TMI Tax Updates - e-Newsletter
June 20, 2014

Case Laws in this Newsletter:

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

Articles

1. PENAL PROVISIONS UNDER COMPANIES ACT, 2013 – PART I

   By: DR.MARIAPPAN GOVINDARAJAN

2. INDIRECT TAXES EXPECTATIONS FROM BUDGET 2014-15

   By: Dr. Sanjiv Agarwal

News

1. Exchange Rate Notification with effect from 20th June, 2014

2. ICAI Signs Memorandum of Understanding with the Saudi Organization for Certified Public Accountants

3. Infrastructure Finance Companies and Infrastructure Debt Fund Non-Banking Financial Companies (ID-NBFCS) to Issue Secured Debentures

4. Reserve Bank Cancels the Licence of Shri Shivaji Sahakari Bank Ltd., Gadhinglaj, Kolhapur, (Maharashtra)

5. RBI Reference Rate for US $ and Euro

Notifications

Companies Law

1. F. No. 01/04/2013(Part –I) CL-V - dated 18-6-2014 - Co. Law

Companies (Share capital and Debentures) Amendment Rules, 2014

2. F. No. 1/21/13-CL-V - G.S.R. 252(E) - dated 31-3-2014 - Co. Law

Companies (Issue of Global Depository Receipts) Rules, 2014.

Customs

3. 47/2014 - dated 19-6-2014 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from the 20th June, 2014

FEMA

4. 309/2014-RB - dated 4-6-2014 - FEMA

Foreign Exchange Management (Export and Import of Currency) (Amendment) Regulations, 2014.

5. 307/2014-RB - dated 26-5-2014 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Eighth Amendment) Regulations, 2014

6. 302 /2014-RB - dated 28-4-2014 - FEMA

Foreign Exchange Management (Export of Goods & Services) (Amendment) Regulations, 2014

7. 300/2014-RB - dated 28-3-2014 - FEMA

Foreign Exchange Management (Manner of Receipt and Payment) (Amendment) Regulations, 2014

Indian Laws

8. F.NO.4/2/2012/NS-II - G.S.R. 392(E) - dated 9-6-2014 - Indian Law

Senior Citizen Savings Scheme (Amendment) Rules, 2014

Highlights / Catch Notes

Income Tax

• High Court Invalidates Corrigendum: TPO's Final Assessment Order u/s 144C Deemed Illegal and Unalterable.

  Case-Laws - HC : Validity of corrigendum issued to the order passed u/s 144C - TPO instead of passing a provisional order or a draft assessment order, has passed a final assessment order - corrigenda cannot validate an illegal order into valid one - HC
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• Section 69C: Inapplicable if Assessee's Expenditure is from Known Sources; Requires Unexplained Source for Invocation.

  Case-Laws - AT : When an assessee incurs expenditure from known sources section 69C does not get attracted; in order to invoke the section it has to be shown that the assessee had not explained about the source of such expenditure or part thereof - AT
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• Penalty u/s 271(1)(c) Not Imposed for Opinion Differences on Expenditure Nature in Income Tax Cases.

  Case-Laws - AT : Penalty u/s 271(1)(c) of the Act - difference of opinion with regard to the nature of expenditure would not amount to furnishing of inaccurate particulars of income - AT
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• Reversal of Interest Provision Not Deductible Under MAT Rules for Book Adjustments, Says Court.

  Case-Laws - AT : Minimum Alternate Tax (MAT) - book adjustments - the assessee is not entitled to claim for deduction for the amount of Provision for interest reversed by it and credited to the Profit and Loss account - AT
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• No Addition for Assessee u/s 28(iii)(c) for Hypothetical Income from Incentives on Advance License.

  Case-Laws - AT : Accrual of incentives - Addition u/s 28(iii)(c) of the Act – Hypothetical income of the incentive on Advance License – Assessee has discontinued its manufacturing operations - no addition - AT
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• Gifts Received Under Bona Fide Belief Not Automatically Penalized u/s 271(1)(c) of Income Tax Act.

  Case-Laws - AT : Levy of penalty u/s 271(1)(c) - gift was received under bona fide belief that the same was a genuine gift - it was taxed during assessment proceedings but the penalty u/s 271(1)(C) cannot be levied automatically - AT
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• Doctors Classified as Consultants, Not Employees: Tax Deduction Required u/s 194J, Not Section 192.

  Case-Laws - AT : TDS on fee paid to doctors – Doctors treated as consultants – there is no employer and employee relationship existing - tax has to be deducted u/s 194J and not u/s 192 - AT
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Customs

• Imported Car Lacks Type Approval, Modifications Lead to Confiscation Under Import Policy Regulations.

  Case-Laws - AT : Old car imported with lot of modification and without the Type Approval Certificate/ COP from international accredited agency was in contravention of the import policy - confiscation upheld - AT
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Service Tax

• Appellant Exempt from Reverse Charge for Vessels u/s 65 if Vessels Remain Outside India During Use.

  Case-Laws - AT : Classification under Section 65 (105)(zzzzj) - supply of tangible goods - Appellant cannot be held to be under the reverse charge mechanism in respect of vessels not located in India during the entire period of their use - AT
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• Real estate agent services, including advice and activities for clients, are taxable under service tax rules.

  Case-Laws - AT : Real Estate Agent services - any services rendered in relation to Real Estate and any advice or activity undertaking in relation to Real Estate for a service receiver would be covered under this category - AT
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Central Excise

• Assessee denied waiver for pre-deposit due to failure in filing exemption declaration for central excise benefits.

  Case-Laws - AT : Waiver of pre deposit - area based exemption - non filing of declaration / application exercising the option to avail the exemption - prima facie case is against the assessee - AT
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• Appellant's Cenvat Credit on Fabric Procurement Challenged; Revenue's Claim of Knowledge of Fake Manufacturers Unsupported by Records.

  Case-Laws - AT : Cenvat Credit - procurement of fabric from dealer - The contentions of revenue that the appellant was aware that the fabric manufacturers were non-existence or fake is not borne out from any of the records - AT
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• Appellant fined Rs. 5000 for moving goods to the first floor without permission, breaching procedural regulations.

  Case-Laws - AT : Confiscation of goods - as the appellant have transferred the goods to the first floor without the permission of the officers which is a procedural and technical laps, the same requires imposition of token penalty - Rs. 5000 levied as penalty - AT
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• Waiver of Pre-Deposit Penalty Clarified: Rule 25 Applies to Producers and Manufacturers, Not Purchasers Ordering Goods.

  Case-Laws - AT : Waiver of pre-deposit of penalty - Penalty under Rule 25 - penalty can be imposed under the specific rule on producer, manufacturer and registered persons and not on the purchaser who has placed an order for supply of goods. - AT
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• Court Rules Independent Buyer Prices Must Apply to Related Party Ingots Sales for Fair Tax Valuation.

  Case-Laws - AT : Valuation of goods - sale to related parties - as the price at which ingots are also being sold to independent wholesale buyers is available, the same is required to be adopted for the purpose of sale to the so-called related persons - AT
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VAT

• High Court Highlights Violation of Natural Justice in Tax Assessment Due to Lack of Hearing Opportunity for Petitioner.

  Case-Laws - HC : Violation of principle of natural justice -the assessing officer ought to have afforded an opportunity of hearing to the petitioner for perusal of such volumnious documents. - HC
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Case Laws:

• Income Tax

• 2014 (6) TMI 543
  Rectification of order u/s u/s 254(2) of the Act – Jurisdiction of the HC - Held that:- Relying upon Commissioner of Income Tax vs. Tata Chemicals Ltd. [2002 (4) TMI 42 - BOMBAY High Court] - the High Court can decide only that question which was raised but not determined by the Tribunal - it was necessary that the question sought to be raised ought to have been raised before the Tribunal and then if it had not determined it, one can say that it has not been determined by the Tribunal and, therefore, the High Court should look into it - it was open to the assessee to raise the issues in its appeal before u/s 260A of the Act - the Tribunal has correctly observed that there was no mistake apparent in the order passed by the Tribunal – Decided against Assessee.

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• 2014 (6) TMI 542
  Interpretation of Explanation 2 to section 9(1)(vii) of the Act – Scope of the term technical service - Liability to deduct TDS u/s 194J of the Act – Payment made for transmission/wheeling of SLDC – Liability to pay interest u/s 201(1A) of the Act - Whether any human intervention was involved in the activity or not - Held that:- Following Commissioner of Income-tax Versus Bharti Cellular Ltd. & Hutchison Essar Telecom Ltd. [2010 (8) TMI 332 - Supreme Court of India] - wherever there was human intervention requiring examination of technical data, the same would fall within the definition of technical services and in the absence – it would not partake the character of technical services – The primary basis to conclude the services to the falling u/s 194J of the Act to be technical services or not is to find as to whether any human intervention was involved in the activity or not - thus, the matter is remitted back to the AO to examine the technical expert and after examining him for fresh adjudication - the assessing authority shall also examine whether the Provisos inserted in Sections 201(1) and 201(1A) by Finance Act, 2012 are applicable retrospectively, as urged by the assessee – Decided in favour of Revenue.

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• 2014 (6) TMI 541
  Sale proceeds of immovable property – Transfer covered u/s 2(47)(v) of the Act or not - Whether the sale proceeds in respect of the immovable property sold by the assessee by agreement for sale is assessable as business income or capital gain under the provisions of the Income Tax Act – Held that:- No record of any appeal have been filed is available - an appeal challenging the finding of fact recorded by the Tribunal has not been filed - revenue has accepted this finding of fact and in relation to the same assessee for prior assessment years - In such circumstances, we do not find that the appeal raises any substantial question of law - in the case of persons to whom the property has been transferred, the relevant date of bringing the income to tax, would be the date on which the entire consideration is received - the possession of the immovable property was not taken or retained - the finding of fact which is recorded by the Tribunal in prior AYs has also been recorded in subsequent AYS and in relation to the same assessee – Decided against Revenue.

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• 2014 (6) TMI 540
  Validity of corrigendum issued to the order passed u/s 144C - TPO instead of passing a provisional order or a draft assessment order, has passed a final assessment order dated 26.03.2013 – In the corrigendum it was only stated that the order passed on 26.03.2013 under Section 143C of the Act has to be read and treated as a draft assessment order as per Section 143C read with Section 93CA (4) read with Section 143 (3) of the Act - Held that:- In and by the order dated 15.04.2013, the second respondent granted thirty days’ time to enable the assessee to file their objections. On receipt of the corrigendum dated 15.04.2013, the assessee company approached the first respondent, but the first respondent declined to issue any direction to the assessment officer on the ground that the first respondent has got jurisdiction only to entertain such an appeal if the order passed by the second respondent is a pre-assessment order - the first respondent declined to entertain the objections raised by the assessee company on the ground that the order passed is not a draft assessment order, rather it is a final order. Relying upon Deepak Agro Foods v. State of Rajasthan and others [2008 (7) TMI 553 - SUPREME COURT OF INDIA] - if an order is passed beyond the statutory period prescribed, such order is a nullity and has no force of law - the period for assessment proceedings expired and fresh assessment orders have been issued by anti-dating it – the High Court ought not to have remanded the matter back to the assessment officer and by doing so, the statutory period prescribed for completion of assessment has been extended by conferring jurisdiction upon the AO, which he otherwise lacked on the expiry of the period - there is a distinction between an order which is a nullity and an order which is irregular and illegal - Where an authority making order lacks inherent jurisdiction, such an order will be null and void ab initio, as the defect of jurisdiction goes to the root of the matter and strikes at his very authority to pass any order and such a defect cannot be cured even by consent of the parties. Where there is an omission on the part of the AO to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured - the website of the department indicate the amount determined by the second respondent payable by the company inspite of issuance of the corrigendum on 15.04.2013 as a tax due amount - while issuing the corrigendum, the second respondent did not even withdraw the taxable amount determined by him or updated the status in the website - such an order passed by the second respondent can only be construed as a final order passed in violation of the statutory provisions of the Act - The corrigendum dated 15.04.2013 is also beyond the period prescribed for limitation - Such a defect or failure on the part of the second respondent to adhere to the statutory provisions is not a curable defect by virtue of the corrigendum dated 15.04.2013 - the respondents cannot be allowed to develop their own case – Decided against Assessee.

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• 2014 (6) TMI 539
  Capital Work-in-Progress - unexplained expenditure - additions u/s 69C - Held that:- when an assessee incurs expenditure from known sources section 69C does not get attracted; in order to invoke the section it has to be shown that the assessee had not explained about the source of such expenditure or part thereof. In the instant case there is no dispute with regard to the source of expenditure and it is also not in dispute that the assessee incurred expenditure. It is not the case of the Revenue that the assessee claimed it as business expenditure. It was only added to the "capital work-in-progress". - Decided against the revenue. Addition u/s 68 of the Act – Unexplained credits in books – Admission of additional evidence under Rule 46A of the Act - Held that:- under section 68 of the Act the AO is duty bound to prove that the assessee would have earned such additional income, by the use of the expression ‘may’ in section 68 of the Act, whereas in the instant case the AO tried to make a case on assumptions, without proving that the material available before the AO is wrong and insufficient. – Decided against Revenue. Revenue appeal before the tribunal - Commissioner has not given his reasons as to why he has authorised the AO to file an appeal on this issue - Held that:- AO has raised a soulless ground which deserves to be dismissed in limine. We could have saved a lot of time had the Commissioner not given his authorisation on such frivolous issues. On the contrary, it is incumbent upon the Commissioner, as a supervisory authority, to admonish the AO for making an addition without basic understanding of legal position. - In fact this is a peculiar case where even the Commissioner (Administration) who is supposed to supervise the proper functioning of the AO, under his charge, has allowed him to file appeals without properly examining the assessment order and the order of the learned CIT(A), which results in unnecessary expenditure to the assessee when appeal is filed by the Revenue and the assessee had to undergo the trauma of engaging counsel and paying substantial fees to defend the case when the Revenue has no case at all. - a token cost of 5,000/- imposed upon the revenue - Decided against the revenue.

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• 2014 (6) TMI 538
  Penalty u/s 271(1)(c) of the Act - Bar of limitation – Held that:- The assessee had challenged the order passed by the CIT(A) on quantum before the ITAT - The ITAT disposed of the appeals of the assessee on quantum order dated 11.2.2011 - the penalty order has been passed within the limitation prescribed u/s 275(1)(a) of the Act - The assessee has claimed the expenditure as revenue in nature on account of certain business activities, one of them being trading in cloth - This claim of the assessee has been found to be bogus not only by the AO and CIT(A), but also by the Tribunal in the quantum proceedings - the trading business in cloth is bogus - the incurring of expenditure by the assessee to the tune of Rs. 2,12,36,953 has not been disputed by the Departmental authorities as well as by the Tribunal. When there is no dispute to the claim of expenditure itself, the only difference is with regard to nature of expenditure - the assessee is claiming it as revenue, the finding of the Department which is also confirmed by the Tribunal is, it is of capital nature - difference of opinion with regard to the nature of expenditure would not amount to furnishing of inaccurate particulars of income, when fact remains that the assessee has disclosed full particulars of expenditure incurred not only in its books of account but also in the return of income filed as well as during the assessment proceedings. The assessee cannot be accused of furnishing inaccurate particulars of income – Relying upon CIT vs. Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - every expenditure/deduction claimed by the assessee in the return of income when disallowed would automatically not lead to the conclusion that the assessee has either concealed its income or furnished inaccurate particulars of income - imposition of penalty u/s 271(1)(c) of the Act is not called for - This is due to the fact that there is always a difference of opinion with regard to an expenditure being revenue or capital - When the incurring of expenditure has not been disputed, the assessee cannot be accused of concealment or furnishing inaccurate particulars of income merely for the reason that the expenditure claimed is held to be of a capital nature – thus, the penalty is set aside – Decide in favour of Assessee.

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• 2014 (6) TMI 537
  Addition towards suppression of income – Held that:- The AO has proceeded to determine the suppressed gross profit and accordingly proceeded to estimate the addition of Rs. 65.00 lakhs on the basis of materials, which were agreed to be correct by the partners of the assessee-firm - CIT(A) has proceeded to determine the income independently on some other basis, i.e., the CIT(A) did not examine the method adopted by the AO for determining the suppressed income, but directed the AO to estimate the income by adopting the net profit rate of 15% - CIT(A) has ignored the impounded materials - the assessee has failed to furnish any material to controvert the findings of the AO to support the decision taken by the CIT(A) – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for adjudication – Decided in favour of Revenue.

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• 2014 (6) TMI 536
  Minimum Alternate Tax (MAT) - book adjustments - Deduction of “lower of unabsorbed depreciation or brought forward business loss” while computing the book profit u/s 115JB of the Act – Held that:- The provisions of sec. 115JB do not prescribe any restriction on the number of years that are required to be considered for ascertaining the brought forward loss or unabsorbed depreciation – the AO is required to segregate the amount into “Brought forward loss” and “Unabsorbed depreciation” and adopt the lower of the two figures for the purpose of computing Book Profit u/s 115JB of the Act - the figure reported by the assessee needs to be verified at the end of the AO – thus the matter is to be remitted back to the AO for fresh adjudication with the direction to segregate the amount of Profit and Loss account into “brought forward loss” and “unabsorbed depreciation” and allow the lower of the two figures as deduction while computing the book profit u/s 115JB of the Act – Decided in favour of revenue. Deduction of Provision for interest and other charges – Held that:- the assessee has wrongly included the amount of Provision created for interest in the Book Profit in the earlier years, even when there is no such requirement u/s 115JA / 115JB of the Act - the amount so increased does not fall in the category of “amounts increased under Explanation 1 to sec. 115JB and under Explanation below the second proviso to sec. 115JA of the Act” - the assessee is not entitled to claim for deduction for the amount of Provision for interest reversed by it and credited to the Profit and Loss account – thus, the order of the CIT(A) is set aside – Decided partly in favour of Revenue.

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• 2014 (6) TMI 535
  Jurisdiction of the CIT(A) u/s 147/148 of the Act – Non-service of notice u/s 148 of the Act – Held that:- Though the submission are recorded as written submissions filed before the CIT(A) however the they are undated and unsigned - there is no reason to presume in the absence of any material to the contrary that the AO is denying the assessee an opportunity to inspect the relevant record or make available to the assessee the material relied upon by the department - the request for directing the department to do what it is duty bound to do cannot be acceded to without first a demonstration by the affected party that the AO is deliberately denying inspection to the assessee - The presumption that inspection is being denied in the absence of any material cannot be made - The issue requires no direction – Decided in favour of Assessee.

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• 2014 (6) TMI 534
  Penalty u/s 271(1)(c) of the Act – Proper reply not filed by assessee – Receipt of salary not added in income – Held that:- The additions have been accepted is no reason to come to the conclusion that the penalty necessarily has to be imposed - penalty proceedings and quantum proceedings are separate and distinct - The explanation offered by the assessee in the penalty proceedings despite there being no challenge to the addition in quantum order necessarily has to be considered on merit in the light of the matrix within which the penalty provisions are required to be examined - there is no bar to the assessee to raise a new contention argument or proposition in the penalty proceedings which has not been taken in the quantum proceedings - There can be many reasons on the basis of which the assessee may not agitate the addition however that inaction cannot be the criteria that arguments, contentions and propositions in penalty proceedings have to be smothered – thus, the matter is required to be remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 533
  Tax effect below prescribed limit - monetary limit for filing an appeal - Held that:- Assessee rightly contended that the tax effect in the case is less than Rs.3.00 Lacs - The position was admitted by the Sr. DR, Ms. Meenakshi Vohra and the parties were directed to place the exact tax effect involved on record - no calculations were provided by the parties - Instruction No.-3/2011 [F.No.279/MISC. 142/2007-ITJ], Dated 09.02.2011 dated 09.02.2011 clearly sets out the “tax effect” will not include interest thereof as such the tax effect is below Rs.3.00 lacs if the interest in the calculation provided is reduced – also it had been held by the high court that the tax impact is less than Rs. 10.00 lacs – revenue has recently issued an instruction bearing no. 3/2011 dated 09.02.2011, which is identical to its earlier instruction bearing no. 5/2008 dated 15.05.2008 - the monetary limit in respect of appeals where the questions of law raised need not to be answered, has been raised from Rs. 4.00 lacs to Rs. 10.00 lacs - the instruction bearing no. 5/2008 dated 15.05.2008 would apply even to the old pending references and appeals - the principle would thus naturally equally apply to the instant instruction bearing no.3/2011 dated 09.02.2011, as well- The tax effect being less than Rs. 10.00 lacs, the question of law does not require to be answered. The appeals are disposed of accordingly - Instruction No.3/2011 dated 09.02.2011 will apply to the present appeal – Decided against Revenue.

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• 2014 (6) TMI 532
  Addition u/s 40(a)(ia) of the Act and section 37 of the Act – Payment made to sub-contractors u/s 40(a)(ia) of the Act – Failure to deduct TDS u/s 194C of the Act – Bogus expenses - Held that:- AO during the course of assessment made total disallowance u/s 40(a)(ia) of the Act but when the matter reached before CIT(A), CIT(A) out of the total disallowance made by AO, treated the expenses to be bogus and the action of AO was upheld with respect to balance disallowance u/s 40(a)(ia). Since the issue the year under consideration with respect to disallowance u/s. 40(a)(ia) is identical to earlier years, no addition is called for - With respect to the addition which has been held by the CIT(A) to be bogus, Assessee has placed copies of Form 15J, 15I copies of RC books and PAN cards of the truck owners – the documents were not before CIT(A), in the interest of justice, the evidence submitted before us, being in the nature of additional evidence needs verification at the end of AO – thus, the matter is remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee.

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• 2014 (6) TMI 531
  Accrual of incentives - Addition u/s 28(iii)(c) of the Act – Hypothetical income of the incentive on Advance License – Held that:- Assessee contended that as per the accounting system followed by it, it had accounted for the incentive income of advance license on hand for unused license or licenses not received but for which application to the appropriate authorities were made - assessee had discontinued its manufacturing operations after 31.03.1995 and due to discontinuing to its operation had surrendered the licenses and no benefit has been derived out of sale of advance license or by importing materials – Relying upon CIT vs. Excel Industries [2013 (10) TMI 324 - SUPREME COURT] - even if it was assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods were actually imported and made available for clearance - the benefits represent a hypothetical income which may or may not materialize and its money value is therefore not the income of the assessee - in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) would be inapplicable. The Assessee has discontinued its manufacturing operations after 31.03.1995, surrendered the licenses to the appropriate authorities and has not obtained subsequently any benefit out of the advance licenses - no income arose to the Assessee and therefore no addition can be made on account of income on advance license – thus, the deletion made on account of income on advance licenses is directed – Decided in favour of Assessee.

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• 2014 (6) TMI 530
  Return filed beyond due date - Computation of book profits u/s 115JB of the Act – Held that:- CIT(A) while upholding the order of AO had relied on the decision which has been subsequently overruled in Ajanta Pharma Ltd. vs. CIT [2010 (9) TMI 8 - SUPREME COURT] - CIT(A) did not decided the issue with respect to availability of deduction when the return of income has been filed beyond the due date as according to CIT(A), the issue was infructuous – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 529
  Disallowance of expenses – Repairs and maintenance – Nature of expenses – Held that:- the details of the expenditure incurred by the assessee on account of repairs and maintenance of building are stated by the CIT(A) – the details of the expenditure claimed by the assessee reveals that the expenditure incurred by the assessee has neither resulted in bringing into existence of any new asset nor any permanent/enduring benefit had accrued to the assessee - the expenditure incurred by the assessee cannot be treated to be a capital expenditure - CIT(A) relied upon assessee’s own case for the earlier assessment year, and treated it as revenue expenditure – thus, there was no reason to interfere in the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 528
  Validity of remand order – Rectification of mistake – Held that:- Revenue contended that the CIT(A)’s directions to the AO to examine the matter and rectify the mistake amounts to setting aside the matter which is not permissible - the ground raised is misconceived - CIT(A) has clearly mentioned that there is no justification for rejecting the petition u/s 154 of the assessee - CIT(A)’s directions to the AO in this regard are consequential and there was no infirmity in the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 527
  Levy of penalty u/s 271(1)(c) of the Act - Addition made u/s 68 of the Act – Gifts received from various persons - Held that:- The declaration of gift was filed by the assessee - Copies of the declarations are furnished in a compilation - assessee has also furnished the photocopies of the return filed by those donors – Relying upon National Textiles Versus Commissioner Of Income-Tax [2000 (10) TMI 19 - GUJARAT High Court] – Explanation 1 does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee - penalty has been levied by invoking the deeming provisions u/s 68 of the IT Act – the deeming provisions cannot be extended to hold that the assessee has concealed the income especially when the assessee has placed on record certain evidences such as gift declarations and bank accounts to show that the gift was received under bona fide belief that the same was a genuine gift - it was taxed during assessment proceedings but the penalty u/s 271(1)(C) cannot be levied automatically – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 526
  TDS deducted u/s 194J instead u/s 192 of the Act – Doctors treated as consultants – Assessee in default u/s 201(1) and 201(1A) of the Act - Held that:- Following Deputy Commissioner of Income-tax Versus Yashoda Super Speciality Hospital [2010 (6) TMI 642 - ITAT HYDERABAD] - the assessee has engaged the services of the doctors on the basis of the agreement - There is no timeframe for working of the doctors - The doctors are given their choice of time to come to the hospital and treat the patients - they are not in the roll of PF as employees of the assessee - the assessee collects the fees from the patients and after deducting Rs.2,500 per month for utilising the infrastructure facilities and Rs.1,500 of the survey fees, the remaining amount was paid to the doctors - The doctors are not entitled to take any gratuity, bonus etc. -They will only be paid fees for the services rendered by them, through a structured agreement. No specific working hours are prescribed to the professionals - For the purpose of treating the doctors as employees, they should be given specific assignment - There should be specific working hours, rules and regulations and they should be on the roll for PF as employees - They shall be given leave as per statutory provisions besides gratuity etc. - These factual aspects which are essential to treat the doctors as employees are absent, thus, the doctors engaged by the assessee are to be treated as consultants, only for rendering professional services - there is no employer and employee relationship existing - CIT (A) has rightly held that tax has to be deducted u/s 194J and not u/s 192 of the Act – thus, there is no infirmity in the order of the CIT(A) – Decided against Revenue.

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• Customs

• 2014 (6) TMI 545
  Violation of the EXIM Policy - Confiscation of goods - Redemption fine and penalty - Held that:- old car imported with lot of modification and without the Type Approval Certificate/ COP from international accredited agency was in contravention of the import policy. When the car was liable to confiscation and the value according to revenue was Rs. 41,23,379.80 for the peculiar circumstance and factors mentioned above, the value of the car is determined to be at Rs. 41,23,379.80 and duty of Rs. 43,95,269.14 is leviable. Considering that there was mis-declaration and suppression of value of the car, imposing the redemption fine of Rs. 10 lakhs shall be justified. Similarly penalty of Rs. 5 lakhs would also be justified - Following decision of Commissioner of Customs vs. Jaspreet Singh Jolly [2012 (10) TMI 654 - DELHI HIGH COURT] - Decided in favour of Revenue.

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• 2014 (6) TMI 544
  Utilization of foreign exchange earning for EPCG scheme as well as SFIS - period prior to 1.4.2007 - Held that:- Revenue being protected partially due to payment of duty by the appellant, appeal may be remanded to the learned Commissioner to grant fair opportunity of hearing expeditiously to both sides to put forth their defence to resolve all the dispute considering submissions of both sides. The demand being huge, appellant is directed to make application to the Commissioner within one month of receipt of this order to fix the date of hearing and on the date fixed, the appellant shall make entire submission both on facts and law without seeking adjournments. Commissioner upon hearing, within three months of last date of hearing, shall pass reasoned and speaking order - Matter remanded back - Decided in favour of assessee.

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• Service Tax

• 2014 (6) TMI 557
  Classification under Section 65 (105)(zzzzj) - supply of tangible goods - reverse charge mechanism - vessels were not located in India - The contention of the appellant is that there is no supply of vessels by the ship owners to the appellant - Held that:- The conditions precedent for Notification of reverse charge in respect of Supply of Tangible Goods from foreign service provider, the expression during the period of use appear under Rule 3 (iii) of the Rules has been interpreted by the Tribunal in the case of Petronet LNG (2013 (11) TMI 1011 - CESTAT NEW DELHI) relied upon by the appellant. The Tribunal held that for being tangible goods must be located in India during the entire period of use and it is not so located in India for any part of the period it cannot be said to be located in India and the Service Tax in respect of the same cannot be levied under the reverse charge mechanism. It is clear from the definition of "India"as extracted above that for the purpose of Import of Service Rules, non-designated area in the Continental Shelf and the Executive Economic Zone of India during the relevant period even after the amendment definition "India" included only the installations, structures and vessels in the Continental Shelf of India and the Exclusive Economic Zone itself. Apart from the above a ship is plying in the Continental Shelf and the Exclusive Economic Zone of India carrying goods or persons cannot be regarded as India for the purpose of Import of Service Rules. Further the expression ‘vessels' is preceded by the words "installation and structures". Applying the principle of Noscitur A Sociis the vessels covered therein would be such vessels which are akin to installation and structures and which are to be stationed at a fixed location in the Continental Shelf and Exclusive Economic Zone of India while rendering services. In our opinion such vessels may be of the type such as floating or submersible drilling of production platforms, generally designed for the discovery or the exploitation of offshore deposits of oil and natural gas. The vessels in question are offshore supply vessels which are different from function in a fixed or stationary position. Appellant cannot be held to be under the reverse charge mechanism in respect of vessels not located in India during the entire period of their use. In view of above, we find that the ratio of the decision of the Tribunal in the case of Petronet LNG (2013 (11) TMI 1011 - CESTAT NEW DELHI) is squarely applicable to the facts of the present case - Decided in favour of assessee.

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• 2014 (6) TMI 556
  Effective Rate of service tax - enhanced of rate of service tax from 8% to 10.2% - Assessee contends that service was provided prior to enhancement date - Held that:- appropriate rate at which tax is leviable is the date of occurrence of the taxable event and in the case of service tax is the date of rendition of the service. In view of this position in law, the assumption to the contrary by the learned primary and appellate Authorities that the appellant is liable to levy and collection of service tax, at the rate prevalent on the date of receipt of consideration for the taxable service provided, is fundamentally misconceived and unsustainable. Since both the authorities have recorded that there was no material on record to support the appellant s claim as to having provided the taxable service prior to increase in the rate of taxation; and since the learned Counsel of the appellant Shri Batra contends that there is sufficient and credible evidence to establish this claim, we consider it appropriate to remit the matter to the appellate Authority, to ascertain whether the taxable services were provided by the appellant prior to 10/09/04 - Matter remitted back - Decided in favour of assessee.

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• 2014 (6) TMI 555
  Planning advisory and execution services - Revenue held this service as Real Estate Agent, commercial or industrial service and construction of Residential Complex - Demand of CENVAT Credit - Held that:- appellants themselves in their appeal memorandum have stated, as reproduced above, that when the scheme is completed, all the members are taken up as either members or share-holders of the society or NTA and the persons of the builder go out of the NTA or the society. Eventually, the NTA or the society either enter into sale deeds in favour of the members or just allots the land in favour of the members. As reproduced by us above, admittedly the land was purchased in the name of the society and the society allotted the land to the members without a registered sale deed thereby stamp duty was avoided. Measures taken by the appellants or the public at large to avoid stamp duty or to devise mechanism to legally not to pay stamp duty should not be a ground for demanding Service Tax or upholding the demand for Service Tax. But what the appellants are asking the Revenue to do is to ignore the legal and statutory documents executed for the purpose of construction/development and transfer of property between the Society/NTA and members. It has to be noted that it is the Housing Society/NTA which purchases the land even though the builder pays to the society to facilitate the payment for the land. Similarly even though the builder identifies the customer/purchaser, the customer/purchaser pay for the land and the constructed building to the Society/NTA and not to the builder. Demand in respect of Real Estate Agent Service - Held that:- The definitions of Real Estate and Consultant would clearly show that the definition covers any service in relation to sale, purchase, leasing or renting of real estate. The Consultant covers a person who renders in any manner various types of activities which include all the activities undertaken by appellant in this case. We have to note that the words used are rendering any service in relation to Real Estate. In the case of Real Estate Consultant, it means rendering advice, consultancy etc. in any manner of Real Estate. Under the circumstances, any services rendered in relation to Real Estate and any advice or activity undertaking in relation to Real Estate for a service receiver would be covered under this category and unfortunately for the appellant the definition clearly cover them. Demand in respect of Construction Service - works contract - date of levy - composition scheme - Held that:- In the case of commercial or industrial service also appellant’s claim is only that there is nobody in between the purchaser of a portion of the property or mall or commercial complex constructed by them and again the same ground has been explained. This contention cannot be accepted - entitlement to benefits of composition scheme arises only after exercise of option as per rules. For the period prior to 2007, no such option would be available for the services. Moreover, it was also submitted that it was a clear understanding of the legislature that many of the services which were included prior to works contract service which has come from 1-6-2007 were, in fact, covered under some other category of service especially relating to construction activity. Therefore, it can not be said that prior to 1-6-2007, the appellant was not liable to payment of Service Tax even if service was classifiable and liable to Service Tax earlier. - Decision of Nagarjuna Construction Co. Ltd. reported in [2010 (6) TMI 91 - ANDHRA PRADESH HIGH COURT] followed. Appellants have not been able to make a prima facie case in their favour. Keeping in view the peculiar facts and circumstances of the case and the facts that no financial difficulties have been pleaded and the balance of convenience, etc. it is felt that the appellant should be directed to deposit an amount of Rs. 2 crore as pre-deposit for hearing the appeal. Taking the interest quantum also into account, but without taking penalty, the amount required to be deposited would come to less than 10% of the dues - stay granted partly.

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• 2014 (6) TMI 554
  Waiver of pre-deposit of duty - Denial of CENVAT Credit - credit of service tax paid in respect of various services received in the residential township for employees. - Held that:- Tribunal in Assessee's own previous case and after relying upon the decision of the Hon’ble Bombay High Court in the case of CCE Vs Manikgarh Cement reported in [2010 (10) TMI 10 - BOMBAY HIGH COURT], directed the applicant to deposit 25% of the duty confirmed - Therefore, assessee is directed to make same pre deposit - stay granted partly.

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• 2014 (6) TMI 546
  Waiver of pre deposit - Undue hardship - uidelines for considering the requirement of pre-deposit - Held that:- if a litigant has got strong prima facie case, then the same can be treated within the fold of undue hardship. But, there are no guidelines in which cases and when undue hardship relatable to prima facie case can be perceived. According to us, it depends upon each and every individual case. Without laying down any exhaustive guidelines, we think that following will be useful for adjudicating the application for waiver of full deposit by the Commissioner as well as this Court - When it is found that the impugned order was passed though having jurisdiction but on apparent non-application of appropriate law or mis - application of law, patently contrary to Supreme Court decision or High Court decision on identical issue which has reached finality, it will also be a strongest case where full waiver be justified. In cases where it is found that there has been an arguable case, apparently, without inviting the counter arguments, the matter cannot be decided, the litigant should be subjected to make pre-deposit to some extent as the learned Commissioner, thinks fit. But, where it is found that there is no absolute debatable case, in those cases, appeals may be allowed to be preferred, but, with the full deposit - to meet the ends of justice, time granted by the learned Commissioner for depositing of the amount of pre-deposit should be extended - Decided partly in favour of assessee.

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• Central Excise

• 2014 (6) TMI 553
  Waiver of pre deposit - area based exemption - non filing of declaration / application exercising the option to avail the exemption - Notification No.50/2003-CE dated 10.6.2003 - Held that:- Requirement of exercising the option and providing specified and mandated particulars, enjoined by Notification No.76/2003-CE, is intended to keep the Government informed of and to place on record relevant particulars enjoined by the Notification to be conditions precedent for availment of exemption benefits thereunder provided. It is in the nature of mandatory stipulation to ensure that there is no escapement or leakage of Excise Duty. This requirement is therefore prima facie mandatory and not discretionary. - This view flows from the decision of the Constitution Bench in Hari Chand Shri Gopal (2010 (11) TMI 13 - SUPREME COURT OF INDIA). Amount of duty demand with interest directed to be pre-deposited - stay granted in respect of penalty only - stay granted partly.

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• 2014 (6) TMI 552
  Cenvat Credit - procurement of fabric from dealer - fraudulent activity - whether the appellant is to be saddled with demand of the Cenvat Credit availed by them on the invoices which were issued by the processors while availing Cenvat Credit on the invoices which were issued by fabric manufactures who were non-existing during the relevant period - Held that:- processors had availed Cenvat Credit on the invoices of fabric manufacturers who were non-existing and passed on the same to the appellant. At the outset, we find that there is no dispute as to the fact that the appellant had filed monthly returns for the period May 2004 to February 2005 with the authorities. The contentions of the Ld. Departmental Representative that the appellant was aware that the fabric manufacturers were non-existence or fake is not borne out from any of the records available before us in as much as, there is no statement recorded of the proprietor of the appellant or any employee. It is also seen from the impugned order that the appellant herein had sought cross examination of the persons who had signed the invoices issued by the fabric manufacturer to these six processors and a claim was made that the said manufacturers are still in existence. This vital submission was not followed up by the lower authorities, in order to establish that the appellant had knowledge of non-existence of these six processors - Demand is also barred by limitation. - Matter remanded back - Decided in favour of assessee.

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• 2014 (6) TMI 551
  Confiscation of goods - Penalty - Whether the seized goods, which was kept at the first floor of the registered premises, is liable to confiscation on the findings that the same was cleared from the appellant factory, with a malafide intention to subsequently clear the same in a clandestine manner - Held that:- Appellant had taken a categorically stand before the authorities below that the material was temporarily shifted to first floor as the registered premises were being painted on account of the marriage ceremony in the family. The statutory records could not be produced on the visit of the officer inasmuch as they were also shifted by the concerned person, who had already left for Kolkata. The said person was called by the appellant and the records were produced by them on the very next day which stands rejected by the authorities below as an after thought - confiscation of the goods and imposition of penalty on both the appellant is not called for. However, I find that as the appellant have transferred the goods to the first floor without the permission of the officers which is a procedural and technical laps, the same requires imposition of token penalty, in terms of provision of Rule 27, which provides a maximum penalty of 5,000/-. Accordingly penalty on M/s. Vikram Prasad Vinod Kumar is reduced to 5,000 - Penalty reduced - Confiscation of goods set aside - Decided Partly in favour of assessee.

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• 2014 (6) TMI 550
  CENVAT Credit - inputs like angle, beams etc. - Manufacturing of capital goods such as Roller Table, Furnace, Weigh Bridge and Cooling Bed - Reversal of CENVAT Credit - Held that:- these inputs have been used by the respondents for manufacturing capital goods and same has been explained by the respondents in reply to the show cause notice. That fact remains uncontroverted. Therefore, the said fact has been admitted. If that fact is admitted, there is no question of denial of input credit. - Decided against Revenue.

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• 2014 (6) TMI 549
  Waiver of pre-deposit of penalty - Penalty under Rule 25 of the Central Excise Rules, 2002 - penalty on purchaser of goods - Held that:- adjudicating authority has not imposed any penalty under Rule 26 but has imposed penalty under Rule 25 of the Central Excise Rules, 2002. On bare reading of the provisions of Rule 25 of the Central Excise Rules, 2002 we find that penalty can be imposed under the specific rule on producer, manufacturer and registered persons and not on the purchaser who has placed an order for supply of goods. In view of the foregoing, we find that the appellant has made out a prima facie strong case for waiver of the pre-deposit of the amounts involved - Stay granted.

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• 2014 (6) TMI 548
  Denial of CENVAT Credit - whether the service tax paid on commission agent services is available as Cenvat credit to the appellants by treating the same as input services in terms of Rule 2(l) of Cenvat Credit Rules, 2004 - Held that:- Circular No. 943/4/2011-CX., dated 29-4-2011 issued by the Board clarifies that even after the deletion of expression “activities related to business” from the definition of input services, the credit of Service Tax paid on the sales promotion activities and on the services of sales of dutiable goods on commission basis would be admissible as credit. It is the contention of the learned advocate that even after the “activities related to business” stand deleted from the definition of inputs credit, as per the Board’s Circular, the Service Tax paid on commission agent services would be available. However, he clarifies that period involved in the present case is prior to the amendment to the definition of input services - Following decision of C.C.E., Ludhiana v. Abhishek Industries Ltd. as reported in [2007 (10) TMI 583 - CESTAT NEW DELHI] - Decided in favour of assessee.

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• 2014 (6) TMI 547
  Valuation of goods - sale to related parties - Valuation in terms of Rules 8 and 10 of Valuation Rules - Held that:- appellants are also selling the ingots to independent buyers. The price at which the goods are being sold to the so called related units is either at par or more than the price at which goods are sold to independent buyers. We note that the provision of Rules 8 and 10 of Valuation Rules are applicable when the entire production is being sold to the related persons. Inasmuch as the price at which ingots are also being sold to independent wholesale buyers is available, the same is required to be adopted for the purpose of sale to the so-called related persons. As such, on this ground itself, we are of the view that the appellant has a prima facie case in its favour so as to dispense with the condition of pre-deposit of duty and penalty - Stay granted.

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• CST, VAT & Sales Tax

• 2014 (6) TMI 558
  Violation of principle of natural justice - Whether the first respondent has passed the order under Section 22 (2) or 27 (2) of TNVAT Act and whether the requirement to afford an opportunity of personal hearing is different from issuing a show cause notice as contemplated under Section 27 (2) of the said Act - Held that:- As per Section 88 (3) (i) of the TNVAT Act, which deals with repeal and saving, it was provided that the amendment or repeal shall not affect the previous operation of the said Act or 1970 Act, as the case may be, or any right, privilege, obligation or liability already acquired, accrued or incurred thereunder and subject thereto, anything done or any action taken including any appointment made, any notification, notice or order issued, any rule or regulation framed or forms prescribed and any certificate, licence, or permit granted in exercise of any power conferred by or under the said Act or 1970 Act, as the case may be, shall be valid and always as deemed to have been valid, during the period the said Act or 1970 Act, as the case may be was in force notwithstanding the repeal of the said Act or 1970 Act as the case may be. Therefore, even the Circular issued by the Commissioner will be applicable in this case. Thus, Section 16 (1) is in para materia of Section 27 of TNVAT Act. Even if the argument advanced on behalf of the respondents is accepted that personal hearing need not be given, when such an opportunity of hearing is specifically sought, it has to be extended to the petiitoner. The quasi judicial powers conferred on the assessing officer has to be exercised in a judicious, fair and objective manner without arbitrariness and subject to the rules of natural justice, including grant of personal hearing and recording of reasons for conclusions ultimately arrived at before rejection of an application for exemption or waiver or stay and the non-adherence to the aforesaid principle will offend Article 14 of the Constitution of India and also renders the very remedy available to the assessee a nugatory. Whether it is application of Section 22 (2) or 27 (1) of the Act, the petitioner ought to have granted an opportunity of personal hearing, when he has specifically sought for the same. Inasmuch as such principle was not adhered to in this case, the impugned orders in WP Nos. 9077 to 9079 of 2014 cannot be sustained. It is also to be mentioned that according to the petitioner, they are in possession of voluminious documents running to 16,09,190 pages of photostat copies and therefore they have produced some sample documents. At least, at that stage, the assessing officer ought to have afforded an opportunity of hearing to the petitioner for perusal of such volumnious documents. The non-consideration of the same vitiates the impugned orders. Even though the impugned orders are quashed, this Court, taking into consideration the demand notices issued by the first respondent are still valid, the effect of quashing the assessment orders will not totally take away the right of the first respondent to proceed further in the matter. Further, taking note of the fact that the transaction reported by the petitioner is huge, pertaining to foreign sale, which according to the petitioner is totally exempted, the question of deposit of any amount will not arise. At the same time, in the impugned orders of assessment, it has been clearly stated that certain documents have been produced in form C and F in which there are lot of differences - If an appeal is filed against the impugned order, it will be a different aspect to be considered. Now, by virtue of this order, the first respondent is directed to re-consdier the entire matter afresh. At the same time, the revenue also has to be safeguarded to some extent. In that view of the matter, out of the demand of 2,400/- crores made by the revenue in the impugned orders of assessment, the petitioner is directed to deposit 10% of the tax amount thereof as a pre-condition for reviving the orders of assessment. This amount shall be depsoited by the petitioner within a period of eight weeks - decided partly in favour of assessee.

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