TMI Tax Updates - e-Newsletter
June 15, 2016

Case Laws in this Newsletter:

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

TMI SMS

• MODEL GST LAW - The proposed draft of GOODS AND SERVICES TAX ACT, 2016 - there will be three laws (1) CGST Act, (2) SGST ACT & (3) IGST Act

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• The first insurance premium paid would go to increase the cost of the vehicle - the same has been treated as capital expenditure - Tri

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Articles

1. TCS under section 206C, BY SELLER OF GOODS AND SERVICE PROVIDERS when consideration is received in cash (w.e.f. 01st June 2016)

   By: DEVKUMAR KOTHARI

News

1. MODEL GST LAW

2. Government Approves two (2) Proposals of Foreign Direct Investment (FDI) Amounting to ₹ 2.19 Crore Approximately; Recommends one Proposal for Approval of CCEA

3. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

4. Index Numbers of Wholesale Price in India (Base: 2004-05=100) Review for the month of May, 2016

5. Initiatives on Improving ‘Ease of Doing Business’ in India as on 7th June, 2016

6. RBI Reference Rate for US $

Notifications

Customs

1. 26/2016 - dated 13-6-2016 - ADD

Seeks to extend the levy of anti-dumping duty on imports of Pentaerythritol, originating in, or exported from the People's Republic of China, for a period of one year

2. 85/2016 - dated 14-6-2016 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Gold and Sliver

LLP

3. F. No. 17/31/2015-CL-V - dated 10-6-2016 - LLP

Limited Liability Partnership (Second Amendment) Rules 2016

Highlights / Catch Notes

GST

• GST Act 2016 Draft Unifies Indirect Taxes with CGST, SGST, and IGST Laws for Streamlined Taxation Across Jurisdictions.

  News : MODEL GST LAW - The proposed draft of GOODS AND SERVICES TAX ACT, 2016 - As per the draft there will be three laws (1) CGST Act, (2) SGST ACT and (3) IGST Act - Each state to have its own SGST Act
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Income Tax

• Court Rules Taxpayer Shouldn't Pay Twice Due to TDS Credit Error in Revenue System; Technical Defect Acknowledged.

  Case-Laws - HC : Credit of tax deducted at source from salary - TDS not credited by Department - Whatever be the reason, the petitioner cannot be asked to pay tax twice, particularly when it appears that on account of some technical defect, the correct figures not being reflected in the system of the Revenue, the petitioner cannot be made to suffer. - HC
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• Cancellation of Section 12A Registration Overturned; Revenue Generation Not Grounds for Revocation Due to Charitable Purpose.

  Case-Laws - AT : Registration U/s 12A cancelled - the revenue generated by the RCA are substantial but this ground cannot be used to cancel the registration granted by the ld CIT as predominant object of the trust is charitable and substantial revenue generated is incidental to the main object - AT
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• Lease Premium to PCNTDA Not Considered Rent u/s 194-I; No TDS Required on Pre-Lease Payments.

  Case-Laws - AT : TDS - Where the lease premium paid to PCNTDA was a pre-condition for entering into the lease agreement, the same not being paid consequent to the execution of the lease agreement, cannot be said to be payment in lieu of rent as envisaged under section 194-I - AT
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• Reopening of Tax Assessment Lacks Genuine Basis, Seen as Response to Revenue Auditor's Objections.

  Case-Laws - AT : Reopening of assessment - this reopening is not based on a judicious approach formed on reasons to believe that there has been escapement of assessee’s taxable income from being assessed but merely seeks to satisfy the revenue auditor party’s objections. - AT
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• Assessee Company Sets 8% Profit Margin on Total Costs, Clarifies Fee Structure for Construction Stages, No Extra Charges Applied.

  Case-Laws - AT : Basis of mark at 8% on total overall cost to arrive at the profit earned - operating cost for rendering services to the group companies - The assessee company clarified on chargeability of fees during construction stage and post construction with supporting evidence and analogy of service fees - No additions - AT
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• Capital Expansion Costs Classified as Capital Expenditure, Not Revenue Expenditure.

  Case-Laws - AT : The expenditure is incurred for the purpose of expansion of capital and therefore cannot be treated as revenue expenditure. - AT
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• Court Rules AO's 43% Profit Estimate Unreasonable, Prefers Historical Profit Rates of 15-18.

  Case-Laws - AT : The percentage of profit vis-a-vis turnover estimated by the AO works out to approximately 43%, which in our humble opinion, is absurd in the line of this business, not only because of the fact that the AO himself estimated arbitrary profit rate of 20.22%, but, also having regard to the past record of the assessee where the assessee has declared the profit range between 15 to 18%, which was accepted by the AO - AT
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• Interest on Employee Loans Classified as "Business Income" for Tax Purposes, Affecting Reporting and Taxation.

  Case-Laws - AT : Interest earned on loans given to employees will be taxed under the head “business income” - AT
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• Initial Insurance Premium Deemed Capital Expenditure, Increases Vehicle Cost Under Tax Rules.

  Case-Laws - AT : Without the first insurance, it cannot be said that the vehicle has been put to use. Therefore, the first insurance premium paid would go to increase the cost of the vehicle and, therefore, the same has been treated as capital expenditure - AT
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Central Excise

• Entities Using Brands Can Claim SSI Exemption Under Central Excise Rules if Trademark Assignment is Valid.

  Case-Laws - AT : SSI Exemption - use of Brand/Trade mark or others - as long as assignment stands the assessee using the brand name is eligible for the benefit of SSI exemption notification - AT
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• Ladle Transfer Cars for Molten Metal Classified Under Heading 8454; Demand for Reclassification Set Aside.

  Case-Laws - AT : Calsiffication of Ladle Transfer Car (LTC) - ladle cars meant for receiving molten metal from a furnace is specifically mentioned in heading no.8454 - Demand set aside. - AT
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• Excise Duty on Sample Bottles: No Demand Raised as No Benefit Returned to Manufacturer, Says Rule 8 Analysis.

  Case-Laws - AT : Valuation - excise duty on the sample bottles under Rule 8 of the Valuation Rules - nothing is flowing back to the manufacture from the distributors - genuineness of transaction not doubted by the revenue - no demand can be raised - AT
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• Cenvat Credit Eligibility on POY Waste During Polyester Yarn Production Supported by Rule 9A of CENVAT Credit Rules, 2002.

  Case-Laws - AT : Cenvat credit - the question of taking credit on POY contained in certain waste arising in process of manufacture of polyester texturised yarn would also not arise. Nowhere Rule 9A of CENVAT Credit Rules, 2002 contains anything to the contrary - AT
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VAT

• Court Denies Reliefs to Petitioners for Missing 'C' Forms, Higher Tax Rate Applies Under Central Sales Tax Act, 1956.

  Case-Laws - HC : Non-production of 'C'-Forms - Demanding a higher rate of tax under the CST Act, 1956 due to the non production of 'C' Forms - The appellants and petitioners are not entitled to the reliefs prayed for - HC
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• Tribunal Rules Calcutta Club Not Liable for Sales Tax on Member Transactions Under Doctrine of Mutuality.

  Case-Laws - SC : Doctrine of mutuality - Dealer - Liability to pay VAT / Sales Tax - Tribunal decided that Calcutta Club Limited, was not liable for payment of sales tax under the West Bengal Sales Tax Act, 1994 - sale of food and drinks to the permanent members - deeming fiction - Matter referred to larger bench - SC
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Case Laws:

• Income Tax

• 2016 (6) TMI 500
  Credit of tax deducted at source from salary - TDS not credited by Department - recovery of tax - Held that:- We notice that undisputedly the tax was deducted from the petitioner's salary directly at source. Such tax so deducted was credited to the department by the District Court. However, out of total tax so deposited, the Revenue's system did not reflect the tax collection and deposit of a sum of 1,38,683/- in the form of section 26AS. It was on this account that the Assessing Officer did not grant benefit of such tax paid by the petitioner which resulted into a demand of tax which would presumably include interest. Whatever be the reason, the petitioner cannot be asked to pay tax twice, particularly when it appears that on account of some technical defect, the correct figures not being reflected in the system of the Revenue, the petitioner cannot be made to suffer. As decided in Sumit Devendra Rajani Versus Assistant Commissioner of Income Tax -OSD & 1 [2014 (8) TMI 418 - GUJARAT HIGH COURT] The petitioner-assessee- deductee is entitled to credit of the tax deducted at source with respect to amount of TDS for which form no.16A issued by the employer-deductor has been produced and consequently department is directed to give credit of tax deducted at source to the petitioner-assessee-deductee to the extent form no.16A issued by the deductor have been issued. Consequently, the impugned demand notice quashed - Decided in favour of assessee

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• 2016 (6) TMI 499
  Registration U/s 12A cancelled - profit motive / commercial activity - The assessee claimed that even if there are certain substantial amendments in object, the assessee deserved registration continue on the ground that the activities are yet charitable in nature - Held that:- The amended objects were not voluntary change. The assessee has to follow the said laws related to sports activities. The comparison given by the ld CIT in his order dated 28/03/2013 does not show any fundamental deviation from the original charitable activities to non-charitable activities. The assessee’s object to promote the cricket in the State by providing/involving various activities at the district level to state level through coaching provided by coaches, ground and facilities etc. Therefore, the assessee’s activities are charitable. At the time of registration, the ld CIT has to consider Section 12AA(3) and he has to consider two conditions for rejection of registration granted (i) the activities of the trust are not genuine, (ii) are not being carried out in accordance with the object of the trust as the case may be. The ld CIT has not found any infirmity in the activities carried out by the RCA as non- genuine or not being carried out as per object of the trust. It is also a fact that the game of cricket become very potential with reference to revenue compared to other games, therefore, the revenue generated by the RCA are substantial but this ground cannot be used to cancel the registration granted by the ld CIT as predominant object of the trust is charitable and substantial revenue generated is incidental to the main object. If, the ld Assessing Officer found any violation in application of fund, he can make disallowance U/s 11 of the Act. Thus, we are of the considered view that the ld CIT was not right in withdrawing the registration granted U/s 12A of the Act. - Decided in favour of assessee.

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• 2016 (6) TMI 498
  TDS u/s 194I - non deduction of tax at source from the lease premium paid to PCNTDA for acquisition of Lease hold rights for 99 years - assessee in default - Held that:- We find in appeal the Ld.CIT(A) following various decisions of the Mumbai Bench of the Tribunal deleted such demand raised by the AO u/s.201(1)/201(1A). We find identical issue had come up before the Coordinate Bench of the Tribunal in the case of Shri Ajay N. Yerwadekar (2015 (11) TMI 1382 - ITAT PUNE) wherein held Where the lease premium paid to PCNTDA was a pre-condition for entering into the lease agreement, the same not being paid consequent to the execution of the lease agreement, cannot be said to be payment in lieu of rent as envisaged under section 194 I. The Tribunal after considering various decisions upheld the order of the CIT(A) and dismissed the appeal filed by the Revenue in respect of lease premium paid to PCNTDA. - Decided in favour of assessee

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• 2016 (6) TMI 497
  Reopening of assessment based upon revenue auditor party’s objections - reasons to believe - Held that:- The assessee’s first argument seeks to quash the impugned reopening by quoting his ‘request’ to revenue audit party hereinabove. He himself makes it clear in the end of the reassessment that the impugned reopening/reassessment has been completed in view of the audit objection. We observe in these peculiar facts and circumstances that this reopening is not based on a judicious approach formed on reasons to believe that there has been escapement of assessee’s taxable income from being assessed but merely seeks to satisfy the revenue auditor party’s objections. Hon’ble jurisdictional high court in RAAJRATNA case (2014 (8) TMI 598 - GUJARAT HIGH COURT) quashes a similar reopening instance by observing that the same does not amount to an Assessing Officer’s satisfaction as per provisions of the Act. The Revenue fails to distinguish its operation in the instant facts and law. We accordingly accept assessee’s first legal argument challenging validity of reopening. We hold the present case to be the one containing Assessing Officer’s failure in recording due independent satisfaction by reiterating that triggering point of a reopening is a judicious belief based on reasons formed in view of tangible material pointing out escapement of taxable income. We accordingly quash the impugned reopening on this score alone. The assessee’s other grounds/arguments on change of opinion and merits are rendered infructuous. - Decided in favour of assessee.

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• 2016 (6) TMI 496
  Determination of profit - Basis of mark at 8% on total overall cost - operating cost for rendering services to the group companies - Held that:- The assessee company engaged in development of IT parks, managerial and technical services to the industrial park and SEZ and income of the assessee is having direct nexus with the operations of SEZ sister concerns. For sister concerns, there is a operational difficulty to work 100% capacity due to various contributing factors like labour, wages and administrative cost. When the industrial park operates at optimum level due to volume of business it indirectly increase the service charges payable to the assessee and realistic inherent reasons for the method of accounting integrated with sister companies. The basis of the Assessing Officer to mark up 8% cost relying on the similar project consultancy of other assessee. The AO selected the profit percentage of other entities differ on management functionalities and business propositions. The ld. Assessing Officer has not conducted any independent investigation to support that there is under valuation of services by the assessee and no comparables of enterprises were provided to show that amount charged to the group company is reasonably very low. The Assessing Officer arbitarily relied on the findings of the assessee and marked up the cost by 8% without considering the submissions and valuable information on disputed issued of the assessee. The charging of fees is not definite measuring criteria as it differs from company policies. The assessee company clarified on chargeability of fees during construction stage and post construction with supporting evidence and analogy of service fees and the Revenue for the first time has raised such objections. Considering the above decision, we set aside the order of Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the mark up and pass the orders.

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• 2016 (6) TMI 495
  Disallowance of professional and consultancy fees paid to PWC towards “equity expansion” - Held that:- The nature of service rendered by M/s. PWC to the assessee company such as preparation of information memorandum, identification of potential investors, assistance in value analysis, assistance in structuring the consideration and the transaction, assistance in negotiations and coordinating the completion of the transaction would eventually be attributable for capital expansion and the assessee has incurred the expenses towards the same. It does not matter whether the expenditure incurred has resulted in the expansion of capital. What matters is the nature of expenditure incurred and not the benefit that is derived out of the expenditure. Considering the nature of expenses, it is apparent that the expenditure is incurred for the purpose of expansion of capital and therefore cannot be treated as revenue expenditure. Hence, we do not find it necessary to interfere with the orders of the Revenue. Consequently, this issue is decided against the assessee. Disallowance U/s.14A r.w.r 8D - Held that:- Assessing Officer had invoked the provisions of section14A r.w.r 8D because the assessee had invested in shares, the dividend income of which, is exempt from tax and thereby computed the disallowance by adopting 0.5% of the average of the opening and closing balance of investment in the relevant assessment year which works out to 29,189/-. Since the disallowance made by the learned Assessing Officer is in accordance with the provisions of the Act, we do not find it necessary to interfere with the orders of the Revenue - Decided against the assessee.

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• 2016 (6) TMI 494
  Addition on difference in cash and bank balances as per statement of accounts prepared on estimate and ad hoc basis - Held that:- financial statement cannot be relied upon to assess the actual transaction of the assessee. In our view, the AO has to assess the actual income of the assessee. No doubt, the turnover of the assessee is less than the turnover prescribed for tax audit u/s 44AB. Assessee had opportunity to opt for assessment u/s 44AD. However, assessee chose to declare more than 8%, assessee may have better reason for declaring more than the limit prescribed u/s 44AD. Assessing Officer is of the opinion that the assessee had earned a specified income from the business of sale of scrap. In such an event, Assessing Officer may not be justified in blowing hot and cold and making a specified addition again based on the balance sheet prepared by the assessee, which was not accepted in totality by the Assessing Officer while estimating the income. At any rate, in the instant case, Assessing Officer having not specified any section/provision, the addition made by the Assessing Officer in our considered opinion is not sustainable. If a separate addition has to be made, the onus is upon the Assessing Officer to bring on record some evidences to justify that the assessee had actually earned undisclosed income over and above what was estimated from the business of sale of scrap and also to bring that there were additional sales which have generated income or there was other source of income. No such effort was made by the Assessing Officer in this case. Also the total income computed by the Assessing Officer including the impugned addition of 3,59,843 works out to 6,79,360/- and the percentage of profit vis-a-vis turnover estimated by the Assessing Officer works out to approximately 43%, which in our humble opinion, is absurd in the line of this business, not only because of the fact that the Assessing Officer himself estimated arbitrary profit rate of 20.22%, but, also having regard to the past record of the assessee where the assessee has declared the profit range between 15 to 18%, which was accepted by the Assessing Officer. Thus Assessing Officer is not made out a case for making a separate addition - Decided in favour of assessee

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• 2016 (6) TMI 493
  Transfer pricing adjustment - determination of cost incurred by assessee towards marketing support service - whether the cost reimbursed to assessee by its AEs is to be included in the cost base for determining the NCP of assessee or not? - Held that:- in order to bring the tested party and comparables at level playing field, it is necessary that reimbursed cost should be considered in the cost base as well as part of income so as to neutralize any variation in the cost incurred by assessee towards carrying out marketing support services. Admittedly, at first place assessee has incurred all these expenses and then got reimbursed by its AEs. All risks incidental to these expenses were at assessee’s account and not AE. Ld. CIT(A) has very rightly excluded any allocation towards finance charges because assessee had received advance from its AEs. The statement given by Mr. Surjit Verma, referred to earlier, in the observation of ld. TPO, clearly showed that both employees coordinated with various agencies which were to conduct or organize these events. He has observed that research was also conducted on behalf of Seagram Martell, findings for which were communicated by Mr. Aditya Gooptu to Seagram Martell. In order to avoid repetition, we are not referring to the detailed activities performed by assessee noticed by ld. TPO, which we have reproduced earlier, while considering the TPO’s findings. It would suffice to observe that assessee played a vital role in all the activities done to promote sales of Seagram Martell Duty Free Ltd. in India and the meager amount of US$ 2500 p.m. was not at all justified considering the services rendered by assessee. We could appreciate assessee’s contention of not including the reimbursement of expenses as part of the cost base if income of Marketing Support Services did not include these reimbursements but that is not so. Ld. TPO has included the same Unascertained liability - provision appearing in the accounts of the assessee company on account of transit shortages - Held that:- Respectfully following the decision of Hon’ble Delhi High Court in assessee’s own case, we restore the matter to the file of AO to pass the order in terms of the observations made by Hon’ble Delhi High Court noted that the AO shall allow the actual transit breakages for A Y 2001-02 as revenue expenditure consistent with the settled legal position. The Assessees would also be permitted to get the benefit of the reversal of the provision for transit breakages made in the AYs in question accordance with law. Income returned by assessee under the head ‘business income' as 'income from other source' - Held that:- The issue was considered for AY 1998-99 and not 1999-2000 as submitted by assessee. Further, the interest income earned only on loans given to employees were considered. Therefore, we direct the assessee to furnish the details of interest earned on loans given to employees before AO and the AO will treat the said interest under the head “business income” and the balance interest is to be confirmed as income from other sources, as assessee has not furnished any details. In terms of aforementioned observations this ground is partly allowed for statistical purposes. Allocation of expenses to Marketing support Service segment and also for including the reimbursement of expenses as cost base and also for the income of this segment for computing the NCP of this segment confirmed Loss on account of foreign exchange rate fluctuation - Held that:- Respectfully following the decision of Hon’ble Jurisdictional High Court in the case of Woodward Governor India Pvt. Ltd. (2009 (4) TMI 4 - SUPREME COURT ), dismiss this ground of appeal, holding that the loss incurred by the assessee was a fate accomplice and not a notional one. Allowance of sales and marketing expenses - Held that:- Respectfully following the order of the ITAT in the case of M/s Seagram Distilleries Pvt. Ltd. (2015 (7) TMI 560 - ITAT DELHI), holding that the brand expenses were in revenue field and contributed towards profit earning process of the assessee, dismiss both these grounds raised by revenue

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• 2016 (6) TMI 492
  Evaluation of the property under section 55A(a) as the fair market value estimated by the registered valuer engaged by the assessee is higher than the actual fair market value - reference to DVO - Held that:- Policy of law is to take the fair market value as on 1st April, 1981 as the basis for the purpose of indexation. If the assessee has shown more than the fair market value he obviously, is interested in increasing the index cost for the purpose of avoiding to pay capital gains. Therefore, the practice adopted by him cannot be permitted. Even assuming that there is a case in which the assessee has offered more than the market value, it is not the policy of law to recover more than what is actually due from the assessee. In either case, the contention of the assessee is wrong and not acceptable. In the case before us, the assessee, however, was inspired by sinister motive of avoiding to pay capital gain and that was the reason why he inflated the fair market value on 1st April, 1981. The reference made by the Assessing Officer was competent. The learned Tribunal was correct in holding that the clause (b)(ii) to section 55A carries a broader spectrum which certainly empowers the Assessing Officer to make reference to the DVO wherein in his opinion the fair market value estimated by the assessee is not proper and since in the present case the reference has been made by the Assessing Officer u/s.55A(b)(ii) of the Act, in our considered opinion such action of Assessing Officer was well within the parameters of the spirit of the section which empowers the Assessing Officer to make a reference to DVO i.e. “in any other circumstances which he thinks that it is necessary to refer the matter to the DVO” and, therefore, in the present case, the action of Assessing Officer in making reference to DVO while not accepting the valuation shown by the assessee on the basis of the registered valuer’s report was well permissible under the law. - Decided against assessee.

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• 2016 (6) TMI 491
  Reopening of assessment - over invoicing of the purchase - Held that:- Order of assessment dated 30.12.2010 did not make any disallowance or addition on over invoicing of the purchase. Thus, the Assessing Officer, ofcourse without citing reasons, accepted the explanation of the assessee regarding the sale and purchase of goods in question. With this background, if we revert back to reasons recorded. It is this very issue which the Assessing Officer now wants to reopen by exercising powers under Section 147 of the Act. In the reasons recorded, he has stated that the assessee purchased goods worth 80.51 lacs from a sister concern which was purchased by the seller for 49.01 lacs and, therefore, there was over invoicing of the purchase to the extent of 31.49 lacs. He, therefore, wanted to disallow such sum of 31.49 lacs under Section 40A(2)(b) of the Act. The attempt on part of the Assessing Officer is, thus, clearly based on change of opinion, which would simply not be permissible. - Decided in favour of assessee

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• 2016 (6) TMI 490
  Reopening of assessment - Eligibility of claim of provisions for bad and doubtful debts under Section 36(1)(viia) - Held that:- Clearly the issue of the petitioner's claim for provision for bad or doubtful debt came up for discussion during the original assessment proceedings and the assessee made a detailed explanation why such claim should not be disallowed. The Assessing Officer in the scrutiny assessment made no disallowance and thus, accepted the explanation of the assessee. It is a different matter that the Assessing Officer did not make any reference to this aspect in the order of assessment. In case of Gujarat Power Corporation Ltd. vs. Assistant Commissioner of Income Tax reported in [2012 (9) TMI 69 - Gujarat High Court ] wherein held in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition Double claim of brought forward depreciation - Held that:- Assessing Officer made no disallowance on the said claim of unabsorbed depreciation of Tapi Bank of 8.28 lacs in the original assessment. Quite apart from this, we do not see any material, on the basis of which, the Assessing Officer asserts that the brought forward loss of 28.58 lacs includes the unabsorbed depreciation of 8.28 lacs. The two are independent separate figures. In fact, it was pointed out by the assessee in the communication dated 30.04.2010 it was a sum of 7.98 lacs of loss of Tapi Bank which was included in the brought forward loss of 28.58 lacs and which the assessee upon noticing error surrendered. Additionally we also do not find any failure on part of the petitioner to truly and fully disclose all material facts necessary for assessment, principal condition required to be satisfied for reopening of the assessment beyond the period of four years. On all counts thus, the petition must succeed

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• 2016 (6) TMI 489
  Registration u/s. 12A - whether in view of amended Section 2(15) of the Act, restricting the definition “charitable purpose”, by excluding carrying on any trade, commerce and business in receipt of an amount in excess of 25 lakhs would by itself entitle the Director of Income Tax to cancel a Registration under Section 12AA (3) of the Act? - Held that:- Circular No.21 of 2016 clearly provides that mere receipts on account of business being in excess of the limits in the proviso would not result in cancellation of Registration granted under Section 12AA of the Act unless there is a change in nature of activities of the institution. Admittedly, there is no change in nature of activities of the institution during the subject Assessment Year. The further submission on behalf of the Revenue that looking at the quantum of receipts on account of commercial activities, it is unlikely/ improbable that in the subsequent Assessment Years, the receipts would fall below 25 lakhs and therefore, the Commissioner is entitled to cancel the Registration. The aforesaid submission made on behalf of the Revenue is based not on facts as existing but on probability of future events. We are unable to accept the submission based on clairvoyance. Further, we are unable to understand what prejudice is caused to the Revenue since whenever the receipts on account of commercial activities is in excess of the limits provided in proviso to Section 2(15) of the Act, the Assessing Officer is mandated/ required to deny exemption under Section 11 of the Act as provided in Circular No.21 of 2016 dated 27th May, 2016. Accordingly, the issue stands covered in favour of the Revenue by virtue of Circular No.21 of 2016. In view of the issue being covered by the CBDT Circular No.21 of 2016, no grievance against the impugned order can be made by the Revenue.

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• 2016 (6) TMI 488
  Addition on account of carriage inward expenses - Held that:- AO before disallowing the expenses has failed to consider the claim of the assessee of such expenses in the earlier years to arrive at the view whether the expenses claimed are more or less. The AO has not pointed out any flaw in the books of accounts. The AO should have verified these expenses with regard to the purchase claimed by the assessee. We also find that the vouchers in support of the expenses are also placed. In our view, Revenue cannot resort to ad hoc and arbitrary disallowance of expenses for the purpose of arriving at the alleged undisclosed income especially when there is no incriminating evidence found against the assessee to establish that the assessee had in any manner, inflated the expenses and not accounted for the correct income. Therefore, an assessment cannot be made to disallow or add back expenses on ad hoc basis and that too, to make arbitrary additions to the alleged income as the onus is on the Revenue to prove the actual expenditure and then establish that the source of money spent for such expenditure had not been satisfactorily explained by the assessee. Therefore considering the totality of the case, we are of the considered view not to interfere in the order of ld. CIT(A) - Decided against revenue Addition on account of bogus purchase - Held that:- From the facts of the case, we find that the AO has disallowed the purchases merely on the ground of non service of notice u/s. 133(6) of the Act. In our view, the AO has failed to appreciate other circumstances of the case such as there was no flaw in the books of accounts, there was no adverse comments in the audit report duly certified by the Chartered Accountant, the confirmation received from the bank regarding the payment made to the aforesaid parties in response to the notice u/s. 133(6) of the Act. In the instant case, all the details relevant to the transaction for the purchase of the materials are very much placed on record. Therefore, in our considered view, merely notice issued u/s. 133(6) of the Act cannot be the sole ground for making the disallowance - Decided against revenue Addition on account of bogus sundry creditors - Held that:- AO in the instant case has failed to verify the payment made to the parties through banking channel from the party. In support of payment, the assessee has submitted the bank statement which is placed on pages 143 to 172 of the paper book. Ld. DR has also failed to bring anything contrary to the finding of Ld. CIT(A), the PAN of the assessee was very much available to the AO and the AO failed to reconcile the amount of creditor’s by way of issuing notice u/s. 133(6) of the Act to the AO having jurisdiction over the party. The AO in the instant case has treated the balance of the party as cash credit merely on the ground that the notice issued u/s. 133(6) of the Act was returned as unserved. The AO has not rejected the purchase bill as submitted by assessee at the time of framing of assessment under consideration. The order of AO is silent about the copy of the ledger and confirmation of account by the party submitted by the assessee. Therefore, in our considered view, the amount of credit balance as appearing in the ledger of the party cannot be regarded as unexplained cash credit. - Decided against revenue

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• 2016 (6) TMI 487
  Addition under the head loss on derivatives - Held that:- The right of the parties to enter into transactions according to their free will and choice has always been protected, the only rider being that both the professed intention and the real intention should be the same. Any transaction in which the professed intention and the intention gathered from the documentation are the same must be considered to be genuine. In the present case the AO disallowed the set off of loss in question not on the basis of any incriminating documents or bringing any adverse evidence on record, but with the observation that the transactions failed to satisfy the test of human probability and the objectives of the transactions was tax evasion. The AO did not doubt the genuineness of the transactions carried out by the Assessee which resulted in the loss. Even in the remand report filed before CIT(A), the AO accepted the veracity of the documents filed by the Assessee in support of the loss but has ignored the loss only on the ground the transactions were colourable and sham device to avoid tax payable on profit on sale of land. This conclusion in the light of the decision of the Hon’ble Supreme Court in the case of Vodafone (2012 (1) TMI 52 - SUPREME COURT OF INDIA ) cannot be sustained. Consequently, the CIT(A) was fully justified in deleting the addition made by the AO and directing the loss to be allowed to be set off as claimed by the Assessee - Decided against revenue Treatment to loss - genuinity of loss - speculative loss which was allowed to be carried forward for set off against speculative income in future as per law - Held that:- The transactions of purchase and sale of shares carried out by the Assesssee were genuine and real. The loss suffered by the Assessee in such trading was also genuine. The transactions were however speculative in nature in accordance with Sec.43(5) of the Act and the loss in question was speculative in nature requiring special treatment in view of Explanation to sec.73 of the Act. Since the transactions were genuine and proved as real by the assessee, the observation of the assessing officer that the same were Sham is bad in law and is contrary to facts. The assessee has suffered losses of 37, 95,659 on transactions on shares entered into electronically screen based transaction in a recognized stock exchange, i.e. BSE and NSE. The particulars supporting and evidences were filed during the course of hearing before the assessing officer. The copy of letter dated 7th May, 2009 submitted to the assessing officer along with the copies of the above stated supporting(s) on the losses on shares, was duly filed by the Assessee before the CIT(A). These documents were neither disputed or disbelieved by the AO. In such circumstances the conclusions of the AO in our view were rightly held to be unsustainable by the CIT(A). The CIT(A) was fully justified in his conclusion that the loss cannot be regarded as sham and had to be regarded as real but treated as speculative loss deserving special treatment in terms of set off in accordance with Explanation to Sec.73 of the Act. We find no grounds to interfere with the order of the CIT(A) - Decided against revenue Disallowance u/s 37 - AO held that the assessee has failed to prove rendering of services by the two ladies who are also wife of the partners. Hence in absence of evidences of rendering of services by the said brokers the expenses was not allowed as it failed to satisfy the test of section 37(1) - Held that:- In the present case, evidence regarding the nature of services rendered by the recipient of commission has not been placed on record by the Assessee. The fact that the recipient of commission were wife of partners, the fact that the property that was purchased by the Assessee was in Mumbai are circumstances which go against the Assessee. As to how the property was identified by the recipient of commission, what is their expertise in the field of acting as intermediaries for purchase and sale of properties, whether the recipients have any past or future history of rendering similar services and earning income thereon are all relevant considerations, which ought to have been examined by the CIT(A) before allowing relief to the Assessee. In the given facts and circumstances of the case, we are of the view that it would be just and proper to set aside the order of CIT(A) on this issue and remand the issue to the AO for fresh consideration, with liberty to the Assessee to establish the ingredients necessary for claiming commission expense as allowable deduction. We make it clear that the burden to prove the ingredients necessary for claiming commission paid as allowable expense has to be established by the Assessee. The AO will afford opportunity of being heard to the Assessee before deciding the issue. Disallowance of co-ordination charges - Held that:- The law is well settled that any payment of commission should be for services rendered by the recipient of the commission. The Assessee to claim expenditure on account of commission has to prove that services were in fact rendered, by the recipient of the commission from the Assessee. The fact that the payment is made by account payee cheque or the fact that tax had been deducted and source or the fact that the recipient of commission has declared commission in his return of income and paid taxes thereon, the fact that there is an agreement for rendering services are all irrelevant considerations. In the present case, evidence regarding the nature of services rendered by the recipient of commission has not been placed on record by the Assessee. The observations that we have made in paragraph 23 of this order will equally apply to this ground also. The AO will afford opportunity of being heard to the Assessee. The burden will be on the Assessee to prove the nature of services rendered and all observations in paragraph-23 of this order will apply to this ground of appeal of revenue also.

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• 2016 (6) TMI 486
  Expenditure incurred and debited in the P 1,00,50,077/- under the head repairs and maintenance and the said expenditure created a new asset for the benefit of assessee for its trade. Therefore, we are of the view that the case laws as relied on by the assessee are distinguishable and do not apply to the facts of the case on hand. The expenditure incurred and claimed by the assessee is capital in nature and the assessee is not entitled to claim deduction as revenue expenditure. See Empire Jute Co. Ltd Vs. CIT reported in (1980 (5) TMI 1 - SUPREME Court) - Decided against the assessee.

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• 2016 (6) TMI 485
  Penalty levied u/s. 271C - short delay in remitting the TDS to the credit of Central Government - Held that:- We find that there is a reasonable cause established by the assessee for remitting the TDS belatedly to the credit of the Central Government account and therefore, we direct the Assessing Officer to cancel the penalty levied u/s. 271C of the Act.- Decided in favour of assessee.

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• 2016 (6) TMI 484
  Disallowance of claim for deduction being interest expenses - interest bearing funds were utilised for making investment in capital assets - Held that:- Undisputedly the fact is that the assessee is the business of “Mall cum Multiplex Activities, running of departmental stores, Food Court, retail chain, Cinemas, Club etc.” under the name and style of M/s SRS Ltd. The advance given was for the acquisition of a commercial complex to be constructed. The transaction ultimately did not take place and the assessee got back the advances. On these facts and circumstances, we are of the considered view that the advances were given for the purpose of business of the assessee. In our considered view, as advance was given for the purpose of business, no disallowance can be made under section 36(1)(iii) of the Act. - Decided in favour of assessee.

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• 2016 (6) TMI 483
  Assessment of income - capital gain v/s business income - Held that:- To clarify the position the CBDT had come out with a Circular No.6/2016. We are of the view that the above Circular should settle the controversy in favour of the Assessee, in the facts and circumstances of the case of the Assessee. We have already observed that the Assessee has been consistently maintaining two portfolio of shares one held as investments and the other held as stock-in-trade of business of dealing in shares. As far as the income on sale of shares held as investments is concerned, the Assessee has always been declaring such income under the head “Capital Gain” and the same has been accepted by the revenue in the past assessments. - Decided against revenue Transaction of shares - whether the STCG on transaction of purchase and sale of shares undertaken by the assessee during the previous year is to be assessed under the head ‘income from business’ as claimed by the revenue or income under the head ‘capital gain’ as contended by the assessee? - Held that:- The income in question has to be assessed under the head “Short Term Capital Gain” as declared by the Assessee Disallowance u/s 14A - Held that:- As far as disallowance of interest expenses under Rule 8D(2)(ii) of the Rules is concerned, we agree with the submission of the Assessee that the Assessee had own funds out of which it can be said that investments were made and therefore no disallowance of interest expenses ought to have been made. A perusal of Balance sheet of the Assessee as on 31.3.2008 will show that the Assessee had own funds of 34.84 Crores and investment were acquired at cost of 27.97 Crores. Therefore the disallowance of interest expenses of 16,04,669/- is directed to be deleted. As far as disallowance of other expenses under Rule 8D(2)(iii) of the Rules i.e., disallowance of other expenses is concerned income earned from investments and short term capital gains (against which no expenses have been shown) is almost 5 times from the business income against which all the establishment and other expenses have been claimed. The Assessee had not claimed any expenditure even on short term capital gain which would have reduced income chargeable at the rate of 10% and increased the business income chargeable at maximum marginal rate of 30%. It cannot therefore be said that the revenue authorities were not justified in disregarding the disallowance made by the Assessee on its own by pointing out specific infirmity in the Assessee’s working of the amount disallowable under Section 14A of the Act. Keeping in mind the above findings of the CIT(A), we are of the view that the disallowance of other expenses as sustained by the CIT(A) of 11,42,424 under rule 8D(2)(iii) of the Rules is proper and calls for no interference. We however clarify that the amount already disallowed by the Assessee in the computation of total income should again not be added. In other words, the disallowance u/s.14A of the Act shall be only 11,42,424/-. - Decided partly in favour of assessee

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• 2016 (6) TMI 482
  Entitlement for claiming deduction u/s 80IB(10) - commercial area of the project exceeded 2000 sq.ft as laid down in section 80IB(10)(d) - Held that:- We find that the issue under appeal is covered by the decision of the Hon’ble Supreme Court in the case of CIT vs Sarkar Builders[2015 (5) TMI 555 - SUPREME COURT ] wherein held the housing project contemplated under sub-section (10) of Section 80IB includes commercial establishments or shops also. Now, by way of an amendment in the form of Clause (d), an attempt is made to restrict the size of the said shops and/or commercial establishments. Therefore, by necessary implication, the said provision has to be read prospectively and not retrospectively. As is clear from the amendment, this provision came into effect only from the day the provision was substituted. Therefore, it cannot be applied to those projects which were sanctioned and commenced prior to 01.04.2005 and completed by the stipulated date, though such stipulated date is after 01.04.2005. Thus High Court was correct in allowing the exemption to assessee in present case since this amendment is prospective and has come into effect from 01.04.2005, this condition would not apply to those housing projects which had been sanctioned and started earlier even if they finished after 01.04.2005 as that of assessee. Also see Veena Developers [2015 (5) TMI 193 - SUPREME COURT ] - Decided in favour of assessee.

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• 2016 (6) TMI 481
  Disallowance of sundry expenses - Held that:- We are of the considered view that the disallowance out of sundry expenses is quite reasonable as made by the CIT(A) keeping in view the facts and circumstance of the case, that the element of personal usage cannot be ruled out and as well vouchers are self made vouchers as set out above in preceding para’s. We donot find any infirmity in the orders of the CIT(A) with respect to disallowance towards the sundry expenses which was an reasonable estimate made by the CIT(A) keeping in view facts and circumstances of the case , which order of the CIT(A) we confirm. However, with respect to the disallowance of foreign travel expenses of 2,36,218/-, which has been enhanced by the CIT(A) from 1,74,520/- made by the AO , we have observed that no notice of enhancement of income was given to the assessee by the CIT(A) before enhancement of the income and in our considered view this issue needs to be set aside to the file of CIT(A) for fresh adjudication after giving proper notice of hearing to the assessee with respect to proposed enhancement of income and after giving proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. - Decided in favour of assessee allowed for statistical purposes.

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• 2016 (6) TMI 480
  Validity of the proceedings initiated under section 158BD - non incriminating material found at the time of search - AO has initiated and completed the assessment proceedings u/s 158BD / 144 of the Act on the basis of documents found at the time of search from the place of UIC group of companies where the search was conducted - Held that:- We find lot of force in the argument made by Ld. AR before us with regard to the satisfaction recorded as per the provisions of section 158BD of the Act. AO of UIC group was to record the satisfaction before initiating the proceeding under section 115BD of the Act. But in the instant case the AO having the jurisdiction over the assessee has recorded the satisfaction which is incorrect as per law. Taking the consistent views in the decisions of Hon ble Supreme Court in the case of Manish Maheshwari (2007 (2) TMI 148 - SUPREME COURT OF INDIA ) and the judgment of Hon ble Gujarat Hon ble High Court in the case of Champakbhai Mohanbhai Patel (2014 (2) TMI 1168 - GUJARAT HIGH COURT ) we reverse the orders of Authorities Below - Decided in favour of asseessee

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• 2016 (6) TMI 479
  Denial of exemption u/s.54EC of the Act investment in REC capital gains bonds falling in two financial years - Held that:- On combined reading of both the provisions, the legislative intent in the subsequent amendment is to restrict the investment of 50,00,000/- to one financial year only. There was ambiguity and confusion on interpreting the provisions as the Commissioner of Income Tax (Appeals) examined the issue on the interpreting the word "any" referring to dictionary meaning because there was no certainty was visualized considering the provisions, CBDT circulars and facts of the case. The Assessing Officer tried to make a distinction of provisions for restricting investment of 50,00,000/- only in one financial year. The assessee has invested in two installments falling in two financial years and availed tax exemption. Amendment of provisions of Sec.54EC in Finance Act, 2014 are prospective and apply from 01.04.2015 effective from assessment year 2015-16 onwards. Thus we direct the Assessing Officer to delete the addition and allow the grounds in favour of the assessee.

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• 2016 (6) TMI 478
  Reopening of assessment - Adoption of the income at the returned figure as against the income returned on the basis of the assessment completed u/s. 143 - Held that:- The action of the AO in treating the lease transactions and re-working the lease/ finance incomes has become final. Consequently, effect in the later year of 2006-07 was also upheld. Assessee in this year has not challenged the AO’s order u/s. 143 as it is in tune with the stand taken by AO in AY. 2005-06 and no prejudice was caused to assessee. Even otherwise, AO is not entitled to review his own order to come to a different conclusion on the same set of facts. In view of this, the proceedings initiated u/s. 147 are bad in law. Moreover, as rightly pointed out by the ITAT in earlier year, those issues were also confirmed by CIT(A) and ITAT in earlier years. Therefore, AO cannot differ from those findings. In view of this, to the extent of reopening of the assessment, we are agreeing with the Ld. CIT(A) and hold that the reopening of assessment is bad in law. Consequently, the order u/s. 143(3) gets restored. AO is directed to examine the order u/s. 143(3), whether the same is in tune with the directions/findings given in AY. 2005-06 and AY. 2006-07. With reference to quantification of financial leases after adjusting the so called claim of depreciation, in case the order u/s. 143(3) is on similar lines, no action is required. Otherwise, AO is directed to pass necessary modification orders u/s. 154/155 in this year also so that there is no double taxation or double allowance of claims/amounts involved. With these observations, Revenue’s appeal is considered partly allowed.

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• 2016 (6) TMI 477
  Disallowance on account of insurance premium on two new vehicles - Held that:- In our considered opinion, the insurance claim of the assessee is not in respect of already existing assets but is in respect of purchase of two new motor vehicles. As per the Motor Vehicle Act, no vehicle is allowed to ply on the road without the insurance cover. Therefore, without the first insurance, it cannot be said that the vehicle has been put to use. Therefore, the first insurance premium paid would go to increase the cost of the vehicle and, therefore, the same has been treated as capital expenditure. Addition u/s 41 - Held that:- We have carefully considered the orders of the authorities below. We find that the additions have been made by the A.O only because he found no transaction done in the accounts of the impugned creditors. In our considered opinion, this cannot be a sufficient cause for holding that there is a remission or cessation of liability. Since there is no categorical finding by the A.O that there is a remission or cessation of liability, we decline to interfere with the findings of the ld. CIT(A) Disallowance u/s. 40(a)(ia) - Held that:- D.R. could not controvert the factual findings made by the ld. CIT(A) nor the ld. D.R. could point out any factual error in the findings of the ld. CIT(A). Since this is a case of reimbursement of expenditure, we decline to interfere with the findings of the ld. CIT(A). For the sake of completion of the adjudication, we find that no additions on this account have been made in earlier assessment years nor any addition is made in subsequent assessment year. Therefore, on identical set of facts, when the law is the same, rule of consistency prohibits such action of the A.O. We draw support from the decision of the Hon’ble Supreme Court given in the case of Radhasoami Satsang [1991 (11) TMI 2 - SUPREME Court ] Expenditure in relation to Trade Mark Registration - revenue v/s capital expenditure - Held that:- The assessee reiterated what has been stated before the lower authorities. At the very outset, we have to state that the expenditure in question has not been incurred for acquisition of any capital asset as such. The expenditure has been incurred for carrying out the business activities of the assessee as registration of the trade mark is essential so as to secure that the competitors do not infringe the rights of the assessee. Further, it is also an undisputed fact that the impugned payments have not been made to the Government but to professionals in their capacity as advisors.

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• 2016 (5) TMI 1273
  Assessment under Section 153A - whether the ITAT was correct in concluding that there had to be incriminating material recovered during the search qua the Assessee in each of the years for the purposes of framing an assessment under Section 153A of the Act? - Held that:- It is not in dispute that in respect of the Respondent Assessee for the AYs in question the initial assessment proceedings took place under Section 143(3) of the Act. Thereafter they were sought to be reopened by issuing notice under Section 147 of the Act and re-assessment orders were passed under Section 147 read with Section 143(3) of the Act. During both the aforementioned proceedings the question whether the gold and silver utensils were the capital assets or personal effects of the Assessee was examined. They were held not to be the personal effects. It has been noticed by the ITAT in the impugned order that for the AYs in question no incriminating material qua the Assessee was found. See CIT v. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ] the Court is of the view that the impugned order of the ITAT suffers from no legal infirmity and no substantial question of law arises for determination.

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• Customs

• 2016 (6) TMI 506
  Imposition of penalty on CHA - Section 117 of the Customs Act 1962 - Difference in number of ladies stitch suits - Held that:- the provisions of section 117 which provides for imposition of penalty on any person who contravenes any provision of the Act or asserts any such contravention and fails to comply with any provisions of the Act. In the present case there is no finding by Commissioner (A) that the appellant abetted with exporter so as to intentionally declare the excess number of ladies suits or as to allow the exporter to claim excess drawback. This seems to be a clear case of human error, wherein 977 suits were mentioned in the EDI as 1977 suits. The said factor would admittedly be incapable of being termed as abetment. As such by extending the benefit of doubt to the appellant who is a CHA only, the imposition of penalty of 50,000/- is aside. - Decided in favour of appellant with consequential relief

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• 2016 (6) TMI 505
  Period of limitation - SCN issued beyond the mandatory period of 90 days from the date of the receipt of the offence report - Regulation 20 (1) of the CBLR 2013 - Revokation of CHA licence and forfeiture of bank guarantee - Held that:- it is plain that the SCN issued on 17th June 2014 under the CBLR 2013 was well beyond the period of 90 days from 25th October 2013. In light of the legal position explained by this Court in HLPL Global Logistics Pvt. Ltd. v. The Commissioner of Customs (General) [2016 (5) TMI 1238 - DELHI HIGH COURT] the time limit as prescribed in Regulation 20 (1) of CBLR 2013 is sacrosanct and the failure to adhere to the said time limit would invalidate any action taken against the Petitioner in terms of Regulation 20 (1) of the CBLR 2013. Therefore, the impugned order passed by the Commissioner of Customs (General) revoking the licence of the Petitioner and forfeiting the whole amount of the bank guarantee furnished is hereby set aside. - Decided in favour of petitioner

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• Service Tax

• 2016 (6) TMI 516
  Denial of Service tax refund - Refund claim on THS charges, bills of lading charges, origin haulage charges, repo charges rejected on the grounds that same are not covered under Port Services as the service providers are registered under different category and proof of deposition of tax under port services was not produced - CHA Services as per OIO and description of goods not mentioned in the invoices issued by CHA. Held that:- the issue has been settled vide CESTAT judgments in the case of M/s. Shivam Exports, M/s. Mecshot Blasting Equipment (P) Ltd. And M/s. Shree Ram Industries Versus CCE Jaipur [2016 (2) TMI 259 - CESTAT NEW DELHI], M/s SRF Ltd. Versus C.C.E., Jaipur-I [2015 (9) TMI 1281 - CESTAT NEW DELHI] and M/s Suncity Art Exporters Versus CCE & ST, Jaipur- II [2014 (11) TMI 251 - CESTAT NEW DELHI]. Refund of Service tax - Cleaning activity, technical inspection and certification service - Held that:- appellant did not pressed this point, therefore, refund is not allowed. - Decided partly in favour of appellant

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• 2016 (6) TMI 515
  Refund claim - Period of limitation - Claim for the period from 01/10/2007 to 31/12/2007 was filed on 04.03.2008 - Held that:- it is found that the time limit to file refund application was extended vide Notification No. 32/2008 dated 18.11.2008. The claim pertains to the quarter 1.10.2007 to 31.12.2007 and the time limit upto 18.11.2008 was only two month for filing refund claim. It got extended to 6 months vide Notification No. 32/2008 dated 18.11.2008 but by the time this notification was issued, more than 6 months had elapsed from the end of the said quarter. Thus, the claim by the appellant was clearly filed beyond the time limit prescribed in the relevant notification. Supreme Court in the case of CCE Vs. Honda Siel Power Products Ltd. [2015 (10) TMI 356 - SUPREME COURT] has held that “it is trite that exemption notification are to be construed strictly and even if there is doubt, the same is to be give in favour of the department”. As the extension of time limit by the Notification No. 32/2008-ST does not come to the rescue of the appellant, the claim is clearly time barred. Allahabad High Court in the case of Commissioner of Central Excise Vs. Monsanto Manufacturers Pvt. Ltd. [2014 (4) TMI 505 - ALLAHABAD HIGH COURT] has held that “Once it is held that demand is time barred, there would be no occasion for the Tribunal to enquire into the merits of the issue….”. Accordingly, we refrain from discussion the merits of this case. - Decided against the appellant

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• Central Excise

• 2016 (6) TMI 514
  Maintainability - Demand of duty - Directions were given by Commissioner to Dy. Commissioner to challenge the same by way of filing of an appeal before the commissioner (Appeals) - Whether the Commissioner is required to direct “Such Authority” to apply to Commissioner (Appeals) for determination of such points arising out of the decision - Section 35 E (2)of Central Excise Act, 1944 - Held that:- it is found that there are conflicting judgments of the Tribunal on the said issue. Whereas in some of the decisions of the Tribunal, it has been held that Section 35 E (2) cannot be interpreted to mean that such directions are required to be given only to the adjudicating Authority or any other officer higher in rank than the Adjudicating Authority. On the other hand, there are Tribunal’s decisions laying down that if the directions are not given to the Adjudicating Authority, the provisions of Section 35 E (2) of Central Excise Act, 1944 stands violated, thus making the appeal filed by any other authority as not maintainable. As there are two decisions of the Tribunal, interpreted and the applicability of the Supreme Court’s decision in the case of CCE Vs. M.M. Rubber Co. [1991 (9) TMI 71 - SUPREME COURT OF INDIA] is different. Therefore matter needs to be resolved by the larger Bench. For the said purpose, we place papers before the Hon’ble President for constitution of a Larger Bench to resolve the following question of law : - “Whether in terms of the provisions of Section 35 E (2) of the Central Excise Act, 1944, directions to file the appeal are required to be given by the Commissioner only to the very same Authority, who adjudicated the case or the same can be given to any other Authority.”

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• 2016 (6) TMI 513
  Recovery of duty on assessable value and imposition of penalty - proposed adoption of the price declaration in the delivery note as the value of the grey fabrics - demand on grounds not imposed in the SCN - Held that:- in view of the decisions of Hon'ble Supreme Court in the case of Commissioner of Central Excise, Nagpur Versus M/s Ballarpur Industries Ltd [2007 (8) TMI 10 - SUPREME COURT OF INDIA], in the case of Saci Allied Products Ltd. Versus Commissioner of C. EX., Meerut [2005 (4) TMI 65 - SUPREME COURT OF INDIA] and in the case of Commr. of Central Excise & Customs, Surat Versus M/s Sun Pharmaceuticals Inds. Ltd. & Ors. [2015 (12) TMI 670 - SUPREME COURT], the impugned order cannot be sustained and is set aside. - Decided in favour of appellant

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• 2016 (6) TMI 512
  SSI Exemption - use of Brand/Trade mark or others - Exemption available to small scale units under exemption notification no. 08/2003 dated 1.3.2003 - denial of exemption as assessee used somebody’s else brand name in the excisable goods cleared - CIT(A) allowed the claim - Held that:- There is no dispute regarding the ownership of the trade mark “Superfix” which was assigned in the name of the Appellants by a deed of assignment dated 18.11.05 by the brand name owner M/s.Indofil Chemicals Co. Moreover, as rightly pointed out by the Appellants, registration of the trade mark/brand name with the trade mark authorities is not relevant for the SSI exemption as even in respect of an unregistered trade mark owned by any person exemption can be availed. The Adjudicating Authority is therefore in error in not properly considering the case laws cited by the Appellants to the effect that the ownership of the trade mark would be with them from the date of the deed of assignment. The Hon’ble Supreme Court in the case of Primella Sanitary Products (2005 (4) TMI 70 - SUPREME COURT OF INDIA ) held that as long as assignment stands the assessee using the brand name is eligible for the benefit of SSI exemption notification. - Decided against revenue

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• 2016 (6) TMI 511
  Calsiffication of Ladle Transfer Car (LTC) - Revenue intended to classify the product under Central Excise Tariff Heading No.8603 as self- Propelled Rolling Stock whereas the appellant classified the said product under Heading 8454 - Held that:- In an integrated steel plant, molten hot metal iron is produced in electric arc furnace. The molten metal is tapped into a ladle, which is placed on a car. The ladle in the said car moves on a monorail to a refining furnace, where further processes like mixing with other metal and sending it to casting section for further process is done As decided in case of Larsen & Toubro Ltd.[2000 (11) TMI 236 - CEGAT, KOLKATA ] ladle cars meant for receiving molten metal from a furnace is specifically mentioned in heading no.8454 - Demand set aside.

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• 2016 (6) TMI 510
  Determination of Assessable value - Valuation - excise duty on the sample bottles under Rule 8 of the Valuation Rules - whether the value of Re. 1/- adopted by the appellant in respect of the small bottles of 60 ml of Lens Care Solution is the correct assessable or the value has to be raised, by adopting the value of the full commercial bottle of 120 ml - appellants contending that the bottles of Lens Care Solution cleared by the appellants were required to be valued based on the price of comparable goods, i.e., half of the price of 120 ml bottles meant for retail sale Held that:- An identical issue was considered by the Tribunal in the case of Sun Pharmaceutical Industries Versus Commissioner of C. Ex., Surat-II reported (2004 (12) TMI 501 - CESTAT, MUMBAI ) and it was held that inasmuch as the smaller packs were being sold by the assessee, though they were meant for further free distribution by the distributors, the price at which the same were being sold represents the transaction value and is required to be adopted as the assessable value in terms of the provisions of Section 4. We further find that on appeal against the said decision by the Revenue, the Honble Supreme Court in the case of Commissioner of Central Ex. & Cus, Surat Versus Sun Pharmaceuticals Inds. Ltd. (2015 (12) TMI 670 - SUPREME COURT ) observed that in the absence of any allegation made by the Revenue that the price at which the samples meant for free distribution were being sold by the assessee to distributors was not the sole consideration, such consideration fulfills the requirement of Section 4 (1)(a) of Central Excise Act, 1944. The fact that physician samples were further given free of cost by the distributors as no price was charged by the distributors, the case cannot be held to be not covered by the provisions of Section 4 (1) (a) of the Act. The said argument of the Revenue would be fallacious and wrong reason. The transaction is between the assessee and their distributors at the price charged by the assessee from the distributors and what the distributors ultimately did with these goods is extraneous and cannot be the relevant consideration to determine the valuation of the excisable goods. In the present case also, we find that the Revenues entire case for enhancement of the price is based upon the fact that the distributors were giving the said packs free of cost, as a promotional scheme. Revenue has otherwise not doubted the fact that the consideration received by the assessee from the distributor is not the consideration or something more has flown back. In the absence of any such allegation much less any evidence, the ratio of law declared by the Honble Supreme Court is fully applicable. - Decided in favour of assessee

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• 2016 (6) TMI 509
  Allowability of Cenvat credit - Partially Oriented Yarn - used in manufacture of Polyester texturised yarn - Held that:- Once the polyester texturised yarn was cleared upto 31.03.2003 on payment of duty at concessional rate subject to the condition that the CENVAT credit of duty paid on POY used in the manufacture of polyester texturised yarn was not availed of, the question of admissibility of credit on POY contained in such polyester texturised yarn (which had been cleared on payment of concessional rate of duty upto 31.03.2003 and in product manufactured out of such polyester texturised yarn simply would not aise. Further once POY was used in the manufacture of polyester texturised yarn, which was cleared on concessional rate of duty subject to the condition that credit on POY was not taken, the question of taking credit on POY contained in certain waste arising in process of manufacture of polyester texturised yarn would also not arise. Nowhere Rule 9A of CENVAT Credit Rules, 2002 contains anything to the contrary. - Decided against the appellant

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• 2016 (6) TMI 508
  Period of limitation - Seeking correction of typographical/clerical error - preamble recorded in the CESTAT order suffers from obvious mistake – Held that:- the provisions of Section 35C(2) clearly reveals that this sub-section deals with rectification of mistake in the order and allows amendment of the order with a view to rectifying mistake apparent from the record. In the present case the appellant is not seeking any amendment to the order or rectification of any mistake in the order. Indeed there is no mistake in the order of the Tribunal which, as stated, disposed of Appeals No. E/2988/2007 and E/1093/2008. Correcting the mistake pointed out because Appeal No. E/1093/2008 did not arise out of order-in-original No. 21/10/Comm/RP/07 dated 13.8.2007 passed by Central Excise Commissioner, Rohtak (as recorded in the preamble part of the order) but admittedly arose out of order-in-original No. 10/2008 dated 28.2.2008 passed by Commissioner, Central Excise, Delhi-I, does not tantamount to amending the order which remains unaltered. Therefore, it is pointless to indulge in an elaborate discussion on the various contentions raised by Revenue to assert that the Tribunal cannot amend or rectify mistake in the order after six months, because, to repeat, no amendment of the order is being sought. – ROM applocation allowed

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• 2016 (6) TMI 507
  Benefit of notification no. 64/95-CE dated 16.03.1995 denied - exemption to specified goods from payment of duty - duty demand raised along with penalty - Held that:- We have seen the correspondence by the appellant dated 02.12.2003 addressed to the Range Superintendent intimating that they would be availing benefit of notification no. 64/95-CE. It is also not disputed that the benefit was being claimed while producing the certificate from the requisite authority which were being placed before the authorities. It is also further seen that the earlier order of the Tribunal was in favour of the assessee. As such it can be reasonably concluded that the issue was debatable and arguable and might have led the assessee to a bonafide belief. Otherwise also we note that the appellant had stated the entire facts to the Revenue and as such reasoning of the original adjudicating authority that the appellant knew that the benefit was not available to them and has wrongly claimed the same, cannot be appreciated. In view of the above we hold that the first show cause notice issued on 03.04.07 for the period June 2004-Feb 2006 is barred by limitation. The confirmation of the demand in respect of the said show cause notice along with imposition of penalty is set aside. As regards the second show cause notice, the Ld. Advocate agrees that the same is within limitation period and the issue on merits stands decided against them in the referred decision of Tribunal in the case of Ordnance Factory (2011 (12) TMI 401 - CESTAT, MUMBAI ). However, as we have already held that there is no malafide on the part of the appellant, we find no reason to impose penalty upon them. Accordingly, demand raised by the second show cause notice stands confirmed along with confirmation of interest, but penalty is set aside. - Decided in favour of assesee

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• CST, VAT & Sales Tax

• 2016 (6) TMI 504
  Non-production of 'C'-Forms - Demanding a higher rate of tax under the CST Act, 1956 due to the non production of 'C' Forms - Dealers were refused to issue 'C' Forms in the Union Territory of Puducherry - Held that:- Once it is found that the Prescribed Authority is the Authority of the State Government and once it is found that under Section 13(4)(e), a power is conferred upon the State Government to make rules prescribing the conditions, subject to which, a declaration under Section 8(4) could be obtained, it is futile to contend that one cannot look beyond Section 8(1) of the Act. The entitlement of a person to a C-Declaration Form cannot be determined solely on the basis of the provisions of Sub-Sections (1) and (4) of Section 8. The entire scheme of the Act, including the provisions of Section 9(2) and Section 13(4)(e) have to be looked into. The availability of different modes for the recovery of a tax due, is actually for the benefit of the State and not intended to benefit the assessee. Neither the assessee,nor the person to whom the assessee owes an obligation, can dictate to the State, the mode of recovery to be chosen by them. The power available to the State for the cancellation of the registration of a defaulting dealer, is actually in addition to the several modes of recovery available to the State. After all, the cancellation of registration does not result in the automatic recovery of tax due. The recourse to the revenue recovery proceedings may or may not yield the desired result, since it would depend upon whether the dealer has sufficient resources or not. There is also no impediment in law for the simultaneous adoption of more than one method of recovery. The appellants and petitioners are not entitled to the reliefs prayed for. Hence, the writ appeals and writ petitions are dismissed - Decided against the petitioners / assessee.

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• 2016 (6) TMI 503
  Exigibility of output tax - works contract or pure service contract - running Photo Studios - business of processing and supplying of photographs, photo prints and photo negatives - consideration of giving of input tax credit admissible against the output tax liability - Held that:- the question of liability to pay tax under the provisions of VAT Act, 2003 has been determined by the Hon'ble Supreme Court finally in the cases of the assessees only now on 30th January, 2015. If the claim for input tax credit and other deductions from the gross turn over on account of labour charges, etc., could not be made by them during the assessment proceedings which took place while this litigation was pending before the Hon'ble Supreme Court, the assessees cannot be non-suited to make such claim now, if otherwise it is admissible in accordance with the provisions of law. The impugned orders passed by the Assessing Authority do not reflect any such consideration by the Assessing Authority either on the basis of such claims made before the Assessing Authority or not. Therefore, while the levy of output tax is sustainable on the said activity now held to be a 'works contract' by the Hon'ble Supreme Court, the computation of net tax liability under the provisions of the VAT Act, 2003 has to be done afresh by the Assessing Authority, in accordance with the provisions of the VAT Act, 2003. The different claims of input tax credit, deduction of labour charges, franchise charge, exemption from Entry Tax on the purchases of materials, etc., require determination of questions of fact based on relevant evidence, returns and claims made or to be made by the petitioner. Therefore, the cases necessarily call for a remand of the proceedings to the Assessing Authority himself, allowing the petitioner to make such claims based on relevant evidence in accordance with law and the respondent Assessing Authority is expected to decide such claims of the petitioner on merits in accordance with law by passing a fresh speaking assessment orders in pursuance of the present remand of case made by this Court. - Petitions allowed by way of remend

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• 2016 (6) TMI 502
  Validity of Assessment order in Form VAT 305 and penalty order under Rule 25(5) of the A.P. VAT Rules dated 08.03.2016 - Unit shifted from Gaganpahad to Shivarampally - Rejection of tax deferment amount and demand of duty - Violation of conditions of eligibility certificate - not awaited for clarification from the Industries Department. Held that:- the fourth respondent had sent a letter to the third respondent informing him of all the facts with regards the present case including violation of condition No.5 of the Final Eligibility Certificate by the petitioner; the fourth respondent had proposed cancellation of the Final Eligibility Certificate; in view of the proposals from the fourth respondent, the third respondent would take necessary action regarding the Final Eligibility Certificate by following the due procedure of law as early as possible; and the petitioner’s representation would be disposed of within three months. As the petitioner’s entitlement under the Final Eligibility Certificate is only for deferment of tax, we see no reason to interfere with the impugned assessment order. It would suffice if respondent Nos.1 and 2 are directed not to take any coercive steps for recovery of the tax due, under the impugned assessment order, for a period of four (4) months from today. As the order of penalty was passed because of the petitioner’s failure to comply with the conditions of the Final Eligibility Certificate, which issue is now under consideration of the third respondent, we consider it appropriate to set aside the impugned order of penalty. - Petition disposed of

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• 2016 (6) TMI 476
  Doctrine of mutuality - Dealer - Liability to pay VAT / Sales Tax - Tribunal decided that Calcutta Club Limited, was not liable for payment of sales tax under the West Bengal Sales Tax Act, 1994 - sale of food and drinks to the permanent members - deeming fiction - Held that:- the controversy that has arisen in this case has to be authoritatively decided by a larger Bench in view of the law laid down in Cosmopolitan Club (2008 (9) TMI 540 - SUPREME COURT OF INDIA) and Fateh Maidan Club (1998 (9) TMI 581 - SUPREME COURT OF INDIA). We are disposed to think so as none of the judgments really lay down that doctrine of mutuality would apply or not but proceed on the said principle relying on the earlier judgments. It is desirable that the position should be clear. For the aforesaid purpose, the matter should be referred to a larger Bench and for the said purpose. - Matter referred to larger bench.

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• Indian Laws

• 2016 (6) TMI 501
  Seeking release from the sentence order and fine imposed - Seizure of 91 bags of Ganja weighing 990 Kg - Contradicting statements of witnesses - Held that:- it is found that apart from PW 1 and PW 4 none of the witnesses have stated about the manner in which sample was drawn. Whereas PW 1 says that samples were drawn from the two packets i.e. top and bottom one, PW 4 generally says that samples were drawn from 3-4 packets. The fact remains that only one sample was sent for testing which tested positive. PW 1 deposed that all the bags were of different sizes and only one sample was sent to the Forensic Science Laboratory, it would be difficult to conclude that the Appellants were in possession of commercial quantity of Ganja and liable for conviction under Section 20-C of the NDPS Act, when in the circumstances of the case, there is no conclusive material that all the bags which had been recovered contained Ganja and nothing else. Therefore, the conviction of Appellants can only be maintained under Section 20 (ii) B of the NDPS Act for which sentence of eight years which has already been undergone by them would be sufficient enough. The fine of 1,00,000/- (One lac) imposed upon the Appellants by the impugned judgment is waived. - Appeals dismissed with modification

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