TMI Tax Updates - e-Newsletter
June 11, 2015

Case Laws in this Newsletter:

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

News

1. Applicability of Indian Accounting Standard (IND AS)

2. RBI Reference Rate for US $

3. RBI imposes penalty on Integral Urban Co-operative Bank Limited, Jaipur

4. RBI seeks comments/feedback on Draft Framework on Issuance of Rupee linked Bonds Overseas

Circulars / Instructions / Orders

VAT - Delhi

1. No.F.7(480)/policy/VAT/2014/1616 - dated 5-6-2015

Designate Assistant Commissioner / VATO as the authorised Special Objection Hearing Authority (SOHA) for that particular ward - For disposal of objections filed under 74 of the DVAT Act, 2004 relating to mismatch of Annexure 2A/2B cases for the Assessment Year 2012-13.

DGFT

2. 20/2015-2020 - dated 9-6-2015

Corrigendum to Public Notice No.16 dated 4th June, 2015 in respect of amendments in Paragraphs 4.38 (viii) (b)&(c) and paragraph 4.42(c) of Hand Book of Procedure by DFGT

Highlights / Catch Notes

Income Tax

• Entity Denied Tax Exemption Under Income Tax Act Section 11 Despite Section 12AA Registration; Must Apply 85% Income to Charity.

  Case-Laws - AT : Exemption u/s.11 denied - Simply because the assessee was registered under section 12 AA of the Act does not entitle it to claim its entire income as exempt under section 11 of the act but for getting that exemption the assessee is required to further satisfy condition of applying 85% of its income for charitable activities - AT
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• Assessing Officer Must Prove Cessation of Liability Benefits u/s 41; Creditor's Absence Insufficient for Decision.

  Case-Laws - AT : Addition on account of cessation of liability u/s 41 - it is on part of AO to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation which he fails to do - in the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable - AT
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• Partial Violations of Section 80IB(10) Don't Justify Full Deduction Denial for Income Tax Act Cases.

  Case-Laws - AT : Pro-rata deduction u/s 80IB - merely because the assessee had violated the provisions of section 80IB(10)(c) of the Act in respect of two units i.e. row houses D-3 and D-4, the deduction under section 80IB(10) could not be denied in entirety. - AT
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• Denial of Section 80 IC exemption overturned; relief cannot be denied in later years without initial year assessment change.

  Case-Laws - AT : Exemption claimed u/s 80 IC denied - denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. - AT
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• Assessee's Appeal for Delay Condonation Denied Due to Insufficient Justification Despite Expert Support.

  Case-Laws - AT : Condonation of delay in filing an appeal - the assessee was assisted by a team of experts/taxation heads/qualified persons, therefore, we find no merit in the claim of the assessee for condoning the delay. - AT
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• Appeal Process Requires Senior Officer Review and Authorization of Case Records and Orders Before Filing.

  Case-Laws - AT : Authorization to file an appeal - At least the senior officer such as Commissioner of Income Tax should have carefully perused the record and CIT(A)'s order before granting authorisation - AT
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• Commission Deduction Allowed for Services in 1999 PSU Contract Case Involving Rate Negotiations and Payment Follow-ups.

  Case-Laws - AT : Disallowance of commission paid - contract was awarded by the PSU of the Government of India in the year 1999 and the agreement with the commission agents has been entered into on 01/04/2000 for rendering the services of negotiating rate difference and follow up payment realization - deduction of commission allowed - AT
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• No Penalty for Unexplained Investments in Property and Marriage Costs Due to Estimations, Not Concrete Evidence (Sec 158BFA(2.

  Case-Laws - AT : Penalty u/s 158BFA(2) - unexplained investment in house property and unexplained marriage expenditure - additions made on estimation basis and not on the basis of any concrete evidence found in the course of search - no penalty - AT
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Service Tax

• Team-Assisted Lining and Loading Not Classified as Manpower Supply for Service Tax Purposes.

  Case-Laws - AT : Classification of service - activity of lining, coating, loading and unloading etc. with the aid of her team (other workers) - the same is definitely not classifiable under manpower recruitment and supply agency service - AT
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• CENVAT Credit Denial Challenged; Case Remanded for Review of Foreign Consultancy Services as 'Input Service'.

  Case-Laws - AT : Denial of CENVAT Credit - Commissioner has not discussed at all as to how the consultancy services received from foreign service providers are not covered by the definition of 'input service' - matter remanded back - AT
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Central Excise

• Excess Duty Payments Should Be Considered in Duty Demand Confirmation u/r 10A of Central Excise Valuation Rules.

  Case-Laws - AT : If assessee has paid excess duty on all clearances during the relevant period, such excesses have to be taken into account for confirming the demand of duty in terms of the provisions of Rule 10A of Central Excise Valuation Rules - AT
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• High Court Upholds Interest on Differential Duty for Retrospective Price Hikes via Supplementary Invoices in Excise Cases.

  Case-Laws - HC : Levy of interest on deferential duty - price increase retrospectively - amount collected through supplementary invoices - levy of interest confirmed - HC
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• Department Officers Must Follow Binding Circulars; Ignoring Them Is Improper and Violates Authority.

  Case-Laws - HC : Binding nature of circular - Officers of the department cannot in violation to the circular proceed to take action by saying that the circular is only advisory in nature or that it is not a circular issued under the statutory rule - HC
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• Limitation for Appeals Starts When Petitioner Receives Tribunal's Certified Order Copy, Not Pronouncement Date.

  Case-Laws - HC : Maintainability of appeal - Bar of limitation - order was pronounced in the open court - period of limitation should commence to run from the date on which the petitioner received the certified copy of the order passed by the Tribunal along with papers - HC
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VAT

• Court Rules Petitioner Lacked Intent to Sell Locally in Tripura; Input Tax Credit Under VAT Laws Denied.

  Case-Laws - HC : Input tax credit - intention of a party has to be judged from its action - the petitioner has been selling almost all its produce outside the State of Tripura. - no hesitation in holding that it was not the intention of the petitioner, while setting up the plant, to sell the produce in Tripura - HC
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• Court Imposes Minimum 10% Penalty Despite Assessee's Honest Input Tax Credit Claim; Legal Interpretation Dispute.

  Case-Laws - HC : Input tax credit - The assessee claimed input tax credit by depicting the true and correct facts. Though we have decided the case against the assessee, but it cannot be said that the dealer had claimed this input tax credit with a view to evade or avoid payment of tax. It is a plain and simple case of different interpretations of the provisions of law. - Minimum penalty of 10% imposed - HC
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• Delhi Sales Tax: Form ST-35 Rejection Overturned; Endorsement for 2000-01 Assessment Year Deemed Sufficient for Dealer.

  Case-Laws - HC : Rejection of ST-35 form - Delhi sales tax - There is nothing to show that the selling dealer (the assessee) could have known as to for which assessment year the specific form had been issued by the department. For his purposes, the endorsement on the top showing it to be a form pertaining to AY 2000-01 was sufficient. - HC
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Case Laws:

• Income Tax

• 2015 (6) TMI 309
  Bogus purchases - CIT(A)sustaining the addition amounting to Rs. 68,31,195/- on account of estimated gross profit on the sale of items in question - Held that: - This cannot be held to be a case of rejection of sales, but essentially it is a case of rejection of part purchases and, accordingly, of part sales. In our opinion, keeping in view that the purchases made by assessee being not fully established except identity of parties, particularly in view of the fact that there was no evidence to establish that the impugned purchases were included in the sales-tax returns of the parties, ld. CIT(A)’s conclusion of arriving at a reasonable estimate, considering the entire conspectus of t he case cannot be faulted. We, accordingly, confirm the order of ld. CIT(A) on this count.- Decided against assessee. Rejection of books of accounts - CIT(A) making addition on the basis of G.P. rate - Held that:- nfirmity in the order of ld. CIT(A) on this count also because when-ever AO examines specific issues in course of assessment and make additions/ disallowances qua those issues, then impliedly part books stand rejected. The AO is not entitled to altogether discard the evidence of the books of account. It is open to the AO to accept assessee’s books with regard to certain kind of transactions and reject them in respect of other transactions as was held in Ganeshilal Chhappan Lal Vs. CIT [1940 (9) TMI 17 - ALLAHABAD HIGH COURT]. Therefore, there is nothing wrong in accepting the book results to the extent of no discrepancy found. The AO though had rejected the books of a/c, but had made addition only in respect of bogus purchases. Thus, impliedly the books of a/c were rejected to this extent only, which was sustained by ld. CIT(A), but he reduced the addition by applying only estimated gross profit to the impugned transactions. Therefore, we uphold the ld. CIT(A)’s action in part rejection of books of account. - Decided against assessee.

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• 2015 (6) TMI 308
  Non-compliance of Section 246 (4) - Held that:- There was a financial constraint faced by respondent assessee. Therefore, he took time to arrange for money but the said amount was duly paid before the appeal was dismissed by the first appellate authority. It has been held that the appeal should have been treated as validly filed on the date when the tax amount was paid. After examining the factual matrix, Tribunal condoned the delay and directed CIT (Appeals) to hear the appeal on merits as it was admitted that the tax amount has been paid. See J.K.Chaturvedi V. ACIT [2003 (9) TMI 286 - ITAT AHMEDABAD] - Decided against revenue.

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• 2015 (6) TMI 292
  Validity of assessment audited under Secion 142(2A) - Held that:- Issuance of order of re-assessment under Section 142 (2A) of the Act, the Assessing Officer had issued notices to the assessee but in none of them the opinion formed by the Assessing Officer for special audit of petitioner's accounts for the assessment year 2012-13, in regard to the nature and complexity of the accounts and the interest of revenue has been disclosed. Hon'ble Supreme Court in Sahara India's case (supra) held that the Assessing Officer has to be formed opinion having regard to the nature and complexity of the accounts of the assessee and the interest of the revenue. The order impugned passed by the Assessing Officer does not disclose the consideration of aforesaid ingredients before issuing the order impugned. Therefore, we are of the view that the order impugned dated 11.03.2015 passed by the Income Tax Officer, Hardoi is not in consonance with the requirement of Section 142 (2A) of the Act and, therefore, it is not sustainable. In the result, the order dated 11.03.2015 is hereby quashed with the liberty to the Assessing Officer to pass a fresh order in terms of the provisions of Section 142(2A) of the Act.

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• 2015 (6) TMI 291
  Penalty under sec.18(1)(c) of the Wealth Tax Act.- Held that:- As in the quantum appeal, the Tribunal deleted the addition made in respect of the property at Anna Nagar on the ground that the same cannot be included in the net wealth of the assessee. This factual aspect was not disputed by the learned D.R. when the property at Annanagar could not be included in the net wealth of the assessee, in our view there cannot be any concealment so as to levy penalty under sec.18(1)(c) of the Act in respect of the very same property. - Decided in favour of assessee.

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• 2015 (6) TMI 290
  Exemption u/s.11 denied - AO disallowing capital expenditure and also making addition on account of gratuity under Sec. 40(a)(ia) - not carrying on activities which can be considered as charitable purpose within the meaning of section 2(15) - Held that:- The entire expenses of the assessee were directed towards providing services to donors who are affluent section of the society and wish to make donation for charitable purposes. The above activity of the assessee of providing services to affluent section of the society cannot be, in our considered view held as activity of general public utility also. Thus we find that no part of the income of the assessee company was actually utilised for any charitable activity during the year. Further no material was brought before us to show that any asset of the assessee-company was utilised to carry out education, medical relief, relief of poor and preservation of environment (including watersheds, forests and wildlife) or extending financial help for such activities. Rather we find that the assessee received the amount from the donor and before disbursing the same utilised the same for earning interest income. The interest income so earned by the assessee was also not utilised for payment to any charitable trust or for any other charitable activities. Simply because the assessee was registered under section 12 AA of the Act does not entitle it to claim its entire income as exempt under section 11 of the act but for getting that exemption the assessee is required to further satisfy condition of applying 85% of its income for charitable activities. In absence of the same only the amount which is utilised by the assessee for doing charitable activities can only be allowed as deduction to the assessee. In the present case as it is observed that no part of the assessee’s income was actually applied for any charitable activities as defined in section 2(15) of the Act, the assessee was not entitled for deduction under section 11 of the Act for application of income towards charitable activities. - Decided against assessee. Software expenditure - Revenue or Capital expenditure - Held that:- No relevant facts were brought on record by the A.O. and no reason was given by the AO for not accepting the claim of the assessee of software expenses being of revenue in nature. In our considered view such an unreasoned order is not sustainable - Decided in favour of assessee.

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• 2015 (6) TMI 289
  Sale consideration claimed as giving rise to long term capital gains treated as unexplained cash credit u/s.68 by CIT(A)- Held that:- Shares of both the companies, i.e. Shalimar Agro Products Ltd. and G-Tech Info Trading were shown to be held by the assessee in the balance sheet filed with the Department in respect of A.Y 2003-04. There is no material on record to show that the return filed by the assessee showing purchases of these shares in A.Y 2003-04 has ever been disturbed by the Revenue. The Revenue has also not contradicted any of the aforementioned evidence submitted by the assessee to support the impugned transactions. Moreover, under similar facts and circumstances, one of the transactions which was added by the AO in respect of shares of M/s. Robinson Worldwide Ltd., was deleted by Ld. CIT(A) on the ground that it pertains to A.Y 2005-06 has been already deleted by the Tribunal in the case of assessee itself. The facts of that transaction and the impugned transactions are not materially different. Therefore, the impugned transactions in the facts and circumstances of the case are covered by the aforementioned decision of the Tribunal in assessee’s own case in respect of assessment year 2005-06. Respectfully following the said decision of Tribunal given in respect of present assessee with regard to assessment year 2005-06, we are of the opinion that Ld. CIT(A) has committed an error in upholding the addition. - Decided in favour of assessee.

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• 2015 (6) TMI 288
  Transfer pricing adjustment - selection of comparables by TPO - Held that:- Bodhtree Consulting Ltd.is not being considered as a comparable company in the case of companies rendering software development services. Comp-U-Learn Tech India Ltd. as relying on case of Kenexa Technologies P. Ltd., vs. DCIT [[2014 (11) TMI 587 - ITAT HYDERABAD] restore analysis of this company to the file of TPO who should look into the financial statements of the company and re-examine whether the company can be considered as a comparable company. Assessee should be given due opportunity to submit relevant details to substantiate its claim. With these directions, analysis of this company is restored to the file of TPO. I-Gate Global Solutions Ltd. company itself classified that ITES company, being similar to assessee company, assessee’s objection is that the information obtained by the TPO was not provided to the assessee. In view of this, we, in the interest of justice restore the matter to the file of the A.O. to examine afresh. The segmental information pertaining to ITES obtained by the TPO should be provided to the assessee for its objections and then re-consider the issue whether the same is comparable or not. Infosys Technologies Ltd. excluded from the list of comparable companies as it is functionally dis-similar and different from the assessee ince it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. Kals Information Systems (Segmental) should not be regarded as a comparable as this company was developing software products and not purely or mainly software development service provider. Tata Elxsi Ltd., (Segmental) should not be regarded as a comparable as unctionally different from that of the assessee Risk analysis - Held that:- Following the decision in the case of Kenexa Technologies P. Ltd., vs. DCIT, Hyderabad [2014 (11) TMI 587 - ITAT HYDERABAD] We remit the issue to the TPO to consider the risk profile of the assessee. We direct the TPO to allow necessary deductions for risk adjustment, after finalising the list of comparables as directed by us Negative working capital - Held that:- There is no need for making any negative working capital adjustment when assessee does not carry any working capital risk. In fact, TPO should have done necessary working capital adjustment to the profits of the selected comparables so as to make them comparable to the assessee. In view of this, we direct the TPO not to make negative working capital adjustment.

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• 2015 (6) TMI 287
  Addition on account of Mobilization advance - CIT(A) deleted the addition - Held that:- As relying on assessee's own case [2011 (11) TMI 506 - Gujarat High Court ]the advance received by the assessee against the purchase of material at site before the execution of work, the same cannot be treated as income of the assessee, especially when the assessee is following the practice of showing advance receipts from the parties in the balance-sheet and when the work is executed, it is shown as receipt and offered for tax. - Decided in favour of assessee. Addition on account of Director’s remuneration - CIT(A) deleted the addition - Held that:- It is not controverted by the Revenue that in the immediately preceding years, i.e. AYs 2004-05 & 2006-07 the claim of the assessee in respect of the remuneration of Directors’ claim was allowed in the scrutiny assessment passed u/s.143(3) of the Act. Since the Revenue has not placed any material on record suggesting that any change into the facts and circumstances in the year under appeal, therefore we do not see no reason to interfere in the order of the ld.CIT(A).- Decided in favour of assessee. Addition on account of cessation of liability - CIT(A) deleted the addition - Held that:- Ss relying on CIT vs. Nitin S.Garg [2012 (5) TMI 30 - Gujarat High Court] wherein held that ITAT is justified in taking the view that as assessee had continued to show the admitted amounts as liabilities in its balance sheet the same cannot be treated as assessment of liabilities - merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have seized to exist – it is on part of AO to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation which he fails to do - in the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable - Decided in favour of assessee. Disallowance of labour charges - Held that:- is evident from the order of ld.CIT(A) that he declined to accept the evidences on the basis that no formal request has been made. The contention of the assessee had been throughout both before the AO and the ld.CIT(A) that the assessee made payment to labour contractors, such payment was made for the purpose of business. We are unable to uphold the view of ld.CIT(A) since there is no dispute with regard to the fact that the assessee has carried out certain work. In this process, he employed labour contractors. No further inquiry is made by the authorities below for finding out the genuineness of claim of the assessee. In our considered view, the assessee ought to have given chance to prove the genuineness of expenditure since it is not the case where the assessee has not carried out work at all. Therefore, to find out the quantum and nature of work executed and for carrying out such work, if any, the expenditure incurred on such work, inquiry is to be made by the Revenue. AO is hereby directed to make further inquiries in respect of claim of the assessee from the persons to whom the assessee made payments towards labour expenses - Decided in favour of assessee for statistical purposes.

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• 2015 (6) TMI 286
  Pro-rata deduction u/s 80IB - whether there is no provision for allowing such partial deduction in terms of provisions of section 80IB(10)? - Held that:- Following the ratio laid down in the case of Pharande Developers, Vs. The Income Tax Officer [2013 (6) TMI 690 - ITAT PUNE] we hold that merely because the assessee had violated the provisions of section 80IB(10)(c) of the Act in respect of two units i.e. row houses D-3 and D-4, the deduction under section 80IB(10) could not be denied in entirety. The assessee is entitled to the said deduction under section 80IB(10) of the Act in respect of balance units which have been constructed as per the conditions laid down in section 80IB(10)(c) of the Act. Only in respect of two units i.e. D-3 and D-4, deduction under section 80IB(10) of the Act would be denied to the assessee. Accordingly, we uphold the order of CIT(A) in directing the Assessing Officer to re-compute the deduction under section 80IB(10) of the Act in relation to the said project by limiting the denial only in respect of row houses D-3 and D-4 and for the balance units the assessee would be entitled to the said deduction under section 80IB(10) of the Act. Thus, the grounds of appeal raised by the Revenue are dismissed. - Decided in favour of assessee

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• 2015 (6) TMI 285
  Penalty proceedings u/s. 271(1)(c) - additional income offered by the assessee on account of certain payments of salaries to domestic servants and drivers etc. in response to the notice u/s. 153A - Held that:- For invoking the provisions of Explanation 5A for levying the penalty u/s. 271(1)(c), the primary condition is that in the course of search the assessee should be found to be the owner of any asset or any income based on any entry in any books or documents or any such transactions. If the documents does not indicate the transaction pertaining to the assessee or the assessee is not found to be the owner then provisions of Explanation 5A cannot be invoked. The onus now in this case and at this stage to prove that Explanation 5A is not applicable, is wholly upon the assessee to explain before the Assessing Officer. Thus, the impugned orders are set aside and the matter is restored back to the file of the Assessing Officer to consider the penalty proceedings afresh in the light of the observations made above. Decided in favour of assessee for statistical purposes

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• 2015 (6) TMI 284
  Disallowance of loss - transactions related to sale purchase of shares and derivatives/commodity trading - As per CIT(A) AO was not justified in treating the transactions of derivative trading and commodity future as speculative, and directed AO to allow the set off of loss incurred from derivative trading against the profit earned from commodity future, sale & purchase of shares and commission earned on sale & purchase of land - Held that:- In the present case, it is an admitted fact that the assessee was engaged in the business of dealing in shares & securities and have incurred loss from dealing in derivatives (shares futures). It is not the case of the AO that the share futures in which the assessee was dealing were not recorded in recognized Stock Exchange, the loss incurred by the assessee was also not disputed by the AO. We, therefore, by keeping in view the provisions contained in clause (d) to Subsection (5) of Section 43 of the Act, are of the view that the ld. CIT(A) was fully justified in directing the AO for not treating the loss incurred by the assessee on derivatives and the profit earned if trading of the commodity as speculative in nature, For the aforesaid view, we are also fortified by the decision of the ITAT Mumbai 'B' Bench in the case of R.B.K. Securities (P) Ltd. Vs ITO (2008 (7) TMI 949 - ITAT MUMBAI). - Decided against revenue.

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• 2015 (6) TMI 283
  Reopening of assessment - assessee challenged the issue of notice u/s.148 in respect of assessment completed u/s. 153A - Held that:- Proceeding initiated u/s. 153A for all six years shall become a subject matter to assessment u/s.153(A) of the Act and the Assessing officer shall have freehand, on assessment, only on the proceeding that are pending to frame the assessment afresh. But in the case where the proceedings have reached finality, the assessment u/s.153A r.w.s.143(3) and where certain material document have been found indicating undisclosed income, the addition shall have to be restricted to those documents or incrementing documents, clubbed only to assessment framed originally. As law does not permit the Assessing Officer to disturb already concluded assessment, whether on the date of intimation of search u/s.132 or requisition of books, no proceedings is pending in the search, materials found indicating incrementing materials, the Assessing Officer engrosses a jurisdiction where he has clubbed two sets of income, return income and unearthed income, had arrived at the total income. Thereafter, if he had a reason to believe the said assessment can be re-assessed u/s.148 of the Income Tax Act as discussed in the earlier paras so as to reopen the assessment, there should be sufficient materials. There is no arbitrary power to the Assessing Officer to reopen on the basis of change of opinion. In the present case we have gone through the reasons for reopening of assessment. It cannot be proper reason to reopening. The Assessing Officer has no power to review his own order. The re-assessment has to be made on fulfillment of certain free condition and if the concept stating ‘'change of opinion" is removed in the graph of re-assessment or/of assessment, redo take place. Once again treat the concept of change of opinion inbuilt test to check to abusive power by Assessing Officer. Hence, the Assessing Officer has power to reopen, provided there is ‘tangible material" to come to the conclusion that there is escapement of income from assessment. The reason must have live link with the foundation of belief. In the present case, the Assessing Officer considered seized material No.136 in annexue NSK/B & D/S dated 20.02.2008 and also seized material document NSK/B & D/S dated 20.02.2008 while framing original assessment and arrived the value of property at Rs. 1,56,65,000/-. Thereafter, the Assessing Officer considered the same seized material to arrive the value of sale property at Rs. 1,81,27,940/- which is not possible. Hence, in our opinion, the reassessment is only on change of opinion which cannot be permitted. Thus the Commissioner of Income Tax (Appeals) has taken correct view in annulling of the re-opened assessment order. - Decided in favour of assessee.

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• 2015 (6) TMI 282
  Suppression of unaccounted on-money income - CIT(A) deleted the addition - Held that:- The assessee sold the flats in various projects at the same rate in A.Ys. 2005-06, 2006-07 and 2007-08. The Revenue has accepted the sale rates of flats in all the years, except sale of 30 flats sold through Shri Atul P. Malde in the year under consideration. It cannot be believed that the assessee sold 30 flats at double the rate then the sale rate of same flats to others in the preceding year, current year and subsequent year. In view of the totality of the above facts, in our opinion, the CIT(A) was fully justified in deleting the above addition made by the Assessing Officer on the basis of the statement of Shri Atul P. Malde which was recorded behind the back of the assessee and moreover, which was retracted by himself within 4 days from the date of giving of his statement. We, therefore, uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue - Decided in favour of assessee.

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• 2015 (6) TMI 281
  Exemption claimed u/s 80 IC denied - Held that:- The assessee has been granted deduction u/s 80 IC for the AY 2005- 06, 2006-07 and 2007-08. The first year of claim was the A.Y. 2005-06. The impugned AY i.e. AY 2008-09 is the fourth year of the claim. The Assessing Officers over a period of three years being assessment years 1988-89, 1989-1990 and 1990-1991 have consistently accepted the claim of the assessee for deduction under section 80-I of the Act and it would not be open for the Assessing Officer to deny the deduction under section 80-1 of the Act on the ground of non fulfillment of the conditions under section 80- 1(2) of the Act without disturbing the assessment for the assessment years relevant to the previous year in which the Unit Nos. 2 & 3 were established. Thus where relief of a tax holiday had been granted to an assessee in an initial assessment year in which the conditions for grant of tax holiday had tobe examined, denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. See CIT vs. Delhi Patra Prakashan Ltd.[2013 (6) TMI 70 - DELHI HIGH COURT], Saurashtra Cement [1979 (2) TMI 21 - GUJARAT High Court] and Paul Brothers [1992 (10) TMI 5 - BOMBAY High Court] - Decided in favour of assessee.

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• 2015 (6) TMI 280
  Condonation of delay in filing an appeal - Assessment without serving of notice u/s. 143(2) - Disallowance u/s. 80IC - delay of 373 days in filing the appeal - Held that:- No merit in the case of the assessee for condoning the delay. The assessee has deliberately put the blame of negligence or inaction on their tax expert. Even if there was any inaction on their part, the assessee has to explain the delay of each day. Rather otherwise, the law is against the assessee, therefore, the appellant has to suffer for not filing the appeal within the period of limitation, more specifically, when the assessee was not prevented by “sufficient cause”, as the substantive right accrued in favour of the other party cannot be taken away without any reasonable ground. As we have discussed in preceding paras of this order the assessee was assisted by a team of experts/taxation heads/qualified persons, therefore, we find no merit in the claim of the assessee for condoning the delay. Consequently, the application of the assessee having no merit, therefore, dismissed. - Decided against assesse.

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• 2015 (6) TMI 279
  Disallowance of Management Fee - CIT(A) deleted the addition - Held that:- Appellant has submitted detailed working of the basis of allocation of expenditure bet n the appellant and SOIPL and has also adequately explained additional queries raised by my office on basis of allocation adopted by the appellant under all possible odd situations. Detailed note to substantiate that the said cost recharge has not resulted in any loss to the Revenue has also been submitted by the Appellant.On the contrary, the AO has made its allegations merely on theories and nothing has been brought on record to show that the management fee is not related to the business of the appellant or has not actually been incurred. Thus, the addition made by the AO to the income of the appellant by disallowing the management expenditure reducing the amount of returned loss is deleted correctly by CIT(A) - Decided in favour of assessee. Disallowance of advertisement expenditure - CIT(A) deleted the addition - Held that:- No merit in allegation of the AO that merely as this is the first year of operation of the Company the advertisement expenditure would render enduring benefit to the company. Moreover, the AO has failed to define the period over which such benefit is expected to be incurred. Thus, placing reliance on the judicial precedents specifically the decision jurisdictional Delhi High Court in case of Salora International (2008 (8) TMI 138 - DELHI HIGH COURT ) and Brilliant Tutorials P Ltd (2007 (1) TMI 147 - MADRAS High Court ) which is on similar fact pattern, the claim of advertisement expenditure made by the appellant is correct and the addition made by the AO is deleted - Decided in favour of assessee. Disallowance of filing fee - Held that:- CIT(A) has allowed the relief on the basis of submissions of the assessee that these expense were inadvertently reported in audit report and actually these related to financial year 2008-09. We do not find any infirmity in his findings - Decided against revenue. Depreciation on accessories and peripherals of computer - Held that:- The accessories and peripherals of computer provide input processing, storage and various output devices. The output devices such as printers, scanner etc. are computer peripherals and form essential parts of the computer. These output devices cannot work in isolation and also working on computer system without an output device such as printer would be futile. In view of the same, the claim of depreciation at 60 percent on printer, scanner, and other computer peripherals by the appellant seems justified. The same position has been accepted by various Tribunals wherein it has been held that computer peripherals such as routers, switches, printers etc are eligible for depreciation at the rate of 60 percent. In view of the same, the claim of depreciation by the appellant is correct and the addition made by the AO is deleted. - Decided in favour of assessee.

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• 2015 (6) TMI 278
  Disallowance of depreciation on motor car - CIT(A) allowed the claim - Held that:- As decided in assessee's own case for assessment year 2005-06 registration under Motor Vehicle Act is not an essential requirement for acquiring ownership of the motor vehicle and that an assessee purchasing a motor vehicle for valuable consideration and using the same for his business cannot be denied benefit of depreciation on the ground that the vehicle was not registered under Motor Vehicle Act. See USHA RECTIFIER CORPORATION (I) PVT. LTD. V/s INSPECTING ASSISTANT COMMISSIONER [1989 (9) TMI 162 - ITAT DELHI-A] and Commissioner Of Income-Tax Versus Dilip Singh Sardarsingh Bagga [1992 (9) TMI 74 - BOMBAY High Court ] - Decided in favour of assessee. Disallowance of bad debts - CIT(A) deleted disallowance - Held that:- the value of the shares transacted by the assessee as a stock broker on behalf of its client is very much a part of the debt as is the brokerage which is charged by the assessee on the transaction. Since the brokerage and value of shares both form a component part of the debt, the requirements of section 36(2)(i) are fulfilled where a part thereof is taken into account in computing the income of the assessee. Further, it is not disputed that the assessee has written off the debts as bad in its books of account. Under these set of facts, we notice that the assessee complied with the provisions of sections 36(1)(vii) as well as 36(2)(i). Hence, by following the decision of Jurisdictional High Court rendered in the case of SHREYAS S. MORAKHIA (2012 (3) TMI 103 - BOMBAY HIGH COURT), we uphold the order of the ld.CIT(A) on this issue.- Decided in favour of assessee. Computer and software development expenditure - capital or revenue expenditure - Held that:- Since the break-up details of the expenditure are not available on record, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly, we set aside the order of ld. CIT(A) on this issue and restore the same to the file of AO with a direction to examine the same in the light of the decision of ITAT in the case of AMWAY India Enterprises (2008 (2) TMI 454 - ITAT DELHI-C ) by duly considering the break-up details, information and explanation that may be furnished by the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of penalty paid to the Stock Exchange for violation of its bye-laws - CIT(A) allowed claim - Held that:- Explanation to Sec 37(1) are not applicable to the penalty paid on contravention of bye-laws of the Stock Exchange. Accordingly, the claim of the assessee to be allowed. See ITO V/s VRM Share Broking (P) Ltd [2008 (11) TMI 441 - ITAT MUMBAI] - Decided in favour of assessee. - Decided in favour of assessee for statistical purposes. Disallowance made under section 14A - Held that:- Since the provisions of Rule 8D are not applicable to the year under consideration, the disallowance to be made u/s 14A of the Act should be computed in a reasonable manner. We have earlier noticed that the AO has applied the provisions of Rule 8D for computing the disallowance. Hence, we are of the view that this issue requires fresh examination. See case of Godrej & Boyce Mfg Co. Ltd [2010 (8) TMI 77 - BOMBAY HIGH COURT] Disallowance of Bombay Stock Exchange Card Amortization expenditure - Held that:- this is the last year of claim, which means that the assessee had made similar amortisation claim in earlier years also. However, it was not shown to us by either parties that the said claim was allowed or disallowed in earlier years. Be that as it may, the ld. CIT (A) has pointed out that, after corporatisation of BSE, even the depreciation on BSE card is allowable up to 19.8.2005 only. Under these set of facts, we are of the view that the assessee has failed to demonstrate us as to how the amortization amount of Rs. 6,42,500/- is allowable as deduction under the Income Tax Act. Hence, we are of the view that the ld. CIT(A) was justified in confirming the disallowance made by AO. - Decided against assessee. Sale of shares - Short Term Capital Gains OR business income - Held that:- Both the tax authorities have given findings that the assessee has earned above said amount on purchase and sale of shares on the very same date. It is well established principle that the intention of a person at the time of purchase of shares is one of the most important criteria to be considered while deciding about the nature of a transaction. The very fact that the assessee has been indulging in intraday transaction, i.e., purchase and sale of shares on the very same day would only show that the assessee has not intended to purchase them as an investor. Hence, we are of the view that the ld.CIT(A) was justified in confirming the assessment of STCG as business income of the assessee. - Decided against assessee.

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• 2015 (6) TMI 277
  Disallowance u/s 40(a)(ia) - non deduction of TDS on internal audit fee - Held that:- In each of the case audit fee did not exceed Rs.,20,000/-. The relevant assessment year involved is 2006-07 relevant to financial year 2005-06. In view of the proviso of section 194J of the Act fee for professional or technical services the assessee is not liable to deduct TDS in case the payment does not exceed the monetary limit prescribed i.e. Rs. 20,000/- in that year in each of the case. Thus assessee is not liable to deduct tax as the payment in all the three cases is less than Rs. 20,000/- each. - Decided in favour of assessee. Disallowance of interest on loan - Held that:- From the above decision of the Co-ordinate Bench of Mumbai Tribunal in the case of Vipin Mehta (2011 (5) TMI 503 - ITAT MUMBAI) and the fact in this case is that the assessee has received Form 15G from the respective payees to whom interest is paid, the AO has no authority to make any disallowance for non deduction of TDS u/s 40(a)(ia) of the Act. - Decided in favour of assessee.

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• 2015 (6) TMI 276
  Entitlement to deduction u/s 80IB - CIT(A) allowed the claim - Held that:- In the appellant's case the provisions of section 801B(10) are applicable, as the appellant's project was approved prior to 01/04/05. The subsequent amendment will not affect the appellant's case in view of jurisdictional Bombay High Court decision in the case of Brahma Associates vs. JCIT (2011 (2) TMI 373 - BOMBAY HIGH COURT). As it is evident from the appellant's submission that the appellant comply all necessary conditions as envisaged under the provisions of law for claiming deduction u/s 80IB(l0) of the Act. Hence taking note, of all the facts on record, therefore to hold that the appellant is eligible for deduction u/s 80IB(10) of the Act. As could be noticed from the order of the learned CIT(A), when there is a specific direction to the AO by the ITAT to follow the Special Bench decision of ITAT it has to be assumed that the direction is with reference to the issues which were originally objected to by the AO and the AO cannot take advantage of the order of ITAT for repeating the addition, defying the directions of the ITAT. At least the senior officer such as Commissioner of Income Tax should have carefully perused the record and CIT(A)'s order before granting authorisation. The very fact that the AO filed the appeals without even verifying the year, which was mentioned in the grounds of appeal, also indicates that the appeals were filed in a routine manner which causes lot of inconvenience to the tax payers and such a practice should be deprecated. With these observations, for the reasons given by the learned CIT(A), we hold that the appeals filed by the Revenue deserve to be dismissed in limine. - Decided against revenue.

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• 2015 (6) TMI 275
  Disallowance of commission paid - decision of CIT(A) is that no services were rendered by the commission agents and that expenditure on commission payment is for influencing the decision making process in the contract awarded by PSU of the Government of India i.e. M/s Modern Food Industries (India) Ltd. - Held that:- As per the agreement of the assessee company with M/s Modern Food Industries (India) Ltd., we find that there is no fixed date or credit period for making payment by M/s Modern Food Industries (India) Ltd. to the assessee company after the dispatch. Under these facts, this is very vital work to follow up for getting payment from M/s Modern Food Industries (India) Ltd. Hence, it cannot be said that no services were rendered by these commission agents to the assessee company. Negotiation of rate difference and follow up of payment realization are two very vital work for which payment of commission to a commission agent is justified unless it is proved that no such work was actually done by the commission agent. The allegation of the authorities below that no services were rendered by the commission agent is on the basis that contract was already awarded by M/s Modern Food Industries (India) Ltd. in the year 1999 and delivery was to be made by the assessee company at its own premises but these two aspects regarding negotiation for rate difference and follow up of payment realization has not been considered by authorities below before holding that no services were rendered. Hence, on this aspect, we are of the considered opinion that the orders of the authorities below are not sustainable. In a case of supply to Government undertaking also, in spite of direct order/contract awarded by PSU, various formalities are to be completed by the supplier and the same can be done in two ways. One way is to have competent person on the roll of the supplier company to do such formality and second way is to obtain the services of commission agent who have such experience and expertise. The expenditure incurred by the supplier on such work in any one of the two manners, as discussed above are allowable and the same cannot be disallowed unless it is established that such expenditure is for effecting the decision making process of a PSU of Government of India. In the present case, we have seen that the contract was awarded by the PSU of the Government of India in the year 1999 and the agreement with the commission agents has been entered into on 01/04/2000 for rendering the services of negotiating rate difference and follow up payment realization and therefore, we are of the considered opinion that in the present case, both the basis adopted by the Assessing Officer and CIT (A) to disallow the commission payment is not valid. We, therefore, delete the disallowance of commission in the present case to all the four commission agents i.e. M/s Premier Ispat Ltd., Kundan Castings Pvt. Ltd., Rainbow Mercantile Pvt. Ltd. and M/s Shree Mahabali Electronics. - Decided in favour of assesse.

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• 2015 (6) TMI 274
  N.P. estimation - Held that:- As in earlier years, the final assessed income of the assessee was in the range of 0.98% to 2.5%. In the subsequent year i.e. assessment year 2011-12, the income of the assessee was assessed at 2.09% on contract receipt of Rs. 1636.39 lac. In the present year, the contract receipt is Rs. 794.07 lac. The decision of the CIT(A) to assess the income of the assessee at Rs. 27 lac results into net profit rate of 3.40% as against 8% estimated by the Assessing Officer. Since in the present year, the assessee has not produced books of account and vouchers related to the expenses, we feel that applying net profit rate of 4% will meet the ends of justice. We direct the Assessing Officer accordingly that the Assessing Officer should assess the income of the assessee by applying 4% rate as the net profit of the gross receipts - Decided partly in favour of assesse. Undisclosed investment in FDRs - Held that:- merit in this stand taken by CIT(A) because it is admitted position of fact that the assessee has FDR investment in this year and the same was undisclosed in the balance sheet. If these FDRs were purchased in earlier year then it was the burden on the assessee to establish that by bringing necessary evidence on record. As per the chart reproduced by CIT(A) on pages 8 to 10 of his order, apart from Sl.No. 15 & 16 also, there are other FDRs which were purchased in the present year i.e. Sl.No. 3 Rs. 3,66,262/-, Sl. No. 6 Rs. 6,66,407/-. Moreover, even if balance FDRs were purchased during the financial year 2008-09 and the same were out of undisclosed sources then also interest on such investment for the present year should be added in assessment year 2009-10 and CIT(A) should have given such direction to the Assessing Officer for making such addition in assessment year 2009-10. The interest accruing in present year on those investments in FDR made in financial year 2008-09 should have been added in present year. Considering these facts, we feel that the order of CIT(A) is not sustainable and the same required a fresh decision in the light of above discussion. Hence, we set aside the order of CIT(A) and restore the matter back to him for fresh decision after providing adequate opportunity of being heard to both the sides - Decided in favour of revenue for statistical purposes. Investment in purchase of FDRs does not relate to the year under appeal - Held that:- this ground of the assessee is also de void of any merit because these two FDR of Rs. 2,73,239/- were made on 29/05/2009 and 21/08/2009 which falls during the present year and since these investments were not reflecting in the balance sheet of the assessee, the addition was rightly upheld by CIT(A). - Decided against assesse.

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• 2015 (6) TMI 273
  Penalty u/s 158BFA(2) - unexplained investment in house property and unexplained marriage expenditure - CIT(A) deleted penalty levy - Held that:- DVO has estimated the investment in the property near about the same amount as declared by the assessee in the account books. The CIT(A) in the quantum proceedings estimated the value of investment at Rs. 30 lakhs as against Rs. 40 lakhs made by the Assessing Officer. Under these circumstances, in our view, the CIT(A) has correctly appreciated the facts and circumstances of the case and held that the impugned addition on account of unexplained investment in house property of Rs. 11,71,687/- was on estimation basis and not on the basis of any concrete evidence found in the course of search towards incurrence of unaccounted expenditure qua the impugned property. Therefore, having regard to the facts and circumstances of the present case, we affirm the action of the CIT(A) in deleting the penalty with respect to the addition of Rs. 11,71,687/- on account of unexplained investment in house property. On account of unexplained marriage expenditure CIT(A) has thoroughly examined it and his inference that addition is based on estimate basis is a reasoned one. Before us, no cogent material or reasoning has been advanced by the Ld. Departmental Representative to say that any document or evidence was found in the course of search which would indicate clinchingly incurrence of unaccounted expenditure on marriage of assessee’s daughters. Merely because, assessee’s explanation with respect to the loose papers was rejected in the quantum proceedings and the marriage expenses estimated cannot be a ground to levy penalty u/s 158BFA(2) of the Act in the context of the facts and circumstances of the present case - Decided in favour of assesse.

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• Customs

• 2015 (6) TMI 297
  Condonation of delay - Remission of duty - Goods destroyed during flood - Held that:- since the appellant was seeking remedy before the higher judicial forum as was advised to them the delay has been suitably justified. We are of the considered view that the delay in filing the appeal before this bench needs to be condoned and accordingly the same is condoned. - Delay condoned.

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• 2015 (6) TMI 296
  Classification of the products - electrical equipment - manufacture of Relays - whether subject products would fall within the classification as described in Sl. No. 112 of Exemption Notification No. 25/99, dated 28-2-1999, which states that the finished product if Relays/Switches/Connectors would be entitled to the Concessional rate provided that the importer follows the procedure set out in the said Rules - Held that:- authority while passing the impugned order did not adjudicate the issue. The petitioner should have been permitted to agitate the classification issued by placing all materials and such issue could be decided after thorough adjudication. However, the procedure followed while passing the impugned order is a summary procedure. Even in the impugned order, it has been stated that the Department proposed to draw samples for the purpose of obtaining expert opinion. Therefore, the respondent by impugned proceedings have not finally adjudicated the issue or finalised the issue against the importer. However, the petitioner insisted on the certificate for availing the benefits under the exemption notification. This order has been passed on 6-5-2014 to safeguard the interest of the revenue by way of abundant caution pending final adjudication. - the observation made in the impugned proceedings, dated 6-5-2014 need not be put against the petitioner when the case is fully adjudicated by the Authority - Petition disposed of.

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• 2015 (6) TMI 295
  Duty demand - Compliance to legal provisions not made before making demand - Held that:- Respondents are to issue a show cause notice and comply with the provisions of law. Equally if they are empowered to seize the goods they will have to comply with the law. If the provisions of law enable them to seize the goods, then, they must comply with such provisions and procedures prescribed therein before effecting seizure. If the law contemplates release of the goods after such seizure even that opportunity should be given to the Petitioners. Needless to state that in all such events the Respondents shall comply with the provisions of the Customs Act, 1962 and the requisite Rules thereunder. - Petition disposed of.

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• Corporate Laws

• 2015 (6) TMI 294
  Delay in disclosure of sale of shares in excess of 2% of the share capital to the stock exchanges - Delay in disclosure of change in shareholding having more than 5% shares - Penalty for violation of Regulation 29(2) r/w 29(3) of SEBI(SAST) Regulation, 2011 and Regulation 13(3) r/w Regulation 13(5) of SEBI (PIT) Regulations, 1992 - Held that:- It may be pointed out that Regulation 29(3) of SAST Regulations is not in consonance with Regulation 29(2), since Regulation 29(2) requires intimation for every acquisition or disposal, but Regulation 29(3) requires such disclosure “to be made within two days of receipt of intimation of allotment of shares or the acquisition of shares or voting rights in the target company” and there is no time limit for disclosure of disposal of shares or voting rights, although there is a requirement under Regulation 29(2). - In the present case, intimation of disposal of shares or voting rights in target company was required to be intimated under Regulation 29(2) read with Regulation 29(3) of SEBI (SAST) Regulations to stock exchanges and target company by acquirer i.e. Vizwise Commerce Private Limited, but in absence of any time limit for same, no violation as such can be attributed since the intimation was provided. However, under Regulation 13(3) r/w Regulation 13(5) of SEBI (PIT) Regulations, it is seen that sale of shares or voting rights was required to be made to the company, if “for” in Reg.13(3) is read as “or”, then the person concerned i.e. Vizwise Commerce Pvt. Limited, did not make the requisite disclosure to target company i.e. Seasons Textiles Limited, within 2 days of sale of 2,50,000 shares, representing 3.34% of share capital of Seasons Textiles on 18/6/2013 and as such can be held violative of provisions of Regulation 13(3) r/w Regulation 13(5) of SEBI (PIT) Regulations, 1992. It is also point out that these requirements are of intimation i.e. putting down the same in requisite form and posting the same within 2 days and not for reaching the company/stock exchange within 2 days of occurrence - for which additional time, over and above 2 days, for reaching the intimation by post to target company or stock exchange, as the case may, is permitted. It was also submitted by Ld. Counsel that promoter/director of Appellant was hospitalized during the time when sale took place and requirement of those disclosures arose and ultimately breathed his last on 22/7/2013 and hence keeping this in view and also the fact that delay in disclosure under Regulation 13(3) read with Regulation 13(5) of SEBI (PIT) Regulations was only 6 days, the penalty imposed by Ld. A.O. is reduced to Rs. 2,00,000/-. - Decided partly in favour of appellant.

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• Service Tax

• 2015 (6) TMI 307
  Waiver of pre deposit - Capital goods - erection of pipelines - whether appellant is eligible for the Cenvat credit of the service tax paid by the contractors who were laying pipelines for transportation of gas through pipeline - Difference of opinion - Majority order - Held that:- appellant is procuring pipes which are imported by them under EPCG system. The said pipes are then handed over to the pipeline laying contractors, who lay the pipes undertake the entire job of pipeline and bill the appellant as for providing the services of "commercial or industrial construction services" and there is also no dispute that contractors classification of service is not accepted. It is noted that there is no dispute that as to the fact that the pipeline system which is put in place by the contractors is used for rendering of out put services falling under the head of "transport of goods (other than water) through the pipeline or conduit services". - services rendered by the pipeline laying contractors would be eligible for Cenvat credit on the ratio of the law as has been laid down by the Hon'ble High Court in the case of CCE Vs. Sai Samhita Storages (P) Ltd. - [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] GSPL had floated a tender for laying of pipeline system of transportation of oil and gas under EPC contract. The pipes which were procured by the award winning contractor and the Cenvat credit of the Central Excise duty paid of such pipeline was availed by GSPL which was disputed and the Tribunal had held the dispute in favour of the Revenue. In the same case, the services were provided by various service providers to the EPC contract winner, was also denied and upheld by the Tribunal on the ground that service providers, provided services to EPC contract winner and not to the said GSPL. The facts of the GSPL case and the facts of the case in hand are totally different as has been already recorded by me. In my view if the services which are rendered by the pipeline laying contractors directly to appellant herein for laying the pipeline and other input services which are required for rendering of the service by the appellant, prima facie the Cenvat credit cannot be denied to the appellant; the same view is applicable in respect of the capital goods which are procured by the appellant directly for construction/laying of the pipeline. - appellants have made out a prima facie case for complete waiver of pre-deposit of the amounts involved - Stay granted.

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• 2015 (6) TMI 306
  Classification of service - Manpower supply service or not - Held that:- Appellant have carried out various odd jobs during the period in dispute for Ispat Industries Ltd. like, lining, coating, loading and unloading etc. with the aid of her team (other workers). It is further evident from bill of the job done that the same is definitely not classifiable under manpower recruitment and supply agency service. The payment of Service Tax in such facts and circumstances, show that the appellant have got no concept or knowledge of Service Tax and have deposited the same out of fear with interest much prior to the issue of show-cause notice, i.e almost a year. Further, the Counsel for the appellant makes the concession by stating that in the facts and circumstances, the appellant will not be claiming any refund of amount (tax) and interest already deposited. In this view of the matter, the impugned order is set aside and the appeal stands allowed in favour of the appellant. - Tribunal has only seen the sample bills produced before it. Further, the impugned order is also silent as to the material facts. In this view of the matter, I remand the issue limited to re-calculation of the tax, to the adjudicating authority - Decided in favour of assessee.

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• 2015 (6) TMI 305
  Denial of CENVAT Credit - Board's Circular No.354/148/09 dated 16/7/09 - Held that:- Cenvat credit was sought to be denied by the show cause notice in respect of consultancy services received from foreign service provider's on the ground that the appellant as the service recipient had paid service tax on these services under section 66 A of the Finance Act 1994, while the Cenvat Credit Rules, 2004 do not permit the cenvat credit of service tax paid by a service recipient under section 66 A. - Commissioner has not discussed at all as to how the consultancy services received from foreign service providers are not covered by the definition of 'input service'. In respect of the other services received by the appellant from various domestic service providers he has not discussed at all the Board's Circular No.943/4/2011cited by the Counsel for the appellant on the ground that he could not locate the circular on CBEC Website. He has not even discussed the question of admissibility of cenvat credit in respect of these services on merit. While a responsible Adjudicating Officer while deciding an issue is expected not to blindly rely upon Board's Circular, he is expected to examine the issue independently on merits. We have no hesitation in observing that the order passed by the Commissioner is an irresponsible order which is not expected from a senior officer of the rank of Commissioner. The impugned order is set aside. The matter is remanded to the Commissioner for de-novo adjudication. - Decided in favour of assessee.

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• Central Excise

• 2015 (6) TMI 302
  Denial of CENVAT Credit - Failure to pay duty due to clerical mistake - Held that:- The only basis of the duty demands against the appellant is that during the period of default beyond 30 days from the due date the appellant were required to pay duty on the clearances during that period without utilizing the Cenvat credit. However, we find that Hon'ble Gujarat High Court [2014 (12) TMI 585 - GUJARAT HIGH COURT] in the judgment mentioned above has struck down above mentioned condition contained in sub-rule (3A) of Rule 8 requiring that during the forfeiture period an assessee would be required to pay duty without utilizing the Cenvat credit. We are therefore, of the prima-facie view that the impugned order is not correct and as such the appellant have strong prima-facie case in their favour. The requirement of pre-deposit of the duty demand, interest and penalty is therefore, waived for hearing of the appeal and recovery thereof is stayed during pendency of the appeal - Stay granted.

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• 2015 (6) TMI 301
  Waiver of pre deposit - Payment of excess duty - Bar of limitation - Held that:- If assessee has paid excess duty on all clearances during the relevant period, such excesses have to be taken into account for confirming the demand of duty in terms of the provisions of Rule 10A of Central Excise Valuation Rules. If that is taken into account, the appellant has undisputedly paid excess duty of Rs. 2 crores. - law was declared against them in the case of Audi Automobiles referred above and was not clear during the relevant period. The said decision was issued in the year 2010. The Tribunal in the case of Tata Motors Ltd. Vs. CCE, Pune-III [2015 (1) TMI 1082 - CESTAT MUMBAI] has held that in such a scenario, the demand would be barred by limitation. - Stay granted.

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• 2015 (6) TMI 300
  Levy of interest on deferential duty - price increase retrospectively - Whether in the facts and circumstances of the case, the appellant is liable to pay interest under Section 11AB of the Act, on raising of supplementary invoice - Held that:- Assessee has cleared goods and paid duty thereon and raised supplementary invoices, but however failed to pay interest payable under Section 11AB of the Act. In view of the decision of the Supreme Court in SKF India Ltd. case, referred supra, the first plea raised by the learned counsel for the appellant fails and in that regard, we find no infirmity in the order passed by the Tribunal. Section 11AA of the Act, as amended by Section 64 of the Finance Act, 2011 (8 of 2011), does not in any way advance the case of the appellant, as we find that the liability to pay interest on delayed payment of duty is clearly envisaged in Section 11A(2B) read with Explanation 2 to the said provision. Such interest was leviable even during the period in question. In fact, the Supreme Court in SKF India Ltd. case, referred [2009 (7) TMI 6 - SUPREME COURT ], observed that there is some ambiguity in the said provisions, which was a cause for amendment brought to Section 11AA of the Act. - Decision in assessee's own previous case followed [2014 (10) TMI 482 - MADRAS HIGH COURT] - Decided against assessee.

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• 2015 (6) TMI 299
  Denial of MODVAT Credit - Whether the Tribunal was justified in holding that the department’s circulars issued giving powers to issue show cause notice under Rule 57-I of the Central Excise Rules, 1944 to the Assistant Collector and Collector can be given effect to the same being executive and advisory in nature and not issued under the provision of Rule 233 (wrongly mentioned as 33 in the question of law framed) of the Rules - Held that:- Officers of the department cannot in violation to the circular proceed to take action by saying that the circular is only advisory in nature or that it is not a circular issued under the statutory rule i.e. Rule 233. Once we find that the legal position in this regard is well settled, then we have to hold that in the light of the circular issued by the Board clarifying the position with regard to who is the “proper officer” as defined under Section 2(b) of the Act, the departmental authorities are duty bound to follow the circular. - It is not known as to how the Tribunal could take a different view from the one taken by it in an appeal filed by the same assessee on 17-10-2000 in the case of Bharat Heavy Electricals Ltd. v. Commissioner of Central Excise, Indore (2000 (10) TMI 374 - CEGAT, NEW DELHI). Once it is found that the show cause notice is issued by an unauthorized person, we have to hold that the entire action initiated is unsustainable, void ab initio and stands vitiated. - Superintendent could not issue the show cause notice in relation to the recovery of Modvat credit after disallowing it and it was only the Assistant Collector or Collector who could issue the notice. Whether the Tribunal is justified in arriving at the conclusion that the department’s circulars have no legal sanctity as they have not been issued in accordance with Rule 33 of the Rules - When a departmental circular is issued by the Board, it would be in accordance to the power available to the Board under Section 37B and until and unless it is not shown that the circular is contrary to any law laid down by the Supreme Court or judgment of High Court, the same shall be binding on all the officers of the Excise Department and only on the ground that the circular is not issued under Rule 233 of the Rules, the officer cannot refuse to follow the circular by saying that it is only advisory in nature. All the circulars issued by the Board in its administrative and executive jurisdiction are binding on the officers of the Board until and unless it can be shown that they are contrary to any law laid down by Supreme Court or High Court with regard to the subject matter of the circular. - Decided in favour of assessee.

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• 2015 (6) TMI 298
  Maintainability of appeal - Bar of limitation - order was pronounced in the open court - whether the order passed by the first respondent rejecting the revision petition as barred by limitation is just and proper - Held that:- In terms of sub-section (2) of Section 35EE of the Central Excise Act, the application for revision of any order passed under Section 35A of the Act shall be filed within 3 months from the date of communication to the applicant of the order, against which, the application is being made in terms of proviso under sub-section (2) of Section 35EE, the Central Government, the Revisional Authority, may if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the aforesaid period of 3 months, allow it to be presented within a further period of 3 months. Therefore, the period of limitation as stipulated in the said provision is 3 months and the authority has got power to condone the delay for a further period of three months provided the applicant shows sufficient cause. While computing limitation, the starting point of limitation should have been the date on which the order passed by the Tribunal was communicated to the petitioner i.e., 24-3-2011. The learned standing counsel appearing for the respondents would contend that should not be the date, but the date on which the order passed by the Tribunal, since the petitioner was represented by counsel before the Tribunal. It is to be noted that the Tribunal returned the papers to the petitioner for being presented before the proper forum. The appeal was dismissed as not maintainable and not on merits. Therefore, unless and until the petitioner is intimated with the order along with original papers, the petitioner cannot approach the revisional authority. Therefore, in the petitioner’s case, the period of limitation should commence to run from the date on which the petitioner received the certified copy of the order passed by the Tribunal along with papers. - Decided in favour of assesee.

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• CST, VAT & Sales Tax

• 2015 (6) TMI 304
  Input tax credit - petitioner purchases raw rubber/latex from the growers and pays purchase tax on the same - Whether the petitioner is entitled to the benefit of input tax credit by taking benefit of the CST payable in respect of inter-State sales - Held that:- Input tax has been defined to mean the tax paid or payable under the Act. Obviously, the word “Act” has to mean the Tripura Value Added Tax Act, 2004 as per the definition of the word “Act” contained in section 2(1) of the Act. Therefore, input tax is relatable to the tax paid or payable only under the TVAT Act and not under the Central Sales Tax Act. Reference may also be made to the definition of the word “Tax” which has been defined in section 2(28) to mean tax payable under the Act, i.e. the TVAT Act. Intention of the State of Tripura was to give benefit of input tax credit only in respect of sales intended or made within the State of Tripura. There is no doubt in our mind that the Act specifically excludes from its ambit, the inter-State sales and the benefit of tax paid on inter-State sales cannot be availed of by the petitioner to claim input tax credit. No document like a project report has been placed on record to show that when the petitioner set up the plant, his intention was to sell the goods within the State of Tripura. Some material like a project report or a feasibility report should have been produced before this Court to show that when the plant was set up, it was the intention of the dealer to sell the goods within the State of Tripura. There may be a case where the dealer sets up a plant to produce some goods which can be used by some other factory within the State. If this is reflected in the feasibility report and evidence is led to show that for reasons beyond the control of the dealer, the other plant where the goods of the dealer were to be consumed has shut down, then the dealer can be heard to argue that he was forced to sell the goods outside the State of Tripura. There is no such material placed on record in this case. Court cannot get inside the mind of the petitioner. The intention of the party has to be determined from the material placed on record. In the present case, almost the entire production for the five assessment years has been sold outside the State of Tripura. The intention of a party has to be judged from its action and as far as the actual action is concerned, it is clear that right from the very inception, the petitioner has been selling almost all its produce outside the State of Tripura. Therefore, we have no hesitation in holding that it was not the intention of the petitioner, while setting up the plant, to sell the produce in Tripura. Movement of the rubber thread commenced from Tripura. Therefore, the authorities in the State of Tripura are entitled to collect the tax. Sub-section (2) makes it amply clear that the authorities empowered to assess, reassess, collect and enforce payment of any tax under the sales tax law of the appropriate State shall on behalf of the Government of India asses, reassess, collect and enforce payment of tax including interest and penalty payable by a dealer under the Central Act. This leaves no manner of doubt that the Commissioner of Taxes, Tripura had the authority to pass the impugned orders. It is well settled law that if an authority has the power and jurisdiction to take certain action, then merely because a wrong provision of law is mentioned or because no provision of law is mentioned, the action cannot be set aside on this ground. After considering the entire record, we are clearly of the view that the intention of the taxing authorities of the State was to collect the CST which had not been deposited by the assessee by claiming input tax credit. We are in agreement with the law laid down by the Allahabad High Court [1970 (9) TMI 93 - ALLAHABAD HIGH COURT] and, therefore, we hold that merely because there was no reference to the provisions of the Central Sales Tax will not make the action illegal, if otherwise the authorities of the State had jurisdiction to take the said action. Section 85 empowers the Commissioner to delegate his powers under the Act to any person appointed under sub-section (1) of section 18 to assist him. When both the sections are read together, it is amply clear that the power of the Commissioner to delegate his powers is hedged by only one condition that he can delegate these powers only to a person appointed under sub-section (1) of section 18 to assist him. The words “assist him” have to be read in the context of section 18(1) and, therefore, the Commissioner can only delegate the powers to a person appointed to assist him under section 18, and not to any other person. In the present case, the Superintendent of Taxes has been appointed under section 18(1) and, therefore, also the Commissioner had the power to delegate his authority to him. Five notices should have been issued for the five assessment years giving at least 15 days time to the assessee to respond. The manner in which the notices have been issued is not proper. The first notice was issued on 01-02-2014 and in this notice, it was stated that the Superintendent of Taxes felt that he had reasons to believe that detailed scrutiny of returns for the period 2008-09 to 2013-14 (upto 31-12-2013) is necessary. What are the reasons have not been spelt out. The Superintendent wanted to reopen the entire proceedings from the year 2008 till 2014. This notice is dated 01-02-2014 and it requires the petitioner to appear before the Superintendent of Taxes on 13-02-2014. To say the least, the manner in which this notice has been issued is highly improper. No reasons have been spelt out as to why detailed scrutiny is required and nothing is stated in the notice with regard to the nature of the inquiry. Basic assessments assessing the tax and interest payable for these three years are upheld. With regard to the years 2011-12 and 2012-13, since there is some dispute with regard to the ‘C’ forms and we are of the opinion that no proper opportunity was given to the petitioner, the assessment orders are set aside and the proceedings shall now commence from the stage of filing of reply by the petitioner. - The petitioner did not hide any facts. It claimed input tax credit by claiming that it was entitled to claim the benefit in terms of the TVAT Act. The taxing authorities of the State of Tripura permitted the petitioner to take benefit of input tax credit on these averments. Suddenly after five years the authorities became wiser and found that the assessee is not entitled to such benefit. We are in agreement with the State that the assessee may not be entitled to such benefit and, therefore, it is liable to pay the amount of Central Sales Tax collected by it along with the statutory interest payable under section 25 of the Act which is 18% per annum. The assessee claimed input tax credit by depicting the true and correct facts. Though we have decided the case against the assessee, we are clearly of the view that in such a situation it cannot be said that the dealer had claimed this input tax credit with a view to evade or avoid payment of tax. It is a plain and simple case of different interpretations of the provisions of law. The assessee interpreted section 10 in a particular manner and this interpretation was accepted by the revenue also. In such an eventuality, it would be highly unfair and unjust to impose the maximum penalty of 150%. This is a fit case where the minimum penalty of 10% alone should have been imposed. - Decided partly in favour of assessee.

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• 2015 (6) TMI 303
  Whether the Tribunal and the authorities below failed to note and appreciate that the appellant having furnished valid and genuine declaration form ST-35 in terms of rule 11 (XXXIV) of the Delhi Sales Tax Rules, 1975 was legally and rightfully entitled to deduction under Section 4(2)(a)(v) of Delhi Sales Tax Act, 1975, on account of sales made to registered dealer - Held that:- Unless there is some material available to show complicity between the purchasing dealer and the selling dealer vis-à-vis the alleged "doubtful" activities of the former, inferences adverse to the interest of the latter are impermissible. The default on the part of the purchasing dealer in submitting a proper utilization certificate respecting the goods purchased under the cover of the ST-35 form may lead to consequences for him but not for the selling dealer. In this context, the third proviso to Section 4(2)(a) of the Sales Tax Act quoted earlier only needs to be applied. It makes it clear that the benefit of deduction continues to inure for the benefit of selling dealer even if the purchasing dealer is found to have indulged in misutilisation. The assessee explained in the proceedings under Section 23(3) of Delhi Sales Tax Act that the sale transactions herein were relatable to purchase order dated 27.06.2000. It is not the case of the Revenue that the ST-35 form is a fabricated document. Concededly, it was issued by the sales tax department of GNCTD to the purchasing dealer who is registered for such purposes with the concerned authorities. There is nothing to show that the selling dealer (the assessee) could have known as to for which assessment year the specific form had been issued by the department. For his purposes, the endorsement on the top showing it to be a form pertaining to AY 2000-01 was sufficient. The mere fact that the form when handed over did not bear a specific date is inconsequential and from this complicity of the assessee cannot be inferred. - deduction of the value of the transaction represented by the ST-35 form has been wrongly disallowed by the Tribunal and the authorities below. - Decided in favour of assessee.

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• Indian Laws

• 2015 (6) TMI 293
  Denial of information sought for - Information regarding proceedings for complaint filed by the appellant - Held that:- Investigation in the matter be conducted by the CBI, Delhi. All records pertaining to the case, which were with the CBI, Chandigarh and the Chandigarh Police, were directed to be handed over to the CBI, Delhi. It was maintained by learned counsel appearing for the CBI, before learned Single Judge, that the investigation in the matter was not just confined to the FIR registered by the Chandigarh Police, rather, the matter as a whole was under investigation including the illegalities and irregularities pointed out even by the appellant in a complaint made by him. - provisions of Section 8(1)(h) attracts itself to the matter. Respondent No. 1, is well within its right to claim exemption from disclosure of information under the said clause. Provisions of Section 8(1)(h) are clear, conscious and incapable of any misconstruction. The same postulates that the information that would impede the process of investigation or apprehension or prosecution of offenders, notwithstanding anything contained in the Act, there shall be no obligation to give the said information to any citizen. - provisions of Clause (h) does not take only the process of investigation within its sweep but also the prosecution of offenders as well - Decided against appellant.

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