TMI Tax Updates - e-Newsletter
June 10, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise Indian Laws

Articles

1. Service Providers - Input Credit Avaiability?

   By: Madhukar N Hiregange

News

1. Text of the Speech of the Union Finance Minister at the Pre-Budget Meeting with the Finance Minsters of all States and Union Territories

2. NABARD Reduces Rates of Refinance with Focus on Investment Credit

3. RBI Reference Rate for US $ and Euro

Notifications

Companies Law

1. F. No. 3/124/2012-CL.II - dated 30-5-2014 - Co. Law

Central Government authorize Shri S. K. Sareen, Additional SP, CBI for the purpose of filing complaints and conducting prosecutions for violation of Sec. 68A of the Companies Act, 1956 in two cases— RC. 3(E)/2006-BS&FC/Mumbai and RC.4(E)/2006-BS&FC/Mumbai

Circulars / Instructions / Orders

Companies Law

1. F. No. 2/8/2014-CL-V - dated 2-6-2014

Companies (Removal of Difficulties) Second Order, 2014

2. F. No. 2/9/2014-CL-V - dated 2-6-2014

Companies (Removal of Difficulties) Third Order, 2014.

Highlights / Catch Notes

Income Tax

• Court Rules Damages for Non-Performance as Business Income, Not Speculation, Based on Contract vs. Market Price Difference.

  Case-Laws - HC : Nature damages for non-performance of the contract - amount of damages by paying the difference between the contract price and the market price - Held as business income and not as speculation income - HC
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• Bond Issue Costs Ruled as Revenue, Not Capital, Due to Business Operations Starting Prior to Relevant Year.

  Case-Laws - HC : Bond issue expenses – Revenue or capital - The business had commenced much earlier and not during the year. - expenditure is revenue in nature - HC
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• Examining Section 69 of the Income Tax Act: Analyzing Time Gap Between Cash Withdrawals and Deposits for Taxpayer Verification.

  Case-Laws - AT : Addition u/s 69 - time gap between the cash withdrawal from bank and the deposit made, and in the process, the possible nexus between the withdrawal made earlier and the redeposit made by the assessee needs to be verified - AT
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• MAT Credit Deduction Precedes Surcharge and Cess Application for Accurate Tax Calculation u/s 115JJA.

  Case-Laws - AT : Levy of Surcharge and education cess - MAT credit u/s 115JJA - MAT credit should first be reduced from the tax payable and thereafter on the residual amount the surcharge and education cess be levied - AT
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• Advance Payment Not a Sale: Gas Sale Didn't Happen, Shouldn't Count as Income This Year.

  Case-Laws - AT : Sale of gas has not taken place during the year under consideration the amount of advance cannot be treated as sale and added to the income of the appellant for the current year - AT
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• Section 147 Reassessment: Taxpayer Must Fully Disclose Info; AO's Specific Queries Irrelevant If Other Queries Raised.

  Case-Laws - AT : Reassessment u/s 147 - Full and true disclosure – it matters little that the AO did not ask any question or query with respect to one entry or note but had raised queries and questions on other aspects - AT
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Customs

• Customs House Agents License Denied; Decision Highlights Need for Proof Before Business Restrictions.

  Case-Laws - HC : Rejection of application for fresh Customs House Agents License - a person who has been carrying on business ought not to be prevented from carrying the business on the basis of allegations not proved in Court of law - HC
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• Director's Receipt of Order in Official Capacity Leads to Condonation of Delay Decision.

  Case-Laws - AT : Condonation of delay - Delay in receipt of order - whether the receipt of order by the director is in personal capacity or on behalf of the appellan - held as in official capacity - AT
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Service Tax

• No Penalty Imposed: Service Tax and Interest Paid Before Show Cause Notice Issued.

  Case-Laws - AT : Penalty - service tax was actually deposited alongwith interest even before the issuance of show cause notice - no justification for imposition of penalty - AT
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• Court Grants Partial Stay on CENVAT Credit and Abatement Issue for Convention Services under Notification 1/2006 ST.

  Case-Laws - AT : Convention service - availing CENVAT Credit while availing benefit of abatement notification 1/2006 ST - stay granted partly - AT
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Central Excise

• Court Grants Partial Stay in Clean Energy Cess Dispute Over Coal Movement Beyond Mines.

  Case-Laws - AT : Levy of Clean Energy Cess - non movement of raw coal nor coal after its processing beyond the coal mines - Prima-facie, either view, the one adopted by Revenue and the other adopted by the petitioner, appear plausibl - stay granted partly - AT
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• Appellant Must Pay Customs Duty on Raw Materials Destroyed by Fire or in Finished Products Lost.

  Case-Laws - AT : Remission of duty - appellant is liable to discharge Customs duty liability on the imported raw materials destroyed as such in the fire accident or the imported raw materials contained in the finished products destroyed as such - AT
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• Authority Ordered to Supply 'Non-Relied Upon Documents' to Appellants in Central Excise Duty Demand Case.

  Case-Laws - AT : Duty demand - Non supply of proper documents - adjudicating authority directed to supply the ‘non-relied upon documents’ to the appellants - AT
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Case Laws:

• Income Tax

• 2014 (6) TMI 227
  Protection addition made - Addition as unexplained credits – Held that:- As it has been already been held by the Tribunal for the earlier assessment year, the Tribunal was of the view that it is proved beyond doubt that the bank accounts were owned by Mr. B.Bhushan and Smt. Renu Bhushan - the bank accounts belonged to M/s NextWave India (AOP) and not NextWave India(P) Ltd. - the protective additions made by the AO and enhancement thereof by the CIT(A) are deleted and the appeals by NextWave India (P) Ltd. are allowed. The existence/veracity of the Tribunal order has not been challenged by the department - It has also not been refuted that the Tribunal Order has been accepted by the department - the facts remaining the same for the year also, as were present before the Tribunal for the immediately two preceding assessment years and the immediately succeeding assessment year, the Tribunal Order needs must be followed - the addition made on substantive basis is the same as that made protectively is to be set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 226
  Capitalization of expenses for project – real estate project - development of a residential colony - project yet to commence - Held that:- They were/are engaged in the real estate development business and had undertaken development of the project - It has to be examined whether the expenditure incurred on development of the project should be taxed by applying Accounting Standard No.7 and in case, the said Accounting Standard has not been followed, the effect thereof has to be ascertained and considered - The exercise has not been undertaken in the case - Tribunal in the order without dwelling on the aspect, held that the expenditure was capital, as corresponding income from the project was not recorded or brought to tax – the matter should be remitted to the AO for a fresh adjudication as to whether other expenses can be allowed as expenditure, in accordance with law, i.e. Accounting Standard as applicable, read with Section 145/145A of the Act – Decided in favour of Assessee.

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• 2014 (6) TMI 225
  Deletion of disallowance of entertainment expenses – Held that:- The Tribunal has correctly come to the conclusion that the expenditure claimed by the assessee on tea, coffee, cold drinks, pan, cigarette, biscuits, crockery are not in the nature of entertainment and looking to the turnover of the assessee, the expenditure is a routine expenditure and customary in nature - Expenditure incurred are for the business considerations and cannot be said to be in the nature of entertainment – Relying upon CIT v. Patel Brothers and Co. Ltd. [1995 (5) TMI 2 - SUPREME Court] - the expenditure for commercial and business expediency, which is normal and not lavish, cannot be said to be falling within the meaning of entertainment expenditure – the order of the Tribunal is upheld - Decided against Revenue. Business income or income from speculation business – Held that:- The assessee has been able to satisfactorily prove that he was able to receive the damages for the breach of the contract and the contract was for supply of goods, it was a business transaction - the damages received was certainly in the nature of business profits and not speculative in nature - there was no question of settling the contract as the cause of action was no longer based on the contract itself but on the breach and settlement of the damages arising from the breach of the transaction does not result from the contract but from the breach - A contract can be settled during the subsistence of the contract and if a breach occurred by the non-performance of the contract or by the actual delivery, a party to the contract settled the amount of damages by paying the difference between the contract price and the market price on the due date of performance that would not amount in law to settling a contract - What has been settled is settling the damages consequent to the breach. Relying upon CIT v. Shantilal P. Ltd. [1983 (7) TMI 1 - SUPREME Court] - The Tribunal was of the view that the assessee received damages for non-performance of the contract and that non-performance of the contract was for reasons beyond the control of the assessee, and the Tribunal was justified in coming to the conclusion that the amount is to be treated as business income and not the income by way of speculative transaction – Decided against Revenue.

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• 2014 (6) TMI 224
  Reduction of lease equalization charges – Calculation of profits under P&L A/c – Held that:- Following Commissioner of Income-tax Versus Virtual Soft Systems Ltd. [2012 (2) TMI 120 - DELHI HIGH COURT] - the lease equalisation charges or funds have to be set off or included on the expenditure side in the profit and loss account to compute and calculate the profits. The principle of matching, i.e., matching of income with the actual expenditure which is incurred by the assessee to earn the income applies - the AO has not based the addition on the finding that there was incorrectness or incompleteness in the account or the accounting standard employed by the assessee were contrary to the accounting standard notified by the Government u/s 145(2) of the Act. The assessee had received lease rentals from which lease equalisation account was reduced - The addition of the fixed assets is reflective as the addition to the quantum of rolling stock - If the purchase price of the rolling stock stands subjected to revenue deduction, would have its own consequences and lead to abnormal financial results and absurdities - the purchase value of the leased assets did not find reflection or deduction in the profit and loss account - as long as the assessee does not indulge in any manipulation of the figures and the capital cost, IRR, etc., are computed in accordance with the accountancy standards and no error or can be found, lease equalisation charge should not be disallowed – Decided against Revenue. Bond issue expenses – Revenue or capital – Held that:- Following CIT v. Thirani Chemicals Ltd. [2005 (12) TMI 86 - DELHI High Court] - issue of debentures oil rights basis to the existing shareholders was revenue expenditure and it was not mandatory to amortise the amount u/s 35D of the Act in view of the Circular No. 52, dated March 19, 1971, issued by the Central Board of Direct Taxes - assessee was/is a Government of India undertaking and was engaged in the business of leasing and financing to Indian Railways - It procured funds from various sources and acquired rolling stock which was leased to Indian Railways - The expenditure which was incurred on bonds was for ensuring finance and availability of funds for carrying out the business of finance and leasing - To procure and get funds in the form of bonds etc. some expenditure had to be incurred - The funds were used for the business activities to earn income - The business had commenced much earlier and not during the year. - expenditure is revenue in nature. - Decided against the revenue. Entitlement for depreciation on office premises – Held that:- The findings are findings of fact - The Tribunal has taken into account and relied upon the possession letter dated April 28, 1998, in which NBCC had accepted that the possession of the space measuring 625 square meters and 285 square meters was handed over to the assessee on September 23, 2000 - NBCC was/is a Government of India undertaking and it is difficult to accept the contention of the Revenue that they would have fudged or manipulated the date of possession – Decided against Revenue.

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• 2014 (6) TMI 223
  Validity of re-assessment u/s 147/148 of the Act - Mere change of opinion – Held that:- The Tribunal noticed that the assessment order u/s 143(3) of the Act was made after duly considering the materials discovered during the course of the survey - the assessment was made on due application of mind to all the available records - section 147 of the Act did not postulate conferment of power upon the AO to initiate proceedings on the basis of mere change of opinion - section 143(3) of the Act makes it abundantly clear that the AO had not only referred to the impounded documents and records found in the course of the survey u/s 133A of the Act from the business and office premises of the assessee but also those were test checked and evaluated in undertaking that exercise. The endeavour on the part of the AO to initiate a reassessment proceeding u/s 147/148 of the Act on the ground that the same records/documents did disclose that the amount had escaped assessment, is unconvincing and untenable as well - Such a conclusion does certainly stem from a change in opinion - a mere change in the opinion of the AO after completion of the assessment u/s 143(3) of the Act is not a legally approved determinant for valid initiation of reassessment proceeding u/s 147 of the Act the essential and inviolable condition precedent therefor being the reason to believe that any income chargeable to tax has escaped assessment – Relying upon CIT v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the words "reason to believe" did not admit of conferment of arbitrary powers to the AO to reopen assessment on the basis of mere change of opinion - the AO had no power to review but to reassess and that reassessment has to be essentially based on the fulfilment of certain pre- conditions, as legislatively ordained – Decided against Revenue.

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• 2014 (6) TMI 222
  Rejection of sale consideration – Computation of LTCG – Valuation u/s 50C made by AO – Held that:- The assessees had sold two properties to M/s. Ponmudi Muthusamy Gounder Trust – CIT(A) has dismissed the appeals of the assessees on the ground that the assessees have not been able to produce any document showing cancellation of sale deeds - an Award of Lok Adalat either on merits or in terms of settlement agreement shall be final and binding on all the parties and on persons claiming under them - the sale deeds have been declared as null and void by the award of Lok Adalat, there is no further requirement for seeking cancellation deeds – thus, the matter is remitted back to the AO and the assessees are directed to produce a certified copy of the Lok Adalat Award dated 8.12.2012 before the AO – Decided in favour of Assessee.

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• 2014 (6) TMI 221
  Disallowance of claim of interest and salary payment – Proper details furnished but not verified - Held that:- The order of the CIT(A) including the remand report, does not indicate the amounts invested by the individuals - Even though assessee furnished evidences regarding payment of interest and consequent TDS made in respective individuals cases and confirmations of them were filed, the amount in the absence of their individual investments and the interest calculation of amount claimed cannot be allowed - assessee has not placed either the annual report or the computation of income - whether the interest is to be allowed as a business expenditure or expenditure relating to earning any interest under the head “Other Sources” is also not clear. The utilisation of the amounts for the purpose of business is required to be established if the amounts are invested in the ‘business’ or under head ‘income from house property’ or ‘other sources’ required to be examined - none of the details are placed except the confirmation letters from the parties, thus, the expenditure in the absence of necessary details of the claims and also under which head the amounts are claimed cannot be allowed - even the salaries and wages are also stated to have been paid for the purpose of the company – the details were not on record nor placed before the AO and CIT(A) - In the absence of any evidence on record, the expenditure without getting it verified by the AO cannot be allowed – thus the matter is remitted back to the AO for verification.

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• 2014 (6) TMI 220
  Addition u/s 69 of the Act – Held that:- The assessee has explained the ostensible sources for all the deposits aggregating to Rs.29.70,000 made into bank account, the AO disbelieved the explanation of the assessee in its entirety, and added the entire amount u/s 69 of the Act - the assessee claimed that an amount of Rs.10,04,700 deposited into the bank account was made out of earlier withdrawals - this aspect has not been properly examined either by the CIT(A) or by the AO, so as to arrive at a definite conclusion that the sum withdrawn earlier would not have been available to the assessee to deposit the same back into bank account - The AO ought to have examined the withdrawals made by the assessee during the relevant period, the time gap between the withdrawal made and the deposit made, and in the process, the possible nexus between the withdrawal made earlier and the redeposit made by the assessee, instead of brushing aside the explanation of the assessee in that behalf, in a summary manner – thus, the matter is remitted back to the AO for examination of the source explained by the assessee with regard to the source for the deposits - Decided partly in favour of Assessee.

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• 2014 (6) TMI 219
  Claim of deduction u/s 80P(2) of the Act – Credit facilities extended to non-members – Held that:- The authorities under the Act cannot go beyond their jurisdiction and make classification within a classification of Members to deny the benefit of deduction – Relying upon M/s.SL(SPL) 151, Karkudalpatty Primary Agricultural Cooperative Credit Society Ltd., Vs. ITO [2014 (5) TMI 556 - ITAT CHENNAI] - the ‘nominal’ members also enjoy statutory recognition as per the Act - once the ‘nominal’ members or non-voting members are themselves included in the definition of ‘members’, they satisfy the relevant condition imposed by the legislature u/s 80P(2)(a)(i) – also in CIT Vs. Punjab State Cooperative Bank Ltd. [2008 (3) TMI 45 - HIGH COURT PUNJAB AND HARYANA] the assessee is eligible for deduction - Revenue has not been able to controvert the contentions of the assessee – thus, the assessee is eligible to claim benefit of deduction u/s.80P(2)(a)(i) & (iv) of the Act – Decided in favour of Assessee.

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• 2014 (6) TMI 218
  Disallowance u/s 14A r.w. Rule 8D of the Act – Held that:- The disallowance made in the case of the assessee u/s 14A by applying Rule 8D is much more than the expenditure actually claimed by the assessee – Relying upon GILLETTE GROUP INDIA PVT LTD Versus DEPUTY COMMISSIONER OF INCOME TAX [2013 (9) TMI 225 - ITAT DELHI] - the disallowance u/s 14A cannot exceed the expenditure actually claimed by the assessee – thus, the AO is directed to restrict the disallowance u/s 14A only to the extent of expenditure actually claimed by the assessee – Decided partly in favour of Assessee.

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• 2014 (6) TMI 217
  Deletion of unaccounted purchases – Exact period in which the shares were purchased – Held that:- The genuineness of the claim of the assessee of having purchased 14000 shares of M/s Orbit Corporation has not been disputed either by AO in the assessment order - the shares were not transferred to the D-mat account of the assessee, the assessee did not make any payment to the concerned brokers and when this matter was finally sorted out and the shares were transferred to the D-mat account of the assessee by the concerned brokers in the month of December, 2007, the assessee made the payment against the said shares immediately thereafter - The documentary evidence clearly established that the shares were purchased by the assessee in the month of May 2007 itself at the prevailing market rate and it was not a case of purchase of shares by the assessee in the month of December 2007 - there was not an iota of evidence brought on record by the AO to show that any consideration for the purchase of said shares over and above what was shown by the assessee in her books of account was paid by the assessee and the allegation of the AO that the assessee had paid consideration outside the books of account was based purely on surmises and conjecture as rightly held by the CIT(A) – thus, there was no infirmity in the order of CIT(A) deleting the addition made by AO to the total income of the assessee – Decided against Revenue. Treatment of income as STCG – Income from Business – Held that:- The assessee had transacted only in 24 scrips during the year consideration out of which 12 scrips were allotted to her through IPOs – It cannot be said that the frequency of transactions in shares of the assessee was high - Even the reasons for immediate sale of the shares allotted through IPOs were satisfactorily explained by the assessee - There were no repetitive transactions entered into by the assessee in the same scrips and the entire investment in shares was made by the assessee out of her own funds - The transactions in all the delivery based shares were consistently treated by assessee as investment transactions and this treatment given by assessee in the books of account was accepted by AO in the earlier years – Relying upon CIT. Versus GOPAL PUROHIT [2010 (11) TMI 222 - Supreme Court of India] - CIT(A) was fully justified in directing the AO to treat the profit derived by the assessee from the delivery based transaction as capital gain - there was no reason to interfere with the order of CIT(A) giving relief to the assessee – Decided against Revenue.

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• 2014 (6) TMI 216
  Estimation of income from business – Rejection of books of accounts – Unverifiable expenses - Held that:- Revenue rightly contended that there were specific material defects pointed out by the AO in the books of account maintained by the assessee and keeping in view the same - CIT(A) was fully justified in rejecting the books of account – the basis adopted by the CIT(A) to determine the net profit rate be applied in the case of assessee to estimate the business income was quite fair and reasonable – also, very fair view was taken by the CIT(A) to restrict the disallowance made by AO on account of unverifiable expenses keeping in view the remand report submitted by the AO after verification of the expenses claimed by the assessee – thus, there is no infirmity in the order of the CIT(A) on the issue of estimation of assessee’s income by applying net profit rate of 8% - Decided against Assessee.

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• 2014 (6) TMI 215
  Levy of Surcharge and education cess - MAT credit u/s 115JAA - minimum alternate tax - Held that:- There was no justification to interfere with the order of CIT(A) in allowing the appeal of the assessee - CIT(A) has correctly referred to the columns made in the IT return for the purpose of calculating the tax liability, which is specifically provided and is followed correctly by the CIT(A) - from next AY 2012-13, the position was changed Following Universal Medicare P. Ltd, Capsulation Premises Versus ACIT LTU Mumbai [2014 (5) TMI 988 - ITAT MUMBAI] - The claim of the assessee is that is that MAT credit should first be reduced from the tax payable and thereafter on the residual amount the surcharge and education cess be levied - In the income tax Return from ITR-6, column no.4, the assessee is required to fill the credit u/s 115JAA of tax paid in earlier years and after which on the balance tax payable, the assessee has to fill the surcharge and educational cess for the purpose of arriving at the gross tax liability there was no merit in the contention of the revenue Decided against Revenue.

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• 2014 (6) TMI 214
  Claim of depreciation u/s 32(1)(ii) of the Act Requisition of participating interest in oil blocks - Held that:- As decided in assessee s own case in the earlier assessment year, it has been held that:- The commercial rights of exploration of mineral oils, as acquired by the assessee falls under the expression of any other business or commercial rights of the nature similar to one of the category i.e. licenses as stipulated in Section 32(1)(ii) - The commercial rights of exploration and licenses acquired by the assessee being in the nature of intangible assets are eligible for the claim of depreciation at the rate prescribed u/s 32(1)(ii) of the Act - It also cannot be said that the right so acquired was not an asset - If it is an asset being the right then it is obvious that same is commercial right, therefore in the nature of asset in the form of license - This right had been granted to the assessee by way of license and the assessee became owner of such right i.e. license to have an access and to carry on of business of exploration and development of mineral oil - such an asset fall within the category of asset falling u/s 32(1)(ii) of the Act - the assessee had acquired business and commercial right and license by making payment of Rs.1559.10 crores, which is in the nature of intangible assets entitled to claim of depreciation u/s 32(1)(ii) of the IT Act as the expenditure is treated as capital in nature the same is eligible for claim of depreciation at the rates prescribed for the assets falling u/s 32(1)(ii) of the Act Decided against Revenue. Allowability of expenses - Evaluating existing business opportunities relating to products pending for final evaluation Held that:- Following CIT Vs. Essar Oil Ltd. [2008 (10) TMI 387 - Bombay High Court] - If the assessee is not successful in obtaining bid, such expenditure is allowable as revenue expenditure - As the assessee was continuously in the business of exploration and production of oil, the expenditure so incurred was in the normal course of its business, such expenditure being revenue in nature incurred for the purpose of existing exploration and production business was required to be allowed u/s 37(1) of the IT Act thus, the order of the FAA is upheld Decided against Revenue. Claim for allowance of risk insurance premium Held that:- As decided in assessee s own case for the earlier assessment years, it cannot be denied that investment in the Sudan and expenditure incurred to take the insurance cover is a business decision - the expenditure needs to be allowed u/s 37(1) of the Act for the reason that the same is incurred in order to safeguard its business interest as it is the real beneficiary of insurance as well as investment made in the subsidiary the expenditure also falls within the meaning for the purpose of business as the appellant has earned substantial dividend from the above investment which has been offered to tax in India and therefore such expense has a direct link with the investment and also in protecting the legitimate business interest of the appellant Relying upon S.A. Builder Ltd VS CIT [2006 (12) TMI 82 - SUPREME COURT] there was no infirmity in these findings of the FAA - The policy itself has been take at the specific directions given by the Govt. of India Decided against Revenue. Taxability of amount received in advance Quantity of gas sold Held that:- As decided in assessee s own case for the earlier assessment years, under the mercantile system of accounting, a transaction of sale or purchase is complete only on the passing of title/risk attached to such sale or purchase from one party to another - the transaction of sale of gas was not complete in the current year as the title/risk of the gas did not pass from the appellant to the buyer in the absence of delivery - there could not be any reason for treating the advance received as a part of sale for the year - the title and risk in the gas sold passes from the seller to the buyer only when the gas sold is delivered by the seller to the buyer and not earlier the amount received by the appellant is in the nature of advance received for sale of gas, and to the extent that the sale of gas has not taken place during the year under consideration the amount of advance cannot be treated as sale and added to the income of the appellant for the current year Revenue could not controvert the factual findings of the FAA Decided against Revenue. Allowability of depreciation on UPS @ 60% - Held that:- Following CIT vs. Oriental Ceramics and Industries Ltd. [2011 (1) TMI 26 - DELHI HIGH COURT] - once the amount has gone out of the coffers of the assessee, the assessee would be entitled to capitalize the same - The assessee has spent the expenditure on the glow sign boards with an object to facilitate the business operation and not with an object to acquire asset of enduring nature - the expenditure was of revenue nature and the Tribunal has rightly treated the same as of revenue nature - depreciation @ 60% on UPS shall be allowed Decided against Revenue.

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• 2014 (6) TMI 213
  Deletion of disallowance of 15% of conference expenses - Deletion of travelling expenses – Held that:- CIT(A) was of the view that except the claim of 15% of cost, no any other amount on account of amount payable to WWEA had been charged either to income and expenditure account of the assessee or to income and expenditure statement of the conference (workshop) - invoice dated 19-03-2007 WWEA had raised a bill for Euro 32000 against their share in the net surplus of the conference income and the same had been paid by the assessee after deduction of tax u/s 195 of the Act – thus, the AO is wrong in coming to a conclusion that the assessee has claimed a deduction twice - Revenue could not controvert the findings of the CIT(A) that the expenditure is different from the conference expenses - There is no double deduction claimed – Decided against Revenue.

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• 2014 (6) TMI 211
  Validity of reopening of assessment u/s 147 of the Act - Full and true disclosure – Bar of limitation – Held that:- The AO reopened the assessment and the action was confirmed by the CIT(A) on the ground that the information provided by the assessee was not full and true and that there was justification with respect to the AO for reopening the assessment - Even if there is any such allegation, such allegation being justifiable and open to judicial scrutiny, cannot survive - all information was there in the record itself and the reopening of assessment was with reference to the material already available on record - there was no failure on the part of the assessee to disclose fully and truly all material facts - So long as the assessee has furnished full and true particulars at the time of original assessment and so long as the assessment order is framed u/s 143(3) of the Act, it matters little that the AO did not ask any question or query with respect to one entry or note but had raised queries and questions on other aspects - there was no failure on the part of the assessee to disclose fully and truly all material facts that are necessary for its assessment. Relying upon CIT & Anr. Vs. Foramer France [2003 (1) TMI 101 - SUPREME Court] - Revenue was not able to show that there is a failure on the part of the assessee to disclose fully and truly all material facts in the assessment finally made - there is no failure on the part of the assessee to make return or to disclose fully and truly all the material facts necessary for assessment - notice issued by the AO on 27/11/2009 u/s 148 of the Act being issued after 4 years from the end of the relevant AY i.e. 2004- 05 is barred by limitation - Decided in favour of Assessee.

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• 2014 (6) TMI 210
  Claim of exemption u/s 80P(2) of the Act - Allowability of exemption in recovery charges and service charges – Main activity of providing credit facility to members – Held that:- The activity resulting in service and recovery charges was an integral part of the main activity of the assessee of providing credit facilities to its members and since the income from service charges and recovery charges was very much incidental to the income of the assessee from the business of providing credit facilities to its members was entitled to deduction u/s 80-P(2)(a)(i) of the Act – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 209
  Deletion towards investment in purchase of property – Held that:- The credit entries in the Axis bank account reflected the amounts received from various persons to whom the properties were sold by him as mediator earning commissions from transactions - the debit entries in the said bank account represented the amounts of purchase price handed over to the sellers after retaining commission on sale properties - the assessee’s explanation about the source of deposits in the bank account has not been contradicted by the AO, who chose to make addition by considering only the credit entries in the Pass book by virtually ignoring that there were debit entries in the same bank account – the order of the CIT(A) is upheld - Decided against Revenue. Deletion of unexplained credit in bank account – Held that:- The assessee tendered an explanation to the effect that he received a sum of Rs. 10 lakh against the tentative purchase of property from Shri Ram Karan Garg - the assessee gave explanation about the source of deposit along with complete particulars of the party issuing cheque, there remains nothing with the Revenue to make any addition on this account, more so, when the explanation so given by the assessee has not been faulted with – thus, the order of the CIT(A) is upheld - Decided against Revenue. Estimated addition of Dhaba income – Held that:- The assessee filed his return declaring income from Dhaba at Rs. 68,193/- against the gross receipts at Rs. 1,60,683 - A copy of Income and Expenditure account is available on record - When the amount of gross receipt is not disputed at Rs.1.60 lakh, there is no logic in sustaining the estimated income of Rs. 2 lakh from Dhaba – the order of the CIT(A) is upheld – Decided against Revenue.

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• Customs

• 2014 (6) TMI 231
  Rejection of application for fresh Customs House Agents License - Disqualification under Regulation 8 - whether the application of the petitioner No.1 for license under CHALR 2004 could have been rejected on the ground that the petitioner No.1 had cleared the examination under Regulation 9 of CHALR 1984 - Held that:- The 2004 regulations expressly save things done before framing of the said 2004 Regulations. There is nothing in the 2004 Regulations wherefrom it may be deducted that a person who has cleared the Customs House Clearing Agent’s examination under Regulation 9 of the 1984 Regulations would again be required to appear for an examination. It appears that the petitioner had a regular licence. However, this licence was in the name of the firm M/s Shipping Agency. It was the petitioner who was actually engaged in the work of clearance of goods through customs on behalf of the firm. It was the petitioner who appeared for the examination. The petitioner cannot be disqualified on the ground of not having cleared the examination under Regulation 8 of CHALR 2004. The licence of the petitioner has not been rejected only on the ground that the petitioner has not cleared the examination under Regulation 8 of CHALR 2004, but also on the ground that on verification of the antecedents of the petitioner it was found that a charge-sheet had been issued under Sections 419/468/471 of the Indian Penal Code which did not support an unblemished record - There can be no doubt that a person guilty of commission of an offence may be debarred from licence. However, it is one thing to be charged with an offence and a different thing to be held guilty of actual commission of that offence. Chances of false implication cannot altogether be ruled out, particularly in a case like the present one, where family disputes have cropped up. It would, in my view, be totally arbitrary and against all norms of fair play to deprive a citizen of his right to carry on business in the absence of any verdict of a Court of law holding him guilty of a criminal offence. The petitioner had carried on business as clearing house agent. A licence had been issued to him. It is a case of continuance of business and/or deprivation of the right to carry on business - a person who has been carrying on business ought not to be prevented from carrying the business on the basis of allegations not proved in Court of law - impugned notice is set asie and quashed - Decided in favour of appellant.

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• 2014 (6) TMI 230
  Waiver of the condition of pre-deposit - penalty under Section 114(i) of the Customs Act, 1962 - Held that:- Department has alleged different roles of different persons in the alleged smuggling of Red Sanders Logs; and the principal allegations appear to be directed against the exporter M/s Mehar Traders, one Shri Abdul Jaffer, said to be the master mind, and another Shri Shahnavaz N.Gavli. The acts and omissions of want of due diligence as also not coming out forthright in relation to the investigation, have been levelled against the Operational Executive and the Managing Director of the petitioner- Company, whose petitions have already been dismissed, as noticed hereinbefore. So far the petitioner-Company is concerned, the basis of quantum of penalty i.e., Rs. 50,00,000/- is not available as such in the order dated 12.03.2013. For the present purpose, we are of the view that when the petitioner has deposited a substantial amount of Rs. 20,00,000/- in terms of the order passed by this Court on 19.12.2013, any direction for deposit of any further amount may cause undue hardship to the petitioner. On the contrary, after such a deposit of the sum of Rs. 20,00,000/-, hearing of the petitioner’s appeal by the Tribunal on merits would serve the cause of justice. Hence, the rule issued in this matter on 19.12.2013 deserves to be made absolute with further necessary observations - condition of pre-deposit, as imposed by the Tribunal in the impugned order dated 21.10.2013 is modified; the petitioner is held liable to make payment of an amount of Rs. 20,00,000/- (twenty lacs) towards the condition of pre-deposit; and the deposit already made by the petitioner pursuant to the order dated 19.12.2013 is taken as sufficient compliance of the requirements of pre-deposit - Decided conditionally in favour of assessee.

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• 2014 (6) TMI 229
  Penalty u/s 114 on CHA - Certain unscrupulous exporters exported certain goods by overvaluing and claimed drawback was sanctioned. However, later on, the goods were detained subject to investigation. - Some of these export consignments were in the name of the present appellant-CHA. - Held that:- From the time of initial investigation itself, Shri C.K. Dawar has clarified that they have never handled the export consignments in question. He had produced various registers detailing various export consignments handled by them and the present exporters were not their clients. It is also observed that the annexures which are purported to be signed by Shri Sachin Devgire. It is also noted that Shri Sachin Devgire was only a G-Card Pass holder and he was not authorized to sign such documents. In view of the above position, the appellants cannot be held responsible and penalty cannot be imposed upon them under Section 114(iii) of the Customs Act, 1962. As far as the second appellant is concerned, investigation has not brought out any role whatsoever and therefore penalty imposed on him is not correct - Decided in favour of appellant.

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• 2014 (6) TMI 228
  Condonation of delay - Delay in receipt of order - whether the receipt of order by the director is in personal capacity or on behalf of the appellant - Held that:- In the affidavit filed by Director of appellant it is stated that he received order on 05. 03.2010 by hand from the CHA Section in New Custom House, Mumbai. It is also stated in the affidavit that the order was received in his personal capacity and the company has not received the order from the department at its registered address. From the letter of the department, as also from the affidavit it is clear that the impugned order was served on the appellant on 05.03.2010. The order is addressed to M/s. Interport Logistics Pvt. Ltd., CHA No. 11/1167 with direction to surrender the original CHA licence and all the Customs pass of their employees. It is a direction to the CHA and, therefore, it cannot be said that the Director of the appellant – firm received the same in his personal capacity. Even when an order is sent through registered post, some Individual present in the office has to receive the order and, therefore, it does not make any difference as to who received the order - No sufficient reason to condone delay - Condonation denied.

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• Service Tax

• 2014 (6) TMI 244
  Penalty for delayed deposit of service tax and interest - services of site formation & Clearance, Excavation & Earthmoving & Demolition services - Held that:- correspondence exchanged between the appellant and the Revenue. Its stands very clearly stated by the appellant in their various communications addressed to the jurisdictional Central Excise Officers that the service tax is not being deposited because of the delay occurring for name change in the agreement, the duty liability was accepted by the appellant and was actually deposited alongwith interest even before the issuance of show cause notice. In such scenario, we find no justification for imposition of penalty on the assessee in terms of the provisions of section 80 of the Finance Act, 1944 - Penalty is set aside - Decided in favour of assessee.

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• 2014 (6) TMI 243
  Waiver of service tax - ‘Management Consultancy’ service - Applicant being a premier Management Institute, provided education to the students in the area of Management - Held that:- Prima-facie, at this stage, without entering into the dispute relating to activities rendered by the Applicant whether it would result into taxable service or otherwise under the category of ‘Management Consultancy’ service, which rests on appreciation of evidence adduced by both sides ; the offer made by the ld.Sr. Advocate to deposit of Rs.42,18,396/-, in addition to the amount of Rs.68.00 lakhs (Rs.33.00 lakhs + Rs.35.00 lakhs = Rs.68.00 lakhs) already deposited, in our opinion, is sufficient for hearing the appeal. Consequently, we direct the Applicant to deposit the said amount of Rs.42,18,396/- within a period of six weeks from today and report compliance on 10.04.2014. On deposit of the said amount, the remaining adjudged dues would stand waived and its recovery stayed during pendency of the appeal - Conditional stay granted.

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• 2014 (6) TMI 242
  Waiver of pre-deposit - convention service - availing CENVAT Credit while availing benefit of abatement notification 1/2006 ST - Held that:- applicant has categorically claimed that they had not availed credit on input service for the period October, 2005 to March, 2007 therefore, they are eligible to abatement under Notification No. 1/06-ST dated-1/3/2006. We find force in his argument that merely because that they would be eligible to avail credit in future, would not disentitle them from availing the abatement under Notification 1/06-ST dated 1/3/2006, where the condition is specific on the availment of CENVAT credit and not laid down to eligibility of CENVAT credit in future. Regarding the demand for the period March, 2007 to April, 2008, prima facie, we find that the applicant had availed CENVAT credit on various input services which have nexus with convention service provided by them. Consequently, prima facie, we find that the applicant had not complied with the condition of Notification No. 1/06-ST dated-1/3/2006 relating to the period April, 2007 to March, 2008. No financial hardship has been pleaded - Conditional stay granted.

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• 2014 (6) TMI 241
  Mandap Keeper service - Service provided to the Members in the club was brought to tax - Held that:- In view of the ratio laid down by Hon’ble High Court of Gujarat in the case of Karnavati Club Ltd. v. Union of India reported in [2009 (9) TMI 561 - GUJRAT HIGH COURT], the activities carried out by Safdarjung Club does not appear to be taxable service as Mandap Keeper. The relationship of client and employer is absent in the present case. Temporary parting with the facilities was not to the clients. Therefore, following the decision aforesaid Decided against Revenue.

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• 2014 (6) TMI 240
  Waiver of pre deposit - benefit of Notification No. 1/2006-S.T., dated 1-3-2006 - Non Payment of CENVAT Credit - Held that:- reversal of Cenvat credit if at the stage of appellate stage is sufficient compliance of the conditions of the notification. At this juncture, learned SDR submits that it has to be verified whether the amount which has been reversed by the appellant is the correct amount which was confirmed by the lower authorities on which credit was taken. At this juncture, as we find that the appellants have reversed the Cenvat credit taken due to which benefit of Notification No. 1/2006 had been sought to be denied, we allow the application for waiver of pre-deposit amount of Service Tax involved and direct the learned SDR to confirm to this Bench by 26-12-2011 as to whether the Cenvat credit amount has correctly reversed as claimed by counsel and recovery of the dues is stayed till the disposal of appeal - Stay granted.

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• Central Excise

• 2014 (6) TMI 239
  Levy of Clean Energy Cess - Assessee contends that alleged quantity of raw coal nor coal after its processing in the washery located within the mine, was not despatched to any destination beyond the coal mine, warranting levy and demand of Cess - whether the petitioner is required to pay Cess on the quantity of coal mined and fed to its washery located within the mine premises - Held that:- The dispute is in substance one involving interpretation of the provisions of Rules 2(g) and 4 of the 2010 Rules. Prima-facie, either view, the one adopted by Revenue and the other adopted by the petitioner, appear plausible. In the totality of circumstances and since the petitioner has already remitted a substantial portion of Cess assessed by the impugned order, i.e. Rs. 13,48,38,600/- against the demand of Rs. 18,72,09,053/-, we are inclined to grant waiver of pre-deposit and stay all further proceedings pursuant to the impugned adjudication order, on condition that the petitioner remits the balance assessed quantum of cess of Rs. 5,28,70,453/- and proportionate interest upto date, on the balance amount of Rs. 5,328,70,453/-, within four weeks - Stay denied.

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• 2014 (6) TMI 238
  Denial of CENVAT Credit - Revenue denied the credit on the sole ground that there is no evidence of transportation of the goods from the premises of M/s Tata Motors to the appellant premises - Suo moto Credit - Revenue contends that refund claim should have been filed instead of availing Suo moto credit - Bar of limitation - Held that:- demand stands raised on the scrutiny of the appellant’s statutory documents itself, which shows that everything was recorded and there cannot be any mala fide. The appellants have also reflected the availment of the credit in their returns filed for the relevant period 2007-2008. Inasmuch as the re-entry was made in December 2007 and the notice stands issued on 8.3.2010 - Demand barred by limitation - Decided in favour of assessee.

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• 2014 (6) TMI 237
  Duty demand - Remission of duty - finished goods as well as raw materials destroyed in fire - demand on inputs imported / procured free of duty - interest - 100% EoU manufacturing bulk drugs and pharmaceutical products - Held that:- in terms of the bond executed, the appellant is liable to discharge Customs duty liability on the imported raw materials destroyed as such in the fire accident or the imported raw materials contained in the finished products destroyed as such. Domestically procured goods were destroyed when they were being stored in the manufacturer's premises and therefore, the appellant cannot seek remission under Rule 21 of the Central Excise Rules, 2002 as the condition of permission stipulates the appellant would be liable to pay excise duty if the goods are not used for the intended purpose. Notification 1/95, under which the goods have been procured, stipulates that the goods have to be used in the manufacture of specific products which are required to be exported. Inasmuch as, in the present case, this condition is not satisfied, the appellant is liable to discharge duty on the raw materials destroyed during storage in the manufacturer's premises - once the goods are procured duty-free under exemption Notifications, the provisions of Section 23 of the Customs Act, will have no application - Following decision of Antarctica Ltd. [2009 (2) TMI 477 - CALCUTTA HIGH COURT ] and S.K. Pattanaik's case [1999 (12) TMI 60 - SUPREME COURT OF INDIA] - Decided against assessee.

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• 2014 (6) TMI 236
  Demand of differential interest per day - Delay in payment of duty - Held that:- The part of Rule 8(3) which includes expression ‘at the rate of two per cent, per month or rupees one thousand per day, whichever is higher’ is held to be invalid. Consequently, interest chargeable on delayed payment had to be only at the rate of 2% per month or for that matter 24% per annum as notified by the State Government in terms of the Section 11BC, which is between the permissible limits in ‘terms of Section 11AB. Consequently, the demand notices are quashed and interest on delayed payment has to be recomputed - Following decision of Lucid Colloids Ltd. Vs. Union of India [2005 (8) TMI 134 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR] - Decided against Revenue.

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• 2014 (6) TMI 235
  Duty demand - Non supply of proper documents - Held that:- appellants were not supplied with the unrelied upon documents, in that situation, the adjudicating authority is directed to supply the remaining documents which were seized and ‘not relied upon’ to the appellants, so that the appellants shall be able to reconcile their records and thereafter the adjudicating authority will do the fresh adjudication. In view of this observation, the matter is remanded to the adjudicating authority with the direction to supply the ‘non-relied upon documents’ to the appellants - Decided in favour of assessee.

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• 2014 (6) TMI 234
  Confiscation of goods - Penalty - Incomplete RG-1 register - Tribunal decided in favour of assessee - Difference of opinion - Matter referred to larger bench with following questions of law:- Whether in the facts of the case and the law applicable including the various decisions of judicial forums discussed, the seized goods are not liable to confiscation and the assessee company and the Director not liable to penalties as held by Member (Judicial) OR Whether in the facts of the case and the law applicable including the various decisions of judicial forums discussed, the seized goods are liable to confiscation and the assessee company and its Director are liable to penalties as held by Member (Technical).

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• 2014 (6) TMI 233
  Demand of cess - Manufacture of cloth - Appellants contends that they cannot be solely made liable as they are only job worker and it is the supplier of cloth who is liable to discharge such liability - Held that:- Appellants themselves admit that they hold Central Excise Registration for processing of man-made fabrics being independent processors and that they undertake the job work of finishing and dyeing of man-made fabrics and accordingly, they are doing job work and collect charges for processing on job charge basis. It has also been admitted by the Appellants themselves in para 3 of their Memorandum of Appeal that grey fabrics is received by the Appellants from various traders considered as deemed manufacturer in terms of Central Excise Act and Rules made thereunder for processing on job charge basis. The processed fabrics is returned to the said deemed manufacturer on payment of duty on the declared value of grey fabrics after adding processing charges as per the settled law. So far as the exemption under the proviso to sub-section (1) of Section 5A is concerned, the same is available to handloom and powerloom industries. The Appellants, who are manufacturing finished goods and not grey fabrics, i.e. the raw material, being not handloom or powerloom industries, cannot derive advantage of exemption on the basis of the raw material manufactured by other manufacturers. Thus, the Appellants are manufacturers of textiles in the aforestated facts and circumstances of the case and being so, they are subject to levy of cess in terms of the aforestated scheme of Law. - Decided against assessee.

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• 2014 (6) TMI 232
  Duty demand - Clandestine removal of goods - Insufficient evidence - Held that:- impugned case is made on the basis of records taken from PEL and on records known to PEL. If the case made out by revenue is taken as correct there was dilution of the concentrate supplied by PEL to produce more goods than the quantity that could have been produced from concentrate supplied by PEL to the extent ranging from 1.65% to 2.78% ignoring the year 1989-90 when it was as high as 6.2%. This position was known to PEL and they chose to do nothing about it. This appears to be an unlikely scenario considering the fact that PEL was very conscious of the quality of their product. So it would appear that PEL did not think that any dilution of their concentrate beyond prescribed limit was done by the Appellant. If that be the case, the case made by Revenue fails. The fact that the Appellant had paid his share of advertisement charges to PEL based on the sales figures in PEL’s books rather than based on clearance figures in the Appellant’s books is also not a sufficient evidence to prove clandestine removal because advertisement is a market development programme and the sales in the territory assigned to the Appellant in an year (even if a part of the sale was not made by him) is a factor from which Appellant stand to gain in subsequent years - So the case made out without investigating the source of the concentrate or the other inputs like pilfer proof caps to produce the quantity of final products held to be clandestinely manufactured is very weak and we are of the view that the demand confirmed cannot be sustained on the basis of evidence produced - Decided in favour of assessee.

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• Indian Laws

• 2014 (6) TMI 212
  Validity of arbitrator's award - Agreement for lease - Dispute over payment of conducting fees, outgoings and property tax - Arbitrator decided in favour of Respondents - Held that:- Admittedly, the Judgment of the Full Bench was not referred, when the issue was raised and not adjudicated by the learned Arbitrator accordingly - The question is always in such matters to consider the facts and circumstances apart from the agreement between the parties. The jurisdiction of the Arbitral Tribunal, in view of above Judgment if excluded, in that case, merely because the Civil Suit was filed by the Petitioner, that itself in no way empowers and/or takes away the right of the Petitioner to raise the preliminary objection about the jurisdiction of the Arbitral Tribunal and get to be decided and/or dealt with the subject of “leave and license” and/or “occupation charges”, arising out of such exclusive occupation. The handing over of the possession pending the Arbitration, in no way takes away the specific pleadings so raised and as quoted above by the Petitioner with regard to the jurisdiction of the Arbitral Tribunal. The Arbitrator has no jurisdiction and/or authority to pass and to entertain such claim, as it is barred by specific provisions. The consequential orders/reliefs so passed, therefore, also unsustainable. This itself is not mean that the Respondent is not entitled to take appropriate steps in accordance with law. We are concerned with the eviction order and related orders passed by the Arbitrator. In the present facts and circumstances, therefore, keeping all points open as the remedy is elsewhere, I am inclined to set aside the award. The amount paid and received shall be subject to adjustment. The parties are at liberty to settle the matter - so far as the costs is concerned, the Claimant¬Petitioner is under obligation to make the payment as per bill dated 14 January 2010 as mentioned in para 70 of the Award. The amount to be paid to the Respondent as submission is made by the learned senior counsel appearing for the Respondent that they have already made the payment as per the bill. The Petitioner to make the payment therefore directly to the Respondent within four weeks - Following decision of M/s. Thakker Warehousing Agency Vs. Maharashtra Small Scale Industries Development Corporation Ltd. [2014 (6) TMI 208 - BOMBAY HIGH COURT] - Order modified regarding costs - Decided in favour of appellants.

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• 2014 (6) TMI 208
  Legality of Arbitration award - Dispute as to ownership of property - Enhancement in rent - Vacating the premises - Appointment of arbitrator - Held that:- Respondent is not the original owner of the property. The Petitioner was in exclusive possession of the property subject to “rent/licence fee” which was also enhanced from time to time. The learned Arbitrator, based upon the alleged occupation, even after termination of the agreement, passed the Award for recovery of arrears of occupation charges/rent. The relevant ingredients as required and necessary to hold that there exists relationship of a licensor and/or licensee also apply to the present case. The submission that it was warehousing agency agreement that itself, in my view, is not sufficient to overlook the case of the Petitioner. The learned Arbitrator, therefore, in view of above settled provisions of law as laid down by the Full Bench of this Court ought not to have proceeded with the matter merely because the possession was handed over during the pendency of the arbitration proceedings. The orders passed by the Court protecting the possession based upon the Respondent's statement and the consent order so recorded, ought to have taken note of before proceeding with the matter in such fashion. Arbitrator has no jurisdiction to entertain and/or decide the dispute so raised/referred by the parties, based upon the alleged arbitration clause in the agreement between the parties. The dispute so referred itself was not arbitrable. - Therefore, there is no question of invoking the principle of “estoppal” and/or “waiver” by the parties. The Court, under Section 34 of the Arbitration Act, is therefore required to adjudicate and decide this issue as it goes to the root of the matter. The Petitioner has raised those grounds in the petition. Therefore, in view of the reasons so recorded above, I am inclined to observe that the sole Arbitrator has no jurisdiction to try and entertain the reference and as the same was beyond its competence and jurisdiction. Therefore, I am inclined to quash and set aside the award and also the consequential orders/reliefs so granted. This order, in no way, deny the rights of the Respondent to invoke the appropriate proceedings in accordance with law - Decided in favour of appellants.

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