Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 17, 2015
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
Indian Laws
TMI SMS
Articles
News
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India and Poland set trade target of USD 5 billion
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RBI Reference Rate for US $
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India’s Foreign Trade (Merchandise): May, 2015 including INDIA’S FOREIGN TRADE (SERVICES): APRIL, 2015
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Auction for Sale (Issue / Re-Issue) of ‘Government Stocks' on June 19, 2015 (Friday).
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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
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Non deduction of TDS u/s 194C - Payment in pursuance of legal obligation, whether in the nature of contract - Held No - Not liable to TDS - AT
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Additions u/s41(1) - As the creditors have been paid in the subsequent years, it cannot be said that during the year under consideration, there was a cessation of liability, provisions of Sec. 41(1) do not apply on the facts of the case - AT
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Penalty levied u/s 221(1) - the reason for non-payment of self assessment tax was that it was not having liquid funds and all its funds were locked in shares and securities - penalty @ 5% of self assessment tax is on higher side - Reduced to 2.5% of self assessment tax - AT
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Bogus purchases - Additions u/s 69C - assessee has not provided PAN No. of the parties - This cannot be the sole reason for disbelieving the explanation of the assessee, when the payments have been made by cheque duly reflected in the bank statement of the assessee - AT
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Deemed dividend u/s 2(22)(e) - if the lending of money constitutes substantial part of business of the company, then the loan given by the company to its share holders cannot be considered to be deemed dividend under the provisions of section 2(22)(e) as the same fall under the exception mentioned in section 2(22)(e)(ii). - AT
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Liability to deduct tds u/s 194H - commission or discount - sale of SIM cards / pre-paid talk time - 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' - AT
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Computation of relief u/s 80 IC - Baddi Unit had transferred the goods to other units on cost basis - The separate books maintained have not been rejected - deduction allowed - AT
Service Tax
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Application to move to the settlement Commission - petitioner had paid the tax liability - this is a fit case to find out whether they should be allowed to settle and redress his grievance before the Settlement Commission - HC
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Appeal before Commissioner (Appeal) in Service Tax - Constitutional validity of proviso to Section 85(3) of the Finance Act, 1994 - limited powers to condone the delay not beyond three months. We are unable to discern any legal flaw - validity upheld - HC
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Rejection of appeal on ground of late filing - Received by the adjudicating officer in time, not by the appellate authority - the order passed by the second respondent/appellate authority cancelling the very appeal on the ground that it was not received in time cannot be accepted - HC
Central Excise
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CENVAT credit - Penalty u/s 11AC - appellant had paid the duty alongwith interest as per the amount ascertained by CERA audit and requested to drop the show cause notice. - penalty imposed under Section 11AC is set-aside - AT
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SSI Exemption - Use of third party trademarks - whether marks have to be treated as trade name or brand names belonging to other persons - Held Yes - AT
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Denial of refund claim - input services - Commission paid to agents - services were utilised for export of goods or not - since there is no nexus with manufacturing, cenvat credit cannot be allowed and No refund - AT
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Denial of refund claim - refund was grated to another manufacturer who has lodged the protest - assessee did not lodged any protest - Bar of limitation - assessee cannot take the benefit of protest lodged by other manufacturer - AT
Case Laws:
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Income Tax
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2015 (6) TMI 477
Validity of assessment under section 153C - CIT(A) came to hold that since the documents seized did not belong to the assessee or relate to the assessment year under consideration, the AO was not justified in initiating the proceedings u/s 153C r.w.s. 153 - Held that:- It is noticed that the documents found from the persons searched, do belong to the assessee. As such, there can be no question of lack of jurisdiction of the AO to initiate assessment of the assessee u/s 153C read with section 153A of the Act for the instant year, which is one of the six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. In view of the foregoing discussion, we are of the considered opinion that the ld. CIT(A) was not justified in annulling the proceedings due to the absence of any books of account or documents for the current year found from the persons searched, belonging to the assessee for the assessment year under consideration. - Decided in favour of revenue.
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2015 (6) TMI 475
Non deduction of TDS u/s 194C - Payment in pursuance of legal obligation, whether in the nature of contract - Payments to Punjab Water Supply and Sewerage Board - Held that:- Such payments are out of legal obligations rather than contractual arrangements, and it is only when payments are made “in pursuance of a contract” that the provisions of section 194C come into play. The contract may be oral or written, express or implied but there must be a contract nevertheless. In the present case, however, the payment is on account of legal obligation under section 24(1) of the Punjab Water Supply and Sewerage Board Act 1976. - Decided in favour of assessee.
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2015 (6) TMI 463
Entitlement to claim deduction under Section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee
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2015 (6) TMI 462
Rejection of books of accounts - AO apply the net profit rate of 5% of gross receipts - as per CIT(A) net profit is estimated @ 2% i.e, 45,02,424/- as confirmed by ITAT - Held that:- The ITAT went through the records, including the finding of the CIT(Appeals) that no rationale was shown for estimating the net profit @ 5% and that the evidence of supplies were otherwise forthcoming. In these circumstances, the ITAT refused to interfere after knowing that the net profit rate had been reduced by the CIT(Appeals). This Court holds that no substantial question of law exists.- Decided against revenue.
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2015 (6) TMI 461
Eligibility of deduction u/s. 80IB(10) on housing project - ITAT allowed claim - whether the built up area of commercial units exceeded the limits of 2000 sq.ft. Prescribed in section 80IB(10) (d) of the Act and therefore, the assessee was not eligible for deduction under section 80IB(10) of the Act? - Held that:- Applying the law laid down in CIT Central Pune V/s M/s. Veena Developers [2015 (5) TMI 193 - SUPREME COURT] and CIT-I V/s. CHD Developers Limited [2014 (1) TMI 1542 - DELHI HIGH COURT] to the facts of the case on hand, it cannot be said that any error has been committed by the learned CIT(A) and the learned tribunal holding that the assessee shall be entitled to deduction under section 80IB(10) of the Act, with respect to the housing project which was approved by the local authority prior to 30/3/2005.3.04. It is required to be noted and it is not the case on behalf of the revenue that the commercial activity was permitted beyond the development rules and/or was in excess to the permissible commercial use. In the present case, however, the assessee alternatively claimed that deduction section 80IB(10) of the Act may be permitted proportionately with respect to the residential construction only and it came to be accepted by the learned CIT(A) and the learned tribunal and the assessee has been allowed deduction under section 80IB(10) of the Act proportionately with respect to the residential construction only and the same has been accepted by the assessee.3.05. At this stage it is required to be noted that as such the amendment in section 80IB(10) of the Act with respect to clause (d) is brought into effect w.e.f. 1/4/2005 which is held to be perspective and as held by the Hon'ble Supreme Court in the aforesaid decision, for the project approved prior to 30/5/2005, assessee shall be entitled to deduction under section 80IB(10) of the Act with respect to residential as well as commercial construction in housing project, however, subject to approval by the development authority in accordance with the Development Rules. - Decided in favour of assessee.
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2015 (6) TMI 460
Deduction claimed under section 80IB(10) disallowed - as per AO Building Use Permission ("the BU Permission") and/or Completion Certificate was granted by the local authority only with respect to 20 units within a period of four year from the date of approval of the project by the local authority and not with respect to the entire housing project consisting of 43 units - ITAT allowed deduction - Held that:- Considering the decision of CIT V/s. Tarnetar Corporation [2012 (10) TMI 803 - GUJARAT HIGH COURT] as the assessee completed project / construction of all 43 units within 4 years from the date of approval by the competent authority and also applied for B.U. Permission within a period of four years with respect to all 43 units, however, could obtain B.U. Permission with respect to 20 units only and for whatever reasons, with respect to remaining 23 units, B.U. Permission was not issued by the authority and as observed hereinabove, construction of all 43 units was completed, the assessee is entitled to deduction under section 80IB(10) of the Act, no error has been committed by the learned tribunal in holding that the assessee shall be entitled to deduction claimed under section 80IB(10) of the Act. - Decided in favour of assessee.
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2015 (6) TMI 458
Registration u/s 12A rejected - DIT(E) held that assessee is merely engaged in construction of housing projects and selling them to prospective buyers, therefore, the activity of assessee is more or less like any other real estate developer/builder, hence, the activity/object of assessee cannot be considered to be a charitable in nature - Held that:- There is nothing in this case which provides services to the mankind on charity basis. The argument of the learned counsel is not tenable because a charitable institution provides services for charitable purposes free of cost and not for gain. The object of the assessee is similar to activities performed by big developers, who are earning prof it. If the registration is granted to the assessee u/s 12A of the Act, then, it will open pandora’s box and everybody will claim exemption from tax, who are incidentally doing some charitable activities in providing parks or roads. The activities of the assessee is nothing but prof it making activities for which it is taking money from general public and no charity activities are carried on for the public. Considering all these facts brought on record by the DIT(E), in our considered view, the assessee is not entitled for grant of registration u/s 12A of the Act. Being so, we do not find any infirmity in the order of the DITE) in refusing to grant registration u/s 12A to the assessee and accordingly, the order of the DIT(E) is hereby confirmed dismissing the appeal of the assessee. See Jammu Development Authority V/s. CIT [2012 (7) TMI 734 - ITAT AMRITSAR] - Decided against assessee.
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2015 (6) TMI 457
Disallowance under section 40(a)(ia) - non deduction of TDS on payments made by the assessee on account of consultancy charges to anesthetist and architect/contractor - CIT(A) deleted disallowance - Held that:- Both the amounts in question on account of consultancy charges and construction expenses were fully paid by the assessee during the year under consideration and there being no amount payable on these accounts, the Ld. CIT(A), in our opinion, was fully justified to hold that the disallowance under section 40(a)(ia) could not be made by relying on the decision of the Special Bench of this Tribunal at Visakhapatnam in the case of M/s. Merlyn Shipping and Transports vs. ACIT, Range- 1, Visakhapatnam [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ]. Moreover, as rightly submitted on behalf of the assessee before the authorities below as well as before us, the amount of ₹ 4 lakhs paid towards construction expenses constituted capital expenditure which was not claimed by the assessee as deduction and the same therefore even otherwise could not be disallowed by invoking the provisions of section 40(a)(ia) - Decided against revenue. Unexplained investment in the construction of hospital building - CIT(A) restricted part addition - Held that:- In the present case, the books of accounts reflecting the construction expenses regularly maintained by the assessee were produced for verification before the A.O. and since the same were not rejected by the A.O. by pointing out specific and material defects, we find merit in the contention of the Ld. Counsel for the assessee that reference made by the A.O. to the DVO for estimating the cost of construction itself was invalid and no addition on the basis of such invalid report could be made on account of unexplained investment allegedly made by the assessee in the construction of building. Although, this issue is decided by the Ld. CIT(A) against the assessee and no appeal has been preferred by the assessee before the Tribunal contesting this issue, Rule-27 of the Appellate Tribunal Rules, 1963 allows the assessee as a respondent, though he is not appealed, to support the order appealed on any of the grounds decided against him. Accordingly, relying on the said Rule, we uphold the impugned order of the Ld. CIT(A) restricting the addition of ₹ 25,38,893 made by the A.O. on account of unexplained investment allegedly made by the assessee in the construction of hospital building to ₹ 3,67,387, although on a different ground. - Decided against revenue.
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2015 (6) TMI 456
Capital gain computation - valuation of property refer to the DVO - assessment as provided under section 50C(2) and 50C(3)- AO computed the capital gains after taking the circle rate/stamp duty valuation - Held that:- Assessee had filed objections against adoption of the circle rate/stamp duty valuation before the Assessing Officer. When assessee has filed objections before the Assessing Officer that circle rates are above the fair market value, the Assessing Officer was duty bound to refer the impugned property for valuation to the DVO before proceeding to make an assessment of long term capital gains. The CIT (A) has only directed the Assessing Officer to refer the matter for valuation to the DVO and thereafter conclude the assessment. The directions of the CIT (A) has legal sanctity by various judicial pronouncements, including the judgment of N Meenakshi vs. ACIT [2009 (9) TMI 59 - MADRAS HIGH COURT]. Therefore, we see no reason to interfere with the order of CIT (A) - Decided against revenue. Unexplained cash credits u/s 68 - CIT(A) deleted the addition - Held that:- The cash deposited of ₹ 14,00,000/- in assessee’s accounts were duly and fully explained in the cash flow statement with supporting evidence consisting of assessee’s bank statements and the sale deed executed by the assessee as General Power of Attorney for his wife, Anjana Gupta. The copies of the cash flow statement, bank statement and various sale deeds are placed on record. The receipt of sale consideration in cash is duly supported by the sale deeds. Therefore, the addition of ₹ 14,00,000/- as unexplained cash credit u/s 68 of the Act is unwarranted and CIT (A) was justified in deleting the same - Decided against revenue. Disallow the claim cost of improvement - CIT(A) deleted the addition - Held that:- The confirmation of expenses on improvement of property before its sale has been placed on record and statement of Shri Daulat Ram Saini was recorded on oath. Confirmation and statement has been rejected by the Assessing Officer on the ground “not satisfactory, insufficient and not reliable” which are vague and based on surmises and conjectures. Therefore, the CIT (A) is justified in deleting the same - Decided against revenue.
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2015 (6) TMI 455
Penalty levied under section 221(1) - CIT(A) reduced the penalty to 5% of the self assessment tax - Held that:- In the instant case, the only reason furnished by the assessee for non-payment of tax was that it was not having liquid funds and all its funds were locked in shares and securities. However, the Ld CIT(A) has expressed the view in paragraph 4.10 of his order that the financial position of the assessee is sound, since it had made huge investment in shares and also by way of providing loans. In any case, the assessee did not furnish any document either before us or before the tax authorities to support of its stand that it was not having liquid funds. Hence, we are of the view that the assessee has failed to furnish any good and sufficient reason for non-payment of self assessment tax. As the assessee has paid the self assessment tax before March, 2011, i.e., within five months from the date of filing of return of income. Under these set of facts, the penalty @ 5% of self assessment tax confirmed by the Ld CIT(A) also appears to be on the higher side. Hence, in order to put this matter to rest, we are of the view that the penalty to be levied u/s 221(1) of the Act should be restricted to 2.5% of the self assessment tax. - Decided partly in favour of assessee.
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2015 (6) TMI 454
Bogus purchases - CIT(A) deleted the addition made on account of unexplained expenditure u/s. 69C in relation to the purchases - Held that:- All the payments have been made through cheque, which have been duly certified by the IDBI bank. Also find that the AO has not brought anything on record to disbelieve the explanation of the assessee. The only evidence/reference made by the AO is that the assessee has not provided PAN No. of the parties. This cannot be the sole reason for disbelieving the explanation of the assessee, when the payments have been made by cheque duly reflected in the bank statement of the assessee, the claim of expenditure cannot be brushed aside lightly. We, therefore, decline to interfere with the findings of the Ld. CIT(A). - Decided against revenue. Cessation of liability u/s. 41(1) - Held that:- Perusal of the ledger account of the parties show that out of the balance shown in the name of Hetal Sales Corporation amounting to ₹ 6,24,721/-, ₹ 3,00,000/- have been made on 18.2.2010, ₹ 3,24,721/- was paid on 12.10.2010. Similarly in the case of Sandesh Sales Corporation, the payment has been made on 31.12.2009, Shakti Trading Company the payment has been made on 2.5.2009, 29.5.2009, 18.12.2009 and 3.2.2010. Similarly, all the transporters mentioned hereinabove have been paid in subsequent years. The payment made is evident from the copies of the ledger account. As the creditors have been paid in the subsequent years, it cannot be said that during the year under consideration, there was a cessation of liability, provisions of Sec. 41(1) do not apply on the facts of the case. We, accordingly set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition of ₹ 36,29,281/-. Decided in favour of assessee.
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2015 (6) TMI 453
TDS u/s.194C on payments made to Sub- Sub Contractor - CIT(A) deleted disallowance - Held that:- As per section 194-C(2) of the Act, the contractor is required to deduct the tax on the payment made to the sub-contractor. In the case in hand, the undisputed fact is that the assessee has made the payments towards labour charges as a sub-contractor. Moreover, the Revenue has not brought any material on record suggesting that payments debited as labour expenses were made as per subsisting contract between the assessee and labour contractors. In the absence of such material, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided in favour of assessee.
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2015 (6) TMI 452
Prescribed monetary limits for filing of appeal before ITAT - Whether, this appeal of revenue, which is below the prescribed limit of tax effect in view of the Board’s Instruction No.5/2014 issued on 10.07.2014 revising the monetary limits for filing of appeals by the Department before ITAT is maintainable or not? - Held that:- On query from the Bench, the Ld. DR could not point out any of the exceptions as provided in the Circular as that this is a loss case having tax effect more than the prescribed limit, which should be taken into account,or that this is a composite order for many assessment years where tax effect will be more than the prescribed limit as per para 5 of above instructions, or that this is a case, where, in the case of revenue, where constitutional validity of the provision of the Act or I.T. Rules 1962 are under challenge,or that Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or that Revenue Audit Objection in the case has been accepted by the Department and the same is under challenge. The Ld. DR could not point out any of the exceptions as provided above. Accordingly, this being a low tax effect case, the appeal of the revenue dismissed in limine without going into merits. - Decided against revenue.
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2015 (6) TMI 451
Reopening of assessment - payment of royalty questioned - CIT(A) deleted reopening - Held that:- the assessee has furnished break-up of sales and royalty agreement inter alia with other details during the course of the original assessment proceedings. Vide letter dt. 4.12.2003 which was submitted on 11.12.2003 once again the assessee has furnished the details of royalty payment alongwith other details. Thus, it can be seen that the payment of royalty has been duly examined by the AO before making the assessment u/s. 143(3) of the Act. After 4 years of making the assessment, reopening of the assessment to verify once again the payment of royalty vis-à-vis sales is nothing but change of opinion and against the ratio laid down by the Hon’ble Supreme Court in the case of Kelvinator of India (2010 (1) TMI 11 - SUPREME COURT OF INDIA). We, therefore decline to interfere with the findings of the Ld. CIT(A). - Decided against revenue. Additions made on account of recalculated sales - CIT(A) deleted addition - Held that:- The undisputed fact is that there is a royalty agreement between the assessee and the Texas based company. It is also an undisputed fact that the payment of royalty is based on sales of grid material. We further find that no evidence whatsoever has been brought on record neither before the First Appellate authority nor before us to show that the assessee has made sales on discounted price. We also find that no such documentary evidences have been verified by the AO during the course of the assessment proceedings. Therefore, in the interest of justice and fair play, we set aside the findings of the Ld. CIT(A) and restore this issue to the file of the AO for denovo assessment. The assessee is directed to file necessary details alongwith supporting documentary evidences to justify that it has made sales at discounted price, to justify that there is no nexus between sales in India of grid material and the payment of royalty to Grid International Inc Texas USA. The assessee is further directed to substantiate its claim by bringing cogent material evidence on record to show that sales in India of Grid material is not based on US list price. - Decided in favour of revenue for statistical purpose
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2015 (6) TMI 450
Deemed dividend u/s 2(22)(e) - whether on the basis of deployment of funds, can it be held that money lending was substantial part of business of Silgo? - CIT(A) deleted the addition - Held that:- In the present case, it has already been mentioned that more than 75% of the funds available have been deployed by Silgo, therefore, money lending constituted substantial part of the business of Silgo and the fact that no interest income was shown by Silgo in Profit & loss account cannot be said to be relevant to decide the question that “whether or not money lending was substantial part of business of Silgo?”. Learned CIT(A) has rightly appreciated the provisions of law, which has been explained by Hon’ble Jurisdictional High Court in the case of Parle Plastics Ltd. (2010 (9) TMI 726 - BOMBAY HIGH COURT ) wherein held that if the lending of money constitutes substantial part of business of the company, then the loan given by the company to its share holders cannot be considered to be deemed dividend under the provisions of section 2(22)(e) as the same fall under the exception mentioned in section 2(22)(e)(ii). - Decided in favour of assessee
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2015 (6) TMI 449
Loss on the sale of shares - treating as speculation loss - Held that:- The undisputed facts in the case in hand is that the assessee is engaged in the business of financing and substantial income has been derived from interest. The assessee claimed loss on sale of shares of ₹ 15,50,000/-. The Assessing Officer treated the same as speculation loss and allowed it to be carried forward and to be adjusted against future speculation profit only. It is undisputed fact that the principal business of the assessee-company is granting of loans and advances and the substantial income has been derived therefrom. The R.B.I. has granted to the assessee Certificate of Registration u/s.45-IA of the Reserve Bank of India Act, 1934 to commence/carry on the business of non-banking financial institution subject to certain conditions. Under these facts, the authorities below have erred and are not justified in applying the provisions of Explanation to Section 73 of the I.T. Act, 1961. Therefore, the impugned order is hereby set aside and the Assessing Officer is directed not to treat the loss as speculation loss. - Decided in favour of assessee.
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2015 (6) TMI 448
Liability to deduct tds - commission to the distributors in relation to the distribution of pre-paid talk time - Held that:- It is undisputed fact that the assessee has been issuing bills after allowing the discount on MRP in net and charged service tax on it. There is no transfer of income from assessee to distributors but MRP is fixed on the prepaid services. At the time of sale, the distributors received the sale proceed either from the retailers or customers. As decided in M/s. Idea Cellular Ltd. Vs. ITO [2015 (6) TMI 443 - ITAT JAIPUR] wherein 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'. Thus 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 447
Rectification order passed under section 154 - Excess depreciation allowed on electrical installation at 15%., Excess depreciation allowed on office equipment at 15%,Payment of contributions of P.F./ESI beyond the due date remain to be disallowed and Income arising out of the development agreement with Vansh Builders taxed as capital gains instead of business income - additions made by the A.O. on the said issues by way of rectification under section 154 were deleted by the Ld. CIT(A) - Held that:- Even though all these issues were raised by the Ld. CIT in the notice issued under section 263, the same were dropped by him while passing the order under section 263 inasmuch as the order of the A.O. on these issues was not revised by him. These issues therefore were not involved in the appeal filed by the assessee before the Tribunal against the Order passed by the A.O. under section 263 and there was thus no occasion for the Tribunal to give any decision or direction on these issues. The order passed by the A.O. on 06.12.2012 giving effect to the order of the Tribunal thus did not involve these issues as the scope of the said order was limited to give effect to the order of the Tribunal which did not involve these issues at all. It therefore cannot be said, by any stretch of imagination, that there was any mistake in the order of the A.O. dated 06.12.2012 on these issues calling for any rectification under section 154 and this position clearly evident from the relevant orders, copies of which are placed on record before us, has not been disputed even by the D.R. We therefore uphold the impugned order of the CIT(A) holding that there were no mistakes in the order of the A.O. dated 06.12.2012 calling for any rectification under section 154 and upholding the same, we dismiss this appeal filed by the Revenue. - Decided against revenue.
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2015 (6) TMI 446
Disallowance of the deduction under section 10B by not allowing the assessee to reduce the expenditure on account of repairs and maintenance which was already debited to the profit and loss account - CIT(A) has allowed the claim of the assessee by accepting the explanation of the assessee that the said amount was not reduced from the profits of the A.Y. 2007-08 and accordingly in the year under consideration it was a rectification - Held that:- An error was committed by the assessee in the books of accounts relevant to the A.Y. 2007-08 by debiting the capital expenditure to the profit & loss account. However, the assessee offered correct income to tax for A.Y. 2007-08. For the year under consideration the assessee has carried out the necessary entries to rectify the said mistake occurred in the financial year 2006-07 by crediting the said amount of ₹ 1,26,46,787/- to the respective expenditures' ledger accounts and correspondingly debiting the fixed capital account. Thus, as a result of the said rectification adjustment made in the books of accounts for the year under consideration the profit of the assessee was increased by the said amount in comparison to the real profit of the year. Therefore, the assessee in computation of income for the assessment year under consideration has deducted the said amount to bring the income at the correct amount. We find that if the income for the year under consideration is not correctly computed in the statement of income it would have resulted in double taxation because the assessee has already added back a sum of ₹ 1,26,46,787/- in the profit & loss account in order to rectify the mistake occurred in the accounts in the earlier year. In view of the above facts and circumstances of the case, we do not find any error or illegality in the impugned order of the Ld. CIT(A) qua this issue. - Decided against revenue.
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2015 (6) TMI 445
Deduction under section 10A - alternative claim made by the assessee for deduction Held that:- Issue involved in the present case is squarely covered by the decision in the case of M/s. Vivera IT Applications Consulting (P) Ltd., Hyderabad vs. ITO, [2015 (6) TMI 435 - ITAT HYDERABAD] wherein similar alternative claim made by the assessee for deduction under section 10A instead of deduction under section 10B for the first time before him was not entertained by the Ld. CIT(A) on the ground that the required report of the auditor in Form 56F for claiming deduction under section 10A had not been submitted by the assessee. Before the Tribunal, the assessee however submitted the report of the auditor in Form 56F and taking the same on record, the Tribunal restored the issue to the file of the A.O. with a direction to consider and decide the alternative claim of the assessee for deduction under section 10A relying on the decision of Coordinate Bench of the Tribunal in the case of Cloud Softek [2014 (2) TMI 742 - ITAT HYDERABAD] wherein it was held that if the assessee is held to be not entitled to deduction under section 10B, his alternative claim for deduction under section 10A should be considered. The ratio of these decisions of the Tribunal, in our opinion, is clearly applicable in the present cases and respectfully following the same, we uphold the impugned order of the Ld. CIT(A) directing the A.O. to consider the alternative claim of the assessee for deduction under section 10A for both the years under consideration in accordance with law on merit. - Decided against revenue.
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2015 (6) TMI 444
Computation of relief u/s 80 IC - Held that:- When Baddi Unit had transferred the goods to other units on cost basis, and when separate accounts are maintained by Baddi Unit and profits arrived at, the question of coming to a conclusion that this profit so arrived at contains trading profit is against the facts of the case. The separate books maintained have not been rejected. Under these circumstances we agree with the contentions of the Ld. Counsel for the assessee and allow the grounds raised by the assessee. The AO is directed to allow the deduction u/s 80IC of the Act as claimed by the assessee. - Decided in favour of assessee.
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Service Tax
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2015 (6) TMI 474
Vagueness of show cause - non-specification of classification/category of services in the show cause notice - nature of receipt - Held that:- A careful perusal of the orders of the adjudicating authority, the Commissioner (Appeals) as also the Tribunal would reveal that the Commissioner (Appeals) has decided the issues on two aspects, viz., one on the vagueness of the show cause notices stating that it is bereft of details and being without clarity and the other on the plea of limitation. The Tribunal, however, in its order, while extracting the portion of the order of the Commissioner (Appeals) was of the view that the Revenue had discharged its burden by producing the statements given by NLC and that the assessees did not dispute it at any point of time and that the entire demand was raised on the basis of the statements provided by NLC. However, this finding of the Tribunal runs conter to the plea raised by the appellants/assessees before the Commissioner (Appeals) as the show cause notices were challenged on the very foundation that they are vague and without particulars as to classification of works that attracts service tax. - Matter remanded back - Decided in favour of assessee.
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2015 (6) TMI 473
Application to move to the settlement Commissioner - Demand of duty and interest - Held that:- Petitioner admitting their tax liability, has also paid a sum of ₹ 14,57,464/= towards service tax and ₹ 9,70,000/= towards interest. Therefore the request made by them in their application dated 03.11.2014 to permit them to approach the Settlement Commissioner could have been considered by the respondent. As he did not do so, this court, taking note of the fact that the petitioner had also paid the tax liability alongwith interest as mentioned above, is of the view that this is a fit case to find out whether they should be allowed to settle and redress his grievance before the Settlement Commissioner. - Decided in favour of assessee.
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2015 (6) TMI 472
Constitutional validity of proviso to Section 85(3) of the Finance Act, 1994 - Condonation of delay - Held that:- Petitioner filed an appeal beyond the condonable period of three months, provided by the proviso to Section 85(3) of the Act. The appellate authority, therefore, dismissed the appeal. The right to file an appeal is conferred by a statute and must, therefore, be availed along with all its impediments. Section 85(3) of the Act allows an assessee to file an appeal within 90 days. The proviso to Section 85(3) of the Act empowers the appellate authority to condone delay but not beyond three months. We are unable to discern any legal flaw in the proviso to Section 85(3) of the Act, that would enable us to hold that the proviso impedes the rights of the petitioner to file an appeal or is in any manner in excess of legislature power or should be read down - Decided against assessee.
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2015 (6) TMI 471
Rejection of appeal on ground of late filing - Received by the adjudicating officer in time, not by the appellate authority - Held that:- Admittedly, the appeal has been preferred in time and in fact, it has reached two different sections in the very same office. After all, it is a transfer from one portion of the building to another portion and especially when the appeal has been received by the very adjudicating officer, who has passed an order, he ought to have sent it to the other wing of the very same building, but the same has not been done so. The order passed by the second respondent/appellate authority cancelling the very appeal on the ground that it was not received in time cannot be accepted. Referred case Radha Vinyl Pvt. Ltd. [2014 (3) TMI 621 - ANDHRA PRADESH HIGH COURT]. - Decided in favour of appellant.
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Central Excise
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2015 (6) TMI 470
CENVAT credit - Penalty u/s 11AC - Held that:- Commissioner (Appeals) observed that the appellant had admitted their mistake and willingly reversed the CENVAT credit alongwith interest. The appellant had not challenged the same before the original authority and has raised objection only on imposition of penalty. - appellant debited cenvat credit alongwith interest and intimated the Central Excise officer on 02.3.2005 and therefore, they requested to drop the show cause notice. The Section 11A (2B) of the Central Excise Act, 1944 provide that where any duty of excise has not been levied or paid or has been short levied or short paid, the person chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise officer before service of notice on him under sub-Section (1) in respect of the duty so paid and inform the Central Excise officer of such payment in writing, who on receipt of such intimation shall not serve any notice under Section 11A(1) in respect of the amounts so paid. In the present case, it is found that the appellant had paid the duty alongwith interest as per the amount ascertained by CERA audit and requested to drop the show cause notice. - penalty imposed under Section 11AC is set-aside - Decided in favour of assessee.
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2015 (6) TMI 469
Denial of SSI Exemption - Use of third party trademarks - clearance of goods goods marks - whether marks have to be treated as trade name or brand names belonging to other persons - Held that:- goods with marks - VF, RE, TVS, DECENT, H.F., J.P.F. and POOJA FORGE have to be treated as the goods bearing the brand name of other persons and the same would not be eligible for SSI exemption - decision in the case of Grasim Industries Ltd. [2005 (4) TMI 64 - SUPREME COURT OF INDIA] followed - Decided in favour of Revenue.
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2015 (6) TMI 468
Imposition of penalty - CENVAT Credit - Held that:- Demand as well as the penalty was confirmed in terms of Rule 8(3)A of the Central Excise Rules, 2002 on the ground that the appellant has utilised the CENVAT Credit during the default period. The duty was admittedly paid along with interest. I agree with learned counsel that the hon'ble High Court of Gujarat in the cases of Indsur Global Ltd. (2014 (12) TMI 585 - GUJARAT HIGH COURT) and of Precision Fasteners Ltd. (2014 (12) TMI 655 - GUJARAT HIGH COURT) has strucked down the proceedings and held Rule 8(3A) as unconstitutional and therefore, the whole foundation of the present case gets demolished. - penalty imposed on the appellant does not survive. - Decided in favour of assessee.
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2015 (6) TMI 467
Denial of refund claim - input services - Commission paid to agents - services were utilised for export of goods or not - Held that:- though the business activities mentioned in the definition are not exhaustive, the service rendered by the commission agents not being analogous to the activities mentioned in the definition, would not fall within the ambit of the expression "activities relating to business" - Assessee in this case is also not eligible for refund of the amount of service tax paid on the services of commission agent. - Decision in the case of Commissioner of Central Excise, Ahmedabad - II v. CEDILE Healthcare Ltd. - [2013 (1) TMI 304 - GUJARAT HIGH COURT] followed - Decided in favour of Revenue.
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2015 (6) TMI 466
Denial of refund claim - Unjust enrichment - Held that:- When the goods were manufactured and cleared, the duty rates indicated in the invoices were 25% and the said amount was collected from the ultimate consumer. Under the circumstances, it cannot be said that the incidence of duty has not been passed on to the ultimate consumer and was borne by the appellant. - No merit in appeal - Decided against the assessee.
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2015 (6) TMI 465
Denial of refund claim - refund was grated to another manufacturer who has lodged the protest - assessee did not lodged any protest - Bar of limitation - Held that:- appellant has filed the refund claim much after the time limit prescribed under the law. The only point that was made is that Kamalakshi Finance Corporation Ltd. had paid the duty under protest. It is the contention of the appellant that the protest made by Kamalakshi Finance Corporation Ltd. would be applicable for them only. - No merits in the contention of the appellant that the refund claim has been filed within the prescribed time limit. - Decided against assessee.
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Indian Laws
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2015 (6) TMI 476
Dismissal of employee after a domestic enquiry was held by the management - Validity of domestic enquiry - Held that:- The object of holding an enquiry proceeding is to give the delinquent employee a reasonable opportunity to prove his answers and to defend himself against the charges levelled against him. A domestic enquiry must be in conformity with the rules of natural justice. The rules of natural justice which are at present confined to the procedural side of law are a body of uncodified moral principles intended to supplement the existing law and not supplant it. The details of the procedure that are to be followed by the Enquiry Officer in a domestic enquiry are not prescribed in any rules framed under any statute. Some of the Standing Orders have prescribed certain guidelines on the procedure to be followed in a domestic enquiry - Enquiry Officer cannot act as a witness for the management or for that matter for the delinquent employee since a person cannot be a judge in his own cause. However, even an Enquiry Officer is at liberty to put questions to the witnesses and that per se would not vitiate the proceedings. - The Enquiry Officer may evolve his own procedure in the absence of any guidelines but the procedure must be fair, free from arbitrariness and in conformity with the principles of natural justice. Mere participation of the Presenting Officer as a witness in a domestic enquiry is not contrary to the principle of natural justice and does not render an enquiry or the entire proceedings inoperative or without jurisdiction in the absence of proof of prejudice to the concern employee. - Decided against Appellant.
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2015 (6) TMI 464
Charges of inflated expenses claimed during the course of audit - disciplinary action CA - Held that:- It is clear that two of the three charges against the respondent No.1 were indeed baseless, exaggerated. The same lends credence to the plea of the respondent No.1, of the complaint against him being revengeful. Similarly, there is no finding of the Disciplinary Committee on the plea of the respondent No.1 of his having infact incurred expenditure on travel more than even the first AC fare. The Disciplinary Committee though noted that the travel was at short notice, in rush season and that the respondent No.1 had procured rail tickets through an agent, but did not consider the charges of the travel agent or the premium at which rail tickets are sold in rush season. We, in the circumstances, have two options; either to ourselves reduce the punishment from that of removal of name from the Register of Members for a period of one month to that of reprimand or to remand the matter to Council to consider the recommendation in the light of the report of the Disciplinary Committee and the representation of the respondent no.1 thereagainst. We choose the former simply for the reason that the matter has already been pending for the last more than ten years and we feel that it need not be prolonged any further. - The requisite reprimand be issued in accordance with law.
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