TMI Tax Updates - e-Newsletter
June 23, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Exemption u/s 54F is denied where assessee purchase a residential plot and constructed a house in the name of his unmarried daughter - Tri

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• Old loans being converted into share application money and since there was no fresh infusion of credit, no addition u/s 68 can be made - HC

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Articles

1. SERVICE TAX EXEMPTION TO PACKAGED / CUSTOMIZED SOFTWARE

   By: Dr. Sanjiv Agarwal

2. CORREIGENDUM TO SHOW CAUSE NOTICE AFTER ADMISSION OF SETTLEMENT APPLICATION – WHETHER SUSTAINABLE?

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Establishment of Fund of Funds for funding support to Start-ups

2. Cabinet approves Protocol amending the Agreement for avoidance of double taxation and prevention of fiscal evasion with Belgium

3. 3rd National Standards Conclave

4. RBI Reference Rate for US $

5. Clarification regarding News Report of Arrest of Tax Defaulters

Notifications

DGFT

1. 11/2015-2020 - dated 21-6-2016 - FTP

Additional quota of 2 lakh MT for import of Rough Marble & Travertine Blocks to authorisation holders under Trade Notice No. 12/2014 dated 8/1/2015

Income Tax

2. 47/2016 - dated 17-6-2016 - IT

Section 197A of the income-tax Act, 1961 - Deduction of tax at source - no deduction in certain cases - Specified payment under section 197A (1F) - if payment is made to a bank listed in the Second Schedule to the Reserve Bank of India Act, 1934

3. 46/2016 - dated 17-6-2016 - IT

No TDS under the Chapter XVII of the income-tax Act, 1961 on the payments of the nature specified in clause (23DA) of section 10 of the said Act received by any securitisation trust as defined in clause (d) of the Explanation to section 115TC

Circulars / Instructions / Orders

Income Tax

1. Press Release - dated 22-6-2016

Amendment in rule 114H of Income-tax Rules, 1962

DGFT

2. 18/2015-2020 - dated 22-6-2016

Allocation of additional quantity for export of sugar to USA under Tariff Rate Quota (TRQ)

3. 9/2016 - dated 21-6-2016

Additional quota of 2 lakh MT for import of Rough Marble & Travertine Blocks to authorisation holders in terms of Notification No. 11 dated 21/6/2016

Highlights / Catch Notes

Income Tax

• No Tax Deduction for Payments to Banks u/s 197A(1F) of Income-tax Act: Facilitating Financial Transactions.

  Notifications : Section 197A of the income-tax Act, 1961 - Deduction of tax at source - no deduction in certain cases - Specified payment under section 197A (1F) - if payment is made to a bank listed in the Second Schedule to the Reserve Bank of India Act, 1934 - Notification
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• High Court affirms ITAT ruling: Converting old loans to share application money isn't new credit u/s 68.

  Case-Laws - HC : Addition u/s 68 - ITAT is correct in holding that old loans being converted into share application money and since there was no fresh infusion of credit, section 68 of the Income Tax Act, 1961 is not applicable - HC
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• Penalty u/s 271(1)(c) Overturned Due to Lack of Inquiry on Taxpayer's Land Sale Income Explanation.

  Case-Laws - AT : Penalty u/s 271(1)(c) - taxability of income from sale of land - AO has accepted the amount offered by the assessee as his income and levied penalty without making any enquires and investigation to disprove that the explanation given by the assessee is either false or bona fide - No penalty - AT
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• Department's Adjustment Revenue Neutral Due to Consistent Tax Rates, No Income Addition per Accounting Standard-9.

  Case-Laws - AT : Accrual of income - the income was not booked as per Accounting Standard-9(AS-9) issued by the ICAI - since the tax rates applicable to the company both in assessment year were the same, the adjustment made by the Department was revenue neutral - No addition - AT
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• Exemption Denied u/s 54F for Property Not in Assessee's Name; Must Be in Assessee's Name to Qualify.

  Case-Laws - AT : Exemption u/s 54F - assessee purchased a residential plot and constructed a house in the name of his unmarried daughter who was dependent and before due date of filing of return of income under section 139(1) - exemption should be allowed only in the name of the assessee - Exemption was rightly denied - AT
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• CIT's Use of Section 263 Overruled; Audit Note Insufficient for Revising Assessments u/s 40A(3) Violation Claim.

  Case-Laws - AT : Revision u/s 263 - violation of the provisions of section 40A(3) - CIT is not justified in invoking jurisdiction u/s 263 on the strength of an audit note - AT
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• No Penalty for Late Tax Payment: Assessee Pays Within a Month, Avoids Penalty u/s 221(1.

  Case-Laws - AT : Levy of penalty u/s 221(1) - default in payment of tax - assessee has not paid taxes which are payable along with a return of income, however paid within a month even before the notice issued by the A.O. and the assessee complied the demand of tax voluntarily - No penalty - AT
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• No Penalty Imposed for Share Sale Proceeds u/s 271(1)(c) Due to Debatable Nature of Section 68 Addition.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition u/s 68 being sale proceeds of shares, as income from undisclosed sources - the issue is debatable and in such a case no penalty was imposable u/s 271(1)(c) of the Income-tax Act, 1961 - AT
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• Section 43B Not Applicable: No Entry Tax Provision in Profit & Loss Account Means No Claim, No Disallowance.

  Case-Laws - AT : Disallowances of the provision of entry tax liability under section 43B - Given that there is no claim of provision of entry tax in the profit/loss account and, hence, in the absence of a claim of an expense, the question of section 43B getting attracted does not arise at the first place. - AT
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• Legal Heir Penalized u/s 271(1)(c) of Income Tax Act; Penalty Deemed Unjustified per Section 159(2).

  Case-Laws - AT : Penalty u/s 271(1)(c) imposed on the legal heir - any sum referred in section 159(1) does not include the penalty proceedings on the legal representative under section 159(2) of the Act. Therefore, penalty imposed on the legal heir is not justified. - AT
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• Section 2(15) Interpretation: Seminar and Conference Activities Classified Separately for Tax Exemption u/s 11.

  Case-Laws - AT : Exemption u/s 11 - the activities of the assessee in organizing seminars and conferences, etc. can be seen de hors its main object of general public utility so as to bring the case within the ambit of first proviso to section 2(15). - AT
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• CIT improperly ordered review of deemed dividends under Sec 2(22)(e) during Sec 153A proceedings, violating Sec 263.

  Case-Laws - AT : CIT was wrong in directing the examination of taxability of deemed dividend u/s 2(22)(e) of the Act, in the proceedings u/s 153A of the Act while passing order u/s 263 of the Act when the proceedings under Section 153A itself has not unearthed the said issue. - AT
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• Directors' Remuneration Allowed Despite No Revenue Receipts; Company Operational and Generating Revenue Later.

  Case-Laws - AT : Disallowance of remuneration to Directors - Although no revenue receipts are generated during the year, however, the company is in existence and has started generating revenue in the next year - No disallowance - AT
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Customs

• Penalty Imposed for Misuse of Importer Exporter Code in Smuggling Incense Raw Materials from India.

  Case-Laws - AT : Levy of penalty for lending of the IEC - Smuggling of prohibited goods from India - export of incense raw materials - Levy of penalty confirmed - AT
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• Chief Commissioner Urged to Promptly Address Petitioner's Request for Customs Duty Payment in Installments.

  Case-Laws - HC : Recovery of duty of customs - can the payment be made in installments - As the petitioner has submitted a representation to the Chief Commissioner on 03.12.2015, ends of justice would be met if the Chief Commissioner is directed to dispose of the representation with utmost expedition, and in accordance with law. - HC
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• Notification Effective September 17, 2015, Despite Gazette Sales Delay Until September 21, 2015.

  Case-Laws - HC : The notification came into force on the date of its issue for publication in the Official Gazette and such date, indisputably, was September 17, 2015 - The Official Gazette containing the said notification may not have been put up for sale prior to September 21, 2015. But that is of no consequence - HC
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• High Court Disapproves Denial of Advance Licence Request Based on DRI Letter; Advises Petitioners to Contact DRI Ahmedabad.

  Case-Laws - HC : Denial of issuing Advance Licence as per the FTP - petitioners were informed that their request for advance licence could not be considered in view of the letter of the DRI and that the petitioners should take up the matter with the concerned DRI, Ahmedabad - HC disapproved the action.
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• Court Orders Revenue Dept to Decide on Cash Refund Claim for Withdrawn Reward Scheme Scrips in 3 Months.

  Case-Laws - HC : Claim of refund in cash - whether the petitioner is entitled to refund of the amount, claimed by them, in cash, as the reward scheme scrips has been withdrawn - Revenue directed to pass a reasoned order within 3 months. - HC
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Service Tax

• Court Finds No Need for Deep Inquiry as Respondents Promise No Harm in Service Tax Dispute Investigation.

  Case-Laws - HC : Probability of arresting the Directors or employees of the petitioner - non payment of service tax - investigation are on - fear of coercive proceedings for recovery of service tax demand - Once we note the stand of the Respondents as not precipitating the matter particularly harming the life and liberty, no need to discuss the issue and arguments in-depth - HC
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• Debate on Export of Services: Does Payment in Indian Rupees Qualify as Convertible Foreign Exchange? Export Rules 2005 in Focus.

  Case-Laws - AT : Export of services or not - Export of Service Rules, 2005 - such set of arrangement would amount to receiving the consideration in Indian rupee would amount to receiving the consideration in convertible foreign exchange only. - AT
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Central Excise

• Court Grants Anticipatory Bail in Ceramic Tiles Excise Duty Evasion Case Involving MRP and Selling Price Discrepancy.

  Case-Laws - HC : Evasion of duty of excise - Anticipatory bail - MRP based valuation - valuation dispute of ceramic tiles - difference of Maximum Retail Price and the product sold at more than the Maximum Retail Price - clandestine removal of goods by the manufacturer. - the applicants are ordered to be released on anticipatory bail in the event of their arrest - HC
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• Transfer of Chain Division: No Reversal of CENVAT Credit or Duty Demand on Finished Goods Required.

  Case-Laws - AT : Transfer of business - reversal of cenvat credit - demand of duty on finished goods - transfer of entire Chain Division Business out of two divisions in toto, including plant, machinery, raw material work-in-progress and finished goods to a new company - Reversal of credit is not required - AT
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• Cenvat Credit Dispute: Court Rejects Revenue's Claim of Double Availment on Inputs by Job Worker.

  Case-Laws - AT : Cenvat Credit - duty paid by the Job worker - inputs which were transferred to the job worker without reversal of such credit - The case of the Revenue is that the appellants have availed credit on same inputs twice is not tenable - AT
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• DTA unit converting to 100% EOU not required to reverse Cenvat Credit on transferred capital goods and inputs.

  Case-Laws - AT : Conversion of DTA unit into 100% EOU - reversal fo Cenvat Credit attributable to the capital goods and inputs transferred to their 100% EOU within the factory premises or otherwise. - No reversal of credit is required - AT
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• Extended Duty Demand Period Not Applicable: No Willful Suppression Detected in ER-1 Returns Examination by Range Officer.

  Case-Laws - AT : Demand of duty - When assessee duly filed ER-1 returns, the jurisdictional Range Officer is required to carryout scrutiny of the returns. If this had been done, the short payment would have come to light. In such circumstances, extended period cannot be invoked as there is no wilful suppression or collusion with intent to evade payment of duty - AT
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• Refund Approved as Appellant Paid Duty Without Passing Cost to Buyers Post-Investigation.

  Case-Laws - AT : Refund of duty - unjust enrichment - The duty was paid by appellant much later after starting of investigations. So it cannot be said that the incidence of duty has been passed on to buyers. - refund allowed - AT
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• Extended Duty Demand Post-ER-1 Return Scrutiny Deemed Unreasonable After Two-Year Delay.

  Case-Laws - AT : Demand of duty - the starting of the enquiry was stated to be scrutiny of ER-1 Returns. This was done apparently after two years. Invoking extended period for demand is not tenable in such a situation. - AT
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• Allegations of Fake Invoices for Cenvat Credit Claims Dismissed Due to Lack of Independent Evidence.

  Case-Laws - AT : Cenvat Credit - allegation of receipt of invoice without receipt of inputs / goods - On an overall appreciation of facts and evidence it is seen that whole case is based upon third party private records and statement of such third party - In the absence of independent evidence the charges leveled against the appellant is not sustainable - AT
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VAT

• High Court: Concessional Tax Rate Under CST Cannot Be Revoked for Not Producing Forms C and F Accidentally.

  Case-Laws - HC : Failure to produce declaratory forms C and F - The benefit of concessional rate of tax under CST cannot be taken away on account of an inadvertent lapse on the part of the petitioner - HC
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Case Laws:

• Income Tax

• 2016 (6) TMI 804
  Addition u/s 68 - ITAT held that old loans being converted into share application money and since there was no fresh infusion of credit, section 68 of the Income Tax Act, 1961 is not applicable - Held that:- It is not the case of the revenue that any sum was found credited in the books of the assessee maintained for the previous aware. We are, in this case, concerned with the financial year ending on March 31, 2003 which commenced on April 1, 2002. It is not the case of the revenue that during the period between April 1, 2002 and March 31, 2003, any sum was credited in the books of accounts of the assessee. The case of the revenue is that on April 1, 2002, the assessee owed a sum of 76,98,000/- to four several creditors. The debt owed by the assessee to those creditors was converted into share applications money. It is as such not a case where money was introduced to the till of the assessee during the relevant previous year. The money had already found its way into the till of the assessee since prior to April 1, 2002. Only the nature of deposit had changed during the previous year. The money which was owed by the assessee by way of loan now became the capital of the assessee. We find that the views taken by the learned Tribunal are in conformity with section 68. Ms. Quereshi has also not been able to disclose any reason why any other view should be taken by us. - Decided against revenue

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• 2016 (6) TMI 803
  Revision u/s 263 - taxability of deemed dividend under Section 2(22)(e) of the Act in the proceedings u/s 153A - Held that:- In present case the issue of deemed dividend does not arise from the provisions of Section 153A of the Act and there is no seized material unearthed at the relevant time. Thus it is beyond Assessing Officer’s power to address the said issue in proceedings initiated under Section 143(3) read with Section 153A of the Act. The CIT was wrong in directing the examination of taxability of deemed dividend under Section 2(22)(e) of the Act, in the proceedings u/s 153A of the Act while passing order under Section 263 of the Act when the proceedings under Section 153A itself has not unearthed the said issue. Thus, the CIT do not have power under Section 263 of the Act to give its own opinion when there is no new material unearthed. The issue taken up by the CIT was not within the purview of the Assessing Officer at the inception of assessment proceedings. - Decided in favour of assessee

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• 2016 (6) TMI 802
  Denial of benefit of sections 11 and 12 - object of carrying on the activity which resulted into income - income from Seminar and conferences - Held that:- The assessee has been set up as a body of Indian Automobile Manufacturers with a view to improve and protect the environment and safety of automobile vehicles and also to work towards the growth of automobile industry in India. All the ancillary objects are directed towards the attainment of principal objects in a meaningful manner. The assessee is annually organizing Auto Expo, which is a trade fair confined to automobile industry. The automobile manufacturers give advertisements of their products which is the major source of receipts from Auto Expo apart from sale of tickets. Since all the manufacturers of automobiles are the members of the assessee society and the Auto Fair is organized displaying various products of automobiles, being the object for which the assessee was set up, it cannot be described as carrying on business, trade or commerce. The next major item is Seminars and conferences against which receipt of 1.85 crore has been shown. The assessee held four seminars/conferences, namely, SIAM Annual Session, Technical seminar, AOTS – Kaizen/MTP Programme and WHTC-August, 2009. Total receipts from these four conferences/seminars has totaled to 1.85 crore. The major item of receipt is 1.59 crore from ‘SIAM Annual Session’, the details of which are available on page 89 of the paper book. As perusing these receipts above, it emerges that these are largely sponsorship amounts received from automobile companies. Details of expenses incurred on seminars and conferences have been set out on page 106 of the paper book. These details reveal that for some conferences, income is higher than the expenses, while for others, it is vice versa. Above narration of the activities actually undertaken by the assessee transpires that these are aimed at the overall promotion of the automobile sector. Even if there has resulted some surplus in organizing these conferences and seminars etc., it cannot be said that the assessee carried out any trade, commerce or business or rendering any service in relation to any trade, commerce or business. It is manifest that none of the activities undertaken by the assessee was pursued with the prior object of earning income. Au contraire, all such activities were performed with the prior object of promotion of growth of the automobile industry in India which is an object of general public utility. The activities of the assessee in organizing seminars and conferences, etc. can be seen de hors its main object of general public utility so as to bring the case within the ambit of first proviso to section 2(15). Even if there has generated some excess of receipts over expenses in doing these activities, the same is a normal incidence of the activity of promotion of automobile industries and cannot be characterized as doing any business etc. or rendering of any services in connection with business etc. Since the AO has denied the benefit of sections 11 and 12 on the ground that the assessee did not fall within the scope of charitable purpose defined in section 2(15) of the Act because of carrying on or rendering of any services in business, trade and commerce, which in our considered opinion is not a correct interpretation of the provision, we direct to grant such benefit to the assessee - Decided in favour of assessee

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• 2016 (6) TMI 801
  Disallowance of remuneration to Directors - AO disallowed 50% of the payment of salary to the Directors as being not wholly and exclusively for business purposes - Held that:- As submitted by the assessee that in the subsequent year the assessee company has started getting revenue receipts and the personnel cost has also gone up to 15.23 lakhs as against 12.01 lakhs during the year. The directors have been paid salary of 9,00,000/- each in A.Yrs. 2008-09 and 2009-10 and no disallowance has been made by the AO, we find force in the above submission of the Ld. Counsel for the assessee. Although no revenue receipts are generated during the year, however, the company is in existence and has started generating revenue in the next year, a fact stated by the Ld. Counsel for the assessee and not controverted by the Ld. Departmental Representative. In the immediately preceding assessment year, the company has paid remuneration of 9,00,000/- and no disallowance has been made. In our opinion, once a Director is in employment his salary should not be reduced in a particular year because there is no generation of revenue. The logic given by the revenue authorities in the instant case in our opinion is not justified. We therefore set aside the order of the CIT(A) and direct the AO to delete the disallowance out of remuneration to Directors. Disallowance of rent for residence of the Director - Held that:- It is an admitted fact that no such rent was paid in the preceding year when the business was going on. When there is no business activity during the year, there was no justification for giving rent of 2,43,000/- for residence of the Director. Further, the rent has been paid to the wife of the Director who is a specified person u/s.40A(2)(b). Similarly, the usage charge of 57,000/-, i.e. rent for the furniture also is uncalled for under the facts and circumstances of the case. We, therefore, uphold the order of the CIT(A) in disallowing the rent expenses of 3 lakhs. Disallowance of travelling, postage and telephone expenses - Held that:- We find the assessee has travelled to Bangkok, Malaysia and Kaulalumpur which are mainly tourist spots. Nothing has been produced before us that the assessee has gone to these places in relation to his business activity and which has resulted into some business. No such proof was also filed that he had discussed with some people/business houses there on account of mining activity. Merely stating that assessee travelled to these places for venturing into new business of mining is not convincing. Therefore, an amount of 1,48,116/- being 50% of travelling expenses out of 2,96,213/- is justified. However, since the assessee is a Private Limited Company, the disallowance of 50% of Telephone expenses, i.e. 79,310/- out of 1,58,620/- and 50% depreciation on motor cars amounting to 1,17,453/- out of 2,34,906/- is not justified. The addition, if any, can be made in the hands of the Directors as perquisite. Disallowance of Electricity expenses - Held that:- As we find the same has rightly been disallowed by the AO and upheld by the CIT(A) since the same relates to the bills of Radhika Bungalow where the parents of the assessee are residing and bills of the residence of one of the Directors Shri Sandip Mantri. Appeal decided partly in favour of assessee

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• 2016 (6) TMI 800
  Levy of penalty u/s 221(1) - default in payment of tax - Held that:- We find that the assessee filed the return of income. However, on the date of return of income filed, the admitted tax is not paid. Subsequently, within a month, assessee has paid almost all the amounts which are payable on the date of the filing of the return of income. The A.O. was of the opinion that the assessee has violated the provisions of section 221(1) of the Act and accordingly levied the penalty at 100% of tax payable. On appeal, the Ld. CIT(A) by considering the explanations given by the assessee, he has restricted the penalty to 10% of tax payable with an observation that the assessee has paid the taxes even before the issue of the notice by A.O. u/s 221(1) of the Act and complied the tax demand voluntarily. We find that the assessee has not paid taxes which are payable along with a return of income, however paid within a month even before the notice issued by the A.O. and the assessee complied the demand of tax voluntarily. Under these above facts and circumstances of the case, it is not a fit case to impose penalty u/s 221(1) of the Act. - Decided in favour of assessee

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• 2016 (6) TMI 799
  Penalty u/s 271(1)(c) imposed on the legal heir - genuineness of purchase - assessee could not produce original evidences at the time of quantum proceedings but produced during the penalty proceedings - Held that:- It is undisputed fact that the assessee expired on November 22, 2010. In this case, the assessment was completed on December 17, 2008, and penalty was imposed on March 1, 2011. It means that after the death of the assessee. The assessee claimed the expenditure of 6,09,534 in the profit and loss account, which has been disallowed by the Assessing Officer. The same has been confirmed by the Income-tax Appellate Tribunal, vide order dated November 26, 2010. The assessee claimed that this marble was fixed in the construction made in Kamla Modi Market which was purchased on February 3, 2006. Copy of the bill placed before us on page 9 of the paper book, which is copy of the bill of lading for purchase of marble at 4,11,608 on which registration number of the seller and the name of the transporter has been given. The evidence placed for remaining expenses also perused and we find that the assessee could not produce these original evidences at the time of quantum proceedings but produced during the penalty proceedings before the learned Commissioner of Income-tax (Appeals) but he has not taken any cognizance. He simply treated them as non-genuine. The learned Commissioner of Income-tax (Appeals) has coterminous power with the Assessing Officer as penalty proceedings are distinct from the assessment order, he could have sent these evidences to the Assessing Officer for verification. The inquiry made by the Inspector in December, 2008, to verify the marble fixed in the constructed area. The case law referred by the assessee particularly the decision of the Mumbai Income-tax Appellate Tribunal Bench in the case of Bhagwansingh Shriramsingh L/H Dinesh Bhagwan Singh v. ITO [2006 (5) TMI 270 - ITAT MUMBAI] is squarely applicable as any sum referred in section 159(1) does not include the penalty proceedings on the legal representative under section 159(2) of the Act. Therefore, penalty imposed on the legal heir is not justified. - Decided in favour of assessee

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• 2016 (6) TMI 798
  Penalty u/s 271(1)(c) - taxability of income from sale of land - as per revenue income earned from sale of land is liable to be taxed and the assessee has not entitled for deduction under section 54B - Held that:- The assessee had a bona fide belief that M/s. Alpha Commercials, according to the mutual agreement, invested the money in residential property so as to facilitate the assessee to have a benefit under section 54F/54B of the Act. However, the Assessing Officer has not considered the explanation offered by the assessee as bona fide and he simply rejected the explanation by saying that the assessee has made a wrong claim in the original return of income and failed to disclose all material facts truly and wholly. According to the Assessing Officer, had it been there is no survey, the assessee's claim would have been gone unnoticed. However, it is not the case of the Assessing Officer that the assessee's claim was false or bogus. Neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) examined the claim of the assessee that whether the assessee has given money to M/s. Alpha Commercials for the purpose of investment in residential property. The Assessing Officer observed that just because the assessee has remitted the demand raised by the Department, it cannot be a reason for levying the penalty. However, he has not found the claim of the assessee that the assessee has handed over the money to M/s. Alpha Commercial for investment in residential property. Further, when the assessee has given an explanation that he has given money to Alpha Commercials for the purpose of investment in residential house, it is the duty of the Assessing Officer to examine the records of M/s. Alpha Commercials to find out whether, the claim of the assessee is genuine or not. The Assessing Officer without making investigation, cannot presume that the explanation given by the assessee is false or bogus. In the present case, the assessee submitted a detailed explanation before the Assessing Officer. Thereafter, it is the duty of the Assessing Officer to establish that the assessee has concealed income or furnished inaccurate particulars of income. In the present case, the Assessing Officer has accepted the amount offered by the assessee as his income and levied penalty without making any enquires and investigation to disprove that the explanation given by the assessee is either false or bona fide. Therefore, in our opinion, the penalty cannot be levied in the present case. - Decided in favour of assessee

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• 2016 (6) TMI 797
  Penalty u/s 271(1)(c) - addition u/s 68 being sale proceeds of shares, as income from undisclosed sources - Held that:- The issue on hand is debatable, open and capable of having an alternate view as the same is held to be representing a substantial question of law by the Jurisdictional High Court at the time of admission of appeal. Accordingly, it is appropriate for us to hold, that the assessee was under a bona fide belief for staking its claim and in the presence of these factors, no penalty under section 271(1)(c ) is leviable. The Hon'ble Delhi High Court in the case of CIT vs. Liquid Investment Limited (2010 (10) TMI 1021 - DELHI HIGH COURT) has clearly held that where High Court has accepted substantial question of law u/s 260A, this itself shows that issue is debatable and in such a case no penalty was imposable u/s 271(1)(c) of the Income-tax Act, 1961. - Decided in favour of assessee

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• 2016 (6) TMI 796
  Accrual of income - Addition to rent receivable from the Railways for use of STM 4 Bandwidth on accrual basis - the income was not booked as per Accounting Standard-9(AS-9) issued by the ICAI - Assessee submitted that since the tax rates applicable to the company both in assessment year 2008-09 (i.e. the year under appeal) and assessment year 2009-10 (i.e. the year in which the company had included the impugned amount in its income) were the same, the adjustment made by the Department was revenue neutral. Held that:- In CIT, Delhi, Ajmer, Rajasthan and Madhya Bharat v. Nagri Mills Co. Ltd. (1957 (9) TMI 30 - Bombay High Court ) the Hon’ble Bombay High Court has held, “We have often wondered why the Income-tax authorities, in a matter such as this where the deduction is obviously a permissible deduction under the Income- Tax Act, raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different; but in the case of income of a company, tax is attracted at a uniform rate, and whether the deduction in respect of bonus was granted in the assessment year 1952-53 or in the assessment year corresponding to the accounting year 1952, that is in the assessment year 1953-54, should be a matter of no consequence to the Department; and one should have thought that the Department would not fritter away its energies in fighting matters of this kind. But, obviously, judging from the references that come up to us every now and then, the Department appears to delight in raising points of this character which do not affect the taxability of the assessee or the tax that the Department is likely to collect from him whether in one year or the other. ” In the result, the appeal of the assessee is allowed.

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• 2016 (6) TMI 795
  Denial of exemption under section 54F - assessee purchased a residential plot and constructed a house in the name of his unmarried daughter who was dependent and before due date of filing of return of income under section 139(1)- Held that:- We perused the provisions of section 54F of the Act which are beneficial provisions but exemption under section 54F has to be claimed only by purchasing/ constructing a new residential property in the assessee's own name and not on his unmarried daughter. This exemption is exclusive to be claimed by the assessee which cannot be clubbed or applied to the blood relation or family members and also rely on the decision of Prakash v. ITO [2008 (9) TMI 234 - BOMBAY HIGH COURT ] where the Lordships have considered that the exemption should be allowed only in the name of the assessee, confirm of the order of the Commissioner of Income-tax (Appeals) on this ground and dismiss the ground of the assessee. Addition twice the sale consideration - source of expenditure incurred for construction - Held that:- The findings of the Assessing Officer based on suspicion without considering the construction expenditure incurred towards labour, materials on day-to-day basis being highly unorganised sector. The observations of the Assessing Officer that the money has been used for some other purpose and investment are made in the construction of the residential property is from undisclosed source which are different from the Tamilnadu Mercantile Bank Ltd. are without any basis or evidence. But on a perusal of the bank account produced in hearing proceedings, we found that cheques were also issued in the name of the persons, and there is no clarity on issue whether the said sum was utilised for the construction of residential building. Therefore, we are of the opinion that the matter has to be re-examined by the Assessing Officer in the above context. Unexplained investment in respect of land - family arrangements - Held that:- Assessing Officer on suspicion treated the difference of 21,53,000 as unexplained income without any evidence or statement recorded from the assessee's mother or sister. The learned Assessing Officer has relied on the sworn statement of the assessee and the daughter and made elaborate findings in his order on addition. The Assessing Officer's observation of unexplained income is on imagination overlooking the fact that the life interest is created for the assessee's mother and sister by will of the late Dharmaraj Nadar (father) in the year 2001. The learned Assessing Officer hastily based on assumption made an addition without considering the basic realities of blood relations and their influence in completing the sale transaction. Therefore, considering the apparent facts and circumstances, we are of the opinion that the matter need to be re-examined as the learned Assessing Officer has not recorded any statement or made inquiry on this aspects. We set aside the order of the Commissioner of Income-tax (Appeals) on this issue and remit the entire issue to the file of the Assessing Officer for limited purpose only to verify the excess amount in bank account pertains to the mother and sister of the assessee.

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• 2016 (6) TMI 794
  Disallowances of the provision of entry tax liability under section 43B - Held that:- Following the double entry system of accounting, the appellant has created a liability by way of a provision towards the entry tax and a corresponding asset in its balance-sheet and there is no charge/transfer of provision to the profit/loss account. The appellant has been consistently passing these entries for the earlier years as well, i.e, the assessment years 2008-09, 2009- 10. Given that there is no claim of provision of entry tax in the profit/loss account and, hence, in the absence of a claim of an expense, the question of section 43B getting attracted does not arise at the first place. Section 43B postulates a situation where the expense otherwise allowable under the Act is subject to disallowance on non-fulfilment of the conditions stipulated therein. Unlike claim of depreciation where the statute stipulates a mandatory allowance of depreciation even if not claimed, there is no such statutory provisions in respect of the claim of statutory liability which even though not claimed but would still be deemed to be allowed for tax purposes. CIT(A) correctly deleted the addition - Decided in favour of assessee Disallowance of remuneration to the partners - Held that:- The remuneration has to be worked out based on certain percentage of the book profit which will be determined at the end of the year. It is also provided that the total amount of the remuneration so worked out is to be shared equally amongst all the three partners and in case of loss, no salary would be allowable to the partners. The CBDT circular similarly provides that where either the quantum or the manner of quantification of remuneration to the partners has been specified in the partnership, the same shall be allowable under section 40(b)(v) of the Act and not otherwise. In the instant case, given that the salary has been made a function of annual book profit which can be determined only at the end of the year, the exact quantum of remuneration has not been specified. At the same time, the partnership deed clearly provides for the manner of quantification of remuneration. It is not a case simpliciter that the partners have left the doors open to claim the remuneration as per section 40(b)(v) of the Act which apparently is the backdrop for issuance of CBDT Circular No. 739, dated March 25, 1996. Given the clear fact and CDBT guidance which rather supports the case of the appellant than the Revenue, the learned Commissioner of Income-tax (Appeals) has rightly deleted the disallowance where is hereby confirmed - Decided in favour of assessee Disallowance of depreciation - absence of valid documentary evidence in support of purchase of truck during the year - Held that:- Commissioner of Income-tax (Appeals) has given a categorical finding that the truck was registered in the name of assessee which is not disputed before us and the wrong mentioning of seller's name appears to be clerical error. He, accordingly, allowed depreciation of 31,800 which is hereby confirmed - Decided in favour of assessee

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• 2016 (6) TMI 793
  Revision u/s 263 - violation of the provisions of section 40A(3) - proceedings initiated on the basis of the audit objections - Held that:- The examination of violation of the provisions of section 40A(3) has been examined by the Assessing Officer on three occasions and he had not found any violation of such provisions. The reply filed by the assessee clearly shows that to manage his business at various places the advances were made to various supervisors engaged working in various locations and these supervisors used to submit the details of material purchased by them and for making payments to labour and each payment was less than 20,000 and, therefore, in fact, there was no violation of the provisions of section 40A(3). Assessing Officer has already applied his mind and has taken a concise decision of not making addition for violation of the provisions as there were no violation at all and, therefore, the order passed by the Assessing Officer was not erroneous and was not prejudicial to the interests of the Revenue. The proceedings under section 263 were initiated on the basis of the audit objections as is noted by the learned Commissioner in his order. The honourable Punjab and Haryana High Court in the case of CIT v. Sohana Woollen Mills [2006 (9) TMI 157 - PUNJAB AND HARYANA High Court ] wherein held Commissioner of Income-tax not justified in invoking jurisdiction under section 263 on the strength of an audit note - Decided in favour of assessee

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• 2016 (6) TMI 792
  Depreciation allowable under Section 11 - whether claim of depreciation by assessee trust would amount to double deduction? - Held that:- As decided in DIT (Exemptions) v. Al-Ameen Charitable Fund Trust [2016 (3) TMI 462 - KARNATAKA HIGH COURT ] while acquiring the capital assets what is allowed as exemption is the income out of which such acquisition of asset is made and when the depreciation deduction is allowed in the subsequent years, it is for the losses or the expenses representing the wear and tear of such capital asset incurred, if not allowed then there is no way to preserve the corpus of the trust for deriving its income. - Decided against revenue

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• 2016 (6) TMI 791
  Disallowance of club expenses - Held that:- It cannot be doubted that assessee is an internationally reputed consultancy company having clients and business across the globe and in that process, key employees and directors had to travel to various destinations in furtherance of their business. We find that the issue is covered by the various decisions of High courts and by this tribunal in assessee’s own case for AY 2002-03. The issue is also covered by the decision of the Hon’ble Apex Court in the case of CIT Vs. United Glass Mfg. Co. Ltd. [ 2012 (9) TMI 914 - SUPREME COURT ] wherein held that club membership fees for employees incurred by the assessee is business expense under Section 37 of the Income Tax Act, 1961. - Decided in favour of assessee

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• 2016 (6) TMI 790
  Transfer pricing adjustment - selection of comparable - determination whether the assessee has to be categorized as a Knowledge Process Outsourcing Services Provider (KPO) or BPO service provider - Held that:- As observed earlier, agreement with the AE for providing service was executed on 1.10.2004. It was valid upto 30.12.2012. In the year for which an order under section 10TE(6) was passed by the TPO, this agreement was relevant for the period 1.4.2012 to 30.12.2012 i.e. nine months. If an agreement for a period of nine months indicates that the assessee’s services were of low-end services, and those services can be categorized as BPO, then, how for the earlier period, the nature of services would be different ? In other words, same agreement cannot be give rise two types of services, merely on the basis of providing at different times. The TPO in the proceedings for the purpose of Safe Harbour Rules paid a visit in the office of the assessee, and himself collected information regarding nature of services. Thus, there is a conflict in the stand of the Revenue in different assessment years on one agreement. Considering this aspect, we are of the view that impugned orders are not sustainable on this issue, therefore, we set aside the assessment order including that of DRP and restore this issue to the file of the AO for fresh adjudication. The ld.AO shall take into account, the TPO’s order passed in subsequent period i.e. dated 26.2.2014 though passed for the subsequent period but deals with same agreement. If the assessee is being accepted as a BPO, then, all the comparable selected by the TPO would not be relevant, and a fresh inquiry has to be conducted. Considering all these aspects, we allow the appeal of the assessee for statistical purpose. Deduction under section 10A - whether Foreign exchange fluctuation gain is directly linked with export business carried on by the undertaking, and hence, deemed to be derived from undertaking’s business eligible for deduction u/s.10A? - Held that:- DRP has recorded a finding that foreign exchange fluctuation gain was directly linked with the export business carried out by the assessee, hence, it is to be treated as income derived by an undertaking. The ld.DR was unable to point out any significant error in the proposition canvassed by the ld.DRP for granting the deduction under section 10A of the Income Tax Act.

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• 2016 (6) TMI 789
  Addition towards purchasing and upgrading software - revenue or capital expenditure - Held that:- The impugned expenditure incurred by the assessee is revenue expenditure, because the same has been incurred towards the purchase of application software and upgradation charges which were required to run efficiently the existing software as well as license charges for using the existing software uninterruptly so as to run the business efficiently. We are, therefore, of the view that the ld. CIT(A) was not correct in confirming the disallowance and we accordingly delete this disallowance. See COMMISSIONER OF INCOME TAX Versus M/s ASAHI INDIA SAFETY GLASS LTD. [2011 (11) TMI 2 - DELHI HIGH COURT ] - Decided in favour of assessee

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• 2016 (6) TMI 788
  Subscription amount paid for club membership - whether an allowable business expenditure? - Held that:- In the instant case, the subscription paid towards membership for a period of five years and the same is being paid annually, thus is an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprise. Thus we hold that subscription amount paid towards membership in N.L.Planters club for a period of five years is an expenditure incurred wholly and exclusively for the purposes of business of the assessee. See COMMISSIONER OF INCOME TAX vs. SAMTEL COLOR LTD [2009 (1) TMI 26 - DELHI HIGH COURT] - Decided in favour of assessee Addition on marked to market loss on unexplained forex contracts - AO was of the view that the marked to market loss is a notional loss, contingent in nature and it is not allowed to be set off against the taxable income - CIT(A) deleted the addition - Held that:- the claimed loss under consideration occurred to the assessee on account of five unexpired forex forward contracts i.e is a loss incurred on account of revaluation of contract on last day of accounting period before date of maturity of forward contract. The Ld.CIT-A observed that the assessee has been following a consistent accounting policy for determining loss under AS-11 and AS-30 as required under Companies Act and it is to be noted that the accounting standards were issued by the ICAI which has received judicial recognition. Accordingly the assessee, the gain or loss on revaluation of the outstanding contracts was booked in the P 85,70,425/- for 2010-11 which supports to show that the assessee has been following consistently accounting standards and the liability has been accrued for a pending obligation for every year i.e the difference was arising for more than one accounting period. Thus disallowance made by the AO treating the impugned amount for A.Y 2009-10 as contingent and notional loss is not justified and that the loss incurred to the assessee on account of five unexpired forex forward contracts on the last date of the accounting period i.e. before the date of maturity of the forward contract is not contingent and it is a actual loss, is allowable. - Decided in favour of assessee

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• 2016 (6) TMI 787
  Transfer pricing adjustment - difference in the arm's length price of the international transaction of incurring of advertisement, marketing and promotion (AMP) expenses relating to creation of marketing intangibles - Held that:- TNMM has been applied as the most appropriate method, which method has not been disturbed by the TPO, then, the international transactions of AMP and Distribution activities should be clubbed. It further held that for determining the ALP of such transactions under a combined approach, only such comparables should be chosen which conform to the AMP functions and other distribution functions conducted by the assessee. If there is some difference in the functions under these international transactions, including that 'of AMP, between the assessee and the comparables, then, suitable adjustment should be made to bring both the transactions at par. If probable comparables are not performing similar functions as done by the assessee and no adjustment is possible for bringing the international transactions of the assessee in an aggregate manner at par with those undertaken by the com parables, then, segregation should be done and the international transaction of AMP spent, should be separately processed under the transfer pricing provisions for the purposes of determining its ALP separately. In such determination of ALP of AMP expenses in a segregated manner, proper set off on account of excess purchase price adjustment should be allowed.We accordingly dispose of the appeals of the assessee for assessment years 2009-10, 2010-11 and 2011-12, we restore the matter to the file of TPO / AO for deciding the issue in conformity with the directions as deduced from the judgment of the Hon'ble Delhi High Court in the case of Sony Ericson Mobile Communication India (P) Ltd [2015 (3) TMI 580 - DELHI HIGH COURT]

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• 2016 (6) TMI 786
  Addition u/s 68 - AO presumed that the purchases of the ‘said shares’ of M/s. Shukun Constructions Ltd. were not made on the date as disclosed by the assessee, but was backdated and an arranged transaction - LTCG income shown as exempt under section 10(38) - Held that:- The authorities below, i.e. AO/CIT(A) have made the addition under section 68 of the Act merely on presumptions, suspicions and surmises in respect of penny stocks; disregarding the direct evidences placed on record and furnished by the assessee in the form of brokers contract notes for purchases and sales of the ‘said shares’ of M/s. Shukun Constructions Ltd., copies of the physical share certificates and her D-MAT account statement establishing the holding of the shares in her name prior to the sale thereof; confirmation of the transactions of buying and selling of the ‘said shares’ by the respective stock brokers, receipt of sale proceeds through banking channels, etc. The statement recorded from Shri Niraj Sanghvi on 31.12.2007, the day the order of assessment was passed, would have no evidentiary or corroborative value to be the basis for coming to an adverse view in the case on hand, since it was recorded behind the assessee’s back, from a person who was not involved in the purchase of the said shares and also since the assessee was not afforded opportunity for rebuttal of the same and to cross-examine the said person. Since no adverse finding has been rendered in respect of the direct material evidence placed on record in respect of her transactions of purchase and sale of the ‘said shares’ of M/s. Shukun Constructions Ltd. which stand duly disclosed in her audited Balance Sheets filed with the return of income of assessment years 2004-05 and the current year under consideration. In this factual and legal matrix of the case, as discussed above, we find that the addition of 95,12,812/- under section 68 of the Act made and confirmed by the authorities below to be unsustainable and therefore direct the AO to delete the said addition and accept the LTCG income of 93,00,012/- shown as exempt under section 10(38) of the Act. - Decided in favour of assessee

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• 2016 (6) TMI 785
  Revision u/s 263 - deduction under section 80-IA allowed - Held that:- Assessing Officer was quite open to the issue of deduction under section 80-IA of the Act with regard to various eligibility conditions provided in the Act, which were queried by her in a number of notices issued to the assessee, which were duly replied by the assessee. After considering all these replies, the Assessing Officer had allowed only a portion of the deduction claimed by the assessee. Thus we see that all the issues are related to deduction under section 80-IB of the Act. All the issues have been investigated properly by the Assessing Officer. In view of this also, we do not find any error in the order of the Assessing Officer. Therefore, we hereby hold the jurisdiction assumed under section 263 to be illegal and quash the order of the Commissioner of Income-tax. - Decided in favour of assessee

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• 2016 (6) TMI 784
  Revision u/s 263 - period of limitation - allowing credit for MAT as per section 115JAA, which, according to him, was wrongly allowed by the Assessing Officer in the absence of any actual payment made by the assessee towards MAT - period of limitation - Held that:- Referring to the decision of the Hon'ble Supreme Court in the case of Alegendran Finance Ltd. (2007 (7) TMI 304 - SUPREME Court ) and having regard to the facts of the case, we are of the view that the period of limitation for A.Y. 2007-08 has to be reckoned from the date of order passed by the Assessing Officer under section 143(3) read with section 263, i.e. 08.12.2011 and not from the date of order passed by the Assessing Officer under section 143(3) read with sections 263 and 251, i.e. 29.11.2012 as the issue relating to the MAT credit on which the assessment for A.Y. 2007-08 was sought to be revised by the ld. CIT was decided in principle by the Assessing Officer vide his order dated 08.12.2011 passed under section 143(3) read with section 263 and since the impugned order under section 263 passed by the ld. CIT for A.Y. 2007-08 on 30.03.2015 was beyond the period of two years from the end of the financial year, in which the order dated 08.12.2011 sought to be revised was passed, the same is barred by limitation as provided in section 263(2) of the Act. The said order passed by the ld. CIT under section 263 for A.Y. 2007-08 is accordingly cancelled treating the same as invalid and the appeal of the assessee for A.Y. 2007-08 is allowed. As a result of our decision rendered above cancelling the order passed by the ld. CIT under section 263 for A.Y. 2007-08 and restoring the order of the Assessing Officer for that year whereby he allowed the MAT credit to the assessee, the orders passed by the Assessing Officer for the subsequent three years, i.e. A.Ys. 2008-09, 2009-10 and 2010-11 allowing adjustment for such MAT credit cannot be said to have any error as alleged by the ld. CIT called for revision under section 263 and this consequential position is not disputed even by the ld. D.R - Decided in favour of assessee

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• 2016 (6) TMI 783
  Revision u/s 263 - addition u/s 69 - Held that:- The fact of issuing of notice under section 148 is mentioned in the assessment order itself. However, in the assessment year 2008-09, we find that no such regularisation under section 148 has been mentioned in the assessment order and, therefore, in this year the revised return was after the prescribed period of time. The due date for filing the revised return in this year is March 31, 2010, whereas the revised return has been filed on June 24, 2010. Therefore it is correct that the Assessing Officer should not have taken cognizance of the revised return as the assessee had filed the revised return beyond the prescribed period of time. But the question remains that whether the Assessing Officer could have ignored such revised return. It was not even necessary on the part of the assessee to file the revised return as he could have claimed during the assessment proceedings itself that the bank deposits reflected the turnover of the assessee from retail trade because the claim of the assessee being engaged in retail trade was open to scrutiny and the Assessing Officer had carried sufficient enquiries in this respect. Therefore, these are not the cases where no enquiry has been done. In the present cases, the Assessing Officer has completed the assessments after accepting the submissions of the assessee that the bank deposits reflected the turnover from retail business whereas in the opinion of the learned Commissioner of Income-tax the additions should have been made under section 69 of the Act. The honourable Supreme Court in the case of Max India Ltd. [2007 (11) TMI 12 - Supreme Court of India ] has held that where two views are possible and the Assessing Officer has taken one of the views with which the Commissioner does not agree it cannot be treated as erroneous or prejudicial to the interest of the Revenue unless the view taken by Assessing Officer is unsustainable in law. THus we are in agreement with the arguments of learned authorised representative that the Assessing Officer had passed orders after due application of mind and these are not the cases fit for action under section 263. - Decided in favour of assessee

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• 2016 (6) TMI 782
  Eligibility for exemption under section 11 denied - as per revenue assessee is charging fees for issuing certificate of origin, it amounts to commercial activity, therefore, no element of charity remains in the object of the assessee - Held that:- Once the High Court in assessee's own case for the assessment years 1967-68 to 1969-70 found that the fees received by the assessee for arbitration and issuance of certificate are incidental to the main activity, the Revenue cannot contend now that the activity of issuing certificate of origin amounts to trade or commerce. Therefore, this Tribunal is of the considered opinion that even though the assessee is receiving fees for issuing certificate of origin, that does not amount to a commercial activity. As found by the Madras High Court, the activity of receiving fee and issuing certificate of origin is only incidental to the main activity. Therefore, this Tribunal is of the considered opinion that the assessee is eligible for exemption under section 11 of the Act. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow the exemption under section 11 of the Act to the assessee provided the income is applied for charitable activity in furtherance to its objects. - Decided in favour of assessee

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• 2016 (6) TMI 781
  Estimation of profit at eight per cent. on the assessee's contractual receipts under the provisions of section 44AD - assessee is a civil contractor - Held that:- Commissioner of Income-tax (Appeals) has observed in the impugned order that the books of account produced by the assessee during the assessment proceedings cannot be relied on, as they had been prepared only when the Assessing Officer had detected that the total contract receipts had not been declared by the assessee in his return of income. Now, this is not in accordance with law. There is no provision under the Act whereby income of an assessee can be estimated in oblivion or disregarded of the books of account produced before the Department, which books are not rejected under section 145 of the Act. In case the Department chooses not to go by the books of account produced, it is a must for the Assessing Officer to reject them on the basis of a reasoned order by pointing out the specific defects therein. This has illegally not been done in the present case. The books produced cannot be disregarded merely on a specious observation that they are not reliable, having been prepared after detection. The undisputed fact remains that these books were duly produced by the assessee before the Assessing Officer in the assessment proceedings and the Assessing Officer did not reject them. It is not a case of levy of concealment penalty, where change of stand after detection may be detrimental. Therefore, this issue is remitted to the file of the Assessing Officer to be decided afresh in accordance with law, on duly taking into consideration the books of account produced by the assessee by affording adequate opportunity to the assessee to support his case Estimation of agricultural income - Held that:- though the assessee had duly apprised the learned Commissioner of Income-tax (Appeals) of the above mistake committed by the Assessing Officer, the learned Commissioner of Income-tax (Appeals) remained in oblivion of this and merely reiterated that the assessee was having land holding of 110 acres and not 75 acres, as had also been wrongly held by the Assessing Officer. The learned Commissioner of Income-tax (Appeals) has fallen in error in upholding the Assessing Officer's action in assessing agricultural income of the assessee at 34,30,758. This conclusion of the learned Commissioner of Income-tax (Appeals) is found to be a result of complete misreading and non-reading of the aforesaid contentions of the assessee before both the authorities below, which were not rejected at any stage. Even before this Bench, nothing has been brought on record to rebut the assessee's specific stand that his land holding was 75 acres and not 110 acres, which was the total land holding of the assessee and his family.Taking the formula of the Assessing Officer, on estimating agriculture income at 27,500 per annum, the total agriculture income of the assessee from his land holding of 75 acres comes to 27,500 x 75 = 20,62,500 and not of 35,34,722, as assessed. Therefore, the amount of 35,34,722 minus 20,62,500 = 14,72,222 is deleted from the addition made and the addition is sustained to the extent of 20,62,500.

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• 2016 (6) TMI 780
  Additional Depreciation claim - engagement or non engagement in activity of "production" - assessee is engaged in designing of the magazines, procurement of raw material such as paper, ink, chemicals, etc, the printing, binding and packing of magazines - Held that:- We notice that the Assessing Officer has himself mentioned in the assessment order that the assessee was involved in the business of manufacturing of greetings, magazines, envelopes, etc, and, therefore, the Assessing Officer could not have taken a contrary view while dealing with the issue of allowability of depreciation. It is further noted by us that the hon'ble Delhi High Court in the case of Delhi Press Patra Prakashan Ltd. (2013 (6) TMI 71 - DELHI HIGH COURT), has dealt with this issue at length for holding that the aforesaid activity amount to manufacturing. It has been held that printing of greetings cards on paper amount to manufacturing a new and marketable article, as a distinct product comes into existence. It was further held that it is not necessary that an industrial undertaking must manufacture a commercially new product. It was further held that, in any case, this activity shall amount to "production". As per section 32, an undertaking, engaged in "manufacturing" or "production" shall be eligible to claim additional depreciation. Thus, in view of this, the controversy becomes narrower. Therefore, the assessee is eligible for the benefit of depreciation, as it is undisputedly engaged in activity of "production". - Decided in favour of assessee

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• Customs

• 2016 (6) TMI 817
  Claim of refund in cash - whether the petitioner is entitled to refund of the amount, claimed by them, in cash, as the reward scheme scrips has been withdrawn - violation of principles of natural justice, inasmuch as an opportunity of personal hearing was not granted to them - Held that:- It is not in dispute that the refund applications, which were filed on 13.1.2010, were not taken for disposal for nearly four years, when the Board had issued circular, directing all the Chief Commissioner of Customs to ensure that all pending applications for refund of 4% SAD paid through DEPB/rewards scrips should be disposed of by 30.06.2013, and report should be sent by the Chief Commissioner of Customs to the Board by 04.07.2013. The petitioner is entitled to one more opportunity to place all contentions before the second respondent, viz., the Original Authority, with regard to three Bills of Entry, dated 06.03.2009, 11.02.2009 and 07.01.2009, for which, refund applications were filed on 13.01.2010. - Revenue directed to pass a reasoned order within 3 months.

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• 2016 (6) TMI 816
  Proceedings against the CHA - validity in continuation of proceedings where, in order in original commissioner set aside the demand on the importer - Held that:- We asked then Mr. Jetly as to how the notice dated 2nd December, 2015, addressed to the petitioner by the Principal Commissioner of Customs (General), Mumbai, survives. Why should then the petitioner be proceeded against under Regulation 20 of the Customs Broker Licencing Regulations, 2013, as none of the charges, prima facie, can be then substantiated particularly in the teeth of the conclusions recorded in the order-in-original. Mr. Jetly states that the Commissioner would duly take note of this order of 26th February, 2016, marked "X" for identification and pass consequential orders, but would require three months' time. - Commissioner directed to pass all consequential orders within prescribed time frame.

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• 2016 (6) TMI 815
  Denial of issuing Advance Licence as per the FTP - allegation of violation of actual user condition in respect of earlier licenses - petitioners were informed that their request for advance licence could not be considered in view of the letter of the DRI and that the petitioners should take up the matter with the concerned DRI, Ahmedabad Held that:- The respondent authorities are not justified in acting as per the dictates of the DRI, Ahmedabad instead of carrying out independent inquiry on its own and acting in terms thereof. When the respondents decide the applications of the petitioners, they are expected to consider the same independently without in any manner being swayed by any instructions issued by the DRI. It is evident, therefore, that the impugned orders have not been passed independently but appear to have been passed under the dictates of the DRI whereby the DRI authorities have directed the authorities not to grant the EODC applications made by the petitioners. The impugned orders, which suffer from various legal infirmities as discussed hereinabove, therefore, cannot be sustained. Having regard to the period which has elapsed since the issuance of the show-cause notices, the business of the petitioners has come to a standstill and hence, at this stage, the petitioners are not interested in obtaining advance licences and hence, the petitioners have not pressed the petitions qua considering their applications for licences. It is, however, clarified that as and when the petitioners apply for advance licences, the respondent authorities shall consider the same in accordance with law and on merits. - For the foregoing reasons, the petitions succeed and are accordingly allowed. - Decided in favor of petitioners.

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• 2016 (6) TMI 814
  Rate of duty on import of crude degummed soyabean oil of edible grade - when a notification comes in effect - Scope of section 25 - The petitioners claim that a notification that had not become effective on the relevant date has been arbitrarily cited by the Customs authorities to demand duty at a much higher rate than payable by the petitioning assessee. Held that:- The most cardinal rule in interpreting a statutory provision is that the language of the statute should be read as it is. If the language of Section 25(4) of the Act is not distorted and the intention thereof gathered from the language used therein, the plain meaning of the words used do not admit of a construction that unless a notification is published in the Official Gazette and unless such notification or the Official Gazette containing the same is put on sale, the notification is not deemed to come into force. The construction of the provision as the petitioners suggest would require the addition or substitution of words not found in the provision or the rejection of certain words as meaningless. It is elementary that if a provision in a statute can be read without adding words thereto or subtracting words therefrom, that would be the ideal construction, unless it throws up an absurd result. The literal construction in this case does not result in any absurdity. The fallacy in the petitioners’ argument is that it is founded on the responses received following the queries raised under the Act of 2005. The queries and the responses received are on the mistaken premise that it is the notification as published in the Official Gazette that must be put on sale. The wording of the relevant sub-section does not warrant such a construction. Both clauses of such sub-section would be complied with if a notification were to be issued for publication in the Official Gazette and such notification were to be simultaneously put up on the website and otherwise offered for sale, though the timing of the issuance of the notification may have resulted in the publication in the Official Gazette to be made a day later. As long as the publication of a relevant notification is made in the Official Gazette, whether within reasonable time or at the first available opportunity of such notification being issued for publication therein, the notification comes into effect immediately upon its issuance for publication in the Official Gazette notwithstanding the publication in the Official Gazette being later. There is no dispute that the notification was issued on the date it is said to have been. There is no dispute that the notification was issued for publication in the Official Gazette on the same day. There is even no dispute that the Official Gazette containing the said notification was published on the same day. All the that the petitioners have been able to demonstrate is that the Official Gazette containing the said notification may not have been put up for sale prior to September 21, 2015. But that is of no consequence. The notification came into force on the date of its issue for publication in the Official Gazette and such date, indisputably, was September 17, 2015. Even if a strict view of the matter is taken and the publication in the Official Gazette is seen to be a precondition to the coming into force of the said notification, that was also completed on September 17, 2015. If the Union’s assertion of copies of the notification being put up for sale on September 17, 2015 is disbelieved, at the highest, it would amount to non-compliance of clause (b) which would have no effect on when the notification came into force. The petition is dismissed with the observation that the liability of the petitioning assessee to pay the duty as per the notification of September 17, 2015 is unimpeachable. It is the higher rate of duty under the notification that the petitioning assessee is liable to pay. - Decided against the petitioners.

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• 2016 (6) TMI 813
  Levy of penalty on steamer agent u//s 116(a) r.w.s. 149(2) - short landing of the cargo - Held that:- Unfortunately, in the case on hand, the Department had missed the bus. The original order of adjudication itself shows that the appellant claimed to have discharged more quantity than what was entrusted to them. But, after arrival, a landing certificate was issued only in 1994 to the effect that there was short delivery. At the time when the landing certificate was issued on 30.9.1994, the vessel had already gone and a period of more than two years had passed and the importer had also cleared the cargo by then. Therefore, the concession granted by the Department to the importer in the form of remission of duty, behind the back of the Steamer Agent, cannot now be taken advantage of by the Department. Therefore, even on merits, we find that the act of Department cannot be accepted. - No Penalty - Decided in favor of appellant.

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• 2016 (6) TMI 812
  Recovery of duty of customs - can the payment be made in installments - Held that:- The Central Board of Excise and Customs, by Circular dated 28.02.2015, decided to allow recovery of arrears of taxes, interest and penalty in instalments. The power to allow such payment in monthly instalments was to be exercised by the Commissioner in his discretion for granting sanction to pay arrears in instalments upto a maximum of 24 monthly instalments, and by the Chief Commissioners for granting sanction to pay arrears in monthly instalments greater than 24 and upto a maximum of 36 monthly instalments. As the Circular issued by the Central Board of Excise and Customs dated 28.02.2015 confers a discretion on the Chief Commissioner to grant sanction to pay arrears in instalments, such discretion can only be exercised by the Chief Commissioner and not by this Court in proceedings under Article 226 of the constitution of India. As the petitioner has submitted a representation to the Chief Commissioner on 03.12.2015, ends of justice would be met if the Chief Commissioner is directed to dispose of the representation with utmost expedition, and in accordance with law. The Writ Petition is, accordingly, disposed of.

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• 2016 (6) TMI 811
  Valuation - inclusion of royalty, lump sum payment (license fee) and technical assistance fee paid to the supplier (related party) - Rule 10(1)(c)of the Customs Valuation (Determination of Value of Imported Goods) Rule, 2007 - Held that:- In absence of proper clause of the agreement being depicted in the order and without demonstrating the manner how such clauses warrant valuation to be made in terms of that Rule arbitrary valuation has been made. In stead of objective evaluation of the agreements and thread bare examination of any evidence on record to invoke above Rule the authority drew inference superficially and arbitrarily. This is not acceptable to law. Therefore, order of both the authorities suffers from legal infirmity. - Matter remanded back for fresh decision.

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• 2016 (6) TMI 810
  Levy of penalty for lending of the IEC - Smuggling of prohibited goods from India - export of incense raw materials - Held that:- Seizure of the goods and attempt to export the prohibited goods of the description aforesaid remained unrebutted. Appellant was the registered holder of the IEC and such IEC was used in attempted export was not controverted. Lending of IEC was also an admitted fact and not denied. Appellant was not expected to lend the same or make any abuse thereof. Apart from lending the IEC which was used to defraud customs by the attempted export, appellant gave his rubber stamp as well as letter head to Mohammed and Sabu to prepare export documents. That caused peril to the interest of Revenue. Appellant acted in defiance of law being aware that his IEC may not be free from abuse. Therefore his plea of innocence fails - Levy of penalty confirmed.

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• Corporate Laws

• 2016 (6) TMI 806
  Scheme of Amalgamation - Held that:- The present scheme of amalgamation is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned. The Scheme is hereby sanctioned.

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• 2016 (6) TMI 805
  IPO - lapse of due diligence - whether the steps taken by the Appellant in light of various provisions of the ICDR Regulations and the Code of Conduct towards the due diligence of the affairs of the Issuer Company are sufficient and adequate in law? - non – disclosure of suppliers and agreements for purchase of granules - fund raising through ICDs and their subsequent deployment - Held that:- On a perusal of Order dated 3rd September, 2012 passed by the Respondent, it emerges that an independent Director of the Issuer Company, who was a signatory to the RHP as well as the Prospectus, however made the following statements on record; firstly, • that the loan committee had a term of reference limited only to availing of various credit facilities from the banks. The Loan Committee had no authority to borrow money through ICDs and secondly; • that no such proposal regarding availing of loans through ICDs was tabled at the meeting of the Board of Directors dated 17th August, 2011. In light of these factual revelations, it is evident that the Loan Committee could not have permitted the raising of money through ICDs since this was not part of its mandate. In the absence of any evidence to the contrary, we, therefore, find that the Appellant was only supplied with an extract, and not the minutes of the Board Meeting dated 17th August, 2011, by the the Issuer Company. In this factual backdrop the Appellant cannot be condemned for not disclosing the matter regarding the raising of funds through ICDs by the Issuer Company in the Offer Documents. Appellant could not have incorporated such a fact of giving ICDs to the three companies taken by the Issuer Company after the conclusion of the IPO in the DRHP, RHP or even in the Prospectus. This charge, therefore, can also not be sustained against the Appellant. However, it must be said that the Appellant seems to have acted in a hurry to issue the RHP on the same date. It should have been more vigilant and careful in filing the RHP on August 17, 2011 itself. As such, we would hasten to add that the filing of Prospectus, which was done two days after the closure of the Issue on 14th September, 2011, issue opened on 7th and closed on 12th September, 2011, the Appellant could have detected all these developments had it undertaken inspection of the Bank accounts of the the Issuer Company. To this extent, we are in agreement with the finding in the Impugned Order that the Appellant did not perform its duty properly in the matter of due diligence. Except, non-examination of the bank statement of the Issuer Company, we do not find any major lapse / flaw in the process of due diligence carried out by the Appellant. Albeit, it is not mandatory for an MB to look into the bank statements it would have been prudent for the Appellant to peruse the bank statements instead of merely relying on the Statutory Auditor’s Report and the statement of the the Issuer Company. Although there is some merit in the charges levelled against the Appellants, as far as non-perusal of Bank statements of the Issuer Company and disclosure of related party transactions ) is concerned, in view of the fact that the punishment already undergone is far in excess of the punishment which the Appellants deserved against the charges in question, we quash the remnant punishment imposed vide the Impugned Order.

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• Service Tax

• 2016 (6) TMI 835
  Probability of arresting the Directors or employees of the petitioner - non payment of service tax - investigation are on - fear of coercive proceedings for recovery of the amount, styled as 'Service Tax', under the provisions of Finance Act, 1994, without following the mandate of Section 73 and/or 73A thereof - he Petitioners claim that they carry on a legitimate business activity by arranging for hotel accommodation for those travelling and that is how they provide online air, rail, cab and hotel booking through a website www.cleartrip.com. Petitioner No.1-Company states that it allows its customers, inter alia, to book hotels through its online portal. Held that:- The Petitioners do not dispute the right to investigate and in accordance with law. That they have already attended the offices of the concerned Respondents and once the statement of the Petitioners was recorded goes without saying that on further summons being issued and on called upon to attend the Officers of the Respondents, they will attend and co-operate in these investigations by producing all the documents and answering the requisite queries, subject, of-course, to their rights in law. It is only when these investigations conclude that the authorities would be in a position to take a decision whether to launch any prosecution. In such a prosecution as well, if the provisions of the Criminal Law, which enable arrest in cases of cognizable offences and nonbailable, that the Petitioners can have an apprehension and which also can be taken care of by approaching a competent Criminal Court. Secondly, there is no question of any recovery of tax by coercive means, unless the investigation results into issuance of a show cause notice, an opportunity to the Petitioner to resist the demand, a adjudication thereof by a reasoned order and protective remedies such as appeals. We do not think that any recovery by coercive measures is straightway permissible and particularly in the given facts and circumstances of the case. Once we also note the stand of the Respondents as not precipitating the matter particularly harming the life and liberty of those, who are in-charge of Petitioner No.1-Company, then, all the more, any detailed discussion by referring to the arguments in-depth, consideration of the case law becomes unnecessary. The Writ Petition is disposed of.

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• 2016 (6) TMI 834
  Rectification of mistake in the order - The present ROM Application is directed on the second issue that is availability of credit on the service tax paid against Technical Assistance Services. - Held that:- Prima facie, we are of the view that the issue is debatable and hence at this stage, this Tribunal cannot enter into such debate once the order was delivered - ROM Application filed by the Revenue dismissed.

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• 2016 (6) TMI 833
  Taxability of commercial training and coaching - services were prospective insurance agent which was recognized under law - IPR services - disallowance of cenvat credit - extended period of limitation - Held that:- Prima facie the issues are in favor of assessee - Stay granted.

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• 2016 (6) TMI 832
  Demand of service tax - construction of quarters for personal use of staff of RSRDC - construction of Daramshala - Held that:- the staff quarters were made by the appellant as sub-contractor engaged by a contractor and therefore the exclusion clause does not come to its rescue as that reuired the engagement of the contract directly by RSRDC to be covered under the exclusion clause in Section 65(105)(zzzh) of Finance Act, 1994. The Daramsala construction prima facie also cannot be taken out of the CICS because the facility of Dharamsala was not free of cost. Regarding the construction of the building for KHTPL which was used for administration/ staff welfare, training centre, canteen, dispensary, staff room, Crhche etc. the appellant tried to make out an arguable case that is was for non-commercial purpose. However, M/s KHTPL is a commercial organization and so it is also arguable that its building was for business or commerce. - Prima facie case is not favor of assessee - Stay granted partly.

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• 2016 (6) TMI 831
  Export of services or not - providing services to foreign companies for promoting their product in India - Revenue entertained a view that since said service were being obtained in India and were being utilized in India, the same cannot be held to be export of services so as to extend the benefit of Export of Service Rules, 2005 - Held that:- Even the Hon’ble Madras High Court in the case of Suprasesh General Insurance Services & Brokers P. Ltd. vs. CST, Chennai [2015 (9) TMI 1219 - MADRAS HIGH COURT] has considered an identical situation and held that such set of arrangement would amount to receiving the consideration in Indian rupee would amount to receiving the consideration in convertible foreign exchange only. - Demand set aside - Decided in favor of assessee.

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• Central Excise

• 2016 (6) TMI 830
  Evasion of duty of excise - Anticipatory bail - MRP based valuation - valuation dispute of ceramic tiles - difference of Maximum Retail Price and the product sold at more than the Maximum Retail Price - clandestine removal of goods by the manufacturer. - the applicants are ready and willing to pay 50% of the Central Excise duty reserving all their rights to contend at an appropriate time in accordance with law to such proposal. He has also submitted that there is no dispute nor any objection qua the ongoing investigation. Held that:- the applicants are ordered to be released on anticipatory bail in the event of their arrest - The applicants shall deposit 50% amount of central excise duty demanded i.e. the amount of 50,00,000/- ( Rupees Fifty Lakh only) (rounded off) within a period of 15 days (fortnight) - Granted relief subject to conditions.

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• 2016 (6) TMI 829
  Transfer of business - reversal of cenvat credit - demand of duty on finished goods - transfer of entire Chain Division Business out of two divisions in toto, including plant, machinery, raw material work-in-progress and finished goods to a new company - Proceedings were initiated against appellant to recover such Cenvat credit attributable to the above items on the ground that the appellant is liable to reverse the credit on these goods (inputs, intermediate goods, final products and capital goods) as they are no longer in their ownership and control and as such on sale and transfer of Chain Division to a new legal entity, these items are deemed to have been cleared attracting the provisions of Rule 3 (5) of Cenvat Credit Rules, 2004. Held that:- the factual position as asserted by the appellant have not been rebutted by the original authority in any finding. Though, excise liability arises immediately on manufacture it is only on removal of goods the duty is to be discharged. We find that the duty on finished excisable goods is liable to be paid upon clearance and in this case, there is no physical clearance of excisable goods by the appellant. On creation of new joint venture company, the duty liability on clearance of these goods has admittedly been discharged by that company. Hence, we find the demand on appellant amounting to 1,33,25,607/- cannot be sustained. Reversal of cenvat credit - The Hon’ble Supreme Court in the case of J.K. Spinning and Weaving Mills Ltd., & Anr.[1987 (10) TMI 51 - SUPREME COURT OF INDIA] examined the scope of term removal. It was held that there can be no doubt that the word removal contemplates shifting of a thing from one place to another. In other words, it contemplates physical movement of goods from one place to another. The Tribunal in Dalmia Cements (Bharat) Ltd. Vs Commissioner of Central Excise, Tiruchirapalli reported in [2007 (11) TMI 211 - CESTAT, CHENNAI] following the ratio of the Hon’ble Supreme Court in the above decision examined the scope of application of Rule 3 (5) of Cenvat Credit Rules, 2004 - when there is no removal of goods under cover of invoice, as provided under rule 9, there is nothing in Rule 3 (5) to invoke the deeming fiction as insisted by the department. Demand is not sustainable - Decided in favor of assessee.

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• 2016 (6) TMI 828
  Cenvat Credit - duty paid by the Job worker - inputs which were transferred to the job worker without reversal of such credit - The case of the Revenue is that the appellants have availed credit on same inputs twice - first as duty paid on “inputs” when initially purchased and second time as duty paid on “processed goods” from the job worker. - Held that:- The issue came up only because the jurisdictional officers at the job worker's end held that job worker is a manufacturer not eligible for the concession under notification no. 214/86. This resulted in the payment of duty by the job worker on the processed goods cleared back to the appellant. The supplementary invoice was issued to pass on the duty so paid. The credit was availed by the appellant on these invoices. - Credit allowed - Demand set aside - Decided in favor of assessee.

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• 2016 (6) TMI 827
  Conversion of DTA unit into 100% EOU - reversal fo Cenvat Credit attributable to the capital goods and inputs transferred to their 100% EOU within the factory premises or otherwise. - Held that:- inputs and capital goods were within the factory premises of the appellant even after carving out of the EOU by them. Provisions of rule 3(4) of the Cenvat Credit Rules are attracted only when the MODVAT/CENVAT Credit availed inputs or capital goods are removed from the factory premises is undisputed. The adjudicating authority has held that through two different legal entities and two different registrations have been given, one as a DTA and other as a 100% EOU, hence it should be considered as removal of capital goods and inputs. We do not agree to this proposition as it is undisputed that the EOU is also named as Behr India Ltd. (100% EOU) and Balance-sheet of the appellant is one and the same though the legal status of the EOU is bit different than the DTA, it cannot be said that both are separate units. In our view this observation of the adjudicating authority cannot withstand scrutiny of the law - appellant has made out a case in his favour - Demand set aside - Decided in favor of assessee.

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• 2016 (6) TMI 826
  Cenvat Credit availed MS angles, HR Plates, MS channels etc. as capital goods - MS items were used for manufacture of various parts/components/accessories/spares of capital goods within the factory or for repairs and maintenance of capital goods. - Extended period of limitation - Held that:- The appellant has disclosed the availment of credit in the ER-1 returns and also in the Cenvat credit statements. Further, the show cause notice itself relies upon ER-1 returns and the information furnished by appellant. The appellant has also produced photographs and certificate issued by chartered engineer as to the use of MS items in fabrication of capital goods, and these in turn are used for manufacturing finished product. When assessee duly filed ER-1 returns, the jurisdictional Range Officer is required to carryout scrutiny of the returns. If this had been done, the short payment would have come to light. In such circumstances, extended period cannot be invoked as there is no wilful suppression or collusion with intent to evade payment of duty. The show cause notice is time barred. The appellant succeeds on the ground of limitation. - Decided in favor of assessee.

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• 2016 (6) TMI 825
  Refund of duty - unjust enrichment - 100% EOU - Exemption from payment of duty on procurement of goods used for R&D purpose - The department entertained the view that R&D was not part of manufacturing activity and that the benefit of exemption from payment of duty cannot be extended to inputs used for R&D purpose. - Held that:- Department has not adduced any evidence to establish that appellant showed the duty element in the invoices. It is their case that as the appellants showed the amount as expenditure in the Profit & Loss account, the amount is factored in working out the sale price and so the duty has been passed on indirectly. I am not convinced with these arguments. When the appellants are not liable to pay duty, the amount paid does not have the colour of duty at all. Therefore, the doctrine of unjust enrichment is not applicable to the said amount. The duty was paid by appellant much later after starting of investigations. So it cannot be said that the incidence of duty has been passed on to buyers. When the Department argues that the incidence of duty has been passed on, not directly, but indirectly, then it is for the Department to establish the details of such passing of incidence of duty. It cannot be based on assumptions that incidence of duty is passed on. The refund is not hit by the doctrine of unjust enrichment. - Decided in favor of assessee.

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• 2016 (6) TMI 824
  Demand of duty - disallowance of credit availed on MS items - extended period of limitation - Reduction in penalty - Held that:- the assessee's contention that prior to the judgment in Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] case, they entertained a bona fide belief that credit is admissible is not without force. Further Revenue has not adduced any evidence to establish that there was suppression of facts with intent to evade payment of duty. I find that Revenue has miserably failed to establish sufficient ground to invoke the extended period. ER-1 returns filed by the assessee are required to be subject to detailed scrutiny in course of which the concerned officer can call for documents from the assessee wherever necessary for the scrutiny. In the present case, we find that the starting of the enquiry was stated to be scrutiny of ER-1 Returns. This was done apparently after two years. Invoking extended period for demand is not tenable in such a situation. The show-cause notice is barred by limitation. In the result, the impugned order is set aside and appeal filed by assessee is allowed with consequential reliefs - Decided in favor of assessee.

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• 2016 (6) TMI 823
  Cenvat Credit - allegation of receipt of invoice without receipt of inputs / goods - fraudulent activity - Held that:- he case is seen to have been initiated against the appellants basing on the private records seized from the residence of Sh.Prabhakar, KMC . In these note books, certain figures/entries were mentioned against Mayur. Though in the impugned order, it is stated that the investigating officer has elaborately dealt about the link of Mayur with appellants, I do not find any such elaborate discussion or evidence. The only statement is that appellants, SLI is known in the market as “Mayur Fans” There is no evidence to link the entries resumed with the appellant. One of the grounds relied by department is that the specification of thickness of sheets shown in the invoices do not match with the specification of sheet thickness required by the appellant for manufacture of fan blades. This is answered by the appellant saying that they use sheets with thickness ranging from 0.7mm to 1.22mm. The department has not adduced any evidence to show that the fan blades manufactured by appellants cannot be manufactured using sheets of thickness as stated to have been used by appellant. The main evidence relied by department is the private note book resumed from the residence of Shri Prabhakar of KMC. In his statement dated 29-06-2005 Shri Prabhakar has deposed that the sale and purchase recorded in note book no.1 were made by him in his personal level as a side business for which no permission was obtained from anyone or kMC. - The statement of Shri. Prabhakar is not corroborated by cogent evidence to establish the allegation against appellants. The payments were made by appellant through cheque. But there are no records to establish from the accounts of appellant that there was any cash flow from appellant to KMC. On an overall appreciation of facts and evidence it is seen that whole case is based upon third party private records and statement of such third party, Shri Prabhakar. In the absence of independent evidence the charges leveled against the appellant is not sustainable - Demand set aside - Decided in favor of assessee.

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• 2016 (6) TMI 822
  Challenge to the common order passed by the Settlement Commission under the Customs and Central Excise Act - as per the order due to lack of cooperation on the part of the applicant, the matter has to be sent back to the Commissioner of Customs for adjudication. - Held that:- The window given under the Customs Act by inserting chapter XIVA by Finance Act 1998, is to give a reprieve to an applicant who comes forward before the Commission by making full and true disclosure and this Commission was set up on similar lines, as that of the Commissions already functioning under the Income Tax Act. On a perusal of the facts as set out in the impugned order as well as on perusal of the materials placed on record, it is evidently clear that the petitioner failed to cooperate in the disposal of the matter. The reply which is expected to be given by an applicant is a simple Yes or No . In the event, if the reply is Yes , he has to disclose about the case, which is pending. However, the reply given by the petitioner is not a straight forward reply, but by stating that pertaining to the show cause notice, which is subject matter of settlement application, no appeal has been filed, is pending before the Appellate Authority or Tribunal or Court and this is the first time, the petitioner has filed the Settlement Application before the forum. The reply given obviously does not answer the specific query in a direct fashion. The letter dated 18.12.2014, given by the petitioner to the Commission makes it manifestly clear that the petitioner had no intention to co-operate with the disposal of the matter by the Commission. Therefore, the Commission after recording elaborate reasons held that the facts and circumstances clearly show lack of cooperation. There is no valid ground made out by the petitioner to interfere with such a finding. - order of the commission sustained - Decided against the petitioner.

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• 2016 (6) TMI 821
  Cenvat Credit on capital goods used for the purpose of Research and Development of New Model - nexus with manufacturing activity - revenue submitted that the Tribunal has wrongly rejected the appeal of the revenue without considering the arguments raised by the department and relevant provisions of law. It was also urged that the impugned order does not satisfy the test of being a reasoned and speaking order and was, thus, liable to be quashed. - Held that:- The Tribunal being a final fact finding authority was required to deal with all aspects of facts and law and then record its conclusions based thereon. No legally justified reasons have been recorded by the Tribunal for allowing the appeal of the assessee. - Matter restored before the Tribunal - Decided in favor of revenue.

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• 2016 (6) TMI 820
  Recovery of central excise duty from successor of Unit - Auction purchaser - Restriction on to deliver, or otherwise dispose of, the plant and machinery without the order in writing of the Assistant Commissioner of Customs and Central Excise. - Held that:- In the present case, while the auction notice no doubt requires the auction purchaser to ascertain whether there are any central excise dues or not, the correspondence, to which our attention is drawn, shows that Export-Import Bank of India had informed central excise officials, by letter dated 10.07.2013, that despite repeated reminders and requests to take possession of the finished goods lying in the premises of M/s.Bommidala Filaments Limited, the Central Excise Department had failed to take possession; Exim Bank had sold the assets charged to them through auction to the successful bidder; they had already transferred the assets to the successful bidder; as the finished goods are not charged to Exim Bank and Exim Bank is not an agent of the Customs and Central Excise Department, they were not bound to take responsibility of keeping the goods in its custody; and the Central Excise Department could take possession of the finished goods immediately. It is evident that the impugned notices, calling upon M/s.Polisetty Somasundaram (the auction purchaser) and M/s.Kohinoor Ropes Private Limited, (which had purchased the plant and machinery from Polisetty Somasundaram) not to deliver or dispose of the plant and machinery, merely on the ground that these goods hitherto belong to M/s.Bommidala Filaments Limited who had defaulted in payment of central excise dues, fall foul of the law declared by the Supreme Court in Rana Girders Limited [2013 (8) TMI 540 - SUPREME COURT] The impugned proceedings are, accordingly, set aside and the writ petitions are allowed. It is made clear that this order does not preclude the respondents from taking possession of the finished goods, from the premises of M/s.Polisetty Somasundarm, towards recovery of the Central Excise dues. - Decided in favor of petitioner.

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• 2016 (6) TMI 819
  Cenvat Credit - eligible inputs - appellant had used the various items (MS Plates, Angles etc.,) for fabricating /assembling /erection of plant, machinery and buildings - original authority observed that appellant is not eligible for credit as the subject items are used for construction of building - Held that:- the reliance made by authorities below on the case of Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)], to disallow the credit on MS items used for machines/equipment is misplaced. - credit availed on MS items used for machinery and equipments is to be allowed. The impugned items used for plant shed, generator shed, fibre/cement storage shed, is not admissible. The credit availed for the purpose of shed is disallowed. The records do not separately show the quantification of credit availed on MS items used for sheds. - Matter remanded back for quantification - Decided partly in favor of assessee.

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• 2016 (6) TMI 818
  Cenvat Credit - service tax paid on GTA services - place of removal of finished goods - Held that:- On perusal of para11 and para 15 of the agreement as noticed above, it is very much clear that sale is on FOR(Free on Road) basis. It is clearly stated that price is inclusive of freight charges. The invoice also clearly declares that goods are sold for delivery on FOR basis and that ownership responsibility continues till goods are handed over to the customer. Para 12 is nothing but a clause explaining the time and mode of payment to be made. The contention of Revenue that para 12 would show that ownership of goods get transferred to customer immediately on making payment is without basis. Again, the last part of para 11 is only an option given to customer for transporting the goods in their vehicles. But not even a single instance of exercising this option is proved by Revenue. Thus as per records, the appellants have succeeded in establishing that the sale is on FOR basis and place of removal is the customer’s premises. On such score, the Board Circular is binding on the department and the denial of credit is unjustified. - Credit allowed - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2016 (6) TMI 809
  Default notices of tax, interest and penalty - Delhi Value Added Tax Act, 2004 (DVAT Act) - mismatch in Annexures 2A 2,03,07,461. - Consequently, the Court has no hesitation in declaring the impugned notices of assessment tax, interest and penalty both dated 29th September 2015 under Section 9 of the CST Act as well as the subsequent notice of default assessment of tax and interest under Section 32 of the DVAT Act dated 31st May 2016 to be invalid. They are accordingly quashed. The question now is about the future course of action - purchase from the suspicious or cancelled dealers - Held that:- Given the contradictory stands of the Department on the one hand and the Petitioner on the other , it is directed that within four weeks from today the AVATO/concerned Assessing Officer (AO) of Ward No. 8 will issue a notice to the Petitioner setting out the details of the dates on which purchases are supposed to be have been made during the first quarter of 2013-14 by the Petitioner from any of the above four entities and enclose the supporting documents if any. The AVATO/AO will also disclose in the said notice any other information in his possession leading to the conclusion that either any or all of the above four entities were either not functional during the first quarter of 2013 or where their registration was cancelled, the date(s) of such cancellation. The AVATO/AO will also communicate the date on which the Petitioner should appear before him. The petition disposed with directions.

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• 2016 (6) TMI 808
  Input tax credit - valid duty paying documents - tribunal did not considered the documents - Karnataka Value Added Tax Act, 2003 [KVAT] - Held that:- In our view, the said aspects would be vital as it may also go to the root of the matter because, if those documents are considered and thereafter, the finding is recorded as to whether burden has been discharged or not by the petitioner, then the matter may stand on different footing. Further if the documents are considered and even if the burden is discharged, any input tax credit that may be available to the assessee has not been examined by the Tribunal. - Matter remanded back to tribunal for passing fresh orders - Decided in favor of assessee.

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• 2016 (6) TMI 807
  Failure to produce declaratory forms C and F - determination of central sales tax liability @10% - Held that:- There appears to be a miscarriage of justice in not having afforded an opportunity to explain the circumstance and there may be a default on the part of the petitioner itself, in not having proceeded with diligence before the Tribunal in seeking to establish the reasons assigned. Therefore, it would be proper if the petitioner is permitted to establish the reasons assigned, before the Tribunal. By this measure, no prejudice is caused to the Revenue for the law itself provides the benefit to the assessee. In that, if the declaratory forms are produced, he would be entitled to a concessional levy of tax. This benefit cannot be taken away on account of an inadvertent lapse on the part of the petitioner. - Petition allowed - matter remanded back - Decided in favor of petitioner.

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