Authorisation] as contained in the Appendices & Aayat Niryat Forms of FTP 2015-20

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

Clarification regarding benefit under Incremental Export Incentivisation Scheme (IEIS) notified vide Notification No.27 dated 28th December 2012

Highlights / Catch Notes

Income Tax

• Assessee Denied Additional Depreciation on Machinery for Ready Mix Concrete Production; Not Considered Manufacturing Under Tax Laws.

  Case-Laws - AT : Additional depreciation on Ready Mix Concrete [RMC] - assessee is not entitled for additional depreciation in respect of machinery used since production of ready mix concrete would not amount to manufacture of article or thing - AT
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• Court Rejects Revenue's Claim: Unit Trust of India Not a Deemed Company, Units Aren't Deemed Dividends.

  Case-Laws - HC : Addition of speculation loss - submission on behalf of Revenue negatived that provisions of UTI Act creates a fiction to make Unit Trust of India a deemed company and the income received on its unit by an assessee to be deemed dividend. Thus units are not shares. - HC
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• High Court: Insurance companies not required to deduct TDS on interest from compensation for death or injury.

  Case-Laws - HC : TDS liability on interest on award of insurance compensation in view of the death or injury - the orders calling upon the insurance company to pay the TDS/deduct TDS on the interest part, are not sustainable and are hereby set aside - HC
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• Foreign Exchange Gains from Marketing Commissions Must Be Classified as Operating Income Under Reporting Rules.

  Case-Laws - AT : Foreign exchange gain pertaining to marketing commission segment should be considered as operating income - AT
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• Assessee Must Deduct TDS on Payments to ATP u/s 194E of Income Tax Act, Clarifies Liability.

  Case-Laws - AT : TDS liability - Payment to Association of Tennis Profession (ATP) - ATP is a non-resident sports institution and therefore Section 194E applies to the payments made by the assessee to the ATP - AT
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• Subsidy Reduces Cost of Plant and Machinery for Taxpayers per Section 43(1) Explanation.

  Case-Laws - AT : Since the subsidy received for setting up of industries by installing plant and machinery would definitely reduce the cost of the plant and machinery from the side of the assessee and it is to be reduced from the cost of plant and machinery in terms of above Explanation to Sec.43(1) - AT
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• Income from Operating Effluent Treatment Plant Classified as Income, Not Capital Receipt, for Tax Purposes.

  Case-Laws - AT : Treatment of income from trial run receipts - the income earned by the assessee by operation of plant and machinery for treating the effluent water and collected the income from the customer on commercial basis and it cannot be considered as a capital receipt - AT
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• Assessee Can Choose Initial Assessment Year for Deductions u/s 80-IA of Income Tax Act for Optimal Benefits.

  Case-Laws - AT : Disallowance under section 80-IA - choosing of the initial assessment year - it is the option of the assessee to choose the initial assessment year for claiming deduction under section 80-IA of the Act - AT
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• Income Addition Based on Survey Statement u/s 133A Deemed Unsustainable by Law.

  Case-Laws - AT : Undisclosed income - Addition made on the basis of the statement during the survey u/s. 133A is not sustainable in the eyes of law - AT
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• Capital Gains Tax Applicable on Sale of BOPP Films Undertaking as Going Concern: Section 50B & 2(42C) Explained.

  Case-Laws - AT : Taxing of capital gains u/s.50B r.w.s.2(42C) - sale of undertaking as a going concern for a lump sum consideration - addition made by the AO u/s.50B on account of gain arising from transfer of BOPP Films Undertaking confirmed - AT
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• Officer's Error: Disallowed Section 11 Amounts by Misapplying Sections 40(a)(ia) & 43B for TDS and Liability Issues.

  Case-Laws - AT : When income is computed u/s 11, A.O. was not correct in disallowing the amounts by invoking the provisions of sec. 40(a)(ia) and 43B for failure to deduct TDS and failure to remit the unpaid liabilities - AT
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• Understanding 'Income from House Property': Fair Rental Value vs. Actual Rent u/ss 22 & 23.

  Case-Laws - AT : Income assessable under the head ‘Income from House Property’ - The adoption of an enhanced rate does not breach the theory of real income inas- much as what the law envisages is the estimation of the annual value, defined as the fair rent that a house property is expected to fetch from year to year (sec. 23). It is only where the actual rent exceeds the fair rental value that the same is taken as annual value u/s. 22 - AT
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• Reopening of Tax Assessment Invalidated: Assessing Officer Failed to Properly Consider Investigation Wing's Information.

  Case-Laws - AT : Reopening of assessment - assessments based on receipt of certain information from Investigation Wing invalid due to non application of mind by the A.O - AT
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• Court Rules Interest on Business Investments Deductible; Disallowance by Tax Authorities Overturned in Favor of Assessee.

  Case-Laws - AT : Disallowance of expenditure on account of interest on prorata basis - when the assessee has made investment for business expediency to promote the business of its subsidiary, the interest paid thereon has to be allowed and as such, AO as well as CIT (A) have erred in making disallowance of assessee’s claim of deduction on account of interest on prorata basis - AT
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• Loan Waiver for Capital Asset Purchase Considered Capital Receipt; Not Taxable u/s 28(iv) of Income Tax Act.

  Case-Laws - AT : Addition u/s. 28(iv) - waiver of the outstanding principal amount of loan - amount used for the purchase of capital asset, the waiver thereof is a capital receipt not chargeable to tax under section 28(iv) - disallowance under section 28(iv) restricted to the loan waiver which has been used for trading activity - AT
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• Mobilization charges for contract with Cairn to be taxed u/s 44BB of Income Tax Act.

  Case-Laws - AT : Taxation on mobilization charges - Entire payment of mobilization charges in question was paid for the purpose of execution of the contract between the assessee and the ‘Cairn’ and therefore the entire sum was liable for taxed under section 44BB - AT
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• Income from drilling rigs in India taxed u/s 44BB, not as technical service fees u/ss 44DA/115A.

  Case-Laws - AT : Income from the services rendered in connection with providing drilling rigs/drilling services to ‘Cairn’ in India are in the nature of services and facilities in connection with, or supplying plant and machinery on hire which are used in prospecting for extraction or production of mineral oil and the provisions of section 44BB would apply and the income would be taxable accordingly and not as fee for technical services either u/s 44DA or section 115A - AT
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Customs

• Customs, DRI, and DGCEI officers not "proper officers" u/s 2(34) for pre-April 8, 2011 reassessment actions.

  Case-Laws - HC : Department cannot seek to rely upon Section 28(11) as authorising the officers of the Customs, DRI, the DGCEI etc. to exercise powers in relation to non-levy, short-levy or erroneous refund for a period prior to 8th April 2011 if, in fact, there was no proper assigning of the functions of reassessment or assessment in favour of such officers who issued such SCNs since they were not “proper officers” for the purposes of Section 2(34) - HC
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• Commissioner Urged to Stay Adjudication Pending Tribunal Decisions to Avoid Inconsistencies and Further Legal Actions.

  Case-Laws - HC : Commissioner ought to have stayed the adjudication proceedings since the issue was pending before various Tribunals at different stages would lead to absurd - there is always a possibility of further legal proceedings being taken out by the aggrieved party - HC
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Service Tax

• Penalty Waived for Assessee Who Paid Service Tax and Interest Before Show Cause Notice u/s 80.

  Case-Laws - AT : Levy of penalty - As the assessee had paid service tax and interest by showing their bonafides before issuance of SCN - Penalty liable to be waived of by invoking Section 80 - AT
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• Appellant Must Deposit Service Tax Collected as Duty; Tax Demand Confirmed, Penalty Waived.

  Case-Laws - AT : If according to the appellant service tax liability was not attracted then also they should have deposited the amount with the department as an amount recovered in the guise of duty - Demand of tax confirmed but penalty waived. - AT
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• Failure to Deposit Collected Service Tax Within Six Months is a Cognizable Offense u/s 89(1.

  Case-Laws - HC : Once the seervice tax is collected it is the duty to pay it to the credit of Central Government within six months from the date of collection - Failure to deposit is a cognizable offence and is hit by Section 89(1) and is liable to be punished u/s 89(1)(ii) - HC
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Central Excise

• Assessee Wins Guar Gum Classification Dispute Due to Limitation Issue Amid Conflicting Tribunal Judgment.

  Case-Laws - SC : Classification of Guar Gum and Guar Dal Flour - Assessee succeeds inasmuch as on the ground of limitation itself inasmuch as at the relevant time there was conflicting judgment of the Tribunal - SC
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• Tribunal Judgments Bind All Equal Benches and Authorities on Similar Issues.

  Case-Laws - HC : As long as a judgment of the Tribunal stands, it would bind every Bench of the Tribunal of equal strength and the departmental authorities taking up such an issue - HC
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• Court Rules Against Punitive Denial of Modvat Credit for Simultaneous Cenvat Credit and Depreciation Errors.

  Case-Laws - HC : Simultaneous availing Cenvat Credit and Depreciation - once the mistake is detected and he filed revised returns, deprivation of the benefit of Modvat Credit could only be punitive. This cannot be the object of the grant of Modvat Credit - HC
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VAT

• Refund Permitted for Deposits Under GVAT Act Not Classified as Tax Paid According to Section 36(1.

  Case-Laws - HC : Nature of amount deposited as per the direction of the Court - GVAT - Such amount cannot be termed as an amount of tax paid as envisaged under sub-section (1) of section 36 of the GVAT Act - refund allowed - HC
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Case Laws:

• Income Tax

• 2016 (5) TMI 270
  Additions u/s 68 - Cash available as Stridhan with Late Smt. Saroj Gupta on her demise - Held that:- It is not disputed that Late Smt. Saroj Gupta had not filed a wealth tax return in respect of her net wealth as on 31st March, 2006 which would be mandatory if she possessed cash to the extent as claimed by the AO. The Assessee had sought to explain non-filing of the wealth tax return by asserting that the cash available with Late Smt. Saroj Gupta on 31st March, 2006 was only Rs. 13,31,800/- and the remaining amount of Rs. 1.75 lacs was received by her after 1st April, 2006 and before the date of her demise (that is, 14th August, 2006). Apart from the fact that the Assessee provided no material to substantiate the aforesaid contention, it is also relevant to note that the cash was claimed to be Late Smt. Saroj Gupta's "Cash of my Istridhan" and thus unless invested would not increase with efflux of time. The ITAT described the explanation provided by the Assessee as “fantastic”. We concur with the view that the aforesaid explanation is wholly unsustainable and was rightly rejected by the ITAT. Admittedly, Late Smt. Saroj Gupta had also not disclosed any cash-in-hand other than under her proprietorship concerns. The Assessee's contention that Late Smt Saroj Gupta was not required to disclose her cashin- hand is difficult to accept. It is relevant to note that a proprietorship concern does not have a separate legal identity other than its sole proprietor and an assessee carrying on business is required to maintain books of accounts necessary for his/her assessment. Be that as it may, the ITAT noted that there was no evidence of Late Smt. Saroj Gupta owning and possessing any cash-in-hand and the self serving documents could not be relied upon. It is relevant to note that out of Rs. 15.06 lacs stated to have been found in the almirah of Late Smt. Saroj Gupta, a sum of Rs. 5 lacs was in currency notes in the denomination of Rs. 1,000/- and Rs. 8,51,500/- was in the denomination of Rs. 500/-. Clearly, such currency could not have been acquired by Late Smt. Saroj Gupta as her Stridhan during the time of her marriage as currency in such denomination was not available at that time. We concur with the view of the ITAT that the entire explanation of bequest of Stridhan and discovery of currency is an elaborate subterfuge to attempt to explain the aggregate cash deposited by the Assessee in the subsequent financial year (that is, Financial Year 2007-08). - Decided against revenue.

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• 2016 (5) TMI 269
  Addition of speculation loss - amounts received from mutual funds/bonds as business income - Revenue contended that Unit Trust of India is a deemed company and income from units is also a deemed dividend therefore the units have to be considered to be shares covered by Section 73 - Held that:- The Apex Court in Apollo Tyres (2002 (5) TMI 5 - SUPREME Court ) negatived the above submission on behalf of the Revenue holding that the provisions of UTI Act creates a fiction to make Unit Trust of India a deemed company and the income received on its unit by an assessee to be deemed dividend. However the Court held that there is no deeming provisions for unit to be considered as share. Thus units are not shares. In the present facts also no specific provision has been pointed out to us which would deem the units in a mutual funds and/or bonds to be shares either for the purposes of the Act or for any other purposes. In that view of the matter, in our view, the decision of the Apex Court in Apollo Tyres Ltd. (supra) would cover the controversy arising for our consideration as units are not shares and therefore dealing in units cannot be considered to be shares. - Decided in favour of assessee

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• 2016 (5) TMI 268
  TDS liability on compensation in view of the death or injury - insurance company has been called upon to pay the amounts of TDS deducted on the interest income which was deposited by the insurance company with the Income tax Department - Held that:- There is force in the contention raised on behalf of the petitioner that the claimants are liable to pay double the tax, one on receipt of compensation which would be added in the income and the other where TDS would be deducted by the insurance company, thus, it amounts to putting an onerous liability on the taxpayers as they are liable to pay tax two times. The payment of compensation on account of death and injury is not a business transaction or a receipt of any charges on account of services rendered by any other party. Compensation received under the Motor Vehicles Act is either on account of loss of earning capacity on account of death or injury or on account of pain and suffering and such receipt is not by way of earning or profit. Award of compensation is on the principle of restitution to place the claimant in the same position in which he would have been had the loss of life or injury has not been suffered. Therefore, the impugned orders calling upon the insurance company to pay the TDS/deduct TDS on the interest part, are not sustainable and are hereby set aside. - Decided against revenue

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• 2016 (5) TMI 267
  Depreciation on Goodwill - Held that:- When the AO has not disputed the fact that the assessee has no goodwill to claim the depreciation, disallowance made by the AO and affirmed by the CIT (A) is not sustainable in the eyes of law. Moreover, in assessee’s own case qua the AYs 2008-09 and 2009-10, has already held that the assessee is entitled to claim depreciation on goodwill which is an asset u/s Explanation (3b) to section 32(1) of the Act - Decided in favour of assessee Disallowance of expenditure on account of interest on prorata basis - Held that:- AO has not disputed that the loan was advanced to M/s. Bharti Infotec Ltd. as per Memorandum and Articles of Association to promote business of its subsidiary, the interest claimed by assessee thereon cannot be disallowed. Moreover, it was commercial expediency of the assessee company to advance the loan to promote business of its subsidiary company. So, we are of the considered view that the advances made to the subsidiary companies are to be treated as business advances. Moreover, when the assessee company was carrying out its business activities through its subsidiaries and the assessee company was having interest free funds to the tune of Rs. 99.27 crores and Rs. 101.11 crores available with the assessee company in the beginning and end of the financial year respectively under consideration as per balance sheet not disputed by the AO when the assessee has claimed to have paid loan amount to its subsidiary from the mixed fund, then, it should be assumed that payment was made out of interest free funds. So, when the AO has not disputed the fact that the assessee company has used interest free funds only for advancing money to M/s. Bharti Infotec Ltd., the question of making disallowance on prorata basis does not arise. Following the ratio of the judgment in the case of Hero Cycles Pvt. Ltd. (2015 (11) TMI 1314 - SUPREME COURT OF INDIA), we are of the considered view that when the assessee has made investment for business expediency to promote the business of its subsidiary, the interest paid thereon has to be allowed and as such, AO as well as CIT (A) have erred in making disallowance of assessee’s claim of deduction on account of interest on prorata basis - Decided in favour of assessee

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• 2016 (5) TMI 266
  Bogus purchases - Held that:- AO made addition solely on the basis of assessment order of another company M/s Nath International.AR also submitted that entire stock registers along with stock registers of M/s Nath International were also physically produced before the AO. On the basis of above stock registers it is proved that the assessee had sufficient stock of ready fabric which was sold to the assessee firm. - Decided in favour of assessee Excess claim of expenses booked for quilting job work done by one of the job worker - Held that:- CIT(A) was right in deleting the addition by holding that the assessee had fully explained the differences between the statement of account of the assessee and copy of ledger account in the books of the assessee. The ld. DR has not brought on record anything concrete to contradict the same. - Decided in favour of assessee TDS u/s 195 r.w.s 194H - non deduction of tds - CIT(A) deleted the addition - Held that:- his issue of deductibility of tax at source on export commission is squarely covered by the CBDT Circular No. 786 dated 7.2.2000 and also the decision of the Hon'ble Supreme Court in the case of Toshoku Ltd [1980 (8) TMI 2 - SUPREME Court ] wherein held commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India, hence no TDS. Therefore, without going into the merits of the issue, we find no infirmity in the order of the ld. CIT(A)- Decided in favour of assessee Disallowance of car expenses - Held that:- AO had wrongly applied the provisions of section 40A(3) of the Act as each of the cash payments considered by the AO were below Rs. 20,000/- - Decided in favour of assessee Disallowance u/s 40(a)(ia) - payment for job work under various heads claiming them to be purchases and had not deducted TDS - Held that:- We find force in the submission of the ld. AR that if the AO had properly examined the vouchers, he would have found that they payments were actually for purchase of raw material and not for job work and subsequently he would not have proceeded to disallowed the same u/s 40(a)(ia) of the Act by holding that no tax had been deducted. The ld. CIT(A) was quite justified in deleting the addition which is not sustainable as the payments were made for purchase of material and not for job work which the ld. CIT(A) has found to be supported by bills of parties placed on record and in the paper book - Decided in favour of assessee

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• 2016 (5) TMI 265
  Disallowance of interest - Held that:- The issue had been decided in favour of the assessee by his predecessor in the immediately preceding year, that the appeals filed by the Department against the order of his predecessor for the AY. s. 2000-01 and 2001- 02 had been dismissed by the Tribunal , that there was no change in facts during the year as compared to the facts in the earlier years. Therefore, he directed the AO to delete the disallowance of interest relatable to CWIP. Addition on account of unutilised modvat credit - Held that:- The Tribunal in the assessee’s own case for the AY. 2002-03 had restored the matter to the file of the AO for giving effect to the provisions of section 145A in entirety and not restricting its operation to the value of closing stock alone, that in the set aside matter, the AO did not grant any relief, that the FAA granted relief to the assessee holding that no addition was required if one strictly followed the provisions of section 145 A of the Act, that the AO filed an appeal before the Tribunal challenging the order of the FAA, that the Tribunal vide its order dismissed the appeal, filed by the AO. Considering the above, issue restored back to the file of the AO for fresh adjudication. He is directed to decide the issue as per the directions given in the order for the AY. 2003-04 Exclusion of 90% of the certain business receipts from the profit of the business for the purpose of computing deduction u/s. 80 HHC - Held that:- Exclusion of insurance claim is confirmed as relying on case of Pfizer Limited [2010 (6) TMI 433 - Bombay High Court ] as held the insurance claim on account of the stock-in-trade did not constitute an independent income or a receipt of a nature similar to brokerage, commission, interest, rent or charges. Hence, such a receipt would not be subject to a deduction of ninety per cent. It is found that issue of sales tax refund and sales tax set off has been decided in favour of the assessee by the Hon’ble Apex Court in the case of Alfa Lavel (India) Ltd. (2007 (11) TMI 281 - SUPREME Court ). We find that the issue of registration charges written back was decided in favour of the assessee by the Tribunal while deciding the case of Extrusion Process Private Ltd. (2006 (6) TMI 261 - ITAT MUMBAI ). As far as exclusion of sale of scrap is concerned it is found that in the case of Sony India Pvt. Ltd. (2008 (9) TMI 420 - ITAT DELHI-H ) to hold the said income comprising of sale of scrap, amounts written back and sale proceeds of spare parts was directly related to the dominant business of the taxpayer company and the same, therefore, represented its operational income which was entitled for inclusion in the profits of the business for the purpose of computing deduction under s. 80HHC - Decided against revenue Benefit of deduction under section 80 HHC denied - Held that:- In the absence of any profit available to the assessee from exports, the benefit of deduction under section80 HHC was rightly not available. In our considered opinion the ld CIT(A)was justified in rejecting the ground of the assessee on the claim of deduction under section 80HHC in the absence of any eligible profit - Decided against assessee Disallowance invoking the provisions of section 40A(2)(b) - Held that:- We find that the assessee had produced a reliable evidence in form of a certificate issued by TC, that the AO did not discuss anything about it and made the disallowance. In our opinion, the order of the FAA does not suffer from any legal or factual infirmity. He had decided the issue after considering the certificate that was relevant to decide the issue. Therefore upholding his order, we decide ground against the AO Adjustment u/s. 92CA - addition on account of sale of goods to AE - transaction on the basis of TNMM or Comparable Uncontrolled Price(CUP)method - FAA deleted the addition proposed/made by the TPO/AO - Held that:- The assessee wanted to sell Diacamba in USA, that from the local registration prospective it was essential to have a USA entity, that it set up GUSA which could carry out registration marketing and distributing functions, that it had applied the TNMM four determining the ALP of the transactions, that G-USA dealt only in the products of the assessee and had no other business activity, that any profit/loss occurring to the AE was on account of the products purchased from the assessee, that the AE had incurred a net loss of 10. 98% on sales, that 74% of the sale was made to G-USA, that there was no evidence of shifting of profit by the assessee to its AE, that it had charged USD 14. 11 per Kg. from its AE for the goods supplied, that the average sale price to non-AEs of USD 14. 64 per Kg. resulted in adjusted APL of USD13. 99 per Kg. In our, opinion there is no legal or factual infirmity in the order of the FAA. Therefore, confirming the same we decide ground against the AO. Deduction u/s. 80 HHC - Held that:- 90% of the receipts of the assessee under the three heads i. e. consultancy services,sundry creditors balances written back and sundry income should not be excluded from the profit of the business for the purpose of computing deduction u/s. 80 HHC of the Act. Reduction of profits eligible for deduction u/s. 80HHC for the purpose of calculating book profits u/s. 115JB - Held that:- Identical issue has been decided in favour of the assessee by the Tribunal , while adjudicating the appeal for the AY. 2003-04 to hold that deduction claimed u/s. 80HHC had to be worked out on the basis of adjusted book profit u/s. 115JA and not on the basis of profits computed under regular provisions of law applicable to computation of profits and gains of business. Deemed dividend addition u/s 2(22)(e) - Held that:- Commercial transactions between two companies could not be brought within the purview of the provisions of section 2(22)(e) - Decided in favour of assessee Addition u/s. 92 CA (3) - Held that:- Australian-AE was set up to obtain and hold registration rights of certain products in Australia as was required to enable the assessee to make sale of its products in Australia, that the Australian-AE would pay usage rights received from the assessee to MA-AUS, after keeping some portion, that the TPO did not consider the basic fact that the assessee made direct sales to third parties and the resultant profit was accounted for directly in its books of accounts, that the expenses pertaining to making those sales had to be booked in its P&L a/c. , that the role of the Australian-AE was limited, that AE did not have any other business. - Decided in favour of assessee TP adjustment on depreciation of registration rights - Held that:- The wholly owned subsidy of the assessee held registration rights in two products, that it had paid registration charges for selling those products in the US markets, that it had also paid other fees as required by the US laws, that it had incurred total expenditure of USD 1, 58, 79, 306 under the head registration charges, that the AE got the assets revalued as on 01. 01. 2204, that registration rights were revalued from Rs. 44. 29 crores to Rs. 67. 99 crores by the independent valuer, that on 30. 09. 2004 the AE was dissolved, that the assessee took over the assets and liabilities of the AE at the revalued price, that the payment for registration rights and other fees were paid much before the revaluation, that it adopted lesser value of the rights as compared to the value determined by the valuer, that further clarification were called from the valuer, that in the remand report the TPO agreed that payment was made by the AE for the rights in earlier years, that there was no discrepancy in the method of valuation, that the TPO pointed out element of non transferability in the valuation report for supporting the adjustment, that the FAA has given a categorical finding of fact that the TPO was factually incorrect in arriving at the conclusion of non transferability, that the AE had right to transfer the rights to others also. Considering the above facts, we are of the opinion, that the order of the FAA does not suffer from any legal or factual infirmity. Therefore, confirming his order, we decide ground against the AO. - Decided in favour of assessee Non-adjudication of the ground relating to computation/re-computation of capital loss on liquidation of investment held by the assessee in G-USA- Held that:- FAA should have decided the issue raised by the assessee. The TP adjustments do not deal with computation/ re-computation of capital loss. Such computation will have its own consequences. The assessee had specifically mentioned that loss would have to be computed at Rs. 23. 06 crore as against Rs. 18. 2 to crores. As the FAA has not adjudicated the issue, so, in the interest of Justice, we are restoring back the issue to the file of the FAA for fresh adjudication. He is directed to afford a reasonable opportunity of hearing to the assessee. First ground of appeal is decided in favour of the assessee, in part. Disallowance of additional deduction u/s. 35(2AB)(1) in respect of the expenditure of Rs. 15. 57 crores incurred on in-house research and development activity carried out its Dombivili R&D facility - Held that:- As the AO/FAA did not have benefit of the certificate issued by the Board at the time of assessment/deciding the appeal. So, following the above order of the Tribunal, matter is restored back to the file of the FAA to decide the issue afresh.

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• 2016 (5) TMI 264
  Taxing of capital gains u/s.50B r.w.s.2(42C) - transfer of the BOPP films undertaking to Xpro India Ltd. (XIL) - Held that:- We had gone through the terms of BTA, which clearly provides that sale of undertaking as a going concern for a lump sum consideration of Rs. 14 crores. With regard to the contention of ld. AR that individual values has been ascribed to net current asset, we found that the AO has reproduced the individual items of assets/liabilities in para 3.6 and has held that most of the items have been taken over by the buyer at the book value with minor and negligible difference. Further the net current assets by nature are such that its value change from day-to-day, and, therefore, its exact value on the date of actual transfer cannot be determined at the time of entering into contract, which is usually much earlier than the date of conveyance. We found that even assignment of individual value to net current asset was only for the purpose of ascertaining the change in the value of such assets in the intervening period i.e. the date of agreement and the date of conveyance. The conclusion drawn by the AO and CIT(A) are as per material on record, therefore, did not require any interference on our part. Accordingly, we uphold the addition made by the AO u/s.50B on account of gain arising from transfer of BOPP Films Undertaking. Computation of deduction u/s.80HHC - reducing 90% of receipt on account of sundry receipts including sale of empty bags, cartons, octroi/BPT/insurance premium and excise/sales-tax refunds from the business profits as contemplated in explanation (baa) to section 80HHC while calculating the deduction under section 80HHC - Held that:- Similar issue was dealt with by the Tribunal in assessee’s own case in the assessment year 1998-99 and restored the matter to the file of the Assessing Officer with the directions n the light of the following principles: (1) Net income, which is assessable under section 28 of the Income Tax Act, will not be eligible for inclusion ill the profits of the business for computing the relief under section 80HHe. Therefore, items like dividend income, profit on sale of investments, etc., which are not assessable under section 28, will have to be excluded while computing the profits of the business for computing the relief under section 80HHC. (2) Any receipt, which has no element of export turnover, should be treated as independent income ill terms of the judgment of the Hon'ble Supreme Court in the case of Hero Exports (2007 (11) TMI 13 - Supreme Court of India ) and therefore 90% thereof should be excluded from the profits of the business. (3) The issue as to whether 90% if gross receipts or 90% of net receipts with reference to incomes falling under Explanation (baa)(1) should be considered. (4) Sales tax and excise duty would not form part of the total turnover in terms of the judgment of the Hon 'ble Supreme Court in the case of CIT vs. Lakshmi Machine Works, reported in(2007 (4) TMI 202 - SUPREME Court ).

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• 2016 (5) TMI 263
  Allowability of expenditure on car/s - nature of the professional expenses - whether the assessee could not establish any direct nexus of the impugned expenditure with the said business? - Held that:- The firm and the partners are separate & distinct entities/persons under the Act, even as the receipt of interest and remuneration by a partner from a firm is only in nature of share in the profits of the firm and, thus, assessable as business income. This position gets further clarified after the amendments to the Act (viz. ss. 28, 40, 184, 185) by Finance Act, 1992, materially altering, firstly, the definition of income (of a partnership firm and its’ partners) and, secondly, the manner of its computation and bringing it to tax. On facts, assuming the car/s being used for the business purposes of the firms, why should a partner bear the expenditure of the firm, which, besides being not deductible in his hands, would only be to his own detriment. The assessee, on the other hand, stating that the firms (of which he is a partner), as being not interested in investing in a car. In fact, in case of the same (common) car being used, the expenditure would necessarily have to be appropriated between the two firms, for which the car is thus used, and the assessee (refer s. 38(2)). In other words, the expenditure would required to be split three ways, i.e., the two firms for which the car is being also used, and the assessee. That, as well as the proportionate incidental expenditure – on car repairs, depreciation, and interest (on car loan), is, as afore-stated, the only expenditure that the assessee can rightly claim against the business income from the firms, with that relatable to the business purpose of the firms being deductible in their hands. Further, the assessee has nowhere specified the expenditure on the personal user of the car/s, an aspect which cannot be overlooked. We, accordingly, restore the matter back to the file of the A.O. to verify the assessee’s claims and determine the expenditure on car/s deductible in his hands in accordance with law, issuing definite findings of fact. The onus, we may clarify, to establish his claims, with materials and explanations, would only be on the assessee. We decide accordingly. - Decided in favour of assessee for statistical purposes. Income assessable under the head ‘Income from House Property’ - Held that:- The adoption of an enhanced rate does not breach the theory of real income inas- much as what the law envisages is the estimation of the annual value, defined as the fair rent that a house property is expected to fetch from year to year (sec. 23). It is only where the actual rent exceeds the fair rental value that the same is taken as annual value u/s. 22. That the tenants are related entities, and the assessee entered into the rental arrangements (perhaps for the first time), as stated, with a view to set off the interest on loan utilized for self occupied house property (residence), is of little relevance and, if anything, rather impugns the assessee’s case. We, accordingly, do not consider it as a fit case for remand. As regards maintenance charges (Rs.10,096/-) paid to the housing society, the payment thereof is certainly an expenditure that would be factored into while determining the rent, so that where paid/payable by the owner, who is legally liable therefor, the rent is increased to that extent, neutralizing its impact. Considering the totality of facts, including the nominality of the amount, we consider the assessee’s claim as sustainable in law as the market rent presumably factors in such charges. The same is directed to be allowed.We, accordingly, confirm the action of the Revenue, further directing it to allow the assessee, in computing the income from house property, his claim qua maintenance charges (Rs.10,096/-) after verifying if the same is wholly in respect of the rented house property/s

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• 2016 (5) TMI 262
  Transfer pricing adjustment - application of the rate of 3% take by the Transfer Pricing Officer to determine the arm's length rate of the international transaction of provision of corporate guarantee on behalf of the associated enterprise - Held that:- The Hon'ble Bombay High Court in the case of Everest Kento Cylinders Ltd.(2012 (11) TMI 1099 - ITAT MUMBAI) considering a somewhat similar situation has explained that instances of commercial banks providing guarantees could not be compared to instances of issuance of corporate guarantee. As per Hon'ble Bombay High Court, when commercial banks issue bank guarantees, the same is quite distinct in character, than the situation where a corporate issues guarantee to the effect that, if a subsidiary associated enterprise does not repay a loan, the same would be made good by such corporate. Keeping the said ratio it is quite clear that the manner in which the Transfer Pricing Officer has proceeded to determine the arm's length rate based on the probable rate being charged by the commercial banks is not justified. In this view of the matter, we are unable to approve 3% rate of guarantee commission fee determined as arm's length rate by the income-tax authorities. In the alternative, the addition that is required to be sustained is the position canvassed by the assessee before the Transfer Pricing Officer i.e. adoption of 0.50% as arm's length rate for the purpose of determining the arm’s length income on account of guarantee commission fee in the present case. Considering the entirety of facts and circumstances of the case and on the basis of the material available on record, we, therefore, proceed to uphold the rate of 0.50% for the purpose of determining the arm's length rate of the guarantee commission fee. Depreciation on data cable and other computer peripherals - @15% OR 60% as per assessee - Held that:- It was a common point between the parties that similar issue has been decided against the assessee for assessment year 2007-08 ) by following earlier decision of the Tribunal for assessment year 2006-07. Depreciation @ 15% confirmed - Decided against assessee

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• 2016 (5) TMI 261
  Undisclosed income of the assessee - statement recorded during the survey u/s. 133A - Held that:- Addition made on the basis of the statement in the present case recorded u/s. 133A is not sustainable in the eyes of law, hence, we delete the addition of Rs. 1.25 crores made by the AO and confirmed by the Ld. CIT(A) - Decided in favour of assessee

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• 2016 (5) TMI 260
  Calculation of deduction u/s 10A - exclusion of telecommunication expenses and foreign travel expenditure from export turnover for the purpose of deduction - Held that:- We direct the AO to exclude the above mentioned expenses both from the export turnover as well as from the total turnover while calculating deduction u/s 10A of the Act. See CIT Vs. Gem Plus Jewellery India [2010 (6) TMI 65 - BOMBAY HIGH COURT ] wherein held that since the export turnover forms part of the total turnover, if an item is excluded from the export turnover, the same should also be reduced from the total turnover to maintain parity between numerator and denominator while calculating deduction u/s 10A of the Act

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• 2016 (5) TMI 259
  Reopening of assessment - assessments based on receipt of certain information from Investigation Wing - Held that:- The reopening is bad in law due to non application of mind by the A.O. - Decided in favour of assessee

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• 2016 (5) TMI 258
  Professional charges received - whether were not in the nature of fees for technical services as defined in sec. 9(1 )(vii) - invoking the provisions of sec 44DA r.w.s. 115 - Held that:- Income from the services rendered in connection with providing drilling rigs/drilling services to ‘Cairn’ in India are in the nature of services and facilities in connection with, or supplying plant and machinery on hire which are used in prospecting for extraction or production of mineral oil and the provisions of section 44BB of the Act would apply and the income would be taxable accordingly and not as fee for technical services either under section 44DA or section 115A of the Act - Decided in favour of assessee Interest charged under section 234B - Held that:- The clause of the contract agreement contained provision for production of lower or no withholding tax certificate by the assessee to the ‘Cairn’, however, the Revenue has not produced any evidences that any such certificate of lower or no withholding tax was ever submitted by the assessee to the ‘Cairn’, and therefore it cannot be said that the assessee played any role in lower or no withholding tax by the payer. Thus, respectfully following the judgment of the Hon’ble High Court in the case of GE Packaged Power Inc,[2015 (1) TMI 1168 - DELHI HIGH COURT] we are of the opinion that the assessee cannot be held responsible for lower or no withholding tax and consequent responsibility of interest under section 234B of the Act for non-payment of advance tax on its income. Accordingly, we uphold the finding of the learned Commissioner of Income-tax(Appeals) on the issue and the ground of the Revenue is dismissed. - Decided in favour of assessee Considering the entire mobilization charges for taxing under section 44BB - Held that:- The entire payment of mobilization charges in question was paid for the purpose of execution of the contract between the assessee and the ‘Cairn’ and therefore the entire sum was liable for taxed under section 44BB of the Act. Accordingly, we uphold the finding of the learned Commissioner of Incometax( Appeals) on the issue in dispute and the ground of the assessee is dismissed. - Decided in favour of revenue

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• 2016 (5) TMI 257
  Disallowance of expenditure incurred for obtaining advisory services in connection with the restructuring of bank debts - Held that:- Fee has been paid to the said consultant primarily for rendering advice to reduce the interest burden of the assessee-company by, inter alia, exploring the possibility of identifying a strategic investor/lender. It is a settled proposition that payments made to consultants for obtaining professional services in connection with debt restructuring with banks, etc. is a revenue expenditure within the meaning of Sec. 37(1) of the Act and such proposition is supported by the judgment of the Hon’ble Gujarat High court in the case of CIT vs. Gujarat State Fertilizers & Chemicals Ltd.,(2013 (7) TMI 701 - GUJARAT HIGH COURT ), a decision which was relied upon by the ld. Representative for the assessee in the course of the hearing. However, the ld. Representative for the assessee, quite fairly conceded that insofar as the proportion of fee relatable to the restructuring and raising of equity share capital was concerned, such expense would fall for disallowance as per the ratio of Brooke Bond (India) Ltd. (supra). In this context, having regard to the entirety of facts and circumstances of the case, in our view, it would be in fitness of things that 10% of the expenditure, i.e. Rs. 5,05,080/- be disallowed and balance of the expense be allowed as a revenue expenditure. - Decided partly in favour of assessee Disallowance of expenditure in connection with issuance of shares - Held that:- The facts which emerge from the perusal of the orders of authorities below reveal that the impugned expenditure has been incurred in connection with increase in authorised share capital of the assessee-company and raising of share capital. The said expenditure, in our view, has been rightly disallowed following the ratio of the judgment of the Hon’ble Supreme Court in the case of Brook Bond India Ltd. (1997 (2) TMI 11 - SUPREME Court). Such expenditure is also not covered in the scope of Sec. 35D of the Act, as fairly conceded by the ld. Representative for the assessee. - Decided against assessee Addition u/s. 28(iv) - waiver of the outstanding principal amount of loan - Held that:- As per a working provided by the Ld. Representative for the assessee such amount is crystallized at Rs. 34.99 crores and the balance of Rs. 4.01 crores is considered as being used for trading operations. Therefore, having regard to the facts of the present case, the waiver of loan can be said to be relatable to acquisition of capital asset to the extent of the proportion in which the loan proceeds were utilized for acquisition of capital asset. At the time of hearing, when the aforesaid was put across to the assessee a working thereof was furnished whereby it was submitted that an amount of Rs. 1.57 crores out of the total waiver of Rs. 15.35 crores can only be considered to fall within the scope of section 28(iv) of the Act for the reason that the same related to loan funds used for the purposes of trading/business. Quite clearly, the balance of the waiver is relatable to the proportion of loan funds utilized for acquisition of the shares of M/s. Applisoft Inc. and on this aspect the ratio of the judgement of the Hon’ble Bombay High Court in the case of Mahindra and Mahindra Ltd.(2003 (1) TMI 71 - BOMBAY High Court ) clearly supports the plea of the assessee. In this background of the matter, we, therefore, conclude that so far as the amount used for the purchase of capital asset is concerned, the waiver thereof is a capital receipt not chargeable to tax under section 28(iv) of the Act, which follows that the Assessing Officer is required to restrict the disallowance under section 28(iv) of the Act to the extent of Rs. 1.57 crores only, being the loan waiver which has been used for trading activity. We hold so - Decided partly in favour of assessee MAT applicability on waiver of outstanding principal amount of loan and interest thereof - assessee claimed that the provisions of section 115JB of the Act do not apply to the income accrued or arising from the business so carried on in the SEZ Unit - Held that:- The difference between the assessee and the Revenue on the application of sub-section(6) of section 115JB of the Act relates to the waiver of outstanding principal amount of loan and interest thereof. The stand of the Revenue is that such income is not generated out of the services rendered by the assessee but is on account of a One Time Settlement with the bank and, therefore, it does not fall in the exclusion contained in the sub-section(6) of section 115JB of the Act . The phraseology of sub-section (6) of section 115JB of the Act prescribes that the income referred thereto may arise out from the ‘services rendered’ or from the ‘business carried on’ by the unit. The concept of ‘income arising from services rendered’ is narrower than the ‘income arising from any business carried on’ and viewed in that light in our view, the impugned income can definitely be said to be falling within the expression ‘arising from any business carried on’ in SEZ Unit. Therefore, in our view, the assessee has to succeed on its plea seeking exclusion of the impugned sum from the purview of section 115JB of the Act on account of sub-section (6) thereof. - Decided in favour of assessee Benefit of set off of unabsorbed depreciation against income from other sources denied - Held that:- The only issue agitated by the assessee is in relation to set-off of claim of unabsorbed depreciation, which in our view, is quite well-founded in terms of section 32(2) of the Act. To the aforesaid extent, we set-aside the order of CIT(Appeals) and direct the Assessing Officer to revisit the claim of the assessee in accordance with law, after allowing the assessee a reasonable opportunity of being heard. - Decided in favour of assessee for statistical purposes. ALP determination - adoption of Transactional net margin method (TNMM) selected by the Transfer Pricing Officer/Assessing Officer in preference to the CUP method adopted by the assessee - Held that:- Similar issue has been considered by the Tribunal in assessment year 2004-05 and it is pointed out that the issue has been sent back to the file of the Assessing Officer for determining the arm's length price of international transaction afresh including the selection of the most appropriate method for carrying out comparability analysis

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• 2016 (5) TMI 256
  Disallowance under section 80-IA - choosing of the initial assessment year - Held that:- Choosing of the initial assessment year for claiming deduction under section 80-IA of the Act in a block of ten years out of fifteen years is with the assessee, i.e., it is the option of the assessee to choose the initial assessment year for claiming deduction under section 80-IA of the Act. Further, the loss claimed by the assessee in respect of eligible business is to be set off against the income of the assessee from other ineligible business as in respect of the assessment years and there is no need to notion ally carry forward these losses up to the initial assessment year and write off the same out of the profits of eligible business. - Decided in favour of assessee

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• 2016 (5) TMI 255
  TDS liability - Payment to Association of Tennis Profession (ATP) - disallowance u/s 40(a)(i) - Held that:- Section 194E read with Section 115 BBA apply to payments made to a non-resident sports association or an institution. In the instant case, ATP is undisputedly a governing body of the world wide men’s professional Tennis Circuit, responsible for ranking of its players and coordinating the Tennis Tournament in the world. In such circumstances we are of the opinion that ATP is a non-resident sports institution and therefore Section 194E applies to the payments made by the assessee to the ATP. In the light of the above, the order of the CIT (A) is reversed and the order of the Assessing Officer is restored - Decided against assessee Working of operating costs - Held that:- Reimbursement costs has to be excluded as the same do not involve any functions to be performed so as to consider it for profitability purposes. Thus we direct AO/TPO to exclude reimbursement costs while working out the operating costs. - Decided in favour of assessee Exclusion of Mega Soft Ltd. as comparable and inclusion of Orient Information Technology Ltd. in the set of comparables - Held that:- As regards to the inclusion of Orient Information Technology Ltd. is concerned, the TPO had not given any particular reason for its exclusion. The said company also designs, develops and deploys customized software solution and application, so its functionality was comparable with the assessee. The said company was not considered by the TPO because it was a loss making company but that cannot be a reason to exclude it from the set of comparable in view of the decision of the ITAT Delhi Bench in the case of Yum Restaurants India Ltd. [2011 (5) TMI 852 - ITAT DELHI ] wherein it has been held that merely a company showing loss would not lose its status of comparable if other criteria depicted status of comparable. Thus this issue is remanded back to the Assessing Officer for verification of the calculations furnished by the Ld. A.R of the assessee and to be decided afresh in accordance with law. Disallowance of expenditure incurred in Indian Rupees payable to Indian Residents - non deduction of tds - Held that:- The provisions of Section 40(a)(i) of the Act do not apply to A.Y 2004-05 which is the assessment year under consideration. Therefore, no disallowance can be made in respect of expenditure incurred in Indian Rupees payable to Indian Resident on allegation of non-deduction of tax at source in respect of A.Y 2004-05 as there was no such enabling provision in the statute. Therefore, the CIT(A) rightly deleted the disallowances in respect of expenditure incurred in Indian Rupees payable to Indian Residents - Decided in favour of assessee Disallowance of 20% of the miscellaneous expenses - Held that:- A.O has not given any basis for making the adhoc disallowance. - CIT (A) has rightly deleted the adhoc estimated disallowance of miscellaneous expenses, and this ground of the Department appeal is liable to be dismissed. - Decided in favour of assessee

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• 2016 (5) TMI 254
  Disallowance u/s.14A - Held that:- When the authorities below have observed that the assessee has received Rs..70.00 lakhs from the group concern was interest free and no interest was debited on this amount, the ld. CIT(A) has rightly held that the disallowance under Rule 8D(2)(ii) cannot be made when there was no interest burden on the amount borrowed from the group concern - Decided against revenue. Disallowance of additional depreciation on Ready Mix Concrete [RMC] - Held that:- The assessee is not entitled for additional depreciation in respect of machinery used since production of ready mix concrete would not amount to manufacture of article or thing Disallowance made under Rule 8D(2)(iii) - Held that:- Assessing Officer rightly invoked the Rule-8D and arrived at the disallowance of expenses u/s.14A r.w.Rule-8D. In order to arrive at a reasonable amount of expenditure, which may vary from case to case and situation to situation, the legislature, after taking various factors into consideration, came to a conclusion that such expenses can be reasonably calculated @ 0.5% of the average investments made by the assessee. For this purpose, the legislature has arrived at a common formula to calculate the expenses @ 0.5% of the average investments made as per step-3 of the formula given in Rule-8D. Accordingly the legislature incorporated and introduced the Rule-8D. Further, as could be seen from the assessment order, the Assessing Officer has rightly quantified the expenditure under Rule 8D(2)(iii) and disallowed under section 14A of the Act.

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• 2016 (5) TMI 253
  Benefit of exemption under sec. 11 denied - A.O. was of the opinion that though, its objects are charitable in nature and activities are genuine, the activities carried out by the assessee are akin to any commercial activity and hence, computed the income under the head profits and gains of business or profession - Held that:- Admittedly, The Society is registered under sec. 12A of the Act and it is imparting education. It is not a case of A.O. that the objects are not charitable in nature and the activities of the assessee are not genuine. The A.O., one side admitted that the objects of the society are not under debate, nor any case is being made out for reconsideration of exemption allowable to assessee, but on the other hand, denied the exemption for the reason that the assessee gross receipts have increased over a period. On perusal of assessment order we find that the A.O. neither doubted the genuineness of the activities of the society, nor pointed out any violation referred to sec. 13(1)(c) or 13(1)(d), which are pre conditions for denying exemption u/s 11 of the Act. Therefore, we are of the opinion that the A.O. was not correct in denying exemption under sec. 11 and assessed income under the head profits and gains of business of profession. - Decided against revenue Applicability of provisions of sec. 40(a)(ia) and 43B when income computed under sec. 11, 12 & 13 of the Act - Held that:- If any expenditure is disallowed by invoking the provisions of section 40(a)(ia) and 43B, it leads to a situation where assessee income available for application is enhanced without being any real income for application for charitable purpose, which leads to an absurd situation where the trusts/societies enjoying exemption u/s 11 have to pay taxes. This is because, the assessee claiming exemption u/s 11, shall apply 85% of income for the purpose of objects of the Trust. The legislature in its wisdom has kept separate provisions which are independent from any other provisions of the Act for computation of income of trusts claiming exemption u/s 11 of the Act. Therefore, we are of the opinion that, when income is computed under sec. 11 of the Act, the provisions of sec. 40(a)(ia) & 43B are not applicable. Hence, the A.O. was not correct in disallowing the amounts by invoking the provisions of sec. 40(a)(ia) and 43B for failure to deduct TDS and failure to remit the unpaid liabilities. - Decided against revenue

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• 2016 (5) TMI 252
  Foreign exchange gain treated as non-operating income - Held that:- Foreign exchange gain pertaining to marketing commission segment should be considered as operating income. Selection of comparable - Held that:- In the present case, the authorities below having held that M/s Spinco’s operations are functionally different than the assessee, in our considered view, M/s Spinco cannot be taken as a comparable. When M/s Spinco ceases to be a comparable, the TPO should look for external comparables which he has rightly adopted some of the external comparables. Therefore, following the decision of the Ahmedabad Bench of the Tribunal in the case of Fortune Infotech Ltd.(2016 (2) TMI 382 - ITAT AHMEDABAD ), we restore the matter to the file of the TPO who shall consider the external comparables and determine the ALP by taking the segmental financials after providing adequate opportunity of being heard to the assessee.

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• 2016 (5) TMI 251
  Treatment of income from trial run receipts - revenue receipt OR capital receipt - Held that:- The source need not be continuously productive and it is sufficient if the income is flowing from some exercise or operation by the appellant and in ordinary parlance which can be considered as income. To constitute income, the receipt need not necessarily have their origin in business activity or investment or under an enforceable obligation. The conclusion in construing the word ‘income’ one has to ask whether having regard to all the circumstances surrounding the particular payment and receipt in question, what is relevant is of the character of income according to the ordinary meaning of that word in the common language or whether it is merely a casual receipt. The word ‘income’ is of elastic import and it is extended meaning are not controlled or limited by the use of the words ‘profit and gains’. The diverse forms which income may assume cannot exhaustively be enumerated and so in each case the decision of the question as to whether any number of receipt is income or not must depend upon the nature of the receipt and the scope of relevant taxing provision. In the present case, the income earned by the assessee by operation of plant and machinery for treating the effluent water and collected the income from the customer on commercial basis and it cannot be considered as a capital receipt as the assessee operated the plant and machinery without the requisite permission and it is to be revenue receipt to be considered for levying the tax after giving necessary deduction for earning that income. - Decided against revenue Treatment of subsidy received from Government of India as a deduction from cost of fixed asset - Held that:- The subsidy was sanctioned by the Government of India for setting up of common effluent treatment water at Tripur and thus, it amounts to bearing the part of the cost of plant and machinery by Government of India through subsidy and it is not for carrying on the business of the assessee rather than setting up of the industry. Hence, in our opinion the cost of fixed asset to be reduced to that extent of subsidy received bythe assessee.Since the subsidy received for setting up of industries by installing plant and machinery would definitely reduce the cost of the plant and machinery from the side of the assessee and it is to be reduced from the cost of plant and machinery in terms of above Explanation to Sec.43(1) of the Act. Being so, we do not find any infirmity in the order of the lower authorities. The same is confirmed. - Decided against revenue Levy of penalty u/s.271(1)(c) - Held that:- We find force in the argument of the ld.A.R, though the assessee treated the trial run receipt and subsidy received as a capital receipt, the AO treated the Trial run receipt as revenue receipt, thereby increasing the income of assessee and also deduct the subsidy receipt from the cost of fixed asset. Thereafter, he recomputed the depreciation, finally resulted increase in loss, then returned loss by the assessee. There is no any revenue loss to the Department and this is only a technical breach, which cannot be reason to levy penalty. Accordingly, placing reliance in the judgment of Apex Court in the case of M/s.Reliance Petro Products Pvt Ltd in [2010 (3) TMI 80 - SUPREME COURT ](SC), we are inclined to delete the penalty - Decided in favour of assessee

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• 2016 (5) TMI 250
  Depreciation on bio-gas plant - Held that:- In view of the available documentary evidence; the positive affirmation made by WPIL, the lessee who is a party to the lease transaction, regarding the existence of the bio gas pilot plant; the inconsistent statements made by the MD of Niphad SSK Ltd and the incomplete inquiry in the case of IDBI, about the ownership of the bio gas plant, non-existence of bio-gas plant especially during F.Y.1992-93 was not conclusively proved by lower authorities. In view of the above discussion and keeping in view the totality of facts and circumstances of the case, we set aside the orders of both the lower authorities and the matter is restored back to the file of AO for deciding afresh considering the documentary evidences discussed above and after giving due opportunity to the assessee. - Decided in favour of assessee for statistical purposes. Penalty imposed u/s.271(1)(c) - Held that:- Assessing Officer only says that assessee has committed a default but what is the nature of default has not been discussed at all. The Assessing Officer is silent on exactly which provisions of section 271 (1 )(c), he is invoking to impose the penalty. This is not justified at all for imposition of penalty. Assessing Officer has not made out a case of what is the default committed and what is the provision of the Income-tax Act applicable in that default for imposing penalty. There is inadequate satisfaction of the Assessing Officer for imposition of penalty on facts also. I am satisfied that the evidences relied upon in the assessment proceedings are only indicative and do not go to establish non existence of pilot plants. In fact the evidence relied upon by appellant in the penalty proceedings, particularly, insurance documents which clearly mention existence of the plants at the sites, goes to establish the other way round. In such a situation, the confirmation of quantum addition is to our mind based upon a perception of preponderance of probabilities about existence or otherwise of the pilot plants. There is no conclusive deduction in the assessment order or in the first appellate order of quantum appeal. In such a situation, imposition of penalty is not justified and the same is deleted - Decided in favour of assessee

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• 2016 (5) TMI 249
  Eligibility of deduction u/s.80IB(10) - CIT(A) had denied the claim of deduction for the reason that assessee had not complied with the conditions stipulated under clause (a), (b) & (c) of Section 80IB(10) of the Act and the basis such conclusion was DVO's report - It is CIT(A)’s observation that assessee has constructed only on 5686.74 sq.mtrs., but on the other hand, it is assessee’s contention that it has developed on the area of 8838.74 sq. mtrs. of land and for which, support is drawn by ld. A.R. on the certificate being no. 1870 dated 9th September, 2010 issued by Ahmedabad Urban Development Authority (AUDA) - Held that:- On perusal of the aforesaid certificate, it is seen that the certificate has been issued by AUDA on 09.09.2010 whereas the impugned order of ld. CIT(A) is dated 04.06.2010 meaning thereby that when the order was passed by ld. CIT(A), the aforesaid certificate issued by AUDA was not before her and therefore she did not have the benefit of the aforesaid certificate. Further on perusal of the certificate, it is seen that it gives details about the area of land, permission number, approved built up area, date of approval etc. which are important factors which would go in determining the eligibility of assessee for deduction u/s.80IB(10) of the Act. In such a situation, in the larger interest of justice, we are of the view that the issue about deduction u/s.80IB(10) of the Act needs to be re-examined in the light of the aforesaid certificate issued by AUDA and in accordance with law - Decided in favour of assessee for statistical purposes.

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• 2016 (5) TMI 248
  Depreciation claimed on the computers - Held that:- After going through the depreciation chart, there is no error in the claim made by the appellant. The deprecation disallowance is hereby deleted. - Decided against revenue Addition on unexplained credits in the name of Sh. Gokul Tandon - Held that:- As the additional evidences are filed by the assessee in respect of genuineness of the transaction and creditworthiness, before us, in the interest of justice, we feel it appropriate to remit the matter back to the file of the Assessing Officer, to examine all the additional evidences submitted by the assessee before the Tribunal and decide the issue in accordance to law Addition on account of unexplained cash credit in the name of M/s Go To Customer services private limited - Held that:- We find that the amount of unsecured loan received and paid as per the details filed by the assessee prepared on the basis of its books of accounts were matched with the ‘ledger accounts’ confirmed by the loan creditor M/s Go To Customer services private limited, then there was no basis for the Assessing Officer for holding the loan amount appearing in tax audit report as correct and making addition for unexplained cash credit on that basis, was not justified. In view of above, we find that order of the ld. Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and we uphold the finding of Commissioner of Income-tax (Appeals) on the issue in dispute - Decided against revenue Disallowance of various expenses claimed by the assessee - Held that:- We find that not only the assessee has averred that books of account were produced before the assessing officer but also the books of accounts of the assessee company were audited by the auditor as per company law as well as by the tax auditor. In our opinion, the findings of the ld. Commissioner of Income-tax (Appeals) on the issue in dispute are well reasoned and no interference on our part is required. Thus, we uphold the finding of the ld. Commissioner of Income-tax (Appeals) on the issue in dispute. - Decided against revenue

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• 2016 (5) TMI 247
  Addition due to negative balance in the books of account - whether the assessee has introduced any unaccounted money for purchases? - Held that:- In the case before us, the assessee appears to have purchased turmeric through Agricultural Market Committee. The turmeric being an agricultural produce, the assessee has to necessarily make payment in cash to the agriculturists. It is not the case of the Revenue that purchases and sales were not recorded in the books of account. As rightly submitted by the Ld.counsel for the assessee, the negative balance was withdrawal of funds from the bank and payments were made to agriculturists in cash in a later date. Therefore, rejection of books of account is not justified at all. In such circumstances, adopting peak credit is the only method to find out the cash balance. Therefore, the CIT(Appeals) has rightly restricted the negative balance to Rs. 1,29,716/-. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed. Unexplained creditors and purchases - Held that:- Admittedly, the assessee has not furnished all the addresses of the persons from whom the purchases were made. The assessee, however, clarified before the Assessing Officer that the purchases were made from Government regulated market committee. The fact that the turmeric was purchased through regulated markets is not in dispute. When the regulated market committee was monitoring the transactions and purchases of turmeric, this Tribunal is of the considered opinion that the Assessing Officer could have very well examined the actual purchases made by the assessee and the details of the agriculturists. Inspite of the fact that the assessee has disclosed the details of the purchases of turmeric and the fact that the Agricultural Committee is monitoring the transactions of the assessee, the Assessing Officer has not taken any steps to examine the genuineness of the transactions. In those circumstances, disallowing the claim of the assessee as non-genuine is not justified. Therefore, the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer. Allowance of publicity expenses - Held that:- It is not in dispute that the assessee is manufacturing and selling turmeric powder in the brand name of Aachi. Aachi group is marketing the turmeric powder manufactured by the assessee in their own brand name along with other products manufactured by them. The claim of the assessee is that advertisement made by the assessee to promote the brand name “Aachi” would directly benefit the assessee in increasing the turnover. This Tribunal is of the considered opinion that when the assessee is manufacturing turmeric powder and marketing the same in the brand name of “Aachi” through Aachi group, promoting the brand name “Aachi” in the market would increase the market share of the assessee. This would directly increase the turnover in the market. Consequently, the profit of the assessee would go up. Therefore, the expenditure incurred by the assessee is only for the business purpose. Merely because the Aachi group gets incidental benefit that cannot be a reason to disallow the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed. Enhancement of turnover and estimating profit of the assessee - Held that:- Some of the packing material consumed during the year was actually used for turmeric powder manufactured and packed and was lying in the closing stock. The volume of such closing stock as on 31.03.2009 was 1,15,345 Kgs. The opening stock as on 01.04.2008 was 6,856 Kgs. Therefore, the net closing stock of 1,08,489 Kgs should also be considered as the resultant of the packing material consumed during the year under consideration. Therefore, the Assessing Officer’s calculation of 37,90,500 Kgs actually represents the finished product manufactured by the assessee during the financial year 2008-09. To arrive at the probable sales effected during the year, the net increase in the closing stock is to be reduced from the goods manufactured during the year. In view of the above, this Tribunal is of the considered opinion that in the absence of any material on record that the assessee has inflated the purchases or sales, the estimation of probable sales on the basis of the packing material consumed by the assessee is not justified. This Tribunal is of the considered opinion that the estimation of total sales without considering the actual purchases would inflate the sale, therefore, the CIT(Appeals) has rightly found that the total turnover was 19,75,167.60 Kgs as against 37,90,500 Kgs estimated by the Assessing Officer. Therefore, the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the CIT(Appeals) and accordingly the same is confirmed. Addition of unaccounted purchases - Held that:- As rightly submitted by the Ld. counsel for the assessee, the enhanced addition of purchase was deleted by the CIT(Appeals), which was confirmed by this Tribunal in the earlier part of this order. Once the enhanced purchase was deleted, the enhanced estimation on sales would also automatically get deleted. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the addition. Furthermore, when the Assessing Officer estimated the turnover, it is obligatory on his part to reduce the turnover declared by the assessee. On one hand the Assessing Officer estimated the turnover and on the other hand, the turnover declared by the assessee was not reduced. This inflated the turnover of the assessee arbitrarily. Therefore, the CIT(Appeals) has rightly found that the turnover declared by the assessee has to be reduced from the turnover estimated by the Assessing Officer. Revenue appeal dismissed.

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• 2016 (5) TMI 246
  Addition towards inflation of purchase of rice - Held that:- What is to be seen is whether the assessee has purchased the paddy or not. In this case disallowance was made only on the ground that the assessee has not produced the bills and vouchers. The fact remains that the assessee has produced bought note which contains the names of the farmers and their village names. By referring to the village name and name of the farmers, one can easily identify the individual from whom the paddy was purchased. It is not necessary to mention their complete address of the farmers who are living in the village. Each and every agriculturist can be very much identified by referring to their individual name and the village. Therefore, the Assessing Officer may not be justified in saying that the bought note does not contain complete name and address of the farmers. The next contention of the Assessing Officer that the farmers could not preserve their paddy and sell in a later stage is farfetched. Paddy is not a perishable commodity. The paddy harvested by the agriculturists can be stored for a reasonable period of time. At the best, the moisture content may be reduced by passage of time. The paddy is not a perishable commodity. Therefore, merely because the bills were raised during the period when there was no harvest, that cannot be a reason to doubt the purchase itself. Rule 6DD relaxes the rigour of provisions of Section 40A(3) of the Act with regard to payment made to agricultural and forest produces purchased from cultivator, grower or producer of such articles. When Rule 6DD enables the purchaser to pay cash after taking into consideration of the economic condition in which the agriculturists of this country are living, expecting a bill/voucher from the agriculturists is something which cannot be obtained by the assessee. In those circumstances, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the addition - Decided in favour of assessee. Unexplained cash deposit in bank account - Held that:- The CIT(Appeals), by following his own order in the assessee's own case for assessment year 2007-08, found that the net available cash as on 31.03.2007 was Rs. 5,23,773/-. Therefore, the CIT(Appeals) presumed that the assessee could explain the source for making investment in the bank account. As rightly submitted by the Ld.counsel for the assessee, this fact needs to be verified. Accordingly, the orders of the lower authorities are set aside and the issue of addition of Rs. 5,23,773/- is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue in the light of availability of funds as on 31.03.2007 and thereafter decide the matter in accordance with law after giving reasonable opportunity to the assessee.- Decided in favour of assessee by way of remand. Addition towards unexplained loans and advances - Held that:- The Assessing Officer disallowed the claim of the assessee only on the ground that the balance sheet does not reflect the loan/advance said to be given by the assessee to his wife Smt. Punitha Balakrishnan. The fact remains that the loan was given through four cheques on four different dates. This fact is not disputed by the Revenue. When the amount was transferred from the bank by means of cheques, this Tribunal is of the considered opinion that rejection of claim of the assessee only on the ground that the balance sheet does not disclose the advance said to be made by the assessee is not justified. - Decided in favour of assessee

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• 2016 (5) TMI 245
  Penalty u/s 271(1)(c) - sale of agriculture land - Held that:- The ld. Authorised Representative argued the grounds against the addition by the Assessing Officer though accepted the addition and also paid taxes. The assessee company is a public limited company and Books of Accounts are Audited under Companies Act and provisions of Income Tax Act. The assessee’s contention that the land is agricultural land cannot be sustained with proof, as reiterated before lower authorities and also filed paper book containing central notification and guideline values and copy of patta and chitta, VAO certificate for census to substantiate that land is agricultural land fall within specified area. The assessee is arguing the penalty proceedings but not quantum appeal were the grounds to substantiate the addition are being argued. On perusal of records and lower authorities order, we find that assessee company was provided adequate opportunity of hearing and they could not substantiate with documentary evidence except relying on the notification and the decisions which the Commissioner of Income Tax (Appeals) has distinguished in his order. Therefore, we find that Commissioner of Income Tax (Appeals) has examined the issue and also explanations of the assessee were dealt. Therefore, we are not inclined to interfere with the order of the Commissioner of Income Tax (Appeals) and uphold the same. - Decided against assessee.

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• 2016 (5) TMI 244
  Penalty u/s 271(1)(c ) - Held that:- In the present case the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. The orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee

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• 2016 (5) TMI 243
  Addition u/s 68 - Held that:- Disallowance was on account of unexplained cash credit u/s 68. But the assessee has produced and explained the cash book of sister concern Suman Trading Co where the transactions with the assessee has been duly recorded and matched with the cash book. The ld. DR failed to bring anything contrary to the findings of ld. CIT(A). So we do not find any reason to say that Rs. 60 lakhs is unexplained cash. So we upheld the decision of ld. CIT(A). - Decided in favour of assessee Additions on account of the mismatch of records between M/s Shiva Cement Ltd and the assessee - Held that:- We understand that the discrepancies noted from the third party statement are not necessarily undisclosed income of the assessee.The additions cannot be merely made on the evidence collected from third parties. In our considered view we are inclined not to interfere in the order of ld. CIT(A)in deleting the addition - Decided in favour of assessee

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• 2016 (5) TMI 242
  Disallowance of business expenses - Held that:- As objection raised by the ld. Assessing Officer in disallowing these expenses has already been struck down by the decision of co-ordinate bench in assessee's own case confirming the existence of business activity in the year under appeal, we do not find any reason for disallowance of these normal business expenses and accordingly we allow the expenses of Rs. 23,82,268/- as business expenses out of the total disallowance of Rs. 54,29,508/- as mentioned in ground no.1 of the appeal. - Decided against revenue Disallowance of bad debt - Held that:- When assessee’s case has travelled to the Tribunal in the second round and assessee had sufficient opportunity to prove the genuineness of the claim of bad debt of Rs. 30,47,240/- and then also he has been unable to satisfy the lower authorities and even before us, during the course of hearing, we do not find any reason to accept the contentions and claim made by the assessee in this ground relating to disallowance of bad debt in the given circumstances - Decided against assessee Allowability of interest expenses under the provisions of section 57(iii)- Disallowance of interest claimed by assessee against interest income shown under the head income from other sources - Held that:- In order to claim expenses under the provisions of section 57(iii) of the Act nexus has to be proved that the same has been incurred for earning the income shown under the provisions of section 56 of the Act i.e. the income from other sources. Applying these provisions to the facts of the case, we find that assessee has declared interest income of only Rs. 534557/- and has claimed interest expenses of Rs. 4554551/- Out of total interest claimed at Rs. 4554551/- Assessing Officer has already allowed the claim at Rs. 2199959/- and for the balance amount of interest of Rs. 2354592/- nothing was placed on record by the assessee to prove that it has been spent to earn interest income which has been declared u/s 56 of the Act and rather we find force in the observation made by ld. Assessing Officer that the amount of interest of Rs. 2354592/- has been paid on loans taken has actually been diverted towards investment in shares and other non-interest bearing investment and this gets further support by the fact that assessee has earned long term capital gains of Rs. 13260055/-. In these circumstances, we are unable to accept the contention made by ld. AR of assessee about the allowability of interest expenses at Rs. 2354592/- under the head income from other sources and we uphold the order of ld. CIT(A) and accordingly dismiss this ground of assessee.- Decided against assessee Insurance claim received and sundry balance written off treated as ncome from other sources - Held that:- In the light of decision of the co-ordinate bench in assessee’s own case wherein it has been held that assessee has carried out the business activities and allowed the impugned profit and loss account wherein the insurance claim and sundry balance written off were shown in the credit of profit and loss account of M/s Labh Enterprise and these credits of Rs. 30,443/- and at Rs. 14,054/- on account of insurance claim and sundry balance are arising out of business activities of M/s Labh Enterprise carried out before 1.4.1995 i.e. taking over of the business by the assessee as a sole proprietor. We are, therefore, of the view that these credits of Rs. 30,443/- and Rs. 14,054/- on account of insurance claim received and balance written off totaled at Rs. 44997/- were rightly shown by the assessee under the head business income and ld. CIT(A) was not correct in upholding the action of Assessing Officer in assessing these credits of Rs. 44997/- under the head income from other sources - Decided in favour of assessee

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• 2016 (5) TMI 241
  Addition on account of bad debts - Held that:- CIT(A) has decided this case on bad debt written off itself. No opinion has been expressed by the ld CIT(A) on business loss. We find that the assessee has advanced this money for the business purposes but this amount has not been accounted for in previous year as income. Therefore, order of the ld CIT(A) is not justified allowing the bad debt U/s 36(1)(vii) of the Act, but it is business loss as amounts were advanced for business purposes. The assessee also claimed bad debt of Rs. 2,87,930/-, which was advanced to Shri Mohiuddin, who was designer and served the firm on remuneration basis. The advance was adjusted against the salary but suddenly he left the assessee’s job and recovery could not be made out by the assessee, but there is no evidence with the assessee to demonstrate that Shri Mohiuddin was in employment and has expertise in designing carpet and also worked with the assessee. No income from this advance has been accounted for in the previous years. Therefore, we upheld the order of the ld CIT(A) for business loss to the tune of Rs. 1.45 crores and confirmed the addition of Rs. 2,87,930/- as advanced to Shri Mohiuddin and claimed as bad debt. - Decided partly in favour of assessee Disallowance under the head various expenses - CIT(A) restricted the addition @ 10% as against 15% done by AO - Held that:- It is difficult to get bill of each and every expenditure incurred by the assessee particularly taxi, rickshaw, tea etc, therefore, no reason to intervene in the order of the ld CIT(A). Accordingly, we uphold the order of the ld CIT(A)

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• 2016 (5) TMI 240
  Addition on undervaluation of stock - Held that:- Undisputedly the assessee has been following the weighted average rates method in valuing the stock and same was accepted by the Revenue in earlier years. Therefore, there is no justification in rejecting the method of valuation made by the Assessing Officer. Moreover, the Assessing Officer has not furnished the reasonable explanation of the reasons for rejecting mode of valuation adopted by the assessee. We have carefully examined the order of the CIT(A) and find that the CIT(A) has adjudicated the issue in a right perceptive in deleting the addition - Decided in favour of assessee Addition on account of unexplained investment in acquisition of excess stock of marble - Held that:- Since assessee has not challenged this order of the CIT(A), it attains the finality. So far as the addition of Rs. 53,78,792/- is concerned, the CIT(A) has restricted the addition to the profit earned on the sale of stock outside the books of account at 11%, resulting into addition of Rs. 5,91,667/-. Since we do not find any infirmity in the order of Ld. CIT(A) as the addition is only to be made with respect to profit earned on stock of sale outside the books of accounts. Accordingly, we confirm the order of the CIT(A) in this regard.- Decided against revenue Addition u/s 56 - purchase of shares by the assessee from Bharat Bearings Ltd. and Shankar Telecom Ltd. for Rs. 1 per share against the face value of shares of Rs. 10/- for each share - CIT(A) deleted the addition - Held that:- We find that undisputedly the transaction took place in the month of April, 2010 whereas the provisions of Section 56 (2)(viia) was made applicable w.e.f. 01.06.2010.Therefore, the provisions cannot be attracted to the present transaction. The applicability of the other provision of Section 69 and 69A was also examined by the CIT(A). Since CIT(A) has properly adjudicated the issue in the light of relevant provisions of the Act, we find no infirmity therein. Accordingly, we confirm his order.- Decided against revenue Disallowance u/s 14A - Held that:- CIT(A) has calculated the disallowance as per Rule 8D and Section 14A. Since no specific defect in the calculation of disallowances were pointed out by the Ld. DR, we find no infirmity in the order of the CIT(A) - Decided against revenue

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• 2016 (5) TMI 239
  Disallowance of bad debts - Held that:- Section 36(1)(vii) was amended w.e.f. 1.4.1989 and as per the amended provision of clause (vii) of section 36(1) of the Act, subject to the provisions of sub-section (2) of section 36, the amount of any bad debts or part thereof which is written off as bad debts as irrecoverable in the accounts of the assessee, the provisions shall be allowed. Hence, the basis of disallowance adopted by the AO is perverse and misconceived and against the letters and spirit of relevant provisions of section 36(1)(vii) of the Act which is not sustainable and the same was rightly dismissed by the ld. CIT(A). In the light of the proposition laid down in the case of TRF Limited [2010 (2) TMI 211 - SUPREME COURT ], the claim of the assessee pertaining to bad debts, the ld. CIT(A) was correct in granting relief to the assessee as the assessee had written off the claimed amount in bad debts in its books of account during the previous year and there was no requirement to establish this fact that the debts have become bad debts in the previous year after 1.4.1989 there was no requirement to show and efforts of recovery and to establish that the debts have become debts despite of sincere and all possible efforts of the assessee. - Decided in favour of assessee

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• 2016 (5) TMI 238
  Addition of unsecured loan received from 10 persons added u/s 68 - ingenuity - Held that:- Regarding the identity of the creditors, it has been proved by the assessee beyond doubt as all the lenders are having permanent account number bank account and have filed their return of income. While filing the computation of total income along with return of income only income from embroidery and knitting is mentioned. There is no detail of gross income or expenditure incurred by these assesses on their respective business is shown. All the computation of income, statement of affairs and capital account has been prepared in similar fashion. Surprisingly all the 10 lenders have opened their bank account with the same branch of Dena bank i.e. Dena Bank, Subash Bazar, Meerut City. It is also surprising that the address of all the parties is 13 Ismail Nagar, Meerut City. All these lenders have come together and deposited cash in their bank accounts with the same bank and then deposit these amounts with the assessee as well as its sister concern on the very next day proves more than what is saidby lower authorities. Therefore in the case of these 8 ladies wherein the identicalmodus operandi has been adopted for giving alleged loan to the assessee who are having their meager income and has meager cash in hand and have minimum bank balance with them. We are of the view that the assessee has miserably failed to prove the creditworthiness of these lenders. Coming to the issue of genuineness of these transaction because loan is through banking channel it cannot surpass the test of genuineness of the transaction on the facts narrated above in the case of the assessee. Similarly, in the case of other two other assesses who have deposed before the AO regardingdeposit Rs. 5 lacs each are also dealt in a similar manner. In case of Mr. Ashique Elahi the income of Rs. 210,000/- has been shown however, there is no narration in the computation of total income about the activities of these persons. In the statement of affairs cash at hand of Rs. 170,000/- has been shown, further in his bank account only cash of Rs. 25,000/- is available. In the case of Rehmat Elahi, the facts are also identical. Therefore all these evidences in case of lenders lead that theidentity of these creditors have been proved and nothing else. In view of the above facts, we confirm the order of the learned Commissioner of Income tax (Appeals) confirming addition of Rs. 6125000/- with respect to 10 lenders unsecured loan added u/s 68 - Decided against assessee Addition u/s 41(1) - Held that:- It is apparent that Mr. Asraf Sohail appeared before the AO and confirmed that he is a broker and purchase of animals has happened through him. It is also submitted that it is modus operandi of the assessee to credit the name of broker instead of petty suppliers. However, the name of those suppliers who supplied animals through this broker was not made available by the assessee before the lower authorities. Therefore in the interest of justice we set aside this ground to the file of the AO to enquire from whom the assessee has purchased animals and how payment have been made to the subsequent. If Asraf Sohail has received the payment then the statement of Asraf Sohail needs to be verified and reexamined and if the paymentsare made to the petty suppliers then definitely the assessee must be having detail about them. Regarding the claim of the modus operandi existing we are of the view that the assessee may be entering purchase transaction through various other brokers and whether similar modus operandi prevails or not. This fact has not been verified by AO therefore also we set aside this issue to the file of AO to make enquiry in accordance with law after affording proper opportunity to the assessee.

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• 2016 (5) TMI 237
  Addition u/s 68 - Held that:- In this case in some of the bank accounts there are entries of transfer deposits in the bank account of these persons before the issue of cheque to the assessee. However we could not find any entry of unsecured loan in the statement of affairs of these parties except gift received from the mother of Rs. 50,000/- in some accounts. Therefore there is no source available with the assessee of the sums shown to have been received by the lenders through banking transfer entries in their account. Further the finding of the CIT (A) in a tabular form also depict the modus operandi of the amount deposited in the books of the assessee as unsecured loan from these parties. We are of the view that there is no difference if the amount is deposited by the assessee through cheque or through banking channel as these are the different modes of the transaction. They neither prove nor disprove the creditworthiness of the lender or genuineness of the transactions. We are also of the view that no decision cited by the assessee or ld AR are applicable on the facts of the case of the manner in which the return of income is filed, statement of affairs are prepared and amounts are introduced in the books of assessee which does not commensurate with the income shown by the lenders. In view of our above finding we also hold on the same reasoning as there is no change in facts and evidences produced before us that the loans of Rs. 51,81,500/- has rightly been added by the AO u/s 68 of the Act and confirmed by the ld. CIT(A) - Decided against assessee Disallowance u/s 40a (ia) - non-deduction of tax at source to the persons who are agent of foreign shipping lines - Held that:- The provision of section 172 applies to them and tax is not required to be deducted u/s 194 C of the act. Secondly if the expenses are already paid and not payable in that case the provision of section 40a (ia) is required to be applied and no disallowance is called for to the extent sums are paid, in view of the decision of the Hon’ble Allahabad High Court in the case of CIT Vs. Vector Shipping Pvt. Ltd [2013 (7) TMI 622 - ALLAHABAD HIGH COURT]. In view of this above two directions, we set aside the issue to the file of the AO for verification if the payments are made to the agents of foreign shipping agents then no disallowance is called for. Further, the disallowance is also required to be reduced to the extent of amount paid by the assessee in view of decision of the Hon’ble Allahabad High Court.

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• 2016 (5) TMI 236
  Disallowance made under the head 'staff welfare expenses - Held that:- None of these expenses were incurred for personal benefit of the assessee and the authorities below have not brought out any direct evidence that these expenses were incurred for the personal benefits of the assessee. The learned Commissioner of Income-tax (Appeals) in his order has extensively dealt with the case of CIT v. Lakshmi Vilas Bank Ltd. (2014 (4) TMI 827 - MADRAS HIGH COURT ) wherein suggested that the tax authorities to consider the claims and allow expenditure in a businesslike manner considering the ground realities. There should not have tendency of always having some suspicion, doubt and should not draw unreasonable inference based on some unreasonable apprehensions. The hon'ble High Court even observed that if there is some personal expenses incurred for personal use, it is for saving of time. Further, in this case, regular books of account have been maintained and audited under section 44AB of the Act. No adverse inference has been drawn by the auditor. Taking the guidance of various judicial pronouncements, we concur with the findings of higher judicial authority that the tax authorities must consider the claims in reasonable and practical manner. The disallowance of petty nature of expenses makes hardly any impact on overall revenue collection but such disallowance creates a lot of dissatisfaction amongst taxpayers. - Decided in favour of assessee

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• 2016 (5) TMI 235
  Unaccounted receipts - on-money received - Held that:- There is nothing on record to suggest that any material was found during the course of search evidencing on-money received for other bungalows. In such situation, the extrapolation method cannot be applied to the receipts of other bungalows. Further, the Assessing Officer was not justified in estimating the profit on "on money" receipts @ 25 %. This 25% estimation of profit on on-money receipts is purely on the basis of assumptions, surmises and conjectures. Thus, in our opinion, the CIT(A) was not justified in confirming the addition made by the Assessing Officer by estimating the profit on "on money" receipts @ 25% while the assessee has already offered tax on the admitted unaccounted receipts from its Greenwood Project amounting to Rs. 300 lakhs. Under these facts and circumstances of the case, the authorities below are not justified in making the addition in question and confirming the same; and therefore, the addition in question is directed to be deleted. - Decided in favour of assessee

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• 2016 (5) TMI 234
  Penalty u/s 271(1)(c) - excess claim of cost of acquisition - Held that:- The excess claim of cost of acquisition made by the assessee was not detected by the Assessing Officer, but the assessee had suo motu and voluntarily brought to the notice of the Assessing Officer by letter dated 17.09.2013. The assessee had furnished all the relevant documents which would show the share of the assessee in the said land, e.g., the copy of sale deed of the said land was placed on the record of the Assessing Officer which clearly point out the share of the assessee. Thus, there was no attempt on the part of the assessee to hide or conceal anything relating to this claim. In view of the above facts and circumstances of the case, the Assessing Officer was not justified in imposing penalty. Reliance placed on the decision of Reliance Petro Products P Ltd, reported (2010 (3) TMI 80 - SUPREME COURT ), wherein it is held that mere rejection of any claim would not automatically invite penalty so long as the claim is bonafide and genuine, the rejection of such claim would not amount to furnishing inaccurate particulars of income. In the light of above, delete the penalty imposed u/s 271(1)(c) of the Act. - Decided in favour of assessee

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• 2016 (5) TMI 233
  Additions of undisclosed FD - Held that:- AO has made various additions of undisclosed FD in the hand of the assessee by framing the assessment under section 144 of the Act. The AO got the information of undisclosed FD/investment as a result of search of CBI at the premises of the assessee. All the addition were confirmed by the ld. CIT(A). However before us the ld. AR has submitted all the necessary supporting documents justifying the source of the investment/ FD that they were carried forward from the earlier years. In view of above we are inclined to reverse the order of the lower authorities and assessee’s ground is allowed. - Decided in favour of assessee. Addition on on substantive basis of Income declared by the daughters - Held that:- Income declared by the daughters of the assessee in their respective hand were taxed in the hands of the assessee on substantive basis. Now from the submission of the assessee, we observe that the same has been taxed in their individual names on substantive basis. The ld. DR has not brought anything on record contrary to the argument of ld. AR. and simply relied on the orders of authorities below. In view of above, we are inclined to reverse the order of the lower authorities and assessee’s ground is allowed.- Decided in favour of assessee. Addition of interest income being 10% of investment in the hands of his wife i.e. Amita Puri - Held that:- Out of the total amount of Rs. 26,84,104/- the investments are only to the extent of Rs. 6,09,171/- the rest are being receipts, expenditure and interest received. Tax has already been paid on the interest income received on the matured investments and this was offered to tax in the year such income was received, the details of which are given under the Chart for A/.Y. 2002-03 titled “TABULAR EXPLANATION OF INTEREST REFCEIVDED AND OFFERED TO TAX” which may be seen for AY 2002-03. In view of this, there is no question of payment of interest of Rs. 1,61,638//-. It is urged that this addition of interest may kindly be deleted. From the above we find that the wife i.e. Amita Puri of assessee has declared the income in her hand. The necessary details have also been furnished in the form of paper which is placed on record. In view of above we are inclined to reverse the order of the lower authorities and ground of assessee is allowed.- Decided in favour of assessee. Enhancing of interest income though the same has already been taxed in the hands of Amita Puri – wife of the assessee - Held that:- This interest income was not disputed by the AO at the time of assessment. However the ld. AR of the assessee submitted before us that the interest income for Rs. 5,00,600/- is actually the income of the wife (Smt. Amita Puri) of the assessee which is the part of the income declared by her for the AY 2002-03 for an amount of Rs. 16,01,520.00. Our attention drew to the page no. 50-52 of the paper book where the copy of the assessment order was placed. The ld. DR at the time of hearing did not bring anything on record contrary to the submission of the assessee. We find that the addition of the interest income in the hands of the assessee will amount to double tax. - Decided in favour of assessee.

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• 2016 (5) TMI 232
  Claim of deduction u/s.80IB(10) - CIT(A) allowed the claim - filing of additional evidence - Held that:- Where the signature and verification on the memorandum of appeal was made by any agent of the assessee or for the Revenue and not by the assessee or the Assessing Officer, it cannot be held that the appeal or any application filed is a valid appeal or application. Further, as per the ITAT Rules, 1963, filing of additional grounds equates the procedure for filing of appeal with that of these applications. As far the assessee is concerned, the appeals are to be signed by the assessee and none other than the assessee. Hence, the preliminary objection by the ld. DR is not maintainable. Accordingly, the preliminary objection by the ld. DR is dismissed as non-maintainable and only AO can raise such ground. At the time of assessment proceedings, the assessee made the submissions before the AO, wherein product function, and dues dissimilar is relating to poultry, feed, compound premix was brought out but, the AO ignored all these and proceeded to compare the profit margin of independent companies manufacturing feeds and compound premix, which are dissimilar. The assessee has also furnished price level comparability of an identical product manufactured by an independent party and the same was also ignored by the AO. However, the assessee was produced the same before the CIT(Appeals), who after examining came to the conclusion that marketing price of the assessee is justified in view of the price chart by the comparable cases. As such, in our opinion, the findings given by the CIT(Appeals) in his order is appropriate and does not call for any interference - Decided in favour of assessee

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• 2016 (5) TMI 220
  Disallowance u/s 14A - Held that:- Issues stands concluded in favour of the respondent-assessee and against the Revenue by virtue of the decision of this Court in Godrej & Boyce Mfg. Co. Ltd. Vs. Deputy Commissioner of IncomeTax and another [2010 (8) TMI 77 - BOMBAY HIGH COURT] . Amounts received from various public sector companies - whether were only advances and not receipts of income? - Held that:- We find that the respondent-assessee follows the mercantile system Accounting and adopting the percentage completion of method. The finding by the Tribunal that the amounts related to the milestones achieved during the year has been offered to tax in the subject assessment year is essentially a finding of fact. On principle it cannot be disputed that income only arises when the same has accrued to the respondent-assessee who follows the mercantile system of accounting. Tribunal was correct in its decision that the amounts received from various public sector companies were only advances and not receipts of income, based on the percentage completion method followed by the Company Appeal admitted on substantial questions of law at question nos. (iii) and (iv). (iii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the orders of the CIT(A) in regard to the liability on account of warranties? (iv) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the provision of warranty is an ascertained liability within the provisions of Section 115JB of the Income Tax Act?

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• Customs

• 2016 (5) TMI 227
  Stay petition - Classification of goods - Principal Commissioner of Customs, classified the goods imported as bituminous Coal under different heading/sub-heading 2701-1200 of the schedule to the Customs Tariff Act, 1975 - Petitioner submitted that Commissioner ought to have stayed the adjudication proceedings since the issue was pending before various Tribunals at different stages - Held that:- it is noticed that against the impugned order passed by the Commissioner, statutory appeal lies before the Tribunal. In view of the availability of such alternative statutory remedy, particularly, in the field of the taxation, the Court would always be slow in entertaining the writ petition. Additionally, we must remember that the question in the petition concerns classification of the goods and therefore, even once the Tribunal decides the appeal, be it of the assessee or the department, further appeal would lie to the Supreme Court and not to the High Court. This would be an additional ground why the Court would not entertain the writ petition against the order of the adjudicating authority. The contention, that in view of pendency of the proceedings before various Tribunals, the Commissioner ought not to have proceeded with the finalization of the show-cause notice proceedings, is not one of universal validity. Under what circumstances, a certain proceeding should be kept in abeyance awaiting finalization of a similar issue, must depend on facts and circumstances of each case. Accepting the petitioner's contention, that all proceedings of like nature must be kept pending till the issues are clarified finally, would lead to absurd consequences. As noted, the issues are referred to the Larger Benches of the Tribunal. In fact, in one such case, where the Madras Tribunal made a reference, the aggrieved party has approached the High Court of Madras, in which, the reference order is stayed pending further hearing of the petition as can be seen from the order supplied by the counsel for the petitioner in case of Commissioner of Customs vs. Chettinad Cement Corp. Ltd. reported in [2015 (10) TMI 1530 - MADRAS HIGH COURT], even after the Larger Bench were to dispose of the references, there is always possibility of further legal proceedings being taken out by the aggrieved party. Therefore, to suggest that till similar issues achieve finality, any further adjudication can not take place would not be quite correct. Further, every question of classification in addition to involving question of law, would also depend on facts of each case. Therefore, petitioner is relegated to the appellate remedy. In view of the fact that the petitioners have been pursuing their case before the High Court, if they file the appeals before the Tribunal latest by 15.05.2016, the same would be accepted without raising objection on limitation. - Decided against the petitioner

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• 2016 (5) TMI 226
  Misdeclaration of Import of Hot Rolled Steel Coil (with Chromium) Grade API 5L Gr B of various sizes - it was found that the steel coils contained a label, which was mentioned the grade as "SS 400", therefore, seized as misdeclared - Respondent submitted that as security, the petitioner may be directed to give Bank Guarantee for a sum of Rs. 2,20,55,468/- and on giving the Bank Guarantee, the respondents may be directed to release the goods. Held that:- since the petitioner agreed that he would give Bank Guarantee for a sum of Rs. 2,20,55,468/-, the petitioner is directed to give Bank Guarantee for a sum of Rs. 2,20,55,468/-(Rupees two crores twenty lakhs fifty five thousand four hundred sixty eight only) to the satisfaction of the first respondent and the Bank Guarantee, to be given by the petitioner, shall be in force till the adjudication proceedings is completed. It is made clear that the order passed in the present writ petition shall not stand in the way of the adjudicating authority, deciding the matter in accordance with law. The respondents are directed to release the goods, weighing 5558.010 Mts of Coils, within three days from the date of giving the Bank Guarantee by the petitioner. - Petition disposed of

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• 2016 (5) TMI 225
  Proper officer - Juridiction to issue Show Cause Notice - Constitutional validity and effect of Section 28(11) of the Customs Act, 1962 - inserted by the Customs (Amendment and Validation) Act, 2011 ( Validation Act, 2011 ) with effect from 16th September 2011 - In terms of Section 28(11) of the Act, all persons appointed as Customs Officers under Section 4(1) of the Act prior to 6th July 2011 shall be deemed to have and always had the power of assessment under Section 17 and shall be deemed to have been and always had been the proper officers - Whether Section 28(11) cures the defects pointed out by the Supreme Court in the case of Commissioner of Customs v. Sayed Ali [2011 (2) TMI 5 - Supreme Court] - Held that:- the Department cannot seek to rely upon Section 28(11) of the Act as authorising the officers of the Customs, DRI, the DGCEI etc. to exercise powers in relation to non-levy, short-levy or erroneous refund for a period prior to 8th April 2011 if, in fact, there was no proper assigning of the functions of reassessment or assessment in favour of such officers who issued such SCNs since they were not proper officers for the purposes of Section 2(34) of the Act and further because Explanation 2 to Section 28 as presently enacted makes it explicit that such non-levy, short-levy or erroneous refund prior to 8th April 2011 would continue to be governed only by Section 28 as it stood prior to that date and not the newly re-cast Section 28 of the Act. Section 28(11) interpreted in the above terms would not suffer the vice of unconstitutionality. Else, it would grant wide powers of assessment and enforcement to a wide range of officers, not limited to customs officers, without any limits as to territorial and subject matter jurisdiction and in such event the provision would be vulnerable to being declared unconstitutional. As regards the period subsequent to 8th April 2011, it is evident that if the administrative chaos as envisaged by the Supreme Court in Sayed Ali (supra) should not come about, there cannot be any duplicating and/or overlapping of jurisdiction of the officers. It would have to be ensured through proper co-ordination and administrative instructions issued by the CBEC that once a SCN is issued specifying the adjudicating officer to whom it is answerable, then that adjudication officer, subject to such officer being a proper officer to whom the function of assessment has been assigned in terms of Section 2(34) of the Act, will alone proceed to adjudicate the SCN to the exclusion of all other officers who may have the power in relation to that subject matter. Validity of SCN issued on 12th and 15th April 2013 by the Additional Director General, DRI, Bangalore - alleged non-levy, short-levy or erroneous refund for period beginning with 1st April 2008 - Held that:- insofar as any of the above SCNs relate to the period prior to 8th April 2011 they are clearly without jurisdiction since the ADG, DRI could not have exercised such power for a period prior to 8th April 2011. Further in terms of Explanation 2 to Section 28 as has presently been enacted with effect from 8th April 2011, for the period prior to 8th April 2011, Section 28 of the Act as it stood prior to that date will apply and not the new Section 28 of the Act. That being the position, the proceedings pursuant to the above SCNs issued by the ADG, DRI regarding non-levy, short-levy or erroneous refund prior to 8th April 2011, cannot be legally sustained and are hereby quashed. All proceedings consequent thereto are also hereby quashed. However, insofar as the SCNs cover the period subsequent to 8th April 2011, the adjudication proceedings shall go on in accordance with law. Validity of SCN issued on 31st October 2003 under Section 28/124 of the Act by the Assistant Commissioner, SIIB - not empowered or assigned the function of a proper officer under Section 2(34) of the Act at the time he issued the SCN Held that:- the Department cannot seek to rely on Section 28(11) of the Act to validate the SCN issued by the Assistant Commissioner of Customs, SIIB to the Petitioner on 31st October 2003. As has already been held by the Court, Section 28(11) of the Act cannot validate SCNs or proceedings pursuant thereto in relation to non-levy, short-levy or erroneous refund for a period prior to 8th April 2011 if such SCNs have been issued or proceedings conducted by officers of the Customs, DRI or DGCEI or as in the present case by the SIIB, who are not proper officers within the meaning of Section 2(34) of the Act. Therefore, the SCN issued to the petitioner on 31st October 2003 and all proceedings pursuant thereto are hereby quashed. Validity of SCN dated 30th April 2010 issued by the ADG, DRI, Delhi - Search conducted at the residential premises of Petitioner No.4 - Challenge is on the ground that Respondent No. 3 was not authorised to issue such SCN as he was not a proper officer within the meaning of Section 2(34) of the Act. Counter affidavit filed where it is denied that at the time when the SCN was issued i.e. 30th April 2010, the ADG, DRI was not assigned the function of assessment under Section 17 and reassessment under Section 28 of the Act and was, therefore, not a proper officer for the purposes of Section 2(34) of the Act - Held that:- the recourse to Section 28(11) of the Act as introduced with effect from 8th July 2011 cannot be had to validate the impugned SCN particularly in view of Explanation 2 to Section 28 as it presently stands. Consequently, the Court quashes the impugned SCN dated 18th April 2010, and SCN dated 12th February 2013 and all proceedings consequent thereto. Writ Petition (C) No. 1185/2013 and the pending application, if any, are disposed of. Validity of SCN dated 9th March 2011 issued by the Commissioner of Customs (Preventive) and Circular dated 29th September 2011 issued pursuant to the insertion of sub-section 11 to Section 28 - pursuant to the putting on hold various consignments of woollen carpets sought to be exported by the Petitioner - Held that:- it is clear that in relation to the events that took place prior to 8th April 2011 no SCN could have been issued to the Petitioner by the Commissioner of Customs (Preventive) who admittedly is not a proper officer in terms of the Section 2(34) of the Act. Section 28(11) of the Act cannot be resorted to for validating the said SCN and proceedings pursuant thereto. Therefore, the impugned SCN dated 9th March 2011 and the subsequent Circular dated 23rd September 2011 issued by the Department consequent upon the enactment of Section 28 (11) of the Act is quashed. Validity of SCN dated 3rd April 2013 issued by the DRI, Delhi to BSNL as well as an order dated 23rd May 2013 passed by the Central Board of Excise and Customs (CBEC) under Section 4 of the Act - assigned several cases including the case on hand to the Commissioner of Customs (Import General) for the purposes of adjudication under Section 4 of the Act and consequent order dated 16th December 2013 passed by the Commissioner of Customs (Import General) - At the time when the SCN was issued to the Petitioner by the DRI there was no assignment of the functions of assessment or reassessment under the Act in favour of the DRI in so far as it pertains to events that occurred prior to 8th April 2011 - Held that:- Section 28(11) of the Act cannot be relied upon to validate the SCN issued in relation to non-levy, short-levy or erroneous refund for a period prior to 8th April 2011 by officers of the DRI even subsequent to the deeming fiction brought about by Section 28(11) of the Act. Therefore, the impugned SCN dated 3rd April 2013 and all proceedings consequent thereto including the impugned orders dated 23rd May 2013 and 16th December 2013 are quashed. Validity of SCN dated 24th December 2011 issued by the ADG, DRI - Short levy of customs duty for the period 28th January 2011 to 28th February 2013 - Held that:- for the reasons already mentioned, the said SCN and all the proceedings consequent thereto for the period from 28th January 2011 up to 8th April 2011 cannot be sustained in law and are hereby quashed. The adjudication proceedings as regards further period beyond 8th April 2011 will proceed in accordance with law. Validity of SCN dated 31st October 2008 issued by the ADG, DRI, Delhi and Circular No. 44/2011-Cus dated 23rd September 2011 issued consequent upon the insertion of Section 28(11) of the Act - Reassessment of imported goods during the period prior to 8th April 2011 - Admittedly, the case pertains to a period prior to 8th April 2011. Further it is not in dispute that at the time when the SCN was issued, the ADG, DRI was not assigned the functions of reassessment under Section 28 of the Act and, therefore, was not a proper officer for the purposes of Section 2(34) of the Act - Held that:- for the reasons already discussed, the impugned SCN dated 31st October 2008 and the Circular dated 23rd September 2011 are hereby quashed. Validity of SCN dated 14th March 2011 issued by the ADG, DRI - alleged imports made through the ICD, Tughlakabad during the period prior thereto - Held that:- in light of the above discussion, with the ADG, DRI not being the proper officer under Section 2(34) of the Act at the time when the SCN was issued, Section 28(11) of the Act cannot be referred to for validating the acts and the SCN issued by the ADG, DRI. Since it pertains to a period prior to 8th April 2011 it is governed entirely by Section 28 as it originally stood, i.e., prior to 8th April 2011. Therefore, the impugned SCN dated 14th March 2011 issued by the ADG, DRI and all proceedings pursuant thereto are quashed. Validity of SCN dated 29th May 2014 - alleged short levy during the period 27th May 2009 to July 2013 - Held that:- as far as the period involved covers the period 27th May 2009 to 8th April 2011, it cannot be sustained in law since during the said period the ADG, DRI had no power of assessment or reassessment. To that extent the impugned SCN and all proceedings pursuant thereto for the period prior to 8th April 2011 are hereby quashed. However, for the period subsequent to 8th April 2011 the proceedings may go on in accordance with law. Validity of SCN dated 2nd April 2009 issued by the DRI and for declaring Section 28(11) of the Act to be constitutionally invalid - Held that:- it is not in dispute that at the time the SCN was issued, the DG, DRI or any other officer of the DRI was not specifically assigned the task of reassessment and, therefore, was not a proper officer under Section 2(24) of the Act. Accordingly, the impugned SCN and all proceedings consequent thereto are hereby quashed. Validity of SCN dated 2nd December 2013 issued by the ADG, DRI - in relation to 190 bills of entry for the period prior to 8th April 2011 - Held that:- the ADG, DRI who issued the SCN was admittedly not a proper officer for the purposes of Section 2(34) of the Act. Therefore, the impugned SCN dated 2nd December 2013 and all proceedings consequent thereto to the extent they pertain to the period prior to 8th April 2011 are hereby quashed. The proceedings for the subsequent period may go on in accordance with law. Validity of SCN dated 2nd December 2013 issued by the ADG, DRI - Held that:- the impugned SCN are hereby quashed to the extent they pertain to the period prior to 8th April 2011. The proceedings for the subsequent period may go on in accordance with law. Validity of SCN dated 12th March 2014 issued by the ADG, DRI - imports made for the period 24th June 2009 to 8th April 2011 - 8 bills of entry pertain to ICD, Tughlakabad, 6 pertain to Mumbai Port and 2 pertain to ICD, Mulund in Bombay - held that:- for the reasons already explained, the said SCN is unsustainable in law and the said SCN and all proceedings pursuant thereto are hereby quashed. Validity of SCN dated 7th November 2013 issued by the ADG, DRI - Imports of Narrow Woven Fabrics from China during the period 8th November 2008 to 30th November 2010, i.e., a period prior to 8th April 2011 - Held that:- for the reasons already discussed, the said SCN dated 7th November 2013 and all proceedings consequent thereto are hereby quashed. Validity of SCN dated 9th June 2014 issued by the ADG, DRI - Invokation of Section 124 of the Act and Section 28 read with Section 9A of the Customs Tariff Act, 1975 - Imports of Color Picture Tubes made through the ICD, Tughlakabad as well as ICD, Dadri for the period May 2009 to January 2011 - Held that:- for the reasons already mentioned, the said impugned SCN and all proceedings pursuant thereto are unsustainable in law and are hereby quashed. Validity of SCN dated 10th September 2004 issued by the ADG, DRI - alleged mis-declaration of value of export of Alloy Steel Forgings (Machined) from ICD, Tughlakabad and CFS, Patparganj - availing higher DEPB credit for the period prior to 8th April 2011 - Held that:- for the reasons already mentioned, the impugned SCN and all proceedings consequent thereto stand hereby quashed. Validity of SCN dated 20th November 2014 issued by the ADG, DRI - Section 124 of the Customs Act read with Section 9A of the Customs Tariff Act, 1975 - Import of Color Picture Tubes in the year 2010 - Held that:- for the reasons already mentioned, the impugned SCN and all proceedings consequent thereto are unsustainable in law and hereby set aside. Validity of SCN dated 23rd September 2014 issued by the ADG, DRI - Color Picture Tubes imported from January 2009 to February 2011 - Held that:- for the reasons already mentioned, the impugned SCN and all proceedings consequent thereto are unsustainable in law and hereby set aside. Validity of SCN issued on 17th December 2007 by the DRI to be adjudicated by the Commissioner of Customs - Searches were conducted in the residential premises of the Petitioner - allegedly mis-declaring and undervaluing the import in connivance with the various Registrars of Newspapers in India - Demand of duty - appeal filed before the CESTAT against the said order is still pending and the CESTAT has required the Petitioner to deposit the 10% duty amount as a pre-deposit - Held that:- the SCN was issued by the ADG, DRI who at the time of issuance of the said SCN had not been assigned functions by the CBEC of assessment or reassessment and, therefore, is not a proper officer under Section 2(34) of the Act. The impugned SCN and all proceedings consequent thereto are hereby stand quashed. - Petitions disposed of

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• 2016 (5) TMI 224
  Classification of Bhujia, Cheese Balls, Potato chips and other similar products - CESTAT held that the impugned goods to be fall under Chapter 21 reported in [2007 (5) TMI 56 - CESTAT, KOLKATA] - By relying on the judgment of this Court in the case of Commissioner of Central Excise, Chandigarh v. Pepsi Foods Ltd. [2011 (7) TMI 1088 - Supreme Court of India], Apex Court decided the appeal in the favour of assessee and against the revenue.

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• 2016 (5) TMI 223
  Seeking release of confiscated goods - Seizure of 26 gold biscuits - Section 110(1) of the Customs act, 1962 - Illegally imported into India - High Court held that the goods have been smuggled into India without payment of customs duty in violation of Section 7(1)(c) and Section 11 of the Customs Act, 1962 and were liable for confiscation under Section 111 of the Act after seizure under Section 110 of the customs Act, 1962 reported in [2016 (4) TMI 923 - MEGHALAYA HIGH COURT] - Apex Court dismissed the petition raised but permitted the petitioner to take up all such grounds which are available to him including the grounds raised in this special leave petition.

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• Service Tax

• 2016 (5) TMI 231
  Extended Period of limitation - Demand of Service tax alongwith interest - Business Auxiliary Service - No concrete and sufficient evidence against the appellant - Held that:- If according to the appellant service tax liability was not attracted then also they should have deposited the amount with the department as an amount recovered in the guise of duty. Alternatively, appellant was expected to get in touch with the department for seeking any clarification /course of action. In the light of these facts extended period of limitation was correctly applied when confirming the demand and interest against the appellant. Appeal of the appellant to that extent is rejected. Waiver of penalty under Section 80 - Appellant argued that even if extended period is held to be applicable then also penalties imposed upon the appellant are required to be waived as per the provisions of Section 80 of the Finance Act, 1994 - Held that:- it is the case of the appellant under Section 80 that they were under the impression the services provided to Govt. departments do not attract service tax because the nature of works specified in definition of Commercial or Industrial Construction, under Section 65(25 b) of the Finance Act, 1994 are normally carried out by Govt./Govt. departments. It is observed that works relating to Roads, Airports, Railway, Bridges, Tunnels and Dams under Commercial or Industrial constructions specified under Section 65(25 b) are normally carried out by Govt./Govt. departments. Appellant thus had a reasonable cause for not discharging Service Tax liability. Appellant has thus a case for waiver of penalties imposed under Section 77(2) and Section 78 of the Finance Act, 1994. - Decided partly in favour of appellant

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• 2016 (5) TMI 230
  Levy of equal penalty u/s 78 of the Finance Act, 1994 - Invokation of Section 80 ibid - Reversal of excess Cenvat credit availed along with interest under protest before issuance of SCN - Held that:- there is no suppression of facts with an intention to evade payment of duty, as the respondent has paid the service tax and interest by showing their Bonafides. Therefore, a reasonable cause is present to invoke Section 80 ibid and the penalty is waived of. - Decided against the revenue

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• 2016 (5) TMI 229
  Evasion of service tax - cognizable offence and is hit by Section 89(1) - Violation of conditions of Bail - t bail granted to the appellant was on the basis of his undertaking that he shall make the entire balance amount within fifteen days from the date of release on bail. After bail was granted, he had filed writ petition on 23rd November, 2015 challenging the remand application. - Earlier the VCES application was rejected due to non payment of installment of 50% of the amount. Held that:- Evidently, the applicant had gone back from his undertaking on the basis of which the Court had passed the order for release on bail and therefore, he lacked bona fide. - it was absolutely wrong on the part of the appellant to go back from the undertaking after securing release on bail and thereafter to challenge the remand application by filing the writ petition. Though the appellant in page 50 of the writ petition had admitted that a sum of Rs. 1,81,80,941/- is due and payable, however in paragraph 4 of the writ petition it has been stated that if adjudicated the amount would be less than Rs. 50 lakhs. So the stand of the appellant is inconsistent. Moreover, the orders of rejection have gone unchallenged. Therefore, the learned Judge was justified in dismissing the writ petition. The respondents are entitled to cost, which is assessed at Rs. 10,200/-. - Decided against the appellant

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• 2016 (5) TMI 228
  Validity of Tribunal's clarification - Tribunal does not indicate as to whether the assessee addressed on merits of the demand of Service Tax - Imposition of penalty - Sections 76 and 77 of the Finance Act, 1994 - Held that:- we are not satisfied with the approach of the Tribunal. In revenue matters, the approach as taken would not only entail in loss of revenue but precious judicial time and of the Higher Court. The Tribunal ought to avoid it in all circumstances. Therefore, the order passed on 26th March, 2015 is quashed and set aside. - Matter restored before the tribunal.

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• Central Excise

• 2016 (5) TMI 275
  Extended Period of limitation - Guar Gum and Guar Dal Flour - Whether the goods to be classified under Chapter sub-heading 1301.10 as per assessee or under Chapter heading 1101.00 as per Revenue - Held that:- the assessee succeeds in the case inasmuch as on the ground of limitation itself because of the reason that the judgment of the Tribunal on the issue of limitation is perfectly justified inasmuch as at the relevant time there was conflicting judgment of the Tribunal and thus the action of the respondent in classifying the goods was clearly bonafide and larger period of limitation would not be available to the Department. - Decided against the revenue

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• 2016 (5) TMI 274
  Valuation - inclusion of pre-inspection charges in the assessable value of goods - Petitioner submitted that the Assistant Commissioner committed a serious error in confirming duty demand contrary to the decision of the Tribunal in case of the petitioner itself which is a breach of the principles of judicial discipline - Held that:- the Assistant Commissioner committed a serious error in ignoring the binding judgment of superior Court that too in case of the same assessee. The principle of precedence and judicial comity are well established in our legal system, which would bind an authority or the Court by the decisions of the coordinate Benches or of superior Courts. Time and again, this Court has held that the departmental authorities would be bound by the judicial pronouncements of the statutory Tribunals. Even if the decision of the Tribunal in the present case was not carried further in appeal on account of low tax effect, it was not open for the adjudicating authority to ignore the ratio of such decision. It only means that the Department does not consciously agree to the view point expressed by the Tribunal and in a given case, may even carry the matter further. However, as long as a judgment of the Tribunal stands, it would bind every Bench of the Tribunal of equal strength and the departmental authorities taking up such an issue. An order that the adjudicating authority may pass is made appealable, even at the hands of the Department, if the order happens to aggrieve the Department. This is clearly provided under Section 35 read with Section 35E of the Central Excise Act. Therefore, even after the adjudicating authority passes an order in favour of the assessee on the basis of the judgment of the Tribunal, it is always open to the Department to file appeal against such judgment of the adjudicating authority. Therefore, only choice open for the adjudicating authority, was to decide the case in consonance with the judgment of the Tribunal dated 16.06.2014 and thereafter leave it to the Departmental authorities to decide the question of filing appeal against such an order, if otherwise permissible in law. Impugned order dated 16.10.2015 is set aside. No opinion is expressed on the legal issue of includability of the predelivery inspection charges in the assessable value of the goods. - Decided in favor of assessee.

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• 2016 (5) TMI 273
  Recovery of Modvat Credit together with interest and penalty - Benefit unlawfully claimed by way of depreciation even on the component of duty on which Modvat Credit had been taken - Appellant contended that while restoring the Order in Original, the Tribunal did not take note of that portion of the Order in Original which entitles the appellant to take Modvat Credit from 30.4.2005 - Held that:- appellant, though entitled to one of the two benefits, availed both the benefits. After detection by the Preventive Unit, the appellant chose to file an application for rectification under Section 154 of the Act as well as revised returns in respect of the Assessment years 1999-2000 and 2000-2001 which were accepted. In so far as the Assessment year 1998-99 is concerned, the time limit for filing a revised return had already expired and the attempt of the appellant to file application for rectification under Section 154 of the Act failed up to the Supreme Court. The assessee started up with a claim for two benefits and ended up with losing both the benefits. Therefore, the question is as to whether at least after the appellant realised his mistake and had foregone one of the benefits the appellant should still be penalized? The answer to this question would be an emphatic no. It is true that only after detection by the Preventive Unit, the appellant attempted to withdraw one of the two benefits. But the mistake has been explained by the assessee on the ground that their registered office was located in New Delhi and their factory was located in Tamil Nadu. The calculation of depreciation in so far as it relates to the duty component on which Modvat Credit had already been claimed, is certainly a tedious process. It does not mean that the appellant can have the licence to commit a mistake. But once the mistake is detected and he filed revised returns, deprivation of the benefit of Modvat Credit could only be punitive. This cannot be the object of the grant of Modvat Credit. At least in the Order in Original, the Original Authority declared the entitlement of the appellant to Modvat Credit from 30.4.2005. Now while restoring the Order in Original, the CESTAT has modified that portion also, without there being an appeal by the Department to the Appellate Commissioner as against the Order in Original. Therefore, the appellant is entitled to succeed. The Original Authority shall workout the total amount of depreciation given up by the appellant, despite losing the battle in relation to the Assessment Year 1998-99, for the purpose of finding out the extent to which the appellant is entitled to the benefit. - Decided partly in favour of appellant

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• 2016 (5) TMI 272
  Imposition of penalty - High court has held that since, there was an element of suppression and non-disclosure of the activity of re-packing from bulk pack to smaller packs and selling the same affixing brand name of M/s. Tata Chemicals Ltd. from their unregistered premises, without payment of duty and without disclosing their said activity to the department, the penalties imposed on both the appellants were also justified reported in reported in [2013 (9) TMI 242 - CESTAT KOLKATA] - Apex Court has set aside the Tribunal's order in the opinion that the assessee has been able to substantially satisfy the Revenue. Apex Court allowed the appellant's appeal

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• 2016 (5) TMI 271
  Cenvat Credit - Procurement of molasses - Availed Cenvat credit on the duty paid on inputs and capital goods and service tax paid on input services - procured inputs for their distillery unit, being molasses, the main raw material - as per agreement service providers were appointed for performing liason works for the appellant to get allotment of molasses from the office of the Excise Commissioner and Controller of Molasses, Allahabad. Held that:- as molasses are under the strict control of the State Excise Authority, the appellant have rightly incurred expenses for procurement of the same for their distillery unit, so as to manufacture the taxable output being denatured spirit/alcohol. There is no dispute that the assessee have not received the services and paid the service tax on the said services. Further, I hold that expenses incurred by the appellant for procurement of inputs, is eligible input service as defined in Rule 2(l)(ii) of CCR, 2004. Accordingly, it is found that the ld. Commissioner (Appeals) have erred in observing that the service provider have only obtained the permit to procure molasses but not the molasses which is the actual raw material. Accordingly, the impugned order is set aside. - Decided in favour of appellant with consequential benefit

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• CST, VAT & Sales Tax

• 2016 (5) TMI 222
  Seeking direction to release old own used KOBELCO Hydraulic Excavator - Machinery transported for job work with all requisite documents including 'Form JJ' - Detained on the ground that there was a clerical error in 'Form JJ' while mentioning the TIN number of the contract - Petitioner contended that, even after production of the original certificates with the proof of evidence, the same were not considered by the 1st respondent. Held that:- the 1st respondent is directed to release the KOBELCO Hydraulic Excavator detained pursuant to the Goods Detention Notice 665/15-16 dated 15.03.2016, forthwith on production of a copy of this order. Further, the 2nd respondent is directed to verify the records of the petitioner with regard to the purchase of the Excavator and if necessary, the 2nd respondent is directed to pass suitable orders. - Petition disposed of

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• 2016 (5) TMI 221
  Nature of amount deposited - deposited as per order of Tribunal - Whether by way of pre-deposit or payment of tax - Held that:- as per provisions of sub-section (4) of section 73 of the GVAT Act, it appears that while the amount deposited under section 35F of the Central Excise Act, 1944 and section 129E of the Customs Act is by way of deposit pending the appeal, the amount paid under sub-section (4) of section 73 of the GVAT Act appears to be in the nature of payment of tax. However, it is not necessary to enter into any discussion in that regard, inasmuch as, in the present case, the amount deposited by the respondent is not under subsection (4) of section 73 of the GVAT Act, nor has the appellate authority passed any order under the proviso to subsection (4) of section 73 of the GVAT Act. From the language employed in this court orders, it is clear that what the respondent has been directed to pay is by way of pre-deposit and not payment of tax under the orders which were subject matter of challenge before the Tribunal. Therefore, the amount deposited by the respondent being in the nature of pre-deposit, once the Tribunal has allowed the appeals and decided the same in favour of the respondent, the consequence would be automatic and the respondent would be entitled to refund of the amount paid by way of predeposit. Refund of excess amount of tax paid - Section 36 of the GVAT Act - Petitioner submitted that the expression used is “paid” which is distinct from the expression “deposit”. Therefore, section 36 of the GVAT Act would not be applicable to the facts of the present case - Held that:- Section 36 of the GVAT Act provides for refund of excess payment and lays down that subject to the other provisions of the Act and the rules, the Commissioner may refund to a person the amount of tax, penalty and interest, if any, paid by such person in excess of the amount due from him. Provided that, the Commissioner shall first apply such excess towards the recovery of any amount due under the Act or the earlier laws and shall then refund only the balance amount, if any; provided further that no adjustment under the provision shall be made towards a recovery of an amount due that has been stayed by an appellate authority. On a perusal of the provisions of section 36 of the GVAT Act as a whole, there is nothing therein to indicate that the same requires an application to be made prior to refund of any amount by a person. Moreover, what section 36 of the Act contemplates is refund of any amount of tax, penalty and interest paid by a person in excess of the amount due from him. As the amount paid by the respondent is by way of a pre-deposit pursuant to the above order passed by this court, which in terms of the said order, would enure till the final disposal of the appeals. Therefore, such amount cannot be termed as an amount of tax paid as envisaged under sub-section (1) of section 36 of the GVAT Act. The amount deposited by the respondent being in the nature of pre-deposit and not payment of tax under the provisions of the Sales Tax Act, the amount deposited by it is bound to be refunded in view of the fact that the appeal has been allowed by the Tribunal. Whether the Tribunal acted within the bounds of its jurisdiction in issuing directions of the refund of amount deposited by the respondent by way of pre-deposit pursuant to the above order passed by this court - Held that:- as per provisions of GVAT Act, it is evident that there is no provision therein for return of the amount deposited by way of pre-deposit during the pendency of the appeal. A perusal of the Gujarat Value Added Tax Tribunal Regulation, 2008 shows that the same contains provisions which are in pari materia to that of the Gujarat Primary Education Tribunal (Procedure) Order, 1987. Regulation 44 bears the heading “Tribunal to follow provisions of Civil Procedure Code in the matters not provided in these regulations” and postulates that the Tribunal shall, in any matter not provided for in these regulations, follow the procedure, as far as it is applicable, laid down in the Code of Civil Procedure, 1908 as may be amended from time to time. Having regard to the similarity of the provisions under two regulations, the court is of the view that the decision of this court in the case of Girishchandra R. Bhatt v. Dineshbhai V. Sanghvi, Principal and others [1995 (12) TMI 388 - GUJARAT HIGH COURT] would be squarely applicable to the facts of the present case. Propriety of Tribunal in entertaining the applications - appeal filed by the petitioner was pending before this court - return of the amount of pre-deposit - Held that:- refund of the amount of pre-deposit is consequential of the orders of the Tribunal and the same has no connection with the appeals preferred by the petitioner before this court. As rightly submitted by the learned counsel for the respondent, even if the orders of the Tribunal were to be stayed, the assessment orders would not spring into operation entitling the petitioner to recover the amount under the same. The impugned order passed by the Tribunal, therefore, cannot, in any manner, be said to come in conflict with any order that may be passed by the High Court in the appeals. Having regard to distinct nature of the proceedings before the High Court and before the Tribunal, it cannot be said that the order passed by the Tribunal lacks propriety. - Decided against the revenue.

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