TMI Tax Updates - e-Newsletter
June 2, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Service tax Voluntary Compliance Encouragement Scheme (VCES) cannot be rejected beyond the period of 30 days from the date of filing - Tri

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• Merely because service tax was paid after pointed out by the Department, the benefit of Section 73(3) cannot be denied - No penalty - Tri

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Articles

1. LEVY OF KRISHI KALYAN CESS

   By: SARAVANAKUMAR BALASUBRAMANIAN

News

1. Kalraj Mishra lists two years achievements technology centres on a fast track 8 lakh udyog aadhar memorandum registrations in just 8.5 months

2. Cabinet approves signing and ratification of Agreement between India and Qatar on Co-operation and Mutual Assistance in Customs Matters

3. RBI Reference Rate for US $

4. India continues to remain a bright spot in world economy with robust macro-economic and fiscal parameters;

Notifications

Companies Law

1. F. No. 1/35/2013 CL-V - dated 31-5-2016 - Co. Law

Companies (Authorised to Register) Amendment Rules 2016

Customs

2. 22/2016 - dated 31-5-2016 - ADD

Seeks to impose definitive anti-dumping duty on "Methyl Acetoacetate", originating in or exported from USA or China PR, for a period of five years (unless revoked, superseded or amended earlier)

3. 21/2016 - dated 31-5-2016 - ADD

Seeks to impose anti-dumping duty on 'Dichloromethane (Methylene Chloride)' of all types [tariff item 2903 12 00], originating in or exported from People's Republic of China or Russia, for a period of five years (unless revoked, superseded or amended earlier), from the date of imposition of the provisional anti-dumping duty i.e. from the 08th of December, 2015

Circulars / Instructions / Orders

Service Tax

1. F. No. B-1/19/2016 -TRU - dated 31-5-2016

Enactment of Finance Bill, 2016

DGFT

2. 15/2015-2020 - dated 31-5-2016

Ten additional Pre-Shipment Inspection Agencies are notified as PSIAs in terms of Para 2.55(d) of HBP 2015-20 in Appendix 2G

Companies Law

3. 7/2016 - dated 31-5-2016

Relaxation of additional fees and extension of time for filing of e-forms by the Companies under Companies Act, 2013 and for filing of Annual Return (Form 11) by the LLPs under the Limited Liability Partnership Act, 2008

Highlights / Catch Notes

Income Tax

• India Exempts Tax on Inter-Connectivity Charges and Leased Line Usage; No Tax Deduction at Source Required.

  Case-Laws - AT : Expenses on account of inter-connectivity charges and usage of leased line - the same is not chargeable to tax in India and as such, no tax is required to be deducted at source. - AT
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• Income from DMRC contract not taxable for AOP; individual members responsible for their own income tax assessment.

  Case-Laws - AT : Assessment as AOP or not - income arising from the DMRC contract was not assessable to tax in the hands of AOP but each member of the AOP shall be separately assessable to income tax in their own capacity. - AT
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• Foreign travel expenses for specified persons are not excessive u/s 40A(2) and won't be disallowed.

  Case-Laws - AT : Addition u/s 40A(2) - excessive expenditure - The payment is made in respect of foreign travel of the specified persons but that does not bring the expense within the scope of disallowance under section 40A(2).- AT
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• Court Affirms Entire Purchase Price of Flat as Cost; Rejects Unjustified Separation of Land and Building Values.

  Case-Laws - AT : Disallowance of depreciation - whether price paid for purchase of flat will be taken as the cost of flats - Held Yes - tax authorities are not justified in bifurcating the selling price between the land and building without bringing any material to support their view. - AT
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• No TDS Deduction Required for FCCB Redemption Premium Reversed in Subsequent Year u/s 196C.

  Case-Laws - AT : TDS u/s 196C - non deduction of TDS on premium/interest payable on redemption of FCCB by amortization on pro-rata basis of implicit rate of return - TDS is not liable to be deducted on mere provision which was reversed during the next year - AT
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Customs

• Refund of Special Additional Duty Cannot Be Denied Despite Pre-Out-of-Charge Sale; Compliance with Notification No. 102/2007-CUS Confirmed.

  Case-Laws - AT : Refund of SAD - out of charge was given after date of sale - the conditions of the Notification No. 102/2007-CUS, are complied with by the appellant - Merely because goods were sold before Out-of-Charge was given, refund cannot be denied - AT
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Service Tax

• Penalty Waived for Misinterpretation of Service Tax on Mithi River Dredging Under Finance Act, 1994.

  Case-Laws - AT : Imposition of penalty - Liability of Service tax - Dredging services i.e. desilting of Mithi River - non-payment of service tax by the appellant would be due to mis-interpretation of the provisions of the Finance Act, 1994 - No penalty - AT
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• No penalty for late service tax payment if taxpayer complies after notification, aligning with Section 73(3) provisions.

  Case-Laws - AT : Levy of penalty - To suggest that in every case where service tax is being paid on being pointed out by the Department, the benefit of Section 73(3) would not be available would tantamount to rendering Section 73(3) redundant, which is clearly impermissible - No penalty - AT
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• Service Tax VCES Rejection Invalid Due to Late Show Cause Notice Issued Beyond 30-Day Limit.

  Case-Laws - AT : SCN for rejection of service tax Voluntary Compliance Encouragement Scheme (VCES) - As the designated authority, has issued a show cause notice beyond the period of 30 days, VCES cannot be rejected - AT
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• Commissioner of Central Excise Orders Refund Without Stay; Application for Withholding Refund Addressed.

  Case-Laws - AT : Stay application for withholding refund - order has been passed by Commissioner of Central Excise (and not Commissioner of Central Excise (Appeals)) - refund to be allowed - No stay - AT
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Central Excise

• Manufacturers Choose: Full SSI Exemption Without Cenvat Credit or Pay Duty with Cenvat Credit for Branded Goods.

  Case-Laws - HC : In the present scheme of SSI exemption, manufacturer has been given clear option to opt both of the two benefits i.e. (a) to avail the full SSI exemption without Cenvat Credit and (b) payment of duty on Goods manufacturing under the brand name of others with availing cenvat credit. - HC
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Case Laws:

• Income Tax

• 2016 (6) TMI 56
  Application for issue of Notification under Section 80IA4(iii) rejected - Held that:- HC order [2015 (3) TMI 367 - BOMBAY HIGH COURT] confirmed where in the writ petition was dismissed on the ground that, Inconsistencies in data and manipulation of information does not lead to evidences on the basis of which the application deserves approval.Despite giving many opportunities and substantial time for compliance, satisfactory explanation has not been filed. It has thus not been found to be a fit case for notification u/s. 80IA(4)(iii) of the Act. Hence, the competent authority has decided to reject the application. Stay rejected - Decided against assessee.

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• 2016 (6) TMI 55
  Penalty u/s 271B - failure to get accounts audited u/s 44AB - Held that:- We find force in the arguments of the assessee for the reason that the requirement of audit u/s 44AB of the Act applies, when the turnover as per the books of accounts exceeds Rs. 40 lakhs. In the present case on hand, on perusal of the facts available on record, we find that the total turnover as per books of accounts of the assessee is less than Rs. 40 lakhs. Therefore the A.O. was not correct in levying the penalty u/s 271B of the Act. The CIT(A) without appreciating the facts properly, confirmed the penalty levied by the A.O. Therefore, we set aside the order passed by the CIT(A) and direct the A.O. to delete the penalty levied u/s 271B of the Act. - Decided in favour of assessee Penalty u/s 271(1)(c) - addition made on estimation basis - Held that:- No penalty can be levied for concealment of income u/s 271(1)(c) of the Act when additions are made on estimation basis. In the present case on hand, the A.O. has estimated the gross profit on unaccounted turnover and also made additions towards unexplained investments in building on estimation basis. The assessee has admitted the additional income during the course of survey proceedings and paid the taxes. The assessee also explained the reasons before the A.O. and requested for immunity from the penalty proceedings. Therefore, when the addition is made on estimation basis and assessee has admitted the additional income to buy peace and to cooperate with the department for smooth completion of the assessment proceedings, the A.O. was not correct in levy of penalty u/s 271(1)(c) of the Act. The CIT(A) without appreciating the facts, confirmed the penalty levied by the A.O. and also enhanced the penalty in respect of unexplained investments in the building. Therefore, we set aside the order passed by the CIT(A) and direct the A.O. to delete the penalty levied u/s 271(1)(c) of the Act. - Decided in favour of assessee

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• 2016 (6) TMI 54
  Computation of irrecoverable amounts in respect of running and terminated chits - Held that:- This issue had arisen in the earlier AYs as well wherein held that we have to mention that this issue has not come up during the course of arguments of the case. If the assessee has made the claim as indicated, no prejudice would be caused to him by setting aside the matter. Similarly no prejudice would be caused to revenue on this count as it can examine the claim afresh. To allow the claim to the extent indicated above fresh collection of facts and figures are required and thus we set aside the issue to the file of the Assessing Officer for considering the claim afresh in the light of this order. Thus the appeal of the assessee for the assessment years 1998-99 and 1999-2000 on this ground of allowability of bad debt is allowed for statistical purposes.Accordingly, we do not find any infirmity in the order of the CIT(A) and therefore, the Assessing Officer is directed to re-compute the bad debts relatable to running chits as per the directions of the ITAT in its order cited supra as in the earlier years. Accordingly, this ground raised by the assessee as well as Revenue is dismissed Taxability of foreman dividend - Held that:- The assessee fairly admitted that this issue also is covered against the assessee by the above decision for the A.Y 2007-08 upholding the taxability of foreman dividend Addition towards commission on removed chits - Held that:- On a careful consideration of the issue, we find that from out of the amount that is payable to the defaulting subscriber consequent to his replacement by another person the company is entitled to deduct 5% as commission. This has nothing to do with the regular commission income of the assessee. Thus the stand of the assessee that the commission income accrues when the accounts have been finally settled to the defaulting non subscriber to our mind appears to be the correct position. Otherwise in case of a non prized subscriber the amount of 5% would be deducted from the amounts due to him much before the settlement of his account and recognised as income by way of transfer from current liabilities to profit and loss account

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• 2016 (6) TMI 53
  Income from sale of shares and securities - short-term capital gain OR profit and gains of business - Held that:- Mere not using interest bearing borrowed funds is not sufficient to conclude that transaction of share sales are not business income. Having regard to the volume and frequency of the transactions, no separate books of accounts or demat accounts and other facts and circumstances, we are of the opinion that overall effect of all the factors revealed that the activity of sale and purchase of shares claimed under the head ‘short-term capital gain’ cannot be sustained and it is held as the activity in the nature of business and assessable under the head ‘profit and gains of the business’. Accordingly, we uphold the finding of the learned Commissioner of Income-Tax(Appeals) on the issue in dispute and the ground of the appeal is dismissed.- Decided in favour of assessee. Disallwoance of credit of security transaction tax under section 88E of the Act in consequence of taxing the short-term capital gain under the head ‘profit and gains of business and profession’ - Held that:- As we have already upheld the findings of learned CIT(A) of taxing the transactions claimed under the head ‘short-term capital gain’ under the head ‘profit and gains of business and profession’, the assessee deserves for credit of Security Transaction Tax under the section 88E of the Act. Accordingly, we direct the Assessing Officer to allow that credit in accordance to law after verification of the security transaction tax paid. Penalty u/s 271(1)(c) - Held that:- we are in agreement with the submission of the learned Authorized Representative that all the factual information in respect of transaction of purchase and sale of shares was duly provided to the AO and no part of income was concealed, nor furnished any inaccurate particulars of income by the assessee. We find that in same set of information the income assessed under the head ‘profit and gains of business or profession’ rather than under the head ‘short-term capital gain’. The learned Commissioner of Income Tax(Appeals) relied on the case of Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts Private Limited,, [2010 (3) TMI 80 - SUPREME COURT] wherein held mere making of a claim, which is not sustainable in law, would not, ipso facto, amount to furnishing inaccurate particulars regarding the income of the assessee and would, therefore, not automatically result in a penalty order against the assessee - Decided in favour of assessee.

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• 2016 (6) TMI 52
  Reopening of assessment - Held that:- We are of the considered opinion that the AO had not satisfied the condition precedent for invoking the provisions of sec.147 i.e. reason to believe that income escaped assessment and therefore, we have no hesitation to quash the re-assessment proceedings. - Decided in favour of assessee.

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• 2016 (6) TMI 51
  Assessment u/s 144 or 153C - nature of assessment - Held that:- Material belonging to the assessee, which was seized in the search proceedings of Dhingra Group of cases was handed over to the AO of the assessee on the date on which satisfaction note was recorded by the AO of the searched person i.e. 5th July, 2010 and accordingly the six preceding assessment years from the assessment year relevant to the previous year in which the seized material was handed over to the AO of the assessee would be assessment year 2005-06 to 2010-11. We, accordingly, hold that the relevant assessments which could be reassessed as per section 153C r.w.s. 153A(1) in the case of the assessee would be from AYs 2005-6 to 2010-11, thus the assessment completed under section 144 of the Act for the year under consideration i.e AY 2009-10, is illegal and invalid as same should have been completed under section 153C of the Act. Since we have already held the entire proceedings under section 144 of the Act as illegal, we do not propose to adjudicate other grounds of the assessee. - Decided in favour of assessee

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• 2016 (6) TMI 50
  Assessment framed under sec. 153A/143(3) - Disallowance on account of deduction claimed under sec. 80IB - Held that:- Following the ratios laid down in Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ) hold that the assessment framed under sec. 153A/143(3) of the Act questioned in the present case is not valid in absence of incriminating material found during the course of search and abatement of assessment and reassessment already framed on the date of search. The assessment is accordingly quashed as void-ab-initio. The issue is thus decided in favour of the assessee and the grounds involving the same are allowed. The merit of the disallowance of the claimed deduction under sec. 80IB of the Act questioned in the remaining ground has thus become infructuous. - Decided in favour of assessee

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• 2016 (6) TMI 49
  Validity of the proceedings initiated under section 158BD - Held that:- Assessing Officer of the UIC group was to record the satisfaction before initiating the proceeding under section 115BD of the Act. But, in the instant case, the Assessing Officer having the jurisdiction over the assessee has recorded the satisfaction which is incorrect as per law. Taking the consistent views in the decisions of the hon'ble Supreme Court in the case of Manish Maheshwari (2007 (2) TMI 148 - SUPREME COURT OF INDIA ) and the judgment of the hon'ble Gujarat High Court in the case of Champakbhai Mohanbhai Patel (2014 (2) TMI 1168 - GUJARAT HIGH COURT ) we reverse the orders of the authorities below and this ground of the assessee's appeal is allowed.

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• 2016 (6) TMI 48
  Exemption u/s 11 - whether the amount was expended wholly for charitable activities and in accordance with the purpose for which it was given by the donor - Held that:- The basic purpose of foreign contributions for activities on health and education. The agreement was entered in Canada on April 1, 2006, referred at page 28 of the paper book and there is no fresh evidence filed as its forming part of the assessment record and in the nature of clarifactory explanations. We find the activities and arguments of the learned authorised representative are supported with documentary evidence with duly signed and dated credential agreements along wtih photographs. The assessee has complied with the FCRA provisions for donations received for the purpose of health and educational programme as per the mandate of the Canadian donor and the assessee claimed such expenses as application of income for school and hospitals. Considering the apparent facts, evidence, activities and the FCRA provisions and clarificatory explanation of the learned authorised representative and duly signed documentary proof, we are not inclined to interfere with the order of the Commissioner of Income-tax (Appeals) who has dealt exhaustively vis-a-vis explanations and clarification and we confirm the same. - Decided against revenue

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• 2016 (6) TMI 47
  Treatment of receipt from sale of film scripts - income from other sources OR business income - Held that:- The assessee has failed to place on record any material evidence to controvert the findings of the learned Commissioner of Income-tax (Appeals)/Assessing Officer that the income from sale of film scripts is to be treated as "Income from other sources" and not "Business income" as claimed and consequent disallowance of various expenses claimed by the assessee. In this view of the matter, we are of the opinion that there is no sufficient reason for us to interfere with or deviate from the findings in the impugned order of the learned Commissioner of Income- tax (Appeals) and therefore uphold the same. - Decided against assessee Charging of interest under section 234A, section 234B, section 234C and section 234D - Held that:- The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the hon'ble apex court in the case of CIT v. Anjum M. H. Ghaswala [2001 (10) TMI 4 - SUPREME Court ] and we therefore uphold the action of the Assessing Officer in charging the assessee the said interest. The Assessing Officer is, however, directed to recompute the interest chargeable, if any, under section 234A, section 234B, section 234C and section 234D of the Act while giving effect to this order.

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• 2016 (6) TMI 46
  Rejection of Books of accounts and estimation of G P - Held that:- The assessee has failed to place on record material evidence to controvert the findings of the learned CIT(A) on the issue of rejection of books and estimation of G.P. In this view of the matter, we are of the considered opinion that there is no cause for us to interfere with or deviate from the decision of the learned CIT(A) and therefore uphold his findings on rejection of the assessee’s books of account and the estimation of G.P. @0.5% consequently leading to the addition of Rs. 29,67,013/- - Decided against assessee. Disallowance of Expenditure on salary - Held that:- The assessee has failed to place on record any material evidence to controvert the findings of the learned CIT(A) on the issue of disallowance of expenditure of Rs. 3,00,000/- claimed as paid as salary to two employees by the assessee. In this view of the matter, we are of the considered opinion that there is no cause for us to interfere with or deviate from the decision of the learned CIT(A) on this issue and therefore conform and uphold the same. - Decided against assessee.

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• 2016 (6) TMI 45
  Revision u/s 263 - non entitlement to adjust foreign exchange gain while computing the total income - Held that:- CIT having reached the conclusion that the assessee is not entitled to adjust foreign exchange gain while computing the total income and did not mention anything in his order that the order of AO suffered any error and it is prejudicial to the interest of revenue, except mentioning the case requires reconsideration. In our opinion, the facts contained in n the case of COMMISSIONER OF INCOME TAX vs. GOYAL PRIVATE FAMILY SPECIFIC TRUST reported in [1987 (10) TMI 43 - ALLAHABAD High Court ] are similar and applicable to the case on hand and relying on the same we hold that the order of the CIT is bad under law and consequently it is set aside. On the case on hand, the order of the CIT does not show any firm reasons as required under section 263 of the Act to declare the assessment order was erroneous and was prejudicial to the interests of the Revenue, as observed above a direction was given to AO to work out the taxable income as per law. In our view it is against the established principles of law. Therefore, applying the ratio of aforesaid decision, we hold that the order dt:12-08-2014 passed by the CIT-IV is bad under law which is liable to be set aside. - Decided in favour of assessee.

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• 2016 (6) TMI 44
  Disallowance of additional depreciation under section 32(1)(iia) - whether the assessee is entitled to carry forward 50% of additional depreciation in the succeeding year when the plant and machinery was put in use less than 180 days in the preceding previous year? - Held that:- We have carefully gone through the order of the Coordinate Bench in the case of Automotive Coaches & Components Ltd. v. DCIT (2016 (4) TMI 34 - ITAT CHENNAI ) and find that the issue involved is squarely covered in favour of the assessee. The ld. DR could not controvert the above findings of the Tribunal or filed any higher Courts decision having modified or reversed the findings to arrive at a conclusion that the assessee is entitled to claim 50% of additional depreciation in the succeeding year when the plant and machinery was put in use for less than 180 days in the preceding previous year. Thus respectfully following the decision in the case of Automotive Coaches & Components Ltd. v. DCIT (supra), we direct the Assessing Officer to allow 50% of additional depreciation in the succeeding year as claimed by the assessee - Decided in favour of assessee

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• 2016 (6) TMI 43
  Reopening of assessment - whether the notice is barred by limitation? - Held that:- The undisputed fact is that the notice u/s. 148 was issued beyond the period of four years from the end of the Assessment Year in all the three cases. On the perusal of reasons recorded which are extracted hereinafter, we find that there is no whisper or an allegation that the assessee failed to make a full and true disclosure of all material fact necessary for assessment in its return of income. Thus assessee having fully and truly disclosed all the material facts necessary for the assessment as required by the AO, the precondition for invoking the proviso to s. 147 was not satisfied and therefore, AO acted wholly without jurisdiction in issuing notice under s. 148 beyond the four year period mentioned in s. 147. Thus reopning is bad - Decided in favour of assessee

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• 2016 (6) TMI 42
  Expenses on account of inter-connectivity charges and usage of leased line - whether payment to M/s. Verizon Hong Kong Ltd., a resident of Hong Kong to be classified either as royalty or income attributed to a Permanent Establishment in India? - TDS liability - Held that:- DRP has not insisted upon any evidence to support the findings returned by the AO to reach at the conclusion that the assessee was provided with any technical services by the payee rather the assessee has made reimbursement of the amount in question to the group company as leased line inter-connectivity charges. Furthermore, since there was no contract or the agreement between the assessee and M/s. Verizon Hongkong Ltd., a resident of Hongkong, and the leased line interconnectivity charges were reimbursed to Meridian IQ Asia Limited, Hongkong, which was invoiced by M/s. Verizon Hongkong Ltd., the same is not chargeable to tax in India and as such, no tax is required to be deducted at source. Following the order passed by the coordinate Bench of the Tribunal in the judgment cited as Wipro Ltd. (2003 (4) TMI 223 - ITAT BANGALORE-C), we are of the considered view that the services offered and availed by the assessee company cannot be termed as technical services by any stretch of imagination and the amount in question paid by the assessee is not taxable, hence, the assessee has no liability to deduct the tax at source under section 195 of the Act. - Decided in favour of assessee.

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• 2016 (6) TMI 41
  Addition u/s 68 - Held that:- From bare perusal of the observations made by CIT(A) it is evident that he has not at all examined the creditworthiness of the lender particularly with reference to the documents showing agricultural holding and produce thereon. Ld. CIT(A) has not given any cogent reasons for confirming the addition to the extent of Rs. 1,15,000/-. Considering the entirety of facts and circumstances and the detailed documents submitted by lender, we are of the opinion that the addition deserves to be deleted as lender has been able to establish its identity, genuineness of the transaction and the capacity to advance the loan. Accordingly, this ground is allowed in favour of assessee Undisclosed cash deposit in the bank account - Held that:- There was cash deposit amounting to Rs. 50,000/- in the bank account of the assessee on 16.6.2005. the source of the said cash was explained as Rs. 17,000/-each received from Manoj Kumar, Mohd. Saffique and Mohd. Aslam. He observed that in response to notice u/s 133(6), which were received back it transpired that there was no such person. Assessee also could not produce them before the AO. Accordingly, addition of Rs. 50,000/- was made, which was confirmed by CIT(A).After hearing both the parties we do not find any reason to interfere on this count as the assessee miserably failed to explain the basic three ingredients in respect of these three loans. In the result, this ground is dismissed against assessee

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• 2016 (6) TMI 40
  Assessment as AOP - whether the consortium is to be taxed as an AOP or Individual members are to be taxed separately? - Held that:- We have examined the Joint venture agreement dated 17th December 2002. On reading of clause no .4 5,8,10,11,16 especially and on conjoint reading of other clauses of the agreement its is apparent that each of the members is responsible for its own part of the contract execution, will take away gross receipt and incurred expenditure for the execution of project relating to his part and earn profit or loss accordingly. The control and management of consortium rests with individual consortium members with respect to their work and for the coordination purposes one Lead party Persys SDN. BHD. Is nominated for coordination with DMRC. Therefore, it satisfies all the four conditions mentioned in para no 3 of the circular NO.7/2016. Ld. DR could not point out any clause of the agreement, which does not satisfy any of the above four conditions of the circular. Further by the circular stated above revenue has also reiterated salient features of what would constitute and AOP and held that if the above four conditions are satisfied than the consortium arrangement shall not be treated as an AOP but individual members will be taxed separately. Thus considering the terms and conditions between the parties are squarely falling within the conditions specified in para no 3 of the above circular. Therefore, we confirm the finding of the ld. CIT (A) that income arising from the DMRC contract was not assessable to tax in the hands of AOP but each member of the AOP shall be separately assessable to income tax in their own capacity.

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• 2016 (6) TMI 39
  Disallowance of the legal expenses - Held that:- AO has disallowed the legal expenses only on the ground that these expenses were not related to the business activities of the assessee. The bills and vouchers produced in the paper book depicts that the assessee have been taking legal advisers from advocates and consultants. Considering the kind of activity carried on by the assessee there is a need for day-to-day consultation with advocates and consultants in respect of the sale of plant and machinery. The authorities below have contended that certain bills pertains the previous year relevant to the assessment year under consideration, the same has been received in the current assessment year. Merely because the assessee has received the bill in the current assessment year the same cannot be disallowed for the reason that it is an ongoing pendency in the legal profession that a memo of appeal is raced by the professional consultant for any work carried out by them during the year. Such situations cannot be categorized and disallowed under prior period expenses. Since the bills have been received in the year under consideration the liability for payment of these expenses also gets crystallized during the year under consideration. - Decided in favour of assessee Addition in respect of unaccounted sale - Held that:- AO proceeded to make addition on the sale amount received from other parties, on the basis, as the assessee had taken 75% of sale amount in black from M/s.Sai Trading Co. as M/s.Laxmi Steels. The assessing officer has not recovered any documents/records which could support the additions made by the Ld. AO on the sale amount from other parties. It is very much apparent from the assessment order that the assessing officer has made this addition of surplus unaccounted sale on a mere guesswork. This being the position and respectfully following the ratio laid down in the case of the Dhakeshwary cotton Mills Ltd., (1954 (10) TMI 12 - SUPREME Court) and Kulwant Rai (2007 (2) TMI 185 - DELHI High Court ) we delete the addition made by the assessing officer on account of unaccounted sales. - Decided in favour of assessee

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• 2016 (6) TMI 38
  Revision u/s 263 - non deduction of tds on payment to contractor for supply of labour and transportation - Held that:- There is no error in the order of the AO causing prejudice to the Revenue. The assessee had duly demonstrated before the Ld. CIT, that it was not required to deduct TDS on the impugned payments. The assessee has stated before the Ld. CIT that no payment was made for supply of labour & transportation, in pursuance to any contract for the supply of the same. In fact, the assessee had explained, that the so called contractors used to only facilitate payments to various temporary unskilled labour employed by the assessee. The modus operandi was explained as being that entire payment relating to a group of labourers being made to one so-called contractor, who in turn distributed it to the individual labourers. The assessee had demonstrated the same through monthly wage sheets of various labours. The assessee had also stated that it had not paid any commission to these so-called contractors. Further the assessee demonstrated before the Ld. CIT that no payment to a single labour exceeded Rs. 20,000/- i.e., the prescribed limit for deducting tax at source. The Ld. CIT we find has not controverted all these facts. In fact the entire case of the Ld. CIT rests on the submission of the assessee in which he has termed these persons as “Contractor” This alone cannot lead to the conclusion that the payments were made to contractor, without controverting the evidences produced by the assessee in support of its contention. In view of the same, we hold that the impugned payments are not liable to be tds deduction. - Decided in favour of assessee Claim of 100% depreciation on temporary structures of office - CIT held that the assessee had claimed double deduction since no bills and vouchers in support of this expenditure had been furnished by the assessee on this aspect - Held that:- We find that this issue had been investigated during assessment proceedings and the AO after considering the assessee reply, had taken a plausible view and allowed the assessee 100% depreciation on the temporary structure. Moreover the case of the Ld. CIT we find is that in the absence of bills and vouchers pertaining to the impugned expenses, the assessee has claimed double deduction. We fail to understand how the assessee has claimed double deduction when the fact is that the impugned amount was debited to capital account and 100% depreciation claimed thereon.- Decided in favour of assessee Bogus purchases - Held that:- We find that during assessment proceedings, the issue of purchases was considered by the AO and a lump sum addition of Rs. 12 lacs on account of unverified purchases was made. Having done so, we find that the Ld. CIT intends to revisit this very issue in the current proceedings and that too for verifying the genuineness of the impugned purchases. Meaning thereby that there is no categorical finding of any error in the order of the AO. In our considered opinion, revisionary powers under section 263 cannot be exercised in such circumstances. Moreover, the fact that two supplies are presumably defaulters being not registered under the relevant law, does not lead to any adverse inference being drawn against the assessee, more particularly when no defect has been found in the bills and vouchers produced by the assessee. Further we find that in the assessment order passed in consequence to the order passed under section 263, no addition on this issue has been made - Decided in favour of assessee Purchase made on 31/03/2008 but not shown as work in progress - Held that:- We find that no addition on this account has been made in the assessment order passed in consequence to the order passed under section 263. Any adjudication on this issue is of no consequence and it remains only academic in nature.- Decided in favour of assessee Interest not found to have been included in the income of the assessee - Held that:- We uphold the order of the Ld. CIT, since clearly there was an error in the order of the AO, having not examined the issue of taxability of interest, which resulted in an amount of Rs. 36,287/- escaping assessment thus causing prejudice to the Revenue. The assesssee we find has given no plausible explanation for not disclosing the impugned amount in its Profit & Loss account.- Decided against assessee Disallowance of rent paid for equipment and legal expenses - non deduction of tds - Held that:- Undeniably the issue of tax deduction at source on legal expenses & Rent was not examined during assessment proceedings. Even before the Ld. CIT the assessee though furnished an explanation for not deducting tax at source but failed to substantiate the same with copies of ledger accounts , bills and voucher. In view of the same we hold that the assessee has not been able to establish categorically before the Ld. CIT that it was not required to deduct tax at source in the payments of rent and legal expenses and the same having not been examined during assessment proceedings also, the Ld. CIT had rightly held the order of the AO to be erroneous so as to cause prejudice to the Revenue.- Decided against assessee

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• 2016 (6) TMI 37
  TDS u/s 195 - payment in the nature of fees for technical services within the meaning of that expression u/s 9(1)(vii) - withholding of tax - Held that:- Undisputedly disallowance has been made in the present case by holding the impugned payments as being in the nature of FTS. Admittedly no services in respect of the impugned payments were rendered in India. Further it is also not disputed that the entire amount has been paid and nothing is outstanding for payment. Thus all payment having been made before 8th May 2010, and no services having been rendered in India, the decision of the Hon’ble Tribunal in the preceding year squarely applies in this year also and following the same we uphold the conclusion arrived at by the Ld. CIT(A) that the assesee did not have any tax withholding liabilities from foreign remittance for fees for technical services and thus no disallowance under section 40(a)(i) was warranted.- Decided in favour of assessee.

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• 2016 (6) TMI 36
  Non referring the valuation of the property sold during the year to the D.V.O for determining its true value for the purpose of computation of capital gain as per the provision of section 50C(1) and (2) - Held that:- AR submitted that the market value of the impugned property is less than what is assumed by the authorities below. Ld. AR contended that the impugned land was agricultural when sold by the assessee and it was only later on that it was converted to residential. Moreover Ld. AR stated that the land was under dispute and civil litigation was in progress. Documents in support of his contention were placed before us as additional evidence alongwith an application under Rule 29 of the Income Tax Appellate Tribunal Rules 1963 seeking admission of the same for the reason that the documents came into possession of the assessee only after the passing of the appellate order. It is amply clear from the above that the assessee has been challenging the adoption of stamp duty value as consideration for the purpose of calculation capital gains from the sale of land all along. In view of the same and in the interest of justice we consider it fit to restore the matter back to the file of the AO for reconsidering the claim of the assesee challenging the stamp duty valuation and further direct the AO to refer the matter to the D.V.O as prescribed under section 50C(2) of the Act. We direct that the assessee be given full opportunity to adduce all evidence in support of its contention and after giving adequate opportunity of hearing the matter be decided in accordance with law. - Decided in favour of assessee for statistical purposes.

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• 2016 (6) TMI 35
  Registration under section 12-AA cancelled - Held that:- Under section 12AA of the Act, a review what is open to scrutiny is only the pursuit of objects as registered. In the case of CIT vs. Surya Educational & Charitable Trust (2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT ) it has been held that the Learned CIT ought not to concern himself with the application of funds beyond examining the genuineness of the pursued of the avowed objects. Examination of the application of funds is the prerogative of the Assessing Officer during the assessment. Since there is no finding anywhere that the society has not carried out its objective of imparting education or in other words there is no finding that any activity other than education is being pursued by the society, we are of the view that the Learned CIT(Appeals) was not justified in cancelling of registration invoking the provisions of sec. 12AA (3) of the Income-tax Act, 1961. It is reiterated that only when the registered objectives are not pursued or that the very pursued of activities is bogus or sham then only a cancellation order can survive and endure. In absence of such finding by the Learned CIT, we are of the view that he was not justified in cancelling the registration granted to the appellant-assessee under section 12AA of the Income-tax Act, 1961. We thus while setting aside such cancellation order of the Learned CIT questioned before us restore the registration granted under sec. 12AA - Decided in favour of assessee

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• 2016 (6) TMI 34
  Penalty under section 271(1)(c) - concealment of income - Held that:- There are two components of income assessed, one, income originally assessed and other, addition made in the second assessment order. Now, in the second order penalty under section 271(1)(c) has been initiated, which was not in the original assessment order . Satisfaction of the AO in the second order was with regard to Rs. 35 lakhs only, which was evident from the finding and observation of the AO as reproduced above. It is an undisputed fact in the appellate proceedings the addition of Rs. 35 lakhs was deleted and confirmed from the stage of ITAT and has attained finality. Since the very basis for the initiation of penalty and satisfaction of the AO for the addition of Rs. 35 lakhs got vitiated, therefore, the entire proceedings for levy of penalty does not have any legs to stand. So far as the levy of penalty for the original assessed income of Rs. 3,20,870/- is concerned, there was no initiation at the time of original assessment, therefore, the same cannot be revived in the second assessment order sans any satisfaction or initiation. Thus, on this preliminary ground itself, we are of the opinion that, contention raised by the Ld. Counsel appears to be correct and no penalty under section 271(1)(c) on addition of Rs. 3,20,870/- can be sustained. Accordingly, we direct the AO to delete the penalty of Rs. 73,774/-. Thus, the appeal for the assessment year 2003-04 is allowed. For the assessment year 2002-03 and 2001-02 this case there has been enhancement of contract receipts and estimate of net profit purely on ad-hoc basis without any relevant material on record. Here in this case, the contract receipts has been taken on the basis of entire credit appearing in the bank accounts which cannot be the basis for determining the turnover of contract receipts, at least while levying a penalty under section 271(1)(c), because consideration which arises in the penalty proceedings are separate and distinct from assessment proceedings. Here, in this case now the entire assessment and consequent addition rests upon pure estimation of income, therefore, neither the case of concealment of income nor for furnishing of inaccurate particulars. Thus, penalty levied by the AO and confirmed by the CIT(A) on the premise raised by the authorities below cannot be confirmed. Accordingly, we delete the penalty for both the years. - Decided in favour of assessee.

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• 2016 (6) TMI 33
  Deduction u/s 80-IB - Addition as projects not completed during the year on the basis of project completion method regularly followed by the assessee - Held that:- It is only after the end of the litigation and vacation of the stay order the assessee got the occupation certificate on 18.02.2010 for the additional floors. We also find that the possession were given to the buyers of the flats as per the original sanction plan whereas the additional floors were still under construction during the year. The total number of flats as per the original plan were 155 to which 44 flats were added after revised occupation certificate obtained from the BMC. In the case of Hawala Construction Private Ltd. [2011 (8) TMI 1080 - ITAT MUMBAI] the Tribunal held that a project is completed when a occupation certificate is received in respect of buildings and revenue authorities are not justified in rejecting the project completion method constantly followed by the assessee. Thus we are of the considered view that the method of accounting followed by the assessee i.e. project completion method was correct and recognized one and AO was wrong in rejecting the same while accepting the same method in the earlier and preceding years - Decided in favour of assessee.

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• 2016 (6) TMI 32
  Addition u/s 68 - addition treating the share capital subscribed as undisclosed income of the company - Held that:- It emerges from the record that Investigation Wing report is based entirely on the fact that one Shri Deepak Gupta was engaged in accommodation entry provider and M/s. Enpol (P) Ltd. was one of the benami concern. The ld. CIT(A) held that Shri Deepak Gupta is non-existent. His finding are self-contradictory and contrary to Investigation Wing. Besides non-providing of cross examination of the key person Deepak Gupta amounts to violation of principles of natural justice. From the materials available on record, it emerges that assessee discharged its primary onus in terms of Section 68 of the Act. Relying on judgment of ITAT Mumbai Bench in the case of ITO vs. M/s. Superline Construction (P) Ltd. and another (2015 (12) TMI 1453 - ITAT MUMBAI ) and various other judgments cited by the assessee, the addition in question is deleted. - Decided in favour of assessee.

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• 2016 (6) TMI 31
  Levy of penalty u/s.271[1][c] - Held that:- Considering the decision from Hon’ble Apex Court in CIT vs Reliance Petro Products Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ), wherein, on the issue whether merely because, the assessee has claimed expenditure, which was not accepted or was not acceptable to the Revenue that by itself would not attract penalty, clearly favours the claim of the assessee. Thus in the present case we direct the Ld. Assessing Officer to delete the penalty - Decided in favour of assessee

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• 2016 (6) TMI 30
  Validity of the assessment framed u/s 153C - Held that:- The first and foremost step for initiation of proceedings u/s 153C i.e., the recording of the satisfaction by the Assessing Officer of the person searched is missing, the proceedings. Thus the initiation of the proceedings u/s 153C in the assessee’s case are held to be invalid and accordingly the assessment framed, thereafter u/s 153C of the Act is quashed. - Decided in favour of assessee

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• 2016 (6) TMI 29
  Penalty u/s 271(1)(c) - provision for bad and doubtful debts claimed - Held that:- The impugned order passed by the CIT (A) confirming the penalty order is not sustainable in the eyes of law as the assessee has claimed provision for bad and doubtful debts due to inadvertent and bonafide mistake and voluntarily revised the income by offering the said amount of Rs. 4,59,714/- for taxation. Consequently, the impugned order passed by CIT (A) is hereby set aside. - Decided in favour of assessee

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• 2016 (6) TMI 28
  Arm’s length price adjustment in respect of investment advisory fees charged by the assessee from its associated enterprises - selection of MAM - Held that:- The exercise of ascertaining the arm’s length price, simplictor on the basis of the fees in percentage terms with non AEs and without having regard to the other factors governing determination of price, is inappropriate and unsustainable in law. It is also important to bear in mind the fact though rule 10B refers to the expression ‘price’, rather than the expression ‘amount’, the connotations of ‘price’ cannot extend to a formula on the basis of which the amount is to be quantified, in all situations- particularly when the formula on the basis of which amount is determined does not have a direct nexus with the product or service involved. What has been adopted as internal CUP, i.e. fees in percentage terms at the level of US $ 0.39 million fund and US $ 2.55 million fund, is inherently incomparable with the fees, in percentage terms at the level of US $ 135.83 million fund and US $ 37.75 million fund. We, therefore, reject the adoption of this internal CUP. We have noted that the DRP has justified rejection of TNMM on the ground that the normal trade practice is to invoice the investment advisory services, in intra AE transactions, on cost plus basis. It is difficult to understand the rationale of this approach. What is done by other entities in similar situations is hardly relevant as long as no defects are pointed out in the applicability of the TNMM on the facts of this case. The internal CUP, as used in this case, has been found to be inappropriate and unacceptable. There is nothing else to show the suitability of any other method on the facts of this case, and, if at all there is a residuary method, or what is termed as the method of last resort, it is transactional net margin method. TNMM has almost become the 'default' method for taxpayers in recent years. In view of these discussions, in our considered view, the TNMM method, as adopted by the assessee, should have been accepted. We have also noted that the assessee has produced segmental accounts for the investment advisory services in this case. As regards the point that only salary costs are taken into account in the segmental accounts and other costs are not taken into account and other issues with respect to correct working of the TNMM, with the consent of the parties, we remit the matter to the file of the TPO for adjudication de novo on the correctness of the segmental accounts, in accordance with the law, by way of a speaking order and after giving yet another opportunity of hearing to the assessee.

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• 2016 (6) TMI 27
  Disallowance of deduction u/s. 80IB(11A) - Non-consideration of the Audit Report filed at the time of assessment proceedings - Held that:- . Non-filing of Audit report inadvertently before the Commissioner of Income Tax (Appeals) cannot be considered as sufficient cause when the Assessing Officer has specifically taken a ground to disallow deduction to the assessee for non-filing of Audit report before him. The assessee has been negligent and callous in pursuing his cause before the authorities below. As the assessee has failed to show that he is engaged in the integrated business of handling, storage and transportation of food grains and thus, the assessee is not eligible for claim deduction u/s. 80IB(11A) of the Act. - Decided against assessee Disallowance u/s. 40(A)(3) - Held that:- In the report the Assessing Officer furnished his comments in respect of four persons i.e. Shri Prashant Jakite, Shri Sonaji Trimbakrao Bedke, Shri Sheikh Rashid Shaikh Chand and Shri Siddheshwar Kondiba Sontakke. The Assessing Officer has categorically stated that the payments are made by the assessee to the farmers through them. The Assessing Officer has not stated anywhere in the report that the assessee has purchased agricultural produce from these persons. The Assessing Officer has further stated that the assessee has paid commission to the above mentioned four persons. The Commissioner of Income Tax (Appeals) after considering the observations of the Assessing Officer deleted the disallowance u/s. 40(A)(3) in respect of cash payments to the tune of Rs. 61,38,831/-. After perusing the documents on record, we are of the considered view that the Commissioner of Income Tax (Appeals) was justified in deleting the disallowance u/s. 40(A)(3) of the Act. - Decided against revenue

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• 2016 (6) TMI 26
  Addition u/s 40A(2) - excessive of expenditure - Held that:- So far as the expenditure on foreign travel is concerned, the payment is not made to the specified persons. Section 40A(2) specifically deals with the situation in which the payment is made to the specified persons. That is not the case here. The payment is made in respect of foreign travel of the specified persons but that does not bring the expense within the scope of disallowance under section 40A(2). The very foundation of impugned disallowance is thus wholly unsustainable in law. As for the element of personal expenses being present is concerned, the assessee before us is a legal entity. Even if an expenses incurred by the assessee results in a personal advantage to its directors, such a fact of personal advantage to the directors does not affect the deductibility of expenses as long as the expenses are incurred wholly and exclusively for the purposes of business of the company. A personal advantage to the directors, even if that be so, cannot be a reason enough for resorting to the disallowance. Hon’ble jurisdictional High Court’s decision in the case of Sayaji (2001 (7) TMI 70 - GUJARAT High Court ) supports this proposition. The decision that the assessee’s senior directors, who are on their way out, personally meet the vendors and introduce the newer directors is essentially a business decision and it cannot be open to the Assessing Officer to question same. The element of business needs in such circumstances is clearly present. The assessee company may or may not have direct tangible benefit as a result of the expense but then just because the assessee does not get immediate tangible benefit, the expense does not cease to be deductible in nature. The disallowance has been made under section 40A(2) and, in any event, it cannot be open to the Assessing Officer to improve upon his case at this stage and add the reasons which were not even taken up at the assessment stage. Keeping in view these discussions, as also bearing in mind entirety of the case, we deem it fit and proper to delete the entire disallowance - Decided in favour of assessee.

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• 2016 (6) TMI 25
  Disallowance of depreciation - whether price paid for purchase of flat will be taken as the cost of flats or to be bifurcated between land and flat - Held that:- In the instant case, the assessee has paid the purchase price for purchase of flats and it is not discernible from the sale deed that it has paid anything separately for land. On the contrary, the sale deed makes it very clear that what was conveyed was only the super structure of the flats. On the contrary, it is an undisputed fact that the ownership of the land has remained with the vendor till the end of the year under consideration. The conveyance deed also makes it very clear that the land shall be transferred by the vendor to a co-operative society or any other form of organization. The assessee does not have any right or say in the matter of conveyance of land. These clauses coupled with the provisions of Maharashtra Apartments Act makes it clear that the assessee shall have only right of interest in the common area and facilities. Hence we are of the view that the tax authorities are not justified in bifurcating the selling price between the land and building without bringing any material to support their view. It is an undisputed fact that the assessing officer has allowed depreciation on the flats in AY 2006-07 and 2007-08. Hence, we are of the view that it may not be proper on his part to draw adverse inferences during the instant year, on the basis of certain presumptions entertained by him, that too without bringing any material on record to support his views. On the contrary, as stated earlier the recitals made in the conveyance deed actually supports the contentions of the assessee. Thus we direct the AO to allow the depreciation as computed by the assessee taking the price paid for purchase of flat as the cost of flats. - Decided in favour of assessee.

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• 2016 (6) TMI 24
  TDS u/s 196C - non deduction of TDS on premium/interest payable on redemption of FCCB by amortization on pro-rata basis of implicit rate of return over the period of bonds along with the TDS payable and charged to the Securities Premium Account periodically assessee in default u/s. 201(1) & 201(1A) - Held that:- As during the financial year ended on 31st March 2011, there was no question of there being any income by way of interest, as the FCCB' s were zero percent bonds carrying no interest and only giving the bondholder a right to get a premium of 39.37% on maturity. We also found that no interest whatsoever was payable during the financial year ended 31 March 2011. The word "payable" requires that a liability must accrue against the assessee during the year ended 31 March 2011 for the payment of the alleged interest and that a corresponding right / debt has to accrue to the bondholder. In this connection reliance is placed on the decision of the Supreme Court in the case of E. D. Sassoon & Company Ltd. and Others v/s. CIT (1954 (5) TMI 2 - SUPREME Court ). The decision in the case of Pfizer Ltd. [2012 (11) TMI 164 - ITAT MUMBAI] is of relevance because in that case the ITAT has held that there was no question of treating the assessee as an "assessee in default" in respect of non-deduction of TDS, even though the assessee had made a provision for expenses in its books of accounts. Now, coming to the observation made by lower authorities to the effect that assessee itself has made entry in the books of accounts, therefore, liable to deduct tax thereon. It is now settled position by several decisions of Hon’ble Supreme Court including the latest decision in the case of Tools Ltd. Vs. JCIT (2015 (3) TMI 853 - SUPREME COURT ) that entries in the books of accounts are not relevant. In any event, the assessee has reversed the entry for TDS in the immediate next financial year.In view of the above, we do not find any merit in the AO's action for holding the assessee as “assessee in default” for non-deduction of tax at source. - Decided in favour of assessee.

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• 2016 (6) TMI 23
  Revision u/s 263 - Eligibility for deduction u/s 80IA - Held that:- The Ld. AR has drawn our attention to various pages in the paper book which support the assessee’s claims that the A.O., during the assessment proceedings u/s 143(3) of the Act, had made extensive enquiries about the assessee’s claim of deduction u/s 80IA. A copy of the reply furnished by the assessee to the A.O in this regard is found to be placed in pages 46 to 51 of the Paper Book. A perusal of the assessment order also shows that on Page 2, the A.O has specifically allowed the claim of deduction u/s 80IA after reducing it by Rs. 6,03,245/- on account of other income not being eligible for the claim of deduction. Therefore, it will be wrong to infer that there has been no application of mind by the A.O while considering the claim of the assessee although he might not have expressed it in terms of a lengthy discussion on the issue In the instant appeal before us, the AO has conducted an enquiry. He has given a consideration to the claim of the assessee also as is evident from the disallowance made by him on account of other income. However, he has not launched a lengthy discussion on the issue of deduction but that does not lead to an inference that there has been a lack of enquiry on his part on the issue. It is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an AO, acting in accordance with law, makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the AO. Therefore, it cannot be held that in the instant case the AO’s order was erroneous and prejudicial to the interest of the revenue within the terms of section 263 of the Act. The impugned action of the Ld. CIT u/s 263 of the Act was patently illegal and liable to be quashed. - Decided in favour of assessee.

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• 2016 (6) TMI 22
  Addition on account of under valuation of closing stock - Held that:- The assessee was valuing the closing stock at cost or market price whichever was lower and this practice was followed consistently. In the instant case, it was claimed that in the preceding year and succeeding year, similar valuation has been accepted by the Deptt. and whenever the shares were sold, the profit earned in the trading was offered for taxation, the contention of the assessee was that no trading took place as on 31s t March, 2009 in respect of the shares in question, as such the valuation on that date was not quoted and considered as nil. The above said contention was not rebutted by bringing any cogent material on record. It was also not rebutted by the department that whenever the shares were sold the profit earned on the said transaction was offered for taxation and accepted by the Deptt. We, therefore, by considering the totality of the facts, are of the view that the addition made by the AO and sustained by the ld. CIT(A) was not justified, accordingly the same is deleted - Decided in favour of assessee Undisclosed deposits in bank - Held that:- It is an admitted fact that the assessees received a cheque of Rs. 1,25,000/- from Smt. Rekha Gupta and deposited the same in his bank account Smt. Rekha Gupta is proprietor of M/s. P.K.Gupta & Co. and maintained the cash book in her regular course of business. She deposited a sum of Rs. 1,25,000/- on 14.3.2008 which is evident from page no. 130 of the assessee’s paper book. She also furnished her confirmation which has not been doubted, copy of the same is placed at page no. 46 of the assessee’s paper book. She also disclosed her address as well as bank and Income-tax ward were she was assessed. Smt. Rekha Gupta also furnished copy of her Income-tax return which is placed at page no. 66 of the assessee’s paper book. From the above narrated facts, it is clear that the assessee discharged the onus cast upon him to prove the identity of the depositor, her creditworthiness and genuineness of the transactions. Therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified - Decided in favour of assessee Addition on account of low household withdrawals - Held that:- In the present case, it is noticed that the assessee and his wife had withdrawn a sum of Rs. 1,23,730/- out of which Rs. 23730/- were on account of school fees of the children. The assessee is residing with his family in his own house, and no rent was paid. In the present case, it is not brought on record that how and in what manner the withdrawals by the assessee and his wife were not sufficient to meet out the needs of the day to day life. It, therefore, appears that the addition has been made by the AO only on the basis of presumption which is not tenable in the eyes of law. We, therefore, delete the addition made by the AO and sustained by the Ld. CIT(A).- Decided in favour of assessee

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• 2016 (6) TMI 21
  Addition u/s 14A - Held that:- in respect of disallowance u/s 14A, the assessee submitted complete details of the capital and reserves of assessee and also submitted the profits earned during the year. The learned CIT(A) has made a finding of fact that assessee had made an investment of Rs. 2.75 crores in the F.Y. 2008-09 as against free funds of Rs. 12.38 crores. The learned CIT(A) has also made a finding of fact that assessee had earned net profit of Rs. 17.33 crores during the year which is far in excess of the investment made in the capital of subsidiary company. The learned CIT(A) further held that in earlier years on similar facts and circumstances the addition u/s 14A was not made and keeping in view the rule of consistency the addition was not sustainable in the present years. While recording detailed findings the learned CIT(A) has also relied upon a number of case laws. The learned DR was not able to controvert any of the findings of learned CIT(A), and, therefore, we do not find any infirmity in the order of learned CIT(A) - Decided against revenue Disallowance u/s 36(1)(iii) - Held that:- Coming to other grievance of Revenue, we find that learned CIT(A) has made a findings of fact that that assessee was having free reserves far more than advances to two firms. The learned CIT(A) has also categorically held that the assessee had given advances to two firms under normal business operations and, therefore, he had rightly held that disallowance u/s 36(1)(iii) was not warranted. The learned DR was not able to controvert any of the findings of learned CIT(A), and, therefore, we do not find any infirmity in the order of learned CIT(A)- Decided against revenue

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• Customs

• 2016 (6) TMI 11
  Admissibility of refund claim - Special refund mechanism as per exemption notification no. 102/2007-CUS dated 14/09/2007 - SAD leviable under sub-section (5) of Section 3 of Customs Tariff Act, 1975 is refundable as the appellant had sold the goods so imported - Certificate from Chartered Accountant indicating the sale of goods and amount of VAT/CST payable has been paid - Held that:- the goods which were let out of charge has been sold by the very said invoice, there is no other contrary finding by the First Appellate Authority that the goods were not sold. Be that as it may, it is found that the conditions of the Notification No. 102/2007-CUS, are complied with by the appellant. Also the issue now stands settled in the favour of the appellant by the judgment of the Tribunal in the case of Glasstech India Versus Commissioner of Customs, Ghaziabad [2015 (1) TMI 160 - CESTAT NEW DELHI]. In view of the foregoing, there being no dispute as to the sale of the goods though the out of charge was given after date of sale, therefore, the impugned orders are unsustainable and liable to be set aside. - Decided in favour of appellant with consequential relief

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• 2016 (6) TMI 10
  Confiscation in lieu of redemption fine and imposition of penalty - Smuggling of 148 grams of gold bangles - non-declaration at green channel - contravention of provisions of Section 77 of the Customs Act, 1962 - Held that:- any oral submission made before the adjudicating authority will be a material piece of evidence. In view of the specific admission made by the respondent before the adjudicating authority, Government is inclined to hold that the respondent is a carrier of the impugned goods. In the present case as the passenger is not the owner of the goods and neither Shri Satish who handed the gold over to the passenger nor Shri Thangaraj to who, the gold was meant to be handed over have claimed the impugned goods. Therefore, the gold cannot be allowed to be handed over to the respondent to re-export who is only a carrier. In this regard Government places reliance on various decisions of higher Courts the ratio of which is squarely applicable to the instant case. Government further notes that the provision to Re-export of baggage is available under Section 80 ibid. However this Section is applicable only to cases of bonafide baggage declared to Customs, which the respondent failed to do and is not eligible for re-export of impugned goods. Government also finds no merit in the plea of the respondent that the gold was not required to be declared and can be cleared free of duty of the condition of re-export. Government notes that in terms of Section 77 anything imported by a passenger is required to be declared to Customs and is chargeable to duty above the passenger is required to be declared to Customs and is chargeable to duty above the specified limits. Further gold and gold jewellery can be imported by only eligible passengers subject to fulfillment of conditions thereof. Government finds that the passenger was a Sri Lankan passport holder not eligible to import the impugned goods and the same were also not declared to the Customs. But for being apprehended by Customs, the passenger could have been successful in smuggling in the impugned goods into the country on behalf of another. Therefore, penalty has rightly been imposed upon the respondent under Section 112 ibid and Government finds no reason to interfere with the order of the Commissioner (Appeals) to the extent that penalty has been reduced to Rs. 20,000/- only. The re-export of the impugned goods allowed in this case by the Commissioner (Appeals) is therefore set-aside and the impugned Order-in-Original ordering absolute confiscation is restored. - Decided partly in favour of revenue

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• 2016 (6) TMI 9
  Confiscation in lieu of redemption fine and imposition of penalty - Smuggling of 87.5 gram of gold bangle - non-declaration at green channel - contravention of provisions of Section 77 of the Customs Act, 1962 - Held that:- any oral submission made before the adjudicating authority will be a material piece of evidence. In view of the specific admission made by the respondent before the adjudicating authority, government is inclined to hold that the respondent is a carrier of the impugned goods. In the present case as the passenger is not the owner of the goods and neither Shri Satish who handed the gold over the passenger nor Shri Thangaraj to whom the gold was meant to be handed over have claimed to impugned goods. Therefore, the gold cannot be allowed to be handed over to the respondent for re-export who is only a carrier. In this regard Government places reliance on the various decisions of higher Courts the ratio of which is squarely applicable to the instant case. Government further notes that the provision to Re-export of baggage is available under Section 80 ibid. However this Section is applicable only to cases of bonafide baggage declared to Customs, which the respondent failed to do and is not eligible for re-export of impugned goods. Government also finds no merit in the plea of the respondent that the gold was not required to be declared and can be cleared free of duty of the condition of re-export. Government notes that in terms of Section 77 anything imported by a passenger is required to be declared to Customs and is chargeable to duty above the passenger is required to be declared to Customs and is chargeable to duty above the specified limits. Further gold and gold jewellery can be imported by only eligible passengers subject to fulfillment of conditions thereof. Government finds that the passenger was a Sri Lankan passport holder not eligible to import the impugned goods and the same were also not declared to the Customs. But for being apprehended by Customs, the passenger could have been successful in smuggling in the impugned goods into the country on behalf of another. Therefore, penalty has rightly been imposed upon the respondent under Section 112 ibid and Government finds no reason to interfere with the order of the Commissioner (Appeals) to the extent that penalty has been reduced to Rs. 10,000/- only. The re-export of the impugned goods allowed in this case by the Commissioner (Appeals) is therefore set-aside and the impugned Order-in-Original ordering absolute confiscation is restored. - Decided partly in favour of revenue

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• Corporate Laws

• 2016 (6) TMI 5
  Restoration of name in the register of companies maintained by the Registrar of Companies - Held that:- Notice in respect of action under S.560 was not sent to the registered office of the company. Consequently, the condition precedent for the initiation of proceedings to strike off the name of petitioner from the Register maintained by the respondent was not satisfied. Looking to the fact that the petitioner is stated to be a running company; and that it has filed this petition within the stipulated limitation period, and to the decision of the Bombay High Court in Purushottamdass and Anr. (BulakidasMohta Co. P. Ltd.) v. Registrar of Companies, Maharashtra, it is only proper that the impugned order of the respondent dated 23.06.2007, which struck off the name of the petitioner from the Register of Companies, be set aside. At the same time, however, there is no gainsaying the fact that a greater degree of care was certainly required from the petitioner company in ensuring statutory compliances. Looking to the fact that annual returns and balance sheets were not filed for almost seventeen years, the primary responsibility for ensuring that proper returns and other statutory documents are filed, in terms of the statute and the rules, remains that of the management. Accordingly, the petition is allowed. The restoration of the company’s name to the Register maintained by the Registrar of Companies will be subject to payment of costs of Rs. 22,000/- to be paid to the common pool fund of the Official Liquidator, and the completion of all formalities, including payment of any late fee or any other charges which are leviable by the respondent for the late deposit of statutory documents within 8 weeks; the name of the petitioner company, its directors and members shall, stand restored to the Register of the respondent, as if the name of the company had not been struck off, in accordance with S.560(6) of the Companies Act, 1956.

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• 2016 (6) TMI 4
  Sanction of the Scheme of Amalgamation - Held that:- Considering the approval accorded by the equity shareholders and creditors of the petitioner companies to the proposed Scheme of Amalgamation and the affidavits filed by the Official Liquidator and the Regional Director, Northern Region not raising any objection to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. The petitioner companies will comply with the statutory requirements in accordance with law.

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• FEMA

• 2016 (6) TMI 3
  Refusal to dispense with the amount of deposit of the penalty fully by Foreign Exchange Appellate Tribunal - Held that:- The learned Tribunal omitted to notice that there was unexplained delay of nine years in issuing the show cause notice. The learned Tribunal also ignored the fact that the appellant was a mere agent of the principal, Sri S.Jegathesan. Considering the facts and circumstances of the case, we are of the opinion that the Tribunal should have dispensed with the deposit fully. In that view of the matter, the appeal is allowed. The appellant shall be entitled to press the appeal without having to deposit any amount by way of pre-deposit under section 54 of 1973 Act. It is clarified that the views expressed herein are for the purpose of disposal of this appeal and shall not preclude the Tribunal from arriving at its own conclusion on merits in accordance with law.

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• Service Tax

• 2016 (6) TMI 20
  Imposition of penalty - Section 76 & 78 of the Finance Act, 1994 - Business Auxiliary Service - Reverse charge mechanism - Services for Commission Agents when used in respect of exported products were exempt from payment of service tax by virtue of Notification No. 41/2007 dated 06.10.2007 as amended by Notification No. 12/2008 dated 01.04.2008 and subsequently vide Notification No. 18/2009-ST dated 07.07.2009. available as Cenvat credit - Service tax along with interest had been paid before issuance of SCN - Held that:- in the appellant's own case (when it was known as Sterlite Industries (India) Ltd.) reported in [2005 (5) TMI 212 - CESTAT, MUMBAI], the Tribunal has already held that where credit is available to another unit of the same company, the situation was revenue neutral and the allegation of suppression with an intention to evade payment of duty could not have been sustained. Therefore, the allegation of suppression with the intention to evade payment of tax not being sustainable, the Revenue was not justified in contending that the appellant was hit by the bar under Section 73(4). In this view of the matter, the benefit under Section 73(3) ought to have been extended to the appellant and no notice should have been issued to it. Also the entire amount of interest paid by the appellant is a cost to the company in a situation where otherwise there can be no dispute that there was an exemption available from the payment of service tax in respect of Commission Agent services. The appellant was entitled to the benefit of the said exemption had it complied with the procedural requirements. The other argument of the Department that the tax was paid on being pointed out by the Revenue is also no ground for denying the benefit under Section 73(3) as the Section itself envisages that the tax which has been short paid or short levied can be paid by an assessee on its own volition or upon being pointed out by the Department. To suggest that in every case where tax is being paid on being pointed out by the Department, the benefit of Section 73(3) would not be available would tantamount to rendering Section 73(3) redundant, which is clearly impermissible. In view of the above, I hold that benefit of Section 73(3) was available and accordingly set aside the penalty. The appropriation of tax and interest already paid is upheld. - Decided in favour of appellant

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• 2016 (6) TMI 19
  Whether the rejection of declaration filed by the appellant under service tax Voluntary Compliance Encouragement Rules (VCES) is correct or not - investigation against them is still under process - Appellant filed VCES declaration and paid the amount of disputed tax - Designated authority issued show cause notice of his intention to reject the said VCES declaration - Held that:- this issuance of show cause notice is against the Board Circular No. 169/4/2013-ST dated 13/05/2013. The designated authority has to indicate his intention of rejection of VCES within 30 days of the VCES being filed. As the designated authority, has issued a show cause notice beyond the period, as indicated by the Board, the said show cause notice for intention of rejecting the VCES is non-est. Impugned orders is unsustainable and is set aside. - Decided in favour of appellant

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• 2016 (6) TMI 18
  Stay application for withholding refund - Demand dropped in order-in-original - Consulting engineering service - Respondent stated that once demand has been dropped, even as per the board's circular F, No. 276/186/2015-CX.8A dated 1.6.2015 the refund should not be withheld - Held that:- even CBEC circular advises field formations to try and obtain stay only where orders have been passed by Commissioner (Appeals). In this case the order has been passed by Commissioner of Central Excise (and not Commissioner of Central Excise (Appeals)). - Stay applications dismissed as misconceived and infructuous

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• Central Excise

• 2016 (6) TMI 17
  Imposition of penalty - Section 112 of the Customs Act, 1962 - petitioners had a statutory alternative remedy of filing an appeal under Section 129(1) of the Act before the CEGAT, New Delhi and they availed it - Appeal dismissed for want of prosecution - Held that:- the petitioners cannot be permitted to keep quiet for a long period of time and then make a complaint that as the records have been weeded out they cannot file an application for recall of the order and so the writ petition should be entertained. There is nothing on record to indicate that the petitioners had made any attempt to file any application. Also no good reason seen to accept the plea of petitioner that to protect the interest of the petitioners the Court may hear the petitioners after imposing costs. It is only when laches of 25 years had been satisfactorily explained by the petitioners that the Court could have considered imposing costs but the petitioners have miserably failed to satisfy the Court about the laches. - Decided against the petitioner

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• 2016 (6) TMI 16
  Entitlement to claim full SSI exemption in terms of Notification No. 8/2003-CE dated 1.3.2003 - goods manufactured under his own brand name even though Cenvat Credit was availed by it in respect of the duty paid on the inputs utilized in the manufacture of those goods which bear brand name of another person and are cleared on full payment of duty - Held that:- In the present scheme manufacturer has been given clear option to opt both of the two benefits i.e. (a) to avail the full SSI exemption without Cenvat Credit and (b) payment of duty on Goods manufacturing under the brand name of others with availing cenvat credit. The issue in the present appeals is governed by the ratio of the Supreme Court in Commissioner of C. Ex., Chennai v. Nebulae Health Care Ltd. [2015 (11) TMI 95 - SUPREME COURT] and the judgment in Commissioner of Central Excise, Ahmedabad v. Ramesh Food Products [2004 (11) TMI 103 - SUPREME COURT OF INDIA] had been rightly distinguished by the Tribunal on the same lines as has been noticed by the Apex Court in the aforesaid pronouncement. Accordingly, there is no error in the approach of the Tribunal which may warrant interference by this Court. - Decided against the revenue

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• 2016 (6) TMI 15
  Entitlement to avail benefit of deemed credit of duty - Notification No. 1/93-CE dated 28.2.1993 - Re-rollable material used as inputs in terms of the order dated 1.3.1994 of Government of India, Ministry of Finance even after crossing the exemption limit of Rs. 75 lacs - Held that:- by following the various decisions of Tribunal and High Court's, the appellant is entitled to avail benefit of deemed credit of duty on re-rollable material. Accordingly, the order of the Tribunal dated 1.3.2004 is set aside. - Decided in favour of appellant

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• 2016 (6) TMI 14
  Dismissal of settlement application - Demand towards Cenvat credit wrongly availed - CCESC opined that the applicant has not cooperated with the CCESC in the proceedings before it - Difference between the applicant and the Department on an issue arising from the application - Held that:- the Court finds that both in the order dated 9th June, 2014, rejecting the first application and the subsequent order dated 3rd September, 2014, rejecting the second application, the CCESC has proceeded on two wrong premises. One was that the diary of Mr. Rai was not before it. However, this error was rectified by it by the order dated 16th November, 2015. The second error was in concluding that since the Department and the Assessee were not ad idem on certain factual details, the matter should be sent back for adjudication before the concerned Excise Officer. The CCESC failed to appreciate that the grounds on which the application can be rejected are restricted to those set out in Section 32-F (1) and Section 32-L of the CE Act. Therefore, for these reasons, this Court sets aside the impugned order of the CCESC rejecting the first application and the order passed by it rejecting the second application. The order passed by the CCESC, to the extent of correcting the mistake as noted does not call for interference. - Petition disposed of

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• 2016 (6) TMI 13
  Exemption from the condition of pre-deposit - Assessee has been asked to deposit upto 50% of the amount of duty as pre-deposit for hearing of appeal though - Commissioner/ CESTAT have passed orders to exempt condition of pre-deposit to some extent - In few cases, it has been directed to deposit upto 25% of the amount of duty and, in some other cases, to the extent of 50% of the demand - Held that:- taking into consideration the amendment brought through the Finance Act, 2014 that condition of pre-deposit of 7.5% of the amount of duty without any provision for exemption has been provided and various orders, the orders passed by the Commissioner/ CESTAT need interference. Thus, on deposit of 15% of the amount of duty or the penalty, as the case may be, appeals would be heard by the Commissioner/ CESTAT. The amount of 15% of the duty or the penalty, as the case may be, would be deposited within a period of one month from today. - Appeals disposed of

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• 2016 (6) TMI 12
  Monetary limit for entertaining an appeal - High Court limit is Rs. 15,00,000/- - Amount involved is less than Rs. 15,00,000/- - Held that:- taking note of the CBEC Circular dt.17/12/2015 & 01/01/2016, the monetary limits which indisputably in these appeals is less than Rs. 15 lacs, much less than what has been prescribed for filing appeal before the High Courts, deserve to be dismissed as not pressed. However, it is made clear that the substantial questions of law raised in these appeals, if any, is left open to be examined in an appropriate proceeding, if arises in future. At the same time we consider it appropriate to observe that if the appeal falls in any of the exceptions as referred to in the Circular dt.17/12/2015, the Revenue will be at liberty to move an application for recalling of the order, if so advised. - Decided against the revenue

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• CST, VAT & Sales Tax

• 2016 (6) TMI 8
  Constitutionality of Notification No. FD 21 CSL 2014(II) dated 28.02.2014 - levy of tax on sale of liquor including beer, fenny, liqueur and wine by a dealer who is not a person holding licence in Form - Held that:- by respectfully agreeing with the submission at bar by the learned Additional Government Advocate for the Revenue and having gone through the detailed judgment of the learned Single Judge dated 30.09.2015 (Sri. M.Madhava Gowda vs. Under Secretary to Government and others) and other connected cases, dismissing similar writ petitions, this Court is of the opinion that the present writ petition also deserves to be dismissed for the same reasons and in the light of the observations made by the learned Single Judge in the judgment dated 30.09.2015. - Decided against the petitioner

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• 2016 (6) TMI 7
  Validity of Single Judge order - granted stay with a condition to deposit 30% of the demand amount and to furnish bank guarantee for the remaining amount within eight weeks - Appellant submitted that once the concluded re-assessment was there, it could not be reopened merely because, subsequently, Supreme Court has held that charger is not a part of mobile for the purpose of levying VAT. Also that even Section 39(2) was not on the statute, which has been invoked since Section 39, which is invoked has come into force in the year 2013, whereas reassessment is concluded in the year 2012. Held that:- the interim order passed by the learned single judge shall stand modified to the effect that there shall be stay against recovery of the demanded amount on condition that the appellant furnishes bank guarantee equivalent to 30% of the demand on or before 06/06/2016 and further gives an undertaking also to be given before that date to this court through its Managing Director for the remaining 70% of the demanded amount declaring that, in the event the appellant fails in the petition and the demand is confirmed, ultimately, the amount equivalent to 70% with accrued interest shall be paid within a period of three months from the date of the final order. - Appeals disposed of

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• 2016 (6) TMI 6
  Limitation for passing re-assessment order - Section 39 of the KVAT Act, 2003 - would have expired on 30.04.2016 and not on 30.03.2016 - Demand of tax - Breach of principles of natural justice - Denial of reasonable opportunity of defending the case - Held that:- this Court considers it expedient to set aside the impugned order, dated 31.03.2016 and, directing the petitioner-assessee to submit its written objections and reply to the show-cause notice immediately by appearing before the Assessing Authority on 29.04.2016 itself, the Assessing Authority is permitted to pass fresh and revised re-assessment order on merits, in accordance with law, in his own wisdom, expeditiously. - Decided in favour of petitioner

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• Indian Laws

• 2016 (6) TMI 2
  Re Auction orders under SARFAESI ACT - Held that:- While we recognise the duty on the part of the respondent Bank under Article 14 to act fairly, we cannot also, in the facts of this case, hold that the omission on the part of the respondent Bank in informing the writ petitioner about the pendency of the case before the Tribunal or the order passed, the contents of which we have already taken note of, would afflict the re-auction notice with an illegality. In terms of the conditions, quite clearly, the writ petitioner had failed to act in the manner provided under the terms of the auction notice, which were binding on the writ petitioner. In such circumstances, when the respondent Bank decides to go in for re-auction, we would think that it may not be appropriate to place the blame at the doorstep of the respondent Bank in judicial review proceedings or to interfere with the re-auction. There remains question relating to reserve price. The reserve price fixed in the re-auction is about Rs. 51,00,000/- more than what was fixed in the first auction. The learned Senior Counsel for the respondent Bank would submit that the Bank officers had fixed the price on their perception of the price that would be fetched in the auction. It may be true that the writ petitioner had quoted higher price in the first auction, but that sale did not go through. More importantly, this is a matter, which was not really put in issue by way of appropriate pleadings for the learned Single Judge to have entered the finding as he has done. In such circumstances, on the said score also, it may not be appropriate to interfere with the re-auction. It is not that we are oblivious of the fact that, ordinarily, banks, particularly public sector banks, are expected to make all efforts to fetch the maximum price for the properties so that the auction is fair to the borrower and also to the Bank itself when large amounts are due to it; but, since we are concerned with the legality of the action of the respondent Bank, it may not be appropriate for us to consider the matter further even on the lines of conducting a re-auction, with which idea, we did toy with in our minds. The upshot of the above discussion is that the appeal filed must be allowed; the directions issued by the learned Single Judge must be set aside; and the writ petition must be dismissed. However, we would think that, in regard to the question about the forfeiture of Rs. 50,00,000/-, which has been effected by the respondent Bank, we should leave it open to the writ petitioner to seek appropriate remedy before the competent forum, if advised. The amount, however, deposited by the writ petitioner in a sum of Rs. 1,77,00,000/-, which has been directed to be put in Fixed Deposit under orders of this Court, shall be returned to the writ petitioner along with the accrued interest.

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• 2016 (6) TMI 1
  Accounts of the writ petitioner not NPAs - SARFAESI Act - Held that:- It is the settled law that the secured creditor has obligation to communicate the reasons for non-acceptance of the representation or the objection of the borrower. In the instant case, in reply dated 07.01.2016 (Annexure 6 to the petition), the secured creditor has given sufficient reasons for not accepting the objections of the borrower. There is no violation of statutory provisions so as to quash the notice of the respondent bank in exercise of extra ordinary jurisdiction. It does not appear that the secured creditor has arbitrarily classified the accounts of the borrower company as NPA. The respondent bank, no doubt, is required to protect the loan, which it had sanctioned but, at the same time, the respondent bank should adopt a practical and pragmatic approach for which the RBI has framed guidelines which are binding upon them and which are required to be followed meticulously. The bank has not acted against the petitioner contrary to the guidelines issue by RBI. This Court, accordingly, concludes the matter and refuses to entertain the writ petition on the ground that there is nothing on record wherefrom one can come to a definite conclusion that the accounts of the writ petitioner were not NPAs as on the date of issuance of the notice under Section 13(2) of the Act.

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