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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter June 24, 2015 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise TMI SMS Commercial Training /Coaching -Amt received for textbooks, uniform, medical check-up not to be included in the value of taxable service -Tri Deduction u/s 54F - incomplete construction of residential property - No condition that it should be occupied within stipulated period - Tri News CCI imposes penalties on Kerala Film Exhibitors Federation (KFEF) and Film Distributors Association (FDA) for contravention of Competition Act, 2002. RBI Reference Rate for US $ Auction for Sale (Re-Issue) of Government Stocks India to be the Partner Country in the major Russian Industrial Trade Fair “INNOPROM 2016” to be held at Yekaterinburg, Russia in July 2016. Notifications Income Tax 49/2015 - dated 22-6-2015 - IT Income-tax (8th Amendment) Rules, 2015 - Amendment in Rule 12 and ITR Forms to be filed for the AY 2015-16 46/2015 - dated 17-6-2015 - IT SECTION 10(6C) OF THE INCOME-TAX ACT, 1961 - NOT TO INCLUDE INCOME ARISING TO FOREIGN COMPANY BY WAY OF ROYALTY OR FEES FOR TECHNICAL SERVICES - NOTIFIED COMPANY – DASSAULT AVIATION AND THALES S.A., PARIS Circulars / Instructions / Orders DGFT 21/2015-20 - dated 23-6-2015 New format of Bank Guarantee, to be executed with DGFT, for recognition as Pre-Shipment Inspection Agency (PSIA). Customs Cus/04/2015 - dated 30-3-2015 Authorization of Additional Public Sector Banks for Collection of Customs Duty through e-payment-reg. Highlights / Catch Notes Income Tax Rule 12 of the Income Tax Rules, 1962 - Now ITR-1 and ITR-4S can be filed where exempted income exceeds ₹ 5000 alongwith Salary Income or House Property Income or Income from Other Sources Visit to Get Source Denial of deduction u/s 80IC - no merit in the claim of the assessee vis-à-vis deduction under section 80IC of the Act in respect of the interest received from HIMUDA, interest on IT refunds and award received from Government - however Foreign Exchange Fluctuation Gain we hold that the is directly linked to the business - AT Visit to Get Source The extra shift allowance has to be calculated on the basis of number of days in which the factory had worked for extra shift and not on the basis of individual plant/machinery working an extra shift - HC Visit to Get Source Community development expenditure - business is not static and over a period of time, it would include within its fold the care and concern for the society at large which would result in a goodwill being created in its favour leading to better business - expenditure allowed - HC Visit to Get Source Transfer pricing adjustment - ALP - selection of comparables - The risk undertaken and the assets employed by a software development company cannot be compared to a BPO company. - AT Visit to Get Source Rejection of books of accounts - Each year have to be examined independently based on facts and materials on record, because, the matter pertaining to rejection of books of accounts are factual issues, which need to be examined every year - AT Visit to Get Source Deduction u/s. 54F - construction of residential property - payment made to builder - construction was not complete in respect - No condition that it should be occupied within the stipulated period - there is no requirement regarding registration and valid title, as a condition for availing exemption u/s. 54F(1) - AT Visit to Get Source Addition on capital gain - invocation of provisions of section 50C - Joint Venture (JV) Since the assessee has not received any consideration in lieu of any transfer of the capital asset, there is no question of any capital gain in the hands of the assessee. Whatever capital gain has arisen, it is only in the hands of Methodist Church in India and not in the hands of the assessee. - AT Visit to Get Source Income from the house property - premises used for the purposes of the business in which he was a partner - annual value is to be determined as per the provisions of section 23(1)(a) being applicable for self-occupied property - rent received in preceding years anyway has no direct relevance in computation of annual value - AT Visit to Get Source Exemption u/s. 10A - AO has held that the assessee has used the secondhand laptops which are in the nature of plant and machinery - Conclusion drawn by AO is erroneous - AT Visit to Get Source TPA - CIT(A) has examined the agency agreement and held that that certain adjustments on account of functional differences between a person who acts as ‘principal to principal’ i.e. a trader and a person who acts as a mere ‘commission agent would be allowed - order of CIT(A) sustained - AT Visit to Get Source Corporate Law Control of Yes Bank - Right to Nominate is not in the nature of a ‘contract of personal service’ and was not limited to the two individuals in question. There is no question of contextual repugnancy - It was unnecessary to include in the Articles a mere ‘right to suggest’; brute strength in shareholding and even mere shareholding would have done as well. It is the right to nominate - HC Visit to Get Source The Articles of a company are to it very like what the Constitution is to citizens. Shareholders are truly ‘invested’ in the enterprise: not merely for making profits and earning dividends, but also with a view to ensure that their rights, enshrined in the Articles, are always protected - HC Visit to Get Source Rectification in Register of Members - the technical points raised by the Petitioners as to the non-compliance of guidelines for "Good /Bad Delivery" by the Respondent No.1 Company, and non compliance of the Circular of Ministry of Company Affairs do not have much substance - CLB Visit to Get Source Rectification in the Register of Members - Section 111 (4) of the Companies Act, 1956 - Shares transferred fraudulently - Doctrine of estoppel - Period of limitation - petitioner has not approached the CLB with clean hands and, therefore, she is not entitled to the reliefs sought for and the petition deserves to be dismissed - CLB Visit to Get Source Service Tax Levy of Penalty u/s 76 - mandatory or any discretion is left with the authorities for imposing such penalty - no reason why the Authorities should depart from imposing such penalty as mandated by the provisions of the Act. - HC Visit to Get Source Recovery of service tax - Recovery before adjudication of upon the matter and fixed the quantum of service tax - the recovery which is being made that smacks with arbitrariness - recovery stayed - HC Visit to Get Source Commercial Training and Coaching service - Valuation - Amount recovered towards expenses such as textbooks, uniform, medical check-up, insurance etc is not required to be included in the value of taxable services - AT Visit to Get Source Levy of penalty - keeping in view the amendments to the Notification 24/2004 which introduced changes in the definition of vocational training, a fair case is made out before us to hold that there was a reasonable cause for failure to deposit the service tax. - AT Visit to Get Source CENVAT Credit - Input Service Distributor (ISD) - There was no provision that the cenvat credit distributed by the Head Office as input service distributor should be in proportion to the turnover of the factories located at various places. Such restriction, was put after 31.3.2012. - AT Visit to Get Source Central Excise Transfer of CENVAT Credit - Sale of manufacturing unit alongwith raw material and semi finished goods - It is permitted even to transfer the Cenvat credit to the buyer unit as well as transfer of stock of input - Transfer of credit allowed - AT Visit to Get Source Cenvat credit - Runner Mass in the nature of input or capital goods - Held as Input - Considering it is only a question of interpretation and there is no suppression involved in this case. Therefore, the demand is also hit by limitation. - AT Visit to Get Source Case Laws: Income Tax 2015 (6) TMI 706 Unexplained cash credits u/s. 68 - CIT(A) deleted the addition - Held that:- The assessee established the genuineness of the transaction of both the creditors since the loan was taken by account payee cheque and credited to the bank account of the assessee hence clear transaction was effected through banking channel. The creditworthiness of the creditors were filed by copy of relevant bank account of the creditors, the bank account, complete address of the holder and clearing cheque of the creditors are available in the copies of such cash. The assessee had thus prima facie established that all three ingredients for proving the cash credit introduced. This finding is not controverted by the Revenue by placing any material to disproving the same. Since this issue is well settled by various judicial pronouncements in the case of cash credits, the assessee has to establish identity of the creditors, the creditworthiness of such creditor and the genuineness of the transaction. In this view of the matter, we do not find any infirmity into the order passed by Ld. CIT(A). - Decided against revenue. Disallowing the interest paid on unsecured loan - CIT(A) deleted the addition - Held that:- The fact that amount of ₹ 1.15 crores was the opening balance of loans taken from the financial year 2005-06 onwards and the same was never considered as unexplained credits u/s. 68 of the Act and this fact is not controverted by the Revenue, in this view of the matter, we do not find any infirmity into the order passed by Ld. CIT(A), hence, this ground of Revenue’s appeal is dismissed.- Decided against revenue. 2015 (6) TMI 705 Addition u/s 41(1) - outstanding credit balances of certain parties brought forward from earlier years - Held that:- It is an admitted fact that the assessee has not written off the credit balance of the certain parties brought forward from earlier years, and they are appearing in the liability side of the balance sheet of the assessee. The issue of disallowance thereof under section 41(1) of the Act is covered in favour of the assessee with the decisions of the Hon’ble Gujarat High Court CIT Vs. Nitin S. Garg [2012 (5) TMI 30 - Gujarat High Court] - Decided in favour of assessee. Addition under section 68 - capital introduced from sale of orchard effected by an independent partnership firm, in which the appellant was one of the partners - Held that:- he learned counsel for the assessee submitted that the amount was brought from another partnership firm, in which the assessee was one of the partners. In reply to a specific question, he could not provide any evidence to prove its case - Decided against assessee. Addition being 15% of the labour charges - assessee submitted that telescoping benefit on some additions was allowed by the CIT(A) and the issue was not decided by him - Held that:- In the facts of the case, we are of the view that the issue in these grounds of the appeals should be decided by the CIT(A) on its merits, and accordingly, we restore the issues in these grounds of the appeal to the file of the CIT(A) with direction to decide the same afresh in accordance with law after providing reasonable opportunity of hearing to the assessee. - Decided against assessee for statistical purposes. 2015 (6) TMI 704 Denial of deduction u/s 80IC in respect of 'Other Income" - Interest received on refund of excess recovery by HIMUDA, Award reed from Government, Interest on IT Refunds and Foreign Exchange Fluctuation - CIT(A) agreeing with the AO that the said income was not derived from the business of the eligible Undertaking - Held that:- While deciding appeal of the revenue upheld the order of Commissioner of Income Tax (Appeals) in allowing deduction under section 80IC of the Act on Miscellaneous Income, Insurance claim and income from sale of scrap. However, following the parity of reasoning as in the earlier year, we find no merit in the claim of the assessee vis-à-vis deduction under section 80IC of the Act in respect of the interest received from HIMUDA, interest on IT refunds and award received from Government. However, in respect of Foreign Exchange Fluctuation Gain we hold that the is directly linked to the business activity and consequently, the assessee is entitled to the claim of deduction under section 80IC of the Act. - Decided partly in favour of assessee. Allowing entire deduction under section 80I(C) which includes the income from Job Work and Other Income - Held that:- In view of the claim of the assessee being allowed from year to year we find no merit in the stand of the Assessing Officer in the present year in the absence of any change in the fact situation. We are in agreement with the order of the CIT (Appeals) in this regard. - Decided against revenue. Allowing the deduction u/s 80IC in respect of 'Job Work Income" - Held that:- Following the order of the Tribunal in the case of assessee itself in the earlier years relating to assessment years 2005-06 to 2008-09, we find no infirmity in the order of the CIT (Appeals)- Decided against revenue. Allowing the deduction u/s 80IC in respect of 'Other Income' accrued to the assessee on account of income like interest received from Housing Board, Interest income from IT Refund, miscellaneous income, insurance claim and income from sale of scrap etc. - Held that:- similar issue arose before the Tribunal in assessment years 2006-07 and 2008-09 and the claim of the assessee vis-à-vis deduction under section 80IC of the Act on the aforesaid income has been allowed to the assessee. Following the same we uphold the order of the CIT (Appeals). However, we find that the Commissioner of Income Tax (Appeals) had only allowed the claim of deduction under section 80IC of the Act on other income i.e. miscellaneous income, income from sale of scrap and insurance claim and not on the interest income received from Housing Board and IT refunds. The grounds of appeal raised by the revenue in this regard are thus misplaced and we uphold the order of Commissioner of Income Tax (Appeals) in allowing the claim of deduction under section 80IC of the Act on Miscellaneous income, insurance claim received and income from sale of scrap. - Decided against revenue. Disallowance u/s 24 (A) - CIT(A) deleted disallowance directing to treat receipts from M/s Hankel Teroson India Ltd., as rental income - Held that:- The income from letting out of premises in the case of the appellant has been assessed under the head 'income from house property' right from A.Y. 2003-04. Thus entirely in agreement with the Ld. Counsel for the appellant that sharing of common expenses has nothing to do with the letting out of the premises, since these two are different areas. The appellant has not been claiming depreciation on the said premises over the past so many years and for this reason also it would not be appropriate to disturb the head under which the impugned income should be assessed. The disallowance made by the Assessing Officer is accordingly deleted - Decided against revenue. Disallowance of expenditure incurred on laying down of PU coating on floor - Held that:- expenditure incurred on laying down of PU coating on floor which admittedly has a short life span and the same cannot be held to increase the life span of the building. We find no merit in the orders the authorities below and reversing the same, we hold that the expenditure incurred by the assessee is duly allowable as revenue expenditure - Decided in favour of assessee. 2015 (6) TMI 703 Unexplained cash credit taxed u/s.68 - CIT(A) deleted the addition - Held that:- We are not in agreement with the argument of learned DR, firstly, that both the assessees have discharged their primary onus as prescribed u/s.68 of IT Act and secondly that the order on which learned CIT(A) had placed reliance stood confirmed by the Respected Co-ordinate Bench in the case of M/s. Mukesh Kumar and Co. [2015 (6) TMI 706 - ITAT AHMEDABAD]. We, therefore, hereby confirm the factual as well as legal findings of learned CIT(A) and find no force in the grounds raised by the Revenue in respect of both the Appeals. - Decided in favour of assessee. 2015 (6) TMI 699 Disallowance u/s 14A read with Rule 8D - assessee is a non-resident individual - Held that:- AO has applied Rule 8D for making disallowance on income not chargeable to tax. The Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) has held that the provisions of Rule 8D are applicable from assessment year 2008-09. Thus, to the impugned assessment year, i.e. assessment year 2007-08, the provisions of Rule 8D will not be applicable. However, we are of the opinion that a reasonable disallowance has to be made on income not chargeable to tax. Accordingly, we direct the Assessing Officer to make a disallowance of 2% of interest free income earned by the assessee during the relevant period.- Decided partly in favour of assessee. Rejection of set off of short term capital loss against short term capital gains - Held that:- The assessee had debited the short term capital loss in Profit & Loss account instead of treating it under the head “capital gains”. After the assessee realized her mistake, she filed a revised computation before the Assessing Officer at the time of scrutiny assessment. The Assessing Officer refused to accept the claim of the assessee. The Hon'ble Supreme Court of India in the case of Goetze (India) Ltd. (2006 (3) TMI 75 - SUPREME Court ) has held that powers of the Tribunal are not impinged for accepting such claim of the assessee. Accordingly, we remit this issue back to the file of the Assessing Officer with a direction to consider the revised computation furnished by the assessee. - Decided in favour of assessee for statistical purposes. Rental income from property treated as business income instead of income from house property - Held that:- For the assessment year under appeal the assessee changed the head from the business income to “income from house property”. The rental income whether to be treated as business income or under the head “income from house property” is a mixed question of fact and law. The authorities below have not examined the rent agreement entered into by the assessee with tenants and other facts surrounding the agreement. If the main intention of the assessee is to let out the property or any part of it, the rental income therefrom should be assessed under the head “income from house property”. If the object is to exploit the commercial property by letting out temporarily, then the income derived from such letting out of property can be termed as “business income”. We are of the considered opinion that this issue needs a revisit to Assessing Officer to examine the rent agreement and analysis of other material. The A.O. shall also take into consideration the general principles laid down by the Hon'ble Supreme Court of India in the case of Universal Plast Ltd. v. CIT (1999 (3) TMI 15 - SUPREME Court ) to determine whether the rental income is assessable as “business income” or “income from house property”. - Decided in favour of assessee for statistical purposes. 2015 (6) TMI 684 Disallowance u/s 14A read with Rule 8D - Held that:- Question No.(i) stands concluded in favour of the respondent-assessee and against the appellant/revenue by the decision of this Court in M/s Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT reported in [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Decided in favour of assessee. Denial of exclusion of income exempt u/s 10(35) from the total income of the assessee for the purpose of calculating - whether 85% of the income had been applied for the objects of the trust or not as per the provisions of section 11(1)(a) - Tribunal in setting aside the order of the CIT(A) confirming the order of the AO denying exclusion - Held that:- The order passed by the CIT (Appeals) has not dealt with the decisions cited by the respondent-assessee at the time of hearing before it in CIT (Appeals) Vs. Silk & Art Silk Mills Association Ltd. (1989 (10) TMI 35 - BOMBAY High Court) and in His Holiness Silasri Kasivasi Muthukumaraswami Thambiran & Ors. Vs. Agricultural ITO reported in (1977 (11) TMI 57 - MADRAS High Court ) and merely stating that the same are not relevant does not meet the requirement of natural justice viz. An order supported by reasons. In the above view of the matter, the impugned order of the Tribunal setting aside order of CIT (Appeals) and restoring it to him for fresh consideration cannot be found fault with. Disallowance of depreciation - Tribunal allowed claim - Held that:- Amount spent on acquiring assets are taken as application of income for the purposes of Section 11 of the Act and the depreciation claimed thereafter on the same amount i.e. the value of fixed assets during the subsequent years is being granted on the user of the same. Accordingly, in view of the decision of this Court in Institute of Banking (2003 (7) TMI 52 - BOMBAY High Court) and Ville Parle Kelavani Mandal (2015 (5) TMI 220 - BOMBAY HIGH COURT ) rendered on 23 March 2015 and an earlier decision in The Watch Tower Bible and Tract Society of India [2015 (1) TMI 480 - BOMBAY HIGH COURT], the Question stands concluded in favour of the respondent/assessee and against the revenue Disallowance of carry forward of excess application of income of the earlier years against the income of the year under consideration - ITAT remanded issue - Held that:- The Tribunal had restored the issue for the earlier years to the Assessing Officer to decide the matter afresh and to determine the application of income in terms of Section 11 of the Act. Consequently, the Tribunal set for the subject assessment year aside the order of CIT (Appeals) and restored the issue to the Assessing Officer to consider the same afresh in the light of the decision taken by the Assessing Officer in respect of the orders passed for the earlier assessment years. Thus, the question as framed by the revenue does not give rise to any substantial question of law. - Decided against revenue. 2015 (6) TMI 683 Disallowance of expenditure - Tribunal deleting the disallowance holding that the disallowance intended to be made under Section 40A(2)(b) was apparently made by the Assessing Officer under Section 37(1) - Held that:- It is a common contention of the parties that, it is Section 40A(2)(b) of the Act which was invoked by the Assessing Officer while passing the assessment order and the challenge to the assessment order by the respondent assessee was also in context of Section 40A(2)(b) of the Act. It is clear from the above observations of the Tribunal that it has not examined the appeal on merits and merely dismissed the appeal on the ground that the revenue ought to have filed an amendment application placing reliance upon Section 37 of the Act. We find that the Tribunal has disposed of the appeal without considering the contentions of the parties before it. The Tribunal was obliged to adjudicate upon the appeal on the basis of the grounds made out by the parties and on examination of the same could have either upheld the order of the Commissioner of Income Tax (Appeals) or set it aside. However, it is not open to the Tribunal to dismiss the appeal without examining the contention of the parties on a ground which is not urged by any of the parties. We also find that the issue raised by the appellant Revenue with regard to allowing the payment of ₹ 13.20 lacs has not been rightly examined by the Tribunal. It merely upheld the order of the Commissioner of Income Tax (Appeals) without considering the grievance of the Revenue. - Decided in favour of revenue for statistical purposes. 2015 (6) TMI 682 Entitlement to extra shift allowance in terms of circular dated 26 May 1985 of the CBDT - whether reduction plant is an integral part of the factory of the assessee ? - Held that:- Both the CIT (Appeals) as well as the Tribunal have reached a concurrent finding of fact that the reduction plant is an integral part of the factory of the respondent. This concurrent finding of fact by Commissioner of Income Tax (Appeals) and the Tribunal is not shown to be in any manner perverse. This issue stands concluded in favour of the assessee by the decision of the Supreme Court in South India Viscose Ltd. Vs. CIT reported in [1997 (7) TMI 9 - SUPREME Court] wherein the Supreme Court had occasion to consider the effect of the circular dated 28 September 1970 which is in fact reiterated in the subsequent circular dated 26 May 1985. The Apex Court has observed that extra shift allowance has to be calculated on the basis of number of days which the factory had actually worked on extra shift and the extra shift allowance has not to be calculated qua a machinery or plant in the factory. Thus as held by the Supreme Court the extra shift allowance has to be calculated on the basis of number of days in which the factory had worked for extra shift and not on the basis of individual plant/machinery working an extra shift. - Decided in favour of assessee. 2015 (6) TMI 681 Community development expenditure - whether be allowable as business expenditure - ITAT allowed claim - Held that:- Tribunal while following the decision of the Madras High Court in Commissioner of Income Tax v/s. Madras Refineries Ltd., [2003 (11) TMI 47 - MADRAS High Court] held that the concept of business is not static and over a period of time, it would include within its fold the care and concern for the society at large which would result in a goodwill being created in its favour leading to better business. The Madras High Court in Madras Refineries (supra) had allowed expenditure incurred on drinking water facilities and aid to the school. Therefore, in the present case also, expenditure incurred for community is for the purpose of business. This is in effect, a finding of fact and the Revenue is unable to show, it is perverse. Thus, no fault can be found with the order of the Tribunal. - Decided against revenue. 2015 (6) TMI 680 Disallowance under Section 40(a)(ia) - rent payment made without deduction of TDS - ITAT deleted the addition - Held that:- Commissioner of Income Tax (Appeals) as well as the Tribunal has reached a concurrent finding of fact that the payment made by the respondent assessee to its holding company of ₹ 51.91 lacs is not rent but is merely a reimbursement of expenses. Consequently, the occasion to apply Section 195 of the Act does not arise. This concurrent finding of fact is not shown to be perverse. Thus, no substantial question of law arises for our consideration and the appeal seeks to challenge concurrent findings of fact. - Decided against revenue. 2015 (6) TMI 679 Appeal is admitted with regard to Question 'A' and 'G'. Whether the Tribunal was justified in holding head office expenditure over and above what had already been allocated by the appellant was required to be further allocated for the purposes of computing deduction under section 10A, 10B, 80IC and 80IB of the Income Tax Act, 1961? Whether on the facts and in the circumstances of the case the Tribunal ought to have held that no adjudication in terms of Section 145(2) of the Act can be made in respect of that part of the purchase price that represented the cenvat credit available on the goods purchased by the appellant as the same was not a duty that was paid or incurred by the appellant?" (Reframed during the course of hearing.) 2015 (6) TMI 678 Reopening of assessment - CIT(A) quashed reopening - prior approval of the Commissioner of Incometax- II, Lucknow was duly taken u/s 151 of the Income-tax Act by the Assessing Officer for re-assessment proceedings - Held that:- In the present case, the order of CIT(A) is dated 30/07/2010 and therefore, as per the provisions of the first proviso to section 147, reassessment was time barred at that point of time because of the provisions of first proviso to section 147 because four years from the end of the relevant assessment year has already expired on 31/03/2009 and the order of the CIT(A) is dated 30/07/2010. Under these facts, even if it is held that there is direction of CIT(A), as required under sub section (1) of section 150, the provisions of sub section (1) of section 150 cannot be invoked as per the per the provisions of sub section (2) of section 150 of the Act and under these facts and legal position, we do not find any infirmity in the order of CIT(A) on this issue. - Decided against revenue. Addition on current assets - royalty received and interest on term deposit - CIT(A) deleted the addition - Held that:- In the present case, this is not the case of the Assessing Officer that corresponding amount is appearing in the liability side of the balance sheet but it is apparent from Schedule-12 that the assessee has shown corresponding amount as income. The amount of income shown under both these heads i.e. royalty received and interest on term deposit is higher than the amount shown in the balance sheet under the head ‘other current assets’ on account of royalty receivable and interest accrued on term deposit. It means that entire income under these heads were accounted for as income and that part of these two income, which were receivable at the end of the year, were shown in the balance sheet under the head ‘current assets’ and therefore, it cannot be said that the assessee has not shown these two items as income in the present year. - Decided against revenue. Deduction u/s 35(2AB) - CIT(A) mentioning that no in house scientific research has been carried out by the appellant - Held that:- As decided in assessee's own case for assessment year 2005- 06 and 2006-07 [2015 (2) TMI 894 - ITAT LUCKNOW] merely getting approval from ARAI and purchasing certain material from the market cannot be said to be carrying out in-house research & development activity. Research & development means to carry out research to find out some new technology or new equipment or product and that should be carried out in-house as per the requirement of section 35(2AB) of the Act. The assessee has failed to justify his claim of in-house scientific research carried out and therefore, no deduction under section 35(2AB) is admissible to the assessee. - Decided against assessee. Disallowance of interest paid on loans - Held that:- Since the assessee could not establish that borrowings were for business purposes, deduction is not allowable u/s 36(1)(iii) of the Act and moreover, u/s 57(iii) also, deduction is already allowed by the Assessing Officer to the extent of interest income and entire interest expenditure cannot be allowed because it could not be established by the assessee that the borrowing was made for making investment in FDR by showing direct nexus between the borrowing from bank and making FDR in bank. Considering all these facts, we do not find any reason to interfere in the orders of the authorities below. - Decided against assessee. Disallowance of Bad and Doubtful Debts, Advances and other written offs on account of Sundry Debtors written off and Earnest Money Security Deposit written off - Held that:- As decided in assessee's own case for AY 2005-06 and 2006-07 a clear finding is given by CIT(A) that the assessee has not written off bad debts in question and assessee has credited the amount to the account with the heading ‘provision for doubt debts.’ As per the provision of section 36(1)(vii), bad debt is allowable on actual write off and not on provision and hence, we do not find any reason to interfere in the order of CIT(A) on this issue - Decided against assessee. Disallowance of Benevolent expenses - Held that:- As decided in assessee's own case for AY 2009-10 [2013 (11) TMI 1541 - ITAT LUCKNOW] these expenses are to be accepted as incurred for business purpose but regarding quantum of expenditure, the assessee has to bring on record full details in respect of collection from employees and contribution by the employer company and also the proof of payment to the legal heir of the deceased employee and to the extent contribution by assessee is in accordance with factory order, the deduction should be allowed. The Assessing Officer should pass necessary order as per law as per above discussion after providing proper opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of Prior Period Adjustment - Held that:- The total disallowance made by the Assessing Officer included ₹ 796.41 lac on account of gratuity and ₹ 275.82 on account of leave encashment. Regarding these two amounts, we find that the provisions of section 43B are also applicable and therefore, it is necessary to find out as to whether the assessee has made payments in the present year or not in respect of these two amounts of gratuity and leave encashment. Therefore, we set aside the order of learned CIT(A) and restore the matter back to the file of the Assessing Officer for fresh decision. Regarding other amounts we find that a clear finding has been given by CIT(A) that the assessee has not pressed the claim of expenses for financial year 2004-05. Regarding interest and penalties on taxes he has given a finding that the same is not allowable under the Income-tax Act and therefore, the claim relating to earlier years is not allowable. Regarding the claim on account of material adjustment, he has given a finding that the assessee has not filed any detail other than that it relates to resale. In the absence of any detail regarding this claim, the same is not allowable. Deposit with Sales Tax is also not allowable because this is a deposit and not an expense. Regarding depreciation he has given a finding that the same is to be allowed in the year with which the depreciation is related with. Regarding repairs and maintenance also, the same is not allowable unless it is shown that the liability has crystallized in the present year. Hence, on all these aspects, we do not find any reason to interfere in the order of learned CIT(A). - Decided partly in favour of assessee for statistical purposes. Disallowance of provision made towards pending Sales Tax Cases - Held that:- We find that any amount payable to Sales Tax Department is allowable subject to the provisions of section 43B and since the assessee has made a provision only of ₹ 13,95,518/- towards pending Sales Tax cases and it is not the case of the assessee that payment was also made in the present year, deduction is not allowable u/s 43B of the Act. - Decided against assessee. Disallowance out of advances written off as bad and doubtful debt - CIT(A) restricted part disallowance - Held that:- As only part relief of ₹ 36,671/- was allowed by CIT(A) in respect of shortages in spares and general stores and for evaporation loss of petrol and diesel in assessee’s own pumps. It was held by CIT(A) that these losses are incurred during the course of business and therefore, allowable. We do not find any infirmity in the order of CIT(A) on this issue - Decided against revenue. Disallowance of "demand and interest on taxes” - CIT(A) restricted part disallowance - Held that:- CIT(A) allowed relief of ₹ 62,933/- but he has not given any finding that this amount was actually paid in the present year and in the absence of that finding, the order of CIT(A) is not sustainable but still we feel that in the interest of justice, the matter should go to CIT(A) for fresh decision. He should give finding that the amount was actually paid or not and if amount was paid then only the deduction should be allowed and otherwise the disallowance should be confirmed. - Decided in favour of revenue for statistical purposes. Disallowance of gratuity paid under LIC scheme - CIT(A) deleted the addition - Held that:- Since the issue is covered against the assessee by the Tribunal decision in assessee’s own case for assessment year 2002-03 and 2003-04 we do not find any reason to take a contrary view. - Decided in favour of revenue. Addition on account of "interest subsidy on house building loans” - CIT(A) deleted the addition - Held that:- As in assessee’s own case for assessment year 2002-03 and 2003-04, this issue was decided in favour of the assessee and it was held that the interest subsidy to the employees is for maintaining harmonious relationship and welfare of the employees, which is nothing but business expenditure. Respectfully following this Tribunal decision in assessee’s own case, we hold that in the present year also, this disallowance is not justified. - Decided against revenue. Addition on account of royalty receivable and interest accrued in term deposits - CIT(A) deleted the addition - Held that:- from the above Para from the order of CIT(A), we find that a clear finding is given by him that the amount shown by the assessee under the head current assets on account of royalty receivable and interest were also shown by the assessee in income in Schedule-12 of the balance sheet. This finding of CIT(A) could not be controverted by Learned D.R. of the Revenue and therefore, we do not find any reason to interfere in the order of CIT(A). - Decided against revenue. 2015 (6) TMI 677 Transfer pricing adjustment - ALP - selection of comparables - Held that:- We are in agreement with the submissions made by the assessee that the aforesaid comparables i.e. Maple Esolutions Ltd. cannot be selected for the purpose of benchmarking in the case of the assessee while applying TNMM method.. The TPO failed to appreciate that the aforesaid comparable company and the assessee are engaged in different businesses altogether. As the business model of voice based companies is of totally different nature than that of non voice based companies, we have no option but to exclude the comparable Maple E-solutions Ltd. for the purpose of benchmarking.. It is pertinent to mention here that the aforesaid comparable company was also involved in fraud and the business reputation came under serious indictment. As regards Indusind Information Technological Limited, it is the case of the assessee that the business model of the comparable chosen by the TPO is that of software development unlike that of the assessee company which is engaged in the business of BPO services. The aforesaid comparable may be excluded for the purpose of benchmarking the arm’s length price of the international transactions entered into by the assessee. The software development company has a completely different functional profile as compared to a company engaged in BPO services. The risk undertaken and the assets employed by a software development company cannot be compared to a BPO company. The approach of the TPO by selecting the band of PLI between 10% and 50% is completely arbitrary and has no basis for reasons stated above. The selection of comparables by the TPO has led to arbitrariness wherein the loss making companies are excluded and comparables only in the range of 10% to 50% are selected. The benchmarking made by the TPO is not as per the principles governing Indian Transfer Pricing guidelines regulations or even the OECD guidelines.In view thereof the matter is restored to the file of the AO for making fresh search of comparables in view of the position of law enunciated in the present decision. - Decided in favour of assessee statistical purposes. 2015 (6) TMI 676 Rejection of books of accounts - addition on undisclosed income - whether the books of account of the assessee have been rightly rejected u/s 145(3) on the ground that assessee is showing bogus sale of milk in its book in order to suppress the production and sale of various high profit margin products manufactured by it and, therefore, estimation of income is justified? - Held that:- No specific defect or discrepancy has been highlighted by the AO nor any enquiry has been made. Further, we have also called for the records and books of account of the assessee to see the nature of entry and recording of transactions. Therefore, under such facts and circumstances prevailing in this year, the finding of the Tribunal in the earlier years will not apply in the impugned assessment year. Otherwise also, if the assessee’s books of accounts were not found properly maintained in the earlier years then, it cannot be ipso facto presumed that the books of accounts are defective or not properly maintained in this year also. The principles of res judicata will not apply in such matters. Had it been so, then in assessee’s own case, for the assessment years 2009-10 & 2010-11, the department has not only accepted the books of account and book result but also its income from sale of milk. If in the subsequent year, the factum of sale of milk have been accepted then with the same logic, the finding of the assessment year 2006-07 and 2007-08 that there is no sale of milk, cannot be held to be applicable in the impugned assessment year, i.e. A.Y. 2008-09. Each year have to be examined independently based on facts and materials on record, because, the matter pertaining to rejection of books of accounts are factual issues, which need to be examined every year. Thus, in view of our above finding, we hold that books of account and the book result, as shown by the assessee should be accepted and consequentially the estimation of the undisclosed income of ₹ 8,30,742/-, as submitted by the CIT(A) is deleted. - Decided in favour of assessee Addition u/s 69A - Held that:- Cash was found from the residence of the Director Jasvinder Bajaj, wherein a sum of ₹ 7,34,000/- was found and ₹ 39,500/- was found from another Director, Shri Swaranjit Bajaj. At the time of search, it was claimed that there was cash in hand in the names of various persons including that of the assessee company, which aggregated at ₹ 32,72,780/-. The reply of the assessee as filed before the AO has not been properly rebutted or examined. Further, from the statement of cash balance of various persons, it is seen that, the availability of cash as per their books maintained and claimed by the assessee appears to be correct. In all the personal Balance-sheets and cash balance as appearing in the cash-book belonging to the family members of the Directors and Director themselves sufficient cash was available, therefore, under these circumstances same cannot be added in the hands of the assessee company, because the amount has not been found from the premises of the assessee company but from the residence of the Directors and the family members. Accordingly, we hold that no addition on account of unexplained cash can be made in the hands of the assessee company u/s 69A of the Act and hence, addition u/s 69A is deleted - Decided in favour of assessee. 2015 (6) TMI 675 Revision u/s 263 - claim for expenditure towards payment of Excise Duty has been allowed by AO despite not being disclosed in the regular books of accounts - Held that:- The only view possible in view of the specific provisions of section 43B(a) is that the excise duty has to be allowed in the year in which it is actually paid. It is not denied by the revenue that the assessee has paid the excise duty during the impugned assessment year. Since dictum of law on this count does not require any other interpretation, therefore, we are of the view that the order passed by the Assessing Officer cannot be regarded to be erroneous coupled with the errors. For invocation of the provisions of section 263 both the conditions that the order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of the revenue must be satisfied. Since, in our opinion, there was no error in the order of the Assessing Officer allowing the deduction to the assessee in the original assessment passed under section 143(3) in respect of the excise duty amounting to ₹ 29,17,01,515/- in respect of which the proceeding under section 263 has been carried out by the CIT, we, therefore, on this basis itself, set aside the order of the CIT passed under section 263. Interest paid allowed by AO despite not being disclosed in the regular books of accounts - Held that:- Assessing officer has after examining the submissions of the assessee as well as making the enquiry on this issue taken a conscious decision. Thus it is a case where the Assessing Officer has examined the issue by making enquiry on the basis of which the CIT invoked jurisdiction under section 263. It is not a case of lack of enquiry on the part of Assessing Officer the Assessing Officer after making enquiries allowed the claim of the assessee on that issue. It is not necessary that the Assessing Officer should discuss in detail the finding in his order, although the Assessing Officer has given clear-cut finding in this regard. Thus it is a case where due inquiry was conducted by the Assessing Officer as is apparent from assessment order on this issue on which CIT invoked jurisdiction under section 263. Once the order passed under section 143(3) is rectified under section 154, the order passed under section 143(3) get merged with the order passed under section 154 and the natural consequence will be that the order passed by the CIT(Appeals) will also get merged with the order passed by the Assessing Officer. It is not denied that both the issues in respect of which the proceeding under section 263 has been initiated were duly considered and decided by the CIT(Appeals) before issuing show-cause notice by the CIT. In view of this fact, we, therefore, on this basis quash the order of CIT passed under section 263. - Decided in favour of assessee. 2015 (6) TMI 674 Deduction u/s. 54F - CIT(A) allowed the claim - Held that:- An analysis of the provisions of section 54F of the Act in the light of the grounds raised by the Revenue in the appeal would show that there is no merit in the grounds raised by the Revenue in its appeal. Section 54F(1) lays down that any capital gain arising from transfer of long term capital asset, not being a residential house, will be allowed exemption, if the assessee has after the date on which the transfer took place, within a period of three years after that date, constructed residential house, the assessee will be entitled to claim deduction, even after the capital gain is invested in construction of a residential house. It cannot be disputed by the Revenue that the payment made by the assessee to the builder is for the purpose of construction of a residential house. It is pertinent to mention that there is no requirement regarding registration and valid title, as a condition for availing exemption u/s. 54F(1). The purport of the section is investment in construction of a property and the fact that provisions of section 54F(1) does not use that expression will not mean money spent for construction of residential property will not be eligible for deduction u/s. 54F of the Act. It is therefore clear that none of the grounds raised by the Revenue in the grounds of appeal has any merit and accordingly the appeal by the Revenue is dismissed. If the money is invested in constructing the residential house, merely because the construction was not complete in all respects and was not in a condition to be occupied within the stipulated period, that cannot be a ground for rejecting the benefit of deduction u/s. 54F to the assessee. The Hon’ble Court in the case of Sambandam Udaykumar [2012 (3) TMI 80 - KARNATAKA HIGH COURT] observed that the essence of the provisions of section 54F is whether the assessee who received the capital gain has invested in the house. Once if it is demonstrated that the consideration received on transfer has been invested in construction of the residential house, then though the construction is not complete in all respects and as required under law, the assessee should be given the benefit of section 54F. A reading of the aforesaid decision of the Hon’ble Karnataka High Court would show that there is no particular stage of completion of construction that is contemplated. It is not in dispute that the later the construction was completed and has occupied the residential house. In such circumstances, we are of the view that no fault can be found with the order of the CIT(Appeals) allowing benefit of deduction u/s. 54F of the Act to the assessee. - Decided against revenue. Interest on borrowed funds utilized for acquisition of property - whether constituted cost of acquisition and same should have been allowed as such while computing the Long Term Capital Gain on sale of property? - Held that:- The assessee did not raise the issue with regard to deduction of ₹ 7,82,394 which was interest paid on borrowing claimed as deduction while computing long term capital gain on sale of land. This sum of ₹ 7,82,394 was interest paid on funds that the assessee borrowed to acquire the land. The AO did not allow the said claim for the reason that it could neither be considered as expenditure incurred in connection with transfer nor cost of acquisition nor cost of any improvement thereon. The assessee challenged this part of the order of AO before the CIT(Appeals). The CIT(Appeals) did not adjudicate this issue at all. In the Cross Objection, the submission of the assessee is that the CIT(Appeals) failed to adjudicate this issue.Since the CIT(Appeals) has not adjudicated this issue, we are of the view that it would be just and appropriate to direct the CIT(Appeals) to adjudicate this issue after affording the assessee opportunity of being heard. - Decided in favour of assessee for statistical purposes. 2015 (6) TMI 673 Disallowance u/s 14A - disallowance in respect of the investment in the wholly owned Indian subsidiaries - Held that:- The fund flow statement filed by the assessee is only regarding the fresh investment made by the assessee during the year which is otherwise excluded for the purpose of disallowance u/s 14A being the investment in foreign companies. It is not clear from the record whether any disallowance was made on account of interest expenditure in the earlier assessment years. Since the investment was made in the earlier assessment years, therefore, the disallowance on account of interest expenditure has to be as per the funds available with the assessee and the finding on the issue of disallowance u/s 14A for the earlier years is relevant for the purpose of deciding this issue for the year under consideration. Similarly, the issue of disallowance on account of administrative expenses has to be decided keeping in view the finding of the earlier assessment years on this account. Accordingly, in the facts and circumstances of the case, we set aside this issue to the record of Assessing Officer to decide this issue afresh by considering the finding of the earlier A.Ys on this issue and further in view of the decisions in case of JM Financial Ltd. Vs. Addl. CIT (2014 (4) TMI 752 - ITAT MUMBAI) as well as Garware Wall Ropes Ltd. Vs. Addl. CIT (2015 (2) TMI 628 - ITAT MUMBAI ). - Decided in favour of assessee for statistical purposes. Disallowance u/s 80IB/80IC - allocation of expenses made by the assessee between eligible business and non-eligible business - Held that:- Keeping in view the decision of Hon’ble Supreme Court in the case of Consolidated Coffee Ltd. v. State of Karnataka (2000 (11) TMI 136 - SUPREME Court) and having regard to the facts of the case, we are of the view that the allocation of expenses made by the assessee between eligible business and non-eligible business for the purpose of computing deduction u/s 80IB/80IC of the Act was reasonable and there was no justifiable reason for the A.O. to disturb the same and make reallocation on adhoc basis. We, therefore, delete the addition made by the A.O. by restricting the claim of the assessee for deduction u/s 80IB/80IC of the Act by reallocating the common indirect expenses - Decided in favour of assessee. Depreciation on UPS - at the rate of 15% OR 60% - Held that:- We are in agreement with the view that computer accessories and peripherals such as, printers, scanners and server, etc., form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60 per cent. See CIT v. BSES Rajdhani Powers Ltd.[2010 (8) TMI 58 - DELHI HIGH COURT ] - Decided in favour of assessee. Transfer Pricing adjustment in respect of sale of insecticide products to various AEs - Held that:- The concept of clubbing and aggregating the transaction is based on the premise that such transactions influenced by each other and particularly in determining the price and profit involved in the transactions then such transactions can safely be regarded as closely linked transactions. The OECD guidelines has referred a portfolio approach as business strategy consisting of tax payers bundling certain transaction for the purpose of earning an appropriate return across portfolio rather than single product. The assessee is selling various insecticide products used in the household at various strata of the society and, therefore, the products of the assessee are clearly falling under the one portfolio of same category of product and, therefore, the assessee can have a portfolio approach as a business strategy. A similar view has been taken by the Coordinate bench of this Tribunal in the case of Taj Sats Air Catering Ltd. Vs. Additional CIT (2013 (12) TMI 1007 - ITAT MUMBAI ). Thus we are of the view considered opinion that all the insecticide products sold by the assessee to its AE in each country shall be clubbed together for the purpose of determining the arm’s length price. Consequently, the addition made by the Assessing Officer is deleted. - Decided in favour of assessee. 2015 (6) TMI 672 Addition on capital gain - invocation of provisions of section 50C - Held that:- From a careful perusal of the joint venture agreement, we find that it is abundantly clear from this agreement that there is no absolute transfer of land by the first party i.e. Methodist Church in India in favour of M/s Ritam Charitable & Education Society. Basically, it is joint venture agreement executed between the Methodist Church in India and M/s Ritam Charitable & Education Society to expand the hospital facilities and also to set up a medical college in the field of medicine. Since the first party has provided the land and immovable property owned by it to the second party for the development of the project, one time payment of ₹ 10 crore was made to second party. This one time payment will be called to be the consideration for surrendering certain rights in the immovable property by the first party i.e. Methodist Church in India in favour of M/s Ritam Charitable & Education Society for which if any capital gain is to be accrued, it would be accrued only in the hands of Methodist Church in India. The assessee is nowhere a party to the joint venture agreement. It was simply a hospital managing the affairs of the hospital only. It did not own the property of the hospital including the land therein as per its constitution as it was owned by Methodist Church in India. Therefore, from any angle, if the joint venture agreement and constitution of Clara Swain Hospital is seen, it would be abundantly clear that assessee has not transferred any land or any right in the capital asset in favour of M/s Ritam Charitable & Education Society. Moreover, onetime payment of ₹ 10 crore was also not made to the assessee. The payment was made to Methodist Church in India through DD issued in favour of Executive Board of Methodist Church in India. Since the assessee has not received any consideration in lieu of any transfer of the capital asset, there is no question of any capital gain in the hands of the assessee. Whatever capital gain has arisen, it is only in the hands of Methodist Church in India and not in the hands of the assessee. Therefore, we are of the view that the Revenue has wrongly assessed the capital gain in the hands of the assessee on transfer of any right in movable or immovable property or land in favour of the M/s Ritam Charitable & Education Society. So far issue of invocation of section 50C is concerned, we find that since the capital gain cannot be taxed in the hands of the assessee, the issue remains academic only and we therefore, decline to adjudicate the same. Accordingly, we set aside the order of CIT(A) and delete the additions of capital gain made in the hands of the assessee. - Decided in favour of assessee 2015 (6) TMI 671 Prescribed monetary limits for filing of appeal before ITAT - Whether, this appeal of revenue, which is below the prescribed limit of tax effect in view of the Board’s Instruction No.5/2014 issued on 10.07.2014 revising the monetary limits for filing of appeals by the Department before ITAT is maintainable or not? - Held that:- On query from the Bench, the Ld. DR could not point out any of the exceptions as provided in the Circular as that this is a loss case having tax effect more than the prescribed limit, which should be taken into account,or that this is a composite order for many assessment years where tax effect will be more than the prescribed limit as per para 5 of above instructions, or that this is a case, where, in the case of revenue, where constitutional validity of the provision of the Act or I.T. Rules 1962 are under challenge,or that Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or that Revenue Audit Objection in the case has been accepted by the Department and the same is under challenge. The Ld. DR could not point out any of the exceptions as provided above. Accordingly, this being a low tax effect case, the appeal of the revenue dismissed in limine without going into merits. - Decided against revenue. 2015 (6) TMI 670 Addition on account of deemed income from the house property - Held that:- There is no dispute about the elementary position that neither any rent was received in the relevant previous years, no is anything on record to suggest that rent was first payable and then foregone. The assessee had used the premises for the purposes of the business in which he was a partner. In these circumstances, the annual value is to be determined as per the provisions of section 23(1)(a) being applicable for self-occupied property, in any case, rent received in preceding years anyway has no direct relevance in computation of annual value - The expression 'the sum for which the property might be expected to be let out from year to year', as is judicially well settled does not mean the rent received in preceding years but the rent receivable in the perfect market conditions which is best indicated by the municipal valuation. The action of the authorities below, as the appellant pleads, is indeed unsustainable in law. We, therefore, direct the Assessing Officer to delete the impugned additions and compute the income from house property under section 23(1)(a) of the Act. The assessee gets the relief accordingly. Even if the Ld. DR argued that the property is in question was different in A.Ys. 2003-04 to 2005-06 but as per the Tribunal's order description of the property is the same as mentioned by the Assessing Officer. Moreover the Tribunal has, on principle, decided this issue by directing the Assessing Officer that the municipal ratable valuation may be adopted. We, accordingly, remit the issue to the file of the Assessing Officer for the limited purpose to work out the annual value of the property u/s. 23(1)(a) as per the municipal valuation submitted by the assessee - Decided in favour of assessee. Disallowance u/s. 14A - professional fees and interest - Held that:- We fail to understand if any expenditure is claimed against the taxable income how the same can be disallowed by invoking the provisions of Sec. 14A. Admittedly, the assessee has declared the interest income to the extent of ₹ 7,863,257/-. In fact the Assessing Officer could have verified the said claimed u/s. 57(iii) and not u/s. 14A. The assessee has also filed the certificate that the interest bearing loans taken by him were not utilized for investment in any of the firms', but used for investment in the house property and advances of the loans to others. The issue of computation of the income under the head ‘income from other sources' is not before us. We, therefore, hold that there is no justification for the Ld. CIT(A) to sustain the disallowance u/s. 14A in respect of interest expenditure of ₹ 500,461/- and accordingly same is deleted. So far as professional fees paid by the assessee is concerned nothing has been placed before us to verify the nature. We, accordingly, confirm the order of the Ld. CIT(A) on said amount. - Decided partly on favour of assessee. Disallowance u/s. 14A r.w. Rule 8D - CIT(A) restricting the disallowance to the extent of expenditure actually claimed by the assessee - Held that:- The principles laid down in the case of Gillette Group India (P) Ltd. (2012 (6) TMI 406 - ITAT DELHI ) are squarely applicable to the assessee's case. We, therefore, confirm the order of the Ld. CIT(A) by holding that disallowance u/s. 14A r.w. Rule 8D cannot be more than the expenditure claimed by the assessee - Decided against revenue. 2015 (6) TMI 669 Denial of claim of the assessee u/s. 10A - the business is already in existence and thus condition in section 10A 2(ii) has been violated - Held that:- In the instant case the assessee has produced the evidence to show that two laptops and a printer were purchased by the partner of the assessee firm Shri Arvind V. Patel on behalf of the assessee firm and payment was also made by the said partner from his Bank A/c. The assessee has produced the copy of the HDFC Bank Account of the assessee firm and as per the said statement it is seen that the said bank account was opened on 20-04-2009 whereas the laptops and printer were purchased by the assessee on 03-04-2009. We have asked the assessee to file the copies of the partner’s return of income for A.Y. 2010-11 and as per the directions of the Bench the assessee has filed the copies which are placed on record. On perusal of the copies of the partner’s returns it is seen that except the share of profits from the assessee firm and the remuneration, there is no income which can be said to have earned by using two laptops. We fail to understand how the Assessing Officer has held that the assessee has used the secondhand laptops which are in the nature of plant and machinery. On perusal of the assessment order we find that all these facts were put on record by the assessee in his explanation dated 13-12-2012. Admittedly the laptops and printer are newly purchased may be on account of partner which are used for the business of the assessee firm. Nothing is there on record to support the case of the Assessing Officer that those laptops and printer were used earlier for some other business by the partner. In our opinion, the conclusion of the Assessing Officer in respect of the alleged violation of clause (iii) to Sec. 10A(2) is also erroneous. Accordingly Assessing Officer is directed to allow the deduction claimed by the assessee u/s. 10A - Decided in favour of assessee. 2015 (6) TMI 668 Revision u/s 263 - disallowance of depreciation on on forging press as per CIT(A) - Held that:- Assessing Officer has granted depreciation to assessee on being satisfied with the explanation of the assessee, supported by documents that forging press was installed and put to use on 29.03.2008 after conducting proper enquiry into matter. The Assessing Officer, after considering explanation of the assessee, partly disallowed depreciation as well, will prove that issue of depreciation was correctly examined by the Assessing Officer at assessment stage. Therefore, when the Assessing Officer adopted one of the courses permissible in law and the view taken by the Assessing Officer was permissible as per law to which the ld. Commissioner of Income Tax may not agree, would not treat the assessment order to be erroneous and prejudicial to the interest of revenue. Ld. Commissioner of Income Tax has not held that the view taken by the Assessing Officer is unsustainable in law. It, therefore, appears that the ld. Commissioner of Income Tax changed the opinion by reappraising the evidence already on record, thus it would not give revisional jurisdiction to him under section 263 of the Act to set aside the assessment order. - Decided in favour of assessee. 2015 (6) TMI 667 Disallowance u/s 14A - CIT(A) deleted the addition - Held that:- This is admitted position of law as per the judgment of M/s Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT reported in [2010 (8) TMI 77 - BOMBAY HIGH COURT] that Rule 8D is prospective and therefore, applicable from assessment year 2008-09 and afterwards. Therefore, Rule 8D is not applicable in the present year. At the same time, even prior to assessment year 2008-09 from when Rule 8D is applicable, some reasonable disallowance has to be made u/s 14A of the Act. The learned CIT(A) has confirmed the disallowance of ₹ 12,000/- . In our considered opinion, the disallowance of ₹ 12,000/- for average investment of ₹ 491.08 lac is not reasonable and therefore, we hold that disallowance should be made of ₹ 50,000/- on account of administrative expenses. - Decided partly in favour of assessee. Addition on account of adjustment of arms length price - CIT(A) deleted the addition - Held that:- From the provisions of clause (b) of sub Rule 1 of Rule 10B of Income-tax Rules, it is seen that resale price method is applicable where there is purchase of property or service from associate enterprise but in the present case, the assessee is not purchasing the goods from the associate enterprises but the assessee is selling the goods to associate enterprise. Based on this fact, this finding is given by CIT(A) that resale price method does not apply to the assessee ‘s case. After examining the facts and after giving this finding that the T.P.O., while dealing with international transactions with the A.Es., has himself accepted the commission rates upto 10% given to the US (A.E.) on referred sales and upto the 8% to UK(A.E.) and therefore, the CIT(A) has held that the gross margin available to the A.E. should have been benchmarked at 8% and not at 5% as the T.P.O. has himself treated all these commission payment at arm’s length and has made no adjustment in the commission transactions of the assessee. Thereafter, the CIT(A) has examined the agency agreement and held that that certain adjustments on account of functional differences between a person who acts as ‘principal to principal’ i.e. a trader and a person who acts as a mere ‘commission agent would be allowed because in case of ‘principal to principal’ transaction, person, inter alia, incurs expenditure on imports, storage and distribution of the goods which in normal course are not incurred by a commission agent and therefore, suitable adjustments for such expenditure has to be given and then only the resultant gross margin can be compared with the benchmarked 8% gross margin. On this basis, the CIT(A) has reduced the import expenses of goods from sale price by the A.E. and worked out the gross margin of the A.E. @7.04%, which is less than 8% even when no other expenses have been allocated except import expenses on goods and under these facts, it was held by CIT(A) that the adjustment made by the T.P.O. is not justified and correctly deleted the same.- Decided against revenue. 2015 (6) TMI 666 Reopening of assessment - non providing reasons for issuing notice - Held that:- Requirement of recording the reasons and communicating the same to the assessee, enabling the assessee to file objections and the requirement of passing a speaking order, are all designed to ensure that the Assessing Officer does not reopen the assessments which have been finalized on his mere whim and fancy, and that he does so only on the basis of lawful reasons and, a deviation from these directions would entail the nullifying of the proceedings Respectfully following the decision of Hon'ble Jurisdictional High Court in Haryana Acrylic Manufacturing Company (2008 (11) TMI 2 - DELHI HIGH COURT ), we decide the issue in favour of the assessee and hold that in view of the fact that the assessee was not given the copy of the reasons for issuing notice under Section 148 of the Act by the Assessing Officer inspite of a specific written request of the assessee for providing the same, the whole reassessment proceedings and the resultant order of assessment passed under Section 143(3)/148 of the Act have become vitiated entailing in nullifying proceedings and, accordingly, the orders of assessment under Section 143(3)/148 are quashed - Decided in favour of assessee. 2015 (6) TMI 665 Disallowance u/s 40(a)(ia) - non deduction of TDS - CIT(A) deleted the addition following the decision of Merilyn Shipping & Transport Limited - Held that:- The decision of Merilyn Shipping & Transport Limited [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] as relied upon by CIT(A) in allowing claim but the said decision has not been approved in the case of Crescent Exports Syndicate [2013 (5) TMI 510 - CALCUTTA HIGH COURT ]. Thus on the basis of which the ld. CIT(Appeals) has allowed the relief to the assessee, we, therefore, set aside the order of the ld. CIT(Appeals) and restore this issue to the file of the CIT(Appeals) with a direction that the ld. CIT(Appeals) shall re-decide the appeal of the assessee afresh in accordance with law after giving proper and sufficient opportunity to the assessee. - Decided in favour of revenue for statistical purposes. Disallowance of ROC expenses - CIT(A) allowed claim - Held that:- Before the CIT(Appeals), the assessee submitted that the ROC expenses is part of preliminary expenses and pre-operative expenses as mentioned in Schedule 8 and only 1/5t h of such expenses has been claimed as deduction. CIT(Appeals) restored this issue to the file of the Assessing Officer mentioning that Assessing Officer while giving effect to this order will re-check the amount actually claimed by the assessee and give consequential relief. This ground of appeal is allowed subject to the directions given above. - Decided against revenue. Disallowance of insurance - difference in the stock as taken in the books of accounts - CIT(A) allowed claim - Held that:- no interference is called for in the order of CIT(Appeal s). The assessee held the insurance of the stock of ₹ 1.25 crores, but it does not mean that the assessee was having the said stock in its books of accounts. Even otherwise, the stock policy has been taken on 12.02.2008 while the value of stock in the balance sheet has to be taken at the end of the year, i.e. 31.03.2008 in the impugned case. The basic presumption made by the Assessing Officer is incorrect while making the addition on the basis of difference in the stock as taken in the books of accounts. We accordingly confirm the order of CIT(Appeals) - Decided against revenue. Customs 2015 (6) TMI 701 Challenge to acquittal of the Respondent under offence under Sections 22 and 23 of the Narcotics Drugs & Psychotropic Substances Act, 1985 - Held that:- when a passenger, boarding an international flight presents a ticket at the airlines counter, his baggage is weighed and a baggage tag is issued which is then affixed either on the ticket or on the boarding pass. The passenger has to physically present himself at the counter with the baggage he wishes to check in. In many airports the baggage is also x-rayed before it is checked in. The passenger's details are verified by examining his or her passport and then making sure that the baggage he wishes to check in is within the permissible weight. The baggage tag and its counterfoil is generated on computer with the name of the passenger, the weight of the baggage and the flight details printed on it. The tag is affixed on the baggage and the counterfoil either on the ticket or the boarding pass. It is well-nigh impossible for a computer-generated baggage tag to be got issued in the name of a passenger who is not himself carrying the baggage. It is inconceivable that some other person got a baggage checked in or got a baggage tag in the name of the Respondent and got its counterfoil affixed on the Respondent's boarding pass or ticket which he somehow did not notice. The baggage tag and its counterfoil constitute evidence of conscious possession of the baggage by the Respondent and therefore, assume significance. Under Section 54 (a) of the NDPS Act, when a person fails to account satisfactorily for being in possession of a narcotic or psychotropic substance, a presumption can be drawn, unless the contrary is proved, that he has committed an offence under the NDPS Act in respect of such substance. If the clothes and personal belongings found in the bag were women‟s clothing as stated by the Respondent in reply to question No.8 in his statement under Section 313 Cr PC, clearly the defence counsel would have noticed it and got a question recorded in that regard in the cross-examination of the witness - The evidence of PW-9 is trustworthy and consistent and has been corroborated by PW-11, the IO. The difference in the time of completion of proceedings as spoken by PW-9 (till 12 midnight) and PW-11 (till 4 am.) cannot by itself be taken to have diluted the credibility of their testimonies. - trial Court committed a manifest error in disbelieving the prosecution evidence, and also overlooking critical pieces of the evidence of the prosecution in concluding that it had not been able to prove the Respondent's conscious possession of the psychotropic substance. In the considered view of the Court, the prosecution evidence proves that fact beyond reasonable doubt. Even if in the present case the NCB officials were not in a position to explain to the Respondent the contents of the notice under Section 50 NDPS, on account of his inability to understand English and the inability to arrange for an interpreter at the airport, an adverse inference ought not to be drawn against the NCB since the contraband was not found from the person but from his checked-in luggage. The evidence on record does not persuade the Court to conclude, as the trial Court has done, that the officers had deposed falsely in that regard. Such a conclusion was not warranted in the facts and circumstances of the case. There is no evidence whatsoever regarding the tampering of the parcels or the samples sent for testing. There is nothing to show that the procedure for preserving and sending the samples for testing was not complied with. On the question of mixing of the substance, the trial Court appears to have overlooked the specific answer given by PW-11 in his cross-examination on 6th September 2011 Prosecution has been able to prove beyond reasonable doubt that it was the Respondent who had checked in his black trolley bag from which the psychotropic substance was recovered and that he was in conscious possession thereof. The prosecution has been able to prove that what was being carried by the Respondent by way of export from India to place outside India was a commercial quantity of a prohibited psychotropic substance, thus clearly attracting the offences under Sections 22 and 23 of the NDPS Act. - Court accordingly sets aside the impugned judgment of the trial Court and convicts the Respondent for the offences under Sections 22 (c) and 23 (c) of the NDPS Act. Quantum of sentence - Held that:- Under Section 22 (c) NDPS Act, the minimum sentence for a person who is found in possession of a commercial quantity of a psychotropic substance (in this case Meth) is ten years rigorous imprisonment („RI‟) with fine not less than ₹ 1 lakh. It is likewise for the offence under Section 23 (c) NDPS Act. Consequently, for each of the offences under Sections 22(c) and 23(c) of the NDPS Act, this Court sentences the Respondent to undergo ten years RI with a fine of ₹ 1 lakh and in default to undergo simple imprisonment for three months. Both the sentences shall run concurrently. - Decided in favour of Revenue. 2015 (6) TMI 688 Duty drawback claim - Seizure of goods - Held that:- Circular No. 1/2011-Customs dated 4.11.2011 and Circular No. 30/2013-Customs dated 5.8.2013 require exporter to execute a bond of an amount equal to the value of goods and furnish appropriate security in order to cover the redemption fine and penalty in case goods are found to be liable to confiscation. We have directed the petitioner to furnish bond of 100% value of the goods. - goods of the petitioner shall be released for export provided the petitioner furnishes bond equal to the amount of seized goods other than cash and bank guarantee. This order shall be complied with by the authority. - Decided conditionally in favour of assessee. 2015 (6) TMI 687 Denial of refund claim - Refund of SAD - Bar of limitation - Held that:- there is no limitation for refund of SAD prescribed under Section 27. Further, I agree with the Hon'ble High Court as held in Sony India case (2014 (4) TMI 870 - DELHI HIGH COURT), that limitation period cannot be started before the claim has crystallized. Accordingly, I hold that the appellant is entitled to refund of SAD. - Decided in favour of assessee. Corporate Laws 2015 (6) TMI 707 Right vested by the Articles of Association denied - Control of Yes Bank - Family dispute - Held that:- Yes Bank’s Articles do contain a set of proprietary and participative rights; particularly in Article 110(b). These are rights that are attached to shares, and flow from, and only from the shareholding of Ashok Kapur and Rana Kapoor. Of these various rights, the right to recommend under Article 110(b) decidedly is not and never was personal to either Ashok Kapur or Rana Kapoor. It endures to each of their successors, legal representatives and assigns. This right is not in the nature of a ‘contract of personal service’ and was not limited to the two individuals in question. There is no question of contextual repugnancy. The right to recommend, read in context, is much more than the right to suggest. The very nature and context of Article 110 clearly indicates that this was always intended to be a right to nominate three “IP Representative Directors” to Yes Bank’s Board. It was unnecessary to include in the Articles a mere ‘right to suggest’; brute strength in shareholding and even mere shareholding would have done as well. It is the right to nominate. It is equally incorrect to suggest that the Plaintiffs have, only on account of Ashok Kapur’s demise, transmogrified into some sort of non-promoter capacity. The applications to the RBI to this end are motivated, self-serving and prima facie unlawful. It also follows that any recommendations made by the 1st Defendant, Rana Kapoor, without the concurrence and consent of the Plaintiffs are also ultra vires the Articles and are null and void. For the reasons previously discussed, Defendant No. 8 cannot have been validly appointed as an IP Representative Director or an Independent Director. His appointment is invalid. The appointment of Defendant No.9 to the chairmanship of Yes Bank is ultra vires the Articles, and null and void, and the so-called approval of the RBI to that appointment is inconsequential. Similarly, the appointments of Defendants Nos. 10, 11 and 12 as whole time directors of Yes Bank’s Board are also prima facie ultra vires its Articles and void. As regards Defendants Nos. 7 and 18, I am unable to understand how it could have been proposed to ‘treat’ them as Independent Directors. They were required to be appointed as such by validly passed resolutions at a properly called General Meeting and there is no provision in the 2013 Act to allow any person to be ‘treated’ as an independent director. Yes Bank has before it even now a plenitude of options even when it comes to the directors whose appointments are in jeopardy, what need is there for an interim order? Here, too, I think the answer is an inevitability: if something has been done that is illegal or ultra vires, to allow it to continue for the next two decades while the suit wends its tortuous way through a trial is patently unfair. On the question of balance of convenience, commercial expediency cannot trump acts ultra vires or illegal. If reliefs are not granted, the Articles’ meaning is forever lost. The Articles of a company are to it very like what the Constitution is to citizens. Shareholders are truly ‘invested’ in the enterprise: not merely for making profits and earning dividends, but also with a view to ensure that their rights, enshrined in the Articles, are always protected. It is of little use to say that the Plaintiffs are not a minority because they have a large shareholding. - Pending the hearing and final disposal of the present Suit, the Defendants be restrained by a temporary order and injunction from nominating and/or recommending the appointment of any Directors under clause 110(b) of the Articles of Association of Defendant No. 6 without consulting and obtaining the consent of the Plaintiffs - restrain Defendant No.7 from acting or holding himself out as Chairman of Defendant No.6 - restrain Defendant No. 1 by a temporary order and injunction from acting or holding himself out as Managing Director or Chief Executive Officer of Defendant No. 6 - that the Hon'ble Court be pleased to declare that Defendant No. 9 was not validly appointed the Non-Executive Part-time Chairman of Defendant No. 6 from the date of his purported appointment - restrain Defendant Nos. 1 and 6 by themselves, their servants, agents and officers by a temporary order and injunction from appointing any person either as chairman and/or as managing director without consulting and obtaining the prior written consent of the Plaintiffs in this regard - restrain Defendant Nos. 1 to 6, by themselves, their servants, agents and officers by a temporary order and permanent injunction from in any manner initiating, taking or continuing any steps (including, making representations to any regulators/authorities and acting on the representations already made to regulators /authorities) for de-classifying and/or changing the category of the Plaintiffs as the promoter of Defendant No. 6 in the Annual Reports of Defendant No. 6 or otherwise howsoever. 2015 (6) TMI 686 Rectification in Register of Members u/s Section 111 and 111A of the Companies Act, 1956 - To get convenience of de-materialization share sent to the company for transfer in a single name - Period of limitation - Doctrine of "delay" and "laches" - Held that:- The Petitioners have not given any cogent and convincing reason as to why they did not approach the CLB in the 7 years i.e. from 2005 to 2012. Assuming that the provisions of Limitation Act do not apply with respect to the petition filed under Section 111 of the Act, it is undisputed proposition of law that the doctrine of "delay" and "laches" applies to the proceedings filed under Section 111 of the Act. Despite having knowledge of dismissal of the Appeal and further not offering any explanation for delay of 7 years in filing the present Appeal, in my considered opinion, they are not entitled from any equitable and discretionary reliefs from this forum. Period of limitation - In terms of Article 137 of the Limitation Act, 3 years period with effect from the date of cause of action would be available for an aggrieved party toy CLB for relief under Section 111/111A of the Act. In light of the above law, I have examined the pleadings as contained in the petition. On perusal of the pleadings, it is noted that the cause of action to file the instant Company Petition had arisen firstly in the year 2005 when the Petitioners' appeal was dismissed by the Appellate Court. Undisputedly, the petition came to be filed in the year 2012 which is obviously beyond prescribed period of 3 years. I, therefore, hold that the petition is hopelessly time barred and it deserves to be dismissed on this ground alone. The Respondent has categorically denied that there was any difference of signatures on the Transfer Deeds. There is no reason to disbelieve the statement made by the Answering Respondent that there is no difference of signatures on the Transfer Deeds. In my view, the contention of the Petitioners as to non-appearance of the Respondent Nos.2 and 3 in the instant Company Petition also does not in any way help the Petitioner's case. Furthermore, the technical points raised by the Petitioners as to the non-compliance of guidelines for "Good /Bad Delivery" by the Respondent No.1 Company, and non compliance of the Circular of Ministry of Company Affairs do not have much substance. In my considered opinion, the Petitioners have failed to establish that their names were removed by the Company without sufficient cause. In conclusion, the Petition deserves to be dismissed being time barred and having no merits. - Decided against the appellant. 2015 (6) TMI 685 Rectification in the Register of Members - Section 111 (4) of the Companies Act, 1956 - Shares transferred fraudulently - Doctrine of estoppel - Period of limitation - Held that:- In this case, the only controversy involved is as to whether the Petitioner has signed the documents placed on record by the Respondents in support of their claim. I may make it clear that in the course of submissions, the Ld. Sr. Counsel appearing on behalf of the Petitioner, did not seriously challenge the signatures of the Petitioner on the questioned documents. In other words, the Ld. Counsel impliedly accepted the signatures of the Petitioner on the documents referred to and relied upon by the contesting respondents. The Ld. Sr. Counsel appearing for the Respondents confined his arguments by saying that the Petitioner was having no knowledge of having signed these documents. According to him, the Petitioner might have signed these documents inadvertently in routine course and/or her signatures might have been obtained by mis-representation of without knowing the real nature of the transactions under challenge in this petition, and therefore, these documents are not binding on her. Doctrine of estoppel - Having analyzed the facts and circumstances of the case, I am not inclined to accept that the doctrine of “estoppel”, waiver” and/or “acquiescence” would apply to the facts of the case in hand. By virtue of Section 108 of the Act, it is mandatory for a valid transfer of shares that the transferor and transferee must sign the form as provided in Section 108 and submit the same to the Company before making any entry on the reverse of the share certificate. It is also mandatory for the company to ensure and check as to the validity of the transfer form executed under Section 108 of the Act. Further, the transfer must be approved by the Board of Directors by an appropriate resolution to be passed in this regard, and thereafter, only the entries on the reverse of the share certificates need to be made. It is a well settled proposition of law as held in the decisions in the cases of (i) Shirish Finance Investment (P) Ltd. Vs. M. Sreenlvasulu Reddy [2001 (9) TMI 1055 - HIGH COURT OF BOMBAY ] (ii) Manna/al Khethan Vs. Kedarnath Khetan [1976 (11) TMI 135 - SUPREME COURT OF INDIA] that execution of Transfer Deeds under Section 108 of the Act, is a mandatory requirement in law and, therefore, there can be no estoppel, waiver and/or acquiescence against the statutory provisions of law despite the fact that the Petitioner has executed the aforesaid documents. The Petitioner is a co-trustee, her name exists on the Register of Members of the Company, along with DGK and SNI. Thus, she is a joint shareholder in respect of the shares held by N.S. Trust. It is a settled proposition of law that by virtue of Section 153 of the Companies Act, 1956, the Company cannot take cognizance of the Trust and it is obliged in laws to only look at and treat the Petitioner, the Respondent No.2, DGK and SNI as its members and/or joint holders qua the impugned shares. She has categorically pleaded and made an attempt to demonstrate that she did not execute any transfer forms transferring the impugned shares as required under Section 108 of the Companies Act. In my opinion, these allegations are sufficient to hold that the Petitioner is a person aggrieved” within the meaning of Section 111(4) of the Act, whose name, according to the Petitioner, has been removed without sufficient cause by the Company. It is a well settled proposition of law that a necessary party is one without whom no order can be made effectually, a proper party is one in whose absence an effective order can be made whose presence is necessary for a complete and final decision on the question involved in the proceedings. Rule 10(2) of Order 1 of the C.P.C. also indicates as to who is to be termed as a necessary or proper party. These provisions, inter alia, empower the Court to add the name of any person, namely (1)”who ought to have been joined” and (2) “whose presence before the court may be necessary in order to enable the court to effectually and completely adjudicate upon and settle all the issues involved in the matter”. The object of Order 1 Rule 10 is to bring before the Court, at the same time, all persons who have an interest in the subject matter of the disputes so that separate trials may be avoided. - Decided in favour of appellant. Rights of Co-trustee / joint shareholders - It is a settled proposition that a party cannot be left without remedy under law. It is also fundamental law that no party can be compelled to invite evidence against himself/ herself. It is also pertinent to mention here that the parties, who, according to the Respondents, are the necessary and proper parties have not approached this Board till date for their impleadment as a party in this petition despite having knowledge of the instant proceedings. Therefore, in my view, the Contesting Respondents are not entitled to contend that the petition suffers from non-joinder of necessary and proper parties. I have also considered the plea taken by the Respondents that keeping in view the complicated question of facts and law, the CLB is not competent to adjudicate this petition in the summary jurisdiction, and the proper recourse for the Petitioners is to file a civil suit for declaration with respect to the title of the shares, as held in M/s Ammonia Supplies Corporation (P) Ltd. V/s M/s Modern Plastic Containers Pvt. Ltd. [1998 (9) TMI 427 - SUPREME COURT OF INDIA]. Having gone through the said decision, it is to be noted that the Hon’bie Apex Court has held in the said decision that the primary jurisdiction for rectification of register of members is with the CLB and on examination of the material available on record, if it comes to the conclusion that the serious questions of facts and law are involved, in that eventuality, the CLB may relegate parties to the civil court for adjudication of their claims by way of filing a civil suit. On overall discussion of the preliminary objections raised by the Respondents challenging the maintainability of the Company Petition, I have come to the conclusion that the petitioner has not approached the CLB with clean hands and, therefore, she is not entitled to the reliefs sought for and the petition deserves to be dismissed. Further, I have come to the conclusion that the petition is barred by limitation and on this ground also the petition deserves to be dismissed. In the present case, as stated above, there is no compliance as required under Section 108 of the Act. - The Ld. Sr. Counsel for the Respondents has failed to convince me that without the said compliance the transfer of shares is valid in law. I, therefore, hold that in so far as the transfer of the impugned shares is concerned, the same is not in accordance with the law. However, since I have held that the petition is not maintainable for the reasons stated hereinabove, I, therefore, have no option but to dismiss the petition. Service Tax 2015 (6) TMI 697 Penalty u/s 76 - Whether Sections 76 and 80 of the Finance Act, 1994 as amended warrant levy of penalty equal to amount of Service Tax by way of mandatory condition or any discretion is left with the authorities for imposing such penalty - Held that:- This is a case of deliberate suppression of facts with a willful intention to evade payment of Service Tax and the evasion would not have come to light but for the investigation conducted by the Officers. On a revision, the Commissioner (Appeals) initiated penalty proceedings and imposed penalty. The said order was confirmed by the Tribunal following the decision of the Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors reported in [2008 (9) TMI 52 - SUPREME COURT], which cannot be faulted with. When there is a deliberate suppression, the provision mandates imposition of penalty. Hence, we find no reason why the Authorities should depart from imposing such penalty as mandated by the provisions of the Act. - Decision in the case of Dhandayuthapani Canteen - Vs - Customs, Excise and Service Tax Appellate Tribunal [2015 (1) TMI 812 - MADRAS HIGH COURT] followed - Decided against assessee. 2015 (6) TMI 696 Recovery of service tax - Recovery before adjudication of upon the matter and fixed the quantum of service tax - Held that:- It cannot be disputed that even before adjudication, the respondents could recover the amount. But on the assumed basis, the recovery which is being made that smacks with arbitrariness - Decision in the case of Technomaint Contractors Limited v. Union of India, reported in [2014 (4) TMI 882 - GUJARAT HIGH COURT] followed - the petitioner is entitled for interim order - recovery proceedings stayed - Decided in favour of assessee. 2015 (6) TMI 695 Demand of service tax - Banking and other Financial services - taxability of Arrangement fees - Service Tax on Agent's Bank fee - Invocation of extended period of limitation - Difference of opinion - matter to be placed before the Hon'ble President for reference to the Third Member on the following points:- (i) Whether in the facts and circumstances of the case, the Arrangement fee and Agent's Bank fee are taxable in the hands of the appellant company in view of the findings recorded by the learned Member (Technical) Or Whether the same was not taxable in view of the findings recorded by Member (Judicial). (ii) Whether in the facts and circumstances of the case, the extended period of limitation is invocable and penalties under Section 76 & 78 are payable as held by the learned Member (Technical) Or Whether the extended period of limitation is not invocable in the facts and circumstances of the case as held by the learned Member (Judicial). 2015 (6) TMI 694 Commercial Training and Coaching service - vocational training - valuation - exemption under Notification 24/04-ST - levy of penalty - Held that:- From the course content, it is clear that courses are academic in nature and covers broad spectrum of subjects as diverse as Micro Economic, Business Communication, Psychology & Organizational Behaviour, Commercial Laws, Computer based Data-Analysis, Corporate Finance, Negotiation & Contracting. In the second year, courses though gets limited to the field of specialization but are again diverse, theory oriented and academic in nature. The content of courses can by no stretch of imagination can be called vocational. No doubt the two years course will help candidates in understanding various facets of management and get employment. It is a professional management course. This cannot be considered as Vocational Course that imparts skill to enable the trainee to seek employment or self employment after the said course. Decision in the case of Ashu Export Promoters P. Ltd. [2011 (11) TMI 387 - CESTAT, NEW DELHI] distinguished. However in the case of the second appellant, we agree with the Ld Counsel that the genuine belief that Charitable Trusts are not covered by the expression "Commercial Training or Coaching Centre" is supported by the fact that Not 24/2004 was amended retrospectively to cover such institutions. Therefore the larger period of limitation cannot be invoked as held by the Tribunal in the case of I2IT P. vs. CCE - [2014 (9) TMI 345 - CESTAT MUMBAI]. Valuation - Held that:- Amount recovered under students fund is recovered under receipts and is towards expenses such as textbooks, uniform, medical check-up, insurance etc. Unspent amounts are returned to the students. The ld. counsel also showed from the appeal papers the details of the amounts returned to the students. We agree with the reliance placed on the case of Intercontinental Consultant & Technocrafts P. Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT] in which the Delhi High Court held that amounts recovered towards expenses cannot form part of the value of the service. Similar is the case relating to charges for re-examination fees which is an activity post the coaching training and is an expense recovered from the students. Accordingly, we hold that these charges are not includable in the value of the service. In view of the uncertainty prevailing on the leviability of tax on "Commercial Training and Coaching centres and keeping in view the amendments to the Notification 24/2004 which introduced changes in the definition of vocational training, a fair case is made out before us to hold that there was a reasonable cause for failure to deposit the service tax. And therefore, the benefit of section 80 which uses the word "reasonable cause" must be extended to the appellants. - demand of service tax and interest on all the appellants but set aside the demand for the larger period of limitation; however the penalties are set aside in terms of Section 80. - Appeal disposed of. 2015 (6) TMI 692 Waiver of pre deposit - CENVAT Credit - invoices issued in the name of the Corporate Office and distributed the credit to various units under ISD invoices - according to the department, this service tax cenvat credit is in respect of the service which had been entirely used in the Vizag Unit and, therefore, the service tax credit in respect of this service which was received and used by Vizag Unit was not available to the appellant unit located at Bhilai Held that:- There was no provision that the cenvat credit distributed by the Head Office as input service distributor should be in proportion to the turnover of the factories located at various places. Such restriction, was put after 31.3.2012. In view of this, prima facie, we are of the view that during the period till 31.3.2012, there was no irregularly in issuing of the ISD invoices by the Head Office to the appellant company passing on the cenvat credit in respect of the service which may have been used exclusively by the Vizag Unit. Such restrictions came only w.e.f 1.4.2012 and according to the ld. Counsel for the appellant, the credit distributed w.e.f. 1.42012 period is only about ₹ 11 Lakhs. Appellant unit would not be eligible for cenvat credit in respect of the invoices issued by Head Office during the period w.e.f. 1.4.2012. In view of this, we direct the appellant unit to deposit an amount of ₹ 12 lakh within a period of 6 weeks. - Partial stay granted. Central Excise 2015 (6) TMI 702 Waiver of pre-deposit - utilization of credit of Basic Excise Duty - discharge of Education Cess - Held that:- High Court of Gujarat in the case of Madura Industries Textiles in [2013 (1) TMI 352 - GUJARAT HIGH COURT], has upheld the order of the Tribunal, wherein this view was taken. Since the issue has attained some kind of finality by the judgment of Hon'ble High Court of Gujarat, we find that the impugned order which holds against the appellant is unsustainable and is liable to be set aside. - Decided in favour of assessee. 2015 (6) TMI 700 Benefit of Cenvat credit - whether the appellant is liable to reverse the Cenvat credit of ₹ 61,000/- approx. which has been used by them for payment of duty in respect of goods produced and cleared by them on 4th and 5th May, 2007 which was not in any case payable by them, Cenvat credit of ₹ 61,000/- was be available to them if they are liable to pay duty - Held that:- The same was reversed by paying duty liability on the goods which were not required to pay any duty. As such by using the said credit for payment of duty, they are deemed to have reversed the same, thus making the entire situation as revenue neutral. As such, I find no justification for confirmation of demand on such denial of credit. Accordingly, the impugned order is set aside 2015 (6) TMI 698 Utilization of basic excise duty - Whether the Appellants are eligible to utilize the Basic Excise Duty for payment of Education Cess and Secondary & Higher Education Cess leviable on the final product. - Held that:- Decision in the case of M/s Ajanta Mfg. Ltd Vs CCE Rajkot [2015 (6) TMI 662 - CESTAT AHMEDABAD] and CCE Vs Madura Industries Textiles [2013 (1) TMI 352 Gujarat High Court] - Decided in favour of assessee. 2015 (6) TMI 693 Transfer of CENVAT Credit - Sale of manufacturing unit alongwith raw material and semi finished goods - Duty demand in respect of inputs and semi finished goods transferred to the buyers of the unit - inputs were not used by the appellant in the manufacture of the final product - Held that:- Though the manufacturing unit was sold by the appellant to M/s. Bon Ltd. but sale is on as where is basis. Accordingly, the input in question was not removed from the factory and therefore in absence of removal of input from the factory duty demand is not sustainable. It is also not disputed that the factory was on going and after sale, the buyer, M/s. Bon Ltd was engaged in the manufacture and was assessed under Central Excise. It is also not a case that M/s. Bon has removed the input lying in the factory without payment of duty or disposed of otherwise. - it is permitted even to transfer the Cenvat credit to the buyer unit as well as transfer of stock of input. In this regard, the Revenue in their ground of appeal stated that since factory was partly sold therefore Rule 10 is not applicable. - No infirmity in the impugned order - Decided against Revenue. 2015 (6) TMI 691 Determination of capacity of production - Appellants were manufacturing Pan Masala containing tobacco known as Gutka with two Retail Sale Prices namely, ₹ 1.00 per pouch and ₹ 0.50 per Pouch - two different RSPs of the goods manufactured by them was falling in the same slab – what is the "new retail sale price" and whether an RSP different from existing RSP belonging to the same RSP slab of the various RSP slabs mentioned in Rule 5 can be treated as the "new RPS" for the purpose of the 1st proviso to Rule 8 - Held that:- On going through the provision of Section 3A of Central Excise Act, 1944 and the provisions of PMPM Rules, 2008 framed under Section 3A(2) & 3A(3) of the Act, we are of the prima facie view that for the reasons given below, the "new retail sale price" mentioned in the 1st proviso to Rule 8 of PMPM Rules, 2008 means the retail sale price of the RSP slab, different from the RPS slab of the existing RSP - Tribunal, in case of Phool Chand Sales Corporation (2012 (11) TMI 476 - CESTAT, NEW DELHI) has also expressed the view that 1st proviso to Rule 8 of PMPM Rules applies only when pan masala/gutkha with two RSPs falling under two different slabs are manufactured on a machine in a month. - Appellant have a strong prima facie case in their favour as in our prima facie view, the impugned order is wrong and the requirement of pre-deposit of the duty demand, interest thereon and penalty for compliance with the provisions of Section 35F would cause undue hardship - Stay granted. 2015 (6) TMI 690 Cenvat credit - Runner Mass in the nature of input or capital goods - whether it is to be treated as an input for manufacture of the final product and eligible for 100% credit or it is a part of the capital goods and not eligible for 100% credit, whether the appellants are liable for penalty and whether the demand is hit by limitation or otherwise - Held that:- runner mass is not even used inside the furnace but it is used in the runner path which allows smooth flow of the molten metal therefore, the credit availed by the appellants as inputs is valid. Show cause notice was issued on 20.03.2009 demanding reversal of credit availed for the period from April,2005 to August, 2007, invoking the extended period. They have correctly declared the item as input to the department and availed 100% credit and also filed regular returns. As seen from the grounds of appeal at para-36, CERA carried out Audit in July 2004, August, 2008, and October, 2007, and internal audit of the department carried out audit in November,2003, March, 2005 and February, 2007 and February, 2008, no objection was raised either by CERA or by the internal audit. Considering it is only a question of interpretation and there is no suppression involved in this case. Therefore, the demand is also hit by limitation. - Appellants are eligible to avail 100% credit on the 'runner mass' as inputs. Accordingly, the impugned order is set aside - Decided in favour of assessee. 2015 (6) TMI 689 Exemption Notification No.10/2003 - CENVAT Credit - appellants had manufactured and cleared hand pumps by availing exemption - Held that:- Assessee is required to file an application along with a Chartered Accountant certificate after making payment of the amount of duty with interest. If the Commissioner finds that the amount paid is not correct, he is required to ensure that the verification is done within two months and the shortfall, if any, is intimated to the assessee within two months and thereafter the assessee is required to make payment within 10 days of such communication. It is not the case of the Revenue that in this case, the appellant had not made the payment correctly and there was a shortfall and there was a communication of such shortfall to the assessee. The section nowhere requires the Commissioner to pass an order or communicate that the amount paid is correct in accordance with law. Once the Commissioner does not send any communication within two months, the matter has to be considered as finalized as per the provisions of Section 73 - Obviously, there is no case for the Department to demand 10% of the amount received by the appellant in respect of exempted hand-pumps once the assessee fulfilled the obligations caused on him under Section 73 giving retrospective effect to the provisions of Rule 6 of CCR 2004. Therefore I find that the litigation started by the Department was under a mis-conception and the first appeal itself should not have been filed. - Decided in favour of assessee.
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