Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 18, 2015
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Validity of reopening of assessment - AO proceeded to exercise the powers since he wanted to verify certain aspects the assessment already complete, Thus Assessing Officer has clearly exceeded his jurisdiction under Section 147 - HC
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Transfer of development rights - whether could be treated as sale consideration in the circumstances of the case? - . Since the assessee failed to sell any such rights in the two years in question, the advances received cannot be classified as income. - HC
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Protective assessment could only be made at the stage when there was any doubt or dispute about the assessability of a particular sum either in relation to the assessment year and/or in relation to the assessee - HC
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Addition on account of bogus purchases from eleven parties - the addition is not sustainable on the basis of assumption and conjectures relying on the four statemetns recorded u/s 133A and that too without affording an opportunity of cross examination to the assessee - AT
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Revision u/s 263 by CIT(A) - The provisions of Section 50C of the Act are not applicable when the shops are treated as stock-in-trade and income from such transaction was held as a business income - revision is not valid - AT
Service Tax
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Recovery of tax u/s 87 from successor of deceased proprietor - SCN was issued to the deceased but could not be adjudicated during his life time - garnishee notices - before adjudication, demand cannot be recovered u/s 87 - HC
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Extended period of limitation - there was no scope for any confusion even with regard to the said exclusion. It needs to be mentioned that the bona fide belief is not a hallucinatory opinion of an uninformed person. - demand with penalty confirmed - AT
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Valuation - when the postage is recovered from the service receiver on actual basis by a service provider, he acts as a pure-agent and, therefore, the reimbursements made to a pure-agent is not includible in the value of taxable service rendered - AT
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CENVAT Credit - Capital goods - Only because at the time of issuing the invoices by the suppliers / provider the Maruti Show room & Workshop were not registered and invoices were addressed to the appellant s temporary administration office, the appellants cannot be denied the benefit of the Credit - AT
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Management maintenance or repair service - It is seen that the appellant did not take Service Tax registration and did not file ST-3 returns - did not submit the details in spite of being asked and did not even respond to summons - demand with penalty confirmed - AT
Central Excise
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CENVAT Credit - it is a clear case of suppression of facts where the appellants deliberately adjusted the shortage as if it is consumed in the manufacture of final products at the end of every month and created fresh opening balance at every month without making reversal of credit on the shortage of inputs - AT
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Valuation of clearance of goods after reprocessing - Re-moulding charges are for the expenses incurred for re-processing and re-manufacturing of the goods and the same cannot be treated as consideration for the goods earlier cleared on sale - AT
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SSI Exemption - Penalty u/s 11AC - Keeping in view the fact that different copies of the invoices were manipulated, it is a case of fraud and extended period of limitation is correctly involved and is upheld. - AT
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CENVAT Credit - Taking into account of the conduct of the Appellant for excess availment of credit for more than ₹ 1 Crores, we find that it is a fit case to impose penalty under Rule 15(1) of CENVAT Credit Rules. 2004. - Penalty on employees waived - AT
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Refund of unutilized cenvat credit - it may not be correct to treat the date of clearance of the goods for export as the 'relevant date'. - refund claims have to be treated as not hit by limitation - AT
VAT
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Issuance of 'C' forms - subsequent sale against E-1 / E-2 forms - The issue whether the petitioner is entitled for exemption and has satisfied the conditions under Section 6(2) of the CST Act cannot be decided in these proceedings at the instance of the Tax Department. - HC
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Premature recovery proceedings on the basis of best judgment re-assessment order - As such the Garnishee notices cannot be sustained - HC
Case Laws:
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Income Tax
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2015 (7) TMI 594
Disallowance of the carry forward and set off of excess application of income - Held that:- Section-11(1)(a) of the Act provides that “income derived from property held under Trust wholly for charitable or religious purpose” shall not be included in the total income to the extent such income is applied for charitable or religious purpose in India. The Act also provides that upto 15% of such income is accumulated or set apart, then that shall also not be included in the total income. Further Section-11(1)(d) of the Act provides that “income in the form of voluntary contribution made with specific direction that they shall form part of the corpus of the trust or institution” will also not be included in the total income. The amount applied from the ‘Loan’ or ‘Sundry Creditors’ will be allowed as application of fund in the year in which such ‘Loan’ or ‘Sundry Creditors’ are repaid. It is pertinent to mention that if the amount is applied from the ‘Corpus fund’ or ‘accumulated fund’ it will not be treated as application of fund because ‘Corpus fund’ and ‘accumulate fund’ are already exempt from the income of the Trust and once again if it is treated as application of fund it would amount to double deduction. Therefore the claim of the assessee to carry forward the excess application of fund cannot be entertained applying the commercial principles. However if the excess amount of ₹ 23,96,355/- is applied from the borrowed fund or from Sundry Creditors, the same shall be allowed as application in the year in which such Loan or Sundry Creditors are repaid from the income of the Trust as discussed herein above. - Decided against assessee. Disallowance of the depreciation while computing the income of the assessee trust - Held that:- This issue is elaborately discussed in the case of Lissie Medical Institution Vs. CIT reported in [2012 (4) TMI 115 - KERALA HIGH COURT] and held the issue against the assessee wherein held that after writing off the full value of the capital expenditure on acquisition of assets as application of income for charitable purposes and when the assessee again claimed the same amount in the form of depreciation, such notional claim became a cash surplus available with the assessee, which was outside the books of account of the trust unless it was written back which was not done by the assessee. It was not permissible for a charitable institution to generate income outside the books in this fashion and there would be violation of section 11(1)(a). It was for the assessee to write back the depreciation and if that was done, the Assessing Officer would modify the assessment determining higher income and allow recomputed income with the depreciation written back by the assessee to be carried forward for subsequent years for application for charitable purposes - Decided against assessee. Gross rent received - treated as the income from house property of the assessee OR computed in accordance with the provisions of U/s.23 & 24 - Held that:- While determining the “income” of the assessee trust and its “application of income” for the purpose of claiming exemption U/s.11(1)(a) of the Act, the provisions of Chapter-IV - Sections 22 to 27 of the Act which is applicable for computing the income chargeable to tax under the head ‘income from house property’ will not be attracted. However, provisions of section 22 to 27 of the Act will come into play when the assessee is not entitled to the benefit of Section-11(1)(a) of the Act and when such income of the Trust is chargeable to tax under the head “income from house property”. It is pertinent to mention here that Hon’ble Calcutta High Court supra has held that income contemplated by the provisions of section 11 is the real income and not the income as assessed or assessable. Accordingly, while arriving at the rental income of the assessee-trust any expenditure incurred whatsoever related to the rental income has to be allowed as deduction and the net income which is the real income, will be treated as the income of the Trust. From our above discussion the ground raised by the assessee on this issue will not survive and therefore, the order of the Revenue is upheld. - Decided against assessee.
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2015 (7) TMI 577
Validity of reopening of assessment - claim of deduction for the same projects under Section 80 IA(4) - Held that:- If the reasons recorded in the present case are attentively read, it is mentioned, "during course of assessment it is remained to be verified, whether the assessee was the owner of the infrastructure facility or not'." In the next also it was stated "on verification of profit and loss account'." It was further stated "during the assessment proceedings it is remained to be verified the expenses incurred '". Thus, what can be figured out from the reasons recorded is that the Assessing Officer wanted to re-open the assessment as according to him certain aspects remained to be verified. It cannot be gainsaid that re-opening of assessment for the purpose of "verifying" or "verification" will be necessarily an action based on a mere change of opinion. The connotation of word "to be verified", "verification" is to reexamine the existing material. Verification is always with reference to the details already considered once. When one wants to verify his decision, it means that one reviews the decision. Re-assessment powers cannot be exercised to merely review the earlier assessment on the special ground that something was omitted from consideration or particular conclusion was imprecisely or wrongly arrived at. Formation of such belief by the Assessing Officer has to satisfy the requisite parameters which are conditions precedent for examine of provision under Section 147. The necessary conditions being satisfied. From the reasons recorded themselves, therefore, it was seen that the Assessing Officer proceeded to exercise the powers since he wanted to verify certain aspects the assessment already complete, Thus Assessing Officer has clearly exceeded his jurisdiction under Section 147 of the Act in issuing the impugned notice. - Decided in favour of assessee.
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2015 (7) TMI 576
Transfer of development rights - whether could be treated as sale consideration in the circumstances of the case? - Held that:- In the instant case, since no sale occurred, no income can be said to have accrued to the assessee.The assessee's submission that sale is deemed to have taken place when proper conveyance is executed, in the circumstances is sound. In the absence of any sale, the revenue’s attempt to bring to tax the advances received by the assessee must also fail, given that such advances were not towards any income that the assessee was entitled to receive in the two assessment years. Indeed, the Business Development Agreement dated 02.08.2006 between M/s DLF Ltd. and the assessee and the Memorandum of Understanding dated 06.12.2006 between M/s DLF Ltd., the assessee and CBDL indicate that the advances received by the assessee from M/s DLF Ltd. and CBDL were for sale of development rights. Since the assessee failed to sell any such rights in the two years in question, the advances received cannot be classified as income.This Court affirms the ITAT’s ruling on the first question of law and holds that the AO had erroneously added the amounts to the assessee’s income on account of sale of development rights for AY 2007-08 and AY 2008-09. - Decided against revenue. Non-deduction of TDS on the payments made on reimbursement of service charges - Disalllowance u/s 40(a)(ia) - Held that:- in the instant case, it is undisputed that M/s DLF Land Ltd. had deducted TDS on the payments made by it under various heads on behalf of the assessee. Further, it is also not disputed that the assessee deducted TDS on the service charge paid by it to M/s DLF Land Ltd. on the reimbursement expenses. In such circumstances, this Court holds that the entire amount paid by the assessee to M/s DLF Land Ltd. is entitled to deduction as expenditure. Neither provision obliges the person making the payment to deduct anything from contractual payments such as those made for reimbursement of expenses, other than what is defined as "income". The law thus obliges only amounts which fulfil the character of "income" to be subject to TDS in such cases; for other payments towards expenses, the deduction to those entitled (to be made by the payeee) the obligation to carry out TDS is upon the recipient or payee of the amounts. See Commissioner of Income Tax-III v. Gujarat Narmada Valley Fertilizers Co. Ltd. (2014 (4) TMI 235 - GUJARAT HIGH COURT ) - Decided against revenue.
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2015 (7) TMI 575
Entitlement to claim deduction under Section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee
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2015 (7) TMI 574
Addition on transaction of long term capital gains as income from other sources - the said information came to the knowledge of the assessing officer after initiation of proceedings under Section 147 - appellant claimed exemption under Section 54-F on the income shown under the head "long term capital gains" indicating that the amount was invested in the construction of a house - Held that:- The issue relating to long term capital gains was already declared by the appellant in his returns filed under Section 139 of the Act. This issue was discussed in detail in the block assessment proceedings by the assessing officer in the assessment order passed under Section 158-BC. This block assessment order under Section 158-BC was passed prior to the issuance of reassessment notice under Section 148 of the Act. Consequently, information regarding long term capital gains was already existing on the file of the assessee and did not come up as an issue for the first time during reassessment proceedings under Section 147 of the Act nor can it be said that such issue came to the knowledge or notice of the assessing authority subsequently in the case of reassessment proceedings. The assessing officer in the reassessment order under Section 147 of the Act has clearly indicated that the matter was discussed and examined in detail in the block assessment order and an addition of ₹ 36,60,072/- was made on a protective basis in order to protect the interest of revenue. It is apparently clear, that this issue relating to long term capital gains had not come to the notice of the assessing officer subsequently in the course of reassessment proceeding. We are of the opinion, that the assessing officer could not have made this addition in reassessment proceeding under the cover of "protective basis". We are of the opinion that protective assessment could only be made at the stage when there was any doubt or dispute about the assessability of a particular sum either in relation to the assessment year and/or in relation to the assessee. The amount which is alleged to have escaped assessment was duly indicated by the assessee in his return under Section 139 of the Act and was also considered in the block assessment order under Section 158-BC. In the block assessment order the assessing authority had assessed this amount on long term capital gains as undisclosed income. The block assessment order was set aside on the ground that such amount was not an undisclosed income which finding was affirmed by the Tribunal. Once the Tribunal has given a categorical finding that the amount was not an undisclosed income, which order has attained finality, the said amount cannot be treated as an escaped income chargeable to tax under Section 147 of the Act. See Vishwanath Prasad Ashok Kumar Sarraf vs. Commissioner of Income Tax and others [2010 (4) TMI 445 - ALLAHABAD HIGH COURT ] - Decided in favour of assessee.
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2015 (7) TMI 573
Disallowance of depreciation - Absolute stay on the recovery proceedings - Held that:- Keeping in mind the ratio of case of Commissioner of Income Tax v. Rao Bahadur Calawala Cunnan Chetty Charities [1979 (8) TMI 17 - MADRAS High Court] read with the aforesaid circular of the Central Board of Direct Taxes in F.No.404/10/2009-ITC dated 1.12.2009 affirming Instruction No.1914 dated 2.12.1993, is of the considered view that when the issue whether the assessee is entitled to the depreciation claim for the assessment year 2009-10 has been decided by this Court, as have already held by order in M/s Kalapet Primary Agricultural Credit Cooperative Society, Pondicherry v. The Income Tax Officer (2015 (7) TMI 556 - MADRAS HIGH COURT) that all authorities, civil, criminal and judicial, coming within the territory of the High Court, shall act in the aid of the High Court, hence, the assessing officer is bound by the order passed by the jurisdictional High Court without taking any stand that the High Courts of other States are taking a different view, thus no other option except to set aside the impugned order, for the simple reason that the appeal is pending for consideration. Accordingly, the impugned order is set aside. It is open to the second respondent-Commissioner of Income Tax (Appeals)-17, Chennai, the appellate authority to expedite the hearing of the pending appeal and dispose of the same on merits and in accordance with law at the earliest possible time.
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2015 (7) TMI 572
Entitlement to deduction of gross dividend under Section 80-M - Whether Tribunal was correct in allowing the deduction whereas the Apex Court had in Distributors Baroda Pvt. Ltd. (1985 (7) TMI 1 - SUPREME Court ) held that only net dividend is deductible? - Held that:- It is undisputable that the Hon'ble Supreme Court in Distributors (Baroda) Pvt. Ltd. (supra) has held that deductions under Section 80-M would not be of the gross amount but of the net amount of dividend received i.e. after deducting the interest paid on monies borrowed. In the facts before the Hon'ble Apex Court, the Distributors (Baroda) Pvt. Ltd. borrowed to invest in shares for earning dividend income. Thus the decision in the case of Distributors (Baroda) P. Ltd. (supra) is distinguishable in facts as in those facts there was interest paid on money borrowed to make investment in companies which resulted in income to the assessee therein. This is not so factually in this case. The decision of the Apex Court would have no application in the present facts and hence gross dividend and net dividend received is the same. In the present facts, as amply demonstrated in the impugned order, the respondent-assessee had its own funds available to make the investment. Therefore, the presumption as set out in Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) would apply, which presumption the revenue has not disturbed. Moreover, for the earlier assessment year, the revenue has extended the benefit of deduction under Section 80-M as claimed by the respondent-assessee without deducting any amount. In view of the above, the impugned order has granted deduction under Section 80-M of the Act as claimed. - Decided against revenue. Profits of the Marketing Division of the respondent Company - whether entitled for deduction under Section 80IB - Held that:- The impugned order the Tribunal has upheld the respondent's claim for deduction under Section 80I of the Act by merely following its own decision in the case of Hindustan Petroleum Corpn. Ltd. [1989 (7) TMI 150 - ITAT BOMBAY-B ]. In the above decisions wherein in respect of identical issue, this Court has held that deduction under Section 80I of the Act refers to profits and gains from industrial undertaking. It held that manufacturing, processing and marketing are part of the industrial undertaking.- Decided against revenue.
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2015 (7) TMI 571
Unaccounted transaction - AO made the addition on this issue on the basis of loose papers found during course of the search which are not included in the documents BS-1 to BS-8 - ITAT deleted the addition - Held that:- the assessee made detailed submission before the ld. CIT(A) noted above explaining each and every loose paper which are found recorded in BS-1 to BS-8. The papers and tabulations of the assessee were forwarded to the AO for his comments in which AO has not pointed out any mistake. The ld CIT(A) also verified the facts himself and gave a categorical finding that most of the transactions on documents/loose papers discussed by the AO in para 10 of the assessment order are found recorded in the documents BS-1 to BS-8. The assessee himself admitted few transactions not entered into BS-1 to BS-8. Working of the same is also given and the basis of the same. No justification to interfere in the order of the ld. CIT(A) as regards the transaction entered into the documents BS-1 to BS-8. It is settled law that in the block assessment, addition could be made on the basis of evidence recorded and found during course of the search. The submission of the ld. DR shows that even if some loose papers are recovered during course of the search, the computation of undisclosed income should be computed for whole of the block period. Such a submission itself would prove and support the findings of the fact recorded by ld. CIT(A) that there is no basis whatsoever in making huge addition against the assessee. No material is also found during course of the search if assessee made any investment in making those unrecorded sales. If the sales are there, there are bound to be purchases. The income however could be computed on the basis of unrecorded sales made outside the books of account for which evidence is recovered. The ld. CIT(A) on going through the submission of the assessee and material on record noted that the transactions relating to the sale of gold ornaments weighing 1587.472 grams and unrecorded sales of ₹ 60,790/- are not recorded in the books of account as well as in BS-1 to BS-8. The ld. CIT(A) took the value of the same as 6,98,488 and applied n.p rate of 13% and make the addition of ₹ 90,903/- and further addition of ₹ 34,000/- being investment in the aforesaid sales. We have applied n.p rate of 3% in the case of the assessee being wholesale dealer. The same rate is applicable on this issue also therefore for unrecorded sale of gold ornaments, the entire sale receipts cannot be profit of the assessee. On both the figures of ₹ 6,98,488/- and ₹ 60,970/- as is confirmed by ld. CIT(A), if n.p rate of 3% is applied, it would give approximate profit of ₹ 21,000/- + ₹ 1830/- (Rs,22,830/-). Since no evidence of undisclosed investment is found, the addition of ₹ 34,000/- is deleted. We accordingly set aside the orders of the authorities below to the above extent and direct the authorities below to take the profit on undisclosed sales at ₹ 22,830/- as against ₹ 1,85,593/- sustained by the ld. CIT(A) - Decided in favour of assessee.
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2015 (7) TMI 570
Admit on the following substantial question of law:- “Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in quashing the proceedings under Section 147 of the Income Tax Act on the ground that without disposing of the pending proceedings under Section 154 of the Income Tax Act for Assessment Year 2002-03, the Assessing Officer could not have initiated proceedings for reopening the assessment under Section 147 of the Income Tax Act for the same?”
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2015 (7) TMI 569
Appeal Admit on the following substantial question of law :- “ Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in law in holding that the A.O. was not justified in issuing notice u/s.148 and thereby quashing the assessment proceedings initiated u/s.147 of the Income Tax Act, 1961 ?"
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2015 (7) TMI 568
Transfer pricing adjustment - determination of Arm s Length Price (ALP) in respect of the international transaction of sale of manufactured goods by the Assessee to one its Associated Enterprise (AE) - claim of the Assessee that TNMM should be adopted as the MAM instead of CPM -selection of comparable - Held that:- In the instant case, the assessee has not made out any case or adduced any evidence to demonstrate that there has been any change in the facts, functionalities or availability of data. Nor is it the assessee's case that any of these have been taken wrongly in the TP Study that warrant a change of method has become necessary. The only reason for seeking change of method is that the comparables chosen by the TPO are different from that chosen by the assessee and that the functional profile of the comparables are different. While the aspect of functional difference has been discussed in the later part of the order, we can conclude here that the change of method sought by the assessee is not in tune with the Indian TP Rules, which finds support in the UN TP Manual. A careful perusal and analysis of the assessee's submissions before the CIT (Appeals) clearly places the assessee's stated position as one that accepts CPM as the MAM, provided certain adjustments are made for the differences in the marketing and selling functions, based on the actual expenses incurred by the companies. We, therefore, clearly find that it is before the Tribunal that the assessee has changed its stand, stating that TNMM is the MAM and that it would be absurd to consider CPM to be the MAM. TNMM was broached as an alternative approach only during the appellate proceedings. As we have already held, the concept of alternate approach or use of more than one method is not recognized in Indian TP Rules. The Indian TP Rules recognize use of only one method the most appropriate method (MAM). Based on the discussions in the pre paragraph of this order, CPM is the MAM in this case. TPO has not given any weightage to the various aspects pointed out by the assessee which call for making appropriate adjustments to the margins of the comparable companies, as required under Rule 10B(1)( c )(iii), (ic) (v) of the Rules. The computation of adjustment at 8% made by TPO is not backed by proper reasoning or rationale. The comparables selected by the TPO perform additional functions in the nature of selling marketing thus evidencing functional differences with the appellant. This fact has been acknowledged by the TPO, but while giving adjustment, the TPO has computed the adjustment at an adhoc figure of 8%. In view of the difference in functions, the assessee is entitled to adjustments which are reliable and accurate, as stipulated in Rule 10C(2)(e) of the Rules. If such adjustments are provided on actual basis, the difference in the functional profile with the comparable companies gets quantified as provided in Rule 10B(1)( c ) (iii) as applicable to Cost Plus Method (CPM). In the absence of such adjustment, a mere application of CPM on comparables with different functional profile will not be intune with the TP Rules. Therefore, as CPM is adopted as the MAM, the assessee should be allowed adjustment on actual basis, which will reliable and accurate, as stipulated in Rule 10C(2). Needless to add, the TPO will afford opportunity of hearing to the assessee with leave to file detailed submissions in this regards, if necessary. - Decided in favour of assessee for statistical purposes. Profit derived from the business of the Export Oriented Unit ( ECU ) by exporting spare parts, components etc. - whether was ineligible for deduction under section 10B of the Act and treating the export of spare parts, components as a trading activity ? - Held that:- It is clear from the decision of the Special Bench in the case of Maral Overseas Ltd. [2012 (4) TMI 345 - ITAT INDORE ] that as far as deduction u/s. 10B is concerned, it is the profits of the business which have to be considered. Such profits will include even profits from trading activity. The Special Bench has clearly laid down that in section 80HHC, the legislature restricted the meaning of the words profits of the business in Explanation (baa) to section 80HHC, but in section 10B, no such restriction or exclusion is laid down. The Special Bench thus opined that profits of the business would include all profits having nexus with the business of the assessee. In view of the decision of the Special Bench referred to above, we are of the view that the claim of the assessee should be accepted - Decided in favour of assessee. Excluding the turnover on account of spares and components from the export turnover without excluding the same from the total turnover while computing deduction u/s. 10B - Held that:- This issue is no longer res integra and has been settled by the decision of the Hon ble High Court of Karnataka in the case of Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT), wherein held that whatever is excluded from the export turnover should also be correspondingly reduced from the total turnover while computing deduction u/s. 10B of the Act. Following the decision of the Hon ble High Court of Karnataka, we direct the AO to exclude the turnover from export of spares components both from the total turnover as well as the export turnover. Income from scrap sales - whether would form part of the profits of the undertaking eligible for deduction u/s. 10B? - Held that:- It is not in dispute before us that in assessee s own case, this Tribunal has taken a view that income from sale of scrap should form part of profits of the undertaking eligible for deduction u/s. 10B of the Act.In the circumstances, following the decision of the Tribunal in assessee s own case, we uphold the order of the ld. CIT(Appeals) - Decided against revenue. Selection of comparables - Held that:- We are of the view that 25% export earning is an appropriate filter and the fact that by applying that filter only one company is left as a comparable, will not be a ground not to apply the aforesaid filter. We are therefore of the view that the ld. CIT(A) was correct in applying 25% export earnings filter.- Decided against revenue.
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2015 (7) TMI 567
Addition under section 69A - CIT(A) deleted the addition - Held that:- Assessing Officer was not justified in making addition u/s 69A of the Act by treating the seized cash as unexplained money of the assessee. On careful consideration of the assessment order and impugned order of the CIT(A), we have no hesitation to hold that the Assessing Officer did not appreciate the explanation and evidence submitted by the assessee rather he ignored some important facts which were self speaking and the same were rightly considered and noted by the CIT(A) while granting relief to the assessee and in deleting the impugned addition of ₹ 25.75 lakh made by the AO u/s 69A of the Act. - Decided against revenue. Period of limitation - whether cross objections are time barred in view of provision of Section 253(4) ? - Held that:- the appeal was filed on 03.10.2011 and case was fixed for first hearing on 05.12.2011. From the record, we also see that no notice was issued to the assessee for the first date of hearing that was 05.12.2011 and the assessee approached the Assistant Registrar of ITAT, New Delhi firstly on 28.02.2012 and requested to provide copy of Form No.36 along with grounds of appeal raised by the Revenue. The assessee subsequently filed reminder/applications on 03.10.2013, 22.02.2013 and 05.03.2013 with the same request which was finally redressed on 13.03.2013 when the Assistant Registrar, ITAT, Delhi directed to provide copy of grounds of appeal to the assessee. In pursuance to last application dated 05.03.2013 admittedly assessee filed cross objection on 04.04.2013. In this situation, we are of the view that when the assessee has established that no notice along with copies of Form No.36 and grounds of appeal of the Revenue were served upon the assessee and the assessee could get copies of Form No.36 and grounds of the Revenue after restless efforts only on 13.03.2013 then the time limit prescribed in Section 253(4) of the Act would be reckoned only after receipt of complete notice along with copies of Form No.36 and grounds of appeal of the Revenue which is on 13.03.2013 in the present case. Hence, thus cross objection filed on 04.04.2013 cannot be alleged and held as time barred. Accordingly, legal objection of the Revenue is dismissed. Understatement of sale consideration of the property situated at 9/100, Shastri Gali, Vishwas Nagar, Shahdra, Delhi - CIT(A) deleted the addition - Held that:- From careful reading of assessment order as well as order of the CIT(A) the assessee has not submitted any evidence in support of this contention that the property was sold to a person who was already occupying the property in issue as tenant and there were court cases and other dispute under which the property was sold to the person who was already in possession of the property and, therefore, the assessee got less consideration in comparison to the fair market value. In this situation, we are an agreement with the conclusion of the authorities below, the estimate made by the Assistant Valuation Officer has not been demolished and rebutted by the assessee with the quite plausible explanation or acceptable evidence, therefore, view taken by the Assessing Officer and upheld by the CIT(A) is justified and we are unable to see any infirmity or any other valid reason to interfere with the same on account of addition of ₹ 1.77 lakh made by the AO. At the same time, we further observed that the Assessing Officer made addition of ₹ 5,00,000/- by treating a gift as a part of sale consideration in respect of impugned property. The CIT(A) observed that AO has failed to adduce cogent evidence and record in support of understatement of sale consideration by the assessee in respect of said addition of ₹ 5,00,000/-. The Ld. counsel of the assessee has placed reliance on the judgments of Hon’ble Apex Court in the cases of CIT Vs. George Henderson Co. Ltd. reported in (1967 (4) TMI 18 - SUPREME Court), CIT Vs. Gillanders Arbuthoot & Co (1972 (9) TMI 13 - SUPREME Court), K.P. Varghese Vs. ITO (1981 (9) TMI 1 - SUPREME Court), CIT Vs. Shivakami Co. (1986 (3) TMI 2 - SUPREME Court ) and CIT Vs. Godawari Corpn. Ltd. (1992 (9) TMI 3 - SUPREME Court) and ratio of these decisions is that unless there is evidence that more than what was stated in the sale deed, was received no higher price or value can be taken to be the basis for computation of capital gains. In the present case, the CIT(A) rightly noted that Assessing Officer had failed to bring any evidence against the assessee to establish of record that there was understatement of sale consideration by the assessee by ₹ 5,00,000/- which was received by the assessee in the garb of gift in the name of Shri Ashish Jain son of assessee. - Decided against revenue. Undisclosed income - assessee had received a payment of ₹ 5,00,000/- from M/s J.V. Industries Pvt. Ltd - CIT(A) deleted addition - Held that:- The confusion arose before the AO due to incompleteness in the facts and details submitted before the AO which were subsequently explain by way of filing details submission, statement of Bank account and other relevant details during first appellate proceedings. Admittedly, the assessee offered long term capital gain to the extent of ₹ 3,47,817/- on the sale of 10,000 shares of M/s J.V. Industries Pvt. Ltd. which were sold to M/s Nirman Securities Ltd. and the assessee received sale consideration through account payee cheque which was also credited to his saving Bank account. Under above noted facts and circumstances, we are an agreement with the conclusion of the CIT(A) that the assessee satisfactorily explained the source of ₹ 5,00,000/- and its further used for repayment of advance against sale agreement and in this situation addition made by the AO was rightly deleted by the first appellate authority. We are unable to see any infirmity or any other valid reason to interfere with the impugned order in this regard and we upheld the same - Decided against revenue. Addition in the hands of the assessee holding that Shri Ashish Jain was a minor - unexplained source of repayment of advance to Shri Vinod Kumar Jain against the sale agreement - CIT(A) deleted addition - Held that:- When the amount of gift was routed through banking channels from donor Smt. Kaushalya Jain to donee Shri Ashish Jain which was further advanced as loan to the assessee, then it may also be presumed that the gift was given by Smt. Kaushalya Jain to the minor son of the assessee out of love and affection and also to clear the clouds and bitterness in the relations between with her brother i.e. the assessee. Under above noted facts and circumstances, we have no hesitation to hold that the CIT(A) after considering the detailed submission of the assessee rightly concluded that the addition of ₹ 5,00,000/- on amount of unexplained source of repayment of advance to Shri Vinod Kumar Jain against the sale agreement is not sustainable. We are unable to see any infirmity, perversity or any other valid reason to interfere with the same - Decided against revenue. Unaccounted receipt of cash claimed to have been received from Sheel Kumar Jain - CIT(A) deleted addition - Held that:- When admittedly Shri Sheel Kumar Jain was expired on 02.11.2005 prior to finalization of assessment order on 19.12.2006 then it was not possible for the assessee to produce Late Shri Sheel Kumar Jain during assessment proceeding. The Assessing Officer could have verified the factum of repayment of advance to Shri Sheel Kumar Jain by examining and verifying the statement of accounts inter alia the capital account of the assessee with his sole proprietary firm M/s Jain Metal Works but instead of making any further enquiry examination or verification the Assessing Officer rejected the explanation and supportive evidence of the assessee at the threshold that without making any enquiry examination of verification and proceeded to make addition of ₹ 3,00,000/- without bringing doubt any sustainable allegation or incriminating material against the assessee and the same was rightly deleted by the first appellate authority with the aforesaid disallowances and conclusion. We decline to interfere of the conclusion of the CIT(A) on this issue - Decided against revenue. Rejection of books of accounts - Enhancement of income of the assessee by AO adopting average GP rate of preceding assessment years and in making addition of ₹ 16,96,788/- - CIT(A) deleted the addition - Held that:- No hesitation to hold the Assessing Officer reject the books of account of the assessee without any valid reason and without following due procedure as per provision of the Act and without any justified and cogent basis and the rejection of books of account AO was rightly dismissed by the CIT(A). Turning to the issue of addition of ₹ 16,96,788/- applying difference of GP rate of 4.1% calculated on the basis of average of GP rate of immediately preceding three assessment years, we note that since the rejection of books of account have not been found to be sustainable then the Assessing Officer cannot be held as justified in making the addition by applying difference in GP rate of 4.1% on the basis of average of preceding three years and addition in this regard cannot be held as sustainable and in accordance with law in absence of justified and reasonable basis. We are of the considered opinion that if explanation, evidence or any material is submitted by the assessee in support of its return then it should be accepted after due examination and verification and unless the same is controverted or rebutted by the cogent admissible evidence by the AO arbitrary addition by taking 4.1% difference is not correct. We, therefore, are of the considered opinion that considering the G.P. rate of the earlier three years the G.P. rate of 5% of turnover would be most appropriate and justified. Hence, we direct the AO to adopt 5% of G.P. rate and calculate the disallowance accordingly. Accordingly, Ground Nos. 7 & 7.1 of the revenue are restored to the file of the AO for the limited purposes as directed above. - Decided partly in favour of revenue for statistical purposes.
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2015 (7) TMI 566
Transfer pricing adjustment - selection of comparable - Held that:- We direct the AO/TPO to exclude these companies [Flextronics Software Systems Ltd., iGate Global Solutions Ltd.,Mindtree Ltd.,Persistent Systems Ltd., Sasken Communication Technologies Ltd.,Tata Elxsi Ltd.,Wipro Ltd. and Infosys Technologies Ltd. from the list of comparables. It is submitted by the learned counsel for the assessee that if all the above companies are excluded from the list of comparables as not comparable with a software development service provider such as the Assessee, then the operating margin of the assessee would fall within the + or -5% of the operating margin of the comparable companies. AO is therefore directed to verify the said contention and compute the ALP accordingly. Further, as the ALP needs no further adjustment as a result of exclusion of all the above companies, we are not inclined to admit the additional ground of appeal seeking inclusion of the companies raised in the additional ground of appeal as comparable companies for the purpose of determination of the ALP of the international transaction, as it would only result in academic exercise. In view of the same, the additional grounds of appeal are not admitted. - Decided partly in favour of assessee.
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2015 (7) TMI 565
Disallowance of expenditure - ₹ 3 crores paid to Mr. Lohade for withdrawing the civil suit along with his rights, title in the property - survey action u/s.133A of the I.T. Act was conducted - CIT(A) deleted the addition on the ground that the AO had erroneously interpreted the MOU as well as the statements of Mr. Arvind Jain, Director of M/s. Full Moon Housing Pvt. Ltd., i.e. the purchaser and the statement given by Mr. Sanjay N. Lohade - Held that:- No infirmity in the order of the CIT(A) deleting the addition. As mentioned earlier, the MOU was found during the course of survey. Out of the 5 entries totalling to ₹ 9,26,46,600/- the amount of ₹ 2,11,46,600/- received by the assessee in cash was offered by him as additional income during the course of survey. The assessee has honoured this and included the same in his return of income. The Ist 3 items are accepted by the AO as genuine, therefore, we fail to understand as to how and why the amount of ₹ 3 cores should not be held as genuine as business expenditure when the same was paid to Mr. Lohade for surrendering his rights as per the MOU. The land in question was not free from litigation and civil suit was pending. Therefore, we find force in the argument of the Ld. Counsel for the assessee that the purchaser M/s. Full Moon Housing Pvt. Ltd. after evaluating the interest in the land of Mr. Sanjay N. Lohade and after negotiating for the amount paid the amount of ₹ 3 crores on their behalf and not on behalf of the assessee. It was the purchase who itself decided the terms of payment including the amount to be paid to Kadam Family, Mr. Sanjay N. Lohade and to the respondent and therefore the AO’s observation that the said purchaser made the payment to Mr. Sanjay N. Lohade at the behest of the respondent, in our opinion, is incorrect. Further, in view of the above facts, the observation of the AO that Mr. Sanjay N. Lohade had no locus standi is also incorrect since Mr. Sanjay N. Lohade was given not only Power of Attorney but was also given the right to obtain the development agreement and purchase the said land in his name and for that purpose the entire litigation involved in Civil Suit No.1006/1996 was also required to be attended by him at his own cost and responsibility. Even if the amount of ₹ 3 crores would have been paid by the assessee to Mr. Sanjay N. Lohade for giving free and peaceful possession of the land to M/s. Full Moon Housing Pvt. Ltd. the said amount would have been allowed as deduction from the hands of Shri Kailash Babulal Wani, i.e. the assessee. Therefore, in our opinion, it is immaterial as to whether the amount has been paid to Mr. Sanjay N. Lohade by M/s. Full Moon Housing Pvt. Ltd. at the instance of the assessee or the assessee has paid directly to Mr. Sanjay N. Lohade from the total consideration. As mentioned earlier in the preceding paragraphs, the MOU was impounded, therefore, the contents of the MOU has to be considered and accepted as a whole. The revenue cannot be permitted to use a part of the MOU as correct and the other part as incorrect. Since the document impounded from the premises of the assessee shows payment of ₹ 3 cores to Mr. Sanjay N. Lohade which has been assessed in his hands as commission income and which has been upheld by the CIT(A), therefore, we find no infirmity in the order of the CIT(A) deleting the addition of ₹ 3 crores from the hands of the assessee - Decided against revenue. Unexplained expenditure - CIT(A) delted part addition - Held that:- The assessee has given the details of expenditure of ₹ 25,00,000/- the details of which are already given above at para 16. It is not known from where the Assessing Officer had taken the figure of ₹ 4,10,000/-. We find except the other expenses/legal fees of ₹ 14,970/- the balance expenses are related to document franking and document registration demand draft. The legal expenses of ₹ 14,970/- is very nominal considering the transactions in question. We therefore, do not find any infirmity in the order of the CIT(A) deleting the addition of ₹ 4,10,000/-. - Decided against revenue.
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2015 (7) TMI 564
Addition on account of bogus purchases from eleven parties - Held that:- The assessee has explained before authorities below that the delivery of goods were directly made by the suppliers at the port for the purpose of export, therefore, there was no question of payment of transport charges separately by the assessee. We note that the assessee has placed on record the details and shown from the purchase bills that purchases are matched with the export sale in the case of the trading of goods for the purpose of export and therefore, there is no scope of any doubt about the purchases which are directly matching to the sale (export). Even otherwise, when the sales and all other quantitative details and figure regarding stock are accepted by the Assessing Officer then in the absence of any direct evidence showing the non genuineness of purchases in question, the addition is not sustainable on the basis of assumption and conjectures relying on the four statemetns recorded u/s 133A and that too without affording an opportunity of cross examination to the assessee. In view of the facts and circumstances of the case, we are of the opinion that the addition in quesiton on account of bogus purchase is not sustainable and accordingly the same is deleted - Decided in favour of assessee. Addition on account of DEPB license - Held that:- In the facts and circumstances of the case when the assessee has clearly made out his case that the amounts recorded in the charts found during the survey was related to the DEPB licenses and the details show the items, amount and the license numbsers, therefore, in the absence of any material to prove the contrary, the evidence produced by the assessee is sufficient to prove the claim of the assessee. Accordingly in the facts and circumstances of the case, we are satisfied that the assessee has established its claim that the amount in question is representing the sale of DEPB licenses during the year. Accordingly the addition in question is deleted.- Decided in favour of assessee. Disallowance made u/s 40A(3) - Held that:- As per the details filed by the assessee prima facie it appears that each payment made is less than ₹ 20,000/-. Further the authorities below have not verified and examined this fact that whether this payment was made for work of embroidery and fabrication of garments. For the year under consideration if each payment is less than ₹ 20,000/- then provisions of section 40A(3) is not applicable. The amendment brought to this section vide Finance Act 2008 w.e.f 01.04.2009, is not applicable to this year and if each payment is representing for a seaparate work or piece of work then the payment below ₹ 20,000/- cannot be disallowed by invoking the provisions of section 40A(3) as applicable for the A.Y. under consideration. Accordingly, in the facts and circumstances of the case, we set aside this issue to the record of the Assessing Officer for proper verification and examinaiton of facts and decide in terms of above observation.- Decided in favour of assessee for statistical purposes. Disallowance made u/s 43B in respect of PF & ESI - Held that:- While disallowing this amount on account of delayed payment, the Assessing Officer considered the time period allowed under the respective Acts and not as per the provisions of section 43B. We find that all the payments were made by the assessee before the date of filing of return u/s 139(1) of the Income Tax Act, accordingly, the payment made on or before the due date of furnishing the return of income u/s 139(1) is allowable as provided under the proviso to section 43B. and accordingly the disallowance is not sustainable hence, deleted. - Decided in favour of assessee. Disallowance of manufacturing expenses - Held that:- When the assessee has explained the reasons for difference the Assessing Officer ought to have examined the explanation and other relevant record. Further without disputing the difference of the expenses in the two set of details in respect of other eleven months, the Assessing Officer took the figure of difference only in respect of month of March despite the fact that the said difference was distributed for the other eleven months. In view of the above facts and circumstances of the case that we are of the opinion that this issue has not been properly examined by the Assessing Officer. Accordingly we set aside this issue to the record of the Assessing Officer for proper verification of the fact and consideration of explanation of the assessee and then decide the same as per law.- Decided in favour of assessee for statistical purposes. Disallowance of transfer entries made in the Books of Accounts - Held that:- We find substance in the arguments of the Ld. Authorized Representative that when these parties can be examined as all the parties are assessed to tax and having permanent account numbers (PAN) and further the assessee has settled these accounts in subsequent year by making payments or by way of supply of goods then this issue requires a proper consideration and examination. We further note that there is no cash credit in the books of the assessee but the balance are shown as outstanding payable by the assessee to the sundry creditors. Therefore, the addition made by the Assessing Officer on account of unexplained cash credit without giving the finding whether these entries are in the nature of cash credit or not. Accordingly, in the facts and circumstances of the case, we remand this issue to the Assessing Officer to consider all the facts and circumstances as well as re-payment and settlement of the accounts by the assessee in the subsequent years which has been accepted by the departmetn. Further whether there is a cash credit appearing in the ledger account of these parties or whether these are only outstanding balances to be paid by the assessee, therefore, the Assessing Officer has to decide this issue on proper examination and consideration of all the relevant facts.- Decided in favour of assessee for statistical purposes. Addition on account of unexplained purchases - Held that:- The Assessing Officer made the addition by suspecting the purchases on the ground that the assessee has shown the purchases from these parties without making any payment during the year. The CIT(A) has confirmed the addition made by the Assessing Officer by following the order for the A.Y. 2006-07. Though the impugned order of CIT(A) is not sustainable because we have already given the finding on the issue of bogus purchases for the A.Y. 2006-07, whereby, the addition made on account of bogus purchases has been deleted, however, in the facts of case except one party which is common for both the A.Ys namelly SPS Enterprises and other parties are not subject matter for the A.Y. 2006-07. We find that treating the purchases from these parties as bogus without disputing the quantitative details and purchases, stock and sales is not justified. Accordingly, in view of our finding for A.Y. 2006-07, we decide this issue in favour of the assessee. GP addition - Held that:- even if the Assessing Officer was not satisfied with the book results of the assessee, the adoption of GP at 10% as against the GP of the assessee for the earlier years at 2.3% is not justified. We find that the Assessing Officer has not brought out any comparable or prevailing GP in the trade for adopting the TP at 10%. Further the Assessing Officer has completely over looked the relevant fact of GP for all other AYs of the assessee. Accordingly the issue is required to be considered by the CIT(A) on merits by considering all these aspects, though the assessee did not appear before the CIT(A), however, the impugned order of CIT(A) is very cryptic and without examination of any fact or relevant aspect of the matter. In the facts and circumstances of the case and in the interest of justice, we set aside the impugned order of CIT(A) and remit the matter to the record of CIT(A) for deciding the same afresh by considering all the relevant facts and circumstances as discussed above. The assessee is directed to co-operate in the proceedings before the CIT(A).- Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 563
Addition on account of long term capital gain - AO adopting the stamp duty valuation as sale consideration - CIT(A) adopting the sale consideration of ₹ 11,34,93,000 in place of ₹ 9,06,00,000 shown by the assessee by invoking the provisions of S.50C - assessee in the present case is a partnership firm - Held that:- As relying on the decision of the Hon'ble Bombay High Court in the case of Bhatia Nagar Premises Co-operative Society Ltd. V/s. Union of India and Others (2010 (3) TMI 813 - Bombay High Court) and K.R.Palaniswamy & Ors. V/s. Union of India and others (2008 (8) TMI 27 - High Court of Madras ), we do not find merit in the preliminary issue raised by the assessee in this appeal, contending that the Assessing Officer, for invoking the provisions of S.50C, has to bring something on record to show that the consideration has been understated by the assessee, and that the assessee has actually received more than what is declared by him. The additional grounds raised by the assessee are accordingly dismissed. As already noted, the assessee in the original grounds raised in this appeal has challenged the valuation of its property as determined by the DVO in his valuation report. In this regard, it is observed that the additional evidence in the form of letter dated 20.1.2012 issued by the General Manager, A.P. Industrial Infrastructure Corporation was filed by the assessee before the learned CIT(A), wherein it was stated that the land rate in industrial Estate, Sanath Nagar fixed by the Price Fixation Committee during February, 2006 was ₹ 3,750 per sq. metre. The said additional evidence, however, was not admitted by the learned CIT(A) mainly on the ground that the assessee had not furnished any reason whatsoever as to why the said evidence was not filed before the Assessing Officer. As submitted by the learned counsel for the assessee in this regard, the said evidence in the form of letter dated 20.1.2012 was obtained by the assessee only after the completion of assessment by the Assessing Officer on 30.12.2011 and since the same was not available at the relevant time, it could not be filed before the Assessing Officer. Keeping in this submission made by the learned counsel for the assessee, we are of the view that the learned CIT(A) should have admitted the additional evidence filed by the assessee in the form of letter dated 20.1.2012 issued by the General manger, A.P. Infrastructure Corporation Ltd. Keeping in view our decision rendered above admitting the letter dated 1.4.2009 filed by the assessee before us as additional evidence as well as the letter dated 21.2.2012 filed by the assessee before the learned CIT(A) as additional evidence, we consider it just and proper to restore the matter to the file of the Assessing Officer for deciding afresh the issue relating to the valuation of the assessee’s property, as done by the DVO in the light of this additional evidence. The impugned order of the learned CIT(A) on this issue is accordingly set aside and the matter is restored to the file of the Assessing Officer for deciding the same afresh - Decided partly in favour of assessee for statistical purposes.
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2015 (7) TMI 562
Levy of penalty u/s.271(1)(c) - assessee claimed that land to be of the nature of agricultural land as per sec 2(14)(iii) of the Act and accordingly the profit derived from its sale was claimed to be exempt and not liable to tax - Held that:- We find in the instant case the assessee sold certain land and treated the same as agricultural land which is beyond 8 kms from the local limits of municipality and treated such income as non taxable being exempt. We find during the course of assessment proceedings the AO on the basis of information gathered by him confronted the same to the assessee to which the assessee admitted her mistake vide letter dated 16-12-2008 and accepted that the said land in question cannot be treated as an agricultural land exempt from capital gain tax. The assessee also admitted that the land in question is within 8 kms of the Municipal limits. The fact remains that the land in question is not an agricultural land. As regards the other issue, i.e. the distance of the land from the PCMC is concerned, we find the Tribunal has already given a categorical finding that the land in question is within 8 kms from the PCMC as per the certificate given by the Asst. Director of Town Planning. The above certificate also remains unchallenged. The certificate produced by the assessee from the Talathi was also considered by the Tribunal and was rejected on the ground that it is general in nature and the certificate issued on the basis of local enquiry is not supported by any proper map. The Tribunal has further held that distance cannot be determined on the basis of local enquiries as mentioned by the “Kamgar Talathi” in his certificate. Thus, the land in question is neither agricultural land nor situated beyond a distance of 8 kms or more from the municipal area, i.e. PCMC herein question. As find from the various details furnished by the assessee in the paper book as well as the submissions made before the AO, CIT(A) and the Tribunal that the assessee has consciously and deliberately concealed her particulars of income and furnished inaccurate particulars of income arising out of the sale of land. Even the Tribunal in its order has also mentioned that the assessee has taken contradictory stand before the AO and the CIT(A) on this particular aspect. In our opinion, it is a clear case of concealment of income and a deliberate act of omission on the part of the assessee in filing the inaccurate particulars of income. The note given by the assessee in her computation statement will not absolve the assessee from the mischief of penalty u/s.271(1)(c) of the I.T. Act since it was very much known to the assessee that the land in question was neither agricultural land nor situated beyond a distance of 8 kms from the municipal limits. Therefore, the various decisions relied on by the Ld. Counsel for the assessee will not be of any help to the assessee. Had it been a bonafide mistake or bonafide omission or commission, the decisions would have been applicable but when the particulars given by the assessee consciously to defraud the revenue by not paying the legitimate tax due, the decisions will not come to the help of the assessee. Under these circumstances and in view of the detailed reasoning given by the CIT(A) upholding the levy of penalty we do not find any infirmity in the same. Accordingly, the order of the CIT(A) is upheld so far as the levy of penalty is concerned. - Decided against assessee. Quantum of penalty to be levied - submission of the assessee that since the profit has been held by the Tribunal to be of long term capital gain and not business income, therefore, the penalty should be restricted to the quantum of tax sought to be evaded - Held that:- As find merit in the above contention of the Ld. Counsel for the assessee. Since the tax on long term capital gain is lower than the tax on the business income, therefore, the penalty should be restricted to the tax sought to be evaded which in the instant case will be the tax sought to be evaded on the capital gain and not on business income. Since the Tribunal has already held that the income in question is long term capital gain, therefore, the tax sought to be evaded is on the long term capital gain which is lower than the tax computed by the AO on the business income. We therefore direct the AO to recompute the penalty treating the income as long term capital gain which has attained finality after the order of the Tribunal. We hold and direct accordingly. - Decided in favour of assessee.
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2015 (7) TMI 561
Transfer pricing adjustment - selection of comparable - Coral Hub Limited - Held that:- In the case of Mercer Consulting (India) Pvt. Ltd. (2014 (7) TMI 715 - ITAT DELHI) also the company was engaged in rendering IT and IT enabled services to its AEs. This company was providing service in the nature of application development, quality assurance, application maintenance, implementation services, helpdesk services, administrative processing, contribution processing, health and benefits processing and pension plan valuation services to the clients of its AEs for and on their behalf for which it is compensated on cost plus basis. Therefore, we do not find any reason to take a different view in the case of present assessee which is also rendering almost similar services. It is well settled law that in TP cases identical replica of the tested party cannot be found and one has to consider the broad similarities between the tested party and the comparables. The business model of assessee is not comparable to coral hub particularly on account of different models adopted by two companies for carrying out its functions. We, accordingly, direct the AO to exclude this comparable. Eclerk Services Ltd. - primarily assessee was engaged in providing primary data for various field of activities but not complete business solutions. Therefore, this company could not be treated as comparable for the purpose of determining ALP of the transactions between the assessee company with its AEs. We, accordingly, direct that this company be excluded from the list of comparables finally taken by the AO/ TPO as per the direction of the DRP. Aditya Birla Minacs Worldwide Limited; and Microgenetic Systems Ltd. - Admittedly the AO while giving effect to the direction of DRP has adopted the PLI of Aditya Birla Minacs Worldwide Limited and of Microgenetic Systems Ltd., on the basis of safe harbor rule and substituted the margin that was calculated by TPO in his order. This could not be done by AO unless there was direction by ld. DRP. The AO could not vary the margins as computed by TPO in his order, because once reference has been made by AO under section 92CA(1), then in view of the provisions of section 92CA(4), the AO is required to compute the total income of the assessee under sub-section (4) of section 92C in conformity with the ALP as determined by the TPO. Therefore, unless DRP has given any specific direction altering the ALP as determined by TPO, the AO does not have power to alter the same. We, accordingly, direct the AO to take the margins in regard to Aditya Birla Minacs Worldwide Limited and Microgenetic Systems Ltd., as determined by TPO.
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2015 (7) TMI 560
Disallowance of brand registration expenses - revenue v/s capital - Held that:- Respectfully following the decision of this Tribunal in the appellant’s own case for the assessment year 2002-03, we allow this ground of appeal filed by the assessee wherein CIT(Appeals) noted that these expenses were for fees required to be paid for as per state excise law for registration of the brand and allowed it by holding the same as revenue in nature. - Decided in favour of assessee. Disallowance of provision for transit breakages - Held that:- The Tribunal confirmed the disallowance only on the ground that there was no basis for making provision for transit breakages as had no benefit of the decision of Hon’ble Supreme Court in the case of Rotrok Controls (India) Pvt. Ltd. Vs., [2009 (5) TMI 16 - SUPREME COURT OF INDIA]. It is undisputed that the provision was made based on the dispatch of goods to various destinations on the basis of past experience. The crucial facts to be taken into consideration that the provision made on the dispatch of goods is reversed the moment the goods reached the destination only actual breakages are charged to P&L account. It is only in respect of the goods which are under dispatch at the year end the provision was created. This shows that the amount debited to P&L account represents mostly actual breakages and this system of accounting is being followed continuously by the appellant. The provision is made on scientific basis and can be estimated such provision can be allowed as a deduction. Applying this principle to the facts of the case, even in this case the provision was made based on past experience and the actual damages were taken into account immediately after the goods reached the destination which means that the provision was made only in respect of goods which were under dispatch as at the end of the year. This provision was made based on the past experience. Therefore, the provision had been made on some basis. Therefore, based on the ratio laid down in the above cases, the provision is allowable as a deduction.- Decided in favour of assessee. Restricting the allowance of brand expenses to only 1/5th of such expenses - Held that:- From the details, it is clear that the expenditure is incurred only towards sales promotion and on advertisement issued. As decided in case of CIT Vs. Monto Motors [2011 (12) TMI 50 - DELHI HIGH COURT] advertisements and sales promotion are conducted to increase sale and their impact is limited and felt for a short duration. No permanent character or advantage is achieved and is palpable, unless special or specific factors are brought on record. - Expenditure are revenue in nature - Decided in favour of assessee. Addition on account of excessive depreciation claimed - CIT(A) deleted the addition - Held that:- The issue is no longer res integra as the Hon’ble Delhi High Court in the assessee’s own case in the preceding year by holding that the approach of the authorities below is correct having regard to the judgment of the Supreme Court in the case of ITR Vs. Mahendra Mills, [2000 (3) TMI 3 - SUPREME Court ] holding that since the depreciation for the assessment year 2001-02 was not actually claimed, there was no justification to reduce the written down value by the amount on hypothetical depreciation. Matter would have been different had the Assessing Officer in the assessment proceedings for the assessment year 2000-01 actually granted depreciation to the assessee, may be forced depreciation without there being a claim by the assessee. Without giving such a benefit to the assessee by allowing depreciation in the previous year, there was no justification in reducing the value on the fixed assets. - Decided in favour of assessee.
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2015 (7) TMI 559
Treatment to vyaj badla income - as interest income or short term capital gains - Held that:- The reasons given in the assessment order for this issue and the submissions made on behalf of the appellant are similar to those arising in other appeals of the cases of the same group. In all such cases the modus operandi is almost similar. CIT(A) has not erred in confirming vyaj badla income as interest income instead of short term capital gain. - Decided against assessee. Depreciation disallowance on sales tax incentive - CIT(A) deleted disallowance - Held that:- CIT(A) has followed the tribunal’s order in for assessment year 2002-03 holding that the incentive provided is in the form of sales tax exemption and not towards meeting the cost of any particular asset. A co-ordinate bench holds that the requisite conditions of Sec. 43(1) Explanation-10 are nowhere satisfied. It has observed that a subsidy or an incentive is in capital field, but at the same time it may not be asset specific. It has accordingly been held that the impugned subsidy or incentive cannot be taken into account for reducing the cost of assets. It has been finally concluded that such a cost of asset can only be reduced by a subsidy or grant which is to meet directly or indirectly the cost of assets in question. Revenue fails to point out any distinction on facts or law. We find that the tribunal’s earlier order relates to the very subsidy schemes (supra). It has also been held that the authorities below have wrongly treated the same to be revenue receipt as in the impugned assessment year as well. We adopt consistency in these circumstances and affirm the CIT(A) findings under challenge - Decided against revenue. Deduction u/s.80HH and 80IA on exchange rate difference (Mandali Division) - CIT(A) allowed claim - Held that:- As held in Priyanka Gems case [2014 (3) TMI 938 - GUJARAT HIGH COURT ] such an income is directly related to assessee’s export business and it could not be been removed beyond the first degree. The Revenue fails to point out from the case record that the assessee’s force in exchange gains fluctuation are not connected to its export activities. We affirm the CIT(A) findings in these facts - Decided against revenue. Disallowance of section 80HHC and 80IA deduction regarding interest on debtors (Mandali Division) - CIT(A) allowed claim - Held that:- Once the assessee’s interest in question has arisen from trade debtors, the same could not have been disallowed for the purpose of impugned deduction u/ss. 80HHC and 80IA of the Act. - Decided against revenue. Exclusion of sales tax and excise duty while working out section 80HHC deduction - Held that:- he case file reveals that a co-ordinate bench of the tribunal in assessee’s case for assessment year 2002-03 has relied on the judgment of hon’ble apex court in CIT vs. Lakshmi Machine Works, [2007 (4) TMI 202 - SUPREME Court] holding that excise duty and sales tax do not involve any element of turnover and hence, they have to be excluded. The Revenue fails to point out any distinction on facts involved in the impugned assessment year vis-à-vis those in assessment year 2002-03.- Decided against revenue. Interest on fixed deposits, loans, interest expenditure and reduction of expenses from the insurance claim for the purpose of deductions claimed u/ss. 80HH, 80HHC and 80IA - Held that:- Considering the the decision of hon’ble jurisdictional high court in [2014 (10) TMI 396 - GUJARAT HIGH COURT] and also Commissioner of Income Tax -Ahmedabad-III Versus Nirma Ltd.[2014 (10) TMI 388 - GUJARAT HIGH COURT] in its own case directing the authorities below to adopt netting formula i.e. the total receipts minus the expenditure incurred in relation thereto for the purpose of excluding it from the deduction claimed u/s.80HH or 80I in the light of the hon’ble apex court decision reported as ACG Associated Capsules P. Ltd. vs. CIT (2012 (2) TMI 101 - SUPREME COURT OF INDIA ), direct the Assessing Officer to adopt netting formula qua assessee’s grounds Decided in favour of assessee for statistical purpose Disallowance of depreciation on wooden structures - Held that:- There is no dispute between the parties that the relevant invoices stood issued in the name of assessee’s group concern. The assessee fails to prove existence of any agreement with its group concern to first purchase the wooden structure in its name, install it and thereafter get the same reimbursed. It also fails to provide installation details thereof despite clear findings of both the lower authorities. We reiterate that the present is second round of proceedings upto the tribunal. Thus, we hold that the assessee’s claim in question has been rightly disallowed by both the lower authorities for want of necessary factual evidence - Decided against assessee. Disallowance of expenditure of soda ash project and LAB project - Held that:- Assessee has not placed on record the tribunal’s earlier order holding that the expenditure in question has not been incurred in expansion of the already existing units of business. We observe in these facts that earlier observations of the ld. co-ordinate bench have attained finality. The assessee’s paper book does not contain any cogent evidence to rebut the same. We find no reason to take a different view on facts in this consequential round of litigation. . However, an alternative contention at this stage is also raised that if the impugned expenditure is held to be capital in nature, it is entitled for consequential depreciation relief. We find that this plea requires examination at the Assessing Officer’s behest in facts of the case. - Decided partly in favour of assessee for statistical purposes. Depreciation relief on soda ash project and LAB END Project - Held that:- The Assessing Officer’s order is silent on the impugned depreciation claimed. This is not the Revenue’s case in appellate order that the assessee has not put its assets in question in ready to use condition even if its commercial production has not commenced. We quote the case law of hon’ble Delhi high court in CIT vs. Integrated Technologies Ltd. [2011 (12) TMI 48 - DELHI HIGH COURT ] in these facts holding that it is not necessary to actually put to use the plant and machinery in question but such a depreciation claim is allowable even if the assets in question are kept ready for being used in the business concern. The Revenue fails to point out any judicial precedent to the contrary - Decided in favour of assessee
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2015 (7) TMI 558
Revision u/s 263 by CIT(A) - CIT while setting aside the assessment order held that the sale consideration at ₹ 35,00,000/- for shop was less than the circle rate at ₹ 69,72,402/- paid and that the stamp duty was paid on the said circle rate, therefore, the said circle rate was the most reasonable rate while accepting the sale rate - CIT invoked the provisions of section 50C - whether the provisions of section 50C of the Act are applicable to the assets held as stock-in-trade? - Held that:- The provisions of Section 50C of the Act are not applicable when the shops are treated as stock-in-trade and income from such transaction was held as a business income. Therefore, the ld. CIT was not justified in setting aside the assessment order only on this basis that the AO has not taken the sale value as per section 50C of the Act i.e. the circle rate. We, therefore, are of the view that the ld. CIT was not justified in setting aside the assessment order by invoking the provisions of section 263 of the Act. In the instant case, the assessee furnished all the details relating to the business profit earned and the sale of shops. The AO specifically asked the assessee to show cause as to why the interest should not be allowed proportionately with reference to actual sale of shops as reduced by the gross profit. Accordingly, interest on loans and income from business was worked out. The ld. CIT had not doubted allowable interest worked out by the AO, therefore, he was not justified in observing that the AO accepted the business income without making proper inquiry. Moreover, the ld. CIT had not pointed out how and in what manner the assessment order was erroneous and prejudicial to the interest of the Revenue. He simply stated that the AO had not made the proper inquiry but did not point out which inquiries were to be made but had not been made by the AO. Therefore, by considering the totality of the fact we are of the view that the ld. CIT was not justified in setting aside the assessment order dated 22.12.2010 and directing the AO to frame fresh order. He was also not right in holding that the sale price of the shop should have been taken at circle rate in accordance with the provision of Section 50C of the Act instead of actual sale price disclosed by the assessee and accepted by the AO. Accordingly the impugned order passed by the ld. CIT is set aside and the assessment order framed by the AO is restored. - Decided in favour of assessee.
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Corporate Laws
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2015 (7) TMI 579
Penalty u/s 15H(ii) of SEBI Act, 1992 - Violation of Regulation 14(1) of SAST Regulations, 1997 - Failure to make public announcement of offer within stipulated time - Serving of notice by speed post - Held that:- Learned counsel for respondent stated that speed post is not one of modes as per Regulation 3 of these Regulations, but vehemently argued that service of notices on appellant has been proper and speed post is advantageous mode of transmission, since same can be tracked and that service of notice on appellant was at his residence, which has been acknowledged by appellant or his authorised agent and proof of service of all notices is available with respondent and hence appellant cannot deny that notices were not received by him. As per Regulation 3(b) of Manner of Service of Summons and Notices issued by Board Amendment Regulations, 2007 (MSSNB Regulations 2007), transmitting a copy of notices by registered post with acknowledgement due, addressed to that person or his duly authorised agent, or by speed post or by such courier service, as may be approved by the Board or by any other means of transmission of documents including Fax message or electronic mail service, which affords a record of delivery, is a proper service and hence contention of appellant that he did not received copies of any of the notices, in connection with the case, is not acceptable. - Decided against the appellant.
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2015 (7) TMI 578
Winding up of company - Inability to pay debts - Held that:- it cannot be determined by the company court that the company sought to be wound-up is "unable to pay its debts" within the meaning of clause (e) of section 433 of the Act unless it is heard at the admission stage. This is fortified by the use of the word "may" - denoting a discretion vested in the court - in the opening part of the section, as contrasted with the use of the word "shall" in the proviso to clause (h) which does not confer any discretion on the court where the winding-up petition is presented by the Government (Central or State) on the ground that the company has acted against the interests of the sovereignty and integrity of the country, security of the State, public order etc. There seems to be a clear line of difference between cases where there are substantial arguable issues in favour of the company sought to be wound-up even on the question whether the debt is due and cases where the merits of the revival scheme are projected as a defence and an appeal is made to the conscience of the company court to exercise the discretion not to order winding-up. Pradeshiya Industrial and Investment Corporation of UP (1994 (2) TMI 267 - SUPREME COURT OF INDIA) decided by the Supreme Court is a case which exemplifies the first category. There, there were certain questions of law raised in defence of the plea against the winding-up under section 433(e): that the promoters‟ agreement was cancelled, which aspect was not taken note of by the company court, that the appellant before the court which was sought to be wound-up was not a debtor at all as it was a financial institution which aspect was also not considered and that the claim was the subject matter of arbitration proceedings, which had also been overlooked by the company court. It was in these circumstances that the Supreme Court held that the defence of the company was a "substantial one and not mere moonshine". In fairness to the petitioner, it must be said that it was stated on its behalf that the effectiveness of the CDR Scheme and its impact on the ability of the respondent-company to repay its debts is a matter that can be examined in detail once the petition is admitted. The right of the respondent-company to argue, at that time in the course of the second motion proceedings, on the basis of the Scheme and the financial ability obtaining at that time was not disputed. In these circumstances, the winding-up petition is admitted. - Decided in favour of Appellant.
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Service Tax
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2015 (7) TMI 593
Recovery of tax u/s 87 from successor of deceased proprietor - SCN was issued to the deceased but could not be adjudicated during his life time - garnishee notices - Whether respondents 2 to 4 could have initiated recovery proceedings under Section 87 of Finance Act when there is no adjudication or quantification of the amount due and payable by the registered service tax provider - Held that:- the words "amount payable by a person" will have to be considered in the background of Section 73 of the Act inasmuch as, show cause notice issued under Section 73(1) of the Act is required to be adjudicated after considering representation of the person if filed and thereafter determine the amount payable. Undisputedly, in the instant case, show cause notices dated 05.08.2009, 19.10.2009 and 22.04.2015 having been issued to the service provider, has not yet been adjudicated and as such, respondents-2 to 4 could not have taken recourse to invoke Section 87 for recovering the amounts due from the service provider by issuance of garnishee notices to respondents-5 to 8. Though the respondents have sought to defend such action on the ground that these amounts had been collected by the service provider and same had not been remitted to the department or to the account of the Central Government, the course left open to respondents-2 to 4 is as provided under Section 73(1) namely, adjudicating the show cause notices and thereafter on such adjudication, resort to recover the amount so determined to be due from the service provider by taking steps as provided under Section 87. It cannot be gain said by the respondents that on the strength of the investigation conducted by them by enquiring with the service recipients, they are recovering the amounts reflected in the show cause notice dated 22.04.2015 by issuance of garnishee notices to respondents-5 to 8 and if such contention or plea is accepted, it would render the adjudication process itself otiose or nugatory, in as much as, in all cases the respondents can take a stand and contend that the investigation conducted by them is sufficient to recover tax even before adjudication is complete or even before the amount due is quantified. To put it differently, the adjudication of show cause notices after recovering alleged amounts due would be a post decisional hearing and would become an empty formality. Same not being the intention of the Parliament can be gathered from the scheme of the Act - In view of the recovery made by the respondent No.4 pursuant to the recovery notices Annexure L, N P and R respectively and same having been held to be illegal, consequential orders to direct the fourth respondent to remit the amount back to the respective accounts is required to be issued, since such recovery was without authority of law. - Decided in favour of assessee.
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2015 (7) TMI 592
Extended period of limitation - bonafide belief - Penalty u/s 77 & 78 - Site Formation, Clearance. Excavation, earth moving and demolishing service - Held that:- Payment was made by cheques dated 17.06.2006 and 21.06.2006 for the services rendered as per the work order dated 17.06.2006 and the bill in respect thereof was issued by the appellant on 18.08.2006. Thus, there is no doubt that the Show Cause Notice dated 05.05.2011 was issued within a period of five years, which is the extended period available for issuing the same in case of wilful mis-statement/suppression of facts on the part of the appellant with intent to evade payment of service tax. - Perusal of Section 73 ibid makes it clear that the only requirement for Revenue to be able to invoke extended period of five years is to establish suppression, collusion or wilful mis-statement with intent to evade service tax and the date on which Revenue discovered or became aware is not a variable in this equation. Perusal of Section 73 ibid makes it clear that the only requirement for Revenue to be able to invoke extended period of five years is to establish suppression, collusion or wilful mis-statement with intent to evade service tax and the date on which Revenue discovered or became aware is not a variable in this equation. - impugned order clearly notes that the said amount was not reflected in the ST-3 return which itself is sufficient to establish suppression of facts on the part of the appellant to evade service tax. Further, the details about the said payment received were never submitted by the appellant during the enquiry. Indeed, the said details were, (had to be), obtained from the service recipient (SICCL). It is on record that Investigating Officer asked the appellant vide letter dated 02.02.2010 to submit the facts and figures, copies of work order, bank statement, etc., but the same were never supplied by the appellant and it was only then that the Investigating Officer called for the information/ details from the service recipient, SICCL. Mere perusal of the definition vis-a-vis the description of work (service) done by the appellant does not leave any scope to even entertain a reasonable doubt, leave alone reasonable belief, that the service rendered may not be covered under the said definition. Mere non-mention of the particular clause of the definition in the Show Cause Notice when the definition is so graphically clear could in no way jeopardise the appellant's ability to defend itself and the defence submitted by the appellant is ample evidence thereof and therefore the same (i.e., such non-mention) is inconsequential. - there was no scope for any confusion even with regard to the said exclusion. It needs to be mentioned that the bona fide belief is not a hallucinatory opinion of an uninformed person. Exemption under Notification No.17/2005-ST, dated 07.06.2005 that is applicable to the site formation and clearance, excavation and earthmoving and demolishing and such other similar activities referred to in sub-clause (97a) and (zzza) of clause 105 of Section 65 of the Act. provided by any person in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports or other ports. No elaborate discussion is needed to state that the service rendered by the appellant was not in the course of construction of roads, airport, railways, transport terminal, bridges, tunnels, dams, ports or other ports and therefore, the said Notification (No.17/2005-ST) is clearly not attracted in this case. - No infirmity in the impugned order warranting appellate intervention - Decided against assessee.
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2015 (7) TMI 591
Valuation - Inclusion of reimbursable expenses - Inclusion of postage and other stationary expenditure - Held that:- appellant herein is rendering services of a 'Share Transfer Agent' and 'Registrar to an Issue' under the Securities and Exchange Board of India (Registrar to an Issue and Share Transfer Agents) Rules, 1993 and the connected regulations. The said service came under the tax net for the first time on 01/05/2006. Therefore, the question of demanding any service tax on reimbursement of expenditure would not arise at all prior to 01.05.2006, even though the appellant might have paid service tax wrongly under the category of 'Business Auxiliary Service'. Postage and other stationary expenditure, have been reimbursed on actual basis - service tax cannot be levied on an amount charged as tax since the same is not a consideration for rendering any service. Postage is an amount received by the postal department for transmission by post and cannot be considered as a consideration received by the person who is the sender of the postal article. Further, when the postage is recovered from the service receiver on actual basis by a service provider, he acts as a pure-agent and, therefore, the reimbursements made to a pure-agent is not includible in the value of taxable service rendered, as what is provided under Section 67 of the Finance Act, 1994 is only the consideration received for the value of services rendered. Same is the position with respect to the cost incurred towards stationary articles used for sending various items by post. Therefore, these reimbursements on actual basis cannot form the value of taxable service at all. Therefore, the service tax demand by including cost of such expenditure in the value of taxable service is clearly unsustainable in law. - impugned order is clearly unsustainable in law. Accordingly, we set aside the same - Decided in favour of assessee.
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2015 (7) TMI 590
Disallowance of CENVAT Credit - Capital goods - Held that:- It is evident from records that the Maruti dealership business commenced during the relevant period. On a pragmatic approach, it has to be considered that the appellant needs time to set up business/business premises. Only then can the appellant apply for service tax registration. The appellant cannot be found fault with or denied the benefit otherwise available to the appellant, for the reason that, in the process of setting up of business the appellant used the available office address. The Department does not have a case that the capital goods were not utilized in the appellants Workshop. In fact a certificate has been issued by the supplier of the goods that they were supplied to the workshop and the billing was done at the appellants, IV Bridge, Napier Town, Jabalpur address because the appellant was in the process of setting up the Workshop. In the case of input services also, the Department does not have a case that these were not provided or utilized by the appellants Maruti Showroom & Workshop. It is categorically stated by the appellant that the appellant keeps separate accounts for all these business. Only because at the time of issuing the invoices by the suppliers/provider the Maruti Show room & Workshop were not registered and invoices were addressed to the appellant s temporary administration office, the appellants cannot be denied the benefit of the Credit. The appellants have got their premises registered with service tax and the dispute was only during the limited time when the appellant was in the process of setting up the business. - appellants are entitled to the benefit of Cenvat Credit - Decided in favour of assessee.
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2015 (7) TMI 589
Penalty u/s 76 & 78 - Business Auxiliary Service - Authorized service station - Held that:- Neither the primary adjudication order nor the impugned order intimated the appellant/ assessee regarding the facility available under Section 78, of remitting the confirmed demand of tax, interest and 25% of the penalty within the period of 30 days towards compliance with the liability assessed. In the light of judgments of several High Courts on this aspect of the matter, we therefore declare that the appellant is at liberty to remit the assessed component of service tax, the interest thereon and 25% of the penalty under Section 78 as stands confirmed by the lower appellate authority, within 30 days from today towards compliance with its liability confirmed by the impugned order. - no substantial error in the concurrent findings recorded by the primary and lower appellate authorities, that the appellant had provided the taxable service to RKBK True Value and had collected service tax and was in any event liable to service tax, in view of invoices produced by the appellant itself. The impugned order is impeccable and warrants no interference - Decided against assessee.
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2015 (7) TMI 588
Management maintenance or repair service - benefit of Notification No. 12/2003-ST - Held that:- In the case of A.N.S. Construction (2009 (6) TMI 465 - CESTAT, NEW DELHI), the CESTAT held that "respondents were engaged for activities of growing grass, plants, trees or fruits, vegetable, regular mowing of laws, pruning and trimming of shrubs end cleaning of garden, would not come within the ambit of "maintenance of immovable property". While we find it hard to discern any ratio in the said judgement, the adjudicating authority has dropped the demand pertaining to the period up to 30.4.2006 on the ground that during that period maintenance or repair of only immovable property was liable to service tax. The Commissioner [Appeals] clearly noted that with effect from 1.5.2006 the change in definition of "management, maintenance or repair" brought "maintenance or repair of properties whether immovable or not" within the scope of 'management, maintenance or repair service' and accordingly confirmed the impugned demand for the period with effect from 1.5.2006. It is seen that the appellant did not take Service Tax registration and did not file ST-3 returns pertaining to the impugned service. It also did not submit the details in spite of being asked and did not even respond to summons. The required details had to be gathered from JNN/JDA. Thus, the appellant is clearly guilty of suppression of facts. - Impugned service is liable to service tax under management, maintenance or repair service and the appellant is guilty of suppression of facts. - case remanded to the Commissioner (Appeals) with the direction that the impugned service tax liability may be recomputed after extending the benefit of Notification No. 12/2003-ST in respect of supply of goods (like trees/shrubs/climbers etc.) provided the conditions of the said Notification No. 12/2003-ST are satisfied - Decided partly in favour of assessee.
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Central Excise
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2015 (7) TMI 585
Denial of CENVAT Credit - Availment of credit on inputs received in tankers as well as in packaged condition in drums and barrels - Shortage of goods - Held that:- there was no shortage between the physical stock and the book stock for more than 70% of the period. Not even a single or minor variation in the stock, whereas only for particular months (shown in bold) there is a huge shortage. If the difference is due to the measurement method between the actual weighment and the massflow meter is to be taken there is no consistency as indicated in the above table. If at all there is any inputs remained in the pipelines in a continuous process and then the same should have been reflected every month. There cannot be abrupt and sudden shortage of inputs only in particular months during the year. For example, in the case of input OLOA 200 and Glissipal 1000 , the shortage accounted are very substantial in terms of quantity, which was worked out by the adjudicating authority in his order. There is no uniformity in the shortage of inputs and it is evident that this shortage cannot be attributed to the difference in measurement because of heating of liquids, or evaporation loss, or remnant of inputs in pipelines as claimed by the appellants. As rightly held by the adjudicating authority, the inputs are having high viscosity and not volatile in nature. Considering the fact that the shortage of inputs accounted only for specific months and not in a continuous manner it is established that the shortage of inputs is not on account mere difference in variation of weigment methodology and the said quantity of inputs have not been used in the manufacture of final products after receipt of the inputs in appellant's factory. Further, it is evident that it is not the case that the shortage is of very meager or negligible quantity. - loss is not due to evaporation or process loss and also the percentage of shortage is more than 5.56%. Therefore, case laws relied upon by the appellants clearly distinguished and the same are not applicable to the facts of the present case. Appellants are failed to put forth any justifiable reason that the shortage is purely due to the difference in actual weighment and the massflow meter as there is no uniformity. Whereas, in the present case very high abnormal shortage of inputs ranging from 3.0 Tons to 12.658 Tons, in respect of OLOA 200 and in the case of Glissopal 1000, from 3.3 Tons to 13.51 Tons cannot be treated as process loss or evaporation or calibration or weighment loss. Therefore, the appellants are not eligible for the modvat/cenvat credit on the quantity of inputs which are not used in the manufacture of final products and the impugned orders confirming demand of reversal of credit on the shortage of inputs are liable to be upheld. As regards the imposition of penalty, the adjudicating authority has rightly invoked the extended period as the appellants failed to record the shortage in the statutory records in RG 23 and part1 and part2 during the period from 2000-2001, where the appellants are required to maintain statutory records. The appellants are also failed to show the shortage of stocks even under the cenvat rules. As clearly brought from the impugned orders that the appellants deliberately adjusted the shortage in their internal records as consumption of inputs at the end of the month. I find that the appellants failed to inform the department at any time on the shortage of inputs. But for the department verification of appellant records it would not have come to the light. Therefore, it is a clear case of suppression of facts where the appellants deliberately adjusted the shortage as if it is consumed in the manufacture of final products at the end of every month and created fresh opening balance at every month without making reversal of credit on the shortage of inputs. Therefore, the adjudicating authority in respect of first two appeals has rightly invoked the extended period. - Decided against assessee.
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2015 (7) TMI 584
Valuation of goods - clearance of fresh manufactured goods and goods after reprocessing - inclusion of amortizing cost of moulding - Credit had been taken under Rule 16 of the Central Excise Rules, 2002 in respect of the consignments of plastic moulded furniture returned from the distributor for being re-made / re-manufactured - Held that:- It is seen that this statement of Shri G.M. Bhandari is not corroborated any other evidence and not only this, when the statements of Shri K.K. Maheshwari, Director of the appellant company and of Shri Harinder Kumar Garg, Manager of the appellant company were recorded they were also not confronted with this statement. In view of this we hold that merely on the basis of statement dated 23/07/2002 of Shri G.M. Bhandari, it cannot be presumed that in past also, the appellant had taken CENVAT Credit under Rule 16 of the Central Excise Rules, 2002 in respect of the old and used plastic furniture received by them which had not manufactured and cleared by the appellant on payment of duty. In view of this, the CENVAT Credit demand of ₹ 6,61,719/- along with interest and equivalent penalty is not sustainable. As regards the dispute regarding including the amortized cost of moulds in the assessable value of the goods, the appellant themselves conceded that the same would be includible. However, the dispute in this regard is over the method of calculation. In our view, the amortized cost must be calculated in accordance with the Board's Circular No. 170/4/96CX dated 23/1/1996, i.e., the cost of the mould divided by the total quantum of production which can be made by using that moulded multiplied by the number of pieces manufactured as cleared. There is no dispute that if the amortized cost is calculated in this manner, out of the duty demand of ₹ 7464/- and the duty demand of ₹ 2936/- can be confirmed. Accordingly, the duty demand of ₹ 2936/- is confirmed and the rest of the demand on this count is set aside. Re-moulding charges are for the expenses incurred for re-processing and re-manufacturing of the goods and the same cannot be treated as consideration for the goods earlier cleared on sale. In view of this, we hold re-moulding charges are not includible in the assessable value and as such the duty demand of ₹ 1,73,427/-along with interest and equivalent penalty is not sustainable. - only duty/CENVAT Credit demand of ₹ 54096/- along with interest and equivalent penalty is upheld and the remaining duty/CENVAT Credit demand along with interest and equivalent penalty is set aside - Decided partly in favour of assessee.
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2015 (7) TMI 583
SSI Exemption - Penalty u/s 11AC - Invocation of extended period of limitation - Held that:- Goods so called as cartons, wallets or catch covers are similar in nature and are meant for packaging of different products. We have also gone through the heading 4817 as also 4819. We find that heading 4817 covers wallets of paper or paperboard containing an assortment of paper stationery. The goods manufactured by the appellant are primarily meant for packaging of condoms, pencils, pharmaceutical items. These will therefore not be covered by the description given in heading 4817. These would be clearly covered under heading 4819.19 and would be chargeable to duty. During investigation, the appellants have not clarified and made such a claim. We also note that the description in all the copies is inserts. An insert can be a leaflet or some other item of cardboard. In the event the inserts are nothing but printed leaflets, then these would not be chargeable to duty and the same would be required to be excluded from the computation of duty. On this issue, the matter is remanded to the Commissioner. Appellant has not produced any documents even before this Tribunal so as to indicate that they have the duty paying documents. However, in the interest of justice, we are giving two months' time from today to produce the duty paying documents used in the manufacture of dutiable cartons, wallets, catch covers etc. and correlate the same (with grammage etc.) to their final products. Such documents will be produced before the jurisdictional Commissioner. Thereafter the Commissioner will examine the claim of the appellant and in case they are entitled to the cenvat credit, extend the same. The balance amount of duty will be paid by the appellant in cash within 30 days from communicating the requantification details. In case the appellants fail to produce the said documents within two months, it will be assumed that they are not claiming cenvat credit and requnatification done. Keeping in view the fact that different copies of the invoices were manipulated, it is a case of fraud and extended period of limitation is correctly involved and is upheld. Penalty under Section 11AC and interest are also upheld. However, the amount of duty, interest and penalty will require to be requantified. The role of Shri Subhash Palande who was the managing director and was looking after the day-to-day work, has been clearly brought out in the adjudication order and the manipulation in the description in the different copies of the invoices cannot happen without his direction and we, therefore, do not find any merits in his appeal. Similarly, it is not disputed that appellants 3 and 4 were not in the business of manufacturing cartons, catch covers etc. but were only making the positive plates for printing industry. The goods which have been shown as if manufactured by appellants 3 and 4, were in fact manufactured by appellant No. 1 and they have connived so as to evade payment of excise duty. The penalties have been correctly imposed on them. - Decided party in favour of appellants.
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2015 (7) TMI 582
Denial of CENVAT Credit - CENVAT Credit on the basis of the xerox copies of invoices and bills of Entry - held that:- Excess availment of credit was made with intention to evade payment of duty. The case law in the case of Pratam Fab Processors pvt. Ltd (2013 (9) TMI 502 - CESTAT MUMBAI) as relied upon by the learned Authorised Representative would not be applicable in this case. In that case, two Show Cause Notices were issued to the Appellant for excess availment of credit. It is seen that there was an intention on the part of the Appellant to evade payment of tax. So, in the present case, imposition of penalty under Section 11AC of the Act, would not be warranted. The nature of availment of excess credit as revealed from the statement of Smt. Beena Thomas, that in some cases, they have availed the credit on the assessable value to the extent of ₹ 1.04 Crores. The Appellant had taken credit twice on the same invoice. Taking into account of the conduct of the Appellant for excess availment of credit for more than ₹ 1 Crores, we find that it is a fit case to impose penalty under Rule 15(1) of CENVAT Credit Rules. 2004. Regarding the penalty imposed on other Appellants, we find that they are the employees of the Appellant Company. There is no evidence of direct involvement of the Appellant for excess availment of credit deliberately. Hence, in our view, the imposition of penalties on other Appellants are not warranted. - disallowance of CENVAT credit along with interest is upheld - However, penalty is reduced - Decided partly in favour of assessee.
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2015 (7) TMI 581
Utilization of wrongful CENVAT Credit - Penalty under Rule 25 read with Section 11AC - violation of the provisions of Rule 8(3A) - Held that:- Appellant has not violated any of the sub-clauses (a), (b), (c) or (d) of Rule 25 (1) and, therefore, no penalty is imposable under Rule 25. It is to be mentioned that the said decision was relating to Rule 8(3) alone. Rule 8(3A) was introduced with effect from 1.6.2006 and the earlier Rule did not have any provision for clearing the goods consignment-wise and in those situations the Hon'ble High Court has come to the conclusion that Rule 25 is not violated and, therefore; penalty cannot be imposed under Rule 25 and in those circumstances, even Section 11AC of the Central Excise Act is not applicable. The position has changed after the introduction of Rule 8(3A) and as in the present case, the goods were cleared without payment of duty consignment-wise and hence the ratio of the said judgment will not be applicable. Further, it is a well settled law by now that in case of taxing statute, various penal provisions are in the nature of civil obligations and do not require any mens rea or wilful intention until and unless the relevant provision provides for the same - appellant has violated Rule 8(3A) and hence the goods covered by the show cause notice are liable to confiscation and the appellant is liable to penalty under Rule 25 of the Central Excise Rules, 2002 - However, penalty is reduced - Decided partly in favour of assessee.
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2015 (7) TMI 580
Denial of refund claim - refund of unutilized credit - CENVAT Credit of Basic Excise Duty and AED (GSI) - Held that:- Refund claims under Rule 57F (13) of Central Excise Rules, 1944 read with notification no. 85/87 pertain to the period prior to 1/4/2000 and these refund claims are of the accumulated AED (GSI) credit in respect of the inputs which had been used in the manufacture of tyres exported under bond without payment of duty. There is no dispute that though during that period, there was no AED (GSI) on the tyres , the appellant in view of the Board's Circular dated 12/3/2003 would be eligible for cash refund of the AED (GSI) credit. In view of the amendment of CENVAT Credit Rules, 2002 in March, 2003 they had utilized the entire amount of AED (GSI) Credit of Rs . 8,71,12,812/-accrued prior to 1/4/2000 for payment of Basic Excise Duty and Special Excise Duty on tyres and subsequently when the utilization of AED (GSI) credit for payment of Basic Excise Duty and Special Excise Duty was restricted by section 88 of the Finance Act, 2004, to that AED (GSI) Credit only which had accrued w.e.f . 1/4/2000, they out of the total pre-1/4/2000 credit of Rs . 8,71,12,812/-utilized earlier, paid back an amount of Rs . 8,49,74,300/-and thus, the amount of Rs . 21,38,512/-still remains utilized for payment of Basic Excise Duty and Special Excise Duty. While the notification no. 85/97 CE(NT) provides that the claim for cash refund under Rule 57F (13) is to be filed within the limitation period prescribed under section 11B and section 11B prescribes the limitation period which is to be counted from the 'relevant date' as defined in that section, neither this notification nor section 11B gives the definition of the 'relevant date' for the purpose of cash refund under Rule 57F (13). While cash refund under Rule 57F (13) becomes admissible only after export of the goods having been made under bond and when the assessee cannot utilize the CENVAT Credit attributable to the inputs used in the manufacture of the goods cleared for export under bond, for payment of duty on the clearances for home consumption, the Rule does not prescribe as to how only the manufacture exporter is to want utilization of the accumulate credit for payment of duty on the clearances for home consumption. Therefore, it may not be correct to treat the date of clearance of the goods for export as the 'relevant date'. - refund claims have to be treated as not hit by limitation. In view of the above discussion, the impugned order is set aside and the appeal is allowed. The appellant would be eligible for cash refund under section 57F (13) only if in terms of the Tribunal's final order dated 14//2015 they reverse the AED (GSI) Credit of Rs . 21,38,512/-in their CENVAT Credit Account - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (7) TMI 587
Issuance of 'C' forms - subsequent sale against E-1 / E-2 forms - The petitioner has been denied "C" Form by the Board (purchaser of the goods) on the ground that the petitioner has not produced any proof of payment of tax under the CST Act - Held that:- the first sale alone will be taxable and the tax on subsequent sale will be exempted if dealers are registered. Therefore, the Board cannot insist proof of tax paid by the first seller. For the reason that the Board has already admitted supply of materials by the petitioner, they are bound to issue "C" Forms as and when Form E-2 certificate is received from the petitioner. It is always open to the Assessing Authority to consider genuineness of the claim for exemption claimed by the petitioner in appropriate proceedings. The issue whether the petitioner is entitled for exemption and has satisfied the conditions under Section 6(2) of the CST Act cannot be decided in these proceedings at the instance of the Tax Department. Thus, the writ petition is disposed of directing the Board to issue "C" Forms to the petitioner as and when petitioner produces E-2 certificate without any delay. - Decided in favor of petitioner.
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2015 (7) TMI 586
Premature recovery proceedings on the basis of best judgment re-assessment order - garnishee/recovery notices - petition has submitted rectification application - Held that:- order of re-assessment as well as demand notices came to be served on the petitioner namely when it was despatched by respondent under Registered Post Acknowledgement Due on 07.04.2015, and it came to be received by petitioner on 09.04.2015. Thus, 30 days period in the instant case would commence from 09.04.2015 and ends on 08.05.2015. However, even before 30 days period came to an end respondent has resorted to recover the tax determined under the impugned re-assessment orders by invoking Section 45 of the Act and calling upon the persons holding money on behalf of petitioner and which is payable to petitioner by directing them to remit the funds to the Department within three (3) days from the date of notices dated 28.03.2015. As such the impugned Garnishee notices Annexures-G and H cannot be sustained. Though Annexures-G and H cannot be sustained same is not quashed, in as much as pursuant to Demand notices respondent has issued notices dated 28.03.2015 and 30.03.2015, Annexures-J and K respectively under Section 45 of the Act to debtors of petitioner and same being held bad in law and as such they require to be quashed by reserving liberty to the respondent to issue fresh notices in the event of petitioner application for rectification Annexures - M and N being rejected. Respondent shall dispose of the applications dated 13.04.2015 Annexure-M and N filed by the petitioner expeditiously at any rate within 15 days from the date of hearing which is fixed at 12.05.2015 at 11.00 A.M. without waiting for any further notice. - Decided partly in favor of assessee.
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