TMI Tax Updates - e-Newsletter
June 28, 2016

Case Laws in this Newsletter:

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

Articles

1. Service Tax on Builder / Developer

   By: Santosh thapliyal

2. Service Tax Implication on Co-operative Society

   By: Richi Jain

News

1. Auction for Sale (Re-issue) of Government Stocks

2. Commerce Secretary level Inter-Governmental Committee meeting between India and Nepal

3. Government initiates process to constitute Monetary Policy Committee (MPC) under the Reserve Bank of India Act, 1934

4. RBI Reference Rate for US $

5. Prime Minister speaks on Income Declaration Scheme in Mann ki Baat

6. Finance Minister participates in the First Annual General Meeting of Asian Infrastructure Investment Bank (AIIB) at Beijing, China yesterday; Addressing Board of Governors’

Notifications

VAT - Delhi

1. F.3(14)/Fin(Rev-I)/2012-13/DS-VI/208 - dated 24-6-2016 - DVAT

Appointment of Assistant Commissioner cum VATO

2. F.3(11)/Fin(T&E)/2009-10/DS-VI/210 - dated 24-6-2016 - DVAT

Appointment of Special Vigilance Commissioner and Addl.Commissioner, Value Added Tax

Highlights / Catch Notes

Income Tax

• Central Bank of India Loan Upfront Fee is Tax-Deductible from Assessee's Income.

  Case-Laws - AT : The ‘upfront fee’ paid to Central Bank of India on loan taken from it is allowable as a deduction from the assessee’s income. - AT
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• Rental Income from Commercial Complex: 75% as House Property Income, 25% as Business Income Allocation.

  Case-Laws - AT : Rental income from letting out the commercial complex, including the amenities - 75% of the rental income has to be assessed as income from house property and the balance 25% as income from business - AT
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• Assessee's foreign equity investment violates Section 10(23C) proviso; approval denied u/s 10(23C)(vi) of Income Tax Act.

  Case-Laws - AT : The assessee invested its funds in the equity shares of a company incorporated outside India. The third proviso to Section 10(23C) clearly says that the assessee cannot invest in the equity shares of any company and the investment has to be made only as per the mode prescribed under Section 11(5) - Approval u/s 10(23C)(vi) not granted - AT
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• Revenue Reopens Assessment with New Evidence Linking Unassessed Income, Correctly Applying Sections 147 and 148.

  Case-Laws - AT : Reopening of assessment - Revenue has received cogent tangible material having live link/nexus with the reasons to believe that the income has escaped assessment, the return of income was originally processed and accepted u/s 143(1) and not u/s 143(3) r.w.s. 143(2) - case was re-opened within four years - Revenue has rightly invoked the provisions of section 147/148 - AT
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• Taxpayer Can Present New Arguments in Penalty Proceedings, Separate from Assessment, per Section 271(1)(c.

  Case-Laws - AT : Penalty u/s.271(1)(c) - declaration of income recorded u/s.132(4) - It is the settled position of law that penalty proceedings and assessment proceedings are separate and distinct. The assessee can advance new arguments during penalty proceedings - AT
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• Plastic Goods Factory's Moulds Eligible for Higher Depreciation Rate per Tax Guidelines and Case Law.

  Case-Laws - HC : Depreciation on moulds -Factory of the assessee was plastic goods factory. The moulds used for manufacturing such goods, therefore, qualify for higher rate of depreciation - HC
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• Assessment Reopening Addressed: Assessee Justifies Provision for Damaged Goods, AO Forms Opinion Without Disallowance.

  Case-Laws - HC : Reopening of assessment - provision for damaged goods - full accounts, details and justifications for the claim was placed before AO in response to written query raised by the AO - in the final order of assessment, AO made no disallowance, it can hardly be stated that he did not form any opinion with respect to this claim of the assessee. - HC
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• Court Allows Reopening of Assessment for Higher Stamp Valuation Due to Non-Disclosure of Key Facts by Assessee.

  Case-Laws - HC : Reopening of assessment - higher stamp valuation - when the sale deed was not on record during the original assessment, this certainly is a case where the assessee failed to disclose truly and fully material facts necessary for assessment - HC
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• Entities Offering Preschool Education Qualify for Registration u/s 12A of Income Tax Act.

  Case-Laws - AT : Eligibility of benefit of registration u/s 12A - normal schooling - pre-schooling is very much integral part of the term ‘education’ as has been envisaged u/s 2(15) - registration to be granted - AT
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• High Court Rules Assessing Officer's Assumption on Land Payments in MoUs Illegal; Sale Deeds Not Executed.

  Case-Laws - HC : Undisclosed investment - Addition on the basis of documents (MoU) seized during the course of search / survey - sale deeds for lands covered by MoUs had not been executed - it was absolutely illegal for the Assessing Officer to presume the factum of payment for those lands and that too at the rate mentioned in the MoUs. - HC
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• Court Allows Section 43B Deduction with Excise Duty Refund Adjustment, No Cash Payment Needed for Tax Claim Validity.

  Case-Laws - HC : Deduction u/s 43B - non payment of excise duty in cash - actual payment - adjustment of refund from Central Excise and Customs - The claim would not be hit by section 43B of the Act. - HC
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Customs

• Customs Duty Exemption for Hospital Machines Upheld: No Violations Found from 1994 to 1998 Under Notification No.64/88.

  Case-Laws - HC : Import of certain sophisticated machines for the Hospital and installation thereof - In this case, notification was rescinded on 01.03.1994. The authorities are not correct in cancelling the Customs Duty Exemption Certificates issued under Notification No.64/88, dated 01.03.1988, saying that the respondent / petitioner had not complied with the conditions for the subsequent period, namely 1994 to 1998 - HC
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Service Tax

• Court Allows Cenvat Credit for CHA Services and Outward Freight on Exported Water Pumps, Despite Revenue's Objection.

  Case-Laws - AT : Cenvat credit on the CHA service and outward freight paid on export clearances - manufacture of water pumps - there is no merit in Revenue's contention that the appellant should have availed the benefit of Notification No. 17/2009 instead of taking Cenvat credit on the impugned services. - Credit allowed - AT
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• Cenvat Credit Covers Services for Factory Modernization, Renovation, and Repair; Eligible for Credit Approval.

  Case-Laws - AT : Cenvat Credit - The inclusive part of the definition includes services related to modernisation, renovation and repair of factory. These works in my opinion would fall within the work of modernisation, renovation and repair works and therefore are eligible for credit. - Credit allowed - AT
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• Toll Collection by Agreement with NHAI Exempt from Service Tax under Business Auxiliary Service Category.

  Case-Laws - AT : Business Auxiliary service (BAS) - activity of toll collection in terms of agreement between the respondents and NHAI is not subject to service tax - AT
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Central Excise

• Revision Application for Unutilized Credit Refund u/r 5 Cenvat Credit Rules 2004 Deemed Non-Maintainable by Law.

  Case-Laws - CGOVT : Revision Application relates to refund of unutilized credit under Rule 5 of Cenvat Credit Rules 2004, the subject matter is not covered in the first proviso to sub-section (1) of Section 35B of the Central Excise Act 1944. - Revision application is not maintainable - CGOVT
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• EOU Exceeds 50% DTA Clearance of FOB Exports; Duty Rate Assessment Requires Tax Authority Evaluation per Notifications.

  Case-Laws - AT : 100% EOU - clearance goods into Domestic Tariff Area (DTA) in excess of 50% of FOB value of exports - DTA clearances permitted by the Development Commissioner by itself will not decide the rate of duty applicable, which the tax authorities have to determine in terms of the applicable notification - AT
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• Spent Earth from palm oil refining ruled non-excisable under Central Excise Act, lacking marketability per Sections 2(d) and 2(f).

  Case-Laws - AT : Excisability of Spent Earth arising as a residue in the process of refining crude palm oil - Marketability of the goods - Scopeo of Section 2(d) as well as in Section 2(f) of Central Excise Act - Spent Earth arising as a residue cannot be held as excisable goods - AT
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• Central Excise Registration Revoked for Fraud; Assessee Entitled to Order and Hearing Opportunity Before Revocation.

  Case-Laws - HC : Revocation of the registration of Central Excise - detection of fraud - A right was accrued with registration in favour of the assessee. If common registration was to be revoked, nobody prevented the revenue to pass proper order by giving an opportunity of hearing to the assessee. - HC
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• High Court Condones Appeal Delay Due to Improper Order Service u/s 37C(1) of the Act.

  Case-Laws - HC : Condonation of delay in filing an appeal before the tribunal - In absence of service of copy of the order in the manner prescribed under section 37C(1) of the Act, delay cannot be attributed towards the appellant for challenge of the order. - Delay condoned - HC
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Case Laws:

• Income Tax

• 2016 (6) TMI 984
  Reopening of assessment - disallowance of provision for damaged goods - Held that:- The quoted portion of the Tribunal's impugned order would, however, establish that the entire issue was considered by the Assessing Officer in the original scrutiny assessment. The Tribunal records that the Assessing Officer had raised several queries in the notice issued to the assessee, in which, in query No. 16 he had sought details of liability for damaged goods of 1,00,59,941/-. The assessee had filed its reply alongwith P 1,62,77,457/- in the preceding assessment year to 1,00,59,941/- in the present year. The assessee had also placed notes of policy for damaged goods stating that the same was received in damaged condition in subsequent years out of those sold during the year is made in the accounts of the year corresponding to the sales on estimation basis. Thus, full accounts, details and justifications for the claim was placed before the Assessing Officer during the original assessment proceedings. This was in response to the written query raised by the Assessing Officer. If, thereafter, in the final order of assessment, the Assessing Officer made no disallowance, it can hardly be stated that he did not form any opinion with respect to this claim of the assessee. - Decided against revenue

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• 2016 (6) TMI 983
  Depreciation on moulds - higher rate of depreciation - @ 30% OR 15% - Held that:- We notice that subclause( vii) of clause(3) of Entry III in PartA in the New Appendix I, reads as under: “(vii) Moulds used in rubber and plastic goods factories” Thus for mould used in rubber and plastic factories, higher rate of depreciation of 30% is prescribed. Rate of depreciation of 15% applies to residual items. Thus if an item falls under said subclause (viii) rate of depreciation would be 30%. In the present case, admittedly, moulds were used for manufacturing of plastic goods. These goods were in the nature of electric switches and sockets. Merely because after the manufacture, the consumer may be having plastic wires and circuits installed in such plastic switches and sockets, so as to make them functional, would not take away the basic character of the appliances being plastic goods. The assessee was exclusively involved in manufacturing such goods. Factory of the assessee was therefore, plastic goods factory. The moulds used for manufacturing such goods, therefore, qualify for higher rate of depreciation under subclause( vii) of clause(3) of Entry III in PartA in the New Appendix I @ 30%. - Decided in favour of assessee

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• 2016 (6) TMI 982
  Deduction u/s 43B - non payment of excise duty in cash - adjustment of refund from Central Excise and Customs - Held that:- Department had adjusted the refund claim of the assessee of 3.71 crores towards its excise duty liability. That being the position, it cannot be said that excise duty of 3.71 crores was not actually paid over. The claim would not be hit by section 43B of the Act. - Decided against revenue

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• 2016 (6) TMI 981
  Reopening of assessment - higher stamp valuation - assessment in the hands of legal heir of deceased assessee - Held that:- We do not find that the Assessing Officer lacked jurisdiction to reopen the assessment. It appears that the assessee had declared the sale consideration of the land in question as 87.71 lacs where as had accepted the stamp valuation which would come to 2.12 crores considering the stamp duty of 11.92 lacs affixed on the sale deed. It was in this background, the Assessing Officer invoked section 50C of the Act treating the difference as deemed long term capital gain. When these facts were not on record, when the sale deed was not on record during the original assessment, this certainly is a case where the assessee failed to disclose truly and fully material facts necessary for assessment. - Decided against assessee.

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• 2016 (6) TMI 980
  Undisclosed investment - Addition on the basis of documents (MoU) seized during the course of search / survey - Held that:- On the record, there is nothing to establish the factum of actual payment of purchase price at the rates as mentioned in MoUs by the assessee to the sellers for lands covered by the Agreements for Sale or the MoUs. On the contrary, the Affidavits of all the six sellers found and seized during the search, itself confirm that none of them had received any amount in excess of the amounts mentioned in the Affidavits, which were with respect to lands covered by Agreements for Sale dated 26.02.1996 and had not received any single penny towards the sale price of lands covered by MoUs and that saledeeds for lands covered by MoUs had not been executed. In the presence of the aforesaid documents evidence, the assumption or presumption arrived at by the Assessing Officer is uncalled for and bad in law. - it was absolutely illegal for the Assessing Officer to presume the factum of payment for those lands and that too at the rate mentioned in the MoUs. The Tribunal was completely justified in deleting the addition - Decided in favour of assessee

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• 2016 (6) TMI 979
  Eligibility of benefit of registration u/s 12A - Whether Pre-School would fall in the term ‘education’ as envisaged u/s 2(15)? - Held that:- In the case of Life Shines Educational & Charitable Trust (2015 (10) TMI 1478 - ITAT CHENNAI ) held that “pre-schooling’ shall fall within meaning and scope of the ‘education’ as used u/s 2(15). Thus, in view of the aforesaid discussion and facts of this case, we do not find any justification in the view adopted by the Ld. DIT that preschooling is not part of education activity. In our considered view pre-schooling is very much integral part of the term ‘education’ as has been envisaged u/s 2(15) of the Act and we hold so. Whether charging of fee and retaining surplus amounts to commercial activity, disentitling an assessee from the benefit of exemption u/s 11 and 12? - Held that:- the assessee trust is carrying out the activity of education and is therefore entitled for benefit of registration u/s 12A and we direct the DIT to grant the benefit of registration u/s 12A. Accordingly, the assessee is hereby granted the benefit of u/s 12A with effect from the date when the application was filed by the assessee. The AO is at liberty under the law to examine the aspect of application of income solely for the purpose of education and also to examine that the assessee is carrying out the activity of education only and AO is also permitted to examine compliance of other provisions of the law in this regard and accordingly he may decide about the granting of benefit of exemption at the time of assessment in different years - Decided in favour of assessee

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• 2016 (6) TMI 977
  Approval under Section 10(23C)(vi) - whether the assessee-institution can invest any part of its accumulated income or the current income on the equity of non-resident subsidiary company and claim exemption as application of income? - Held that:- The compliance of terms and conditions stipulated by the prescribed authority would be a matter of decision at the time of assessment. In the case before us, the assessee is an Indian institution investing its funds generated out of its charitable activity in India, outside the country. The Indian Income-tax Act provides for accumulation of its surplus funds to the extent of 15% and also provides the method of investment. The assessee invested its funds in the equity shares of a company incorporated outside India. The third proviso to Section 10(23C) of the Act clearly says that the assessee cannot invest in the equity shares of any company and the investment has to be made only as per the mode prescribed under Section 11(5) of the Act. In this case, the investment was made in violation of mode prescribed under Section 11(5) of the Act. Since the investment was made in violation of statutory provision, this Tribunal is of the considered opinion that the assessee-institution violated the statutory provision at the initial stage itself. Therefore, it is not entitled for approval under Section 10(23C)(vi) of the Act. - Decided against assessee

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• 2016 (6) TMI 976
  Disallowance of Interest Expenditure claimed under section 36(1)(iii) - CIT(A) deleted the disallowance - Held that:- No interference is called for in the impugned order of the learned CIT(A). We, therefore, sustain and confirm the decision of the learned CIT(A) in holding that since the amount advanced to VTL as share application money was done in the normal course of its business, for purposes of its business and was made on grounds of commercial expediency, the disallowance of interest claimed under section 36(1)(iii) of the Act was not warranted and in deleting the same. - Decided against revenue Disallowance of Upfront Fee paid to Central Bank of India - Held that:- Consequent to our decision, upholding the learned CIT(A)’s view that the share application money advanced to VTL was for purposes of business of the assessee, we also uphold the finding of the learned CIT(A) the ‘upfront fee’ paid to Central Bank of India on loan taken from it is also allowable as a deduction from the assessee’s income. - Decided against revenue

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• 2016 (6) TMI 975
  Penalty u/s.271(1)(c) - declaration of income recorded u/s.132(4) - Held that:- It is the settled position of law that penalty proceedings and assessment proceedings are separate and distinct. The assessee can advance new arguments during penalty proceedings. We find although the above documents were filed before the lower authorities as certified in the paper book, however, the lower authorities have not commented upon this issue either in the assessment order or penalty order or in the order of CIT(A). We therefore are of the opinion that levy of penalty u/s.271(1)(c) on the amount of 14 lakhs is not warranted under the facts and circumstances of the case if the cheques are received in A.Y. 2010-11. However, the same needs verification at the level of the AO. The AO shall verify the TDS Certificate and bank statement of the assessee regarding the receipt of the same in A.Y. 2010-11 and if found correct to delete the penalty on the amount of 14,00,000/-. Since the assessee in the instant case has declared the amount of 17,00,000/- and 10,00,000/- respectively on the basis of various discrepancies found in the seized documents during the course of search and the assessee has declared the same in the statement recorded u/s.132(4), therefore we hold that the assessee is liable to penalty u/s.271(1)(c) of the Act for concealing the particulars of his income to the extent of income arising from land business with Mr. Dilip Phadol – 17 lakhs and profit of unrecorded transaction in Kirana – 10 lakhs. The argument of Ld. Counsel for the assessee that penalty cannot be levied on estimated addition of income on Kirana is not applicable under the facts and circumstances of the case. The AO is directed to recompute the penalty accordingly - Decided partly in favour of revenue

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• 2016 (6) TMI 974
  Reopening of assessment - investment from unexplained sources u/s. 69B - genuity of loan - Held that:- The reason and purpose for transferring the loan receivable from assessee to ‘Sanson Developers Properties’ by the lender San Finance Corporation as on 31-03-2006 is very important to come to conclusion and adjudicate this appeal to understand the entire factual matrix and pith and substance of the nature and substance of entire loan transaction which the assessee has not clarified. The assessee has merely stated that the loans are outstanding in the books of lender M/s San Finance Corporation while the fact of the matter is that the said San Finance Corporation by passing journal entry on 31-03-2006 has removed/erased the loan outstanding of 16,50,650/-- due from the assessee from its books of account and the amount of 16,50,650/- stood transferred to being receivable from ‘Sanson Developers Properties’ as on 31- 03-2006 and the receivable from assessee in books of San Finance Corporation was reduced to Nil as on 31-03-2006. It is almost after one year on 31-03-2007, the said amount of 16,50,650/- was transferred back to the debit of the assessee as being receivable by said San Finance Corporation by passing a journal entry on 31-03-2007 of the amount of 16,50,650/-. No clarification and explanation has been given by the assessee with respect to above entries. Revenue also has not made any enquiry and examination to understand the reason and purpose of transferring the entry by San Finance Corporation by debiting to the account of ‘Sanson Developers Properties’ as on 31-03-2006 with 16,50,650/- and removing the name of the assessee as borrower of the said loans from San Finance Corporation from its books of accounts as on 31-03-2006 and bringing the loan receivable from assessee to ‘Nil’ as on 31-03-2006 , before fastening liability on the assessee. Thus, in the interest of justice, this matter need to be set aside to file of the AO for de-novo enquiries and examination to bring on record the pith and substance of the nature of entire loan transactions undertaken by the assessee with the said San Finance Corporation to evaluate its genuineness. For reopening , it cannot be held that the A.O. has formed any opinion with respect to the investment made by the assessee in the flat in the Adarsh Co-operative Housing Society Limited. Information has been received by the Revenue that the assessee has invested an amount of 66,08,512/- and based upon that the Revenue has reopened the case and the notices has been issued within four years from the end of the assessment year by issuing notice u/s 148 and 142(1) of the Act dated 21st July, 2011 and since the Revenue has received cogent tangible material having live link/nexus with the reasons to believe that the income has escaped assessment , the return of income was originally processed and accepted u/s 143(1) and not u/s 143(3) r.w.s. 143(2) of the Act and the Revenue has re-opened the assessment within four years of the end of the assessment year, we hold that the Revenue has rightly invoked the provisions of section 147/148 of the Act and we uphold the reopening of the assessment. Decided partly in favour of assessee for statistical purposes.

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• 2016 (6) TMI 973
  MAT computation - loss which can be deducted under Section 115 JB(2) - Held that:- There is no specific mention in the impugned order the manner of calculation of the amounts in terms of the explanation to Section 115 JB(2) of the Income Tax Act. Without going into the merits of the rival contentions, we find it appropriate to quash and set aside the impugned order of the ITAT and remand the matter to the learned Tribunal to re-examine the matter only on this limited aspect, after hearing the parties in accordance with law. It is, however, clarified that the matter is remanded only for the restricted purpose to examine whether the appellants are entitled to get the deduction on account of losses incurred as provided in Section 115 JB(2) of the Income Tax Act.

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• 2016 (6) TMI 972
  Benami account - Additions made on the basis of peak amounts - Held that:- The concurrent findings recorded by the Assessing Officer, CIT(A) and the Tribunal that the savings account No.16860 in the name of Shri Sube Singh was infact benami account of the assessee and the additions made on the basis of peak amounts therein for the relevant assessment years were totally justified. The contention of the assessee in the facts and circumstances as noticed hereinabove cannot be accepted as the view taken by the Assessing Officer, CIT(A) and the Tribunal is based on appreciation of evidence on record. Learned counsel for the appellant has not been able to produce any material to controvert the well-reasoned findings recorded by the authorities below. Thus, no substantial question of law arises - Decided against assessee

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• 2016 (6) TMI 971
  Validity of reassessment proceedings - Held that:- No fresh material or information was referred to by the AO in the reasons recorded for re-opening the assessment, that the material referred to was the same, that the reasons arose from the perusal of the existing assessment record. Thus the order passed by the AO for re-opening the assessment for the year under appeal was invalid. Therefore, consequential order passed has to be treated an invalid order. - Decided in favour of assessee

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• 2016 (6) TMI 970
  Penalty levied u/s 271D - violation of the provisions of sec. 269SS - period of limitation - Held that:- We are of the view that the intimation given by the AO cannot be considered to be initiation of penalty proceeding u/s 271D of the Act. Further, as stated earlier, the penalty proceedings can be said to have been initiated only when the notice relating to the same are issued to the assessee. Accordingly we agree with the view of the tax authorities that the penalty was initiated in the instant case only on 11.06.2009. The time limit for completion of the penalty proceedings as per sec. 275(1)(c) shall be either 31.3.2010 or 31.12.2009, whichever expires later. Accordingly, in the instant case, the time limit shall expire on 31.3.2010. In the instant case, the penalty order has been passed on 21.10.2009 and hence we are of the view that the same is not barred by limitation. Section 273B provides that the penalty u/s 271D of the Act shall not be imposable if the assessee proves that there was reasonable cause for the said failure. Thus the penalty u/s 271D of the Act shall not be levieble, if the assessee shows that there was a reasonable cause for accepting the loan or deposit by way of cash. We notice that the assessee has only contended before the tax authorities that the impugned amount was received as advance towards sale of flat. Before us, the assessee has raised some more contentions, which were not examined by the tax authorities. With regard to the observation of the tax authorities that the assessee has shown the advance amount as “Unsecured Loans” in the Balance Sheet, the assessee has submitted that the assessee has maintained two separate accounts. This fact also requires examination by the tax authorities, since it is urged before us for the first time. In view of the fresh contentions raised before us and also in view of the fact that the accounts of the assessee require verification, in the interest of natural justice, we are of the view that this issue requires fresh examination. Accordingly, we set aside the order of Ld CIT(A) and restore the same to the file of the Addl. Commissioner with the direction to examine this issue afresh by considering various contentions that may be raised by the assessee. - Decided partly in favour of assessee for statistical purposes.

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• 2016 (6) TMI 969
  Scope of rectification - whether the prior period loss which was claimed and allowed as deduction in the assessment proceedings u/s 143(3) of the Act, could be allowed or not in the present assessment year on payment basis cannot be examined in the proceedings u/s 154 of the Act? - Held that:- In any event the claim of the assessee that there was actual payment of the aforesaid sum during the previous year and the loss in question is allowable as deduction u/s 43B(c ) of the Act was not considered by the AO in the order u/s 154 of the Act. In any event this is a debatable issue and therefore proceedings u/s 154 of the Act cannot be appropriate As far as the employee’s contribution to PF and ESI is concerned the question is as to whether analogy of section 43B of the Act is applicable to the employer’s contribution can be extended to employee’s contribution u/s 36(1)(va) of the Act is a debatable issue. A series of case laws on this issue would also show that this issue is highly a debatable one and outside the purview of the proceedings u/s 154 of the Act. - Decided against revenue

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• 2016 (6) TMI 968
  Disallowance of loss claimed by the assessee on sale of assets - sale of assets was partly made to one of the sister concerns i.e. concern in which one of the partners had more than 33% share - business shut down - Held that:- There are two aspects to the claim of loss by the assessee on sale of its assets. First of all, all these assets were used in chemical industry carried on by the assessee and had its wear and tear. Where the plant has been closed down by the assessee, the whole plant 8,03,896/- in the hands of assessee. - Decided in favour of assessee

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• 2016 (6) TMI 967
  Reopening of assessment - notice is challenged solely on the ground that the Assessing Officer had neither issued nor served such notice before the last date i.e. 31.03.2015 - Held that:- We find that the file of the department contains reasons recorded by the Assessing Officer carrying a signature of the date of 31.05.2015. The draft notice in proforma was placed before the higher authority for approval. He has granted his approval recording as under: “After perusal of record and in view of reasons given by AO in Annexure I, I am satisfied that income has escaped assessment. In this case and it is a fit case for issue of notice u/s. 148 of the Income Tax Act. Therefore, necessary approval is accorded.” Below this, we find the signature of the Principal Commissioner of Income Tax, Shri Sandip Kapoor carrying date of 31.03.2015. The question of issuance of notice, therefore, must rest. As noted, according to the department, the service was effected through two modes. Firstly, the service was delivered by personal delivery at the given address of the petitioner-company, where one Krishna Yadav was present and also received a notice putting his signature and giving his mobile phone number. However, to avoid any future complications, the Assessing Officer also directed the Tax Inspector to serve notice to the company in person upon which, the Tax Inspector visited the office of the assesee and found it closed, upon which, the service was made through affixing in presence of two panch witness. We find the original panchnama in the files of the department - Decided against assessee

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• 2016 (6) TMI 966
  Interest charged u/s 201(1A) - non tds on port services - Tribunal cancelled interest levy - Held that:- Though assessee had not deducted tax from the amount payable to the contractor, the contractor had already paid the tax. It was held that if the person on whose behalf tax was to be deducted at source had paid such tax and that too at the time when it had become due, it would not be proper on the part of the Revenue to levy interest under section 201(1A) of the Act. See CIT vs. Rishikesh Apartments Cooperative Housing Society Ltd [2001 (6) TMI 17 - GUJARAT High Court] - Decided in favour of assessee

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• 2016 (6) TMI 965
  Addition u/s 68 - admitted liability - addition of share capital - Held that:- The Tribunal was justified in upholding the addition on account of alleged share capital to the extent of 8,77,500/- under Section 68. A sum of 6,62,000/- had earlier been admitted by the assessee during a disclosure as submitted by Mr. Khaitan. The share capital to the extent of Rs, 9,90,000/- was accepted both by the CIT(A) and the Tribunal. We are also of the opinion that the judgement of the learned Tribunal is neither perverse nor arbitrary nor unreasonable

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• 2016 (6) TMI 964
  TDS u/s 194C - payments made by the assessee to Mukamams and Transporters who are members farmers of the Zone Samiti - TDS laibility - Held that:- A decided in SHREE CHALTHAN VIBHAG KHAND Versus INCOME TAX OFFICER [2014 (12) TMI 1224 - GUJARAT HIGH COURT] the supply of sugarcanes at the gates of factories of the respective assesses was a part of sale transaction, and therefore, we are of the opinion that the assesses are not liable to deduct TDS as relying on COMMISSIONER OF INCOME TAX (TDS) Versus KRISHAK BHARATI COOPERATIVE LIMITED [2012 (10) TMI 655 - GUJARAT HIGH COURT] - Decided in favour of assessee

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• 2016 (6) TMI 963
  Penalty levied u/s. 271(1)(c) - addition on account of non-compete fee - Held that:- This is not a case of non disclosure of the income. The claim made by the assessee was found untenable. The Tribunal therefore, referred to various decisions including that of the Supreme Court in case of CIT v. Reliance Petroproducts Pvt. Ltd., reported in [2010 (3) TMI 80 - SUPREME COURT ] in delting the penalty - Decided in favour of assessee.

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• 2016 (6) TMI 962
  Deduction u/s. 80-HH and 80I - whether Tribunal erred in holding that insurance claim received by the appellant-assessee is not income derived from the industrial undertaking of the appellant and consequently, the appellant cannot claim deduction under section 80-HH and 80-I ? - Held that:- So far as the issue under consideration is concerned, it is squarely covered by the decision of Munjal Showa Ltd. vs. Deputy Commissioner of Income-tax [2003 (6) TMI 188 - ITAT DELHI-E ] held Insurance claim was basically a part of repair and maintenance. In fact, it was reimbursement of repair and maintenance expenses incurred by the assessee on behalf of insurance company. Since repair and maintenance incurred by the assessee on behalf of insurance company constituted a part of business expenditure, so insurance claim obviously constituted income derived from the industrial undertaking. - Decided in favour of the assessee

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• 2016 (6) TMI 961
  Disallowance made u/s 14A - Tribunal directing the Assessing Officer to delete the suo moto disallowance of 6.23 crores made by the assessee company in the return of income - ITAT deleted the disallowance - Held that:- The question of disallowance under section 14A of the Act has been examined on the basis of materials on record. The Tribunal found that the assessee's interest free funds far exceeded its interest free investments. The Tribunal relied on the decisions of this court in case of this very assessee concerning similar issues in the later assessment years, against which we are informed that the Special Leave Petition has been dismissed. Regarding a claim contrary to the disclosures in the return, the Tribunal relied on the decision of Supreme Court in the case of the National Thermal Power (1996 (12) TMI 7 - SUPREME Court ) to observe that the purpose of assessment is to tax real income - Decided against revenue

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• 2016 (6) TMI 960
  Unaccounted moneys paid to the builder for the purchase of a shop - Held that:- The Department has failed to discharge its obligation to prove the income or any payment is made on behalf of the appellant. In view of the well settled law, no additions can be made on the basis of probabilities and therefore the appeals are required to be allowed in favour of assessee

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• 2016 (6) TMI 959
  Applicability of provisions of Section 158BD - block assessment - Whether ITAT was right in law in holding that provisions of Section 158BD can arise out of material or evidence found during the course of the survey proceedings under Section 133A ? - Held that:- In the present case, admittedly, no evidence indicating charging of “on money” by the assessee on the sale of shop was found during the search. Only one document, viz. Deed of partnership, was found, which was not sufficient to prove the alleged irregularity on the part of assessee. Therefore, the Assessing Officer ought not to have considered this issue in block assessment proceedings and the Tribunal also committed serious error in invoking Section 158BD of the Act as the case would lie under Section 158BC of the Act. Consequently, the Question raised in this appeal is answered in the negative, i.e. in favour of the assessee and against the Revenue.

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• 2016 (6) TMI 958
  Slump sale of an undertaking - whether corresponding WDV is required to be reduced from the remaining block and depreciation on such reduced block can only be allowed as held by ITAT? - Held that:- It is to be noted that Section 43(6) which provides “written down value”, more particularly clause (C) whereby Section 43 (6)(c) was amended on 01/04/2000 and therefore the observations in paragraph No.19.1 of ITAT are contrary to the law which was prevailing in the relevant assessment year. The said provision came into force on 01/04/2000 and therefore it can be made applicable for the assessment year 2001-2002 and the applicability of the same without referring the same, in our view is bad in law and therefore the said issue is required to be answered in favour of assessee and against the department. Thus, the issue No.1 is answered in favour of assessee and against the department. Cost of bonus shares taken at Rs.nil - the said bonus shares are issued prior to the amendment to S.55(2)(aa) - Held that:- As so far as the finding of the AO rejecting the claim of the appellant on the ground that the cost of the bonus shares is to be taken at NIL as per the amended provisions of law, in view of the judgment of the Constitutional Bench in case of CIT V. Gold Co. Ltd. [1969 (4) TMI 29 - SUPREME Court ] which has been referred to in Escorts Farms (Ramgarh) Ltd. (1996 (9) TMI 4 - SUPREME Court ), Section 55(2)(aa) which came into operation on 01/04/1996 and therefore the transaction of disposing of original share on average price is required to be benefited to the appellant and ought to have been accepted by the AO which has been referred by the Tribunal. Thus, this issue is also answered in favour of appellant-assessee

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• Customs

• 2016 (6) TMI 1003
  Benefit of Exemption Notification No.64/88, dated 01.03.1988 after repealed by Notification No.99/1994, dated 01.03.1994. - Import of certain sophisticated machines for the Hospital and installation thereof - the appellant / respondent withdrew and cancelled all Customs Duty Exemption Certificate issued to the respondent / petitioner under Notification No.64/88-Cus, dated 01.03.1988 and also rejected the request for issuance of installation certificate. The respondent / petitioner, who benefited the tax exemption are bound to discharge their liability during the period when the said Notification No.64/88 was in force. The authorities can enforce such obligation only during that period when the notification was in force and not for the subsequent period. - In this case, notification was rescinded on 01.03.1994. The authorities are not correct in cancelling the Customs Duty Exemption Certificates issued under Notification No.64/88, dated 01.03.1988, saying that the respondent / petitioner had not complied with the conditions for the subsequent period, namely 1994 to 1998. - Decided in favor of assessee and against the revenue.

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• Service Tax

• 2016 (6) TMI 1002
  Delay in filing of an appeal before the Commissioner of Central Excise (Appeals) - Condonation of delay - Order impugned before the appellate authority is dated 09.03.2012. Appeal has been filed on 14.08.2012. Admittedly, it is within the extended period of limitation - Held that:- When the Hon'ble Supreme Court has described the manner of disposal of an appeal, as illegality, the same can be corrected by this Court, in exercise of the powers under Article 226 of the Constitution of India and no useful purpose would be served in relegating the appellants to approach the alternative remedy. Courts have held that a writ petition is maintainable, when the act committed is per se illegal, and contrary to the statute. The Commissioner of Service Tax (Appeals) is directed to take the appeal and decide the same, on merits, without being influenced by any of the observations or discussions in the earlier order, dated 30.11.2015, as it has been now set aside by this Court. - Appeal restored before the First appellate authority.

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• 2016 (6) TMI 1001
  Cenvat credit on the CHA service and outward freight paid on export clearances - manufacture of water pumps - adjudicating authority denied the input service credit on the impugned services, on the ground that benefit of Notification No. 17/2009 should have been compulsorily availed by the exporter manufacturer. Held that:- Since the notification being a conditional exemption notification, it is for the manufacturer to decide whether to avail the said exemption or not. Thus, there is no merit in Revenue's contention that the appellant should have availed the benefit of Notification No. 17/2009 instead of taking Cenvat credit on the impugned services. - Credit allowed - Decided in favor of assessee.

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• 2016 (6) TMI 1000
  Cenvat credit - eligible input services - works contract service - whether appellant is eligible for credit on certain works contract service during the period April 2011 to December 2012. - the works carried out in the factory by appellant for which service tax was paid under the category of works contact service. It is submitted that in line with the business requirements, the appellant made certain changes in the production process, factory layout, and made improvements to the existing facilities to increase volume of production and also to improve quality of the product. Civil contractors were engaged to carry out certain works Held that:- The inclusive part of the definition includes services related to modernisation, renovation and repair of factory. These works in my opinion would fall within the work of modernisation, renovation and repair works and therefore are eligible for credit. - Credit allowed - decided in favor of assessee. Cenvat Credit on works contract service of fabrication of pipelines, erection of cooling tower and laying foundation - Held that:- The works contract service in relation to building, civil structure, laying of foundation etc. has been brought within the ambit of exclusion to exclude not only setting up but something more. - The credit availed on services used for laying foundation of tank/cooling tower is disallowed. Decided partly in favor of assessee.

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• 2016 (6) TMI 999
  Business Auxiliary service (BAS) - activity of toll collection in terms of agreement between the respondents and NHAI - The respondent also undertook their job work of road maintenance and undertaking development and maintenance of road etc. - Held that:- the activities of toll fee collection cannot be held to be a service provided under the category of business auxiliary service - there is no service tax liability - Decided in favor of assessee.

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• Central Excise

• 2016 (6) TMI 998
  Cenvat Credit - reversal of credit u/s 6 - clearance of final products to SEZ developers without payment of duty Whether the amendment to the Cenvat Credit Rules 2004, by substituting clause(i) of sub-rule (6) of Rule 6 of Cenvat Credit Rules 2004 by way of notification No.50/2008-C.E (N.T.) dated 31.12.2008 is prospective in operation or retrospective? - Held that:- Tribunal cannot be said to have committed error in following the decision of this Court in case of Fosroc Chemicals (India) Pvt. Ltd., [2014 (9) TMI 633 - KARNATAKA HIGH COURT] - When the issue is already covered by the decision of this Court, it cannot be said that any questions of law would arise for consideration as sought to be canvassed. On the aspects of appeal preferred before the Apex Court, the learned Counsel has not been able to show that any interim stay has been granted restraining the operation and implementation of the decision of this Court in the above referred matter. - revenue appeal dismissed - Decided against the revenue.

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• 2016 (6) TMI 997
  Revocation of the registration of Central Excise - detection of fraud - opportunity of hearing was not given to the assessee before passing the order of revocation of common registration. - Held that:- while the earlier writ petition was filed by the assessee, it was without taking remedy before the Commissioner (Appeals). The appeal was thus filed and, finding an order of revocation dated 27.11.2013 to be in violation of principles of natural justice, it was interfered by the Commissioner (Appeals). The order of the Commissioner (Appeals) has been upheld by the Tribunal. A right was accrued with registration in favour of the assessee. If common registration was to be revoked, nobody prevented the revenue to pass proper order by giving an opportunity of hearing to the assessee. The revenue cannot pass unilateral order without hearing other party. It is more so when allegations have been made for playing fraud on the department. - Revenue appeal dismissed. - Decided against the revenue.

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• 2016 (6) TMI 996
  Condonation of delay in filing an appeal before the tribunal - it was submitted that the order against which appeal was preferred before the Tribunal had not been served on the appellant-assessee - The appellant was not aware of the order. - Held that:- The perusal of section 37C(1) of the Act of 1944 reveals mode of dispatch and, at the relevant time, it could have been sent through registered post but with acknowledgement due. There is nothing on record to show that after sending copy of the order through registered post, the acknowledgment due was produced. In view of above, mandate of section 37C(1) of the Act of 1944 has not been looked into by the appellate tribunal. In absence of service of copy of the order in the manner prescribed under section 37C(1) of the Act, delay cannot be attributed towards the appellant for challenge of the order. - Delay condoned. - Matter restored before the tribunal.

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• 2016 (6) TMI 995
  Rebate / refund of duty on goods supplied to SEZ units - admissibility of refund claim of jute cess paid on goods supplied to SEZ units - period of limitation - in supersession of the earlier claim of refund, subsequently the applicant submitted revised claim of 13,36,029/- The contention of the department in this regard was that as the- applicant has submitted their initial refund claim on 04.08.2009 hence their refund claim for the period from 01.072008 to 04.08.2008 has become time barred and hence non grantable. - Held that:- That jute cess in the instant case was paid under a mistake of law, in as much as Section 7 of the SEZ Act specifically exempts payment of jute cess in respect of goods supplied from DTA to a unit in the SEZ. Government finds that the main issue in the impugned Order-in-Appeal is the admissibility of refund under Section 11 B of the Central Excise Act read with Section 3 of the Jute Cess Act in respect of supplies made thereof. - Hence the instant case does not fall with the purview of ambit and scope of provisions contained for Section 35EE read with proviso to Section 35(B) (1) of the Central Excise Act, 1944 under which the instant revision application has been made. - Revision Application filed before Central Government in terms of Section 35 EE of Central Excise Act 1944 is beyond jurisdiction - Revision application dismissed.

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• 2016 (6) TMI 994
  Rebate / refund claim - export goods - receipt in Indian Rupee through Vostro Account - claim rejected to the extent of remittance not received in foreign currency - The applicant submits that the order of the respondent is erroneous and legally untenable in as much as there is no condition that rebate of duty on exports would be allowed only if the export proceeds are realized in convertible foreign exchange. The applicant submits that Rule 18 or notification issued under the said rule does not prescribe any condition that the rebate is dependent on realization of export proceeds. Held that:- Government notes that the applicant has contended that they have made inward remittance in the instant case in Indian Rupees through Vostro Account through Vostro Account with Deutche Bank. On perusal of copies of some documents, Government finds that an amount of INR has been shown in the Bank statement of M/S. Standard Chartered Bank. Applicant has given his submission before Commissioner (Appeals). However, there is no findings of Commissioner (Appeals) on this point while drawing the conclusion that applicant did not comply with provision contained in para 2-40 of the FTP. - Matter remanded back.

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• 2016 (6) TMI 993
  Refund of un-utilized cenvat credit - rejection of refund to the extent transferred from other unit - Condonation of delay - export of Indian Mouth Freshner falling under chapter Sub-Heading No.21069020 - The Commissioner (Appeals) decided the case in favour of respondent assessee as there was no confirmed demand of 1,44,16,817/- against the respondent for violation of Rule 10 of the Cenvat Credit Rules. Now the Department has filed this Revision Application under Section 35EE of the Central Excise Act, 1944 before the Central Government on grounds mentioned in para 4 above. Held that:- the present application has been filed within a period of three months from the relevant date even though it was sent to the wrong address due to the misdirection of the Appellate Commissioner and Committee of Commissioners. If the application had not been wrongly addressed, it would have reached the Revision Application Unit at the correct address well within time as it reached the address to which it was sent as per the postal authorities. - Government holds that the revision application has been filed within time under Section 35EE of the Central Excise Act, 1944 and question of being hit by limitation does not arise. Government observes that under Section 35 EE of the Central Excise Act, 1944, a Revision Application against the Order of Commissioner (Appeals) passed under Section 35 A ibid lies with Government only if such orders relate to cases as mentioned in the proviso to sub-section (1) of Section 35(B) of the Act. As the issue covered in this Revision Application relates to refund of unutilized credit under Rule 5 of Cenvat Credit Rules 2004, the subject matter is not covered in the first proviso to sub-section (1) of Section 35 B of the Central Excise Act 1944. Therefore, Revision Application on this issue does not lie before Central Government under Section 35 EE of the Central Excise Act, 1944. Further, Government observes that the Department as in the authorization to file Revision Application under Section 35EE (2) has erred in considering the issue as a case of rebate of duty. - Revision application dismissed - Decided against the revenue.

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• 2016 (6) TMI 992
  Cenvat credit on inputs/inputs services - manufacture and clearance of sugar and molasses - part of electricity generated in their captive power plant has been sold - Held that:- the issue is squarely covered in favour of the appellant-assessee by various judgments cited supra wherein it has been consistently held that bagasse which is waste/by-product emerging during the course of crushing of sugarcane for manufacture of sugar could not be equated with exempted goods and hence, Rule 6 of Cenvat Credit Rules are not applicable - demand set aside - Decided in favor of assessee.

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• 2016 (6) TMI 991
  100% EOU - clearance goods into Domestic Tariff Area (DTA) in excess of 50% of FOB value of exports - eligibility of concessional rate of duty for the said clearances - Held that:- DTA clearances permitted by the Development Commissioner by itself will not decide the rate of duty applicable, which the tax authorities have to determine in terms of the applicable notification. Year-wise break-up of FOB value and DTA clearances has not been specifically recorded and a clear finding about the eligibility of the appellant arrived at. This is necessary as the appellant is claiming that whenever Development Commissioner gives permission for DTA clearance all such clearances will be entitled for concessional rate of duty when they clear the goods within the period stipulated. - Matter remanded back.

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• 2016 (6) TMI 990
  Excisability of Spent Earth arising as a residue in the process of refining crude palm oil - Marketability of the goods - Scopeo of Section 2(d) as well as in Section 2(f) of Central Excise Act - edible refined palm oil an exempted finished product - Held that:- In view of the decision in the case of M/s Union of India and Ors vs M/s DSCL Sugar Ltd [2015 (10) TMI 566 - SUPREME COURT] and Circular dated 25-04-2016, Spent Earth arising as a residue cannot be held as excisable goods. - Decided in favor of assessee.

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• 2016 (6) TMI 989
  Rectification of mistakes - Revenue sought ROM in the order of this Tribunal dt. 11.08.2013 - apparent mistake - Held that:- the mistakes/errors stated by the Revenue, seeking rectification, cannot be carried out without undertaking a re-analysis of the facts and evidences on record and the gamut of case laws cited, which would be definitely a long drawn process and ultimately result in review of the Order. - ROM application dismissed.

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• CST, VAT & Sales Tax

• 2016 (6) TMI 988
  Best judgement assessment - inclusion of turnover relating to branch office - enhancing the declared turnover of the assessee by 10% inter alia rejecting the other claims made by the assessee - Karnataka Value Added Tax Act, 2003 (KVAT) - Held that:- In the present case, we do not see any such nexus established by the authorities to the estimation made enhancing the declared turnover by 10%. It is the categorical contention of the assessee that all the accounts relating to the branch office were declared in the account books maintained by the main office and there was no suppression of turnover. In such circumstances, no attempt is made by any of the authorities or by the Tribunal to address on these arguments/contentions advanced by the assessee. Non-furnishing of the branch certificates would not suffice to enhance the declared turnover unless supported by suppression of turnover. Demand set aside - matter remanded back - Decided in favor of assessee.

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• 2016 (6) TMI 987
  Restriction in input tax credit - deduction of input tax in excess of 2% of the tax - KAT - returns were to be discarded and the re-assessment was to be undertaken - Held that:- It is hardly required to be stated that even if the return of the assessee is discarded resulting in a process of re-assessment, the Assessing Officer further needs to examine the permissibility of the input credit and if permitted, then to what extent. While considering the said aspects, the Assessing Officer had to also examine as to whether a claim be submitted including restricted claim, if any, deserved to be accepted or not. It is a different matter that for valid reasons, he may discard such a restricted claim too. But in any case, it was obligatory on his part to record the reasons. Order set aside - Matter remanded back.

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• 2016 (6) TMI 986
  Concessional rate of tax on the interstate sale of rice/broken rice - transaction not covered by ‘C’ Forms - In respect to export, the ‘H’ Forms furnished by the dealer was not supported by other documentary evidence. - Held that:- As the impugned assessment order was passed in violation of the principles of natural justice, it must be and is, accordingly, set aside. Whether he assesses the petitioner to tax under the Central Sales Tax Act or under the Telangana Value Added Tax Act, the revisonal authority shall issue a fresh show cause notice along with the information obtained by him from G.I.S, or any other information which he seeks to rely upon. In case, he is of the view that the subject goods are intra-state sales, and not inter-state sales, it is open to him to issue a show cause notice under the Act. - Matter remanded back. In so far as ‘H’ Forms are concerned, while the assessing authority rejected the petitioner’s claim for exemption from tax, under Section 5(3) of the Act, for a turnover of 13,50,735/-, the revisional authority had denied them the benefit of exemption for an additional turnover of 4,80,000/- on the ground that the “H” Forms were not accompanied by supporting documents - . These are all matters which the revisional authority is required to consider on the basis of the document on record, or such other documents which the petitioner may choose to submit in addition thereto. - Matter remanded back. - Decided partly in favor of assessee.

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• 2016 (6) TMI 985
  Levy of penalty - bonafide belief - matter was related to interpretation of notification - levy of local entry tax on transformer oil - Held that:- Hence, the appeals are partly allowed. The order of the Revisional Authority as well as Assessing Officer so far as it relates to payment of tax, interest is concerned, the same is maintained and not interfered with. However, the order of the Additional Commissioner and the Assessing Officer for the imposition of the penalty is set aside. The Assessing Officer is directed to issue fresh demand excluding penalty portion. - Decided partly in favor of assessee.

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