Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 17, 2015
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
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India and World Bank Sign US $ 250 Million Financing Agreement for Andhra Pradesh Disaster Recovery Project
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Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified
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Introduction of composite caps for simplification of Foreign Direct Investment (FDI) policy to attract foreign investments
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Inscribing on Bank Notes
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Proposal to permit utilization of India's capital contribution to SAARC Development Fund for its Economic and Infrastructure Windows
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Extension of Scheme of Recapitalisation of Regional Rural Banks to improve their Capital to Risk weighted Assets Ratio
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RBI Reference Rate for US $
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Government Approves Ten (10) Proposals of Foreign Direct Investment (FDI) Amounting to ₹ 1675.15 Crore Approximately
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Once the sales are accepted, the entire undisclosed purchases cannot be added for computing the income of the assessee except by applying a profit rate i.e. gross profit as declared by assessee in regular books of account or the gross profit declared by other concerns in the similar trade. - AT
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Exemption of income under the provision of Section 11 denied - proviso to Section 2(15) of the Act cannot be applied to the appellant society as it is not engaged in any activity which are in the nature of trade, commerce and business - AT
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Capital gain - transfer of immovable property without any written contract - in absence of determination of cost of land by state govt., no capital gain can be computed in the impugned AY - AT
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Treatment to interest subsidy - revenue v/s capital - granting incentives was to generate employment through acceleration of industrial development and thus each incentive can be said to have been designed to achieve public purpose - capital in nature not taxable - AT
Corporate Law
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Application for winding up - Non-payment of debt - This court is of the opinion that the denial of debt by the respondent is not bona fide and that the same is a cloak or moonshine to evade payment of an admitted debt - application admitted - HC
Indian Laws
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Claim of interest - if the protest is not made before the encashment of the amount and it does not appear from the conduct of the parties that the such encashment was made under protest, the plaintiff is prevented from raising an objection over the short payment - HC
Service Tax
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Classification of service - the appointment of the Assessee is not as a Commission Agent, but for Depot Manager, and therefore, it would cover under the definition of Clearing and Forwarding Agent - AT
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Commercial coaching and training service - discharge of service tax only on 80% - Royalty received - the appellant had correctly remitted service tax on the amount received for rendition of commercial coaching or training services i.e. 80% of the amount paid by students - demand set aside - AT
Central Excise
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Eligibility for cenvat credit - Capital goods - Whether common registration under Rule 9 of Central Excise Rules, 2002 can be issued to sugar mill and its co-generation power plant which are separated by a public road - Held Yes - AT
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Manufacture of Grain Feeder, En-mass Grain Feeder, Grain Discharger, Bins for grain storage, Loaders & Hoppers - There can be no doubt as even after knowing that their goods are chargeable to excise duty, the appellants instead of paying the excise duty, chose to describe their goods with different nomenclature - demand of duty and penalty confirmed - AT
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CENVAT Credit - input service - Renting of immovable property - rental premises was not included in the registered premises - in connection with activity of the factory such as storage of goods - credit allowed - AT
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Valuation - Invocation of extended period of limitation - Issue involved in these proceedings was a contentious one and appellant had certain judicial pronouncements on the interpretation of Section 4 of the Central Excise Act, 1944 with respect to related persons - demand set aside - AT
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Reversal of CENVAT credit - Because of the reversal at the instance of the departmental officers, on which the revenue has not raised any dispute on admissibility, re-credit the same by the appellant cannot be faulted with. - suo motu re-credit of the amount reversed by an assessee, there is no need to file any refund claim u/s 11B - AT
VAT
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Levy of sales tax / VAT on sale of REP licenses - .Whether the Hon'ble Tribunal is correct in holding that the income received by way of premium on sale of REP licences alone is taxable as 'turnover' as against the aggregate amount for which the said goods were sold - Held yes - HC
Case Laws:
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Income Tax
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2015 (7) TMI 557
Ineligiblity for claiming deduction u/s.80P - In view of the nature of activities being carried out by the assessee as listed by the Assessing Officer in his detailed and well reasoned order, there is no doubt that the assessee is carrying on banking activities and is thus in-eligible for claiming deduction u/s.80P - CIT(A) allowed deduction - Held that:- For the purpose of sub-section 4, ‘co-operative bank’ and ‘Primary Agricultural Credit Society’ shall have the meanings assigned to them under the Banking Regulation Act, 1949. We find that the issue whether credit co-operative societies are same as cooperative banks has been dealt in detail by the Bangalore Bench of the Tribunal in the case of ACIT Vs. M/s.Bangalore Commercial Transport Credit Co-operative Society Ltd., (2011 (4) TMI 1222 - ITAT BANGALORE). After comparative analysis of the ‘co-operative banks’ and ‘co-operative societies’ on various parameters, the Tribunal came to the conclusion that the activities of both the organizations and the compliances to be made under various Acts for both the organizations are varied. The sub-section 4 to section 80P is applicable only to co-operative banks and not to credit co-operative societies. Gujarat High Court in the case of CIT Vs. Jafari Momin Vikas Co-op. Credit Society Ltd.,(2014 (2) TMI 28 - GUJARAT HIGH COURT ) wherein the Hon’ble High Court after taking into consideration the CBDT Circular No.133/07 has held that sub-section 4 section 80P will not apply to assessee which is not a co-operative bank The Revenue has tried to establish that the assessee although a credit co-operative society is carrying banking business and is thus not eligible. In our opinion, the assessee is not a co-operative bank. The activities in the nature of accepting deposits, advancing loans etc., carried on by the assessee are confined to its members only and that too in a particular geographical area. The activities of the assessee are not regulated by the RBI or the provisions of the Banking Regulation Act. Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application and it is entitled to deduction u/s 80P(2)(a)(i) of the Act – thus, the order of CIT(A) is correct and upheld - Decided in favour of assessee.
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2015 (7) TMI 556
Stay of demand - disallowances under Section 40(a)(ia) for the alleged violation of Section 194A, 194H and Section 194J - Held that:- It shall be the duty of the assessing authority to collect every demand which has not fallen due or has been stayed by a Court or Tribunal etc. It appears in the case Income Tax Officer, Ward-II(3), Coimbatore v. M/s Veerakeralam Primary Agricultural Cooperative Credit Society, Coimbatore (2015 (7) TMI 557 - ITAT CHENNAI) while dealing with a similar issue, placing reliance on the judgment Commissioner of Income Tax v. Jatari Momin Vikas Cooperative Credit Society Ltd. [2014 (2) TMI 28 - GUJARAT HIGH COURT] brings the case of the petitioner under the guidelines-C(i)(a) for staying demand, which says that if the demand in dispute relates to issues that have been decided in assessee's favour by an appellate authority or Court earlier, the demand will be stayed. While the issue appears to be clear, this Court does not find any justification why the assessing authority has not considered the guidelines under the Instruction No.1914 dated 2.12.93. Moreover, it is well settled legal position that all authorities, civil, criminal and judicial, coming within the territory of the High Court, shall act in the aid of the High Court. While so, the assessing authority is bound by the order passed by the jurisdictional Tribunal without taking any stand that the Tribunal or High Courts of other States are taking a different view. Be that as it may, when the appeal has been filed by the petitioner before the appellate authority along with stay petition, keeping in mind that any further observation would have a cascading effect on the pending appeal of the petitioner, with all hesitation, is restraining to express anything on the merits, therefore, in the fitness of things, this Court, accepting the request made by the learned counsel for the petitioner for a direction to dispose of the main appeal itself, as the petitioner had received the notice dated 4.2.2015, hereby directs the second respondent-appellate authority to dispose of the appeal. Needless to mention that till then, the first respondent shall not proceed with the recovery, as it is well settled law that during the pendency of the appeal before the appellate authority, the department is not entitled to initiate the recovery proceedings. Decided in favour of assessee.
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2015 (7) TMI 555
Validity of 153A proceedings - Surrendered income of ₹ 20,00,00,000/- - Whether the disclosure was voluntary or given under coercive circumstances? - Held that:- In our considered opinion the contentions raised by ld. Counsel for the assessee lead to a clear inference that the disclosure of the assessee cannot be regarded as voluntary. The pressure of restrained DDs. of 31.48 crs. against a disclosure tax liability of about 7 crs is palpable. It has the propensity to derail the business and creating enough pressure for businessmen to somehow avoid the pressure. Besides the chronology of events and attendant circumstances do not convince us that this summary disclosure was voluntary and on the scale of merit it can override the other facts. Consequently we have no hesitation in holding that the solely relied disclosure was involuntary. In these circumstances the desirability of additions is to be judged on other facts and circumstances. Reliance is placed on Hon'ble Rajasthan High Court in the case of CIT v. Ashok Kumar Soni [2006 (7) TMI 162 - RAJASTHAN High Court ] for the proposition that admission in statement during search proceedings is not conclusive proof. Besides Hon'ble Supreme Court in the case of Pullangode Rubber Produce (1971 (9) TMI 64 - SUPREME Court ) has also held so that such statement can be explained in the light of correct facts. Whether in the light of CBDT instruction dtd 10-03-2003, search proceedings and assessment can be based incriminating material and not on such disclosures - Held that:- A perusal of the CBDT instruction reveals that even Board is aware of such laconic disclosures and expects its officers to rely on incriminating evidence. Thus CBDT also is not in favor of search assessments being based only on such disclosures; it wants them to be based on incriminating material. In view the facts, circumstances, CBDT instruction and various case laws relied on by the assessee we are unable to uphold the additions solely on the basis of disclosure which doesn't meet the eye and have been hold by us to involuntary. Whether the additions are based on any incriminating material discovered as a result of search in terms of sec. 153A - Held that:- There is no reference to impugned additions being based on any worthwhile incriminating material or evidence except raising some suspicions. The sole basis of additions in both cases is proposed to be the disclosure. Consequently the additions made are not as a result of any material found during the course of search, in view thereof impugned additions cannot be sustained as they do not conform to mandate of sec. 153A. Whether the assessees furnished proper explanation about the Corporation bank a/c, Gurgaon and transaction relating to Raghubir and Ranga Rao - Held that:- As the facts emerge the Corporation bank a/c belonged to Raghubir, the proceeds deposited therein came to him through banking channel on account of agreement to sale his share in ancestral land to G P Realtors not connected to assessees. The transaction came in dispute and was subject matter of litigation, settled by a compromise before court, asessees have been termed as brokers in court proceedings. Raghubir advanced the money by cheque to Ranga Rao for purchase of some property. Department has again relied on assesses 2nd disclosure letter which also mentions that these transactions are not connected to asseessee. As the final disclosure remained at 20 crs., assesses to avoid the harassment agreed for its inclusion as it did not take the tax liability any further. Apropos departments contention that why assesses did not tell this in first blush assessee has demonstrated that they requested for some time to verify from parties who cooperated. The affidavits, bank certificates, documents relating to G P Realtors including compromise deed all corroborate the assesses contentions. Therefore no adverse inference or addition can be drawn against assesses in this behalf. Additions made in a search assessment u/s 153A which is meant for assessment of undisclosed income consequent to search proceedings - Held that:- By detailed observations we have held that neither any worthwhile incriminating material, information, and evidence was discovered as a result of impugned multiple search operations nor the additions sustained are based on any such material. The sole basis of additions is the disclosure which we have held to be involuntary. Consequently the additions do not conform to the mandate of sec. 153A. Thus delete the impugned additions - Decided in favour of assessee.
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2015 (7) TMI 538
Validity of assessment under Section 153C - whether Tribunal was justified in law in upholding the order of the CIT(A) quashing the assessment proceedings on the ground that the AO had not recorded, his satisfaction even which the AO making the assessment of searched person was himself having jurisdiction over such other person (i.e. the assesse) and thus was not required to record any satisfaction for initiating proceedings u/s 153C in case of the assessee? - whether there is any distinction or dissimilarity between Section 158BD and Section 153C of the I.T. Act? - Held that:- In the present case, the concurrent finding of fact recorded by the Appellate Forums is that, no satisfaction has been recorded by the Assessing Officer before issuing of notice under section 153C. Further, none of the papers seized belongs or belong to the assessee (noticee). The Appellate Forums have further found that no addition or even observations have been made by the Assessing Officer in any of the orders for the relevant assessment years in connection with any material found during the course of search. Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. The power bestowed on the Assessing Officer having jurisdiction be it under Section 153C or Section 158BD is identical.Suffice it to observe that the dissimilarity of the form of two provisions would make no difference to the purpose underlying. We are not inclined to accept the argument of the Department that the purpose underlying the two provisions is different. We also find that even the procedure is not different. The subject matter of the action would differ in the context of the machinery provision invoked, in the given case. That, however, cannot be the basis to extricate the Assessing Officer, who resorts to power under Section 153C of handing over the items referred to in Section 153C to the Assessing Officer having jurisdiction, of his duty to be satisfied about the jurisdictional fact that the items belongs or belong to a person other than the person referred to in Section 153A. After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct enquiry and due verification of the relevant facts; before forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in Section 153A) under his jurisdiction on the basis of his own enquiry. In our opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over the items to him. As a result, we hold that there is no infirmity in the view taken by the Tribunal on the questions under consideration. The view taken by us is reinforced from the decisions of other High Courts in the cases of Commissioner of Income Tax (Central) Vs. Gopi Apartment (2014 (5) TMI 158 - ALLAHABAD HIGH COURT ), Pepsi Foods P. Ltd. (2014 (8) TMI 425 - DELHI HIGH COURT ), Pepsico India Holdings P. Ltd. (2014 (8) TMI 898 - DELHI HIGH COURT) and lastly CIT Vs. Madhi Keshwani (2015 (3) TMI 542 - ALLAHABAD HIGH COURT). - Decided in favour of assessee.
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2015 (7) TMI 537
Exemption under Section 10 (22) and under Section 10 (23C) - ITAT allowed claim - Held that:- As decided in Assam State Text Book Production and Publication Corpn. Ltd., Vs. Commissioner of Income Tax, Guahati-I [2009 (10) TMI 60 - SUPREME COURT] the High Court, in its impugned judgement, has not considered the historical background in which the Corporation came to be constituted; secondly, the High Court ought to have considered the source of funding, the share-holding pattern and aspects, such as Return on Investment; thirdly, it has not considered the letters issued by C.B.D.T. which are referred to in the judgement of the Rajasthan High Court granting benefit of exemption to various Board/Societies in the country under Section 10(22) of the Act; fourthly, it has failed to consider the judgements mentioned hereinabove; and lastly, it has failed to consider the letter of the Central Government dated 9th July, 1973, to the effect that all State-controlled Educational Committee(s)/Board(s) have been constituted to implement the Educational policy of the State(s), consequently, they should be treated as Educational Institution. Although the substantial questions of law need not be answered but the operative arrangement as directed by the Supreme Court may have to be adopted even in these appeals of remanding the matter to the Assessing Officer for denovo consideration in the light of the decision of the Supreme Court and the decisions of the Rajasthan High Court and Orrisa High Court referred to therein, which have been affirmed by the Supreme Court. - Decided in favour of revenue for statistical purposes.
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2015 (7) TMI 536
Enhancement of tax liability - payments made to sub-contractors through cheque a sum of ₹ 2,70,70,745/- - ITAT allowed the appeal of the assessee in part - Held that:- The Appellate Tribunal while deciding the appeal, has casually proceeded to sustain the order passed by the Assessing Officer. None of the major points decided by the Appellate Commissioner are answered by the Tribunal while setting aside the order passed by the Appellate Commissioner. Though the order passed by the Tribunal runs to number of pages, the crux of the matter is not adverted to by the Tribunal while arriving at the conclusion. On careful perusal of the order passed by the Tribunal, we are of the opinion that the order of the Tribunal cannot be sustained inasmuch as the Tribunal has not applied its mind judiciously to the facts and circumstances of the case. In view of the same, interest of justice requires that the matter has to be re-dealt by the Income Tax Appellate Tribunal, Bangalore. By the said process, no prejudice would be caused to either of the parties.
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2015 (7) TMI 535
Dual method of Accounting - permissibility of one method to arrive at book profits and another method to arrive at taxable income - Whether the appellate authorities were correct in holding that no expenditure can be allotted to the exempted income earned by the assessee when the Assessing Officer had worked out 5% and the appellate Commissioner had worked out at 2.5% despite assessee incurring expenditure for earning such income? - Held that:- In the assessee's case itself [2014 (11) TMI 179 - KARNATAKA HIGH COURT] by an elaborate judgment, this Court considered the said questions of law and by an order dated 1st July 2004 has answered the first and second substantial questions of law in favour of assessee and against the Revenue. Bad debts disallowed u/s 36(1)(vii) - appellate authorities allowed claim - Whether the appellate authorities were correct in holding that excessive claim under proviso to Section 36(1)(viia) of the Act is allowable despite the assessee claiming deduction under Section 36(1)(viia) of the Act which would amount to double deduction? - Held that:- This Court in the assessee's case itself [2014 (11) TMI 179 - KARNATAKA HIGH COURT] had remanded the matter to the Assessing Authority and directed the Assessing Authority to decide the said questions of law in terms of the judgment of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. v. CIT [2012 (2) TMI 262 - SUPREME COURT OF INDIA] - Decided in favour of revenue for statistical purposes. Unrealized lease rentals on NPA's - whether allowable deduction despite the same not having not accrued and not satisfying Section 43D and RBI Guidelines which did not equate unrealized lease rental of NPA's with that of bad and doubtful debts as claimed by the Assessee? - assessee is one of the leading Scheduled Commercial Banks in the Private Sector - Held that:- There is a communication issued by the Reserve Bank of India to all commercial banks calling upon to follow the "Guidance Note on Accounting for Leases" issued by the ICAI, making it clear that their earlier instructions on treatment of leasing activity on par with loans and advances would continue to remain in force. Therefore, the said communication/guidelines has no bearing in understanding Section 43D of the Act. When the legislature has expressly used the words "income by way of interest" in Section 43D of the Act, if we had to include in that Section the unrealized rentals from equipment leasing activity, it would amount to the Court rewriting the Section, which is impermissible in law. In fact, the authorities have not carefully read the aforesaid statutory provision. It is a case of misreading the provision. A liability under the Income Tax Act cannot be foisted on the basis of analogy. Unless the statute provides, no tax to be levied. Similarly, when the statute expressly provides how the income received is to be taxed and in which year, strictly in accordance with the statutory provision, the tax has to be levied. The language employed in the aforesaid Section is simple. There is no ambiguity. We have to follow the words used in that Section. There is no scope for interpretation at all. Hence, the impugned order passed by the Appellate Authorities cannot be sustained. - Decided in favour of the Revenue.
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2015 (7) TMI 534
Disallowance of lunch expenses to personnel on outdoor duty - Held that:- In the assessment year 1992-93, the Tribunal following earlier order for AY 1991-92 has upheld the disallowance of lunch expenses to the extent of ₹ 2 lakhs. Whereas, in the assessment year 1995-96, the Tribunal has held that lunch expenses incurred for the employees during the course of outdoor duties is to be allowed u/s 37(3) and accordingly, following the same, we direct the AO to allow the lunch expenses of the employees incurred on the outdoor duty. Thus, this issue is decided in favour of the assessee. Disallowance of Foreign Travel expenses - Held that:- this issue has been decided by the Tribunal not only in the earlier years but also in the assessment year 1995-96 wherein, the Tribunal vide para No. 37 has deleted the said addition after following the earlier years orders of the Tribunal. Thus, respectfully following the earlier years precedence and also the order for the assessment year 1995-96, we direct the AO to delete the said addition. - Decided in favour of the assessee. Disallowance for total expenses and air fares of foreign visitors in India - Held that:- A mistake has been crept in the order of the Tribunal, wherein, it has been noted that the said ground is not pressed, which fact is not correct. Accordingly, we rectify the same and hold that such expenses are to be allowed as similar disallowances have been deleted by the Tribunal not only in the assessment years 1992-93 and 1993-94 but also in the assessment year 1995-96 - Decided in favour of the assessee. Excess and short provision of expenditure - assessee had mainly challenged the adding back of the amount of provisions of expenses as on year end based on estimates for which actual bills were not received - Held that:- The assessee has been making the provisions for expenses in respect of services and goods received during the previous year for which bill is not received till the time of the provision is made and payment is made on later date upon the receipt of the bill. Such a claim of provision has been made as assessee was following mercantile method of accounting. If there was some excess provision as compared to the actual payment made to the assessee in the later year then same needs to be added back. The Ld. CIT(A) after confirming the said addition had directed the AO to consider this aspect in the subsequent year by reducing the income offered by the assessee in that year to the amount of the excess provision written back to avoid double taxation. So far as addition on this account is concerned, the finding of the Tribunal in para 5 & 6 cannot be disturbed, because if such an excess provision has been added back and directions have been given to the AO that he should reduce the income offered by the assessee on such a provision written back by the assessee, there is no merits in allowing such excess provision in this year, as direction has been already given for consequential relief in the next year. This year, no different stand can be taken. Disallowance on account of expenses pertaining to the assessment year 1993-94, which were actually incurred in the year under consideration and there was short provision made in the earlier year - Held that:- We feel persuaded to agree with the contention of the Ld. Sr. Counsel that, if the excess provision is being disallowed on the ground that actual bills for which payment has been made is less than the provision and same should be added in the year of excess provision, then on same logic it has to be held that if the assessee’s actual payment is more than the provisions made, then assessee should be granted deduction in respect of short provision made, because, it would lead to jeopardy to the assessee. However, we find it difficult to take a contrary view, within the limited scope of section 254(2), as it will amount to review of the earlier order, which is not permissible. More so, in the wake of the fact that in AY 1993-94, the Tribunal has dismissed this point raised by the assessee in Miscellaneous Application, as fairly pointed out by the Ld. Sr. Counsel. Accordingly, we decline to interfere with the conclusion of the Tribunal VRS expenses in respect of Bhandup unit works and Head office employees - Held that:- In this year the only issue was that of incremental liability towards payment of pension under VRS Scheme. There was no need for any actuarial valuation certificate or examination of agreements. Moreover, in this year, the Ld. CIT(A) has already verified the same. Therefore, there was no need for the Tribunal to set aside the issue to the file of the AO for re-examination and this fact seems to be omitted by the Tribunal while giving the finding that same is covered by the earlier order of the Tribunal. Accordingly, we hold that there is no need for verification either of the agreement or actuarial valuation certificate; as firstly, this has already been examined by the Ld. CIT(A); secondly, in this year it has incurred only incremental liability; and lastly, the Tribunal in AY 1995-96has already modified the similar finding. Accordingly, the present Miscellaneous Application filed by the assessee is allowed.
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2015 (7) TMI 533
Addition on low and unexplained House Hold exp. - Held that:- From the reply of Sh. Vijender Mann it is evident that he was giving answers in present tense and, therefore, we find considerable force in the submission of ld. counsel for the assessee that the statement refers to the position as obtaining on 23-9-2009 when admittedly the children were not college going. However in AY 2006- 07 the children were school going as is evident from the certificate filed in the PB. These certificates are photo copies only and were not furnished before the AO and were filed for the first time before the ld. CIT(A). Ld. CIT(A) has not considered these certificates. Therefore, the authenticity of these certificates needs to be examined at the AO level. These certificates clearly negate the very basis for making addition of ₹ 3,09,000/- which was primarily made on the basis of house-hold expenses being ₹ 10,000/- per month and children education at ₹ 2 lacs. Further, keeping in view the extensive agricultural activities carried out by assessee’s husband, his statement that he had sold buffalo and tuda for more than ₹ 1 lacs cannot be doubted particularly when at the time of taking the statement the AO did not ask for the same assessee should be allowed further credit of ₹ 1 lakk from the addition made for house hold expenses over and above the credit to be allowed in respect of educational expenses, which were only ₹ 33,830/- (Rs. 17,515/- + 16,315/-) and not ₹ 2 lakhs subject to verification of the certificates from D.A.V. School (supra). The matter is restored to the file of AO for verification of the certificates from DAV school contained at pages 22 & 23 of the PB. - Decided partly in favour of assessee for statistical purposes. Addition on interest - Held that:- Bare perusal of the noted explanation makes it evident that Sh. Vijender Mann and assessee had current account and the entire agricultural produce was sold through assessee on which assessee got commission.In respect of other advances also there were business dealings with the parties and, therefore, amounts were lying in different accounts on account of commercial expediency. Hence, no addition was called for on account of debit balances lying with customers on notional basis for not charging interest on their account. We may further observe that there is no finding recorded by lower revenue authorities as to whether the advances lying with customers were out of borrowed funds or out of own funds. Therefore, we are of the opinion that lower revenue authorities were not justified in making addition on this count. We, therefore, delete the addition in question.- Decided partly in favour of assessee. Disallowance of shortage of paddy - Held that:- Loss on account of drying of paddy cannot be denied merely because in earlier year assessee had not claimed the same. It is a natural phenomenon and, therefore, on account of drying of paddy loss in weight is bound to occur. We are in agreement with ld. CIT(A) that as far as the opening balance is concerned, no loss on this count can be allowed because, if there was any such loss, it should have been claimed in earlier year. However, in respect of purchase of paddy during the year, we are of the opinion that it would meet the ends of justice if 5% loss on the purchase of paddy during the year is allowed on account of moisture less of the paddy. In the result - Decided partly in favour of assessee.
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2015 (7) TMI 532
Disallowance under section 14A - CIT(A) who deleted the addition under rule 8D(2)(ii), while he confirmed the disallowance made under rule 8D(2)(iii) - Held that:- Tribunal for the earlier assessment year had considered the very same issue at length stating as per Rule 8D(2)(ii), disallowance can be made in respect of that interest expenditure which is not directly attributable to any particular income or receipt. The learned CIT (Appeals) after considering the facts on record held that there is no material on record to show that the overdraft cannot has been directly used for tax exempt investments and that the interest free funds, reserves and surplus are sufficient to make the tax free investments. Revenue has not brought on record any material to substantiate that the overdraft account was utilized for making tax free investments. Revenue has also not disputed that the investments proceeds from the public issue of shares. Thus, it cannot be said that funds from the overdraft account, on which interest is paid, has been invested in mutual funds which yield tax exempt income. In this factual matrix, we hold that the learned CIT (Appeals) was justified in deleting the disallowance under section 14A r.w. Rule 8D(2)(ii) In the present case, the assessee, in so far it relates to common expenses [falling within the ambit of Rule 8D(2)(iii) of the Rules], has taken a stand that no expenses whatsoever was incurred by the assessee. The AO has only dealt with the expenditure in the form of interest. With regard to other indirect common expenses, he has only made an observation that the assessee does not maintain separate accounts to enable identification of expenditure relating to exempt income. It is thus clear that as far as indirect expenses are concerned, neither the assessee has given any basis for his claim that no expenses were incurred for earning the exempt income, nor has the AO arrived at an objective satisfaction regarding the claim of the assessee that no indirect expenses were incurred to earn the tax-free income is not correct. In the circumstances, we are of the view that it would be just and appropriate that the order of the CIT(A) should be set aside and the issue with regard to disallowance to be made of indirect expenses under Rule 8D(2)(iii) of the Rules should be remanded to the AO for fresh consideration. Thus we confirm the order of the CIT(A) as far as disallowance under rule 8D(2) is concerned and set aside the issue of disallowance u/s rule 8D(2)(iii) to the file of the AO with similar direction as given by the Tribunal. - Decided partly in favour of assessee for statistical purposes. Claim of deduction u/s 80IB(10) - residential units having built up area of 1500 sq. ft. or less in ‘Brigade Gateway’ and ‘Brigade Metropolis’ housing projects. - Held that:- As the housing projects “Brigade Gateway” and “Brigade Metropolis” were same for Assessment Years 2007-08, 2008-09 and 2009-10 in respect of which deduction under section 80-IB(10) of the Act was denied by the Assessing Officer. Revenue has failed to demonstrate as to how the facts in the assessment year under consideration i.e. 2009-10 are different, even though in ground No.5 of revenue’s appeal it is stated that the facts of the present assessment year are different. It appears to us that the facts and circumstances of the case as it prevailed for Assessment Years 2007-08 and 2008-09 are identical for the Assessment Year under consideration i.e. 2009-10. As explained above, proportionate deduction under section 80- IB(10) of the Act has been allowed by different co-ordinate benches of this Tribunal in the assessee's own case for earlier assessment years. Revenue’s appeals against the aforesaid decisions of the Tribunal (supra) have been dismissed by the Hon'ble Karnataka High Court (supra) and Revenue’s SLPs by the Hon'ble Apex Court (supra). In this view of the matter, respectfully following the decisions of the co-ordinate benches of this Tribunal, the Hon'ble Karnataka High Court and the Hon'ble Apex Court in the assessee's own case for the earlier assessment years (supra), we hold that the assessee is entitled for deduction under section 80-IB(10) of the Act in respect of residential units having built up area of 1500 sq. ft. or less in ‘Brigade Gateway’ and ‘Brigade Metropolis’ housing projects. - Decided in favour of assessee. Disallowance of Interest paid u/s.36(1)(iii) - CIT(A) deleted the disallowance - Held that:- The CIT(A) has only followed the decision of this Tribunal in the assessee’s own case for the earlier assessment year 2009-10. Respectfully following the decision of the co-ordinate bench to which one of us i.e. Judicial Member is the signatory, we do not see any reason to interfere with the order of the CIT(A) as there appears to be no material on record to justify the Assessing Officer’s conclusion that deposits and advances have flown from out of the bank overdraft facility, we are of the considered view that the learned CIT (Appeals) has rightly deleted the disallowance of interest - Decided in favour of assessee. Disallowance of fine and penalty paid by the assessee on account of project Brigade Gateway - Held that: - This issue is decided against the assessee by the decision of the jurisdictional High Court in the case of CIT vs. Mamta Enterprises (2003 (10) TMI 26 - KARNATAKA High Court) which has been followed by the CIT(A) in rejecting the assessee’s ground of appeal.- Decided against assessee. As in respect of disallowance of fine and penalty, the AO should be directed to allow the deduction u/s 80IB(10) of the Act as it results in increase in the business profit. Estimating annual value of the building let out to Brigade Foundation for running its school at ₹ 15,00,000/- and consequent addition of ₹ 10,50,000/- under the head ‘income from house property’ - Held that:- The assessee has not disputed the fact that it had parted with the completed portion to Brigade Foundation for running the school during the relevant assessment year and since it had not entered into an agreement of sale with Brigade Foundation for sale of the said property, the benefit of using the property should be treated as the ALV of the property and should be brought to tax. Since the revenue authorities have accordingly brought the income to tax and the assessee has not been able to produce any evidence to the contrary, we do not see any reason to interfere with the order of the CIT(A). This ground of appeal is, therefore, rejected - Decided against assessee.
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2015 (7) TMI 531
Entitlement for registration u/s 12AA - DIT(E) observed that a trust or society having both charitable and non-charitable objects is not eligible for exemption of its income, is, not entitled for registration u/s 12A of the Act - Held that:- If the predominant object of a trust or institution is charitable and in the process of achieving that object some activity of commercial nature generating income is carried out, which again is utilized for charitable object, it cannot be said that the trust or institution is not established for charitable purpose. Moreover, the application of proviso to section 2(15), as rightly pointed out by ld. AR, has to be looked into at the stage of assessment while examining assessee’s claim of exemption u/s 11 of the Act and not at the time granting registration u/s 12AA. This is because, though, the first proviso to section 2(15) of the Act excludes any activity of the nature of trade, commerce or business from being considered to be a charitable purpose, but, the second proviso to section 2(15) restricts the application of first proviso only to such trusts and institutions having receipts from commercial activity exceeding a prescribed limit in a particular previous year. Therefore, application of proviso to section 2(15) has to be looked into in every assessment year. Further, ld. AR has demonstrated before us, receipts from sales of finished goods and royalty forms only a small percentage of total receipts of the assessee. Therefore, it cannot be said that assessee is mainly engaged in commercial activity. Another important aspect worth mentioning is, in course of hearing ld. AR brought to our notice, that similar institutions established in other parts of the country have been granted registration u/s 12AA of the Act. To substantiate such claim, he submitted registration certificates granted to similar institutions at Bhubaneswar, Indore and Aurangabad. Though, ld. AR submitted that this fact was also placed before ld. DIT(E), but, the order of ld. DIT(E) is totally silent on the issue. Be that as it may, if similar institutions established by central govt. in other states having similar object have been granted registration u/s 12AA, as is the case in Bhubaneswar, Indore and Aurangabad, we do not find any justifiable reason why assessee should be deprived from availing such benefit. In the aforesaid facts and circumstances, we set aside the impugned order of ld. DIT(E) and remit the matter back to him to verify this aspect and if it is found that institutions in other places having similar object have been granted registration u/s 12AA, he may consider granting registration u/s 12AA of the Act to assessee. - Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 530
Transfer pricing adjustment - Not applying TNMM to the internal uncontrolled transactions of the company for determining the ALP - Held that:- It is a fact on record, assessee during the year has provided software development services to both AE and Non-AEs. There is no dispute to the fact that assessee in its TP documentation has undertaken an analysis by applying internal TNMM. The TPO in his order also accepts this fact. It is also the plea of assessee that as it has maintained segmental details with regard to the transactions made with AE as well as transactions made with non-AEs during the relevant period and has also maintained relevant record indicating segmental details with regard to both the transactions, then, as per rule 10B(3) internal comparables have to be given preference as price charged by assessee for controlled transactions with AEs can be compared with similar uncontrolled transactions with third parties. On examining relevant statutory provisions, we find merit in the submissions of ld. AR. As the assessee during the year has undertaken transactions with both AEs and non-AEs, and as claimed, has not only maintained segmental details of such transactions, but, has also undertaken comparative analysis in its TP study, it has to be looked into in an objective manner before rejecting the same. However, as noticed from the order passed by TPO, he has not assigned even a single reason why internal comparables/transactions should not be considered. Even the DRP has also not properly appreciated assessee’s contention in this regard. As far as observation of the DRP that uncontrolled transactions constitute merely 21.4% amounting to ₹ 44 crores as against huge volume of transactions with AE, therefore, it cannot be compared, we are of the view that claim of assessee cannot be rejected on such general observations. Before rejecting assessee’s analyzation under internal TNMM, departmental authorities are required to assign cogent reasons for not accepting the same. Only because volume of transaction is small or insignificant, on that ground alone it cannot be rejected.Since the matter has not been properly enquired into or examined ether by TPO or DRP, we are inclined to remit the issue to the file of TPO for examining afresh after due opportunity of being heard to assessee. TPO must make an endeavour to examine segmental details and find out whether internal transactions/comparables can form the basis of determination of ALP. - Decided in favour of assessee for statistical purposes. Not allowing credit of TDS - Held that:- Though, application u/s 154 has been filed by assessee AO has not dealt with the same. Considering the nature of dispute, we direct AO to verify the facts relating to the claim of TDS and if the online statement show credit of the aforesaid TDS in the name of assessee, the same may be allowed.Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 529
Disallowance of deduction in respect of loss in the value of shares of ICO Global Holdings Ltd. in the computation of its business income - assessee has raised an alternative ground that the loss on the shares of ICO Global Holding Ltd. is admissible as a capital loss - Held that:- Transfer within the meaning of section 2(47) of the Act is an inclusive term, including extinguishment of any right in an asset, as held, inter alia, in “CIT vs. Collis” (2001 (2) TMI 9 - SUPREME Court), “Karthikeya V. Sarabhai vs. CIT”, (1997 (9) TMI 2 - SUPREME Court), “Sath Gwaldas Mathuradas Mohata Trust vs. CIT” (1987 (1) TMI 78 - BOMBAY High Court ) and “DCIT vs. BPL Sanyo”, (2008 (2) TMI 386 - KARNATAKA HIGH COURT). Further, relinquishment is also a transfer u/s 2(47)(1)(i),as is exchanged. The ld. CIT(A) has himself held it to be a case relating to liquidation (page 9, last line of the impugned order). However, the ld. CIT(A) has not considered that the shares of I.C.O. Global Holdings Ltd. were actually transferred. The loss was on investment in the shares. The shares were received from the company/liquidator, as noted by the ld. CIT(A). Therefore, we hold that the loss is a capital loss. Pertinently, the issue raised by the assessee that it was a business loss stands decided against the assessee Denial of claim made u/s 80IA of the Act, in respect of earth station - Held that:- This issue stands consistently decided against the assesee by the Tribunal for the assessment years 1996-97 to 2000-01. Therefore, the facts remaining the same for the year under consideration also, this issue is decided against the assessee.The assessee had also claimed deduction u/s 80IA of the Act in respect of internet. It is seen that for assessment years 1999-2000 and 2000-01, the Tribunal has set aside this issue to the file of ld. CIT(A). Here also, the facts remaining the same, and in keeping in view the said appeal Tribunal order, this issue is remitted to the file of ld. CIT(A), to be decided afresh on affording due opportunity of being heard to the assessee. Liability to pay interest under section 234D - Held that:- Levy of interest u/s 234D would be applicable in these years in view of the decision of Hon’ble Bombay High Court in CIT vs. Indian Oil Corporation Ltd.(2012 (9) TMI 517 - BOMBAY HIGH COURT). - Decided against the assessee. Interest u/s 244A needs to be excluded while computing the interest u/s 234B of the Act and this computation needs to be done for the period beginning on 1-6-2003. We order accordingly and remit the issue to the A.O. for the purpose, to be decided afresh in accordance with law, keeping in consideration the above decisions. Reduction in the cost of depreciable fixed asset by ₹ 4.28 crores and in taxing the non-adjustment of cost of fixed asset, the depreciation of ₹ 1.07 crores on the amount of ₹ 4.28 crores - Held that:- Here, it is not disputed that the assessee had, in the succeeding year, suo motu made the necessary adjustments and reduction in the cost of depreciable fixed asset. It is only a question of time taken. In fact, there is no revenue loss. Therefore, directing the A.O. to make necessary verification and grant relief accordingly. Disallowing certain late remittances of Provident Fund (PF) concerning the contribution by the management towards PF and pension fund - Held that:- Such contributions are covered under the provisions of section 43-B of the Act as held in CIT vs. Alom Extrusion Ltd. [2009 (11) TMI 27 - SUPREME COURT ] - Decided in favour of assessee. Disallowance of claim being the amount paid to use the land at Bandra Kurla Complex for 80 years, as a business expenditure - Held that:- The first alternative claim of amortization in this regard has also been decided against the assessee in “CIT vs. Khimline Pumps Ltd.” (2002 (9) TMI 94 - BOMBAY High Court) holding such expenditure to the capital in nature. Accordingly, this alternative claim is also rejected.The assessee has further raised a second alternative claim, i.e., of depreciation in this regard. Since the nature of the expense has already been held to be capital, as above, the A.O. is directed to allow the depreciation thereon in accordance with law.The issue of allowability of repairs and maintenance expenses (prior deductions being expenses pertaining to the year under consideration), amounting to ₹ 3,41,222/- as raised on the additional ground stands decided in favour of the assessee by the Tribunal in its case for assessment years 1997-98, 1999-2000 and 2000-01. The facts remaining the same, the issue of allowability of repairs and maintenance expenses, i.e., prior period expenses being expenses pertaining to the year under consideration, is decided in favour of the assessee.The assessee has also claimed write-back of repairs and maintenance expenses disallowed in A.Y. 1999-2000, since the expenses related to prior period. These expenses are of ₹ 49,99,521/- for A.Y. 2000-01. Under similar circumstances, the A.O. should verify whether this write-back of repair and maintenance expenses was also subjected to tax for A.Y. 1999-2000, being disallowed in the assessment order and to take steps to avoid double taxation of the same amount as per the Tribunal order for A.Y. 2000-01, for the year under consideration also, we remit the matter to the file of the A.O. for making a similar verification and to allow relief accordingly. Levy of penalty u/s 271()(c) - disallowance of claim of business loss on account of ICO Global Holdings Ltd. - Held that:- Disallowance of a claim which is not found bogus or inherently incorrect or patently untenable would not ifso facto lead to the conclusion that the assessee has furnished inaccurate particulars of income or concealed particulars of income attracting levy of penalty U/s 271 (1)(C). The assessee has disclosed all the relevant facts and details in respect of the claim during the assessment proceedings and the claim has been specifically explained through the notes of the return of income. Therefore, we find that the penalty on the disallowance of claim of business loss on account of written down value of shares of ICO Global in the facts and circumstances of the case does not warrant levy of penalty. Accordingly, we delete the penalty on this account. - Decided in favour of assessee. Disallowance of deduction u/s 80IA of the Act on income from earth station undertaking - Held that:- As regards the penalty against the disallowance of deduction u/s 80IA on earthstation it is to be noted that the question of law involved in the claim of the assessee is a highly complexed and debatable one as it was finally decided by a larger bench of this Tribunal. Since the issue was referred to the larger bench (SB) of this Tribunal for adjudication which itself manifests that there was possibility of more than one view on this issue. Accordingly, the disallowance of claim which involves a highly debatable issue and based on the difference of opinion would not amount to furnishing incorrect particulars of income or concealment of particulars of income on the part of the assessee. Hence levy of penalty on such a debatable legal issue is not warranted and accordingly deleted. - Decided in favour of assessee. Wrong full claim of advance rent as revenue expenditure - Held that:- The claim was never shown to be malafide. The A.O. did not elaborate any reasons by recording the finding in the assessment order as to why the assessee was being disbelieved. The claim invited a difference of opinion. All this did not attract levy of concealment of penalty and the ld. CIT(A) has correctly deleted the same. Therefore, ground No. is also rejected. Decided in favour of assessee.
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2015 (7) TMI 528
Addition on account of bogus purchases - CIT(A)deleted the addition - Held that:- No defects have been found in the stock register nor any defects have been pointed out by the A.O. in the audited books of accounts maintained by the assessee. Despite search and seizure no adverse material was found to substantiate the disallowance made by the A.O. The so called spot enquiry done by the Inspector has no credence as no details have been filed before us, nor was the assessee confronted with the manner in which spot enquiry was conducted, the persons who conducted the spot enquiry or the material gathered by the Revenue in the spot enquiry. Thus the Revenue cannot place reliance on this enquiry. The purchases which are disallowed relate to cement and steel which are essential for the purpose of construction. No enquiries are made with the banks, other statutory authorities on the identity of the parties. Details such as whether sales tax authorities have accepted the quantum of purchases made by the assessee have not been obtained Identity could be ascertained by the AO, both from the banker and the sales tax authorities. Under the circumstances we have to uphold the contentions of the assessee, that the finding of the AO, that the assessee has not furnished full details, is factually in correct. Coming to the identity of the parties we find that all the parties are registered with sales tax department and have charged VAT in each of the bills. All these parties have bank accounts and payments were made through account payee cheques. Evidence of material having been received by the assessee, has been filed. As regards the fact that the assessee was not able to produce the parties, we agree with the contentions of the assessee that non production of the parties cannot be a ground of disallowance of all the purchases as the persons from whom purchases are made could not always be in the control of the assessee, specifically when they are unrelated parties and volume and quality of evidence produced by the assessee is such that non production of the party from whom the assessee purchased cannot lead to a conclusion that the purchases are not genuine. Thus we uphold the finding of the Ld.CIT(A) on the deletion of the disallowance which was treated as bogus purchases by the A.O - Decided in favour of assessee. G.P. addition - Rejection of books - Held that:- As no defects have been pointed out in the books of accounts, we uphold the contentions of the assessee and vacate the finding of the Ld.CIT(A) on estimation of gross profit. The direction given to the AO to recompute the assessee’s gross profit @ 27% instead of at 16% is hereby vacated and this ground of the assessee is allowed. - Decided in favour of assessee.
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2015 (7) TMI 527
Treatment to agricultural income as income from undisclosed sources - Held that:- The AO has not accepted the assessee’s claim of having earned any agricultural income contrary to his claim of earning of ₹ 1,90,500/-; and following suit, CIT (A) also had the same view of AO; and accordingly the Ld CIT(A) upheld the action of AO and treated ₹ 1,90,500/- claimed by assessee as agricultural income as income from undisclosed sources. The assessee is aggrieved by the said impugned order of the CIT (A). Now, as it has been held by the Tribunal in the preceding years to the instant assessment year and subsequent years that the assessee has earned agricultural income in those years and assessee’s agricultural income has to be calculated for his own land at ₹ 10,000/- per bigha and ₹ 5,000/- per bigha on land taken on lease by the assessee. The ld DR, could not bring to our notice any change in facts during the year under consideration, so in the light of the said finding and direction, following suit, we direct the AO that after verifying the exact holding of land by assessee and the land taken on lease/rent basis, rework out the agricultural income of assessee. Accordingly, AO is directed to treat agricultural income as having been earned by the assessee, to the extent computed in terms of above direction. - Decided in favour of assessee for statistical purposes. Addition on account of low household withdrawals - Held that:- Direct the AO to accept ₹ 72,000/- as house hold expenses for the year under consideration and do the recomputation accordingly as decided by Tribunal in the preceding years. Addition on deficiency in the fund required for making investment - Held that:- Tribunal’s order in assessee’s own case for assessment years 2000-01, 2002-03, 2004-05 and 2005-06 stating that a perusal of the records reveals that the said addition was in fact the amount reflected by the assessee as its opening balance for the year under consideration (Rs 564260 opening balance shown by assessee – ₹ 82470 salary of assessee = ₹ 560117), which the AO as well as the Ld CIT(A) has treated as made on account of capital introduced from undisclosed source. Since it is the opening balance of the year as claimed by the assessee before the AO and CIT(A), which both did not accept and addition confirmed, we find this issue of amount reflected as opening balance needs to be recomputed since the Tribunal has accepted that the assessee is earning agricultural income, therefore, the accumulated cash balance which it reflects in the opening balance needs to be recomputed. - Decided in favour of assessee for statistical purposes. Undisclosed Investment on property purchased - CIT(A) deleted addition accepting the source of ₹ 5,05,000/- from his own past saving in bank account and cash with him (assessee)- Held that:- What the ld CIT(A) has done was that out of the addition of ₹ 18,05,000/- made by AO in respect to purchase of properties, only ₹ 7 lakhs has been found to be explained by the assessee to the satisfaction of the ld. CIT (A). The other claims of the assessee as to his source for purchasing the land costing ₹ 17.73 + stamp duty= i.e. ₹ 18,05,000/- lakhs have been arrived by the Ld CIT(A) by bringing the amount added by the AO, which in turn has been confirmed by the Ld CIT(A) for the preceding and this assessment year to justify the source for purchase of land.CIT(A) says that since this amount which is confirmed as income from undisclosed source is in the hands of the assessee, so he had the source to buy the properties. However, we take note that now because of the order passed by the Tribunal on 30.04.2010, the amounts confirmed by the Ld CIT(A) also has taken transformation, e.g. the amount confirmed by the Ld CIT(A) includes the amount claimed by the assessee as agriculture income and also the amount reflected as opening balance, so in that scenario, once the AO has recasted the cash flow statement where credit for agricultural income and opening balance are taken, if there is sufficient cash to justify ₹ 11,05,000/-, then the AO is directed to delete the addition and in case there is any deficiency or difference, then that amount be confirmed as income from undisclosed source. Therefore the deletion of addition of ₹ 11, 05,000/- is set-aside, and the issues limited to this addition is remanded back to the file of AO, to re-compute as directed above - Decided in favour of revenue for statistical purposes.
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2015 (7) TMI 526
Disallowance of the Research & Development expenses - CIT(A) granting relief of 50% - Held that:- As perused the copy of the ledger account of the R & D expenditure, it is very clear that the expenditure incurred is in the nature of routine expenditure for maintenance of Quality Control Department. Obviously, this expenditure had not resulted in creation of an asset of enduring nature and therefore, we hold that the entire expenditure should be allowed as Revenue expenditure. - Decided against revenue. Disallowance of TS 16949 certification charges - Held that:- From the perusal of the material available on record as well as the expenditure furnished before the Assessing Officer, we are of the opinion that the expenditure incurred is revenue in nature and does not create an asset of enduring nature and therefore, we direct the Assessing Officer to allow the entire expenditure. - Decided against revenue. Capitalization of the expenditure incurred on software development - Held that:- The issue in appeal is squarely covered by the Special Bench decision in the case of Amway Products Vs. DCIT (2008 (2) TMI 454 - ITAT DELHI-C ). Therefore, we direct the Assessing Officer to allow the same as a revenue expenditure - Decided against revenue. Disallowance of repair and maintenance expenditure of the building - Held that:- As a result of this expenditure no new asset had been created and the expenditure was incurred mainly for the purpose of maintaining the existing buildings. Therefore, the ratio laid down by the Hon’ble Supreme Court in the case of Ballimal Naval Kishore Vs. CIT (1997 (1) TMI 3 - SUPREME Court) is squarely applicable.- Decided against revenue. Disallowance of commission paid to Managing Director - Held that:- It appears from the material on record that the commission to the Managing Director was paid on par with the other employees of the company and therefore the provisions of Section 36(1)(ii) have no application. The ratio laid down in the case of AMD Mertplas Pvt. Ltd vs. CIT, (2011 (12) TMI 320 - Delhi High Court ) is squarely applicable to the facts of the case. - Decided against revenue. Taxability of DEPB incentives on the exports made - Held that:- This issues is no more res integra and is covered by the Hon’ble Supreme Court decision in the case of Topman Exports Pvt. Ltd. Vs. CIT, (2012 (2) TMI 100 - SUPREME COURT OF INDIA ) wherein held that the DEPB credit chargeable as income under Section 28(iiib) in the year in which the assesee applied for DEPB credit against the exports made and therefore, we restore this issue back to the file of the Assessing Officer with the direction that the income on account of DEPB credit should be taken into account only in the year in which the assessee had applied for the credit against the export made. Decided partly in favour of revenue for statistical purposes.
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2015 (7) TMI 525
Transfer pricing adjustment - whether the provisions of transfer pricing not applicable on the appellant company, the assessment order ought to have been quashed on this ground itself? - addition of ₹ 19,92,355/-being Arms Length Price of loan interest made by the AO - Held that:- As the learned counsel himself accepts, on a conceptual note, several types of debts, particularly long term unsecured debts, and revenue participation investments could be termed as ‘quasi capital’. So far as arm’s length price of such transactions are concerned, this cannot be ‘nil’ because, under the comparable uncontrolled price method, such other transactions between the independent enterprises cannot be at ‘nil’ consideration either. Nobody would advance loan, in arm’s length situation, at a nil rate of interest. The comparable uncontrolled price of quasi capital loan, unless it is only for a transitory period and the de facto reward for this value of money is the opportunity for capital investment or such other benefit, cannot be nil. As for the intent of the assessee to treat this loan as investment, nothing turns on it either. Whether assessee wanted to treat this loan as an investment or not does not matter so far as determination of arm’s length price of this loan is concerned; what really matters is whether such a loan transaction would have taken place, in an arm’s length situation, without any interest being charged in respect of the same. As for the contention regarding crucial role being played by, or visualized for, this AE, there is no material on record to demonstrate the same or to justify that even in an arm’s length situation, a zero interest rate loan would have been justified to such an entity. A lot of emphasis has also been placed on the fact that the loan was out of the GDR funds, and, for this reason, the interest free loan was justified. We are unable to see any logic in this explanation either. Even when the loan is given out of the GDR funds held abroad, the arm’s length price of the loan is to be ascertained. The source of funds is immaterial in the present context. We have also noted that the assessee has not offered any assistance on the quantum of ALP adjustment in respect of this loan transaction, and that in the subsequent assessment years, the assessee himself has accepted ALP adjustment by adopting the LIBOR + 2% interest rate. In this view of the matter, no interference is warranted on the quantum of the ALP adjustment either. In view of these discussions, we confirm the stand of the authorities below on this issue and decline to interfere in the matter. - Decided against assessee. Disallowance of 1/5th of GDR Issue expenses claimed by the company as allowable deduction u/s. 35D - whether the expenses incurred for issue of share capital is capital loss to the company - Held that:- As held in the case of Brooke Bond Limited (1997 (2) TMI 11 - SUPREME Court), the expenses on issuance of share capital are capital expenses in nature and that these expenses cannot be allowed as a deduction as revenue expenses. However, as long as these expenses, even if capital in nature, satisfy the conditions set out in Section 35D, these expenses are eligible for amortization under Section 35D. One of the conditions in Section 35D(1), as it stood at the material point of time, is that either the eligible expenses should be incurred before the commencement of the business, and, in a situation in which the expenses are incurred after the commencement of business, the expenses should be incurred for extension of his undertaking or setting up of a new industrial undertaking. This condition is clearly not satisfied on the facts of the present case as the expenses are incurred after the commencement of the business and it is not even assessee’s case that the expenses are incurred for extension of his undertaking or for setting up of new industrial undertaking. As for the decision of a coordinate bench, in the case of Mahindra & Mahindra Ltd Vs JVIT [2009 (10) TMI 639 - ITAT MUMBAI ], this decision was in the context of foreign currency convertible bonds which were debt instruments, though convertible into equity at a later stage. That decision has no bearing on the facts of this case. In view of these discussions, we see no merits in this grievance of the assessee either. - Decided against assessee. Loss due to foreign fluctuation - capital loss OR revenue loss - Held that:- The loss is entirely notional inasmuch as no foreign exchange is brought in India which is required to be repatriated in terms of higher rupee value. In both the Hon’ble Supreme Court judgments relied upon by the learned counsel, namely CIT Vs Woodward India Limited [2009 (4) TMI 4 - SUPREME COURT ] and Oil and Natural Gas Corporation Vs CIT [2010 (3) TMI 81 - SUPREME COURT], the additional liability had arisen in rupee terms since the funds were brought into India but, on account of fluctuation in exchange value, making the repayment of these loans required higher rupee payments. In the present case, however, since the amount is lying abroad in foreign exchange denominated accounted, the exchange rate fluctuation has no additional liability for repayment. There is no real loss as such. The loss is purely an accounting loss due to conversion of foreign currency obligations on the basis of different rates. In the light of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.- Decided against assessee.
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2015 (7) TMI 524
Disallowance of a provision in respect of ‘post retirement medical benefit’ to its employees, as a contingent, and not an ascertained, liability - Tribunal allowed claim - Held that:- The tribunal for A.Y. 1996-97 has followed its order for A.Y. 1997-98 (2014 (7) TMI 290 - ITAT MUMBAI). As regards the Revenue’s contention of the provision being not on a scientific basis, based on an empirical study, even as observed by the apex court in Bharat Earth Movers (2000 (8) TMI 4 - SUPREME Court ), the tribunal has directed the provision to be allowed only on actuarial valuation, restoring the matter back to the file of the Assessing Officer (A.O.) for the purpose. The provision is also the subject matter of the Accounting Standard (AS)-15 issued by the Institute of Chartered Accountants of India. We have, accordingly, no hesitation in, likewise, directing for the allowance of the assessee’s claim subject to actuarial validation. The matter is, accordingly, restored to the file of the A.O. for the purpose. Disallowance of expenditure incurred for acquiring the right to use know-how - Held that:- The assessee, though initially made a claim u/s.37(1), has settled for its claim being allowed u/s.35AB, amortizing the same over a period of six years; being, as clarified by the ld. AR, qua the same technical know-how obtained from Escom Telecom, USA as for the earlier years. The issue is, thus, again only a continuation of the assessee’s claim pursuant to the same technical know-how arrangement for transfer/user. The assessee shall, accordingly, be allowed its claim as exigible u/s. 35AB of the Act - Decided in favor of assessee Contribution by the assessee to the 20 point programme initiated by the Government of India - Held that:- he tribunal, following its earlier decision in the assessee’s case for A.Y. 1989-90, has allowed the contribution toward implementation of the twenty point program of the Government of India as deductible u/s. 37(1). Respectfully following the consistent stand by the tribunal, which has considered the decision by the apex court in Venkata Satyanarayana Rice Mill Contractors Co. (1996 (10) TMI 2 - SUPREME Court), we direct for the allowance of the same.- Decided in favor of assessee Addition toward the valuation of the closing stock, effected u/s. 145A - Held that:- Opening stock, which stands valued at net of excise, i.e., as the closing stock for the immediately preceding year, following exclusive method of accounting. The excise duty thereon is allowable u/s. 37(1) r/w sec.43B. However, there can be no double claim, so that to the extent already allowed per the enhanced valuation, on account of excise, of the opening stock for the year, mandated per s. 145A, there is no basis for its claim.The A.O. is accordingly directed to give effect to both the provisions of s. 43B and s. 145A (i.e., by valuing all the components of the Trading A/c at inclusive of all duties) for the current year, bearing in mind that there is no double deduction qua the same sum. We decide accordingly.- Decided in favor of assessee Denial of deduction u/s. 80-I/80-IB on capital power plants and production recovery units on its LPG bottling plants - Held that:- The process of bottling the LPG Gas into cylinder makes the same marketable on execution of the process. It therefore follows that a new product comes into existence - Deduction allowed . See COMMISSIONER OF INCOME TAX-1 Versus M/s HINDUSTAN PETROLEUM CORPORATION LTD. [2013 (5) TMI 124 - BOMBAY HIGH COURT] - Decided in favor of assessee. Write off of capital work-in-progress (or CWIP) - Held that:- Without doubt, as apparent from the foregoing narration of facts, which are not disputed, the expenditure under reference is a capital expenditure, which is inferable from the very fact of the write off of the cost of a capital asset, being accumulated under the head ‘capital work in progress’. What was being set up is a treatment plant, with a defined purpose, in alignment with the assessee’s processes. It clearly forms a part of the capital structure or the profit making apparatus of the firm. Its cost, upon completion, would only stand to be regarded as a capital expenditure in the form of a capital asset, liable for depreciation on user for the purposes of business. That the same could not be, for some reason fructify, is a different matter altogether. That is, the abortiveness of the expenditure would not be determinative of or alter the nature of the expenditure (refer: CIT vs. Tamil Nadu Chemical Products Ltd. [2002 (9) TMI 80 - MADRAS High Court ].Both the capital and the revenue expenditure are incurred ostensibly only toward business purposes. The denial of deduction qua the latter is on account of the nature of the expenditure and not for want of satisfaction of the condition of it being incurred for and in the regular course of business. The law in the matter is well settled and the case law, legion. We may, for reference, though site some decisions by the apex court as in the case of Hasimara Industries Ltd. vs. CIT [1998 (5) TMI 7 - SUPREME Court]. An expenditure incurred on a capital asset does not lose the character of capital expenditure, and does not become a revenue expenditure on the score that the said capital expenditure also ultimately enures to the efficient running of the business. Assessability of the interest u/s. 244A - Held that:- As regards the issue of time of the taxability of interest u/s. 244A, the same, as admitted by the ld. AR, stands squarely covered by the decision by the larger bench of tribunal in Avada Trading Co. Ltd. (2006 (1) TMI 465 - ITAT MUMBAI). Its stands clarified that interest u/s.244A is assessable on the grant of refund, of which it forms a part, upon processing u/s.143(1). Accordingly, the entire interest received is subject to tax in the first instance. No part thereof can be with-held for the assessment on the ground of being provisional. Of-course, there can be no double taxation. The fact that a particular method of accounting has been consistently followed in the past is no ground for following it in future, where it is not proper in-as-much as each year is separate and independent year of assessment, and income of each year only is to be brought to tax for that year. Deduction qua interest withdrawn u/s.244A, the same stands again discussed and decided by the tribunal in Avada Trading Co. Ltd. (supra). It was, with reference to the decision in CIT vs. Chunilal V. Mehta & Sons (P.) Ltd. [1971 (8) TMI 4 - SUPREME Court] held that the withdrawal would relate back to the year of grant of the refund (interest) in-as-much as it can only be considered as allowed in excess for that year. The decision is consistent with the decision in CIT vs. Syndicate Bank [1986 (1) TMI 85 - KARNATAKA High Court ]. The proper course therefore would be to claim the same through rectification u/s.154. We decide accordingly, also clarifying that the time limit for rectification u/s. 154 would extend on the basis of the orders under appellate proceedings. Disallowance u/s.14A - Held that:- The various file notings, internal approvals, requiring liasoning with different banking, Board approval/s, etc. (SPB 16-22), rather, confirm the expenditure of time and attention of the senior executives as well as their staff, so that there was input in terms of organizational resources toward what we may term as ‘investment management’, entailing incurring of expenditure. Our second observation is that the same is not in any fixed proportion of the amount invested, which also needs to the product liquidated in alignment of the cash management and, therefore depends on the exigency of the situation, requiring a balance of the current and future cash requirements by the company; assessment of investment options, considering the time frame for which the investment is to be made. In our view, a fixed cost, i.e., in monetary terms itself, would therefore be required to be ascribed, making a reasonable estimate toward the direct or indirect costs incurred in relation to these investments, yielding or liable to yield tax-exempt income, meeting thus the ends of justice. We estimate the same at ₹ 10 lacs. Non disallowance of the expenditure, other than on interest, no disallowance qua the same could be proposed or directed by the ld. CIT(A) - Held that:- We find the argument specious as well as inconsistent with the scheme of the Act. Section 14A, as well as the other provisions, viz. sections 68, 69, 69A, etc. mention of ‘Assessing Officer’ as he is the assessing authority Act, and for no other reason. It is not meant as a fetter on the process of assessment or otherwise act as a deterrent or limitation on the scope of the assessment. The whole premise for providing for satisfaction is towards the provision of an objective basis, which could be subject to review, besides operating as an in-built check against arbitrariness. Appellate proceedings, it is well settled, are only a continuation of the assessment proceedings. The powers of the first appellate authority under the Act are coterminous with that of the assessing authority, so that he has all powers of assessment, including the power of enhancement, the only limitation being that it cannot extend to a new source of income. He is, therefore, not only vested with but obliged to do what he did, i.e., given that the ‘satisfaction’ by the A.O. was not based on any materials or the facts of the case, based on a presumption made de hors the record. Reference towards the foregoing statement of law may be made to the decisions in the case of CIT vs. Kanpur Coal Syndicate [1964 (4) TMI 18 - SUPREME Court ]. Rather, the Act provides for a check in the form of power of revision u/s. 263, i.e., against any arbitrary action or even lack of proper enquiry/due application of mind (refer: Malabar Industrial Co. Ltd. vs. CIT [2000 (2) TMI 10 - SUPREME Court ] by the A.O. We, accordingly, see no issue of competence here.
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2015 (7) TMI 523
Denial of deduction under Section 80P(2)(a)(i) - CIT upholding the action of the Assessing Officer in assessing the interest received by the appellant on short term deposits with Syndicate Bank amounting under the head ‘Income from other sources’ - Held that:- Respectfully following the decision of in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. (2014 (2) TMI 1184 - ITAT BANGALORE), we hold that the learned CIT(A) was not correct in denying the assessee the deduction claimed under Section 80P(2)(a)(i) of the Act in respect of ₹ 26,16,800 earned by the assessee. The judgment of the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society Ltd. (2010 (2) TMI 3 - SUPREME COURT) relied upon by the learned CIT(A) has been considered and distinguished by the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. (supra). We find that the facts of the case on hand are similar to the facts of the aforesaid case decided by the Hon'ble High Court of Karnataka, since in both cases the assessee was a credit co-operative society and invested in fixed deposits out of the surplus funds of business. Applying the ratio of the judgment of the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. (2015 (2) TMI 995 - KARNATAKA HIGH COURT ), we hold that the assessee is entitled to deduction under Section 80P(2)(a)(i) of the Act in respect of interest income earned on fixed deposits, as well as that the said interest income forms part of the business income earned by the assessee and the same is not to be taxed under the head ‘Other Sources’. In this view of the matter, the deduction claimed by the assessee under Section 80P(2)(a)(i) of the Act in respect of interest of ₹ 26,16,800 earned from investments in fixed deposits and Govt. Securities out of surplus funds from business, is allowed. - Decided in favour of assessee. Interest under Section 234B and 234C of the Act - Held that:- The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala (2001 (10) TMI 4 - SUPREME Court) and we, therefore, uphold the action of the Assessing Officer in charging the said interest
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2015 (7) TMI 522
Estimation of profit - Undisclosed Purchase - non production of books of accounts - Held that:- Assessee has not produced books of account before the AO or before CIT(A) during the course of assessment proceedings or appellate proceedings. The AO while framing assessment has gone through the audited accounts and the stock register maintained in Form No IV. AO has never denied that the sales are not out of these unaccounted purchases. The sales made are accepted as it is. Once the sales are accepted, the entire undisclosed purchases cannot be added for computing the income of the assessee except by applying a profit rate i.e. gross profit as declared by assessee in regular books of account or the gross profit declared by other concerns in the similar trade. In view of the above facts and circumstances and particularly when the books of accounts were not produced by the assessee before the AO, the book results cannot be accepted and the same are to be rejected. In any case, the computation method of the AO for determining undisclosed purchases is taken through mathematical exercise. We find that the assessee maintaining the stock and production registers as per the guidelines of FCI, which are Form No.I to IV. The registers are regularly checked by FCI for the reasons that 40% of the production would have been sold to FCI as per Government order. The AO should have verified the closing stock in view of stock register maintained for the purposes of FCI. Even otherwise, this stock inventory of the magnitude of 43,447.20 quintals is impossible to be weighed and determine the closing stock within the time-limit of 12 hours, which was the period during which the Survey Party stayed in the business premises of the assessee. From the finding of survey, it is clear that weighing is not done but only counting of bags or inventory of bags is taken by the Survey Party counting the number of bags in the stacks. We find that the FCI Inspector has signed the stock register as on 31.03.2010 by mentioning the 5700 quintals of paddy, whereas the AO determined the stock as 43,347.20 quintals. The assessee has maintained stock register in Form No I, II, III & IV under DCF&S/FCI guideline as maintained by the Rice Mill. Neither AO nor CIT(A) has cross-verified the registers maintained by assessee. In such circumstances, we direct the AO to recompute the income by applying gross profit rate on the unaccounted purchases, which are sold out. Gross profit declared by the assessee, we are of the view that these are undisclosed purchases as sold by the assessee and sale is admitted by the Revenue, a reasonable GP rate will be 10% for computing profit of the assessee. Accordingly, we direct the AO to recompute the income after deleting the addition made on account of undisclosed purchases but apply GP rate of 10% on the undisclosed purchases. The AO is directed accordingly. - Decided partly in favour of assessee.
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2015 (7) TMI 521
Exemption of income under the provision of Section 11 denied - Computation of income of assessee society - CIT (A) held that the activities of the assessee fall within the purview of the proviso to section 2(15) - whether the appellant society is engaged in the activities which are in the nature of educational or advancement of any other objects of general public utility? - Held that:- .The mere fact that the appellant society had generated surplus, during the course of carrying on the ancillary objects, shall not alter the character of the main objects so long as the predominant object continues to be charitable and not to earn the profit. Please refer to the judgments rendered by the Hon’ble Apex Court in the cases of Addl. CIT vs. Surat Art Silk Cloth Manufacturers’ Association [1979 (11) TMI 1 - SUPREME Court] and CIT v. A.P. State Road Transport Corporation [1986 (3) TMI 1 - SUPREME Court]. As viewed from any angle, we hold that the Appellant society is entitled from exemption of income under the provision of Section 11 of the Act and the proviso to Section 2(15) of the Act cannot be applied to the appellant society as it is not engaged in any activity which are in the nature of trade, commerce and business. Accordingly, we direct the Assessing Officer to allow the exemption under the provisions of Sec. 11 of the Act. - Decided in favour of assessee. Disallowance of prior period expenses, deferred tax liability and provision for income-tax - Held that:- If the commercial principles for determining the income are applied, it is but natural that the adjustment of the expenses incurred by the appellant society for charitable purposes in the earlier year against income earned by the appellant society in the subsequent year will have to be regarded as application of income of the appellant society for charitable purpose in the subsequent year in which such adjustment has been made having regard to the benevolent provisions contained in section 11 and will have to be excluded from the income of the appellant society under section 11(1)(a) Reliance in this regard is placed on the decision in the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal, (1993 (11) TMI 17 - GUJARAT High Court ). Further, we also note that the provisions of section 11(1)(a) of the Act does not prescribe that income of the year should have been applied only in the year in which income has arisen. Therefore, we hold that the pre-operative expense should be allowed as deduction. The Assessing Officer had adopted the excess of income over expenditure for taxation and further addition of provision for income tax was made. For the purpose of computation of income available for application for charitable purposes, it is only the actual receipts and payments which are all alone to be considered. Therefore, we direct the Assessing Officer to allow the provision for taxation only in the year in which actual payment is made. Allowability of depreciation - Held that:- We direct the Assessing Officer to allow the depreciation as an application of income. See case of A.P. Olympic Association [2014 (2) TMI 988 - ITAT HYDERABAD] - Decided in favour of assessee.
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2015 (7) TMI 520
Capital gain - transfer of immovable property without any written contract - whether there is a transfer of capital asset during the year in terms of section 2(47)(v) as alleged by AO? - CIT(A) deleted he addition - Held that:- Thus, it is patent and obvious, handing over possession of property by assessee to the income tax department is by virtue of an unilateral act of the state govt. over which assessee has neither any say nor any control but at the same time it has to comply to the same. In the aforesaid facts and circumstances, it cannot be said that the basic condition of section 53A of T.P. Act in the present case has been fulfilled. Moreover, consideration payable towards transfer has also not been quantified till date. Though, it is provided in GOMS that a separate order would be passed determining the cost of the property and adjusting the same towards loan payable by assessee to the state govt., but, as yet no such order has been passed by the state govt. In the aforesaid facts and circumstances, in absence of written contract, quantification of consideration to be paid, it cannot be said that there is a transfer in terms of section 2(47)(v) of the Act. It is clear from the GOMS issued by govt. that the cost of land will be determined by the state govt. through a separate order. However, as yet no order has been passed by the govt. determining the cost of land. It is also evident from the statement of audited accounts of assessee, though, assessee has credited the market value of the property to P&L A/c, but, it has been shown as receivable and has not been adjusted against loan repayable to the state govt. In the aforesaid facts and circumstances, in our view, in absence of determination of cost of land by state govt., no capital gain can be computed in the impugned AY. Ld. CIT(A), in our view, is therefore justified in deleting the addition made by AO on account of long term capital gain. - Decided in favour of assessee. Deduction claimed on payment of VRS - direction of ld. CIT(A) amounts to setting aside the issue to AO - Held that:- we are of the view that ld. CIT(A) instead of directing AO to verify assessee’s claim and decide the issue, should himself have decided the issue as direction of ld. CIT(A) amounts to setting aside the assessment order, which he is not authorized to do under the statute. If at all ld. CIT(A) wanted to verify any factual aspect, he could have called for a remand report from AO and accordingly decided the issue himself. In the aforesaid view of the matter, we are inclined to set aside the order of ld. CIT(A) on the issue and remit the matter back to his file for deciding the issue afresh on merit after due opportunity of being heard to assessee. If necessary ld. CIT(A) may call for a remand report from AO before deciding the issue. - Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 519
Tds deduction - section 194I OR under section 194C - assessee has deducted tax @2% on the payments made to the concerned persons in accordance with section 194C of the Act treating the payments as contract for service but whereas the assessing officer has treated the payment as a lease rental and therefore he opines that the tax to be deducted at source ought to be at 10% in accordance with section 194I - assessee in default - CIT(A) found the assessee has discharged its onus of having fulfilled the conditions laid down in terms of proviso to section 201 of the Act and therefore has to succeed in these appeals - Held that:- The income from "warehousing" is chargeable under the head "Business Income" and not under the head "income from House Property" as held by jurisdictional High Court in the case of CIT vs. NDR Warehousing Pvt. Ltd (2014 (12) TMI 189 - MADRAS HIGH COURT ) and also by the Bombay High Court in the case of Nutan Warehousing Company Ltd vs. DCIT [2010 (2) TMI 397 - BOMBAY HIGH COURT]. These facts are not controverted by the Department Representative. Being so, this is an admitted fact that once income of the letout of ware housing is treated as business income then tax deduction at source to be made u/s.194C of the Act. Being so, in our opinion the Commissioner of Income Tax (Appeals) is justified in observing that the assessee is liable to deduct tax at source u/s.194C, since the nature of the service rendered by the assessee is not only providing space but also providing warehousing activity and the income derived from such activity is "business income" and not income from "house property". Further, if the tax deducted and the same was deposited in the Government account, the due credit shall be given to that extent. If the recipient has declared income in their return of income, the assessee cannot be liable for payment of TDS once again in view of the judgment of Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd vs CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] wherein it has been held that where deductee, recipient of income, has already paid taxes on amount received from deductor, department once again cannot recover tax from deductor on same income by treating deductor to be assessee in default for short fall in its amount of tax deducted at source. However, the department is at liberty to recover the amount of interest, if any, arising out of delayed payments of taxes under the provisions of Section 201(1A) of the Act from assessee. - Decided against revenue.
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2015 (7) TMI 518
Dis allowances of of ‘commission on collection’ and ‘commission on sales’ - CIT(A) deleted the addition - Held that:- Originally these disallowances were made on the ground that there were differences between the amounts claimed in the profit and loss account and the relevant ledger accounts produced in the course of assessment proceedings. The explanation put forth by the assessee before the learned CIT(A) was that there were two concerns operated by the assessee and if the expenditure claimed in both these concerns were taken together and for the entire period under consideration, there will be no difference at all. That this claim has been examined by the learned CIT(A) and found to be correct is not in doubt as is evident from the impugned order. We find no merit in the plea raised by Revenue that the disallowance has to be sustained since the entire books of account were not produced in remand proceedings. The production of the entire books of accounts, in our view, was not required in so far as examining the veracity of the assessee's claim. What is material for examination was the copies of the ledger accounts of the concerned proprietary concerns viz. M/s. Traces and M/s. Sanforce vis-a-vis the financial statements of both these concerns from which it will become clear as to whether there is a difference in the extent of expenditure claimed as per the profit and loss account and the ledgers of the parties in the books of account. These have been produced before the authorities below in appellate and remand proceedings and it is clear from the categorical finding of the learned CIT(A) that there is no difference at all. - Decided against revenue. Disallowance under Section 40(a)(ia) - Non deduction of TDS on collection commission and sales commission - Held that:- The learned Authorised Representative contends that the assessee has paid the amounts and that nothing is outstanding / payable as on the last day of the year under consideration. However, since this averment of the assessee is not discernible from the impugned order, we set aside this issue to the file of the Assessing Officer. The Assessing Officer shall ascertain whether the assessee has paid the amounts or not. In case it is found that the payments have already been made as contended by the assessee i.e. on or before 31st March, 2008, then the Assessing Officer shall examine the issue in the light of the order of the co-ordinate bench in the case of Ananda Markala (2014 (12) TMI 613 - ITAT BANGALORE) as extracted. - Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 517
Addition on net increase in the assessee’s capital on account of write back as well as write off of some old credits and debits appearing in accounts - Income – Concept & Scope - Held that:- We confirm the assessment of the impugned sum as income, which would, in the absence of the establishment of the cause of remission or cessation of liability, fall to be assessed under Chapter IV-F under the head ‘income from other sources’ u/s. 56. When an amount, which is stated, claimed and accepted as a payable, is no longer so, the assessee gains to that extent. There is nothing unreal or notional about this gain. It can show that, even so, the same is not chargeable as income or no tax liability is attracted in-as-much as the benefit is not in the nature of income. The assessee offers no such explanation. What is admitted though is that there has been remission/cessation of liability in-as-much as these are no longer payable. Why? No reason is advanced. It is under these circumstances that the law permits the A.O. to draw an adverse inference of it as representing the assessee’s income. As regards the year, there can again be little doubt in the matter. The impugned credit/s, which we have found as a fresh credit/s, is during the current year. The liability was accepted as genuine for and up to the immediately preceding year, while it is no longer payable as at the year-end. The taxable event, in terms of gain, thus, has taken place during the year, even if one considers the passing of the journal entry, recording so, on a particular (single) date in the books, to be a matter of convenience only. It is for these reasons that we find the impugned credit as corresponding and answering to the concept of income under section 2(24) and, further, as standing to fall to be assessed u/s. 56(1) and 56(2), finding strong support in the decision in the case of T.V. Sundram Iyengar [1996 (9) TMI 1 - SUPREME Court]. - Decided against assessee. Addition being the write back of earlier year expenses to the assessee’s capital account for the year - Held that:- . No taxable event has taken place in the current year, as well as, as it appears, in the past. A reversal of a wrong entry, having no income or expense implication, cannot, by any stretch of imagination, result in income. Book entries do not create income but merely recognize it. In fact, even the Act does not define ‘income’ conclusively, but only in terms in which it ordinarily manifests itself. The Revenue has wholly failed to discharge the onus on it to show that any income has either arisen or stood received by the assessee during the year, which could only be by showing that the credit written back, stated to be fictitious by the assessee, was actually not so but represented an actual liability of the assessee, so that she has actually gained to that extent. There is also no case of the assessee owning a godown and being entitled to rent in its respect or for ground-rent qua the same, for the current or even an earlier year. It is for these reasons that we stated at the beginning of our discussion of our finding no appeal or merit in the Revenue’s case. We decide accordingly, directing the deletion of the impugned sum.- Decided in favour of assessee.
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2015 (7) TMI 516
Claim of deduction u/s.80IB(10) - CIT(A) allowed the claim - Held that:- The building plan of the housing project has been first approved by the Thane Municipal Corporation on 21.9.2004 which was sanctioned by the Executive Engineer, Thane Municipal corporation on 17.09.2004. Once it is established that the building plan of the housing project was first approved on 21.9.2004 and no plan was approved prior to that date, we need to go into the other aspects of question. Accordingly the housing project in question was approved on 21.09.2004 when the plan was approved by the Thane Municipal Corporation. The correspondence between the assessee and the Thane Municipal Corporation prior to that approve of the building is not relevant to decide the date of approval as per the Explanation to section 80IB(10). In view of the above discussion, we decide this issue against the revenue and in favour of the assessee Denying benefit of deduction u/s.80IB(10) in respect of profits arising from development of 12 residential units of buildings Varsha and Grishma of the housing project Prakruti Park at Thane - Held that:- The proportionate deduction is allowable when the other conditions regarding the area of plot is fulfilled after reducing the proportionate area of the plot representing the residential units which have the area exceeding 1000 sq.ft.. In the case in hand, the learned AR of the assessee has pointed out from the record that the total area of plot is 18742.2 sq.mtrs. and if proportionate area of 12 flats combined into six residential units is reduced from the total area of plot, ,the balance would be much more than the requirement of one acre. We note that the total number of flats in two buildings are 192 out of which 13 flats are merged for making six residential units. Therefore, keeping in view of the total area of the plot, we find that the remaining area is more than one acre as required u/s.80IB(10). We do not find any error or illegality in the order of the CIT(A) qua this issue - Decided against assessee.
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2015 (7) TMI 515
Treatment to interest subsidy - revenue v/s capital - 3% Central Interest Subsidy under the Central Interest Subsidy Scheme, 2002 of Government of India in favour of Kathua unit; 2.5% interest subsidy under Rajasthan Investment Promotion Scheme, 2003 by Rajasthan Government in favour of Bhawanimandi unit and Interest subsidy under Technology Up-gradation Fund Scheme by Ministry of Textiles, Government of India in favour of all the units of the company - Held that:- With regard to interest subsidy, under the Interest Subsidy Scheme 2002, Ld. CIT(A) noticed that the assessee company had received interest subsidy to the extent of 3% of the working capital advanced by the banks / financial institutions. The amount of subsidy so received was shown as part of “miscellaneous income” in Schedule XV. The subsidy was granted for industrial development in the State of Jammu & Kashmir for creating employment opportunities. By applying the “purpose test”, laid down by Hon’ble Apex Court in the case of Ponni Sugars & Chemicals Ltd. (2008 (9) TMI 14 - SUPREME COURT ) and also in the light of other judgements, which have considered the schemes, Ld . Commissioner observed that primary consideration of Central Government in granting incentives was to generate employment through acceleration of industrial development and thus each incentive can be said to have been designed to achieve public purpose and therefore, it is not by any stretch of imagination constitute as production incentive for the benefit of assessee alone. Therefore, the interest subsidy is in the nature of capital receipt. With regard to 2.5% capital investment subsidy, under Rajasthan Investment Promotion Scheme, 2003, Ld. CIT(A) observed that subsidy was provided for promoting investment in the State of Rajasthan and was linked to capital investment/ and hence the scheme was in the larger public interest, therefore, it constitutes capital receipt and not liable to tax. Similarly, with regard to 5% interest subsidy granted by Ministry of Textiles, Ld. CIT(A) perused the objects of the scheme while coming to the conclusion that it was introduced to promote technological upgradation in the Indian Textile Industry and also noted that the issue is squarely covered by Punjab & Haryana High Court decision in the case of Shyam Lal (2011 (1) TMI 409 - PUNJAB AND HARYANA HIGH COURT ) wherein it was held that such subsidy received under the said scheme is capital in nature. - Decided against revenue.
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2015 (7) TMI 514
Deduction u/s 80HHC on interest on intercorporate deposits - ITAT allowed claim - Held that:- The deduction allowed under Section 80HH of the Act is in the form of incentive for establishment of an industry in a backward area. The interest paid on intercorporate deposits can by no means is said to be an activity of the industry so established. When the making of intercorporate deposits itself is not part of the manufacturing activity, the question of the income derived therefrom being treated as qualified for deduction under Section 80HH of the Act, does not arise.- Decided in favour of revenue. Disallowance of lease rent - ITAT allowed claim - Held that:- Necessary facts are not placed before this Court. In case the lease is referable to, or connected with the principal activity of manufacture, the deduction can certainly be allowed. However, if the principal activity is only of manufacturing drugs, it is difficult to infer the leasing of any machinery or premises as part of that activity. At any rate, the Tribunal also did not analyse and record a finding that the leasing was part of the principal activity of the respondent. Therefore, we find that the view taken by the Tribunal cannot be sustained in law. - Decided in favour of revenue.
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2015 (7) TMI 513
Penalty u/s 271(1) (c) - Bogus loan - CIT(A) deleted penalty levy as quashed by ITAT - Held that:- In the original return the assessee had shown the return income of ₹ 7,14,500/-only. After the Investigation Wing detected the money laundering racket at Mumbai, wherein the assessee was also found to have been involved, only thereafter the assessee filed revised return of income declaring bogus loan of ₹ 10 lakh and interest thereon as additional income Thus, it was established that the assessee has considered income of ₹ 10,88,972/-. It is also required to be noted at this stage that even after the original assessment was completed and during the course of investigation by communication dated 23.11.2004 the assessee wrote a letter to the Deputy Director of Investigation, Mumbai offering additional income of ₹ 5 lakh shown as loan from Babulal D. Visrolia and Vinod L. Patodia. However, even at that time also, he offered the additional income of ₹ 5 lakh and thereafter, when the reassessment proceedings were initiated the assessee admitted to have introduced bogus loan of ₹ 5 lakh from Babulal D. Visrolia and ₹ 5 lakh from Vinod L. Patodia [in all ₹ 10 lacs] and shown the additional income of ₹ 10 lakh and amount of ₹ 88,972/-thereon in response to the notice under section 148 of the IT Act. Considering the facts and circumstances, the concealment of income of ₹ 10,88,972/- came to be established and consequently when in a penalty proceedings under section 271(1)(c) of the IT Act, the minimum penalty of ₹ 5 lakh has been levied by the AO, which has been confirmed by the ITAT, we see no reason to interfere with the impugned judgment - Decided against assessee.
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Corporate Laws
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2015 (7) TMI 541
Application for winding up - Non-payment of debt - Bona fide dispute or not - No reply to statutory notice - Charges of coercion in counter affidavit filed - Held that:- Any prudent company, which is not liable to pay the debt, is not expected to remain silent to a statutory notice. With respect to admission of debt under two letters dated December 29, 2009 and December 30, 2009, the counter-affidavit has raised vague pleas by stating that the said admission was made subject to reconciliation. However, in the additional counter-affidavit, the respondent has come out for the first time with the plea that the said two letters were issued under coercion. Also the respondent has come out with a vague plea that it used to issue undated cheques as security. There is no specific plea that the petitioner has misused one such cheque by presenting the same in bank for a sum of ₹ 2,18,64,235 putting July 20, 2011, as the date on which the cheque was issued. Admittedly, a criminal case under section 138 of the N. I. Act following the dishonour of the said cheque is filed and the same is pending before a criminal court. The plea of the respondent raised for the first time in the additional counter-affidavit that it has made over payment of ₹ 25,59,240 was not supported by any correspondence exchanged between the parties. For the first time, the respondent has disputed the two invoices dated July 12, 2008, for ₹ 2.47 crores and August 14, 2008, for ₹ 1.36 crores in the additional counter-affidavit only on the ground that they were not reflected in the VAT audit conducted by the State Government. It has not come out with any specific plea that those invoices were either fabricated or concocted. This court is of the opinion that the denial of debt by the respondent is not bona fide and that the same is a cloak or moonshine to evade payment of an admitted debt. Having admitted in categorical terms that it is liable to pay ₹ 1.50 crores subject, however, to reconciliation, the respondent cannot resile from the said admission and seek to deny the debt. The law is well-settled that where the debt is liable to be paid, a petition for winding up is maintainable even in the absence of precise quantification (see : Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P.) Ltd. [1971 (10) TMI 49 - SUPREME COURT OF INDIA] and Tweeds Garages Ltd. [1961 (11) TMI 37 - IN THE CHANCERY DIVISION ]. Though the respondent claims to be in good financial health, as it has failed to pay the admitted debt to the petitioner. - Application for winding up admitted.
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2015 (7) TMI 540
Penalty u/s 15A(b) of the SEBI Act, 1992 - Contravention of Regulation 29(2) & 29(3) of the SAST Regulations, 2011 and Regulation 13(3) & 13(5) of the Prevention of Insider Trading Regulations, 1992 - Non disclosure of acquisition of shares - Ignorance of law is not an excuse- Held that:- The main contention of the appellant, who has appeared in person before us, is that he was not aware about the requirement of law in making disclosure as a part of SAST Regulations, 2011 and PIT Regulations, 1992. We note that ignorance of law is not an excuse. It seems to be an afterthought in as much as the appellant had undergone inquiry before the SEBI for similar type of violation in the recent past when he had increased his shareholding to the tune of 5.6% of the total shares of RPIL on September 5, 2012. It is, therefore evident that appellant was aware about the requirement of law as regards disclosures on acquiring 2% or more shares of the company. t is also noteworthy that the appellant, on his own showing, could inform the company about the acquisition of shares in question with a request to the company, in turn, to inform the Stock Exchange. This also makes it abundantly clear that the appellant was aware about the requirement of law to make disclosures about acquisition of shares in question at or above 2% to the company as well the to the Stock Exchange but he chose not to do it. It is thus clear a case of repetitive violation of law for which no leniency can be shown even in the matter of quantum of penalty. - Decided against the appellant.
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Service Tax
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2015 (7) TMI 554
Classification of service - Business Auxiliary Service or Commission Agent service or clearing and forwarding agent service - Held that:- It is a Depot Agreement between the Company and the Assessee. - Clause (6) of the agreement stipulates that the goods entrusted to the Assessee for sale will remain the sole property of the Company until sold. Upon reading of the above clauses and Clause (6) as relied upon by the learned Advocate, it is clear that the Company entrusted the Assessee as a Depot Manager for clearing and handling of the goods, in their depot upto the sale of the goods in the market. The definition of Clearing and Forwarding Agent covers any service either directly or indirectly connected with clearing and forwarding operation in any manner. The expression in any manner has wide amplitude. The definition of Commission Agent would apply predominantly on sale or purchase of the goods. In the present case, we find that the appointment of the Assessee is not as a Commission Agent, but for Depot Manager, and therefore, it would cover under the definition of Clearing and Forwarding Agent - Decided in favour of Revenue.
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2015 (7) TMI 553
Vivisection of service - Composite contract - ship management service - ship management service - Difference of opion - Registry is directed to put up the file before the Hon'ble President to resolve the issue, by reference to a third Member. Whether, in the facts and circumstances, the composite contract of ship management service can be vivisected for the period in question, when 'ship management service' was not taxable, and the taxable component like 'repair and maintenance' be charged to tax separately in view of the findings recorded by the learned Member (Technical). Or Whether the composite contract cannot be vivisected in the facts and circumstances for taxing the taxable components 'repair and maintenance' as held by Member (Judicial).
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2015 (7) TMI 552
Commercial coaching and training service - discharge of service tax only on 80% - Royalty received - Held that:- The authorized representative of Aptech Ltd. is required under the terms of the franchise agreement to disburse the course fee credited into the escrow account between Aptech Ltd. and the appellant, in the proportion agreed to between the parties under the said agreement. Accordingly, the appellant received 80% of the course fee and 20% by Aptech Ltd., as its royalty under the franchise agreement. - Decision in the case of Kunal IT Services Pvt. Ltd. vs. C.C.E., Pune III [2015 (4) TMI 1005 - CESTAT MUMBAI] followed - the appellant therein had correctly remitted service tax on the amount received for rendition of commercial coaching or training services i.e. 80% of the amount paid by students. - Decided in favour of assessee. Disallowance of cenvat credit - Denial of refund claim - Input service was received prior to registration of the appellant as a service provider - Held that:- Decision in the case of mPortal India Wireless Solutions P. Ltd, vs. C.S.T., Bangalore reported as [2011 (9) TMI 450 - KARNATAKA HIGH COURT] followed - registration is not mandatory for the availment of credit. On the basis of this binding authority, the concurrent denial by the authorities below of credit of ₹ 2000/- is also unsustainable and requires to be set aside. - Decided in favour of assessee.
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2015 (7) TMI 551
GTA service - Abatement - packaging commission paid to the overseas firm - Held that:- In so far as demand under GTA service is concerned appellants have already paid ₹ 1,31,352/- after claiming abatement of 75% even though the same was not allowed by the adjudicating authority. If abatement is considered, they have already paid entire service tax except interest. - service tax demand on the service rendered by the overseas person - service provider at UK agrees to packing or repacking as required by the buyer of the First Part for which consideration has been paid not exceeding 5% of the invoice. Therefore, the amount paid to the overseas person is for the packaging of garments at Ireland, U.K. though it is mentioned as "packaging commission". Therefore, taking into consideration the service tax paid ₹ 1,31,352/- paid on GTA and the service rendered by the overseas person is only packaging of garments and not for procurement of orders, the appellant has made out prima facie case for waiver of predeposit - Stay granted.
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2015 (7) TMI 550
Waiver of pre deposit - 'Consulting Engineer' service - Held that:- Amendment to the said Explanation is prospective in nature. It is also evident that the demand has been raised on the outstanding amount in respect of service from associate enterprises received before 10.05.2005. It is nowhere brought out in the impugned order or in the Show Cause Notice that the outstanding amount as on 10.05.2008 has ever been paid by the appellant. - Following the ratio of the judgement of CESTAT in the case of Gecas Services India Pvt. Ltd. (2014 (7) TMI 410 - CESTAT NEW DELHI), we waive the requirement of pre-deposit and stay recovery of the impugned adjudicated liability during pendency of the appeal - Stay granted.
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Central Excise
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2015 (7) TMI 546
Eligibility for cenvat credit - Capital goods - Whether common registration under Rule 9 of Central Excise Rules, 2002 can be issued to sugar mill and its co-generation power plant which are separated by a public road - Held that:- Sugar mills and co-generation power plant separated by a public road are connected through overhead conveyer by which bagasse is generated in the sugar mill is transferred to co-generation power plant where it is used in the boiler for generation of steam which is used for generation of electricity. The electricity generated is used in the sugar mill in its various parts and surplus electricity was sold to the state electricity board. In terms of supplementary instructions issued by the board under Rule 31 of Central Excise Rules, 2002 ( chapter 2 of CBEC s Excise Manual of Supplementary Instrucitons,2005) separate central excise registration is required in respect of separate premises except in cases where two or more premises are actually part of the same factory (where processes are interlinked), but are segregated by public road, canal, or railway-line. When sugar mill and co-generation power plant are connected through overhead conveyer by which bagasse generated in the sugar mill is transferred to co-generation power plant where it is used in the boiler for generation of electricity and the electricity generated in the co-generation power plant is used in the sugar mill for its operation and only surplus electricity is sold to the state electricity board and when it is not disputed that administrations/work management of the sugar mill and co-generation power plant is common, the functioning of the sugar mill and its co-generation plant located across the public road has to be treated as interlinked and the two have to be treated as one factory. The Commissioner (Appeals) s findings in the impugned order on the functioning of the sugar mill and co-generation power plant that the two are totally incorrect. In our view, the reasons have been given by the Commissioner (Appeals) for upholding denial of common registration for sugar mill and co-generation power plants are absurd. - Decided in favour of assessee.
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2015 (7) TMI 545
Manufacture of Grain Feeder, En-mass Grain Feeder, Grain Discharger, Bins for grain storage, Loaders & Hoppers - These machines are used for transporting of grains - classification under Heading 8437/8436 or under 8428/8479 - appellants had not taken Central Excise registration and were clearing the said machines without payment of duty - Denial of CENVAT Credit - Penalty u/s 11AC - Held that:- keeping in view the HSN Explanatory Notes as also the fact that the machines manufactured by the appellants in no way process the grains or even do not do any auxiliary function before processing of grains but are limited to conveying or lifting or storing grains. (The nomenclature feeder used by the appellants is a misleading one). There can be no doubt that the machines would be correctly classifiable under Heading 8428 and not under 8437. Handling machines designed for any goods are covered under Heading 8428 irrespective of the fact that such machines are used in a factory or in mines or in construction and the item being handled is cement or minerals or grains. In view of the above position, we have no hesitation in holding that the machines being manufactured would be correctly classifiable under Heading 8428 and not 8437 as claimed by the appellants and the goods would, therefore, be chargeable to excise duty. - there are few other machines viz. bins, hoppers and Grain Feed Controller which the Revenue has proposed under Heading 8479 and the appellants claim the same would be classifiable under Heading 8437. Again, these goods are not meant for processing of the grains etc. but are machines for storage of grains or their parts. We agree with the Revenue that such machines would fall under the residuary heading of 8479 as these cannot be considered as machinery for milling industry. 8479 covers Machines and mechanical appliances having individual functions, not specified or included elsewhere in Chapter 84. There can be no doubt that the appellants were aware about the dutiability of the said goods and, therefore, they have intentionally not used the generally understood commercial terminology of the said goods and instead used the words green feeder, en-masse feeder etc. to avoid payment of excise duty. In our view, the conduct of the appellants would support the invocation of the extended period of limitation as also imposition of penalty. There can be no doubt as even after knowing that their goods are chargeable to excise duty, the appellants instead of paying the excise duty, chose to describe their goods with different nomenclature. We, therefore, uphold the imposition of penalty under Section 11AC. It is true that the cenvat credit can be taken as per Rule 3 of the Cenvat Credit Rules. However, the peculiar facts in the present case are that the appellants did not pay the duty treating their goods as non-dutiable and hence they were not eligible for availment of cenvat credit. Now since the goods are held to be dutiable, they are eligible for taking the cenvat credit. The appellants, therefore, must be given a chance to provide the copies of various documents like invoices etc. and other records as required to prove that the said inputs or input services were used in the manufacture of the goods and if the appellants are able to satisfy from the documentary evidence then the cenvat credit should be extended to the appellants and the net duty should thereafter be worked out. Penalty will also change accordingly. We, therefore, remand the matter to the Commissioner for the limited purpose of examining the documents to be submitted by the appellants - Decided partly in favour of assessee.
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2015 (7) TMI 544
CENVAT Credit - input service - Renting of immovable property - rental premises was not included in the registered premises - Penalty u/s 11AC - Premises which was not part of their manufacturing premises and had been included in their Central Excise Registration only on 31/3/2009 therefore it is contended in the show cause notice that said premises could not be considered as part of their factory premises to be used in the manufacture of their goods and therefore service cannot be considered as input service - Held that:- As far as use of the premises is concerned it is not in dispute that same is used in connection with activity of the factory such as storage of goods. For the same use Revenue has allowed credit, subsequent to the date of inclusion of such premises in the registered premises of the factory therefore as far as use prior to the inclusion in the registered premises or thereafter it is same therefore it cannot be said that merely premises is not included in the registration premises the same is not used for activity related to manufacture. The whole emphasize for disallowing credit was given by the lower authorities on the ground that since the said rental premises was not included in the registered premises therefore credit is not admissible - use before or after, when it is meant for factory activity, credit is admissible whether the premises was included in the registered premises or otherwise. It is kept in mind that service is not tangible unlike inputs or capital goods. Scope of service is not limited within the four corner of factory, even if same services are received by the appellant at any place directly or indirectly related to manufacture of activity or related to business activity of the assessee irrespective whether it is provided within the factory or out side the factory, credit is admissible. Therefore in my considered view so long as rental premises in the present case is used for manufacturing activity of factory unit, credit is admissible, therefore the impugned order is set aside. - Decided in favour of assessee.
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2015 (7) TMI 543
Valuation - Invocation of extended period of limitation - whether Valuation of the HDPE/ PP Bags manufactured by the appellants sold through related person, as inter-connected undertakings, can be made under Rule 11, read with Rule 10(a) of the Valuation Rules, 2000 as they existed prior to 01.12.2013 - Held that:- It has been clearly brought out by the Revenue that the persons who are calling the shots in the case of the appellants and the interconnected undertakings are relatives hence by virtue of express language of Rule 10(a) of the Valuation Rules the appellants will be held to be related. Adjudicating authority in Para 23.3 and 23.4 of the order-in-original dated 10.1.2011 17.1.2011 has held that in the present proceedings Rule 11 of the Valuation Rules is put into service according to which for determining value Rule 10(a) falls within reasonable norms. - No reason to interfere with the orders passed by the lower authorities and the same are upheld on merits. Issue involved in these proceedings was a contentious one and appellant had certain judicial pronouncements on the interpretation of Section 4 of the Central Excise Act, 1944 with respect to related persons . Under the existing factual matrix of facts, it can not be held that there was any intention on the part of the appellants to evade payment of duty. Accordingly, extended period is not invokable to the demands and no penalties are imposable upon the appellants. Demands have to be thus limited to the period under Section 11A of the Central Excise Act, 1944 without invoking extended period. - Decided partly in favour of assessee.
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2015 (7) TMI 542
Reversal of CENVAT credit - Subsequently, neither any query was raised by the department nor any show cause notice was issued - appellant took re-credit of the said amount - Held that:- re-credit is not against any amount of duty payment. It is admittedly re-credit of an amount of CENVAT credit debited at the instruction of the officers. I find that the amount of debit which was made earlier was legally admissible as CENVAT credit to the appellant. Because of the reversal at the instance of the departmental officers, on which the revenue has not raised any dispute on admissibility, re-credit the same by the appellant cannot be faulted with. - suo motu re-credit of the amount reversed by an assessee, there is no need to file any refund claim under Section 11B. In view of teh Madras High Court judgment, which is squarely applicable in the present case, re-credit of the amount already reversed by the appellant cannot be objected to. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (7) TMI 549
Levy of tax on export sales - Ambit and scope of the term "does not sell the goods so manufactured" and " not only intra state but also export sale" - Tamil Nadu General Sales Tax Act, 1959 - Held that:- , as in the hierarchy of law, the Constitution provision will supersede any conflicting statutory provision, we hold that the interpretation sought to be laid on behalf of the State, to hold that Section 3(4) will apply to the export sale of the assesses will run counter to the well laid legal principles referred to above and the same cannot be countenanced. - Decision in case of M/s. Tube Investments of India Limited V. State of Tamil Nadu [2010 (10) TMI 938 - MADRAS HIGH COURT] followed. - Decided in favor of assessee.
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2015 (7) TMI 548
Levy of sales tax / VAT on sale of REP licenses - .Whether the Hon'ble Tribunal is correct in holding that the income received by way of premium on sale of REP licences alone is taxable as 'turnover' as against the aggregate amount for which the said goods were sold as per the definition of the term 'turnover' as laid down in Section 2(r) of the TNGST Act, 1959? - Held that:- According to the Department, the assessee had surrendered REP licence to the Reserve Bank of India and that the turnover was 1,51,76,000/-, whereas the Appellate Authority and the Tribunal have held that the aggregate value insofar as the surrender of REP licence was ₹ 22,58,840/-. The rate of tax leviable on surrender of REP licence at 8% is not in dispute. On a conspectus of two orders, viz,, the first Appellate Authority as well as the Tribunal, it is clear that factually both the Authorities have found that the turnover on surrender of REP licence was only ₹ 22,58,840/-. In the absence of any record or material to the contrary, we are unable to countenance the argument of the learned Additional Government Pleader appearing for the State that there was an error in levy of tax in respect of REP licence surrendered to the Reserve Bank of India. - Decided against the revenue.
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2015 (7) TMI 547
Second re-assessment - KVAT - Power to review - After the audit of the books of accounts of the petitioner, re-assessment proceedings were initiated under sub-section (1) of Section 39 of the Karnataka Value Added Tax Act and on 6.6.2014, an order was made holding that petitioner was entitled to refund - When the petitioner was expecting refund of the said amount, once again re-assessment proceedings were initiated under Section 39(2) of the Act and an order was made on 21.10.2014 (Annexure-A to the writ petitions) holding that petitioner was in arrears of tax, interest and penalty. Held that:- The only condition for making further reassessment in addition to earlier assessment is when the authority takes notice of further evidence. But in the instant case, there was no further evidence which came to the notice of the assessing authority. Merely because the assessment in respect of M/s.Amma construction was made subsequently those facts could not have been taken note of in the instant case. There must be further evidence which is noticed by the assessing authority so as to make further assessment or reassessment. The assessing authority thus did not have any jurisdiction to do so and therefore subsequent assessment orders at Annexures A1 and B1 and demand notices at Annexures- A2 and B2 respectively are quashed. - However, if the respondent/department is of the view that the assessment made at Annexure-C calls for any further interference, then liberty is reserved to them to take such action in accordance with law. With regard to Refund - Liberty is reserved to the petitioner to make a representation and if such a representation is made, the same shall be considered in accordance with law and expeditiously within a period of two months from the date of representation. - Decided partly in favor of assessee.
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Indian Laws
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2015 (7) TMI 539
Claim of interest - Suit for money on account of delayed payment of the principal sum and the agreed interest. - Whether the suit is barred by waiver, acquiescence, estoppel or principles analogous thereto - Whether there has been accord and satisfaction between the parties in respect of the transactions, which form the subject matter of the suit - This Court cannot lose sight of, one fact that the plaintiff encashed the amounts received after the maturity without protesting that the interest is to be paid not till the date of maturity of those bonds but its actual payments. - if the protest is not made before the encashment of the amount and it does not appear from the conduct of the parties that the such encashment was made under protest, the plaintiff is prevented from raising an objection over the short payment
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