TMI Tax Updates - e-Newsletter
June 3, 2014

Case Laws in this Newsletter:

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

Articles

1. Services provided to Foreign Principals for marketing their products in India qualify as an export of service

   By: Bimal jain

2. RELATED PARTIES UNDER NEW COMPANY LAW

   By: Dr. Sanjiv Agarwal

News

1. Union Government Starts Devolving Funds to the Newly Created State of Telangana; Presidential Order to the Fourteenth Finance Commission for Taking into Account the Resources Available to the Successor States and Making Recommendations with Respect to both the Successor States Sent for Notification

2. Auction for Sale (Issue) of Government Stocks

3. Index of Eight Core Industries (Base: 2004-05=100), April, 2014

4. Nirmala Sitharaman Writes to State Governments to Ease Boiler Inspections Move in Line with Government’s Keenness to Radically Improve Ease of Doing Business

5. Growing NPAs in Banks: Efficacy of Ratings Accountability & Transparency of Credit Rating Agencies (Speech delivered by Shri R. Gandhi, Deputy Governor, Reserve Bank of India at the Conference conducted by ASSOCHAM on May 31, 2014, at Le-Meridian, New Delhi)

6. RBI Reference Rate for US $ and Euro

7. Finance Minster Shri Arun Jaitley Appointed India’s Governor on the Board of Governors of the Asian Development Bank

8. PM greets the people of Telangana

Notifications

Income Tax

1. 28/2014 - dated 30-5-2014 - IT

Income-tax (6th Amendment) Rules, 2014.

Highlights / Catch Notes

Income Tax

• Assessing Officer must offer property valuation option u/s 50C(2) of the Income Tax Act to ensure fairness.

  Case-Laws - HC : Reference to valuation officer u/s 50C(2) - Even in a case where no such prayer is made by the assessee, the AO, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law - HC
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• Court Accepts 253-Day Filing Delay, Cites Sufficient Cause; Affidavit Absence Not Grounds for Dismissal.

  Case-Laws - HC : Condonation of delay – Delay of 253 days – assessee has shown sufficient cause for condonation of 253 days - contention of the assessee should not have been brushed aside only on the ground that there was no affidavit filed in support of the said addendum - HC
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• Court Rules Prior Notice Not Required for Bank Account Attachment u/s 220(6) of Income Tax Act.

  Case-Laws - HC : Whether it was proper on the part of the AO to attach bank account without serving a copy of the notice of attachment on the assessee u/s 220(6) - Held no prior notice is required - HC
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• CIT's Revision Order Deadline u/s 263 Starts from Original Assessment Date: 30.11.04.

  Case-Laws - AT : Power of the CIT for revision u/s 263 – The limitation period for passing the order u/s 263 would start running from the date of the passing of the original assessment order, i.e., 30.11.04 - AT
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• Captive Power Unit Faces Loss, No Profits Eligible for Deduction u/s 80IA of Income Tax Act.

  Case-Laws - AT : Deduction u/s 80IA of the Act - Captive power generating unit - there was a loss in the power generation undertaking of the assessee, thus, there was no eligible profit for allowing deduction u/s 80IA - AT
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• Reassessment u/s 147 Confirmed Due to Unreliable Demat Account Entries Involving "Off Market" Transactions.

  Case-Laws - AT : Reassessment u/s 147 - the entries in the Demat Account were not sacrosanct because the AO had found on investigation that those were all “off market” transactions - those companies were nothing but entry providers - additions confirmed - AT
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• Penalty Waived for Non-Deduction of TDS Due to Reasonable Cause u/ss 271C and 273C.

  Case-Laws - AT : Penalty u/s 271C – Failure to deduct TDS u/s 194C - the non-deduction of tax at source on such payments cannot be said to be without a reasonable cause within the meaning of Section 273C - penalty waived - AT
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Service Tax

• Cricket Tournament Organized Independently; No Evidence of Co-Sponsor Influence; Demand Set Aside by Authorities.

  Case-Laws - AT : Event management service - assessee on their own are organizing the cricket tournament - there is no evidence on record to show that the respondents organized the tournaments at the request of the co-sponsors or franchisees- demand set aside - AT
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• Tax Credit Demand Unjustified: Appellants Not Initially Required to Pay, Credit Taken for Non-Payable Amount.

  Case-Laws - AT : CENVAT Credit - Since tax was not, in the first instance, payable and the appellants merely have taken credit of what was not payable by them, the impugned demand cannot be justified - AT
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Central Excise

• Cenvat Credit Transfer Allowed: De-bonded 100% EOU Can Transfer Unutilized Credit to DTA Unit.

  Case-Laws - AT : Cenvat credit lying unutilized in the accounts of de-bonded 100% EOU is transferred to their DTA unit - prima facie transfer of cenvat credit available in EOU account to the DTA unit on debonding of EOU is permissible. - AT
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• Court Rules Amendments Apply to Pending Rebate Claims for Area-Based Exemptions and Refunds.

  Case-Laws - HC : Area based exemption - Refund - if the petitioner's rebate claims were pending either before the adjudicating authority or the appellate authority or the revisional authority, when such amendments were introduced, such amendments had to be applied to such pending proceedings. - HC
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• Court Rules Appellant Not Liable for Duty on Semi-Finished Goods; Remission Decision Deemed Ineffective.

  Case-Laws - AT : Remission of duty - without going into the technical issue is as to whether the remission is required in semi-finished goods are not, appellant is not liable to pay any duty, the rejection or acceptance of the remission application is ineffective - AT
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Case Laws:

• Income Tax

• 2014 (6) TMI 16
  Deletion of penalty u/s 271(1)(c) of the Act - Interest on Sugar Development Fund – Held that:- The absence of a reference to the initiation of proceedings u/s 271(1)(c) is not an inadvertent omission since it is clear that in respect of several other heads, where the AO did consider it appropriate to initiate penalty proceedings, he made an observation to that effect - the AO issued a direction for initiating penalty notice u/s 271(1)(c) "as discussed above" - The expression "as discussed above" is material because it refers to those heads in respect of which a specific direction was issued by him for initiating steps u/s 271(1)(c) – Relying upon MAK Data P. Limited Vs. Commissioner of Income Tax [2013 (11) TMI 14 - SUPREME COURT] - the AO has to satisfy himself whether penalty proceedings should be initiated or not during the course of assessment proceedings and he is not required to record his satisfaction in a particular manner or reduce it into writing - there is no direction whatsoever by the AO in respect of the specific head of interest on the SDF loan, on which the penalty was deleted by the Tribunal - The omission in the case of the SDF loan stands in sharp contrast to those items where the AO has specifically directed the initiation of penalty proceedings u/s 271(1)(c) – thus, the Tribunal was justified in deleting the penalty u/s 271(1)(c) in respect of the SDF loan – no substantial question of law arises for consideration – Decided against Revenue.

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• 2014 (6) TMI 15
  Revision u/s 263 of the Act - Addition u/s 68 of the Act as business income - Whether in the absence of any satisfactory explanation regarding the source of the creditor, can it be said that the credit is not a business income – Held that:- The AO has considered the entire issue and found that the unexplained cash credit is to be treated as income u/s 68 - This is not a case where the decision of the AO can be treated as erroneous - If two views are possible, the AO having adopted one view, it cannot be said that such an approach is erroneous – Relying upon Lakhmichand Baijnath Versus Commissioner Of Income-Tax, West Bengal [1958 (11) TMI 3 - SUPREME Court] - even if the explanation given by the assessee, as to how the amounts came to be received, is rejected as untenable, the credits were to be treated as business receipts which are chargeable - When such a view is possible, there was no reason for the Commissioner to have invoked Section 263 of the Act to arrive at a different finding. Setting off of brought forward business loss – Held that:- The Assessing Officer passed an order giving effect to order u/s 263 of the Act - the revenue has preferred an appeal before the Tribunal which came to be dismissed, against which the appeal is filed - the Administrative Commissioner could not have exercised jurisdiction to invoke Section 263 of the Act, the assessment order made pursuant to the order is rightly rejected by the appellate authorities and the Tribunal – Decided against Revenue.

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• 2014 (6) TMI 14
  Computation of capital gain - FMV u/s 55(3) - fair market value of the assets as on 1.4.1981 – assessee acquired the property by succession from previous owner – No cost of acquisition of acquired land – Held that:- Following The Commissioner of Income Tax, Patiala Versus Raja Malwinder Singh, Patiala [2011 (1) TMI 775 - PUNAJB AND HARYANA HIGH COURT] section 55(3) statutorily prescribes the cost to be equal to the market value on the date of acquisition - This being the position, capital gain is not excluded even on the plea that value of the asset in respect of which capital gain is to be charged was incapable of being ascertained –section 55(3) provides for a situation where value of the asset acquired could not be ascertained - If market value can be ascertained, it has to be taken to be equal thereto and if the value cannot be ascertained, it has to be equal to market value on a specified date at the option of the assessee - It is not the case of the assessee that land had no market value at all on the date of its acquisition - even where the cost of acquisition of capital asset cannot be ascertained but the asset has a market value, capital gain will be attracted by taking the cost of acquisition to be fair market value as on January 1, 1954, or on date statutorily specified or at the option by the assessee, the market value on the date of acquisition – no substantial question of law arises for consideration – Decided against Assessee.

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• 2014 (6) TMI 13
  Reference made to valuation officer u/s 50C(2) of the Act – Claim of exemption u/s 54EC of the Act - Sale consideration received is fully invested in bonds notified - Held that:- The valuation by the departmental valuation officer, contemplated u/s 50C, is required to avoid miscarriage of justice - The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty - The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer - There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused - Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the AO, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law – thus, the order is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 12
  Rejection of application for condonation of delay – Delay of 253 days – Held that:- Shaikh Ahmad, who was the senior partner of the firm was looking after the accounts and income-tax matters of the appellant-firm and therefore the explanation offered by the appellant-firm that on account of the death of Shaikh Ahmad, senior partner on 15 November 2011, the continuing partners, who are young and inexperienced, could not apply their mind immediately for taking legal opinion and for giving suitable instructions for filing an appeal - the assessee's case is that the appellant-firm has been making loss and the appellant was required to take legal opinion on the question arising from u/s 44AF and 43B of the Act. It is true that the delay is not of few days , but at the same time the delay is not inordinate and there is nothing to doubt the bonafides of the continuing partners of the appellant-firm for the delay in filing an appeal by applying the test for interpretation on expression “sufficient cause” – the assessee has shown sufficient cause for condonation of 253 days in filing an appeal - The Tribunal did not apply the correct legal test and did not even consider the explanation offered by the assessee that the senior managing partner of the appellant-firm had died a few months before the CIT (A) passed the order adverse to the appellant-firm - the Tribunal committed substantial error of law in not considering the material on record – If the Tribunal had any doubt about the stand adopted in the addendum dated 19 June 2013, the same should not have been brushed aside only on the ground that there was no affidavit filed in support of the said addendum. - thus, the order of the Tribunal is set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 11
  Validity of attachment of bank account u/s 220(6) of the Act - Prior notice not served – Whether it was proper on the part of the AO to attach and debit a sum without serving a copy of the notice of attachment on the assessee - Held that:- The section does not postulate that before an action is set into motion, a notice is required to be served on the assessee but what is held is that if such an action is contemplated, the notice should also be served to the assessee and, therefore, this Court finds that the judgement rendered in the case of Golam Momen (2003 (4) TMI 60 - CALCUTTA High Court) depicts the correct proposition of law. - Decided against the assessee. A special fact is required to be narrated - The assessee is carrying on the business as a civil contractor and have purchased a flat on a hire purchase basis – assessee contended that it would be an unjust hardship on the part of his client if the amount which was deposited in the bank account for the purpose of meeting out the liability under the order of the Supreme Court is allowed to continue under the order of attachment issued by the department - The parties are unison on the fact that out of the total demand a sum of Rs.1 lac have already been paid by the petitioner - While considering the unjust hardship which may be caused to the assessee, the Court shall also bear in mind the interest of the revenue as well - the last date for making the instalment is due on 5th March 2014 the Court to mitigate the situation and to render justice between the parties, directed the assessee to pay a further sum of Rs.1 lac - For such limited purposes, the bank shall allow the assessee to operate the bank account, under attachment – Decided partly in favour of Assessee.

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• 2014 (6) TMI 10
  Deletion of addition by adoption of FMV – fair market value of land as on 01.04.1981 - Held that:- CIT(A) rightly was of the view that the circle rate of the land in the area was Rs.125 to Rs.200/- per sq yard for new location and Rs.175to Rs.275/- per sq yard for old location – the AO did not accept the circle rate on the ground that the order of the ADM(Finance) furnished by the assessee is without signature and the present incumbent of that office has refused to provide a certified copy of the notification - the assessee could get the notification of circle rate under the Right to Information Act - the circle rate of Meerut was Rs. 125 to 200/- per sq yard for new location and Rs. 175 to Rs.275/- per sq yard for old location - the assessee has adopted rate of Rs.135/- per sq yard - a copy of notification was already produced by the assessee before the AO who refused to accept it because it was not signed by ADM(Finance) - the assessee has obtained the certified copy of the notification under the Right to Information Act - Considering the circle rate fixed by ADM (Finance) for the purpose of levy of stamp duty on sale of land in that area, the fair market value of land adopted by CIT(A) at Rs.135/- per sq. yard cannot be said to be excessive or unreasonable – thus, there is no justification to interfere with the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 9
  Entitlement for deduction of foreign traveling expenses – Held that:- The assessee has contended that the amount pertained to local taxi hiring charges, snacks, newspapers and magazines and other miscellaneous expenses which assessee accepts is not in a position to support by vouchers - In the peculiar facts and circumstances considering where the business purpose has been accepted by the Revenue in the assessment order itself – the AO is directed to allow necessary relief to the assessee by way of estimation after the assessee provides some breakup of the expenses claimed - this is a fit case where estimation has to be resorted to – thus, the matter is remitted back to the AO for adjudication – Decided in favour of Assessee. Entitlement for deduction of professional fees – Held that:- The claim of payments to Mr. Sagnik Goswami is a recurring issue and in the circumstances it is considered appropriate to restore the issue back to the file of the AO to take into consideration the contract and agreement, copy placed, showing that Mr. Sagnik Goswami has been offered the appointment as a consultant to the assessee - The document is relevant and crucial and since this is a recurring issue, it should be taken into consideration before a view is taken – thus, the matter is remitted back to the AO for adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 8
  Rejection of books of accounts - Nature of assessee – Professional or contractor – Held that:- Income of the assessee has been estimated in a very arbitrary manner - There is nothing placed on record to justify the estimate of income at 60% of the gross receipts of the assessee - when and if estimate has to be arrived at then the estimate necessarily has to be an honest estimate which may be based either on past accepted history of the assessee or on a comparison made with identically situated persons engaged in similar activity - In the absence of relying on relevant material the action of department is open to criticism on the count of being arbitrary and capricious – for the rejection of books of accounts CIT(A) held that the vouchers are self-vouched as such not reliable as opposed to the AO’s finding that supporting vouchers have not been produced - In the face of the contradiction in the orders available on record and considering the rival stands, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 7
  Power of the CIT for revision u/s 263 – Period of limitation u/s 153A - Validity of order of recalculation of deduction u/s 80IB and 80HHC of the Act – whereas the issue of deduction u/s 80HHC was the subject matter of proceedings upto the stage of the Hon'ble High Court, that of deduction u/s 80IB was contested upto before the Tribunal. The issue is as to whether in such a circumstance, it was within the ambit of the powers of the Id. ClT to invoke the provisions of Section 263 of the Act to revise the assessment order in respect of the issue of deduction u/s 80HHC and 80IB. Held that:- Following Saw Pipes Ltd. vs. Addl. CIT [2005 (4) TMI 264 - ITAT DELHI-D] - as a result of the search conducted, no incriminating material was found and so, the issues of deduction u/s 80HHC and 80lB of the Act could not have been the subject matter of assessment u/s 153A of the Act – the order relates back to the assessment order dated 30.11.04, passed u/s 143 (3), and neither of the issues at hand are the subject matter of assessment in the order passed u/s 153A - once the issue of deductions u/s 80HHC and 80lB of the Act could not be the subject matter of assessment u/s 153A, obviously, the order passed u/s 153A is not revisable by invoking the provisions of Section 263. Deduction u/s 80HHC and deduction u/s 801B, have been the subject matter of appeal, as above. That being so, the assessment order dated 30.11.04, passed u/s 143 (3) of the Act, cannot, by any stretch of imagination, be said to have become irrelevant or shall abate – Relying upon CIT vs. Smt. Shaila Aggarwal [2011 (11) TMI 213 - ALLAHABAD HIGH COURT] - Section 153A does not have the effect of abatement of an appeal pending against the regular assessment – the proceedings have already terminated are not allowable for abatement unless the statute expressly provides for it. The limitation period for passing the order u/s 263 would start running from the date of the passing of the original assessment order, i.e., 30.11.04 - That being so, the limitation expired on 31.03.07, whereas the notice u/s 263 itself was issued on 24.01.12 – Decided in favour of Assessee.

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• 2014 (6) TMI 6
  Deletion of Royalty expenses – Held that:- Following M/s Hero MotoCorp Limited Versus Additional Commissioner of Income tax [2013 (9) TMI 796 - ITAT DELHI] - The running royalty was calculated as a percentage of sales - The lump sum payment was treated as capital expenditure by the assessee company and the running royalty was treated as revenue expenditure - The assessee made lump sum payment of $5,00,000 for the technical assistance for construction of plant and paid a running royalty as a percentage of sales in respect of technical assistance for manufacture, assembly and service of the motorcycles – thus, the order of the CIT(A) is upheld – Decided against Revenue. Deletion of model fee – Fee paid for obtaining technical know-how – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee’s expenditure towards TGF/model fee is fully eligible to be treated as revenue expenditure and even if it is assumed that there is any shred of doubt, the rule of consistency does help assessee’s case and it will not be desirable that assessee be subjected to a new regime of opinion without analysis of peculiar facts - The model fee expenditure is to be treated as revenue expenditure – Decided against Revenue. Addition of software expenses u/s 37(1) of the Act – Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that the application software, which were used in day to day operation and conduct of assessee’s business - they do not provide any enduring benefit to the assessee - The assessee only had the license to use the software and the proprietary, intellectual rights contained in the software continued to vest with the vendor i.e. licensor of the software - thus, the order of the CIT(A) is upheld – Decided against Revenue. Transfer pricing adjustment - Difference in arm’s length price in international transactions of purchase of spare parts – Held that:- Following M/s Hero MotoCorp Limited Versus Additional Commissioner of Income tax [2013 (9) TMI 796 - ITAT DELHI] - for determining the ALP of purchase of the spare parts/ components, CUP method would be most appropriate method - the selection of CUP method by the TPO - while applying the CUP method, it is to be ascertained whether similar goods were available indigenously - no specific opportunity was allowed to produce such evidence – thus, the matter is remitted back to the AO to allow adequate opportunity to the assessee to produce evidence in support of its contention that the spare parts were purchased from the AE only when the same were not available indigenously – Decided partly in favour of Revenue. Denial of benefit of deduction u/s 80HHC of the Act – Custom duty benefit under DEPB Scheme and other claims – Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that assessee contended that Hon’ble Supreme Court has transferred a large number of writ petitions filed in various High Court’s, challenging the amendment carried out in the 3rd and 4th provision to section 80HHC, vide amendment of taxation law (2nd amendment) Act, 2005 – the benefit of the decisions of the High Courts are not available to the Revenue because CIT(A) has decided the appeal of assessee on 29.11.2010 – thus, the matter is remitted back to the AO for verification and re-adjudication – Decided in favour of Assessee. Treatment of interest income - Income from other sources or not – Exclusion of the interest income for computing deduction u/s 80HHC of the Act – Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that net income has to be excluded under Clause (baa) of the explanation to Section 80HHC - Clause (baa) of the explanation to Section 80HHC envisages two-step process in computing profit derived from export. In the first step assessing officer is required to apply section 28 to 44 in order to compute the profits and gains of business or profession – thus, the matte is remitted back to the AO for adjudication – Decided in favour of Assessee. Disallowance of deduction u/s 80IA of the Act - Captive power generating unit – Held that:- Following M/s Hero MotoCorp Limited Versus Additional Commissioner of Income tax [2013 (9) TMI 796 - ITAT DELHI] - where the goods or services held for the purposes of eligible business are transferred to another business, carried on by the assessee, then for the purpose of deduction, the profits and gains of such eligible business shall be computed as it transfer had been made at the market value of such goods or services as on date - there was a loss in the power generation undertaking of the assessee, thus, there was no eligible profit for allowing deduction u/s 80IA – Decided against Assessee. Levy of interest u/s 234D of the Act – Held that:- Explanation (2) to section 234D of the act has been clearly stated that the provision of the section shall also apply to an AYs before 1st June 2003 if the assessment for such year commences before 1st June 2003, and if the proceedings in respect of such assessment year is completed after the date - assessment was completed only on 28.02.2006 – thus, the provision of section 234D would apply – thus, the order of the CIT(A) is upheld – Decided against Assessee.

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• 2014 (6) TMI 5
  Interest short granted - Entitlement of interest on the amount of interest due u/s 244A of the Act – Held that:- Following Supreme Court decision in CIT v/s Gujarat Fluoro Chemicals, [2013 (10) TMI 117 - SUPREME COURT] - only interest provided under the statute which can alone be claimed by the assessee, and not any other interest on statutory interest - the provisions of section 244A only provides for interest on refund under various contingencies, and only the interest as provided in the statute can be claimed by the assessee and no other interest on such interest, which has been to be computed u/s 244A - the order of the CIT(A) is set aside and the matter is remitted back to the AO for computation of interest which is allowable u/s 244A – Decided in favour of Aseessee.

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• 2014 (6) TMI 4
  Disallowance made u/s 14A r.w. Rule 8D(2)(ii) of the Act – Held that:- Following Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] - rule 8D is applicable from the AY 2008-09 - From the assessee’s balance sheet, it can be seen that the Shareholders’ funds stand against Investment in shares - the amount invested in such securities is far in excess of the shareholders’ funds - CIT(A) was not justified in sustaining disallowance under Rule 8D(2)(ii) because the Investment in securities is quite less than the shareholders’ funds - the total expenses incurred by the assessee are much more than the disallowance and the incurring of expenses for earning exempt income is very much there - the disallowance as per the mandate of rule 8D(2)(iii) is held to have been rightly made and confirmed – Decided partly in favour of Assessee. Deletion of disallowance u/s 40(a)(ia) of the Act – Held that:- The ACIT authorized the assessee to make payment to M/s Vikson Finance & Investment Pvt. Ltd. without deduction tax at source only during the period 23.1.2008 to 31.3.2008 - The assessee was regularly deducting tax at source from brokerage payment up to 30.11.2007 - How the assessee presumed for not deducting tax at source for the period 1.12.2007 to 22.1.2008 is not understandable - there can be no question of claiming expense in first year and making disallowance in the subsequent year, if there is failure to deduct tax at source as per the relevant provisions - there is no reference to section 194H in the assessment order and further in the absence of any finding on this issue by the CIT(A) – the matter is remitted back to the CIT(A) for adjudication – Decided in favour of Revenue.

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• 2014 (6) TMI 3
  Nature of piece of land sold - Difference in opinion - Held that:- The majority was of the view that the piece of land sold is not a ‘capital asset’ - Decided in favour of Assessee.

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• 2014 (6) TMI 2
  Reassessment u/s 147 - fraudulent transactions in shares – Full and true disclosure - Held that:- The information which was received after the search operation was new information which was not revealed by the assessee and that information came to the notice of the AO consequently after the search was conducted - there was no belief of the AO - the reopening was held as not sustainable in the eyes of law - once, the reason recorded were assigned by the AO then it is wrong to say that he has not applied his mind, there was a proper application of mind by the AO - The AO has given copy of the “reasons for reopening” to the assessee which was duly signed - although the notice was issued after the expiry of four years but it was issued within six year- This fact has not been controverted by the assessee - the time limit for notice as prescribed u/s 149 of IT Act was not in controversy because the amount which has escaped the assessment had exceeded Rs.1 lac – thus, there was no force on the ground of the assessee challenging the reopening of the assessment – Decided against Assessee. Addition made – Sale and purchase of scrips – Held that:- The purchase as well as the sale transactions of the scrips was not genuine - The reason for taking this view is that the purchase rate had not tallied with the rate as per BSE website and that the purchases have also been made in cash - only paper transactions have been made because there was no evidence of physical delivery of the shares - The AO was right in asking the details of the dividend if any received during the holding period - But no such information was provided at any stage of proceeding. Even, the entries in the Demat Account were not sacrosanct because the AO had found on investigation that those were all “off market” transactions - those companies were nothing but entry providers - it was proved beyond doubt that Mahasagar Group was engaged in the business of issuance of fraudulent bills – thus, the order of the CIT(A) is upheld – Decided against Assessee.

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• 2014 (6) TMI 1
  Penalty u/s 271C of the Act – Failure to deduct TDS u/s 194C of the Act – Payment made to broadcasters of different TV channels on account of air time charges – Held that:- Following ORTEL COMMUNICATIONS LTD Versus ASSTT COMMISSIONER OF INCOME TAX (TDS) [2013 (6) TMI 373 - ITAT CUTTACK] - levy of penalty u/s 271C is not automatic - Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision the same was without a reasonable cause - The initial burden is on the assessee to show that there existed reasonable cause which was the reason Tor the failure referred to in the concerned provision - Thereafter the officer dealing with the matter has to consider the explanation offered by the assessee or the person, as the case may be. An honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do - The assessee has given explanation before the authorities that the due to circumstances prevailing and under bonafide belief that tax was not required to be deducted at source U/S.194C on the payments - the non-deduction of tax at source on such payments cannot be said to be without a reasonable cause within the meaning of Section 273C - the penalty levied u/s 271C is not justified and is liable to be set aside – Decided in favour of Assessee.

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• Customs

• 2014 (6) TMI 21
  Smuggling of foreign currency - Redemption fine - Travelling for Private business or Official duty - Endorsement for travellers cheques – Seizure of IC also – Reduction of Penalty - Held that:-Unless the person is travelling on official duty or to perform a duty during the course of his employment, other visits have to be considered as private visits - In the absence of any precedent judicial pronouncements to the contrary, this courts following own understanding of the private visit and other visits - Further it was also submitted that the appellants were arrested and underwent detention under COFEPOSA and suffered financially and further they have borrowed money for this purpose - Appellants wanted to purchase lathes for their own business and they were not acting as carriers and there is no indication to show that smuggling was their regular occupation, a sympathetic view as regards penalty is called for and further in view of the precedent decisions cited by the learned counsel, the absolute confiscation of foreign currency and Indian currency in this case is not warranted . Relying upon T. Soundrarajan Vs. CC, Chennai [2007 (4) TMI 167 - CESTAT, CHENNAI] - A redemption fine of 15% in respect of S/Shri Anthony Domnick, Bheemappa Thyagarajan and Venkoba Rao would meet the ends of justice as far as foreign currency and Indian currency seized and confiscated from them is concerned - As far as Shri Raghu Gowda is concerned, since he was travelling for the second time and he had done the same earlier also and he was the one who has advised the other three to indulge in such activity and therefore he cannot be treated on par with the other three appellants for whom it was the first trip – Therefore, in his case the redemption fine should be 30% - If the penalties imposed on the appellants is reduced to 1 Lakh each for Shri Venkoba Rao 50, 000 for Shri Anthony Domnick and 3 Lakh for Shri Raghu Gowda it would meet the ends of justice - Decided partly in favour of accuseds.

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• 2014 (6) TMI 20
  Bar of Limitation - Refund of claim of CVD (Additional Customs Duty) - Concessional Duty Notification No. 7/20013-C.E., dated 1-3-2003 - Section 27 of the Customs Act, 1962 – Unchallenged assessment - Held That:- Judgment in ASSISTANT COLLR. OF CUS. Versus ANAM ELECTRICAL MANUFACTURING CO. [1997 (1) TMI 80 - SUPREME COURT OF INDIA] followed – Where refund application was filed by manufacturer/purchaser beyond the statutory time limit of Section 11B/27, such petitions must be held to be untenable in law, regardless of any direction to the contrary contained in the order in any appeal, suit or writ petition - Statutory time limit not extendable by any authority or Court in case of “illegal levy” – Relying upon Hero Cycles Ltd. Versus Union of India [2009 (6) TMI 4 - BOMBAY HIGH COURT] - It was observed that without challenging the assessment there cannot be refund claim - Assessees have not challenged the assessment at all but have filed refund claim - Refund claims have to be considered u/s 27 - Appeal has no merit – Decided against assesse.

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• 2014 (6) TMI 19
  Confiscation of goods - Redemption fine - Held that:- adjudicating authority specifically after taking into consideration the request made by the respondent to STPI for import of goods and approval given by the STPI, held that as the goods were imported after necessary approval from STPI, the appellant was under the bona fide belief that the goods are covered under the Notification No. 52/2003-Cus. In view of this finding, we find no ground to interfere with the order passed by the adjudicating authority regarding confiscation of the goods, redemption fine and penalty - Decided against Revenue.

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• Corporate Laws

• 2014 (6) TMI 18
  Winding up of company - Inability to pay debts - Respondents claims the goods supplied were defective - whether the defence raised by the respondent is bonafide or a sham defence. - Held that:- facts clearly indicate that the invoices were due and payable on 24.01.2013, 20.02.2013 and 07.03.2013 respectively. There has been no specific complaint which has been produced on record prior to this period. The letter dated 22.01.2013 is only in response to the demands being made by the petitioner and even this letter does not specify that the amount claimed by the respondent is disputed or not payable. The complaints which have been adverted to by the respondent are also generic in nature and it is material to note that all the complaints are in the month of April, 2013 i.e. much after the payments of the invoices had become due and payable. It is also material to note that one of the customers who is alleged to have complained is also a party related to the respondent. The debit note on the basis of which the respondent claims that amounts are not payable to the petitioner is dated 08.05.2013 which is more than two months after the last invoice became due and payable and after the respondent had received the notice of the present petition. Although, the respondent has filed photograph of goods supplied which is contended to be defective, there is no communication on record which indicates that the respondent ever attempted to return the said goods - It is also material to note that the notice issued under Section 434 (1) (a) of the Act had elicited no response and even at that stage, the respondent had not crystallized any issue - defence raised by the respondent is spurious and created for the purposes of resisting the present petition - However time is granted to Respondent to pay off debts before publication of winding up notice - Decided favour of Appellants.

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• Service Tax

• 2014 (6) TMI 34
  Club or Association service - principle of mutuality - Held that:- In light of the judgment of Jharkhand High Court in Ranchi Club Ltd. vs. CCE & ST, Ranchi Zone reported in [2012 (6) TMI 636 - Jharkhand High Court] and of the Gujarat High Court in Sports Club of Gujarat Ltd. vs. Union of India reported in [2013 (7) TMI 510 - GUJARAT HIGH COURT], both of which had followed the judgment of the Supreme Court in Joint Commercial Tax Officer, Harbour Division, II - Madras vs. The Young Men’s Indian Association reported in [1970 (2) TMI 87 - SUPREME COURT OF INDIA], the position is no longer res-integra. The services provided by a club to its members is covered by the principle of mutuality and would not amount of rendition of service by one person to another and therefore would not amount to a taxable service - Decided in favour of assessee.

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• 2014 (6) TMI 33
  CENVAT Credit - GTA Service - Place of removal - Whether the appellant, could utilize CENVAT Credit for discharging its service tax liability on GTA service received in respect of inward transportation of inputs for the period from October 2005 to September 2006 beyond place of removal - Held that:- By the amendment made with effect from 1st April, 2008 substituting the word ‘from’ by the word ‘upto’ all that has been done is to clarify the issue. Neither the services rendered to the customer for the purpose of delivering the goods at the destination was covered by the definition of input service prior to 1st April, 2008, nor is the same covered after 1st April, 2008. If the definition provided in Section 2(l)(ii) is read a whole, if would appear that outward transportation charges or taxes paid in regard thereto is claimable only with regard to those transports which were made from one place of removal to another place of removal. Therefore, it is held that the CENVAT Credit of service tax paid by the appellant on GTA service received in respect outward transportation of finished goods beyond the place of removal is not admissible to them. The lower authorities have thus correctly disallowed the credit of Rs. 5,02,949/- along with appropriate interest. On the aspect of imposition of penalties on the appellant on the second issue, I set aside the penalty of Rs. 1,00,000/- imposed upon the appellant under Rule 15(1) of the CENVAT Credit Rules, 2004 as the issue involved was one of interpretation of definition of ‘input service’ under Rule 2(l) of the CENVAT Credit Rules, 2004 and was under litigation - Commissioner of Central Excise, Kolkata-VI Vs. Vesuvious India Limited [2013 (12) TMI 1025 - CALCUTTA HIGH COURT] - Decided partly in favour of assessee.

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• 2014 (6) TMI 32
  Claim of refund of service tax on the ground that the same was not payable - service tax was paid on notional interest after audit objections - Sub licensing of premises - Receipt of interest free security - Bar of limitation - Held that:- Revenue authorities are required to look into the limitation aspect. Admittedly, the refund is to be given only in those cases where it is not required to be deposited. As such, limitation would not apply in any case of refund, which proposition would be against the law. Further, it is well settled that the Revenue authorities, including the Tribunal, being creature of statue are required to work within the four corners of the law and cannot go beyond it. As such the refund, if otherwise admissible, has to meet the barred of limitation. They have applied for the refund claim on 12.08.2009. The original adjudication authority has observed that the said letter dated 12.08.2009 is in the office records but has not accepted the same on the ground that there is no evidence of having received the said letter in the office. In my view, the above findings are self-contrary. On one hand the Asstt. Commissioner is accepting the presence of the refund claim application in the office record and on the other hand has observed that the same does not show the receipt. If the same was actually not filed by the appellant, I really fail to understand as to how the said letter travelled up to the concerned file and found its way therein. As such, I deem it fit to set aside the impugned order and remand the matter to the original adjudicating authority look into the said fact afresh and to decide the issue accordingly - Decided in favour of assessee.

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• 2014 (6) TMI 31
  Demand of service tax - event management service - Held that:- Revenue wants to charge Service Tax under the category ‘event management service’. As per the provisions of Section 65(40) of the Finance Act, event management means any service provided in relation to planning, promotion, organizing or presentation of any arts, entertainment, business, sports, marriage or any other event and includes any consultations provided in this regard. As per the provisions of Section 65(41) of the Finance Act, ‘event manager’ means any person who is engaged in providing any service in relation to event management in any manner. From the facts on record we find that there is no request by any franchisee or co-sponsors to organize the cricket tournament. The respondents on their own are organizing the cricket tournament. However, the franchisees or co-sponsors advertise their products by way of putting hoardings during the tournament - there is no evidence on record to show that the respondents organized the tournaments at the request of the co-sponsors or franchisees. Therefore it cannot be said that the respondents have provided any event management service and therefore the same would not attract any Service Tax - there is no evidence on record to show that the respondents organized the tournaments at the request of the co-sponsors or franchisees. Therefore it cannot be said that the respondents have provided any event management service - Decided against Revenue.

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• 2014 (6) TMI 30
  CENVAT Credit - Availment of facility of warehousing export goods in the USA prior to distribution of the same to the ultimate buyers. - Held that:- Since the warehouses were hired in the USA beyond the jurisdiction of the Indian authorities, no Service Tax can be levied and collected on such services rendered and received abroad. Since tax was not, in the first instance, payable and the appellants merely have taken credit of what was not payable by them, the impugned demand cannot be justified. For the same reason, there is no justification for imposition of penalty and recovery of the interest amount. As such, the impugned order is set aside - Decided in favour of assessee.

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• 2014 (6) TMI 29
  Maintainability of appeal - proof of delivery of order in original - Commissioner (Appeals) has dismissed the appeal on time-bar by observing that the same stands filed even after condonable period. - Held that:- unless the impugned documents were sent by registered post under registered AD cover. In the present case, there is nothing on record to show that the impugned order was sent under registered post. Further, the appellants by writing the letter to the Superintendent in August, 2009 have intimated to the Revenue about non-receipt of the letter - Matter remanded back - Decided in favour of assessee.

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• Central Excise

• 2014 (6) TMI 27
  CENVAT Credit - cenvat credit lying unutilized in the accounts of de-bonded 100% EOU is transferred to their DTA unit - Held that:- prima facie transfer of cenvat credit available in EOU account to the DTA unit on debonding of EOU is permissible. It is further observed that inputs and capital goods on which credit was availed by EOU were further utilized in DTA unit and therefore they are eligible for credit. Ld. advocate contended that the amount in question is still lying in the books of account and therefore there is no reason for insisting for predeposit of the amount by way of cash - Following decision of Tecumseh Products India P. Ltd. Vs CC & C.E [2011 (3) TMI 632 - CESTAT, BANGALORE] - Matter remanded back - Decided in favour of assessee.

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• 2014 (6) TMI 26
  Area based exemption - Refund of duty paid through PLA - unit located in Kutch - Benefit of exemption notification no.39/2001 dated 31.7.2001 - Retrospective amendment in law - Held that:- petitioner's rebate claims though were rejected by the Assistant Commissioner on 8.3.2006 and 8.3.2007, according to the petitioner, such orders were never communicated to the petitioner company. The respondents have not accepted this aspect. However, in the affidavit in reply, it is stated that the office of the concerned Assistant Commissioner having been shifted in the year 2008, some of the documents were not traceable. It was therefore, not possible for the department to produce the proof of the service of the orders. Petitioner was never served with such orders. It was therefore, that when the law was changed to its retrospective effect by virtue of introduction of proviso to section 18 of the Central Excise Rules and enactment of section 88 of the Finance Act, 2008, that the petitioner labouring under the impression that rebate claims were still pending adjudication before the Assistant Commissioner, wrote on 14.5.2008 and requested that in view of such amendment, the rebate claims be sanctioned. It was on this application that the Assistant Commissioner passed various orders including one produced at Annexure-C dated 23.5.2008. All rebate claims which pertained to the period of 1.3.2002 to 7.12.2006 covered under the retrospective operation of the statutory provision, were granted. Law retrospectively amended must be applied to the rebate claims of the petitioner. It is undisputed that such retrospective amendment in the statute covered all rebate claims. Therefore, if the petitioner's rebate claims were pending either before the adjudicating authority or the appellate authority or the revisional authority, when such amendments were introduced, such amendments had to be applied to such pending proceedings. Resultant effect would be that rebate claims were granted. Merely because the petitioner was prevented from preferring such further proceeding on account of the orders passed by the adjudicating authority were not communicated to the petitioner, situation cannot change. - Decided in favour of assessee.

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• 2014 (6) TMI 25
  Confiscation of Indian Currency - As per Revenue, the said currency is the sale proceeds of gutka - clandestine removal - Held that:- For confiscating the currency in terms of Section 121 of Customs Act, 1962, which stands made applicable to the Central Excise law, it has to be first concluded that the same was actually the sale proceeds of the clandestinely sold excisable goods - before confiscating the currency, the Revenue must establish that there was by sale; that the sale was of smuggled goods; that the sale was a person having knowledge reason to believe that the goods were smuggled origin; that the identity of the seller and buyer must be established by the customs authorities. If all the above ingredients of Section 121 are not established by the Revenue, the violation of Section 121 cannot be made out. The said decision stands followed in a number of subsequent decisions and it stands held that in the absence of any evidence to establish the Indian currency as sale proceeds of tainted goods, the benefit has to be extended to the appellant - onus to prove that the Indian currency in question is the sale proceeds of the clandestinely removed goods is upon the Revenue, which is required to be discharged by production of affirmative, tangible and positive evidences. Apart from the fact of recovery of Indian currency and the retracted statement of the appellant, there is virtually no evidences to indicate that the said currency is the sale proceeds of clandestinely removed goods, which the appellant had, in any case stopped manufacturing with effect from November, 2006 - Decided in favour of assessee.

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• 2014 (6) TMI 24
  Remission of duty - whether the appellant is entitled to the remission of duty in terms of the provision of Rule 21 of the Central Excise rules, in respect of the semi-finished goods/work in process, destroyed in fire accident - Held that:- Appellant is not liable to pay duty on the semi-finished goods. As such, there is no requirement to file the remission application. No duty can be confirmed against them in respect of the said semi-finished goods. In fact, I find that vide impugned order of Commissioner (Appeals) has not confirmed any duty against the assessee and has simplicitor rejected the remission application, which is not going to adversely effect the appellants - Accordingly, without going into the technical issue is as to whether the remission is required in semi-finished goods are not, appellant is not liable to pay any duty, the rejection or acceptance of the remission application is ineffective - Decided in favour of assessee.

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• 2014 (6) TMI 23
  Benefit of Notification No.30/2004-CE, dated 09.07.2004 - Unutilized CENVAT Credit - Held that:- AED is exempted by Notification No.30/2004-CE and, the case relates to 2004, there is no scope to utilize such credit by the appellant. In view of that, the decision of eligibility to avail the unutilized credit lying in Cenvat credit account as on 31.12.2004 on merit at this stage, when AED is exempted and the appellant is unable to avail credit is mere academic one - Decided In favour of assessee.

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• 2014 (6) TMI 22
  Availability of credit of service tax paid on the outdoor catering service - Held that:- Though it is a fact that number of workers was one of the criteria for the Larger Bench to hold the services as input services but to make a distinction on the basis of reasoning adopted by the Larger Bench cannot be appreciated inasmuch as it is the ratio of the law declared by the Larger Bench which is applicable and not the reasoning. Apart from above, I also find that the Larger Bench held that the outdoor catering service is an input service irrespective of the fact that a subsidised food is provided or not or whether the cost of the food is given by the worker or by the factory catering service availed - Following decision of Paramount Communication Ltd. Vs. CCE [2013 (3) TMI 38 - CESTAT NEW DELHI] - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (6) TMI 28
  Validity of Tribunal Order - Rate of Tax - Manufacture and sale of Lizol (floor cleaner), Harpic (toilet cleaner) and Mortein mosquito repellents – Classification - Entry 88 or Entry 20 to Schedule IV – Interpretation of Statute - Andhra Pradesh Value Added Tax Act, 2005 - Held That:- Judgment in Nuclear Fuel Complex v. State of Andhra Pradesh [2011 (2) TMI 1253 - Andhra Pradesh High Court] followed - In interpreting entries in a Sales Tax Act, resort should be not to the scientific and technical meaning of the terms or expressions used, but to their popular meaning i.e., the meaning attached to them by those dealing in them Indo International Industries v. CST [1981 (3) TMI 77 - SUPREME COURT OF INDIA] - Where the definition of a word has not been given, it must be constructed in its popular sense, that sense which people conversant with the subject-matter, with which the statute is dealing, would attribute to it Asian Paints India Ltd. v. CCE [1988 (3) TMI 61 - SUPREME COURT OF INDIA] - The test to such cases is : How is the product identified by the class or section of people dealing with or using the product - Relying upon Atul Glass Industries (P) Ltd. v. CCE [1986 (7) TMI 90 - SUPREME COURT OF INDIA] - It is, generally, by its functional character that a product is so identified. Relying upon BOMBAY CHEMICAL PVT. LTD. Versus COLLECTOR OF CENTRAL EXCISE, BOMBAY [1995 (4) TMI 59 - SUPREME COURT OF INDIA] - The disinfectant fluid produced by the appellant had the capability of killing any insects or pests - The test for classifying a tariff was reiterated - Each of the words insecticides, pesticides, fungicides or weedicides are understood both in the technical and common parlance as having broad meaning - Therefore, if any goods or items satisfy the test of being covered in either of the expression, then it is entitled to exemption - Since the goods produced by the appellant are capable of killing bacteria and fungi which too, is covered in the expressions ‘pesticide’ and ‘fungicide’ there appears no reason to exclude the goods from the aforesaid notification. Both SGS Laboratory, Calcutta and IICT, Hyderabad reports support the view that Harpic and Lizol are disinfectants - Applying the ratio in Bombay Chemical Pvt. Ltd. the conclusion is irresistible that Harpic and Lizol are covered in “pesticides” liable to tax at 4% - When the language of the taxing entry is plain, it is not for the Courts, to introduce words to uphold the assessment – This Court cannot read Harpic and Lizol as being included in toilet preparations to bring them under the excluded category under entry 88(b) of IV Schedule - Even if the manufacturer obtained drug licence, for manufacturing disinfectants they do not cease to be pesticides and hence fall under in entry 20. According to G.O. No. 1615, dated 31-8-2005, all the goods in entry 20 of IV Schedule are also covered under the HSN Code (heading) 3808 except three products, namely, repellents for mosquitoes, Gibberillic acid and plant growth regulators - The product “disinfectants” are in sub-heading 3808.40.00 and they are not excluded from the main “heading” – Harpic and Lizol are disinfectants capable of destroying germs and micro-organisms like Escherichia coli, Staphylococcus aureus, Enterococcus hirae, Pseudomonas aeruginosa and Candida albicans etc. - Being disinfectants they fall within the category of pesticides covered by entry 20 of IV Schedule - Even though Harpic Lizol are manufactured under drug licence issued in Form 25 issued under Rule 70 of the Drug Rules, they do not fall under entry 88, therefore, the question of these goods coming within the excluded category under entry 88(b) does not arise - Both the goods in question, therefore, are exigible to tax at 4% but not at 12.5% - The ruling of the ARA cannot be approved as affirmed by Tribunal - In all the matters, it is left open to the respective assessing officers to undertake fresh reassessment - Revision and Writ Petitions, as also miscellaneous petitions, shall stand disposed of – Decided in Favour of Assessee.

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• Indian Laws

• 2014 (6) TMI 17
  Cancellation of sale made to petitioner - Challenge to auction sale - Failure to to follow the mandatory provisions of Rules 8(5), 8(6) and 9(2) of the Security Interest (Enforcement) Rules, 2002 - Held that:- Single Judge of the High Court after holding that the sale in question was invalid, directed making of payments by respondent Nos. 1 and 2 to respondent No.3 bank with clear direction that on such payment, insofar as the bank is concerned its dues shall stand settled. Not only respondent Nos. 1 and 2 made the payment as directed which was accepted by respondent No.3 bank, insofar as respondent No.3 bank is concerned it even accepted the said judgment and did not file any appeal thereagainst. Only the appellant filed the appeal. Though the order of the learned Single Judge about the validity of the sale had been affirmed, the Division Bench interfered with the other direction of the learned Single Judge which should not have been done as bank had not challenged the order of the learned Single Judge. We are, therefore, of the opinion that in the facts of this case, once the payment is made to the appellant by respondent Nos.1 and 2 in the manner stated hereinafter, the possession of the property shall be delivered to the respondent Nos.1 and 2 with no further liability towards the bank. sale in favour of the appellants dated 18th December, 2006 and the subsequent delivery of possession to the appellants is null and void. The sale is accordingly set aside. The appellants are directed to deliver the possession of the property purchased by them under the Sale Deed dated 20th December, 2006 to Respondent Nos. 1 and 2 immediately upon receiving the entire amount as directed - Decided in favour of appellants.

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