TMI Tax Updates - e-Newsletter
June 19, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Service tax - Appellant failed to prove that value received by them is actually cum duty value - benefit of cum duty value denied - Tri

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• When the legislature is silent about interest on refund of tax amount, the interest can be considered by way of a compensatory measure - HC

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• AO disallowed part of expenses as deferred revenue expenditure - such right given to assessee and not to revenue - AO cannot disallow - Tri

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Articles

1. RECOVERY OF SERVICE TAX UNDER SECTION 87 OF FINANCE ACT,1994

   By: DR.MARIAPPAN GOVINDARAJAN

2. CALL BOOK CASES – SERVICE TAX

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Settlement of Insurance claims related to the floods in Jammu & Kashmir in September 2014

2. Central Action Plan 2015-16 issued by CBDT.

3. RBI Reference Rate for US $

4. NITI Aayog holds a high level consultation to promote Innovation and Entrepreneurship.

Notifications

Customs

1. 63/2015 - dated 18-6-2015 - Cus (NT)

Rate of exchange of conversion of the foreign currency relating to imported and export goods with effect from 19th June, 2015.

2. 62/2015 - dated 17-6-2015 - Cus (NT)

Courier Imports and Exports (Clearance) Amendment Regulations, 2015 - Amendment in Courier Imports and Exports(Clearance) Regulations, 1998.

Circulars / Instructions / Orders

SEZ

1. Minutes of the 65th meeting of the SEZ - dated 19-5-2015

Minutes of the 65th meeting of the Board of Approval for SEZs held on 19th May 2015 to consider proposals for setting up Special Economic Zones and other miscellaneous proposals.

Income Tax

2. D.O.No.279/misc/93/2015-SO(ITJ) - dated 16-6-2015

Implementation of the CIT(A) module in the new Income Tax Business Application (ITBA) for ease in handling the appeal workload and its disposal and the automatic generation of MIS for reporting and for control of work.

FEMA

3. 111 - dated 18-6-2015

Exim Bank's GoI supported Line of Credit of USD 100 million to the Government of Socialist Republic of Vietnam for financing supply of High Speed Patrol Vessel.

4. 110 - dated 18-6-2015

Move from manual reporting of BEF statement - Now submission on line in Extensible Business Reporting Language (XBRL) system from half year ended June 2015.

Highlights / Catch Notes

Income Tax

• Educational Institution's Section 12AA Registration Canceled for Operating Commercially, Violating Charitable Trust Status.

  Case-Laws - AT : Registration u/s 12AA cancelled - when the educational institution was run in a commercial manner by the so-called charitable institution, whether such a trust is entitled for registration u/s 12AA of the act - Held No - AT
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• High Court Rules: Section 12A Registration Valid, Tax Exemption Hinges on Meeting Section 2(15) Criteria Without First Proviso.

  Case-Laws - HC : Registration u/s 12A - Notwithstanding the fact that the assessee is conferred registration under the provisions of Section 12A of the Act, unless the assessee falls within the provisions of Section 2(15) of the Act, excluding the first proviso, the assessee would not be entitled to the benefit of exemption from the tax - Registration cannot be cancelled - HC
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• MAT Calculation u/s 115JB Excludes Indexation for Long-Term Capital Gains on Equity Shares.

  Case-Laws - AT : Profit on sale of equity shares - MAT calculation - The concept of indexation while computing the Long term capital gain cannot be imported to the computation of book profit u/s. 115JB as per the expressed provisions of the said section itself which is a complete code in itself. - AT
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• Assessee Granted Right to Claim Deferred Revenue Expenditure for Loan, Not Revenue Authorities.

  Case-Laws - AT : Disallowance of expenditure incurred by assessee for raising loan by treating the same as deferred revenue expenditure - right to claim deferred revenue expenditure is given to assessee and not to revenue. - AT
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• Selling Discounted Future Interest Portfolios: Income Deemed Accrued Upon Agreement Date.

  Case-Laws - AT : Accrual of income - it has to be admitted that future interest cannot be taken as income. However, when assessee bundles it and sells it as a portfolio for a discount, the amount did accrue and received on the date of entering agreement.- AT
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• Interest Expenditure Disallowance u/s 14A Must Consider Sections 80AB and 80A for Income Tax Deductions.

  Case-Laws - AT : Disallowance of interest expenditure by invoking the provisions of section 14A - This is also subject to Section 80AB and 80A(1) and (2). Chapter VIA does not postulate or state that the incomes which qualify for the said deduction will be excluded and not form part of the total income - AT
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• Taxpayers Cannot Use Past False Statements to Affect Current Tax Obligations: Income Tax Liability Principle Explained.

  Case-Laws - AT : Which is the year of remission or cessation of liability - it is not open for the assessee to turn back and say that you accepted my lie for the preceding year/s and, therefore, you are bound by it - AT
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Customs

• Exemption Granted for Imported Seismic Software for Petroleum Operations with Certified Necessity Confirmation.

  Case-Laws - AT : Import of software for Seismic purposes - the appellant has produced a certificate from duly authorised person - imported goods are required for petroleum operation - benefit of exemption allowed - AT
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Service Tax

• Court Denies Cum Duty Value Benefit Due to Lack of Client Documents in Service Tax Dispute.

  Case-Laws - AT : Demand of service tax - No reason why any documents could not have been obtained from their client to show that the value received by them is actually cum duty value - benefit of cum duty value denied - AT
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• Appellant Ignored Show Cause Notice and Missed Hearings, Indicating Possible Negligence in Tax Responsibilities.

  Case-Laws - AT : Demand of service tax - appellant had service tax registration but did not receive the show cause notice, did not submit any reply to the show cause notice, did not even appear for personal hearings on various dates can only lead to the conclusion that their intentions were not bonafide - AT
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• SMPP Service Under BAS: Appellants Send SMS for Clients Without Independent Authority, Clearly Within Business Auxiliary Scope.

  Case-Laws - AT : Business Auxiliary Service - providing Short Message Peer to Peer (SMPP) - the SMS which is being sent to the client's subscriber is only on behalf of the client and the appellants cannot send any material on their own. Thus it is amply clear that the service has been rendered by the appellants on behalf of the clients and is therefore clearly covered under the scope of BAS - AT
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Central Excise

• Appellants' Refund Claim Denied for Motor Spirit Duty; No Unjust Enrichment Found in Ethanol Blending Case.

  Case-Laws - AT : Denial of refund claim - appellants had paid full duty on the motor spirit obtained by them for blending with ethanol -when there is no change in the price, it cannot be said that assessee has benefited unjustly. - AT
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VAT

• Courts May Award Interest on Tax Refunds as Compensation When Legislature Omits Details, Linked to Doctrine of Merger.

  Case-Laws - HC : Interest on refund claim - Doctrine of merger - compensatory measure - when the legislature is silent about entitlement of interest on refund of the tax amount already paid by the citizen, the interest can be considered by way of a compensatory measure. - HC
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Case Laws:

• Income Tax

• 2015 (6) TMI 548
  Disallowance under section 40 (a)(i) - CIT(A) deleted disallowance - whether foreign agency commission paid by the assessee to the non residents/payee attracts disallowance under section 40 (a)(i) for non deduction of TDS? - Held that:- It transpires from the case file the assessee has paid foreign exchange commission to its non-resident agent who do not have any permanent establishment in India. There is no material to prove that these payment have arisen out of an agreement executed in India. Nor there is any evidence to conclude that the non-resident/payee has rendered any technical service to the assessee. The Revenue also fails to prove the payments to have been accrued, arisen or paid in India so as to make it taxable under provision of the Act. Thus we hold that the assessee was not liable to deduct TDS qua abovestated commission paid to its non resident payees. Accordingly, the CIT(A)'s findings stand affirmed. - Decided in favour of assessee.

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• 2015 (6) TMI 547
  Registration under s. 12AA cancelled - when the educational institution was run in a commercial manner by the so-called charitable institution, whether such a trust is entitled for registration under s. 12AA of the Act? - Held that:- When the assessee trust was collecting capitation fee for admission of the students over and above the prescribed fee, whatever the name it may be called, either as a building fund, development fund, etc. then the element of charity no longer remains. Such an institution cannot be considered to be a charitable institution for the purpose of grant of registration under s. 12AA of the Act. This view of the Tribunal is fortified by the judgment of of T.M.A. Pai Foundation v. State of Karnataka [2002 (10) TMI 739 - SUPREME COURT] and in Islamic Academy v. State of Karnataka [2003 (8) TMI 469 - SUPREME COURT]. A useful reference can also be made in Mohini Jain v. State of Karnataka [1992 (7) TMI 330 - SUPREME COURT] and in P.A. Inamdar v. State of Maharashtra [2005 (8) TMI 614 - SUPREME COURT]. The jurisdictional High Court in Dawn Educational Charitable Trust [2014 (3) TMI 149 - KERALA HIGH COURT] held that when the school is running on commercial lines under cloud of charitable purpose, the rejection of application for registration is justified. Since the material available on record clearly suggests that the educational institution is being run in a commercial manner, this Tribunal is of the considered opinion that the assessee is not entitled for registration under s. 12AA of the Act. - Decided against assessee.

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• 2015 (6) TMI 532
  Penalty u/s 271 (1)(c) - quantum of addition of Rs. 3,55,85,515/- assessed u/s 115-A - Held that:- When the addition was deleted in quantum appeal, then there is no justification for levy of the penalty. - Decided in favour of assessee.

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• 2015 (6) TMI 531
  Registration of the Trust under Section 12A cancelled - Held that:- The receipts from commercial activities are more compared to the overall receipts of the charitable organization can neither lead to the conclusion that the activities of the trust or institution are not genuine nor it can be said that the activities of the trust or institution are not being carried out in accordance with the objects of the trust or institution and therefore, the two conditions stipulated under the provisions of sub-section (3) of Section 12AA of the Act, which empowers the authority to cancel the registration, do not exist in the present case. The registration granted is cancelled in view of the amendment of first proviso to Section 2(15) of the Act. That is not a ground specified in the statute for cancellation of the registration. In fact, sub-section (8) of Section 13 of the Act which is introduced by Financial Act, 2012 which came into effect from 1.4.2009 categorically provides that, nothing contained in Section 11 or 12 shall operate so as to exclude any income from the total income of the previous year or any receipt there of. If the provisions of the first proviso to clause (15) of Section 2 becomes applicable in the case of such person in the said previous year, the statute has protected the interest of the revenue. Notwithstanding the fact that the assessee is conferred registration under the provisions of Section 12A of the Act, unless the assessee falls within the provisions of Section 2(15) of the Act, excluding the first proviso, the assessee would not be entitled to the benefit of exemption from the tax. - Decided in favour of assessee.

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• 2015 (6) TMI 530
  Reopening of assessment - CIT(A) quashed reopening - Held that:- CIT (A) has clearly mentioned that the escapement of income was not on account of failure on the part of the assessee to fully or truly disclose all material facts necessary for assessment. Further, there is nothing on record to suggest that there is a new material in possession of the Assessing Officer, indicating escapement of income, to initiate reassessment proceedings. Therefore, in the light of case of Madhukar Khosla vs. ACIT (2014 (8) TMI 568 - DELHI HIGH COURT), the Hon’ble Court has held that ‘if there is no “reason to believe” that the income has escaped assessment based on new “tangible material”, then the reopening of assessment amounts to impermissible review’ we hold that CIT (A) is justified in quashing the reassessment proceedings and we see no reason to interfere with the same. It is ordered accordingly. - Decided in favour of assessee.

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• 2015 (6) TMI 529
  Disallowance of claim of set off of Long term Capital Loss on sale of shares - Security Transaction Tax ( STT ) was deducted against the Long Term Capital Gain arising on sale of land at Chennai- Held that:- section 10(38) excludes in expressed terms only the income arising from transfer of Long term capital asset being equity share or equity fund which is chargeable to STT and not entire source of income from capital gains arising from transfer of shares. It does not lead to exclusion of computation of capital gain of Long term capital asset or Short term capital asset being shares. Accordingly, Long term capital loss on sale of shares would be allowed to be set off against Long term capital gain on sale of land in accordance with section 70(3). We allow the assessee s ground no.1 and direct the Assessing Officer to allow the claim of set off of Long term capital loss on sale of shares against the Long term capital gain arising on sale of land. - Decided in favour of assessee. Disallowance of expenses u/s. 14A made after applying Rule 8D - Held that:- On perusal of the impugned orders, we find that the assessee had made the claim before the Assessing Officer that no expenditure can be said to be attributable in relation to the earning of dividend income. Once such a claim has been made, the Assessing Officer was required under the statute to satisfy himself having regard to the accounts of the assessee about the correctness of the claim of the assessee. There has to be some finding of the Assessing Officer that the assessee s claim is prima facie not tenable. The assessee has pointed out that entire investments have been made out of its own capital and internal accruals, therefore, no expenses can be said to be attributable. This claim of the assessee required examination by the AO having regard to the accounts of the assessee and the nature of expenditure which can be said to be attributable for earning of the exempt income. The AO while deciding this issue may consider the decision of Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. [ 2010 (8) TMI 77 - BOMBAY HIGH COURT ]. - Decided in favour of assessee for statistical purposes. Penalty u/s. 271(1)(c) levied on account of disallowance for assessee s claim for set off of loss and disallowance made u/s. 14A in the quantum appeal have no legs to stand. Accordingly, the penalty levied is deleted and the appeal is allowed. - Decided in favour of assessee

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• 2015 (6) TMI 528
  Profit on sale of equity shares - MAT calculation - whether the proviso to section 10(38) is a charging section and consequently the long term capital gain on sale of equity shares is chargeable as book profit under section 115JB and not the profit on sale of equity shares as held by the learned CIT(A) - Held that:- The book profits as contemplated in section 115JB means the net profit, which has been shown/credited in the profit & loss account as prepared under the relevant provisions of the Companies Act. Under the Companies Act, only the net gain/loss from sale of shares is to be included. It does not speak of Long term capital gain or Short term capital gain. Thus, while computing the book profit, income u/s. 10(38) will not be reduced and this income here would mean income credited to the Profit & loss account. Once, Explanation to section 115JB provides that the amount of income which is to be reduced or not, which inter alia means any such amount which is credited to the Profit & loss account then only such amount credited in the Profit & loss account shall alone be taken into consideration for computing the book profit. The concept of indexation while computing the Long term capital gain cannot be imported to the computation of book profit u/s. 115JB as per the expressed provisions of the said section itself which is a complete code in itself. Thus the net amount on account of sale of shares will alone be taken into account in computation of book profit and not the amount of Long term capital gain after indexation. - Decided against assessee. Non inclusion of securities transaction tax [STT] as a deduction in computing the book profit under Section 115JB - Held that:- Here we agree with the contention of the learned counsel, because the assessee in the Profit & loss account has credited the net gain after net off of STT of Rs. 25,65,015/-. Thus, the STT amount will not be included in the computation of book profit and only the net gain of Rs. 1,90,39,06,630/- shall alone be taken into account. - Decided in favour of assessee.

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• 2015 (6) TMI 527
  Transfer pricing adjustment - Information Technology enabled services (ITES) segment - selection of comparable - Held that:- Coral Hub Ltd. is not a suitable comparable were ITES segment of the assessee company. outsourcing charges of this company constitute 90% of the total operative cost, therefore, the same is functionally different from the present assessee. In the present case, neither the TPO nor the DRP has brought out any fact or evidence to establish that the present assessee is also earning income from outsourcing charges, hence, we are inclined to hold that the present assessee undertook ITES segmental activities, during the period under consideration, at its own without any outsourcing. Therefore, we are of the considered opinion that the outsourcing charges, which constitutes more than 90% of the total operating cost of the Coral Hub Ltd., is a very important factor and the same having greater bearing on the profitability of the comparable. In this situation, the Coral Hub Ltd. cannot be considered as a suitable comparable for benchmarking of International transactions of the assessee in ITES segmental activities, because the factum of heavy outsourcing activity carried out by this company looses the tag of suitable comparability. Eclerx Services Ltd. deserve to be deleted from the final set of comparables. Apparently, this company provides tailored process outsourcing and management services in addition to multitude of the data aggregation, and mining and maintenance services from vigilant reading of annual report available at Page 659 to 738 of the assessee paper book Volume-II, it can be easily seen that it is not closed to the assessee ITES segmental services transaction which are impressed by the manual process ITES services. It is not a suitable comparable to the assessee company for AY 2008-09 due to high pitched financial result and the same deserve to be deleted from the final set of comparables. Cosmic Global Ltd. is functionally dissimilar to the present assessee and Cosmic Global Ltd. is not a suitable comparable to the present assessee for benchmarking and determining the arm’s length price (ALP) of present assessee ITES segmental International transactions for AY 2008- 09. Accordingly, we hold that Cosmic Global Ltd. was wrongly included in the final set of comparables which deserves to be deleted.

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• 2015 (6) TMI 526
  Disallowance of expenditure incurred for purchase of application software - Held that:- In the present case, the A.O. had noted in the assessment order that expenditure was incurred on application software and, therefore, assessee cannot be said to have incurred expenditure on customized software. In the case law of CIT (A) Vs Asahi India Safety Glass Ltd. [2011 (11) TMI 2 - DELHI HIGH COURT] relied upon by Ld. A.R. the Hon’ble Court has held that expenditure incurred on application software is a revenue expenditure. In the present case as noted by A.O. the expenditure was incurred on application software. Therefore, respectfully following the Hon'ble Delhi High Court, we hold the expenditure incurred on application software to be revenue in nature - Decided in favour of assessee. Disallowance of Bad Debts - A.O. and Ld. CIT(A) has not allowed the claim of assessee holding that deduction is allowed in respect of bad debts which is written off as irrecoverable in the accounts and not in respect of any debt which may be written off in its accounts - Held that:-CIT(A) has held that only when proceedings in BIFR are concluded in the case of Grapco and after recovering whatever is recovered , the dues of assessee can be ascertained. However from the order of TRF Ltd. VSs CIT [2010 (2) TMI 211 - SUPREME COURT ], we find that Hon’ble Apex Court has held that for a claim of bad debt, the assessee has to only establish that debt has been written off and it was not necessary to establish that debt has become irrecoverable. Admittedly, the debt has been written off as noted in the assessment order itself and the loan was given in ordinary course of regular business activities of the assessee. Therefore, as per the Hon'ble Supreme Court decision, the action of writing off of debt was sufficient to claim the loss. In the judgements relied upon by Ld. A.R., the Hon'ble Supreme Court had remitted back the claim of bad debt to A.O. as in that case, the facts of writing off of debt was not examined by A.O. However, in the present case, the debt has actually been written off therefore, relying upon the ratio of judgement of Hon'ble Supreme Court, we hold that the claim of assessee in respect of bad debt written off is allowable - Decided in favour of assessee. Disallowance u/s 14A - Held that:- CIT(A) has held that out of internal accruals of s.248 crores for the year ended 31.03.1996, and Rs. 253 crores in the year ended 31.03.1997, the assessee had made investment of Rs. 34.99 crores and Rs. 46.93 crores in these two years, which means that the figures of internal accruals for two years was six times more than the figure of investments in these two years. Therefore, relying upon the decision of ACIT Vs Eicher Ltd. [2006 (1) TMI 183 - ITAT DELHI-C ] Ld. CIT(A) has rightly held that disallowance on account of interest was not applicable to the assessee. Disallowance u/s 14A - A.O. has made addition on a lump sum basis without noting down incurring of any expenditure @ 25% of dividend income whereas Ld. CIT(A) has restricted the disallowance to the extent of 5% of gross total income - Held that:- Both the authorities have not made any finding of fact of incurring of any expenditure in this respect. Hon’ble Punjab & Haryana High Court in the case of Hero Cycles Ltd. [2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT] has held that disallowance u/s 14A requires finding of incurring of expenditure and where it is found that for earning exempt income, no expenditure has been incurred, disallowance u/s 14A cannot be made. Thus without recording of finding of fact as to the incurring of some expenditure, disallowance made by A.O. and partly confirmed by Ld. CIT(A) is not justified. Moreover, we find hat dividends were received from the group companies wherein the investment was made as a strategic investment and not for the purpose of earning dividend and since these are strategic investments there is no chance of incurring of any expenditure on day to day basis. - Decided in favour of asseessee. Disallowance of expenditure incurred by assessee for raising loan by treating the same as deferred revenue expenditure - Held that:- There is no dispute about the fact that assessee had incurred the expenditure and the expenses are not of capital nature, therefore, as per section 37 of Act, these are allowable in the year in which such expenditure has been incurred. The A.O. had relied upon the judgement of Madras Industrial Corpn. [1997 (4) TMI 5 - SUPREME Court] for disallowing a part of expenditure. However, in the judgement of Madras Industrial Investment, the Hon’ble Court had held that expenditure can be spread over a period of time provided the assessee decides to do so and therefore, from the above judgement it can be concluded that right to claim deferred revenue expenditure is given to assessee and not to revenue. - Decided in favour of assessee. Disallowance of notional foreign exchange fluctuation loss - Held that:- As noted by A.O. in his assessment order the loss on account of foreign exchange fluctuation has occurred on account of working capital loans in foreign exchange and therefore, the loss claimed is allowable u/s 37(1) of the Act. See CIT Versus M/s Woodward Governor India P. Ltd.[2009 (4) TMI 4 - SUPREME COURT] - Decided in favour of assessee.

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• 2015 (6) TMI 525
  Accrual of income - Addition on gain on assignment of loan portfolio - sale of portfolio - Held that:- This issue involved in the appeal of the assessee is squarely covered in favour of the Revenue and against the Assessee by the decision of Coordinate Bench of this Tribunal in assessee’s own case for the A.Y. 2009-2010 [2015 (2) TMI 937 - ITAT HYDERABAD] wherein held that at the time of sale of portfolio, there is a gain of Rs. 1.54 Crores. This amount received by assessee is in a way discounted interest on the future receivables. Since this amount is already received by assessee, question of postponing the accrual does not arise. Had assessee been accounting the interest receivables as and when accrued, without sale of the portfolio, it has to be admitted that future interest cannot be taken as income. However, when assessee bundles it and sells it as a portfolio for a discount, the amount did accrue and received on the date of entering agreement. As can be seen from the above example, out of the total amount of Rs. 2,96,16,526/- receivable in a later year, assessee discounted Rs. 1,41,74,070/- and has received an amount of Rs. 1,54,42,456/- as gain, out of the total price received of Rs. 24,33,76,256/- [that total amount Rs. 24,33,76,256 – Rs. 22,79,34,100 = 1,54,42,456]. Thus, in a way, out of the book value of Rs. 22.79 Crores of portfolio, assessee did receive Rs. 24.33 Crores thereby having the gain of Rs. 1.54 Crores. Since the transaction happened on 19th March, the entire amount is to be accounted as income on that transaction as a gain. - Decided against assessee. Disallowance of deduction u/s.35D - Held that:- Since the issue relevant to the assessee’s claim for deduction under section 35D as involved in the year under consideration is consequential to the similar issue involved in the initial year i.e., A.Y. 2007-2008 for which the appeal is pending before the Ld. CIT(A), the same may be remitted back to the Ld. CIT(A) for deciding the same afresh depending on his decision on a similar issue for the initial year. Since the learned D.R. has also not raised any objection in this regard, we remit this matter back to the Ld. CIT(A) for deciding the same afresh depending on his decision on a similar issue involved in assessee’s own case for A.Y. 2007- 2008 for which the appeal is pending with him. - Decided in favour of assessee for statistical purposes.

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• 2015 (6) TMI 524
  Assessment under section 153A/153C - whether CIT(A) has erred in allowing the enhanced claims of interest on loans and depreciation in the proceedings initiated under section 142(1) of the I.T. Act. Held that:- A perusal of the impugned order of the Ld. CIT(A) also shows that neither the Ld. CIT(A) has given any specific finding on the merit of the assessee’s claim nor has he directed the A.O. to verify the same on merit and this position is not disputed even by the Ld. Counsel for the assessee. We therefore, modify the impugned order of the Ld. CIT(A) and restore the matter to the file of the A.O. for the limited purpose of deciding the issue relating to the assessee’s claim for depreciation on office building and interest on loan availed for the said building on merit in accordance with law after verifying all the relevant aspects - Decided partly in favour of revenue for statistical purposes.

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• 2015 (6) TMI 523
  Disallowance of deduction claimed u/s 54F - Held that:- Assessee has not submitted any documentary evidence to establish his claim that the amount withdrawn from the bank account out of the sale proceeds of immovable property were actually utilized for construction of new house. Therefore, in absence of even a single piece of evidence to indicate that assessee has utilized sale proceeds/capital gain in construction of new residential house, the claim of deduction u/s 54 cannot be accepted. No documentary evidence has been brought on record to establish the fact that assessee’s father has given up his right over the property or assessee has actually made investment towards construction of house property. - Decided against assessee. Non-consideration of part of cost of acquisition of immovable property for computing capital gain - Held that:- That assessee’s claim of incurring an amount of Rs. 4,32,720 as cost of construction, requires to be considered afresh in view of additional evidence submitted by assessee by way of confirmation letter dated 28/01/12 from Parsn Foundation Pvt. Ltd. Accordingly, we set aside the order of ld. CIT(A) on this issue and remit the matter back to the file of AO for deciding the same afresh after due opportunity of hearing to assessee. - DEcided in favour of assessee for statistical purposes.

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• 2015 (6) TMI 522
  Unexplained investment - CIT(A) deleted the addition relying on additional evidence filed by the assessee in the form of a confirmation letter issued by the partners of M/s. SK Builders - Held that:- A perusal of the copy of the relevant confirmation letter shows that the same does not contain any date. Even the letter stated to be filed by the assessee before the Assessing Officer is also undated and the same does not contain anything to show that the relevant confirmation letter was filed by the assessee before the Assessing Officer alongwith the said letter. On the other hand, there is a clear mention made by the Assessing Officer on page 3 of the assessment order that the claim of the assessee of having paid the amount of Rs. 66,22,500 to persons other than the partners of M/s. SK Builders on the request of M/s.SK Builders, was not supported by any evidence filed by the assessee. We therefore, are inclined to accept the contention of the Learned Departmental Representative that the relevant confirmation letter was filed by the assessee for the first time before the learned CIT(A) and the same constituting additional evidence was relied upon by the learned CIT(A) to give relief to the assessee without giving any opportunity to the Assessing Officer to verify the same. There is thus a clear violation of Rule 46A of the Income-tax Rules, 1962 by the CIT(A), and his impugned order is therefore, liable to be set aside. Thus restore the matter to the file of the Assessing Officer for deciding the same afresh after verifying the relevant confirmation letter filed by the assessee. - Decided in favour of revenue for statistical purposes.

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• 2015 (6) TMI 521
  Non deduction of TDS on commission payment u/s 194H - assessee sold SIM/recharge cards and top-up cards to the franchisees at a concessional price - CIT(A) concluded that the transaction between the parties is on principal to principal basis and therefore, the concession given to the franchisees cannot be treated as commission, but trade discount - Held that:- As per third proviso to S.194H which is inserted by the Finance Act, 2007, no deduction need to be made on any commission or brokerage paid by BSNL to its Public Call Office franchisee, and this proviso was held to be clarificatory in nature in the case of CIT V/s. Bharat Sanchar Nigam Ltd. (2013 (3) TMI 199 - PUNJAB & HARYANA HIGH COURT). Having regard to the circumstances of the case, as noticed that the assessee being public sector undertaking stands on a different footing and the view taken in the case of Idea Cellular (2010 (2) TMI 24 - DELHI HIGH COURT) cannot be applied, since the relationship between the BSNL and the franchisee stands on a different footing and the same was recognised by the CBDT. In fact, the decision of Hon'ble Delhi High Court and other High courts, on this point were considered by Hon'ble Karnataka High Court in the case Bharti Airtel Ltd. V/s. Dy. CIT and others (2014 (12) TMI 642 - KARNATAKA HIGH COURT) while holding that Section 194H is not applicable . Since no jurisdictional High Court decision is available as on date, the latest decision of Karnataka High Court, which considered and distinguished earlier rulings of other High Courts, deserves to be followed. In fact, the first appellate authority has taken into consideration the circular issued by the corporate office of the BSNL dated 13.12.2007 and another circular dated 15.4.2008 while coming to the conclusion that the nature of the payment made by the assessee to its franchisee is trade discount only. Since the view taken by the learned CIT(A) is mainly based on the factual matrix of the case, the order passed by the learned CIT(A) does not call for any interference. - Decided against revenue.

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• 2015 (6) TMI 520
  Income from sale and purchase of shares - capital gains or business income - Held that:- The assessee is to be treated as an investor for the year under consideration also. We hold accordingly. The AO, therefore, is directed to treat the income from sale and purchase of shares as short term capital gains and long term capital gains according to the period of holding as per the provisions of law. - Decided in favour of assessee.

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• 2015 (6) TMI 519
  Unexplained expenditure u/s.69C - the amounts remitted toward the father’s medical treatment - Held that:- There is no doubt in the present case as to the source; the assessee’s sister, Ms. Hapiping C. Chiang, who is working with Canadian Trust Company, having adequate income/ capital. It is the nature of the credit, however, that the assessee has not been able to satisfactorily prove, so that to that extent it becomes an unexplained credit. In fact, ‘gifts’ are considered as income, i.e., generally, only on account of the inability to explain or substantiate the nature of the sum credited, which includes the credit to, as in the instant case, the assessee’s capital account, even as there is little to doubt qua its source. Thus once there is an unexplained credit, it is open to the AO to hold it as the assessee’s income and no further burden lies on the Revenue to show that it is from a particular source. To state differently, the credits would constitute a valid ground for including the same as income u/s. 68, that is, separate and distinct from that for being unable to prove or explain satisfactorily the source of the expenditure. - Decided against assessee. In sum, the facts and circumstances lead to an unmistakable conclusion of the assessee’s father being critically ill, and the assessee’s sister, living far away, showing her concern and responsibility toward her father as well as appreciation for her brother in looking after him - her father, with whom he was staying, and being in a position to, contributing thereto as her moral obligation. We, accordingly, confirm the addition of Rs. 8,85,102/- found credited to the assessee’s capital account in his accounts as his income for the foregoing reasons.

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• 2015 (6) TMI 518
  Disallowance of provision for trade guarantee - Held that:- Identically, the Tribunal has placed reliance upon the decision of the Tribunal for the assessment year 2004-05, wherein a detailed deliberation has been made on identical facts / issue. In the absence of any contrary material or any case law cited by the Revenue against the assessee, on the reasoning contained in the aforesaid order / earlier order of the Tribunal, we allow this ground of the assessee. Disallowance of deduction u/s 80IA - Held that:- As no claim was made by the assessee u/s 80IA of the Act and admission by the learned D.R. that no such claim was made, there is no question of making any addition / disallowance. Disallowance of professional fee - Held that:- The assessee is in the business of power generation for the last about 50 years, therefore, how these can be treated as pre-operative expenses. More specifically when the Assessing Officer himself has observed that the amount was paid to the consultant in connection with feasibility report on power generation, as is evident from the assessment order. Power generation is not the new business of the assessee. It is evident that the assessee disclosed income to the tune of Rs. 270,38,23,066=24, from sales, services and operation, etc. The assessee rendered services to the extent of Rs. 95,02,33,220, the nature of business shown by the assessee is manufacturing / trading in diesel engine, trading in engineering goods and other engineering services. Thus, it can be concluded that it is not the new business of the assessee. - Decided in favour of assessee. Addition for provision of trade guarantee to book profit computed u/s 115JB - Held that:- actuarial valuation report was not filed by the assessee before the Assessing Officer. Therefore, we remand this issue to the file of the Assessing Officer to examine the claim of the assessee and decide in accordance with law. The assessee be given opportunity of being heard with further liberty to furnish evidence, if any, in support of its claim. - Decided in favour of assessee for statistical purposes.

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• 2015 (6) TMI 517
  Entitlement to claim depreciation on portion of plant and machinery received towards grant/subsidy from National Dairy Development Board under "70% loan and 30% grant" scheme - whether 30% grant has been received towards the project as a whole and hence, it is entitled to depreciation on the entire cost of assets installed and put to use without deducting the grant portion? - Held that:- In the light of the judgement of Mahesana District Co-operative Milk Producers Union Ltd. vs. CIT (1999 (12) TMI 4 - GUJARAT High Court) and CIT vs. Sun Fibre Optics (P.) Ltd.(2012 (6) TMI 502 - KERALA HIGH COURT ), we are of the considered view that the authorities below were not justified in excluding the grant portion of the amount from the actual cost. Hence, we hereby delete the disallowance and direct the AO to give deduction on the entire amount. - Decided in favour of assessee. Disallowance of expenditure contributed to Amul Research & Development Association (ARDA) - Held that:- In the case in hand, undisputedly the assessee has made contribution for research, therefore such payments would fall under section 35 of the Act and for claiming deduction u/s.35 of the Act, the Association is required approved in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed. No material is placed on record that the Association is approved in the manner prescribed. Under these facts, we do not see any infirmity in the order of ld.CIT(A),same is hereby upheld. - Decided against assessee. Disallowance of interest expenditure by invoking the provisions of section 14A - Held that:- Section 14A states that for the purpose of computing total income under Chapter IV, no deduction shall be allowed in respect of expenditure incurred in relation to the income which does not form part of the total income under this Act. It does not state that income which is entitled to deduction under Chapter VIA has to be excluded for the purpose of the said Section. The words “do not form part of the total income under this Act” is significant and important. As noticed above, before allowing deduction under Chapter VIA we have to compute the income and include the same in the total income. In this manner, the income which qualifies for deductions under Sections 80C to 80U has to be first included in the total income of the assessee. It, therefore, becomes part of the income, which is subjected to tax. Thereafter, deduction is to be allowed in accordance with and subject to the fulfillment of the conditions of the respective provisions. This is also subject to Section 80AB and 80A(1) and (2). Chapter VIA does not postulate or state that the incomes which qualify for the said deduction will be excluded and not form part of the total income. They form part of the total income but are allowed as a deduction and reduced. Therefore, respectfully following the judgement of the Hon’ble Jurisdictional High Court rendered in the case of CIT vs. Banaskantha Dist.Co-op.Milk Producers’ Union Ltd.( 2014 (5) TMI 12 - GUJARAT HIGH COURT ), we hereby direct the AO to delete the disallowance. - Decided in favour of assessee.

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• 2015 (6) TMI 516
  Unexplained expenditure u/s.69C - statement u/s.108 of the Customs Act was recorded, wherein about undervaluation resorted by the assessee in respect of 22 consignments - CIT(A) deleted addition - Held that:- The adjudication by the custom authority has not been done, therefore, the only basis to rely on the statement made before the DRI should not be the only ground for confirming the addition. Both the parties have agreed that the finding of the custom authorities would have bearing on the present case. Therefore, the respective representatives of the parties agreed that the issue be restored to the file of AO for deciding the issue after the outcome of the adjudication by the Custom Authority. In view of the submissions made by the respective representative of the parties, we hereby restore this issue to the file of the AO to decide the issue after the adjudication order is passed by the custom authority. - Decided in favour of revenue for statistical purposes. Disallowance of freight and clearing and forwarding expenses u/s.40(a)(ia) - non-deduction of TDS - Held that:- Undisputedly, the ld.CIT(A) has not doubted the submission of the assessee that payment so made does not contain income/profit element. Despite that he proceeded to confirm the addition. Under the identical facts, in the AY 2007-08, however he restricted the disallowance to the extent of service charges paid to the CHA. Therefore, in the year under consideration also, disallowance ought to have been restricted to service charge. The impugned disallowance is, therefore, restricted to the extent of service charges. The AO is hereby directed to recompute the disallowance in the light of above direction. - Decided in favour of assessee for statistical purposes. Disallowance of depreciation on plant and machinery - Held that:- During the course of hearing, a query was raised by the Bench, whether the plant and machinery was operated and used for manufacturing at any point of time in near future. The answer was negative, ld.counsel for the assessee could not place any material on record suggesting that the plant and machinery were used. Under these facts, we do not see any reason to interfere with the order of the ld.CIT(A), the same is hereby upheld. - Decided against assessee.

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• 2015 (6) TMI 515
  Addition u/s.68 - CIT(A) deleted the addition - Held that:- There is no dispute with regard to the fact that the identity of the depositors is not doubted. The genuineness of the transaction also established as the same effected through banking channel. The assessee has furnished evidences of the creditworthiness of the persons from whom he has obtained loans. The Revenue has not rebutted the evidences placed by the assessee by placing any contrary material on record. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue. Disallowance of shop rent & godown rent - CIT(A) deleted the addition - Held that:- The shop rent and godown rent were disallowed on the ground that no PAN or confirmation of the parties were furnished to whom these payments of rent were made. The books of account of the appellant were audited. The shops and godown were not taken on rent during the year under consideration but the same were taken on rent in A.Y. 2003-04. No such disallowance were made in earlier year. The Ld. Counsel has furnished sufficient evidence for the tenancy of the shop and godown. Such evidences were also independently filed before the Assessing Officer during remand proceedings vide letter dated 11.08.2011. After considering the evidences so filed, there is no justification for disallowing the shop and godown rent - Decided against revenue.

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• 2015 (6) TMI 514
  Transfer pricing adjustment - AO/ TPO had accepted and adopted TNMM method with regard to other international transaction, therefore, no separate bifurcation of AMP expenses is to be made as per assessee - Held that:- Submission of assessee cannot be accepted because TPO had applied the bright line test by considering those comparables which were routine distributors. He did not carry out any study with reference to the functions performed by comparables selected by him vis a vis functions performed by assessee in regard to its marketing and distribution activities. The international transaction of AMP expenses can be clubbed with other international transactions carried out by assessee as distributor, if AMP functions performed by tested party and comparables are same. If there is difference in the functions between the assessee and comparables, the suitable adjustment was to be first made to bring the both at same pedestals. It is pertinent to note that comparables selected by assessee in its TP study for benchmarking the distribution activity and for benchmarking the AMP functions only Remi Elektrotechnik Ltd. is common in both. Therefore, the plea that since TPO has accepted TNMM method, therefore, AMP expenditure should not be separately considered is devoid of any merit. In view of the decision of Hon’ble High Court in Sony Ericsson case (2015 (3) TMI 580 - DELHI HIGH COURT ), there is no dispute that the discount and sales commission being directly attributable to selling activities of assessee, have to be excluded from the components selected by TPO in regard to AMP expenses. However, as far as submissions of ld. counsel with regard to the expenses in connection with the sponsorship and sales promotion are concerned, we are of the opinion that since the assessee’s plea has not been examined by ld. DRP/ TPO, the matter should be restored to file of TPO/ DRP to record a finding on the assessee’s claim as noted in the submissions of ld. authorized representative. - Decided in favour of assessee for statistical purposes.

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• 2015 (6) TMI 513
  Deduction of interest on borrowed capital invested in shares - assessee has claimed the interest cost as a part of the cost of acquisition and/or improvement - Held that:- To bring an expense within the cost of its improvement, the expenditure has to be by way of a (physical) addition or alteration, adding value to the capital asset. Admittedly, no such improvement has taken place to the shares, which continue to be held as such, i.e., as acquired. This is again part of the settled law, for which we may refer to the decision in the case of Industrial Credits discontinued business, et. al. No material or evidence or even explanation is forthcoming from the assessee. The only inference under the circumstances is that the liability no longer exists. Per contra, the assessee has obtained a benefit by way of remission or as the case may be cessation of liability. An inference of fact is again only a finding of fact, drawn in consistence and in harmony with in the conspectus of the facts and circumstances of the case. - Decided against assessee. Which is the year of remission or cessation of liability - Held that:- The assessee having claimed it as a liability for the immediately preceding year as well, and which stood accepted by the Revenue, would preclude the assessee from contending that the liability was not existing, or was in fact not a liability even as at the end of the immediately preceding year. That is, it is not open for the assessee to turn back and say that you accepted my lie for the preceding year/s and, therefore, you are bound by it. The only consequence in law is that the cessation or remission has occurred during the relevant previous year. - Decided against assessee.

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• Customs

• 2015 (6) TMI 535
  Classification of goods - import of Hook and Eye - Classification under Chapter 8308 1010 or under CTH 62129090 - Violation of principle of natural justice - Held that:- When the lower appellate authority chooses to change the description altogether to a new product other than what was re-assessed by the original authority but failed to give an opportunity to the appellants to put forth their defence. - Commissioner (Appeals) has not only decided the classification to a new product as Bra Extender instead of Hooks & Eyes and also directed the lower authority to initiate proceedings for mis-declaration/suppression and also to examine the past clearances. When the Department chooses to rely on certain evidence whether it is Textile Committee report, literature or any records it is mandatory that appellant shall be given an reasonable opportunity to defend their case. We also find that the appellants have filed appeals before lower appellate authority disputing the classification followed by the Department and the lower appellate authority has gone beyond the grounds of appeal and described the product entirely to a new description as Bra Extenders and also directed the original authority for initiate proceedings against the appellant. - the original authority and the lower appellate authority not followed the principles of natural justice, and it is a fit case to be remitted back to Department, the impugned order is liable to be set aside for deciding the classification issue afresh after providing a reasonable opportunity of hearing to the appellants - Matter remanded back - Decided in favour of assessee.

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• 2015 (6) TMI 534
  Import of software for Seismic purposes - Denial of the benefit of Notification No. 21/2002-Cus. dated 1.3.2002 - importation of the identical goods by the assessee - Held that:- Item imported by the appellant in this case is similar to the item imported in the case of Tullow India Operations Ltd. (2005 (10) TMI 502 - SUPREME COURT OF INDIA) i.e. IT software and also observed that in this case the item imported by the appellant is squarely covered by item No. (1) of Schedule 12 attached as per Sr. No. 214 to the Notification No. 21/2002-Cus dated 1.3.2002. Further, the appellant has produced a certificate from duly authorised person of Directorate General of Hydro Carbons, in the Ministry of Petroleum and Natural Gas, Govt. of India to the effect that imported goods are required for petroleum operations. In these circumstances, we hold that the appellant has complied with the condition of Notification No. 21/2002-Cus. dated 1.3.2002. Therefore, the appellant is entitled to avail the benefit of the said notification. - Decided in favour of assessee.

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• Corporate Laws

• 2015 (6) TMI 533
  Rectification in Register of Members - Sections 58 and 59 of the Companies Act, 2013 - Indemnity Insurance Policy to cover risk related to certain losses including loss of shares - Held that:- The Respondent Nos. 1 to 3 have stated therein that the Respondent No.l being neutral party having no vested interest in the subject matter of the Appeal have no objection of whatsoever nature, if the CLB pass a favourable order as prayed by the Appellant, the list of shares as on date being annexed to the Company Appeal. I have heard the parties and perused the record. Having considered the submissions advanced on behalf of the Parties and in the facts and circumstances of the case, the Appeal is allowed in terms of prayer 6.1 to 6.3 made in the Company Appeal, subject to furnishing an Indemnity Bond by the Appellant to the satisfaction of Respondent No.1 Company. The Respondent Nos.1 and 2 upon receiving such Indemnity Bond shall rectify its Register of Members by inserting the name of the Appellant Company in place of the Transferors of the respective shares. It is, however, made clear that this order shall not be treated as a precedent in other cases, keeping in view of the fact that the Respondent Nos. l to 3 have not opposed the prayer made by the Appellant in the Instant Company Appeal. - Decided in favour of appellant.

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• Service Tax

• 2015 (6) TMI 546
  Demand of service tax - cum duty value - Event Management service - Invocation of extended period of limitation - Held that:- appellant at no stage made available any documents such as invoices and contracts with their clients which would indicate that value received by them is cum duty value. We notice that one of the clients is a well-known company i.e. Hindustan Unilever. We find no reason why any documents could not have been obtained from their client to show that the value received by them is actually cum duty value. Appellant got enough opportunity to produce documents from their client even if their own documents were washed away in floods. The case of Roopa Ram Suthar (2014 (12) TMI 826 - CESTAT NEW DELHI) does not come to the aid of the client because in that case documents existed and invoices clearly disclosed that no service tax component was added and collected from customer. Appellant was very well aware of their responsibility and liability, having taken service tax registration in Feb 2003. But appellant still chose to avoid all Legal obligations cast on them after taken service tax registration and not complying with the requirement of filing ST3 returns on periodical basis for a long period of six years till the time of issuance of show cause notice - appellant had service tax registration but did not receive the show cause notice, did not submit any reply to the show cause notice, did not even appear for personal hearings on various dates can only lead to the conclusion that their intentions were not bonafide. - Decided against assessee.

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• 2015 (6) TMI 545
  Penalty u/s 76 & 78 - Classification of service - Valuation - Held that:- Irrespective of the fact whether the activity is classified as "port service" or as a "Cargo handling" service, the stated policy of the government is to exempt exports from levy of any tax. But the fact whether almost the entire cargo pertains to export containers is not discussed in the order of the Commissioner although the learned AR did not dispute the statement made by the counsel before the bench. Section 67 which deals with valuation was amended on 18.4.2006. Prior to this date, service tax was chargeable on the gross amount charged by the service provider for service provided. After the amendment on 18.4.2006, explanation (c) to section 67 was introduced which states that the gross amount charged will include payment of cheque, credit cards, deduction from accounts, credit or debit notes, or book adjustment. We do not agree with Revenue that the amendment to Section 67 has not made any material difference to the provisions of valuation. Before the amendment on 18.4.2006, the gross amount charged by the appellant would be none other than the amount for which invoice is raised. There is no other consideration flowing from the receiver to the appellant. The whole transaction can be read as a contract that provides for charging only on the basis of the net number of containers handled in excess by the appellant. It must be noted that during the relevant period there was no valuation Rules. The Service Tax (Determination of Value) Rules 2006 came into effect form 19.4.2006, that is after the period of dispute in the present case. Therefore resort cannot be had to these Rules for the determination of value. In this view of the matter the taxable value on which service tax is chargeable must be considered as the invoice raised for the service provided - Decided in favour of assessee.

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• 2015 (6) TMI 544
  Cenvat Credit - availment of Cenvat Credit on the capital goods and the input services - construction of towers for providing Telecom Infrastructure - Held that:- the issue involved in this case is regarding the services rendered by the appellants as infrastructure service providers and not as telecom service provider and are providing business support service in form of infrastructure service; - Decisions in the cases of GTL Infrastructure Ltd. [2014 (9) TMI 647 - CESTAT MUMBAI]and Reliance Infratel Ltd. (2015 (3) TMI 701 - CESTAT MUMBAI) followed - cenvat credit allowed - impugned orders are unsustainable and liable to be set aside - Decided in favor of assessee.

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• 2015 (6) TMI 543
  Business Auxiliary Service - appellants were providing Short Message Peer to Peer (SMPP) service to various clients but were not paying service tax thereon - Held that:- Telecommunication service defined under Section 65(109a) requires that the services, inter alia, is rendered by a person, who has been granted a licence under the first proviso to sub-section (1) of Section 4 of Indian Telegraph Act, 1985 and the appellants not having been granted such a licence are not covered thereunder. Consequently, the appellants' contention that as they are covered under Telecommunication Service, they cannot be covered under BAS is totally invalid [even if the contention that being covered under Telecommunication Service would necessarily mean they were not covered under any other taxable service earlier is presumed (without admitting) to be valid]. There is hardly any doubt that the appellants were providing service to their client's subscribers on behalf of their clients for which they were paid by their clients. If the services provided by them to their clients' subscribers were not on behalf of their clients, they (i.e., the appellants) had no reason to provide service to their clients' subscribers and there would be no reason for their clients to pay the appellants for the said service. Indeed, to whom the data/SMSs should be sent, at what time they should be sent, the priority to be attached to them etc. are all decided by the clients and the appellants are merely acting on behalf of the clients. There is an agreement between the appellants and their clients, like an agreement dated 28.08.2006. Under the agreement, the appellants have to give their client a direct SMPP connection through their network. The appellants then have to deliver the SMSs received from the clients to the latter's subscribers for which they get a fee from the clients. The clients also promise not to send any data which consider as objectionable. The terms of the agreement make it clear that the SMS which is being sent to the client's subscriber is only on behalf of the client and the appellants cannot send any material on their own. Thus it is amply clear that the service has been rendered by the appellants on behalf of the clients and is therefore clearly covered under the scope of BAS as the appellants have rendered service in relation to provision of service on behalf of the clients. Section 67(2) of Finance Act, 1994 allows cum-tax benefit only if the gross amount charged for the service is inclusive of service tax payable. In the light of the admitted fact that the price charged by the appellants did not include any service tax, the cum tax benefit cannot be extended to them. - however, penalty u/s 78 is set aside - Decided partly in favour of assessee.

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• Central Excise

• 2015 (6) TMI 550
  Abatement of duty - whether the appellant must have, first paid, the duty due for the whole month by the due date and then must have claimed abatement or whether the appellant are required to pay only the net amount of duty payable after adjusting the abatement - Held that:- Assessee is not required to just pay the duty for the whole month and then claim the abatement and that he is required to pay only the duty for the days for which the machines were operating and only the interest for the period from the due date to the date on which the adjusted duty chargeable was paid would be leviable. We find that the same view has also been taken by Hon’ble Allahabad High Court in the case of Steel Industries of Hindustan vs CCE Gahziabad reported in [2013 (10) TMI 172 - ALLAHABAD HIGH COURT], wherein Hon’ble High Court held that for claiming the abatement for the closure period, depositing the duty for the whole month was not a pre-condition under Rule 962B of the Central Excise Rules, 1944. - Decisions in the case of Shri Flavours Pvt Ltd vs CCE Delhi-IV reported in [2014 (4) TMI 417 - CESTAT NEW DELHI], Kuber Khaini P. Ltd. vs CCE Rohtak (2015 (6) TMI 549 - CESTAT NEW DELHI), Shri Padma Balaji Steel Pvt. Ltd. vs CCE Coimbatore reported in [2009 (3) TMI 783 - CESTAT, CHENNAI] - Accordingly, the impugned orders are set aside except to the extent that the appellants be liable to pay interest for the period of delay in payment of the adjusted duty from the due date - Decided partly in favour of assessee.

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• 2015 (6) TMI 549
  Abatement of duty - Held that:- There is no dispute about the appellant s entitlement to the abatement and Revenue s only objection is as regards the procedural violation. We find that an identical issue was the subject matter of the Tribunal s decision in the case of Shree Flavours Pvt. Ltd. Vs. CCE, Delhi-IV reported in [2014 (4) TMI 417 - CESTAT NEW DELHI ], wherein by taking note of the earlier decision of the Tribunal in the case of Kaipan Pan Masala Pvt. Ltd. [2013 (1) TMI 356 - CESTAT, NEW DELHI], it was held that non-deposit of the duty and subsequent non-claiming of the abatement in violation of the procedure prescribed under the said Rules would not result in denial of substantive benefit to the appellant and the only consequence would be confirmation of interest. - Decided partly in favour of assessee.

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• 2015 (6) TMI 540
  Abatement under Rule 10 of the PMPM Rules - Gutkha, Pan Masala and/Chewing Tobacco. - whether for claiming the abatement, the appellant should first pay the duty for the whole month by 5th March 2013 and should have thereafter claimed the abatement - Held that:- Department does not dispute that the appellant would be eligible for abatement under Rule 10 of the PMPM Rules for the period of closure from 1st March 2011 to 16th March 2011 - Tribunal held that in such cases for claiming abatement it is not necessary that the assessee should pay duty for the whole month and that the assessee would be required to pay proportionate duty only for the number of days for which the unit were functioning. Therefore, so far as the duty demand of Rs. 32,25,805/- is concerned, the same is prima facie not sustainable. - Decision in the case of assessee's own previous case [2015 (6) TMI 550 - CESTAT NEW DELHI] followed - Demand of duty is not sustainable. There were a total number of 21 packing machines out of which 13 machines were installed for packing of Pan Masala pouches of MRP Rs. 1 and 8 machines installed were for packing of Chewing Tobacco of MRP Rs. 1. W.e.f 24.07.2013 four new machines were installed which were used for packing of Pan Masala pouches of MRP of Rs. 4. - In terms of Rule 8 of the PMPM Rules in case of addition or installation or removal or un-installation of a packing machine in the factory during a month, the number of operating packing machines for that month shall be taken as maximum number of packing machines installed on any day during the month. Thus, in terms of Rule 8, if the number of packing machines installed in a factory, during the month varies, the maximum number of machines on any particular date would be treated as "the number of operating machines" for the purpose of calculation of duty liability under Rule 7, according to which the duty payable by a pan masala/ gutkha unit for a particular month shall be calculated by application of the appropriated rate of duty specified in the notification no. 42/08-CE to the number of "operating packing machines" in the factory during the month. Since the appellant had installed the 4 new machines on 24.07.2013 for manufacture of the new RSP of Rs. 4 per pouch in our prima facie view, the 4th Proviso to Rule 9 would be applicable. Therefore, we are of prima facie view that in respect of 4 new machines, the duty would be chargeable on prorata basis for the remaining days in the month that is, from 24.07.2013 to 31.07.2013, and as such the duty demand confirmed by the Commissioner on this basis would not be sustainable. - requirement of pre deposit of duty demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed - Stay granted.

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• 2015 (6) TMI 539
  Waiver of pre deposit - Valuation u/s 4A - Inclusion of freight - Held that:- duty is required to be paid inclusive of freight amount. As far as invoking the extended period of limitation is concerned, there also, we find that issuance of the other show cause notice does not affect the present show cause notice. In the other show cause notice, the department was of the view that the applicant is required to pay duty under Section 4A (as was being done by the applicant before August, 2006). The fact that the applicant was not including the freight element for discharging duty was suppressed from the department. In any case, the question of invoking extended period of time is a matter of facts and law combined together and will have to be gone through at the time of final hearing. We have also gone through the annual reports. Keeping in view the financial condition, we direct the applicant to deposit 25% of the duty demanded, minus the amount already deposited, within a period of eight weeks and report compliance on 8 th June, 2015 - Decided partly in favour of assessee.

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• 2015 (6) TMI 538
  Penalty u/s 11AC - Interest u/s 11AB - Valuation - addition of amortization cost of pancake master tape - Held that:- Direction given by the Tribunal has already been taken care therefore there is no need for any further addition on account of amortisation in the value adopted by the Revenue therefore there was no need of re-working of excise duty which was already worked out and confirmed in the earlier order hence the same confirmation made in the impugned order is absolutely in order and does not require any interference. Since first order of the Tribunal was not challenged by the appellant, at this stage the appellant cannot raise any grievance. In view of the above position we are of the considered view that the impugned order by the Ld. Commissioner is just, proper and legal and no infirmity found therein. Hence the impugned order is upheld - Decided against assessee.

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• 2015 (6) TMI 537
  Denial of refund claim - appellants had paid full duty on the motor spirit obtained by them for blending with ethanol - concessional rate of duty under Notification No. 28/2002-CE dated 13.05.2002 - appellants had not followed the procedure prescribed under the Rules - Unjust enrichment - appellant had not shown the duty liability separately in their invoices - Held that:- Commissioner (Appeals) has relied on the fact that the Commissioner (Appeals) in the first round of litigation had already taken a view that the assessee is free to apply for registration and departmental officer will examine merits and grant refund if they are otherwise eligible for refund. He has interpreted this to mean that the procedure relating to registration was held to be unnecessary in this case having regard to the facts and circumstances. The unjust enrichment issue also was considered by the Commissioner and he held that when there is no change in the price, it cannot be said that assessee has benefited unjustly. - assessee had already applied for the registration which was granted on 14.02.2003 that is within less than a month of the receipt of the first consignment. Therefore both on procedural aspect as well as on unjust enrichment aspect, the appeal filed by the Revenue cannot be considered in their favour. - Decision in the case of assessee's own previous case followed [2010 (10) TMI 399 - CESTAT, AHMEDABAD] - Decided against Revenue.

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• 2015 (6) TMI 536
  Denial of CENVAT Credit - Whether appellant is entitled to take Cenvat credit on the invoices issued by the first stage dealer for the period 10.10.2000 to 7.3.2003, after 1st March, 2003 all AED paid during the period 10.10.2000 to 7.3.2003 or not in the facts and circumstances of this case - Held that:- If both are taken together there is no allegation against the appellant that appellant cannot take the Cenvat credit on the supplementary invoices by the first stage dealer after 1.3.2003 or not. Further I find that the dispute of availment of AED paid prior to the period 1.3.2003 and same issue was before the Hon'ble High Court of Delhi in appellants own case wherein the period was 1.4.2000 to 9.10.2000 i.e. prior to 1.3.2003. In that case in the remand proceedings, learned Commissioner (Appeals) has held that invoices issued by the first stage dealer for payment of AED, the appellant is entitled to take Cenvat credit. The CBEC circular clarifies the same that if AED has been paid prior to 1.3.2003, same can be utilized for the payment of subsequent period after 1.3.2003. - following the decision of the Hon'ble High Court of Delhi in appellants own case cited [2010 (9) TMI 136 - DELHI HIGH COURT], I hold that appellant has correctly taken the Cenvat credit - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (6) TMI 542
  Detention of goods - Held that:- Petitioner is directed to pay the tax as one time payment under protest as a condition precedent for release of the goods in question, in terms of Section 67(4) of the Tamil Nadu Value Added Tax Act, 2006 and on such payment of the one time tax in terms of Section 67(4) of the Tamil Nadu Value Added Tax Act, the respondent shall release the goods forthwith to the petitioner. It is made clear that the petitioner has to face the adjudication proceedings that may be initiated by the respondent. - Petition disposed of.

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• 2015 (6) TMI 541
  Interest on refund claim - Doctrine of merger - compensatory measure - Whether the Tribunal has erred in holding that dealer is entitled to interest under section 54[1][aa] on refund arising from appellate order - Held that:- principles of compensatory measure may apply if the taxing statute is silent about the said aspect. The Legislature may control quantification of interest or the entitlement of interest on refund subject to meeting with the test of constitutional provision. But, when the legislature is silent about entitlement of interest on refund of the tax amount already paid by the citizen, the interest can be considered by way of a compensatory measure. General principles for awarding compensation to the Assessee for the delay in receiving monies properly due to it is not disapproved by the Larger Bench of the Apex Court in the case of Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals [2013 (10) TMI 117 - SUPREME COURT] - observation made in case of Gujarat Fluoro Chemicals (supra) is a complete answer to the contention that the interest can be awarded even if not expressly barred by the statute or that the taxing statute is silent about the same. Question raised could no more be considered as substantial question of law since such aspect is already covered by the principles of doctrine of merger well settled in the system of administration of justice and also in the abovereferred decision of the Apex Court as well as of this Court. - no substantial question of law would arise for consideration in the present Tax Appeals - Decided against Revenue.

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