TMI Tax Updates - e-Newsletter
July 21, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• Even if repairs of roads/ airports is specifically excluded from Commercial or Industrial Construction it is still taxable as MMR Services

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News

1. FDI In Railways

2. Quality Standards for Import of Goods

3. Approval for setting up of IT/ITES SEZs

4. Foreign Investment under 'MAKE IN INDIA' Programme

5. 'START-UP INDIA'-Coverage and Eligibility

6. Details of Industrial area Development Projects for Himachal Pradesh

7. RBI Reference Rate for US $

8. Sharing of information of black money by foreign countries

9. Merger of Nationalised banks

10. Synchronisation of financial accounting year with calendar year

11. Detection of black money by Government

12. Decline in amount of black money in foreign banks

13. Stricter monetary policy for price control

14. Opening of Bank branches in rural areas

Notifications

Income Tax

1. 59/2016-S.O. 2380 (E) - dated 12-7-2016 - IT

Section 35AC - Eligible projects or schemes - recommendations of the National Committee for Promotion of Social and Economic Welfare

Circulars / Instructions / Orders

SEZ

1. Minutes of the 71th meeting of the SEZ - dated 22-6-2016

Minutes of the 71st of the Board of Approval for SEZs held on 22nd June 2016 to consider proposals for setting up Special Economic Zones and other miscellaneous proposals

Customs

2. F. No. 278A/33/2016-Legal - dated 24-6-2016

Constitution of a fresh panel of Senior/Junior Standing Counsels against existing slots for handling CBEC cases of Indirect taxation before the various High Courts and other fora - Calling for fresh recommendations

3. F. No. 609/24/2016-DBK/1562-1589 - dated 26-5-2016

Data i.r.o. motor cars of Customs TH 8703 exported during July-Dec. 2015 under drawback scheme (with/without combination with other scheme)

Highlights / Catch Notes

Income Tax

• Play School Operation Not Formal Education, Ineligible for Section 12AA Registration Under Income Tax Act.

  Case-Laws - AT : The assessee’s activity of running play school cannot be said that it is a formal education. In view of the above, we are of the opinion that the assessee is not entitled for registration u/s 12AA of the Act - AT
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• Interest Payments in Income Tax: Evaluating Excessive Interest Rates and Comparisons with Bank Offers for Reasonableness.

  Case-Laws - AT : Disallowance of interest payment - Excessive interest or not - If the companies are paying the same rate of interest as the bank are paying then the public would not see any benefit in making deposits with the Company and they will go for bank interest. - AT
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• Court Questions Legitimacy of Unsecured Loans to Assessee u/s 68; Doubts Raised on Loan Providers' Financial Status.

  Case-Laws - AT : Addition u/s 68 - creditworthiness - The assessee has taken alleged unsecured loan in systematic manner. In some of the cases cash was deposited one or two days before the money was given to the assessee, and the assessee is man of means. How it can be expected that small farmers not having any regular source of income would give loan in this fashion. - AT
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• Unexplained Income u/s 69A: Discrepancy in Funds Received Raises Tax Scrutiny for Assessment Years 2004-07.

  Case-Laws - AT : Addition on unexplained money received by the appellant u/s 69A - When the sale deed was executed in the assessment year 2004-05 year, it is not acceptable that the balance amount was received by the assessee in the assessment year 2006-07 - AT
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• Microfinance Business Denied Tax Exemption u/s 11 for Lack of Charitable Activities.

  Case-Laws - AT : Exemption u/s.11 - as the assessee is carrying on micro finance business in a commercial manner so as to earn profit and there is no iota of charity carried on by the assessee so as to grant exemption under sec.11 of the Act - AT
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Customs

• Commissioner (Appeals) Decision Reducing Penalty for Undeclared Goods Import Challenged Under Customs Law.

  Case-Laws - CGOVT : Import of baggage without declaring goods - Levy of penalty - carrying contraband or dutiable goods - the Commissioner (Appeals) has erred in reducing the redemption fine and penalty on the applicant - CGOVT
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Service Tax

• Road and Airport Repairs Fall Under "Management, Maintenance, or Repair Service" for Tax, Despite Exclusion from Construction Definition.

  Case-Laws - HC : Merely because repairs of roads and airports is specifically excluded from the definition of “commercial or industrial construction” it could still be brought in under the category of “management, maintenance or repair service” - HC
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• Sub-contractor must pay service tax on input services used by main provider; no exemption applies.

  Case-Laws - HC : Levy of service tax on sub-contractor - in view of the specific clarifications regarding 'input service' rendered by the sub-contractor, which is used by the main service provider for completion of the work, it cannot be held that the sub contractor is not liable to pay service tax for the services provided by him. - HC
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Central Excise

• Refund Claim Denied for Missing Declaration Before Export Under Notification No. 21/2004-CE(NT) Requirements.

  Case-Laws - CGOVT : Rebate / refund claim - input stage credit - inputs used in the manufacture of their export goods - claim was rightly rejected on the grounds that the applicant has manufactured and exported the finished goods before filing the requisite declaration under the said notification and failed to fulfil the condition of the Notification No. 21/2004 -CE(NT) dated 06.09.2004. - CGOVT
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• Court Confirms Duty Payment on Full Value of Goods, Including HDDs, Not Just CPUs in Excise Duty Case.

  Case-Laws - AT : Valuation - bifurcation between the value of the goods into (i) CPU and (ii) HDD and there by discharging payment of central excise duty only on the former without taking into account value of the latter. - Demand confirmed - AT
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• On-site fabricated steel structures deemed immovable; demand for fabrication costs dismissed by authority.

  Case-Laws - AT : Manufacture - the steel structures were undeniably fabricated at site, by assembling them piece by piece, the structure came into existence as they were erected at site and as correctly held by adjudicating authority, the structures fabricated are fixed to the earth - demand set aside - AT
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• CENVAT Credit Confirmed for Bought-Out Parts in Boiler Installation Under Central Excise Rules.

  Case-Laws - AT : Denail of Cenvat Credit - whether bought out items are inputs - The appellant is entitled to take CENVAT credit on the bought-out parts used in the installation of boilers - AT
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VAT

• Detaining Betel Nut Shipments Requires Proof of Ownership and Formal Order for Revenue Protection. Legal Scrutiny Possible if Challenged.

  Case-Laws - HC : Detention of consignment of betel nuts - proof of ownership of goods - Detention of goods for protecting interest of Revenue is a strong measure and can be permitted only on a formal order being passed so that the legality thereof can be examined when questioned. - HC
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• Court Affirms Full Rebate Entitlement Under KVAT Act Section 12(1), Output Tax Does Not Exceed Rebate Claim.

  Case-Laws - HC : Claiming special rebate in terms of Section 12(1) of the KVAT Act, 2003 - The petitioner was entitled for rebate for the entire amount paid in terms of Section 12(1) and even going by the fourth proviso, since the output tax payable does not exceed the total claim for rebate under Section 6(2). - HC
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Case Laws:

• Income Tax

• 2016 (7) TMI 831
  Registration u/s 12AA denied - non charitable activity - Held that:- From the material placed before us, we find that the assessee is not carrying out any charitable activity as per the Trust Deed except running play school by collecting a fee. Even otherwise there is nothing on record to show that the assessee is carrying out charitable activities as per its Trust Deed. The assessee trust deed has contained one of the object that to help the orphan and destitute children. We find that the assessee has not admitted single orphan or destitute in its play school. The assessee trust has not admitted any student without collecting fee as prescribed by it. In view of the above, in our opinion, it is not a charitable activity. That apart, the assessee play school neither recognized by the State Government nor recognized by the Central Government or any authority. Therefore, the assessee’s activity of running play school cannot be said that it is a formal education. In view of the above, we are of the opinion that the assessee is not entitled for registration u/s 12AA of the Act - Decided against assessee

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• 2016 (7) TMI 829
  Addition u/s 68 - creditworthiness - agriculture income - Held that:- Source of loan has been stated to be agriculture income. But when we peruse the statement, it will reveal that creditor has meager income. It is highly improbable that one could keep saving in cash at home for a long time. For example, Smt. Vijaylaxmi Shrivastva has given an amount of 3.00 lakhs to the assessee on 31.5.20093. She has bank account with Bharat Co-op. Bank Ltd. She has agriculture land of 16 bighas. Her annual agriculture income has roughly 50,000/- to 60,000/-. She has stated that savings were being deposited in the Co-operative Bank. If we appreciate the statement of this creditor, then, it would reveal that it is highly improbable that agriculturist, having meager income would keep safe the sale proceeds of agriculture produce for five to six years in cash at home. Her statement in itself is contradictory. In reply to question no.5, she stated that “I keep all my savings at Bharat Cooperative Bank”. Then, in the next reply to the next question, she deposed that “I keep few amounts of saving at home”. If these two questions are compared with question no.9, where the AO had asked place of keeping agriculture income, she deposed that such income was kept at home. Similarly, we have perused the statement of other creditors. All that statements did not inspire credence to us. The assessee has taken alleged unsecured loan in systematic manner. In some of the cases cash was deposited one or two days before the money was given to the assessee, and the assessee is man of means. How it can be expected that small farmers not having any regular source of income would give loan in this fashion. As far as discrepancy pointed by the assessee with regard to Mr.Mahesh Shrivastva, if that discrepancy is taken note of, he was not credit-worthy of giving any loan to the assessee. The ld.Revenue authorities have appreciated the facts and circumstances in right perspective while making addition. We do not see any reasons to interfere with the order of the ld.CIT(A). - Decided against assessee.

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• 2016 (7) TMI 828
  Addition on unexplained money received by the appellant u/s 69A - Held that:- When the sale deed was executed in the present year, it is not acceptable that the balance amount was received by the assessee in the assessment year 2006-07, particularly when no cogent evidence in respect of his claim was produced before us or before any of the authorities below. Therefore, we hold that the amount of 34,37,500/- should also be taxed in the present year in addition to the addition upheld by the ld.CIT(A) of 8.75 Lakhs. In this manner, we uphold an addition of 43,12,500/- out of the addition made by the AO of 77.50 Lakhs. The remaining amount of 34,37,500/- is already offered to tax by the assessee in the present year. Therefore, to this extent, no further addition can be made and hence, this much addition is being deleted out of the total addition made by the AO of 77.50 Lakhs and partly deleted by the ld. CIT(A). We would also like to observe that if the assessee has disclosed income in the assessment year 2006-07 of 34,37,500/- which is being taxed in the present year and if the assessee can establish that both are same, then such income should not be taxed in the assessment year 2006-07 and if the tax has been paid by the assessee in that year, credit for the same be allowed in the present year against the addition being upheld by us of 34,37,500/- from the date of payment of tax for the assessment year 2006-07. - Decided partly in favour of revenue

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• 2016 (7) TMI 827
  Exemption u/s.11 entitlement - assessee trust has been carrying on micro financial activities to rural poor women - charitable or non charitable purpose - Held that:- The assessee is lending money at commercial rate prevailing in the market. By advancing loans at that rate of interest, it cannot be considered as an activity carried on by the assessee as charitable and for the benefit of the public. When the assessee carried on micro finance activity in a commercial line, then it is not a charitable activity but an activity to expand the finance business by contracting weaker section of the public and it does not involve any charitable activity. Therefore, looking into the activities carried on by the assessee, we fully agree with the findings of the AO and this view of ours is squarely covered by the decision of the Tribunal in the case of Janalakshmi Social Services (2008 (8) TMI 606 - ITAT BANGALORE). The assessee relied on various judgments, which cannot be applied to the facts of the present case, as the assessee is carrying on micro finance business in a commercial manner so as to earn profit and there is no iota of charity carried on by the assessee so as to grant exemption under sec.11 of the Act. Hence, in our opinion, the CIT(A) not justified in granting exemption u/s.11 of the Act to the assessee. Accordingly, we reverse the order of the Ld.CIT(A) and restore the order of the AO. - Decided against assessee Allowance of bad debts - Held that:- CIT(A) is not justified in granting deduction as bad debts as that business of assessee trust, which is not continuing during the relevant period and in case of discontinued business, the claim of assessee u/s.36(1)(vii) cannot be allowed. - Decided against assessee Addition to the capital account of the assessee Trust - Held that:- The assessee took a plea befoe the AO that this impugned amount has been received on transfer of capital asset from M/s.Grama Vidiyal Trust to M/s.Grama Vidiyal Micro Finance Ltd. Contrary to this observation of the AO, the CIT(A) observed that there is no transfer of any asset, as such there is no levy of capital gain tax at 8,24,15,000/-. This findings of the CIT(A) is not based on any positive material. Hence, the facts brought on record not enough to give any findings on this issue. Therefore, the entire issue is remitted to the file of AO for fresh consideration after giving opportunity of hearing to the assessee. Allowability of depreciation on the assets on which the entire cost of assets has been allowed as application of income in earlier assessment years - Held that:- There is no question of allowing any depreciation in the assessment year under consideration on the assets which Written down value (WDV) had become ‘Nil’. Thus, this ground of the Revenue is allowed.- Decided against assessee Allowance of claim corpus Donation - Held that:- If the voluntary contributions received by the Trust created, partly or wholly, for charitable purpose, then in term of sec.2(24)(iia) of the Act it forms the part of the corpus fund of the Trust and it is a capital receipt. In the present case, since we have observed that assessee is not a charitable trust, it is engaged in the commercial activity and is not entitled for exemption u/s.11 of the Act. The assessee is required to give details of receipt of 3.70 crores and it is to be proved by assessee that it is not a revenue receipt and if it is in the field of capital receipt, capital receipt would not be liable for the exemption u/s.11 of the Act. Accordingly, this issue is remitted to the file of AO to examine afresh and assessee shall furnish necessary details. The ground of Revenue is partly allowed for statistical purposes.

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• 2016 (7) TMI 826
  Application of deemed profit rate of 10% u/s 44BB - revenues earned from a non-resident company on account of provision of technical personnel for executing contracts with M/s. ONGC - DRP after considering the relevant decisions held that section 44BB of the Act being a more specific provision shall prevail over the general provisions of the Act and that the services rendered by the Subcontractor at the off shore rigs of a contractor is part and parcel of activities for extraction etc of mineral oils and would be covered u/s 44BB Held that:- We respectfully note that in the case of ONGC [2015 (7) TMI 91 - SUPREME COURT ], speaking for the Hon’ble Apex Court, their Lordships categorically held that payments for providing various services in connection with prospecting, extraction or production of mineral oil would be assessed u/s 44AB and not u/s 44D of the Act. On the basis of aforesaid discussion, we are inclined to hold that the issue is squarely covered in favour of the assessee and the DRP was not justified and correct in directing the AO to assess income of the assessee from non-resident company on account of provision of technical person for executing contract with ONGC shall be taxed applying due profit rate of 10% u/s 44BB of the Act. - Decided against revenue.

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• 2016 (7) TMI 825
  Penalty u/s 271(1)(b) - defaults of not complying with notices for Assessment Year 2011-12 - Held that:- The contentions of ld. DR carry merits inasmuch as the impugned penalties were imposed on 19-12-2012 much prior to the framing of assessments on 17-1-2014. In view thereof the case laws cited by the assessee are distinguishable. Assessee has failed to demonstrate that there was any understanding with ld. AO as tried to be canvassed. Besides in any case adjournment applications ought to have been filed citing any reason which existed. Non filing of adjournment applications and non attendance of proceedings cannot be viewed lightly. The assessee has thus failed to show any demonstrable reasons of sufficient cause for non compliance. In view thereof, see no infirmity in the orders of lower authorities imposing the impugned penalties. - Decided against assessee

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• 2016 (7) TMI 824
  Disallowance of interest under Section 36(1)(iii) - AR challenging the impugned order contended that the assessee company has transferred certain funds to its subsidiary company without any interest out of the loan taken at interest for business expediency - Held that:- The assessee has advanced loan of 1,23,48,111/- to Shri Manoj Kumar Jain without charging any interest and lent loan of 3,28,30,957/- to M/s. R.J. Fabrics by charging interest @ 6% out of the funds borrowed by the assessee at the interest of 18%. Had the loan been advance to Shri Manoj Kumar Jain and M/s. R.J. Fabrics for commercial expediency, the assessee would not have charged interest even @ 6% per annum. The assessee has failed to prove any business nexus between the assessee company and Shri Manoj Kumar Jain except the fact that Shri Manoj Kumar Jain is son of the assessee So, when the assessee has failed to prove commercial expediency for advancing the interest free loan/loan at the nominal rate of interest to its subsidiary and relative, the judgments cited as S.A. Builders vs. CIT (A) [2006 (12) TMI 82 - SUPREME COURT ] , Chandigarh, CIT vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and CIT vs. Jugal Kishore Dangayach (2013 (11) TMI 1661 - RAJASTHAN HIGH COURT) relied upon by the assessee are not applicable to the facts and circumstances of the case. We are of the considered view that the AO has rightly disallowed the claim of the assessee u/s 36(1)(iii) of the Act, affirmed by the CIT (A). - Decided against assessee.

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• 2016 (7) TMI 823
  Deduction under section 80P denied - Held that:- CIT(A) in the Asstt.Year 2007-08 was of the view that deduction under section 80P would not be admissible on the profit arisen to the assessee on trading of nonagriculture items, either sold to its members or non-members. This deduction was not allowable, and not claimed. On this premise, the ld.CIT(A) has decided the issue. This aspect was brought to the notice of the ld.CIT(A) in the present assessment year also, but no cognizance was taken. Faced with this situation, I set aside both the orders and restore this issue to the file of the AO for re-adjudication. The ld.AO shall examine the facts in the light of the Tribunal’s order passed in the Asstt.Year 2007-08.

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• 2016 (7) TMI 822
  Suppression of sales - CIT(A) deleted the addition - Held that:- A perusal of the assessment order, we find that the AO failed to bring any evidence on record which can suggest suppression of sales made by the assessee. The assessee was showing an income of more than 7 crores in its return. It could not file confirmation from two scrap purchases having value roughly of 40 lakhs only. The ld.AO has calculated this aspect in such manner suggesting that the assessee has sold finished goods, but there is no evidence with the AO to that effect. We failed to understand on what basis the AO has drawn this inference. On the other hand, the ld.CIT(A) has observed that quantitative Excise record was maintained by the assessee, and they were subject to the audit by the Excise Department. Its product is excisable. It is not the case that the assessee has avoided excise duty or some evidence was found, exhibiting the avoidance of excise duty. Therefore, after taking into consideration the above finding, we do not find any reason to interfere with the order of the ld.CIT(A) on this issue - Decided against revenue Disallowance made by the AO under section 14A - CIT(A) has reduced the disallowance - Held that:- The order of the ld.CIT(A) need not to be interfered with for two reasons, viz. (i) Hon’ble Gujarat High Court in the case of CIT Vs. CIT V/s Corretech Engineering (P) Ltd, [2014 (3) TMI 856 - GUJARAT HIGH COURT ] has held that if no exempt income is there during the year, no disallowance under section 14A can be made. Similarly, Rule 8D was not applicable in the Asstt.Year 2007-08. The Hon’ble Delhi High Court in the case of Maxo Maxopp Investment Ltd. vs. CIT [2011 (11) TMI 267 - Delhi High Court ] and Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT ] has held that Rule 8D cannot be applied with retrospective effect. It is applicable from the Asstt.Year 2008-09. Therefore, no disallowance can be on the basis of Rule 8D.- Decided against revenue

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• 2016 (7) TMI 821
  Validity of initiation of re-assessment proceedings - rectification of mistake - professional/technical charges - Held that:- Proceedings u/s 154 were initiated by means of notice dated 23.2.2011. The assessee furnished reply to this notice. As against these proceedings u/s 154, taking place in the year 2011, the AO initiated the instant re-assessment proceedings in the year 2013. The ld. DR was required to intimate the status of section 154 proceedings on the earlier date of hearing and the case was accordingly adjourned. Today, the ld. DR submitted in the open court that he enquired from the concerned AO about the status of section 154 proceedings initiated in the year 2011, who, in turn, stated that neither any order has been passed u/s 154 nor such proceedings have been dropped. This shows that the AO initially initiated rectification proceedings in the year 2011 and without completing the same, started re-assessment proceedings in 2013 and, thereafter, completed the assessment by means of order u/s 143(3) read with section 147. This manifests that during the continuation of the proceedings u/s 154, the AO embarked upon the same issue by means of a separate re-assessment proceedings without concluding the earlier proceedings initiated u/s 154. It goes without saying that initiation of two parallel proceedings on a similar subject matter, cannot sustain. If first proceedings have been validly initiated, then such proceedings must come to an end for making a way for the initiation of another proceedings on the same subject matter. Unless the earlier proceedings are buried, either by way of an order on merits or by dropping the same, no fresh subsequent proceedings on the same subject matter can be initiated. Adverting to the facts of the instant case, it is noticed that the rectification proceedings u/s 154 were initiated in the year 2011 and these were still on in the year 2013, when the proceedings u/s 147 were initiated on the same subject matter. This manifests that the proceedings u/s 147 cannot stand during the continuation of proceedings u/s 154. Ex consequenti, the initiation of re-assessment by means of notice u/s 148 and the proceedings flowing therefrom are hereby set aside. The AO is fully empowered to give a logical conclusion to the proceedings u/s 154 as per law.

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• 2016 (7) TMI 820
  Revision u/s 263 - whether the purchases relatable to the unreconciled sales have been recorded or not? - Held that:- In the instant case, no discrepancies were noticed on the quantitative particulars filed by the assessee either by the ld AO or by the ld CIT. We find that the ld CIT had directed the ld AO to verify whether the purchases relatable to the unreconciled sales have been recorded or have not been recorded in the books already by the assessee. This only tantamount to ld CIT trying to direct the ld AO to make fishing and roving enquiry in this aspect to justify his suspicion. We find that the ld CIT is not sure about the aspect as to whether the order of the ld AO is erroneous or not. Hence it could be safely concluded that the ld CIT had not given any categorical finding in his order that the order of the ld AO is erroneous. Hence the basic assumption of revisionary jurisdiction u/s 263 of the Act fails The purchases, sales and manufacturing expenses disclosed by the assessee are not disturbed by the revenue. Hence it could be safely concluded that the alleged unreconciled sales could have emanated only out of alleged undisclosed purchases. In such an event, the only recourse to tax the income is by applying the gross profit percentage thereon, which is what has been ultimately done by the ld AO in the assessment by making an addition of 89,779/- . Hence the order passed by the ld AO cannot be considered as erroneous in nature and prejudicial to the interest of the revenue. In fact the order in the given set of facts and circumstances could only be viewed as prejudicial to the interests of the assessee and not for the revenue. In any case, we are in complete agreement with the arguments advanced by the ld AR that the profit for the whole year has to be determined by the ld AO and by the ld CIT. We find that the ld AO had only arrived at an arithmetical figure of closing stock as on 25.1.2008 as a balancing figure at 15,08,380/-. It is pertinent to note that the said figure would automatically become the opening stock as on 26.1.2008 thereby making it revenue neutral. Ultimately no discrepancies were noticed by the ld AO and by the ld CIT in the final audited accounts of the assessee and the books of accounts produced by the assessee from where the profits of the assessee could be reasonably deduced therefrom. The books of accounts and the audited figures of the assessee were not rejected by the ld AO or by the ld CIT. Under these circumstances, the order passed by the ld AO cannot be construed as prejudicial to the interest of the revenue. - Decided in favour of assessee

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• 2016 (7) TMI 819
  Revision u/s 263 - the assessee had not offered any income in terms of section 36(2) of the Act out of these advances and accordingly not entitled for deduction u/s 36(1)(vii) of the Act on the write off of the same - Held that:- AO had duly appreciated the stand of the assessee during the course of original assessment proceedings and had allowed the deduction to assessee by taking one of the possible views in the matter. When one possible view has been taken, the same cannot be substituted by another view of the Learned CIT. We also find that the Learned CIT had initiated the revisionary proceedings on the pretext that the claim of deduction made by the assessee is not allowable u/s 36(1)(vii) of the Act as no income was offered by the assessee in terms of section 36(2) of the Act. But from the records, we find that the assessee had not made any claim towards bad debts warranting invocation of section 36(1)(vii) read with section 36(2) of the Act. Hence the initiation of section 263 proceedings by the Learned CIT on the wrong assumption of facts is to be declared as bad in law. With regard to the argument advanced by the Learned DR that the loss arising on account of advances written off should be construed as capital loss for which certain case laws were relied upon by him, in view of our aforesaid findings and judicial precedents relied upon hereinabove, we don’t deem it fit and appropriate to get into the aspect of whether the loss arising on account of write off is a capital loss or not. Thus the revisionary jurisdiction invoked by the Learned CIT u/s 263 is to be quashed. - Decided in favour of assessee

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• 2016 (7) TMI 818
  Disallowance u/s 80IB(10) - treatment to assessee as developer - Held that:- A bare reading of the agreement would suggest that the assessee had borne the risk and also entitled for the reward. Clause-4 of the agreement duly authorizes the assessee to register individuals, firms or companies as a member of the Society and determine the price for unit registered for them. The emphasis of the ld.AO towards clause-9 of the agreement is concerned, it contemplates remuneration at the rate of 15% on the contribution collected from the members. The ld.CIT(A) has considered this aspect and held that it is not a very substantial aspect for determining character of assessee as a contractor or developer. It is pertinent to mention here that clause (4) authorizes the assessee to register new member and settle price for units registered for them. This authority to the assessee is in addition to already existing members. Therefore, if we look the details in the light of the above agreement, then, it would reveal that the CIT(A) has rightly treated the assessee as developer and rightly allowed the deduction under section 80IB(10) of the Income Tax Act - Decided in favour of assessee.

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• 2016 (7) TMI 817
  Aassessments made u/s. 153A - addition to income - Held that:- In the light of the documents found at the time of search which may be considered as incriminating for making the impugned assessments. Surprisingly, there is not even a whisper of any incriminating material found at the time of search which could be considered as the basis for framing assessments u/s. 153A of the Act. As, there is no alleged incriminating material which could have prompted the A.O. to disturb the concluded assessment. Therefore, we do not find any legality in the assessments so made by the A.O. We have no hesitation to set aside the findings of the ld. CIT(A) and direct the A.O. to delete the impugned additions from the hands of the aforementioned assessees made u/s. 153A of the Act in the respective assessment years mentioned hereinabove - Decided in favour of assessee.

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• 2016 (7) TMI 816
  Nature of income on sale and purchase of shares - Short term capital gains OR business income - Held that:- A perusal of the profit and loss account of the assessee shows that the assessee has separately shown Derivative profit, long term capital gains/short term capital gains on shares. In the balance sheet, the assessee has shown shares under the head 'investment'. These investment shares have been valued at cost. The intention of the assessee at the time of the purchase of shares is paramount. If the assessee has clear intention of being an investor and showing the shares as investment, we do not find any reason to disturb the intention of the assessee. A perusal of the aforementioned history of assessments of the assessee shows that only during the impugned assessment year, the A.O. has taken a stand that that the assessee is trading in shares. The Hon’ble Supreme Court in the case of Radhasoami Satsang [1991 (11) TMI 2 - SUPREME Court] has expounded the rule of consistency observing that if the facts are identical and the law has not changed then the view taken in the earlier years should be followed. CIT(A) did not erred in law and on facts in directing not to treat the short term capital gains earned by the assessee as business income. - Decided against revenue

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• 2016 (7) TMI 815
  Disallowance u/s 14A - Held that:- We find that the issue involved is squarely covered by the Hon’ble Jurisdictional Calcutta High Court in the case of CIT vs R.R.Sen and Brothers (2013 (7) TMI 260 - Calcutta High Court) and accordingly direct the ld. AO to adopt 1% of the exempt income for making disallowance u/s 14A of the Act. - Decided partly in favour of assessee. Disallowance of provision of leave encashment u/s 43B(f) - Held that:- As decided in assessee’s own case for A.Y.2008-09 the provision made by the appellant company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. - Decided in favour of assessee. Disallowance u/s 14A of the Act could be made while computing the book profit u/s 115JB - Held that:- As already in ground no.1 herein above that 1% of exempt income be adopted for the purpose of disallowance u/s 14A of the Act. We held that the same disallowance be made while computing the book profit u/s 115JB of the Act as requested by the ld. AR. - Decided partly in favour of assessee.

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• 2016 (7) TMI 814
  Renewal of approval under section 80G(vi) denied - Held that:- DIT (Exemptions) has not called for any clarifications/justifications from the assessee and has proceeded to adjudicate and reject the assessee’s application in contravention of the principles of natural justice. Therefore, in the interest of justice, we restore the issue to the file of the Ld. DIT (Exemptions) for fresh adjudication with the direction that the assessee be afforded a proper opportunity of being heard before such adjudication. - Decided in favour of assessee for statistical purposes.

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• 2016 (7) TMI 813
  Mismatch of amounts credited in TDS certificates and amounts credited in the P&L account - Held that:- The subsequent years assessments have been framed u/s 143(3) of the Act for the assessment year 2009-10 and 2010-11, whereby no such additions have been made by the revenue in the assessment framed u/s 143(3) of the Act. As submitted before us that inclusion of advances from customers as income of the impugned assessment year will lead to double addition of the same income as the assessee company has duly offered for taxation the said income in the year in which services were rendered and same cannot be brought to tax as income in the year of receipt as the assessee company is following mercantile system of accounting. As submitted before us that this has led to double taxation of the same income which is not permissible as per Scheme of the Act In our considered view, the matter of reconciliation of income between the TDS certificates and books of accounts of the assessee company needs verification by the authorities below and in the best interest of justice, the orders of the learned CIT(A) is set aside and the matter is restored back to the file of the A.O. for de- novo determination of the issue on merits after considering the clarifications, evidences and replies submitted by the assessee company in its defense to substantiate its contentions , and decide the matter afresh in accordance with law. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee company in accordance with principles of natural justice in accordance with law before framing de-novo assessment on merits in set aside proceedings - Decided in favour of assessee for statistical purposes.

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• 2016 (7) TMI 812
  Denial of exemption under section 11 - assessee was in receipt of fees for issuance of certificate of origin for the assessment year under consideration and hit by the proviso to section 2(15) - Held that:- Where the main object of the Institution was “charitable” in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non members, were all held to be “charitable” in nature. Assessee association’s primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. Hence, assessee is not hit by newly inserted proviso to section 2(15) of the Act - Decided in favour of assessee Disallowance of depreciation - entire cost of acquisition of assets were treated as “application of income” for the purpose of claiming exemption under section 11 - Held that:- The provision of section 11 of the Act cannot override section 32 of the Act. If the assessee claimed exemption under section 11 under Chapter III of the Act, it cannot claim depreciation under section 32 of the Act. Therefore, the Assessing Officer has to examine whether the assessee has claimed the cost of acquisition of capital assets as application of income or not in any earlier assessment years and if it is claimed so, the assessee cannot claim depreciation as an application of income while claiming exemption under section 11 of the Act in subsequent assessment years. When the cost of asset become NIL, there is no question of allowing any depreciation. The cost of asset was allowed once again as application of income, it would amounts to double deduction, if depreciation is also allowed as application of income, which cannot be permitted. Accordingly, we direct the Assessing Officer to examine this issue and grant depreciation if the assessee has not claimed the cost of acquisition of asset as application of income while claiming exemption under section 11 of the Act in any assessment year - Decided in favour of assessee for statistical purposes.

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• 2016 (7) TMI 811
  TPA - selection of comparable - Exclusion of HMT Bearings Ltd - Held that:- It is undisputed fact that this company is a public sector undertaking company. Its operations are based on policy requirements of the Government and it is a preferred company of the Govt. of India for entrusting of work and therefore, it totally operates in a controlled environment. Hence, this company cannot be compared with that of the assessee-company, which is a private company operating in uncontrolled business environment Exclusion of SLN Bearings Ltd., the assesseecompany is seeking exclusion of this company from the list of comparables on the ground that its export sales are less than 4%. We find from the Annual Report of the company, filed in paper book at page Nos.545 to 567, that the export sales were 62.03 lakhs as against total sales of 1239.17 lakhs which is less than 4% and whereas exports of assessee-company are 100% of total sales. Thus we hold that this company cannot be compared with the assessee-company whose export earnings are less than 4% as the assessee-company exports constitutes 100% of the sales. Gains made on account of foreign exchange earnings as part of operating income included. Exclusion of preliminary expenditure and preoperating expenditure from operating cost - Held that:- As this expenditure have nothing to do with operations of the company. We hold that this should not be included as part of operating cost. Accordingly, we direct the AO to exclude this expenditure from operating expenditure. We make it clear that our directions relating to adjustment of operating profits/operating cost should be made applicable even in case of comparable companies finally chosen and accordingly, the issue is restored to the file of TPO/AO on the above lines.

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• 2016 (7) TMI 810
  Adhoc disallowance of consumption of raw material and personnel cost - Held that:- This issue has been adjudicated in assessee’s own case for the AY. 2009-10. Thus respectfully following the decision of the Co-ordinate Bench in the aforesaid case, we set aside the order of CIT(A) to this extent and allow the expenditure incurred on the same. There is no reason to disallow 5% of expenditure on adhoc basis. Brought forward losses of earlier years set-off during the current year while assessing the incomes at a positive figure - Held that:- The action of the AO cannot be appreciated. However, as seen from the orders of ITAT pertaining to earlier years, there are various issues which were sent back to the AO for examination and re-determination. Consequent to those orders, if there are any brought forward losses and (or) un-absorbed depreciation, assessee is entitled to claim set-off and carry forward of the same as the case may be in this year. AO is directed to re-determine the amount and allow the necessary benefit as per the provisions of law. This ground is considered allowed for statistical purposes. Disallowance u/s. 40(a)(ia) - Non remitting of TDS - Held that:- Since the TDS was remitted during the impugned assessment year, assessee is entitled to claim the deduction of the same amount.

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• 2016 (7) TMI 809
  Rejection of books of accounts - A.O. estimated net profit of 12.5% on main contracts - Held that:- It is an admitted fact that estimation of net profit from civil contract receipts is consistently followed by the department on various rates depending upon the facts and circumstances of the each case. The ITAT, also upheld the estimation of net profit ranging from 8 to 12.5% on main contracts. It is an admitted fact that the profit ratio cannot be a constant factor for each and every contractor in all cases. It varies from place to place depending upon the type and nature of works contract executed by the contractor. In the present case on hand, the assessee contended that he had executed works contract in various places, wherein he has procured material locally depending upon the business expediency. The assessee contends that he had admitted a net profit of 7.5% which is reasonable when compared to the nature of works executed by him. The CIT(A) after considering the relevant details and also taken into account the ratio of the jurisdictional ITAT, in the case of M/s. Srinivasa Lakshmi Constructions (2011 (1) TMI 1437 - ITAT HYDERABAD) has scaled down the estimation of net profit to 9% on main contract works net of all deductions including deduction towards depreciation. We do not see any error or infirmity in the order of CIT(A). Hence, we inclined to upheld the order of the CIT(A) and dismiss the appeal filed by the revenue. - Decided in favour of assessee

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• 2016 (7) TMI 808
  Addition on protective basis - Held that:- From the orders of the authorities below we find that the assessee was a joint account holder along with his mother in the bank account maintained at branch of Axis Bank at Kolkata. The assessee as well as his mother has accepted the bank account as pertaining to the business activity of the mother of the assessee. This fact has not been disputed by the Assessing Officer also. He has made addition on protective basis only to protect the interest of the Revenue in case the addition was not considered in the hand of mother of the assessee . But we find from the order of the learned Commissioner of Income-tax (Appeals), that the amount of cash deposit was duly considered in the assessment of mother of the assessee. We find that issue in dispute has already been considered in the hand of mother of the assessee, therefore, the addition in the hand of assessee is not justified. - Decided in favour of assessee.

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• 2016 (7) TMI 807
  Penalty order u/s 271(1)(c) - cash paid by the assessee for acquisition of shops out of undisclosed sources - Held that:- From the order of he ld.CIT(A), it is seen that factual findings have been recorded that element of cash was involved in the transaction of acquisition of shops. The Assessing Officer has given a finding after verifying the evidences that cash component of payments aggregating to 3,44,02,000 was involved in the transaction. Amount-wise break up and details was also given by ld.CIT(A) on page 6 of his order wherein under the name of the assessee specific amounts have been mentioned. Nothing has been brought before us to rebut these factual findings. Under these circumstances, we find the ld.CIT(A) has rightly confirmed the penalty levied by the Assessing Officer. In view of the same, no interference is called for in the order of the ld.CIT(A) and the same is confirmed. - Decided against assessee.

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• Customs

• 2016 (7) TMI 796
  Maintainability of writ petition - availability of alternative remedy of appeal - Absolute confiscation of the articles in question i.e., gold biscuits weighing 4334.79 grams - The Commissioner has also ordered confiscation of other articles and has also imposed penalty on the persons found to be in possession of, or dealing with, the gold in question. - Held that:- exercise of writ jurisdiction in this matter is declined; and this writ petition stands dismissed. However, it is left open for the petitioner in taking recourse to appropriate remedy in accordance with law.

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• 2016 (7) TMI 795
  Maintainability of writ petition - writ petitioner had mis-described the goods and also had them under valued. - Held that:- Since the respondents did not use any affidavit either before the Trial Court or before this Court nor did Mr.Saraf dispute the correctness of the contents of the Office Notes appearing at pages 63 and 64 the contents of the Office Notes dated 6th June, 2013 and 14th June, 2013 appearing at pages 63 and 64 of the stay petition are deemed to have been duly proved by the writ petitioner. For the aforesaid reasons, we find no substance in the submission that there has been violation of any statutory right of the writ petitioner which calls for issuance of any Writ in the nature of Mandamus.

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• 2016 (7) TMI 794
  Import of silver / silver coins in a baggage - period of stay less than six months abroad - Held that:- Government observes that the liability of the goods for confiscation cannot be ignored on the mere technical ground that the Section 111 of the Customs Act is not mentioned in the concluding para of the show cause notice. Also it is not the case that the respondent was not put on notice regarding the charges against him. In the present case, exact nature of the contravention has been clearly spelt out in the show cause notice. Government notes that the applicant has also contended that the Commissioner (Appeals) has erred in setting aside the penalty imposed by the original adjudicating authority under Section 112 of the Act, ibid on the grounds that goods are not liable for confiscation. Government observes that Section 111 of Customs Act, 1962 deals with confiscation of improperly imported goods. In this case the original authority has clearly held the impugned goods to be liable for confiscation under Section Ill(d) & (o) of the Customs Act, 1962 but did not order for actual confiscation of the goods as the same were already released to the respondent. Further, in terms of Section 112 penalty shall be imposed on a person involved in acts of omission or commission, in relation to any goods which renders such goods liable to confiscation under Section 111 of the said Act, or abets the same, or acquire possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under the said Section 111. As Commissioner (Appeals) has erred in holding that the goods have not been held to be liable for confiscation, Government thus holds that penalty is rightly imposed under Section 112 of the Act ibid by the original authority. - Decided in favor of revenue.

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• 2016 (7) TMI 793
  Import of baggage without declaring goods - Levy of penalty - carrying contraband or dutiable goods - passing through green channel - Held that:- Government notes that not only the applicant attempted to smuggle the impugned goods in substantial quantity but it is also an uncontested fact on record that he also colluded with and abetted with another passenger to facilitate smuggling of the impugned goods. Therefore the applicant has rightly been held as liable for penalty under Section 112 of the Customs Act, 1962. As regards the quantum of penalty Government notes that the fine and penalty imposed by the original authority is commensurate to the value of the goods and is not harsh considering the role of Shri.Gagan Preet Singh in facilitating the smuggling of impugned goods. Keeping in view the gravity of offense and overall circumstances of the case and the value of the impugned goods, the Commissioner (Appeals) has erred in reducing the redemption fine and penalty on the applicant. Government therefore restores the quantum of redemption fine and penalty as imposed by the original adjudicating authority. - Decided in favor of revenue.

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• 2016 (7) TMI 792
  Import of baggage without declaring the goods - passing through green channel - carrying goods on behalf of others - waiver of pre-deposit - Held that:- Government finds nothing on record to show that the said stay order of Commissioner (Appeals) for depositing an amount of 15000/- towards the penalty amount has been challenged before any forum and has thus attained finality and needs to be complied with. The applicant failed to comply with the directions of the Commissioner (Appeals) under Section 129E. As the applicant admittedly failed to comply with these directions which were in the nature of precondition for hearing the case on merits, Government holds that the Commissioner (Appeals) has rightly dismissed the applicant's appeal.

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• Corporate Laws

• 2016 (7) TMI 786
  Composite Scheme of Arrangement in the nature of Amalgamation is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned and the same is hereby sanctioned. The consequential reduction of Equity Share Capital of Saumya, the Transferee Company as set out in Clause 8 of the Scheme and paragraph 11 of the petition is hereby confirmed. However, since there is no net reduction of capital, minute under Sec. 103(1) is not necessary.

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• 2016 (7) TMI 785
  Holding a Board meeting and passing resolutions by preventing the applicant and his mother participate in the Board - video conferencing not provided - Held that:- As gone through the entire rules 3, as understood that this rule is meant for providing video conferencing, indeed it is the duty of the directors convening the Board meeting to inform the other directors regarding the options available to them to participate in the video conferencing mode or other audio video mode or other options available to them to participate through video conferencing or other audio video means. In fact it is the obligation upon the directors convening the meeting to provide every facility to the directors asking video conference and enable them to participate in the Board meeting. Sub-rule 3(e) only says that if intimations is given at the beginning of the calendar year that will remain valid for the entire calendar year, it is not said anywhere that if it is not given at the beginning of the year, video conference is not to be provided in that calendar year, therefore, it does not mean that the directors are not entitled for video conferencing if intimation is not given at the beginning of the calendar year. It is needless to say when a provision is read, it has to be read wholly and not in pieces, therefore, no merit in the argument of the respondents counsel saying that video conferencing is not provided because no intimation is given at the beginning of the calendar year. It is no doubt true that upon demise of the one of the directors from B group, the Board equation has been changed, for which R2(e) has already filed an application and the same is pending before this Bench. R2(e) should have pursued for hearing instead of adopting this method to balance the equation in the Board. In view of the same, hereby believe that holding a Board meeting and passing resolutions by preventing the applicant and his mother participate in the Board is not fair, therefore, as hereby stay the operation of the resolutions passed in the Board meeting held on 4-6-2016 and also to withhold passing resolutions in respect to Item 2 and Item 3 of the Board meeting scheduled to be held at 3 p.m. on 22-6-2016 until further orders in this CP.

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• Service Tax

• 2016 (7) TMI 784
  Demand of service tax - (i) repair and maintenance of roads; (ii) repair and maintenance of airport runways; (iii) site formation activity undertaken at roads. - period from 2005-06 to 2009-10. - It was submitted that, commercial or industrial construction service was introduced as taxable service under the head “construction service” with effect from 10th September, 2004. The same service was renamed as “commercial or industrial construction service” with effect from 16th June, 2005. Though it refers to repair, alteration, renovation etc., but that does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels or dams. If that is excluded from commercial or industrial construction, then, the same cannot be taxed under another general category of management, maintenance or repair service. Held that:- the definitions are for the purpose of understanding the taxable service provided or to be provided by a stock-broker, to a policy holder by an insurer, by an advertising agency, by a courier agency etc. and when it came to service in relation to management, maintenance or repair, the legislature was free to tax it. Merely because repairs of roads and airports is specifically excluded from the definition of “commercial or industrial construction” it could still be brought in under the category of “management, maintenance or repair service”. Ultimately, management, maintenance or repair is defined to mean any service provided by any person under a contract or an agreement for a manufacturer or any person authorised by him in relation to management of properties, whether immovable or not, maintenance or repair of properties, whether immovable or not or maintenance or repair including reconditioning on restoration, or servicing of any goods, excluding a motor vehicle. Eventually, in inserting and incorporating definitions so as to understand taxable service if management, maintenance or repair is taken to be a distinct service and that aspect is excluded from the definition of the term “commercial or industrial construction service”, then, it is not a case of redundancy or rendering any provision nugatory, but being specific and clear. Once the matter is understood in this manner, then, the submission of Mr. Sridharan, based on the judgment of the Hon'ble Supreme Court of India in the case of Tahsildar Singh (supra) cannot be accepted. Mr. Sridharan forgets that we are not construing as to whether airport is covered by section 98 of the Finance Act, 1994. We are concerned here with appellant’s specific case. Some of the services provided included extension, strengthening of runways, taxi ways, apron taxi ways. We are concerned with these services. Whether these services are falling in the category of maintenance and repairs of road is the question before us. We do not think that we are required to find out whether definition of “airport” itself includes runways and even if they are so included, whether those are contemplated by section 98. Section 98 refers to building services relating to management etc. of non commercial Government buildings. We are not construing the ambit and scope of such services. We are concerned with the excision from the definition of this service the maintenance of road, repair to runway etc. That exclusion is clear. As a result of the above discussion, we do not find any merit in the appeal. Once the order impugned in the writ petition is a consequential one and follows the tribunal’s order under appeal and is delivered and pronounced on remand, then, for the very reasons, which we have assigned for upholding the conclusion of the tribunal would cover the outcome of the writ petition. If the tribunal’s order dated 29th May, 2013 is upheld, then, this order also must prevail. Consequently, the writ petition must also fail. Rule is discharged. Decided against the appellant.

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• 2016 (7) TMI 783
  Condonation of delay - HC [2014 (7) TMI 828 - MADRAS HIGH COURT] confirmed the decision of Tribunal and declined to condone delay holding gross negligence on part of assessee - Apex Court dismissed the assessee appeal on the ground of delay as well as on merits.

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• 2016 (7) TMI 782
  Levy of service tax on sub-contractor - It was submitted that, invoice would indicate that service tax was levied on the bill raised by the petitioner on the 3rd respondent. Therefore the petitioner took a stand that no service tax need be levied on the bill raised by the 4th respondent on the petitioner. - Held that:- This court is of the considered opinion that in view of the specific clarifications regarding 'input service' rendered by the sub-contractor, which is used by the main service provider for completion of the work, it cannot be held that the sub contractor is not liable to pay service tax for the services provided by him. However it is for the adjudicating authority to decide on verification of records regarding the discharge of liability of 'service tax' and to decide with respect to the credit relating to the 'input service'. Necessary decision has to be taken by the 1st respondent considering the claim for the credit based on remittance of the entire tax liability by the 1st respondent. - In view of the interim order continued during pendency of this writ petition, no demand can be enforced against the 4th respondent for payment of service tax with respect to the contract in question, till the adjudication is finalised. - Decided partly in favor of petitioner.

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• Central Excise

• 2016 (7) TMI 806
  Rebate/ refund claim - export of goods - in one case the container number and seal numbers on various export documents were not tallying; in the other case the date of Mate Receipt was 0502.2009 and as per the endorsement of the Custom Officer, the goods had been exported on 05.02.2009 itself whereas the corresponding ARE-I was dated 28.02.2009 and the Shipping Bill was dated 26102.2009. The rebate claim was also rejected for non-submission of BRCs. Held that:- Government notes that the applicant failed to give any plausible explanation with regard to above said discrepancies in container No. and Seal No. Further, no amendments have been made for correction of Seal No. and Container No. in relevant documents. As such, in absence of any such specific explanation, other submissions of the applicant fall flat to establish that goods cleared from factory have been actually exported. s regards restricting the rebate to duty @5.15% and to duty paid on FOB value, Government finds that in catena of its judgments, it has been held that rebate is admissible only to the extent of duty paid at the effective rate of duty i.e. 4% in terms of Notification No.4/06-CE dated 01.03.2006 as amended, as applicable on the relevant date on the transaction value of exported goods determined under Section 4 of Central Excise Act, 1944. Ratio of said judgments will be applicable to this case also. As regards the issue of date of Mates Receipt is concerned, the applicant contended that they have submitted fresh copy of the relevant Mate Receipt which shows the date as 05.02.3009, this aspect may be condoned. In this regard Government finds no merit in the plea of the applicant as nothing is placed on record to show that the fresh Mate's Receipt was produced before the concerned authorities and that suitable amendments were made in the relevant documents viz. ARE-I etc. Therefore, it is rightly held by the lower authorities that goods could not have been exported prior to clearance from factory and rebate is liable for rejection on this ground alone. Revision application rejected - Decided against the revision applicant.

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• 2016 (7) TMI 805
  Rebate / refund claim - Rule 18 - merchant export - it was revealed that there was no acknowledgement with regard to 'Let Export Order" by the Customs Authority except for an initial of Superintendent of Customs. Further it was also revealed that the ARE-I did not bear any certificate regarding self-sealing as provided under Clause 6 of Chapter 8 (Export under claim for Rebate) of Supplementary Instructions. It also did not contain the declaration to the effect as to who will claim the Duty Drawback i.e. whether by the manufacturer or by the Merchant Exporter. Held that:- Government notes that the Commissioner (Appeals) has not taken into consideration the full facts of the case in as much as that whether the applicant has claimed drawback on customs portion and rebate on finished goods. Also there is no bar on availment of rebate on duty paid on exported finished goods w.r.t export made under DEPB Scheme. As such, reliance of the Commissioner (Appeals) on above said High Court is not applicable to the present case as the applicant has claimed to avail benefit of Drawback of Customs portion and rebate on finished goods. Government further observes that another contention of the applicant is that original authority as well as appellate authority have erred while giving their findings that the ARE-I did not bear any certificate regarding self-sealing. They have claimed that the said export goods have been made by the applicant themselves under the examination and sealing of Range Superintendent and Inspector while referring to the ARE-I. In this regard, Government observes that under such circumstances, being a matter of fact, the claim of the applicant for the purposed correlation of duty paid goods with the goods exported needs to be verified on the basis of original documents. - Matter remanded back.

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• 2016 (7) TMI 804
  Rebate / refund claim - Rebate claim on the basis of supplementary invoices - Period of limitation - Rule 18 - The applicant filed rebate claims and the same were sanctioned - Subsequently, because of contractual obligation the applicant received additional amounts due to cost variance from their importers i.e. M/S. RHI AG Vienna and their other affiliated group companies, on which the applicant paid the differential duty with interest. Subsequent to payment of differential duty, the applicant filed two rebate claims. Held that:- In remand proceedings, the original authority has held that during the material period of export of subject excisable goods that is from 21.03.2002 to 31.012008 on which impugned rebate was claimed, the applicant were only a manufacturing unit in DTA and not 100% EOU and as such, ratio of Government of India order No. 418/2011-CX dated 27.04.2011 is not applicable to this case and the rebate of 4,36,053/- is in order. In respect of the claim for 24,04,012 /- only the rebate of 18,70,080/- was sanctioned and 5,33,92/- was rejected as time barred. Government further notes that the applicant is challenging only rejection of 5,33,932/- in this Revision Application. This issue has already been settled in first round of Revisionary Proceedings vide Government of India Revision Order No. 455-456/11-CX dated 03105.2011. The said Revision Order dated 03.05.2011 has not been reported by the applicant to have challenged before any higher judicial forum. As such, the said Revision Order dated 03.05.2011 has attained its finality. As such, rebate claim of 5,33,932/- which was held inadmissible as time barred, also attained finality. This issue, which has already attained finality, cannot be raised in this second round of Revisionary Proceedings as the issue is no longer res-integra. The whole case, therefore, becomes infructous and as such, Revision Application cannot be entertained at this stage. Revision application rejected - Decided against the applicant.

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• 2016 (7) TMI 803
  Rebate / refund claim - input stage credit - inputs used in the manufacture of their export goods - claim was rejected on the grounds that the applicant has manufactured and exported the finished goods before filing the requisite declaration under the said notification and failed to fulfil the condition of the Notification No. 21/2004 -CE(NT) dated 06.09.2004. Held that:- While claiming the rebate under such Notification No.21/2004-NT dated 06.092004 the applicant should have ensured strict compliance of the conditions attached to the Notification No.21/2004-NT dated 06.09.2004. - Government finds that there is no provisions under Rule 18 of Central Excise Rules 2002 for condonation of non-compliance with the conditions and procedure laid down in the Notification allowing rebate under said Rule. In view of the above discussions, Government finds that the applicant failed to fulfill the above mandatory condition of the said provisions and the condition being mandatory the same is required to be followed by the applicant particularly when the applicant is the beneficiary in the claim of rebate. Revision application rejected - Decided against the applicant.

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• 2016 (7) TMI 802
  Condonation of delay - Rebate / refund claim - proof of export of goods - discrepancy in ARE-I from - applicant contended that, the customs authorities while signing certificate on triplicate of ARE-I against Part-B inadvertently endorsed wrong shipping bill no. 1044599 which was subsequently was got corrected as no. 1045171 bearing the dated signatures of the customs officers on such corrections made by them dated 07.01.2010. Held that:- Government finds no merit in the contention of the applicant regarding filing of appeal before the wrong forum due to incorrect advise of their Counsel, as the notes of guidance of the impugned Order-in-Appeal clearly mentions where appeal would lie in such cases. Also the applicant has failed to place on record any evidence of having filed an appeal in CESTAT or copy of direction from CESTAT. Government, therefore cannot consider exclusion of time spent before CESTAT for purpose of condonation of delay in filing Revision Application. Government observes that despite specific directions, applicant failed to file Revision Application promptly and the above reason for delay appears to be very vague, unclear and an afterthought. Under such circumstances, Government is of considered opinion that the applicant has clearly failed to show sufficient cause which prevented them from filing Revision Application within the prescribed time limit under Section 35 EE. As such, the applicant's application of condonation of delay is liable for rejection in view of aforesaid discussion. Delay not condoned - Revision application rejected.

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• 2016 (7) TMI 801
  Cenvat Credit / MODVAT Credit - capital goods - diverting the steel items for non-manufacturing operations like fabrication, maintenance of structures, etc., and in manufacture of goods exempted from duty. - Held that:- Undeniably steel pipes are an essential/integral part of T.G. set without which the T.G. set cannot be put into use. T.G. sets would fall under the category of capital goods as 'generating sets' are expressly mentioned in the definition. - Credit allowed - Decided against the revenue.

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• 2016 (7) TMI 800
  Valuation - bifurcation between the value of the goods into (i) CPU and (ii) HDD and there by discharging payment of central excise duty only on the former without taking into account value of the latter. - The main defence raised by assessee against the allegations is that separate invoices were issued for the bought out items which were not manufactured by them, but were only supplied by them to customers. They did not avail Modvat credit on bought out items. Held that:- Most of the judgments placed before us by the appellant are regarding the issue whether the software is includable in the assessable value. The issue in the case being entirely different we do not consider it necessary to discuss them. At the cost of repetition, it has to be stated that the appellant was clearing computer system/a whole unit as is seen from the illustration in the show cause notice. Though appellants contend that peripherals were bought out items assembled in the factory, and then cleared as a computer unit, there is no iota of evidence to establish how the items from their trading premises was transferred to manufacturing premises. So also, there is no satisfactory explanation for insisting upon the customers to place split orders on two premises. Demand of duty confirmed - however penalty reduced. - Decided partly in favor of assessee.

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• 2016 (7) TMI 799
  Manufacture - fabricated structure - classification - fabricated structures like purlins, monorails, beams, girders, columns, bracings, platforms, cable ends, etc. - Held that:- the steel structures were undeniably fabricated at site, by assembling them piece by piece, the structure came into existence as they were erected at site and as correctly held by adjudicating authority, the structures fabricated are fixed to the earth. - Demand set aside. - Decided against the revenue.

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• 2016 (7) TMI 798
  Cenvat / Modvat Credit - Manufacturing of dutiable and exempted goods - maintenance of separate records - it was observed by the Central Excise Officers that they availed modvat credit in respect of inputs namely 'cullet' and 'other waste of glass' falling under Tariff Item No. 7001.10 and used the same in the manufacture of final products which were chargeable to duty and other final products which were not chargeable to duty. They did not maintain separate accounts in respect of the said inputs used in the manufacture of dutiable goods and exempted goods, as envisaged under sub-rule (9) or rule 57CC of the erstwhile Central Excise Rules, 1944. Held that:- the appellant had reversed the proportionate Cenvat credit on taxable input during the relevant period within the spirit of Rule 57CCC as introduced with retrospective effect vide the Finance Act, 2010. We further hold that the Id. Commissioner have erred in disbelieving the Certificate of Chartered Accountant which was based on the data and facts contained in the SCN dated 23/9/98 which, after verification, had been accepted by the Revenue in the subsequent order of adjudication. Thus, we hold that there was nothing much left for the Id. Commissioner to examine the same and except arithmetical accuracy of the amount reversed and interest if any, paid. Accordingly, we allow the appeal on merits. - Decided in favor of assessee.

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• 2016 (7) TMI 797
  Denail of Cenvat Credit - whether bought out items are inputs - Held that:- Since the boiler is the final product of the manufacturer, every component within it and every input that goes into the component manufactured in the factory would an input in so far as CENVAT Credit Rules, 2004 is concerned. It is certainly not a tenable claim that Revenue can distinguish between an input of an input and an input itself when there is no dispute that the components manufactured from inputs and the components that are inputs have gone into the final products; nor can Revenue presume to enter the commercial arena and dictate the manufacturing policy of an industry. In the context of the decision of the Tribunal in the appellant's own case cited supra which we respectfully follow, we find that the 'bought-out' items are also inputs for the purpose of taking credit in accordance with the definition in rule 2(k)(i) as it stood then. The appellant is entitled to take CENVAT credit on the bought-out parts used in the installation of boilers. We notice that some of the boilers have been erected at the Special Economic Zone at Jamnagar while others have been exported from India. Considering the decision of the Tribunal in re Flat Products Equipments (I) Ltd (supra) the demand of credit cannot survive. Credit allowed - Decided against the revenue.

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• CST, VAT & Sales Tax

• 2016 (7) TMI 791
  Detention of consignment of betel nuts - proof of ownership of goods - Case of the petitioner is that the goods were in the process of transportation outside the State of Gujarat and that, therefore, no local tax was to be paid. The department, however, strongly refuted such averments and contended that the investigation reveals that the so-called sellers of Karnataka have denied having sold such goods to the petitioner. Inquiries with the dealers at Himachal Pradesh which were supposed to have received the goods also falsifies the claim of the petitioner. Held that:- The contention that the petitioner cannot reclaim the goods as the petitioner's ownership is not established, need not detain us. Firstly, the goods were detained from the petitioner's custody. Secondly, there is no counter claim by any other agency staking claim of ownership over the goods. Thirdly, there is no police complaint alleging that the petitioner is in possession of stolen property. Lastly, the department's anxiety can be taken care of by directing the petitioner to indemnify the department against any claim. The Government Pleader also argued that such sales without payment of local tax might have taken place in the past also. If the department has an angle of seizure of goods for protecting the interest of Revenue, no such formal order has been passed. In absence of any such order, we cannot permit the department to continue to hold custody of the goods on mere apprehensions. Detention of goods for protecting interest of Revenue is a strong measure and can be permitted only on a formal order being passed so that the legality thereof can be examined when questioned. Goods to be released subject to conditions.

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• 2016 (7) TMI 790
  Classification of Loader - Rate of VAT - whether loader will fall under expression machinery, thereby falling within Entry No.35 of notification, dealing with machinery used in excavation in works contract and not under Entry No.87 of ScheduleII of the Gujarat Value Added Tax Act, 2003? - Held that:- the equipments involved are in the nature of loader used in execution of works contract and, therefore, would not be part of entry 35. - Decided in favor of assessee.

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• 2016 (7) TMI 789
  Jurisdiction of the appellate authority u/s 62 of the Karnataka VAT Act - principles of natural justice - Held that:- Admittedly, the notice Ex.1 was given to the assessee on 1.4.2016 to which the assessee himself has filed objections vide Annexure C dated 29.4.2016, may be a detailed but a preliminary reply simultaneously asking for more time to file a more detailed reply. In fact, the re-assessment order indicates that the assessee company vide letter of 11.4.2016 had asked for four weeks time for filing detailed objections, but the Assessing Authority gave time only up to 25.4.2016 but till then, since the assessee did not file further objections, therefore, considering the objections dated 29.4.2016, the Assessing Authority passed the reassessment order on that very date on 29.4.2016 itself. Thus, the principles of natural justice cannot be said to have been grossly or totally violated or totally ignored in the present case so as to render the impugned order a nullity, as contended by the learned counsel. The assessee failed to file detailed reply before 25.4.2016 as directed by the Assessing Authority. - writ petition dismissed.

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• 2016 (7) TMI 788
  Claiming special rebate in terms of Section 12(1) of the KVAT Act, 2003 - The total output tax payable by the petitioner during the relevant years was more than the special rebate claimed for the purchase turnover as per Section 6(2). However, while making the assessment, the assessing officer had only given a special rebate at 4% of the purchase turnover for the year 2011-12 and 5% for the year 2012-13. This according to the petitioner is on a wrong interpretation of the fourth proviso to Section 12(1) of the Act. The petitioner, therefore, challenges the vires of the statute viz., fourth proviso to Section 12(1) and alternatively contending that the method adopted by the assessing officer in giving rebate is absolutely wrong. Held that:- As rightly contended by the learned counsel for the petitioner, when Section 12(1) gives a benefit and the benefit is restricted by way of a proviso, the proviso has to be read as it is without any addition or deletion. Each word in the proviso has to be given a meaning and while giving such an interpretation, the only possible view that could be taken is with reference to the amount of special rebate that the dealer claims with reference to the output tax payable and not with reference to the rate of tax. The assessing authorities were not justified in limiting the rebate to 4% and 5% as the case may be. The petitioner was entitled for rebate for the entire amount paid in terms of Section 12(1) and even going by the fourth proviso, since the output tax payable does not exceed the total claim for rebate under Section 6(2). - Decided in favor of petitioner.

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• 2016 (7) TMI 787
  Levy of penalty - offences of failure to maintain proper accounts and failure to keep true and correct accounts - Inability to produce their books of accounts for verification during inspection - Subsequently the regular books of accounts were called for and on inspection of the books of accounts that were produced, variation in stock was found - Held that:- when the responsibility of maintaining true and accurate accounts disclosing the stock is entirely on the assessee, the First Revisional Authority could not have directed the intelligence officer to arrive at the opening stock on the basis of the accepted stock of any previous year and taking the purchase and sale. Such an order passed by the First Revisional Authority is certainly an order prejudicial to the interest of the revenue as contemplated under Section 37 of the KGST Act entitling the commissioner of commercial taxes to exercise his powers thereunder. - Levy of penalty confirmed.

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