TMI Tax Updates - e-Newsletter
June 2, 2015

Case Laws in this Newsletter:

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

Articles

1. Unnatural expansion of definition of "income" seems beyond power conferred to tax income under the Constitution of India. A new chapter of REAL TAX TERRORRSIM by NAMO Sarkar to counteract judicial pronouncement to include capital receipts in meaning of income.

   By: DEVKUMAR KOTHARI

2. RECENT AMENDMENTS IN CENVAT CREDIT PROVISIONS - PART-III

   By: Dr. Sanjiv Agarwal

News

1. Index of Eight Core Industries (Base: 2004-05=100), April, 2015

2. Big Push to Private Participation in Defence Manufacturing: Government Provides Level Playing Field with Defence PSUs

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

4. RBI Reference Rate for US $

5. Income Tax Return Forms ITR 1, 2 and 4S Simplified for Convenience of the Tax Payers;

Notifications

Companies Law

1. File No. 1/16/2013-CL-V - dated 29-5-2015 - Co. Law

Companies (Registration Offices and Fees) Second Amendment Rules, 2015

2. File No. 1/13/2013-CL-V - dated 29-5-2015 - Co. Law

Companies (Incorporation) Second Amendment Rules, 2015 - Prior permission from the concerned sectoral regulators, where ever is required, is necessary, before commencement of object of the company.

3. File No. 1/10/2013-CL-V - dated 29-5-2015 - Co. Law

Companies (Registration of Charges)Amendment Rules, 2015

4. File No. 1/6/2015-CL-V - dated 29-5-2015 - Co. Law

Commencement Notification of Companies (Amendment) Act, 2015

5. File No. 1/4/2013 CL-V - dated 29-5-2015 - Co. Law

Companies (Share Capital and Debentures) Second Amendment Rules, 2015. - Provision specifying the manner in which share certificate are required to be signed modified

6. F. No. 1/31/2013-CL-V-Part - dated 29-5-2015 - Co. Law

Companies (Declaration and Payment of Dividend) Second Amendment Rules, 2015 - The condition that, No company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company of the current year, omitted

Customs

7. 27/2015 - dated 1-6-2015 - ADD

Seeks to levy definitive anti-dumping duty on imports of Acrylic Fibre, originating in or exported from Korea RP and Thailand for a period of five years.

8. 26/2015 - dated 1-6-2015 - ADD

Seeks to extend the validity of notification No. 70/2010-Customs, dated the 25th June for a further period of one year. - Levy of anti dumping duty on Import of Poly Vinyl Chloride Paste Resin, originating in, or exported from, the European Union to continue for further period of one year

9. 25/2015 - dated 1-6-2015 - ADD

Seeks to extend the validity of notification No. 66/2011-Customs, dated the 26th July for a further period of one year. - Levy of anti dumping duty on Poly Vinyl Chloride Paste Resin exported from, Korea RP, Taiwan, People’s Republic of China, Malaysia, Thailand and Russia to continue for further period of one year.

Highlights / Catch Notes

Income Tax

• Income Tax Return Forms ITR 1, 2, and 4S simplified for easier filing; official notification coming soon.

  News : Income Tax Return Forms ITR 1, 2 and 4S Simplified for Convenience of the Tax Payers - Notification to follow
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• Payments to Abu Dhabi Works Department not "fees for technical services" per Section 9(1)(vii) of Income Tax Act.

  Case-Laws - HC : Fee for Technical service - Payment for dealings with the Works Department, Abu Dhabi, which included coordinating with the authorities in the said department and handling invoices for the assessee - emittances made by the assessee would not come within the scope of the phrase “fees for technical services” as employed in Section 9(1)(vii) - HC
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• Court Discusses Discretion in Prosecuting Income Concealment u/ss 276C and 277; Not Always Mandatory.

  Case-Laws - HC : Prosecution launched for concealment of income under section 276C r.w.s. 279 - launching a prosecution is not mandatory in every case of failure provided in section 276B. The same would apply also in respect of failure under sections 276C and 277 which the petitioner is accused of in this case. - HC
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• High Court Denies Assessee's Request to Carry Forward Business Loss Due to Late Tax Return Filing Under Sub-Section (1.

  Case-Laws - HC : Entitled to carry forward and set off the business loss -assessee did not file return within the time prescribed by sub-section (1) or within the time extended by the ITO. There is, as such, nothing that the Court can do to assist the assessee - HC
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• Notice Deemed Served: Assessee Fails to Prove Otherwise, Proceedings Upheld u/s 292BB of Income Tax Act.

  Case-Laws - AT : The moment, the notice is signed and put in the course of transmission by the department, the notice is deemed to be served, unless the contrary is proved. The assessee had not proved contrary, therefore, notice U/s 143(2) of the Act has been served on the assessee properly by the Assessing Officer - proceeding sustained r.w.s 292BB - AT
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• Tax Exemption u/s 11 Challenged for Income-Generating Public Utility Institutions; Impacts Section 10(23C)(iv) Eligibility.

  Case-Laws - AT : Eligibility of exemption u/s 11 - if the expression “charitable purpose” is given meaning that in case an Institution, with an object of advancement of general public utility, derives an income then it would be falling within the exception carved out by the first proviso to sec. 2(15) of the Act then no entity would qualify for the exemption u/s 10(23C)(iv) - AT
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• Individuals must prove cash found during searches is linked to sales receipts; evidence required if no cash book exists.

  Case-Laws - AT : Unexplained cash found at the time of search - When assessee does not maintain any cash book, onus is on assessee to establish link between the cash found and receipts from sales by producing corroborative evidence - AT
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Customs

• Anti-Dumping Duty Imposed on Acrylic Fiber Imports from Korea and Thailand for Five Years.

  Notifications : Anti-dumping duty on imports of Acrylic Fibre, originating in or exported from Korea RP and Thailand imposed for a period of five years. - Notification
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• Anti-dumping duties on PVC Paste Resin from Korea, Taiwan, China, Malaysia, Thailand, and Russia extended for one year.

  Notifications : Levy of anti dumping duty on Poly Vinyl Chloride Paste Resin exported from, Korea RP, Taiwan, People’s Republic of China, Malaysia, Thailand and Russia to continue for further period of one year. - Notification
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• Customs Duty Exemption Considered for Import of Raw Materials Essential for Manufacturing Insulin Injections.

  Case-Laws - AT : Import of raw materials for manufacturing of life saving medicines, namely, "insulin injection" - The purpose of the imported goods is for manufacturing of medicines which cannot take place unless the samples are drawn and tested - benefit of exemption cannot be denied - AT
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Corporate Law

• Companies Must Get Regulator Approval for Business Objectives per 2015 Amendment Rules.

  Notifications : Companies (Incorporation) Second Amendment Rules, 2015 - Prior permission from the concerned sectoral regulators, where ever is required, is necessary, before commencement of object of the company. - Notification
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• Amendment Updates Signing Rules for Share Certificates in Compliance with Companies Law.

  Notifications : Companies (Share Capital and Debentures) Second Amendment Rules, 2015. - Provision specifying the manner in which share certificate are required to be signed modified - Notification
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• Companies Law Update: Firms Can Now Declare Dividends Without Offsetting Previous Losses and Depreciation.

  Notifications : Declaration and Payment of Dividend - The condition that, "No company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company of the current year", omitted - Companies Law
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Service Tax

• Loading Coal via Tippers Falls Under Cargo Handling, Sand Extraction from Riverbed Classified as Mining Services.

  Case-Laws - AT : Activity of loading/unloading of coal by engaging tippers would come within the purview of the "Cargo Handling Service" - The mining of sand from the riverbed would come within the scope of mining service and not under "Cargo Handling Service". - AT
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• Court Rules Against Revenue's Extended Limitation Period in Show-Cause Notice Under Business Auxiliary Service Regulations.

  Case-Laws - AT : Business Auxiliary Service - it would be difficult to accept the contention of the Revenue that subsequent show-cause notice issued on 17.04.2012 invoking extended period of limitation would sustain, when the earlier show-cause notice, was quashed on the ground of limitation by the Hon'ble High Court. - AT
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Case Laws:

• Income Tax

• 2015 (6) TMI 10
  Technical service in terms of Second Explanation to Section 9 (1) (vii) read with Section 194J - payment incurred by the assessee to the UAE concerns - whether the non-resident was providing consultancy services? - Held that:- In the transaction between the assessee and Marble Arts and b) income must be in respect of professional services or other independent activities of a similar character. Article 4(1)(b) of the DTAA defines “resident of a contracting state” in the context of UAE to mean any person who under the laws of that State is liable to tax therein. Article 3(e) defines “person” to include a company. Therefore, the CIT(A) rightly rejected the revenue”s contention that Article 14 is inapplicable for the reason that the services in question were provided by companies, as opposed to individuals - Decided in favour of the assessee

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• 2015 (6) TMI 9
  Prosecution launched for concealment of income under section 276C r.w.s. 279 - Held that:- We direct that respondent No.2 shall decide whether or not to take action under section 279 of the Act on his own in accordance with law and without being influenced by the directions from any other source including from the CBDT including on the basis of the communications relied upon by the petitioner or otherwise. By our judgment in M/s Kudos Chemie Ltd. v. Assistant Commissioner of Income Tax (TDS), Chandigarh [2015 (5) TMI 589 - PUNJAB & HARYANA HIGH COURT], we have held that launching a prosecution is not mandatory in every case of failure provided in section 276B. The same would apply also in respect of failure under sections 276C and 277 which the petitioner is accused of in this case. Further, in the event of respondent No.2 deciding to launch the prosecution, he shall do so only by a reasoned order on all the issues raised by the petitioner. In the event of the decision of respondent No.2 being adverse to the petitioner to any extent, the same shall not be implemented for a period of four weeks after service of the same upon the petitioner.

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• 2015 (6) TMI 8
  Non deduction of TDS - Payments made for execution of contract work - whether transaction between the assessee and M/s. Nicolas Piramal India Ltd., is not a sale transaction but it's a contract manufacturing attracting provisions of section 194C ? - Held that:- In the present case, admittedly no raw material was supplied by the assessee to the manufacturer and if the 'know how' was given to the manufacturer, it was not on payment of any licence fees or royalty. As such, on facts it is clear that even the 'know how', if termed as a 'material', was not purchased by the manufacturer from the assessee. A case similar to the one in hand came up in the case of CIT v. Glenmark Pharmaceuticals Ltd. reported in [2010 (3) TMI 289 - BOMBAY HIGH COURT] wherein held that in a case where no raw material is supplied by the assessee to the manufacturer, it could not be treated to be 'work' within the definition provided in the Explanation (iv) (e) of Section 194C of the Act and has thus answered the similar question, as raised in this case, in favour of the assessee and against the Revenue.

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• 2015 (6) TMI 7
  Entitled to carry forward and set off the business loss - Held that:- Section 80 finds place in Chapter VI. The assessee obviously is seeking to get benefit of the provisions contained in Chapter-VI. The provisions of Chapter VI are regulated by section 80 which emphatically lays down that the benefit of carry forward of losses cannot be allowed unless the return has been filed within the time provided in sub-section (1) of Section 139 or within such further time as may be allowed by the ITO. Admittedly, the assessee did not file return within the time prescribed by sub-section (1) or within the time extended by the ITO. There is, as such, nothing that the Court can do to assist the assessee. Assessee Company was not entitled to carry forward and set off the business loss Tribunal was justified in law in holding that the provisions contained in Section 80 of the Income Tax Act, 1961 are substantive in nature - Decided against assesse.

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• 2015 (6) TMI 6
  Restoration of original appeal - Rule 10 of Income Tax Rules regarding filing of affidavit - Claim of unlawful survey proceedings - A crude attempt to influence independent judgment process for petty professional ends - Held that:- It may be pertinent to mention that ld. Counsel Shri K C Moondra FCA and Mukul Moondra ACA, seem to be ignorant about filing a proper power of attorney, which is to be given on a NON JUDICIAL stamp paper. Whereas they have filed a plain printed paper with Rs. 10/- court fee stamp which is not a valid and prescribed power of attorney. Thus their appearance could have been lawfully denied by the bench. This again shows the lenient approach of the bench bellying his wild allegations.Furthermore the ICAI guidelines provide that every chartered accountant shall mention his registration no. on the power. Sadly both of them i.e. S/shri K C Moondra and Mukul Moondra have not mentioned their ICAI registration no. Making their power of attorney again defective, inadmissible and in violation of ICAI guidelines.Under these facts and circumstances, we find that the ld. Counsel for the assessee Shri K.C. Moondra and his son Shri Mukul Moondra are liable for suitable proceedings for their professional misconduct, misbehavior, wasting the time of court and unlawfully attempting to interfere in the process of judicial dispensation. Considering all the facts, circumstances and material on record by invoking rule 32A of the ITAT Rules we hold that Shri K.C, Moondra and Shri Mukul Moondra are liable for levy of costs as prescribed by said rule 32A. Consequently, we impose cost of Rs. 25,000/- on Shri K.C. Moondra and Rs. 10,000/- on Shri Mukul Moondra for their delinquencies as mentioned above. Separate proposal under Contempt of Court Act will be duly forwarded to Hon’ble Rajasthan High Court.The cost is recoverable u/r 32A(2) of the ITAT Rules and shall be deposited in the ‘Prime Minister Relief Fund. Copy of this order to be sent by registry to Institute of Chartered Accountants of India to take appropriate disciplinary action against them in terms of ICAI rules and guidelines. Matter of main appeal - Right from the time of survey and thereafter appellant and his CA Shri K.C. Mundra did not cooperate with the department in finalizing the assessment proceedings. Only wild allegations were made against all the officers of the department without any basis thereof. From these facts it is clear that survey action was conducted in a normal manner by the survey team. However, Shri Shiv Ratan Mundra tried every possible trick to obstruct Government officers in discharge of their official duty. Search and survey operations are carried out by the income tax department as per the powers conferred by the statute. Members of survey team go to the business premises of a tax payer as representatives of the Government of India. The appellant used the terms as “so called survey” and “alleged survey” showed that he has no respect for law enforcement agency. It has been held by the ld CIT(A) that there is absolutely no material on record on the basis of which survey proceeding can be called unlawful or arbitrary. Accordingly, he dismissed the ground No. 1 of the appeal. As per Section 133A of the Act the concerned Assessing Officer authorized income tax authority to conduct a survey. The income tax authority go to the business premises to verify the stock as well as cash position on the date of survey. The survey team showed the authorization to the Director of the company in the case of company and asked to sign on it. Thereafter the authorized officer starts to verify the cash on the date of survey and make inventories of stock and books of account found during the course of survey. As per stock register/ledger, they prepared stock position as on date of survey. The part of the survey team is deputed to verify the stock physically and prepared stock inventory with the help of staff or assessee himself. It is found that assessee was non cooperative with the survey team as he has not given statement U/s 133A and also not signed on it. From the record, it is fact that a survey took three days to complete the survey proceeding which shows that there was non-cooperation from the Director of the company. As per assessment order also, there was non-cooperation and the survey team had impounded 51 books of account, which were relevant to various assessment years, which has been reproduced by the Assessing Officer on page 2 to 4 of the assessment order but no adverse inference has been drawn by the Assessing Officer. Only discrepancy was found in the stock position on the date of survey which has been calculated by both the authorities judiciously. Therefore, we do not find any reason to intervene in the order of the ld CIT(A). According we uphold the order of the ld CIT(A). The assessee submitted a list of closing stock during the assessment proceedings at Rs. 2,54,98,772.93 and physical stock during the course of survey was found at Rs. 1,41,16,603/-. There was a shortage in stock at Rs. 1,13,82,169/-. The assessee has shown G.P. rate in immediate preceding year @ 16.22% on the basis of this GP rate, the total GP addition was made by the Assessing Officer and confirmed by the ld CIT(A) had Rs. 18,46,187/- is justified. There was a discrepancy during the course of survey on the basis of stock inventory prepared physically as well as stock position on the basis of books of account. Therefore, the Assessing Officer rightly rejected the book result U/s 145(3) of the Act. We do not find any reason to interfere with the order of the ld CIT(A). Accordingly, grounds No. 2,3,4 and 6 of the appeal are dismissed. The Assessing Officer had afforded opportunity to the assessee to explain the reason for decline in G.P. rate compared to preceding years. He had not given any cogent reply to explain the reasons for decline in G.P. before both the authorities. Before us also no reply was submitted. The ld Assessing Officer applied the preceding years G.P. rate in absence of any reply from side of assessee. Therefore, we uphold the order of the ld CIT(A). Accordingly, this ground of appeal of the assessee is dismissed.The ld CIT(A) found that 143(2) notice was dispatched through speed post on 18/8/2009. Therefore, he found that allegation of the appellant that notice U/s 143(2) of the Act was fabricated by the Assessing Officer is baseless and not acceptable. The appellant also had not brought any evidence regarding fabrication of notice as well as allegation made in anonymous letter. Therefore he dismissed the assessee’s ground of appeal. We have gone through the order of lower authorities. The assessee had not brought on record any evidence against the notices issued by the Assessing Officer even his objection has been considered by the Assessing Officer. The alleged anonymous complaint had no relevance with reference to service of notice U/s 143(2) of the Act in absence of evidence. The assessee alongwith his authorized representative appeared before the Assessing Officer and had cooperated in assessment proceedings, therefore, as per Section 292BB of the Act where as assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provisions of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and assessee shall be precluded or taking any objection in any proceeding or inquiry under this Act that the notice was not served upon him, no served upon him in time and served upon him in improper manner. The assessee can raise objection before completion of the assessment. Therefore, the Hon’ble Punjab & Haryana High Court in the case of VRA Cotton Mill Pvt. Ltd. Vs. Union of India (2013) 359 ITR 495 (P&H) has held that the moment, the notice is signed and put in the course of transmission by the department, the notice is deemed to be served, unless the contrary is proved. The assessee had not proved contrary, therefore, notice U/s 143(2) of the Act has been served on the assessee properly by the Assessing Officer. Therefore, the assessment passed by the ld Assessing Officer is valid. This ground of appeal is dismissed. - Decided against the assessee.

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• 2015 (6) TMI 5
  Additional income offered voluntarily - return of income filed in response to notice u/s 153A - at the time of search the assessee had offered to disclose the income on the basis of percentage completion method which has been retracted later on - Held that:- There is no finding that the assessee has been following percentage completion method regularly since beginning or in any other project. There is no such evidence or documents which have been found during the course of search indicating that the assessee had been following percentage completion method regularly. If the assessee has been following one of the recognized methods as prescribed by AS-9, then it cannot be held that the Revenue can impose a different method upon the assessee unless there is a finding of fact that such a method is not reflecting the true profits of the assessee. Now it has also been brought on record by the ld. Counsel that in the subsequent year i.e. in the year of completion of the project in A.Y. 2012-13, the Revenue itself has accepted the project completion method for recognition of revenue and accordingly, has assessed the income of the project on the same method. Thus, a contrary view cannot be taken for this year. - Decided against revenue. Disallowance of interest u/s. 36(1 )(iii) on loans - Held that:- So far as the advance of Rs. 50 lakhs, it is seen from the record that the said amount was given for purchase of plot of land pertaining to Survey No. 187, Hissa 4A, situated at village Kharghar, Taluq Panvel. Since the assessee is the developer of the project, the said land was intended to be purchased for developing the project at PanvelOnce the advance has been given for the purchase of plot of land which is for business purposes then no adverse inference can be drawn so as to disallow the interest on the ground that the same is for non-business purpose. Similarly, the loan to the partnership firm has been in which the partners are common. The said firm too is engaged in the business of developer. Further, from the perusal of the balance sheet as pointed out by the ld. Counsel, it is seen that interest free funds in the form of capital is more than Rs. 2.85 crores, whereas the advance/loan given is only Rs. 82 lakhs and once the assessee had interest free funds, then presumption can be drawn that the same has been given from interest free funds. Also as the assessee has been following ‘project completion method’ and such interest cost have been capitalized in the account, then no disallowance can be made in this year. See CIT v/s Reliance Utilities & Power Ltd [2009 (1) TMI 4 - HIGH COURT BOMBAY] - Decided in favour of assesse. Addition on account of statutory deposits to the total income - Held that:- we do not find any reason to disallow the said amount, because the assessee has debited the same to WIP and if at all any disallowance is called for, then the same will go to reduce from the WIP. It cannot be added to the total income of the assessee during the year. On this ground alone, we do not find any reason to uphold such disallowance - Decided in favour of assesse. Disallowance of professional fees for registration of trademark with logo - revenue v/s capital expenditure - Held that:- As the assessee had contended that this expense has been debited to WIP and, therefore, in view of the reasoning given above, the same cannot be disallowed and added to the income of the assessee for this year, because if at all the disallowance is called for, it will go to reduce the WIP only. Accordingly, the disallowance made in this year cannot be sustained - Decided in favour of assesse.

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• 2015 (6) TMI 4
  Eligibility of exemption u/s 11 - whether the activities of the assessee are charitable in nature? - Held that:- CIT(A) has categorically held that the provisions of sec. 2(15) of the Act will be seen that the proviso to section 2(15) of the Act will be applicable only if the entities carrying out any activity or rendering any services in the nature of trading, commerce or business and the most important feature of the business is being profit motive. After analyzing entire activities, receipts and its application, the CIT(A) correctly hold that activities of the assessee society are not carried out with profit motive. As we have respectfully noted earlier the observations of India Trade Promotion Organization vs. DGIT(E) ( 2015 (1) TMI 928 - DELHI HIGH COURT) that the expression “charitable purpose” as defined in 2(15) of the Act is read in the context of section 10(23C)(iv) of the Act and we would have to give up the strict and literal interpretation sought to be given to the expression “charitable purpose” by the Revenue and if an Institution established for charitable purpose did not receive an income at all then what would be need for taking any benefit u/s 10(23C)(iv) of the Act. Therefore, if the expression “charitable purpose” is given meaning that in case an Institution, with an object of advancement of general public utility, derives an income then it would be falling within the exception carved out by the first proviso to sec. 2(15) of the Act then no entity would qualify for the exemption u/s 10(23C)(iv) of the Act and this meaning obviously provide the effect that the provision of sec. 10(23C)(iv) of the Act would be rendered redundant. Thus we are unable to see any ambiguity or perversity in the order of the CIT(A) which granted relief for the assessee by directing the AO to allow exemption u/s 11 of the Act for the assessee. At this point, it is also pertinent to mention that the AO has not brought out any fact to support this allegation that the activities carried out by the assessee society were conducted or derived in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business and the dominant and prime objective of the assessee society was to earn profit i.e. activities of the assessee society was derived for profit motive. - Decided against revenue. Entitlement of depreciation to the assessee society - Held that:- On this issue we respectfully take note of the decision of DIT(E) vs. Indraprastha Cancer Society (2014 (11) TMI 733 - DELHI HIGH COURT), wherein it was held that where a charitable institution has purchased a capital asset and treated the amount spend on the said asset as application of income then the said charitable institution is entitled to claim depreciation on said assets utilized for the activities of the institution. As we have already approved the conclusion of the CIT(A) that the assessee society is eligible for exemption u/s 11 of the Act then we are of the considered view that the CIT(A) directed the AO to allow depreciation for the assessee society in both the assessment years. Therefore, this ground and objection of the ld. DR being devoid of merits is dismissed. - Decided against revenue

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• 2015 (6) TMI 3
  Denial of exemption u/s 11 - large amount of capital fee as collection of money for admission of students in the school - Held that:- As can be seen from the content of the sworn affidavit, it is the contention of the assessee that neither there is a regulating authority/prescribed body in India, as far as the assessee is concerned, nor there is any fee prescribed for the assessee either by DARE/MEA or by any of the bodies to which it is affiliated to. It is further submission of the assessee that the one time admission/capital fee of Rs. 1.75 lakhs from each of the student is part of the fee structure approved by the school management, hence it cannot be said that the assessee has charged any fees over and above the prescribed fee for denying exemption u/s 11 of the I.T. Act to the assessee. As the aforesaid issue requires examination by the AO as it is not clear whether they have examined this aspect while coming to the conclusion that the assessee has charged fees over and above the prescribed fee.- Decided in favour of assesse for statistical purposes.

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• 2015 (6) TMI 2
  Undisclosed investment in stock - CIT(A) restricting the addition - Held that:- From the working submitted by assessee it appears, assessee has arrived at the actual physical stock on the basis of the purchase invoices. However, since the said working was not furnished before AO and was for the first time furnished before ld. CIT(A), for affording fair opportunity to the department, we are inclined to remit the matter back to the file of AO to verify assessee’s claim of actual cost price of physical stock available on the date of search on the basis of these workings vis-à-vis the purchase invoices, which are part of the seized material and thereafter make addition, if any, on account of excess stock. As far as adoption of GP rate is concerned, we are of the view that if in the impugned AY assessee has shown a GP of 30%, then, the same has to be applied for working out the value of stock. With the aforesaid observations, the matter is remitted back to the file of the AO for necessary verification and deciding the issue after due opportunity of being heard to assessee. - Decided in favour of revenue for statistical purposes. Unexplained cash found at the time of search - CIT(A) deleted the addition - Held that:- As seen from the facts on record, neither at the time of search operation nor during the assessment proceeding, assessee has offered any reasonable explanation with regard to the source of cash found at the time of search. However, before the ld. CIT(A), assessee pleaded that cash found represents sales effected till the date of search. When assessee does not maintain any cash book, onus is on assessee to establish link between the cash found and receipts from sales by producing corroborative evidence. Thus remit the matter back to the file of AO for deciding afresh - Decided in favour of revenue for statistical purposes.

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• 2015 (6) TMI 1
  Disallowance of expenditure u/s 14A - Held that:- For the limited purpose of verifying assessee’s claim that it has not earned/claimed any exempt income in the concerned assessment years and deciding the issue in terms with the ratio laid down by CIT Vs. Corrtech Engergy Pvt. Ltd., [2014 (3) TMI 856 - GUJARAT HIGH COURT], Quality Engineering and Software Technologies Pvt Ltd. Vs. DCIT, [2015 (1) TMI 869 - ITAT BANGALORE] and CIT Vs. Shivam Motors (P) Ltd. [2014 (5) TMI 592 - ALLAHABAD HIGH COURT], we remit the matters back to the file of AO. Assessee must be given reasonable opportunity of being heard in the matter. In view of our aforesaid direction, the grounds raised by the department challenging the relief granted by ld. CIT(A) in restricting the disallowance u/s 14A have become infructuous, hence, they are dismissed. - Decided in favour of assesse for statistical purposes. Non remittance of employees contribution to PF and ESI within the due date - Held that:- Keeping in view the proposition of law and following the decision of CIT Vs. Nipso Polyfabriks Ltd. (2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT) we hold that employees contribution to PF & ESI remitted before the due date of filing of return u/s 139(1), will be allowable as deduction - Decided in favour of assesse.

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• Customs

• 2015 (6) TMI 13
  Denial of benefit of exemption on the ground of not using the goods as per intended purpose - Import of raw materials for manufacturing of life saving medicines, namely, "insulin injection" - Revenue contends that assessee are using 5 gms from each consignment for quality control test as samples and for testing purposes are not used in the manufacture of final products, hence the quantity is not used for the intended purposes as per Notification No. 21/2002-Cus dated 01/03/2002 - Held that:- manufacturing of the final product as per Drugs and Cosmetics Act and Rules made thereunder cannot be undertaken unless the raw materials are tested for which sampling is undertaken in form of drawal of about 5 gms of raw material at starting stage of manufacturing activity. The purpose of the imported goods is for manufacturing of medicines which cannot take place unless the samples are drawn and tested - both the lower authorities are totally incorrect in passing the impugned orders and holding that the appellant is liable to pay differential Customs duty and not eligible for the exemption notification No. 21/2002-Cus. - Decided in favour of assessee.

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• 2015 (6) TMI 12
  Imposition of redemption fine and penalty - import of ‘Digital Multifunction Printing and Photocopying Machines' - confiscation of the impugned goods under Section 111 (d) of the Customs Act, 1962 - Held that:- lower appellate authority has not considered the facts of repetitive offence committed by the respondents while reducing the redemption fine and penalty. It is seen that the appellants cleared identical goods repetitively and the impugned import is the third one. - Digital Multifunction printing and photocopying machines are restricted items as per amended para 2.17 of the Foreign Trade Policy only w.e.f. 28.03.2013. Whereas, the impugned import was made on 05.08.2009. In view of the Hon'ble High Court Order [2013 (4) TMI 655 - MADRAS HIGH COURT], the impugned order reducing the redemption fine and penalty is set aside and the matter is remanded to the lower appellate authority - Decided in favour of Revenue.

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• Corporate Laws

• 2015 (6) TMI 11
  Proposed Scheme of Amalgamation - Dispensation with the requirement of convening the meeting of equity shareholders, secured and unsecured creditors under Section 391 to 394 of the Companies Act, 1956 read with Rules 6 and 9 of the Companies (Court) Rules, 1959 - Dispensation of requirement of the transferee company to approach the High Court of Andhra Pradesh for sanction of Scheme of Amalgamation under Sections 391-394 of the Companies Act, 1956 - Held that:- The applicant/transferor company has 02 equity shareholders and 44 unsecured creditors. Both the equity shareholders and all the unsecured creditors have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and unsecured creditors of the applicant/transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no secured creditor of the applicant/transferor company, as on 30th January, 2015. The applicant also seeks dispensation of requirement of the transferee company to approach the High Court of Andhra Pradesh for sanction of Scheme of Amalgamation under Sections 391-394 of the Companies Act, 1956 on the ground that the Scheme does not entail or involve any arrangement between the transferee company and its shareholders since applicant/transferor company is a wholly owned subsidiary of the transferee company; no new shares will be issued by the transferee company in lieu of the shares of the transferor company; and there will be no change in the control and management of the transferee company, therefore, the rights of the shareholders of the transferee company will not be affected in any manner whatsoever by the Scheme. It is further submitted that both the companies are profit making companies and have sufficient reserves and surplus and high positive net worth and the aggregate of assets of both the companies are more than sufficient to meet their respective and combined aggregate liabilities towards their respective creditors. Therefore, the rights of the creditors of the transferee company will not be adversely affected. The applicant has also placed on record the certificate from GVR & Co., Chartered Accountants, showing the positive net worth of the transferor and transferee companies. I have carefully considered the case laws cited i.e. Andhra Bank Housing Finance Ltd. [2003 (3) TMI 550 - HIGH COURT OF ANDHRA PRADESH] , Sharat Hardware Industries Pvt. Ltd. [1976 (5) TMI 78 - HIGH COURT OF DELHI] , Mahaamba Investments Ltd. [2001 (1) TMI 904 - HIGH COURT OF BOMBAY] at the Bar, wherein the transferee company, being the holding company, has been granted exemption from taking out separate proceedings under Section 391(2) of the Companies Act, 1956. In view of this settled legal position and considering the Scheme of Amalgamation, the requirement of the transferee company having to approach the High Court of Andhra Pradesh under Section 391(2) of the Companies Act, 1956 for sanction of the Scheme of Amalgamation is dispensed with. - Decided in favour of appellant.

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• Service Tax

• 2015 (6) TMI 20
  Demand of service tax - Cargo Handling Services - Held that:- Mined coal at pit-heads required to be transported to stockyards or crushing sites from the mine area can be certainly considered as cargo. Therefore, the activity undertaken by the appellant clearly falls within the definition of "Cargo Handling Service" as defined in law. - The Hon'ble High Court of Orissa in the case of Coal Carriers (2011 (2) TMI 1140 - ORISSA HIGH COURT) held that loading of coal into the railway wagons would fall within the definition of "Cargo Handling Service". The Hon'ble High Court also observed that as per the dictionary meaning the goods which are being carried or transported by any means of transportation and has become load of the trucks would also come within the meaning of "cargo" and therefore, the activity was squarely covered by "Cargo Handling Service" as defined in law. In this view of the matter, we are of the view that the activity undertaken by the appellant squarely falls within the scope of "Cargo Handling Service" as defined in law. - same relates to mining of sand from the riverbed and transporting the same to the Western Coalfield's mining area. Sand is a minor mineral and therefore, mining of sand from riverbed comes within the definition of mining service and will not come within the scope of "Cargo Handing Service" as the main activities is of mining and therefore, demand of Service Tax on mining of sand is not sustainable in law. Activity of loading/unloading of coal by engaging tippers would come within the purview of the "Cargo Handling Service" and the appellant would be liable to discharge Service Tax liability accordingly. As regards the mining of sand from the riverbed the said activity would come within the scope of mining service and not under "Cargo Handling Service". Since there was a confusion about the scope of levy, the extended period of time is not invocable in the present case and accordingly, the demand should be restricted to the normal period of limitation. The appellant would be liable to pay interest on the Service Tax demand payable for the normal period of limitation. Since the dispute relates to the classification of service, imposition of penalties are not warranted. Therefore, the matter is remanded to the adjudicating authority only for the limited purpose of quantification of the Service Tax demand for the normal period of limitation and for excluding the sand mining activity undertaken from the scope of Cargo Handling Service. - Decided partly in favour of assessee.

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• 2015 (6) TMI 19
  CENVAT Credit - air travel, travel insurance, vehicle insurance, vehicle maintenance, mediclaim for employees and CHA services - Held that:- Record does not reveal connection of air travel to the service provided nor the travel insurance. So also the vehicle insurance does not exhibit whether that is in any way relate to output service provided. Revenue succeeds on all these three counts. But mediclaim for employees is integrally connected to secure their services to render provision of output service. Thus, Cenvat credit in respect of such services availed is permissible. - As regards CHA, computers imported warranted availing of services of that agent. The computer so imported being used for provision of output service, there should not be denial of Cenvat credit of service tax paid thereon - Decided partly in favour of Revenue.

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• 2015 (6) TMI 18
  Business Auxiliary Service - Invocation of extended period of limitation - Activity of Handling of finished goods - Held that:- Prima-facie, we find that on more or less similar activities, the Applicant had challenged the earlier Work Order before the Hon'ble Gauhati High Court, which was quashed on the ground of limitation. No-doubt, the earlier service tax demand was issued under the category of "Cargo Handling Services", but prima-facie, we find that the activities, which the Applicant rendered under both these Work Orders, are more or less similar in nature. Therefore, prima facie, at this stage, it would be difficult to accept the contention of the Revenue that subsequent show-cause notice issued on 17.04.2012 invoking extended period of limitation would sustain, when the earlier show-cause notice, was quashed on the ground of limitation by the Hon'ble High Court. In the result, the Applicant could able to make out a prima-facie case for requirement of predeposit of all dues adjudged is waived and its recovery is stayed during pendency of appeal - Stay granted.

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• 2015 (6) TMI 17
  Waiver of pre deposit - Management, Maintenance & Repair service - whether the work of draining/replacement of damaged fencing and providing cement concrete pavement along side State Highways would be covered under the scope of management and repair of roads - Held that:- Work order was obtained from PWD, Bikaner and the work was along the state highways. Thus, it is quite arguable that the drainage/fencing and pavements form part of the road as the interpretation of word "road" can be confined only to the part which vehicles ply to the exclusion of pavement and fencing on the sides. In case of Himalaya Plantations Vs. CCE, Nagpur [2014 (5) TMI 577 - CESTAT MUMBAI], the Tribunal observed that it appears that the services in relation to maintenance of road divider is covered under section 97 of the Finance Act, 1994. In view of the foregoing, we are of the view that the appellant have made out a good case for full waiver of pre-deposit and we order accordingly and stay the recovery of the impugned liabilities during the pendency of appeal - Stay granted.

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• Central Excise

• 2015 (6) TMI 14
  Restoration of appeal - Dismissal of the applications of the appellants for extension of time to deposit the amounts as a condition precedent to the maintainability of the appeal - Held that:- There was a delay of only 7 days in complying with the orders requiring the appellants to deposit the amounts. The application for extension of time filed on 22.04.2013 and the application for restoration were, however, dismissed by the order of the Tribunal dated 26.09.2013 impugned in this appeal. - It would be grossly inequitable and unfair to deny the appellants an opportunity of having their case heard on merits on account of their having delayed in complying with the order by just 7 days. The application for extension dated 22.04.2013 was pending when the appeal was dismissed on 23.04.2013 for non-compliance with the said orders. - The concluding words “to secure the ends of justice” are wide enough to cover cases such as these viz. to grant an extension of time to deposit an amount or to restore appeals dismissed on account of the failure to comply with the orders of pre-deposit. - Appeal restored.

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• CST, VAT & Sales Tax

• 2015 (6) TMI 16
  Constitutional validity of Explanation (i) to Section 2(1) (zg) of the Haryana Value Added Tax Act, 2003 and Rule 25 (2) of the Haryana Value Added Tax Rules, 2003 - Inclusion of the value of land for charging VAT on developers - Held that:- Following decision in the case of CHD Developers Limited, Karnal Vs The State of Haryana and others [2015 (4) TMI 784 - PUNJAB AND HARYANA HIGH COURT], Decided partly in favour of assessee.

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• 2015 (6) TMI 15
  Rectification of mistake - Whether the Tribunal has committed an error or not in exercising the powers under Section 62 of the said Act which are analogous to Section 22 of the U.P. Trade Tax - Held that:- Rectification of an order does not mean obliteration of the order originally passed and its substitution by a new order - Tribunal while deciding the Second Appeal proceeds on a footing that the assessment in question was made under Section 33(3) of the said Act. However, the assessments were made in fact under Section 33(2) of the said Act. It could further be seen that even the lawyer who was representing the petitioner before the learned Tribunal in the rectification application, himself admitted that the original assessments were made under Section 33(2) and not under Section 33(3) of the said Act - Tribunal is very much justified in directing its earlier order to be recalled and directing the appeals to be heard after their restoration in accordance with the basis of accurately recorded facts. No doubt, as held by the Division Bench, the power of recall cannot be resorted to review the order in the garb of rectification. However, if the learned Tribunal has passed the order on the basis of incorrect factual position, the learned Tribunal can very well pass the order after recording the correct factual position. - Decided against assessee.

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