TMI Tax Updates - e-Newsletter
June 1, 2015

Case Laws in this Newsletter:

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

TMI SMS

• I.Tax - Passport illegally impounded - impossible to leave India - such period to be excluded for computing days for Residential Status - HC

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Articles

1. Export condition fulfilled even if payment is received in Indian Rupees

   By: Bimal jain

2. SETTLEMENT OF CASES – RECENT AMENDMENTS

   By: Dr. Sanjiv Agarwal

3. RETROSPECTIVE VALIDATION OF A STATUTE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Framework for Revival and Rehabilitation of MSMEs

2. Revision of the classification/upgradation certain cities/towns on the basis of Census-2011 for the purpose of grant of House Rent Allowance and Transport Allowance to Central Government employees

Notifications

Customs

1. 24/2015 - dated 29-5-2015 - ADD

Seeks to levy definitive anti-dumping duty on imports of 'Electronic Calculators of all types [excluding calculators with attached printers, commonly referred to as printing calculators; calculators with ability to plot charts and graphs, commonly referred to as graphing calculators; programmable calculators]',originating in, or exported from, People's Republic of China for a period of five years

2. 49/2015 - dated 29-5-2015 - Cus (NT)

Tariff values for Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soya bean Oil, Brass Scrap (all grades), Poppy seeds, Gold, Silver and Areca nuts - Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Highlights / Catch Notes

Income Tax

• Court Rules Passport Impoundment Period Excluded from Residency Status for Tax Purposes; Individual Not a Resident.

  Case-Laws - HC : Treatment as a resident in India - Passport being unjustifiably impounded - it was impossible for the assessee to leave India - He virtually became an unwilling resident on Indian soil without his consent and against his will - such period must be excluded - Cannot be treated as Resident - HC
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• Notice for Reassessment u/s 143(2) Needs No Deputy Commissioner Approval if Directed by Commissioner u/s 263.

  Case-Laws - HC : There is no necessity of prior approval of Deputy Commissioner for issue of notice u/s 143(2) for re-making an assessment in pursuance to direction given by CIT u/s 263 - HC
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• Profit Split Method Rejected for Transfer Pricing; TPO to Use Residual PSM for Arm's Length Price Determination.

  Case-Laws - AT : TP Adjustments - Disregarding Profit Split Method ('PSM') as the most appropriate method for benchmarking - TPO, should determine the ALP by adopting residual PSM as the MAM and by allocating residual profits based on the relative value of each enterprise's contribution - AT
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• No Penalty for Capital Gains Misclassification: Section 271(1)(c) Clarifies Unsustainable Claims Aren't Inaccurate Particulars.

  Case-Laws - AT : Penalty u/s 271(1)(c) - capital gain have been directly credited to capital reserve account in the balance-sheet, whereas as per the AO such capital gain should have been credited in the profit and loss account only - mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars - no penalty - AT
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• Loss Claims Allowed for Material Pilferage and Transit Shortages After Consistent Accounting of Consumable Stores and Spares.

  Case-Laws - AT : Disallowance of loss of material through pilferage, shortage of material in transit, shortage arising on physical verification, etc. - assessee has accounted for both gains as well as losses in respect of consumable stores ad spares in a consistent manner - claim of loss allowed - AT
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• Income Tax Act Section 12AA: Charitable Status Retained Despite Profitable Activities if Aimed at Public Utility Goals.

  Case-Laws - AT : Registration under section 12AA - primary purpose was advancement of objective general public utility and it would remain charitable even if an incidental or ancillary activity or purpose of achieving the main purpose was profitable in nature - AT
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Customs

• Double Jeopardy Claim Rejected: Distinct Offenses Under FTDR and Customs/Excise Acts Allow Separate Penalties.

  Case-Laws - AT : 100% EOU - Appellants contention of double jeopardy on the ground that they have already been penalised under the FTDR Act, 1992 is totally invalid as the ingredients of offences under the FTDR Act and the Customs Act, 1962/Central Excise Act, 1944 are different. - AT
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Service Tax

• Service Tax Exemption Requires Proof Training Doesn't Equip Trainees for Employment or Self-Employment in Commercial Coaching.

  Case-Laws - AT : Commercial Training & Coaching - In the absence of any evidence which would indicate that the training imparted by the respondent does not enable the trainee to 'seek employment or undertake self employment, exemption cannot be denied. - AT
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Central Excise

• Assessee Must Follow Rule 21 Procedure to Claim Excise Duty Remission for Goods Lost Naturally Within Limits.

  Case-Laws - HC : Remission of duty - even if in the facts of the case, the assessee claims remission from excise duty of goods said to have been lost in natural course, within the permissible limit, as per the circulars, he has to follow the procedure prescribed under Rule 21 of the Rules - HC
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Case Laws:

• Income Tax

• 2015 (5) TMI 938
  Treatment as a resident Indian - whether the period for which the assessee was in India involuntarily on account of his passport having been impounded is not to be counted for purposes of Section 6(1)(a) of the Income Tax Act so as to hold him entitled to be a non-resident? - Held that:- the Income Tax Act leaves the choice to the citizen to be in India and be treated as a resident for purposes of taxation or be not in India so as to avail the status of a non-resident. The simple test the muster of which is to be passed is the minimum prescribed period of presence in India in a particular financial year. It naturally follows that the option to be in India, or the period for which an Indian citizen desires to be here is a matter of his discretion. Conversely put, presence in India against the will or without the consent of the citizen, should not ordinarily be counted adverse to his chosen course or interest, particularly if it is brought about under compulsion or, to put it simply, involuntarily. There has to be, in the opinion of this Court, something to show that an individual intended or had the animus of residing in India for the minimum prescribed duration. If the record indicates that – such as for instance omission to take steps to go abroad, the stay can well be treated as disclosing an intention to be a resident Indian. Equally, if the record discloses materials that the stay (to qualify as resident Indian) lacked volition and was compelled by external circumstances beyond the individual’s control, she or he cannot be treated as a resident Indian. We do not agree with the contention of the Revenue that Section 6(1)(a) of the Income Tax Act shall be a strictly constructed or that it does not permit exceptions. The case at hand itself is a good example why a literal interpretation of the relevant statutory clause is not commended for such course might not only lead to unjust, unfair or absurd consequences but also be prone to abuse. While executive action resulted in his passport being unjustifiably impounded, this rendered if impossible for the assessee to leave India. He virtually became an unwilling resident on Indian soil without his consent and against his will. His involuntary stay during the period that followed till the passport was restored under Court’s directive, thus, must be excluded for calculating the period under Section 6(1)(a) of Income Tax Act - Decided against revenue.

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• 2015 (5) TMI 937
  Revision u/s 263 - CIT was of the view that Assessing Officer erred in addition of alleged suppressed business profit aggregating to 11 crores - Assessing Officer erred in disallowing the alleged cost of production claimed - ITAT quashed revision order - Held that:- We do not find that the Tribunal erred in holding that clause (c) of the Explanation to subsection (1) of section 263 cannot be applied. In the present case, that has no application because the matters which have been considered and decided in the Appeal by the first appellate authority are being made subject matter of the revisional authority's order. In other words, the power to revise, as conferred by section 263, is sought to be exercised so as to deal with the same matters which have been considered and decided in the Appeal. We do not find any merit in Mr. Mohanty's submission because detailed references have been made in the foregoing paragraphs to the case of the Assessee before the Assessing Officer, his initial order, the order of the first appellate authority, the direction issued by the first appellate authority and which was given effect to by the Assessing Officer. All these would denote that something which was very much part and parcel of the appellate authority's order and dealt with extensively therein is now sought to be revised and revisited. We fully agree with the Tribunal when it concluded in para 14 that it is evident from the order of the Commissioner (Appeals) that the claim of cost of production of film was a subject matter of Appeal before him and after consideration of remand report of the Assessing Officer he gave his findings. Therefore, this order of the Assessing Officer dated 31st December, 2009 undisputedly had merged with the order of the first appellate authority dated 12th October, 2011 as far as the claim of cost of production of the film is concerned. Similarly, the other argument that applicability of Rule 9A has not been considered by the Commissioner, the Tribunal in para 15 found that this was also very much before the authorities and hence, even in relation thereto, it cannot be said that the Assessing Officer at the time of making the assessment order did not consider the applicability of Rule 9A vis a vis the claim of the Assessee on the aspect of cost of production of the film. - Decided against revenue.

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• 2015 (5) TMI 936
  Transfer pricing adjustment - selection of M/s Torrent Gujarat Biotech Limited and M/s Standard Pharmaceuticals Limited as comparables as directed by ITAT - Held that:- The issues that arise in this case do not raise a question of law much less a substantial question of law. The Tribunal’s order is far from perverse or absurd. It was a possible view. It was in fact a view that the TPO himself took by selecting Standard Pharmaceuticals Limited where use of PEN-G was only 5.23% as against the 7.60% use of PEN-G by Torrent Gujarat Biotech Limited. The Tribunal’s view was more than just a probable one. Our attention was not invited to any error on principle in the choice of the said companies as comparables. - Decided against assesse.

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• 2015 (5) TMI 935
  Necessity of prior approval of Deputy Commissioner for issue of notice u/s 143(2) for re-making an assessment in pursuance to direction given by CIT u/s 263 - Held that:- It is well settled that once an assessment is re-opened by virtue of the order passed by CIT under Section 263, the initial order of assessment ceases to be operative. The effect of re-opening of assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made of re-assessment. Thus, in the present case, in our opinion, after the previous assessment, which was set aside by the CIT in exercise of his power under Section 263, the whole proceedings started afresh. Moreover, the assessment under Section 143 (1) of the Act was set aside by the Commissioner, the higher authority, in exercise of his powers under Section 263 of the Act, and therefore, it ceased to operate or in other words the Assessing Officer had to pass order under Section 143 (3) as if there was no assessment under Section 143 (1). In view thereof, it was open to the Assessing Officer to make assessment under sub-section (3) of Section 143 without seeking prior approval as contemplated by sub-section (2) thereof. In other words, this is not a case where the Assessing Officer chose to make reassessment under Section 143 (3) of the Act of his own. This being so, it was not necessary to seek previous approval of the Inspecting Assistant Commissioner before issuing notice under sub-section (2) of Section 143. - Decided in favour of the Revenue.

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• 2015 (5) TMI 934
  Reopening of assessment - deductions under section 80IA(4) of the Income Tax Act, 1961 on the rail system - Held that:- There is no order as yet passed by the Assessing Officer and in pursuance of the notice to reassess the income allegedly escaping assessment and chargeable to tax. The Assessing Officer has yet to make up his mind. He has only sought a clarification and based, as apprehended by the Petitioner, on some general circulars. In the event any order is passed on conclusion of the reassessment proceedings and if it is adverse to the interest of the Petitioner, the Petitioner can file a Appeal against that order and seek a protective relief. We do not think that this Court should proceed on the footing and at this stage that the deduction will be revisited. In such circumstances, we dispose of this Writ Petition with a direction that the Assessing Officer shall take into consideration the objections that have been raised and forming part of this order and set out in the Writ Petition as resistance and objections of the Petitioner to reopening or revisiting the deduction under section 80IA(4) of the Income Tax Act, 1961. All pleas including those raised in this Writ Petition shall be considered by the Assessing Officer as if they have been raised in a personal hearing

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• 2015 (5) TMI 933
  Stay of demand - Non deduction of tds - treating assesse as assessee in default - stay of the tax and interest demanded rejected - Held that:- It would suffice and meet ends of justice if the petitioner is put on terms and directed to pursue its grievance before appellate authority namely, CIT (Appeals)-12 for stay for being adjudicated on merits along with the appeal itself expeditiously, at any rate within an outer limit of two months from the date of receipt of copy of this order and subject to following conditions: (a) Petitioner-assessee shall deposit further a sum of 20 Crores on or before 31.03.2015 before first respondent -Assessing Officer. (b) Petitioner- assessee shall deposit further sum of 40 Crores before first respondent- Assessing Officer on or before 30.04.2015. (c) For the balance amounts as demanded under demand notice dated 18.02.2015 petitioner shall furnish Bank Guarantee/s in favour of first respondent- Assessing Officer on or before 30.04.2015 kept alive till disposal of the appeal by the CIT (Appeals)-12

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• 2015 (5) TMI 932
  TP Adjustments - Disregarding Profit Split Method ('PSM') as the most appropriate method for benchmarking Appellant's international transactions - held that:- The claim of the assessee that the issue is covered by the order of the Co-ordinate Bench in GOIPL [2014 (4) TMI 787 - ITAT DELHI] wherein held that when a transaction is integrated and interrelated and when costs are incurred by multiple entities and the revenues are to be apportioned to multiple entities, then the factual conclusions of the T.P.O have to be vacated - the "Profit Split Method" (PSM) is the "M.A.M" for the reason that the assessee generates revenue out of operations that are highly integrated - When one transaction, (example transmitting data from a destination in one country, to a destination in a different country in a secured manner) requires deployment of assets and functions of different entities, located in different Geographical locations, to ultimately deliver services and when such combined efforts generate revenues, the MAM for determining arm's length price is "Profit Split Method (PSM)", thus being the predecessor to the assessee is found to be correct. Relative contribution has to be determined, based on key value drivers - there is a general consensus on the principles of allocation of residual surplus - as per rule 10B(l)(d) of the IT Rules, a contribution or residual PSM would need to be supplemented by a comparable PSM - the TPO, should determine the ALP by adopting residual PSM as the MAM and by allocating residual profits based on the relative value of each enterprise's contribution In the absence of any submission whatsoever on the part of the Revenue despite more than adequate opportunities having been provided, we find on our independent study of the reasoning available on record brought out in the TPO’s order which has been upheld by the DRP that in the face of similarity of reasoning which already stands considered in the case of GOIPL, the issue needs to be restored back to the TPO with identical directions. Decided in favour of assesse for statistical purposes

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• 2015 (5) TMI 931
  Tds liability - assessee is a hospital and has doctors working in it by virtue of employment as well as certain agreement entered between - whether payment made by the assessee to the doctors is covered u/s 194J in respect of 3rd and 4th category of Doctors (Doctors on Revenue share with Minimum Guarantee and Senior Doctors on minimum Guarantee consultancy fees) instead of section 192 being TDS on salary as per the AO - Held that:- Admittedly, the working hours were flexible and determined mutually by the assessee and the doctor. The consultant doctors are free to come at their convenience and treat the patients. The agreement does not provide for any supervision or control over the doctor. The doctors at their own discretion treat the patients by making use of the infrastructural facilities and manpower available in the hospital. The doctors are governed by the rules and regulations of their regulatory body in their professional activity (MCA) and the assessee being a hospital they expected the doctors to conduct themselves as per its policy while discharging their profession. This expectation of the assessee is nothing but for maintaining discipline by the said consultant doctors by abiding to the code of conduct of assessee hospital, cannot be considered to be exercising control and supervision over the doctors in their independent professional activity. We find that clause dealing with indemnity insurance payable by the consultant in case of any liabilities for any act of medical malpractice arising under Consumer Protection Act clearly takes the assessee hospital out of any vicarious liability which again goes on to show that there is no master-servant relation between them. We find that consultants are not governed by the service rules and leave rules which are applicable to employees. Therefore, it is obvious that the, doctors are not considered to be employed by the assessee and they are rightly considered only as consultant professionals.So, in our opinion, the agreement between the assessee and the doctors is one for providing professional services, and there is no element of employer and employee relationship existing. Therefore, in our opinion, tax has to be deducted under s. 194J of the Act as fee for professional services and not as salary. -Decided in favour of assesse 5th category doctors 'Junior Doctors' on minimum guarantee consultancy fees" - whether are employees and therefore TDS ought to have been deducted u/s 192 mainly due to absence of indemnity bond and that they are subject to leave rules /conduct rules - Held that:- We find force in the contention of the ld Sr. counsel the remuneration paid to the consultants by the hospital has been debited in the books as fees for professional services from year to year. The consultants have also accounted for the fees as income from profession. The consultants have consistently and regularly disclosed consultation fees in their income tax returns from year to year and paid tax accordingly. This indicates concurrence of intention and motive of both the parties to the agreement which is also reflected in their conduct and actions to form the relationship on principal to principal basis. Thus these consultant doctors (5th category consultant) also are independent professionals and the assessee hospital rightly treated them so, and has rightly deducted tax at source u/s 194J of the Act. - Decided in favour of assesse.

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• 2015 (5) TMI 930
  Transfer pricing adjustment - DRP directing AO to delete the disallowance made on account of transfer pricing adjustment involving payment of share application money - Held that:- This issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for assessment year 2008-09 wherein it was held by the Tribunal relying on its earlier decision in the case of Vijay Electricals Ltd. V/s. Addl. CIT (2013 (7) TMI 804 - ITAT HYDERABAD) that the amount representing investment made by the assessee company in share capital of its subsidiary outside India was not in the nature of international transaction, as referred to in S.92B of the Act, and therefore, Transfer Pricing provisions were not applicable to such transactions. Thus we uphold the impugned order of the Dispute Resolution Panel directing the Assessing Officer not to make any addition on account of transfer pricing adjustment in respect of the transactions of the assessee company with its AE, involving payment of share application money - Decided in favour of assesse. Disallowance of expenditure incurred on staff welfare and others - DRP allowed the claim - Held that:- Similar issue was involved in the case of the assessee for the assessment year 2008-09 wherein held that the department cannot disallow the expenditure merely because there is a clerical error in the bills produced by the assessee towards the expenditure.It was held that if the expenditure is not claimed by M/s. Maytas Properties Ltd., it is fair to allow deduction towards business expenditure in the hands of the assessee. Accordingly, the issue was restored by the Tribunal to the file of the Assessing Officer to verify whether the same expenditure was claimed by M/s. Maytas Properties P. Ltd. and if it is found, on such verification that there is no such double claim, the Assessing Officer was directed by the Tribunal to allow the claim of the assessee of such expenditure - Respectfully following the said decision of the coordinate bench of this Tribunal in assessee’s own case,we uphold the impugned order of the Dispute Resolution Panel - Decided against revenue. Disallowance of expenditure for which payments were made in cash - DRP directing the Assessing Officer to restrict the disallowance only to the extent of 10% - Held that:- this issue is also squarely covered by the decision of the Tribunal in assessee’s own case for assessment year 2008-09, which has been relied upon by the Dispute Resolution Panel to give relief to the assessee on the similar issue involved in the year under consideration, i.e. assessment year 2009-10 - Decided against revenue. Addition of interest allegedly attributed to the advances given by the assessee company to its group concerns - DRP deleted the addition - Held that:- all the material facts relevant to this issue as involved in the year under consideration are similar to assessment year 2008-09 in as much as the assessee company had interest free funds in the form of customer advances amounting to 556.36 crores and debentures and CCDs amounting to 600 cores, which were sufficient to give the interest free advances to the subsidiaries as well as other companies. - Decided against revenue. Disallowance of expenditure for construction work - DRP allowed the claim - Held that:- The issue involved in the year under consideration as well as all the material facts relevant thereto are similar to assessment year 2008-09, we respectfully follow the decision of the coordinate bench of the Tribunal and uphold the impugned order of the DRP giving relief to the assessee on this issue as the entire payment to sub- contractor shall not be disallowed as there is evidence on record for such payment. More so, the assessee has produced payment details and it has been subjected to tax deduction. Being so, considering the totality of the facts and circumstances, we are inclined to allow the claim of the assesse - Decided against revenue. Income recognition - change in the method of recognition of income based on registration of agreements for sale or completion of possession and consequential reversal of revenue on cancellations/legal cases - Held that:- As relating to the estimation of budgeted cost for the purpose of determining percentage of completion of project, the same is squarely covered by the decision of the Tribunal in assessee’s own case for assessment year 2008-09, wherein it was held that the percentage of completion is required to be worked out on the basis of budgeted cost of construction, as revised from time to time, depending on the facts of the case. Respectfully following the said decision of the Tribunal in assessee’s own case for assessment year 2008-09, relevant portion of which is extracted hereinabove, we uphold the impugned order of the DRP on this aspect of the matter. As regards the second aspect of the issue relating to the change in the method of recognition of income adopted by the assessee company, In the present case, as a result of extra-ordinary events witnessed by the Satyam group of companies to which the assessee company belonged in the month of January, 2009, there was uncertainty with regard to the completion of project by the assessee company and delivery of units booked. Keeping in view this uncertainty, some of the agreement holders tendered applications for cancellation of the units booked and demanded refund of the advances paid. Some of the agreement holders also filed cases against the assessee company for cancellation the agreements and refund of the amounts paid by them. The ultimate collection from these agreement holders thus became uncertain and the assessee company, in our opinion, rightly decided to postpone the revenue recognition to the extent of such uncertainty, by adopting the new method of recognition of income on the basis of registration of agreements for sale or handing over of possession of the units, as the same enabled it to assess the ultimate collection with reasonable certainty. As such, considering all the facts of the case, we are of the view that the learned DRP was fully justified in directing the Assessing Officer to accept the change in the method of revenue recognition adopted by the assessee and consequential reversal of revenue on the basis of the cancellations/legal cases, and upholding its order giving relief to the assessee on this issue - Decided in favour of assesse. Disallowance of various expenses - bills produced by the assessee company in support of the said expenses were not in its name, but were in the name of other group companies - Held that:- we uphold the impugned order of the DRP directing the Assessing Officer to verify the relevant expenses and if it is found on such verification that the payments are made by the assessee company by cheque and the same expenses are not claimed by the other group companies, in whose names the relevant bills are issued, the same may be allowed as deduction in the case of the assesse - Decided against revenue. Disallowance under S.40(a)(ia) - default on the part of the assessee to deduct tax at the rate of 1% for the payments made to Maytas Infra P. Ltd., instead of 2% - Held that:- As decided in CIT V/s. S.K.Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] the provisions of S.40(a)(ia) are applicable for non-deduction of tax and not for short deduction of tax, and no disallowance under the said provision could be made in a case where there is only a short deduction of tax at source. Thus we uphold the impugned order of the learned DRP directing the Assessing Officer not to make disallowance on this issue under S.40(a)(ia). - Decided against revenue. Disallowance under S.40(a)(ia)- failure of the assessee to deduct tax at source from the payment of interest made to MIL ICD, as required under S.194C - held that:- As it is observed that a similar issue was involved in assessee’s own case for assessment year 2008-09 wherein Tribunal restored this matter to the file of the Assessing Officer with a direction to verify as to whether corresponding interest was duly offered to tax by MIL in its return of income and tax thereon was also duly paid. The Assessing Officer was directed by the Tribunal that if it is found on such verification that tax has already been paid by the payee, on the interest income, the disallowance under S.40(a)(ia) need not be made. As the learned DRP vide its impugned order has remitted this matter involved in assessment year 2009-10 to the file of the Assessing Officer for deciding the same as per the same directions as given by the Tribunal in assessee’s own case for assessment year 2008-09, we find no justifiable reason to interfere with the order of the DRP on this issue. - Decided against revenue.

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• 2015 (5) TMI 929
  Undisclosed income - receipt of ‘on money’ - addition on seized materials and as admitted by the working partner of the assessee firm - Held that:- The undisputed facts emerged from the above discussion is that the assessee is engaged in the business of construction. The assessee has been showing the flats in question as stock-in-trade, therefore in view of the decision of the Coordinate Bench rendered in the case of ITO vs. Shri Siddharth S.Patel (2010 (4) TMI 1032 - ITAT AHMEDABAD). The provisions of section 2(47) would not be applicable. The assessee has disclosed the ‘on money’ in the return of income in the year in which the sale-deed was executed. The Revenue has not rebutted this contention. Therefore, in the light of case of CIT vs. Motilal C.Patel and Co. (1988 (4) TMI 36 - GUJARAT High Court), such amount can be subjected to tax when sale-deed is actually executed. Since the Hon’ble Gujarat High Court has held that the amount would become for the assessment year in which the sale transaction is completed. In the case in hand, it is not disputed that sale-deeds were executed in the year subsequent to the year under appeal. Therefore, in view of the binding precedent, we are of the considered view that the authorities below were not justified in taxing the amount including ‘on money’ during the year under appeal. Further, the assessee has submitted that it has offered for tax the amount including ‘on money’ in the year whenever sale-deed was executed. This fact is also not controverted by the Revenue by placing any contrary material on record. Therefore, the AO is hereby directed to verify whether the assessee has offered for taxing the amount as its income in the year when the sale-deed was executed. If it is found that the assessee has offered the amount in the year in which the sale-deed was executed, then the AO would delete the addition made in this year. We are conscious of the fact that this Tribunal had taken a contrary view, since now the decision of the Coordinate Bench in the case of ITO vs. Shri Siddharth S.Patel is brought to our notice and no distinguishing fact is pointed out by the ld.Sr.D.R. In the light of the above discussion, the appeal of the assessee (in the case of M/s.Ohm Developers) is allowed for statistical purposes in the terms as indicated hereinabove. - Decided in favour of assesse for statistical purposes.

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• 2015 (5) TMI 928
  Transaction in shares - treated as stock in trade treating it as a business income or investment so as to treat it as capital gain - Held that:- It is a fact that assessee is showing these shares in its investment portfolio in the books of accounts. Shares sold were shown in the balance sheet for the previous year relevant to assessment year 2005- 06 as investment and the same has been carried forward as investment in the beginning of the financial year relevant to assessment year 2006-07. In the earlier years, the revenue has accepted the position of investments as it is in the books of accounts of the assessee. It is also a fact that most of the investments realized during the year were held as investment for more than a year even, in some of the cases, these investments were held for more than 2 to 4 years. The assessee submitted details of these transactions before the Assessing Officer. It is also a fact that during the year, the assessee has earned substantial dividend income of 3,51,49,900/-. The CIT (A) has given the relief to the assessee relying on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Rohit Anand [2010 (8) TMI 232 - Delhi High Court] wherein held that although even a single transaction can be in the nature of trade, however, where the assessee has demonstrated that his intention was never to trade in shares. Then, revenue cannot change the position otherwise. The investments have been made by the assessee out of his own fund and the shares were held quite for a long period. The Income-tax Act itself provides that when the shares are held for a period of more than a year or more will be treated as long term capital asset, contrary to the fact that other assets to be called as long term asset have to be held for more than 36 months. These shares were being treated as investment in earlier years and this fact has been accepted by the Assessing Officer. Substantial dividend income was being earned on these investments.The assessee is holding the shares by taking the delivery by making full payment on such investments. All these circumstances suggest that realization of these investments shall give a rise to the capital gains and it cannot be termed as trading of shares. - Decided in favour of assesse. LTCG or STCG - Held that:- Since we have approved the CIT (A)'s view that investments declared in the books of accounts shall not be treated as trading in the shares as business, therefore, the shares held as investment at the beginning of the year, even if these are sold within a period of 30 days, then also capital gain arises in respect of trading profit, this amount shall be treated as short term capital gain.- Decided in favour of assesse. Treating interest income under the head income from other sources - Held that:- The CIT (A) has dismissed the assessee's ground without going into the details regarding business of granting the loans as the assessee was registered as NBFC. There is no clear cut finding regarding this aspect in the order of the authorities below. CIT (A) has rather based his order on the fact that assessee is claiming capital gain on sale of shares, hence, no business income. This reliance is not justified as assessee is a NBFC and doing business of granting loan. Hence, we allow this ground of assessee's cross objection.

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• 2015 (5) TMI 927
  Penalty u/s 271(1)(c) - inaccurate particulars of income by the assessee relating to capital gains - CIT(A) deleted penalty levy - Held that:- During the course of assessment, the Assessing Officer observed that the assessee has credited profits on sales of shares directly to capital reserve and not credited the same to the profit and loss account. The assessee though included the capital gain derived from sale of shares in the normal computation but not included the same while computing book profit u/s 115JB of the Act; therefore, in the opinion of the Assessing Officer, non inclusion of the capital gain while computing book profit u/s 115JB amounts to furnishing of inaccurate particulars of income by the assesse. We find that the Assessing Officer was not justified in holding that the inaccurate particulars of income relating to capital gain was furnished by the assessee. No inaccuracy in any of the particulars in respect of capital gain earned by the assessee was found by the Assessing Officer and the addition to the book profit was made because of difference in the opinion in respect of presentation of such capital gain whether such capital gain should have been credited in the profit and loss account or directly to capital reserve in the balance-sheet. The assessee was of the opinion that such capital gain could have been directly credited to capital reserve account in the balance-sheet, whereas as per the Assessing Officer such capital gain should have been credited in the profit and loss account only. The Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt Ltd, reported in [2010 (3) TMI 80 - SUPREME COURT] wherein held a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. - Decided in favour of assesse.

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• 2015 (5) TMI 926
  Disallowance of extra-ordinary items being loss due to cyclone, flood, fire, etc. - assessee could not substantiate that it had incurred expenditure on repairing its assets damaged due to flood - CIT(A) deleted the addition - Held that:- It is seen that the assessee had receivd finaicial assistance amounting to 16,01,00,000/- for this purpose. This is evident from the Government of Gujarat Resolution NOs.GUV-1105-2724-K1 dated 4.7.2005, 10.10.2005 and 13.10.2005 issued by the Principal Secretary, Energy Petrochemicals Department. The assessee had incurred less expenditure than the subsidy received and the excess has been duly offered for taxation. Being an undertaking wholly owned by the Government of Gujarat, the accounts are to be audited by the auditors appointed by C AG. As per the accounts furnished to C AG, the expenses incurred on repair of flood damaged assets amounted to 1,48,54,169/-. The C AG has certified the expenditure. No further evidence in this regard would ordinarily be necessary. If, however, it was felt that the expenses were over-stated, an independent enquiry could have been made to ascertain the correct expenses. However, this has not been done. Looking to the circumstances and also the fact that the excess subsidy received has been included in the taxable income, it is held that the AO was not justified in making the addition of 1,48,54,169/-, which is directed to be deleted - Decided against revenue. Disallowance of claim of guarantee fees paid to Government of Gujarat - disallowance of claim of cost of raising finance for specialized job - CIT(A) deleted the addition - Held that:- In the instant case, the assessee did not acquire any right to exploit a commercial technology or process, and neither was the benefit enduring , since the payment of guarantee commission was an annual charge. The benefit derived from payment of such commission thus lasted for exactly one year only. Such shortlived benefit cannot be categorized as enduring . Hence, inclined to the view that the payment of guarantee commission was a revenue expenditure. Further, the jurisdictional Bench of ITAT had occasion to consider the allowability of guarantee commission paid to a Director of the company in respect of loans taken from the bank. In the case of CIT v. Metalising Equipment Co.Pvt.Ltd [2001 (2) TMI 21 - RAJASTHAN High Court] that the payment of commission for guaranteeing repayment of loan was allowable as revenue expense. The addition is directed to be deleted. - Decided in favour of assesse. Disallowance of loss of material through pilferage, shortage of material in transit, shortage arising on physical verification, etc. - CIT(A) deleted the addition - Held that:- The amount written off consists of numerous items of small spares and consumable items. In a business of the size of the appellant, keeping tract of small consumable stores and spares with perfect accuracy is not always possible. At the time of annual stock verification, some items were found to be in excess or short of the number/quantity recorded in the stock register. Where the quantum was found in excess, the value of stock has been enhanced by such excess and where some items were found short, the value of shortage had been written off. The net effect during the year was shortage of the value of 3,13,53,470/-. As compared to the turnover such loss is less than 1/20th of 1%. This is quite negligible. The assessee has accounted for both gains as well as losses in respect of consumable stores ad spares in a consistent manner. Accordingly, it is held that the disallowance made was not justified - Decided in favour of assesse. Disallowance of claim under the head penalty expenses - CIT(A) deleted the addition - Held that:- From the details furnished, it is seen that the Savarkundla Transmission Division and Transmission Division Kodinar normally entered the expenditure incurred on rates and taxes under the accounting hear Penalties on Statutory Levies . From the supporting documents filed it is seen that the payments actually pertained to rates and taxes being in the nature of land revenue. Hence the discrepancy stands explained. There was no penal payment involved. Accordingly, it is held that the AO was not justified in making the disallowance - Decided in favour of assesse. Recomputation of book profit u/s.115JB of the Act for the purpose of computing MAT by allowing claim of depreciation under item (ii) (a) as directed by CIT(A) - Held that:- What is material for the purposes of section 115JB is not the profit loss account prepared in terms of the Income-tax Act but that prepared in terms of Schedule-VI of the Companies Act. the Department of Company Affairs has issued Circular dt. 7.3.2009 which allows depreciation to be claimed at higher rates on the basis of bona fide technological evaluation. It has been clearly stated therein that the rates prescribed in Schedule - XIV could be viewed as minimum rates. From Part B (wherein notes to the accounts have been disclosed) it is seen at item- 5(vii) relating to depreciation, that the company provides depreciation as per the rates notified by CERC, a regulatory commission by virtue of section 76 of Electricity Act, 2003, which are different from the rates prescribed under the Companies Act, 1956. During the year such rates were reduced, which could not however be implemented by the assessee during the year due to the fact that the notification was received very late. The assessee has complied with the provisions of Schedule-VI of Companies Act while preparing its accounts. In the instant case, from the facts as above, the assessee has complied with the provisions contained in Schedule-VI to the Companies Act read with Schedule-XIY and Circular dt. 7.3.2009 of the Department of Company Affairs. Hence the AO s action in reducing the claim of depreciation under item (ii)(a) is held to be unjustified. The AO is directed to recompute the book profit for MAT by allowing the depreciation claimed - Decided against revenue. Disallowance of the expenditure being the provision made for employees cost for arrears - Held that:- In the present case, the ld.CIT(A) has recorded the fact that the Gujarat Government accepted the 6th Pay Commission in December- 2008. Therefore, respectfully following the ratio laid down in the case of CIT vs. Kerala State Financial Enterprises Ltd.(2008 (2) TMI 383 - HIGH COURT OF KERALA) and CIT vs. Bharat Heavy Electrical Ltd.(2012 (9) TMI 515 - DELHI HIGH COURT), the disallowance made by the AO is hereby deleted. - Decided in favour of assessee.

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• 2015 (5) TMI 925
  Disallowance under section 14A - CIT(A) deleted part disallowance - Held that:- the disallowance of 5,00,000/- made by the AO was on ad hoc estimate basis, and the CIT(A) also sustained 50,000/- out of the same on ad hoc estimate basis. The DR could not bring any material before us to show that any amount more than 50,000/- was incurred by the assessee for earning of dividend income. Therefore, we do not find any good reason to interfere with the estimate made by the CIT(A). - Decided against revenue. Disallowance under section 14A at the rate 5% of the dividend income - Held that:- It shall meet ends of justice to restrict the disallowance under section 14A at the rate of 2% of the dividend income earned during the year by the assesse - Decided partly in favour of assesse. Transaction in shares - short term capital gains or business income - Held that:- No material has been brought before us to show, what was the frequency of the transaction in question. It is not the case of the Revenue that any borrowed fund was utilized for acquiring shares or units of mutual funds under consideration. In our considered view, the intention of the assessee at the time of acquiring shares of mutual fund has to be ascertained by taking into consideration all the relevant factors, like utilization of borrowed funds, frequency of transaction, volume of transaction, manner in which the acquisition is reflected in the financial statements etc. No single factor is determinative of actual nature of the transaction. In the absence of any material brought before us by the Revenue to show that same shares or the units of mutual funds were frequently purchased and sold, on which short term capital gain was claimed by the assessee, or that no borrowed funds was utilized by the assessee in acquiring the shares and units in question, we do not find any good reason to interfere with the order of the CIT(A) accepting the income shown as short term capital gains. - Decided against revenue. Disallowance of deduction of preliminary expenses under section 35D - CIT(A) allowed the claim - Held that:- In the instant case, it is not in dispute that the expenditure in respect of which the deduction was claimed by the assessee under section 35D was incurred after 31st March, 1998. Thus, in any view of the matter, the deduction is to be allowed to the assessee for five years only. The assessee has submitted that deduction has already been allowed for five years to it, and of course at the rate of 10% and not at the rate of 20%. Be that as it may, the year under consideration being 6th and 7th year, the deduction under section 35D is not allowable to the assessee in view of the proviso quoted above - Decided in favour of assesse. Addition of provision for doubtful loans while computing book profit u/s.115JB - CIT(A) deleted the addition - Held that:- Set aside the orders of the lower authorities on this issue, and remit the matter back to the file of AO for deciding the issue afresh in the light of the above cited decision of CIT Vs. Yokogawa India Ltd.[2011 (8) TMI 766 - KARNATAKA HIGH COURT ] after verifying the facts of the instant case. It is needless to mention that the AO shall allow reasonable opportunity of hearing to the assessee before deciding the issue afresh. - Decided in favour of Revenue for statistical purpose.

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• 2015 (5) TMI 924
  Interest on Non Performing Assets u/s.43D - CIT(A) deleted the addition - Held that:- In view of the ratio laid down in ACIT Vs. Osmanabad Janta Sah. Bank Ltd. (2015 (3) TMI 886 - ITAT PUNE) and in ACIT vs. The Omerga Janta Sahakari Bank Ltd. (2014 (12) TMI 355 - ITAT PUNE), we uphold the order of CIT(A) in holding that the interest on NPAs is not taxable in the hands of the assessee for the captioned assessment year - Decided against revenue.

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• 2015 (5) TMI 923
  Unexplained credits in the books of account u/s 68 - CIT(A) deleted the addition - Held that:- AO denied opportunity of being heard for the assessee and the CIT(A) wrongly shifted onus on the revenue authorities and misunderstood the meaning of onus with regard to section 68 of the Act. Hence, we are of the considered opinion that the issue of share application money was not adjudicated by the lower authorities as per provisions of section 68 of the Act and as per ratio and proposition laid down in the case of CIT vs MAF Academy P. Ltd. (2013 (12) TMI 13 - DELHI HIGH COURT) wherein it was held that the onus to prove genuineness, creditworthiness and identity of the transaction is on the assessee and mere production of incorporation details, PAN or income tax returns may not be sufficient when surrounding and attending facts predicate a cover up. Therefore, restore the issue to the file of AO for de novo adjudication only on the issue of alleged share application money after affording due opportunity of hearing for the assessee - Decided in favour of revenue for statistical purposes.

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• 2015 (5) TMI 922
  Receipt from demutualization of stock exchange - whether receipt did not constitute long term capital gain? - issue of notice U/S 143(2) beyond the period of 12 months - Held that:- CIT(A) has dismissed this ground of appeal holding that the notice was issued within the prescribed period of time. He has not mentioned about service of the said notice, therefore, we deem it appropriate to set aside this ground or appeal to the office of A.O. who on the basis of record will find out as to whether the service of notice u/s 143(2) was within the prescribed period of time and accordingly will decide this legal issue as per law. Taxability of receipt on account of demutualization DSE scheme 2005 - Held that:- CIT(A) has dismissed this ground of appeal relying upon the earlier order of the tribunal in the case of assessee itself for Assessment Year 1997-98 [2010 (5) TMI 785 - ITAT DELHI] wherein find that during that year, the assessee had received an amount of 25 lacs on account of sale of membership card and, therefore, the Tribunal had held that membership card to be capital asset and therefore had decided the issue holding that the assessee was liable to pay capital gain tax. However, in the present case, the assessee had not sold the membership card but had received the amount on account of demutualization of stock exchange and, therefore the facts of the present case are distinguishable from the facts of the case for the Assessment Year 1997-982010 . CIT(A) has also held that the judgement of Stock Exchange Ahmedabad Vs ACIT [2001 (3) TMI 2 - SUPREME Court] apply in the cases where the membership had seized and was surrendered with the stock exchange authorities. We have already held that facts of the present case are distinguishable from the facts of the case in 1997-98. Therefore in view of above, we deem it appropriate to set aside this issue also to the office of A.O. should also enquire from Delhi Stock Exchange or from other members of stock exchange who also must have received similar amounts regarding taxability of such amounts in their cases. The A.O. should also examine the claim of assessee that Delhi Stock Exchange was a charitable organization. Needless - Decided in favour of assesse for statistical purposes.

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• 2015 (5) TMI 921
  Unexplained money u/s.69 - Held that:- We do not find any justification in the action of the AO for rejecting the cash memo merely on the plea that these were not signed/authenticated by the recipient of the goods. In case of retail trade, there is no practice of getting the signature in sales bills. Furthermore, in case of cash sales there is no need to give full details of the buyer and the recipient of goods, insofar as assessee delivers the goods only after receipt of entire sale consideration. Since the deposit in bank account was much more than sales shown by assessee, onus is on the assessee to show the source of excess money deposited in bank account either in cash or through cheques. In the interest of justice and fairplay, we restore the appeal for assessment year 2005-06 to the file of AO for deciding afresh after giving due opportunity of hearing to the assessee. - Decided in favour of assesse for statistical purposes. Unexplained cash credit u/s 68 - Held that:- credit in the bank account was on account of 119,900/- received from assessee’s son Nizarali Govani whose loan confirmation was also filed. Further a sum of 3.25,000/- was transferred from saving account No.10078 with Development Credit Bank. 3,00,000/- is received from client’s daughter Rozina Govani whose loan confirmation was also enclosed. However, to substantiate the claim of various deposits and withdrawals the assessee has not filed any cash-flow/fund-flow statement. From the orders of lower authorities it is not clear that documentary evidences with respect to source of funds were filed before them. Thus the addition made during the assessment year 2006-07 u/s.68 as well as on account of short term capital gains is also restored to the file the AO for deciding afresh after giving due opportunity to the assessee.- Decided in favour of assesse for statistical purposes

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• 2015 (5) TMI 920
  Transfer pricing adjustment - international transaction of Royalty payment - Held that:- The most of the key parts are registered in India, contribution of UK entity was considered to be minor as major part of designing of this “India specific product”, it was concluded had been done in India. In view of these facts the TPO questioned the occasion to make royalty payments to JC Bamford. Thus relying on the reasons considered by the DRP in 2007-08 assessment year the TPO in the facts of the present case adopted the same reasoning leading to rejection of assessee’s claim. Loss pertaining to M/s JCB Manufacturing Ltd. as a result of the merger of the entity with the assessee company - held that:- the appellant company claimed loss of JCB Manufacturing Limited (“amalgamating company”) as returned to be set off and carry forward. The AO made TP adjustment and reduced the loss in the assessment order. The appeals against TP adjustments are stated to be pending before the ITAT in the case of JCB Manufacturing Limited. The fact that only assessed loss is to be carried forward is not in dispute. In the afore-mentioned facts and circumstances, the limited prayer of the assessee is allowed.

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• 2015 (5) TMI 919
  Registration under section 12AA denied - rejection of application in Form 10A - Held that:- It has been clearly established by various decisions that when the main object of the institution was "charitable in nature", the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if it is carried out with non-members, were all held to be "charitable in nature". The basic principle underlined the definition of charitable purposes remains unaltered even by amendment to section 2(15) of the Act with effect from April 1, 2009, though the restrictive first proviso was inserted therein. In the given facts of the case, the assessee's association's primary purpose was to give focus on areas of education, environment and engagement (community and employee). It has through constant and well monitored support aimed towards community sustainability. Therefore, they have focused on areas of education and environment, watershed management, women empowerment through skill development initiatives, provision of drinking water, youth empowerment, medical health camps, environmental conservation program, and promotion of sports and a host of extracurricular activities at local levels aimed towards community sustainability. Hence, the assessee association primary purpose was advancement of objective general public utility and it would remain charitable even if an incidental or ancillary activity or purpose of achieving the main purpose was profitable in nature. Hence the finding of the Director of Income-tax (Exemptions) has mentioned in the object clause 17 under the said incidental objects under Part B of the memorandum of association at paragraph 5 of his order stating it to be non-charitable does not disentitle the assessee for availing of exemption under section 12 of the Income-tax Act. - Decided in favour of assessee.

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• Customs

• 2015 (5) TMI 943
  100% EOU - Exemption under 136/94-CE - Double jeopardy - Non fulfillment of export obligation - Import of goods before 2003 - Confiscation of goods - Imposition of penalty - whether the duty foregone at the time of procurement of impugned goods is recoverable or not - Held that:- there cannot be any doubt/dispute that for the goods procured prior to 31.3.2003, the conditions of Notification No. 52/2003-Cus dated 31.3.2003 and 22/2003-CE dated 31.3.203 would be of no avail. Whether the duty foregone at the time of procurement of impugned goods is recoverable or not - Held that:- Impugned goods imported duty free were clearly rendered liable to confiscation as they were cleared duty free under Notification No. 126/94-Cus. but the condition of exemption was not fulfilled by them. - No disability in the Rule 173Q which makes it inapplicable to 100% EOU. - Rule contains Sub-Rule (1) and Sub-Rule (2) and Sub-Rule (2) only states that An order Sub-Rule (1) shall be issued by Central Excise officer following the principles of natural justice . Thus non intention of Sub Rule of Rule 25 ibid has in no way prejudiced the appellants. Appellants contention of double jeopardy on the ground that they have already been penalised under the FTDR Act, 1992 is totally invalid as the ingredients of offences under the FTDR Act and the Customs Act, 1962/Central Excise Act, 1944 are different. It needs to be appreciated that this case does not involve clandestine removal of goods or any wilful mis-statement or suppression of facts and even the appellate body of the DGFT in the given circumstances had taken a lenient view with regard to imposition of penalty for the violation of the provisions of the Foreign Trade Development and Regulation Act. In these circumstances the penalties imposed deserve to be substantially attenuated. - Decided partly in favour of assessee.

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• 2015 (5) TMI 942
  Imposition of penalty - Non furnishment of documents - Change in penalty section from section 117 to Regulation 5 of the Customs Regulations 2011 - Held that:- There is no mala fide intention on the part of the importer to evade any duty and was following a practice. Appellant in reply to the show cause notices asked for extension of time which the Adjudicating Authority should have allowed - Adjudicating authority imposed penalties under Section 117 of the Customs Act 1962 by penalties so imposed were held to be imposable only under Regulation 5 of the Customs (Provisional Duty Assessment) Regulations 2011. This was not the subject matter of the show cause notices. Therefore, above findings arrived at by the First Appellate Authority are required to be rejected, as he cannot go beyond the scope of show cause notices when the same is not agitated by the Revenue. - Decided in favour of assessee.

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• Corporate Laws

• 2015 (5) TMI 941
  Delay in filing of appeal by 142 days - Condonation of delay as per Section 10-F of the Companies Act, 1956 - An application under Section 14 of the Limitation Act, seeking condonation of delay of 142 days - Held that:- The maximum period upto which an appeal can be filed in the Court even if filed late, is 120 days (i.e. 60+60 days). This Court cannot condone the delay beyond the period of 60 days. Even the plea raised by the appellant that earlier on account of ill advise, a writ petition was filed, hence, taking support of Section 14 of the Limitation Act the delay is to be condoned, but such a plea is not available to the appellant as Section 14 of the Limitation Act has no application in appeals. While considering the judgment of Hon'ble the Supreme Court in Popular Construction Co.'s case [2001 (10) TMI 1044 - SUPREME COURT OF INDIA] and subsequent judgment in Gopal Sardar vs Karuna Sardar [2004 (3) TMI 743 - SUPREME COURT], this Court in Pawan Goel's case [2008 (2) TMI 626 - HIGH COURT OF PUNJAB AND HARYANA], opined that the maximum period available to the appellant for preferring appeal to this Court is sixty+sixty days i.e. 120 days, subject to the condition that the appellant has shown sufficient cause for condonation up to sixty days beyond the prescribed period of sixty days and the provisions of Sections 4 to 24 of the Limitation Act have no application.The issue was thereafter considered by Hon'ble the Supreme Court in Chhattisgarh State Electricity Board's case [2010 (4) TMI 1031 - SUPREME COURT]. Similar view was expressed by Division Bench of Delhi High Court in Delhi Development Authority vs M/s Durga Construction Company [2013 (11) TMI 1527 - DELHI HIGH COURT] decided on 7.11.2013. What can be summed up from the aforesaid authoritative enunciation of law on the issue by Hon'ble the Supreme Court and different High Courts is that where certain period has been specified in the special Act limiting powers of the Court to condone the delay, the same would amount express exclusion of Section 5 of the Limitation Act within the meaning of Section 29 (2) of the Limitation Act. - Decided against the appellant.

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• 2015 (5) TMI 940
  Winding up application by Debenture Trustee - Failed to pay the amounts due to the Petitioner under the Deed of Corporate Guarantee - FDI In India in contravention of FDI policy / Fema regulations - Held that:- From the afore-stated facts it appears that FMO, a foreign entity wanted to invest a substantial sum by way of FDI in a slum rehabilitation project being undertaken in Mumbai by Rubix, and an Industrial Park being undertaken by Amazia. The FDI Policy and the statutory FEMA Regulations (which incorporates the FDI Policy as a Schedule thereto) permit FDI in townships, construction of houses, only by way of equity investments (which is defined to also include debentures which are compulsorily required to be converted into equity : CCDs). The FDI Policy and the FEMA Regulations prohibit any other form of investment (non equity) in the said sector with an assured return/rate of return. However, FMO was interested in an investment which would ensure an assured fixed return to it. Since this was not permissible under the FEMA Regulations/FDI Policy, the investment structure was devised/adopted. The conduct of FMO in routing its FDI nominally through Vinca to Amazia and Rubix against issuance by them of OPCDs and the amendments/provisions made in Vinca’s Articles of Association, establishes that FMO was fully aware that it could not under the FDI Policy and FEMA Regulations directly invest in the OPCDs, or require that its FDI amount/investment be returned back to it with a fixed rate of return after a stipulated period i.e. without bearing an equity investment risk. The complex structure devised for FMO’s FDI investment establishes that all parties (including FMO) were aware that the transaction which was premised on return back of the FDI amount along with a fixed rate of return thereon, was not permissible under/in violation of the FDI Policy and the FEMA Regulations. It is clear that in claiming the amount and initiating the present proceedings, the Petitioner is acting at the instance of FMO/FMO nominees on the Board of Directors of Vinca. This is the stipulation in Vinca’s articles and under the DTD. In any event, inasmuch as the transaction (based on return of the FDI/principal amount invested along with a fixed rate of return thereon) is not permissible/prohibited under the FDI Policy and the FEMA Regulations, neither IDBI nor FMO can seek the assistance of the Court to effectuate/implement/enforce such a prohibited/illegal transaction. The aforesaid facts prima facie support the contention of the Company that the factual matrix and the transaction documents establish that the transaction of routing the FDI through the newly interposed Vinca was a colourable device and was structured to enable FMO to secure repayment of its FDI amount (Rs. 418 crores) and a rate return of 14.5% per annum thereon, contrary to the FDI Policy and the statutory FEMA Regulations and in any event the transaction is illegal and prohibited by law, is unenforceable, and consequently the Bank Guarantee issued by Vinca being part of the said structure is also unenforceable. The FMO is as much a party to the aforestated colourable device/structure designed as the Respondent Company. In my view, the Company has raised a dispute which requires adjudication on further evidence in a properly constituted Suit. - Decided against the appellant.

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• FEMA

• 2015 (5) TMI 939
  Maintainability of appeal - whether the appeals were dealt with by the Appellate Tribunal (which is the new avatar of the Appellate Board) under FERA or FEMA - Held that:- Language of Section 49(5)(b) of FEMA is suggestive of the fact that it is only an appeal, which was pending before the Appellate Board, and which could not be disposed of before the commencement of the Act (i.e., FEMA), would stand transferred to the Appellate Tribunal. Therefore, to suggest that the subject appeals, were disposed of by the Appellate Tribunal, based on the said provision, in my view, does not appear to be, on a plain reading of the provision, the correct position of law. - since the subject appeals were not pending on the date of commencement of FEMA, the Appellate Tribunal, which got constituted after the dissolution of the Appellate Board, had exercised powers under FERA and not had taken recourse to the provisions of the FEMA. In so far as Section 35 of the FEMA is concerned, it gives a right to an aggrieved party to prefer an appeal against “any” “order” or “decision” of the Appellate Tribunal. Therefore, an appeal, even against an interim order of the Appellate Tribunal, will be available to the petitioners. The appeal, however, will have to be preferred, by the aggrieved party (in this case the petitioners herein) before the concerned High Court. The explanation to Section 35 of the FEMA, sets out, as to which High Court would be the appropriate court in a given case. It is not the petitioners’ case that they are ordinarily residents of Delhi or, they carry on business or personally work for gain within the jurisdiction of this court. That being so, this court is not the appropriate court where an appeal under Section 35 of FEMA can be preferred by the petitioners - Appeal not maintainable - Appeal disposed of .

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• Service Tax

• 2015 (5) TMI 949
  Commercial Training & Coaching - Benefit of Notification 24/04-ST dated 10.09.2004 as amended by Notification 3/10 dated 27.02.2010 - Scope of Section 65(27) of the Finance Act, 1994 - Held that:- In the absence of any evidence which would indicate that the training imparted by the respondent does not enable the trainee to 'seek employment or undertake self employment, findings of the first appellate authority as factual matrix are uncontested and are to be held as correct. - training imparted by the respondent herein and as recorded by the first appellate authority would definitely get covered under the category of Finance Executive in Non-engineering trades as notified by the Apprentices (Amendment) Act. Accordingly, we hold that in fact the judgment of the Tribunal in the case of Sadhana Educational & People Dev. Services Ltd. (2013 (12) TMI 735 - CESTAT MUMBAI) supports the case of the respondent. - Decided against Revenue.

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• 2015 (5) TMI 948
  Interest u/s 75 - delayed payment of service tax - Equivalent penalty for non-payment of interest - Held that:- Jurisdictional authority has worked out the actual number of days delayed for payment of service tax for each amount received from August, 2004 to December, 2004 and he has also worked out the number of days of delay which varies from 150 to 28 days and the total interest amount payable was quantified as 73,369 - amount re-quantified by the department is the correct interest amount payable for the delayed payment of service tax. Therefore, there is no infirmity in the impugned order directing the adjudicating authority to re-quantify the interest. Further, I do not find any valid ground put forth by the Revenue against dropping of penalty by the Commissioner (Appeals). The lower appellate authority has waived the penalty taking into consideration of the fact that the respondent has already paid the service tax. Considering the interest amount itself is reduced from 1,33,004/- to 73,369/-, I do not find any infirmity in the impugned order in so far as setting aside the penalty. Accordingly, revised interest amount of 73,369/- worked out by the department as per the direction of the Commissioner (Appeals) is upheld and waiver of penalty is upheld - Decided against Revenue.

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• 2015 (5) TMI 947
  Waiver of pre deposit - consulting engineering services - Service provided in SEZ - Held that:- It is the case of export of service outside India as the applicants has provided services to the service recipient located outside India. Further for the project of Debhol Restart, they have discharged the service tax liability. For the project namely, JERP, the unit is located in SEZ and for the project KG-D 6 the unit is located outside the territory of India. In these circumstances, applicant has made out a case for complete waiver of requirement of pre-deposit. Consequently amount already deposited by the appellant is sufficient for compliance with the provisions of Section 35 F of Central Excise Act, 1944 read with Section 83 of Finance Act, 1994, for waiver of requirement of pre-deposit of service tax, interest and penalties. Consequently, we waive the requirement of pre-deposit of balance amount of Service Tax, interest and penalties and stay recovery thereof during pendency of the appeals. - Stay granted.

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• Central Excise

• 2015 (5) TMI 944
  Remission of duty - Whether the remission of duty involved on storage loss of molasses be allowed even without filing of remission application though prescribed specifically in the statute under Rule 21 of Central Excise Rules, 2002 - Held that:- Notification only prescribes outer limit up to which excisable goods can be said to have been lost in natural course, with reference to the particular good. Such prescription of the outer limit will not mean that the statutory provision for claiming such remission are to be given a go by. It is not open to the assessee to himself determine the remission because of alleged loss even if it is within the permissible limits. - even if in the facts of the case, the assessee claims remission from excise duty of goods said to have been lost in natural course, within the permissible limit, as per the circulars, he has to follow the procedure prescribed under Rule 21 of the Rules. Only after an order is made granting remission in respect of the goods so lost due to natural circumstances, he could be exempted from payment of excise duty. - Since Tribunal did not consider this aspect, Matter remanded back - Decided in favour of Revenue.

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• CST, VAT & Sales Tax

• 2015 (5) TMI 946
  Waiver of pre deposit - Validity of order passed by Tribunal - Tribunal directed the first appellate authority to disposed of the matter in the light of decision in the case of ONGC within 3 months - Held that:- State of Gujarat brought it to the notice of the learned Tribunal that the decision of the learned Tribunal in the case of ONGC is challenged before the High Court and the High Court has admitted the appeals and the appeals are pending for final disposal and therefore, the High Court is seized with the matter. Despite the aforesaid brought to the notice of the learned Tribunal, the learned Tribunal not only dismissed the said applications by not removing the outer time limit fixed by it directing the first appellate authority to decide the appeals within a period of three months after following its earlier decision in the case of ONGC Limited, reiterated again and directed the first appellate authority to decide the appeals within stipulated time after following its decision in the case of ONGC Limited. Once it was brought to the notice of the learned Tribunal that the appeals against its decision in the case of ONGC Limited are pending before this Court and this Court is seized with the matter, even to avoid any further multiplicity of proceedings, the learned Tribunal could not have insisted for disposing of the appeals by the first appellate authority following its earlier decision in the case of ONGC Limited, which are the subject matter of appeals before this Court and that too within stipulated period - respondent - original appellant has stated at bar that he has no objection, if that part of the order, by which the learned Tribunal has directed the first appellate authority to decide the appeals within three months and that too after following the decision of the Tribunal in the case of ONGC Limited is quashed and set aside. If the respondent - original appellant is permitted to withdraw the amount, which the respondent - original appellant deposited pursuant to the interim order dated 25.6.2013 passed by the learned Tribunal in First Appeal Nos.11 and 12 of 2013 i.e. 18,69,75,730/- on furnishing unconditional and irrevocable Bank Guarantee of the like amount in the name of the Commissioner of Commercial Tax, it will make the ends of justice and it will protect the interest of both the parties. - Decided partly in favour of Revenue.

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• 2015 (5) TMI 945
  Claim of interest on refund with refund - Refund not granted inspite of order of High Court - Levy of sales tax – turnover - shame transactions for obtaining loan from bank - Held that:- From a cursory reading of Rule 34, it is evident that the said rule mandates that the assessing authority shall give effect to the order of the High Court (Special Tribunal) within three months from the date of communication of the order. It is clear from the above provisions that there appears to be no other option except to comply with the order of the High Court (Special Tribunal), except where the order in issue is challenged in a higher forum and the order has been stayed. - Supreme Court in SCBA - Vs - B.D. Kaushik (2012 (9) TMI 560 - SUPREME COURT), while considering the scope of the Court to entertain miscellaneous petitions after delivery of judgment in the main petition, held that to do complete and substantial justice to the parties in the proceedings, when the miscellaneous petition filed is curative in nature and not used for supplanting substantive law, in exercise of inherent powers, shall entertain such petitions for implementing the orders of the Court. Power of the Court does not end with the passing of the order, but more so, in seeing that the order is implemented in letter and spirit, howsoever difficult it may be. In case where the orders passed by the Court are not implemented, the Court, in exercise of the inherent powers, should see to it that the orders passed by the Court are implemented. - Insofar as the interest for the delayed payment is concerned, Rule 34 mandates that the assessing authority shall refund without interest within three months from the date of communication of the order, any excess tax found to have been collected. A reading of Rule 34 makes it abundantly clear that beyond the period of three months from the date of communication of the authorisation (order of the High Court), any delay in refund of excess tax is liable to attract interest and the department is bound to pay the same. In the present case, inspite of the order being despatched by this Court on 15.4.2014, almost a year having passed, the department has not refunded the amount back to the petitioner. Therefore, invoking Rule 34, the petitioner is entitled to interest on delayed payment beyond the period of three months from the date of communication of the order. Therefore, this Court is of the considered view that the department is liable to pay interest on the amount deposited by the petitioner pursuant to the order of this Court dated 3.8.2010, as provided under Rule 34 of the Rules. - Decided in favour of assessee.

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