TMI Tax Updates - e-Newsletter
June 16, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Fee for belated TDS returns u/s 234E - prior to 1.6.15 there was no enabling provision u/s 200A for raising demand towards levy of fees -Tri

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Articles

1. SC upholds plea of revenue neutrality in case of captive consumption to set aside invocation of extended period

   By: Bimal jain

2. Finance Act, 2015- Single Member Bench (SMC) of ITAT - more scope is desirable for disposal of cases by SMC benches.

   By: DEVKUMAR KOTHARI

News

1. GST Update 3 - GST threshold

2. GST Update 2 - Bill on gst referred to select committee

3. GST update 1 - FM sticks to April deadline for gst

4. Suggestions for improving Gold monetisation Scheme by delegation of the Commodity Participants Association of India.

5. Index Numbers of Wholesale Price in India (Base: 2004-05=100)Review for the month of May, 2015

6. RBI Reference Rate for US $

Notifications

Customs

1. 30/2015 - dated 12-6-2015 - ADD

Continuation of anti-dumping duty on imports of Nylon Tyre Cord Fabric (All grades) for a period of 5 years unless revoked, superseded or amended earlier.

DGFT

2. 11 /2015-2020 - dated 15-6-2015 - FTP

Provision for Import, auction/sale and re-export of rough diamonds in Special Notified Zone (SNZ) notified - New Para 4.49 in FTP 2015-20.

Highlights / Catch Notes

Income Tax

• Demanding Fees for TDS Defaults u/s 234E Was Unenforceable Before June 1, 2015, Due to Lack of Provision.

  Case-Laws - AT : Fee for defaults in furnishing TDS statements / TDS returns - Levy of fees u/s 234E - in the absence of the enabling provision under section 200A, no such levy could be effected - as the law stood, prior to 1st June 2015, there was no enabling provision u/s 200A for raising a demand in respect of levy of fees under section 234E. - AT
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• License Fees and Management Services Not Subject to Section 44C Adjustments in Income Tax; No Disallowance Needed.

  Case-Laws - AT : Payment of 'license fees' and 'management services' - head office expenditure" - do not falls within the ambit and purview of section 44C and, accordingly, the nature of adjustment to the total income for the purpose of disallowance is not required - AT
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• Trust's 80G Exemption Denied Due to Trustee Appointment Based on Organizational Affiliation; CIT Lacks Interference Authority.

  Case-Laws - AT : Exemption u/s 80G(5)(vi) refused - Trustees appointed because they belonged to a particular organization - it is the prerogative of the assessee trust to choose its trustees and the CIT could not interfere with the same - AT
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• Project Incompletion Suppresses Profit; Income Not Assessable, Rendering Quantum Determination Academic Exercise.

  Case-Laws - AT : Suppression of profit -project was not completed - Once the income is not assessable, the question of determination of quantum of income from the said project is only academic - AT
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• Arranger's fee for loan arrangement not classified as managerial or consultancy service under IT Act, no TDS u/s 195.

  Case-Laws - AT : TDS liability u/s 195 - Payment towards "Arranger's fee" - activity of arranging of a loan - it cannot be termed as managerial or consultancy services within the meaning of section 9(1)(vii) - AT
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• Indian Head Office and Canadian Branch Transactions Not Classified as International Transactions in Transfer Pricing Case.

  Case-Laws - AT : Transfer pricing adjustment - whether the transactions between the head office in India and branch office in Canada can be considered as international transactions, even though the assessee inadvertently reported the same so as a matter of abundant caution? - Held No - AT
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• Dispute Over Deduction Amount Calculation u/s 80-IB(10) of Income Tax Act, Entitlement Uncontested.

  Case-Laws - AT : Eligibility for deduction u/s 80-IB(10) - additional income - there is no dispute that the assessee had made a claim of deduction 80-IB(10) and the question is only about quantification of the deduction and not the deduction itself - AT
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Service Tax

• Appellant must submit more evidence to prove customer collections were contingency deposits, not service tax, per case requirements.

  Case-Laws - AT : Non deposit of amount collected as service tax - it is necessary to lead more evidences by the appellant to substantiate their claim that the amount which was collected from the customers/clients were nothing, but contingency deposits and not service tax. - AT
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• Meditation Services Classified Under Health and Fitness for Tax; Enhances Physical Wellness by Promoting Inner Peace.

  Case-Laws - AT : Health and fitness services - Meditation services - The argument that, Meditation does not induce any physical well-being is erroneous, inasmuch as that by undergoing meditation course, an individual will definitely be physically well as he is at peace with his inner soul, the fact that cannot be disputed by any one - AT
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Central Excise

• Duty Demand Set Aside for Transmission Assemblies in Tractor Manufacturing Due to Limitation Period.

  Case-Laws - AT : Duty demand - Captive consumption - Whether the Transmission Assemblies captively consumed in the manufacture of tractors of Engine Displacement Capacity (EDC) below 1800-CC- TAs came into existence in manufacture of Tractors by the respondent and the same are excisable goods - levy of duty confirmed - but demand set aside on the ground of period of limitation - AT
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Case Laws:

• Income Tax

• 2015 (6) TMI 443
  Non-deduction of TDS u/s 194H on discount given to the prepaid distributors - CIT(A) confirming the order of the AO in holding the assessee as 'assessee in default' u/s 201 - Held that:- Assessee has issued sale invoices of SIM cards to its distributors net of discount. Similarly relevant entries have been entered in the books net of discount. Discount or so called commission has not been separately paid to distributors, thus there is no payment of any income as emphasized in Tata Tele judgment(2015 (3) TMI 1023 - ITAT JAIPUR). What has been effected by way of these sale transactions is sale of service embedded or encrypted on SIM cards, and treating same as ‘Principal to Principal transaction’. In view of the facts, circumstances, rival submission and material available on record assessee is not liable for deduction u/s 194H. Therefore we reverse the orders of lower authorities on these issues and delete the demand. - Decided in favour of assessee.

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• 2015 (6) TMI 439
  Non deduction of tds - lease premium paid - CIT(A) deleted demand raised and interest under section 201(1) and 201(1A) respectively - Held that:- As relying on case of ITO vs.Shah Group Builders Ltd., [2014 (1) TMI 1497 - ITAT MUMBAI] impugned order of the ld. CIT(A) holding that the lease premium paid by the assessee to CIDCO not being in the nature of rent as contemplated in section 194-I of the Act, the assessee was not liable to deduct tax at source from the said payment and hence could not be treated as the assessee in default u/s 201(1) & 201(1A) of the Act. The appeal filed by the Revenue is accordingly dismissed. - Decided in favour of assessee.

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• 2015 (6) TMI 438
  Claim deduction u/s 80IA - whether the earlier year losses of the eligible unit can be set off against the profit of the said unit in this year, when the assessee has exercised to chose the initial assessment year from A.Y. 2009-10? - Held that:- As relying on case of M/s. Shevie Exports Vs. JCIT [2013 (5) TMI 16 - ITAT MUMBAI] we hold that the assessee’s claim for deduction u/s 80IA is allowable from the profits derived from the Windmill unit, starting from A.Y. 2009-10, which is the “initial assessment year” chosen by the assessee. The earlier year losses cannot be set off against the profits for eligible units in this year. - Decided in favour of assessee.

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• 2015 (6) TMI 437
  Fee for defaults in furnishing TDS statements / TDS returns - Levy of fees u/s 234E - Held that:- Adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. This intimation is an appealable order under section 246A(a), and, therefore, the CIT(A) ought to have examined legality of the adjustment made under this intimation in the light of the scope of the section 200A. Learned CIT(A) has not done so. He has justified the levy of fees on the basis of the provisions of Section 234E. That is not the issue here. - as the law stood, prior to 1st June 2015, there was no enabling provision u/s 200A for raising a demand in respect of levy of fees under section 234E. The issue is whether such a levy could be effected in the course of intimation under section 200A. The answer is clearly in negative. No other provision enabling a demand in respect of this levy has been pointed out to us and it is thus an admitted position that in the absence of the enabling provision under section 200A, no such levy could be effected. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234 E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee.

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• 2015 (6) TMI 436
  Declaration of income under the provision of Section 44BB - Held that:- Revenue of the assessee is effectively connected with PE in India is concerned, it is found that the Assessing Officer has already examined the effective connection of the Revenue of the assessee with the PE in India while holding that the income of the assessee is taxable under sec. 44DA of the Act. As noted that the ruling of AAR in the case of Geophzika Torun SP. GO. [2009 (12) TMI 4 - AUTHORITY FOR ADVANCE RULINGS] has been confirmed in the case of DIT vs. OHM Ltd. (2012 (12) TMI 422 - DELHI HIGH COURT). The said judgment was followed in the assessment year 2008-09 in the case of PGS Geophysical AS (2014 (7) TMI 723 - DELHI HIGH COURT ). In the light of above judgments held that for the relevant assessment year i.e. 2008-09, the assessee is entitled to declare its income under the provisions of sec. 44BB of the Act. The Learned CIT(Appeals) was thus justified in holding so. - Decided in favour of assessee. Mobilization/demobilization of Vessel outside India - Held that:- In view of the CIT & Another Vs. Atwood Oceanics Pacific Ltd. [2010 (5) TMI 453 - UTTARAKHAND HIGH COURT] payments mentioned above, we hold that the revenue of Rs. 2,81,23,166/- arising from mobilization/demobilization of Vessel outside India is taxable. - Decided against assessee. Levy of Interest - Held that:- Interest u/s 234B & 234C is not chargeable, since assessee is a non-resident and as such tax is to be deducted at source by Indian party. The Hon’ble High Court in the case of DIT Vs. NGC Network Asia (2009 (1) TMI 174 - BOMBAY HIGH COURT ) and DIT Vs. Clifford Chance LLP [2009 (7) TMI 1215 - BOMBAY HIGH COURT] has decided issue in favour of assessee.

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• 2015 (6) TMI 435
  Deduction under section 10A - whether CIT(A) was justified in not entertaining assessee’s additional ground claiming exemption u/s 10A ? - Held that:- There is no dispute that assessee is a 100% EOU and has exported software services to outside India, assessee’s alternative claim u/s 10A requires to be considered. Since the exemption claimed u/s 10A was not raised before AO and though raised before the CIT(A), but, was not entertained by him, we consider it appropriate to remit the issue back to the file of AO for examining the same after considering all facts and materials on record and in accordance with the statutory provision. The assessee must be afforded a reasonable opportunity of being heard in the matter. - Decided in favour of assessee.

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• 2015 (6) TMI 427
  Plantation expenditures - ITAT allowed it as a revenue expenditure - Held that:- As relying on case of Hindustan Electro Graphites Ltd. Vs. CIT [1995 (12) TMI 67 - MADHYA PRADESH High Court ] wherein held that the expenditure did not result in any gain to the assessee and did not enhance the value of the establishment. The expenditure was intended to make the atmosphere pollution-free. The Tribunal did not record any categorical finding that the expenditure resulted in any appreciation of the assets or was unrelated to the business activities of the assessee. Plantation in such factory is necessary to avoid pollution of environment and create congenial atmosphere. The Tribunal disallowed the expenditure on wrong premises. The amount expended was wholly and exclusively for the purposes of the business and was not in the nature of capital expenditure or personal expenses of the assessee. The amount was deductible under section 37 - Decided against revenue. VRS payments - ITAT allowed it as a revenue expenditure - Held that:- As relying on case of Commissioner of Incometax Vs. Simpson and Co. Ltd. (1996 (6) TMI 12 - MADRAS High Court) which was also considered by the learned Tribunal, wherein held, that the amount paid to employees under the Voluntary Retirement Scheme was an allowable deduction as the expenditure was incurred on grounds of commercial expediency and the expenditure was laid out wholly and exclusively for purposes of the business of the assessee. - Decided against revenue.

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• 2015 (6) TMI 426
  Reopening of assessment - adoption of sale price - whether AO was justified in applying the same sale price to the land sold by the appellant, which was sold in a different year? - Held that:- There does not appear to be even any attempt at arriving at the real/actual rate. There are certain aspects which require consideration. For instance, the rate of Rs. 19,837/- per marla was in respect of the transaction in the year 2006-07 whereas the appellant's transaction was in the previous year. There is a possibility, to say the least, of the prices having increased during the year. There are certain other aspects which require consideration such as the fact that the appellant's lands were not on the main road but behind those which abutted the main road and the lands that abutted the main road fetched the price of Rs. 19,837/- per marla. The questions of law are, therefore, answered in favour of the assessee/appellant, only for this limited reason, namely, the authorities ought to have made an effort to ascertain the price rather than merely relying upon the rate at which the lands were sold in the subsequent year. Matter is remanded to the Assessing Officer, only for the limited purpose of ascertaining the rate at which the appellant could have sold his lands. - Decided in favour of assessee.

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• 2015 (6) TMI 425
  Addition on account of gift received - reopening of assessment - Held that:- As regarding sufficiency of reasons recorded, we find that at the time of issue of notice, the detailed reasoning is not required as detailed reasoning can only be given after hearing the assessee. The A.O. had definite information through Investigation Wing of the Department that assessee along with his brother had taken bogus gifts therefore, this reason itself is sufficient to ascertain the correct facts. At the time of issuance of notice, the A.O. only needs a prima facie view that some income had escaped assessment. As regards the Revenue had not made necessary efforts to serve notice in the ordinary course before taking resort to notice by affixture, we find that notice server has clearly submitted a report that notice could not be served despite various visits. It is not required to note down time and date of visit on every visit. If he submits a report regarding non service of notice, it is a sufficient compliance for making alternative arrangement of serving the notice. As notice was issued before sanction, is also devoid of merit as receipt of sanction by A.O. on 01.06.2001 by post does not mean that A.O. was not conveyed sanction telephonically or otherwise. Thus notice u/s 148 has been rightly served upon the assessee - Decided against assessee. It has been established that NRE account of donor Shri Subhash Sethi was being used for the purpose of making bogus gifts as the alleged donor has himself stated before Enforcement Directorate that he had not made any gift to any person in India out of his said NRE account as he has not remitted any money from abroad into this account. As noted by Ld. CIT(A) a letter dated 07.08.1995 written by alleged donor Shri Subhash Sethi denying any gift to any person in India finds mention in the order of Enforcement Directorate dated 27.06.2002. We further find that in the case of brother of assessee, Shri Ved Prakash Chug, similar addition has been made and was confirmed by Ld. CIT(A) vide his order dated 01.08.2003. As per the statement of Ld. A.R., he was not aware of the status of any appeal filed by Shri Ved Prakash Chug before the Tribunal wherein Ld. D.R. categorically stated that the issue had attained finality in that case as no appeal was preferred by Shri Ved Prakash Chug before the Tribunal. The appellant also could not establish as to what was the relationship between donor and appellant, and what was the occasion on which gift was alleged to have been given. In view of above facts and circumstances, we do not find any infirmity in the order of Ld. CIT(A) as regards merits of the case. Therefore, addition sustained by Ld. CIT(A) is confirmed - Decided against assessee.

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• 2015 (6) TMI 424
  Admission of additional evidence by the CIT(A) - whether in violation of rule 46A - Held that:- Powers of the Board, which have been vested in them for carrying out for the purposes of the Act, have to be exercised in such a judicious manner so as not to make any statutory provision redundant and nugatory. The rules made in exercise of these powers should also not be interpreted in such a manner as to narrow down, dilute or curtail the statutory powers, conferred on the CIT(A), by the provisions of s. 250(4) or (5) of the IT Act, 1961. Therefore, a harmonious interpretation of s. 250, even r/w r. 46A, cannot but mean that if facts of a case warrant that, before disposal of any appeal, CIT(A) is required to make further inquiries, either on his own or through the AO, he is not denuded of the powers to do so because of the provisions of r.46A. On a consideration of facts of this case, and in the peculiar facts of this case, in my view, the CIT (A) ought to have admitted the additional evidence which could not be, for genuine reasons, produced before the Assessing Officer. In view of these discussions uphold the well reasoned and well considered action of the CIT(A) and decline to interfere in the matter. - Decided against revenue. Addition of commission expenses - CIT(A) deleted the addition - Held that:- The elaborate reasoning for the relief so granted by the CIT(A) is quite valid and judicious. The additional evidences in support of these expenses were duly sent to the AO as well and his comments thereon are duly considered. The relief granted by the learned CIT(A) is in accordance with the accepted past history of the case and even the quantum of expenditure is lesser than similar expenditure incurred by the assessee in preceding assessment years. As regards the question of non deduction of tax at source from these payments, as noticed, from the details of payments furnished before me, none of these payments is in excess of the threshold limit resulting in TDS obligations. In view of these discussions, as also bearing in mind entirety of the case, approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.- Decided against revenue. Addition of office expenses - CIT(A) deleted the addition - Held that:- The disallowance was made by the AO, on purely estimated basis, as the evidences in support of the expenses were not produced during the course of the assessment proceedings. However, as we have noted earlier in this order, subsequently assessee submitted all the necessary evidences by way of additional evidence under rule 46 A, on which remand report was also called from the AO. It was in this backdrop and satisfied with the material on record that the CIT(A) has correctly granted the impugned relief. - Decided against revenue. Addition of losses of Jaipur and Delhi branches - CIT(A) deleted the addition - Held that:- After verification of these details and looking to the fact that the assessee (appellant) was maintaining regular books of account including the books for these two branches and all the details of purchase and sales are available, loss shown by the assessee (appellant) from these two branches cannot be denied and the same cannot be disallowed in absence of any evidence to shown the losses incurred by the assessee (appellant) from these two branches were not genuine or the documents/books maintained by the assessee (appellant) are not reliable. However, since the AO has not brought any such evidence on record except disallowing the losses in absence of verification, the same cannot be disallowed after it has been shown that the proper details of sales and purchases made by the assessee in these two branches are available - Decided against revenue. Addition of expenses of Pleasure Tours Varanasi branch and Agra branch - CIT(A) deleted the addition - Held that:- The disallowances were ad hoc disallowances for want of evidence but the all the requisite details were furnished at the assessment stage and no defects were pointed out in respect of the same. Also noted that all the evidences admitted as additional evidences under rule 46A were duly confronted to the AO and his remand report was called in respect of the same. In view of these discussions, as also bearing in mind entirety of the case, approve the conclusions arrived at on this issue as well and decline to interfere in the matter. - Decided against revenue. Disallowance, in respect of telephone expenses, car expenses and scooter running expenses - at l/6th by CIT(A) as against l/10th as is the accepted past history of the case - Held that:- The contention of the assessee is indeed correct. All along the disallowance has been restricted to l/10th of these expenses and there is no reason to deviate from that aspect of the accepted past history. Therefore, direct the AO to restrict the disallowance to l/10th of these expenses.

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• 2015 (6) TMI 423
  Payment of 'license fees' and 'management services' - Whether are in the nature of 'head office expenses' with the ambit of section 44C? - assessee here is an Indian branch of UK based, Lloyd's Register Asia, which in turn is a subsidiary of a holding company, Lloyd's Register UK. - Held that:- From the definition/illustration of the scope of head office expenditure, it is evident that it is in the nature of executive and general administration expenditure incurred by the assessee outside India. The nature of such expenditure has been illustrated to include certain kinds of expenditure. From the nature of expenditure as enumerated in sub clause (a) to sub clause (c) of the aforesaid Explanation and if compared with the nature of expenditure incurred by the assessee branch, then it will be seen that none of the expenditure under the head "license fees" falls within this category, even remotely. The payment of 'license fee' is purely for using of brand/trademark and other business intangibles, which are in the nature of intellectual property. Nowhere such types of expenditure fall within the scope of "head office expenditure" as illustrated in clause (iv). So far as general, technical and marketing support services are concerned, they again are neither in the nature of rent, rates, taxes, repairs, insurance, salary, wages, bonus, commission, etc., or travelling by any employee. Expenditure under the "License fee" have nothing to do with these kind and nature of expenditures. Thus, the entire payment of license fees do not fall within the ambit of section 44C as illustrated in clauses (a) to (c) of the Explanation and, therefore, the learned CIT(A) has rightly held that royalty or license fees expenditure cannot be treated as head office expenditure. Now coming to the nature of head office expenditure under clause (d) of the Explanation i.e. "such other matters connected with executive and general administration as may be prescribed". Such an exercise for illustrating the said expenditure under the said sub clause has to be prescribed by the CBDT. However, no such illustration has been given or prescribed by the Board, atleast nothing has been brought before us that CBDT has issued any Circular or clarification illustrating "such other matters connected with executive and general administration". Therefore, it cannot be held that the nature of expenses under the head license fees falls even under sub clause (d). Now coming to the "management charges", it can be noticed from the nature of expenses as elaborated in Schedule 3 of management services agreement dated 16.07.2003, prima facie they are specialized services under various heads as enumerated above in para 13. None of these services are in the nature of head office expenditure as illustrated in sub clause (a) to (d). For computing the deduction of head office expenditure, it is sine-qua-non that the nature of head office expenses must fall within the illustration given in clause (iv) of Explanation. The learned CIT(A) has held that the 50% of management fees is hit by section 44C, without even analyzing the nature of expenses, as how or how much they fall within the scope and ambit of nature of head office expenditure as defined in Section 44C. Thus, in our conclusion, neither the payment of "license fees" nor the "management charges", falls within the ambit and purview of section 44C and, accordingly, the nature of adjustment to the total income for the purpose of disallowance is not required.- Decided in favour of assessee.

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• 2015 (6) TMI 422
  Exemption under S. 80G(5)(vi) refused - as per CIT(A) there is no correlation between the objects of the assessee trust and its working except construction of Gaushala, the other objects remained on paper - Held that:- There is no legal provision that the assessee shall undertake all its objects, as mentioned in the trust deed, simultaneously. The first object of the assessee trust as detailed in clause (5) of the trust deed was construction of Gaushala and the CIT himself has admitted that the assessee trust has undertaken the activities with regard to the construction and maintenance of Gaushala. Thus the assessee may not undertake all of its objects as may be mentioned in the trust deed together, we are of the view that this reasoning of the learned CIT is liable to be rejected. Working of the trust was neither in accordance with the rules enumerated in the trust deed nor record has been kept - Held that:- There is no legal requirement of passing of resolution by all the trustees for every occasion. The working of the trust may be undertaken by the office bearers of the trust. We are of the view that so far as the activities of the trust were in accordance with the objects of the trust and were genuinely charitable in nature, the assessee is entitled to the benefit of Section 80G of the Act. Books of account and vouchers maintained and produced were not reliable and did not disclose correct state of affairs - Held that:- The assessee claim that it is factually incorrect that the final account submitted to the Department for the past many years did not disclose the correct state of affairs of the assessee is acceptable as the CIT could not point out a single entry or asset found outside the books of account of the assessee trust. We find that the CIT has pointed out some discrepancies in the accounts and the vouchers maintained and produced by the assessee. It is settled law that any discrepancy in the accounts or in the vouchers maintained by the assessee or in the application of funds of the trust could be examined by the Assessing Officer at the time of framing of the assessment. Trustees appointed because they belonged to a particular organization - Held that:- We are of the view that it is the prerogative of the assessee trust to choose its trustees and the CIT could not interfere with the same and should not have exceeded his jurisdiction in commenting upon the desirability or otherwise in the appointment of the trustees. Funds were not properly utilized and all recorded purchases and expenses in the absence of vouchers seem to be incorrect, therefore, money seems to have siphoned off - Held that:- There is no merit in this observation of the CIT and merely because some of the vouchers were not found complete, it could not be said that the activities of the assessee were not genuine or were not carried out in accordance with the objects of the assessee trust. It is not the case of the CIT that the assessee has undertaken some activity, which could be called not charitable in nature. Regarding the siphoning off the money, the same is a mere imagination on the part of the officer. We find that the assessee has filed a comparative chart of rates charged by M/s Jindal Mectec Private Limited for the work of constructing sheds in the assessee’s Gaushala, comparing the same with the rates charged by them from others. We find that M/s Jindal Mectec Private Limited is a concern of Shri Pawan Kumar Jindal, a trustee of the assessee trust and the assessee has been able to provide the G.R. numbers along with truck numbers which have transported the material to the site of the assessee’s Gaushala. The facts of this case do not suggest any siphoning off the funds for the benefit of any particular trustee or a group of trustees and, therefore, this reasoning of the learned CIT is devoid of any merit and, is accordingly rejected. The Department could not show that any one of the conditions for grant of benefit under Section 80G of the Act as detailed in the provision of Section 80G(5) read with Rule 11AA of the Income-tax Rules was not complied with or that the activities of the assessee were not genuinely charitable in nature. The CIT(Exemptions), Chandigarh (with whom jurisdiction is stated to lie) is directed to grant the benefit of Section 80G to the assessee trust and pass necessary order within fifteen days of receipt of the order of the Tribunal.- Decided in favour of assessee.

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• 2015 (6) TMI 421
  Suppression of profit - impounded material during the course of survey u/s 133A from the assessee premises - Whether the income from the project is to be assessed in the year under consideration? - CIT(A) delete the addition - Held that:- Out of the actual sale consideration of flats at Rs. 5,63,27,300/-, the amount received by the assessee till the end of the accounting year relevant to assessment year under consideration was only Rs. 52,95,000/-. Thus, the sale consideration received was not even 10% of the total sale consideration of the flats. Not a single sale deed was executed. From these facts, it is evident that the project under consideration was far from completion during the accounting year relevant to assessment year under consideration. The income from the project under consideration during the year under consideration was not assessable in this year, because the project was not completed. Once the income is not assessable, the question of determination of quantum of income from the said project is only academic. - Decided against revenue. Unexplained labour expenditure u/s 69C - CIT(A) delete the addition - Held that:- the profit and loss accounts found at the time of survey is only an estimated profit and loss account in which projected profit is worked out which the assessee expected to earn on the completion of the project. From the profit & loss account found at the time of survey, we find that on income side there was a credit of Rs. 5,63,27,300/- with the narration “contract work income”. The assessee is not doing any contract work, but this amount was the sale consideration which the assessee was expected to receive on the execution of sale deed of the flats booked till the date of survey. At the expenditure side, there is no debit for the value of the land or the opening work-in-progress. Considering the totality of these facts as well as the factual finding recorded by the CIT(A), we are of the opinion that the CIT(A) was fully justified in holding that in the absence of any corroborative evidences indicating the fact that assessee actually incurred more expenditure than what was shown in the books of accounts, no addition u/s 69C can be made. We, therefore, uphold the order of the CIT(A) with regard - Decided against revenue. Disallowance of the transportation exp. - CIT(A) deleted the addition - Held that:- CIT(A) has recorded the finding that the assessee had filed the relevant invoices issued by the parties to whom the payment of transportation charges have been made. The assessee has also deducted TDS from the payment of transportation charges. Thus, the CIT(A) was of the opinion that from these evidences the nature of the expenditure stands clearly explained. After considering the facts of the case and arguments of both the sides, we do not find any justification to interfere with the order of the CIT(A) - Decided against revenue. Unexplained investment in land - CIT(A) deleted the addition - Held that:- The issue whether the purchase price shown by the assessee at Rs. 7,31,000/- is the correct purchase price or not is not relevant in the year under consideration. The year under appeal before us is Assessment Year 2007-08 and the relevant previous year would be 01.04.2006 to 31.03.2007. Admittedly, the assessee purchased the said plot of land on 16.02.2006 which would fall in the Assessment Year 2006-07. We, therefore, hold that the issue of addition u/s 69 in respect of purchase of land as on 16.02.2006 cannot be considered in Assessment Year 2007-08. Therefore, any addition for alleged understatement of purchase price of plot purchased on 16.02.2006 cannot be sustained in Assessment Year 2007-08. With this remark, we hold that the deletion of addition by the CIT(A) for unexplained investment in the purchase of plot was fully justified - Decided against revenue. Disallowance of deduction u/s 80IB - CIT(A) deleted the addition - Held that:- The CIT(A) has treated this ground as infructuous as additions made to the income of assessee stand deleted and did not give any finding on merit. Thus, the Ground of the Revenue’s appeal is misconceived and the same is rejected being misconceived.- Decided against revenue.

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• 2015 (6) TMI 420
  Trading addition - CIT(Appeals) confirming the action of the Assessing Officer in applying a GP rate of 56.17% in export division - Held that:- The estimation made by the Assessing Officer appears to be on the higher side in spite of the fact that the ld CIT(A) has accepted the explanation may be to some extent which is not defined. In the facts and circumstances of the present case, no addition is called for when the explanation of fall in G.P. appears to be satisfactory. In the present case, the finding of the Coordinate Bench in A.Y. 2005-06 to 2007-08 are squarely applicable as no specific defect in purchase and sale has been pointed out by the Assessing Officer. In local sale, the G.P. had increased from 34.46% to 34.53% compared to preceding year. In export division, the GP was constant as shown in A.Y. 2007-08 @ 49.07% and in year under consideration @ 49.06%. Therefore, by respectfully following the decision of the Coordinate Bench, we delete the addition confirmed by the ld CIT(A). - Decided against assessee. Disallowance of commission - Held that:- In past, similar additions were made by the Assessing Officer, which has been either deleted by the CIT(A) or confirmed by the CIT(A) but finally the Coordinate Bench had confirmed a lump sum addition of Rs. 50,000/- in each year. The ld CIT(A) has specified the defects with reference to bills and not deduction TDS on commission payment but he is not allowed the assessee to explain the reasons for not deducting TDS. The discrepancy is specific and commission payment in this line of business is accepted in general as the handicraft emporiums generally pay the commission to the guides, taxi drivers, auto drivers. They come from outside and had dealing occasionally and it was not fair to pay commission in front of customers. It is just like a secret commission and a very short duration is available with the assessee to complete the formalities for paying commission. Therefore, there may be defects in the receipts of commission payment but it is a part and parcel of the business dealings. Therefore, we confirm the disallowance under this head at Rs. 1 lac out of total disallowance made by the Assessing Officer at Rs. 16,54,883/- - Decided partly in favour of assessee. Disallowance of employee’s contribution towards PF - the assessee paid PF on 21/5/2007 and 28/09/2007 whereas the due date was on 15/5/2007 and 15/09/2007, accordingly AO made addition U/s 36(1)(va) read with Section 2(24)(x) - CIT(A) confirmed the addition U/S 43B(b) - Held that:- We consider the issue after considering the argument of both the sides and the Hon’ble Rajasthan High Court decision in the case Jaipur Vidyut Vitran Nigam Ltd. (2014 (1) TMI 1085 - RAJASTHAN HIGH COURT) had decided that these payments are allowable U/s 43 of the Act even paid before due date of return. The assessee had filed return on 06/10/2008 whereas payments were made in the month of May and September, 2007 in accounting year itself, therefore, we delete the addition made by the Assessing Officer and confirmed by the ld CIT(A). Decided in favour of assessee.

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• 2015 (6) TMI 419
  TDS liability u/s 195 - Payment towards "Arranger's fee" payable to HSBC, Hongkong - whether such a fees paid to the arranger can be termed as "interest" within the meaning of section 2(28A) or "fees for technical services for service" within the meaning of section 9(1)(vii)? - Held that:- In this case arranging of a loan cannot be equated with lending of managerial services at all. It is also not in the nature of 'consultancy services' because, Arranger did not provide any advisory or counselling services. The Arranger was not involved in providing control, guidance or administration of the credit facility nor it was involved in day-today functioning of the assessee in overseeing the utilisation or administration of the credit facility. It was not in charge of entire or part of the transaction of arranging services, hence, it cannot be termed as managerial or consultancy services within the meaning of section 9(1)(vii). Accordingly, the Arranger fee cannot be held to be taxable u/s 9(1)(vii) also and therefore, no TDS was deductible on such payment. Thus, the finding of the ld. CIT(A) that the payment of "Arranger fees" entails deduction of tax at source u/s 195 is reversed and we hold that assessee was not liable to deduct TDS on payment of Arranger fee to HSBC, Hongkong. - Decided in favour of assessee.

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• 2015 (6) TMI 418
  Transfer pricing adjustment - whether the transactions between the head office in India and branch office in Canada can be considered as international transactions, even though the assessee inadvertently reported the same so as a matter of abundant caution? - Held that:- It is not permissible to make transfer pricing adjustment by applying the average operating profit margin of the comparables on the assessee’s universal transactions entered into with both the AE and non- AEs. As the entire exercise under Chapter-X is confined to computing total income of the assessee from international transactions having regard to the arm’s length price, there is no scope for computing the income even from non-international transactions having regard to the ALP. As the TPO has computed the transfer pricing adjustment qua all the transactions carried out by the assessee with reference to the base of ‘total costs’, also inclusive of costs relevant for transactions with non- AEs, we vacate the impugned order on this issue and restore the matter to the file of AO/TPO for recalculating the amount of addition of transfer pricing adjustment by taking into consideration the international transactions only under this segment to the exclusion of transactions with Canada Office and non-AEs. - Decided in favour of assessee for statistical purposes. Depreciation on building let out to some third party - whether should be excluded from the total operating costs? - Held that:- The direction given by the DRP for verifying and excluding the excess amount of depreciation has not been adhered to by the TPO/AO, which position is contrary to law. As such, we set aside the impugned order on this score and remit the matter to the file of the AO/TPO for passing an order in conformity with the direction given by the DRP. We want to make it explicit that we have not undertaken the exercise of examining any aspect of the actual amount of the excess depreciation liable for exclusion. The DRP has also simply directed the TPO to verify this aspect, and, then, exclude the excess amount of depreciation in determining the ALP of the international transaction. As such, the Officer is not only entitled but also duty bound to verify the correctness of the claim lodged by the assessee before excluding the excess amount of depreciation. Treatment of hypothetical interest on security deposits as income u/s 28(iv) - Held that:- It is amply clear that the direction given by the DRP for deletion of this addition has not been taken into consideration by the AO while finalizing the assessment. We have noticed above that the direction given by the DRP is binding on the AO in terms of section 144C(13). Adopting the discussion made above, we hold that the addition of Rs. 11.58 lac is not warranted because of the direction given by the DRP for the deletion of the addition. Transfer pricing adjustment towards interest on interest free loan given by the assessee to its AE - Held that:- Respectfully following the precedent for the AY 2002-03, we set aside the impugned order and remit this matter to the file of AO/TPO for a fresh determination of the transfer pricing adjustment, on the basis of the directions given by the Tribunal for such earlier years.

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• 2015 (6) TMI 417
  Reopening of assessment - non inclusion of sales consideration - Held that:- The assessee has not included the sale consideration of Rs. 26,84,940/- to one Shri Manish Jhunjhunwala vide agreement dated 02.06.2006, is never the subject matter of addition by the AO and once this is not the subject matter of addition, the reassessment proceedings initiated by issuing of notice u/s. 148 of the Act cannot survive because the very base for issuance of notice u/s. 148 of the Act goes. In view of the above decision of Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. (2010 (4) TMI 431 - HIGH COURT OF BOMBAY) and in Shri Ram Singh [2008 (5) TMI 200 - RAJASTHAN HIGH COURT] no contrary decision was pointed out by ld. Sr. DR, we respectfully following the decisions quash reassessment proceedings. The issue raised by assessee under Rule 27 of the Rules is allowed and initiation of reassessment proceeding is quashed. - Decided in favour of assessee.

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• 2015 (6) TMI 416
  Transaction of shares -`business income’ OR `capital gain’ - Held that:- From the break up of summary of capital gain, it is seen that the assessee’s investment in debt mutual funds is around 73% and also there is investment in venture funds. The investment in equity shares is approximately 27%. From this, it can be very well inferred that the assessee is mostly into long term investment activity. This is also coupled with other factors like, assessee has made investment solely from his own funds and not from any borrowed funds; he has managed his entire investment activity, through Fund managers / PMS. All these factors goes to show the intention of the assessee, which was to buy the shares for investment purpose and to sell the same to maximize the gain from such investments. Besides this, another very vital factor relevant in the assessee’s case is that, on similar nature of transactions, which fact has been noted by the AO in the assessment order itself that in the earlier years the department has accepted the gain from sale of shares to be assessed under the head `capital gains’ and such a view has been accepted under scrutiny proceedings passed u/s 143(3). Thus, on the facts and circumstances of the assessee’s case, we hold that the gain from transaction of shares by the assessee is to be assessed under the head `capital gains’ and not as `business income’. - Decided in favour of assessee.

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• 2015 (6) TMI 415
  Addition on account of long term capital gain - whether section 50C of the Act would be invocable? - Held that:- Index-II of the registered agreement reflects two values, one which is the value assessed by the stamp valuation authority for the purpose of payment of stamp duty, and the value on which the stamp duty has been actually paid, with the latter being higher. In such a situation, if the latter value is to be adopted as the deemed value for section 50C of the Act, it triggers the provisions of sub-section (2), inasmuch as the said value clearly exceeds the fair market value of the property adopted for the payment of stamp duty, inasmuch as the stamp valuation authority himself has stated the market value of the property at Rs. 4,37,20,550/- which is lower. Therefore, in such a situation, in our view, it was in the fitness of things that in order to justify invoking of section 50C of the Act, the Assessing Officer was required to compare the consideration stated in the agreement at Rs. 4,37,20,550/- with the value assessed for the payment of stamp duty, i.e. at Rs. 4,37,20,550/- as indicated in Index-II and not the amount of Rs. 4,80,00,000/-, on which stamp duty has been paid. Considered in this light, we therefore find that the addition of Rs. 42,79,000/- is not justified on the strength of invoking of section 50C of the Act. We accordingly set-aside the order of the CIT(A) and the Assessing Officer is directed to the delete the impugned addition of Rs. 42,79,000/-. Decided in favour of assessee.

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• 2015 (6) TMI 414
  Disallowance u/s 14A r.w. rule 8D - Held that:- In this case CIT(A) though upheld the applicability of Sec.14A of the Income tax Act, he has given direction to AO to look into the actual amount incurred for earning exempt income and recompute the same for the purpose of disallowance. Hence, the assessee’s grievance on the findings of the CIT(A) is misconceived. We do not find any infirmity in the order of the CIT(A) and the same is confirmed. - Decided against assessee. Addition u/s 68 - unaccounted cash credit - CIT(A) deleted the addition - Held that:- Genuineness of transaction cannot be said to have been proved by the confirmation letter filed by the assessee and thus, initial burden placed on the assessee is also not discharged. The finding of the CIT(A) that assessee has discharged the identity and capacity of the parties and genuineness of transaction is not borne out of records. In our opinion the judgment in the case of Orissa Corporation Pvt. Ltd. has no application because the facts in that case have a material effect with the credit worthiness and credibility of the creditors was not doubted in any manner. In this case inherent improbability to produce the creditor could be sufficient cause to reject the assessee’s claim even if simple statement of account of creditors was filed by the assessee. Genuineness of credit cannot be accepted merely because identity is established and amount received by cheque. Being so, in our opinion it is appropriate to remit the entire issue to the file of AO, for fresh consideration, with the direction to assessee to discharge the burden cast upon it so as to prove the identity and capacity of the parties, and the genuineness of the transaction. - Decided in favour of revenue for statistical purposes.

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• 2015 (6) TMI 413
  Disallowance of Interest Expenses u/s. 36(1)(iii) - Held that:- As decided in assessee's own case for previous AY's [2012 (2) TMI 476 - ITAT MUMBAI] held unless there is a finding that assessee's investment is not business activity and the funds are not utilized for the purpose of business, disallowance under section 36(1)(iii) does not arise. There is no disallowance under section 14A in this year as the dividend income was taxable. Therefore, the interest disallowance has to be considered under section 36(1)(iii). If there is income or loss under the head "capital gains", the interest disallowance under section 36(1)(iii) pertaining to the investment activity is also to be considered as deduction, while working out the capital gain. Accordingly, the assessing Officer is directed to examine the nexus with borrowed funds on which interests was claimed to the utilization of funds either in investment activity or in business activity and disallow amount accordingly under section 36(1)(iii) and consider whether it is allowable while working our capital gain etc. Thus issue in this ground is restored to the file of the Assessing Officer for fresh consideration after examining the facts and to decide according to law. Assessee should be given an opportunity to make submissions and furnishing the necessary details in this regard. - Decided in favour of assessee for statistical purposes

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• 2015 (6) TMI 412
  Disallowance under section 14A - Held that:- The straightway application of rule 8D in the case of the assessee by the lower authorities is not sustainable. Taking into consideration the overall facts and circumstances of the case, in our view, the expenses equal to 4 per cent. of the exempt income earned by the assessee would constitute reasonable disallowance and the same is restricted to that extent accordingly. - Decided partly in favour of assessee. Addition of amount to the closing stock - there is no tax implication even if the "inclusive method" prescribed in section 145A of the Act is followed as contested by assessee - Held that:- The assessee has not furnished working to show that the "net profit" remained the same under both the "inclusive method" and the "exclusive method". Since the assessee has followed the guidance note issued by the Institute of Chartered Accountants of India, it would be in a position to demonstrate the abovesaid fact before the Assessing Officer, i.e., the assessee could establish that there was no change in the income under both methods by furnishing necessary workings. Accordingly, we are of the view that the assessee should be given one more opportunity to demonstrate this fact. - Decided in favour of assessee for statistical purposes.

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• 2015 (6) TMI 411
  Application for registration u/s.12AA rejected - Held that:- No dissatisfaction with regard to the objects of the trust, which represents the other limb or aspect on which the ld. DIT(E)) is required to satisfy himself, has been expressed by him, nor any such reservation stands brought out before us during hearing. Under the circumstances, we, in view of the foregoing, are of the clear view that the denial of registration by the ld. DIT(E) is not sustainable both in law and in the facts and circumstances of the case. We, accordingly, set aside the impugned order, and direct acceptance of the assessee’s application. - Decided in favour of assessee.

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• 2015 (6) TMI 410
  Disallowance of bus maintenance and bus spares and consumables charges - CIT(A) restricted disallowance - Held that:- We do not find any reason to sustain the adhoc disallowance made by the Commissioner of Income Tax (Appeals). Thus, we delete the addition of Rs. 2,00,000/- made under the head bus maintenance, bus spares and consumables. - Decided in favour of assessee. Disallowance of bus hire charges - Held that:- It is not disputed that assessee hired vehicles from various parties and those vehicles were in turn used for transporting students of Sri Venketeshwara Engineering College, Sriperumbudur. In such circumstances, it cannot be ruled out that assessee has made payments to those parties for hiring buses. The assessee has returned receipts from the business of transportation of students at Rs. 57,05,083/-. The parties might not have responded to the letters issued by the Assessing Officer in view of strained relationship with the assessee. On this ground alone, the payments made to those parties for hiring buses by the assessee cannot be doubted. In these circumstances, we delete the disallowance - Decided in favour of assessee. Disallowance under section 40(a)(ia) - non deduction of tds - Held that:- Provisions of section 40(a)(ia) have no application in case the payments were made within the accounting year. Since the assessee has made the payments within the accounting year, the provisions of section 40(a)(ia) have no application.- Decided in favour of assessee.

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• 2015 (6) TMI 409
  Eligibility for deduction u/s. 80P(2)(a)(i) - assessee is a co-operative bank - revision u/s 263 - Held that:- As decided in CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot [2015 (1) TMI 821 - KARNATAKA HIGH COURT ] when the status of the assessee is a co-operative society and not a co-operative bank, the order passed by the AO extending the benefit of exemption from payment of tax 80P(2)(a)(i) of the Act is correct and such an order is not erroneous and therefore, jurisdiction u/s. 263 of the Act cannot be invoked. The Order u/s. 263 insofar as it relates to the deduction u/s. 80P(2)(a)(i) of the Act holding that assessee as a co-operative bank cannot be sustained and is hereby quashed. - Decided in favour of assessee.

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• 2015 (6) TMI 408
  Eligibility for deduction u/s 80-IB(10) - additional income - Held that:- Provisions of sec. 80-IB(10)(e) and (f) are not applicable to all the above transactions of the assessee but are applicable to the allotment and bookings done after 1/4/2010. In the case of Brahma Associates vs. Joint CIT reported in (2009 (4) TMI 215 - ITAT PUNE ) wherein it has been held that the assessee shall be eligible for deduction u/s 80-IB(10) insofar as there is compliance with the conditions of sec.80-IB(10) of the Act. Therefore, we confirm the finding of the CIT(A) that proportionate disallowance is to be made in respect of the transactions which have been made subsequent to the introduction of clauses (e) and (f) to sec. 80- IB(10) as well as the flats where there is violation u/s 80-IB(10)(c) of the Act. We find that sub-sec.(5) of sec.80A prohibits the allowability of any claim u/s 10A, 10AA or 10B or sec.10BA C or under chapter C of the Act unless and until the assessee had made such a claim in its return of income. In the case before us there is no dispute that the assessee had made a claim of deduction 80-IB(10) and the question is only about quantification of the deduction and not the deduction itself. In such circumstances, we are of the opinion that the assessee is eligible for deduction u/s 80-IB(10 of the additional income also. - Decided partly in favour of assessee.

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• Corporate Laws

• 2015 (6) TMI 428
  Charges of oppression and mismanagement - Sections 397, 398 read with Section 402 of the Indian Companies Act, 1956 - Reduction in shareholding from 50% to 30% fraudulently - No communication for AGM - Non payment of bonus or dividents - Illegally sale of property belong to company - Diversion / siphoned of company funds - Held that:- As per own admission by the Company, by way of showing the Petitioner's shareholding in the Annual Returns filed until 2012, this fact is very clear that the Petitioner was holding 1950 shares in the Company. It is needless to say that the admission is the best evidence against the party who makes it. In my opinion, the Respondents cannot be allowed to assert the fact that the impugned shares were transferred in favour of the Respondent No. 2 in 1976-77 by way of gift. In addition to the above, it is a well settled law that for a lawful transfer of shares the execution of transfer deeds, as provided in Section 108(1) of the Act, is a must, as held in the case of Manalal Khetan v. Kedar Nath Khetan [1976 (11) TMI 135 - SUPREME COURT OF INDIA]. As regards the limitation, it is an established proposition of law as held in the cases of Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad (dead) through L.Rs [2005 (1) TMI 409 - SUPREME COURT OF INDIA] that an act of oppression is a continuous wrong until it is brought to end by passing an appropriate order. The causes of action lastly arose in his favour in the year 2013 when he came to know that the company has not shown him as a shareholder. Therefore, the petition since is filed well within 3 years, it is well within the limitation. From the narration of the facts by the Respondents as stated in the preceding paras, it is evident that the Respondents have not disputed that the Petitioner initially was holding 50% shares. Subsequently, his shareholding was reduced to 36.1% for the reason that he had become an NRI. It is further admitted that the Petitioner was holding 1950 shares constituting 26.7% shareholding in the Company. However, as discussed hereinbefore, the Respondents have failed to prove the factum of gift of the said number of shares in favour of the Respondent No. 2. Their plea that these shares were gifted by the Petitioner thus has not been proved by the Respondents. Therefore, depriving the Petitioner from his shares with mala fide motive and for no valid reason, in my opinion, amounts to grave act of oppression. It is continuous wrong and is still persisting. In my opinion, this singular act of oppression is enough to grant appropriate reliefs to the Petitioner in this case. Based on the overall discussion above, I have come to the conclusion, in so far as to the allegation of illegal transfer of 1950 shares of the Petitioner in favour of the Respondent No. 2 is concerned, the Petitioner has succeeded to prove the same as an act of oppression. Although, this is a single act, yet looking to the seriousness of gravity the said act of oppression, the effect of which is still persisting, in my view, the Petitioner is entitled to the relief with respect to the impugned shares. The petition, therefore, is disposed.

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• Service Tax

• 2015 (6) TMI 442
  Banking and Financial services - Service tax liability on Leasing of equipments, hire purchase agreements , Business Auxiliary services - Securitization transactions - Collection Commission - Failure to deposit recovered amount as service tax under section 11D of the Central Excise Act, 1944 - Levy of service tax on penal interest , prepayment/termination charges & management fees - Held that:- From the ratio laid down by the Hon'ble Supreme Court in Sundaram Finance Ltd.'s case [1965 (11) TMI 123 - SUPREME COURT OF INDIA], it is crystal clear that the effect of transaction be determined from the terms of the agreement considered in the light of surrounding circumstances and the court has power to go behind the documents and to determine the nature of transaction whatever may be the form of the documents. An attempt has been made by us to analyze the true nature of the transaction between the Appellant and its customers from the agreements/documents placed before us. We find that in almost all the cited agreements/contacts, the Appellant had been approached by the respective customers for procuring/purchasing a vehicle, (except agreement dated 22.03.2000 between the Appellant and M/s.Shiva Cement Ltd. which relate to lease of equipment). We find that the customers were required to pay the amount/value shown in the schedule-II of the agreements in monthly installments for the period specified in schedule-III agreed between the appellant and the customers. We find that most of these transactions are not supported with purchase and allied documents by which it could be ascertained as to the true intention of the parties in advancing/purchasing the equipment/vehicle. Even though theoretically it has been argued that the equipment/vehicle was purchased by the appellant and thereafter leased to the customer's against. lease rent, but examining such agreements, we noticed that some amount was initially paid, thereafter, the remaining amount was paid by the appellant to the dealer and the initial payment is described as down payment, margin money, etc., but it is not clear in all cases as who had paid this initial payment. In the event such margin money is paid by the customer, and from other attendant circumstances it could not be said that the arrangement is as an operating lease and the asset is owned by the Appellant. In the result, we are of the firm opinion that ascertaining of the facts are vital, to application of the principle of law, in the interest of justice this aspect need to be remitted to the ld. Commissioner for verification of the facts in detail and ascertain the true nature of transaction between the appellant and its customers during the period under dispute and arrive at the conclusion whether the transaction/services falls within the scope of taxable services of banking and other financial services defined at Section 65(12) of Finance Act, 1994. Taxability of securitization transactions - From the submissions advanced by both sides we find that the securitization as narrated by the ld. Advocate, taking cue from the RBI guidelines, is claimed by the Appellant to have been limited to the first stage, however, whether it involved the second stage of rendering service has not been scrutinized/examined by the ld. Commissioner before deducting the said securitization amount from the gross taxable value for two financial years considering the same as non-taxable under the Finance Act, 1944. Therefore, in our opinion the true transaction of securitization contracts entered into with respective Banks/customers ought to be examined before arriving at any conclusion whether the amount claimed by the appellant is the result of a sale transaction or service as argued by the revenue, and accordingly are leviable to service tax or otherwise. Therefore, this aspect also needs to be remitted to the Ld. Commissioner for consideration afresh. Taxability of Collection Commission - After analysis of the agreement/transaction documents following the principle laid down in Pagaria Auto centre's case [2014 (2) TMI 98 - CESTAT NEW DELHI (LB)], the Tribunal in a subsequent case viz. Atamaram Auto Enterprises [2015 (6) TMI 440 - CESTAT NEW DELHI] held that such services are taxable being in the nature of promoting or marketing services provided by the Banks under the heading of Business Auxiliary services.In the present case we find that the Ld. Commissioner has without scrutiny of the agreements/contracts with the client Banks, arrived at the conclusion that the service rendered by the Appellant are in the nature of promoting the business of client-banks and hence classifiable under BAS. As held in Pagaria Auto centre's case, it is necessary to examine/scrutinize the transaction to ascertain whether it is BAS or otherwise. Therefore, this issue also needs to be remitted to the Ld. Adjudicating authority for consideration afresh. Non deposit of amount collected as service tax - It has not been substantiated by the appellant as to how the said contingency deposits had been collected from the customers, that is, whether it was collected in lump sum or was shown as deposits in the respective agreements/contracts or Bills raised by the appellants or any other manner during the relevant period. Advancing the bare claim that collection was towards contingency deposit could not lead to any conclusion that these amounts have been collected as deposits, not as representing service tax as alleged by the department since at the initial stage of investigation the said facts were admitted by the Assistant Vice President (AVP) of the appellant/ Thus, it is necessary to lead more evidences by the appellant to substantiate their claim that the amount of Rs. 69,52,945/- which was collected from the customers/clients were nothing, but contingency deposits and not service tax. In the interest of justice, therefore, the Appellant be provided a further fair chance to produce before the adjudicating evidence in favour of the said claim. So this issue has also needs be remanded for consideration afresh. - Decided partly in favour of assessee. Penal interest , prepayment/termination charges & Management fees - Tribunal in the case of Bank of Baroda [2014 (3) TMI 653 - CESTAT NEW DELHI ] & Small Industries& Development Bank of India [2011 (1) TMI 495 - CESTAT, NEW DELHI] held that penal interest, prepayment charges are not be leviable to service tax under the category of banking and financial services. Following these decisions we're of the view that service tax is not payable on the penal interest and prepayment/termination charges. With regard to the Management fees the Ld. Commissioner is directed to record a detailed finding supported with reasons on its leviability to service tax. - Decided partly in favour of revenue.

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• 2015 (6) TMI 441
  Health and fitness services - Meditation services - Held that:- The argument that, Meditation does not induce any physical well-being is erroneous, inasmuch as that by undergoing meditation course, an individual will definitely be physically well as he is at peace with his inner soul, the fact that cannot be disputed by any one. If that be so, the argument of the appellant's that spiritual meditation as conducted by the appellant does not help physical well-being is to be discarded. - meditation courses offered by the appellant may be for spiritual balance, in life, but fundamentally contributes towards the physical well-being and the physical benefits of an individual. In our considered view, there cannot be a dispute that meditation helps an individual attaining mental peace. In our view, physical well-being of an individual would also encompass the mental peace of that individual, would mean that the claim of the appellant that physical well-being is incidental would not carry the case any further. - appellant was first informed as to there being no tax liability on the meditation courses conducted by them, subsequently there was a change in view of the Board and it was opined that service tax liability arises on the meditation courses. In our considered view, revenue authorities cannot demand service tax liability from the appellants for the period prior to 18 March 2009 - Decided in favour of assessee.

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• 2015 (6) TMI 440
  Business Auxiliary Service - Commission received from banks and insurance companies - Waiver of penalty on ground of no mens rea - Held that:- Commissioner (Appeals) has given a clear finding based on documentary evidence that the commission received by the appellants from banks and insurance companies was in relation to marketing of their product. The appellants have not given any evidence to the contrary. The service rendered in relation to marketing of the products of banks and insurance companies is expressly covered under the category of Business Auxiliary Service as seen from the definition thereof given in Section 65(19) of Finance Act, 1994 which includes service in relations to promotion or marketing of service. Further this issue is covered in favour of Revenue in the CESTAT Larger Bench decision in the case of M/s. Pagariya Auto Center [2014 (2) TMI 98 - CESTAT NEW DELHI (LB)]. - Decided against the assessee. Waiver of penalty - Commissioner (Appeals) has categorically observed that there was no mens rea or intention on the part of the appellants to evade Service Tax which they had paid along with interest even before the issue of Show Cause Notice. It is pertinent to mention that the impugned order cannot be overruled merely because some other equivalent authority may have come to a different conclusion with regard to extending the benefit of Section 80 in the given circumstances. To set aside the impugned order, Revenue has to show that the said order is illegal, perverse or unreasonable with regard to extending the said benefit in the given circumstances. The Revenue has evidently failed to do so. - Decided against the revenue.

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• Central Excise

• 2015 (6) TMI 433
  Duty demand - Captive consumption - Whether the Transmission Assemblies captively consumed in the manufacture of tractors of Engine Displacement Capacity (EDC) below 1800-CC manufactured by respondent during the period 1.8.1996 to 1.06.1998 is exigible to excise duty - Bar of limitation - Held that:- TA comes into existence during manufacture of Tractor, is an intermediate product and the same is a distinct product commercially known to the market as such. The Apex Court [2015 (5) TMI 28 - SUPREME COURT] has categorically held that the transmission assemblies of tractors are commercially known products, and that the fact that not a single sale of such Assembly has been made by the appellants is irrelevant. The ratio in the above case is squarely applicable to the case before us. We, therefore, have no doubt to hold that in this case the TAs came into existence in manufacture of Tractors by the respondent and the same are excisable goods. We therefore, uphold the levy of excise duty on TAs which came into existence in the course of manufacture of Tractors. - Respondent cannot be accused of any fraud, wilful misstatement or suppression of facts so as to invoke the extended period of limitation clause as per proviso to Section 11A(1) of the Central Excise Act, 1944. Since the Show Cause Notice for demand of duty for the period from 1.8.1996 to 1.6.1998 has been issued on 31.8.2001, the same is wholly time barred and the duty demand is not sustainable on limitation. - Decided against Revenue.

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• 2015 (6) TMI 432
  Duty demand under Rule 57CC - Emergence of hazardous waste emerges known as Mother Liquor during the process of manufacture of final product 'gelatin' with the help of Hydrochloric acid - Held that:- Decision in the case of appellant's own cases [2014 (5) TMI 253 - SUPREME COURT] and [2008 (12) TMI 46 - HIGH COURT BOMBAY] followed - Decided in favour of assessee.

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• 2015 (6) TMI 431
  Denial of CENVAT Credit - output transportation service - Circular No. 97/08/2007 dated 23.08.2007 - Held that:- Since appellant has paid service tax by availing cenvat credit as well as in cash. Therefore, the following decision of the Hon'ble High Court of Karnataka in the case of Motorola India Pvt. Ltd. (2006 (7) TMI 223 - HIGH COURT OF KARNATAKA AT BANGALORE) and as S. Subramanyan & Co. (2014 (3) TMI 316 - GUJARAT HIGH COURT ) of the Hon'ble High Court of Gujarat, I hold that appellant has correctly taken the suo moto credit. - Decided in favour of assessee.

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• 2015 (6) TMI 430
  Denial of refund claim - Refund of advance duty paid - Surrender of license - Ban on manufacture of gutkha - Held that:- The ground on which the Commissioner (Appeals) has reversed the Assistant Commissioner's order sanctioning the refund is factually incorrect as from the Appellant's letter to the Assistant Commissioner it is absolutely clear that the appellant wanted to stop the manufacture of gutkha permanently in view of ban on its manufacture and sale. - Assistant Commissioner has refunded the disputed amount strictly under Rule 16 of the Pan Masala Packing Machines Rules. The appellants was required to be intimated to surrender all their registration for permanent closure of their machines which the appellant has complied with. Therefore, I hold that learned Assistant Commissioner has correctly sanctioned the refund claim under Rule 16 of the Pan Masala Packing Machines Rules of an amount of Rs. 14,70,768/-.

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• 2015 (6) TMI 429
  Duty evasion - on the basis of the documents recovered from M/s Gopal Steel and the statement of Shri Gopal Krishna Aggarwal, that the Investigating Officers inferred that the appellant had sold the consignments of sponge iron to various customers through M/s Gopal Steel without payment of duty - Held that:- It is clear that no inquiry had been made with the transporters or the customers mentioned in the records of Shri Gopal Krishna Aggarwal and similarly neither the factories of the appellant had been visited in follow up action nor there is any allegation that any discrepancies in the stock of finished goods or raw material has been noticed in their factories. In all these cases though the inquiries have been made with the representatives of the appellant, there is nothing in those statements from which any adverse conclusion can be drawn against the appellants. The entire evidence in support of the Department's allegation of duty evasion against the appellants and the confirmation of duty demands against them alongwith interest is only the documents recovered from Shri Gopal Krishna Aggarwal and his statements - Since, in this case the appellant had requested for cross-examination, but the same has been refused by the Commissioner, which, in our view, is necessary, as other than the documents recovered from Shri Gopal Krishna Aggarwal and his statement, there is no other evidence in support of the Department's allegation of duty evasion - Appeal restored.

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• CST, VAT & Sales Tax

• 2015 (6) TMI 434
  Jurisdiction of Commercial Tax Officer - Held that:- sales had been done to the tune of Rs. 35,06,220/-. In view of Section 3(4) (a)(ii), the respondent has no jurisdiction to assess the tax based on the purchase value. According to the petitioner, the respondent had taken the purchase value as yardstick without considering the provisions of the Act. The statute speaks about Sales Tax turnover alone for the purpose of liablity under Section 3(4) of the Act - Hence impugned order is set aside - Decided in favour of assessee.

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