TMI Tax Updates - e-Newsletter
June 23, 2015

Case Laws in this Newsletter:

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

TMI SMS

• BAS - Job work - the finished goods coming after the chemical reaction cannot be said to have been not manufactured - No Service Tax - Tri

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Articles

1. ACCEPTANCE OF DEPOSITS BY COMPANIES UNDER COMPANIES ACT, 2013 – PART I

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Media Persons requested to refrain from writing News Items/Articles based on Speculation about the Outcome of Selection Process for the Post of MD & CEO of Five Public Sector Banks (PSBs)

2. RBI Reference Rate for US $

Circulars / Instructions / Orders

Income Tax

1. F. No. 279/Misc 53/2003-ITJ - dated 19-6-2015

Ensure strict compliance of Instruction No.20, dated 23.12.2003 - Regarding issue of appellate order by CIT (Appeals) within 15 days of the last hearing.

Customs

2. 01/2015 - dated 27-3-2015

Instructions -requiring drawl of samples and sending the same for testing as per requirement of the assessing group or as per requirement of any Allied Act,

Highlights / Catch Notes

Income Tax

• Section 43B Disallowance Upheld: Statutory Liabilities Must Be Paid, Even Under Presumptive Taxation Scheme Section 44AF.

  Case-Laws - AT : Addition u/s 43B - presumptive assessment u/s 44AF - disallowance made by the AO by invoking the provisions of Sec. 43B of the Act in respect of the statutory liabilities are in order even though the Assessee's income has been offered and assessed under the provisions of Sec. 44AF - AT
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• Interest Deduction Allowed for Interest-Bearing Loan Repayment of Interest-Free Loan u/s 24(b) of Income Tax Act.

  Case-Laws - AT : Income from house property - if the interest free loan is repaid by interest bearing loan funds, the interest on such loan is allowable for deduction u/s 24(b) of the Act - AT
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• AO Rectifies Order u/s 154, Disallows Excess Duty Claim; Interest on Excise Duty Allowed Only on Payment Basis.

  Case-Laws - AT : Rectification of order u/s 154 - AO disallowed to the assessee excess duty, penal interest - interest on excise duty to be allowed to payment basis only and not on accrual basis - Rectification to that extent is valid - AT
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• Section 271(1)(c) Penalty: No Penalty for Assessee Since No Loss Declared in Tax Return.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition so made does not affect either reducing the loss declared in the return or converting the loss declared in the return into income. The assessee has not declared loss in the return - no penalty - AT
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• AO Must Document Dissatisfaction with Assessee's Disallowance Calculation Before Adjustments u/s 14A of Income Tax Act.

  Case-Laws - AT : Disallowance u/s 14A r.w.r. 8D(2)(iii) - AO was duty bound to record his dissatisfaction that the working of the disallowance made by the assessee under section 14A of the Act was incorrect. - AT
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• Lease Rent Classified as Business Income; Related Expenses Allowable as Business Expenses for Tax Purposes.

  Case-Laws - AT : Leave and licence income - the lease rent received by the assessee is assessable as income from business in the hands of the assessee and the related expenditure has to be allowed in the hands of the assessee - AT
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• Court Allows Assessee's Claim for Speculation Loss in Gold Bullion Trading; Rational Business Practice Recognized.

  Case-Laws - AT : Disallowance of speculation loss from trading in gold bullions -assessee in fact transacted in gold and bullions in the normal course of business to earn profit. No prudent businessman will intentionally incur losses - Claim allowed - AT
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• Assessee Qualifies for Section 80IA(4) Deduction Without Full Port Development; Crane Maintenance Confirms Eligibility.

  Case-Laws - AT : Deduction u/s 80IA(4) - An assessee did not have to develop the entire port - The fact that the assessee was also maintaining the cranes was not disputed. The facility was commenced after April, 1995. The assessee was entitled to the special deduction under section 80-IA - AT
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• Income Tax Director's Rejection of University's Section 12AA Registration Deemed Unjustified Due to Lack of Property Safeguards.

  Case-Laws - AT : The DIT(E) has rejected the application on the ground that in case of dissolution there is no safeguard to the properties created by the University. - DIT(E) was not justified in declining the registration to the assessee u/s.12AA of the Income-tax Act, 1961 - AT
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• Stamp Paper Costs Disallowed for Not Being Incurred During the Considered Year.

  Case-Laws - AT : Loss on expenditure on account of Stamp Papers - expenditure was not incurred during the year under consideration, nor the expenses can be said to have materialized during the year - expenditure was rightly disallowed - AT
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Corporate Law

• Secured Creditor Entitled to Contractual Interest Post-Winding Up Before Unsecured Creditors Get Paid.

  Case-Laws - HC : Entitlement of contractual rate of interest by secured creditor for the post winding up period - Surplus amount available before such amount is distributed among the unsecured creditors - official liquidator directed to pay to the appellant interest at the contractual rate - HC
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Service Tax

• Cenvat Credit on Input Services for Call Centers Eligible for Refunds on Exported Output Services.

  Case-Laws - AT : Refund - Cenvat credit of input services used in exported output services - essential services, used by Call Centres for provision of their output services would qualify as input services and be eligible for taking credit as well as refunds. - AT
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• Assessee Entitled to Deduct Goods Value in Transformer Repair; Demand Invalid Due to Incorrect Valuation.

  Case-Laws - AT : Valuation - assessee entitled for deduction of the value of the goods supplied during repair of the transformer - the impugned demand would not survive as the demand has been computed on the value of such goods on the ground that the value thereof was not excludible from the assessable value - AT
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• Chemical Reaction-Based Job Work Classified as Manufacturing, Exempt from Service Tax Liability Under Business Auxiliary Services.

  Case-Laws - AT : Business Auxiliary service - Job work - Manufacture - When there is a chemical reaction involved, the finished goods coming after the chemical reaction cannot be said to have been not manufactured - No Service Tax Liability - AT
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Central Excise

• Microsoft Software on CDs/DVDs Subject to Duty, Not Eligible for Notification 6/2006 Benefits as Customized Software.

  Case-Laws - AT : Manufacture - replicating certain Microsoft software on CDs/DVDs - prima facie, the applicant will be required to pay duty on the said goods - cannot be called customized software so as to extend the benefit of Notification 6/2006 - AT
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• Tax Conditions for ICB Power Projects Must Be Possible; Law Cannot Demand the Impossible.

  Case-Laws - AT : Goods meant for power project - international competitive bidding (ICB) - When a particular condition cannot be satisfied, its fulfilment cannot be insisted in accordance with the principle of lex non cogit ad impossiblia which is applicable to the tax matters also - AT
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• CENVAT Credit Denial Overturned: Insufficient Evidence in Alleged Fraud Case Involving Melting Scrap Invoices from Mandi Govind Garh.

  Case-Laws - AT : Denial of CENVAT Credit - In the absence of any cogent evidence against the respondent, the charge of availment of fraudulent CENVAT Credit on melting scrap on the invoices issued by the dealers of Mandi Govind Garh is not sustainable. - AT
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Case Laws:

• Income Tax

• 2015 (6) TMI 649
  Tribunal's right in reviewing its own order on merits - Held that:- If the order has been passed in exercise of powers conferred under proviso to Rule 24 of the Appellate Tribunal Rules, we find no justification to find fault with the order of the Tribunal, that too on the above stated facts. Accordingly, on the first question of law, this Court is of the considered opinion that in view of the power vested with the Tribunal under proviso to Rule 24 of the Appellate Tribunal Rules, there is no embargo on the Tribunal in reviewing its own order for the reasons supra. Therefore, this Court finds no reason to interfere with the finding of the Tribunal. Accordingly, the first substantial question of law is answered in favour of the assessee/respondent. Disallowance of losses of the carton division to be set off to arrive at business profits for the calculation of benefit u/s 80 HHC - assessee maintained separate accounts - Held that:- On the 2nd substantial question of law raised, the Tribunal has considered the same on merits in the light of the decision of this Court in Rathore Brothers case (2001 (10) TMI 72 - MADRAS High Court) holding that the losses of the carton division do not have to be set off to arrive at business profits for the calculation of benefit u/s 80 HHC on the ground that the assessee maintained separate accounts and remanded the issue to the Assessing Officer for fresh consideration. In such view of the matter, this Court is of the considered view that the issue raised in the 2nd question can very well be gone into by the appropriate authority in the remand proceedings and it is not necessary for this Court to deal with the said issue for the present. - Decided against revenue.

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• 2015 (6) TMI 648
  Addition u/s 43B - statutory liabilities which had not been paid by the Assessee before the due date - Applicability of Sec. 43B when the return is filed applying the provisions of Sec. 44AF - Held that:- The statutory liability in the present case has not been paid before the due date of filing the return. Further, the non-obstante clause in Sec. 43B has a far wider amplitude because it uses the words “notwithstanding anything contained in any other provisions of this Act”. Therefore, even assuming that the deduction is permissible or the deduction is deemed to have been allowed under any other provisions of this Act, still the control placed by the provisions of Sec. 43B in respect of the statutory liabilities still holds precedence over such allowance. This is because the dues to the crown has no limitation and has precedence over all other allowances and claims. In these circumstances, we are of the view that the disallowance made by the AO by invoking the provisions of Sec. 43B of the Act in respect of the statutory liabilities are in order even though the Assessee's income has been offered and assessed under the provisions of Sec. 44AF of the Act. - Decided against assessee. Addition representing the sundry creditors - Held that:- As admittedly the same cannot be made in the hands of the Assessee when applying the provisions of Sec. 44AF. This is because once the presumptive tax provision is applied, then, the books of accounts are deemed not to be available for the purpose of computation of the profit and gains of the business. Consequently, we are of the view that the addition representing the sundry creditors as made by the AO and as confirmed by the ld. CIT(A) is liable to be deleted and we do so. - Decided in favour of assessee.

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• 2015 (6) TMI 647
  Disallowance of interest under Proviso to Sec.36(1)(iii) - CIT(A) deleted addition - Held that:- AO has not brought anything on record to indicate that capital was borrowed for capital work-in-progress. This finding on fact is not rebutted by the Revenue by placing any material on record. Therefore, we do not see any infirmity in the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue. Disallowance of depreciation - CIT(A) deleted addition - Held that:- The Revenue has not brought any material on record as to how the facts in the present case are different from the facts in the earlier years. The Revenue has not placed any material on record suggesting that the order of the ld.CIT(A) in the earlier assessment year has been reversed by this Tribunal or by the Hon’ble Jurisdictional High Court. Under these facts, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld.- Decided against revenue. Disallowances u/s.14A - investment in shares of companies other than 2 foreign subsidiary companies - Held that:- There is no dispute with regard to the fact that the provisions of Rule 8D would be applicable in the year under consideration. The ld.CIT(A) has decided this issue in accordance with Rule 8D of the IT Rules, 1962, therefore we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against assessee.

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• 2015 (6) TMI 646
  Revision u/s 263 - interest expenditure claimed on a loan raised from State Bank of India was not allowable since the loan was intended for starting a new amusement park at Mumbai and assessee had dropped the plan - Held that:- In so far as the first issue viz., interest claimed on loan from SBI, used for acquiring the land in question was concerned, Ld. AR has admitted that the issue required a look by the AO, since it was not verified by him at the stage of the assessment proceedings. Hence, in so far as this particular claim of the assessee is concerned, we cannot find any fault in the order of the CIT. - Decided against assessee. Assessee had made an investment in M/s. Wonderla Holiday (P) Ltd, under the same management and on such investment Section 14A of the Act was applicable - Held that:- In so far as the issue relating to disallowance u/s.14A is concerned, there was no error in the assessment order, which could be considered as prejudicial to the interests of Revenue. As assessee did not have any exempt income. That a disallowance u/s.14A of the Act, can be made only if there is a claim of exempt income - Decided in favour of assessee.

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• 2015 (6) TMI 645
  Income from house property - Disallowance of interest on borrowed capital u/s 24(b) - CIT(A) allowed partial relief - Held that:- In financial year 2003-04, out of repayment of Rs. 2.08 crores, Rs. 2 crores was borrowed as a short term loan from ERHL (a group company of assessee). This short term loan of Rs. 2 crores was repaid to ERHL in financial year 2004-05 by again borrowing Rs. 2 crores from D. S. Construction Company. These facts are verifiable from paper book page 8, where these entries are recorded. There is one more entry of Rs. 12.96 lacs as received from D. S. Construction Company and further, there is another entry of Rs. 9,500/-, which was paid to D S Construction Company. Therefore, in all, the balance due to D S Construction Company was Rs. 3,77,52,230/- out of which Rs. 3,76,00,000/- was paid after borrowing from Lord Krishna Bank. The above facts are verifiable form the balance sheet of assessee for the year ending 31.03.2005 where an amount outstanding from bank loan is reflected at Rs. 3.76 crores and unsecured loan from D.S. Construction Company has reduced from Rs. 1,64,56,230/- to Rs. 57,230/-. Therefore, in fact, the entire loan of Rs. 3.76 crores has been utilized to repay the debts raised by assessee for construction of property the income of which was offered under the head ‘income from house property’. Ld. CIT (A) while granting partial relief to the assessee only considered the amount of outstanding as on 31.03.2004 of Rs. 1.64 crores due to M/s. D. S. Construction Company. However, he misdirected himself in not considering the amount of Rs. 2 crores which was raised by assessee as a short term liability to reduce the loan component of M/s. D.S. Construction Company and also ignored the other transactions entered during financial year 2004- 05. The transactions entered into by assessee in 2004-05 also relate to acquisition of property. Therefore in all, the entire interest on the term loan from bank should have been considered by Ld. CIT(A) for allowing relief to the assessee. Circular 28 as relied upon by Ld. A.R. and as noted by Ld. CIT(A), clearly state that if the interest free loan is repaid by interest bearing loan funds, the interest on such loan is allowable for deduction u/s 24(b) of the Act. - Decided in favour of assessee. Value of building (gross block) as per the depreciation chart up to FY 02-03 was Rs. 1.11 Crores only - Held that:- Revenue has challenged that as on 31.03.2003, only an amount of 1.11 crores was invested in building therefore, interest on entire loan of Rs. 3.76 crores cannot be considered. However, we find that besides building, there is an investment in land also which is at Rs. 7,97,88,679/- and investment in property always includes investment in land also. - Decided in favour of assessee.

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• 2015 (6) TMI 644
  Addition on fall in G.P. rate - CIT(A) deleetd the addition - Held that:- Working of gross profit must necessarily take into account the opening and closing stock, and direct expenses, and not only be based on comparison of purchase prices of raw material and sale prices of finished products. That the Assessing Officer has based the addition of Rs. 4,31.41,035/- entirely on the fall in gross profit rate, without bringing any other material on record, and without disputing the results. It is established law that fall in gross profit alone, without pointing out defects in the books of account, is not an adequate basis for making additions. Additions to the profits of the assessee made solely on the ground that it was low without giving a specific finding that the accounts of the assessee were not correct and complete, or that the income could not be properly determined and deduced from the accounting method employed by the assessee, is not justified. We find considerable cogency in the finding of the Ld. CIT(A) in the impugned order that the mere fact that there was a less rate of gross profit declared by an assessee as compared to the previous year would not by itself be sufficient to justify the addition. See Aluminium Industries (P) Ltd. Vs. CIT (1995 (2) TMI 437 - GAUHATI HIGH COURT). - Decided against revenue.

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• 2015 (6) TMI 643
  Order passed under section 154 by the AO annulled by CIT(A) - AO disallowed to the assessee excess duty, penal interest and central excise and interest - whether the rectification order passed by the AO is valid or not? - Held that:- Mistakes are of two types, mistake of fact or mistake of law. So far the fact is concerned, there is no mistake. The facts submitted before us are undisputed. In respect of mistake of law, the ld. DR, even though vehemently contended but could not bring to our knowledge how there is a mistake in respect of allowing the deduction was for excise duty. We, therefore, confirm the order of the CIT(A) annulling the rectification order, so far it relates to deduction of excise duty amounting to Rs. 29.17 crores as well as 2.54 crores. Whether the interest paid by the assessee during the year in respect of excise duty accrued during the impugned assessment year so that it can be said whether there is a mistake apparent on record ? - Held that:- It is not disputed that the assessee was following the mercantile system of accounting. In the mercantile system of accounting, a liability is deductible when it accrues. In the case of the assessee, we noted that the Central Excise Settlement Commission passed the order on 29.02.2008 with corrigendum dated 28.03.2008. Therefore, so far the interest is concerned, the liability accrues when the order was passed by Central Excise Settlement Commission. But the assessee filed a writ petition before the Hon’ble Delhi High Court and the Delhi High Court allowed time to the assessee for making the payment of dues including the central excise as well as interest thereon. The interest no doubt paid during the year but there is no provision under the Income Tax Act para 2 section 43B, which allows the deduction of the interest on payment basis, in case the assessee follows the mercantile system of accounting. The interest, in our opinion, was allowable as deduction only in the assessment year 2008-09 and in case the assessee disapproves the assessee could have argued that the accrual of the liability got postponed and it will accrue only when the High Court passed the order. In our opinion, there cannot be two views possible. So far the deduction of the interest in respect of excise duty is concerned, to that extent, we are of the view that there was a mistake apparent in the order of the AO passed under section 143(3) and therefore, the AO has rightly taken the action under section 154, as non-deductibility of the interest during the impugned assessment year was not debatable and there cannot be two conceivable views in this regard. To that extent, we set aside the order of the CIT(A) and restore the order of the AO, so far it relates to the deductibility of interest in respect of central excise is concerned. We may, however, observe that the assessee be allowed deduction of the interest in the assessment year 2008-09 or in the year when the liability finally is determined by the order of the Hon’ble Delhi High Court, if the assessee proves that the liability accrues during that assessment year. - Decided partly in favour of revenue.

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• 2015 (6) TMI 642
  Penalty u/s 271(1)(c) - CIT(A) partly allowed the appeal of the assessee and sustained the penalty in respect of addition made due to provision for sundry debtors and provision for suspense - Held that:- In the case of the assessee, we noted that the assessee has returned the income at Rs. 1,32,45,460/- and the income has been assessed at Rs. 1,32,45,460/-, even though there has been addition made by the AO in respect of provision for sundry debtors and provision for suspense, for which the penalty has been sustained by the CIT(A) but the addition so made does not affect either reducing the loss declared in the return or converting the loss declared in the return into income. The assessee has not declared loss in the return. Therefore, in our opinion, explanation 4(a) on the basis of which, the penalty has been imposed and confirmed by the CIT(A), will not apply. We, therefore, set aside the order of the CIT(A) and delete the penalty imposed by the AO under section 271(1)(c). - Decided in favour of assessee.

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• 2015 (6) TMI 641
  Reopening of assessment - non-furnishing of reasons recorded by the AO - Held that:- No copy of the reasons recorded were furnished to the assessee, which is necessary before the assessment is completed. We hold that in view of the decision of the Tribunal in the case of Telco Dadajee Dhackjee Limited (2012 (8) TMI 495 - ITAT MUMBAI ) and the case of Videsh Sanchar Nigam Ltd., (2011 (7) TMI 715 - Bombay High Court ), the reassessment order passed by the AO u/s.143(3) r.w.s 147 of the Act dated 30.12.2010 is bad in law as the AO had not furnished copy of the reasons recorded despite specific request made by the assessee before he completed the assessment. - Decided in favour of assessee.

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• 2015 (6) TMI 640
  Disallowance u/s 14A r.w.r. 8D(2)(iii) - Held that:- In view of the detailed working given by the assessee and following the ratio laid down in Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) and Taikisha Engineering India Ltd. [2014 (12) TMI 482 - DELHI HIGH COURT] and Maxopp Investment Ltd. [2011 (11) TMI 267 - Delhi High Court] before applying the provisions of Rule 8D of the I.T. Rules, the AO was duty bound to record his dissatisfaction that the working of the disallowance made by the assessee under section 14A of the Act was incorrect. A perusal of the assessment order reflects that no such dissatisfaction was recorded by the AO and in view thereof the provisions of section 14A(2) of the Act had not been applied and accordingly we find no merit in the disallowance made by the AO under section 14A(2) of the Act read with Rule 8D without recording dissatisfaction that the working made by the assessee vis-à-vis the expenditure which is to be disallowed under section 14A of the Act was incorrect. - Decided in favour of assessee.

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• 2015 (6) TMI 639
  Appeal decided ex-parte - Held that:- The appeal of the assessee was decided ex-parte on the basis of material on record. In the absence of the assessee having explained reason for non attendance before the CIT(A) on different dates of hearing, we find no merit in the plea of the assessee. Author plea raised by the assessee was that CIT(A) had not considered the statement of facts filed by assessee. However, perusal of order of CIT(A) reflects that the statement of facts are incorporated ground wise. Hence we find no merit in the plea of the assessee. - Decided against assessee. Non obtaining necessary approval/direction under section 144A - Held that:- The reliance by the assessee on the provision of section 144A of the Act in this regard is not correct as passing a best judgment assessment under section 144 of the Act is independent from the powers of the JCIT to issue direction in certain cases under section 144A of the Act. Consequently we up holding the order of CIT(A) dismiss the ground of appeal raised by the assessee. - Decided against assessee. Adddtion on account of Short fall in G.P. - Held that:- After going through the statement of facts filed along with appeal memo and in the absence of the assessee having failed to produce the original purchase and sale bills and also purchase and sale register, the CIT(A) up held the addition of Rs. 6,46,097/-. The assessee has failed to controvert finding of the CIT(A) and in the absence of the same and the assessee having failed to file original purchase and sale bills before the authorities below, we are inconformity with the order of the CIT(A) in this regard and the ground of appeal no. 4 raised by the assessee is dismissed. Addition made under section 41(1) - difference in Sundry creditors liability - Held that:- The assessee before us has failed to furnish any reconciliation statement and in the absence of the same we find no merit in the ground of appeal - Decided against assessee. Disallowance to the extent of 20% out of conveyance, delivery, labour, salaries shop expenses and staff welfare - Held that:- As before the CIT(A) assessee failed to file any details and hence the addition made by the AO was confirmed. Even before us despite an opportunity being granted, the assessee has failed to appear and justify the nature of expenses and file requisite details. In the absence of the same we find no merit in the ground of appeal - Decided against assessee. Disallowance of depreciation on vehicles - Held that:- The assessee submitted debit note from one Dinesh Shinde regarding the purchase of two vehicles. No other details were filed by the assessee, hence depreciation on the said vehicles amounting to Rs. 87,731/- was disallowed which in turn was up held by the CIT(A). The assessee before has failed to furnish the requisite documents in support of purchase of the said vehicles and in the absence of the same we find no merit in the claim of the assessee. - Decided against assessee.

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• 2015 (6) TMI 638
  Leave and licence income - assessability under “income from other sources” or “profits and gains of business or profession” - Held that:- Assessee, in furtherance of its object of Memorandum of Association, had leased out the premises, which in turn was subleased on leave and licence basis, thus the intention of the assessee was to exploit the asset leased by it, by way of letting out the same, then such letting out activity is in furtherance of assessee’s intention to carry out the business in a systematic and organized manner. Consequently we hold that the rental income declared by the assessee is to be assessed as income from house property. Another aspect to be kept in mind is that similar income offered by the assessee on account of similar rent received from same tenant in earlier years were assessed as income from business in the hands of the assessee. Another aspect to be kept in mind is that during the year under consideration, i.e. at the close of the year on 31.03.2003 the agreement with American Express Bank had come to an end and the assessee entered into a fresh agreement with British High Commission again establishes the case of the assessee, that it is involved in a systematic and organized activity of leasing out its premises, which in turn are not owned by the assessee. In the totality of the above facts and circumstances we hold that the lease rent received by the assessee is assessable as income from business in the hands of the assessee and the related expenditure has to be allowed in the hands of the assessee. The AO shall accordingly compute the income in the hands of the assessee in line with our directions after affording reasonable opportunity of hearing to the assessee. This ground of appeal, which was restored back to the file of the Tribunal by the Hon'ble High Court is allowed. - Decided in favour of assessee. Disallowance of recruitment and staff training expenses and salary paid to Shri Naval Kumar - Held that:- As decided in assessee’s own case relating to assessment year 2003-04 it is held an overall appreciation of the evidence and explanation submitted on behalf of the assessee, we are of the view that the assessee has failed to explain and substantiate that the expenditure on staff training and salary pad to Mr. Naval Kumar was wholly and exclusively for the purpose of business of the assessee. We, therefore, confirm the orders of revenue authorities - Decided against assessee.

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• 2015 (6) TMI 637
  Disallowance of speculation loss from trading in gold bullions - CIT(A) deleted disallowance admitting additional evidence - Held that:- If a person purchases any item and then sold the same in both situations, there is a physical delivery is taken and given. It is also noted that the parties from whom the dealing in gold was made like Shri Rakesh Patel of Jorss Bullions, Pushpak Bullions and R.S. Bullions were produced before the Assessing Officer, who accepted the transactions as has been discussed even in the assessment order. All the parties confirmed the transaction and none of the parties ever denied about physical delivery. Assessee also produced the records along with challans (delivery note) which clearly shows that the gold was traded. Even the ld. Assessing Officer did not point out any defects in the challans, therefore, the conclusion of the ld. Assessing Officer that there was no physical transaction is without any basis. It is also noted that the assessee paid VAT on the turnover, which is applicable to delivery based trading. The totality of facts clearly indicates that the assessee in fact transacted in gold and bullions in the normal course of business to earn profit. No prudent businessman will intentionally incur losses. Even otherwise, all the payments are through banking channel; therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against revenue. Disallowance of expenses on account of trading in gold - CIT(A) deleted disallowance - Held that:- While deliberating upon ground no.1 and the conclusion drawn in the impugned order, we find that these are normal business expenses, consequently, the stand of the ld. Commissioner of Income Tax (Appeals) is affirmed, more specifically, when there is no basis for making such disallowance and even otherwise, the ad-hoc disallowance, if any, under the facts, is not permissible.- Decided against revenue.

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• 2015 (6) TMI 636
  Addition of unsecured loans u/s. 68 - CIT(A) deleted addition - Held that:- The assessee had produced all the required documentary evidences and discharged its onus as far as those 76 creditors are concerned.The AO did not make any further inquiry.So,in our opinion,order of the FAA does not suffer from any legal infirmity.In case of remaining 14(JVA and 13 creditors about whom the assessee filed details before the FAA)creditors the FAA had rightly held that it had failed to discharge the initial burden. FAA had rightly deleted the addition of Rs. 2.99 Crores.The AO had made no effort to verify the details filed by the assessee before him.He could have at least made preliminary inquiry about them.He made inquiry about four persons directly and on the basis of such inquiry made an addition of Rs. 3.55 Crores. Provisions of the section 68 do not permit such action- on the basis of specific inquiry general additions cannot be made.Hon’ble Rajasthan High Court in the case of R S Rathore (1994 (7) TMI 45 - RAJASTHAN High Court) has clearly laid down the said principle. No discrepancy was found by the AO in the documents filed by the assessee. Therefore,upholding the order of the FAA, we decide the first limb of the first ground of appeal against the AO. Second part of the first ground deals with deletion of interest amount of Rs. 40.37 lakhs.While deciding the appeal filed by the assessee,we have upheld the decision of the FAA in restricting the interest disallowance.Second ground of appeal is also decided against the AO.

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• 2015 (6) TMI 635
  Disallowance of deduction claimed u/s 80IA(4) - CIT(A) deleted addition - Held that:- As dedcided in assessee's own case [2012 (4) TMI 563 - ITAT AHMEDABAD] the obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order to qualify for a deduction under section 80IA. The condition of a certificate from the port authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The aa developed the facility on a BOLT basis under the contract with JNPT. On the fulfilment of the lease of ten years, there was a vesting in the JNPT free of cost. The finding that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The facility was commenced after April, 1995. The assessee was entitled to the special deduction under section 80-IA - Decided in favour of assessee.

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• 2015 (6) TMI 634
  Revision u/s 263 - CIT(A) directed AO to recompute the short term capital gain after ascertaining the correct cost of acquisition of the wind mill and correct amount of depreciation - Due to huge business losses, the depreciation u/s. 32(1) was not claimed in Assessment Year 1997-98 when this wind mill was acquired by the assessee even not in subsequent year up to 2001-02. and was claimed in Assessment Year 2002-03 when it was made obligatory for the assessee to claim deprecation - depreciation claimed by the assesssee at Rs. 1,14,80,000/- was treated as a capital gain u/s. 50 - Reopening of assessment - Assessing Officer has disallowed the setting off of capital gain against brought forward depreciation losses - Held that:- According to the first proposition of the assessee, the Assessing Officer has re-opened the assessment proceeding in order to find out, whether short term capital gain computed by the assesse can be adjusted against the deprecation losses brought forward from earlier? No doubt, assessment has been re-opened on a little different reason but before considering any issue, whether set off to be allowed or not?, it is but natural that ld. Assessing Officer would first verify the amounts which can be set of with each other. The computation of short term capital gain is one of the components for verifying this factor, therefore, it suggests that ld. Assessing Officer has applied his mind on the figure of the short term capital gain computed by the assesee. He has examined this and only thereafter disallowed this set off against brought forward losses. The Assessing Officer has applied his mind and taken a possible view after going through returns of the assessee for earlier years. Therefore, ld. Commissioner is not justified in taking action against assessment order, where Ld. Assessing Officer had taken a possible view in law The computation of capital gain is linked with the ultimate set off, it is same source of income to be determined in the hands of assessee, therefore, he could have considered the ultimate amount required to be computed as a short term capital gain. The source and the issue related to that source were subject matter of an appeal and therefore to our mind the interdiction available in explanation “C” appended with section 263 sub-section 1 would come in the way of Ld. Commissioner for taking action u/s. 263 against the assessee. The impugned order is not sustainable in view of the second proposition also. Asessee has worked out brought forward deprecation losses of Rs. 1,82,62,722/-. This amount will be increased by addition of Rs. of the depreciation which is to be thrust upon the assessee by a sum of Rs. 1,14,80,000/-. The net result will be again zero. (Rs. 1,82,62,722/- + Rs. 1,14,80,000 depreciation not claimed earlier = 2,97,42,722/-). This amount will be available to the assessee as a brought forward losses. It is more than the sale proceed of wind mill computed at Rs. 2,29,60,000/-. The net result will be zero. The case in hand, even if for the sake of argument, we also assume that ld. Assessing Officer has committed an error by not computing the true capital gain with the application u/s. 50(1) then also ultimately no prejudice has been caused to the revenue. Therefore, the impugned order is not sustainable in law. - Decided in favour of assessee.

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• 2015 (6) TMI 633
  Application filed by the assessee u/s 12AA rejected - Held that:- In the instant case, in case of dissolution of University, property would go to sponsoring body that itself is registered under section 12AA of the Act, subjected to the relevant provisions of the Act. Undisputedly, the education is included into the definition of charitable purpose as per Section 2(15) of the Act. It is settled position of law that at the time of registration u/s 12AA of the Act, the DIT(E) has to satisfy with regard to the genuineness of activities of the Trust. In our considered view, the DIT(E) ought to have given specific finding with regard to genuineness of the activities of the University. The DIT(E) has rejected the application on the ground that in case of dissolution there is no safeguard to the properties created by the University. There is no finding that the University is not imparting education, or otherwise imparting of such education on the basis of commercial consideration. It is pointed out by the ld. Counsel for the assessee that as per the Gujarat Government Gazette Notification under the provisions of the Gujarat Private Universities Act, 2009, the University cannot run commercially. The ld. DR could not controvert the contention of the ld. Counsel for the assessee that under the identical facts other Universities have been granted registration u/s 12AA by the Revenue. Under these facts, we are of the view that the ld. DIT(E) was not justified in declining the registration to the assessee u/s.12AA of the Income-tax Act, 1961. - Decided in favour of assessee.

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• 2015 (6) TMI 632
  Treatment to the interest received on account of bank deposit - capital receipt or income from other sources - Held that:- In the present case, the funds were not surplus funds as the fixed deposits which were made from October onwards were redeemed till April 2009 and funds were utilized for contract payments for the project. During proceedings before Ld. CIT(A), the assessee had filed copy of contract awarded during July 2008 to June 2009 and it had demonstrated that funds which were kept temporarily in the form of fixed deposits were linked with the setting up of project and cannot be categorized as surplus funds. We find that the facts in the present case are also similar to the facts in the case of Indian Oil Panipat Power Consortium Ltd. (2009 (2) TMI 32 - DELHI HIGH COURT). In the present case also, amount was invested by joint venture partner by raising share capital and funds were directly linked with setting up of project. Ld. CIT(A) has made a clear finding with respect to linkage of funds treating the interest income received on account of bank deposit as capital receipt. Therefore, in view of above, we do not find any infirmity in the order of Ld. CIT(A) and the same is upheld. - Decided against revenue.

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• 2015 (6) TMI 631
  Addition on cash seized from Shri Ghanshyam Sharma - CIT(A) deleted the addition - Held that:- There is no dispute that Shri Deepak Aggarwal, Director of MIs Continental Milkose India Ltd had accepted the fact of having sent the cash of Rs. 1,75,000/ - to the assessee company through Shri Ghanshyam Sharma. The source of the amount of Rs. 1,75,000/- has also been explained by statement of Shri Deepak Aggarwal recorded the course of survey. As such the ownership of the cash recovered from Shri Ghanshyam Sharma was clearly not that of the appellant company. The A.O. has added the amount on the ground that the amount is not reflected in the books of accounts of the assessee. As explained by the appellant, the amount is not reflected in its books as the money was not received by the company and the proposed sale never took place. In these circumstances of the case, the explanation furnished by the appellant is reasonable. - Decided in favour of assessee. Difference in the account of Shri Sanjeev Goyal, appearing the books of assessee company as found from his residence and as per- records of title company - CIT(A) deleted the addition - Held that:- There is no evidence on record to indicate that the page-l , Annexure A-4 contained the up to date entries of the imprest account of Shri Sanjeev Goyal with the company. There is bound to be difference in the two records if the period to which each relates is different from each other. The addition made by the A.O. is on insufficient material and basis and the discrepancy having been explained the addition is correctly deleted. - Decided in favour of assessee. Stock of spare parts outside books of accounts - CIT(A) deleted the addition - Held that:- Merely on the basis of surmises, it cannot be said that the claim of the appellant regarding quantity of spare parts used on 13/14.9.2000 was incorrect or manipulated. The position appearing from the books of accounts of the assessee itself has to be kept in view while judging the issue. Accordingly, it is held that the finding of the A.O. that spare parts valued at Rs. 15,70,373/- had been sold outside the books is based only on presumption, without any concrete evidence. No evidence has also been found during the search to indicate any suppression of sales, specifically of spare parts. The actual rate of individual items of spare parts is supported by the books of accounts and vouchers kept by the appellant - Decided in favour of assessee. Undisclosed income by treating the stock of spares having been sold outside the books of account - CIT(A) deleted the addition - Held that:- in the inventory prepared during the search, the items of spares listed are 288 only. This shows that the entire quantity of spare 'parts could not be incorporated into the inventory. It is also noted that the rates listed in the inventory are approximate and appear in round figures. This shows that the rates and value adopted in the inventory cannot be relied upon, particularly when the assessee has maintained detailed record of spare parts in list- III and the rate of items is verifiable from the purchase documents. The arguments given by the A.O. for making the addition are general in nature and no specific discrepancies in explanation have been pointed out. There is also no incriminating evidence found during the search regarding sale of spare parts outside the books of account. The appellant is also correct in pointing out that the spare parts used in the production process would not be of any value to outside parties as these have specific enduse. The spare parts are specific to the production process and are not generally capable of being sold as such in the market. Thus additions correctly deleted - Decided in favour of assessee. Undisclosed income of sale of packing material outside the books of account - CIT(A) deleted the addition - Held that:- The submissions of the appellant in relation to the stock lying in the fumigation chamber that there is no mention in the search inventory of any material lying in the fumigation chamber and contention of the assessee regarding stock having not been considered being old/scrap material cannot also be discard. The contentions regarding packing material lying in the packing room are also reasonable. Thus there is no question of any sale of even rejected packing material, as the same contains the name of the assessee preprinted on them. In these circumstances the presumption of sale of packing material outside the books of account is not justified - Decided in favour of assessee. Unexplained investment in stock of finished goods found in excess - CIT(A) deleted the addition - Held that:- the appellant was required to furnish quantitative reconciliation of stock at production for the period 114/2000 to 14/9/2000 ( i.e. the date of the search), viz. total stock of WPC and other items as per books as on 311312000 and stock of WPC etc. found at the time of search on 141912000. Such reconciliation was prepared by the appellant and furnished vide replies dated 28/5/2003 and 18/6/2003. The appellant has also filed copies of stock ledger account of the factory at Kosi Kalan, which is a part of the seized record, from which the goods were received and issued to stock at production. This shows that the stock found during the search is reconcilable with reference to the books of accounts and variations if any are very nominal. Accordingly, the claim of the appellant that stock at production is part of finished goods and reflected in the books of accounts is accepted and the addition of Rs. 1,94,12,755/- (reduced to Rs.l,70,81,755/- in the order U/S 154 dt.26/212003) is correctly deleted. - Decided in favour of assessee. Undisclosed income on account of sale of Skimmed Milk Powder outside the books of account - Undisclosed investment in the stock of Skimmed Milk Powder - CIT(A) deleted the addition - Held that:- From the stock ledger account, it is noted that the appellant company is regularly recording the quantity of SMP only in terms of weight in kgs and not in terms of number of bags. Accordingly, the exercise made by the Assessing Officer to work out alleged shortage of skimmed milk powder not justified. The reasons for mentioning the quality in terms of kgs in the stock ledger have also been explained by the appellant in its written submissions, which have been reproduced above. It is also noted that the recording in the stock ledger does not mention the supplier's name. Further, it is also clear from the record that during the course of search no evidence is found to indicate sale of SMP, which is a raw material used in the production process of the appellant.The stock of SMP has to be considered only as per weight in kgs, and the reasons for differences in quantity in bags (due to repacking in course of time) have been explained by the appellant. Accordingly, the additions deleted - Decided in favour of assessee. Unexplained investment in stock of work in progress - CIT(A) deleted the addition - Held that:- The work in progress has necessarily to be estimated, considering the nature of production carried on by the appellant company. The estimate so made in the assessment is in line with the quantity and value of work in progress shown by the assessee earlier for the year ended 31/3/2000 in the balance sheet at Rs. 53,07,490/-. Further no material or evidence has been found during the search to indicate excess investment in .work in process. In these circumstances of the case, there is no material on record to arrive at the conclusion that the appellant company may have made the entire investment or any part of investment in the stock of work in process outside the books of accounts - Decided in favour of assessee.

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• 2015 (6) TMI 630
  Disallowance of the loss on expenditure on account of Stamp Papers purchased for buying Stock of Lana by Companies amalgamated with the Appellant Company but which could not be utilized. - Held that:- In the mercantile system of accounting expenses or income are allowed on the basis of incurrence or accrual. The expenditure was not incurred during the year under consideration, nor the expenses can be said to have materialized during the year as discussed earlier in the order, therefore, we hold that expenses incurred on cost of stamp paper has rightly been disallowed by authorities below. The case law relied upon by Ld. A.R. are distinguishable as the case laws relates to write off of book debts whereas the present case relates to allow ability of expenses. However, Ld. A.R. has claimed that in Assessment Year 2008-09, an amount of Rs. 74,11,018/- was received against claim and was offered to tax. The taxation of this amount in Assessment Year 2008-09 will amount to double taxation to this extent. Therefore, we hold that his amount of Rs. 74,11,018/- needs to be reduced from the disallowance made during the year under consideration subject to verification by A.O. Therefore, we are of the opinion that the case of assessee be remitted back to the office of A.O. who on the basis of documents and returns and accounts of assessee for Assessment Year 2008-09 will examine the claim of Ld. A.R. regarding offering of such amount in the return of income and if the same is found to have been offered in such assessment year then he will reduce this amount from disallowance made in the year under consideration. - Decided partly in favour of assessee for statistical purposes.

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• 2015 (6) TMI 628
  Liability to payment of Fringe Benefit Tax - whether there exists a master servant relationship between the appellant and its consultants? - Held that:- As relying on assessee's own case [2013 (5) TMI 713 - ITAT AHMEDABAD] FBT is eligible only in a case where expenditure is incurred by the employer ostensibly for the purpose of business but includes partially a benefit of a personal nature passed on to the employee. But, a legitimate business expenditure not within the ambits of employer & employee relationship is outside the scope of FBT. In view of these observations, we hereby hold that the FBT provisions have wrongly been invoked in the present case. We hereby reverse the legal findings of the authorities below and direct the AO to give relief accordingly - Decided in favour of assessee.

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• Customs

• 2015 (6) TMI 653
  Demand of differential duty - Demand of bank guarantee - Held that:- petitioner is allowed to avail the alternative remedy of appeal as provided under Section 129A of the Act within the period of limitation, which according to learned counsel for the petitioner is still subsisting. It is, however, observed that in case an appeal is filed within the period of limitation, the same shall be disposed of expeditiously by the Tribunal preferably within one month from the date of filing of the appeal in accordance with law. - Decided in favour of assessee.

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• 2015 (6) TMI 652
  Confiscation of goods - Smuggling of red sanders - Held that:- Appellants were not involved in the smuggling of Red Sanders for the reason that the containers were stuffed and sealed with Corrugated Boxes at ICD, Waluj under the physical supervision of the custom officers, thereafter the custodian got the control of the container. The tampering of seal, change of the goods i.e. loading and concealment of prohibited goods i.e. Red Sanders were taken place in the transit from ICD to the Nhava Sheva Port. This clearly shows that the present Appellants whose role was to arrange and provide the empty container for export goods, cannot be implicated in the act of smuggling of Red Sanders. However, the Appellants have knowingly about the Public notice No. 17/2012 not complied the KYC norms of the person Shri Rohit Mahadik who placed order for container. Employees have deliberately for their vested committed an act to make the goods liable for confiscation. From the nature of the offence committed in the present case, when the penalty is imposed on the companies, penalties on the employees are not warranted. As regard penalties on the Appellant companies, I find that in view of the role of the companies, the lapse is only confined to the non compliance of KYC and not involvement in the smuggling of Red Sanders. In view of this facts, I am of the view that the quantum of penalty on the Appellant companies are very higher side and the Appellant companies deserve reduction in the penalty imposed under Section 114(i). - However, penalty reduced - Decided partly in favour of assessee.

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• Corporate Laws

• 2015 (6) TMI 651
  Illegal collection of deposits from general public - Deposit in the form of 'Optional Fully Convertible Debentures' (OFCD) - Conditional order of bail that the contemnors deposit Rs. 10,000 crores – Rs. 5000 crores in cash and balance of Rs. 5000 crores in the form of bank guarantee of a nationalised bank, to be furnished in favour of SEBI - No full compliance of the condition for grant of interim bail - Held that:- This Court feels concerned with the fact that three persons are deprived of their liberty for the last fifteen months and this situation is quite onerous to them. On the other hand, public interest as well as public good demands that the two Sahara Companies, which had collected whopping amount of more than Rs. 22,000 crores from the public in an illegal and unauthorised manner, are made accountable for the same in the manner it is directed vide orders dated 31.08.2012 and 05.12.2012. By any yardstick, this is a huge liability, which the contemnors are bound to discharge by depositing the same with SEBI. It is, thus, an unprecedented situation of personal liberty of the three applicants on the one hand vis a vis majesty of law and ensuring larger public good, on the other hand. It is this sense of justice, in an unprecedented kind of situation, that has compelled the Court to take such an extreme step. It is this legal realism which has compelled the Court to adopt an approach which sounds more pragmatic. It is "doing what comes naturally" approach to the problem at hand, which required such a drastic step, going by the experience of this case, giving rise to 'Reflection' that provided 'Understanding'. This case is a burning example where the true dictate of justice is difficult to discern, and the law needed to come down on the side of practical convenience. This Court is not powerless as it can always direct selling the properties of the Sahara Companies to ensure recovery of the aforesaid amount as the value of those properties is stated to be much higher. However, it is not done so far pursuant to the wishes of the applicants who have pleaded against the sale of these properties by the Court with repeated assurances that these companies would be taking necessary steps for generating the desired finances and the Court has accepted their request and given them opportunities and chances to do so. In case the bank guarantee is made encashable on default, the trigger point for encashment would be the default by the contemnors in depositing the balance amount in terms of the directions that we propose to issue. It is in that spirit that we accept the bank guarantee format furnished by the contemnors and grant to them time to deposit the balance amount that remains to be deposited subject to below conditions. - Rs. 36,000 crores (approximately), deposit the balance outstanding amount within a period of 18 months commencing from the date of their release from custody in nine installments. First eight installments Rs. 3,000 crores payable every two months from the date of their release from custody and last installment shall be of the remaining amount - default in payment of 2 installments (not necessarily consecutive) the bank guarantee furnished shall be encashed by SEBI - The bank guarantee shall also be encashable in the event of failure of the contemnors to deposit the full amount outstanding against them within a period of 18 months commencing from the date of their release - In the event of failure of the contemnors to deposit three instalments (not necessarily consecutive), the contemnors shall surrender back to custody and in case they fail to do so, they shall be taken into custody and committed to jail - Since only some of the properties have been released by this Court for sale by the contemnors, the contemnors shall be free to apply for permission to sell any further property within 15 days from their release in order to enable them to raise funds for deposit of the required amount in terms of the order of this Court - deposit passports in this Court within 15 days from the date of this order or before their release, whichever is earlier.

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• 2015 (6) TMI 650
  Entitlement of contractual rate of interest by secured creditor for the post winding up period - Surplus amount available before such amount is distributed among the unsecured creditors - Held that:- Under provisions of sections 529, 529A and 530 of the Act , the dues of the secured creditor and the dues of the workmen of the company in liquidation are made to stand on par with each other. As per sub-section (2) of section 529A, the debts payable to these categories shall be paid in full. The phrase "paid in full" undoubtedly pre-supposes that in case of secured creditors, the debts must include principal and interest payable under the contract and in case of workmen, wages payable to them under the contract of employment, or the statutory provisions in force, as the case may be. Thus, unless the assets of the company in liquidation are insufficient to meet the dues payable to these two categories, they shall be paid in full. In case the amount realised by sale of the charged property is insufficient to satisfy the debts of the secured creditors and the workmen's dues, such balance amounts, not exceeding workmen's portion in the secured debtor's security shall be treated as priority debts under sub-section (1) of section 529A and in such case, these debts shall be paid before considering the claims of other creditors. It is only after making payment of these debts in full, if any further amounts remain, that the creditors included under section 530 shall have preference for payment. If any further amount still remains, the unsecured creditors who include the secured creditors are entitled to, to the extent of the portions of their unsecured debt, payment of dividends subject to proof of their debt by applying the provisions of the Insolvency Act. While the claim for payment of interest at the contractual rate for the post winding up period is supported by the statutory provisions discussed above, even in equity also a secured creditor is entitled to claim interest at the contractual rate where the amounts realised from the sale of assets are sufficient to discharge the debt of the secured creditors and the workmen's dues. It is not merely iniquitous but also wholly illogical that a secured creditor is denied the contractual rate of interest, for, many of the secured creditors are public institutions which lend tax payers' money. Denial of interest at contractual rate to these public institutions, which are instrumental in establishment of companies, seriously affects public interest as they will not be in a position to plough back the substantial monies disbursed by way of loans into their capital, resulting in crippling of their activities. In the long run, these financial institutions may become a great burden to the State as further State funds need to be pumped in to nurture them. From the report of the official liquidator, it is quite evident that the amount claimed by the appellant at the contractual rate of interest is less than the surplus amount available with him even after allowing all the admissible claims of the workmen and other creditors. Therefore, the official liquidator is directed to pay to the appellant interest at the contractual rate, i.e., 9.50 per cent per annum, on the principal amount adjudicated by him from April 22, 1988, i.e., the date on which the company was ordered to be wound up till date within one month from the date of receipt of this order. - Decided in favour of appellant.

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• Service Tax

• 2015 (6) TMI 661
  Refund - Cenvat credit of input services used in exported output services - Held that:- On perusal of the impugned order, I find that the first appellate authority has come to the correct conclusion as to that the respondents are eligible for CENVAT Credit of input services and also eligible for refund of the same as they have exported the services under the category of "Business Auxiliary Services". The appellants have also contended that the case is fully covered by the clarification issued by the Circular 120/1/2010-ST dated 19.01.2010 towards para 3.3. The CBEC's Circular No. 120/01/2010-ST dated 19.01.2010 specifically provides that the essential services, used by Call Centres for provision of their output services would qualify as input services and be eligible for taking credit as well as refunds. Further, it was clarified in the said Circular that the phrase ‘used in' in the CENVAT Credit Rules and Notification should be interpreted in a harmonious manner. The inputs services, without which the quality and efficiency of output cannot be achieved, should be allowed as eligible input services for refund. Based on the above all the input services as referred in Para 11, which were disallowed by the adjudicating authority, are used by the applicant in providing the ‘export' outputs services and are very essential to provide quality output services . In the absence of any evidence controverting the factual findings of the first appellate authority; I find that the impugned order is correct and legal and does not suffer any infirmity. - Decided against the revenue.

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• 2015 (6) TMI 660
  Valuation - Management maintenance and repair service - Inclusion of entire cost of repair including the cost of various items replaced during the repair of transformers, although the repair work was done under a composite agreement - Held that:- Invoices raised by the appellant clearly indicate the value of the goods separately. Not only that the contract itself while giving the rate of repair package clearly stated the value of labour charges and the value of HV/ LV leg oil, transformer oil and supply items. The adjudicating authority has also conceded that the appellant has paid VAT on the items supplied. In these circumstances, we do not find the observation of the adjudicating authority to the effect that "in the absence of any specific clause in the contract specifying the quality, make, specification of the items, it would be difficult to concede these a 'sale' even though the service provider has paid VAT on the same" legally valid and sustainable. - the appellant was entitled for deduction of the value of the goods supplied during repair of the transformer in which case the impugned demand would not survive as the demand has been computed on the value of such goods on the ground that the value thereof was not excludible from the assessable value - Decided in favour of assessee.

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• 2015 (6) TMI 659
  Business Auxiliary service - Job work - Manufacture - process of converting 'Para Nitro Cumene, in to 'Para Cumidine' - Held that:- Both the lower authorities have wrongly concluded that the processing activity undertaken by the appellant does not amount to 'manufacture' for more than one reason. Firstly, it is undisputed that the goods or inputs were received by the appellant from the principal manufacturer under job work-challan as per the provisions of Rule 4(5)(a) of the CENVAT Credit Rules. The said sub-rule mandates for movement of duty paid inputs on which CENVAT credit is availed, for further processing in to intermediate product outside the factory premises and receiving them back for further consumption. We find from records that the principal manufacturer had clearly intimated the Department as to the intention of getting the part of the process done from the appellant. This activity of processing in the appellant's factory premises is definitely an activity of 'manufacture' inasmuch as, the finished goods coming into existence after processing are different from the inputs which are put into use. When there is a chemical reaction involved, the finished goods coming after the chemical reaction cannot be said to have been not manufactured. We perused the chemical formula and the properties of the inputs and of the final goods and we find that there is a difference between the two which would mean that the finished goods 'Para Cumidine' is arising out of a manufacturing process. In our considered view, the activity undertaken by the appellant would amount to manufacture even if it is under a job-work procedure. - impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.

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• Central Excise

• 2015 (6) TMI 662
  Denial of CENVAT Credit - Held that:- The provisions of Cenvat Credit Rules, 2004, do not explicitly bar the utilisation of cenvat credit of basic excise duty for discharge of educational cess and secondary and higher secondary education cess for the material period in question - impugned order which upholds disallowance of utilisation of cenvat credit of basic excise duty for payment of education cess and secondary and higher secondary educational cess is incorrect and is liable to set aside. - Decided against Revenue.

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• 2015 (6) TMI 658
  Manufacture - replicating certain Microsoft software on CDs/DVDs - Benefit of serial No. 27 of Notification No. 6/2006-CE - Held that:- Applicant does not have any case on merits as the work of replicating and that also in large quantity, will not be relating to a customized software. It is not under dispute that such software has been developed by the Microsoft and are used in computer system by various original equipment manufacturers or other customers. In such a situation, the software cannot be called customized software so as to extend the benefit of Notification 6/2006-CE dated 01/03/2006. In view of the said position, prima facie, we are of the view that the applicant will be required to pay duty on the said goods. However, the question comes what would be the value for computation of duty. It appears that the Revenue has added US $ 7/- per disc for computing the duty. The figure of US $7/- has been taken as that is the royalty that is required to be paid by the Authorised Replicators/OEM to the Microsoft for the main software. Similarly, recovery disc is provided to OEM manufacturer so that in case of any problem in the original software, recovery disc is used. Similar is the position in respect of other type of discs other than works. In case of Works, it appears that the same royalty is indirectly paid to the Mircrosoft. - stay granted partly.

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• 2015 (6) TMI 657
  Goods meant for Mega power project / Independent power project - international competitive bidding (ICB) - Denial of exemption under Notification No.6/06-CE dated 01.03.2006 and Notification No.6/2002-CE dated 01.03.2002 - Held that:- Joint Secretary in the Ministry of Power in the certificate issued by him in respect of power project, in question, has certified that the power project is interstate Thermal Power Project of capacity of 1000 Mega Watt and has also certified regarding fulfilment of the conditions 86 (a) (i) and (a) (ii) the condition No.86 and in respect of the condition No.86 (a) (iii) the Joint Secretary in his letter dated 17.08.2005 addressed to M/s. Jindal has clarified that this condition has not applicable for independent power project. This fact has also been taken note of by the Commissioner in para 5.1.3 of the impugned order. When a particular condition prescribed in Notification No. 21/02-Cus. for full customs duty exemption is not applicable and for this reason, the condition cannot be satisfied, its fulfilment cannot be insisted in accordance with the principle of lex non cogit ad impossiblia which is applicable to the tax matters also. We, therefore, hold that the denial of exemption under Notification No.6/02 -CE and 6/06-CE on the ground that the goods imported would not be eligible for customs duty exemption under Notification No.21/03-Cus. is not correct. - decided in favour of assessee.

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• 2015 (6) TMI 656
  Duty demand - Insurance claim - Held that:- In their remand proceedings there were directions to Revenue also to tell the appellant under which provision revenue is seeking the demand of duty from the appellant on insurance claim on damaged goods. Neither both the authorities below nor the Ld. AR is able to tell under which provision duty is payable before the appellant on insurance claim received for damaged goods. In these circumstances, relying on the case laws cited by the Ld. Counsel for the appellant, Ratnatraya Heat Exchangers Ltd. Vs. CCE Mumbai[2011 (3) TMI 385 - CESTAT, MUMBAI], I hold that demand is not sustainable. - impugned order is set aside - Decided in favour of assessee.

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• 2015 (6) TMI 655
  Denial of CENVAT Credit - Fraudulent availment of CENVAT Credit - Held that:- The sole reason to denying the CENVAT Credit is that the Revenue did not find any entry at Punjab Sales Tax Barrier but on the other hand entry at the Himachal Pradesh Sales Tax Barrier entry point is there. Therefore, the receipt of scrap has been entered into the barrier of Himachal Pradesh. Moreover, the allegation against the respondent is that they have procured this scrap from Delhi. If the scrap is procured from Delhi to enter into Himachal Pradesh, the same has to pass through many State Barriers but Revenue has failed to prove that respondent has procured the scrap from Delhi with cogent evidence that same has passed through various barriers particularly from the Punjab Barrier of Sales Tax. Admittedly, no statement of transporters has been recorded to unearth the truth and the payment of all the scraps have been made by the respondent through account of payee cheques. In the absence of any cogent evidence against the respondent, the charge of availment of fraudulent CENVAT Credit on melting scrap on the invoices issued by the dealers of Mandi Govind Garh is not sustainable. Demand of differential duty - imported melting scrap - Held that:- certificate issued by the Range Superintended cannot be denied by any authority in the absence of any contrary evidence. Admittedly, in this case Revenue has not produced any contrary evidence. Therefore, the end user certificate is a reliable evidence to ascertain the fact that the respondent has received the imported melting scrap, therefore, we hold that respondent are entitled for the benefit of notifications allowing the entitlement of concessional rate of duty on the condition of end user as the respondent has complied with the conditions of notifications. Therefore, on imported melting scrap, the respondent is not liable to pay differential custom duty and cannot be denied CENVAT Credit of CVD paid by them. Clandestine removal of goods - parallel invoices - Held that:- Merely, the statement that they have received these photocopies of invoices from Excise and Tax Department of Himachal Pradesh, in the absence of any documentary evidence, the parallel invoices are no acceptable documents, therefore, we hold that the duty cannot be demanded on this fake invoices produced by the Revenue. Therefore, demand of duty against the respondent on this account is also not sustainable. - Decided against Revenue.

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• 2015 (6) TMI 654
  Determination of value of ammonia manufactured by the appellant - Rule 6(b)(i) - Held that:- The appellant, no doubt, had cleared ammonia to the dealers and, therefore, the value of comparable goods manufactured by them is available. But, in accordance with the proviso to Rule 6(b)(i), while determining the assessable value in respect of captively consumed goods, the proper officer has to make reasonable adjustments taking into consideration all relevant factors. To our mind, the relevant factors to be considered would be factors such as quantity of sales, transportation, packing etc. Therefore, it is necessary that the adjudicating authority consider all relevant factors for arriving at the value of captively consumed goods. With these directions we remand the matter to the adjudicating authority - Matter remanded back - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (6) TMI 664
  Levy of turnover tax - Section 10A - turnover tax was leviable only on turnover of sales and purchase above Rs. 50 lakhas. - total turnover including branch transfer outside Gujarat was Rs. 2,38,70,378. The assessing authority has allowed branch transfer of Rs. 2,06,45,800 and Rs. 20,80,022 as interstate sales - Held that:- Tribunal has not committed any error in passing the impugned judgment and order. The learned Tribunal has dealt with all the issues with respect to turnover the tax levied under Section 10A; interest charged under Section 47(4A)(a); interest charged under Section 47(4B) and penalty levied under Section 45(6) of the Act in extenso. Levy of interest - Held that:- The learned Tribunal has specifically observed and held against the assessee and in favour of the Government that the ad-hoc payment cannot be said to be payment made under Sub-Sections (1), (2) or (3) of Section 47 of the Act. However, it is further observed that the interest so levied, would be limited from the date of expiry of time prescribed to the date when the ad-hoc payment was made, subject to however that the difference of tax paid and tax assessed exceeds 10% of the tax paid. - there is no substance in the main tax appeal and the impugned judgment and order passed by the learned Tribunal is not required to be interfered with by this Court, to issue Rule in the present application for condonation of delay, call upon the respondent, to condone the delay and thereafter, to dismiss the appeal would, as such, be exercise in futility or the same be unnecessary burden upon the respondent. - Decided against Revenue.

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• 2015 (6) TMI 629
  Clandestine removal of goods - Duty demand - Held that:- No material is available on record to show that any enquiry was made through the vehicle owners or any material was confronted to the assessee-dealer. Further, in the absence of the same, we find that fastening of liability on the petitioners in the facts and cirumstances was uncalled for. - Revenue had failed to prima facie demonstrate with reference to any material on record that there existed some nexus of the petitioners to remove the alleged goods without payment of tax in accordance with law. Furthermore, the factum of the petitioners being exempted unit till November 3, 1988 was also not disputed. - Impugned order is set aside - Decided in favour of assessee.

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