TMI Tax Updates - e-Newsletter
July 25, 2015

Case Laws in this Newsletter:

Income Tax Customs Law of Competition Service Tax Indian Laws

Articles

1. TRIPLE THE AMENDMENTS, TRIPLE THE HASSLE, NOW ALL IS WELL

   By: Pradeep Jain

2. GST Knowledge Series#2 - Goods & Service Tax – Key Features

   By: Chitresh Gupta

3. CONTRACTORS REGISTERED WITH THE PF DEPARTMENT, HAVING INDEPENDENT CODE NUMBER ARE TO BE TREATED AS ‘INDEPENDENT EMPLOYER’

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Foreign Direct Investment

2. Amendment in Negotiable Instrument Act

3. Simplification of ITR Forms; Issue of PAN Cards

4. Proposal for Introducing ‘Interoperable Cash Deposit’ in National Finance Switch (NFS) Gets in Principle Approval from RBI Subject to Certain Conditions

5. IRDA Norms: Authority Comes out with Revised Second Exposure Draft on 29.05.2015 That does not Mandate Percentage Limits for Banks to Sell Products of Insurance Companies

6. Decline in Wholesale Price Index

7. Introduction of Prepaid Payment Instruments for Mas Transit System

8. Task Force on Financial Redressal Agency

9. Gold Deposit Scheme (GDS): Salient Features Include-All Designated Banks can Operate GDS as per Guidelines Issued by RBI; Banks Issue a Passbook/Certificate to Depositor; Resident Indians Can Invest etc.

10. Reduction in Customs Duty

11. Health Insurance to Senior Citizens

12. Recommendations of SIT on Black Money as Contained in the Third SIT Report

13. Penalty on Directors of Companies

14. Strengthening of Corporate Governance in Companies in India

15. Companies Registered with Registrar of Companies

16. RBI Reference Rate for US $

17. Unintended consequences of new international supervisory framework: An Emerging Market Perspective (Keynote address by Shri S.S. Mundra Deputy Governor, RBI at the Banque de France – Reserve Bank of India Joint Conference at Paris on July 20, 2015)

18. Change in Tariff Value of Gold Notified

19. Lack of institutional funds for Micro and Small Enterprises

Notifications

Customs

1. 69/2015 - dated 23-7-2015 - Cus (NT)

Tariff Notification in respect of fixation of T V of Edible oil, Brass, Poppy seed, Areca nut, gold and Sliver

Highlights / Catch Notes

Income Tax

• ITAT Rules Share Sale Profits as "Income Business," Supports Reopening Assessments u/s 147 of Income Tax Act.

  Case-Laws - HC : Reopening of assessment - ITAT confirming that profit on sale of shares is to be assessed under the head “income business” and not under the head “capital gains” - The initiation of such proceedings under section 147, according to us, is fully within the four corners of section 147 of the Act. - HC
  Visit to Get Source

  ---

• High Court Upholds Tribunal's Decision: Penalty for TDS Default u/s 221 Stands, No Sufficient Cause Shown by Appellant.

  Case-Laws - HC : Levy of penalty u/s. 221 - TDS default - Tribunal has rendered a finding of fact that the reason set out by the appellant for failure to deposit the tax within time is not a good and sufficient cause - levy of penalty confirmed - HC
  Visit to Get Source

  ---

• Court Clarifies Section 40(a)(ia) of Income Tax Act: Applies Beyond Interest Payable on Financial Year's Last Day.

  Case-Laws - HC : Addition invoking Sec.40(a)(ia) - The language of the Section does not warrant an interpretation that it is attracted only if the interest remains payable on the last day of the financial year. If this contention is to be accepted, this Court will have to alter the language of Section 40(a) (ia) and such an interpretation is not permissible. - HC
  Visit to Get Source

  ---

• Depreciation allowance for trucks in hiring business limited to 15% instead of 30% due to classification rules.

  Case-Laws - HC : Depreciation allowance at the rate of 30% for the vehicles given on hire denied - It was engaged in the business of hiring trucks and those trucks cannot be treated as 'motor vehicles other than those used in the business of running them on hire' so as to limit the depreciation allowance to 15%. - HC
  Visit to Get Source

  ---

• Petitioners' Cases Centralized in Agra u/s 127; No Prejudice Due to Significant Business Activities There.

  Case-Laws - HC : Transferring and centralizing all the cases of the petitioners at Agra u/s 127 - whereas substantial business activities are being done through Agra only, no prejudice is being caused to the petitioners in the transferring and centralizing all the cases of the petitioners at Agra. - HC
  Visit to Get Source

  ---

• Income from Unlet Properties: Calculate Using Annual Letting Value Based on Standard Rent, Guided by Case Laws and Tax Rules.

  Case-Laws - AT : Computation of income from House property - in case of the properties not let out ALV had to be based on standard rent - AT
  Visit to Get Source

  ---

Customs

• Kindle Device Classified as Electrical Machine with Translation Functions Under Entry 85437099, Not a Video Apparatus.

  Case-Laws - AAR : Classification of goods - Kindle Device will be covered under entry 85437099 being an electrical machine with translation or dictionary functions - classification as video recording or reproducing apparatus rejected - AAR
  Visit to Get Source

  ---

• Amendment to Claim VKGUY Scheme Allowed on Free Shipping Bill Post-Export, Court Confirms Validity.

  Case-Laws - AT : Whether amendment by a declaration of intent of claiming VKGUY scheme can be allowed on the free shipping bill under which goods already have been exported - Held Yes - AT
  Visit to Get Source

  ---

Indian Laws

• Consumer Protection Act: National Commission Can Waive Pre-Deposit and Issue Conditional Stay Orders in Appeals.

  Case-Laws - SC : Waiverof pre deposit - Complaint u/s 17(1) of Consumer Protection Act, 1986 -If the National Commission after hearing the appeal of the parties in its discretion wants to stay the amount awarded, it is open to the National Commission to pass an appropriate interim order including conditional order of stay. - SC
  Visit to Get Source

  ---

Service Tax

• Wharfage Charges Not Subject to Service Tax: No Services Rendered by Port or Authorized Person.

  Case-Laws - SC : Valuation - it is the Board itself that charges or recovers wharfage charges from the licensee - UCL and does not authorize UCL to recover such charges from other persons. This being the position, it is clear that no service is rendered by a port or by any person authorized by such port and, therefore, the very first condition for levy of service tax is absent on the facts of the present case. - SC
  Visit to Get Source

  ---

• Applicant Eligible for Cenvat Credit on Capital Goods if Intermediary Dealer is Registered Under Central Excise and Cenvat Credit Rules.

  Case-Laws - AAR : CENVAT Credit - Capital goods used to provide output services - applicant is eligible to Cenvat credit of Central Excise duty paid by the manufacturer on pipes and valves on the basis of documents issued by "intermediary dealer", would be as per Central Excise Rules read with Cenvat Credit Rules, only when said "intermediary dealer" is a "registered dealer". - AAR
  Visit to Get Source

  ---

• Cenvat Credit Claim Allowed on Service Tax Paid by Contractors, Excludes Civil Works for Pipeline Substations.

  Case-Laws - AAR : CENVAT Credit - Applicant is eligible to avail Cenvat Credit of the Service Tax that would be paid by the EPC Contractor/other construction contractors and other service providers (except for Service Tax paid vis a vis construction services for the civil works package for building the pipeline substations) - AAR
  Visit to Get Source

  ---

• Tribunal's Role Limited to Confirming Appeal Filing by Committee of Commissioners; Cannot Challenge Based on Meeting or Reasons.

  Case-Laws - HC : The role of the Tribunal is, limited to only ascertaining as to whether or not the Committee of Commissioners (comprising of duly authorised officers) has taken a decision to institute the appeal. Once, such satisfaction is reached in this behalf, the Tribunal cannot render the appeal incompetent, in particular, on the ground that no meeting took place, or that, there were no independent reasons recorded by the Committee of Commissioners - HC
  Visit to Get Source

  ---

• SEZ Units Must Pay Service Tax Even with Ab Initio Exemption if Services Not Exclusively for Authorized Operations.

  Case-Laws - HC : Benefit of ab initio exemption - SEZ units - Notification No.12 of 2013 - Mere issuance of Form A2 would not absolve the petitioner unit of its liability to pay the service tax and cesses along with interest on delayed payment, if it is subsequently found that the petitioner unit has not used the services exclusively for the authorized operations as per the undertaking, in Form A1 - HC
  Visit to Get Source

  ---

• Court Rules No Service Tax on Tents for Magh Mela Religious Event in Allahabad; Exempt from Mandap Keeper Service Tax.

  Case-Laws - HC : Demand of service tax from Officer Incharge of the Magh Mela at Allahabad - Mandap Keeper Service - Since the supply of the tents by the petitioner was for a religious congregation the respondent was not liable to pay the Service Tax to the petitioner - HC
  Visit to Get Source

  ---

• Willful Suppression of Facts Extends Limitation Period in Works and Turnkey Contracts; Misstatement Impact Confirmed.

  Case-Laws - AT : Invocation of extended period of limitation - Willful suppression of facts - Works contact - lump sum turnkey contract - this is a clear cut case of wilful statement as also suppression of facts. Submissions of some letters/contracts in the facts of this case will not make any difference - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2015 (7) TMI 813
  Reopening of assessment - ITAT confirming that profit on sale of shares is to be assessed under the head “income business” and not under the head “capital gains” - Held that:- Law mandates that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment for any assessment year to invoke the power to re-open assessments under section 147 Admittedly, assessments for the year 2006-07 were completed treating the income in question as capital gains Once the assessment for the year 2008-09 was completed and the income for that year was assessed as business income, the Assessing Officer had sufficient materials to believe that income chargeable to tax as business income for the assessment year 2006-07 had escaped assessment It was on that basis, proceedings under section 147 was initiated The initiation of such proceedings under section 147, according to us, is fully within the four corners of section 147 of the Act. The factual correctness of the findings of the Assessing Officer was not disputed at any stage of the proceedings It was on the basis of the assessment for the year 2008-09 that the assessment for the year 2006-07 was re-opened and the same standard has been applied in respect of the assessment for 2010-11 also These findings, the factual correctness of which has been concurrently confirmed by the first appellate authority and the Tribunal, when appreciated in the light of the principles laid down by the Apex Court in Commissioner of Income Tax, Nagpur v Sutlej Cotton Mills Supply Agency Ltd [1975 (7) TMI 2 - SUPREME Court], only leads to the conclusion that the assessee was engaged in trading in shares and was not holding the shares as stock-in-trade to contend that the accretions are only capital gains. In such circumstances, the questions of law raised will have to be answered in favour of the Revenue

  ---

• 2015 (7) TMI 812
  Levy of penalty u/s. 221 - failure to pay tax deducted at source within the prescribed time - Whether the interpretation placed by the Tribunal upon Sections 221 and 201 of the Income Tax is correct confirming the levy of penalty upon the appellant to the extent of 5% of the TDS? - Held that:- Section 201(1) of the Act itself provides that where there is failure of an assessee to deduct tax and pay to the revenue, such an assessee is deemed to be in default. The failure to deposit in time is accepted/admitted position. There is no dispute about the questions. Thus the appellant is deemed to be in default. Therefore, it cannot be said that the penalty proceedings are without jurisdiction under Section 221 of the Act. The Parliament has specifically provided for the words "in addition to the amount of arrears alongwith the amount of interest payable be liable for penalty" only with a view of qualifying that payment of the amount of arrears and the interest payable would by itself not wipe away the liability to penalty under Section 221 of the Act. The submission on behalf of the appellant that penalty under Section 221 of the Act would be payable only when the same is in addition to the arrears of payment of tax deducted also stands negatived by the Explanation added to Section 221(1) of the Act. This Explanation clarifies that an assessee shall continue to be liable to penalty even if the tax has been paid before levy of penalty. The proviso under Section 201 would have no application to the facts of the present case. The legislature did not provide for the words "by or under this Act" in the proviso as in the absence of deducting tax, the occasion to deposit it within time as provided in the Rules would not apply. This is so as the time begins to run from the date of the deducting of tax as is evident also from Section 200 of the Act which provides that any person deducting any sum shall pay it within the prescribed time, the sum so deducted to the Central Government. It must be borne in mind that the assessee continues to be in default in case the tax has not been deposited with revenue within the time prescribed under the Act. Tax deposited thereafter but before penalty proceedings are initiated would not cleanse the assessee from being in default. The penalty is imposed upon the assessee under Section 221 of the Act for the default in not having paid the tax deducted at source within the time provided under the Act. This default is not wiped away by the assessee depositing the tax after the prescribed time. It is in the above circumstances, that the reliance of the petitioners upon the decision of the Apex Court in Sri Hohan Wahi v. CIT [2001 (3) TMI 4 - SUPREME Court] seems inappropriate. Thus we find no merit in the appellant's above submission that no penalty can be imposed as there was no default at the time when penalty proceedings were initiated. The retrospective amendment with effect from 1 April 1962 besides being clarificatory would also take into account a partial deposit with revenue of the tax deducted at source within the ambit of Section 201(1) of the Act. The Calcutta High Court's decision in CIT v. S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] being relied upon by the petitioner does not in our view assist the petitioner as it holds that although an assessee would be defaulter for nonpayment of tax deducted at source, yet payments made cannot be disallowed under Section 40(a)(1a) of the Act. This is where partial payment of tax deducted has been made to the revenue. Tribunal has rendered a finding of fact that the reason set out by the appellant for failure to deposit the tax within time is not a good and sufficient cause. At the hearing, the appellant had not been able to show that the above finding of the Tribunal is in any manner perverse and/or arbitrary.Accordingly, the imposition of penalty cannot be found fault with. Tribunal was right in law in upholding the levy of penalty u/s. 221 of the I.T. Act, 1961, for failure to pay tax deducted at source within the prescribed time - Decided against assessee.

  ---

• 2015 (7) TMI 811
  Reopening of assessment - Validity of reasons recorded - Held that:- in this case, in fact, the reasons indicate that the basis of the impugned notice is the declaration made by the petitioner in its profit and loss account and its balance sheet read with its notes to the accounts. These clearly show that the petitioner had claimed higher depreciation in view of reestimation of the written down value of its assets over the remaining revised useful life. This information was available with the Assessing Officer at the time when he passed the assessment order dated 29/08/2011 under Section 143(3) of the Act. Thus, the reasons ex-facie do not even remotely suggest that there was a failure on the part of the petitioner to disclose all material facts necessary for assessment. However, the Assessing Officer seeks to draw an inference from the facts which were already available that in view of claiming higher depreciation, there was suppression of book profits, resulting in lower tax payable under the MAT provision i.e. Section 115JB of the Act. In the course of submissions, even the Revenue accepted that there was no failure on the part of the appellant to disclose all material facts necessary for assessment. It is not permissible to the Revenue to draw inferences from the reasons recorded that all material facts, though fully disclosed, are not truly disclosed. Even otherwise, the Revenue was not able to show the facts, which have not been truly disclosed by the appellant, during the assessment proceedings.Accordingly, we find that the primary requirement for issuing the two impugned notices beyond period of 4 years, namely failure to disclose fully and truly all material facts necessary for assessment is not satisfied in the facts of both the impugned notices. Therefore, the impugned notices are without jurisdiction. - Decided in favour of assessee.

  ---

• 2015 (7) TMI 810
  Addition invoking Sec.40(a)(ia) - whether Tribunal erred in law in making addition u/s 40(a)(ia) when the payee has included the entire interest paid by the appellant in its total income and filed return of income accordingly? - whether under Section 194A, an individual is excluded from the liability to deduct tax and that therefore, disallowance is without jurisdiction? - Held that:- In the light of the proviso to Section 194A(1), if the appellants are claiming the exemption provided in the Section, the burden is on them to establish that they, being individuals, satisfied the conditions specified in the proviso to the Section. From the orders impugned, we find that no such contention was urged before the statutory authorities. In fact the Tribunal has entered into a specified finding that - "in this case, business income of the assessee exceeded the limit prescribed u/s 44AB of the Act, therefore the assessee, even though an individual is liable to deduct tax while paying interest to the firm u/s 194A(1) of the IT Act". No material whatsoever has been supplied by the appellants to contradict this specific factual finding recorded by the Appellate Tribunal. Therefore, this contention cannot be accepted. Whether second proviso to Section 40(a)(ia) of the Act, introduced by the Finance Act 2012, being retrospective in operation, disallowance could not have been ordered invoking Section 40 (a)(ia) of the Act? - Held that:- Going by the language of Section 40(a)(ia), once it is found that there is failure to deduct tax at source, the fact that the recipient has subsequently paid tax, will not absolve the payee from the consequence of disallowance. In so far as the judgment in Hindustan Coca Cola case (2007 (8) TMI 12 - SUPREME COURT OF INDIA ) is concerned, that was rendered in the context of section 201(1), the object of which being compensatory in nature, cannot be of any assistance to the appellants to resist a proceeding under Section 40(i)(ia) of the Act. This contention, therefore, is only to be rejected. Section 40(a)(ia) makes it clear that the consequence of disallowance is attracted when an individual, who is liable to deduct tax on any interest payable to a resident on which tax is deductible at source, commits default. The language of the Section does not warrant an interpretation that it is attracted only if the interest remains payable on the last day of the financial year. If this contention is to be accepted, this Court will have to alter the language of Section 40(a) (ia) and such an interpretation is not permissible. This view that we have taken is supported by judgments of Crescent Exports Syndicate and another [2013 (5) TMI 510 - CALCUTTA HIGH COURT ] and Commissioner of Income Tax v. Sikandadarkhan N Tunvar [2013 (5) TMI 457 - GUJARAT HIGH COURT], which have been relied on by the Tribunal. - Decided against assessee.

  ---

• 2015 (7) TMI 809
  Depreciation allowance at the rate of 30% for the vehicles given on hire denied - Assessing authority limited the depreciation allowance to 15% in respect of the petitioner, only because of the TDS certificate in which the nature of payment was shown as payment to contractor and not as hire charges - Held that:- Merely on the basis of the TDS certificate furnished by M/s KSE Ltd. and the hire charges received per metric tonne, the claim of petitioner should not have been rejected. It is pertinent to note that the assessing authority as well as revisional authority, while rejecting the claim of petitioner refers to the contract receipt as one "for letting out lorries on hire". When they themselves admit that the petitioner firm was "letting out lorries on hire" the petitioner firm comes under Clause III(3)(ii) of Appendix I to the Income Tax Rules and is entitled to depreciation allowance @ 30%, It was engaged in the business of hiring trucks and those trucks cannot be treated as 'motor vehicles other than those used in the business of running them on hire' so as to limit the depreciation allowance to 15%. Thus it is declared that the petitioner will get the benefit of depreciation allowance at the rate of 30% . - Decided in favour of assessee.

  ---

• 2015 (7) TMI 808
  Entitlement to deduction on profit from sale of DEPB from its total income - whether ITAT erred in allowing the claim without fulfilling the conditions prescribed in the 3rd proviso to Section 80HHC? - Held that:- The Revenue, on the premise that the decision of the Gujarat High Court in the case of Avani Exports & Ors. V. Commissioner of Income Tax & Ors [2012 (7) TMI 190 - GUJARAT HIGH COURT] is pending before the Supreme Court has filed the present Tax Case (Appeals). Now the Supreme Court [2015 (4) TMI 193 - SUPREME COURT] has rendered a finding that the exporters having a turnover below Rs. 10.00 crores and above Rs. 10.00 crores should be treated similarly and the amendment to Section 80HHC(3) is effective prospectively. We find that the case of the respondent/assessee falls within the parameters of the above-said decision of the Gujarat High Court, affirmed by the Supreme Court. Hence, following the above-said decision of the Gujarat High Court, affirmed by the Supreme Court, we do not find any reason to entertain these appeals. - Decided in favour of assessee.

  ---

• 2015 (7) TMI 807
  Transferring and centralizing all the cases of the petitioners at Agra - Validity of order under Section 127 transferring the case of petitioners - Held that:- Since four of the petitioners are located in Delhi and three of the petitioners are located in Bulandshahar, it was essential that the assessment proceedings with regard to the search and seizure is centralized, which in the instant case has been done pursuant to the proposal of the Commissioner of Income Tax (Central) Kanpur. We find that there has been no arbitrariness in the decision taken by the respondents in the instant case. The contention of the petitioner that their reply was not considered is incorrect. We find from the reply of the petitioners that they themselves consented for centralization of the case but contended that instead of centralizing them at Agra it should be centralized at Delhi. We find from the draft show cause notice that most of the business activities including the corporate office of the petitioners are at Agra and though the residential premises of petitioner nos. 3 and 4 is at Delhi, their residential premises is being used as a registered office of petitioner nos. 1 and 2 nonetheless, no business activities of substantial nature is being carried out from this premises, whereas substantial business activities are being done through Agra only. In the light of the aforesaid, we are of the opinion that no prejudice is being caused to the petitioners in the transferring and centralizing all the cases of the petitioners at Agra. - Decided against assessee.

  ---

• 2015 (7) TMI 806
  Disallowance of depreciation - Assessee claimed to be a charitable trust - ITAT allowed claim - Held that:- Assessee had already claimed capital expenditure on assets as expenses and the claim of depreciation on assets was in addition to the capital expenditure claimed. In doing so, the Assessing Officer is stated to have ignored and not abide by the binding judgment of the Honourable Supreme Court of India in the case of Escorts Limited v/s Union of India [1992 (10) TMI 1 - SUPREME Court ] The view taken by the Tribunal and consistent with that of the Commissioner of Income Tax (Appeals) has been approved by this Court in the case of Commissioner of Income Tax v/s Institute of Banking reported in (2003 (7) TMI 52 - BOMBAY High Court ). - Decided in favour of assessee.

  ---

• 2015 (7) TMI 805
  Nature of mandamus declaring Sections 245 D (4A) and 245 HA as inserted by the Finance Act as ultra vires - proceedings before settlement commission - Whether, amendments in Chapter XIX-A of Finance Act, 2007 are ultra vires the constitution? - Held that:- As decided in M/s. Jai Guru Jewelers Vs. Union of India and others [2013 (7) TMI 582 - ALLAHABAD HIGH COURT] where following decision of Star Television News Limited Versus Union of India and others [2009 (8) TMI 86 - BOMBAY HIGH COURT] to hold that by reading down the provisions of Section 245D (4A) (i) and Section 245HA (1) (iv) the constitutional validity of the amendments providing abatement of proceedings may be saved and protected from the vice of discrimination, and issue same directions to find out, if the delay is attributable to the applicants before making final order. We further direct that in carrying out the directions of this Court in the pending applications, the Settlement Commission will, in arriving at a finding on the question whether the delay in disposal is attributable to the applicants, follow the same guidelines, which have been set out in the judgment in Star Television News Ltd v. Union of India (supra) - Decided in favour of assessee.

  ---

• 2015 (7) TMI 804
  Entitlement for deduction under Section 10-B - ITAT allowing claim even though the assessee did not file the audit report in the prescribed form along with the return of income, as required under that section - Held that:- The issue involved in this appeal is covered by a decision of this Court reported in CIT Vs Print System & Products (2006 (2) TMI 120 - MADRAS High Court) in favour of the assessee wherein held that the filing of the audit report along with the return, as contemplated under section 32AB(5) of the Act, is only directory and not mandatory. - Decided in favour of assessee.

  ---

• 2015 (7) TMI 803
  Appeal deserves admission on the following substantial questions of law : Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was right in upholding the order of the Ld.CIT (A) that depreciation is allowable on the assets of the trust inspite of cost of which has been fully allowed as application of income in current or past years by relying upon the decision of the Hon'ble Bombay High Court in the case of CIT vs Institute of Banking (2003 (7) TMI 52 - BOMBAY High Court) and ignoring the ratio of Hon'ble Supreme Court in the case of Escorts Ltd vs Union of India (1992 (10) TMI 1 - SUPREME Court ) wherein Hon'ble Supreme Court has held that double deduction cannot be a matter of inference, it must be provided for in clear and express language regard being had to its unusual nature and its serious impact on the revenues of the State ?

  ---

• 2015 (7) TMI 802
  Withdrawal of appeal - Held that:- Petitioner has stated at the bar that in view of subsequent development, as such, the cause does not survive, and, therefore, she seeks permission to withdraw the present petition, however, has requested to reserve liberty in favour of the petitioner to file fresh petition in case the cause survive. Present petition is dismissed as withdrawn with above liberty.

  ---

• 2015 (7) TMI 801
  Validity of reopening of assessment - assessee set off unabsorbed depreciation for the AY.1994-95 amounting to Rs. 25.81 crores in the AY.2004-05 - Held that:- There is no doubt the reassessment notice was issued after four years for AY under appeal, that the provisions of proviso to section 147 were applicable to the case,that the AO had not mentioned that the failure of the assessee to disclose the relevant and material facts led to under assessment or escapement of income for the assessment year under consideration.From the reasons recorded the belief of assessee in failure of the assessee is not emerging.The FAA has also not dealt with the issue at all.The operative part of this order reads as under: “In view of the foregoing,I find that the issuance of notices u/s.148 by the AO is in order and no interference is therefore called for.This ground of appeal is accordingly, dismissed.” Nowhere he had discussed as to how the facts of the cases relied upon by him were applicable to the facts of the case under appeal.In these circumstances,in our opinion,the order of the FAA is not a speaking order.He had not dealt with the objections raised by the assessee.As the basis for endorsing the reopening after four years is missing,so,we are reversing his order.We hold that the order passed by the AO and upheld by the FAA was not a valid order,as the twin conditions of reopening of the matter,after a period of four years,were missing.Effective ground of appeal filed by the assessee is decided in its favour. Directors remuneration for making disallowance u/s.14 A - Held that:- While completing the original assessment,the AO had called for information about commission payment and had considered it while computing the disallowance to be made under section 14A of the Act.At that time if he did not invoke the provisions of section 36(1)(ii)then it has to be presumed that he had applied his mind and had taken a conscious decision about the disputed item.It is not the case of the AO or the FAA that material was not available at the time of the original assessment.The AO has reviewed his original order and in our opinion in the reassessment proceedings it is not permissible. See M/s. OHM Stock Brokers Pvt. Ltd. Versus Commissioner of Income Tax-4, Mumbai and another [2013 (3) TMI 200 - BOMBAY HIGH COURT] - Decided in favour of assessee.

  ---

• 2015 (7) TMI 800
  Reopening of assessment - disallowance of deduction u/s.80HHC - Held that:- Respectfully following the ratio laid down in the judgement(s) of the Hon’ble High Court of Gujarat in the case of Rajesh Babubhai Damania vs. ITO reported at (2000 (6) TMI 5 - GUJARAT High Court ) and Ramgosri Constructions (P.)Ltd. vs. ITO, [2008 (11) TMI 73 - MADRAS HIGH COURT ] we proceed to decide that in the original assessment order placed at page Nos.90 to 108 of the paper-book, the AO in para-5 of its order decided this issue of deduction u/s.80HHC of the Act we are of the considered view that it is not the case where the material was not available with the AO and AO has not applied his mind in the case under appeal. Therefore, we hold that the reopening of the assessment is made on the basis of change of opinion only as the ld.counsel for the assessee has demonstrated from the records that all information/details were available with the AO and the AO has applied his mind on the allowability of deduction u/s.80HHC and computation of book profit. Therefore, order under appeal is set aside and assessment framed u/s.143(3) read with section 147 is quashed being invalid. - Decided in favour of assessee.

  ---

• 2015 (7) TMI 799
  Validity of proceeding initiated under section 153C - Disallowance of 50% out of the expenditure claimed on the commission income - Held that:- When the assessee has furnished the names of the persons to whom payments were made and the payments are through cheques, the details of which were before the A.O., nothing prevented him from making enquiry to ascertain the correctness of assessee’s claim or genuineness of the expenditure. Moreover, when the A.O. accepted 50% of the expenditure claimed, there cannot be any doubt with regard to the fact that the expenditure was laid out wholly and exclusively for the purpose of business. The doubt entertained by the A.O. is only on the quantum of expenditure incurred. As stated earlier, the entire expenditure has been incurred through cheque payments. Therefore, the genuineness of the expenditure cannot be doubted without bringing positive evidence on record that the payments made through cheques were not on account of expenditure incurred for earning the commission income or they are bogus. There being no enquiry whatsoever by the A.O. in this regard, the addition made cannot be sustained. The Ld. CIT(A), in our view, while confirming the addition made by the A.O. instead of deciding the merits of the addition on the basis of facts has deliberated more on the issue, whether such addition can be made in a proceeding under section 153C of the Act. Therefore, there being no valid reason behind disallowance of 50% out of the expenditure claimed, we delete the additions made on this account in different assessment years. This ground in all the appeals are therefore allowed. Addition under section 69A of the Act - whether the amount allegedly received by the assessee from Shri Suresh Chand Agarwal towards sale of immovable property can be assessed under the Head “Capital Gains”? - Held that:- Reading of the assessment order as well as order of Ld. CIT(A) gives an impression that department has selectively relied upon the seized material while making the addition. While department has relied upon the unsigned letter dated 19.09.2010 and the receipts, it has completely ignored the agreement of sale, cancellation agreement and the undertaking by assessee and his wife to return back the money to Mr. Suresh Chand Agarwal, receipt executed by Mr.Suresh Chand Agarwal, which were also part of the seized material. Keeping aside for the moment assessee’s claim that he never received the amount of Rs. 2.66 crores and also assuming that the contents of the unsigned letter dated 19.09.2010 and receipts are correct, however, on consideration of the entire seized material as a whole, the situation which emerges is, though the assessee might have received an amount of Rs. 2.66 crores from Mr. Suresh Chand Agarwal towards part sale consideration of the property but he was supposed to return back the money to Mr. Suresh Chand Agarwal once the transaction did not materialize and agreement of sale was cancelled. Therefore, the amount of Rs. 2.66 crores being a debt due to Mr. Suresh Chand Agrwal cannot be treated as income of assessee and his wife. Moreover, it is neither expected nor believable that inspite of the fact that the transaction fell through and property was ultimately sold to a third party, Mr. Suresh Chand Agarwal would have given up his right over such a substantial amount of money and kept quite without recovering it from the assessee. One cannot visualize such a situation as it is beyond human probability and normal human conduct. Therefore, even assuming that assessee might have received the amount of Rs. 2.66 crores from Mr. Suresh Chand Agarwal towards sale of property, it must be equally true that assessee has refunded back the money to Mr. Suresh Chand Agarwal on cancellation of agreement of sale. Receipt executed by Mr. Suresh Chand Agarwal, copy of which is at page No.23 of the paper book bears testimony to this fact. Therefore, the amount in question cannot be brought to tax even under the Head ‘Capital Gain’ as the sale is not complete. Thus, looked at from any angle the amount of Rs. 1,33,00,000 is not taxable at the hands of the assessee. Accordingly, we direct the A.O. to delete the addition. This ground is allowed. - Decided in favour of assessee.

  ---

• 2015 (7) TMI 798
  Computation of income from House property - whether on the basis of standard rent / municipal value where as both the properties at Ghatkopar, Mumbai and Deolali, Nasik are not governed by Rent Control Act and no standard rent has been fixed for these properties by any Controller as directed by CIT(A) - Held that:- AO had determined the ALV without any basis.The FAA has given a categorical finding in that regard and has held that no investigation had been done to ascertain the actual fair rent of the property.The FAA has relied upon the judgment of Hon’ble Apex Court delivered in the case of Sheila Kaushik (1981 (8) TMI 1 - SUPREME Court).She has also referred to the decisions of the Tribunal in the cases of Ashwin Adekar [2008 (7) TMI 616 - ITAT MUMBAI] and Park Paper Industries Ltd.(2008 (8) TMI 599 - ITAT MUMBAI ).We find that in the case of Sheila Kaushik the issue has been decided in favour of the assessee and it has been held that in case of the properties not let out ALV had to be based on standard rent.The decisions of the Tribunal relied upon by the FAA support the decision of the FAA.Therefore,we are of the opinion that her order does not suffer from any legal infirmity.Upholding her order, - Decided against revenue. Share transactions - CIT(A) giving direction that wherever assessee has held shares for more than one month that may be treated as short term capital gain and if the holding period is less than one month then it should be treated as business income - Held that:- As decided in assess's own case [2011 (11) TMI 452 - ITAT MUMBAI] if the Department has accepted that some of the shares were purchased and held by the assessee as investment allowing the claim of the assessee for long term capital gain arising from sale thereof, there is no justification for them to contend that the assessee had purchased and held other shares as stock in trade merely because they were sold within a period of one year especially when other facts relevant thereto are almost similar. Further, intention of the assessee at the time of purchase of shares is relevant. See Gopal Purohit (2010 (1) TMI 7 - BOMBAY HIGH COURT ). - Decided in favour of assessee. Deletion of proportionate expenses - assessee has claimed all expenses against short term capital gain only and not a single rupee was attributed to Long Term Capital Gain which is claimed exempt U/s.10(38) of the Act. - Held that:- AO had made proportionate disallowance assuming that the expenses claimed to have been incurred against the SRCG were indirectly attributable to LTCG also. But he has not explained as to what was the basis for arriving at the above conclusions. The AO had without making any enquiry about the nature of expenses and the number of transactions of LTCG made an addition of Rs. 8,61,667/- . We find that the FAA had deleted the disallowance as she was of the opinion that adhoc disallowance should not be made.In our opinion, considering the facts and circumstances of the case the order of the FAA does not suffer from any legal infirmity.- Decided in favour of assessee. Disallowance u/s 14A - CIT(A) giving direction to re-examine and compute 14A disallowance - Held that:- AO had invoked the provisions of Rule 8D, the AY under appeal is 2007-08, that as per Hon’ble Jurisdictional High Court in Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT) Rule 8D was not applicable for the year under consideration. Therefore,in our opinion the AO was not correct in applying Rule 8D. Secondly, the FAA has restored back the matter to the file of the AO to re-examine the issue. In our opinion the interest of Revenue was not adversely affected by the direction of the FAA. In our opinion there is no need to interfere with her order- Decided in favour of assessee.

  ---

• 2015 (7) TMI 797
  Transfer pricing adjustment - addition made on the basis of Arm’s Length Price - impugned action of the Ld CIT(A) to exclude M/s Satyam computers Ltd,from the list of comparables selected by the by the TPO,/AO questioned - CIT(A) delted the TPO addition - Held that:- CIT(A) has noted that in the case of Agnity Technologies Private Limited vs. Income Tax Officer, Ward 12(1), New Delhi [2010 (11) TMI 852 - ITAT DELHI] has upheld the decision of the DRP which had excluded M/s. Satyam from the list of comparables. Ld. CIT(A) further observed that in view of this, M/s Satyam Computers Services Ltd. should be taken out from the list of comparable companies. In the light of the aforesaid facts, ld. CIT (A) took the decision to exclude M/s. Satyam from the list of comparables, which we uphold since the financial results of the said company is the result of admitted financial irregularities and conspiracy hatched and committed by the directors and cannot be relied upon. So the financial result of the said company cannot be used by the TPO to compute the ALP, which has been rightly done by the ld. CIT (A), so we concur with his decision to exclude M/s. Satyam from the list of comparables, so the Revenue’s ground is dismissed. Thus by excluding M/s. Satyam from the list of comparables, the mean of the assessee falls within ± 5% of 22.15%. Hence, we do not see any reason to interfere with the impugned order passed by the Ld. CIT(A), hence, we uphold the same. Therefore, the issues in dispute raised by the Revenue are rejected. - Decided in favour of assessee.

  ---

• Customs

• 2015 (7) TMI 818
  Classification of goods - Classification of Kindle device - Notification No. 25/2005-Cus. Dated 01.03.2005 - Classification under entry 8543 70 99 or under entry 8528 59 00 - Held that:-The main entry 8528 is in respect of the monitors, projectors and the television sets that is clearly not the case here. The specific entry relied upon by the Customs is 8521 which pertains to video recording or reproducing apparatus, whether or not incorporating video tuner. This is clearly not applicable for the simple reason that Kindle device is not meant for video recording or reproducing anything. The other related entry under this heading pertains to video recorders beta cam or beta cam SP or digital beta cam S-VHS or digital –S etc. That is clearly not the proper description of Kindle device. The third entry relied upon by the Customs Department is under the heading 9504 which pertains to video game consoles and machines, articles for funfair table or parlor games, including printables, billiards, special tables for casino games and automatic bowling alley equipment. From the very nature of the description, the Kindle Device will not be a part of toys, games and sports equipments; parts and accessories thereof which is to be covered under the heading 9504. Kindle Device will be covered under entry 85437099 being an electrical machine with translation or dictionary functions. Therefore, this late objection raised by the Revenue is rejected. We have seen the some import details. All these imports have been under the entry 85437099 and accepted by Customs. Of course, these imports were not made by the applicant but that is irrelevant once the Customs Departments accepts the same to be covered by 85437099. - Benefit of notification granted - Decided in favour of assessee.

  ---

• 2015 (7) TMI 817
  Duty drawback claim - Sections 74 and 75 - Held that:- Circular No.1/2011-Customs dated 4.11.2011 and Circular No.30/2013-Customs dated 5.8.2013 require exporter to execute a bond of an amount equal to the value of goods and furnish appropriate security in order to cover the redemption fine and penalty in case goods are found to be liable to confiscation. We have directed the petitioner to furnish bond of 100% value of the goods. Therefore, our order is in consonance with the Circulars issued by the Customs Department. - goods of the petitioner shall be released for export expeditiously preferably within a period of one week from the date of copy of this order is produced before respondent No.2 provided the petitioner furnishes bond equal to the amount of seized goods other than cash and bank guarantee - Decided conditionally in favour of assessee.

  ---

• 2015 (7) TMI 816
  Eligibility of exemption for Marine Gas Oil - exemption under Sl. No. 217 of Notification No. 21/2002-Cus., dated 1-3-2002 - Held that:- There was a specific query from the Custom House asking the Chemical Examiner to state specifically whether the product is MGO or not. Instead of specifically stating whether the product is MGO or not, the Chemical Examiner has chosen to show us that the product is LDO. In the absence of a specific report from the Chemical Examiner that the product is not MGO which was what required by the Custom House, it cannot be said that the Chemical Examiner’s report supports the case of the Custom House. There is no evidence to show that the product is not MGO. - In fact even though the tests were conducted much earlier the results of the samples were communicated to the appellants only in 2012, the learned counsel drew our attention to a letter written by the appellants to the Customs saying that the sample may be referred to CRCL for re-examination. Further no action was taken on this letter probably because by the time the letter was written a number of years have already passed. Since it is not the case of the Revenue that the product imported by the appellant does not fulfill the parameters for MGO as per the Indian Standards, we are not in a position to uphold the impugned order taking a stand that what is imported is LDO and not MGO and therefore the benefit of exemption is not available. - appellant is eligible for the benefit of the notification as claimed by them and accordingly the impugned order is set aside - Decided in favor of assessee.

  ---

• 2015 (7) TMI 815
  Whether amendment by a declaration of intent of claiming VKGUY scheme can be allowed on the free shipping bill under which goods already have been exported - Held that:- Goods were exported during Aug. 2009 and Sep. 2009, whereas all these clarifications and amendments regarding declaration of intent of the export claiming VKGUY scheme was brought to the effect in Sep. 2009 and subsequently Nov. 2009 vide Circular No. 26/2009-Cus., dated 13-9-2009, 36/2010-Cus., dated 23-9-2010, DGFT Policy Circular No. 32(RE-2010) 2009-14, dated 3-6-2011, Public Notice No. 53(RE-2010)/2009-14, dated 3-6-2011, whereas the export of the appellant were taken place on Aug. 2009 and Sep. 2009. In these circumstances, non-declaration by the appellant of their intent to avail VKGUY scheme on the shipping bill is bona fide and amendment to that effect in the shipping bill is covered under the provision of Section 149 of Customs Act, 1962 Exporter was unaware of the formalities of advance licence and due to ignorance, the exporter failed to avail appropriate scheme. In the present case, VKGUY scheme was allowed on the free shipping bill without any declaration and requirement of declaration of free shipping bill .brought into effect. More or less on same time goods in the present case has been exported therefore, appellant was not aware of these circulars and amendments of Sep 2009. - request of the appellant seeking amendment in the free shipping bill is legitimate and covered by the provision of Section 149 of Customs Act, 1962. It is also to be noted that the Revenue has hot brought any material on record that the amendment sought for by the appellant will cause any loss to the Revenue or will prejudice the interest of the Revenue in any manner - order of the lower authority is set aside - Decided in favour of assessee.

  ---

• Law of Competition

• 2015 (7) TMI 828
  Validity of impugned order - Abuse of dominant position - Practice of anti-competitive activities - Held that:- The duties of the Director General are enumerated in Chapter V of the Competition Act, 2002. Section 41(1) obliges the Director General, to assist the Commission in investigating into any contravention of the provisions of the Act or any Rules or Regulations made thereunder. But, he shall do so only "when so directed by the Commission." But, Sub-Section (2) of Section 41 confers upon the Director General, the same powers as are vested upon the Commission under Section 36. In other words, the Director General has powers to summon and enforce the attendance of any person to examine him, to order the discovery and production of documents, to receive evidence on affidavit, to issue Commissions for the examination of witnesses or documents and to requisition the production of any public record or document. The provisions of Sections 240 and 240A of the Companies Act, 1956 are made applicable to an investigation made by the Director General, as they would apply to an Inspector appointed under the Companies Act. As a matter of fact, if a person fails to comply, without reasonable cause, with a direction given by the Director General in terms of Section 41(2), such a person is liable to be punished with fine. Therefore, it is clear that the role of the Director General is actually to assist the Competition Commission in the effective discharge of its duties. - Therefore, Section 19(1)(b) may have to be read and understood in the context of Section 21 and 21A of the Competition Act, 2002. If so done, it will be very clear that the word "Statutory Authority" found in Section 19(1)(b), Section 21 and Section 21A cannot include the Director General. There is yet another reason for my conclusion. The Proviso to Section 21(1) empowers a Statutory Authority to make a reference suo motu to the Commission. But the Director General is not empowered to initiate an investigation suo motu. Therefore, the Director General cannot come within the definition of the expression "Statutory Authority". First contention that the permission to expand the scope of the enquiry cannot be construed as the initiation of investigation suo motu by the Director General. So long as the Competition Commission has the power to initiate an enquiry suo motu and take the assistance of the Director General in the conduct of such enquiry and so long as there is no bar for the Director General to provide information under Section 19(1)(a) of the Act, the petitioner cannot find fault either with the Director General or with the Commission. In this case the Director General did not rope in other car manufactures, of his own accord. The Director General, by filing a memo, merely brought to the notice of the Commission that there are other car manufactures who follow the very same practices, as followed by the three Respondents named by Mr.Kataria. The Commission directed the Director General to include the others also within the purview of the initiation of investigation suo motu by the Director General. Commission must record its reasons for forming a prima facie opinion with reference to the information furnished to the Commission. After pointing out in para 93 of its decision that the functions performed by the Commission are in the nature of preparatory measures in contrast to the decision making process, the Supreme court nevertheless held in para 97 that at the stage of forming a prima facie view under section 26 (1), the Commission should record minimum reasons for formation of a prima facie opinion. Therefore, it is contended by the petitioner that since the order dated 26.04.2011 does not contain any reason and does not reflect the formation of a prima facie opinion, the impugned proceedings are vitiated. The powers conferred upon an Inspector under Section 240 and 240A of the Companies Act, 1956 are just procedural in nature. The power conferred under these provisions include the power (i) to require any body corporate to furnish information or to produce such books and papers as he may consider necessary; (ii) to keep in his custody any books and papers; (3) to examine someone on oath; and (4) to seize documents. All that sub-section (3) of Section 41 says is that these powers can be exercised by the Director General, subject to the powers conferred by the Commission under sub-section (2) of Section 41 read with sub-section (2) of Section 36. - Therefore, the Director General merely placed an additional information before the Commission by his memo dated 19.04.2011. If the Commission had not issued a direction on 26.04.2011, the Director General could not have proceeded against all other car manufactures. The direction issued by the Commission on 26.04.2011 would tantamount to a directions under Section 41(1). Therefore, the question of overstepping of jurisdiction did not arise. Commission or the Director General had not done anything in a manner otherwise than what is prescribed in the Act and the Regulations. As stated earlier, the Director General did not suo motu initiate any investigation. He merely placed before the Commission, an information already available in the complaint lodged by the individual. It was an additional information that could be taken note of under the Proviso to Section 26(1). The Commission had already formed a prima facie opinion and recorded its reasons in respect of the three named car manufacturers. Therefore, it was not necessary for the Commission to again and again record reasons. The Commission did not come to any conclusion with regard to the writ petitioners, on the basis of any special pleadings as against them. The decision taken by the Commission was only to expand the scope of the investigation. Therefore, I do not think that either the Director General or the Competition Commission overstepped the jurisdiction vested in them in law. - Decided against Appellants.

  ---

• Service Tax

• 2015 (7) TMI 827
  Valuation - wharfage charges - port services - inclusion of the amount of rebate/concession granted in wharfage charges amounting to 80% allowed to the licensee - under-valuation or not - tribunal observed that no service at all was rendered by the Gujarat Maritime Board in relation to any vessel and, therefore, no amount was payable by way of service tax. - Held that:- Though GMB is the owner of the jetty under the said agreement, yet for providing the service of allowing a vessel to berth at the said jetty, it is necessary for GMB itself to keep the said jetty in good order. Wharfage charges are collectible because they are in the nature of fees for services rendered. The expenses that are defrayed by the Board for the maintenance of the jetty is sought to be collected as wharfage charges. This amount would necessarily include all amounts that are spent for keeping the said jetty in good condition including dredging so that vessels can berth alongside the jetty. It is clear that so far as jetties operated by the Board are concerned, the Board itself defrays such expenses. It is only in cases like the present where the jetty is primarily meant for loading and unloading goods belonging to a particular private party that repair and maintenance expenses are to be borne by the private party and not by the Board. It is in this circumstance that we find that there is no service, therefore, rendered by GMB to UCL. Authority given to perform any of the services must first and foremost be under terms and conditions as may be agreed upon by the Board and the private person. Further, under sub-Section (4) of Section 32, it is the private person who is then authorized to charge or recover any sum in respect of such service rendered. This is conspicuously absent in the aforesaid agreement. There is no doubt on a reading of the agreement that it is the Board itself that charges or recovers wharfage charges from the licensee - UCL and does not authorize UCL to recover such charges from other persons. This being the position, it is clear that no service is rendered by a port or by any person authorized by such port and, therefore, the very first condition for levy of service tax is absent on the facts of the present case. So far as the direct berthing facilities provided for captive cargo is concerned, the lease rent charged for use of the waterfront also does not include any service in relation to a vessel or goods and cannot be described as “port service”. - Decided against Revenue.

  ---

• 2015 (7) TMI 826
  CENVAT Credit - Capital goods being immovable property - Revenue contended that the applicants would receive constructed pipeline system which is embedded to the earth and therefore cannot be termed as "goods" for availing Cenvat credit of duty, as they are neither moveable nor marketable - Next issue raised by the Revenue is that the EPC Contractors who received the duty paid pipes and valves (capital goods) for laying the pipeline, were only eligible to take Cenvat Credit on capital goods under Rule 3 of Cenvat Credit Rules, 2004 and not the applicants. - Duty paying documents. Held that:- in present case, capital goods (pipes and valves) are to be used for providing output service and it is not relevant whether these goods provide such service by being embedded to the earth. Therefore, we agree with the applicant that the relevant date to determine whether an item qualifies to be 'capital good' is the time of its receipt and not subsequent date. Ownership - since the applicant would receive the pipes and valves as owners and then issue them on bailment to the EPC contractor for a specific purpose of providing services to bring into existence a pipeline. Therefore, the contention of Revenue that when pipes and valves are transferred from manufacturer to the applicant, applicant would get possession of pipes and valves from the manufacturer but same is not for consideration and thus, there would be no "sale" in terms of Section 2 (h) of Central Excise Act, 1944, - is factually incorrect. Duty paying document - EPC contractor, who pays for the goods to the manufacturer, may direct said goods to be delivered at applicant's site, without it coming to the premises of EPC contractor and he (EPC contractor) need not be a "registered dealer" with the Central Excise. However, applicant cannot take Cenvat Credit of Central Excise duty paid on pipes and valves on the basis of invoice issued by "intermediary dealer", until and unless, this intermediary dealer is a "registered dealer". Therefore, the contention that the applicant is eligible to Cenvat credit of Central Excise duty paid by the manufacturer on pipes and valves on the basis of documents issued by "intermediary dealer", would be as per Central Excise Rules read with Cenvat Credit Rules, only when said "intermediary dealer" is a "registered dealer". Appellants are eligible to avail Cenvat Credit of excise duty that would be paid on the pipes and valves procured from the manufacturer against the applicant's output service tax liability for services in the nature of transport of gas through pipeline, provided, invoice for said Cenvat Credit of Central Excise duly on pipes & valves, is issued by "registered dealer".

  ---

• 2015 (7) TMI 825
  Denial of CENVAT Credit - input services - installation and commissioning related services on the input side for bringing into existence a pipeline - Revenue has contended that the services used for erection and commissioning of such plant, do not take part directly in providing output taxable service of transportation of gas and also same cannot be considered to be integrally connected in providing output service in view of restrictive definition of "input service" Held that:- Applicant has given a detailed description of process followed in laying pipelines, which includes site preparation, pipe transportation, pipe stringing, pipe welding, trenching, external coating, lowering in, back filling and land restoration. It is observed that both the above referred services to be excluded from the scope of "input service" are to be used for support of capital goods. There is no doubt that the subject goods i.e. pipes and valves, are capital goods but the input service to be rendered by the applicant is not for support of pipes and valves i.e. "capital goods" but for laying of pipeline for transport of gas. As input service received by the applicant from EPC contractors and others is not for laying of foundation or making of structure for support of capital goods, same does not fail under the exclusion clause. Applicant is eligible to avail Cenvat Credit of the Service Tax that would be paid by the EPC Contractor/other construction contractors and other service providers (except for Service Tax paid vis a vis construction services for the civil works package for building the pipeline substations) against the applicant's output service tax liability under the taxable output service in the nature of transport of gas through pipelines. - Decided in favour of assessee.

  ---

• 2015 (7) TMI 824
  Whether the Custom, Excise and Service Tax Appellate Tribunal (CESTAT) in an appeal under Sub-Section (2) and (2A) of Section 86 of the Finance Act, 1994 read with applicable provisions of the Central Excise Act, 1944, can examine and go into the question of application of mind on merits by the Committee of Chief Commissioners or Commissioners - Held that:- There is no gainsaying that, as in the case, of quasi-judicial function carried out by statutory authorities, even in respect of administrative decision, reasons ought to be given. The purpose behind seeking reasons is not only to do away with the allegation that the conclusion reached is arbitrary and / or unfair but, is also insisted upon, to enable the aggrieved party, as also, a superior authority (which could be a statutory authority or court or Tribunal) to ascertain as to what weighed with a decision making authority in reaching its conclusion. The principle has been summed up in the case of Alexander Machinery (Dudley) Ltd. Vs. Crabtree, 1974 LCR 120 that the decision of an administrative, quasi- judicial or even a judicial authority should not represent an “inscrutable face of a sphinx”. Therefore, while one cannot but agree with the proposition that there should be material on record which reflects the reasons as to why the Revenue wishes to prefer an appeal, what does not flow from that, is that, the Committee of Commissioners should necessarily give their own reasons if they otherwise agree with the reasons already on record. In the facts of the case, the record itself shows, to which, we have made a reference above, as to why the Revenue was desirous of preferring an appeal. The reasons set out were cogent and substantial. As to whether the reasons recorded would finally persuade the Tribunal to hold in favour of the Revenue is not what concerns the Committee of Commissioners. This is so as it is an unilateral administrative decision of an aggrieved party i.e., the Revenue. As the administrative decision of the kind involved, as indicated above, requires the Committee of Commissioners to look at errors of fact and / or law in the order passed by the adjudicating authority only from the point of view of the Revenue i.e. as to whether the revenue should prefer an appeal. At this stage, the Committee of Commissioners is, neither addressing nor adjudicating upon the stand taken by the respondent/assessee. While, the decision of the Committee of Commissioners has consequences, in as much as, the adjudicating authority’s order is put in jeopardy by institution of the appeal, it has no civil consequences which, if at all, arise only when, the appeal is entertained and adjudicated upon by the Tribunal. This was a decision rendered in a writ petition by a Division Bench. By this decision, which is really in the nature of an order, the assessee had questioned the maintainability of the appeal pending before the Tribunal on the ground that a review of the order of the Committee of Commissioners did not validly take place (by which we would understand that a meeting was not convened) in terms of Section 86(2) of the Finance Act. The Division Bench by a short order permitted the petitioner / assessee to raise the said objection by way of a preliminary issue before the Tribunal. - this approach is inconsistent with the purpose and the object for which Section 86(2) has been incorporated in the Finance Act. As articulated hereinabove, the role of the Tribunal is, limited to only ascertaining as to whether or not the Committee of Commissioners (comprising of duly authorised officers) has taken a decision to institute the appeal. Once, such satisfaction is reached in this behalf, the Tribunal cannot render the appeal incompetent, in particular, on the ground that no meeting took place, or that, there were no independent reasons recorded by the Committee of Commissioners. - Decided in favour of Revenue.

  ---

• 2015 (7) TMI 823
  Benefit of ab initio exemption - SEZ units were exempted from payment of service tax utilized for the authorized operations of the SEZ units - Notification No.12 of 2013 - Held that:- Respondent No.2 was not justified in refusing authorization to the petitioner, in Form A2 for availing ab initio exemption from payment of service tax. On a perusal of the notifications, it is clear that the petitioner had an option to either pay the service tax in advance or not to pay the same, subject to the conditions provided in the notifications. For seeking ab initio exemption, the petitioner unit was required to secure the approval of the list of services, as are required for the authorized operations of the unit on which the unit desires to claim exemption from service tax from the 'Approval Committee'. Admittedly, the petitioner unit also furnished a declaration, in Form A1 verified by the Specified Officer of the SEZ along with the list of specified services. Once, the SEZ unit secures the approval of the 'Approval Committee' to the list of the services on which the SEZ unit wishes to claim exemption from service tax and furnishes a declaration, in Form A1 verified by the Specified Officer of the SEZ, it is rightly submitted on behalf of the petitioner that the respondent No.2 or for that matter, any Jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise is enjoined with a duty to issue the authorization, in Form A2. It is clear from Notification No.12 of 2013, under which the petitioner unit has exercised an option not to pay the service tax ab initio, that the respondent No.2 was obliged to issue the authorization, in Form A2 to the petitioner unit in the circumstances of the case. Mere issuance of Form A2 by the respondent No.2 would not absolve the petitioner unit of its liability to pay the service tax and cesses along with interest on delayed payment, if it is subsequently found that the petitioner unit has not used the services exclusively for the authorized operations as per the undertaking, in Form A1. In terms of Notification No.12 of 2013, the petitioner unit is enjoined with a duty to submit to the Superintendent of Central Excise, a quarterly statement, in Form A3, furnishing the details of specified services received by it without payment of service tax. If that is so, the respondent No.2 could not have refused the authorization to the petitioner unit in Form A2 on the ground that some of the claims made by the petitioner for refund had been rejected in the past. Ample safeguards are provided by Notification No.12 of 2013 for recovery of sales tax and cesses along with interest on delayed payment if it is found that the specified services on which the exemption has been claimed, have not been used exclusively for authorized operations. On a perusal of the documents annexed to the petition and the communications exchanged between the parties that the respondent No.2 has illegally denied the benefit of Notification No.12 of 2013 to the petitioner unit. - Impugned order is set aside - Decided in favour of assessee.

  ---

• 2015 (7) TMI 822
  Demand of service tax from Officer Incharge of the Magh Mela at Allahabad - Mandap Keeper Service - Held that:- Definition of Mandap Keeper and Mandap makes it apparently clear that the petitioner does not come under this definition clause. The petitioner is a Pandal or Shamiyana contractor providing services in connection with the preparation, arrangement, erection or decoration of a Pandal or Shamiyana. Further, we find, that Mandap keeper is for organization of any social, official or business function. However, the Department has issued a clarification dated 17.9.2004 which provides that Pandal or Shamiyana keepers will not be liable for Service Tax, if they provide services for purely religious ceremony and congregation. Definition of ''Mela' it is clear that services provided by a Shamiyana and Pandal contractor for a religious fair or congregation in the Mela area at Allahabad would be covered under the Circular dated 17.9.2004. In the instant case the tender invited by the Mela Officer was for the purpose of erection of temporary tents etc. in the Mela area during the Magh Mela season for the year 2004-05. Since the supply of the tents by the petitioner was for a religious congregation, which was held in the Mela area at Allahabad, the respondent No.1 was not liable to pay the Service Tax to the petitioner - Decided against Petitioner.

  ---

• 2015 (7) TMI 821
  Demand of service tax - Repair and maintenance service - Held that:- It is not in dispute the 4th respondent has initiated recovery proceedings to recover the amount determined as tax by order dated 22.3.2013. It is also not in dispute that the petitioner availed the statutory remedy of appeal which is pending adjudication and that its application seeking stay of the impugned order has not yet been considered, consequent to which the impugned order is executable. In the given fact situation, when the statutory remedy of appeal is availed by the petitioner, it will be entitled to protection till adjudication of the grounds of appeal against the impugned order. If the impugned order as passed by the 4th respondent is allowed to be executed, it is obvious the appeal will become infructuous or will lead to multiplicity of proceedings - petitioner has made out a case for grant of relief which, undoubtedly , will be for the limited purpose of ensuring petitioner to exercise the right of appeal. - Stay granted.

  ---

• 2015 (7) TMI 820
  Waiver of pre deposit - Commercial training or coaching - Computer Training Services - Held that:- Petitioner had deposited Rs. 40,00,000/- as pre-deposit on two dates, namely, Rs. 32,00,000/- on 31/1/2015 and Rs. 8,00,000/- on 13-2-2015, even though the Tribunal had granted only six weeks to comply with the said condition of pre-deposit. Considering the fact that the petitioner was pursuing the matter by way of appeals before us we condone the delay on the part of the petitioner in complying with the said condition of pre-deposit and direst the Tribunal to take up the appeals on merits and proceed further in accordance with law. - petitions are disposed of.

  ---

• 2015 (7) TMI 819
  Invocation of extended period of limitation - Willful suppression of facts - Works contact - lump sum turnkey contract - A lot of emphasis have been given by the senior counsel that the department had knowledge about their activities. - Held that:- So far the first question referred is concerned whether the works contract can be vivisected even prior to 1.6.2007 and the service portion discernible in the contract can be subjected to levy of Service Tax, the same as indicated by the learned third Member is covered by majority decision (five Members Bench) of this tribunal in the case of L&T Ltd. vs. Commissioner of Service Tax, Delhi (2015 (3) TMI 748 - CESTAT NEW DELHI (LB)), the issue stands covered in favour of the Revenue and against the assessee i.e. the indivisible works contract can be split up for the purpose of levy of Service Tax prior to 1.6.2007. In 2003, when the new service 'installation and commissioning' was introduced, the appellant themselves were vivisecting the lump sum turnkey contracts and were to collect service tax under the category of consulting engineering service. There was no reason whatsoever not to charge, collect and pay the service tax in similar manner in respect of installation and commissioning service when separate consideration for that service was already available in each of these contracts, and installation and commissioning was the dominant service in these contracts. - this is a clear cut case of wilful statement as also suppression of facts. Submissions of some letters/contracts in the facts of this case will not make any difference. - Decided against Assessee.

  ---

• Indian Laws

• 2015 (7) TMI 814
  Waiverof pre deposit - Complaint u/s 17(1) of Consumer Protection Act, 1986 - Held that:- The second proviso to Section 19 of the Act mandates pre-deposit for consideration of an appeal before the National Commission. It requires 50% of the amount in terms of an order of the State Commission or 35,000/- whichever is less for entertainment of an appeal by the National Commission. Unless the appellant has deposited the predeposit amount, the appeal cannot be entertained by the National Commission. A pre-deposit condition to deposit 50% of the amount in terms of the order of the State Commission or Rs. 35,000/- being condition precedent for entertaining appeal, it has no nexus with the order of stay, as such an order may or may not be passed by the National Commission. Condition of pre-deposit is there to avoid frivolous appeals. If the National Commission after hearing the appeal of the parties in its discretion wants to stay the amount awarded, it is open to the National Commission to pass an appropriate interim order including conditional order of stay. Entertainment of an appeal and stay of proceeding pursuant to order impugned in the appeal stands at different footings, at two different stages. One (pre-deposit) has no nexus with merit of the appeal and the other (grant of stay) depends on prima facie case; balance of convenience and irreparable loss of party seeking such stay. - Interference is not called for - Decided against appellant.

  ---