TMI Tax Updates - e-Newsletter
June 13, 2016

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise Wealth tax

Articles

1. GROWTH OF PHARMACEUTICAL INDUSTRY IN INDIA

   By: DR.MARIAPPAN GOVINDARAJAN

2. Services by Senior Advocates to Business Entities brought under Reverse Charge

   By: Bimal jain

News

1. Stock-taking meeting of Chief Negotiators for India-European Free Trade Association Trade & Economic Partnership Agreement

Notifications

Income Tax

1. 9/2016 - dated 9-6-2016 - IT

Simplification of procedure for Form No. 15G & 15H - Clarifications

Circulars / Instructions / Orders

Customs

1. 27/2016 - dated 10-6-2016

Procedure to be followed by nominated agencies importing gold/silver/platinum under the scheme for ‘Export Against Supply by Nominated Agencies’

Highlights / Catch Notes

Income Tax

• Simplified Process for Submitting Forms 15G and 15H to Avoid Tax Deductions Aimed at Helping Senior Citizens.

  Notifications : Simplification of procedure for Form No. 15G & 15H - Clarifications - Notification
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• Tribunal's Ruling on Amalgamated Company's Liability for Amalgamating Company's Unfulfilled Profit Distribution Challenged.

  Case-Laws - HC : Amalagamtion - Liability of the amalgamating and amalgamated company - Tribunal was not right in holding that the proceedings against the amalgamated company could not be initiated on account of the failure of the amalgamating company to distribute the statutory percentage of the accumulated profits - HC
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• Court Rules TDS Not Required on Salaries of Religious Nuns in Tamil Nadu Schools After Affidavit Verification.

  Case-Laws - HC : Deduction of TDS from the salaries of the Religious Nuns in the service of the petitioners' school - because the Government is paying authority, the Income Tax Department on receipt of such affidavit and on their satisfaction would give a certificate or a letter to the Government of Tamil Nadu that they need not deduct TDS insofar as the Priests and Nuns are concerned - HC
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• AO Failed to Specify Penalty Basis u/s 271(1)(c); No Penalty Imposed for Income Tax Violation.

  Case-Laws - AT : Penalty U/s 271(1)(c) - AO has not specified at the time of initiation of penalty proceedings whether penalty is initiated for the inaccurate particulars of income or concealment of income - No penalty - AT
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• Rental Income Split: 75% as House Property Income, 25% as Business Income for Commercial Complex Owners.

  Case-Laws - AT : Classification of rental income received by the assessee from the commercial complex - the rental income has to be bifurcated and 75% of the same has to be classified as income from house property and 25% has to be classified as income from business. - AT
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• Taxpayer Can Claim Depreciation on Film Rights as Intangible Assets u/s 32, Not Section 37(1.

  Case-Laws - AT : Assessee gets enduring benefit from the rights acquired in films and serials and they do not expire on the date of first telecast as contemplated by the assessee - The rights are intangible assets within the meaning of Explanation (iii) to Section 32 and do not fall within the purview of Section 37(1). The assessee is entitled to claim depreciation on same - AT
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• No Penalty for Non-Deduction of TDS: Payments Declared in Returns, No Default u/s 271C.

  Case-Laws - AT : Levy of penalty u/s 271C - non deduction of tds - payees of incomes had declared the payments in their income tax return and that is why order u/s 201(1) has not been passed and if the order u/s 201(1) has not been passed the assessee cannot be said to be assessee in default - No penalty - AT
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• Assessing Officer's Notice to Reopen Assessment u/s 148 Lacks Tribunal's Direction or Findings.

  Case-Laws - AT : Reopening of assessment - determination of loss the notice issued by the Assessing Officer u/s 148 r.w.s 150(1) of the Act cannot be said to be based on any finding or direction of the Tribunal - AT
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• Cash Payments for Scrap Purchases from State Transport Corporation Not Disallowed u/s 40A(3) If Genuine.

  Case-Laws - AT : Applicability u/s 40A(3) - payments made in cash by the assessees to MSRTC for purchase of scrap in auction - no disallowance can be made u/s.40A(3) where genuineness of payment is not doubted. - AT
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Customs

• Court Rules Import Date Proximity Doesn't Make Second-Hand Cars New; Misdeclaration in Customs Addressed.

  Case-Laws - HC : Import of second hand cars mis-declaring them as new - by giving the proximity of the date of manufacture and the date of import of the car, it cannot be said that the said car ceased to be a new car and became a 'second hand' car at the time of its import - HC
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• Court Rules Import Proceedings Invalid: Section 159A Inapplicable, Notification No. 133/1987 Not Invoked for Deep Sea Trawlers.

  Case-Laws - HC : Legality of proceedings - Import of deep sea fishing trawlers - Section 159A would not save the proceedings initiated against the appellant under notification No. 133/1987. If that be so, the whole proceedings initiated against the appellant are without jurisdiction - HC
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Service Tax

• Appellant Eligible for Refund u/r 5 of CCR for Unutilized Credit Before June 16, 2008, Despite Late Registration.

  Case-Laws - AT : Eligibility for refund - Rule 5 of the CCR - Export of services - even though appellant were not registered prior to 16.6.2008, they are eligible for refund of the unutilized credit which was accumulated prior to registration - AT
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• SEZ Unit's Service Tax Refund Unfairly Reduced by TDS; Ruling Clarifies Refunds Shouldn't Be Affected by TDS Deductions.

  Case-Laws - AT : Service tax refund - SEZ unit - Period of limitation - reduction of refund amount pertaining to the amount deducted on account of TDS is unsustainable- AT
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Central Excise

• Cenvat Credit Unavailable for Goods Destroyed in Fire; No Duty on Unsold Destroyed Goods.

  Case-Laws - AT : Cenvat credit on inputs and capital goods lost in fire accident - There could be no clearance of destroyed products. As the destructions has been an admitted fact, there could be no duty liability on the goods, which are not cleared - AT
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• Unremitted Sales Tax Retentions Not Excludable u/s 4(3)(d) of Central Excise Law.

  Case-Laws - AT : Valuation - if the assessee charged and collected amount towards sales tax but not paid the said full amount to the State, the amount retained under whatever name shall not be eligible for exclusion in terms of Section 4(3)(d) - AT
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• Rebates Against Customs Duty Arrears Deemed Improper If Used to Offset Unfinalized Duty Demands.

  Case-Laws - AT : Appropriation of rebate sanctioned in cash against the custom duty arrears - the appropriation of refund amount towards duty demand pending in other cases which has not attained finality is not legal and proper. - AT
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• Appellant-Assessee Not Required to Reverse Cenvat Credit on Imported Inputs Re-Exported, Court Rules.

  Case-Laws - AT : Cenvat Credit - appellant-assessee is not required to reverse cenvat credit taken on the inputs which were imported and subsequently re-exported. - AT
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• Container Costs Excluded from Taxable Value When Goods Are Sold Without Packaging.

  Case-Laws - AT : Valuation - if some goods are marketable without being put into the containers, the cost of containers including their testing charged would not be includible in the assessable value - AT
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Case Laws:

• Income Tax

• 2016 (6) TMI 431
  Liability arising out of the assessment after amalagamtion - Liability of the amalgamating and amalgamated company - Held that:- On a plain reading of the definition of the expression of “amalgamation”, appearing in the Income Tax Act quoted above, the impression which one receives is that all the liabilities of the amalgamating company immediately before the amalgamation becomes become the liability of the amalgamated company. We are, in this case, concerned, with the assessment year 2002-03, i.e. to say pertaining to the financial year which ended on March 31, 2002, whereas the amalgamation took place with effect from November 2002. There is, as such, no dispute on fact that it is a liability of the amalgamating company which accrued prior to the amalgamation. The assessee maintained a studied silence and did not bring to the notice of the revenue, in particular the assessing officer, about the amalgamation sanctioned by the High Court at Mumbai on March 26, 2003. The assessee not only did not bring this fact to the notice of the assessing officer, the assessee also filed a return for the assessment year 2003-04. Therefore, the assessee itself did not act upon the amalgamation. Be that as it may, by reason of the amalgamation, the order passed on 31st March, 2005, pertaining to the assessment year 2002-2003 could not have become a nullity. The liability arising out of the assessment order became the liability of the amalgamated company Tribunal was not right in holding that the proceedings against the amalgamated company could not be initiated on account of the failure of the amalgamating company to distribute the statutory percentage of the accumulated profits, our answer is in favour of the Revenue and against the assessee.

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• 2016 (6) TMI 430
  Deduction of TDS from the salaries of the Religious Nuns in the service of the petitioners' school - petitioners are in Catholic Institutions, religious Priests and Nuns who have been employed in the respective Schools/Colleges owned and administered by Dioceses, Congregation or institutions - whenever salaries are directly paid by the Government to the concerned religious Priests or Nuns, who are working in the schools owned by Catholic Dioceses and Congregation? - Held that:- When the Government directly pays to the concerned Congregation or Diocese which has already been exempted from payment of tax, naturally there cannot be any evasion of tax and as have rightly pointed, in this connection, already the department has taken a stand way back in the year 1944 to the circular in 1977 whenever ultimately the beneficiary is the Congregation which has been exempted then they need not pay tax. It is made clear because the Government is paying authority, the Income Tax Department on receipt of such affidavit and on their satisfaction would give a certificate or a letter to the Government of Tamil Nadu that they need not deduct TDS insofar as the Priests and Nuns are concerned because they are not paying salary to the individual which are now being paid only in the name of the Congregation or Diocese only. - Decided in favor of petitioners / assessee.

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• 2016 (6) TMI 429
  Penalty u/s 271(1)(c) - estimation of income u/s 44AF - Held that:- The assessee is a small trader involved in bamboo business and filed his return of income by estimating the income u/s 44AF. Therefore, the assessee is not required to maintain any books of account as per the provisions of section 44AF and relaxation available to these kind of assessees. Hence, the assessee had filed the return of income and AO has not found any mistake or not found any discrepancies in the return of income, in this regard, the concealment of income is ruled out. Coming to the submission of inaccurate particulars, AO had sent the notice u/s 143(2) asking for information on the investment made by the assessee. Assessee had filed the relevant information called for. The Assessing Officer had attempted to investigate the genuineness of the document and persons involved in signing the agreement. The documents were found to be genuine and the persons involved are not traceable due to efflux of time i.e. after expiry of 5 years. Since assessee had discharged the initial burden of proof and considering the substantial time lag, we are inclined to adjudicate the issue in assessee’s favour as this case is not a fit case to levy penalty u/s 271(1)(c) of the Act. Accordingly, the penalty is deleted and grounds raised by the revenue are dismissed.- Decided in favour of assessee.

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• 2016 (6) TMI 428
  Penalty U/s 271(1)(c) - assessee admitted additional income on account of undisclosed expenditure/investment towards purchase of land in survey U/s 133A - Held that:- As per Section 275(1)(a) of the Act, the penalty order ought to have been passed on or before 31/3/2012 i.e. within one year from the end of the financial year in which the ld CIT(A)’s order was received by the department. However, penalty order passed on 27/09/2013 by the ld Assessing Officer, therefore, penalty order passed is barred by limitation. We further find that the penalty proceedings initiated in original assessment has been dropped by the ld Assessing Officer vide D&CR No. 87/135 dated 27/3/2012. When there is no addition made in set aside proceedings, no penalty can be imposed on Rs. 4,57,72,496/-. In set aside assessment order, the ld Assessing Officer has not specified at the time of initiation of penalty proceedings whether penalty is initiated for the inaccurate particulars of income or concealment of income. The case laws relied by the ld AR i.e. CIT Vs Manjunatha Cotton & Ginning Factory & Ors. (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) is squarely applicable - Decided in favour of assessee.

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• 2016 (6) TMI 427
  Classification of rental income received by the assessee from the commercial complex - income from business v/s income from house property - Held that:- Since the assessee itself claims 75% of rental income has to be classified as income from house property, the CIT(Appeals) has rightly found that 75% of the rental income for assessment year 2003-04 as income from house property. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that 75% of the rental income has to be assessed as income from house property and the balance 25% as income from business. By respectfully following the law laid down by the Apex Court in Chennai Properties and Investments Ltd. (2015 (5) TMI 46 - SUPREME COURT), we hold that the rental income has to be bifurcated and 75% of the same has to be classified as income from house property and 25% has to be classified as income from business.

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• 2016 (6) TMI 426
  Disallowance for cost of production of TV serials and programmes incurred by the assessee - AO allowing depreciation only @ 25% thereon by treating the same as capital expenditure - Held that:- Similar issue had arisen in the case of the sister concern Prism TV Private Ltd., Hyderabad vs. DCIT, Circle16(3), Hyderabad wherein held that the assessee gets revenue from production and broadcasting serials on the lines of feature films, the rights of broadcasting such serials are also treated as stock in trade till the time they are aired and the expenses are debited to the Profit & Loss account. The assessee treats the films and the serials at par and applied the provisions of Rule 9A and 9B of the Income Tax Rules, as are applicable in case of films on serials as well. On the other hand, the contention of the Revenue is that the film and serial broadcasting rights acquired by assessee are perpetual in nature. After first telecast, the assessee does not discard the films but carefully store the same in digital library for airing the same again. Therefore, the assessee gets enduring benefit from the rights acquired in films and serials and they do not expire on the date of first telecast as contemplated by the assessee. The rights are intangible assets within the meaning of Explanation (iii) to Section 32 and do not fall within the purview of Section 37(1). The assessee is entitled to claim depreciation on same - Decided in favour of assessee Valuation of film software library - rate of depreciation allowable therein - Held that:- This issue has been dealt with by this Tribunal (to which both of us are signatories) in the case of M/s. UEPL [2016 (3) TMI 820 - ITAT HYDERABAD] for the A.Y. 2007-08 and after considering the issue at length, we have held that the film software library is in the nature of an intangible asset and the depreciation thereon is allowable at the rate allowable on an intangible asset. However, as regards the valuation of the asset, this Tribunal has pointed out that certain circumstances leading to the valuation of the asset have not been considered by the authorities below and hence, has set aside the same for re-valuation. Respectfully following the same, we deem it fit and proper to remand this issue also to the file of the A.O. with similar directions and direct the A.O. to allow depreciation as is allowable on an intangible asset.

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• 2016 (6) TMI 425
  Disallowance of exemption u/s 10A on account of income from Export of software and It enabled services - whether the Axsys Technologies Pvt. Ltd has been formed by reconstruction or not? - employees transferred from VCIL to the assessee along with some liability which was shared by the assessee company together - Held that:- Even though employees were transferred from VCIL to assessee were sharing some common liabilities and the shareholders of both the companies are same, it cannot be taken as a ground for denying the benefit u/s 10A of the Act by holding the assessee as reconstruction company. The assessee i.e. Asxys Tecnologies Pvt. Ltd. is a separate legal entity which is newly formed and having its own plant & machinery. Hence, we uphold the order of Ld. CIT(A) and this ground of Revenue is dismissed. - Decided in favour of assessee Addition on account of interest free loan provided to VCIL - Held that:- The fund of the assessee was sufficient enough to cover the money advanced to VCIL. So the money advanced to VCIL was not out of the borrowed fund. Besides the above the assessee debited the account of the VCIL for the services rendered for Rs. 1,14,24898.42 as evidenced from the ledger placed on page 32 of the Paper book. These bills were raised with the service tax to VCIL by the assessee and VCIL has deducted the TDS from the bills. Accordingly the debit balance appearing in the ledger of the VCIL in the books of the assessee cannot be regarded as money advanced out of the borrowed fund. From the facts we also find that the debit balance was not there in the accounts of VCIL throughout the year. As per the submission of the assessee there was own interest free fund for Rs. 1,53,56,168.00 and the ld. DR failed to bring anything contrary to the findings of the ld. CIT(A) in deleting the addition - Decided in favour of assessee

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• 2016 (6) TMI 424
  Addition u/s 69 as undisclosed investment in immovable property - CIT(A) deleted the addition - Held that:- It is clear from the order of CIT(A) that the assessee never made any investments in the purchase of immovable property worth Rs. 44 crores in Mumbai. The assessee only created only mortgage over an immovable property for a sum of Rs. 44 Crores to avail credit facilities from Deutche bank. The necessary Form No.8 was filed by the assessee in the Ministry of Corporate Affairs on 14.07.2007. Incidentally the mortgage was also created on 14.07.2007. In the light of the aforesaid document and in the absence of any other reliable evidence to show that the assessee made any investment of Rs. 44 Crores in purchase of a property, we are of the view that addition made by the AO was rightly deleted by CIT(A). We may also add that the I.T.S. or (AIR information) details received by the AO was only an information which could be the basis for starting an enquiry against the assessee. These details cannot be conclusive against the assessee - Decided against revenue

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• 2016 (6) TMI 423
  Sale value for the purpose of computation of Short Term Capital Gains - reference to the Valuation Officer so as to determine the FMV of the property - in the second round of proceedings, assessee has taken a new plea that a deduction from the cost should be given on account of transfer fee paid for Rs. 27,200/- - Held that:- Plea of the assessee that a deduction from the cost should be given on account of transfer fee paid as stated by the Ld. CIT(A), was neither made by the assessee in the return of income nor before the assessment proceedings before the Assessing Officer. Rather, upto the stage of Tribunal no such claim was made. Once, the matter is set aside by the Tribunal for a limited purpose, then, the assessment has to be framed within the directions of the Tribunal. The determination of income and issue has to be circumscribed strictly in accordance with the order of the Tribunal and it cannot travel beyond. Accordingly, we agree with the conclusion drawn by the Ld. CIT(A) that once such a claim is not arising out of the mandate and directions of the Tribunal, then, the same cannot be raked up or a fresh claim can be made in the second round of proceedings. Accordingly, the order of Ld. CIT(A) is affirmed and the grounds raised by the assessee is dismissed.

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• 2016 (6) TMI 422
  Penalty under section 271(1)(c) - Assessee surrendered the additional income under section 132(4) - Held that:- It is undisputed fact that during the course of search, no incriminating documents were found and seized. The assessee surrendered the additional income under section 132(4) at Rs. 15 lacs and requested not to impose penalty u/s 271(1)(c) of the IT Act. The ld. AO imposed the penalty by invoking the Explanation 5A to section 271(1)(c) of the Act, which has been confirmed by ld. CIT (A) by considering the judgment of Hon ble Supreme Court in the case of MAK Data Pvt. Ltd. (2013 (11) TMI 14 - SUPREME COURT ). But for imposing the penalty under Explanation 5A on the basis of statement recorded during the course of search, it is necessary to be found incriminating documents and is to be considered at the time of assessment framed under section 153A of the Act. The issue has been considered by various High Courts as well as by ITAT as relied upon by the assessee, which are squarely applicable to the case of the assessee. As no incriminating documents were found during the course of search, therefore, Explanation 5A to section 271(1)(c) is not applicable. Accordingly, we delete the penalty confirmed by ld. CIT (A). - Decided in favour of assessee.

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• 2016 (6) TMI 421
  Levy of penalty u/s 271C - non deduction of tds - assessee treated as 'assessee in default' - Held that:- We find that it is an undisputed fact that order u/s 201(1A) was passed vide order dated 07.03.2011 and no order u/s 201(1) has been passed as the order pointed out by learned DR was passed u/s 201(1A) and not u/s 201(1). The learned DR was not able to point out any order passed u/s 201(1) of the Act. The amended provisions of section 201 of the act also states that if the person to whom any amount has been paid without deduction of tax and such person had taken such income in their income tax returns and had paid taxes on such income the assessee cannot be said to be an assessee in default. The authorities below has not disputed this fact that payees of incomes had declared the payments in their income tax return and that is why order u/s 201(1) has not been passed and if the order u/s 201(1) has not been passed the assessee cannot be said to be assessee in default. The Hon’ble Chandigarh Bench of ITAT, in [2016 (5) TMI 69 - ITAT CHANDIGARH] under similar circumstances has deleted the penalty u/s 271 (1)(c) wherein held the assessee being not in default in respect of the amount of tax itself, there cannot be any levy of penalty u/s 271C, more so, where there was a reasonable cause for not deducting the TDS on the payment made by the assessee - Decided in favour of assessee.

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• 2016 (6) TMI 420
  Disallowance of interest - AO disallowed the claim on the ground that the assessee had more than enough interest free funds, i.e. to the tune of Rs. 128.84 crores at its disposal whereas the ICD given to M/s. Kinetic Engineering was amounting to Rs. 30 crores only - Held that:- The assessee has not used the ICD from M/s. Jaya Hind Sciaky Ltd. for the purpose of its own business and the assessee could not establish the nexus of interest income with that of the interest expenditure. We find the CIT(A) rejecting the additional evidence filed before him upheld the action of the AO. The reasons given by CIT(A) have already been reproduced in the preceding paragraphs. As submitted by the assessee that there is a clear nexus between the ICD taken from M/s. Jaya Hind Sciaky Ltd. and given to M/s. Kinetic Engineering Ltd. which is routed through and reflected in the bank account. Although such evidence was filed during the course of hearing before CIT(A) he has not admitted the same on the ground that there was no prayer for admission of the additional evidence and there is no justifiable reason as to why the same was not filed during the assessment proceedings. Although the assessee has explained that there is direct nexus between the ICD taken from M/s. Jaya Hind Sciaky and given to M/s. Kinetic Engineering Ltd., however, it is a fact that such nexus was not explained properly before the AO and the CIT(A) has not accepted the additional evidence filed before him as mentioned earlier. Thus we deem it proper to restore the matter to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the nexus of such ICDs taken and loan given and the nexus of interest income and the interest expenditure. - Decided in favour of assessee for statistical purposes.

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• 2016 (6) TMI 419
  Allowability of the non-compete fee and the depreciation thereon - Held that:- We find that on demerger of the parent company, the assessee has succeeded to the issue of the depreciation on non-compete fee as well and therefore, the decision of the Tribunal for the A.Y. 2008-2009 (cited supra) on the very same issue would be consequential and applicable to the facts of the case before us. This appeal before us being for the subsequent assessment year, also needs to be remanded to the file of the A.O. to give consequential effect to the decisions taken by him for the A.Y. 2009-2010. This ground of appeal is accordingly treated as allowed in favor of assessee for statistical purposes. Treating of the cost of production of TV serials and programmes - revenue or capital expenditure - Held that:- AO directed to treat the expenditure incurred by the assessee on cost of production of TV programmes as revenue expenditure as the future likelihood of these resources being a possible source of revenue, cannot in the opinion of this Court justify its inclusion in the capital stream. Disallowance of depreciation on film software library - Held that:- We find that this issue has arisen for the first time in the assessment year 2007-2008 when M/s. Ushodaya Enterprises P. Ltd., had taken over the business of M/s. Ushakiran Movies and M/s. Ushakiran Television. The issue had come up for adjudication before the ‘A’ Bench of this Tribunal [2016 (3) TMI 820 - ITAT HYDERABAD] and this Tribunal vide its order has remitted the issue to the file of the A.O. for the limited purpose of verification of facts and circumstances stated to be the cause of the transfer of the asset i.e., the ‘Film Software Library’ to the assessee and also for the re-valuation of the asset in accordance with the provisions of Law. The issue in the ground before us is consequential to the decision given by this Tribunal in the case of M/s. Ushodaya Enterprises Limited. Therefore, this issue is also remitted to the file of the A.O. with a direction to give consequential effect after a decision is taken in the case of M/s. Ushodaya Enterprises Limited in accordance with the directions of the Tribunal. - Decided in favour of assessee for statistical purposes.

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• 2016 (6) TMI 418
  Reopening of assessment - determination of loss - Held that:- The Third Member found that the notice issued by the Assessing Officer u/s 148 r.w.s 150(1) of the Act cannot be said to be based on any finding or direction of the Tribunal The Third Member also held that the notice issued by the Assessing Officer u/s 148 of the Act is barred by limitation. In view of the majority opinion, the orders of the lower authorities are quashed and the appeal of the assessee is allowed.

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• 2016 (6) TMI 417
  Applicability u/s 40A(3) - payments made in cash by the assessees to MSRTC for purchase of scrap in auction - Held that:- We are of the considered opinion that the CIT(A) has erred in holding that MSRTC is not a “State” and cash payments made to MSRTC are hit by the provisions of section 40A(3) of the Act. In so far as genuineness of the payments to MSRTC by the assessees, they are not disputed by the department. Once it has been held that MSRTC is a “State” within the meaning of Article 12 of the Constitution of India, the payments cannot be disallowed u/s.40A(3). The provisions of Rule 6DD would protect the assessee from such disallowance. The assessees have explained that cash payments have been made to MSRTC on successful bid of scrap auction. The payments are made in cash immediately to guard against the pilferage of scrap. Thus, cash payments are also made out of business expediency. Therefore, in our considered view, no disallowance can be made u/s.40A(3) in the facts of the present case. Our view is fortified by the decision rendered in the case of Sri Laxmi Satyanarayan Oil Mill Vs. CIT (2014 (8) TMI 486 - ANDHRA PRADESH HIGH COURT ) no disallowance can be made u/s.40A(3) where genuineness of payment is not doubted. The provisions of Rule 6DD (b) provide exception to Section 40A(3) where cash payments are made to Government. The aforesaid exception will operate in the case of the assessee. Thus, the CIT(A) has erred in holding that disallowance u/s.40A(3) is to be made in respect of cash payments made by assessees to MSRTC. - Decided in favour of assessee.

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• Customs

• 2016 (6) TMI 444
  Benefit of penalty at reduced rate - Non payment of appropriate Customs Duty - DTA clearance - goods were imported against Duty Free Credit entitlement Certificate - Held that:- We find that undisputedly the appellant had imported inputs duty free packed in MS barrels availing the benefit of Notification No.53/2003Cus. Dt.31.03.2003; but failed to pay appropriate duty on the MS Barrels when cleared to Domestic Tariff Area. Since the appellant has failed to establish that MS Barrels are not capable of further use/ repeated use, therefore, appropriate Customs duty ought to have been paid on its clearances to Domestic Tariff Area. Therefore, we do not find merit in the contention of the ld. Advocate for the appellant that duty is not payable on these MS barrels. However, we find force in the submission of the ld. Advocate to the extent that the Appellant are eligible to pay 25% of penalty subject to fulfilment of conditions laid down under the provisions of Section 114A of Customs Act, 1962, in view of the principle of law laid down by Hon'ble Gujarat High Court in G.P. Presstress Concrete Works case (2012 (8) TMI 933 - GUJARAT HIGH COURT ) as such an option has not been extended to the Appellant by both the authorities below.

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• 2016 (6) TMI 433
  Import of second hand cars mis-declaring them as new - Eligibility for grant of benefit of Notification No. 21/2002-Customs dated 1st March 2002 - Settlement Commission has granted the benefit of notification and immunity from the penalty and prosecution - Held that:- by giving the proximity of the date of manufacture and the date of import of the car, it cannot be said that the said car ceased to be a new car and became a 'second hand' car at the time of its import. The impugned order of the CCESC giving the benefit of the Customs Notification dated 1st March 2002 and determining the differential customs duty to the tune of Rs. 7,44,174 cannot be said to be perverse and warranting any interference by this Court. Other directions issued by the CCESC regarding interest, penalty and fine in lieu of confiscation and granting immunity from prosecution to the Respondent also do not require interference by this Court. - Petition disposed of

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• 2016 (6) TMI 432
  Legality of proceedings - Import of deep sea fishing trawlers on 26.02.1998 but finding the same to be not seaworthy, sent it for breaking up - Non-compliance of provisions contained in notification No. 133/87 - Appellant stated that by that time, notification No. 133/87 was rescinded by notification No. 47/96 dated 23.07.1996, so the liability under notification No. 133/87 was not in existence from 23.07.1996. Held that:- Clause (c) of Section 159A is attracted only in a case where a right, privilege, obligation or the liability is acquired, accrued or incurred under any notification superseded or rescinded. Insofar as this case is concerned, the acquisition of liability could have arisen only on the transfer of the vessels for breaking up, which event took place either on 26.02.1998 or thereafter. As on that date, notification No. 133/1987 was no longer in force. This means that as on 26.02.1998 or thereafter, in the absence of notification No. 133/1987 being inexistence, the liability thereunder could not have been acquired or incurred, to attract clause (c) of Section 159A. This, therefore, means that Section 159A would not save the proceedings initiated against the appellant under notification No. 133/1987. If that be so, the whole proceedings initiated against the appellant are without jurisdiction. - Decided in favour of appellant

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• Service Tax

• 2016 (6) TMI 447
  Eligibility for refund - Rule 5 of the CCR - unutilized credit availed prior to obtaining registration - software and application engineering and support service - export of service - Held that:- by following the judgment of Karnataka High Court in the case of mPortal India Wireless Solutions Pvt. Ltd. Vs ST [2011 (9) TMI 450 - KARNATAKA HIGH COURT] and decision of Principal Bench of the Tribunal at Delhi in the case of Dorling Kindersley (I) Pvt. Ltd. Vs CCE & ST Noida [2015 (6) TMI 748 - CESTAT NEW DELHI], even though appellant were not registered prior to 16.6.2008, they are eligible for refund of the unutilized credit which was accumulated prior to registration. Eligibility for refund of Cenvat credit - Nexus between the input service availed by appellant vis-a-vis the output service rendered by appellant - Input services not directly used for providing output service - Period of dispute is prior to 2011 - Held that:- the credit taken by the appellant in relation to various output services is in order in view of the fact that period of dispute is prior to 1.4.2011 and also in view of the fact that the phrase activities relating to business would cover all the activities for which credit has been denied and in view of various rulings of the High Court and the Tribunal on the eligibility of service. Period of limitation - Eligibility of refund claim - time-barred for a portion of the claim for refund - Held that:- the matter is remanded to the first appellate authority to re-examine the aspect in view of the amendment brought in by Notification No.14/2016-CE (NT) dt. 1.3.2016 and other evidences to be gone into by the first appellate authority. - Appeal disposed of

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• 2016 (6) TMI 446
  Service tax refund - SEZ unit - Period of limitation - list of specified services required for authorized operation in unit duly approved by the approval committee was not submitted - No evidence of depositing the reduced payment to the extent of TDS against billed amount in the Government account - Held that:- as far as non-submission of list of specified services duly approved by the approval committee is concerned, the issue is squarely covered vide judgment of CESTAT in the case of Markers Mart And Prince Exports Versus C.C.E & S. Tax., Jaipur II [2016 (2) TMI 258 - CESTAT NEW DELHI]. Regarding the delay, the Commissioner (Appeals) observed in the impugned order that there was no application seeking extension of time for filing refund and therefore the claim is not wrongly held to be hit by time bar. Having said so, we would like to observe that the amount involved in this case is paltry and the revenue has stated that the appellant also has a factory where they claim refund of service tax under Notification No. 41/2007-ST and were following similar timeline in this case also. In these circumstances we are of the view that given the fact that there is a provision for condoning the delay in the notification No. 9/2009-ST and the delay was not unreasonable or deliberate, the delay deserved to be condoned and we condone the same. It is seen that the lower authority observed that the evidence of having deposited the TDS in the Government account was not submitted and therefore he did not allow the refund of service tax component pertaining to the TDS. While we do not find anything seriously unreasonable in the reasoning of the lower authority having regard to the fact that the amount involved on this account is paltry, the revenue has asserted that the TDS has actually been deposited in the Government account, the service provider has not disputed that fact and further, the service tax sought to refunded has actually been paid and the provisions of SEZ Act are overacting, we are of the view that reduction of refund amount pertaining to the amount deducted on account of TDS is unsustainable. - Decided in favour of appellant

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• 2016 (6) TMI 445
  Tax liability - Security service - Substantial reduction on reconciliation of accounts - Held that:- even the delay in receipt of payment advice may cause difference in determination of liability of the relevant taxing period. Therefore, it may not cause prejudice to the interest of Revenue, if the appellant gets an opportunity for reconciliation of its figures and satisfy the adjudicating authority for determination of proper tax liability. Accordingly, the appellant is directed to make an application within a month of receipt of this order to the adjudicating authority to fix date of hearing. Proper application of law and proper re-adjudication on such count - Imposition of penalty - Appellant pleaded that when huge demand was discharged, the law requires that penalty if any imposable, should only be confined to the unpaid amount - Held that:- appellants pleading deserves consideration for the reason that when the tax liability is discharged partially to that extent of liability is discharged, penalty may not be exigible. However, saying so, we do not prevail over the mind of the adjudicating authority since there is no estoppel against law and what that is law shall apply on the facts and circumstances of the case that may reach to his record. The appellant shall be heard on both facts and law and a reasoned and speaking order shall also be passed. Ld. Adjudicating authority has extended the concessional penalty of 25% of the tax demand. He may also extend such concession on the facts and circumstances of the case in all fairness. - Appeal remanded back

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• Central Excise

• 2016 (6) TMI 443
  Central excise duty on finished goods - cenvat credit wrongly availed on inputs and capital goods lost in fire accident - Held that:- Regarding the duty demand/reversal of credit on capital goods, the impugned order finds that there is no legal provision during the material period for demanding duty on such damaged capital goods. These capital goods were still lying in the factory. As correctly held by the Commissioner (Appeals), the capital goods damaged in 2005 are bound by the provisions of Rule 5 A of the Cenvat Credit Rules, 2004 introduced w.e.f. 16.05.2005 and at the time of clearance of these goods, in whichever shape, they have to pay appropriate amount of duty. I find that the Appellate Authority is correct in concluding that duty on the finished goods as well as raw materials cannot be demanded merely because the appellants have not applied for the remission of duty. The finished goods and the raw materials were admittedly never cleared from the approved premises of the respondent. There is no legal provision to sustain recovery of duty only on the ground that remission application has not been filed in respect of goods lost in fire. The Tribunal in Mira Chemicals (2007 (3) TMI 653 - CESTAT, AHMEDABAD ) relying on the earlier decided cases held that when the goods were admittedly destroyed the fact that a proper application for remission of duty has not been made by the assessee, would not result in liability of excise duty. Also see Indchem Electronics (2002 (9) TMI 195 - CEGAT, CHENNAI ), Tribunal held that when the goods were destroyed due to fire accident and there is no allegation that there was any diversion of goods, there is no warrant to reverse the input-credit. The said decision has been upheld by the Hon’ble Supreme Court reported in [2003 (4) TMI 556 - Supreme Court of India ]. There could be no clearance of destroyed products. As the destructions has been an admitted fact, there could be no duty liability on the goods, which are not cleared. - Decided against revenue

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• 2016 (6) TMI 442
  Valuation - Correct quantum of exclusion towards sales tax from the transaction value for Central Excise purpose - allegation of suppression of facts - penalty imposed - Held that:- The principle laid down in CCE, Jaipur - II vs. Super Synotex (India) Ltd [2014 (3) TMI 42 - SUPREME COURT ] is equally applicable to the facts of the present case. The legal position that emerges is that if the assessee charged and collected amount towards sales tax but not paid the said full amount to the State, the amount retained under whatever name shall not be eligible for exclusion in terms of Section 4 (3) (d). On perusal of the original order and the impugned order, we find no reasoning to support the allegation of suppression of facts. The only reference made by the lower Authorities that the improper valuation was revealed during the course of audit and scrutiny of sales tax returns and as such it was concluded that the assessee had intention to evade Central Excise Duty. We find that considering the above factual background, the invocation of extended period in the present case is not legally sustainable. Accordingly, the demand of differential duty is to be restricted to the normal period which shall be payable with applicable interest by the appellants. On the same reasoning, we find imposition of penalty equal to the duty amount is also not sustainable. Since, the excise duty applicable on retained sales tax amount has not been collected by the assessee from the buyers, they are eligible for calculation of duty liability taking the differential value as cum duty value. The demand shall be restricted to the normal period and the duty will be calculated on the basis of cum duty valuation. The penalty imposed also is set aside.

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• 2016 (6) TMI 441
  Appropriation of rebate sanctioned in cash against the custom duty arrears - As per the Revenue, the appropriation is permitted in accordance with law whereas as per the appellants the appropriation of rebate of refund cannot be done against the customs duty arrears by invoking Section 142 of the Customs Act - Held that:- All the orders against which appropriation is made have been challenged by the appellant before this Tribunal and the stay has been granted by this Tribunal and they are pending for final disposal and the demand has not attained finality. Further it is a settled position of law as held in the cases cited above that the appropriation of refund amount towards duty demand pending in other cases which has not attained finality is not legal and proper. Therefore keeping in view the above stated position, we are of the considered view that the appropriation of refund claim against disputed pending custom appeals is not sustainable in law as the demands in those cases have not reached finality. Therefore we set aside the impugned order and allow the appeals with consequential relief if any.

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• 2016 (6) TMI 440
  Reversal of cenvat credit taken on the inputs imported and subsequently re-exported - Held that:- The goods which are exported do not suffer the duty incidence. Keeping this view in mind, we do not find it appropriate to make a distinction between goods which are exported under ARE-1 procedure on payment of duty under claim for rebate, and those which are exported under bond without payment of duty/reversing the credit under Rule 3(5). Both sets of goods cannot suffer incidence of duty. See Videocon International Ltd. Vs CCE Vadodara-II- [2008 (7) TMI 275 - CESTAT, AHMEDABAD] allowing clearance of inputs/capital goods for export without reversal of the credit taken Thus we hold that the appellant-assessee is not required to reverse cenvat credit taken on the inputs which were imported and subsequently re-exported. Accordingly, we allow the appeal filed by the appellant-assessee

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• 2016 (6) TMI 439
  Valuation - Computation of assessable value - whether cost of the Plastic containers supplied by the Buyers is includible in the assessable value of the product manufactured by the party? - Held that:- On going through the orders passed by the Asstt. Commissioner and the Commissioner (Appeals), we find that the Asstt. Commissioner has relied upon the precedent decisions of the higher authorities in dropping the demand. The Appellate Authority has not disputed the fact that the said decisions relied upon by the Asstt. Commissioner fully apply in respect of the valuation of the goods where the packing materials itself is being supplied by the customers, but has decided not to follow the same on the ground that the provisions of Section 4 were amended w.e.f. 1.7.2000. The very same decisions stand considered by the Tribunal in a recent decision in the case of Commissioner of Central Excise Vs. Grasim Industries Ltd. [2014 (4) TMI 650 - CESTAT NEW DELHI ] wherein held that if some goods are marketable without being put into the containers, the cost of containers including their testing charged would not be includible in the assessable value - Decided in favour of assessee

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• 2016 (6) TMI 438
  Seeking waiver of pre-deposit - non compliance of the conditional order of stay - no finding rendered by CESTAT as to the existence or non-existence of undue financial hardship - Held that:- taking note of the financial constraint expressed and the contentious issues raised in the appeals, we deem it fit that the appellant should be given an opportunity, to pursue the appeals before CESTAT, Madras, by extending the time, for compliance, i.e., to make pre-deposit of Rs. 3 lakhs and we are also of the view that no serious prejudice would be caused to the respondent by directing extension of time. Three weeks' time is granted from today for making pre-deposit of Rs. 3 lakhs, as ordered by the Tribunal. On making such deposit, stay petitions filed would stand restored. - Civil Miscellaneous Appeals disposed of

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• 2016 (6) TMI 437
  Seeking complete waiver of pre-deposit - without requiring mandatory pre-deposit of 7.5% / 10% for filing an appeal before CESTAT - Section 35F of the Central Excise Act, 1944 - Financial hardship to the petitioner - Held that:- under Section 35F of the CE Act as it stood prior to 6th August 2014, a discretion was available to the CESTAT to consider the financial hardship and accordingly determine the pre-deposit amount. That discretion has been consciously sought to be curtailed and thus an amendment was made to Section 35 F CE Act requiring making of a pre-deposit of 7.5% in all cases subject to an upper cap of Rs. 10 crores. A direction, therefore, to the CESTAT that it should waive the pre-deposit would be contrary to the express legislative intent expressed in the amended Section 35F with effect from 6th August, 2014. While, the jurisdiction of the High Court under Article 226 of the Constitution to grant relief notwithstanding the amended Section 35 F cannot possibly be taken away, the Court is of the view that the said power should be used in rare and deserving cases where a clear justification is made out for such interference. Having heard the submissions of Mr Datta and having perused the adjudication order, the Court is not persuaded to exercise its powers under Article 226 to direct that there should be a complete waiver of the pre-deposit as far as the Petitioner’s appeal before the CESTAT is concerned. - Waiver not granted

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• 2016 (6) TMI 436
  Denial of Cenvat credit on GTA services - denial of credit on the ground that the "input service" as defined under Rule 2 (l) of Cenvat Credit Rules, 2004 does not allow credit on transportation beyond the place of removal - whether the transportation of clinker from Shambhupura to Bhatinda cannot be considered as input service for the manufacture of such clinker - Held that:- Considering the series of decisions by various High Courts which have been consistently followed by the various Benches of the Tribunal, it is inclined to follow the ratio followed by these decisions to hold that the appellant is eligible for Cenvat credit on GTA services now under dispute.

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• 2016 (6) TMI 435
  Recovery of differential duty - inputs cleared as such to other sister units by reversing the credit availed on such inputs, instead of discharging the duty on the value of the inputs at the time of its clearance from their factory to their sister units, as per Rule 3(4) of Cenvat Credit Rules, 2001/2002 - Held that:- Undisputedly the appellant had cleared "inputs" on which CENVAT Credit was availed during the period June 2001 to February 2003 to their sister concerns. While clearing the said inputs, as such, they reversed the CENVAT credit availed on such inputs at the time of its receipt of the same at their premises. The Revenue objected to the said method alleging that as per Rule 3(4) of Cenvat Credit Rules, 2001/2002, the appellants were required to pay duty on the value of the said inputs. The adjudicating authority, however dropped the proceeding on the basis of amended provision which came in to force w.e.f 01.03.2003. We find that on an Appeal filed by the Revenue, the learned Commissioner (Appeals) after applying the correct position of law confirmed the demand against the appellant. We find that the adjudicating authority while deciding the show cause notice adopted the amended provision of Rule 3(4) of CCR,2001/2002 which came into force from 01.03.2003 instead of Rule 3(4) as was in existence during the relevant period June 2001 to February 2003. - Decided against assessee.

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• 2016 (6) TMI 434
  Classification of steam boilers - goods manufactured and cleared by the appellant after 16/3/1995 - Held that:- On a specific query from the bench appellant could not produce copies of the contracts/purchase orders to substantiate whether complete boiler is ordered to be manufactured or only parts of the boiler are required to be manufactured. These factual submissions made by the appellant can be verified only by the Adjudicating authority. In the interest of justice, this matter is required to be remanded back to the adjudicating authority for de novo consideration. Appellant should produce all the relied upon case laws/expert opinion before the adjudicating authority to establish that the finished goods supplied have the essential character of the steam boilers. Needless to say that an opportunity of personal hearing should be extended to the appellant by the adjudicating authority before deciding the issue in remand proceedings. Appeal filed by the appellant is allowed by way of remand to the adjudicating authority.

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• Wealth tax

• 2016 (6) TMI 448
  Penalty imposed u/s 18(1)(c) of the W.T Act - concealment of wealth for not filing the W.T return voluntarily - Held that:- In the present case, The AO must have found that that the assessee concealed his particulars of any asset or furnished any inaccurate particulars of assets or debts as prescribed in clause ( c) of section 18 of the W.T Act 1957 and AO has not given any cogent reason for imposition of penalty. As discussed above mere non-furnishing of a return per se is not tantamount to concealed his particulars of any asset or furnished any inaccurate particulars of assets or debts within the meaning of clause ( c) of section 18 of the W.T Act 1957 Since the assessee himself is a senior citizen and his the then AR, Mr. K.V Singh was serious ill and hospitalized is reasonable cause for not filing the wealth tax return for the assessment year under consideration in time. Thus referring to Explanation-3 to clause (c) of section 18(1) of the W.T Act 1957, we are of the considered opinion that the penalty imposed u/s. 18(1)( c) of the W.T Act 1957 and confirmed by the CIT(A) is not sustainable in law. The same is, therefore quashed, accordingly grounds raised by the assessee are allowed. - Decided in favour of assessee

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