TMI Tax Updates - e-Newsletter
July 22, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Visit of service tax officers to the premises of the assessee restrained from taking recourse to Rule 5A(1) - HC

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Articles

1. TREATMENT OF COMPENSATION ATTRIBUTABLE TO A NEGATIVE COVENANT UNDER INCOME TAX ACT, 1961

   By: DR.MARIAPPAN GOVINDARAJAN

2. READING DOWN MODEL IGST ACT (PART-5)

   By: Dr. Sanjiv Agarwal

News

1. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

2. Startup India States’ Conference

3. SIT directs Enforcement Directorate to take necessary action under FEMA with respect to 216 Companies with respect to the period before 1st March, 2016 and 572 Companies for the period after 1st March, 2016 for which each such Company had export proceeds pending for realisation for more than ₹ 100 crore;

4. Income Tax Department to issue 7 lakh letters seeking Information in respect of High Value Non PAN Transactions

5. RBI Reference Rate for US $

6. First Annual Meeting of the Board of Governors of BRICS New Development Bank held yesterday at Shanghai; Second Annual meeting of New Development Bank to be held in India in 2017 and India will Chair the Board of Governors of NDB next year; India to follow the approach of ‘Reform to Transform’ through far reaching Structural Reforms and has taken several initiatives to boost investment climate and improve the Ease of Doing Business

7. Cabinet approves amendment in the Benami Transactions (Prohibition) amendment Bill, 2015

8. Cabinet approves proposal of M/s. Ambuja Cements Limited for acquisition of 24% shares in its holding company-Holcim (India) Private Limited

9. Workshop for Banking Correspondents (BCs) for implementation of Atal Pension Yojana (APY) held on 19th July 2016

Notifications

Companies Law

1. F. No. 01/04/2013 CL-V (part-II) - dated 19-7-2016 - Co. Law

Companies (Share Capital and Debentures) Third Amendment Rules, 2016

Customs

2. 102/2016 - dated 21-7-2016 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 22nd July, 2016

Income Tax

3. 61/2016 - dated 20-7-2016 - IT

Central Government notifies the districts of the States mentioned as backward areas under the first proviso to clause (iia) of sub-section (1) of section 32 and sub-section (1) of section 32AD of the Income Tax Act 1961

4. 60/2016 - dated 20-7-2016 - IT

Income Declaration Scheme, (Amendment) Rules, 2016

5. 59/2016 - dated 20-7-2016 - IT

Amendment in Notification Number S.O.1830(E) dated the 19th May, 2016

Indian Laws

6. F. No. 1/15/2010-PI - dated 12-7-2016 - Indian Law

Amendments in Notification Number G.S.R. 38(E), dated the 19th January, 2011

Circulars / Instructions / Orders

DGFT

1. 10/2016 - dated 20-7-2016

Closure Of EPCG authorizations in case of supplies to SEZ units which have been made prior to 01.4.2015 and where exports proceeds have not been realized through Foreign Currency Account (FCA) of the SEZ unit

2. Trade Notice 3/2016 - dated 20-6-2016

Weekly Open House in terms of DGFT Trade Notice No. 22/2015 dt. 31.3.16 and Trade Notice No. 2/2016 dt. 4.4.2016

3. Trade Notice No. 15/AM16 - dated 9-6-2016

Execution of BG/LUT in case of indigenous sources

4. Trade Notice No. 14/AM16 - dated 5-5-2016

Instruction Of CBEC for EODC

Customs

5. F. No. 528/43/2016-STO (TU) - dated 20-7-2016

Extension of benefit of Notification No. 24/2005 dated 01.03.2005 (Sr. No. 3) {as amended by Notification No. 132/2006-Customs dated 30.12.2006 (Serial No. 15)} to Micro/Mini SD cards

Central Excise

6. 1039/27/2016-CX - dated 21-7-2016

Classification of Micronutrients, Multi-micronutrients, Plant Growth Regulators and Fertilizers-clarification regarding classification of Glyphosates

Highlights / Catch Notes

Income Tax

• Temple Registered u/s 6 Recognized as Charitable and Religious Institution u/s 12AA.

  Case-Laws - AT : Registration under section 12AA - any institution registered under section 6 of the A.P. Charitable and Hindu Religious Institutions and Endowments Act is deemed to be carrying on the charitable and religious activities. The certificate of registration therefore, establishes that the ‘Temple’ is a religious and charitable institution. - AT
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• Charitable Trust's Donation to Religious Trust Disallowed Under Income Tax Act Section 13(1)(b.

  Case-Laws - AT : Addition u/s 13(1)(b) - nature of donation - disallowance made on the contribution made by the assessee to Little Flower Monastery - the charitable trust cannot donate to the trust which is formed for religious purpose. - AT
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• Estimating Property Value: Challenges in Determining Fair Market Value u/ss 55 and 55A of the Income Tax Act.

  Case-Laws - AT : Valuation - the fair market value of the property is dependent on several factors which influence valuation and there is no scientific or straight jacket method to value the property at a particular point of time and somewhere estimation element will definitely creep in while determining the fair market value of the property as on date keeping in view the mandate of Section 55 and 55A - AT
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• Penalty Case: Section 271(1)(c) on Excessive Unabsorbed Depreciation Claim in Book Profit Calculation u/s 115JB.

  Case-Laws - AT : Penalty u/s.271(1)(c) - assessee’s claim for unabsorbed depreciation in the computation of its’ book profit u/s. 115JB a little over 100% - Notably, the provision does not employ the word “losses”. In fact, even if it did, it would only imply losses for all the preceding years, taken cumulatively, as reduced by the cumulative profit (for all these years). And, at any rate, may give rise to some doubt only in such a non-existent case. - AT
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• Tax Authority Must Prove Gains from Bogus Purchases; 1% Addition Confirmed u/s 69C of Income Tax Act.

  Case-Laws - AT : Bogus purchases - applicability of sec 69/69A - The onus for the gain associated with the procurement of bills (and purchase of goods from the grey market), we may add, is on the Revenue. - The addition for 1% of the impugned purchases (u/s. 69C) is, in any case, confirmed. - AT
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• Unexplained Investments in Agricultural Land u/s 69; Assessee Sole Owner Despite Co-Purchaser Involvement Per Benami Act 1988.

  Case-Laws - AT : Addition of unexplained investments in purchase of agricultural land u/s 69 - This co-purchaser admittedly is not entitled to purchase agricultural lands. We observe that even he had purchased the land in assessee’s name, the latter is the sole owner thereof as per the provisions of the Benami transations (Prohibition) Act 1988. - Additions confirmed - AT
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Customs

• Court Overturns Penalty on Directors Due to Lack of Specific Charges in Show Cause Notice.

  Case-Laws - HC : Levy of penalty on the directors when there is no charge in the show cause notice or imposing the penalty - By merely providing the notice that the contents be brought to the notice of the Directors who may submit their response would not be sufficient notice to them. In the notice no allegations were made against the Directors. - Penalty set aside - - HC
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Service Tax

• Service tax officers barred from visiting assessees' premises u/r 5A(1), but can use Finance Act Section 82.

  Case-Laws - HC : Visit of service tax officers to the premises of the assessee restrained from taking recourse to Rule 5A(1) - The respondents shall, however, be free to take recourse to Section 82 of the Finance Act in accordance with law - HC
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• High Court Rules Both VAT and Service Tax Can Apply to Tangible Goods Supply Without Ownership Transfer.

  Case-Laws - HC : Levy of VAT and Service tax both on Supply of tangible goods service - Merely because the petitioner argues that not service tax but value added tax would be leviable since the title in the property does not pass on to the lesee would not be a ground to hold that the tax authorities cannot examine and entertain such a contention thus rendering them wholly without jurisdiction. - HC
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• Cenvat Credit Paid on Common Input Services; Penalty Waived for Appellant's Taxable and Trading Activities.

  Case-Laws - AT : Waiver of penalty - Cenvat Credit - providing taxable services and trading activity - the appellant has paid the entire cenvat credit on common input services even though some part of the input service is attributed to the taxable activity - penalty waived - AT
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Central Excise

• Exemption Denied for Instrumental Cables to Mega Thermal Plant; Condition No. 86 of Notification 21/2002 Fulfilled.

  Case-Laws - AT : Claim of exemption from duty - supply of instrumental cables to Mega Thermal Power plant - Since the goods manufactured in India can not be classified under 98.01 of the Central Excise Tariff, denial of the exemption on the ground of non-fulfillment of condition of Project Import Regulation is not sustainable particularly when condition No. 86 of the Notification No. 21/2002, dated 1-3-2002 is fulfilled by them. - AT
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VAT

• Court Orders Respondent to Process Refund Claims with Interest u/s 38 DVAT Act Within Eight Weeks.

  Case-Laws - HC : Delay in processing and issuing the refund - a direction is issued to the Respondent to process the claim refund made by the Petitioners for the aforementioned periods as set out in the three writ petitions and issue appropriate orders granting refund together with interest in terms of Section 38 of the DVAT Act within a period of eight weeks from today - HC
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• Court Rules Morality and Intention Irrelevant in Tax Adjudication; Legal Tax Avoidance Permitted u/s Guidelines.

  Case-Laws - HC : Demand of VAT - higher turnover shown in the Income Tax Return - the morality and intention of an assessee does not enter into the field of adjudication in taxing law and that if an assessee can, by a process, which is acceptable in law, avoid or evade taxation, he can do so. - HC
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Case Laws:

• Income Tax

• 2016 (7) TMI 852
  Addition of unexplained investments in purchase of agricultural land u/s 69 - Benami transations (Prohibition) Act 1988. - Held that:- There is no evidence on record rebutting the same. We further find that this assessee has been showing agricultural income as per the impugned order. This is not the case with co-purchaser Shri Girish Kumar. We notice that he is in fact a cloth trader. That being the case, this co-purchaser could not have purchased the agricultural lands in question under Section 63 of the Bombay Tenancy and Agricultural Land’s Act, 1948 (as applicable to Gujarat state). We fortify both the lower authorities’ conclusions holding the assessee to have spent the entire sum of 83,13,850/- in these facts and circumstances. We rather deem it appropriate to go a step further. This co-purchaser admittedly is not entitled to purchase agricultural lands. We observe that even he had purchased the land in assessee’s name, the latter is the sole owner thereof as per the provisions of the Benami transations (Prohibition) Act 1988. We have already held this assessee to have paid the entire purchase consideration of 83,13,850/- in question forming subject matter of the impugned unexplained investment addition made u/s.69 of the Act. The same stands confirmed. - Decided against assessee.

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• 2016 (7) TMI 851
  Assessment u/s 153C - Disallowance made by the AO u/s 37 - Held that:- No satisfaction was drawn by the AO before issuing the notice u/s 153C of the Act while making the assessment of the searched Sh. Jatinder Pal Singh, Director of the assessee company and the ld. CIT(A) had given a categorical finding that no satisfaction note was found on record of Sh. Jatinder Pal Singh, however, satisfaction note was drawn in the case of the assessee in its assessment record. Therefore, the notice issued u/s 153C of the Act, in the present case was bed-in-law and the assessment framed on the basis of invalid notice was not maintainable.- Decided in favour of assessee.

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• 2016 (7) TMI 850
  Reopening of assessment - investment allowance under Section 32A - Held that:- A subsequent reversal of the legal position by the Apex Court will not authorize the Revenue to reopen an assessment beyond a period of four years from the end of the Assessment Years in the absence of failure to disclose truly and fully all material facts necessary for assessments. In passing we may point out that the Calcutta High Court in Simplex Concrete Piles (India) Ltd. [2003 (4) TMI 90 - CALCUTTA High Court ] had considered the effect of amendment to Section 147 and 149 of the Act in 1989. Placing reliance upon the Circular No.549 dated 31st October, 1989 it had held that though the new provisions of Section 147 and 149 of the Act were introduced w.e.f. 1st April, 1989, they would have retrospective effect and govern a notice issued post 1st April, 1989 for reopening the assessment for a period prior to 1st April, 1989. Besides, on facts (similar to the present facts) it found that even under the unamended provisions, the notice for reopening is without jurisdiction. Also see Simplex Concrete Piles (India) Ltd [2012 (9) TMI 516 - SUPREME COURT ] - Decided in favour of assessee.

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• 2016 (7) TMI 849
  Capital gain tax on sale of agricultural land or deduction u/s 54B - fixing the limit of Municipality u/s 2(14)(111)(b) - Held that:- The claim for exemption from capital gains or deduction u/s 54B of the Act, in respect of which there were no claims in the original return of income, cannot be allowed in the re-assessment proceedings - Decided against assessee

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• 2016 (7) TMI 848
  Revision u/s 263 - proportionate disallowance u/s 40(a)(ia) of the Act for short deduction of tax at source - Held that:- We find that this issue has been held in favour of the assessee by the co-ordinate bench decision of this tribunal in the case of DCIT vs S K Tibrewal [2011 (10) TMI 10 - ITAT, KOLKATA] wherein it was held that in the case of short deduction of tax at source, no disallowance u/s 40(a)(ia) of the Act could be made in the hands of the assessee and the assessee could be proceeded against only under section 201 of the Act in such cases. Hence, it could be safely concluded that the ld AO had followed the jurisdictional tribunal decision while adjudicating the issue of disallowance u/s 40(a)(ia) of the Act though he might not have mentioned the same in his assessment order. In such circumstances, the order passed by the ld AO cannot be construed as erroneous. Moreover, the decision of the tribunal purportedly relied by the ld AO had been approved by the Hon’ble High Court. In these circumstances, we can safely conclude that the ld AO had taken one of the possible view. - Decided in favour of assessee

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• 2016 (7) TMI 847
  Registration under section 12AA rejected - nature of activities - Held that:- The assessee temple is registered with the Endowments Department under section 6(c)(ii) of the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987. Section 6 of the Act provides for preparation and publication of list of charitable and religious institutions and Endowments on the basis of the income. Clause-(c) and sub-clause (ii) thereof, provides for religious institutions and Endowments other than Mutts not falling under Clause- (a) or Clause-(b) of section-6 of the Act. The religious institutions and Endowments are defined under sub- sections 22 and 23 of Section-2 of the said Act. The above definitions clearly demonstrate that such religious institutions or Endowments are for the purpose of any service or charity for the public. Therefore, any institution registered under section 6 of the A.P. Charitable and Hindu Religious Institutions and Endowments Act is deemed to be carrying on the charitable and religious activities. The certificate of registration therefore, establishes that the ‘Temple’ is a religious and charitable institution. In the case before us, since the certificate of registration with Endowments Department of the Government of A.P. is a document evidencing the creation of the Trust, we are of the opinion that the CIT(E) has erred in rejecting the application of the assessee for non- filing of the Trust Deed. In view of the same, we deem it fit and proper to set aside the order of the CIT(E) and remand the same to his file for re-consideration of the assessee’s application for registration under section 12AA by taking the certificate of registration with the Endowments Department as evidence of creation of trust. - Decided in favour of assessee for statistical purposes.

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• 2016 (7) TMI 846
  Addition u/s 13(1)(b) - nature of donation - disallowance made on the contribution made by the assessee to Little Flower Monastery - Held that:- The assessee registered as charitable trust and its objective should be solely concentrated to the charitable activities only. The charitable Trust carry on those objects which are enlisted in its object clause could spend its income for that purpose only. Though ld.A.R agreed that the assessee is a charitable trust, he made a plea that religious activities is also permitted to be carried on. However, charitable Trust cannot carry on religious activities. As such in our opinion the donation given to activities carried on by the assessee to another Trust, which in turn related to the religious activities, then the assessee is hit by provisions of the section 13(1)(b) of the Act. Being so, the assessee cannot be granted the exemption u/s.11 of the Act, though the assessee donated to religious trust out of income of assessee trust. It needless to say herein that any charity donation out of accumulated funds is not possible after 01.04.2002 as it is hit by sec.11(3) (d) of the Act. However, this is not the case herein before us. We are concerned herein about donation out of current income to another institution with religious objects cannot be considered as application of income for charitable purpose. In other words, the charitable trust cannot donate to the trust which is formed for religious purpose. - Decided against assessee

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• 2016 (7) TMI 845
  Proportionate dis allowance of interest u/s 36(1)(iii) - investment standing as share application money in various related concerns by treating the same as amount used for non- business purpose - Held that:- We hold that the impugned advance has been made out of interest free funds available with the assessee and there was no question of whatsoever for disallowing interest 36(1)(iii) of the Act. Accordingly, we hold that the disallowance of interest u/s 36(1)(iii) pertaining to the sister concerns upheld by the ld. CIT(A) is not justified, hence, the same is deleted. - Decided in favour of assessee.

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• 2016 (7) TMI 844
  Penalty u/s 271(1)(c) - bogus gifts receipts - reopening of assessment - Held that:- There is detection by revenue authorities of the assessee being beneficiary of bogus gift of 5,00,000/- consequent to searches on Shah group in October 2002 and lists were prepared by Pune directorate for Mumbai region whereby the assessee was listed as one of the beneficiary of bogus gift of 5,00,000/- and the assessee filed revised return of income on 21-10-2004 declaring and surrendering 5,00,000/- as miscellaneous income under the head ‘income from other sources’ in the said revised return of income which was filed beyond the prescribed time limit u/s 139(5) of the Act for filing revised return and was an invalid return being non-existent in the eyes of law. The assessee filing return in response to notice dated 14-07-2005 u/s 148 of the Act whereby the said gift of 5,00,000/- was surrendered and offered as miscellaneous income was post recording of the reasons for re-opening and cannot be said to be voluntary act on the part of the assessee. In our considered view, the action of the A.O. in levying the penalty u/s 271(1)(c) of the Act of 1,45,089/- for concealment of income , which was later confirmed/sustained by the learned CIT(A) was quite justified and we confirm the same - Decided against assessee.

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• 2016 (7) TMI 843
  Treatment to profit on sale of shares - business income or investments - Held that:- In view of the clarification issued by the CBDT regarding determination of income under the head business income or capital gains, it stands clarified that it is upto the assessee as to how he derives income from share transactions- whether as business income or as capital gains. This clarification has been given by the CBDT with the sole objectives of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. In view of this clarification, the decisions relied upon by the AO are distinguishable on facts. The AO itself has accepted the identical nature of income in the assessment year 2006-07 u/s. 143(3). Therefore, there being no change in the facts and circumstances of the case and adopting the rule of consistency as also clarified by the CBDT Circular above, there appears to good reason to give a different treatment to the income shown by the assessee as capital gain. - Decided against revenue

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• 2016 (7) TMI 842
  Addition u/s 68 - non producing sundry creditors / parties - CIT(A) deleted the addition stating that the addition was made merely on estimate basis - notice u/s 133(6) - Held that:- CIT(A) has passed a well reasoned and speaking order, because AO issued notice u/s 133(6) to M/s Star Power Coating and M/s Hari Enterprises which were returned back by the postal authorities due to inadequate address and the notice u/s 133(6) of the Income Tax Act, issued to M/s Jai Mata Di Udyog was returned by the postal authorities with the remarks "to consult Bahadurgarh" meaning thereby the creditors are in existence. I also find that assessee has furnished all other evidences for substantiating its claim before the AO as well as before the Ld. CIT(A) like copy of confirmation alongwith the copies of PAN card of the creditors duly confirmed by them alongwith the other documentary evidence for substantiating the claim of the assessee which the Ld. CIT(A) has mentioned in the impugned order. Therefore, CIT(A) has passed a well reasoned order on the basis of the documentary evidences filed by the assessee and rightly deleted the additions in dispute, which does not require interference - Decided against revenue

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• 2016 (7) TMI 841
  Levy of penalty u/s 271(1)(c) - disallowance of interest - Held that:- The issue is squarely covered in favour of the assessee by the decision of Hon’ble Apex Court in the case of Reliance Petroproducts Pvt.Ltd. (2010 (3) TMI 80 - SUPREME COURT) wherein held a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. The ratio of above decision of Hon’ble Apex Court would be squarely applicable to the facts of the assessee’s case. The assessee has disclosed all material facts and, admittedly, the details supplied by the assessee in its return of income are not found to be incorrect or erroneous or false. Accordingly, we, respectfully following the above decision of Hon’ble Apex Court, hold that no penalty u/s 271(1)(c) of the Act is leviable in respect of disallowance of interest - Decided in favour of assessee. Difference in the disclosure of receipt as per TDS certificate and books of account - Held that:- No satisfactory explanation is given by the assessee’s counsel. The only explanation was that the difference is meager and that the same is a clerical error. We are unable to accept such explanation and therefore sustain the penalty levied in respect of difference in the receipt. We, therefore, direct the Assessing Officer to calculate the penalty at the rate of 100% of the tax sought to be evaded on the difference in the receipt shown in the TDS certificate and as shown in the books of account - Decided against assessee.

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• 2016 (7) TMI 840
  Reopening of assessment - deduction u/s. 10A claimed - Held that:- AO, prima–facie has committed a factual error in recording that the assessee has not claimed the deduction u/s. 10A in its original return of income. In any event, we deem it fit and proper to set aside the issue to the file of the AO with a direction that he shall verify the original returns of income filed by the assessee and dispose-off the issue denovo in accordance with law. Transfer pricing adjustment - what is the nature of service rendered by the assessee to the AE, which is the international transaction-in-question - MAM - Held that:- As the assessee claim that it had supplied the work charts, copies of bills raised etc., to prove that the rate billed for a particular category of employee to the AE and to the non-AE is the same and alleges that likes have not been compared with likes and that he had furnished the details along with comparative charges to the TPO/AO, to demonstrate his claim that there is no variation in the hourly billing rate between the AE and non-AE for man power supply. The AO/TPO is directed to verify the details and recomputed the ALP. In view of the above discussion, we set aside the issue to the TPO should make an analysis of the rates charged to non-AEs and AEs keeping in view the categorisation of the employee and then only arrive at the ALP. In case the assessee is unable to provide the required details and in case the TPO is also unable to cull out the required data, then, in our view, application of TNMM as the most appropriate may be considered. In any event, we are of the opinion that a denovo exercise has to be done on this issue on determination of ALP. Hence, we set aside the matter to the file of the AO/TPO for fresh adjudication in accordance with law. Disallowance of interest on TDS debited to P&L A/c - Held that:- Interest on TDS is not interest paid on income tax per se. Thus, in our view, the disallowance is unwarranted. Addition on account of un-explained share premium - Held that:- The addition was not made by the AO on the ground of non-filing of the evidence to prove the identity, genuineness and creditworthiness of the transaction. The basis of making the addition was non-substantiation of the share premium charged. We hold that the DRP was wrong in coming to a conclusion that the assessee has not provided evidence of identity etc., of the shareholder. In any event, we deem it fit and proper to set aside the matter to the file of AO/TPO for fresh adjudication in accordance with law. The AO/TPO shall provide adequate opportunity to the assessee.

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• 2016 (7) TMI 839
  Penalty u/s 271(1)(c) - assessee donated to three charitable institutions and claimed exemption u/s 35AC - non opportunity to the assessee for cross examination - essee-company was in the process of winding up - Held that:- It needs to be clarified who is looking after the affairs of the assessee-company on day today basis at the relevant point of time. Whether Shri Balasubramanian or Shri Vijaysadarangani was looking after the affairs of the assessee-company at the relevant point of time. If Shri Balasubramanian was looking after the affairs of the assessee-company, then it has to be clarified whether the enquiry report filed by the Income Tax Inspector and the communication said to be received by the Dy. Commissioner of Income Tax, Chennai from the Dy. Director of Income Tax(Investigation), Jamshedpur, was communicated to the assessee. The assessee claims before this Tribunal that no opportunity was given to it to cross examine the Secretary and Treasurer of the Trust who denied the receipt of money. This Tribunal is of the considered opinion that when the Assessing Officer examined the Secretary and Treasurer of the Trust, an opportunity shall be given to the assessee to cross examine them to find out whether actually the Trust received the money or not. It is also necessary to find out who actually opened the bank account in Axis Bank at Kolkata and operated the same. If the trustees of the so called three Trusts opened the bank account in the name of some other persons with connivance of the officials of Axis Bank, the Assessing Officer has to find out what kind of action was taken against the Axis Bank officials and the trustees who are responsible for opening the bank account. Since these details are not available on record, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Coming to the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act, as observed earlier, the assessee was not given any opportunity to cross examine the Secretary and Treasurer of the Trust. Admittedly, as observed earlier, the Secretary and the Treasurer of the Trust were examined and the copies of the statement was not furnished to the assessee and what was available on record is only enquiry report and the letter said to be received by the Dy. Commissioner of Income Tax, Chennai, from Dy. Director of Income Tax (Investigation), Jamshedpur. In those circumstances, penalty being different and distinct from assessment proceedings, the Assessing Officer ought to have given an opportunity to the assessee to cross examine the Secretary and Treasurer of the so called Trust. Since such an opportunity was not given, the matter needs to be reconsidered by the Assessing Officer by giving an opportunity to the assessee for cross examination. - Decided in favour of assessee for statistical purposes.

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• 2016 (7) TMI 838
  Determination of FMV/cost of acquisition and sale value u/s 50-C and 55A - CIT(A) adopting mean value of the properties based on valuation reports submitted by the DVO and assessee valuer for the purpose of cost of acquisition of land as on 01.04.1981 - assessee is the co-owner of the land encroached and occupied by the slum dwellers and the said land is notified slum by State of Maharashtra - Held that:- CIT(A) was required to find out the fair market value of the property as on 01-04-1981 as per provisions of Section 55 and 55A of the Act and in-fact while computing the fair market value , an element of estimation is always involved as the value cannot be determined with the exact precision. The sale instances relied upon by DVO/VO as well as of the assessee’s valuer has some inherent weaknesses and under the factual circumstances of the case , keeping in view of the availability of the data with the DVO/VO and also with the assesee’s government approved registered valuer , the best recourse was to find out mean so that a fair market value of the property is arrived at which in-fact the learned CIT(A) did to determine fair market value of the property as on 01-04- 1981 under the provisions of Section 55 and 55A of the Act. We donot find any infirmity in the order of the learned CIT(A) as the fair market value of the property is dependent on several factors which influence valuation and there is no scientific or straight jacket method to value the property at a particular point of time and somewhere estimation element will definitely creep in while determining the fair market value of the property as on date keeping in view the mandate of Section 55 and 55A of the Act We are inclined to accept the valuation as adopted by the learned CIT(A) by following mean of the valuation adopted by DVO/VO and the assessee’s government approved valuer who is a and we donot find any infirmity in the order of the learned CIT(A) which we affirm/sustain, keeping in view factual matrix of the case. - Decided against revenue

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• 2016 (7) TMI 837
  Penalty u/s.271(1)(c) - assessee’s claim for unabsorbed deposition in the computation of its’ book profit u/s. 115JB a little over 100% - Held that:- The balance brought forward (from the earlier years) can only be one, single balance, carried forward as at the end of the immediately preceding year, 31.3.2005 in the instant case. This is axiomatic, and there cannot conceivably be two (or more) balances, either of brought forward loss or unabsorbed deposition. All that one needs to look at is at the balance of the profit and loss account as at the end of the immediately preceding year, or, equally at the beginning of the current year, and which would reflect the profit or, as the case may be, loss carried forward to, i.e., brought forward from the immediately preceding year, the current year. It is a cumulative balance, which subsumes the credits (on account of profits) or debits (on account of losses) to the P & L account, itself a balance-sheet item. If it is a positive balance, implying a cumulative profit, there is no question of any unabsorbed depreciation, which is thus nil in-as-much as depreciation is debited to the P & L account. If not, i.e., is a negative figure, the amount of depreciation included therein is to be segregated, so that the two, the unabsorbed depreciation and the balance loss are separately known, and the lower of the two set off. If the gross loss is lower than depreciation charged to the P&L A/c (be it for one or more years preceding the current year), it implies there is no loss, other than depreciation, so that it is nil, making the provision of clause (iii) of Explanation 1 to s. 115-JB inapplicable. Notably, the provision does not employ the word “losses”. In fact, even if it did, it would only imply losses for all the preceding years, taken cumulatively, as reduced by the cumulative profit (for all these years). And, at any rate, may give rise to some doubt only in such a non-existent case. The assessee adverts to there being no concept of carry backward of losses under the in Indian tax laws, which contemplate only carry forward of losses argument, though based on a truism, is both invalid and misconceived. There is, further, nothing in the language of the provision of clause (iii) of Explanation 1 to section 115 JB that suggests or gives room to any ambiguity, much less of the sort being canvassed by the assessee. The profit or loss brought forward (to any year) is, as afore-stated, a balance-sheet – which statement is a tabulation of the account balances in a manner so as to depict the (financial) state of affairs of the reporting enterprise as at the value date, generally the end of the account period, item. It thus reveals the sources of funds with it, and their application. The claim should not be banal or a ruse and the penalty cannot be deleted under the guise or pretence of a legal opinion used as a smokescreen or façade. Allowing this will be stretching and making the requirement to prove a bona fide conduct illusionary and ineffective and would fail to check and stop fanciful and incredible claims. It is noticeable, it continued, that most of the income tax returns are accepted without scrutiny or regular assessment and self-compliance of tax provisions is a rule required to be followed (reference in this regard is made to paras 16, 17 and 18 of the decision). In the present case, we have already shown that no ambiguity exists and the clear language of the provision does not, at any rate, admit of the interpretation sought to be provided to it by the assessee. - Decided against assessee.

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• 2016 (7) TMI 836
  Bogus purchases - applicability of sec 69/69A - Held that:- In view of the foregoing, would require a restoration to the file of the assessing authority for a consideration of these aspects of the matter, i.e., the stock availability on each date; the capital invested in such an exercise; and the profit associated with the procurement of goods from other than the established sources (euphemistically called ‘grey market’), while procuring ‘bills’ of ‘goods’. We direct accordingly. He shall decide by issuing definite findings of fact, and after allowing the assessee due opportunity to explain and substantiate its case. The onus for the gain associated with the procurement of bills (and purchase of goods from the grey market), we may add, is on the Revenue. A finding qua quantitative reconciliation shall, however, have to precede the same, being the factual basis for the application of the hypothesis of the purchase from an alternate source. He shall decide, in terms of his findings, in accordance with law, and after allowing a reasonable opportunity to the assessee to substantiate his case. The addition for 1% of the impugned purchases (u/s. 69C) is, in any case, confirmed. Further, lest one considers us as having travelled outside the scope of the appeal, we may advert to the decisions, inter alia, in the case of Kapurchand Shrimal v. CIT [1981 (8) TMI 2 - SUPREME Court ] and Ahmedabad Electricity Co. Ltd. v. CIT [1992 (4) TMI 29 - BOMBAY High Court ]

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• 2016 (7) TMI 835
  Short term capital gains u/s 50 - stamp duty valuation - refer the matter to the DVO - assessee is a mutual association registered u/s 25 of the Companies Act, 1956 engaged in strengthen the cooperative spinning sector and seeking redressal of its various problems - Held that:- A.O. has rightly invoked and applied the deeming provisions of section 50C of the Act whereby the value adopted by the stamp duty authorities of 1,71,75,000/- was adopted by the AO as full value of consideration for the purposes of Section 48 of the Act in which we donot find any infirmity in law and on facts , keeping in view the fact that the DVO report received subsequent to the assessment order has valued the said property at higher than the value adopted by stamp duty valuation authorities , thus keeping in view provisions of Section 50C(3) of the Act the value adopted by the AO of 1,71,75,000/- as full value of consideration for the purposes of Section 48 of the Act stands confirmed by us. Hence, we set aside the order of the ld. CIT(A) and confirm the orders of the A.O. adopting 1,71,75,000/- as full value of consideration under deeming provisions of Section 50C of the Act for the purposes of Section 48 of the Act Non-granting of credit for tax deducted at source and non-granting of credit for self assessment tax paid - CIT(A) has dismissed these grounds observing that the alternative remedies for the grievances of the assessee are available with the assessee which could be availed - Held that:- his aspect of non grant of prepaid taxes as claimed by the assessee needs verification by the authorities below and we are inclined to set aside and restore these issues of non-credit of pre-paid taxes by the AO as set-out above back to the file of the A.O. and the A.O. shall examine and verify the claim of the assessee on merits and proper tax credit should be granted to the assessee on merits after due verification by the AO. Thus, we set aside the orders of the learned CIT(A) on both these issues and restore these issues to the file of AO for de-novo determination on merits after examination and verification of the claim of the assessee as indicated above.

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• 2016 (7) TMI 834
  Disallowance of diminution in value of investments - Held that:- In the earlier years, the Tribunal had allowed this claim by following the decision rendered by Hon’ble Bombay High Court in the case of CIT Vs. Bank of Baroda (2003 (3) TMI 80 - BOMBAY High Court ). We notice that the Ld CIT(A) has followed the above said binding decision of Hon’ble jurisdictional High Court as well as the orders passed by the ITAT. Hence we do not find any infirmity in the order passed by him on this issue. Deduction allowed in respect of bad debts written off - Held that:- In the case of Catholic Syrian Bank (2012 (2) TMI 262 - SUPREME COURT OF INDIA ), the Hon’ble Supreme Court had held that the restriction provided in the proviso to sec. 36(1)(vii) shall apply only to the provision created for rural advances. Accordingly, the Tribunal has restored this matter to the file of the AO with the direction to allow the claim in the light of decision rendered by Hon’ble Supreme Court. Consistent with the view taken in the assessee’s own cases in the earlier years by the co-ordinate benches, the order passed by Ld CIT(A), wherein he has directed the AO to examine this issue in the light of decision rendered by Hon’ble Supreme Court in the case of Catholic Syrian Bank (supra) is upheld. Disallowance u/s 14A - Held that:- Consistent with the view taken therein we direct the AO to restrict the disallowance to 1% of the exempt income in AY 2007-08, since the provisions of Rule 8D are not applicable to this year. In respect of AY 2008-09 the investments are held as stock in trade, interest free funds available with it are in far excess of the investments etc. The Ld D.R submitted that the claim of the assessee that it is holding all its investments as stock in trade is farfetched one, since the assessee is required to hold certain funds as pure investments. We notice that this aspect of the submissions require verification at the end of the AO. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine this issue afresh in the light of fresh explanations that may be furnished by the assessee by duly considering various case laws relied upon by the assessee. Disallowance of lease premium paid - Held that:- This issue has been decided against the assessee by the Tribunal in AY 2006-07 by following the decision rendered by Special Bench of Tribunal in the case of JCIT Vs. Mukund Ltd (2007 (2) TMI 358 - ITAT MUMBAI ) Provisions of sec. 115JB shall not be applicable for both the years under consideration. Disallowance of claim made u/s 36(1)(viii) - Held that:- We notice that this issue has been decided in favour of the assessee by the co-ordinate bench of Tribunal in AY 2006-07. The tax authorities had rejected the claim by holding that the provisions of sec. 36(1)(viii) shall be applicable only to “financial Corporations”. The Tribunal has held that the banks will also be covered by the inclusive definition given for the expression “financial Corporations” in sec. 36(1)(viii) of the Act. Consistent with the view taken therein, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the claim. Disallowance of expenditure relating to issue of capital - Held that:- There is difference between funds inflow and funds outgo. The funds raised by issuing capital shall increase the capital base. The funds so raised, if used for the purpose of business, would ultimately increase the volume of business as well as profitability. The ultimate aim of raising more funds is to increase the volume of business and profitability. Viewed from this angle, the volume and profitability is bound to increase, when funds are used either for creating the assets or as working capital. Hence, we are of the view that the expenses incurred in increasing the capital base is capital expenditure as held by Hon’ble Supreme Court in the case of Brooke Bond India Ltd (1997 (2) TMI 11 - SUPREME Court ), since it would incidentally help in the business of the company and may also help in the profit making.

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• 2016 (7) TMI 833
  Disallowance u/s 14A - Held that:- When the AO has not recorded his dis-satisfaction nor disputed the audited books of account, he was not justified in invoking the provisions contained under Rule 8D. So, in these circumstances, we are of the considered view that CIT (A) has erred in sustaining the disallowance u/s 14A to the extent of 5,00,000/- In face of the fact that the assessee has suo motu made a disallowance u/s 14A to the extent of 2,60,564/- being the salary paid to the Executive (Finance) employed for managing the investment for mutual funds and dividend income, no disallowance can be made. Unascertained liability addition - Held that:- The amount of 4,21,087/- treated as unascertained liability by the AO includes an amount of 3,64,453/- on account of expenses actually incurred in respect of cost of raw material, packing material, electricity, power 4,21,087/- is actually incurred as expenses on account of FOC and complimentary bottles given in the market as samples all over India. Ld. CIT (A), after noticing the factual mistake committed by the AO in treating the amount of 4,21,087/- as unascertained liability, has rightly deleted the same. So, finding no illegality or perversity in the order passed by the ld. CIT (A), we hereby decide ground against the revenue. Addition on commission - Held that:- CIT(A) deleted the addition of 70,000/- made by the AO on the ground that the assessee has paid the commission to M/s. Paras Commercial Corporation, Cuttack, a consignment agent on 02.09.2008 on a monthly commission of 10,000/- per month and the assessee company has raised the bill and paid it after deducting TDS. From the perusal of agreement and Form 16A it is apparently clear that since the agent has not raised any bill since March 2009, the assessee on the basis of agreement provided an amount of 70,000/- from September, 2008 to March, 2009 after deducting the tax at source i.e during the relevant financial year. So, the mistake committed by the AO has been rectified by the CIT (A) and the findings returned by CIT (A) need no interference. - Decided against the revenue. Addition u/s 41 - Held that:- It is settled principle of law that a company can write off any bad debts in its account in any year including the first year of business without proving the fact that the debt has actually become bad. Assessee has rightly claimed provision for discount and rebate written back of 3,07,88,306/- duly disclosed in Schedule 18 of the tax audit report of the composite amount of 5,24,10,339/-. When the write back of 5,05,09,122/-, which includes the amount of 3,07,88,306/-, was duly credited in profit 19,01,217/- in the profit & loss account and after complying with the conditions contained u/s 36(1)(vii) read with section 36(2), the addition made by the AO has been rightly deleted by the ld. CIT (A). - Decided against the revenue.

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• 2016 (7) TMI 832
  Penalty u/s. 271(1)(c) - disallowance of claim of deduction u/s. 80IB on processing charges, miscellaneous income and on interest on employee loans - Held that:- The disallowance may have been confirmed in the quantum proceedings, however, such a finding may not be a final word so far as penalty proceedings are concerned, because the considerations, which arise in penalty proceedings are separate and distinct from the assessment proceedings. In the penalty proceedings, the assessee can point out the factors which had lead to a bona fide belief for making the claim at the time of filing the return of income. Here in this case, the assessee not only by way of notes in the audited accounts but also before the authorities below have relied upon the decisions wherein similar nature of income were held to be allowable for deduction u/s. 80 IA. Thus, the claim of the assessee was genuinely bona fide at the time of filing the return of income. Not only that, some of the items of “other income” like processing charges, insurance claim there are still decisions which are in favour of the assessee post the judgment of Liberty India Ltd. Thus, it cannot be held that the assessee had made any false claim for which any penalty u/s. 271(1)(c) is warranted. Accordingly, on the facts and circumstances of the case, we are of the opinion that no penalty for furnishing of inaccurate particulars u/s. 271(1)(c) can be levied - Decided in favour of assessee

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• Customs

• 2016 (7) TMI 862
  Classification of import of Crestron MTX-3 Panel System - clearance of a remote control for Home Theatre, Home Automation etc. - contravention of prohibition imposed under the Indian Wireless Telegraphy Act, 1933 - confiscated under section 111 (d) of the Customs Act, 1962 - Held that:- Taking into consideration of the fact that the order of the Commissioner (Appeals) was passed on 18.02.2016 and the Appeal has been presented before the CESTAT on 30.05.2016, within the period of limitation and the appeal having been numberred, this Court is of the view that the respondents should be given a reasonable time to move the Petition for Stay before the CESTAT, failing which the goods should be released in terms of the order passed by the Commissioner (Appeals). Accordingly, the respondents are directed to release the goods in question by assessing the Bills of Entries in terms of the order passed by the Commissioner (Appeals) dated 18.02.2016, after a period of thirty days from the date of receipt of a copy of this order. This time is granted to the Department to enable them to move the Petition for Stay before the CESTAT, if so advised in the interregnum. If the respondents are unable to obtain any orders of stay from the CESTAT, they shall, on expiry of the 30th day from the date of receipt of a copy of this order, assess bills of entries in terms of the order passed by the Commissioner (Appeals) and release the goods within a period of two days therefrom.

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• 2016 (7) TMI 861
  Recovery of duty-drawback granted earlier - show cause notice was not issued - The staff, who was incharge of the despatch, has given the date one day prior to the date of notice. There is no postal acknowledgement produced to show that the notices were received by the petitioner. Copy of the Despatch Register has been produced and in the said sheet of paper, name of the petitioner is shown in Serial No.6, though there is no signature and seal 'despatched on'. There is no date and the date has been mentioned on the top of the page. Held that:- It cannot be disputed that the respondent Department have computerized all their activities and the filing procedure has been fully automized, remittances are received by e-payment and they are fully in tune with the concept of e-governance, as propounded by the Government of India. If such is the case, this Court fails to understand why they should follow the archaic practice of maintaining manual despatch book, which do not contain the required particulars. They could not be produced before any court to substantiate that notices or orders have been served on the assessees. In the light of the discrepancies pointed out and the fact that there is no acknowledgement produced, though it may be a fact that the impugned order has been received by the petitioner in the same address, this Court is of the view that the petitioner should be given one more opportunity. - Matter remanded back.

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• 2016 (7) TMI 860
  Levy of penalty on the directors when there is no charge in the show cause notice or imposing the penalty. - Violation of conditions of Export Promotion Capital Goods Scheme [EPCGS] - export obligation could not be fulfilled - Held that:- The show cause notice does not appear to have been addressed to the petitioners who are the directors nor does it lay down any proposal for imposing of the penalty. Held that:- the show cause notice dated 09.09.2003 though titled to be a show cause notice under Section 14 and 11(2) of the FTDR does not fulfill the requirement of Section 11(2) in as much as it concerns the petitioner directors. Firstly as seen from the show cause notice the same is addressed to the noticee firm. Secondly the show cause notice is not directed towards the petitioner directors. Thirdly the proposed action under the show cause notice is for cancel/suspension the importer/exporter code and no penalty either on the company or the Directors is proposed. Fourthly no role or act is specified in the show cause notice by which the directors could be said to have abetted or attempted to make any export or import in contravention of any provisions of the FTDR or rules and order made thereunder or the Foreign Trade Policy. Fifthly so far as the petitioners are concerned no opportunity of hearing is given therefore there is clear violation of principle of natural justice. By merely providing the notice that the contents be brought to the notice of the Directors who may submit their response would not be sufficient notice to them. In the notice no allegations were made against the Directors. In this view of the matter the show cause notice is no show cause notice in the eye of law and therefore the consequential orders are also required to be nullified. - Penalty set aside - Decided in favor of petitioner.

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• 2016 (7) TMI 859
  Suspension of licence of CHA - Whetehr the CHA was negligent or not - Coming to a conclusion that the prima facie CHA has derelicted their duties, the licence was suspended and a charge sheet was issued and inquiry was conducted for failure to discharge obligation of CHA under Regulation no. 13(a), 13(d), 13(e), 13(n) and 13(o) of CHALR 2004. - Held that:- We note that during examinations and cross examination Shri Zeeshan Anwar, it was clearly recorded that he had presented the proprietor of Apex Enterprises and Riya Enterprises and another before the CHA in the office of CHA, while giving papers for clearance of consignment, it is also recorded that CHA advised him to give all proper papers and enquired about genuineness of the consignment and the payment. During cross examination by the presenting officer, Shri Zeeshan Anwar has admitted he was responsible for all the faults in importation of consignments. This would indicate that main appellant herein was not at fault. It is also to be noted that the authorisation etc. were produced before the authorities at the time of clearance of goods and was accepted and goods were cleared, would mean that main appellant could not have contravened the provisions of Regulations 13(a) of CHALR 2004. It can be noticed the Regulation mandates the CHA to verify antecedent, correction of IEC identity of client and functioning of his client at the declared address. It is on record that appellant CHA has verified the same by filling up of the KYC form, verifying the details of IEC from the DGFT website, MSEDCL electricity bill is in the name of IEC holder, ration card, pan card, licence issued under shop and establishment Act, 1948 and above all authentication of bank account by the bank. We find that CHA has verified these documents in respect of all the three IEC holders. In our considered view nothing more can be expected out of a CHA to verify the antecedents of a client coming to him with a business proposal for clearance of imported consignment. In our view the Adjudicating Authority has misconceived the purpose of this Regulation. That there is no violation of CHALR is established against the appellant, nor there is any finding that appellant had advised importers to undervalue the goods. - licence to be restored - Decided in favor of CHA.

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• Corporate Laws

• 2016 (7) TMI 853
  Oppression V/S Arbitration - Whether the subject matter in this CP falls within the ambit of jurisdiction u/s 397, 398 r/w 402 & 403 or within the ambit of arbitration clause constituted in the SSHA arrived at between the parties - Held that:- The only persons, not parties to the Arbitration clause are R4-8 and Performa R9-13. R4 to R8 are nominee directors on behalf of R2, therefore, R2 being a party to the proceedings, it makes no difference whether R4 to R8 are or arc not parties to the agreement. They arc in fact the persons representing the cause and interest of R2, R4 to R8 not being parties to the agreement will have no bearing in invoking arbitration clause, they being shown as Performa respondents, they are not even necessary and proper parties for adjudication of this CP itself, then how does it make sense to say that they not being parties to the SSHA, it can't be referred to arbitration. Moreover, reference under section 45 of 1996 Act is neither governed by CPC nor is governed by part I of 1996 Act. Therefore, this Bench has not found any merit in lite contention of the petitioners. This Bench having opined that there is no oppression to invoke jurisdiction u/s 397/398, and this Bench being of the opinion that if at all the petitioners are aggrieved of breach or violation of the terms of the agreement, the petitioners have go before arbitration.

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• Service Tax

• 2016 (7) TMI 875
  Visit of service tax officers to the premises of the assessee - Constitutional validity of Rule 5A(1) - Held that:- Upon hearing the parties, prima facie the Bench perceives the challenge to Rule 5A(1) to be well founded, as it seeks to override the section. It appears that Rule 5A(2) has been declared ultra vires by an Hon’ble Division Bench of the Delhi High Court [2016 (6) TMI 163 - DELHI HIGH COURT]. This Bench prima facie finds no reason to disagree with such decision. If the authorities cannot make any demand as envisaged in sub-rule (2), gaining access to any premises under sub-rule (1) may not serve any purpose. In that view of the matter, the respondents are restrained from taking recourse to Rule 5A(1) against the petitioner, and the petitioner shall also not be under any liability to place books/accounts, etc. if any demand is made. The respondents shall, however, be free to take recourse to Section 82 of the Finance Act in accordance with law. It further appears that summons have been issued to the petitioner requiring its presence at an office in Chennai with required documents. The petitioner shall be at liberty to respond to such summons and to make available the required documents. The respondents may proceed in accordance with law but no coercive action shall be taken against the petitioner without obtaining leave of the Court. Interim order is passed in favor of petitioner assessee.

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• 2016 (7) TMI 874
  Levy of VAT and Service tax both on Supply of tangible goods service - Section 65(105)(zzzzj) of the Finance Act, 1994 - demand of service tax on lease charges received by the assessee - Held that:- Merely because the petitioner argues that not service tax but value added tax would be leviable since the title in the property does not pass on to the lesee would not be a ground to hold that the tax authorities cannot examine and entertain such a contention thus rendering them wholly without jurisdiction. We may record that the competent authority, in the impugned order, has observed that the petitioner has voluntarily paid value added tax which would not automatically mean that service tax, if otherwise payable, cannot be recovered. Whether the petitioner has paid such tax voluntarily or upon coercion of the department are the issues which can be gone into in statutory appeals, if so filed. - In the result, petition is not entertained leaving it open for the petitioner to pursue statutory remedy.

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• 2016 (7) TMI 873
  Maintainability of writ petition - Demand of service tax - seeking permission to cross-examine the witnesses, which was not granted - Held that:- Only on the ground of alternative remedy, this petition is not entertained without expressing any opinion on the contentions of the petitioner on merits.

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• 2016 (7) TMI 872
  Waiver of penalty - Cenvat Credit - providing taxable services and trading activity - Cenvat Credit in relation to trading activity was proposed to be denied - Held that:- Though there is no escape from payment of cenvat on the non-taxable trading activity but to some extent, the Ld. Counsel is correct that the maintenance of account in this regard is difficult task. - the appellant has paid the entire cenvat credit on common input services even though some part of the input service is attributed to the taxable activity. The appellant also paid the interest. - the appellant has been able to show the reasonable cause for availing the cenvat credit attributed to the trading activity. - appellant is entitled for waiver of penalty imposed under Section 78. - penalty waived - Decided in favor of assessee.

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• Central Excise

• 2016 (7) TMI 871
  Review petition against the order [2015 (9) TMI 356 - SUPREME COURT] - Clandestine manufacturing and removal of goods - dummy job work units - fictitious invoices showing much lower quantities/value than the actual - Held that:- On the aforesaid basis, normal order could have been to remand the case back to the Commissioner. However, immediately after the afore quoted portion, this Court did not do so only on the ground that the tax effect was minimal. In this review petition, the review petitioner/assessee has successfully demonstrated that the tax effect is not minimal. In fact, it is in the neighbourhood of 27 lacs and with interest and penalty the amount may be much large. Having regard to the above, we allow this review petition to the limited extent by substituting the last two paragraphs of the order with the following paragraph: “The appeals are allowed except that only for the limited purpose of deducting the job work got done from outside parties from total clearances and for redetermining the liabilities on that basis, the matter is remanded back to the Commissioner of Central Excise, Rajkot. This exercise may be completed within a period of six months after affording proper opportunity to the respondent.” The review petition is disposed of in the aforestated terms.

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• 2016 (7) TMI 870
  Demand of duty - seeking permission to cross-examine two of the persons from whom statements have been recorded, which appears to be the basis for issuance of the show cause notice dated 02.01.2007 - violation of principles of natural justice - whether the authority could have proceeded to adjudicate the matter and pass the final order, without acceding to the request made by the petitioners for cross-examination of two of the persons, from whom statements were recorded by the department. Held that:- rom paragraph No.8 of the impugned order it is seen that the officer has proceeded to adjudicate the matter by recording that the Consultant, who appeared on behalf of the petitioners, had not pressed for cross-examination of the other witnesses. This according to the petitioners is factually an incorrect statement, as the petitioners wanted to cross-examine those two witnesses, since the quantification made in the show cause notice was on the basis of the statements recorded from those witnesses. The writ petitions are allowed and the impugned order is set aside and the matter is remanded to the respondent for fresh consideration and fresh adjudication shall be made by a different officer, as observed supra and while doing so, the statements recorded from V.Kumaraswamy and S.Padmanabhan shall be eschewed. The petitioners shall appear before the adjudicating authority and co-operate in the adjudicating proceedings by advancing oral and written submissions.

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• 2016 (7) TMI 869
  Condonation of delay - department has filed these revision application 4 days after initial stipulated three months period - Rebate / refund claim - export of goods - the original authority rejected the rebate in toto, on the ground that the applicant claimed simultaneous benefit of rebate and drawback which is not admissible. - Commissioner (Appeals) allowed the appeal by holding that as the respondent availed only Customs portion of drawback, rebate claim is admissible to them. Held that:- Government finds that the applicant in their application for condonation of delay has in a general manner mentioned that the delay in filing is due to postal delay even though application was serf by speed post and over burdening of their review section as reason for delay in filing the Revision Application. The applicant has failed to give any documentary evidences in support of their claim for the delay in filing of appeal. Under such circumstances, Government is of the considered opinion that onus to show cause for not filing application is on the applicant who has failed to show sufficient cause that prevented him from filing Revision Application within stipulated period of three months. The Revision Application has been made contrary to the provisions of Section 35EE (2) and is, therefore, liable for rejection. Decided against the revenue.

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• 2016 (7) TMI 868
  Rebate / refund claim - The applicants contended that the declaration made on as ARE-I was clerical in nature and same may be condoned as a procedural mistake. - applicant failed to follow the procedure prescribed under the Notification No.21/2004-CE(NT) dated 06.09.2004 as declared by them at Sl.No.3(b) of the impugned ARE-I - Held that:- Once, it has been certified that exported goods have suffered duty at the time of removal, it can be logically implied that provisions of Notification 21/04-CE(NT) dated 06.09.04 and Notification 43/01-CE (NT) dated '26.062001 cannot be applied in such cases. There is no independent evidences on record to show that the applicant have exported the goods without payment of duty under ARE-2 or under Bond. Under such circumstances, Government finds force in contention of applicant that they have by mistake ticked in ARE-I form declaration and they have not availed benefit of Notification 21/04-CE(NT) dated 06.092004 and Notification 43/01-CE(NT) dated 26.06.2001. In this case, there is no dispute regarding export of duty paid goods. Simply ticking a wrong declaration in ARE-I form cannot be a basis for rejecting the substantial benefit of rebate claim. However since it is a matter of fact which requires verification in view of rival claims, therefore, the case is remanded back to the original authority to verify the claim of the applicant that they have not availed benefit of Notification 21/04CE(NT) dated 06109.2004 and Notification 43/01-CE (NT) dated 26.06.2001 and thereafter subject to the satisfaction of the Assistant/Deputy Commissioner the rebate claim may be disposed off accordingly. A reasonable opportunity of hearing may be given to concerned parties.

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• 2016 (7) TMI 867
  Rebate / refund claim - applicant did not submit original and triplicate copy of the ARE-I. - applicant's rebate claim was initially sanctioned by the original authority. The department filed appeal before Commissioner (Appeals) contesting that there were certain discrepancies in documents submitted by the applicant. Commissioner (Appeals) allowed department's appeal. Now, the applicant has filed this Revision Application on grounds mentioned in para (4) above. Held that:- Government finds that based on documentary evidence it needs to be verified whether the original (white) and triplicate (pink) copies of ARE-I were furnished with the rebate claim or not. If these are-found-to be available on record as having been furnished time-of-filing-the rebate claim and are in order, then the other issues as listed in para 2 above will also be examined for determining the admissibility of the rebate claim by the original authority. - Matter remanded back.

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• 2016 (7) TMI 866
  Condonation of delay - department has filed these revision application 4 days after initial stipulated three months period - Rebate / refund claim - export of goods - The original authority rejected the rebate claim for simultaneously claiming two benefits viz input credit and drawback claim, which are not admissible to them. - Commissioner (Appeals) allowed appeal holding that as the applicant availed only customs portion of drawback, rebate in admissible to them. Held that:- Government finds that the applicant in their application for condonation of delay has in a general manner mentioned that the delay in filing is due to postal delay even though application was sent by speed post and over burdening of their review section as reason for delay in filing the Revision Application. The applicant has failed to give any documentary evidences in support of their claim for the delay in filing of appeal. Under such circumstances, Government is of the considered opinion that onus to show cause for not filing application is on the applicant who has failed to show sufficient cause that prevented him from filing Revision Application within stipulated period of three months. The Revision Application has been made contrary to the provisions of Section 35EE (2) and is, therefore, liable for rejection. Decided against the revenue.

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• 2016 (7) TMI 865
  Rebate / Refund claim - part of the claim rejected on the ground that applicant has not given any explanation for non-filing of Bill of Lading. - Held that:- the applicant relied on the various judgments regarding procedural relaxation on technical grounds. The point which needs to be emphasized is that when the applicant seeks rebate under Notification No. 19/2004-CE (NT) dated 06.09.2004, which prescribes compliance of certain conditions, the same cannot be ignored. While claiming the rebate under Rule 18 ibid, the applicant should have ensured strict compliance of the conditions attached to the said Notification. As such, there is no merit in the plea of the applicant that the lapse on their part be considered as procedural lapse of a technical nature which may be condoned. - Claim of rightly rejected - Decided against the assessee.

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• 2016 (7) TMI 864
  Clandestine removal of goods - Department has recovered photocopies of four invoices from some sources - recovery of loose sheets of papers - 26 nos. of Gate Pass Books were recovered by the Department - Held that:- it is imperative that the contents of photocopies should be compared with the contents of their respective originals. In absence of the original documents, the photocopies, not being even secondary evidence, are not admissible in evidence. No enquiries have been conducted by the Department at the buyer's end to verify as to whether they have purchased the goods covered under the alleged photocopy of invoices from the appellant. Therefore, demand of duty in such an eventuality will not sustain. The onus to prove the involvement of the appellants in clandestine activity with the intent to evade payment of duty has not been satisfactorily discharged by the Revenue, justifying confirmation of the duty demand. Suspicion however grave cannot replace proof and that the Revenue is not relieved altogether of burden of producing some credible evidence in respect of the facts in issue. In the case in hand, admittedly the Revenue has not brought any tangible evidence to discharge its burden of proof of clandestine removal of goods. It is an admitted fact on record that the Department has not carried out any physical verification of alleged shortage in stock and the same was based on eye estimation only. Thus, in absence of actual physical weighment of stock of finished goods, the allegation of shortage, in my considered view, is not sustainable. Demand set aside - Decided in favor of assessee.

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• 2016 (7) TMI 863
  Claim of exemption from duty - supply of instrumental cables to Mega Thermal Power plant - otification No. 6/2006 CE dated 1.3.2006. - Held that:- We find that goods in question are classifiable under Chapter 85 of the Tariff. Under Central Excise Tariff there is no Heading 98.01 which exists in Customs Tariff only. Since the goods manufactured in India can not be classified under 98.01 of the Central Excise Tariff, denial of the exemption on the ground of non-fulfillment of condition of Project Import Regulation is not sustainable particularly when condition No. 86 of the Notification No. 21/2002, dated 1-3-2002 is fulfilled by them. Appellants are eligible for exemption under Notification 6/2006, dated 1-3-2006 - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2016 (7) TMI 858
  Delay in processing and issuing the refund - It is asserted that neither was the refund issued to the Petitioner within 15 days nor was the case picked up for audit nor any security under Section 38 (5) of the DVAT Act demanded. No notice was issued under Section 59 (2) of the DVAT Act within 10 days from the date of filing return. - Held that:- the failure by the Respondent to process the refund claimed by the Petitioners for all the above tax periods appear to be wholly unjustified. It is no longer open to the Respondent to raise an objection to the grant of refund claimed together with interest. In view of the matter, a direction is issued to the Respondent to process the claim refund made by the Petitioners for the aforementioned periods as set out in the three writ petitions and issue appropriate orders granting refund together with interest in terms of Section 38 of the DVAT Act within a period of eight weeks from today and in any event not later than September 10, 2016. If there is any failure by the Respondent to comply with the directions, the Petitioners shall seek appropriate relief in accordance with law. - Decided against the revenue.

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• 2016 (7) TMI 857
  Constitutional validity of Sections 41B of the Maharashtra Sales Tax Act, 1959 - whether a different mechanism for calculating the Notional Sales Tax Liability can be introduced with retrospective effect from 01.01.1980 by inserting Section 41B to the Act and Rule 31AA to the Rules, so as to defeat the rights vested in the units established under the 1983 Scheme prior to the insertion of Rule 31AA. Held that:- it has to be held that it is Rule 31AA, though not Section 41B, which is repugnant to the industrial policy as declared by the State in 1983 Scheme. Accordingly it is held that, Rule 31AA introduced with effect from March 24, 1995 to the extent it is repugnant to the said industrial policy and to the extent it seeks to apply to the units established under 1983 Scheme retrospectively, to the extent that it provides that the calculation of CQB under the 1983 Scheme has to be made by ignoring the exemption provisions contained under the sales tax law, is illegal and contrary to law. - Decided in favor of assessee.

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• 2016 (7) TMI 856
  Interstate sale or stock transfer - Claim for exemption on consignment sale and stock transfer - though it is supported by Form F Declarations, the claim was found not in order for the reason that the goods have been sold on the very next day and therefore, the first respondent proceeded to disbelieve the transaction as one between principal and agent, but as a transaction between a seller and a buyer - Held that:- the first respondent has not conducted the enquiry as required to be done and as explained by the Hon'ble Division Bench of this Court in the decision in [1994 (9) TMI 326 - MADRAS HIGH COURT]. Therefore, on this ground, the impugned order is liable to be set aside. - Matter remanded back.

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• 2016 (7) TMI 855
  Demand of VAT - higher turnover shown in the Income Tax Return - When the proprietor of the petitioner was questioned and the statement was recorded, it came to light that the returns indicating higher turnover were filed before the Income Tax Authorities only with an intention to receive a bank loan and that they did not represent the actual turnover of the petitioner for the relevant assessment years. - Held that:- the morality and intention of an assessee does not enter into the field of adjudication in taxing law and that if an assessee can, by a process, which is acceptable in law, avoid or evade taxation, he can do so. In the light of the above, the petitioner's right to establish before the Assessing Officer by producing records to show that there was no sales suppression, cannot be foreclosed merely on the ground that he had reported higher turnover in the income tax returns. Considering the facts and circumstances of the case, this Court is inclined to give one more opportunity to the petitioner to produce necessary records before the respondent to establish the actual sales. - Matter remanded back.

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• 2016 (7) TMI 854
  Demand of VAT in revision proceedings (re-assessment) - demand at higher rate of tax - the petitioner having paid lesser rate of tax, the respondent issued notices for revision of assessment. The petitioner was granted opportunity to submit their objections. - Held that:- Tribunal had observed that, The contention of the Revenue is not acceptable because the Revenue has not proved with records that the dealer-respondents restaurant is registered with the Tourism Department of either State Government or Central Government and accredited with stage category in order to levy higher rate of tax as per the entries provided under the First Schedule of the Act. It is not in dispute that the above order passed by the Tribunal had become final. Therefore, for the self same reasons, once again the respondent is not entitled to re-open the assessment, especially in the absence of any tangible material for doing so. That apart, there is nothing stated in the impugned order nor in the pre-assessment notice as regards any fresh materials which were available with them to establish that the petitioner should also be treated as part of the Star rated lodging house. the Writ Petitions are allowed and the impugned assessment orders are quashed - Decided in favor of assessee.

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