Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 1, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Treatment to acquiring technical know - revenue v/s capital expenditure - expenditure incurred for grant of License which accords ‘access’ to technical knowledge, as against, ‘absolute’ transfer of technical knowledge and information would ordinarily be treated as revenue expenditure. - AT
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Depreciation on data base - CIT(A) ought to have allowed the depreciation on the entire payment of ₹ 12 crores towards Acquired Business Database - AT
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Treatment to the losses on sale of share as "capital loss" - Assessee has in its books treated the shares as investment and accordingly valued the shares at cost and therefore its contention of holding the shares at stock in trade is also not supported by the method of accounting and its valuation - auditor has also certified that there is no conversion of capital asset to stock in trade. - AT
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Additional depreciation - carrying out piling works - construction related activity - it is not the case of the assessee that it is producing the prefabricated piles and selling them to outsiders. - the assessee cannot be considered to be an assessee engaged in the business of manufacture or production of an article or thing - AT
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TDS u/s 194A - Excess payment refund debited in the Profit & Loss Account under the head 'indirect expenses' - Whether should be treated as interest on the customers' deposits/advances under section 2(28A)? - Held No - HC
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Disallowance of breakage loss - Merely because the assessee has not claimed such breakage loss in the preceding assessment year, the same in our opinion cannot be a ground to deny a legitimate claim made by the assessee in the impugned assessment year especially when the assessee has submitted proof - AT
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Non deduction of TDS on payments made on account of settlement on withdrawal accumulated balance by the Provident Fund Organization - Keeping in view the interest of the employees as well as the spirit of CBDT Circulars and Instructions, we deem it fit case to grant the stay of demand till the disposal of the appeals before CIT(Appeals). - AT
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Revision u/s 263 - CIT himself accepted that gains on sale of Medchal land has to be assessed under the head "Long term capital gains". The gain is taxable at the rate of 20% only. Whether it is taxed in A.Y. 2007-08 or in later years, the tax rate is at 20% only. Thus, there is no prejudice caused to Revenue - AT
Customs
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Import of memory cards - The goods were seized on the belief that they were smuggled into India and the quantity and value of the goods was mis-declared - In the present case no discrepancy has been pointed out in the labels accompanying the goods. Therefore there is no violation of Section 111(m) - AT
Service Tax
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Valuation - inclusion of reimbursement of expenses - Since the provisions on which reliance was placed to confirm the service tax liability have been struck down, demand set aside - AT
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Disallowance of CENVAT Credit - the centralized registration was granted subsequently - The department has not disputed that the input services were received at the branch office and further that they were utilised for providing output services - credit allowed - AT
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Refund / Rebate claim of tax - Export of services or not - activity of procurement of orders from buyers in India for suppliers of goods situated abroad - whether beneficiary of the entire activity is an Indian consumer - Held No - refund allowed - AT
Central Excise
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Import of the goods duty-free for use thereof in EOU - The duty forgone at the time of import became loss to Revenue. - appellant has discharged duty liability at normal rate of excise duty which is not equal to customs duty forgone. - prima facie the demand raised appears to be correct - AT
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Manufacturing activity or not - installation and erection or heavy storage racks at the premises of its clients - Immovable goods - Not liable to duty of excise - AT
VAT
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Quarterly Return prescribed for the persons engaged in providing facility of electronic shopping (commonly known as e-commerce) through their web-portals, with immediate effect. - Notification
Case Laws:
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Income Tax
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2015 (6) TMI 963
Reopening of assessment - difference of cost of construction shown by the appellant and cost of construction estimated by the Departmental Valuer by way of unexplained investment - Held that:- Re-opening in this case has been done on the basis of DVO’s report only. The report of the DVO is an estimate of the amount spent in the cost of construction of building, and it could not be said that it is an “information” to justify the reopening of the assessment. This issue is covered in favour of the assessee with the series of decisions of the Hon’ble Courts including that of Assistant Commissioner of Income-tax v. Dhariya Construction Co. ( 2010 (2) TMI 612 - Supreme Court of India). It is well settled that the valuation is matter of estimate only and two valuers would not arrive at the same figure of value of the property, and therefore, any estimate made by a valuer could not be said to be “information” to justify the reopening of the assessment under section 147 of the Act - Decided in favour of assessee.
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2015 (6) TMI 962
Transfer pricing adjustment - selection of comparable - determining the ALP on the basis of current year datas and not considering to prior two financial years 2005-06 and 2006-07 - Held that:- In order to determine the arms length price in relation to international transaction, it has to be compared with uncontrolled and unrelated transactions by using the data relating the financial year in which year the international transaction has been entered into. It has been stipulated under rule 10B(4) read with Rule 10D(4) of Income-tax Rules, that contemporaneous information and document should be considered as far as possible for the purpose of comparing uncontrolled transaction with the international transaction. Therefore, the comparability of an uncontrolled and unrelated transaction with the international transaction has to be decided by using current year data. Only when the current year data does not give a true picture of the affairs and results of the comparables due to existence of abnormal circumstances, the multi year data can be considered. When there is no such abnormal or exceptional circumstances/ facts in existence for the year under consideration which could have an influence on the results as well as on the determination of the transfer prices, then the data relating to financial year in which the international transaction has been entered into shall be used.- Decided against assessee. Introducing and upholding to new companies as comparables while determining the ALP - issue of bringing in two new companies, i.e. Brescon Corporate Advisors Ltd. and another Keynote Corporate Services Ltd.- Held that:- The factors for determining inclusion and exclusion of any case in the case of comparables are specifically provided under Rule. Therefore, unless and until there are specific reasons and factors as provided under Rule 10B, an entity cannot be excluded or eliminated from the list of comparables solely on the basis of high profit making unit or loss making unit because no such factor finds place either in Rule 10B(2) or 10B(3). - Decided against assessee. Sustaining the selection of Khandwala Securities Ltd. as comparable even when exceptional profit earned by this company during the financial year 2007-08. As we have already mentioned earlier that Rule 10B does not provide the basis to exclude an entity or eliminate it from the list from comparables solely on the basis of high profit making, for same reasons, we find no merits in this ground of assessee’s appeal also. It is evident that decisive factors for determining inclusion or exclusion of any case in/from the list of comparables are the specific characteristics of services provided, assets employed, risk assumed, the contractual terms and conditions prevailing including the geographical location and size of the market, cost of labour and capital in the markets, etc. Nowhere the higher or lower profit rate has been prescribed as the determinative factor to make a case in comparable. It has been done rightly so because profit is not a factor itself, but consequence of effects of various factors. Only if the higher or lower profit rate results on account of effect of factors given in Rule 10B(2) read with sub-rule (3), that such case shall merit omission then only it can be considered. Higher profits achieved due to factors not mentioned in the Rule then such case shall be continued to find place in the list of comparables. Similar view has been approved by various coordinate Benches of the Tribunal including Exxon Mobil Company India (P.) Ltd. - (2011 (6) TMI 385 - ITAT, MUMBAI) and DCIT vs. M/s. B.P. India Services (P.) Ltd. [2011 (9) TMI 173 - ITAT, Mumbai]- Decided against assessee. Considering the reimbursable expenses and corresponding reimbursements as part of operating expenses and operating income respectively of the assessee while determining the ALP - Held that:- The functional analysis reveals that certain expenses amounting to ₹ 4.9 crores has been incurred in the course of services. Moreover, the agreements of the assessee with AEs stipulate that all ancillary expenses in connection with the services related to the function shall be paid out of the fixed fees paid by the management companies. The expenses incurred to with relation to services performed by the assessee, even if not part of the management fee, should be invariably routed through the profit and loss account and invited an appropriate mark up. In view of these facts, we find no infirmity in including the reimbursement amounting to ₹ 4.9 crores in the cost base.- Decided against assessee. Disallowance of benefit of +/- 5% - Held that: - This issue has been settled by the amendment made by the Finance Act, 2012 retrospectively thereby it has been made clear that benefit of +/- 5% under the Proviso to section 92C(2) of the Act shall not be allowed as standard deduction for the purpose of computation of arm’s length price. The benefit of proviso to section 92C(2) is available only when the price of international transaction is within the tolerance range of +/- 5% of the ALP computed by taking arithmetic mean of more than one price. Thus, it is clear that benefit under this proviso is not available to the assessee. - Decided against assessee. Disallowance of bonus paid by the assessee to its shareholders-cum-directors - Held that:- In assessee’s case, the Managing Director, Ashish Dhawan and Director, Shri Kunal Shroff were holding share of assessee company in the ratio of 2 : 1. They were only shareholders of the company. Bonus was paid in the ratio of shareholdings. In assessee’s case, the payment of the bonus was directly related to the shareholding patterns of the Directors. Shares were held in the ratio of 2:1. The bonus has been paid in the same ratio of 2 : 1. It is according to the shareholding of these two directors. Assessee had also failed to justify the payment as reward for the work. Had the same be a reward it could not have been paid in the ratio of shareholding. The Managing Director and the Director’s reward could not have been in the ratio of 2:1. Further facts of the case clearly establish that had the bonus not been paid to these Managing Director and Director, then it could have been paid as dividend to these two shareholders in the same ratio in which the bonus had been paid. Therefore, the case laws relied upon by ld. AR are not of any help to the assessee. These two shareholders were Managing Director and Director of the company holding the shares in the ratio of 2 : 1 and had this bonus not been paid in the same ratio then the dividend could have been paid in the same ratio. Keeping these facts in view, we find no merits in this ground and the same stands dismissed. - Decided against assessee.
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2015 (6) TMI 961
Upward TP adjustment pertaining to business support services rendered to its AEs - TPO accepted all the comparables but excluded Capital Trust and included Spanco - Held that:- TPO rejected Capital Trust as a comparable simply because for the two out of the last three years taken into consideration, Capital Trust was in the red and not because the nature of business had any variance with that of the assessee. When we look into the business segment of Capital Trust, we find that in the foreign consultancy segment, which we are concerned with, in the year 2004-05, it had OP/OC at 27.25%. Since the nature of services rendered by the comparable were exactly on the similar lines, as that of the assessee, though, during the year, it was in loss, cannot be disqualified as not a legitimate comparable. We are well supported by the decision, cited by the AR, in the case of Brigade Global (supra), relevant portion of which has already been reproduced earlier in the order, we hold that the assessee had rightly taken Capital Trust as a valid comparable and the revenue authorities erred in excluding the same. Apropos the inclusion of Spanco as a comparable, we find that the TPO/DRP were incorrect, because as per the results seen in the case of Spanco, they pertain to BPO segment only, as against the business of the assessee, which provides need based business support services in connection with business activities in the area of financial services carried out by the AEs. Since both these business segments cannot be equated, we hold that the revenue authorities erred in taking the financials of Spanco as a comparable case. - Decided in favour of assessee. Upward adjustment pertaining to brokerage services provided by the assessee to its AEs - Held that:- The assessee had offered list of comparables which had matched its business profile, both with, foreign owned brokers and Indian owned brokers, who were conducting that business through a common channel and according to us, each broker in either category was giving its performance in an uncontrolled regime, therefore, according to us, the adoption of CUP was the most appropriate method, adopted by the assessee to benchmark its ALP. We do not find anything contrary in the conduct and management of the business of the comparable with that of the assessee.We have also referred to the subsequent years study, wherein the average commission is at 19.86 basis charges with AEs and at 20.42 basis points with third parties, which is well within the range as per the proviso.In these circumstances, we are of the considered opinion that no adjustment is required to be made. The addition is therefore deleted.- Decided in favour of assessee. Adjustment pertaining to investment advisory Services in respect of Listed Indian companies & investment advisory /support services in respect of strategic (unlisted) investments - Held that:- TPO as well as DRP have ignored the first fact that the assessee was incorporated in September 2006 and commenced its business operation in December 2006 and most importantly, the assessee in the relevant previous year did not have the license to enter merchant banking business segment. As pointed out by the AR the TPO had adopted the comparables of those entities, whose main segment of business was merchant banking, which have been succinctly examined threadbare by the coordinate Bench in the case of Carlyle India (2012 (10) TMI 884 - ITAT, MUMBAI ), referred to by the AR. On our enquiry from the DR, even he was unable to make any contrary comments on the issue.In the light of our observations hereinabove, we are of the opinion that both DRP as well as TPO erred in adopting comparables, which had a segmental difference from the business of the assessee and therefore, we accept the benchmark adopted by the assessee to fix its ALP. We, therefore, delete the addition made by the TPO/DRP. - Decided in favour of assessee.
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2015 (6) TMI 960
Treatment to acquiring technical know - revenue v/s capital expenditure - Held that:- Assessee was entitled only access to the technical knowledge and information from Daikin for manufacturing of licensed and existing products and it was not a case of absolute transfer of Daikin Technology. The assessee’s right to use license was being hedged with all sorts of conditions as noted. The assessee had acquired the business of Siel Ltd. on a going concern basis vide business purchase agreement dated 8th August, 2000. The technological collaboration agreement with Daikin entered into on the same date primarily facilitated in improving the technical aspect of manufacturing but it did not essentially formed part of the revenue earning apparatus viz. plant and machinery of assessee. The expenditure incurred for acquiring technology which becomes part and parcel of revenue earning apparatus can only be said to be in capital field but where the technology only facilitated in improving the manufacturing process, it could not be said to be part and parcel of capital structure of company. We find that this issue is squarely covered by the decision of Hon’ble Jurisdictional High Court in the case of JK Synthetics (2008 (12) TMI 21 - DELHI HIGH COURT), wherein held expenditure incurred for grant of License which accords ‘access’ to technical knowledge, as against, ‘absolute’ transfer of technical knowledge and information would ordinarily be treated as revenue expenditure. This issue is also covered by the decision of Hon’ble Jurisdictional High Court in CIT vs. Goodyear India Ltd., (2000 (3) TMI 47 - DELHI High Court ), wherein it has been held that consideration paid for betterment of the product was in revenue field. - Decided in favour of assessee.
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2015 (6) TMI 959
Transfer pricing adjustment - determination of arm’s length price by TPO - wrong selection of comparable - Held that:- In the case of Sundaram Finance Distribution Ltd., we find that the main objection of assessee is that the said comparable was included because assessee had supplied the same and the second objection is that in the said comparable there was no staff. As far as first objection is concerned, we are in agreement with the assessee’s counsel that merely because the said comparable was provided by assessee, the same could not be included without proper examination to account for the differences. The assessee is well within his right to demonstrate that a comparable supplied by it in the transfer pricing analysis was not correct and had to be excluded. This right of the assessee is not curtailed in any manner, whatsoever, in the rules. Adjustment of net profit margins of comparable uncontrolled transaction for material differences - Held that:- The comparable uncontrolled transaction has earned much more profit than the assessee. Further Tribunal has also observed that the cost of outsourcing had been included in other heads of the expenditure in respect of wages employee cost. In the present case, these aspects have not at all been considered by TPO. If the business module adopted by Sundaram Finance Distribution Ltd. materially affected the profit then the same had to be adjusted. We, therefore, consider it in the interest of justice that the matter may be restored back to the file of AO for examining the assessee’s plea afresh. Issue regarding ICC International, we find that assessee has demonstrated, as noted earlier, that it had earned super profits during the year because of increase in supply on account of government scheme. We find that TPO has considered the assessee’s objection regarding exclusion of high margin comparables in para 8.7 of his order and the DRP in para 7.1. They have merely, inter-alia, observed that comparables cannot be rejected simply because they are loss or high profit making comparables. However, they have not considered that if certain extra ordinary factors materially affected the profit in a particular year then that aspects had to be taken into consideration and due adjustment was required to be made to the net profit margin for brining the comparable on the same platform at which the assessee was performing its functions. Admittedly the assessee’s objections in regard to ICC International, as noted earlier, have not been considered by DRP and, therefore, we consider it in the interest of justice that this issue should also be restored to the file of TPO for fresh consideration Depreciation on data base - 25% or 15% - Held that:- As decided in assessee's own case so far as the question about admissibility of depreciation of Acquired Business Database is concerned, this issue is covered in favour of the assessee by the judgment of Hon’ble Delhi High Court in the case of CIT vs. Hindustan Coca Cola Beverages Pvt. Ltd. (2011 (1) TMI 138 - Delhi High Court ), wherein, their Lordships, inter-alia, have observed that “It is worth noting, the scope of sec. 32 has been widened by the Finance (No. 2) Act, 1998 whereby depreciation is not allowed on intangible assets acquired on or after 1st April, 1998. As per section 32(1)(ii), depreciation is allowable in respect of know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.” In view of these discussions as also bearing in mind the entirety of the case, we are of the considered opinion that the CIT(A) ought to have allowed the depreciation on the entire payment of ₹ 12 crores towards Acquired Business Database. We, therefore, reject the appeal filed by the AO against partial relief granted by the CIT(A) and uphold the grievance of the assessee in this regard - Decided in favour of assessee Depreciation on computers - Held that:- The issue now stands covered by the judgment of this Court in the case of CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT], wherein it was held that the depreciation at the rate of 60 per cent on such items shall be allowed. - Decided in favour of assessee Disallowance of written off certain sundry advances - DRP directed to delete addition - Held that:- The directions of ld. DRP are very clear and unambiguous and, therefore, the AO clearly misconstrued the same. We, therefore, restore this issue to the file of AO for reconsideration and to give effect to these directions of ld. DRP, as reproduced earlier. - Decided in favour of assessee
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2015 (6) TMI 944
Disallowance of export commission - Held that:- The assessee has failed to furnish the details relating to commission payments and the services rendered by the agent to the assessee. In the absence of such details, one cannot ascertain about the nature of payment, whether Shri Pinkesh Gala has rendered services from outside India, whether the commission payment is chargeable as income in his hands in India. Without ascertaining about the nature of payment, it would be difficult to apply the Circulars of CBDT and also the decisions of Hon’ble Supreme Court or High Courts or Tribunal. Accordingly, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly, we set aside the order of ld. CIT(A) on this issue and restore the same to the file of the AO with a direction to examine the same afresh by considering about the applicability of the decisions referred in the case of GE India Technology Centre Private Ltd [2010 (9) TMI 7 - SUPREME COURT OF INDIA] to the facts prevailing in the instant case. - Decided in favour of assessee for statistical purposes. Allowing interest expenditure claimed against the house property income - Held that:- The assessment order shows that the assessee has agreed for the disallowance of the interest so claimed, since it was pointed to him by the AO that the housing loan was not taken in respect of house against which the interest expenditure was claimed. However, the ld. CIT(A) has allowed the claim without looking into the above facts. Once agreed, the assessee cannot be considered to be aggrieved by the said addition. Accordingly, we set aside the order of the ld. CIT(A) on this issue and restore the addition made by AO. - Decided in favour of revenue. Addition made u/s 69C relating to purchases - CIT(A) deleted the addition - Held that:- AO has made addition merely on the basis of observations made by the Sales tax dept and has not conducted any independent enquiries for making the addition especially in a case where the assessee has discharged its primary onus of showing books of account, payment by way of account payee cheque and producing vouchers for sale of goods, such an addition could not be sustained. On a careful perusal of the decision rendered by Ld CIT(A) would show that the first appellate authority has analysed the issue in all angles and applied the ratio laid down by the High Courts and Tribunals in deciding this issue. Hence, we do not find any reason to interfere with his order on this issue. - Decided against revenue.
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2015 (6) TMI 943
Treatment to the losses on sale of share as "capital loss" - Held that:- From the perusal of the Balance sheet as on 31st March, 2007, it is seen that the shares of RPG Life Sciences Ltd of ₹ 2.37 crores are reflected under the head of "investment" and are valued at cost which is also in line with the accounting policies (as reflected in the annual accounts and placed at page 29 of the paper book,). On the other hand, if the Assessee had treated the shares of RPG Life Sciences Ltd. as part of stock in trade, as is the submission before us, then it should have valued the shares at closing market rate or cost whichever is lower which is the policy adopted by Assessee for value stock in trade. The submission of the Assessee that at the expiry of the lock in period i.e. on 02.04.2007, the shares of RPG Life Science Ltd. were transferred to stock in trade is not supported by any evidence more so when the Assessee is a limited Company and is required to follow certain guidelines, procedures prescribed under the Accounting Standards when there is transfer from "investment" to stock in trade. Further, it is also seen that under clause 12A of the Tax Audit Report for A.Y. 2008-09 which is placed at page 84, against the column with respect to particulars of capital asset converted into stock in trade, the auditor has mentioned as Nil meaning thereby that auditor has also certified that there is no conversion of capital asset to stock in trade. The submission of the Assessee that for the practical purposes it had treated the shares as stock in trade cannot be accepted in view of the fact that the Accounting Standard 13 on Accounting of Investments, issued by the Institute of Chartered Accountants of India which is being followed by the Assessee, states that shares, debentures and other securities held as stock in trade are to be accounted for and disclosed similar to the current investment and with respect to current investment in the Accounting Standard, it is stated that it has to be valued at lower of cost and fair value whereas on the other hand, the Assessee has in its books treated the shares as investment and accordingly valued the shares at cost and therefore its contention of holding the shares at stock in trade is also not supported by the method of accounting and its valuation. Before us, ld. A.R. has also not placed any material on record in support of its contention that for the sake of identification, the shares were placed in investment account. - Decided against assessee.
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2015 (6) TMI 942
Disallowance of Additional depreciation - business of the assessee involves carrying out piling works - business of manufacture or production of an article or thing or not - construction contracts - Held that:- It is in the common knowledge of everyone that, in civil construction contracts, "concrete slabs" are produced separately and they are then fitted at the required places. Does it mean that the civil contractor is manufacturing or producing the "Concrete slabs"? In our view the production of concrete slabs either separately or on the structure itself by the civil contractor forms part of construction activity only, since they are merely two different ways of construction. The same analogy, in our view, would apply to the present case also. In our view, it would not make any difference when the piles are constructed inside the bore at project site itself or the prefabricated piles are fitted into the bore, by producing the piles at a different place. Ultimately the assessee is executing his contract work of piling and the new machinery would enable him to complete the work fast, since the assessee could carry out boring work separately and the prefabricated piles could be prepared prior to boring work also. As observed earlier, it is not the case of the assessee that it is producing the prefabricated piles and selling them to outsiders. Hence, we are of the view that the assessee cannot be considered to be an assessee engaged in the business of manufacture or production of an article or thing. - Decided against assessee.
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2015 (6) TMI 941
Disallowance u/s 40A(3) - Held that:- So far as disallowance on account of purchase of steel from Panvel office imprest account, telephone charges of direction and gardening and plantation, the same cannot be disallowed u/s 40A(3) as per the reasons given by the learned counsel. Accordingly, the assessee gets relief of ₹ 16,092/- and balance amount of ₹ 13,873/- is confirmed. - Decided partly in favour of assessee. Disallowance of donations - Held that:- The assessee has not claimed any such claim of donation in the computation of income, rather it appears in the ledger account of Managing Director. It is the payment made by the individual and not by the assessee, therefore, no disallowance should be made in the hands of the assessee. Accordingly, we direct the AO to delete the said disallowance after verifying the contention of the assessee that the amount of donation has not been claimed by the assessee. - Decided in favour of assessee. Estimate of net profit rate of 8% from the sale of development rights - Held that:- There is no allegation that the payment made by the assessee in the earlier years have been claimed by the assessee. These costs are always taken to work-in-progress. The assessee had spent money to made the payments to the members of co-operative housing to the CIDCO to acquire the rights to develop, then such a payment has to be allowed as cost. No proper basis has been given either by the AO or by the Ld. CIT(A), to estimate the profit on sale of rights. If the cost has been incurred in the earlier year for the acquisition of development rights and if the same has been sold in this year, then, the same has to be allowed. It is not the case of the department that the assessee has claimed the cost/expenditure in the earlier years, therefore, the profit has to be taken at ₹ 2,00,000 as shown by the assessee and addition confirmed by the Ld. CIT(A) on estimate of net profit of 8% is deleted. - Decided in favour of assessee.
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2015 (6) TMI 940
Proportionate deduction of 80IB(10) - flats which are having built up area of below 1000 sq. ft. - whether conditions of 80IB(10) have not been fulfilled for the whole project/building and cannot be approved in piecemeal for some flats in the building? - CIT(A) allowed claim - Held that:- There are series of decisions of this Tribunal, wherein, the Tribunal has held that in case of certain dwelling units exceeds the area prescribed u/s 80-IB(10) then the assessee would be eligible for deduction proportionately to the extent of the dwelling unit having the constructed area less than the limit provided in the section. Even if the proportionate area of plot is excluded from the total area of the plot of the project all other conditions prescribed u/s 80-IB(10) including the size of the plot are satisfied. Accordingly following the earlier order of this Tribunal we do not find any error or illegality in the order of CIT(A) allowing the proportionate deduction u/s 80-IB(10). - Decided in favour of assessee.
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2015 (6) TMI 939
TDS u/s 194A - Excess payment refund debited in the Profit & Loss Account under the head 'indirect expenses' - Whether should be treated as interest on the customers' deposits/advances under section 2(28A) ? - Held that:- The purchaser had paid certain amounts to the appellant. At a later point of time, the purchaser opted out of the agreement and the appellant entered into fresh agreements with new buyers for prices that are higher than what was agreed with the purchasers. Out of the receipts from the new buyers, the appellant refunded to the purchasers the amount paid by them and a portion of the excess amount received. The amount thus refunded to the purchasers represents the consideration the purchasers paid towards the undivided shares in the property agreed to be purchased and also the cost of construction of the apartment, which work was entrusted to the appellant, being the builder. Such a relationship does not spell out a debtor-creditor relationship nor is the payment made by the appellant to the purchaser one in discharge of any pre-existing obligation to be termed as interest as defined in section 2(28A). Further, there is no finding in the assessment order or in the order of the Tribunal that the amount paid by the purchasers, which was refunded, was accounted as deposit or advance received from them or that there is any debtor-creditor relationship between the parties, obliging the appellant to pay the amount to the purchasers. There is also no case for the revenue that the excess amount paid by the appellant was based on any agreement between them or that it was quantified at rates that were already agreed between the parties. In such circumstances, the payments made do not qualify to be interest as defined in section 2(28A) of the Act and the appellant did not have the obligation to deduct tax at source as provided under section 194A nor can they be proceeded against under section 201A, treating them as an assessee in default. The Tribunal was not correct to held that the excess payment refund debited in the Profit & Loss Account of the appellant under the head 'indirect expenses' should be treated as interest on the customers' deposits/advances - Decided in favour of assessee.
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2015 (6) TMI 938
Unexplained deposit in the bank account - Held that:- When the burden is on the assessee to prove the aforesaid factual question, it was the assessee's burden to make available Sri.Francis Joseph for cross examination. In this context, we should also record that the assessing officer had repeatedly issued summons to Sri.Francis Joseph, and that though he stood by his statement, he declined to appear for cross examination for one reason or the other. This was despite the fact that the burden was that of the assessee to produce him for examination. Therefore, in the facts of this case, we are unable to find fault with the Department for not making available Sri.Francis Joseph for cross examination. However, the contention of the assessee that by Annexure G assessment order,Sri.Francis Joseph himself was assessed to income tax for the year 1997-98, merits consideration. That assessment order also makes reference to the aforesaid bank account in the name of Sri.Francis Joseph and the amounts available therein. According to the assessee, Annexure G assessment order has also become final. Assessee has placed reliance on the judgment of the Apex Court in Income Tax Officer, A Ward, Lucknow v. Bachu Lal Kapoor Kewal Ram [1965 (12) TMI 24 - SUPREME Court] and submitted that the Act does not envisage taxation on the same income twice over. The principle that assessment should be in the hands of the right person and that there cannot two assessments for the same income, are too well settled. Therefore, if, as contended by the counsel for the assessee, Annexure G assessment order has become final against Sri.Francis Joseph, the very same amount cannot again be assessed in the name of the assessee also. We find that this issue was neither raised nor considered by the assessing officer nor was this issue properly dealt with by the Tribunal. Since, prima facie, there is force in what is argued, this is an issue that needs to be considered by the Assessing Officer, who will reconsider the liability of the assessee on this account, duly adverting to Annexure G order in the name of Sri.Francis Joseph and with notice to the assessee. Deposit of ₹ 5,60,000/- in the name of the assessee in the capital account of the firm Hotel Mariya, of which he is a partner - Held that:- Though this addition was confirmed by the Appellate Commissioner and the Tribunal, contention raised by the counsel for the appellant is that when ₹ 5,60,000/- was shown to the credit of the assessee in the accounts of the firm, it is for the firm to explain such a credit and the assessee cannot be called upon to explain the same. In support of this contention, he placed reliance of a judgment in Commissioner of Income Tax v. Shiv Shakti Timbers [1996 (5) TMI 21 - MADHYA PRADESH High Court]. However,as rightly contended by the learned Standing Counsel for the Department, ₹ 5,60,000/- was shown as the deposit made by the assessee in the capital account of the firm and this amount was not reflected in the cash flow statement filed by him before the assessing officer. This, therefore, shows that ₹ 5,60,000/- deposited by him in his capital account is an unexplained investment made by the assessee attracting Section 69 of the Income Tax Act. Facts being so, we do not find any illegality in the order of the Tribunal confirming the said addition. Addition of ₹ 4,00,000/- allegedly borrowed by the assessee from one George Joseph - Held that:- It is true that Section 68 talks about books of accounts and it is also true that in so far as this case is concerned, the assessee was not maintaining books of accounts. It is on this basis that the counsel contended that Section 68 could not have been invoked. We are unable to agree. If this logic is accepted, it will be possible for any defaulting assessee to escape from the payment of tax. In our view, Tribunal was perfectly justified in its' finding that in case of this nature the cash flow statement could be treated as the account of the assessee. Therefore, in such circumstances, we cannot accept the case of the assessee.
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2015 (6) TMI 937
Addition on account of warranty in the nature of contingent liability - ITAT deleted the addition - Held that:- The issue involved in these appeals is already concluded in the case of Rotork Controls India Pvt. Ltd. v. Commissioner of Income Tax, [2009 (5) TMI 16 - SUPREME COURT OF INDIA] wherein held that the assessee was engaged in the business of manufacture of valve actuators, which were sophisticated goods. The statistical data indicated that every year some of these were found defective. The valve actuator, being a sophisticated item, no customer was prepared to buy it without a warranty. Therefore, the warranty became an integral part of the sale price. In other words, the warranty stood attached to the sale price of the product. It was held that warranty provisions had to be recognized because the assessee therein had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of the obligation. Therefore, the assessee therein had incurred a liability during the assessment year which was entitled to deduction u/s.37 of the Income-tax Act, 1961. Learned counsel appearing for the Revenue was not in a position to dispute the above proposition of law.- decided in favour of the assessee.
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2015 (6) TMI 936
Disallowance of breakage loss - assessee did not furnish party wise details of breakage/claim made or offered, that no such claim was made in the preceding year and that this is such an item which can be recycled and reused for making glass - CIT(A) deleted the disallowance - Held that:- From the various details furnished by the assessee in the paper book, we find the assessee has furnished the party wise details giving the credit note number and the amount allowed towards such breakage loss. The AO has not disputed the fact of filing of party wise details during the course of assessment proceedings in the remand proceedings. Therefore, the first objection by the AO that the assessee has not furnished the party wise details is not existing. Further, the basis of allowing 1% of the turnover towards breakage charges by the AO is not understood. If the AO was not satisfied due to the reasons mentioned by him, he could have disallowed the entire amount. However, he has not done so and allowed 1% of the turnover towards breakage. This otherwise indicates that he also accepts that there would be breakages. Merely because the assessee has not claimed such breakage loss in the preceding assessment year, the same in our opinion cannot be a ground to deny a legitimate claim made by the assessee in the impugned assessment year especially when the assessee has furnished the list of dealers to whom such credit notes were issued towards breakage loss and sample confirmations from such parties were also filed. - Decided in favour of assessee.
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2015 (6) TMI 935
Non deduction of TDS on payments made on account of settlement on withdrawal accumulated balance under Rule 9, 10 of part A of Schedule IV of the I.T. Act, 1961 - maintainability of appeal for stay orders - Held that:- Law is well settled that the first appellate authority i.e. Commissioner of Income Tax (Appeals) has power to grant stay. In exercise of this power, learned Commissioner of Income Tax (Appeals) has passed the impugned order obviously, under the provisions of Section 250 of the Act since there is no other provision of the Act under which Commissioner of Income Tax (Appeals) can pass the order. It is well settled that the order need not be an order of civil court alone, it can be of any other statutory authority [C.G. Ghanshamdas v. Collector of Madras, [1986 (9) TMI 409 - Supreme Court Of India]. The term ‘order’ has not been defined under the provisions of Income-tax Act, 1961. It is judicially understood that the word ‘order’ as a noun, has been held equivalent to or synonymous with ‘decision’. Therefore, having held that the Commissioner of Income Tax (Appeals) has passed the order under Section 250 of the Act, in our considered opinion, the appeal is clearly maintainable under clause (a) of sub-section (1) of Section 253 of the Act. The appellant organization is only acting as custodian of employees’ funds and on mere perusal of IVth Schedule of the Act, it seems that the provision of IVth Schedule may not be applicable to the Provident Fund Organization which are set up under the Provident Fund Act. Admittedly, the assessee organization is set up under the provisions of Provident Fund Act. Therefore, the order passed by Dy. Commissioner of Income Tax (TDS), Noide, is under serious challenge. Keeping in view the interest of the employees as well as the spirit of CBDT Circulars and Instructions, we deem it fit case to grant the stay of demand till the disposal of the appeals before CIT(Appeals).
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2015 (6) TMI 934
Disallowance of bad debts - CIT(A) deleted the disallowance - Held that:- On the one hand, the AO is taxing the income shown by the assessee by way of liabilities no longer required written off of ₹ 36,91,095/-, but, on the other hand, the AO was not allowing deduction for bad debts of ₹ 34,64,718/- claimed by the assessee. Further, the DR has not controverted the findings of the CIT(A) that bad debt of ₹ 34,64,718/- claimed by the assessee was shown as sales by the assessee in the earlier years, which was accepted by the AO as genuine. Further, the Hon’ble Supreme Court in the case of T.R.F.Ltd. (2010 (2) TMI 211 - SUPREME COURT ) has held that it was not necessary for the assessee to show after 1.4.1989 as per amended section 36(1)(vii) of the Act that the debts have in fact become irrecoverable, but only writing off of the same in the accounts by the assessee was enough. It is not in dispute that the assessee has written off debts of ₹ 34,64,718/- as bad in its books of accounts. It has not been disputed that the debt which has been written off by the assessee arose out of sales made on credit in earlier years and the same was shown as receivable by the assessee in last several years. The same balance was brought forwarded from earlier several years and no recovery therein was made in last few years. The write off of the debts in the books of accounts by the assessee is prima facie evidence of its becoming bad. The Revenue could not bring any material on record to show that the debt had not become bad or any recovery was made by the assessee. Thus no good reason to interfere with the order of the CIT(A) - Decided against revenue.
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2015 (6) TMI 933
Disallowance of traveling expenses - CIT(A) confirmed disallowance - Held that:- CIT(A) has not adverted to the submissions of the assessee as he had specifically submitted that the expenditure have been incurred on travelling of the executives for the business purpose of the assessee-company. There is no dispute with regard to proposition that deduction of expenditure is allowable if same is incurred for the business purpose. The assessee is required to demonstrate the business purpose. In the present case, as per assessee, the travelling expenditure was incurred on travelling of the executives of the company to study market condition and to contact prospective consumers for the purpose of trading in LNG. It is not disputed that such expenditure is allowable, however, the expenditure disallowed on the basis that the assessee failed to establish business nexus. In view of the ratio laid down by the Hon’ble Apex Court the cases of CIT vs. Malayalam Planations Ltd.(1964 (4) TMI 9 - SUPREME Court ) and Madhav Prasad Jatia vs. CIT (1979 (4) TMI 2 - SUPREME Court ), we are of the considered view that the ld.CIT((A) was not justified in rejecting the ground on the basis that there is nexus between the expenditure incurred and the business of the assessee-company. Therefore, we hereby set aside the order of the ld.CIT(A) and direct the AO to delete the addition. - Decided in favour of assessee.
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2015 (6) TMI 932
Liability to payment of Fringe Benefit Tax - whether there exists a master servant relationship between the appellant & its consultants? - the liability of Fringe Benefit Tax arises merely because the expenses incurred by the appellant are of the nature as contemplated by section 115WB of the Act even though there are no employees as held by CIT(A) - Held that:- As relying on assessee’s own cases for previous AY's [2013 (5) TMI 713 - ITAT AHMEDABAD]and [2015 (6) TMI 628 - ITAT AHMEDABAD]FBT is eligible only in a case where expenditure is incurred by the employer ostensibly for the purpose of business but includes partially a benefit of a personal nature passed on to the employee. But, a legitimate business expenditure not within the ambits of employer & employee relationship is outside the scope of FBT. In view of these observations, we hereby hold that the FBT provisions have wrongly been invoked in the present case. We hereby reverse the legal findings of the authorities below and direct the AO to give relief accordingly. - Decided in favour of assessee.
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2015 (6) TMI 931
Revision u/s 263 - The assessee showed lesser profit from the trading activity, which was not properly looked into by the Assessing Officer - Held that:- The order sheet entry of 9.11.2010 divulges that the assessee’s counsel appeared and produced books of account, which were test checked by the AO. Again, on 16.11.2010, the assessee’s C.A. appeared and produced books of account, which were again test checked and the assessment proceedings were completed on 8.12.2010. A bare perusal of the order sheet entry of the AO amply demonstrates that the assessee was called upon to produce books of account, which were duly produced on at least two occasions and the same were also checked by the AO. The observations of the ld. CIT about the non-production of books of account are, therefore, not tenable. Further, we are unable to find any rationale of the ld. CIT in applying a net profit rate of 5% on total turnover for computing income of ₹ 65.84 lac from business operations. This is again an application of the ad hoc net profit rate, unsubstantiated with any cogent reason. As the AO did carry out investigation on all the relevant aspects of the matter, which is evident from the order sheet entry, and the reply of the assessee giving details on several occasions, the assessment order cannot be termed as erroneous. We, therefore, set aside the action of the ld. CIT in making an addition of ₹ 65.84 lac by applying an ad hoc net profit rate. - Decided in favour of assessee. Non-verification of sundry creditors and advances from customers by AO - Held that:- It is a simple case of certain creditors appearing in books of the assessee and the AO getting satisfied with their genuineness after examining the details called for by him. It is not a case of no investigation at all by the AO of such creditors and advances or the AO reaching a patently incorrect conclusion or not conducting any further inquiry, which the attending circumstances suggested. Simply saying that it was for the assessee to prove the genuineness and credit worthiness of the creditors, without any thing to the contrary in the extant facts of the case, is not enough to exercise jurisdiction u/s 263.- Decided in favour of assessee. Non verification of TDS claim and even TDS certificates were not on record - Held that:- The assessee did furnish the necessary details before the AO, which are available on pages 296 onwards of the paper book. The ld. CIT has not spelt out as to how these details were lacking or incorrect. We are disinclined to accept the view point of the ld. CIT on this score as well. - Decided in favour of assessee.
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2015 (6) TMI 930
Eligibility for interest on refund out of excess Self Assessment Tax paidas per clause (b) of Sub-section (1) of Section 244A - CIT(A) allowed claim - Held that:- Issue regarding grant of interest on self assessment is no more res-integra as Hon'ble Bombay High Court in the case of Stock Holding Corporation of India Ltd. vs. N.C. Tewari, the Commissioner of Income Tax, Mumbai &Others, [2014 (11) TMI 899 - BOMBAY HIGH COURT ] after considering various arguments of the Revenue, has held that AO has to compute the interest payable from the date of payment on self assessment tax till the date of refund. Respectfully following the same we hold that Ld. CIT(A) did not commit any error in granting the impugned interest to the assessee - Decided in favour of assessee.
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2015 (6) TMI 929
Reopening of assessment - addition to income applying G.P rate of 14.97% on the suppressed receipts - whether GP/NP cannot be applied to such part of turnover represented by excise duty.? - CIT(A) deleted addition - A.O. also made addition on account of provisions of Section 40A(2b) - Held that:- From the findings of Ld. CIT(A) we observe that Ld. CIT(A) has passed a well speaking, elaborate and reasoned order wherein he has made clear cut findings and has rightly held that excise duty forming part of turnover as declared before trade tax authorities, cannot be subjected to gross profit. Similarly, the other addition made by A.O. u/s 40A(2)(b) has been rightly deleted as in original assessment proceedings also, the A.O. had made similar additions and Ld. CIT(A) had already deleted the same. Therefore, we do not find any infirmity in the order of Ld. CIT(A). - Decided in favour of assessee.
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2015 (6) TMI 928
Transfer Pricing Adjustment - excess advertisement, marketing and promotion expenses incurred by the assessee - Held that:- In view of the directions given in the case of Sony Ericsson Mobile Communications India Pvt. Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT] on the basis of the legal ratio expounded in this decision, facts have to be ascertained and applied. If required and necessary, the assessed and the Revenue should be asked to furnish details or tables. The Tribunal, at the first instance, would try and dispose of the appeals, rather than passing an order of remand to the Assessing. Officer/TPO. The endeavour Should be to ascertain and satisfy whether the gross/net profit margin would duly account for AMP expenses. When figures and calculations as per the TNM or RP Method adopted and applied show that the net/gross margins are adequate and acceptable, the appeal of the assessed should be accepted. Where there is a doubt or the other view is plausible, an order of remand for re-examination by the Assessing Officer/TPO would be justified. - The issue may be remanded back to the file of the AO for fresh verification of facts. - Decided in favour of assessee for statistical purposes.
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2015 (6) TMI 927
Transfer pricing adjustment - TPO rejected the internal bench marking carried out by the assessee since the segmentation of its accounts was artificially created by the assessee for the purpose of transfer pricing - TPO has taken OP/Sales as Profit Level Indicator (PLI) and taken the segmental of the comparable companies wherever it was available - Held that:- Order dated 30.4.2010 passed by the Dispute Resolution Panel (DRP), New Delhi u/s. 144C of the I.T. Act, 1961 is a cryptic and non speaking one. None of the contentions raised by the assessee, have been dealt with by the DRP. Under the circumstances, we have no other alternative, but to remand back the matter to the file of the DRP for fresh adjudication, in accordance with law. The DRP shall pass a speaking order and address all the contentions raised by the assessee.- Decided in fvaour of assessee for statistical purposes.
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2015 (6) TMI 926
Disallowance of the deduction claimed u/s.80-IB - non-furnishing the prescribed audit report in Form No. 10CCB - Held that:- The impugned order is a non-speaking order in-as-much as it does not convey the reason/s informing the decision. It is only when a judicial order bears the reason/s leading to the decision, that it can be said to be valid and, further, enable its review, to which it is subject, i.e., upon either party taking it before a higher appellate forum, as has been. Even if the ld. CIT(A) were to merely follow his order/s for the earlier years, which are not on record, the relevant part/s thereof ought to have been reproduced by him, so as to convey the said reasons, which would then by incorporation form the reasons informing his order or decision, besides constituting a self-contained order, while in the present case it does not state, even broadly, the basis for the confirmation of the disallowance, i.e., for the earlier years. Again, it would also enable the reader to see if the facts and circumstances of the instant case are or are not, identical or similar, as the case may be, for the said decision to apply for the current year. Further still, it was also incumbent on the ld. CIT(A) to state as to why the decision/s by the tribunal, confirming the deduction u/s.80-IB for the earlier years in the assessee's own case, binding upon him, was not followed, as judicial discipline would dictate. His order, accordingly, does not satisfy the mandate of section 250(6), and is accordingly to be set aside for passing a fresh, speaking order in accordance with the law. - Decided in favour of assessee for statistical purpsoes.
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2015 (6) TMI 925
Penalty u/s 271(1)(c) - whether penalty cannot be levied in respect of the addition made on estimate basis by applying the gross profit rate? - CIT(A) deleted penalty levy - Held that:- In the instant case, in pursuance to notice under section 148, revised return of income was filed in which entire income was surrendered with an explanation. The revised assessment was regularized by the revenue. AO had failed to take any objection that declaration of income made by assessee in his revised return and his explanation were not bona fide. Therefore, impugned order of Tribunal was held justified and accordingly upheld. In this background, CIT(A) rightly observed that case of assessee is squarely covered in case of CIT vs. Rajiv Garg [2008 (7) TMI 363 - PUNJAB AND HARYANA HIGH COURT] wherein it was held that the revised return filed by the assessee was accompanied by a note in which he had submitted that he had surrendered the entire amount of sale proceeds of shares to buy peace of mind and to avoid hazards of litigation and also to save himself from any penal action. CIT(A) rightly held that Assessing Officer was not justified in levying penalty u/s 271(1)(c) of the Act on the additional income of ₹ 20.00 lacs so disclosed in the return of income furnished in response to notice issued u/s 148 of the Act. Without prejudice to above, CIT(A) observed that Assessing Officer vide para-5(3) of penalty order had observed that both the ingredients (20,00,000 and ₹ 3,63,275) get merged at the end because the basis of concealment of income is admittedly suppressed sales. If it is considered, then the whole of the addition was made by applying the particular profit rate and the said addition is only on estimated basis. The penalty cannot be levied on estimated income as held n case of CIT vs. Subhash Trading Co. (1995 (11) TMI 37 - GUJARAT High Court). Addition made on account of profit on suppressed sales - Assessing Officer had made addition of ₹ 10,90,436/- by applying the profit rate of 8.5% on the unaccounted sales. In appeal, CIT(A) had restricted the profit rate at 6.5%. In appeal before the Tribunal, the profit rate of 6.5% was held reasonable by ITAT, Rajkot. Thus, addition made for ₹ 10,90,436/- by Assessing Officer came to ₹ 3,63,275/- after appellate order of CIT(A) and same had confirmed by Tribunal as stated above. In view of above, CIT(A) justified in deleting penalty of concealment of income on additional income disclosed for ₹ 20 lacs as well as on estimated income of ₹ 3,63,275/- which was rightly deleted by CIT(A). - Decided in favour of assessee.
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2015 (6) TMI 924
Reopening of assessment - disallowance of development charges - Held that:- It is an undisputed position that expenses in question are incurred on testing the performance of local components vis-à-vis similar components used outside India, to improve performance, import substitution and monitoring compliance with safety standards, and for bench marking performance of it's products. This exercise is essentially a continuous process which permeates different accounting years, and does not result in such an enduring advantage so as to render the expenses as capital expenditure in nature. Testing for products is not a one time event which leads to benefit in the capital field particularly in a situation like this where it is an integral part of routine manufacturing and monitoring activity. Viewed thus, the authorities below were clearly in error in holding the development expenses to be capital expenditure. - Decided in favour of assessee.
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2015 (6) TMI 923
Depreciation on goodwill - Held that:- The assessee acquired the business of weighing division of Phillips India Ltd. and that a sum of ₹ 64,93,706 was paid as goodwill of the business is not in dispute. The assessee is in the business of sales and servicing of electronic weighing solutions. It is therefore clear that the assessee owned goodwill and had used the goodwill for the purpose of its business. In such circumstances, we are of the view that the assessee would be entitled to depreciation on goodwill. - Decided in favour of assessee.
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2015 (6) TMI 922
Registration under 12AA rejected - the objectives of the Trust are not charitable in nature, merely because the objectives included the words “consultancy, investment advisory and an investment agency - Held that:- Remit the issue back to the file of the DIT (E) to consider de novo and give an opportunity to the assessee who shall amend the present objects of the Trust with specific objects towards Research and Development and also DIT (E) shall verify whether assessee has deleted the clause which enable the assessee to carry on activities outside India. The DIT (E) shall decide the issue after perusing the amended objects of the Trust Deed in accordance with law. - Decided in favour of assessee for statistical purposes.
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2015 (6) TMI 921
Penalty u/s 271(1)(c) - addition under the head "Income from House Property" has been made by the Assessing Officer only by "recomputing the income" - Held that:- Due to an arithmetical mistake in the computation statement filed by the assessee along with its return of income, the impugned addition has been made. This is evident' from the Statement of Taxable income, a copy of which was submitted in the paper book. As can be seen from the said statement, it is clear that the assessee has disclosed all the facts relating to the earning of income from property in the return of income filed. Hence no particulars of income from House Property have been suppressed. The addition of ₹ 52,85,744/-has been made on recomputation of income under the head "Income from House Property". As such, levy of penalty u/s 271(1)(c) with regard to the addition of ₹ 52,85,744/- is not warranted. We are of the opinion that assessee has neither concealed any income nor furnished inaccurate particulars of income for the year under consideration. Further, there is no seized material based on which the additions are made in the assessment. Disallowance of loss on sale of fixed assets - Held that:- We find from schedule 10 to P&L for the year under consideration, a copy of which is placed in the paper book that "Loss on sale of fixed Assets" for Rs.l0,74,750/- has been shown in it and hence the assessee has not concealed any particulars with regard to his income. The assessee has not concealed any particulars of income and the addition made by the AO is a technical one. We are of the opinion that levy of penalty u/s 271(1)(c) in respect of this addition is not also not warranted. See Kanbay Software (P) Ltd [2009 (4) TMI 499 - ITAT PUNE-A] wherein held penalty under section 271(1)(c) is a penalty for concealment of income or for furnishing of inaccurate particulars or under the extended definition by virtue of the Explanation 1 to section 271(1)(c), for a deemed concealment of income. As a corollary to this legal position, unless it is established that there is concealment of income or furnishing of inaccurate particulars or it is established that, on the facts of the case, concealment of income can be deemed in accordance with the provisions of law, the penalty provisions cannot be invoked at all - Decided against revenue.
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2015 (6) TMI 920
Revision u/s 263 - directing the AO to determine the sale consideration at ₹ 10,93,55,600 - Held that:- This issue is covered in case of Venkatappaiah Naidu, Vaddineni, Mahendra Vaddineni Versus DCIT, Circle 3(3), Hyderabad [2015 (1) TMI 732 - ITAT HYDERABAD ] wherein held that the stand of CIT cannot be supported. First of all, the agreement with VAPL is a GPA agreement without handing over possession. This stand gets support by the stamp duty paid and accepted by Registration authority. The agreement was registered as GPA agreement and not as a sale agreement. Thus on facts the agreement cannot be considered as sale agreement so as to bring entire capital gain tax in the impugned year. Moreover, there was a statement from Manager of VAPL recorded by A.O. during survey which indicate that there were lot of unsold plots and detailed statement was recorded about sale of various plots and how the monies are accounted. This indicates that the said VAPL is only acting as an agent in sale of property and it did not acquire the property. Therefore, stand of CIT that the land/property in question was sale cannot be accepted. Lastly, the CIT himself accepted that gains on sale of Medchal land has to be assessed under the head "Long term capital gains". The gain is taxable at the rate of 20% only. Whether it is taxed in A.Y. 2007-08 or in later years, the tax rate is at 20% only. Thus, there is no prejudice caused to Revenue. Therefore, the twin conditions for invoking jurisdiction under section 263 have not been satisfied. For these reasons, we are of the opinion that the orders of CIT cannot be justified and so they are accordingly set aside. - Decided in favour of assessee.
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Customs
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2015 (6) TMI 949
Restoration of appeal - Dismissal of of appeal for failure to make pre deposit - Held that:- Customs have reopened the matter on a different issue of valuation after the Settlement Commission had passed its final order. In terms of Section 127J every order of the Settlement Commission is conclusive and no matter covered by such order shall be reopened in any proceedings under the Customs Act or under any other law for the time being in force. Therefore, we find the decisions of Customs authorities in re-opening the case as questionable. However, since the appeal before Commissioner of Customs (Appeals) was dismissed for non-compliance of the provision of Section 129 of the Act, we find it appropriate to remand the appeal itself back to the Commissioner (Appeals) for fresh adjudication. - Decided in favour of assessee.
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2015 (6) TMI 948
Confiscation of goods - import of memory cards - The goods were seized on the belief that they were smuggled into India and the quantity and value of the goods was mis-declared - Violation u/s 111 - Held that:- The present goods are commercial in quantity therefore they have to be classified under the appropriate heading which appears to be heading 8523 in the present case. In this view of the matter, I fail to see how the provisions of Foreign Trade (Development and Regulation) Act, 1992 are violated. The Counsel has shown a copy of the IEC Code which is issued on 3.6.2009 i.e. before the date of show cause notice which was issued on 10.12.2009. The IEC code is also authenticated by Superintendent Customs Ahmedabad. Revenue did not challenge the authenticity of this certificate. Neither have they done so at the time of hearing. It is also not shown that goods in commercial quantity cannot be imported by post parcel It is true that goods imported under an import license do not fall Chapter Heading 98.04. However, in this case the Counsel has rightly taken the stand that they are not importing goods under a license nor have they imported goods for personal use. Therefore, the goods not being covered under Chapter Heading 98.04, there is no violation on their part. Therefore there appears to be no contravention of any law and violation of Section 111(d). As regards the alleged violation of Section 111(m) of the Customs Act, I find that the Commissioner in his order has clearly stated that the show cause notice has not brought out any discrepancy in the declared quantity of the goods. - Neither from the records it is evident that there was any misdeclaration of value or in respect of any other entry made under the Customs Act. As the Ld. Advocate has pointed out, in terms of Section 82 of the Customs Act, which applies to import by post, the label or declaration accompanying the goods shall be deemed to be an entry for import or export. In the present case no discrepancy has been pointed out in the labels accompanying the goods. Therefore there is no violation of Section 111(m). - Decided in favour of assessee.
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2015 (6) TMI 947
Confiscation of goods - Penalty u/s 114 - Misdeclaration of goods - Smuggling of red sanders logs - Held that:- present appellant have issued the container in question for past export through another freight forwarder. I further find that the whole case of the Revenue is based on assumption and presumption as neither the main accused or the exporter/owners of the goods have been found and brought to adjudication and in the absence of examination of the main exporter and further in absence of the purported prohibited goods not found and or confiscated, I hold that no case is made out for imposition of penalty against the appellant. Accordingly, the impugned order with extent to imposition of penalty on the present appellant is set aside. - Decided in favour of assessee.
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Corporate Laws
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2015 (6) TMI 946
Interest on delayed payment of consideration - whether appellant is entitled to interest on the amount which the appellant has received on account of shares sold to the acquires under the open offer. Liability to pay interest under regulation 22(12) of Takeover Regulations, 1997 arises only when the acquire fails to pay the consideration to the shareholders within 15 days from the date of the closure of the offer - Held that:- Similarly paying interest to the appellant under regulation 44(i) of Takeover Regulations, 1997 does not arise because liability to pay interest under that regulation arises only when the acquirer has failed to make a public offer or delayed the making of public offer within the time specified under Takeover Regulations, 1997 from the trigger date. Object of regulation 44(i) is to compensate the shareholder who has suffered delay on part of acquirer. Since appellant was not the shareholder on the trigger date i.e. on July 22, 2005, appellant cannot be said to have suffered on account of delay and consequently question of paying interest to the appellant does not arise at all. Apex Court in the case of Clariant International Ltd. [2004 (8) TMI 390 - SUPREME COURT OF INDIA ] has held that the shareholders contemplated under regulation 44(i) of Takeover Regulations, 1997 must be those shareholders whose shares have been accepted upon public announcement of offer and who had suffered loss owing to blockage of amount by not being able to sell shares held by them. In the present case, appellant was neither the shareholder of the Target Company on the trigger date nor on date when public announcement was made on July 25, 2005 and hence question of paying interest to the appellant does not arise at all. Once a decision is rendered by the Apex Court, it is not open to any person or to any authority to contend that the ratio laid down by the Apex Court cannot be applied on ground that the Apex Court has not considered the matter from any particular angle. - Decided against the appellant.
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2015 (6) TMI 945
Claims to subscription of shares - No proof of holding / registration of shares - Held that:- The learned court specifically observed that the applicants have not replied to the letter of the petitioner and also have not demanded calling upon the petitioner to pay the call money at any point of time. Further the learned court have its finding that the records were very much available with the plaintiffs and the truth will come out if the same is produced. in the petition at para 6.21 the petitioner has categorically stated that there was no demand notice served on the petitioner to pay the call money. In view of the specific finding given by the learned court in respect of the above issues and without going into the merits of the case by conducting a detailed enquiry into the facts of the matter, the petition cannot be dismissed at threshold. In view of the reason, the application is miserably failed and liable to be dismissed. Further the CLH in the matter of S.V.T Spinning Mills Pvt Ltd. [2009 (7) TMI 776 - HIGH COURT OF MADRAS] had opined that the factual issues cannot be adjudicated as preliminary issue. I do follow the said principle in the above order. - Appeal dismissed.
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Service Tax
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2015 (6) TMI 964
Denial of refund claim - Bar of limitation - Held that:- No limitation is prescribed for refund of accumulated CENVAT Credit under Rule 5 of Cenvat Credit Rules, 2004 as the said rule provides for refund of accumulated CENVAT Credit due to reasons of export of service, and being unable to be utilized by the assessee. Further, under the said rule, no time limit is prescribed and hence, no limitation is applicable. Thus, the ground of limitation is decided in favour of the appellant and it is held that the claim of refund is not hit by limitation. - Matter remanded back - Decided in favour of assessee.
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2015 (6) TMI 958
Banking and financial services - valuation - inclusion of reimbursement of expenses - appellant contends that postage and telegraph and courier services are engaged by them for correspondence and they only claim the actual amount which has been paid by them to this service provider and also pay service tax to the service provider - Held that:- Impugned order as well as the Adjudicating Authority's order seeks to rely upon Rule 5(i) of the Service Tax (Determination of Value) Rules, 2006 to include this amount as a taxable amount as a consideration for the services under the provisions of Section 67 of the Finance Act, 1994. This very identical issue of discharge of service tax liability of the reimbursement of the actual expenses was considered by the Hon'ble High Court of Delhi in Intercontinental Consultants & Technocrats P. Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT] wherein the Lordship had struck down Rule 5(i) of Service Tax (Determination of Value) Rules, 2006 holding that these provisions are ultra vires of Section 67 of the Finance Act, 1994. - Since the provisions on which reliance was placed to confirm the service tax liability have been struck down, we do not find any merits in the arguments put forth by the ld. Departmental Representative. The impugned order is unsustainable and is liable to be set aside - Decided in favour of assessee.
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2015 (6) TMI 957
Disallowance of CENVAT Credit - Documents pertaining to unregistered premises - Held that:- An application dated 16/12/2004 made by the appellant requesting for grant of centralized registration from 01/07/2001, is on record and the letter bears the stamp of the receipt by the department. In any case, the fact of this application having been made is mentioned in the order-in-original and is not disputed. However, the order-in-original states that the centralized registration was not applied for in the proper format and that the appellant had not produced any documents to the effect that they had applied for centralized registration. I find from the letter dated 16/12/2004 that the appellant has stated that they may be given permission to have only one registered place in terms of Rule 3(a) of the Service Tax Rules. This request can be considered as an application for centralized registration. In any case, the centralized registration was granted subsequently on 26/03/2013. The department has not disputed that the input services were received at the branch office and further that they were utilised for providing output services. In fact perusal of the accounting records maintained at the Nagpur office shows the receipt of the services at branch office. - no reason to disallow the Cenvat Credit of ₹ 1,24,886/- on the documents pertaining to the branch offices - Decided in favor of assessee.
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2015 (6) TMI 956
Refund / Rebate claim of tax - Export of services or not - activity of procurement of orders from buyers in India for suppliers of goods situated abroad - whether beneficiary of the entire activity is an Indian consumer - held that:- Service provided by the respondent is limited to procurement of orders which are sent to the principal entity abroad. Thereafter the role of the respondent ends in as much he is nowhere connected with the actual sale of the goods by the entity abroad to the customers in India. Rule 3(1)(iii)of the Export of Service Rules, 2005 comes into picture as the service concerned is Business Auxiliary Service and the export is deemed to have taken place if the beneficiary is abroad and the payment is received in foreign exchange in India. These two conditions being satisfied, I hold the service to be export of service. - Reliance is placed on the case of Microsoft Corpn. (I) P. Ltd. [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)] as well as the case of Paul Merchant [2012 (12) TMI 424 - CESTAT, DELHI (LB)]. - decided against Revenue.
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2015 (6) TMI 955
Refund claim - accumulated Cenvat Credit - whether the appellant, who is SEZ unit are eligible for refund of accumulated Cenvat Credit - Held that:- Refund under Rule 5 is admissible to the appellant. The matter was remanded only to examine the claim of the appellant with respect to the time limit involvement and it was also directed that if the refund claim is in time, to sanction the refund in accordance with law. The Ld. Commissioner (Appeals) has gravely mis-understood the order of this Tribunal [2012 (12) TMI 793 - CESTAT, MUMBAI] and he has again gone in merit and rejected the claim. Thus Ld. Commissioner (Appeals) has gravely erred in understanding findings of this Tribunal's order dated 30/8/2012 in the appellant's own case which clearly applied in the present case and accordingly appellants are entitled for the refund. The impugned order is set aside - Decided in favour of assessee.
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Central Excise
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2015 (6) TMI 954
Duty demand - Manufacturing activity - [Oxygen and Argon] gases procured in bulk in tankers were loaded into small cylinders - Held that:- Prima facie, perusal of the judgment of the Apex Court [2011 (8) TMI 93 - Supreme Court of India] throws light that in the case relied by Revenue relates to processing carried out. But, in the present case that is absent. By this we do not express any opinion on the determination of liability on the basis of the tariff entry and chapter note at this stage. However, there shall be waiver of pre-deposit during the pendency of the appeal. - Stay granted.
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2015 (6) TMI 953
Penalty u/s 11AC - GTA Service - Held that:- ingredient of Section 11AC was not examined by learned Commissioner (Appeals). But it cannot be said so when learned Commissioner (Appeals) in the first round of litigation was aware of the fate of adjudication order and he allowed the appeal of the appellant by his order dated 17.11.2009. To grant relief to the appellant. In this regard, he very rightly appreciated the rationale of the decision in the case of M/s. Maruti Suzuki Vs CCE reported in [2009 (8) TMI 14 - SUPREME COURT]. Even ratio of apex court in the case of CCE Vs Gujarat Narmada Fertilizers Co. Ltd. reported in [2009 (8) TMI 15 - SUPREME COURT] in the same direction may be appreciated. - Therefore, in absence of any finding showing evasion, imposition of penalty on it shall be unjustified - Decided in favour of assessee.
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2015 (6) TMI 952
Waiver of pre deposit - Evasion of duty - Clandestine removal of goods - Penalty u/s 11AC - Held that:- It is a case, where the investigation recovered various chits containing entries directly demonstrating clearances of the goods manufactured by the appellant. That brought out the appellants as well as the buyer of such goods to levy. The buyer did not rule out appellant's involvement in the unaccounted clearances. They became witness against appellant by virtue of their dealing with such goods of appellant. The appellant also could not bring out any evidence to lead before the investigation as well as the authorities below, to prove that the goods covered by the chits did not belong to it. - chits assigned title to those chits being owned by it and the entries therein self against the appellant. When such cogent evidence surfaced, it is difficult to conclude that the clearances were accounted. It is therefore a clear case to hold that the goods were removed clandestinely and cleared without payment of duty. - Stay denied.
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2015 (6) TMI 951
Import of the goods duty-free for use thereof in EOU - Clearance of finished goods to DTA - Held that:- It does not appeal to the common sense that how an entitlement pending before the Development Commissioner protects the interest of Revenue at this stage. No doubt foreign exchange did not come for no export made when imported raw materials were processed and the finished goods manufactured were sold in DTA. The duty forgone at the time of import became loss to Revenue. Added to this, appellant has discharged duty liability at normal rate of excise duty which is not equal to customs duty forgone. Therefore, prima facie, the demand raised appears to be correct at this stage. - Partial stay granted.
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2015 (6) TMI 950
Manufacturing activity or not - installation and erection or heavy storage racks at the premises of its clients - Immovable goods - Held that:- The appellant although was principal manufacturer of manufactured rack components, that having been embedded to earth upon welding to fulfill contractual obligation and such racks became inseparable without causing damage thereto when detachment is contemplated, that rules out appellant's liability under Central Excise Act, 1944. Appellant was not mere supplier of goods. It had concurrent liability of embedding the supplied goods duly to earth to call the same as heavy storage racks. - Not liable to duty of excise - Decided in favour of assessee.
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