TMI Tax Updates - e-Newsletter
June 13, 2015

Case Laws in this Newsletter:

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

News

1. Union Finance Minister reviews the Annual Financial Performance of Public Sector Banks including private banks, insurance companies and Financial Institutions for FY 2014-15 - Expects doubling of Loans to the small Business Sector from ₹ 50,000 Crore in 2014-15 to ₹ 1 Lakh Crore in 2015-16

2. To assess the capital Requirement of Public Sector Banks (PSBs), all PSBs requested to make presentations to the Department of Financial Services, Ministry of Finance

3. RBI Reference Rate for US $

Circulars / Instructions / Orders

VAT - Delhi

1. 12/ 2015-16 - dated 10-6-2015

Processing of VAT refund - New certificates introduced, need to be recorded by the concerned officers while processing refund

Income Tax

2. 11/2015 - dated 11-6-2015

Authorisation of Principal Commissioners/Commissioners of Wealth-tax to admit application for revision under section 25 of the Act from assessees seeking refund arising due to exemption of urban land from wealth tax restrospectively w.e.f. 01/04/1993.

3. F.No.225/154/2015/ITA.II - dated 10-6-2015

Extension of due date of filing return of income for Assessment Year 2015-16 in case of Non-corporate & assessee not covered under tax audit provisions - Upto 31st August, 2015

FEMA

4. 109 - dated 11-6-2015

Extension of scheme of External Commercial Borrowings (ECB) for working capital for Civil Aviation Sector by airline companies till 31-3-2016.

5. 108 - dated 11-6-2015

Extension of scheme of raising External Commercial Borrowings (ECB) by eligible borrowers for low cost affordable housing projects till 31-3-2016.

6. 107 - dated 11-6-2015

Permission granted to subscribe to chit funds by NRIs without limit on non-repatriation basis subject to some specified conditions.

DGFT

7. 01/2015-20 - dated 11-6-2015

Supply of a ‘service’ by units located in DTA to SEZ units - ineligible for rewards under Service Exports from India Scheme (SEIS) under FTP 2015-20.

Highlights / Catch Notes

Income Tax

• Income Tax Return Deadline Extended to August 31, 2015, for Non-Corporate and Non-Audit Taxpayers.

  Circulars : Extension of due date of filing return of income for Assessment Year 2015-16 in case of Non-corporate & assessee not covered under tax audit provisions - Upto 31st August, 2015 - Order-Instruction
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• No penalty for not filing tax returns as bona fide explanation accepted u/s 271(1)(c).

  Case-Laws - AT : Levy of Penalty u/s.271(1)(c) - the explanation of the assessee is bonafide for not filing the returns of income for both these assessment years - no penalty can be levied on the assessee on the charge of concealing the particulars of income - AT
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• Court Rules Profit Estimation Unjustified Due to Lack of Stock Register Requirement in Business Accounting Standards.

  Case-Laws - AT : Rejection of books of accounts - no provision either in the Act or in the Rules requiring an assessee carrying business of nature, to maintain the stock register as a part of its account has been brought to notice - estimation of profit is not justified - AT
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• Medical Shop Payments Classified as Royalty u/s 194J; TDS Deduction Required for Assessees.

  Case-Laws - AT : TDS u/s 194J - payments were made on account of running the medical shop and facilities given to the assessee. Therefore, it is a royalty payment and the assessee is required to deduct TDS - AT
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• Sales Tax Penalty Not Deductible u/s 37(1) of Income Tax Act Due to Law Infringement.

  Case-Laws - AT : Disallowance of penalty paid for infringement of law - sales tax penalty - as the payment was not to compensate the loss on account of delay in making the payment, but was on account of penalty for breach of law - amount cannot be allowed u/s 37(1) - AT
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• Court Rules No TDS Deduction Needed for Magazine and Promotional Form Purchases u/s 194C of Income Tax Act.

  Case-Laws - AT : TDS u/s 194C - non deduction of TDS on payments made against printing and processing work - it was purchase of magazines and promotional forms and therefore, there was no question of deducting TDS - AT
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FEMA

• NRIs Can Invest in Chit Funds Without Limits on Non-Repatriation Basis, Subject to FEMA Conditions.

  Circulars : Permission granted to subscribe to chit funds by NRIs without limit on non-repatriation basis subject to some specified conditions. - Circular
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Service Tax

• Refund for Input Services on Cab, Air Travel, and Office Rent Approved as Business-Related Expenses.

  Case-Laws - AT : Denial of refund claim - input services - Nexus with manufacturing activity - rent-a-cab service, air travel service and rent paid on office premises - Each activity is directly connected to the business of manufacture - refund allowed - AT
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Central Excise

• Refund Denied: One-Year Time Limit u/s 11B Applies for Refunds u/r 5.

  Case-Laws - AT : Denial of refund claim - Bar of limitation - Whether the time limit of one year has provided under Section 11B is applicable for refund under Rule 5 - Held Yes - time limit of one year is applicable in the case of refund under Rule 5 - AT
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• Central Railway Printed Goods Not Marketable, Exempt from Excise Duty Under Current Regulations.

  Case-Laws - AT : Manufacture - Marketability of product - Printed material - goods being printed with name and details of Central Railway is not capable of being bought and sold for consideration - Duty of excise is not leviable - AT
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• Duty Demand Invalid Without Experimental Validation of Power Consumption for TMT and CTD Bars Removal.

  Case-Laws - AT : Duty demand - Clandestine removal of goods - TMT Bar / CTD bar - Merely on the basis of power consumption norm which has not been determined by actual experiment, duty demand against an assessee cannot be confirmed - AT
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• Tribunal Overlooked Key Evidence in Paan Masala Case; Penalty Dismissal Reconsidered, Remanded for Further Review.

  Case-Laws - HC : Clandestine removal of goods - Manufacture of paan masala and gutka - Cash found in office premises - Tribunal has erred in ignoring material evidence and has not recorded any finding for setting aside the penalty imposed by the Adjudicating Officer. - matter remanded back - HC
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• High Court Dismisses Petition Against Show Cause Notice Due to Lack of Evidence of Respondent's Consideration.

  Case-Laws - HC : Challenge to the show cause notice - Neither the materials disclosed in the show cause notice nor the statement made in the counter-affidavit would go to show that the respondent has already applied its mind and has formed a definite opinion with regard to the violation committed by the petitioner - writ petition dismissed - HC
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Case Laws:

• Income Tax

• 2015 (6) TMI 367
  Entitlement to claim deduction under Section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee

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• 2015 (6) TMI 366
  Levy of Penalty u/s.271(1)(c) - assessee has furnished return of income only after issuance of notice u/s.148 - While computing the long term capital gain the AO computed the market value of one of the land at Rs. 1,15,50,000/- by applying provisions of section 50C as against the value declared by the assessee at Rs. 91 lakhs - Held that:- For the purpose of invoking the provisions of Explanation 3 to section 271(1) the conditions enumerated are cumulative. The AO having issued a notice u/s.148 to the petitioner within the period specified u/s.153(1), the third condition namely that no notice u/s.142(1) or section 148 should have been issued within the period specified in sub-section 1 of section 153 is clearly not satisfied and therefore it was held that the failure on the part of the petitioner to furnish the return within the period cannot be deemed to be concealment within the meaning of Explanation 3 to section 271(1)(c) of the I.T. Act. See Chhaganlal Suteriya Vs. ITO [2011 (5) TMI 641 - Gujarat High Court] Even otherwise also we find the Pune Bench of the Tribunal in the case of Agricultural Produce Market Committee (2015 (6) TMI 347 - ITAT PUNE while deciding an identical issue had cancelled the penalty levied by the AO u/s.271(1)(c) holding the Explanation 3 below Sec. 271(1)(c) which is deeming provision, is applicable to the assessee as period mentioned u/s. 153(1) has expired and then only the assessee filed the returns of income but at the same time the assessee can still avail the Explanation 1 to establish the bonafide for not filing the returns of income within the time allowed u/s. 139 of the Act. In the present case, we are of the opinion that the explanation of the assessee is bonafide for not filing the returns of income for both these assessment years within the meaning of Explanation 1 below Sec. 271(1)(c) of the Act and in our opinion no penalty can be levied on the assessee on the charge of concealing the particulars of income for both the assessment years. - Decided in favour of assessee.

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• 2015 (6) TMI 365
  Validity of revision u/s 263 - the assessment order passed by the AO u/s 147/148 set aside by ld. CIT holding it to be erroneous and prejudicial to the interest of Revenue - Held that:- The record that the assessee had already filed the return of income despite that she has been wrongly accused of not filing the same; this subjected the assessee to rigor of avoidable 148 proceedings. The record and submissions filed during the course of assessment proceedings did not in any manner indicate that proper enquiries and verification were not conducted. The order of the AO though short yet crisp and clear in arriving at proper findings reflecting reasonable discharge of assessment which cannot be held as erroneous. In our considered view, the case laws cited by the ld. AR in the case of CIT vs. Sun Beam Auto Ltd. (2009 (9) TMI 633 - Delhi High Court), Malabar Industrial Co. Ltd. vs. CIT (2000 (2) TMI 10 - SUPREME Court) and CIT vs. Max India Ltd. (2007 (11) TMI 12 - Supreme Court of India) support assessee's contentions. We are of view that 263 proceedings cannot be invoked where reasonable inquiries are conducted with application of mind; there is conspicuous difference between the cases of lack of enquiry and perception about the level of enquiry. In this case it emerges that ld. CIT carried a different perception about the manner of enquiry which ought to have been conducted by the AO; however it is not 'sufficient to hold the assessment order as erroneous and thereby prejudicial to the interest of revenue. The plethora of case laws cited by the assessee do not support such type of exercise of power u/s 263 of the Act. Hence 263 order holding the AO's order as erroneous cannot be sustained merely because the ld. CIT holds different plausible view about manner of inquiry. Consequently, we are unable to uphold the impugned order u/s 263 of the Act passed by the ld. CIT which is quashed. - Decided in favour of assessee.

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• 2015 (6) TMI 364
  Additions on account of consumption of electricity - CIT(A) deleted the addition - Held that:- The Assessing Officer has neither made comparative analysis of consumption of electricity with identical cases nor has he made any comparative analysis with the assessee’s own case for the earlier years, thus, there was no justification in making the addition of Rs. 5 lakhs on ad-hoc basis. First Appellate Authority has rightly deleted the addition in dispute by giving very much logical reason as above. - Decided against revenue. Additions on account of provision for gratuity and leave encashment under Section 43B - the assessee has claimed that by mistake it has added back excess sum - Held that:- in the computation sheet of income, the assessee had added back ‘gratuity’ and ‘leave encashment’ at Rs. 22,85,832/- and Rs. 21,22,298/- respectively on account of un-paid liability in view of the provisions of Section 43B of the Act. He again held that the assessee had simply asked for adopting the correct figures which in fact was only a prayer to rectify a mistake apparent on record and it did not amount to lodging of a fresh claim and he deleted the addition in dispute, as pointed out in the revenue appeal. We are of the view that the findings given by the learned First Appellate Authority is very much as per law, therefore we are fully agree with the same by upholding the impugned order on this very issue - Decided against revenue. Additional depreciation claimed under Section 32(1)(iia) on plant and machinery - Held that:- First Appellate Authority has wrongly rejected the claim of the assessee by upholding the findings of the Assessing Officer. As a matter of record, the assessee made the claim in dispute during the assessment proceedings and the same cannot be simply rejected on the ground that the assessee should have filed the revised return, which the assessee has not filed within time. Thus set aside the issue in dispute to the Assessing Officer with the direction that the claim for addition of depreciation on plant of machinery amounting to Rs. 6,29,28,039/- filed by the assessee in its reply dated 29.11.2011 may be allowed, if the assessee fulfils the condition enumerated under Section 32 of the Act. - Decided in favour of assessee for statistical purposes.

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• 2015 (6) TMI 363
  Disallowance u/s 40A(3) - 1/5th of total expenditure incurred otherwise than by crossed cheque - CIT(A) deleted disallowance - Held that:- The assessee’s claim has been that these payments were "Bayana" "token" money in cash outside the banking hours for sales effected to parties ultimately to whom major payments were made by cheque payments remains unsupported on record as the assessee also pleads that no expenditure has been claimed in the year under consideration. None of these facts have been confronted to the AO. Facts not brought out in the assessment order namely that the assessee had purchased a land measuring 175.432 acres for Rs. 15,60,77,500/- and in para 6.2 the CIT(A) has taken the fact that "from the records and evidence available that upto the assessment year 2007-08 closing work in progress in land to the tune of Rs. 18,13,70,146/- had been shown which comprises of opening work in progress, purchases and development cost but no amount has been claimed as expenditure in the year under consideration" is a finding of fact which was not confronted to the AO in the light of multi-faceted arguments advanced. None of these facts are coming out from the assessment order and in the absence of the correctness of the finding available on record being established, we are of the view that blindly relying upon the order of the CIT(A) in the case of the issue being covered by the decision of the ITAT in the case of Vansidhar Projects (a sister concern) would not be appropriate. The facts therein would have been to be looked into by the ITAT. Accordingly in view of the above, we are of the view that in the peculiar facts and circumstances, the issue needs to be restored to the file of the AO. - Decided in favour of revenue for statistical purposes. Undisclosed income - CIT(A) deleted addition - Held that:- Perusal of the explanation filed by the assessee before the AO in the assessment order demonstrates that the assessee submitted that the assessee as per record had withdrawn Rs. 1.15 crores and it is out of this Rs. 86.90 lacs were transferred to the Oriental Bank of Commerce Bank at Mathura. A perusal of the impugned order shows that the assessee’s claim was that infact total cash withdrawn from the banks was Rs. 1,97,00,000/- and the amounts found deposited were only Rs. 86.90 lacs. The assessee has also taken the plea that this was for disbursement of the funds for the purchases at Mathura. It has not been explained as to why these amounts withdrawn needed to be deposited in cash in Mathura as the transaction could have been done intra bank. Further no evidence appears to have been led before the CIT(A) by way of evidence to explain that there was any specific need at Mathura on a specific date when the balance in Oriental Bank of Commerce did not have sufficient funds to honour the cheques. The linkage without the dates by way of payments by cheque for sale on a specific date in Mathura due to inadequacies in the bank account at Mathura has not been attempted. The said facts and evidence as has rightly been observed by the AO can be demonstrated by way of a cash flow statement relating the same to the instances of sale needs to be established and it is only then it can be considered whether the amounts were to be added u/s 69 or not. In the absence of relevant evidence on record, the afore-quoted finding of the CIT(A) is set aside and the issue is restored back to the file of the AO by allowing Ground No.-2 of the Revenue. The AO shall re-consider the issue afresh after giving the assessee a reasonable opportunity of being heard and decide the same in accordance with law. - Decided in favour of revenue.

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• 2015 (6) TMI 362
  Rejection of books of accounts - trading addition - Held that:- During the course of search, no incriminating documents were found and seized. The ld Assessing Officer rejected the book result for non-producing of the stock register but various courts has held that non-maintaining of stock register or not producing the stock register before the Assessing Officer is not sufficient ground to reject the Book result U/s 145(3) of the Act. Further, the assessee company is in manufacturing of medicine where Drug Control Act also applicable. According to that Act also, he has to maintain various records in compliance of that Act. It is a fact that no adverse comment had been given by the Assessing Officer on account of any discrepancy in manufacturing of medicines on the basis of search material or any other inquiry made by him. Therefore, the lower authority is not justifying in receiving books U/s 145(3) of the Act. - Decided in favour of assessee. G.P. addition by applying 60% rate of total turnover - assessee has shown G.P. @ 44.79%, - CIT(A) has applied G.P. rate @ 48% and reduced the total addition to the tune of Rs. 4,99,081/- by rectifying the order U/s 154 r.w.s. 250 - Held that:- The finding based on past history and not submitting the stock register before the Assessing Officer but no solid reasons have been assigned by the ld CIT(A). Both the lower authorities have not pointed out any defect in the books of account. The books of account has been audited under the Income Tax as well as Companies Law. The case law relied by the ld AR in the case of Malani Ramjivan Jagannath Vs. ACIT (2006 (10) TMI 145 - RAJASTHAN HIGH COURT) is squarely applicable. As per Income Tax law, in Section 2 (12A) books of account includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device. The Hon'ble Delhi High court in the case of CIT Vs. Jack Elegance Exports (2010 (4) TMI 84 - DELHI HIGH COURT ) has held that no provision either in the Act or in the Rules requiring an assessee carrying business of nature, to maintain the stock register as a part of its account has been brought to notice. The other case laws referred by the assessee on rejection of book and maintenance of stock register are also squarely applicable. Thus, we hold that the addition confirmed by the ld. CIT(A) is not justified. - Decided in favour of assessee.

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• 2015 (6) TMI 361
  TP adjustment - adopted the ALP margin at 35.18% in place of 22.17% and thus, arriving at an adjustment of Rs. 1,45,10,908/- - Held that:- TPO has arrived at the figure of 35.18% margin in the cases of non-AE sales. Such calculation is not made part of the TPOs order. Ld. DRP also did not give any reason to reduce the rate of 35.18% to 30% and same has been reduced in adhoc manner. As against these actions of TPO and DRP, it is the case of the assessee that on similar transaction in earlier years no TP adjustment is made and the matter has to be considered in right perspective. We observe that the assessee has applied Cost Plus Method which has been accepted by TPO but in fact as it appears from the order passed by TPO, that he has adopted internal CUP method when he applied margin of non-AE to the transaction of the assessee with it’s A.E. Keeping in view all these facts, We consider it appropriate to accept the request of Ld. AR to restore this issue to the file of TPO. Accordingly, we restore the issue to the file of TPO with a direction to consider this issue denovo and pass a reasoned and speaking order - Decided in favour of assesse for statistical purposes. Addition on account of employees contribution to PF and ESIC - Held that:- After hearing both the parties, respectfully following the aforementioned decision of Hon’ble Bombay High Court in the case of CIT vs. Ghatge Patil Transports Ltd., (2014 (10) TMI 402 - BOMBAY HIGH COURT)in which it has been held that the Tribunal was right in deleting the addition with regard to payment of employees contribution when the payment has been made before due date of filing the return, we delete the disallowance as all the payments are made before due date of filing of the return. - Decided in favour of assesse. Addition of interest under section 41(1) - Held that: This issue is restored back to the file of AO with a direction to verify the contention of the assessee and, if after verification, it is found that the impugned amount is already offered to tax in assessment year 2004-05 and 2005-06, then no addition should be made in the present year and, if the contention of the assessee is not found to be correct, then the same may be added to the income of the assessee after giving the assessee a reasonable opportunity of hearing.- Decided in favour of assesse for statistical purposes.

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• 2015 (6) TMI 359
  Validity of assessment under sec. 144 - Held that:- No doubt that assessee remained non-cooperative before the Revenue Authorities, but we are also of view that Ld. CIT(A) has confirmed the assessment order in a routine, without discussing in detail the facts and circumstance of the case and also did not deal the issue on merit and passed a non-speaking order. In the background of the aforesaid discussions and precedents, we remit the issues to the files of the Ld. Commissioner of Income Tax (Appeals) to consider each and every aspects of the issues involved in the Appeal and decide the same afresh, after passing a speaking order. - Decided in favour of assesse for statistical purposes

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• 2015 (6) TMI 358
  Rejection of claim u/s 80IB(10) - Project not completed within stipulated time – Completion certificate not furnished – Held that:- As decided in assessee's own case [ 2014 (1) TMI 1232 - ITAT HYDERABAD ] though the assessee's case is related to A.Ys. 2007-08 and 2008-09, the project was got approved by the concerned local authority before 1.4.2004. The provisions of section 80IB as stood prior to the amendment are applicable to the assessee's case. As the substitution of Explanation to clause (a) to subsection (10) of section 80IB of the Income-tax Act, 1961 was brought in under Finance (No. 2) Act of 2004, effective from 1.4.2005. Thus, in the absence of any such requirement read into the section, we find it difficult to accept the observation of the AO that the claim for deduction was rejected on the ground that the assessee had not furnished the completion certificate. The controversy on issue of completion certificate is irrelevant at this point of time in view of the judgment of Madras High Court in the case of CIT vs. Jain Housing & Construction Ltd. [2012 (11) TMI 588 - MADRAS HIGH COURT] though the certificate issued by the Zonal Commissioner is to be considered as proper. - Decided in favour of assesse.

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• 2015 (6) TMI 357
  Disallowance of employer's contribution to P.F. of employees - payment beyond the time prescribed under the provision of I.T. Act, 1961 as well as Provident Fund Act - Held that:- It has been clearly established that the payment of Provident Fund contribution was made before the due date of filing of the return of income, therefore, the same is allowable under section 43B of the Act - Decided in favour of assesse. Valuation of closing stock - AO observed that since excise duty has been incurred on the manufacturing of the goods, the same should have been included in the closing stock as per provisions of section 145A(a) - Held that:- As per sub-clause (ii) of clause (a) of section 145A of the Act, excise duty actually paid or incurred by the assessee is to be included in the valuation of closing stock. Excise duty always incurred on manufacturing of goods, though it is to be paid at the time of movement of the goods outside the factory. But since liability of payment of excise duty has been incurred on the production of the goods, the same is to be included in the closing stock. It is totally irrelevant whether the same was claimed to be expenditure in the profit and loss account by the assessee. As per provisions of section 43B of the Act, the expenditure on account of excise duty can only be allowed if it is paid before the due date of filing of the return of income. Therefore, we find no force in the arguments of the ld. counsel for the assessee that this amount of excise duty cannot be included in the valuation of closing stock, as it was not claimed as expenditure in the impugned assessment year. Therefore, we are of the view that the Assessing Officer has correctly included the excise duty in the valuation of closing stock - Decided against assesse.

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• 2015 (6) TMI 356
  Reopening of assessment - disallowance u/s 40(a)(ia) - Held that:- Carefully examining the orders of the lower authorities and we find that the ld. CIT(A) has examined this issue in the light of assessee’s contentions and was of the view that the royalty was not examined by the Assessing Officer during the course of original assessment proceedings. Therefore, the re-assessment proceedings were rightly initiated and the assumption of jurisdiction by the Assessing Officer is proper and is in order. Since no argument was raised to challenge the findings of the ld. CIT(A), we are of the view that the reopening is valid and accordingly we reject this ground of appeal. - Decided against assesse. Non deduction of TDS on payment of royalty - Held that:- On reading of clauses of the agreement, it is clear that the assessee was allowed to enjoy certain benefits in running the medical shop and for those benefits assessee was required to make payment of royalty per month to SRMS. It is also an undisputed fact that the assessee is well connected with SRMS, a Trust to whom payments are made. We have also carefully examined the definition of royalty given in Explanation 2 to clause (vi) of sub-section (1) of section 9 of the Act and we are of the view that these payments were made on account of facilities given to the assessee. Therefore, it is a royalty payment and the assessee is required to deduct TDS under section 194J of the Act. Decided against assesse. Applicability of provisions of section 40(a)(ia) - Held that:- During the course of hearing, though the assessee has contended that SRMS has taken into account the royalty receipts and has filed return of income under section 139(1) of the Act, but no evidence is placed on record in this regard. But, we are of the view that once these facts are established, disallowance under section 40(a)(ia) of the Act cannot be made. We accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer for necessary verification. If it is established that SRMS has credited the aforesaid receipts of royalty to its income & expenditure account and filed return of income under section 139(1) of the Act, no disallowance under section 40(a)(ia) of the Act can be made in the hands of the assessee. Decided in favour of assesse.

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• 2015 (6) TMI 355
  Unexplained investment - CIT(A) deleted the addition - Held that:- The cost incurred by the assessee on construction of college building at Nagasala, Jadcharla was duly reflected in its books of account regularly maintained for the relevant years including the years under consideration. A perusal of the assessment order passed by the Assessing Officer, however, shows that neither any specific or material defect has been pointed out by the Assessing Officer in the books of account maintained by the assessee or in the bills/vouchers maintained in support of construction cost, nor has he rejected the books of account of the assessee, and this position is not disputed even by the Learned Departmental Representative at the time of hearing before us. Thus the books of account disclosing the cost of construction of college building, were never rejected by the Assessing Officer, we find ourselves in agreement with the learned CIT(A) that the reference made by the Assessing Officer to the DVO for estimating the cost of construction itself was not valid and the additions made on the basis of the said report for both the years under consideration are not sustainable - Decided in favour of assesse.

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• 2015 (6) TMI 354
  Reopening of assessment - validity of notice - Held that:- First Appellate Authority has passed a well reasoned order by stating that the AO has not been able to substantiate the fact that the notice u/s. 148 of the I.T. Act, 1961 for the Asstt. year uder consideration was served upon the assessee company at any time before completing the assessment. Accordingly, he rightly held that the proceedings u/s. 147/148 of the Act, 1961 are held to be not sustainable. Therefore, we find no infirmity in the order of the Ld. CIT(A) and therefore, no interfere is required on our part, hence, we uphold the impugned order passed by the Ld. CIT(A) on these issues - Decided against the Revenue.

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• 2015 (6) TMI 353
  Reopening of assessment - validity of notice - "reason to believe" - Held that:- Assessing Officer has issued the notice after recording reasons and there is no legal and procedural infirmity in issuing of notice. The assessee has never asked copy of the reasons recorded and in view of decision in the case of GKN Drive Shafts (India) Ltd. vs. ITO [2002 (11) TMI 7 - SUPREME Court] we find no merits in the pleadings of the Ld. AR. Further, there is a direct decision of Hon’ble Delhi High Court in the case of CIT vs. Safetag International India (P.) Ltd. [2011 (2) TMI 190 - Delhi High Court]. The Assessing Officer is duty bound to supply the reasons recorded for reopening the assessment to the assessee, after the assessee files the return in response to the notice issued u/s 148 and on his making a request to the Assessing Officer to that effect. In the case under consideration, even the assessee has not made any request for supply of the reasons. - Decided against assesse. Validity of gifts - Held that:- Since the assessee has submitted affidavits, copy of gift deeds and copy of ration cards which contain the particulars of the donor including addresses, details of family members which were sufficient to prove the identity of the person, in such a situation, we hold that assessee was able to discharge the primary onus and thereafter it is for the Assessing Officer to verify the veracity of these documents or issuing the summons u/s 131(2) to make the presence of the donors which he was miserably failed to do so - Decided against revenue.

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• 2015 (6) TMI 352
  Deduction of business loss u/s.28 - CIT(A) rejected the claim - Held that:- AO stated that the amount of Rs. 4,74,404/- consisted of advances given to various parties as well as deposits with the Government departments. Party-wise bifurcation is not available on record. In the absence of the same, it is not clear whether there was any deposit in the capital field. In our considered view, advances which were on revenue field, is allowable as revenue loss, whereas the deposits which were on capital field is not allowable being capital loss. We, therefore, set aside the orders of the lower authorities and remit the matter back to the file of the AO for adjudication afresh - Decided in favour of assesse for statistical purpose. Disallowance of penalty for infringement of law - the assessee had paid sales tax penalty - Held that:- in the case of CIT Vs. Hoshiari Lal Kewal Krishnan (2006 (10) TMI 140 - PUNJAB AND HARYANA HIGH COURT) has held that where the payment was not in the nature of punishment, but was by way of compensation, then the amount was allowable as deduction to the assessee. The Hon’ble High Court observed that case of Haji Aziz and Abdul Shakoor Brothers Vs. CIT, [1960 (11) TMI 15 - SUPREME Court] has held that any amount paid, which was in the nature of penalty for breach of law, was not allowable as deduction while computing the income of the assessee, as the payment was not to compensate the loss on account of delay in making the payment, but was on account of penalty for breach of law. No material has been brought on record to show that the said amount was paid by the assessee by way of compensation for delay in making the payment of sales-tax. - Decided against assesse. Disallowance of export promotion and sales promotion expenses - Held that:- We find that the apart from making a general submission that the turnover of the assessee has increased, no specific error in the order of the CIT(A) could be pointed out by the AR. The purpose of visit and the business connection of the above expenditure could not be established by the assessee by producing relevant material. In the absence of the same, we do not find any good reason to interfere with the order of the CIT(A), which is confirmed - Decided against assesse. Disallowance on account of repairing expenses - Held that:- In the absence of any details of the expenditure, it is not possible on our part to adjudicate the issue completely. In our considered view, when a part of the machine is replaced, then the resultant expenditure is revenue in nature, but when the part replaced itself can be regarded as a separate and independent machine, then the expenditure is capital in nature. Thus restore the issue back to the file of the AO for adjudication afresh in the light of the observation made hereinabove after proper verification by passing a speaking order - Decided in favour of assesse for statistical purpose.

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• 2015 (6) TMI 351
  Penalty u/s 271(1)(c) - depreciation on the IPRs - Held that:- on the date of search, when Mr. Jingnesh Shah director of the assessee company withdrew the claim of depreciation on IPRs, the claim was already allowed by the CIT(A), but was sub judice before the ITAT in regular assessment proceedings.In such a situation, the issue could not have been made the subject matter of assessment under section 153A read with section 143(3), because that provision contemplates, assessment of material found during the course of search along with the original ingredients of the original return. The important qualification is that the material must be incriminating and found during the search, and which may have the character of increasing the income declared in original ROI. In the instant case, it is not the case of department that there was something which was concealed by the assessee, while filing its original return or the return in response to section 153A. In such a case incidence of penalty at all cannot be comprehended. Coming to the correctness of addition, based on statement under section 132(4), we are in agreement with the submissions of the AR, that addition itself cannot be sustained simply on the basis of statement under section 132(4), as held in the case of Raj Pal Bhatia (2009 (11) TMI 531 - DELHI HIGH COURT). Also in the case of SMJ Housing (2013 (7) TMI 660 - MADRAS HIGH COURT) that Explanation 5 cannot be invoked, as no incriminating material is found from the search. All the facts were on record, which has not been disproved by the revenue authorities or otherwise proved to be illegal, even if the claim was non allowable. Non-allowable claim cannot, by itself invite penalty, as held in the case of CIT vs Reliance Petro Products Pvt. Ltd., (2010 (3) TMI 80 - SUPREME COURT) . - Decided in favour of assesse.

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• 2015 (6) TMI 350
  TDS u/s 194C - non deduction of TDS on payments made against printing and processing work - CIT(A) deleted the addition - Held that:- The assessee has filed copies of bills pertaining to M/s Print-O-Pack Ltd. The same were on account of purchases of magazines and promotional forms. The CIT(A) has recorded that these bills show that the assessee has purchased magazines and promotional forms and the cost of magazine etc. includes cost of paper, printing and binding. He has further recorded that the assessee has also filed confirmation from M/s Print-O-Pack Ltd. vide letter dated 28th November, 2011 wherein it is mentioned that the bills were raised for magazines and brochures which include the cost of paper, printing and binding. The CIT(A) has given a finding that the confirmation from M/s Print-O-Pack Ltd. proves that the payments were made not for the job work or printing charges and in the case of the assessee, it was purchase of magazines and promotional forms and therefore, there was no question of deducting TDS - Decided in favour of assesse. Disallowance u/s 40(a)(ia) - non deduction of TDS on payments made against packing and forwarding charges - CIT(A) deleted the addition while accepting additional evidences - Held that:- The assessee has filed copies of bills and confirmations of parties before the CIT(A). The CIT(A) has given a finding that on going through these bills, it was seen that the assessee has purchased poly shrink and polythene bags from M/s Allied Plast, board from Chandra Shekhar (Puraney Dabbey Waley) and Bale Hessien Cloth from Ghanshyam Jute Trading Co. He has recorded a finding that these items are purchases of packing and forwarding material and not the payment for packing and forwarding as observed by the Assessing Officer and therefore, are not covered under the provisions of Section 194C of the Act. In these facts of the case, we are of the view that since the payments were made for purchase of packing and forwarding material, the provision of Section 194C was inapplicable and therefore, no disallowance under Section 40(a)(ia) of the Act could be made - Decided in favour of assesse. Disallowance of unverified bad debts - Held that:- A perusal of the details written off as filed in the compilation before us shows that it consists of various debtor parties whose amount due was ranging from Rs. 513/- to Rs. 5,80,601/-. Allowing the small amounts due from various parties and written off by the assessee, the balance amounts exceeding Rs. 20,000/- are addable due to no evidence whatsoever produced by the assessee to show that these were genuine items of bad debts written off by the assesse. Accordingly, the amount of Rs. 9,36,598/- is disallowed on account of failure of the assessee to provide any copy of correspondence with these parties and also failure to communicate the address of these debtor parties and addition is sustained to that extent and the balance addition is deleted - Decided partly in favour of revenue. Addition u/s 2(22)(e) on account of deemed dividend - CIT(A) deleted the addition - Held that:- provision of Section 2(22)(e) was not applicable in the case of the assessee as it is well settled that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. The issue is covered in favour of the assessee by the decision of Mumbai Bench of the Tribunal in the case of ACIT Vs. Bhaumik Colors Pvt.Ltd. - [2008 (11) TMI 273 - ITAT BOMBAY-E ]. - Decided in favour of assesse

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• 2015 (6) TMI 349
  Transfer pricing adjustment - reimbursements of expenses by the Appellant to its holding company/associated enterprise ('AE') was against a service which was never received (i.e. in other words a sham transaction/colorable devise to shift cash/profits outside India) - Held that:- Reimbursement of engineering expenses and software license expenses made by assessee-company to ATI Canada was for the benefit derived by the company and is not a case of payment of extra profit/cash to the AE. Vide that order [2014 (11) TMI 44 - ITAT HYDERABAD], the ITAT has indeed allowed the software expenses and reimbursement of expenses, therefore, the disallowance per se of Rs. 17,88,20,166/- as services not provided and ALP at NIL does not stand. Therefore, ground No.2 raised before us on the issue of disallowance of entire reimbursement of expenditure is to be held in favour of assessee. We notice from the orders of the authorities and from the order of ITAT that for the Financial Year 2008-09 i.e., relevant for AY.2009-10 before us, the order of the ITAT indicate the software expenses at NIL and engineering expenses at Rs. 10,76,77,131/-. However, the orders of TPO as considered in this impugned order indicate that amount was at Rs. 17,88,20,166/-. Even though in principle, we agree with the findings of the ITAT with reference to the nature of services being rendered by the said company, we, however, direct the Assessing Officer to examine the amounts involved and reconcile the payments considered in the order of ADIT, International Taxation u/s.201(1A) and the amounts considered for disallowance in this order by the Assessing Officer.Subject to the above observations and reconciliation of the amounts involved, the disallowance of entire amount does not arise. Even though assessee has objected to the inclusion of various comparables, not giving adjustment on account of difference in depreciation policy and other objections with reference to determination of ALP, we are of the opinion that this issue has to be restored to the file of DRP for fresh adjudication. - Decided in favour of assesse for statistical purposes.

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• 2015 (6) TMI 348
  Disallowance under section 14A r.w.s.8D - capitalization of interest expenditure as directed by CIT(A) - Held that:- The ld. AR submitted that the assessee has not incurred any expenditure on earning tax free income and there is no question of disallowing notional expenditure but in our opinion there should be certain expenditure on administration of these investments from which the assessee earned exempt income. Hence, in the interest of justice we direct the AO to disallow the amount of Rs. 50,000/- on this count - Decided partly in favour of revenue.

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• Corporate Laws

• 2015 (6) TMI 369
  Non payment of dues - Notice sent under section 433 read with 434 of the Companies Act 1956 - Maintainability of winding up petition - Charges of sub-standard goods - Held that:- It is no doubt true that a winding up petition cannot be equated to a suit for recovery of money. It is however, equally true that neglect in payment of debt due as statutorily defined without a bonafide dispute or substantial defence entails the consequence of winding up of a company in default. That is the conclusion from reading of Section 434(1)(a) read with 433(e) of the Act of 1956. Refer Apex court case of Vijay Industries v. NATL Technologies Ltd. [2008 (12) TMI 404 - SUPREME COURT OF INDIA]. No steps under the Sale of Goods Act, 1948 either to reject the supposedly sub-standard goods or seek a diminution of their price appears to have been taken by the respondent company. Obviously the goods in issue as supplied being consumed, they were not sub-standard. A belated half-hearted dispute indicates that the allegation of goods supplied being sub-standard was /is not bonafide and the respondent company has no substance in its defence at all. The defence set up in the reply dated 29.10.2011 to the notice under section 434 of the Act of 1956 was/ is vague and quite apparently is belated one incapable of any credibility. - Decided in favour of appellant.

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• Service Tax

• 2015 (6) TMI 379
  Waiver of pre deposit - outdoor catering service - tiffin food prepared in the appellants premises was supplied in boxes to the premises Shri Ramswaroop Memorial College of Engineering & Management, Lucknow - Held that:- Appellants prima facie fall under the scope of outdoor caterers as they provided service of supplying food (prepared at their premises) at a place other than their own. The judgement of Delhi High Court referred to by them, prima facie, does not seem to remain good law in the wake of say the Supreme Court judgements in the case of L & T Ltd. Vs. State of Karnataka - [2013 (9) TMI 853 - SUPREME COURT]. We find that the appellants have duly been given the benefit of abatement while arriving at the impugned service tax liability. Thus, in the given circumstances, the appellants have not been able to make out a prima facie case in their favour - Partial stay granted.

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• 2015 (6) TMI 378
  Benefit of abatement of 67% of the tax liability (towards the value of the goods incorporated), under. Notification No. 1/2006-S.T., dated 1-3-2006 - Whether the value of free supplies made by the recipient of commercial or industrial construction service require to be disclosed as part of the gross consideration received for rendition of taxable construction services, to be entitled to the benefits of Notification No. 1/2006-ST - Held that:- This issue stand settled by the decision of Larger Bench of this Tribunal in Bhayana Builders (P) Ltd. v. CST [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] - Impugned order cannot be sustained and is accordingly quashed. The appeal is allowed - Decided in favour of assessee.

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• 2015 (6) TMI 377
  Denial of refund claim - input services - Nexus with manufacturing activity - rent-a-cab service, air travel service and rent paid on office premises - Held that:- All the three services, have nexus to the appellants' activity. The rent-a-cab service has been used for providing transportation facility to the customers and air travel service has been used for travel of partners and employees of the company for business purposes and rent on office premises has been paid. Each action is directly connected to the business of manufacture. In view of the above, appellant is eligible for the refund claims. - refund allowed - Decided in favour of assessee.

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• Central Excise

• 2015 (6) TMI 375
  Denial of refund claim - Bar of limitation - Whether the time limit of one year has provided under Section 11B is applicable for refund under Rule 5 - Held that:- Refund covers the duty of excise on excisable materials used in the manufacturing of goods which are exported out of India. In the present case, the refund is in respect of duty paid on material used in export goods. As per Section 11B(1), the application for refund should be filed before the expiry of one year from the relevant date. As per the definition of ‘relevant date' as mentioned above, as per sub-clause A and B where the refund of excise duty paid in respect of the excisable material used in the manufacture of export goods, the relevant period is one year from the date of export. It is observed that from clause (c) of proviso to sub-section 2 of Section 11B, it is clear that the refund of credit of duty paid on excisable goods used as inputs in accordance with Rule made, or under this Act, is also covered under Section 11B. The present claim being under Rule 5 and Notification No. 5/2006 - CE (NT) issued there under clearly falls under the said sub-Section (c). In view of this provision, it cannot be said that the time limit of one year as provided under Section 11B is not applicable to refund of Rule 5 of CENVAT Credit Rules, 2004, particularly, when there is a specific para 6 of Notification No. 5/2006-CE (NT) which prescribes the time limit of one year. GTN Engineering (I) Ltd. (2011 (8) TMI 960 - MADRAS HIGH COURT) time limit of one year is applicable in the case of refund under Rule 5 and Notification No. 5/2006 - CE (NT) issued there under. In view of above settled position, I am of the considered view that refund of the appellant filed after statutory time limit of one year is not admissible being time barred. Therefore, the impugned order is sustainable and the same is upheld. - Decided against assessee.

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• 2015 (6) TMI 374
  Manufacture - Marketability of product - Printed material - printing various forms such as hospital form, leave application form, reservations form application form for passes, application form for privileged tickets and similar various forms for different purposes - Held that:- Revenue has not discharged the burden of proof that the product in question is marketable or otherwise and from the nature of the product coupled with the fact that printed material printed in the appellants' printing press is not for general use in the market but for their own use, the goods clearly not marketable. We are fully in agreement with the Ld. Sr. Counsel that in terms of definition of excisable goods and explanation thereto the goods should be capable of being bought and sold and that too for consideration. In the present case goods being printed with name and details of Central Railway is not capable of being bought and sold for consideration hence the same is not marketable goods. In view of our above discussion, we are of the considered view that product in question are not dutiable on both the counts of classification as well as marketability. We therefore set aside the impugned orders . Revenue has not discharged the burden of proof that the product in question is marketable or otherwise and from the nature of the product coupled with the fact that printed material printed in the appellants' printing press is not for general use in the market but for their own use, the goods clearly not marketable. In terms of definition of excisable goods and explanation thereto the goods should be capable of being bought and sold and that too for consideration. In the present case goods being printed with name and details of Central Railway is not capable of being bought and sold for consideration hence the same is not marketable goods. Product in question are not dutiable on both the counts of classification as well as marketability. We therefore set aside the impugned orders - Decided in favour of assessee.

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• 2015 (6) TMI 373
  Duty demand - Clandestine removal of goods - Held that:- Entries regarding despatches of Saria II in the daily receipt and despatches sheets recovered from the factory premises have to be treated as clearances of TMT bars only as the price of Saria I and Saria II is same, while TMT Bar is much costlier that the CTD bar and, therefore, the appellants claim that Saria II despatches are the sales of CTD bar by M/s Meenakshi Steel made from the appellants factory is difficult to accept. Moreover both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma in their statements given over a period of one year and which have not been retracted, have stated that the documents recovered from the factory pertain to the finished goods cleared from the factory. If this is so, their claim that despatches of Saria II from the factory are the sales of CTD bars made from the factory which has been purchased from the outside is difficult to accept, more so, as no intimation had been given by the appellant company to the Jurisdictional Central Excise Authorities regarding receipt of duty paid CTD bars from outside and their sale from the factory. Appellants plea made long after the issue of show cause notice and even the after conclusion of the personal hearing that the despatches of Saria II, as reflected in the daily receipt and despatch sheets recovered from the factory, are the sales of CTD bars made by a group trading concern M/s Meenakshi Steel cannot be accepted. In view of this, we hold that the duty demand of Rs. 7,22,15,192/- based on the Chart A, B, C and D, which, in turn, have been prepared on the basis of daily receipt and despatch sheets and delivery orders recovered from the factory premises has to be upheld. During the period from 10/09/05 to 01/10/05 the appellant company received certain quantity of MS Ingots from Nirmal Inductomelts Pvt. Ltd. without any accountal which has obviously been used for manufacture of TMT bars and after taking into account 8% burning loss, the bars estimated to have been manufactured are 202.888 MT on which the duty liability is Rs. 6,77,061/-. In view of this, we hold that duty demand of Rs. 6,77,061/- has also to be upheld. Merely on the basis of power consumption norm which has not been determined by actual experiment, duty demand against an assessee cannot be confirmed when there is no corroboration experiment regarding receipt of unaccounted experiment and despatch of finished product. In view of this, we hold that the duty demand of Rs. 16,38,63,265/- is not sustainable and has to be set aside. - Penalty imposed on assessee company is reduced - Decided partly in favour of assessee.

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• 2015 (6) TMI 372
  Imposition of penalty - Mens Rea - Whether the penalty under Rule13(1) of CENVAT Credit Rules, 2002 was to be imposed even if there was no mens rea on the part of the assessee - Held that:- Decision in the case of Commissioner of Central Excise, Chandigarh Versus Pepsi Foods Limited [2010 (12) TMI 15 - Supreme Court of India] - In view of the settled position of law, no other and further order is required to be passed in this appeal - Appeal disposed of.

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• 2015 (6) TMI 371
  Clandestine removal of goods - Manufacture of paan masala and gutka - Cash found in office premises - Unaccounted sale of gutka and paan masala - Shortage of raw-materials - Held that:- Adjudicating Officer has appreciated the material evidence correctly. The statements made by Sri Dipak Mehra and Sri Davi Sarin have a material bearing on the issue. - Tribunal has erred in ignoring material evidence and has not recorded any finding for setting aside the penalty imposed by the Adjudicating Officer. No reason has been recorded for setting aside the penalties. - Matter remanded back - Decided in favour of Revenue.

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• 2015 (6) TMI 370
  Challenge to the show cause notice - Pre determination of issue - Availment of CENVAT Credit - petitioner had availed input credit based on the invoices showing purchase of materials, like Re-rollable scrap, defective HR Steel plates, Sec HR Steel plates, etc. However, those materials were not actually required for the manufacturing activities of the Unit - whether the respondent has already pre-determined the issue and whether the enquiry is an empty formality - Held that:- The respondent in a very fair manner disclosed all the materials collected during the course of investigation. Nothing was withheld. In case an argument of this nature is entertained that by giving details of the violations and the evidence collected in the show cause notice as well as in the counter-affidavit, no purpose would be served by submitting to the jurisdiction of the statutory authority none of the authorities, exercising jurisdiction under various Statutes and more particularly, under the Central Excise Act, would be in a position to discharge the statutory function. Merely because the show cause notice does not contain a specific word that these are all prima facie findings, the petitioner cannot be heard to say that the respondent has decided the issue once for all and the notice is issued only as a ritual. It is not as if the order passed by the respondent is final. The Central Sales Tax Act contains hierarchy of authorities, in case final order is passed by the respondent by rejecting the explanation. The petitioner is also having a remedy of appeal before the High Court. The respondent has not determined the liability so far. The materials collected by the respondent to fix the liability are disclosed in the show cause notice. Those materials were disclosed only with a view to enable the petitioner to submit its reply - Neither the materials disclosed in the show cause notice nor the statement made in the counter-affidavit would go to show that the respondent has already applied its mind and has formed a definite opinion with regard to the violation committed by the petitioner. - petitioner has not made out a case for quashing the statutory proceedings - Decided against assessee.

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• CST, VAT & Sales Tax

• 2015 (6) TMI 376
  Validity of Reassessment proceedings - Incorrect return files - Held that:- subsequent material, a declaration furnished by the petitioner itself under the statutory form 65A, disclose that the quantity and value of the goods were more than what were furnished in the return. Therefore there does not appear to be any reason to hold that the reassessment order is not based on the valid material which is found subsequent to the assessment. That apart the order is an appelable order. The petitioner has taken a shortcut method to file the writ petition bypassing the provisions of appeal and other remedies before invoking the writ jurisdiction under Article 227 of the Constitution of India. A false return has been filed on the basis of the contents of statutory form 65A which the department found subsequent to the assessment from the check-post in West Bengal. This clearly shows that the petitioner has with a dishonest intention filed false return to cause loss to the state revenue. If so, it amounts to commission of offence punishable under section 415, read with section 417 of the Indian Penal Code. The authorities should not remain complacent by invoking right of reassessment; they should also effectively prosecute the person who files a false return by filing a complaint, seek condonation of delay under section 468 of the Criminal Procedure Code if necessary to sternly deal with such cases of false and dishonest returns - Decided against assessee,

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• Indian Laws

• 2015 (6) TMI 368
  Validity of order passed by settlement commissioner - Violation of principle of natural justice - Held that:- Impugned order has been passed by the Respondent No.3 - the learned Settlement Commissioner by taking into consideration the material, a copy of which was neither supplied to the petitioner nor the petitioner was given an opportunity to meet the said material. - impugned order is in utter violation of the principles of natural justice. - Decided in favour of appellant.

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