TMI Tax Updates - e-Newsletter
June 8, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

TMI SMS

• Merely because an item is listed u/s 56(2), without there being anything to show that it is of income nature, it cannot be brought to tax

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Articles

1. No Service Tax Audit by the Service Tax Department or CAG

   By: Bimal jain

2. NCLT – comes true…

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Government of India and Asian Development Bank Sign $120 Million Loan Agreement to Modernize Irrigation and Improve Water Management in Odisha

2. RBI Reference Rate for US $

3. Second Bi-monthly Monetary Policy, 2016-17: Governor’s Opening Remarks at the Press Conference

4. RBI Reference Rate for US $

5. Second Bi-monthly Monetary Policy Statement, 2016-17 By Dr. Raghuram G. Rajan, Governor

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

7. Repayment of 12.30% Government Stock 2016 on July 02, 2016

Notifications

Customs

1. 23/2016 - dated 6-6-2016 - ADD

Seeks to impose definitive anti-dumping duty on “Polytetrafluoroethylene (PTFE)” [Tariff Item 3904 61 00], originating in or exported from Russia, for a period of five years (unless revoked, superseded or amended earlier)

2. 81/2016 - dated 6-6-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

FEMA

3. 365/2016-RB - dated 1-6-2016 - FEMA

Foreign Exchange Management (Foreign Exchange Derivative Contracts)(Amendment) Regulations, 2016

4. 10(R)/(1)/2016-RB - dated 1-6-2016 - FEMA

Foreign Exchange Management (Foreign Currency Accounts by a person resident in India)(Amendment) Regulations, 2016

Income Tax

5. 44/2016 - dated 2-6-2016 - IT

Corrigendum - Notification Number 33/2016, dated the 19th May, 2016

6. 43/2016 - dated 2-6-2016 - IT

Income–tax (14th Amendment) Rules, 2016

7. 42/2016 - dated 2-6-2016 - IT

Cost Inflation Index for Financial Year notified as 1125 - Amendments in Notification Number S.O. 709(E), dated the 20th August, 1998

8. 41/2016 - dated 2-6-2016 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies “Uttar Pradesh State AIDS Control Society” a body constituted by the Government of Uttar Pradesh in respect of the following specified income arising to that Society

9. 40/2016 - dated 2-6-2016 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies “Pollution Control Board, Assam” a body constituted by the Government of Assam in respect of the following specified income arising to that Board

Law of Competition

10. S.O. 1928(E) - dated 25-5-2016 - Competition Law

Central Government hereby appoints Ms. Anita Kapur, as Member of the Competition Appellate Tribunal, with effect from the 10th May, 2016

Service Tax

11. 34/2016 - dated 6-6-2016 - ST

Seeks to amend notification No. 30/2012-Service Tax dated 20th June, 2012, so as to prescribe extent of payment of service tax by a business entity as a recipient of services provided by senior advocates

12. 33/2016 - dated 6-6-2016 - ST

Seeks to amend Service Tax Rules, 1994 so as to specify the business entity as the person liable to service tax in respect of services provided by senior advocates

13. 32/2016 - dated 6-6-2016 - ST

Seeks to amend notification No. 25/2012 - Service Tax, dated the 20th June, 2012, so as to exempt the legal services provided by senior advocates to a business entity with a turnover up to rupees ten lakh in the preceding financial year

Circulars / Instructions / Orders

VAT - Delhi

1. 9/2016-17 - dated 6-6-2016

Requirement of item-wise details in Forms Annexure-2A, Annexure-2B, DVAT-30 and DVAT-31

Central Excise

2. F. No. 221/01/2016-CX.6 - dated 6-6-2016

Instructions on Information returns to be furnished under Notification No. 4/2016-ST dated 15.02.2016

Highlights / Catch Notes

Income Tax

• Interest Not Applicable for Non-Payment of Advance Tax if Deductible u/s 195; Assessee Not at Fault.

  Case-Laws - AT : Interest levied under section 234B - non-payment of advance tax by the payer - as the tax was ‘deductible’ u/s 195 of the act there is no failure on part of the assessee in payment of advance tax. - AT
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• CBDT Sets Cost Inflation Index at 1125 for Financial Year u/s 48, Aiding in Capital Gains Tax Calculations.

  Notifications : CBDT notifies the Cost Inflation Index for Financial Year as 1125 u/s 48 of the Income Tax Act, 1961
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• Interest from Enhanced Accident Compensation Not Income Under Income Tax Act Section 56, Nature Must Be Income to Tax.

  Case-Laws - AT : Deemed income u/s 56 - interest awarded as a part of enhanced accident compensation - To suggest that since an item is listed under section 56(2), even without there being anything to show that it is of income nature, it can be brought to tax is like putting the cart before the horse - AT
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• Lease Cancellation Creates Capital Asset, Qualifies as Capital Expenditure; Allows Depreciation for Business Benefit.

  Case-Laws - AT : Cancellation of the lease and the payments of the consideration - It is clearly a capital asset has come into existence in the hands of the assessee, which is of enduring benefit for the business of the assessee and consequently, the expenditure is liable to be treated as capital expenditure - Depreciation to be allowed - AT
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• Tax Deduction Denied for Unpaid Leave Encashment Provision u/s 43B Clause (f.

  Case-Laws - AT : If the assessee has not made payment of leave encashment provision in the present year, deduction on account of that provision cannot be allowed as per provisions of clause (f) of section 43B. - AT
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• India-Singapore Double Taxation Avoidance Agreement: Income Remittance to Singapore Qualifies for Lower Tax Rates Under Treaty Provisions.

  Case-Laws - AT : Eligibility to provisions of DTAA between India and Singapore - Where the amount has been remitted to Singapore and has been subject to the tax, we find no merit in the orders of Assessing Officer / DRP in denying the benefit of Treaty provisions to the assessee in taxing the income at lower rates - AT
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• TDS Variation Doesn't Equal Income Escapement; Verification Discrepancies Insufficient for Reassessment Proceedings Initiation.

  Case-Laws - AT : The variation in the TDS benefit to be given does not necessarily lead to escapement of income. Mere need to verify the discrepancy does not bring matter within the scope of the cases in which reassessment proceedings can be validly initiated. - AT
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• Railway Sidings and Tracks Construction Deemed Revenue Expenditure; No Capital Asset Created for Assessee.

  Case-Laws - AT : The amount incurred by the assessee for construction of railway sidings and track outside the refinery complex was a revenue expenditure in the year in which it was incurred since the said expenditure did not result in bringing into existence any capital asset for the assessee - AT
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Customs

• Port Trust Must Pay Duty on Unaccounted LAM Coke Pilfered Under Customs Act Sections 23 and 45(3.

  Case-Laws - AT : Liability of port trust to pay duty on Import of LAM coke - the quantity not accounted for by the custodian has to be treated as pilfered u/s 23 of the Customs Act 1962 and Custodian is responsible for paying duty on such unaccounted imported goods u/s 45(3) of the Customs Act 1962 - AT
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• Documentation Fees & Royalties Excluded from Import Valuation; Not Covered Under Customs Valuation Rules 9(1)(b)(iv) & 9(1)(c.

  Case-Laws - AT : Documentation fees and the royalty are not related to the import of the goods, therefore, the same cannot be included in the value of the imported goods and the same is not covered by Rule 9(1)(b)(iv) and 9(1)(c) of the Customs Valuation Rules, 1988. - AT
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Service Tax

• CBEC Amends Service Tax Rules: Exempts Legal Services by Senior Advocates for Small Business Entities Under 10 Lakh Turnover.

  Notifications : CBEC amends notification No. 25/2012 - Service Tax, dated the 20th June, 2012, so as to exempt the legal services provided by senior advocates to a business entity with a turnover up to rupees ten lakh in the preceding financial year - Notification
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• CBEC Amends Service Tax Rules, 1994: Business Entities Now Responsible for Paying Service Tax on Senior Advocate Services.

  Notifications : CBEC amends Service Tax Rules, 1994 so as to specify the business entity as the person liable to service tax in respect of services provided by senior advocates - Notification
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• CBEC Amends Notification on Service Tax Obligations for Business Entities Receiving Services from Senior Advocates.

  Notifications : CBEC amends notification No. 30/2012-Service Tax dated 20th June, 2012, so as to prescribe extent of payment of service tax by a business entity as a recipient of services provided by senior advocates - Notification
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• Cenvat Credit Allowed for Rent-a-Cab and Air Travel Services Used for Employee Benefits Before April 1, 2011.

  Case-Laws - AT : Allowability of Cenvat credit - Rent-a-cab and Air Travel Agent Service - services used for employees benefit - prior to 01-04-2011 the Cenvat Credit was admissible. - AT
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• Refund Claim for Service Tax on Export Cleaning Services Denied; Cited Wrong Grounds Under Notification No. 41/2007-ST.

  Case-Laws - AT : Eligibility of refund claim of input services on export of goods - The contention of the appellant that cleaning activity is not taxable and therefore refund of Service Tax paid thereon should be given under Section 11B of Central Excise Act is not relevant and tenable because the refund claim was filed and claimed in terms of provisions of Notification No. 41/2007-ST and not under the provisions of Section 11B of Central Excise Act - AT
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Central Excise

• Old Central Excise Registration Cancelled Once New Registration Issued to Buyer, Ensuring Continuous Production.

  Case-Laws - AT : Validity of de-registration of old Central Excise Registration since new registration was granted to the buyer of the premises - it is a national loss to stop production in any factory premises. The law cannot be such by which production in this country can be suspended for any reason - cancellation of old registration is valid - AT
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• Duty Demand Dismissed for Job Worker Identified as Manufacturer Due to Extended Limitation Period; Notification 214/86-CE Cited.

  Case-Laws - AT : Demand of duty from the Job worker who is the actual manufacturer - Extended period of limitation - Principal Manufacturer filed the declaration under Notification 214/86-CE saying that they undertake to discharge liability of Central Excise duty, if applicable - Demand beyond normal period of limitation of one year set aside - AT
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• Cenvat Credit Valid Despite Paper Transactions if Supplier is Registered Dealer; Registration Must be Canceled to Claim Non-existence.

  Case-Laws - AT : Cenvat credit on paper transactions not physically received - If a supplier of goods is the registered dealer of the department itself, the department cannot allege that dealer is non-existent unless and until registration is cancelled. - AT
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• Trade Sample Duty Demand Overturned Due to Lack of Evidence by Revenue Authorities.

  Case-Laws - AT : Clearance of trade samples without payment of duty - Revenue failed to produce any documentary evidence of even a single such samples having been cleared by the appellant during the relevant period without payment of duty - demand set aside - AT
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• Penalty Levied for Removing Non-Excisable Goods with Cenvat Credit; No Suppression of Facts Found in Statutory Record.

  Case-Laws - AT : Levy of penalty - removal of non-excisable goods on payment of duty through cenvat credit - in the absence of any specific allegation in the show cause notice and the disclosure of entire fact in the statutory record does not show suppression of fact on the part of the appellant - AT
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• Show cause notice challenged: Duty paid before issuance makes charges invalid u/s 11A(2B); goods confiscation illegal.

  Case-Laws - AT : Validity of show cause notice - duty along with interest was paid before issuance of SCN - neither show cause should have been issued nor any charges of the show cause notice should have been confirmed - As per the clear legal provision u/s 11A(2B), the confiscation of the goods is not legal and correct - AT
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Case Laws:

• Income Tax

• 2016 (6) TMI 262
  Addition to undisclosed income as defined u/s 158B(b) - Held that:- HC order confirmed [ 2014 (11) TMI 482 - DELHI HIGH COURT] . As during investigation, statements of different persons referred to above, were recorded to ascertain and decipher whether the money deposited in the bank accounts had any connection or belonged to JMM or the said money was undisclosed income of the individual assessees. Assessment in the hands of JMM was on a protective basis. The Tribunal has not considered and examined the said evidence and has also not gone into the question whether and if in case no addition could be made in the hands of the individual assessee, substantive addition on the basis of the said evidence or material could be sustained in the hands of JMM. Of course, in case substantive addition in the hands of the individual assessee stands finally affirmed, the protective addition in the hands of the JMM would dissipate and would not be sustainable. As the appeals were allowed on the preliminary ground; there was no undisclosed income which could be made subject matter of block assessment and additions, if any, could be made only in the regular/normal assessment. Learned counsel for the Revenue accepts the said position. We also notice that the Tribunal has not gone into and examined the merits. Thus, an order of remand would be justified and is required as other issues on merits etc. have to be examined.

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• 2016 (6) TMI 261
  Waiver of interest u/s 139 (8) for delay in filing of the return rejected - time limit under Rule 117A of the Rules for filing an application seeking waiver of interest? - condonation of delay - Held that:- The fact of the matter is that the Petitioner waited for around nine years after the order of the CIT(A) dated 6th/26th December 1990 before again approaching the AO under Rule 117 A for waiver of interest. While Rule 117 A does not expressly bar a second application and does not prescribe any limitation, the Petitioner has no satisfactory explanation for the extraordinary delay in filing the fresh application. The pendency of other proceedings at various fora does not constitute a sufficient justification in this regard. Further as far the revision petition is concerned, the proviso to Section 264 (3) permits the CIT to condone the delay in filing such petition beyond one year from the date of communication of the order seeking to be revised, if the petitioner is able to show that he was "prevented by sufficient cause" from making such application. Qua the first order dated 3rd March 1990 of the AO rejecting the Petitioner's application for waiver of interest, the delay in preferring the revision petition was time barred and the delay was not adequately explained. As regards the second order dated 17th September 2001 of the AO, as rightly pointed out by the CIT in the impugned order dated 20th March 2002, even assuming that the order dated 6th/26th December 1990 of the CIT (A) constituted a fresh cause of action for seeking waiver of interest, the delay of more than 9 years in filing the second application under Rule 117 A was not sufficiently explained. - Decided against assessee.

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• 2016 (6) TMI 260
  TDS u/s 195 - commission income earned by non-resident agents - applicability of DTAA - existence of PE in India - Held that:- In the present case, the non-resident commission agent is carrying out business outside India on behalf of resident assessee and therefore, in our considered opinion, this Explanation 2 to section 9(1) (i) is not applicable in the present case. Examining the applicability of DTAA between India and various countries i.e., Qatar, South Africa, Spain, USA, Singapore and Argentina. Article 7 in the DTAAs regarding business profits is similar in all these DTAAs and as per the same, profits of an enterprise of a contracting State shall be taxable only in that State, unless the enterprise carries on business in the other contracting States through a PE situated therein. Therefore, in the absence of a finding that commission agents are having PE in India as per Article 7 of DTAAs between India and these countries, the business profit of commission agents cannot be brought to tax in India and as per section 90(2), if DTAA is more beneficial than the domestic laws, then DTAA has to prevail. Thus commission payment made by the assessee to these commission agents outside India for procuring export orders cannot be brought to tax in India and as a consequence, TDS is not deductible - Decided in favour of assessee.

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• 2016 (6) TMI 259
  Interest levied under section 234B - non-payment of advance tax - non deduction of tds by the payer - CIT(A) deleted the levy - Held that:- Respectfully following the decision of Honourable Delhi high court in case of DIT V G E Packaged power (2015 (1) TMI 1168 - DELHI HIGH COURT ) we hold that on the payments received by the assessee the payer were required to deduct tax at sources u/s 195 of the act and as the tax was ‘deductible’ u/s 195 of the act there is no failure on part of the assessee in payment of advance tax. Therefore, assessee cannot be saddled with the burden of interest u/s 234B of the act. Hence, we confirm the order of the Ld. CIT (A) in deleting interest under section 234 B of the income tax act 1961 in case of case of the assessee - Decided against revenue

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• 2016 (6) TMI 258
  Disallowance made on account of loss on sale of repossessed assets being capital in nature - Held that:- Loss is on account of bad debts. The loss on account of sale of repossessed assets is nothing but a write off of bad debts. The nomenclature cannot change the real character of the transaction. The appellant debited the loss to revenue account as it is incidental to business. Under no stretch of imagination, this loss can be considered as capital in nature as done by the Assessing Officer. On the basis of the aforesaid decisions, it can be concluded that loss on sale of repossessed assets can be considered for deduction as business loss. This is particularly so as there is no bar in claiming a loss as a business loss, if the same is incidental to carrying on of a business. See Commissioner of Income Tax Versus Citicorp Maruti Finance Ltd. [2010 (11) TMI 802 - Delhi High Court ] and Harshad J Choksi vs. CIT, Bombay [2012 (8) TMI 710 - BOMBAY HIGH COURT ] - Decided in favour of assessee

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• 2016 (6) TMI 257
  Revision u/s 263 - allowing deduction u/s 80IC - treatment to transport subsidy, Central Insurance subsidy, power subsidy and interest subsidy - Held that:- The Hon’ble Gauhati High Court in the case of CIT vs Meghalaya Steels Ltd. [2013 (7) TMI 175 - GAUHATI HIGH COURT] had decided the issue in favour of the assessee holding that all the mentioned subsidies have to be considered as profits and gains derived from the business of the assessee and therefore have to be considered for the purpose of allowing deduction u/s 80IC of the Act. It was also brought to our notice that the Hon’ble Supreme Court has confirmed the order of Hon’ble Gauhati High Court in the case of CIT vs Meghalaya Steels Ltd. [2016 (3) TMI 375 - SUPREME COURT] We are of the view that the view taken by the AO cannot be considered to be erroneous and prejudicial to the interest of the revenue. Though the CIT has exercised the jurisdiction on the ground that the AO had failed to make proper inquiries before concluding the assessment, we are of the view that in the light of the decision of the Hon’ble Supreme Court, such an inquiry at this stage would be a futile exercise. The decision rendered by the Hon’ble Supreme Court has to be considered as law as it stood at all times and therefore the order of assessment in the present case passed by the AO that was sought to be revised by the CIT u/s.263 of the Act, cannot be considered as erroneous and prejudicial to the interest of the Revenue. - Decided in favour of assessee

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• 2016 (6) TMI 256
  Revision u/s 263 - as per CIT(A) AO allowing depreciation as allowable expenditure against receipts of the Assessee - trust during the previous year was erroneous and prejudicial to the interest of the revenue - Held that:- If depreciation is not allowed as a necessary deduction for computing income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income as it is nothing but a decrease in the value of property through wear, deterioration, or obsolescence. Since income for the purposes of section 11(1) has to be computed in normal commercial manner, the amount of depreciation debited in the books is deductible while computing such income. It was so held by the Hon’ble Karnataka High Court in the case of CIT Vs. Society of Sisters of St. Anne (1983 (8) TMI 44 - KARNATAKA High Court ). It was held in CIT Vs. Tiny Tots Education Socieity (2010 (7) TMI 377 - Punjab and Haryana High Court ) that depreciation can be claimed by a charitable institution in determining percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to double benefit. In view of the aforesaid decisions on the issue, we are of the view that the order of the respondent cannot be sustained. The amendment by the Finance Act (No.2), 2014 by insertion of Sec.11(6) of the Act specifically providing for not allowing any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year was admittedly effective only from 1.4.2014 and did not apply to AY 12-13. In the given facts and circumstances of the case exercise of jurisdiction u/s.263 of the Act would not be proper. We therefore quash the order u/s.263 of the Act and allow the appeal of the Assessee. - Decided in favour of assessee.

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• 2016 (6) TMI 255
  Addition on account of interest awarded as a part of enhanced accident compensation - Held that:- Clearly, unless a receipt is not an income, there is no occasion for the provisions of Section 56(1) or 56(2) coming into play. Section 56 does not decide what is an income. What it holds is that if there is an income, which is not taxable under any of the heads under Section 14, i.e item A to E, it is taxable under the head ‘income from other sources’. The receipt being in the nature of income is a condition precedent for Section 56 coming into play, and not vice versa. To suggest that since an item is listed under section 56(2), even without there being anything to show that it is of income nature, it can be brought to tax is like putting the cart before the horse. The very approach of the authorities below is devoid of legally sustainable merits. The authorities below were thus completely in error in bringing the interest awarded by Hon’ble Supreme Court to tax. The question of deduction under section 57(iii), given the above conclusion, is wholly irrelevant. We vacate this action of the Assessing Officer, and disapprove the CIT(A)’s action of confirming the same. Grievance of the assessee is thus upheld.

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• 2016 (6) TMI 254
  Cancellation of the lease and the payments of the consideration - revenue v/s capital expenditure - Held that:- A perusal of the resolution passed by the Board of Directors of the assessee company in respect of authorization for cancellation of the lease, also talks as compensation and for loss of business. A perusal of the agreement entered into by the assessee shows the relinquishment of the lessees lease rights and interest in the leased premises. It is clearly a capital asset has come into existence in the hands of the assessee, which is of enduring benefit for the business of the assessee and consequently, the expenditure is liable to be treated as capital expenditure. A perusal of the assessment order shows that the Assessing Officer not only treated the same as capital expenditure also, but an expenditure out of the capital, but in the grounds of appeal, the issue of capital expenditure has been raised by the Assessing Officer. As we have held that the said expenditure is a capital expenditure, the Assessing Officer is directed to grant the assessee depreciation, on the same, as applicable. - Decided in favour of revenue

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• 2016 (6) TMI 253
  TDS u/s.194C - Disallowance u/s.40(a)(ia) - Held that:- CIT(A) while deciding the issue in favour of assessee had relied on the decision of Special Bench in the case of Merilyn Shipping & Transports(supra) and held that if any amount is payable as on end of the relevant previous year, no deduction u/s.40(a)(ia) can be made. We further find that the ld.CIT(A) has not decide the issue on merits. It is also a fact that the decision of the Special Bench in the case of Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) that was relied upon by the ld.CIT(A) has been overruled by the Hon’ble Jurisdictional High Court in the case of CIT vs Sikhandarkhan N. Tunvar & Bros. reported at (2013 (5) TMI 457 - GUJARAT HIGH COURT), wherein the Hon’ble Jurisdictional High Court has held that the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports does not laid down correct law. It has further held that section 40(a)(ia) of the Act would cover not only amounts which are payable as on 31st March of a particular year, but also which are payable at any time during the year. Before us, the ld. AR has not pointed out any contrary binding decision in his support. We further find that CIT(A) has not decided the issue on merits. In view of the aforesaid facts, we are of the view that the issue needs to be re-examined at the end of the ld.CIT(A) in the light of the judgment of the Hon’ble Jurisdictional High Court and in accordance with law and, accordingly, remit the issue back to the file of ld.CIT(A) to decide it afresh - Decided in favour of revenue for statistical purposes Addition an amount of notional interest income - Held that:- The issue in the present case is with reference to disallowance of interest. We find that CIT(A) after considering the submissions of assessee has granted substantial relief to the assessee and has confirmed the disallowance of interest only to the extent of Rs. 12,354/- as against the disallowance of Rs. 70,830/- made by AO. Before us, assessee has not brought any material to controvert the findings of CIT(A) and, therefore, we find no reason to interfere with the order of CIT(A). - Decided against revenue

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• 2016 (6) TMI 252
  Penalty u/s. 271(1)(c) - discount from IOC that was not accounted by the assessee - Held that:- For levy of penalty apart from falsity of the explanation given by the assessee, the Department must have before it cogent material or evidence from which it could be inferred that the assessee has concisely concealed the particulars of income or had deliberately furnished inaccurate particulars of income. It is well settled that the parameters of judging the justification for addition made in the assessment case of the asssessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of the Act on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated or the non-inclusion of income was to reduce its tax liability. Considering the aforesaid facts and peculiar facts of the case, and considering the fact that the amount has been offered to tax in subsequent assessment years and the assessee being a Government Corporation, we are of the view that in the present case no case for levy of penalty u/s. 271(1)(c) of the Act has been made out. We thus direct the deletion of penalty u/s. 271(1)(c) of the Act - Decided in favour of assessee.

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• 2016 (6) TMI 251
  Revision u/s 263 - Assessment of income - as per CIT(A) the gain on sale of shares ought to have been assessed by the AO under the head income from business and not under the head short term capital gain - whether interest expenditure should be allowed as deduction while computing the short term capital gain and disallowance of expenses u/s 14A Held that:- We find right from A.Y.2001-02 till A.Y.2004- 05 the assessee had two portfolios of shares, one held as investment and the other as stock in trade of business. In respect of shares which were held as investment, gain on transfer of those shares was declared under the head capital gain and the same was accepted by the revenue. It is no doubt true that in those years the assessment was made u/s 143(1) of the Act. Even for A.Y.2006-07 & A.Y.2006-07 the position was the same. The claim of the assessee was accepted u/s 143(1) but for A.Y.2007-08 and 2009-10 assessment was completed u/s 143(3) of the Act. The claim of the assessee has been accepted by the revenue. It is thus seen that only the present A.Y.2005-06 the revenue is taking a stand that the sale of shares held as investment gives rise to income from business. The facts in the present A.Y. are identical to the facts in the other assessment years referred to above. In such circumstances we are of the view that taking a different stand in the present A.Y. would be violation of principles of consistency and the revenue should not be permitted to take such a stand. We are therefore of the view that the gain on sale of shares held as investments will give raise to “capital gain” and has to be assessed as such. As far as disallowance of interest in computing the short term capital gain is concerned, we are of the view that income of an assessee has to be computed under various heads specified under Section 14 of the Act. Deductions are to be allowed in computing the income under various heads only to the extent it is provided by the Legislature under that very head. The computation of capital gain is provided in Section 48 of the Act. According to Section-48, the only deductions which are allowable are - (1) the cost of acquisition of the asset, (2) the cost of any improvement thereto and (3) expenditure incurred wholly and exclusively in connection with the transfer of the asset. The cost of acquisition means the amount paid for acquiring the asset. Once the asset is acquired, then any expenditure incurred thereafter cannot be considered as the cost of acquisition, since such expenditure would not have any nexus with the acquisition of the asset. If income is generated from the capital asset, depending on the head of income under which it is assessed, deduction can be claimed either u/s.36(1)(iii) or Sec.57(iii) of the Act. The entire scheme of the Act, therefore, reveals that interest component after the date of acquisition and till the date of sale cannot be treated as the cost of acquisition. It is only allowable as a revenue deduction on year to year basis against the income generated from such asset or likely to be generated to the extent provided by the Legislature under different heads. We therefore uphold the order of the AO to this extent.- Decided partly in favour of assessee.

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• 2016 (6) TMI 250
  Allowance of actuarial valuation of privilege leave encashment - Held that:- Disallowance was made by the AO by invoking the provisions of clause (f) of section 43B and the same was deleted by the ld. CIT (Appeals) by following the judgment of the Hon’ble Calcutta High Court rendered in the case of Exide Industries Ltd. v. UOI (2007 (6) TMI 175 - CALCUTTA High Court ) wherein it was held that insertion of clause (f) in section 43B is unconstitutional. Subsequently, the Hon’ble Apex Court [2008 (9) TMI 921 - SUPREME COURT ] has stayed the operation of this judgment of the Hon’ble Calcutta High Court rendered in the case of Exide Industries Ltd. v. UOI (supra) and therefore, the order of the ld. CIT (Appeals) by following this judgment of the Hon’ble Calcutta High Court cannot be approved. The legal position that now stands is that clause (f) of section 43B is very much on the statute book and therefore, if the assessee has not made payment of leave encashment provision in the present year, deduction on account of that provision cannot be allowed as per provisions of clause (f) of section 43B. It is not the case of assessee that payment was made for provision of leave encashment - Decided in favour of revenue. Allowance of claim towards provision for bad and doubtful debts - Held that:- We find that as per assessment order, it is the objection of the AO that the details as per requirement of Rule 6ABA are not furnished before him. As some details are made available before us, but as per the certificate given in the PB, all these details were filed before the CIT (Appeals) and the same were not filed before the AO. We also find that no remand report has been obtained by the ld. CIT (Appeals) from the AO. Under these facts, we find force in the contention of the ld. DR of Revenue that this matter should go back to the file of ld. CIT(Appeals) for fresh decision after obtaining remand report from the AO on this issue. Accordingly, we set aside the order of the ld. CIT (Appeals) on this issue and restore the matter back to his file for a fresh decision in light of our above observations, after affording reasonable opportunity of being heard to both the sides. - Decided in favour of revenue for statistical purposes.. Disallowance made with regard to excess claim of salary - Held that:- Letter dated 24.7.2010 issued by Govt. of India, Ministry of Finance, Department of Financial Services in respect of revision of pay & allowances of all Regional Rural Banks employees w.e.f. 1.11.2007. So, on the basis of communication received from Govt. of India, Ministry of Finance, the Board of assessee bank as per its Resolution dated 31.8.2010 has decided to make payment of arrears for the period from 1.11.2007 to 31.7.2010. No doubt, this date of Board Resolution and the letter from Govt. of India, Ministry of Finance is subsequent to the present accounting year i.e., accounting year 2009-10 relevant to A.Y. 2010-11 but it is also true that these dates are prior to the date of filing of return of income by the assessee and therefore, the liability has crystallised prior to the date of filing of return of income. In our considered opinion, under these facts, provision should be made in the accounts for the year which were not finalised at that point of time i.e., crystallisation of liability - Decided in favour of assessee Amortization of premium paid on Government securities - Held that:- The assessee is entitled to deduction on account of amortization of premium on Govt. securities and therefore no interference is called for in the order of the learned CIT(A) - Decided in favour of assessee

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• 2016 (6) TMI 249
  Transfer pricing adjustment - turnover filter application - Held that:- CIT(A) directed the TPO to adopt the turnover filter of Rs. 1 crore to Rs. 100 crores. Further, the submission of the Ld. Counsel for the assessee that in the subsequent year the turnover filter criteria of Rs. 1 crore to Rs. 100 crores shown by the assessee has been accepted by the TPO and the DRP could not be controverted by the Ld. Departmental Representative. Further, we do not find any merit in the grounds raised by the revenue regarding certain observations of the CIT(A). Under these circumstances, we do not find any infirmity in the order of the CIT(A) on this issue - Decided against revenue Working capital adjustment - Held that:- Since the CIT(A) has directed the AO to grant working capital adjustment to the assessee on the basis of average credit/debit period for the year and commercial rate of interest and since working capital adjustment has been allowed to the assessee by the TPO in A.Y. 2009-10 and 2010-11, therefore, we do not find any infirmity in the order of the CIT(A) directing the TPO to grant working capital adjustment on the basis of certain calculation - Decided against revenue

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• 2016 (6) TMI 248
  Eligibility to provisions of DTAA between India and Singapore - Benefits under India-Singapore Tax Treaty v/s income assessed under section 115A - Non granting of benefits under the India – Singapore Tax Treaty to the Appellant denied on the basis that it is not the beneficial owner of the income received from royalty and interest - r DTAA between India and Singapore - Held that:- It is not the case of Revenue that the amount has not been remitted to Singapore, but the benefit of Tax Treaty have been denied to the assessee since the said amount has not been remitted in the current fiscal year i.e. financial year 2009-10. Where the amount has been remitted to Singapore and has been subject to the tax, we find no merit in the orders of Assessing Officer / DRP in denying the benefit of Treaty provisions to the assessee in taxing the income at lower rates. Thus where the assessee who had entered into an agreement with its principal in UK and received the know-how, which in turn, it could sub-license and had in furtherance provided services to its sub-licensee and received sub-licensee fees from sub-licensee i.e. INPL, then such royalty income having been received by the assessee non-resident company on its own right as the beneficial owner of the same, such royalty income is to be subject to tax at concessional tax rate at 10%. Similarly, the interest income earned by the assessee was also received by it being its beneficial owner and which in turn, has been remitted though not in the instant year, is taxable at concessional rate of taxes. - Decided in favour of assessee.

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• 2016 (6) TMI 247
  Reopening of assessment - difference in income declared by the assessee and the income shown in the TDS certificate - Held that:- Only for the purpose of requirement of verification to find out any excess TDS benefit has been given to the assessee, assessment was reopened. There is nothing in the reasons to indicate that there is an escapement of income. To consider the variation in the TDS benefit to be given to the assessee, the assessment was reopened. The variation in the TDS benefit to be given does not necessarily lead to escapement of income. Mere need to verify the discrepancy does not bring matter within the scope of the cases in which reassessment proceedings can be validly initiated. There is distinction between the reasons to believe and reason to suspect while the former is good enough to hold that income has escaped assessment and to initiate suitable remedial measures in respect thereof, the latter can, at best, be the ground to verify and examine the matter further. Mere fact that matters need to be verified and examined further can never be a reason good enough to believe that income has escaped assessment and reopen the assessment proceedings, that too, the very initiation of proceedings but the facts of the instant case was devoid of merit and reassessment is bad in law. - Decided in favour of assessee

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• 2016 (6) TMI 246
  Revision u/s 263 - treatment to sinking fund from the parties as capital or revenue receipt - Held that:- As in the assessment order there was no discussion whatsoever by the Assessing Officer on the issue relating to sinking fund. There is no application of mind or any enquiry by the Assessing Officer on this issue. Being so, in our opinion, the assumption of jurisdiction under section 263 of the Act is justified. Regarding the pleas of the assessee is that the sinking fund is a part of sale consideration of the property, in our opinion, this plea of the assessee is having no merit since it is an admitted fact the office space sold during the year was not actually owned by the assessee. The transaction has actually taken place between M/s. SCM Microsystems (India) P. Ltd. and M/s. Data Telesis Pvt. Ltd. Though the assessee is not involved in the sale of office space, still the sinking fund is collected by the assessee from the buyer. This does not a part of the sale consideration received by the assessee so as to be treated as capital receipt and to grant deduction under section 80-IA of the Act. Thus the transaction is in the nature of charging fees from owners for providing various types of services in the form of maintenance of various routine services and maintenance of the building, consequently, all within the ambit of trading activities, nothing to do with the consideration received by the assessee, if any. Further, there is a binding decision of the Bombay High Court (M. Visvesvaraya, Industrial Research and Development Centre v. CIT (2012 (11) TMI 235 - BOMBAY HIGH COURT) in which the Commissioner of Income-tax placed reliance so as to treat the impugned receipt as a revenue receipt, as such we do not find any infirmity in the order of the Commissioner of Income- tax. - Decided against assessee.

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• 2016 (6) TMI 245
  Disallowance of deduction under section 80-IA - Held that:- This issue involved is squarely covered in favour of the assessee, inter alia, by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 wherein the similar claim of the assessee for deduction under section 80-IA in respect of captive power units has been allowed by the Tribunal relying on the various judicial pronouncements as well as the CBDT instruction No. 1116. Respectfully following the said decision of the co-ordinate Bench, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) allowing the claim of the assessee for deduction under section80-IA on captive power unit - Decided in favour of assessee Determination of the nature of sales tax remission amount received as subsidy - treated as capital or revenue? - Held that:- This issue involved is squarely covered in favour of the assessee, inter alia, by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2003-04 and 2004-05 wherein the similar amount of incentive received by the assessee-company under the same scheme of the West Bengal Government has been held to be capital in nature not chargeable to tax. Respectfully following the said decision of the Tribunal, we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) giving relief to the assessee on this issue - Decided in favour of assessee Loss of one eligible unit is required to be set off against the profit of other eligible unit for the purpose of computing deduction under 80-IA - Held that:- This issue of the Revenue's appeal for the assessment year 2006-07 is squarely covered in favour of the assessee, inter alia, by the decision of the hon'ble Delhi High Court in the case of CIT v. Dewan Kraft System P. Ltd [2007 (2) TMI 149 - DELHI HIGH COURT ] wherein held that the losses of other unit of an assessee-company not set off with the profit of another unit which is eligible for the deduction u/s 80IA - Decided in favour of assessee Disallowance under section 14A - Held that:- As regards the disallowance under section 14A on account of common and general expenses, it is observed that the co-ordinate Bench of this Tribunal has taken a consistent stand on this issue in several cases by holding that a disallowance to the extent of 1 per cent. of the exempt income would be fair and reasonable. Since the learned Commissioner of Income-tax (Appeals) in his impugned order has followed this stand consistently taken by the Tribunal while restricting the disallowance under section 14A on account of common and general expenses to 1 per cent. of the exempt income, we find no infirmity in the same. Accordingly, the impugned order of the learned Commissioner of Income-tax (Appeals) restricting the disallowance made by the Assessing Officer under section 14A to Rs. 34,750 is upheld Addition made to the book profit computed under section 115JB of the Act on account of disallowance of expenses incurred by the assessee in relation to the earning of exempt income under section 14A - Held that:- In the case of Goetze (India) Ltd. (2009 (5) TMI 615 - ITAT DELHI ), wherein the similar addition made to the book profit of the assessee-company computed under section 115JB on account of disallowance of expenses made under section 14A was held to be unsustainable by the Tribunal holding that the provisions of section 14A could not be imported into clause (f) of Explanation 1 to section 115JA. Respectfully following the said decision we uphold the impugned order of the learned Commissioner of Income-tax (Appeals) giving relief to the assessee on this issue - Decided in favour of assessee Disallowance of expenditure incurred on railway sidings - Held that:- Revenue's appeal is squarely covered in favour of the assessee, inter alia, by the decision of the hon'ble Gauhati High Court in the case of CIT v. Bongaigaon Refinery and Petro-chemicals Ltd. [1996 (6) TMI 64 - GAUHATI High Court] as held that the amount incurred by the assessee for construction of railway sidings and track outside the refinery complex was a revenue expenditure in the year in which it was incurred since the said expenditure did not result in bringing into existence any capital asset for the assessee - Decided in favour of assessee Disallowance u/s 14A - Held that:- Direct the Assessing Officer to compute the disallowance to be made under rule 8D(2)(iii) by taking into consideration the average value of that investment appearing in the balance-sheet as on the first and the last day of the previous year, from which the exempt income was earned. Addition of the foreign travel expenses - Held that:- It is observed that after taking into consideration the nature and purpose of Tata Business Excellence Convention organised at Pattaya, a finding has been recorded by the learned Commissioner of Income-tax (Appeals) that the foreign tour undertaken by the employees of the assessee-company to participate in the said convention was for the purpose of its business and the expenditure incurred on such travel was an allowable expenditure. At the time of hearing before us, the learned Departmental representative has not been able to rebut or controvert the finding recorded by the learned Commissioner of Income-tax (Appeals) in this regard - Decided in favour of assessee

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• 2016 (6) TMI 244
  Addition invoking the provisions of section 40A(3) - elaborate submissions were made to prove that the expenses incurred in cash were genuine which were paid to distilleries through the Excise Department for purchase of liquor and there were practical expediency because of which the payments have to be made in cash - Held that:- Each person has licence in his own name to make the sales and purchases as per the terms of these licence agreements. Further, it is quite a known fact that in the business of the liquor, transactions are to be done in cash. All these facts have not been controverted by the Assessing Officer or even by the learned Commissioner of Income-tax (Appeals). This makes out a case that the assessee has business expediency under which it have to make payments in cash. Further, not a single transaction has been questioned at any stage. The learned Commissioner of Income-tax (Appeals) while adjudicating the contention of the assessee with regard to the genuineness himself has held that it is not sufficient for the assessee to establish that the payments were genuine and the parties were identifiable. He was of the view that the assessee is further required to prove that due to exceptional and unavoidable circumstances as provided under the Rules, the payments were made in cash. Therefore, it is not a case of the Department that the payments so made in cash were not genuine. The reasons given by the assessee at every stage have not been disbelieved. Since these reasons are correct, they really make out a case of business expediency. In this view, respectfully following the judgment of the hon'ble Punjab and Haryana High Court in the case of Gurdas Garg (2015 (8) TMI 569 - PUNJAB & HARYANA HIGH COURT ), we hold that the payments cannot be disallowed under section 40A(3) of the Act. - Decided in favour of assessee Addition with regard to ahata income - Held that:- No infirmity in the order of the learned Commissioner of Income-tax (Appeals) as regards ahata income. The Assessing Officer nowhere in his assessment order, nor in the remand report controverted the fact that for running ahata one has to take licence from the excise authority. Neither the Assessing Officer has placed on record any material to show that the assessee has taken this licence or in fact, the assessee is running the ahata. In this view, making addition on account of ahata income on estimate basis that too, comparing the case of the assessee with that of another assessee is not correct. The action of the learned Commissioner of Income-tax (Appeals) in deleting the addition is found to be as per law. - Decided in favour of assessee Addition on account of suppression of sales - Held that:- No infirmity in the order of the learned Commissioner of Income-tax (Appeals) since it is a common fact that in the liquor business, transactions are done through cash. We observe that the Assessing Officer has though proposed to reject the books of account but has not given any finding as to the rejection of the books of account of the assessee. He has not been able to pinpoint any instance of suppression of sales and only on the basis of suspicion, he has made the addition, that too on the estimated basis. These reasons are not enough to make such an addition. In this view, we confirm the order of the learned Commissioner of Income-tax (Appeals) in deleting the addition - Decided in favour of assessee

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• Customs

• 2016 (6) TMI 267
  Imposition of penalty - Seizure of 62,500 strips of Sildenafil Citrate Tablets - Consignee of seized goods - Held that:- the First Appellate Authority cannot hold that Appellant is involved in the smuggling of goods under consideration when he categorically gives a finding that identity of the real owner is not established. No Appeal has been filed by the Revenue against Order-in-Appeal to the effect that Appellant was the real owner of the seized goods. In the absence of any such evidence Appeal filed by the Appellant is required to be allowed. - Decided in favour of appellant with consequential relief

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• 2016 (6) TMI 266
  Liability of port trust to pay duty on Import of LAM coke - not accounted for in the Customs area by the custodian and in the custody of the appellant port - Held that:- there is no evidence brought on record by the appellant that any insurance survey was done by any agency or whether any remission of duty under Sec 23 of the Customs Act 1962 was claimed by the appellant. Imported goods lying in the Customs area in the custody of the appellant can only be cleared on payment of duty and can not be handed over to an importer by taking shelter of Sec 42 & 43 of the Major Port Trust Act 1963. The observations made by the first appellate authority that there is no evidence on record that the goods, for which duty has been demanded are lost or destroyed. Accordingly the quantity not accounted for by the custodian has to be treated as pilfered under Sec 23 of the Customs Act 1962 and Custodian is responsible for paying duty on such unaccounted imported goods under Sec 45(3) of the Customs Act 1962. Accordingly, no reason found to interfere with the orders passed by the first appellant authority & the same is required to be upheld. - Decided against the appellant

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• 2016 (6) TMI 265
  Period of limitation - Revokation of CHA licence and forfeiture of security deposit - Regulation 22 of the CHALR - Bill of Entry falsely filed in the name of Global Logic India Pvt. Ltd. - Huge loss caused to Government revenue by getting the importer’s goods cleared duty free on the strength of fake and forged procurement certificates. Held that:- the licensing authority has been apprised of the matter by the Commissioner of Customs, ICD through Order-in-original dated 5.7.2012. This may be practically considered as the offence report. The show cause notice proposing revocation has been issued on 30.1.2014, well beyond the ninety days limit prescribed for the same in regulation 22(1). The inquiry report which is mandated to be completed within ninety days from the date of the show cause notice has been filed only on 27.2.2015, very much beyond the ninety days time limit prescribed for the same. Finally the impugned order has been passed within ninety days from the date of inquiry report. However, the overall time taken were completion of regular proceeding is a period of 34 months, which is much beyond the allowed total duration of nine months. Therefore, by following the various decisions of the Hon'ble High Court directly dealing with CBLR and sanctity time limit under the regulation, the order of the lower authority which was issued without adhering to the time schedule is liable to be set aside. - Decided in favour of appellant

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• 2016 (6) TMI 264
  Valuation - Includability - Documentation fees and royalty towards technical knowhow - Collaboration agreement for licence and technical assistance - Held that:- it is clear that the agreement and the payment terms provided therein is related to the technical knowhow for the manufacture of final product at the appellants’ end. The agreement no where suggests that there is any link between quantum of import and the payment terms related thereto provided in the agreement. Since the agreement is, towards technical knowhow which is related to the manufacture of the final product and not related to the sale of imported goods, fees cannot be included in the assessable value of the imported goods and the same is not covered by Rule 9(1)(b)(iv) and 9(1)(c) of the Customs Valuation Rules, 1988. The impugned order do not sustain and set aside. - Decided in favour of appellant

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• 2016 (6) TMI 263
  Seeking grant of bail - Seizure of illegally imported foreign currencies - Prohibited goods - Held that:- appointment of franchisee has not been made by the order of the Reserve Bank of India. There is only authorization letter issued by the AFPL. Hence, keeping in view the nature of the offence, evidence, complicity of the accused, severity of punishment, submissions of the learned counsel for the parties, the stand taken by Obeda Khan, Irfan and Laeek, the provisions of the Customs Act and FEMA, no case is made out for bail. - Decided against the applicant

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• Corporate Laws

• 2016 (6) TMI 243
  Scope of the court admitting an appeal under section 10F - interim order of CLB - Held that:- It is the case of the appellant that the order has been passed in a cursory manner and the reason for stating this is, by that order the Company Law Board has in effect stopped the business of the appellant no.1. The appellant no.1 carries on business of development of land by constructing apartments on that and selling the apartments. Therefore, by way of impugned order, it is alleged, the appellant no.1 has been restrained from developing the land, stopped from constructing flats and from selling the flats. The board in paragraph 5 of the order dated 29th October, 2015 has only stayed alienation of land in question until the next date of hearing. The order has been passed on 29th October, 2015 and the next date of hearing was 4th December, 2015. The reason why this interim arrangement was also ordered can be found in the last paragraph of the order. It is because only respondent no.2, who is appellant no.2 herein, had filed the reply and appellant nos.1 and 3 herein had sought time to file reply. They were granted four weeks time to file the reply and the respondents, who are petitioners before the board were granted two weeks thereafter to file the rejoinder. On 14th December, 2015 the appellant nos.1 and 3 did not file any reply but sought extension by another four weeks to file the reply. The time was granted and consequently the respondents herein, i.e., petitioners before the Company Law Board were granted two weeks time to file rejoinder after receiving a copy of the reply. The matter is now stood over to 25th January, 2016 and the interim order is continued. The board has also noted that the reason why the alienation of land in question was stayed was because the counsel for the respondents viz., counsel for the appellants herein had accepted that no construction for flats has commenced and the site plan is awaiting sanction from the authorities. The order does not stop the appellants business of developing the land by constructing apartments. If according to the appellants now the site plans have been sanctioned, in other words, the circumstances have changed, it will be open to the appellants to move the Company Law Board for suitably altering the interim order and the Company Law Board may consider and decide the same on merits. Moreover, the proceedings before the Company Law Board is at a preliminary or introductory stage awaiting a final adjudication on merits following a full contest. The pleadings are incomplete as the appellants have infact sought further time to file a reply. The Company Law Board has only ensured a working arrangement, if one may call it, until the pleadings are complete and parties are heard. Further, do not find any perversity or arbitrariness in the order passed. Thus appeal is not maintainable.

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• Service Tax

• 2016 (6) TMI 281
  Eligibility of Cenvat credit - duty paying document - Services of commercial training and coaching - invoices found to be not eligible documents for availing credit - Held that:- it is found that the sample verification of the copies of invoices issued by the manufacturer and the re-sellers indicates the clear link between the duty paid goods supplied by the manufacturer and received by the appellant. Therefore, no justification found to deny the credit to the appellant. Accordingly, the impugned order is set aside. - Decided in favour of appellant

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• 2016 (6) TMI 280
  Allowability of Cenvat credit - Rent-a-cab and Air Travel Agent Service - services used for employees benefit - Held that:- Rent-a-cab service and Air Travel Agent service though used by employees of the appellant but undisputedly for the performance of the appellant company s business. Therefore, both the services are input service. This Tribunal in the various judgments cited by the Ld. Chartered Accountant allowed the Cenvat Credit in respect of both the services. I am also convinced with the submission and presentation of the books of accounts by the Ld. Chartered Accountant that expenses towards Rent-a-cab service and Air Travel Agent service were booked as expenditure in the Profit and Loss Account of the appellant. I, therefore, do not find any reason why the Cenvat Credit should not be allowed on Rent-a-cab service and Air Travel Agent service to the appellant. The Rent-a-cab service was excluded from the definition of input service. Therefore prior to 01-04-2011 the Cenvat Credit was admissible. As per my above discussion, and the settled legal position, the appellants are entitled for the Cenvat Credit in respect of Rent-a-cab and Air Travel Agent services. - Decided in afvour of appellant

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• 2016 (6) TMI 279
  Eligibility of refund claim - Terminal Handling Charges (THC) charges, bills of lading charges, origin haulage charges, repo charges - Proper invoices were not submitted and debit notes were submitted - Proof of payment of service tax on GTA Services was not submitted and description of goods is not mentioned in the invoices issued by CHA which also include other expenses - Held that:- the issue stand settled in the appellant's favour by CESTAT order in the various cases. Period of limitation - Held that:- it is seen that the claim was filed within 6 months of the end of quarter 01/04/2008 to 30/06/2008, and therefore, was not hit by limitation in view of the time limit extended by the Notification No. 32/2008-ST dated 18.11.2008. It is so because the time limit was extended to six months on 18.11.2008 which means that by virtue of the said notification, refund claim for quarter ending 30.06.2008 could be filed up to the end of December, 2008. Eligibility of refund claim - Cleaning activity - not covered under the Notification No. 41/2007-ST dated 01.10.2007 - Held that:- it is found that the cleaning activity even if considered to be covered under Notification No. 41/07-ST as part of 65(105)(zzzd) is eligible for exemption only if the agency which provided the cleaning services is duly accredited by a competent statutory authorities and the appellant admits that it does not satisfy the said condition. Consequently, the refund pertaining to cleaning activity is not admissible. The contention of the appellant that cleaning activity is not taxable and therefore refund of Service Tax paid thereon should be given under Section 11B of Central Excise Act is not relevant and tenable because the refund claim was filed and claimed in terms of provisions of Notification No. 41/2007-ST and not under the provisions of Section 11B of Central Excise Act. - Appeal partly allowed by way of remand

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• 2016 (6) TMI 278
  Eligibility of refund claim - tax paid on value of services availed in the course of export of iron ore fines - exemption notification no. 17/2009-ST dated 7th July 2009 - Corrigendum/addendum was improper - issued after the receipt of reply to the show cause notice - Held that:- the provisions of the relevant exemption notification require submission of proof that the specified services had indeed been received by the exporter claiming refund of the tax paid. In the instant case, the documents evidence that services were rendered to M/s MME Exports and not to the respondent herein. The documents on record fail to evince nexus between the applicant and the services claimed to have been used. It must also be noticed that the first appellate authority is not empowered to remand matters to the original authority under section 35A of the Central Excise Act, 1994. Therefore, the impugned order is set aside as lacking legally and propriety. The findings of the original authority that the applicant is not eligible for refund, owing to non-compliance with the period prescribed for making such applications and the inability of the claimant to evince utilization of eligible services, is sustained. - Decided in favour of revenue

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• 2016 (6) TMI 277
  Stay application - Waiver of pre-deposit - Demand of differential Service tax along with interest and penalty - Section 76, 77, & 78 of the Finance Act 1994 - before 01.06.2007, appellant was paying service tax under commercial and residential construction services but with effect from 01.06.2007 they started paying service tax under the category of works contract on the basis of composition scheme in respect of contracts which were entered into prior to 01.06.2007 - Held that:- by following the decision of Hon'ble Supreme Court in the case of CCE & Kerala vs Larsen Toubro Ltd [2015 (8) TMI 749 - SUPREME COURT], after 01.06.2007, the tax liability has to be discharged under works contract only and no service tax can be charged on construction of commercial and residential services. Therefore, the applicant has a prima facie case for grant of total waiver of pre-deposit. - Waiver granted and recovery stayed

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• 2016 (6) TMI 276
  Period of limitation - Admissibility of refund claim of Cenvat credit - Rule 5 of the Cenvat Credit Rules 2004 read with Notification No. 5/2006-CE (NT) dated 14.03.2006 - Support services of business or commerce - input services received and consumed for export of output services - consideration received in foreign currency in terms of Rule 4 of the Export of Service Rules, 2005 - Held that:- the impugned order is set aside and the matter is remanded back in terms of the remand order passed in favour of appellant for the refund appeals filed along with the present appeal by the appellant. - Appeal allowed by way of remand

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• Central Excise

• 2016 (6) TMI 275
  Validity of de-registration of old Central Excise Registration since new registration was granted to the buyer of the premises - whether surrender of Central Excise Registration, proposed by the appellant can be accepted by the department or otherwise? - Held that:- In the present case, firstly new company M/s. Monomer Chemical Industries Pvt Ltd has been issued new registration therefore the present appellant cannot be remained as registered person. As regard compliance of the provision of the notification, requirement is only to file declaration, the appellant have filed declaration in Annexure III and disclosed the entire fact including the status of their case which is pending at show cause notice stage. Secondly, appellant even though, there is no confirmed demand, in view of show cause notice, executed indemnity bond wherein they have undertaken to discharge the Central Excise duty liability as and when it arises in future. Therefore it is of the view, after making substantial compliance of the provision there is no reason to deny the de-registration of the appellant. Even, if it is assumed that appellants registration should not be cancelled, in such case new registration to any other person on the same premises cannot be given and if that be so then no operation can be carried out in the said premises. Thus Adjudicating authority is legally and correctly ordered for de-registration of the appellant and accepted the surrender of registration.

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• 2016 (6) TMI 274
  Cenvat credit on material like cement, angles, channels, electrodes, CTD Bars and H.R. Plates. Ld. - denial of claim on the ground that all these materials are for general purpose, structural items used for carrying out civil engineering work and therefore could not be treated as accessories of machines installed in the factory - extended period of limitation invoked - Held that:- In the present case channel, angles, H.R. Plates, welding electrodes were used for fabrication/manufacture of parts or furnace which is capital goods, credit on these items are admissible. As regard credit on cement and CTD Bars, these items were neither used as capital goods nor as input for manufacture of Capital goods for the reason that Cement and CTD bars were admittedly used for making civil structure i.e. foundation for erection or installation of furnace. Though it is made for erection or installation of machinery but it is civil construction like building construction therefore credit on CTD bar and cement is not admissible. As regard limitation in respect of credit taken on CTD bars and Cement, since appellant have not disclosed the fact about use of these material to the department, it amounts to suppression of facts therefore the extended period is rightly invoked. In case of Commissioner of Customs and Central Excise, Ghaziabad Vs. M/s. Rathi Steel and Power Ltd [2015 (5) TMI 168 - ALLAHABAD HIGH COURT] held that there is willful suppression of material fact by the assessee as well as contravention of the provisions of the Act and rules. The fact of the said judgment are more or less similar to the facts of the present case therefore Ld. lower authority rightly invoked the extended period. Hence the demand of Cenvat credit in respect of CTD bars and Cement is sustainable. In view of the above the credit in respect of Channal, Angles, HR Plates, welding Electrodes are allowed. Credit on CTD bars and Cement is disallowed. Adjudicating authority shall re-quantify the demand and penalty and interest commensurate to re-quantified amount of demand. - Decided in favour of assessee in part.

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• 2016 (6) TMI 273
  Recovery of interest for the Cenvat credit wrongly taken, but not utilized - Held that:- There is no liability on the appellant assessee to pay interest; consequently, the appeal is allowed in favour of assessee.

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• 2016 (6) TMI 272
  Demand of duty from the Job worker who is the actual manufacturer - Extended period of limitation - suppression of facts - Held that:- Principal Manufacturer (s) have not been issued any SCN by the Revenue and the job worker, who is the appellant assessee, has only been issued the SCN (Show-Cause Notice). The job worker, who is the appellant assessee has been treated by the Revenue as the manufacturer by the Central Excise Authorities, with whom the Principal Manufacturer (s) filed the declaration under Notification 214/86-CE saying that they undertake to discharge liability of Central Excise duty, if applicable. It is, therefore, not a question of hiding any facts from the Revenue authority. Therefore, when there is not any suppression of facts by the appellant, any demand of Central Excise duty can be made for normal period of one year only. In other words, liability of payment of duty would be for the preceding one year from the date of SCN, i.e. 07.10.2008 ; Central Excise duty liability will be for the clearances made by the appellant assessee for the said period of preceding one year. The appellant has already been given the benefit of refund of service tax paid by the lower adjudicating authority, which can be adjusted against their liability of payment of Central Excise duty for the one year period being confirmed by this order. We also take note that the appellant made a predeposit of Rs. 15.00 lakhs, which can also be adjusted against their liability of payment of duty of Central Excise being confirmed here. As confirming the demand for the normal period of one year. It is also obvious that the appellant would be liable to pay applicable interest on the Central Excise duty from the day it became due till the payment of the same. Original adjudicating authority is hereby directed to compute the liability of duty of Central Excise and the interest of the appellant in terms of this order and inform the appellant within three months of receipt of this order. As no kind of concealment of the facts on the part of the appellant and all along Revenue was in full knowledge of the facts and even the Audit team of the Department visited the appellants premises and advised them to pay service tax instead of Central Excise duty and the appellant had paid the said service tax then. Consequently, there is no justification for imposition of any penalty on the appellant under the law of Central Excise. The Penalty imposed on the appellant is, therefore, hereby set aside.

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• 2016 (6) TMI 271
  Cenvat credit on paper transactions not physically received - Held that:- The manufacture supplier of the goods is not M/s Jai kara Steel Rolling Mills at all. No investigation has been conducted by the Revenue at the end of manufacturer supplier who has issued the invoices on which the appellant has taken Cenvat Credit. No investigation was conducted from the transporters to ascertain the fact whether goods have been transported to the appellant's factory or not. Merely on the ground that M/s Jyoti Steels is non-existent and having no godown, denial of cenvat credit proposed. It is not disputed by the Revenue that during the relevant period, M/s Jyoti Steels was the registered dealer and registration was granted to M/s Jyoti Steels by Central Excise Registration Department. If a supplier of goods is the registered dealer of the department itself, the department cannot allege that dealer is non-existent unless and until registration is cancelled. Admittedly, in the case the appellant is able to produce the invoice against which appellant has availed cenvat credit and the same has been entered in their RG-23 Reigster therefore, the burden lies on the revenue to prove that this is only a paper transaction and the goods have not been received by the appellant at all. To ascertain this fact that appellant has not received the goods, the statement of transporter is very much relevant to find out the truth. Moreover, the investigation at the end of manufacture supplier may also reveal the truth whether the manufacture supplier has supplied the goods to the appellant through the registered dealer or not but the same has not been discharged by the revenue. Thus the charge against the appellant that they have not received goods and it was only the paper transaction is not sustainable. - Decided in favour of assessee.

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• 2016 (6) TMI 270
  Clearance of trade samples without payment of duty - appellant found guilty of willful misstatement and suppression of facts - extended period was invoked and mandatory penalty also imposed - Held that:- We find that at no stage the appellant admitted it had cleared samples during the impugned period without payment of duty. In the letter dated 30.07.2000 it submitted that in its earlier letter dated 16.08.2000 it was mentioned that samples prior to June 1997 might have been cleared from duty paid stock and that was the reason possibly for absence of any specific records about clearance of samples. We find that the SCN contains no evidence of duty free clearance of samples during the impugned period. As regards the contention of the ld. DR that in their statements the officials of the appellant admitted that they cleared samples duty free during the period October 1994 to June, 1997, suffice to say that even if that was the case, it does not conclusively establish that there were clearances of samples duty free during impugned period which is November 1995 to May, 1997 inasmuch as the statements will not be wrong if the samples were cleared say in the period Oct., 1994 to Oct., 1995 because this period is contained in the period October 1994 to June, 1997. Assumption has been made that the appellant cleared samples duty free during the impugned period at the same level at which samples were found to have been cleared during subsequent period June, 1997 to March, 1999. We find no basis to sustain that assumption in the wake of assertion of the appellant that it has cleared no samples duty free during the impugned period and Revenue having failed to produce any documentary evidence of even a single such samples having been cleared by the appellant during the relevant period. Thus the impugned demand has been confirmed on the basis of an assumption without any corroborative evidence to sustain such assumption - Decided in favour of assessee.

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• 2016 (6) TMI 269
  Penalty under Section 11AC - removal of non-excisable goods on payment of duty through cenvat credit - whether there is suppression of fact, mis-declaration, fraud, collusion etc? - Held that:- Appellant have debited the Cenvat Credit even though wrongly at the time of removal of non-excisable fabric, and the appellant has also paid additional equal amount in cash after issuance of show cause notice which they have not contested. On careful reading of the show cause notice, it is find that there is no specific allegation that the appellant has suppressed the fact of removal of non-excisable goods on payment of duty. The appellant shows the debit entry in their RG 23A Part-II account and also shown the quantity of fabrics removed in their RG 23A Part-II account, the same has been reflected in the ER-1 Return. Therefore, in the absence of any specific allegation in the show cause notice and the disclosure of entire fact in the statutory record does not show suppression of fact on the part of the appellant. Thus the penalty under Section 11AC/Rule 15(2) is not imposable on the appellant, however there is no doubt that the appellant have contravened the provision. Therefore the penalty under Section 11A is set aside and the demand of Cenvat Credit, interest and penalty under Rule 27 are maintained. The appeal is allowed in the above terms.

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• 2016 (6) TMI 268
  Validity of show cause notice - duty along with interest was paid before issuance of SCN - Payment of interest within three months from the date of clearance of the goods - Held that:- When there is no suppression of fact on the part of the assessee and the duty along with interest is admittedly paid without contest, the show cause notice should not have been issued. The only exception, is provided that if the duty is not paid by reason of suppression of fact, mis-declaration, fraud, collusion etc. with intent to evade payment of duty, immunity provided under sub-section (2B) is not available to the assessee. In the present case, though the non payment was pointed out by the department but no suppression of fact, mis-declaration, collusion, fraud etc. exist in the case for the reason that M/s. MRBBIPL have issued valid invoice for removal of capital goods. Therefore neither show cause should have been issued nor any charges of the show cause notice should have been confirmed. As per above discussion and the clear legal provision under sub-section (2B) of Section 11A, the confiscation of the goods is not legal and correct. Therefore the impugned order is set aside and appeal is allowed in favour of assessee.

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• Indian Laws

• 2016 (6) TMI 242
  Denial of Registration of sale certificate - auction sale under SARFAESI Act - Held that:- It is crystal clear that it is well settled principle of law that the order of attachment cannot be a bar to register the document. It is clear that the sale of any property, pending the order of attachment, is void only as against the claims enforceable under the order of said attachment and not in respect of other claims. Hence, if a document is presented for registration in compliance with the provisions under the Registration Act, the Sub Registrar cannot deny the registration of the same unless there is interim order from the competent Court restraining him from registering the document and he is empowered to deny the registration of the document within the frame of provisions of the Registration Act and Rules framed thereunder, particularly, on the grounds enunciated under Rule 55, viz., if the document is forged, impersonation by the parties, if the executing party is a minor or a lunatice, etc. Therefore, in the absence of any interim order from the competent Court nor any of the grounds available under Rule 55, the Sub Registrar cannot deny the registration. Writ Petition is allowed and the 2nd respondent viz., Sub-Registrar, Puducherry, is directed to register the Sale Certificate dated 12.01.2016 issued by the petitioner and to release the registered document, within a period of two weeks from the date of receipt of a copy of this order.

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• 2016 (6) TMI 241
  Approval of a scheme by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 - whether an unsecured creditor has the option not to accept the scaled down value of its dues, and to wait till the scheme for rehabilitation of the respondent-Company has worked itself out, with an option to recover the debt with interest post such rehabilitation'? - Whether the decision of Continental Carbon India Ltd. Vs. Modi Rubber Ltd. reached the wrong destination on account? - Held that:- The decision in Modi Rubber [2012 (7) TMI 980 - DELHI HIGH COURT]comes into conflict with the other decisions with respect to Section 18(8) of SICA, 1985 for the reason the other decisions bring out that there is no distinction between secured and unsecured creditors except those creditors who have to give financial assistance under a scheme to a sick company. In other words, every creditor stands on a same footing with respect to the power of the Board to sanction a scheme. Those creditors which have to provide financial assistance would form a sub-category and their consent alone would be necessary with respect to the financial assistance to be provided. We are therefore of the opinion that prima-facie case is made out to refer the matter to a Larger Bench on the following questions:- Whether the decision in Modi Rubber case has not properly appreciated the mandate and scope of Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (“SICA”). Which would subsume the questions; Whether the Section vests BIFR with broad and extensive powers to take such measures as are necessary for revival of a sick company; and Whether without consent of unsecured creditors, the scheme for rehabilitation envisaging reduction of their debt is binding on them. The matter be placed before the Hon'ble Chief Justice for necessary directions.

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