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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter June 26, 2015 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise Wealth tax Articles 1. Filling up the lacunae in defective SCN not allowed in case of an open remand By: Bimal jain Summary: The High Court of Madras ruled that the Tribunal cannot remand a case to fill gaps in a defective Show Cause Notice (SCN). Thirumurugan Enterprises, contractors for Neyveli Lignite Corporation, challenged the SCNs as vague and lacking specific allegations or classifications of taxable services. The Commissioner (Appeals) ruled in their favor, citing vagueness and limitation issues. The Tribunal's decision to remand the case was contested, leading the High Court to assert that the Tribunal must address the issues based on the merits found by the Commissioner (Appeals), disallowing the Department from rectifying SCN deficiencies through open remand. 2. AMENDMENT IN APPELLATE PROVISIONS By: Dr. Sanjiv Agarwal Summary: The Finance Act, 2015 introduced amendments to section 86 of the Finance Act, 1994, effective from May 14, 2015. These changes restrict the scope of appeals to the Tribunal by specifying that appeals concerning the rebate of service tax related to exports must be handled under section 35EE of the Central Excise Act, 1944. This amendment mandates that appeals filed after the Finance Act, 2012 and pending as of May 14, 2015, be transferred to the Central Government for revision. Critics argue this centralizes authority and burdens exporters who must now pursue claims in Delhi, potentially favoring revenue interests over fair appellate review. News 1. Invitation of memoranda on the subject ‘Export Infrastructure in India'. Summary: The Department-related Parliamentary Standing Committee on Commerce is reviewing the topic of Export Infrastructure in India and invites memoranda on the subject. Interested parties have 15 days from the advertisement's publication to submit their memoranda or request to provide oral evidence. Details are available on the Rajya Sabha website under the Committees section. Correspondence should be directed to the Joint Director at the Rajya Sabha Secretariat in New Delhi. 2. RBI Reference Rate for US $ Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 63.6121 on June 25, 2015, compared to Rs. 63.6600 on June 24, 2015. The exchange rates for other currencies against the Rupee were also provided: the Euro was Rs. 71.1692, down from Rs. 71.3119; the British Pound was Rs. 99.7947, down from Rs. 100.5000; and 100 Japanese Yen was Rs. 51.40, slightly up from Rs. 51.38. The Special Drawing Rights (SDR) to Rupee rate will be determined based on this reference rate. Circulars / Instructions / Orders Income Tax 1. F.NO.500/62/2015-FT&TR-III - dated 19-6-2015 Modification in the constitution of Information Security Committee (ISC) of CBDT. Summary: The Central Board of Direct Taxes (CBDT) has modified the composition of its Information Security Committee (ISC) initially established on April 7, 2015. The revised committee includes the addition of the Joint Secretary (FT & TR-II) as a member and replaces the CIT (M & TP) with the CIT (International Taxation-3), New Delhi, who will also assume the role of Chief Information Security Officer (CISO). These changes have been approved by the chairperson of CBDT. FEMA 2. 112 - dated 25-6-2015 Permission to AD Category -I banks to borrow from international / multilateral financial institutions without approaching RBI for case by case approval subject to specified conditions. Summary: AD Category-I banks are now permitted to borrow from international or multilateral financial institutions without needing Reserve Bank of India's case-by-case approval. This decision enhances banks' flexibility in accessing overseas funds. Borrowings must be for general banking purposes, not capital augmentation, and comply with specified prudential conditions. The institutions eligible for lending include those with Indian government shareholding or established by multiple governments. The circular is issued under the Foreign Exchange Management Act, 1999, and does not override any other legal permissions or approvals required. DGFT 3. 22/2015-2020 - dated 23-6-2015 SION for new product 'Golf Gloves' made of Knitted/Crocheted/Woven/Non-woven fabrics under Textiles Product Group. Summary: The Directorate General of Foreign Trade has issued a Standard Input Output Norm (SION) for the export of golf gloves made from knitted, crocheted, woven, or non-woven fabrics under the Textiles Product Group. This new SION, numbered J-376, specifies the quantities of materials allowed for import per unit of export, including fabric, elastic tape, binding tape, Velcro, logo, snap fasteners, Lycra, and knitted ribbed fabric for cuffs. This notice establishes the SION for golf gloves, which previously did not exist, facilitating the export process for this product. Highlights / Catch Notes Income Tax Court Rules Construction Materials as "Plant" for Tax: Eligible for Full Depreciation Despite Independent Use Limitations. Case-Laws - HC : Entitlement to claim 100% depreciation on the centering/shuttering material - poles used in shuttering/ centring work would also be plant no matter that they cannot be used on a stand alone basis. - HC Visit to Get Source Compensation for Surrendering Tenancy Rights is Taxable as Capital Gains Under Income Tax Law. Case-Laws - HC : Compensation for surrender the tenancy right - tenancy right was a capital asset and surrender of the same was a transfer of a capital asset - HC Visit to Get Source High Court Rules Filing Appeal Doesn't Halt Tax Recovery; AO Can Impose Conditions During Appeal Process. Case-Laws - HC : Stay of demand - assessee in default - Mere filing of appeal does not suo-moto stay the recovery proceedings - AO is empowered to exercise his discretion, subject to conditions as he may think fit to impose in the circumstances of case, even though the time for payment has expired, as long as such appeal remains disposed of - HC Visit to Get Source Discrepancy in Stock Value Reporting: No Adjustment Allowed Between Bank and Tax Reports as of March 31, 2010. Case-Laws - AT : Undisclosed closing stock - difference in the value of stock shown to the bank and as declared to the income tax department - no addition for the difference in stock as on 31.03.2010 could be made by relying on the stock statement dated 20.03.2010. - AT Visit to Get Source GMR Project Income: Only "Inside India" Earnings Taxed; "Outside India" Design and Supply Receipts Exempt. Case-Laws - AT : Bifurcation of income from GMR Project in item of “inside India” and “outside India” - the outside receipts pertaining to designing, fabrication and supply of material, activities carried out outside India is not taxable in India. - AT Visit to Get Source Assessee Allowed to Introduce New Grounds and Claim Depreciation Disallowance in Assessment Proceedings. Case-Laws - AT : Disallowance of depreciation - the assessee can raise additional ground and make claim during the assessment proceedings. - AT Visit to Get Source Unexplained Jewelry Investments Found in Search u/s 132 Deemed Meritless in Joint Family Tax Assessment Case. Case-Laws - AT : Unaccounted jewellery - joint family system - search u/s 132 - Addition made on account of unexplained investments in jewellery in the hands of the assessee, is devoid of merit. - AT Visit to Get Source Factoring Charges Not Considered Interest u/s 194A, No TDS Required on Discounting Charges. Case-Laws - AT : TDS u/s 194A - addition on account of factoring/discounting charges as no tax at source was deducted -factoring charges were not interest and as such, provisions of TDS are not applicable. - AT Visit to Get Source Court Evaluates If Amenity Income Should Be 'Income from Other Sources' or 'Income from House Property'. Case-Laws - AT : Income received towards amenities - 'income from other sources' or 'income from house property' - It appears that by separately charging in the guise of amenities charges, the assessee wanted to reduce the liability to property tax which is based on the rental income of the property. - AT Visit to Get Source Registration Denied u/s 12A(1)(a) for Objectives Focused on Regulating Private Security Employment in Maharashtra. Case-Laws - AT : Registration u/s 12A(1)(a) denied - objectives are for regulating the employment of private security guards employed in factories and establishments - it is a welfare measure of the Government of Maharashtra and in our view, the activities of the Board cannot be said to be falling foul of the proviso to section 2(15) - AT Visit to Get Source Customs Valuation of Imported Machinery in Nepal and India: Depreciation Method Applied Per 1987 Circular. Case-Laws - SC : Valuation of imported machines - For six years period i.e., when the machinery was used in Iraq and thereafter, it was brought to Nepal, its value as on that date was ascertained. - Thereafter, for remaining three years, when it was in Nepal and brought to India, depreciation method is adopted.In such circumstances, we do not find any error in applying the circular dated 19.11.87 in the instant case - SC Visit to Get Source Jumbo Rolls Valuation Upheld: Cost Plus Freight Based on Independent Sales with Adjustments for Cutting & Joining Charges. Case-Laws - SC : Valuation of Jumbo rolls - Import from related party - The value established by the original authority adequately represents cost plus freight to the suppliers based on independent sales once the cutting and joining charges are adjusted - SC Visit to Get Source Supreme Court rules penalty reduction unjustified; restores original Rs. 20 lakh fine for breach of court undertaking. Case-Laws - SC : Reduction of penalty - no reason whatsoever is given for reducing the penalty from ₹ 20 lakhs to ₹ 1 lakh except observing that it "appears to be excessive". - the breach has been committed by the respondent. More serious breach is the violation of undertaking given to this Court - Penalty not to be reduced - SC Visit to Get Source Corporate Law CLB's Reconsideration of Ad-Interim Orders: Alteration Not a Review Under Company Law Board Regulations, 1991. Case-Laws - Board : Non compliance of the provisions of the Company Law Board Regulations, 1991. - reconsideration of such ad-interim order passed by the CLB cannot be said to be reviewing of an order. It amply clear that variation/ modification/recalling of an ad-interim order is not covered within the scope of "review of an order". - CLB Visit to Get Source Civil Court Can Address Director Appointment Disputes Due to Lack of Specific Remedy in Companies Act. Case-Laws - HC : Appointment of directors - jurisdiction of the civil court - There is no remedy provided under the Companies Act for redressal of such a grievance before any particular court or forum or by recourse to any particular machinery. In these circumstances, the jurisdiction of the civil court cannot be said to be impliedly barred by the Companies Act for redressal of such a grievance. - HC Visit to Get Source Service Tax CENVAT Credit Denial Overturned Due to Extended Limitation Period; Confusion on Credit Applicability Cited in Decision. Case-Laws - AT : Denial of CENVAT Credit - Trading service - Invocation of extended period of limitation - There was a clear scope for genuine confusion in the matter - demand beyond normal period of limitation set aside - AT Visit to Get Source High Court Orders Central Excise Commissioner to Address Appeal on Rejected VCES 2013 Declaration. Case-Laws - HC : Rejection of declaration under VCES 2013 - Commissioner of Central Excise (Appeals) directed to take up the appeal preferred by the petitioner and dispose of the same in accordance with law - HC Visit to Get Source Court Highlights Need for Checks on Authority Decisions in Absence of Appeal Provisions Under VCES 2013. Case-Laws - HC : Rejection of declaration under VCES 2013 - If any statute or scheme does not make the appeal provision, it would be nothing to mean that the order passed by the authority has become final and conclusive for all the purposes and thereby, giving uncontrolled and unquestionable powers to the said authority by virtue of which, he becomes as monopoly over the statute and will certainly act in an arrogant manner. - HC Visit to Get Source Show Cause Notice Invalidated for Missing Taxable Service Details, Breaching Due Process Requirements. Case-Laws - AT : Improper details in SCN - Specific taxable service not mentioned in SCN - The failure to gather relevant facts for issuing a proper show cause notice cannot provide justification for a vague and incoherent show cause notice which has resulted in a serious transgression of the due process of law - AT Visit to Get Source Pre-licensing training for insurance agents exempt from service tax u/s 65(27) of the Finance Act, 1994. Case-Laws - AT : Pre-licensing training and coaching to the prospective insurance agents - training imparted by the appellant is having the recognition of law and covered under exclusion clause of Section 65(27) of the Finance Act, 1994, therefore the appellant is not liable to pay service tax at all. - AT Visit to Get Source Court Finds Lack of Evidence in Cenvat Credit Case; Non-Compliance Conclusion Deemed Unsupported by Facts. Case-Laws - AT : Cenvat credit - exempted and taxable services - In the absence of the Adjudicating Authority recording a clear finding that the assessee failed to maintain separate accounts and on the basis of some evidence in support of such conclusion, the inference of a failure to maintain separate accounts, is a finding of fact based on no evidence. It is therefore perverse. - AT Visit to Get Source No Penalty for Share Broker u/s 78 Due to Good Faith; Extended Limitation Period Not Applicable. Case-Laws - AT : Penalty u/s 78 - share broking services - in the facts and circumstances of the case, assessee has acted bonafide - neither extended period of limitation is attracted nor any penalty is imposable under Section 76 or 78. - AT Visit to Get Source Central Excise SSI Exemption Non-Compliance: Challan Book Suggests Exceeding Central Excise Duty Limits from May to October 2011. Case-Laws - AT : SSI exemption - Though duty demand cannot be confirmed merely on the basis of power consumption, the recovery of challan book for the period 06.05.2011 to 18.10.2011 containing details of clearances during this period does indicate that the value of the clearances of appellant unit may be far in excess of SSI limit - AT Visit to Get Source Cenvat Credit Rule 6(2) & 6(3)(b) Exemption for By-products in Dutiable Manufacturing: No Credit Reversal Needed. Case-Laws - AT : Reversal of cenvat credit - provisions of Rule 6(2) read with Rule 6(3)(b) of Cenvat Credit Rules, 2002/2004 would not be applicable in such cases when in course of manufacture of dutiable final products some exempted final products also emerge as inevitable by-product. - AT Visit to Get Source Court Finds Revenue's Claim on PTY Twisted Yarn Sales Incorrect; Examines Factory Gate Sales for Excise Valuation. Case-Laws - SC : Valuation - PTY Twisted Yarn - Factory gate sale or not - The allegation of the Revenue against the assessee is that the broker used to sell it to a third party at a higher price is factually incorrect - SC Visit to Get Source Settlement Commission to Decide Validity of Show Cause Notice on Alleged Improper Cenvat Credit Claim of Rs. 1.59 Crore. Case-Laws - HC : Scope of the powers of the Settlement Commission - Commission is empowered to decide as to whether the show cause notice rightly demands a sum of ₹ 1,59,39,047/- stated to be a Cenvat credit illicitly availed by the Petitioners - HC Visit to Get Source Case Laws: Income Tax 2015 (6) TMI 790 Computation of income - applying net rate of 2.24% on the gross receipts by CIT(A) - CIT(A) deleting the addition made on account of 4% commission on debit and credit entries regarding providing accommodation entries - CIT(A) deleting the addition made in respect of TDS amount claimed from M/s PACL India Ltd - Held that:- In almost similar facts identical issues have been decided by the Tribunal in favour of the present assessee. In the present year, also in the case of the assessee, the Assessing Officer has made additions of Rs. 4,28,501/- and Rs. 16,99,945/- on account of TDS amount claimed from PACL India Ltd. and 4% commission on the credit entries in the bank account. Since, the issues raised in the grounds are covered by earlier decision of the Tribunal in the group case of the assessee as well as the recent order of the Tribunal for the similar assessment year 2008-09 we do not find infirmity in the first appellate order. In that case also the Tribunal has upheld the first appellate order on identical issues. Addition made by the AO on account of TDS treating the amount claimed from PACL India Ltd. and PGF India Ltd. as real income of the assessee deleted by the Ld. CIT(A) has been upheld. The Tribunal has also upheld the action of the 1st appellate authority in restricting the addition made on account of 4% commission on debit and credit entries regarding providing of accommodation entries to the said companies to 2.4% of the gross receipt shown in the profit and loss account from the above companies. - Decided against revenue, 2015 (6) TMI 769 Entitlement to claim 100% depreciation on the centering/shuttering material - Held that:- The bottles containing the soft drink cannot be stock-in-trade inasmuch as the bottle by itself is not the subject of sale. The customer or the retailer returns back the bottle to the assessee after the soft drink is consumed. Likewise, the shells which are sent to the customer or dealer also come back with the empty bottles and they cannot also be stock-in-trade. What is the function these bottles and shells perform in the assessee's trade ? Are they essentially tools in the assessee's business ? In our opinion, yes. The bottles are essential tools of the trade for it is through them that the soft drink is passed on from the assessee to the customer. Without these bottles, the soft drink cannot be effectively transported, like the silos which are used to store grain and to empty the same, performing a trade function. As pointed out in Dixon v. Fitch's Garage Ltd. the bottles and the contents are "totally interdependent." So are the shells. The bottles and shells also satisfy the durability test for it is nobody's case that their life is too transitory or negligible to warrant an inference that they have no function to play in the assessee's trade. They are therefore "plant" for the purposes of the Act. individual components of shuttering/centering material do not lose their individuality merely because they are used in combination with other similar or dissimilar units in the construction activity of the assessee. They can be and are normally dis-assembled after their use in combination and revert back to their individual status. Since they are durable and have a function in the assessees business, merely because they are not capable of being used individually on a stand alone basis and have to be used in combination with other units thereof, they do not cease to be a plant. Therefore, it is possible for the assessee to claim depreciation on individual items thereof under the proviso to Section 32 (1) (ii) of the Act and that it is not necessary for him to prove that each such individual item is capable of being used on a stand alone basis. Thus electric poles used in an industry for change of power from D.C to A.C would constitute a plant. It cannot be disputed that poles support the shuttering/centring material used by the assessee. On the same parity of reasoning, poles used in shuttering/ centring work would also be plant no matter that they cannot be used on a stand alone basis. Answer the reference in favour of the assessee that the Appellate Tribunal was justified in law in holding that the assessee is entitled to claim 100% depreciation on the centering/shuttering materials. Also hold that the decision of the Division Bench of this Court in Sri Raghavendra Constructions (2011 (1) TMI 698 - Andhra Pradesh High Court) is not correctly decided in so far as it held that individual units of centring/shuttering material would not be plant are not entitled to 100% depreciation under the first proviso to Sec.32 (1) since they cannot be used on a stand alone basis. It is accordingly overruled. The view taken in Live Well Home Finance (P) Ltd (2015 (2) TMI 366 - ANDHRA PRADESH HIGH COURT ) is the correct one - Decided in favour of assessee. 2015 (6) TMI 768 Compensation for surrender the tenancy right - Whether the assessee has not termed as tenant as per the Maharashtra rent control act? - whether amount received by assessee on account of transfer of capital assets occupied by assessee within the meaning of "capital gain" even otherwise the deed of surrender of tenancy stated that it is a compensation in connection with loss of business, profit and convenience and hardship due to shifting elsewhere? - Held that:- It is an undisputed position that the Respondent Assessee is in occupation of the subject premises consequent to Agreement dated 13th June, 1972 i.e. prior to 1st February, 1973. The impugned order on the basis of the clear provisions found in Section 2(11) and 15A of the Rent Control Act concludes that the Respondent Assessee is a deemed tenant of the subject premises. In fact, Section 15A of the Rent Control Act, inter alia, provides that notwithstanding anything to the contrary in any contract, where a person is in occupation of the premises on 1st February, 1973, he shall be deemed to have become the tenant of the landlord in respect of the premises or part thereof, in his occupation. Thus, it follows that if the owner of the subject premises were to seek eviction of the Respondent Assessee on the basis of the contract, it would fail in view of the clear position in to Section 15A of the Rent Control Act. Thus, the Respondent Assessee is a deemed tenant of the subject premises. Consequently, such tenancy being property would be a capital asset and amounts received on surrender of it would be capital receipts chargeable to tax under the head 'Capital gains.' The issue of tenancy being a capital asset is no longer res integra as the Apex Court in CIT v/s. D. P. Sandu Bros. Chembur [2005 (1) TMI 13 - SUPREME Court] has upheld the view of this Court in Union of India v/s. Cadell Weaving Mill Co. [2001 (2) TMI 105 - BOMBAY High Court ] wherein it has been held that tenancy right was a capital asset and surrender of the same was a transfer of a capital asset. - Decided against revenue. 2015 (6) TMI 767 Stay of demand - whether assessee be not treated as defaulter under the provisions of Section 220 (6) and the assessee has a good prima facie case in its favour? - Held that:- The Powers of Assessing Officer under Section 220 (6) of the Act, cannot be said to be power to grant stay against the recovery of disputed demand. The said provisions gives discretion to the Assessing Authority, not to treat the assessee in default subject to such conditions as he may think fit, to impose in the circumstances of the case, so long as such appeal filed under Section 246 or 246A of the Act is pending, so as to save the assessee from the consequences, which would otherwise follow, if the assessee is to be treated as 'assessee in default', namely, payment of interest under Section 220(2) and penalty under Section 221 of the Act. Mere filing of appeal does not suo-moto stay the recovery proceedings and on presentation of appeal under Section 246 of Section 246 A, the Assessing Officer is empowered to exercise his discretion, subject to conditions as he may think fit to impose in the circumstances of case, for treating the assessee as not being in default in respect of amount in dispute in appeal, even though the time for payment has expired, as long as such appeal remains disposed of. Here the application in question lacked necessary material particulars, as such, there is no infirmity in decision, so taken, in view of this, as far as this Court is concerned, this Court is not at all interfering with the order impugned but certainly as petitioner has already moved Appeal in question alongwith the stay application, we proceed to ask the Appellate Forum to decide the stay application of petitioner/assessee, in accordance with law, within a period of one month from the date of receipt of certified copy of this order and, thereafter, all attempt and endeavor should be made to decide the appeal in question, subject to convenience/roster and statutory provisions holding the field for decision of Appeal by the Appellate Forum. 2015 (6) TMI 766 Undisclosed closing stock - difference in the value of stock shown to the bank by the assesses in their stock statements issued to the bank and as declared to the income tax department in their returns of income - Held that:- AO relied on the statement of the bank manager in which he stated that physical verification of the stock was carried out, in support of his finding that the appellant possessed larger quantity of stock than the stock as per books of account, but the AO has not been able to prove that the stock lying at various sites at Madhya Pradesh as per stock statement dated 20.03.2010 were actually inspected/counted to substantiate the above said finding because the bank officers has not been able to produce the record of the movement of any bank officer from Bathinda to Madhya Pradesh and the records relating to actual counting of stocik. As far as the finding of the AO that the physical verification was proved from the drawing power register, I find tat the drawing power register is not authentic on account of non recording of vital information by the bank officers with regard to date of filing of stock statement and date of physical verification of stock. The AO has also not been able to rebut the contention of the A/R of the appellant that the stock was inflated in the stock statement to avail credit from the bank. Thus, the action of the AO of relying on the statement of the bank manager, the stock statement and the drawing power register for making addition on account of difference in stock, is not justified on facts It is an admitted fact that no stock statement was filed by the assessee on 31.03.2010 and the last stock statement was available on record is dated 20.03.2010, which has been utilized by the AO for making addition on account of difference in stock as per stock dated 20.03.2010 and balance sheet as on 31.03.2010. This fact also goes against the department, as no addition for the difference in stock as on 31.03.2010 could be made by relying on the stock statement dated 20.03.2010. In view of the above, all the grounds of the Revenue are dismissed - Decided against revenue Addition on non charging of interest from debtors - CIT(A) deleted the addition - Held that:- no infirmity in the order of the ld. CIT(A), since no advance has been made during the year and as such no addition can be made. - Decided against revenue 2015 (6) TMI 765 Existence of fixed place PE - fixed place PE in Mumbai treating its liaison office as such for the purpose of taxing royalties received from Hyundai Construction Equipment India (P) Ltd. (HCEIPL) - Held that:- The authorities below has simply followed its orders for earlier assessment years on the issue of treating the Mumbai Liasioning Office as PE. However, to decide the issue as to whether Mumbai Liaisoning is PE for the purpose of HCEIPL as well for the purpose of taxing royalties received from HCEIPL and interest earned on delayed payment of royalty as business income, verification of the above aspects of the facts/contentions raised by the Learned AR is required to be made afresh to meet out the ends of justice. We thus set aside the matter to the file of the Assessing Officer to decided the issue raised afresh after affording opportunity of being heard to the assessee under the above stated background. - Decided in favour of assessee for statistical purposes. Bifurcation of income from GMR Project in item of “inside India” and “outside India” - Whether in absence of any allegation that the supply of spares was not made at arm's length price or that the price for the goods included any element of service rendered by the Chennai PE in India, there is nothing left for attribution to the PE? - Held that:- Tribunal for the assessment year 2007-08 on the issue in the case of assessee itself held that the contracts are divisible. The receipts pertaining to designing, fabrication and supply of material, the activities carried out outside India is not taxable in India. Respectfully following this decision on identical issue in the assessment year under consideration we decide the issue raised relating to MUT pipeline project, MSP platform project, of ONGC and GMR (operation and maintenance contract) projects in favour of the assessee with this finding that the outside receipts pertaining to designing, fabrication and supply of material, activities carried out outside India is not taxable in India. So far as taxability of receipts pertaining to HMI (sub station) of Hyundai Heavy Industries Ltd. is concerned the matter is set aside to the file of the AO to examine the issue in relation to these project in view of finding of the Tribunal on the issue in relation to the above stated three projects and decide the issue accordingly after affording opportunity of being heard to the assessee. - Decided partly in favour of assessee for statistical purposes. Taxing the entire revenue pertaining to outside India operations as income of the assessee - Held that:- These grounds have been covered by the Tribunal in the case of assesee itself for the assessment year 2007-08 to hold that the receipts pertaining to designing, fabrication and supply of material, the activities carried out outside India is not taxable in India. Other issues raised in these grounds have become infructuous. Deduction of service tax - Held that:- The assessee need to explain that no expenses in relation to service tax are debited in the profit and loss account. As assessee has filed information on service tax. The matter is thus set aside to the file of the Assessing Officer to decide the issue afresh after giving opportunity to the assessee to explain that no expenses in relation to service tax are debited in the profit and loss account. Interest under section 234B - Held that:- In the present case, assessee has full role in lower deduction of tax, as it had obtained order section 197 of the Act at lower rate and provided to GMR. In such a case, the payer GMR was not at fault and no order under section 201(1) can be passed in that case as they deducted tax as per order under section 197 of the Act. As the tax was not paid correctly and there was a shortfall in payment of tax, therefore, the interest under section 234B is payable by the assessee. 2015 (6) TMI 764 Disallowance of excess utilization of income - CIT (Appeals) in allowing credit for 15% of the gross receipts in working the short fall of the amounts spent when the assessee - Held that:- CIT (Appeals) on proper appreciation of facts in the light of the provisions of section 11 of the Act and the judgment of the Hon'ble Supreme Court in the case of A.L.N. Rao Charitable Trust (1995 (10) TMI 2 - SUPREME Court) rightly decided the issue in favour of the assessee. The learned D.R for the Revenue did not contribute much on this issue and merely relied upon the order of the Assessing Officer without pointing out any infirmity in the order of the learned CIT (Appeals) in allowing the exemption of 15% on the gross receipts. Thus we do not find any justification to interfere in the order of the learned CIT (Appeals). - Decided against revenue. Disallowance of depreciation - claim of depreciation was raised subsequently during the course of assessment proceedings - CIT(A) allowed claim - Held that:- CIT (Appeals) followed the decision of I.T.A.T., Chandigarh Bench in the case of Budhewal Cooperative Sugar Mills Ltd. Vs. The A.C.I.T. (OSD) [2013 (5) TMI 802 - ITAT CHANDIGARH] in which it was held that the assessee can raise additional ground and make claim during the assessment proceedings. The learned CIT (Appeals) also relied upon Explanation-5 to section 32 of the Act, which provides "for the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income". The learned CIT (Appeals), therefore, noted that the depreciation has to be allowed to the assessee whether it is claimed while computing total income or not. He has also relied upon the order of the I.T.A.T., Bangalore Bench in the case of Rakesh Singh Vs. ACIT, [2012 (11) TMI 503 - ITAT BANGALORE ] in support of his findings. The learned CIT (Appeals), therefore, following the above decisions and Explanation-5 to section 32 of Income Tax Act directed the Assessing Officer to allow the claim of depreciation. In principle, the Revenue did not agitate the allowing of depreciation to the assessee. Therefore, nothing survives in favour of the Revenue. - Decided against revenue. 2015 (6) TMI 763 Bogus purchases - AO made the addition only on the basis of statement of Sh. Surendra Kumar Sharma which was retracted later on by stating that no bogus entries were provided either to the assessee or any other person - CIT(A) directed the AO to apply net profit rate of 5% on the said unverifiable purchases - Held that:- AO made the addition merely on the basis of statement of one Sh. Surendra Kumar Sharma, Proprietor of M/s Riddhi Siddhi Enterprises which was later on retracted and it was stated that he was not indulged in providing the entries to the assessee or to any other person. The AO did not provide any opportunity to the assessee to cross examine Sh. Surendra Kumar Sharma. In the present case, it is also noticed that the turnover of the assessee was accepted by the Trade Tax Department and it is not the case of the AO that proper books of accounts were not maintained by the assessee in regular course of business or the same method of accounting was not followed consistently. The ld. CIT(A) examined the bank accounts as well as books of accounts of the assessee and categorically stated that the purchases as well as the sales were through banking channel and there was no cash deposit in the bank account of the assessee. In the present case, the AO has not pointed out any defects in the books of accounts, therefore, the ld. CIT(A) was fully justified in deleting the addition made by the AO on account of alleged bogus purchases particularly when the GP rate declared by the assessee was progressive and was accepted by the AO. As regards to the additions sustained by the ld. CIT(A) by applying the net profit rate of 5% of the alleged unverifiable purchase. We are of the view that when the ld. CIT(A) himself accepted the trading results of the assessee and also held that the payment for purchases of material had been made through banking channel, GP rate declared by the assessee was progressive then there was no occasion to make the addition by applying the net profit rate of 5% by considering the purchases of Rs. 1,39,70,618/- as unverifiable. We, therefore, by considering the totality of the facts as discussed herein above delete the addition sustained by the ld. CIT(A). - Decided against revenue. 2015 (6) TMI 762 Validity of Section 153C proceedings challenged - Deemed dividend addition u/s.2(22)(e) - Held that:- Neither there existed any incriminating material as contemplated u/s.153C of the Act nor is the present a case of a valid satisfaction recorded therein. We reiterate that this is a case of search proceedings wherein the Revenue’s powers have to be strictly interpreted. We conclude accordingly that the initiation of section 153C proceedings against the assessee under challenge is liable to be quashed. The assessee’s legal grounds succeeds. - Decided in favour of assessee. 2015 (6) TMI 761 Unaccounted jewellery - joint family system - search u/s 132 - Held that:- Revenue has in some cases considered the jewellery found in the possession of one family members, as jewellery belonging to the other family member. It is undisputed that all these family members are residing together. Under these circumstances the submissions of the assessee that jewellery cannot be said to be kept in water tight compartments in joint hindu families and that the jewellery of one family member is given to the other member for use only and that the jewellery found in the possession of one member could belong to another member of the family, is a possible explanation. Further the amount of jewellery found short in the hands of the mother in law and father in law of the assessee tallies in value, with the jewellery found in excess in the room of the assessee. Regarding non tallying of the items of jewellery the explanation that the items are changed frequently by the ladies of the house, is a possible explanation. In any event the additions in this case was made on the basis of values of jewellery and not on the basis of quantitative tally. The assessee in this case explained that Rs. 3 lakhs is the value of 60 tolas as gold ornaments as on 3.7.2002, the date of her marriage, which was duly declared by her, in her I.T.returns. The value of these 60 tolas, as on the date of search is fixed at Rs. 11,59,032/- by the valuer. Deduction is granted by the Ld.CIT(A) to such value of Rs. 11,59,032/-. As regards jewellery worth Rs. 13,02,245/- the Ld.CIT(A) ignored the fact that at the time of search no statement was recorded from the assessee and hence there was no occasion for her to state that part of the jewellery belong to her mother in law/ father in law or to specify the items of such jewellery. AT the first available opportunity the assessee had stated her position. Under the circumstances no adverse inference can be drawn against the assessee. Addition made on account of unexplained investments in jewellery in the hands of the assessee, is devoid of merit. - Decided in favour of assessee. 2015 (6) TMI 760 Disallowances of interest expenses - assessee has running account with the sister concern - Held that:- As far as Assessment Year 2007-08 is concerned, assessee has liquidated its investment of Rs. 100 crore, therefore, a sum of Rs. 100 crore was available with the assessee. During the course of hearing, we have confronted the ld. counsel to show that on liquidation of investment, assessee had realized 100 crore. Because, if the value of shares was diminished on account of fluctuation in market, then how credit of Rs. 100 crore can be given for quantifying the interest free funds with the assessee. Ld. counsel showed us the realization of the investment at Rs. 100 crore accounted in the accounts. Similarly, it has reserve and surplus of Rs. 165 crore. If Rs. 24 crore taken out from this which was added on account of revaluation in the last year, then, the sum at Rs. 141 crore will be available to the assessee. If the investment realized by the assessee out of liquidation of Rs. 100 crore in the shares is added with interest free funds at Rs. 141 crore, then, assessee has the funds of Rs. 241 crore. It has given interest free advances of Rs. 153.52 crore only. It has demonstrated that it has more interest free fund than the one given to the sister concern. There is no dispute on facts between both the Assessment Years. Therefore, considering the discussion in Assessment Year 2006- 07, no disallowance is sustainable in this year also. These grounds of appeals are allowed and disallowance at Rs. 44,65,790/- as well as Rs. 46,76,672/- in Assessment Year 2006-07 and 2007-08 are deleted. - Decided partly in favour of assessee. 2015 (6) TMI 759 TDS u/s 194A - addition on account of factoring/discounting charges as no tax at source was deducted - assessee submitted that the factoring charges is not to be treated as interest and is not liable to be deducted at source u/s 194A - Held that:- In the instant case, the Assessing Officer had listed out the distinction between factoring and bill/invoicing discount. It was further held by the Assessing Officer that as per the terms of agreement entered between the assessee and GTF, the “discounting charges” mentioned therein is actually interest component on the loan. However, we notice that the Hon’ble Calcutta High Court in the case of CIT vs. M/s. MKJ Enterprises Limited (2014 (12) TMI 682 - CALCUTTA HIGH COURT) was specifically considering a case where factoring charges tantamount to interest and whether the tax is to be deducted at source on the same andheld that factoring charges were not interest and as such, provisions of TDS are not applicable. Factoring charges on sale cannot be termed as interest. In view of the Hon’ble Calcutta High Court judgment, we hold that the factoring charges will not come within the purview of section 2(28A) of the Income-tax Act, 1961 and as such, the provisions of TDS are not applicable on facts and circumstances of the case. - Decided in favour of assessee. 2015 (6) TMI 758 Unexplained cash credit addition u/s.68 - Held that:- The assessee nowhere disputes contents of the survey statement. He seeks to justify his credits in question by claiming impugned payments of Rs. 3 lac to have been made while acquiring the rented hospital building in the year 1993. However, there is no evidence forthcoming from the case file whatsoever in support thereof. It is made clear that once the assessee has raised this plea of very old payment, it was incumbent for him to place on record sufficient material. His claim does not inspire confidence in these circumstances. We uphold the action of the lower authorities accordingly and reject the first substantive ground raised in this appeal. - Decided against assessee. Penalty u/s 271(1)(c) - Held that:- We reiterate the settled law that quantum and penalty proceedings are altogether separate. Each and every addition does not lead to automatic imposition of penalty. We look back in the facts of the case and find that the assessee has merely failed in proving the factum of having paid impugned sum of Rs. 3 lac at the time of tenancy rights way back in the year 1993.Therefore, the same cannot be treated to be an instance of concealment and inaccurate particulars of income u/s.271(1)(c) of the Act. The impugned penalty is deleted accordingly. - Decided against revenue Claim of expenditure incurred on hospital building repairs - revenue v/s capital - Held that:- Quantum and extent of repair in absence of the abovesaid factors would not convert the impugned revenue expenditure to that of capital in nature. Thus, the assessee s claim is liable to be entertained u/s.30 of the Act under the head current repairs in the nature of revenue expenditure. Assessing Officer s hypothetical assumption that section 40A(3) disallowance of Rs. 58,003/- would apply in this case if the assessee s claim is accepted as revenue expenditure. We find that the statutory expression in the said provision reads where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding twenty thousand rupees . This is not the Revenue s case that the impugned payments have been made in a sum . It is not clear as to whether these payments are made on separate occasions or in a single instance. The Assessing Officer simply observes that these payments exceeds Rs. 20,000/-. We reiterate that the present is a disallowance provision in a fiscal statute to be literally interpreted. Thus, we reverse the lower authorities findings invoking this hypothetical disallowance. - Decided in favour of assessee. 2015 (6) TMI 757 Income received towards amenities - 'income from other sources' or 'income from house property' - Held that:- On going through the amenities agreement, the only amenity to be provided by the lessor to the lessee was in respect of structural repairs to the building let out and to pay municipal and property taxes in respect of the let out property. We fail to understand how these can be termed as amenities in respect of the letting out property. Even if the property is not let out, the assessee has to incur expenditure towards repairs and maintenance of the said property and also to pay municipal taxes. It appears that by separately charging in the guise of amenities charges, the assessee wanted to reduce the liability to property tax which is based on the rental income of the property. The cases relied upon by the ld. Counsel are totally misplaced and not matching the facts of the case in hand. Considering the fact in totality, we do not find any error in treating the amenity charges under the head 'income from other sources'. - Decided against assessee. Addition on rent received - difference in TDS certificate and computation of total income - Held that:- We do not agree with this claim of the assessee as the method of accounting is only in respect of profits and gains of business or profession or income from other sources. The reconciliation statement filed before us is also not convincing as the assessee is required to compute the income as per the provisions of the law. The undisputed fact is that the assessee has received rent of Rs. 11,87,27,690/- and the same has to be treated as income of the assessee. Therefore, we do not find any reason for not making an addition of Rs. 4,00,697/- - Decided against assessee. Liability of municipal taxes - allowable as income from other sources or income from house property - Held that:- Section 57(iii) shows that any other expenditure not been in the nature of capital expenditure lead out of expanded wholly and exclusively for the purpose of making or earning income which is taxed under the head 'income from other sources'. In our considered opinion, payment of municipal taxes cannot be said to be let out or expanded wholly and exclusively for the purpose of earning amenity charges, as these municipal taxes are directly related to the letting out of the property, the rental income from which is taxed is under the head 'income from house property'. We, therefore, find that the finding of the ld. CIT(A), in allowing the municipal taxes deductable as erroneous. We set aside the findings of the ld.CIT(A) and confirm that of the A.O. - Decided in favour of revenue. Expenditure claimed in respect of cinema theatre to arrive at the business loss on cinema theatre - CIT(A) restricted the claim of expenditure at Rs. 1,86,47,691/- and directed the balance to be treated as capital expenditure - Held that:- We have carefully perused the documentary evidences brought on record before us and referred to. In our considered opinion, there appears to be conflict in these documentary evidences, therefore, in the interest of justice, we restore this issue to the file of the A.O. The A.O. is directed to verify whether the Cinema Theatre was fit for use after considering the report from the office of Commissioner of Police, Mumbai as brought on record by the ld. AR. The A.O. is directed to decide the issue afresh after giving reasonable and fair opportunity to the assessee. - Decided in favour of revenue for statistical purposes.. 2015 (6) TMI 756 Dis-allowance of Interest expenses - Disallowance on ground that RBI not recognised the assessee as NBFC - Disallowance of Carry-forward loss and depreciation - Held that:- Permission/denial by the RBI to register an assessee as NBFC does not decide the issue of carrying of business or make the business illegal. If the assessee had violated any provisions of law under the RBI Act it would be penalised by the appropriate authority. But that does not mean that the systematic organized activity carried out by the assessee for earning profit would not be treated as business. The explanation to sec.37(1) of the Act is not at all applicable to the case under consideration. Also The rule of consistency demands that for deviating from the stand taken in the earlier AY., the AO should bring on record the distinguishing feature of that particular year. We find that the AO or the FAA has not mentioned even a single line as to how the facts of the case under appeal were different from the facts of the earlier or subsequent years. We find that the disallowance of the expenses was without any basis. - Claim of interest allowed - Decided in favor of assessee. Disallowance of Carry-forward loss and depreciation - Issue squarely covered by Judgment delivered in Lavish Apartment Pvt. Ltd. [2012 (7) TMI 666 - DELHI HIGH COURT] in which it was held that income against which brought forward loss is claimed to be set off should represent business income judged by application of commercial principles and not on application of provisions of Act. - Decided in favour of assessee. 2015 (6) TMI 755 Eligibility of for deduction u/s 10B - whether approval of the EOU does not automatically make the assessee eligible for deduction u/s 10B of the Act and the deduction is available only after verification? - AO came to the conclusion that it is the reconstruction of the business of FFIPL and hence the assessee was not eligible for deduction u/s 10B - CIT(A) allowed claim - Held that:- There was no transfer of old plant and machinery during the financial year 2004-05, 2005-06 and 2006-07 and further that the plant and machinery purchased by the assessee from FFIPL in the financial year 2007-08 also did not exceed 20% of the total plant and machinery of the assessee during the said financial year. Since there was no purchase of old plant and machinery from FFIPL in the earlier assessment year even as per contemporaneous records of the EOU/Customs authorities. The relevant date of the plant and machinery purchased by the assessee over the years is reproduced in order of the CIT(A). Thus, CIT(A) held that the manufacturing activity carried on by the assessee in the assessment years earlier to assessment year 2008-09 was by use of new plant and machinery. As regards the transfer of business premises, employees and the customers of FFIPL to the assessee, the CIT(A) observed that there was no prohibition in the use of the business premises of FFIPL by the assessee and also of the employees and customers of FFIPL and further that the transfer of employees and customers of the assessee was only a small percentage of the total employees and customers of the assessee respectively. Thus holding, the CIT(A) set aside the finding of the AO and allowed the deduction u/s 10B of the Act. - Decided in favour of assessee. 2015 (6) TMI 754 Revision u/s 263 - Registration u/s.12A cancelled - when deduction u/s 35(2)(iv) is allowed in respect of capital expenditure on scientific research, no depreciation is allowable u/s 32 on the same asset as held by DIT(E) - Held that:- The issue raised in the ground of appeal is no longer res integra as has been decided in the case of CIT v. Market Committee, Pipli,(2010 (7) TMI 374 - Punjab and Haryana High Court) considering several decisions on that issue and also case of Escorts Ltd. (1992 (10) TMI 1 - SUPREME Court) came to the conclusion that depreciation is allowable on capital assets on the income of the charitable trust for determining the quantum of funds which have to be applied for the purpose of trusts in terms of section 11 of the Act. A trust claiming depreciation cannot be equated with a claim for double deduction. The Hon’ble Punjab & Haryana High Court has also made a reference to the decision of CIT v. Society of Sisters of Anne, (1983 (8) TMI 44 - KARNATAKA High Court), wherein it was held that u/s. 11(1) of the Act, income has to be computed in normal commercial manner and the amount of depreciation debited in the books is deductible while computing such income. Thus jurisdiction u/s. 263 of the Act ought not to have been exercised by the DIT(E). - Decided in favour of assessee. 2015 (6) TMI 753 Reopening of assessment - taxing the receipt of INR 21,138,400 as revenue receipt - Held that:- As in the current assessment year, assessee received a sum of Rs. 2,11,38,400/- as a partial refund of the business purchase consideration on account of certain objections raised by the assessee. The aforesaid amount was accordingly reduced by the assessee from the amount of Goodwill recorded in the books of account. It is quite clear that upon acquisition of the mining and construction business of KWIL, the total consideration paid was capitalized. Therefore, any reduction in the purchase consideration by way of the impugned refund would retain the same character as the original amount. Therefore, we find no justification on the part of the Assessing Officer to treat the said sum as a revenue receipt. The plea setup by the Revenue that the aforesaid refund was on account of certain items, namely, Stock obsolescence; Doubtful account receivable; EMI; Export incentive; Warranty reserve; and, Immovable property (not usable), etc. which are revenue assets. According to the Assessing Officer, such items are revenue assets and therefore, any receipt therefrom is to be understood as a revenue receipt is unacceptable because the aforesaid items have not been entered the revenue account of the assessee, namely, Profit & Loss Account inasmuch as they have not been considered as an item of expense in the preceding assessment year of 2004-05. Therefore, any refund or adjustment in purchase consideration, even if in relation to the aforesaid assets, would not be an item of the Profit & Loss Account of the assessee. Thus, action of the assessee in treating the same as a capital receipt and reducing it from the amount recorded as Goodwill earlier is in order. - Decided in favour of assessee. 2015 (6) TMI 752 Registration u/s 12A(1)(a) denied - services to the employers who were engaged in business and therefore it was hit by the proviso to section 2(15), therefore, held by the Commissioner that the assessee was not entitled to registration u/s 12A(1)(a) - Held that:- As per the provisions of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981 that the said legislation is intended to regulate the employment of private security guards employed in factories and establishments in the State of Maharashtra for making better provisions in the terms and conditions of their employment and welfare through the establishment of the Boards. We are enumerating the clauses of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981 only to point out that the legislature has enacted the aforesaid statute not with the purpose of carrying out of any trade, commerce or business or any activity of rendering any services in relation to any trade, commerce or business. Ostensibly, the said objectives are for regulating the employment of private security guards employed in factories and establishments in the State of Maharashtra and for making better provision for terms and conditions of their employment and welfare. Clearly, it is a welfare measure of the Government of Maharashtra and in our view, the activities of the Board cannot be said to be falling foul of the proviso to section 2(15) of the Act, as contended by the Commissioner. The objections raised by the Commissioner are not germane to reject the assessee’s plea for registration u/s 12A(1)(a) of the Act.- Decided in favour of assessee. 2015 (6) TMI 751 Disallowance of VSAT and Lease line charges u/s 40(a)(ia) - Held that:- This issue has been decided in favour of the assessee in the case of The CIT Vs. M/s The Stock and Bond Trading Company (2011 (10) TMI 172 - BOMBAY HIGH COURT) wherein followed case of “The Income tax Commissioner, Mumbai City-4 Vs. Angel Capital & Debit Market Ltd [2014 (5) TMI 584 - BOMBAY HIGH COURT] to hold that the there is no requirement to deduct tax at source from the payments made to NSE/BSE towards VSAT charges and Lease line charges. - Decided in favour of assessee. Disallowance of claim of set off of Loss arising in Cash segment against the profits in Future & Options - Held that:- Explanation to sec. 73 can be applied after computing the Gross total income, meaning thereby, the same shall not override the proviso to sec. 43(5) of the Act. Hence, as per the decision of Kolkatta bench of Tribunal in the case of M/s Arena Textiles & Industries Ltd (supra), the loss from cash segment can be set off against the profit from derivatives. Thus, after computing the Gross Total Income in the above said manner, the application of provisions of Explanation to sec.73 is required to be examined. Accordingly, we modify the order of Ld CIT(A) on this issue and restore the matter of applicability of Explanation to sec. 73 to the file of the AO with the direction to examine this matter afresh in the light of discussions made supra. - Decided in favour of assessee for statistical purposes. Disallowance of Mark to market loss on derivatives - Held that:- As relying on DCIT Vs. Kotak Mahindra Investment Ltd [2013 (7) TMI 355 - ITAT MUMBAI], Shri Ramesh Kumar Damai Vs. Addl CIT (ITA No.1443/Mum/2009) and Edelweiss Capital Ltd Vs. ITO 2012 (10) TMI 223 - ITAT, MUMBAI] it is held at the Tribunal is consistently holding that the Market to Market loss on derivatives cannot be treated as a contingent liability and hence the same is to be allowed as deduction. - Decided in favour of assessee. Disallowance made u/s 14A - Held that:- AO has disallowed a sum of Rs. 63,848/- in respect of Administrative expenses by applying the provisions of Rule 8D(2)(iii) of the Act. The decision rendered by the jurisdictional High Court in the case of HDFC Bank Ltd (2014 (8) TMI 119 - BOMBAY HIGH COURT) would cover only the interest disallowance that is required to be made u/s 14A of the Act. Before tax authorities, it appears that the assessee did not make any specific submissions against disallowance made u/s Rule 8D(2)(iii) relating to administrative expenses. Hence, we confirm the order of Ld CIT(A) on this issue. - Decided against assessee. 2015 (6) TMI 750 Provisions for leave encashment and gratuity - whether not includable to the book profits u/s 115JB? - Held that:- We following the order of Tribunal in Assessment Year 2000-01 and 2001-02, partly allow the appeal of Revenue by holding that the provisions for leave encashment is ascertained liability. As regards provisions for gratuity, the argument of Ld. A.R. that in subsequent years Ld. CIT(A) has allowed the relief and Revenue has not filed appeals, therefore, order of Ld. CIT(A) should be upheld, do not hold much force as we do not know as to whether there were defects in actuarial report in those years or not. Therefore, following Assessment Year 2001-02, we remit back the issue of gratuity to the office of A.O. for readjudication who will readjudicate on the basis of fresh actuarial report if any to be filed by assessee. - Decided partly in favour of revenue for statistical purposes. Customs 2015 (6) TMI 775 Valuation of imported machines - Depreciation method in terms of Circular No. 493/124/86-CUS dated 19.11.87 - No sale involved only transfer of goods - Held that:- We find that section 14 of the Customs Act, 1962 deals with valuation of goods for the purposes of assessment.The reading of the aforesaid provision manifests that the valuation of the imported goods is to be arrived at by ascertaining the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation or exportation. Therefore, the method to be employed, as per the aforesaid provision, is to ascertain as to how much would be the price of such goods if they are to be ordinarily sold or offered for sale. In exercise of powers contained under Section 156 of the Customs Act, Customs Valuation (Determination of Price of Imported Goods) Rules 1988 have also been framed. In those cases, where it is not possible to determine the price at which such goods are ordinarily sold or offered for sale, Rule 8 provides for residual method and stipulates that the value shall be determined using reasonable means consistent with the principles and general provisions of the said Rules as well as provisions of sub-section (1) of Section 14 of the Customs Act. In the present case, we find that no efforts were made either by the Department or even by the appellant to ascertain the price at which the imported machineries could generally be sold or offered for sale. Had that been done, same would have been in consonance with the provisions of section 14(1) of the Customs Act. It appears that both the parties proceeded on the basis that such price is not ascertainable and therefore resorted to the method of depreciation. Even the appellant did so, though the basis of this exercise as adopted by the appellant was erroneous. For six years period i.e., when the machinery was used in Iraq and thereafter, it was brought to Nepal, its value as on that date was ascertained. Thus, for that period, it took into consideration the value which was fixed by the Chartered Engineer. Thereafter, for remaining three years, when it was in Nepal and brought to India, depreciation method is adopted.In such circumstances, we do not find any error in applying the circular dated 19.11.87 in the instant case. - Decided against the assessee. 2015 (6) TMI 774 Valuation of Jumbo rolls - Import from related party - Held that:- CESTAT has rejected the valuation on following fronts - The original authority also found that the exporting Swiss Company charged the independent importers 20% extra on the basic list price of S-251, A-2 grade materials towards cutting and joining. This extra 20% has been into account and adjusted by the original authorities to compare the prices charged to the respondents and other independent importers. This method adopted by the original authority is perfectly in order to arrive at a valid comparison between goods of the same grade and identification code in the absence of any sale of belts in running length to other independent importers. - On comparison, the original authority found that the Swiss Company is allowing a 20% discount to independent buyers, whereas the respondents have been charged a lower price after allowing 33.3% discount - Once it is held that the supplier and the importer are related and the relationship has influenced the price, valuation cannot obviously be done under the Transaction value method accepting the declared value - The value established by the original authority adequately represents cost plus freight to the suppliers based on independent sales once the cutting and joining charges are adjusted. Fact arrived on the basis of material of record. - Decided against the assessee. 2015 (6) TMI 773 Reduction of penalty - Exemption under Notification No.64/88-CUS dated 1.3.1988 - Import of Nuclear Magnetic Resonance Scanner, which is a medical instrument - Held that:- Insofar as the payment of duty at the reduced value is concerned, Mr. A.K.Sanghi, learned senior counsel may have something to say, but we find that in the order dated 3.11.2003 passed in this appeal, notice was issued limited to the question of reduction of penalty. Therefore, we refrain from going into the issue raised in the appeal and would confine ourselves only to the reduction of the penalty. - no reason whatsoever is given for reducing the penalty from Rs. 20 lakhs to Rs. 1 lakh except observing that it "appears to be excessive". We have already taken note of the circumstances under which the breach has been committed by the respondent. More serious breach is the violation of undertaking given to this Court. - was not a fit case where penalty should have been reduced. Since the respondent is now to pay the duty at the depreciated value of the machinery, we set aside the order of the CEGAT in so far as reduction of penalty from Rs. 20 lakhs to Rs. 1 lakh is concerned - Decided in favour of Revenue. Corporate Laws 2015 (6) TMI 792 Penalty under Section 15A(b) of the SEBI Act, 1992 - Violation of regulation 7(1) & 7(2) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (SAST) and regulation 13(1) & 13(3) read with 13(5) of SEBI (Prohibition of Insider Trading) Regulations, 1992 (PIT) - Held that:- Argument that appellant being house wife, she was not aware of the consequences of erroneous transfer of shares cannot be accepted because admittedly appellant is a post graduate in commerce and apart from carrying on the profession of consultancy appellant has been advancing short term loans to various companies. It is only after appellant agreed to advance loan, ACL transferred shares to the demat account of appellant. Unless appellant had furnished her demat account number, ACL could not have transferred shares. Assuming that shares were erroneously transferred no explanation is given as to how the shares remained in the demat account of the appellant for 43 days. Argument that no investor has suffered on account of non disclosure and that the AO has not considered the mitigating factors set out under Section 15J of SEBI Act, 1992 is without any merit because firstly penalty for non compliance of SAST Regulations, 1997 and PIT Regulations, 1992 is not dependent upon the investors actually suffering on account of such non disclosure. Secondly, penalty under Section 15A(b) for non compliance of the regulation framed by SEBI is Rs. 1 lac for each day during which such failure continues or 1 crore rupees whichever is less. Argument that erroneous transfer was without consideration and did not constitute trade is also without any merit because, for purposes of SAST Regulations what is relevant is acquisition of shares and once acquisition of shares exceeds the limits prescribed therein, provisions of SAST Regulations are triggered. - Decided against the appellants. 2015 (6) TMI 791 Penalty for violation of regulation 8(3) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (SAST) - Whether intention , suspension of trading in exchange and reporting is only for academic purpose, have any impact on the penalty amount imposed by SEBI - Held that:- Obligation to make disclosures under regulation 8(3) of SAST Regulations, 1997 is mandatory and that obligation is not dependent upon any of the circumstances set out hereinabove. Penalty for not making disclosures under regulation 8(3) SAST Regulations, 1997 for the respective year as per section 15A(b) of SEBI Act, 1992 is Rs. 1 lac per day or Rs. 1 crore whichever is lower. In the present case, penalty at the rate of Rs. 1 lac per day for the years 1998 to 2010 would be Rs. 1 crore per year, whereas, the adjudicating officer after considering all mitigating factors set out under section 15J of the SEBI Act, 1992 has imposed composite penalty of Rs. 10 lac for all the years which comes to less than Rs. 1 lac per year. In these circumstances, decision to impose penalty of Rs. 10 lac for all the years cannot be said to be unreasonable or excessive. - Decided against the appellant. 2015 (6) TMI 772 Non compliance of the provisions of the Company Law Board Regulations, 1991. - Suppression of the material facts - Incorrect statement in the petition - Held that:- I have considered the submissions and examined the relevant provisions of the Indian Companies Act, 1956 and the Regulations made there under. The present petition is filed under Section 397/398 of the Companies Act, 1956. Section 400 of the Companies Act mandates that the Company Law Board shall give notice of every application made under Section 397/398 of the Act to the Central Government and shall take into consideration representation, if any, made by the Central Government before passing any final order. Record reveals that the CLB itself dispatched the copy of the petition to the Regional Director representing the Central Government on the next day of filing of the petition. Therefore, in my opinion, substantially this provision has already been complied with. With respect to the last ground taken by the Respondents, it was argued by the Ld. PCS appearing for the Respondent that the Petitioner had filed a complaint before the Registrar of Companies on 17/11/2014, which fact he has not disclosed in the petition, and therefore, the Petition deserves to be dismissed. I have considered this objection too. The ROC is an administrative authority. He is not a judicial or quasi-judicial authority. Therefore, non disclosure of a complaint made to him, in my opinion, is not a sufficient ground for dismissal of the petition. Having considered the submissions, in my opinion, the grounds taken by the Respondent No.4 assailing the maintainability of the petition are frivolous, misconceived and not tenable in law. The same are rejected accordingly. - Decided against the appellant.[C.A.No.322/2014] Power to review its own order passed by CLB - In my opinion, the law cited by the Ld. Counsel appearing for the Petitioner is not applicable to the facts of the present case. In the present case the impugned order passed on 20/11/2014 is an ad-interim order, which clearly states that the resolution, if any, that may be passed in the EOGM, shall not be implemented without approval of the CLB. Therefore, reconsideration of such ad-interim order passed by the CLB cannot be said to be reviewing of an order. It amply clear that variation/ modification/recalling of an ad-interim order is not covered within the scope of "review of an order". Removal of Director - I have also gone through the Report of the forensic audit submitted by the Applicant-Respondent No.2 in support of his case. Without expressing any opinion at this stage on the authenticity and correctness of the said report, it is suffice to say, at this stage, that the Petitioner has been removed by the majority group of shareholders after following due course of law on the charges of misappropriation and diversion of funds of the Company by the Petitioner to his personal use and benefit which charges are prima facie established by the Forensic Audit Report as is seen from the entries reflected in the statements of accounts filed by the said Respondent alongwith the instant application. Further, the contention of the Petitioner that the Company is in the guise of quasi-partnership is not pleaded in the petition. Creation of charge - In so far as the order restraining the Company from creating any third party charge over the Company's assets is concerned, it is directed that if any loan has been sanctioned/availed by the Company prior to filing of the petition from any bank or financial institution, the Company may create charge in respect of the loan sanctioned/availed. It is, however, clarified that after filing of the petition, if any loan is sanctioned/ disbursed no charge shall be created over the company's assets without prior approval of this Bench. - Decided against the appellant. [C.P.No.105/2014] 2015 (6) TMI 771 Appointment of directors under section 10A of the Banking Act - jurisdiction of the civil court - Held that:- In the first place, when a banking company elects its board as a whole in compliance with section 10A(2), the appointments are not under section 10A and there is no question of any of the directors having a "protected" status under sub-section (6) thereof. If for any reason, including the reason of new appointment/s, retirement/s or removal/s, the composition of the board becomes non-compliant with sub-section (2), the situation calls for a reconstitution and provisions of sub-sections (3), (4) and (5) come into play. The reconstitution made, whether by the banking company by election or by the Board by appointment or removal, as the case may be, or by the Reserve Bank by appointment or removal, has protection under sub-section (6). Even that protection is subject to such election, appointment or removal being "duly" made. Since I have come to the conclusion that these appointments were not made under sub-section (3) or (4) of section 10A of the Banking Act and there is, therefore, no question of claiming any protection of sub-section (6), I have not considered the question whether these appointments were or were not "duly made". That question would have a bearing on the maintainability of the suit only in the alternative, if the appointments of defendants Nos. 7 to 12 were held to have been made under sub-section (3) or (4). So also, the other questions, namely, whether the circulars of the Reserve Bank issued under section 35A of the Banking Act override the articles of defendant No. 6 and whether article 110 has any purpose or operation after the exit of Rabobank and what is the correct interpretation of the articles providing for the rights of Indian Partners, need not detain us at this stage. All these questions may be relevant from the point of view of interim reliefs claimed under the notice of motion, but are not necessary to be decided under the preliminary issues framed by this court. Civil suit challenging the appointment of directors - Under section 9 of the Code of Civil Procedure, civil courts have jurisdiction to try all suits of a civil nature unless barred under a statute either expressly or by necessary implication. A few basic principles, whenever a court is called upon to decide whether the jurisdiction is so barred, have long since been established by authority. Firstly, bar of jurisdiction of a civil court is not to be readily inferred. A provision seeking to bar jurisdiction of civil court requires strict interpretation. Secondly, the court would normally lean in favour of a construction, which would uphold the retention of jurisdiction of the civil court. Thirdly, the burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is ousted. Number of judgments of the Supreme Court as well as the High Courts have considered the question of ousting of civil court's jurisdiction under the various provisions of the Companies Act after applying the above principles. In Dwarka Prasad Agarwal's case [2003 (7) TMI 481 - SUPREME COURT OF INDIA], the Supreme Court noted various High Court decisions and held that the civil court's jurisdiction is not completely ousted under the Companies Act. In the present case, we are dealing with appointments of directors which are alleged by the plaintiffs to be ultra vires the company, being opposed, inter alia, to the mandate of its articles. There is no remedy provided under the Companies Act for redressal of such a grievance before any particular court or forum or by recourse to any particular machinery. In these circumstances, the jurisdiction of the civil court cannot be said to be impliedly barred by the Companies Act for redressal of such a grievance. In the result, the jurisdiction of this court to entertain a challenge to the appointment of defendants Nos. 7 to 12 as directors is not impliedly barred under the Companies Act. Both the preliminary issues are, accordingly, answered in favour of the plaintiffs. The suit, as filed, is not barred by any law and is maintainable. This court has jurisdiction to entertain and try the suit. Service Tax 2015 (6) TMI 789 Manpower Recruitment and Supply Agency Services - Held that:- Issue is regarding the taxability of an amount paid by the appellants to one of the Sansta which is engaged in providing labour for harvesting and transportation of sugar cane to the appellants for sugar factory. It is the case of revenue that this activity will fall under the category of Manpower Recruitment and Supply Agency Services . We find that this issue is no more res integra. - In view of authoritative judicial pronouncements on the issue in hand, we find that impugned orders are unsustainable and liable to be set aside - Decided in favour of assessee. 2015 (6) TMI 788 Denial of CENVAT Credit - Trading service - Invocation of extended period of limitation - Held that:- There was a clear scope for genuine confusion in the matter. Ld. Departmental Representative contends that if there was indeed a bona fide belief on the part of the appellants, they would have mentioned the trading activities in ST-3 returns under exempted category but that trading is an exempted service was clarified by an amendment to the Act only with effect from 01.04.2011. Further, several of the services in respect of which the credit is sought to be denied were those covered under sub-Rule (5) of Rule 6 of CENVAT Credit Rules. In these circumstances, the appellants have been able to make out a case that the extended period is not invokable. I find that the period involved in this case is 01.04.2005 to 31.03.2010 and the Show Cause Notice was issued on 16.05.2011. Thus, it is evident that no part of the impugned demand is within the normal period of one year with reference to the date of issue of Show Cause Notice and therefore I hold the demand to be time barred. - Decided in favour of assessee. 2015 (6) TMI 787 Rejection of declaration under VCES 2013 - Statutory provision of Appeal under VCES - Adjudicating authority vs Designated authority - Held that:- In similar circumstances, the Punjab and Haryana High Court, in its decision in M/s.Barnala Builders s case [2013 (12) TMI 568 - PUNJAB AND HARYANA HIGH COURT ] , has categorically held that the order passed under VCES is appealable. We are unable to accept correctness of instructions issued by the Central Board of Excise and Customs, for the simple reason that after incorporation of the Service Tax Voluntary Compliance Encouragement Scheme into the Finance Act, all other provisions of the Act except to the extent specifically excluded, apply to proceedings under the scheme. The impugned order passed by the Deputy Commissioner of Central Excise and Service Tax would necessarily be appealable under Section 86 of the Indian Finance Act, 1994. Adjudicating authority vs Designated authority - It is pertinent to note that though the second respondent has been described as a designated authority, however, a perusal of the order, dated 15.11.2013 passed by him clearly shows that he has dealt with the issue on merits regarding the eligibility of the assessee/petitioner to avail the VCES scheme and passed a detailed order, dated 15.11.2013 holding that since the petitioner had been issued with show cause notice dated 8.2.2012 demanding service tax of Rs. 21,44,299/- for the period from 1.4.2007 to 31.3.2011, which was confirmed vide original order, dated 28.3.2013 and as such in terms of Section 106(2) of the Act, 1994 and in view of Circular Nos.169 and 170, dated 13.5.2013 and 8.8.2013, the petitioner is not entitled to avail the said scheme. Therefore, when the authority, the second respondent herein has given such a categorical finding on going through the facts and circumstances of the case by applying his mind, his decision, in my considered opinion, would fall within the meaning of adjudication which is meant by settled law that giving or pronouncing a decision or order judicially and thereby, I have no hesitation to hold that the second respondent has acted as an adjudicating authority and not as a designated authority. The remedy of appeal is a creation of a statute. In fact, making a provision of appeal is the statute is to give a hope of success to the aggrieved party who has been affected by the adverse order of the decision maker, who, while passing such order, might have misapplied the law, came to an incorrect factual finding, acted in excess of his jurisdiction, abused his powers, was biased, considered evidence which he should not have considered, or failed to consider evidence that he should have considered. To err is human and hence it cannot be expected that all the decision makers would be perfect in their approach in arriving at just conclusions. If any statute or scheme does not make the appeal provision, it would be nothing to mean that the order passed by the authority has become final and conclusive for all the purposes and thereby, giving uncontrolled and unquestionable powers to the said authority by virtue of which, he becomes as monopoly over the statute and will certainly act in an arrogant manner. Commissioner of Central Excise (Appeals) directed to take up the appeal preferred by the petitioner and dispose of the same in accordance with law - Decided in favour of assessee. 2015 (6) TMI 786 Default in remitting the service tax dues - Improper details in SCN - Specific taxable service not mentioned in SCN - Held that:- It is a axiomatic that a best judgment assessment under Section 72 could only be for ascertaining the quantum of the tax liability, in a context where the actual extent of liability cannot be determined with methematical precision on account of non-availability of relevant documents or financial records. There cannot be a best judgment assessment regarding the specific taxable service provided. There can be no best judgment, for instance as to whether the tax liability is for income tax, sales tax, excise duty, customs duty, service tax or professional tax. A conclusion as to the taxable event and the liability to tax under the appropriate fiscal legislation authorizing the levy and collection of such tax is a matter for determination with precision and clarity and not by a process of guess-work or speculation. Neither the show cause notice dated 21/10/11 nor the impugned adjudication order dated 18/1/13 record any assertion/ conclusion whatsoever as to which particular or specific taxable service the appellant had provided. In the absence of an allegation of having provided a specific taxable service in the show cause notice and in view of the failure in the adjudication order as well, neither the show cause notice nor the consequent adjudication order could be sustained. In any event officers are not handicapped and the Act provides ample powers including of search under Section 82 of the Act to obtain information necessary to pass a proper, disciplined and legally sustainable adjudication order. The disinclination to employ the ample investigatorial powers conferred by the Act is illustrative of gross Departmental failure and cannot afford justification for passing an incoherent and vague adjudication order. The failure to gather relevant facts for issuing a proper show cause notice cannot provide justification for a vague and incoherent show cause notice which has resulted in a serious transgression of the due process of law. - Decided in favour of appellant. 2015 (6) TMI 785 Pre-licensing training and coaching to the prospective insurance agents - Sponsored by Insurance companies - Held that:- In the case of NIS Sparta Ltd. [2015 (1) TMI 504 - CESTAT NEW DELHI] it was held that the training imparted by the appellants does not fall under the ambit of Section 65(27) of the Finance Act, 1994 as the training imparted by the appellant is having the recognition of law and covered under exclusion clause of Section 65(27) of the Finance Act, 1994, therefore the appellant is not liable to pay service tax at all. We find that issue in hand is squarely covered by the decision of this Tribunal in the case of NIS Sparta Ltd. [2015 (1) TMI 504 - CESTAT NEW DELHI]. - Decided in favour of assessee. 2015 (6) TMI 784 Irregular/ unauthorized availment of Cenvat credit - Charges of no separate accounts maintained while providing both taxable and exempted services - Held that:- If there was a doubt either regarding maintenance of separate accounts or utilizing credit on common inputs/input services, as required under Rule 6 (2) of the Cenvat Credit Rules, the authorities ought to have summoned the appellants records or should have verified from the appellant s premises, whether assessee had incorrectly pleaded to have maintained separate records while it did not. In the absence of any such notice issued and in view of the failure to have inspected the appellant s records, law does not authorize a conclusion of non- maintenance of separate accounts, without any basis. There is not a single sentence in the entire adjudication order which records the evidence or material on the basis of which the Adjudicating Authority records the finding that the appellant failed to maintain separate accounts. In the absence of the Adjudicating Authority recording a clear finding that the assessee failed to maintain separate accounts and on the basis of some evidence in support of such conclusion, the inference of a failure to maintain separate accounts, is a finding of fact based on no evidence. It is therefore perverse. On the basis of submission it is contended, that if it was found that the appellant had availed credit on inputs and input services which are common to both taxable and exempted services, the demand should be restricted to Rs. 1,81,386/-, which is the position that obtains on the basis of Okay Glass Industries vs. CCE, Kanpur [2015 (2) TMI 924 - CESTAT NEW DELHI ]. - Matter remanded back. 2015 (6) TMI 783 Extended period of limitation - Penalty u/s 78 - share broking services - Held that:- No case of contumacious conduct and/or deliberate default of provisions of Act or Rules is made out against the assessee. The transactions have been found to be duly recorded in the Books of Account, as found by the Audit party. Further, the appellants have immediately applied for amendment to registration certificate pursuant to Audit showing willingness to pay for difference in balance-sheet and ST-3 returns. Further, it is seen that after grant of amended certificate of registration have deposited Service Tax under the new head of classification immediately. Further, in the impugned order, the learned Commissioner (Appeals) have found certain amounts as not taxable under the head Management Consultant Service and have also found that the assessee is entitled to cum tax benefit as Service Tax has not been charged separately in the bills raised for underwriter s service, which escaped tax. In this view of the matter, I hold neither extended period of limitation is attracted nor any penalty is imposable under Section 76 or 78. Upholding the impugned order in part, I further set aside the penalty under Section 78 as imposed in the impugned order. - Decided in favour of assessee. Central Excise 2015 (6) TMI 782 Confiscation of goods - Non accountal of goods - Clandestine removal of goods - Held that:- duty demand of Rs. 12,58,816/-on 30,23,345 HDPE Caps alleged to have been cleared without payment of duty during period from 1999-2000, 2001-2002, the details about these clearances had been supplied by the appellant company himself. However, their plea is that these HDPE Caps had been manufactured on job work basis out of the Granules supplied by the principal manufacturers and had been returned back to them under job work challans and in this regard they have also enclosed the copies of the job work challans. In our view, once the appellant have submitted the job work challans and job work and job work records the lower authorities should have examined this claim and the same should not have been summarily dismissed. In view of this, this duty demand is not sustainable and the matter has to be remanded to the original adjudicating authority for de novo adjudication on this point. - However, confiscation of 2905 KG HDPE waste, 4050 KG of coloured HDEP Granules and 250 KG of HDEP Granules are set aside - However, confiscation of 7408 pieces and 7670 pieces HDPE caps is sustained - Therefore, penalty and redemption fine is reduced. - Decided partly in favour of assessee. 2015 (6) TMI 781 Duty demand - Clearance of goods without payment of duty - Held that:- The case against the appellant is based only on the records recovered from M/s Gopal Steel, a commission agent whose proprietor is Shri Gopal Krishna Aggarwal. The records recovered from M/s Gopal Steel indicate the sale of several consignments of sponge iron manufactured by the appellant to various customers through him for which he had received the commission. However, it is seen that no inquiry has been made with the customers mentioned in the documents recovered from M/s Gopal Steel. Similarly, the factory premises of the appellant had also not been searched and as such there is no allegation of discrepancy in the records of raw material or the finished products. - admittedly, the entire case against the appellant is based on the records recovered from M/s Gopal Steel and the statements of Shri Gopal Krishna Agarwal but the cross-examination of Shri Gopal Krishna Aggarwal, Proprietor of M/s Gopal Steel has not been allowed. In view of this, we hold that the impugned order suffers from the violation of principles of natural justice. - Matter remanded back - Decided in favour of assessee. 2015 (6) TMI 780 SSI exemption - Duty demand on the basis of power consumption - Held that:- Appellant during the period of dispute had neither taken central excise registration nor were paying duty, claiming that their clearances are fully within the SSI exemption limit. However, the challan book recovered from the factory which contained the details of the clearances during the period 06.05.2011 to 18.10.2011 showed the clearances of pipes weighing 3,55,825 Kg. during this period and valued at Rs. 2.49 Crores. This itself, in our view, shows that the clearances during this period had exceeded the SSI exemption limit and the duty involved on these clearances would be at least Rs. 10.00 to 12.00 Lakhs. Though duty demand cannot be confirmed merely on the basis of power consumption, the recovery of challan book for the period 06.05.2011 to 18.10.2011 containing details of clearances during this period does indicate that the value of the clearances of appellant unit may be far in excess of SSI limit. In view of this, we are of the view that this is not a case for waiver from the requirement of pre-deposit. - Partial stay granted. 2015 (6) TMI 779 Availment of fraudulent MODVAT Credit - Commissioner (Appeals) set aside the penalties imposed on the registered dealers and the Authorised Signatory of the unit- Held that:- Unit M/s Vipul Steel & Agro Industries had not challenged the Adjudication order in respect of demand of MODVAT Credit. It is seen that the said unit issued Modvatable invoices to various dealers and manufacturers. The registered dealers, the respondents herein, took the stand before the Adjudicating Authority that they supplied the material to M/s DCM Engineering Products. Proceedings were initiated against M/s DCM Engineering Products on the ground that M/s DCM Engineering Product availed the credit without receiving the inputs. The proceedings against M/s DCM Engineering Products was dropped by the Adjudicating Authority. - This fact was not disputed by the Adjudicating Authority.- No reason to interfere with impugned order - Decided against Revenue. 2015 (6) TMI 778 Reversal of cenvat credit on emergence of exempted by-product Hydrol i.e Acid Oil - Demand of 8% of the sale value of the acid oil - Non maintenance of separate account and inventory of the input/input services used in or in relation to the manufacture of exempted final products and dutiable final products - Held that:- While the main product being manufactured by the respondent i.e , refined vegetable oil being manufactured by M/s Goyal Proteins and Dextrose Monohydrate and Dextrose Anhydrous being manufactured by M/s Starch Chemicals were dutiable final products and the respondent have availed cenvat credit in respect of input/input services used in the manufacture of these dutiable final products. In course of manufacture of these dutiable final products, some by-products exempt from duty also arose. Acid oil emerges in the manufacture of refined vegetable oil and during the manufacture of Dextrose Monohydrate and Dextrose Anhydrous, a by-product viz. hydrol emerges. In these circumstances of the case, it was impossible for the Respondents to maintain separate account and inventory of the inputs/input services meant for dutiable final products and exempted final products as this can be done only if two different final products, one dutiable and the other exempted are being manufactured consciously. When compliance of a provision is impossible, an assessee cannot be penalized for his failure to comply with the same. - provisions of Rule 6(2) read with Rule 6(3)(b) of Cenvat Credit Rules, 2002/2004 would not be applicable in such cases when in course of manufacture of dutiable final products some exempted final products also emerge as inevitable by-product. - Decided against Revenue. 2015 (6) TMI 777 Valuation - PTY Twisted Yarn - Factory gate sale or not - allegation that assessee was clearing PTY from its factory gate at a very low value in the name of non-existing firms, while the goods were actually being cleared to godown at Bhiwandi (Maharashtra) and Surat (Gujarat) from where they are subsequently being sold through brokers to actual buyers at a higher value - Held that:- On a perusal of the order passed by the Commissioner and that of the Tribunal, it is luminescent that the assessee used to sell the PTY Twisted Yarn, the manufactured item to number of buyers as has been found by the Department. Some buyers were taking directly and some sales were made through the brokers. However, the invoices used to be raised in the name of certain buyers. This practice was prevalent since long even when the Excise was not leviable. That apart, it is noticeable that there is no finding that the price that was collected in respect of the items, whatever grade or size may be, from the genuine buyers or the broker, were different and moreover, the duty has been paid at the gate at the same rate at the time of transit on the same quantum. The allegation of the Revenue against the assessee is that the broker used to sell it to a third party at a higher price. It is also reflectible that the adjudicating authority has placed reliance on the approximate stock value statement which was given to the bank to arrive at the conclusion that the assessee had undervalued the sale. The Tribunal, by adequate reasoning has repelled the said analysis made by the Commissioner and disposed it of. It has rightly done so. In the absence of any material on record, we are impelled to think that the factual analysis made by the Tribunal cannot be found fault with. - Decided against the revenue. 2015 (6) TMI 776 Settlement Commission rejected the application - scope of the powers of the Commission - Bifurcation or segregation of the issues in the show cause notice is permissible or not - Differential duty on aluminium conductors manufactured - Wrong availment of Cenvat credit - Held that:- The term ‘case’ has been defined to mean any proceeding under the Act or any other Act for the levy, assessment and collection of Excise duty, pending before an adjudicating authority on the date on which the Application under sub-section (1) Section 32E is made. The Settlement Commission had before it an Application and in respect of a case relating to the Assessee. If the case relating to the Assessee according to Mr. Jetly appearing before us for the Revenue is that which pertains to the show cause notice, then, we do not see how the Commission could have refused to entertain the Application. If the ‘case’ relating to the Applicant before the Commission is the show cause notice and it is not yet adjudicated but the Settlement Commission can make an adjudication in terms of sub-section (1) and settle it, then, we do not see how the Application could have been rejected or thrown out at the threshold. It is conceded that when the Petitioners approached the Settlement Commission and admitted their duty liability all that had happened and transpired was that they had received a show cause notice raising the claims and which they have admitted. In such circumstances, the other reason assigned in para 9.7 for rejecting the Application at the threshold cannot be sustained. We are of the view that the Commission would have to proceed in accordance with law. The issues raised in the show cause notice and which are before the Settlement Commission are not dealt with in the Central Board of Excise and Customs’ order dated 6th January, 2009 or in the Writ Petition which is pending before this Court. In such circumstances, we are of the view that the Commission erred in rejecting the Application made by the Petitioners on the ground that it is not admissible in terms of Section 32E of the Central Excise Act, 1944. The Settlement Commission would have been well advised in proceeding with the Application and passing a final order thereon. Such an approach of the Commission in the given facts and circumstances defeats the object and purpose of approaching the Commission with an Application for settlement of the case. Commission will adjudicate the Application made by the Petitioners under Section 32E in terms of all the claims which are referred to in para 9.2(i) to (iv) but in so far as (i), (ii) and (iii) the adjudication will proceed with regard to payment of interest and the Commission would also be empowered to decide as to whether the show cause notice rightly demands a sum of Rs. 1,59,39,047/- stated to be a Cenvat credit illicitly availed by the Petitioners. - Decided in favour of assessee. Wealth tax 2015 (6) TMI 770 Whether the land at Ambattur sold by the assessee would fall within the exclusion clause of Section 2(ea) of the Wealth Tax Act - Held that:- as the issue involved herein being pure question of fact and as both the Appellate Authorities, after verifying the records, arrived at such conclusion, we find no question of law much less any substantial question of law arises for consideration in these appeals. - Decided against Revenue.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter June 26, 2015

Articles

1. Filling up the lacunae in defective SCN not allowed in case of an open remand

2. AMENDMENT IN APPELLATE PROVISIONS

News

1. Invitation of memoranda on the subject ‘Export Infrastructure in India'.

2. RBI Reference Rate for US $

Circulars / Instructions / Orders

1. F.NO.500/62/2015-FT&TR-III - dated 19-6-2015

2. 112 - dated 25-6-2015

3. 22/2015-2020 - dated 23-6-2015

Highlights / Catch Notes

Income Tax

Court Rules Construction Materials as "Plant" for Tax: Eligible for Full Depreciation Despite Independent Use Limitations.

Compensation for Surrendering Tenancy Rights is Taxable as Capital Gains Under Income Tax Law.

High Court Rules Filing Appeal Doesn't Halt Tax Recovery; AO Can Impose Conditions During Appeal Process.

Discrepancy in Stock Value Reporting: No Adjustment Allowed Between Bank and Tax Reports as of March 31, 2010.

GMR Project Income: Only "Inside India" Earnings Taxed; "Outside India" Design and Supply Receipts Exempt.

Assessee Allowed to Introduce New Grounds and Claim Depreciation Disallowance in Assessment Proceedings.

Unexplained Jewelry Investments Found in Search u/s 132 Deemed Meritless in Joint Family Tax Assessment Case.

Factoring Charges Not Considered Interest u/s 194A, No TDS Required on Discounting Charges.

Court Evaluates If Amenity Income Should Be 'Income from Other Sources' or 'Income from House Property'.

Registration Denied u/s 12A(1)(a) for Objectives Focused on Regulating Private Security Employment in Maharashtra.

Customs

Valuation of Imported Machinery in Nepal and India: Depreciation Method Applied Per 1987 Circular.

Jumbo Rolls Valuation Upheld: Cost Plus Freight Based on Independent Sales with Adjustments for Cutting & Joining Charges.

Supreme Court rules penalty reduction unjustified; restores original Rs. 20 lakh fine for breach of court undertaking.

Corporate Law

CLB's Reconsideration of Ad-Interim Orders: Alteration Not a Review Under Company Law Board Regulations, 1991.

Civil Court Can Address Director Appointment Disputes Due to Lack of Specific Remedy in Companies Act.

Service Tax

CENVAT Credit Denial Overturned Due to Extended Limitation Period; Confusion on Credit Applicability Cited in Decision.

High Court Orders Central Excise Commissioner to Address Appeal on Rejected VCES 2013 Declaration.

Court Highlights Need for Checks on Authority Decisions in Absence of Appeal Provisions Under VCES 2013.

Show Cause Notice Invalidated for Missing Taxable Service Details, Breaching Due Process Requirements.

Pre-licensing training for insurance agents exempt from service tax u/s 65(27) of the Finance Act, 1994.

Court Finds Lack of Evidence in Cenvat Credit Case; Non-Compliance Conclusion Deemed Unsupported by Facts.

No Penalty for Share Broker u/s 78 Due to Good Faith; Extended Limitation Period Not Applicable.

Central Excise

SSI Exemption Non-Compliance: Challan Book Suggests Exceeding Central Excise Duty Limits from May to October 2011.

Cenvat Credit Rule 6(2) & 6(3)(b) Exemption for By-products in Dutiable Manufacturing: No Credit Reversal Needed.

Court Finds Revenue's Claim on PTY Twisted Yarn Sales Incorrect; Examines Factory Gate Sales for Excise Valuation.

Settlement Commission to Decide Validity of Show Cause Notice on Alleged Improper Cenvat Credit Claim of Rs. 1.59 Crore.

Case Laws:

Income Tax

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TMI Tax Updates - e-Newsletter
June 26, 2015