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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter June 6, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS Levy of service tax on preferential location on purchase of flat as composite contract is not sustainable since no valuation mechanism - HC Power to Audit under Service Tax - Officers, audit party deputed by a Commissioner or the CAG cannot seek production of the documents - HC Notifications DGFT 1. 9/2015-2020 - dated 3-6-2016 - FTP Amendment in import policy condition No.2 under Exim Code 4801 of Chapter 48 of ITC (HS), 2012, Schedule – I (Import Policy) Summary: The Government of India has amended the import policy condition No.2 under Exim Code 4801 of Chapter 48 in the ITC (HS), 2012, Schedule-I. The revised policy allows importation of items under Exim Code 4801 without a license, provided that the importer holds a 'Registration Certificate' from the Registrar of Newspapers for India (RNI). Importers must submit necessary documentary evidence authenticated by RNI and an annual audited statement of newsprint consumption and importation to RNI by April 30 each year. These requirements are to be fulfilled at the time of import, and the guidelines will be updated by the Ministry of Information and Broadcasting. Circulars / Instructions / Orders DGFT 1. 16/2015-2020 - dated 3-6-2016 Enlistment under Appendix 2E – Agencies Authorized to issue Certificate of Origin - (Non-Preferential) Summary: Under the authority of the Foreign Trade Policy 2015-2020, the Director General of Foreign Trade has authorized three agencies to issue Non-Preferential Certificates of Origin. These agencies include a plastics manufacturers' association in Maharashtra, the Export Inspection Council in Chennai (Andhra Pradesh), and an engineering export promotion council in Kolkata (West Bengal). Their inclusion is documented in Appendix 2E of the policy, expanding the list of authorized entities for this purpose. This public notice formalizes their roles in facilitating trade documentation. Highlights / Catch Notes Income Tax Commissioner Approves New Deduction Claim u/s 80G; Goetze Ruling Restriction Not Applicable to Appeals. Case-Laws - AT : Fresh claim of deduction u/s.80G in respect of donations allowed by CIT(A) - the restriction laid down in the decision in the case of Goetze (India) Ltd., is applicable only to making claim before AO and not before the appellate authorities under the Act. - Deduction allowed - AT Visit to Get Source Tax Authority Disallows 10% of Company Expenses Due to Lack of Documentation and Bills for General Costs. Case-Laws - AT : Addition of general expenses being 10% of the general expenses - failure of the assessee company to produce the documentary evidences, bills etc. - the disallowance of 10% of general expenses is quite reasonable - AT Visit to Get Source Payment to Assessee's Retired Engineer Husband for Professional Help Deemed Reasonable, Not Bogus by Authorities. Case-Laws - AT : Payment to assessee's husband towards professional assistance given by him - assessee refers patient to various hospitals and generates the income - payment of professional charges to the retired engineer husbad cannot be held as unreasonable or bogus. - AT Visit to Get Source Land Reverts to Agricultural Use After JDA Cancellation, Exempt from Capital Gains Tax on Asset Transfer. Case-Laws - AT : Capital gain - transfer of capital asset - change of the physical characteristics of the land from agricultural to non-agricultural - JDA was finally cancelled - undisputedly agricultural activities are being undertaken on the disputed land till date - Not liable to capital gain tax - AT Visit to Get Source Roaming and inter-connectivity charges not deemed technical service fees u/s 194J due to no human intervention. Case-Laws - AT : TDS - roaming / inter–connectivity charges paid by the assessee to other telecom networks not being in the nature of fees for technical services will not attract the provisions of section 194J as there is no human intervention in providing the roaming services. - AT Visit to Get Source AIR Data Discrepancy Alone Insufficient for Income Addition Without Additional Evidence of Undeclared Income. Case-Laws - AT : Addition made on account of mismatch of AIR data - only on the basis of AIR information no addition should be made-specially when there is no other material with the AO to demonstrate that the assessee had received income more than what was declared by it - AT Visit to Get Source Audit Objection Insufficient for Reopening Assessment: AO Needs Independent Satisfaction u/ss 147/148, Assessment Under 143(3. Case-Laws - AT : Audit objection cannot be considered as tangible material for the AO to reopen u/s 147/148 of the Act concluded assessment u/s 143(3) of the Act, unless the AO records his own satisfaction that income has escaped assessment - AT Visit to Get Source Court Orders Re-evaluation of Payment to Global Vipassana Foundation: Donation or Commercial Expenditure? AO to Conduct De-novo Assessment. Case-Laws - AT : Disallowance of payment made by the appellant to Global Vipassana Foundation - commercial expediency - in the nature of donation or expenditure - AO to determine the issue on merits, de-novo - AT Visit to Get Source Director's Personal Cash Book Records Jewelry Purchases; No Separate Company Account Additions Allowed. Case-Laws - AT : Unexplained purchase of diamond pins, jewellery and jewellery sets - the jewellery was found recorded in the personal cash book of Director, and therefore, no separate addition can be made in the hands of the company. - AT Visit to Get Source Service Tax Cenvat Credit Reversal Before Adjudication Equals Non-Availment; Abatement Notification Stands Valid. Case-Laws - AT : Availing Cenvat Credit while availing benefit of abatement notification - the reversal made before the adjudication order is as good as non- availment of credit - AT Visit to Get Source Service Tax on Preferential Location Charges in Housing Projects Challenged: Section 65(101)(zzzh) Lacks Valuation Mechanism. Case-Laws - HC : Legislative competence for Levy of service tax on preferential location charges while Purchasing a FLAT in the multi-storey group housing project - composite contract - Demand U/s 65(101)(zzzh) is not sustainable in the absence of valuation mechanism since no service can be levied on undivided share of land - HC Visit to Get Source High Court declares Rule 5A(2) of Service Tax Rules unconstitutional; limits authority of Service Tax Department officers. Case-Laws - HC : Power to Audit under Service Tax - Scope of Rule 5A(2) of service tax Rules, 1994 r.w.s. 94(1) and 94(2)(k) - officers of the Service Tax Department, the audit party deputed by a Commissioner or the CAG cannot seek production of the documents mentioned therein on demand - The provisions are unconstitutional - HC Visit to Get Source Central Excise Appeal Delay of 235 Days Excused Due to Corporate Miscommunication and Key Employee Departure in November 2014. Case-Laws - AT : Condonation of delay - 235 days - applicant was totally unaware about the non-filing of the appeal as the matter was being looked after by the Corporate Office at Mumbai and also the concerned person dealing with the Excise matter left the organization in November 2014 - delay condoned - AT Visit to Get Source VAT Court Orders VAT Department to Refund Tax Credit with Interest by May 31, 2016, After Repeated Rejections. Case-Laws - HC : Seeking refund of outstanding amount of tax credit - Refund application was already rejected by the VAT department many a times even after the directions provided by the Court for refund of tax credit - Refund to be given with interest on or before 31st May 2016 - HC Visit to Get Source Case Laws: Income Tax 2016 (6) TMI 182 Disallowance of expenses incurred as maintenance of colonies - revenue or capital expenditure - Held that:- The assessee's business was to provide housing to the general public in the State of Haryana after development of housing colonies. The maintenance work was to be carried out by the respective municipal committees or local authorities. With regard to particular colonies at South Vihar and Narnaul, as per decision of the Board, the assessee had to carry out the maintenance work like upgradation of roads, park, street light, boundary wall etc. The enduring benefit did not accrue to the appellant but to the allottee. Further, the assets did not belong to the assessee. Thus, the expenditure incurred by the assessee on maintenance work was held to be revenue in nature and, therefore, the judgment relied upon by the learned counsel for the appellantrevenue in Arvind Mills Limited's case (1992 (7) TMI 2 - SUPREME Court ) is distinguishable - Decided in favour of assessee. 2016 (6) TMI 181 Disallowance u/s 14A - Held that:- With regard to disallowance under rule 8D(2)(iii) of the Rules is concerned, we find that neither the AO nor the CIT(A) have disputed the correctness of the claim of disallowance as computed by the Assessee but have proceeded to compute the disallowance by applying Rule 8D(2)(iii) of the Rules without objectively examining the claim made by the Assessee. The AO without doing so, disregarded the claim of the assessee and in invoked Rule 8D of the IT Rules without recording the satisfaction as required by Sec.14A(2) of the Act. The law is well settled by now that with regard to expenditure in relation to exempt income, AO has to indicate cogent reasons as to why the claim of the Assessee is being disregarded. We hold that the action of the AO in directly embarking on Rule 8D(2) of the rules was not proper and hence the disallowance under rule 8D(2)(iii) of the Rules is also directed to be disallowed. The net result would be that the disallowance under Sec.14A of the Act as made by the Assessee before the AO is directed to be accepted Disallowance u/s 40 (a)(ia) - non-furnishing of challans for the deposits of TDS - Held that:- The limited prayer of the ld. Counsel for the assessee before us was to remand the matter to the AO to enable the Assessee to produce the balance challans to enable the assessee to claim deduction on actual payment basis. We are of the view that the request made on behalf of the assessee is reasonable and accordingly we set aside this issue to the file of AO for fresh consideration. The assessee is at liberty to file necessary challans to show that actual payment were made during the previous year and to claim deduction on such sum. Applicability of MAT provisions - Held that:- The Hon'ble ITAT, Mumbai in Maharashtra State Electricity Board vs JCIT (2001 (8) TMI 310 - ITAT MUMBAI) took the view that provisions of Sec.115JB of the Act are not applicable to electricity generation companies governed by the provisions of Electricity Act. The Hon'ble Kerala High Court in Kerala State Electricity Board vs Dy. CIT (2010 (11) TMI 127 - Kerala High Court ), has also taken the same view. Addition on account of amortisation of premium paid for purchase of securities - CIT(A) deleted the addition - Held that:- The assessee and categorized as HTM were purchased at a price which was higher than its redeemable value. The difference between the actual cost of these investments and the face value of such investments were spread over to the life of the investments and proportionate deduction was claimed by the assessee under the head "Amortization of HTM". The further claim of the Assessee was that all the securities held by the Assessee were held as "stock-in- trade" by the Assessee. The face value of the securities held in HTM category is alone shown in the books as cost and the premium is not claimed as cost of the securities, as the premium is claimed by way of amortization of premium over the life of the security. The revenue can have grievance only where the cost price of the investment as recorded in the investment trading account includes premium paid at the time of acquisition and also the same premium is separately claimed in the profit and loss account again as a deduction. The plea of the Assessee that there is no such double claim for same cost has been found to correct by the CIT(A). The order of the AO is silent on this aspect. The Assessing Officer disallowed the claim of the assessee on the assumption that full purchase consideration of all the securities was included in the said investment trading account and amortization amount is charged separately in the Profit and Loss Account again and he therefore held that the claim of the Assessee cannot be allowed in computation of total income. This factual assumption of the AO is wrong as found by the CIT(A) which has not been disputed before us. - Decided against revenue Fresh claim of deduction u/s.80G in respect of donations allowed by CIT(A)- Held that:- CIT(A) held that the deduction had been claimed by the Assessee at 100% not u/s.80G of the Act but as other expenses in the profit and loss account and therefore the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (2006 (3) TMI 75 - SUPREME Court ) will not apply to the case of the Assessee. The CIT(A) found that the deduction claimed was otherwise allowable and to the extent it was allowable, the AO was directed to allow the claim for deduction. In the grounds of appeal, the revenue does not dispute the fact that the deduction claimed by the Assessee is allowable as found by the CIT(A). We are of the view that the CIT(A) as first appellate authority is entitled to allow the deduction claimed and the restriction laid down in the decision in the case of Goetze (India) Ltd., is applicable only to making claim before AO and not before the appellate authorities under the Act.- Decided against revenue Provision of section 115JB of the Act are not applicable in the nationalised bank - Decided against revenue Deduction in respect of club membership fees - Held that:- CIT(A) was justified in deleting the addition made by the AO and allowing the expenses incurred by the Assessee as revenue expenditure as the membership is a corporate membership and not in the name of any individual and that the membership is to be allowed till the persons are in job and it will shift in the name of next executive on the superannuation of the earlier executive and was paid for renewal of membership for five years and has not been paid as initial capital membership fee.- Decided against revenue 2016 (6) TMI 180 Eligibility of deduction u/s, 80IB(10) - whether the assessee has violated the condition that the housing units shall not exceed 1000 sq.ft area by construction of flats of more than the area prescribed? - Held that:- The assessee firm has sold 10 flats whereby there is a non-compliance of provisions of clause (e) & (f) of Section 80IB (10) of the Act , which newly introduces clauses (e) & (f) of Section 80IB (10) of the Act are duly applicable for the assessment year 2010-11 under consideration in this appeal, whereby deduction u/s 80IB(10) of the Act has been been disallowed by the learned CIT(A) with respect to ten flats sold infringing the above clauses. The assessee firm, however, with respect to four flats is entitled for proportionate deduction u/s 80IB(10) of the Act in respect of four flats sold to various persons , other than the persons specified in clauses (e) and (f) of Section 80IB(10) and where area of each flat sold is less than 1000 square feet, in accordance with the terms indicated by the Tribunal in its orders [2014 (10) TMI 259 - ITAT MUMBAI] as issue is squarely covered with the ratio of law laid down by the Tribunal in afore-stated decision(s) which we respectfully follow with respect to four flats as per terms indicated above , while deductions u/s 80IB(10) of the Act is disallowed with respect to ten flats as there is non-compliance of provisions of Section 80(IB) of the Act clauses (e) and (f) as applicable to the instant assessment year 2010-11. 2016 (6) TMI 179 Levy of penalty u/s 271(1)(c) - assessee bring rental income as income from business as against income from house property - Held that:- As the assessee company has not furnished inaccurate particulars of income making it liable for penalty u/s 271(1)(c) of the Act as the assessee company duly declared all the income earned on rental income albeit under the head ‘Income from business or profession’ although the claim of the assessee company did not found favour with the Revenue , will not make the assessee company exigible to penalty u/s 271(1)(c) of the Act as the explanation offered by the assessee company is bonafide and a plausible explanation albeit not accepted by the Revenue , keeping in view the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts Private Limited (2010 (3) TMI 80 - SUPREME COURT ) and more so with the recent decision of Hon’ble Supreme Court in the case of Chennai Properties & Investments Ltd. v. CIT, [2015 (5) TMI 46 - SUPREME COURT] it could not be said that this claim of the assessee company to bring rental income as income from business as against income from house property was ex-facie wrong and unsustainable . Thus in view of our above stated discussions and reasoning as set-out above, we order deletion of penalty levied by the AO and confirmed by the learned CIT(A) on this ground. - Decided against revenue Disallowance of depreciation - Held that:- It is incumbent upon the assessee company to have produced the evidences to the satisfaction of the Revenue as the claim of deduction of the expenses in the return of income has been made by the assessee company and primary onus to prove its claim in return of income lay on the assessee company , which the assessee company failed to do so. In earlier years also, similar addition has been made and the assessee company has accepted these additions on confirmation of the additions by the learned CIT(A) after the first appeal stood dismissed by the learned CIT(A) against the quantum additions. In view of our above discussions and reasoning, addition towards disallowance of depreciation on purchase of new fixed assets , to the income of the assessee company needs to be confirmed/ sustained. We find no infirmity in the orders of the learned CIT(A which we confirm/sustain.- Decided against assessee Addition of general expenses being 10% of the general expenses - failure of the assessee company to produce the documentary evidences, bills etc - Held that:- Since, the assessee company is not able to produce any detail with respect to the amount of general expenses of Rs. 91,48,771/- claimed by the assessee company in the return of income filed with the Revenue, the disallowance of 10% of the general expenses was made by the AO which was confirmed by the learned CIT(A) in the first appeal. It is incumbent upon the assessee company to have produced the evidence to the satisfaction of the AO , as the claim of deduction of the general expenses from the income of the assessee company in the return of income has been made by the assessee company and the primary onus to prove its claim in return of income lay on the assessee company , which the assessee company failed to do so in the instant case. In our considered view based on facts and circumstances of the case, the disallowance of 10% of general expenses is quite reasonable keeping in view peculiar facts and circumstances of the case and we confirm the afore-stated disallowance. We find no infirmity in the orders of the learned CIT(A) which we confirm/sustain. - Decided against assessee Reopening of assessment - Held that:- The reopening has been done based upon the rental income offered to tax as business income was brought to tax by the Revenue under the head ‘Income from House Property’ in the preceding year i.e. assessment year 2007-08 leading to income assessed at Rs. 13,30,275/- as against the disclosure of substantially lower income at NIL . There is a tangible information/material which has come to the possession of A.O. having close nexus and live link with the formation of belief by the AO that income has escaped assessment based on which he has formed reason to believe that income has escaped assessment. Earlier, the Revenue has processed the return u/s 143(1) of the Act. No scrutiny assessment has been made u/s 143(3) of the Act. There is no opinion which was formed by the A.O. earlier and thus there is no question of any change of opinion. The reasons recorded were duly furnished to the assessee company by the Revenue. In our considered view, we do not find any irregularity or infirmity in the re-opening of the assessment by the Revenue in the instant case u/s 147/148 of the Act based on our discussions and reasoning above, hence, we uphold the decision of ld. CIT(A) in which we have found no infirmity. - Decided against assessee 2016 (6) TMI 178 Deduction u/s. 80IB(10) - profit derived from development of residential building - allowability of deduction u/s 80IB (10) when the project in question is cleared after approval of the Slum Rehabilitation Authority - Held that:- The due dates for completion of project provided under subsection-10 of section 80IB are not applicable to the project like this in view of the immunity provided under proviso to clause (a) & (b) of the said sub-section 10 of section 80IB. - Decided against assessee 2016 (6) TMI 177 Revision u/s 263 - entitlement of assessee u/s 11(1)(a) allowed by AO - Held that:- Unable to agree that the A.O. has not made any independent inquiry or verification of details and documentary evidences furnished by the assessee during the course of assessment proceedings. A perusal of the copies of documentary evidences filed by the assessee as placed by it in the paper book show that the A.O. accepted the claim of corpus donations on the basis of confirmations and documentary evidences which contained the complete names, addresses, PAN numbers, copies of account payee cheques, audited accounts, audit reports and other documents proving the identity and credit worthiness of all the donors. The genuineness of the donation is also proved from the specific direction in each of the confirmation that the amount has been paid by them towards corpus donation and the Assessing Officer has therefore correctly allowed exemption u/s 11(1)(d) of the Act by making a specific note thereof in the assessment order passed by him. In view of the voluminous documentary evidences filed by the assessee in support of the claim on corpus donation, it cannot be said that the fact of corpus donation has been accepted by the Assessing Officer without verification, more so when the learned CIT(E) has not pointed out any specific discrepancy in the documentary evidences in respect of any donor. It is a settled law that once the quasi judicial power vested in A.O. has been exercised by him in accordance with law and in exercise of such power he has arrived at a conclusion, then merely because the CIT does not feel satisfied with the conclusion it cannot be said that the assessment order is erroneous. In the instant case the A.O. has required the assessee to furnish confirmations of each of the donors along with their PAN number and addresses and the assessee has complied with by filing documentary evidences to prove the identity and credit worthiness of the donors as also the genuineness of the corpus donations given by them. Therefore it cannot be said that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue on this issue. Regarding the issue of room rents, it is found that the assessee society is engaged in the activity of providing education and therefore the provision of hostel to the students is an incidental activity and therefore the room rent receipts from hostel are found to be covered by section 2(15) of the Act and the order of assessment cannot be said to be erroneous and prejudicial to the interests of Revenue when the claim of the assesse was accepted only after making inquiry on this point. It is also seen that such room rent receipts have been earned by the assessee society in all the earlier years also and exemption u/s 11 of the Act has always been allowed. Accordingly even as per the rule of consistency no adverse inference can be drawn against the assessee society on this issue. The investment made by the assessee society in this land is duly included in the fixed assets schedule forming part of the audited accounts which are drawn from the books of accounts examined by the Assessing Officer during the course of assessment proceedings. Therefore we are unable to agree with the contention of the D.R. that the source of acquisition of land has not been verified. In our opinion the conclusion of the Assessing Officer cannot be held to be erroneous and prejudicial to the interests of the Revenue as he has accepted the same on the basis of registered sale deed in favour of the assessee society and this cannot be said to be unsustainable in law, more so when no material on record has been brought on record by the CIT(E) to prove the contrary. Similarly the expenditure on Statue is found to have been incurred as per the Aims & Objects of the assessee society stated in its Memorandum of Association. We agree with the contention of the learned A.R. that the assessment order cannot be said to be erroneous and prejudicial to the interests of Revenue on this ground as the expenditure has been incurred as per the Aims & Objects of the assessee society to perpetuate the memory of Shri Surajmal in whose name the assessee society was set up and the Assessing Officer has accepted the expenditure on statue only after examination of all bills and vouchers of this expenditure. Thus the assessment order passed u/s 143(3) of the Act by the A.O. in this case cannot be said to be erroneous in so far as it is prejudicial to the interests of the revenue. CIT(A) order u/s 263 quashed - Decided in favour of assessee. 2016 (6) TMI 176 Payment to assessee's husband towards professional assistance given by him - Held that:- The assessee enjoys income from pension and medical practice in the field of Cardiology and the assessee also refers patient to various hospitals and had disclosed professional fees which is not a minor income. - Towards earning such huge professional income, the assessee paid a small amount to her husband Shri Pradeep Arora, which is a retired engineer from M/s Seimens Ltd. and has a vast knowledge in the field of medical profession and its administration. Therefore, this payment of professional charges made by the assessee cannot be held as unreasonable or bogus. We cannot forget this fact that similar claim of the assessee has been allowed by the Revenue during the earlier and subsequent assessment year and we are unable to see any valid reason to make such disallowance which has been established by the assessee by way or proper explanation that the professional charges paid to her husband has been incurred against professional assistant extended by him (her husband Shri Pradeep Arora) to her after his retirement from an administrative managerial post. In this situation, we decline to accept disallowance made by A.O and upheld by the CIT(A) and thus we demolish the same. In view of our forgetting discussion, the A.O is directed to delete the addition and to allow the claim of the assessee in this regard. - Decided in favour ofassessee Depreciation claimed on purchase of Honda City and new car - Held that:- Assessing Officer reduced sale consideration of old car from the cost of new Maruti Swift and then worked out the deprecation @ 7.5%. We are not in agreement with the calculation made by the A.O in this regard as for calculation of cost of acquisition of a new car the sale consideration of old car may be deducted from but for calculation of deprecation the total cost of a new car has to be taken into consideration and thus, disallowance made by the A.O of Rs. 8,625/- was not called for and we dismiss the same So far as, the depreciation claimed by the assessee on new Honda City Car is concerned the A.O wrongly noted that the car was purchased on 31/3/2006 whereas per list of dates and events the Honda City Car was purchased on 21/3/2006 as per submissions of the assessee. We are not inclined to accept contention of the A.O that the utilization of Honda City Car from professional activity and for stand by purpose does not exist. At the same time, we are not agreement with the explanation of the assessee submitted during the assessment proceedings that the job of the assessee who is a Cardiologist Medical Practitioner is of emergent in nature and some time if one car is showing some trouble so that the assessee has to keep a small car stand by to fulfill her responsibility of the professional work. Therefore, disallowance of deprecation made by the A.O and upheld by the CIT(A) on newly purchase Honda City is not called for and we direct the A.O to allow the same - Decided in favour of assessee Disallowance @ 20% of expenses debited under the head car repair maintenance, car running and maintenance - Held that:- Assessee has claimed depreciation on both the cars and we are unable to see that the assessee has any other car for personal use, in this situation, the element of personal use of a car cannot be ruled out and the use of cars for personal use has to be presumed in this situation disallowance has to be made regarding personal use of car towards car running maintenance and repair expenses. In the present case, the Assessing Officer made disallowance of 20% all expenses which has been upheld by the CIT (A). In our considered opinion, while the assessee herself and her husband has a Retired Senior Citizens then the element of personal use cannot be taken @ 20% of total expenditure and to meet the ends of justice we direct the A.O to make disallowance of 10% car running maintenance and repair expenses on account of personal use by the assessee - Decided partly in favour of assessee 2016 (6) TMI 175 Capital gain - transfer of capital asset - change of the physical characteristics of the land from agricultural to non-agricultural - Held that:- The JDA was also finally cancelled vide Deed of Cancelation dated 5.5.2015 and copy of which is available at pages 240 to 254 of the compilation and the refundable security received by the assessee was returned back to the developer. Through JDA, though it was agreed to hand over possession of land to the developer, but in fact possession was never handed over to the developer for further activities of development. Therefore, there was no transfer of asset in favour of the developer at any point of time. In the instant case, undisputedly agricultural activities are being undertaken on the disputed land till date. Therefore, from any angle, it cannot be said that there is any transfer of capital asset on which capital gain has accrued to the assessees. In light of these facts, we are of the view that the CIT(Appeals) has properly adjudicated the issue and we do not find any mistake therein. We accordingly confirm the order of the CIT(Appeals). - Decided in favour of assessee. 2016 (6) TMI 174 TDS u/s 194H - discount given to the distributors towards starter kits and recharge vouchers - Held that:- As far as sale of starter kit / sim card is concerned, it is purely a purchase / sale transaction on principal–to–principal basis and there is no relationship of agency. That being the case, the provisions of section 194H are not applicable. Thus provisions of section 194H is not attracted on the discount given on sale of pre–paid starter kit. Thus we set aside the impugned order of the learned Commissioner (Appeals) and quash the demand raised by the Assessing Officer under sections 201(1) and 201(1A). See Bharti Airtel Ltd. & Ors v/s DCIT [2014 (12) TMI 642 - KARNATAKA HIGH COURT] - Decided in favour of assessee. TDS u/s 194J - payments made towards roaming service provided by other telecom service providers - Held that:- In the present case, undisputedly, the Assessing Officer has not obtained any report from the technical expert to ascertain the fact whether there is any human intervention in providing cellular services. It is patent and obvious that the Assessing Officer has relied upon the technical report obtained in case of Vodafone Essar Mobile Services Ltd. Roaming / inter connectivity services are rendered automatically without any human intervention. It is evident from the order passed under sections 201(1) and 201(1A), that the Assessing Officer relying upon the technical report obtained in case of Vodafone Essar [2015 (9) TMI 1358 - ITAT KOLKATA ]. Thus we hold that the roaming / inter–connectivity charges paid by the assessee to other telecom networks not being in the nature of fees for technical services will not attract the provisions of section 194J as there is no human intervention in providing the roaming services. That being the case, assessee was not required to deduct tax at source on payment of roaming charges in terms of section 194J. In view of the aforesaid, we quash the demand raised under sections 201(1) and 201(1A). - Decided in favour of assessee. 2016 (6) TMI 173 Addition made u/s.69 - unaccounted purchases and suppressed stock - Held that:- We do not find any merit in the addition so made by the AO on account of unaccounted purchases and suppressed stock in so far as the AO has not been able to establish by means of any evidence that there were in fact unaccounted purchases or suppressed stock. We found that the AO has made addition merely on the presumption that since GP rate of 60% has been estimated by him, there must have been unaccounted purchases. We found that even during the remand proceedings, the AO has verified assessee’s version and accepted the same with regard to no unaccounted purchases. The CIT(A) has given due reasoning for deleting the addition. The finding recorded by CIT(A) has not been controverted. Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the addition made u/s.69 - Decided in favour of assessee Entitlement to exemption u/s.54G - Held that:- For claiming exemption u/s.54G, the assessee is entitled to make investment within a period of one year before or three years after the transfer of capital asset. Both these are exclusive. Assessee can invest part of the amount within a period of one year before sale of original assets and the balance part may be invested within a period of 3 years after the sale/transfer of asset. Accordingly, we direct the AO to give benefit of Section 54G by verifying the investment so made by the assessee within a period of one year prior to sale of asset and also investment made within a period of 3 years after the sale of asset. With regard to adjustment made by the AO being profit on sale of land and building in Urban area which was directly credited by the assessee to the capital reserves in its books of account, we direct the AO to first calculate the exemption u/s.54G in terms of our above direction and for deciding this issue of book profit accordingly. 2016 (6) TMI 172 Transfer pricing adjustment - TPO disallowed 50% of the region allocation expenses amounting to Rs. 4. 50 crores on the ground that there was no proper basis of allocation and backup calculations were not shared, that the DRP had increased the disallowance to hundred percent of the regional allocation expenses - Held that:- In the case under consideration actually the TPO had DRP have completely taken over the role of the AO. Instead of deciding the ALP of the IT. s reported by the assessee, they have decided the issue of allowability of expenditure incurred by it. Therefore, in our opinion, their order are not in accordance with the provisions of the Act. As far as comparables of BPO services are concerned it is enough to say that the TPO and the DRP had not dealt with the objections raised by the assessee about the comparables selected by the TPO(Pg. 601-10 of the PB). We do not find even a single word about the objection of the assessee with regard to the comparables. The TPO is authorized to select the comparables, but it is his duty not only to mention the methodology of selection process and to meet the objections raised by the assessee about the selection process or the selected comparables. Considering the above, we hold that the assessee had produced all the necessary documents and that the TPO and the DRP did not consider the same while passing/issuing the order/Directions. Therefore, in the interest of justice, we are of the opinion that the matter should be restored back to the file of the DRP who would decide the both the issues afresh after affording a reasonable opportunity of hearing to the assessee. Objections raised by the assessee, with regard to comparables have to be dealt case by case - Decided in favour of assessee in part Disallowance made u/s. 14A - Held that:- Provision of Rule 8D cannot be applied for the year under appeal, as held by the Hon’ble Bombay High Court as in the case of Godrej Boyce Mfg Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ). However, a reasonable disallowance could be made. It is a fact that the assessee had made investment in the AE. s. , that the AO had not proved that interest free funds were used by the assessee to make the investments. Considering these facts we are of the opinion that the matter needs further verification. Therefore, in the interest of justice, we are restoring back the issue to the file of the AO for fresh adjudication. He is directed to afford a reasonable opportunity to the assessee of being heard. Addition made on account of mis-match of AIR data - Held that:- We find that in this case the addition was made only on the basis of AIR report, that the assessee had specifically mentioned that the entries did not pertain to it. In our opinion, the AO should have made further investigation before making the addition. If the disputed amount pertained to receipt of rent it was not difficult for the AO to find out the facts. But, he chose not to make any enquiry and made the addition. We are of the opinion that only on the basis of AIR information no addition should be made-specially when there is no other material with the AO to demonstrate that the assessee had received income more than what was declared by it. In the case under consideration, it is found that except for the information available in the form of AIR the AO had nothing in his possession to prove that the assessee had received the amount in question. - Decided in favour of assessee Disallowance of deduction of Rs. 18. 41 lakhs u/s. 10A - Held that:- The assessee suo-motu had excluded the disputed amount from the turn over while computing the deduction u/s. 10A of the Act, that the AO/DRP erred in disallowing the same amount, that the assessee suffered double disallowance. We are of the opinion that the matter should be reexamined by the AO and the amount in question should not be disallowed twice 2016 (6) TMI 171 Nature of major Repair and Renovation expenditure on land without approval from local authorities - capital cost of improvement as contemplated by section 43(6)(c)(i)(A) - construction / renovation activity done by the same person who purchased the same premises later - Held that:- on the touch stone of preponderance of probabilities which cannot be simply brushed aside or demolished by the Revenue based on conjectures and surmises on suspicion , except through cogent incriminating material which revenue has failed to bring on record in the instant case. In our considered view, the assessee has duly discharged his burden cast under the Act and now it was for the Revenue to have brought on record cogent incriminating material and evidences to rebut and demolish the contentions of the assessee conclusively on the touchstone of preponderance of probabilities which the revenue could not do except by bringing on record inspector report that two of the parties are not existing on the addresses given on the invoices which is not sufficient enough to fasten the liability on the assessee as it does not prove that these purchases were bogus and are accommodation entries as set out above by Revenue Even for the sake of argument it is assumed that the assessee has not obtained the approval from CIDCO for doing this major and extensive structural repair and modification work to the factory Building, this technical breach will not in itself disentitle the assessee from claiming the same under the Act as cost of improvement and more-so it is a case of major and extensive structural repair and modification to the existing factory building and not a case of construction of altogether new factory building. - No addition - Decided in favor of assessee. Accrual of income - project completion method - assessee has submitted that merely by receiving occupation certificate on 30/03/2009 , does not by itself mean that the project is complete as there are several other work which are done post receipt of this occupancy certificate dated 30-03-2009, such as applying for electrical connection, water connection, drainage connection etc and also finishing work is to be done in these flats to complete construction of these flats, as also there are other relevant factors to be kept in mind to book revenue as per percentage completion method apart from the occupancy certificate - Held that:- Revenue has not rejected the books of accounts . Thus, keeping in view the peculiar facts and circumstances of the case and in the interest of substantial justice, we are setting aside this matter to the file of the A.O. with a direction to verify the contentions of the assessee that the entire profit from this Project Carmel with respect to all 27 flats so constructed is duly offered for taxation by the assessee albeit in the assessment year 2008-09,2009-10 and 2010-11. - Matter remanded back. 2016 (6) TMI 170 Reopening of assessment - reasons to believe - Held that:- As the audit objection cannot be considered as tangible material for the AO to reopen u/s 147/148 of the Act concluded assessment u/s 143(3) of the Act , unless the AO records his own satisfaction that income has escaped assessment . In the instant case there is no independent application of mind by the AO to the audit objection to come to the conclusion that income has escaped assessment. While in this instant case, the AO has after considering of the entire material and facts on records have formed an opinion that capital relief is not exigible to tax in the original assessment proceedings , and now it will be covered by change of opinion which is not permissible , as the audit team has also relied upon the same material to propound interpretation of law which is exceeding their jurisdiction - Decided in favour of assessee. 2016 (6) TMI 169 Disallowance of payment made by the appellant to Global Vipassana Foundation - commercial expediency - in the nature of donation or expenditure - TDS liability - Held that:- We have observed that the assessee company has made payment of Rs. 25 lacs to Global Vipassana Foundation during the previous year relevant to the assessment year and the assessee company has claimed it as business promotion expenses (Rs. 20 lacs) and staff welfare expenses (Rs. 5 lacs) in its books of accounts and also in the return of income filed with the Revenue. The payment of Rs. 25 lacs was stated to be made for use of the ‘Global Pagoda’ Mark and the courses of meditation to be held by the Global Vipassana Foundation. No receipt issued by the Global Vipassana Foundation for payment of Rs. 25 lacs made by the assessee company to Global Vipassana Foundation has been produced by the assessee company before the learned CIT(A) despite being asked by the learned CIT(A) to produce the same. The said receipt is also not produced before us. The assessee company is directed to produce the receipt and all other relevant documents in connection with the payment of Rs. 25 lacs to Global Vipassana Foundation to substantiate its claim before the learned CIT(A) for examination and verification by the authorities below as per the mandate of the Act and the Rules made thereof. - Matter remanded back. 2016 (6) TMI 168 Disallowance of interest expenses - Held that:- Methodology of computing interest expenditure allowable under the Act at the rate of 7% of average outstanding balance on the opening and closing balance outstanding to be payable to GTL Ltd by the assessee company and disallowing the balance interest payable by the assessee company to GTL Limited as per contractual obligations itself is fallacious as no finding of fact is arrived at by the AO that the funds so received by the assessee company from time to time as advance from GTL Limited on which interest is payable as per contractual obligations has been diverted for non-business purposes or are utilized for any other purposes other than business purposes. The assessee company has on the other hand brought on record evidences that own funds/interest free funds to the tune of Rs. 25.41 crores are available with it which is reflected in the audited balance sheet, that the assessee company has deployed inter-corporate deposit to the tune of Rs. 25.79 crores on which interest income of Rs. 1.28 crores has been earned which is duly offered for taxation in the return of income filed by the assessee company with the Revenue and the assessee company has advanced interest free funds to the tune of Rs. 14.22 crores to the suppliers and the ledger extracts and audited balance sheets to this effect are duly placed in the paper book. The advances to the suppliers of Rs. 14.22 crores have been stated by the assessee company to be made for purposes of business keeping in view the commercial expediency and it is not brought on record by the Revenue that these interest free advances to suppliers are not made for the business purposes except making a bald statement that the interest is not incurred for the purposes of business and the interest is excessive. In any case , the assessee company has demonstrated that there are sufficient interest free funds available with the assessee company of Rs. 25.41 crores as per audited Balance Sheet filed in the paper book which is sufficient enough to cover the interest free advances to suppliers to the tune of Rs. 14.22 crores and presumption shall apply unless rebutted that the interest free funds available with the assessee company are utilized for advancing interest free advances to suppliers - Decided in favour of assessee. 2016 (6) TMI 167 Allowability of en route expenses - Held that:- AR before us submitted that such expenses were also claimed in earlier years and in this regard no such disallowances were made by Authorities Below. We also find that these expenses are commensurate with the sales declared by the assessee in comparison to earlier years. We also further find that AO has disallowed the claim on ad hoc basis without bringing out any defect and deficiency in the submission of assessee with regard to such expenses claimed by assessee. we also cannot ignore this fact that the assessee has been claiming such expenses since the last several many years and no disallowance was made on account of this. So we are of the view that the consistency should be maintained. In this view of this matter, we are inclined to reverse the orders of Authorities Below on the basis that assessee has been claiming these expenses consistently for the last many years and such expenses have not been disallowed. - Decided in favour of assessee Addition on account of sale of scraped / old and discarded trucks - Held that:- Assessee has reduced the WDV of the relevant block of vehicle from the sale price of the trucks. However, Authorities Below has treated the sale price as Rs. 50,000/- of the truck and the difference of Rs. 35,000/- has been treated as income of the assessee as income which is incorrect as per the provision of Income Tax Act. In case of any sale of the assets pertaining to the block of assets then the sale price should be reduced from the relevant block by the amount of sale price and when the block ceased to exist after adjusting the sale price then the excess amount shall be treated as income under the head “capital gains” and that cannot be taken as “business income”. In the instant case, the Authorities Below without understanding the provision of Income Tax have taken a view that the amount of Rs. 10.50 lakh as income from its business which is incorrect - Decided in favour of assessee 2016 (6) TMI 166 Eligibility to deduction u/s. 80P(2)(a)(i) on interest income - Held that:- Respectfully following the decision of Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd. (2010 (2) TMI 3 - SUPREME COURT ) and taking down the fact that interest income in the present case is identical to the interest income received by the assessee in the decision referred to above. We hold that the assessee is entitled to deduction u/s 80P(2)(a)(i) of the Act in respect of the interest income. In this view of the matter, we reverse the order of Ld. CIT(A) - Decided in favour of assessee 2016 (6) TMI 165 Unexplained purchase of diamond pins, jewellery and jewellery sets - Held that:- From the above findings of the CIT(A), it is clear that jewellery in dispute was found recorded in the perosnal cash book of Shri N.K. Sharma and therefore, the Ld. C IT(A) has categorically held that no separate addition in the hands of the assessee company can be made. The Ld. C IT(A) observed that in the case of the individual in this group of cases, he had accepted cash flow statement prepared by the assessee was based upon the bank account deposits and withdrawals as well as various real estate transactions of purchases / sales. According to Ld. Counsel for the assessee, the cash flow statement clearly revealed the events which were verifiable in terms of bank withdrawals /deposits. The Ld. CIT(A) concluded that the jewellery was found recorded in the personal cash book of Shri N.K. Sharma, and therefore, no separate addition can be made in the hands of the company. Considering the above facts, we do not see any infirmity in the order of CIT(A) on this issue - Decided against revenue Addition on account of payment made to Sh. Jagdeep Singh from undisclosed sources - assessee contended that it was prevented by sufficient cause from producing the copy of statemtent of Shri Jagdeep Singh due to paucity of time since the assessment proceedings were taken up in November 2009 and the records were not traceable, thus the assessee requested the C IT(A) to admit the statement of Shri Jagdeep Singh recorded u/s 131 of the Act as an additional evidence - Held that:- Revenue's appeal is without any merit and deserves to be rejected. There was no violation of Rule 46A of the I.T Rules, by the C IT(A). According to Ld. C IT(A), the assessee was prevented by sufficient cause from producing the statement of Shri Jagdeep Singh, recorded u/s 131 of the Act before the Assessing officer. At the same time, the C IT(A) has afforded an opportunity of being heard to the Assessing officer. The submissions together with the additional evidence submitted by the assessee were sent to the Assessing officer by CIT(A) for comments and after receiving the comments of the Assessing officer, the CITa has adjudicated the issue in accordance with law. CIT(A) has correctly observed that the issue whether any amount was paid on behalf of the company to Shri Jagdeep Singh has to be considered in the context of the pending civil litigation between Shri Jagdeep Singh and Shri Jagdish Arora. It is apparent from the records that Shri Jagadish Arora had filed a suit before the Additional Civil Judge, Derabassi to seek forfeiture of the amount which he had received from Shri Jagdeep Singh to the tune of Rs. 50 lakhs in respect of a deal they had entered into for purchase of land worth Rs. 3.75 crores. It is clear from the above narrated facts that Shri Yadwinder Sharma filed the affidavit before the Civil Court, Derabassi to support the case of Shri Jagdeep Singh. We fully agree with this observation of the CIT(A) that in fact no actual payment either in cash or in cheuqe had been made at all. In this regard, the statement of Shri Jagdeep Singh was recorded by the Assessing officer is relevant; wherein Shri Jagdeep Singh had categorically stated that no amount was actually borrowed from the assessee company as the entire deal for the purchase of land went into civil dispute before the Court. From the answer to Q.No.6 of the statement of Shri Jagdeep Singh, it is clear that no amount either in cash or cheque has been paid to Shri Jagdeep Singh. In fact, the cheque No. 133950 drawn on HDFC bank, Zirakpur dated 25.4.2005 from assessee company was returned within 10 days to Shri Yadwinder Sharma. Thus, in view of the above discussion, we are of the view that the Ld. C IT(A) was fully justified in deleting the addition - Decided in favour of assessee 2016 (6) TMI 164 Penalty levied u/s. 271(1)(c) - undisclosed income by the assessee from sale of shops - Held that:- Findings of the Tribunal in the quantum appeal speaks for itself in as much as the additions based on the statements were discarded following the ratio laid down in the case of S. Khader Khan [ 2007 (7) TMI 182 - MADRAS HIGH COURT] . Further, we do not find any evidence on record which could suggest that the assessee has actually received Rs. 4.75 lacs instead of Rs. 1.80 lacs though the difference may have been sustained by the Tribunal in quantum appeal but in our considered opinion, the same cannot be a justifiable reason for the levy of penalty u/s. 271(1)(c) of the Act. We accordingly set aside the findings of the ld. CIT(A) and direct the A.O to delete the impugned penalty. - Decided in favour of assessee. Customs 2016 (6) TMI 191 Smuggling of 148.5 grams of gold bangles - non-declaration at green channel - contravention of provisions of Section 77 of the Customs Act, 1962 - Confiscation in lieu of redemption fine and imposition of penalty - Held that:- any oral submission made before the adjudicating authority will be a material piece of evidence. In view of the specific admission made by the respondent before the adjudicating authority, Government is inclined to hold that the respondent is a carrier of the impugned goods. In the present case as the passenger is not the owner of the goods and neither to whom the gold was meant to be handed over have claimed the impugned goods. Therefore, the gold cannot be allowed to be handed over to the respondent to re-export who is only a carrier. In this regard Government places reliance on various decisions of higher Courts the ratio of which is squarely applicable to the instant case. Government further notes that the provision to re-export of baggage is available under Section 80 ibid. However this Section is applicable only to cases of bonafide baggage declared to Customs, which the respondent failed to do and is not eligible for re-export of impugned goods. Government also finds no merit in the plea of the respondent that the gold was not required to be declared and can be cleared free of duty of the condition of re-export. Government notes that in terms of Section 77 anything imported by a passenger is required to be declared to Customs and is chargeable to duty above the specified limits. Further gold and gold jewellery can be imported by only eligible passengers subject to fulfillment of conditions thereof. Government finds that the passenger was a Sri Lankan passport holder not eligible to import the impugned goods and the same were also not declared to the Customs. But for being apprehended by Customs, the passenger could have been successful in smuggling the impugned goods into the country on behalf of another. Therefore, penalty has rightly been imposed upon the respondent under Section 112 ibid and Government finds no reason to interfere with the order of the Commissioner (Appeals) to the extent that penalty has been reduced to Rs. 20,000/- only. The re-export of the impugned goods allowed in this case by the Commissioner (Appeals) is therefore set-aside and the impugned Order-in-Original ordering absolute confiscation is restored. - Decided partly in favour of revenue 2016 (6) TMI 190 Stay application - Waiver of pre-deposit of dues on the basis of already heard stay application on 25.11.2014 - Customs duty was filed only on 11.08.2014, dismissed for non-compliance with the amended provisions of Section 129-E of Customs Act, 1962, wherein they were required to deposit 7.5% of the duty amount, as the appeal was filed on 06.08.2014 - Held that:- in view of the Order dated 25.11.2014 of this Tribunal relating to the same order-in-original confirming both Excise duty & Customs duty, in our opinion, the Applicant could be able to make out a prima-facie case for waiver of the dues adjudged, relating to the present Appeal also. Accordingly, pre-deposit of all dues adjudged relating to the present Appeal is also waived and its recovery stayed during the pendency of the Appeal. - Stay and waiver granted 2016 (6) TMI 189 Condonation of delay - 134 days - Absolute confiscation of impugned goods and imposition of penalty - Seizure of Cigarettes of 246 cartons of Davidoff brand - Mis-declaration of goods - none of the cigarette cartons contained any statutory pictorial health warning - goods are smuggled goods - Held that:- Government notes that the time limit of filing revision application before the Revisionary Authority has been provided under Section 129 DD of the Customs Act, 1962 which is 03 months form the date of receipt of Order-in-Appeal. This period of 03 months can be extended further 03 months beyond initial period provided sufficient cause which prevented the applicant from filing Revision Application in time has been shown to the satisfaction to the Government. The applicant in their application for condonation of delay in a general manner attributed the delay to having misplaced the impugned Order-in-Original and has failed to show sufficient cause. There is no provision in Section 129 DD ibid to condone delay exceeding 3 months. Here, the Revision Application has been made contrary to the provision of Section 129 DD (2) and is therefore liable for rejection. - Decided against the applicant Corporate Laws 2016 (6) TMI 185 Quorum for meeting - whether for convening general meeting by holding even single shareholder presence is deemed to constitute meeting as envisaged u/s 186 of Companies Act, 1956 - Held that:- records of R-1 Company were throughout being maintained in Lucknow, R-2 says, it is incomprehensible to him as 10 how the records which were earlier maintained at Lucknow have been suddenly shifted to Delhi just before convening a board meeting. It is true that R-2 declined to hold board meetings in the premises of P-1, because disputes are on in between P-1 and R-2. For if the petitioners are ready and willing to hold any board meeting or general meeting by supplying information to the Respondents in relation to agenda items of respective notices, there can't be any impracticability for holding general meeting, the Respondents submit that they will attend meetings. These petitioners cannot hold out seeking deferment of a meeting, request for change of venue and request for supply of material information connected to agenda items as a ground to invoke jurisdiction u/s 186 of the Act 1956, hence this petition is liable to be dismissed precisely when the respondents are agreeable to attend the meetings. In the light of the ratio decided in R. Rangachari v S. Suppiah by Supreme Court [1975 (9) TMI 75 - SUPREME COURT OF INDIA ], to pass an order under section 186, it is binding on this Bench to see that there must be impracticability for calling, holding and conducting General Meeting, when there is no impracticability for calling meeting, it can't be said that an order could be passed for holding and conducting general meeting alone. Therefore, the reasoning given in Pucci Dante's case (1998 (7) TMI 695 - COMPANY LAW BOARD) can't be applied in this cast. Here, the respondents categorically stated that they are ready and willing to attend the meeting. R-2 has shareholding in R-1 equivalent to the shareholding of P-2. R-2 and his group admittedly have 34,67% shareholding; of course R-2 alleged in the CP 140/2014, that his group had 42.38% holding in P-1 before their shareholding was reduced. If Section 186 is invoked just by being coasted on the allegations in the petition, by ignoring other shareholders reservations to attend general meeting, it will amount to bulldozing the rights of the shareholders. This situation can't he extended to say that whenever shareholders absent to any meeting that will become impracticable, so that court is at liberty to grant relief under section 186 of the Act, 1956, wiping the rights of the other shareholders. Hence no merit in the petition filed u/s 186 of the Act 1956; hence, hereby dismiss this petition without costs. 2016 (6) TMI 184 Restrain orders from buying, selling or dealing in the securities market - failure to comply with the pay-in obligation in relation to Castor Seed Contracts - whether the acts and omissions of 16 entities (including appellants) set out in the impugned order had disturbed the market equilibrium in Castor Seed Contracts? - whether the WTM of SEBI by ex-parte ad-interim was justified in restraining the entities specified therein from entering the securities market? Held that:- In the facts of present case, it is evident that the brokers and obviously their clients including UKS and SOL have repeatedly failed to comply with the pay-in obligation in relation to Castor Seed Contracts which is in gross violation of SEBI Circular dated 01.10.2015. Since such violations took place during the period when the prices of Castor Seed Contracts were falling and the trading in the Castor Seed Contracts had to be suspended, the prima-facie belief that the said violations were also instrumental in disturbing the market equilibrium cannot be faulted. Repeated failure to meet MTM pay-in obligation in relation to Castor Seed Contracts is an established fact and in the facts set out herein above, the prima facie view of the WTM of SEBI that the appellants repeatedly defaulted in meeting the pay-in obligation cannot be faulted. Consequently, the prima facie view of the WTM that repeated failure to meet MTM pay-in obligation has disturbed the market equilibrium cannot be faulted. The expression ‘disturbing the market equilibrium’ has a wider meaning in the commodities derivative market, since it is linked to the supply-demand factors in the underlying physical market and in the present case, conduct of 13 entities including UKS and SOL holding 62.48% of the total open interest of February 2016 Contract had to be seen in that context. It is not the case of SEBI that the appellants were responsible for the fall in the futures price of Castor Seed Contracts. However, in a falling market, if clients/brokers holding 62.48% of the total open interest of February 2016 Contract, have repeated failed to meet MTM pay-in obligation, then the prima facie belief formed by the WTM of SEBI that those clients had taken huge long positions beyond their ability to fulfill the commitment cannot be faulted. Thus prima facie view taken in the impugned order that the acts and omissions of the appellants and other entities referred to in the impugned order had contributed to the disturbance of market equilibrium in Castor Seed Contracts cannot be faulted. Consequently, pending further investigation, the decision to restrain those entities including the appellants from entering the securities market, cannot be faulted. However, it is open to the appellants to file their *objections to the ex-parte order, and if such objections are filed, the WTM of SEBI would be bound and liable to pass appropriate order thereon as expeditiously as possible. Service Tax 2016 (6) TMI 200 Period of limitation - Refund of Cenvat credit availed - input services received and consumed for export of output services - appellant received the FIRCs on 7th October 2009, 11th and 12th December 2009 and 3rd February 2010 in respect of the exports of the services effected during the material period - Held that:- in view of the ratio laid down by the Tribunal in the case of Bechtel India Pvt. Ltd. v. Commissioner of Central Excise, Delhi [2013 (7) TMI 490 - CESTAT NEW DELHI], the refund claim filed in time and cannot be held as time barred. Therefore, the impugned order is unsustainable and liable to be set aside. - Decided in favour of appellant with consequential relief 2016 (6) TMI 199 Admissibility of Cenvat credit - service tax paid on the taxable service used for procurement of plant but not for installation - Held that:- services were so integrally connected with the plant and commissioning thereof erecting at the site, that cannot be ruled out. Services were utilised for erection and commissioning of the plant. The indispensable nature of the services is appreciable from the description provided in the SCN itself. That cannot be ruled out. Period of limitation - Held that:- the element of suppression and fraud should have "intention to evade" but that is not present in the SCN. In absence of allegation in that behalf, there is no foundation in the SCN to allege in adjudication order. This can be said following the Apex Court judgment in the case of Continental Foundation Jt. Venture Vs CCE Chandigarh-I [2007 (8) TMI 11 - SUPREME COURT OF INDIA]. So also, when mala fide is not patent from record, the appellant also gets the benefit of the Apex Court judgement in the case of Uniworth Textiles Ltd. Vs CCE Raipur [2013 (1) TMI 616 - SUPREME COURT]. As a result, both on merit as well as on limitation, appellant succeeds. Imposition of penalty - Held that:- appellant says that tax element has been paid and he will instruct his client to discharge the interest element, if any, on the service tax demand of Rs. 4,94,400/-. Upon compliance of interest payment within a month of receipt of this order, there shall be no penalty at all. - Decided in favour of appellant 2016 (6) TMI 198 Availing Cenvat Credit while availing benefit of abatement notification - services of erection, commissioning or installation service - period 2006-07 to 2008-09 by availing benefit of Notification No. 1/2006-ST dated 01.03.2006 - appellant had not satisfied the condition of Notification No. 1/2006-ST, in as much they claim abatement of 67% of the taxable value despite availing the CENVAT credit on the few input and inputs services. Held that:- the appellant had reversed that entire CENVAT credit so availed before the adjudication order. Therefore, the reversal made before the adjudication order is as good as non- availment of credit, which is supported by the judgment of Hon'ble Supreme Court in the case of Precot Meridian Ltd. [2015 (11) TMI 323 - SUPREME COURT]. The impugned order is unsustainable and liable to be set aside. - Decided in favour of appellant with consequential relief 2016 (6) TMI 192 Legislative competence for Levy of service tax on preferential location charges while Purchasing a FLAT in the multi-storey group housing project - composite contract for purchase of immovable property - whether the explanation to Section 65(105)(zzzh) of the Act introduced by virtue of Finance Act 2010 as being ultra vires of the Constitution of India. - Prior to the amendment brought about by Finance Act 2010, Section 67 of the Act provided that the value of taxable services would be "the gross amount charged by the service provider for such service rendered by him". Section 67 of the Act was amended also to provide for value in cases where the consideration for the services was not wholly or partly consisting of money and in cases where the consideration for the service was not ascertainable. Held that:- We do not find any merit in the contention that the imposition of service tax in relation to a transaction between a developer of a complex and a prospective buyer impinges on the legislative field reserved for the States under Entry-49 of List-II of the Seventh Schedule to the Constitution of India. While the legislative competence of the Parliament to tax the element of service involved cannot be disputed but the levy itself would fail, if it does not provide for a mechanism to ascertain the value of the services component which is the subject of the levy. Clearly service tax cannot be levied on the value of undivided share of land acquired by a buyer of a dwelling unit or on the value of goods which are incorporated in the project by a developer. There is no machinery provision for ascertaining the service element involved in the composite contract. In order to sustain the levy of service tax on services, it is essential that the machinery provisions provide for a mechanism for ascertaining the measure of tax, that is, the value of services which are charged to service tax. Insofar as the challenge to the levy of service tax on taxable services as defined under Section 65(105)(zzzzu) is concerned, we do not find any merit in the contention that there is no element of service involved in the preferential location charges levied by a builder. We are unable to accept that such charges relate solely to the location of land. Thus, preferential location charges are charged by the builder based on the preferences of its customers. They are in one sense a measure of additional value that a customer derives from acquiring a particular unit. Such charges may be attributable to the preferences of a customer in relation to the directions in which a flat is constructed; the floor on which it is located; the views from the unit; accessibility to other facilities provide in the complex etc. Service tax is a tax on value addition and charges for preferential location in one sense embody the value of the satisfaction derived by a customer from certain additional attributes of the property developed. Such charges cannot be traced directly to the value of any goods or value of land but are as a result of the development of the complex as a whole and the position of a particular unit in the context of the complex. Challenge to insertion of clause (zzzzu) in Sub-section 105 of Section 65 of the Act negated - Decided against the assessee. However no service tax under section 66 of the Act read with Section 65(105)(zzzh) of the Act could be charged in respect of composite contracts such as the ones entered into by the Petitioners with the builder. The impugned explanation to the extent that it seeks to include composite contracts for purchase of units in a complex within the scope of taxable service is set aside. - Decided in favor of assessee. Refund of amount already deposited - The concerned officer shall examine whether the builder has collected any amount as service tax from the Petitioners for taxable service as defined in Section 65(105)(zzzh) of the Act and has deposited the same with the respondent authorities. Any such amount deposited shall be refunded to the Petitioners with interest at the rate of 6% from the date of deposit till the date of refund. - Decided in favor of assessee. 2016 (6) TMI 163 Power to Audit under Service Tax - Scope of Rule 5A(2) of service tax Rules, 1994 r.w.s. 94(1) and 94(2)(k) - Power to demand documents - challenged to the constitutional validity of Section 94(2)(k) of the FA on the ground that it gives "plainly unguided and uncontrolled” delegated powers to the Central Government for framing rules. It is stated that Section 94(2)(k) of the FA suffers from the vice of excessive delegation. Held that:- Rule 5A(2) as amended in terms of Notification No. 23/2014-Service Tax dated 5th December 2014 of the Central Government, to the extent that it authorises the officers of the Service Tax Department, the audit party deputed by a Commissioner or the CAG to seek production of the documents mentioned therein on demand is ultra vires the FA is Unconstitutional and, therefore, strikes it down to that extent. The expression 'verify' in Section 94 (2) (k) of the FA cannot be construed as audit of the accounts of an Assessee and, therefore, Rule 5A(2) cannot be sustained with reference to Section 94(2)(k) of the FA. Circular No. 181/7/2014-ST dated 10th December 2014 of the Central Government declared as ultra vires the FA and strikes it down as such. Letter issued by the Commissioner of Service Tax, Audit-1, New Delhi addressed to the Petitioner declared as being unsustainable in law. CBEC Circular No. 995/2/2015-CX dated 27th February 2015 on the subject "Central Excise and Service Tax Audit norms to be followed by the Audit Commissionerates” and the Central Excise and Service Tax Audit Manual 2015 issued by the Directorate General of Audit of the CBEC declared as ultra vires the FA, do not have any statutory backing and cannot be relied upon by the Respondents to legally justify the audit undertaken by officers of the Service Tax Department. Central Excise 2016 (6) TMI 197 Cenvat credit on service tax payment on GTA service - denial of claim on the ground that as per Rule 2(l) of Cenvat Credit Rules 2004, the credit can be availed only on the "input service" which is used by the manufacturer in or in relation to the manufacture of final products and clearance thereof upto place of removal - Held that:- There is no dispute that the appellant have paid the service tax on GTA service, which was pdrformed for transportation of goods from their Allahabad unit to Kalher depot. Therefore in my view the service tax paid in respect of certain service even if service was undertaken other than the appellants factory, the credit can be availed at any one place Even if the service tax is not required to be paid and if the assessee pay the service tax, the same can be taken as Cenvat Credit. In the present case, since on the GTA service their Allahabad unit has already paid the service tax, the appellant was not required to pay the service tax once again therefore the service tax paid by the appellant is admissible as Cenvat Credit to the appellant. Thus the appellant is entitled for the Cenvat Credit. - Decided in favour of assessee 2016 (6) TMI 196 Condonation of delay - 235 days - applicant was totally unaware about the non-filing of the appeal as the matter was being looked after by the Corporate Office at Mumbai and also the concerned person dealing with the Excise matter left the organization in November 2014 - Held that:- where the delay caused in filing the present appeal is not deliberate and intentional and has been caused on account of the circumstances that applicants were not aware of the non-filing of the appeal before the Hon’ble CESTAT and it was only during the last week of July 2015 that the applicants came to know that no appeal had been preferred against the Order-in-Appeal after receiving a call from the jurisdictional Central Excise Officer requiring them to furnish the proof of payment under Section 35F of the Central Excise Act and thereafter the matter was brought to the notice of the Management at Bangalore. Therefore we condone the delay subject to appellants paying cost of Rs. 10,000/- (Rupees Ten Thousand only) within a period of six weeks from today and submitting the compliance report. - Delay condoned 2016 (6) TMI 195 Waiver of pre-deposit of duty, interest and penalty - Non-remission of mandatory 7.5% of duty as required under Section 35 F of the Central Excise Act, 1944, as amended - Held that:- it is found that registry of the Tribunal issued defect memo dated 04.12.2015 to the applicants to produce proof of mandatory deposit. The applicant has not produced the proof of mandatory deposit till date after requesting the time. Therefore, after examining the provisions and the decision of this Tribunal in the case of M/s Kirti Industries vs. Commissioners of Central Excise, Customs and Service Tax-Silvasa [2015 (10) TMI 2451 - CESTAT AHMEDABAD], the Tribunal has no power to entertain the appeal, unless the appellant furnish proof of payment of mandatory amount under Section 35 F of the Act. Therefore, stay applications are not maintainable. - Appeals dismissed as infructuous 2016 (6) TMI 194 Penalty on directors - Held that:- It is brought to our notice that Shri Dilip Nagori expired on 03/05/2013 and Shri Gopal Das Nagori expired on 29/09/2007. Their death certificates stand produced on record. In view of the above, the appeals filed by them challenging imposition of penalties shall stand abated in terms of the provisions of Rule 22 of CEGAT Procedure Rule. We order accordingly. The appeals shall abate. 2016 (6) TMI 193 Cenvat credit of duty paid by the suppliers of raw material - Revenue’s contention is that the supplier of raw materials should have availed the benefit of exemption Notification No. 44/2001-CE (NT) dated 26/06/2001 which covers clearances against invalidated advance licences - Held that:- We find that the issue is no more res-integra and stands settled in favour of the assessee in their own case reported as Balakrishna Industries Ltd. vs. CCE, Jaipur - I (2015 (1) TMI 938 - CESTAT NEW DELHI). By rejecting the Revenue’s stand that the input suppliers should have used the invalidated licences, instead of clearing the goods on payment of duty, it was held that the duty paid by the input supplier is available as credit to the input recipient. Reference was made to number of precedent decisions of the Tribunal. - Decided in favour of assessee CST, VAT & Sales Tax 2016 (6) TMI 188 Seeking refund of outstanding amount of tax credit - Refund application was already rejected by the respondents many a times even after the directions provided by the Court for refund of tax credit - Held that:- considering that there has been an abject failure by the Respondents to comply with the statutory mandate of Section 38 of the DVAT Act, the Court sees no purpose being served in the Petitioners at this stage producing records of over ten years from 1st April 2005 till 21st January 2016. Since the Respondents in any event do not have the records, it will not be possible for them to verify the correctness of the records to be produced by the Petitioners. Also, the stage for the Department to now question the correctness of the self assessment return filed by the Petitioner No.1 way back on 30th October, 2007 for the year 2006-07 has long been crossed. There is no possibility of the said assessment being reopened. The carry forward of the refund amount in the succeeding returns up to 2012 was also never questioned by the Respondents. In the circumstances, the production of records at this stage by the Petitioner No. 1 will only delay the refund further. Considering the number of times the Petitioners have had to approach this Court, the request of counsel for the Respondents for yet another opportunity to consider afresh the issue of refund due to Petitioner No. 1 is not justified. The whole object of stipulating a time schedule under Section 38 of the DVAT Act for processing refunds will be defeated if any further indulgence is shown to the Respondents. Therefore, the Respondents are directed to issue in favour of Petitioner No. 1 the refund order in the sum of Rs. 34,62,662 together with 6% interest per annum from 20th February, 2015 till the date of its payment, which shall not be not later than 31st May, 2016. - Decided in favour of petitioner 2016 (6) TMI 187 Maintainability of writ petitions - Assessment order raising a demand - S.39(2) of the Karnataka VAT Act, 2003 - Availability of an alternate remedy under S. 62 of the Act - Reassessment has been done after refusing the input tax credit to the assessee in respect of the goods purchased by him by the local registered dealers on which the assessee wrongly availed input tax credit as they are 'consumables' - Held that:- in view of the availability of an alternate remedy by way of an appeal against the impugned order under S.62 ibid, this Court is not inclined to entertain the writ petition under Art.226 of the Constitution of India. An effective alternate remedy by way of an appeal is available to the petitioner-assessee. Whether the input tax credit was rightly availed by the petitioner assessee or not and whether on the aforesaid items, the said credit is available to the petitioner or not, are mixed questions of fact and law which are required to be determined by the authorities created under the Act providing the assessee, the remedy of appeal. The writ petitions are, therefore, not entertained under Art.226 of the Constitution of India. - Writ petitions dismissed 2016 (6) TMI 186 Imposition of penalty - Section 78(5) of the RST Act - Motorcycles were being transmitted with the intention of evasion of tax - Declaration form ST-18-A was incomplete in all respect and the material particulars were not filled in - Held that:- it is a case of stock transfer as all the three authorities have come to a finding of fact in this regard. Though the DC(A) as well as the Tax Board have gone into the issue that the vehicle contained all necessary requisite documents by which no case was made out of evasion of tax, however, I may add that though this argument was not raised before any of the authorities that prior to 30/03/2000 on the basis of the notification issued by the State of Rajasthan bearing No./F.4(1)FD/Tax/Div/2000-314 dt. 30/03/2000, there was no necessity of carrying of declaration form ST-18-A in the case of stock transfer/branch transfer/depot transfer of goods or SOS transfer and even if the form was found to be blank or incomplete, no penalty could be levied. Once there was no necessity of carrying declaration form prior to 30/03/2000, question of penalty does not arise. - Decided against the petitioner Indian Laws 2016 (6) TMI 183 Delay in initiating the disciplinary proceedings against the officer - Whether the delay of more than twelve years in initiating the proceedings, that remained unexplained, strikes at the root of the charge memo and the proceedings - Held that:- on the alleged irregularities against respondent pertaining to the period April 2002 to February 2003, the memorandum of charge was issued on 5.3.2014/7.3.2014 i.e. at a distance of twelve years. The only explanation rendered by the petitioners is that since initiation of a departmental proceeding is a very serious exercise and involves threadbare examination of the materials available, as such, care has to be taken to ensure that an innocent is not subjected to harassment nor an errant officer escapes punishment because of hasty and scantily deliberated decision in a given case. This explanation to justify the delay is weak, uninspiring and made as a matter of course. No cogent explanation is set forth to give the least benefit of credence to the said explanation. The irregularities which were the subject matter of the disciplinary proceedings initiated vide Charge Memo is stated to have taken place in 2002-2003. Apparently, the department cannot feign ignorance and say that it came to learn of it only in the year 2014. This is belied by the very fact that the department was alive to the investigations made by CBI and the proceedings before the DRI. It is not comprehended as to why it had taken more than 12 years to initiate the disciplinary proceedings. The delay itself goes to show that the department did not consider the matter as of any serious import affecting the discipline of the department. Here the petitioners have utterly failed to provide sufficient and reasonable explanation for the delay in initiating the disciplinary proceedings against respondent. In our view and having regard to the law laid down by the Apex Court in the case of State of Madhya Pradesh v. Bani Singh [1990 (4) TMI 286 - Supreme Court Of India] and in the case of P.V.Mahadevan v. M.D.,T.N.Housing Board [2005 (8) TMI 674 - Supreme Court Of India], as to the effect of inordinate and unexplained delay vis-à-vis initiation of disciplinary proceedings, the present writ petition is devoid of legal merits. Therefore, for all the reasons stated above, the judgment of the Tribunal cannot be faulted on any legally tenable grounds. Whether the departmental proceedings be allowed to stand when on the same set of charges, evidence, witnesses and circumstances the respondent Bamin Tari was exonerated by statutory authorities - Held that:- this writ petition being without merit on the first point itself, no further elaboration is made to discuss and adjudicate on the second point, save and except, that the Apex Court decisions in Capt M. Paul Anthony v. Bharat Gold Mines Ltd. [1999 (3) TMI 625 - Supreme Court of India] and G.M.Tank v. State of Gujarat [2006 (5) TMI 509 - SUPREME COUR] meets the second point. - Decided against the petitioner
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TMI Tax Updates - e-Newsletter June 6, 2016

TMI SMS

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1. 9/2015-2020 - dated 3-6-2016 - FTP

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1. 16/2015-2020 - dated 3-6-2016

Highlights / Catch Notes

Income Tax

Commissioner Approves New Deduction Claim u/s 80G; Goetze Ruling Restriction Not Applicable to Appeals.

Tax Authority Disallows 10% of Company Expenses Due to Lack of Documentation and Bills for General Costs.

Payment to Assessee's Retired Engineer Husband for Professional Help Deemed Reasonable, Not Bogus by Authorities.

Land Reverts to Agricultural Use After JDA Cancellation, Exempt from Capital Gains Tax on Asset Transfer.

Roaming and inter-connectivity charges not deemed technical service fees u/s 194J due to no human intervention.

AIR Data Discrepancy Alone Insufficient for Income Addition Without Additional Evidence of Undeclared Income.

Audit Objection Insufficient for Reopening Assessment: AO Needs Independent Satisfaction u/ss 147/148, Assessment Under 143(3.

Court Orders Re-evaluation of Payment to Global Vipassana Foundation: Donation or Commercial Expenditure? AO to Conduct De-novo Assessment.

Director's Personal Cash Book Records Jewelry Purchases; No Separate Company Account Additions Allowed.

Service Tax

Cenvat Credit Reversal Before Adjudication Equals Non-Availment; Abatement Notification Stands Valid.

Service Tax on Preferential Location Charges in Housing Projects Challenged: Section 65(101)(zzzh) Lacks Valuation Mechanism.

High Court declares Rule 5A(2) of Service Tax Rules unconstitutional; limits authority of Service Tax Department officers.

Central Excise

Appeal Delay of 235 Days Excused Due to Corporate Miscommunication and Key Employee Departure in November 2014.

VAT

Court Orders VAT Department to Refund Tax Credit with Interest by May 31, 2016, After Repeated Rejections.

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TMI Tax Updates - e-Newsletter
June 6, 2016