TMI Tax Updates - e-Newsletter
July 25, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Govt. Departments e.g. Post office or any other assessee may be permitted and allowed to pay service tax through non-electronic modes

  ---

Articles

1. Shares- latest circulars intended to reduce litigation - some suggestions to really reduce litigation on share transactions and other tax litigation in tax matters

   By: DEVKUMAR KOTHARI

2. READING DOWN MODEL IGST ACT (PART-6)

   By: Dr. Sanjiv Agarwal

3. THE REAL ESTATE APPELLATE TRIBUNAL

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Black Money

Circulars / Instructions / Orders

Service Tax

1. F.No 137/08/2013 - dated 22-7-2016

Permission to pay service tax through non electronic modes

DGFT

2. 23/2015-2020 - dated 22-7-2016

Removal of M/s. Trans Border Safety Control Inspection Services LLC, USA from the list of Inspection and Certification Agencies (Appendix 2G)

Highlights / Catch Notes

Income Tax

• High Court Rules on Income Tax: Goodwill in Succession Not Meeting Section 47(xiv) Affects Capital Gains Calculation.

  Case-Laws - HC : Goodwill arising on succession - capital balance accounted as goodwill - capital gain computation - transfer - interpretation of Section 47 (xiv) - assessee has got the additional share capital allotment without bringing anything to the assignee. Therefore, the prerequisite laid down in section 47(xiv) has not been complied with. - HC
  Visit to Get Source

  ---

• High Court Sets Aside Orders Due to Lack of Notification on Assessment Transfer Reasons to Petitioner.

  Case-Laws - HC : Transfer of cases - Though unaware of the order of transfer of assessment, the petitioner had raised such detailed objections shortly thereafter. However, the fundamental action of the authority was flawed since at no point of time, the petitioner was given any idea why the assessment was under transfer. - orders set aside - HC
  Visit to Get Source

  ---

• Court Rules Speculation Insufficient for Tax Income Additions; Requires Tangible Evidence Like Documents for Justification.

  Case-Laws - HC : Addition towards probable speculation income - mere speculation cannot be a ground for addition of income. There must be a some material substance either in the form of documents or the like to arrive at a ground for addition of income. - HC
  Visit to Get Source

  ---

• High Court Sanctioned Scheme Alters Assessment: Assessee Entitled to Benefits Despite Timing of Order Issuance.

  Case-Laws - HC : Reopening of assessment - When once therefore, a scheme has been sanctioned by the High Court, which would relate back to the appointed date and such order is passed before the order of assessment is passed, it cannot be stated that the assessee should be denied the benefit of such development merely on the ground that during the accounting period and when the return was filed, the High Court order sanctioning the scheme was not yet passed. - HC
  Visit to Get Source

  ---

• Non-compete fee for ex-Financial Director ruled nontaxable u/ss 17(3)(iii) and 28(va) of Income Tax Act.

  Case-Laws - AT : Non-compete fees receipt - taxability under Section 17(3)(iii) or 28(va) as salary income or business income or not - profit in lieu of salary - assessee is an individual and was Financial Director - it cannot be inferred that the said agreement in any way intended to compensate the assessee for loss of employment or in lieu of salary - amount is not taxable - AT
  Visit to Get Source

  ---

• Section 195: Tax Deduction Applies Only if Services Are Utilized and Rendered in India; Outside Services Not Taxable.

  Case-Laws - AT : TDS u/s 195 - Both the conditions have to be satisfied simultaneously, that is, the services which are source of income should be utilized in India and services should have been rendered in India. However, if the second limb is not satisfied that is, services have been rendered outside India, then same was held to be outside the purview of taxability in India. - AT
  Visit to Get Source

  ---

• Government Incentive from Market Linked Focus Product Scheme Not Classified as Income Under Income Tax Act Sections 2(24) & 28.

  Case-Laws - AT : Nature of receipt of Premium on transfer of Market Linked Focus Product Scheme scrips - revenue or capital receipt - the incentive given by the Government to the assessee for exploring the new market is a capital receipt, hence it cannot be treated as income either u/s 2(24) or 28 of the Act. - AT
  Visit to Get Source

  ---

• Compounding fees to Reserve Bank of India allowed as they aren't for offenses; Section 37(1) Explanation inapplicable.

  Case-Laws - AT : Disallowance towards compounding fees paid by the assessee to the Reserve Bank of India - It is not a case where the assessee has been held to have committed an offence or the amount has been paid for purpose, which was prohibited in law, hence the provisions of Explanation to section 37(1) of the Act are not attracted. - AT
  Visit to Get Source

  ---

• Interest Charged from April 1st for Underpaid Advance Tax per Section 234B(1.

  Case-Laws - AT : The section 234B(1) clearly mentioned that if there is a difference in advance tax or the tax, then the interest is required to be paid from 1st April following next financial year - AT
  Visit to Get Source

  ---

• Hospital's 80G(5) Approval Rejected Despite 12AA Registration; Denial Deemed Inappropriate as Conditions Were Met.

  Case-Laws - AT : Approval u/s 80G(5) rejected - object for establishment of the hospital and medical college - once, the registration under section 12AA has been granted, the approval under section 80G should not be denied unless the case of the appellant falls under non-fulfillment of one or more of the conditions specified in section 80G(5) which is not the case before us. - AT
  Visit to Get Source

  ---

• Income Assessment u/s 144 Restricts Further Additions of Income u/s 41(1) of the Income Tax Act.

  Case-Laws - AT : Invocation of section 144 - estimation of income - When an assessment is completed u/s. 144 of the Act by applying the net profit rate on the turnover, addition u/s. 41(1) cannot be made. - AT
  Visit to Get Source

  ---

• House Property Vacant All Year Assigned Nil Value per Income Tax Act Section 23(1)(c.

  Case-Laws - AT : House property income - vacant property - the ALV of the property which remained vacant for the whole year has to be assigned Nil value in terms of section 23(1)(c) of the Act. - AT
  Visit to Get Source

  ---

Customs

• Chartered Accountant Certificate Valid for Refund Claims if Supported by Evidence, Avoids Unjust Enrichment.

  Case-Laws - AT : Refund - unjust enrichment - Whether Chartered Accountant certificate alone is sufficient to show that the burden of duty has not been passed on to their customers - Since it is supported by corroborative evidence, refund allowed - AT
  Visit to Get Source

  ---

Indian Laws

• Supreme Court: No Inherent Right for Lawyers to Be Appointed or Extended as State Counsel or Prosecutor.

  Case-Laws - SC : No lawyer has a right to be appointed as State Government counsel or as public prosecutor at any level nor does he have a vested right to claim extension in the term for which he/she is initially appointed - SC
  Visit to Get Source

  ---

Service Tax

• Lease Agreement Reimbursements Not Taxable as Manpower Supply Services, Service Tax Demand Set Aside.

  Case-Laws - AT : Manpower supply services or not - Consequent to the BIFR Scheme, the Lease Agreement was signed between the appellant (PTL) and Apollo Tyres Ltd. (ATL) on May 14, 2005. In the Lease Agreement, it was inter-alia mentioned that in addition to payment of lease rental, ATL will reimburse to the appellant, PTL the actual expenses including the cost of personal. - Demand set aside - AT
  Visit to Get Source

  ---

• Service Tax Demand on Passenger Fees and Airport Taxes Dismissed; Section 78 Penalty Also Set Aside.

  Case-Laws - AT : Demand of service tax on passenger service fee and airport taxes - extended period of limitation - Demand pertaining to passenger service fee and airport taxes is set aside and the penalty under Section 78 ibid is also set aside. - AT
  Visit to Get Source

  ---

• Denial of Non-Electronic Service Tax Payments Limits Compliance, Undermines Legal Discretion Purpose.

  Circulars : Permission to pay service tax through non electronic modes - Refusing to give them permission amounts to expecting them to comply with the law while simultaneously preventing them from doing so. The purpose of giving discretion in the law gets defeated.
  Visit to Get Source

  ---

Central Excise

• Rebate Claim Denied for Exported Goods Due to Natural Loss in Transit; No Duty Rebate for Unexported Quantity.

  Case-Laws - CGOVT : Rebate claim - export of less quantity of goods - natural loss of goods in transit - as per provision of law rebate of duty cannot be allowed on the quantity of goods which have not been exported. - CGOVT
  Visit to Get Source

  ---

• Cenvat Credit Dispute: Assessee Allegedly Failed to Separate Accounts for Dutiable and Exempted Goods per Rule 6(3)(i) Cenvat Credit Rules.

  Case-Laws - AT : Cenvat Credit - manufacture of dutiable and exempted final products - revenue submitted that assessee has neither maintained separate accounts nor paid an amount equal to 5%/10% on the value of clearances of exempted final products in terms of Rule 6(3)(i) of the Cenvat Credit Rules, 2004. - Revenue can recover the demand only for the normal period of one year from the relevant date - AT
  Visit to Get Source

  ---

• CENVAT Credit on Capital Goods Unaffected by Insurance Compensation Claim for Fire Losses, Says Court.

  Case-Laws - AT : Reversal of cenvat credit on capital goods - loss of capital goods in the fire - The Compensation scheme from the insurance company has no relevance for availment of credit on capital goods purchased in 2006. The fact that the appellant claimed insurance, which is inclusive of Excise Duty, is not at all relevant. - AT
  Visit to Get Source

  ---

• Cenvat Credit Allowed Despite Improper Invoices; Total Credit Didn't Exceed CVD Paid on Import Bills of Entry.

  Case-Laws - AT : Cenvat Credit - Improper Duty paying documents - invoices issued by the sister unit - the total cenvat credit taken by both units did not exceed the CVD paid in respect of the bills of entries under which the supplier unit imported the goods. - credit allowed - AT
  Visit to Get Source

  ---

• SSI Exemption Denied Due to Non-Compliance with Condition 2 of Notification No.9/2003-CE; Condition Not Just Procedural.

  Case-Laws - AT : SSI exemption - Notification No.9/2003-CE, dt.01.03.2003 - The said condition 2 cannot be designated as a mere procedural one and to avail the benefit of the Notification need not be fulfilled. - Exemption was rightly denied - AT
  Visit to Get Source

  ---

VAT

• Court Rules State Needs Valid Reason for Delay; Limitation Act Section 5 Applies Equally in Tax Cases.

  Case-Laws - HC : Condonation of delay - Merely because applicant is a State, delay cannot be condoned without a proper explanation as Section 5 of the Limitation Act is equally applicable to the State as well. - HC
  Visit to Get Source

  ---

• Aluminium Grills in Buildings Taxed Separately from Air Conditioning Systems, Subject to Specific VAT and Sales Tax Rates.

  Case-Laws - HC : Rate of Tax on Aluminium Grills, Aluminium Diffusers and Dumpers - manufacture and sale of Aluminium Grills, which are fixed on ceiling or on the wall of the building as ventilators opening - Aluminium Grill cannot be said to be an integral part of the Air Conditioning or Air Cooling plant - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2016 (7) TMI 975
  Goodwill arising on succession - capital balance accounted as goodwill - capital gain computation - transfer - interpretation of Section 47 (xiv) - AO found that the goodwill was never created in the books of the proprietary concern and therefore it never became an asset of the sole proprietary concern which was taken over on such succession also confirmed by CIT-A and ITAT - Held that:- after considering that the assessee's capital account in the OPM had the credit balance of 1,16,05,939/only and the assessee has been allotted fully paid up share capital worth 3,35,90,640/, we are of the considered opinion that the assessee has got the additional share capital allotment of 2,29,84,701/without bringing anything to the assignee. Therefore, the prerequisite laid down in section 47(xiv) has not been complied with. It is also pertinent to mention that the cases laws relied on by Ld.AR to justify the case of the assessee are distinguishable on facts as in the cases relied by the Ld.AR, a proper valuation of good will has been done prior to the transfer of assets. In view of that matter, we do not find any justifiable reason to interfere with the order of the Ld.CIT(A) confirming the addition/disallowance made by the AO on this count. We do not think that the Tribunal's view and in the backdrop of the peculiar facts can be termed as perverse or vitiated by any error of law apparent on the face of the record. We do not think any question, much less of interpretation of Section 47(xiv) arises in this appeal. - Decided against assessee

  ---

• 2016 (7) TMI 974
  Transfer of cases - petitioner's assessment came to be transferred from DCIT (Circle2)( 1)(1), Ahmedabad to ACIT (Central Circle) Moradabad (U.P.) - Held that:- For multiple reasons, this notice would fail the test of granting reasonable opportunity of hearing. Mere issuance of notice inviting attendance of an assessee for hearing of a case for transfer of the assessment can hardly be stated to be fulfillment of requirement of hearing. On what primafacie grounds or reasons the case is to be transferred, was nowhere indicated in this notice. The petitioner was left to imagine such grounds and meet with them by making a representation in writing or orally if he so desired. By not indicating any reasons, why the authority proposed to transfer the case, the Principal Commissioner merely called upon the petitioner to attend his office for hearing. This notice gives not the slightest idea to the petitioner why the assessment which is otherwise competent at Ahmedabad is proposed to be transferred some 700 kms away at Moradabad in U.P. In other words, the authority asked the assessee to imagine the possible grounds why the case would be considered for transfer and then to meet such grounds by making representation. He thus made the procedure of giving hearing a mere formality. After attempting on couple of occasions to elicit further response from the Commissioner, the petitioner raised written objections under letter dated 04.01.2016 and specifically raised four grounds why the case should not be transferred. The petitioner did refer to the search and seizure operations at the residential premises of the director of the company and survey action at the factory of the petitioner company. However, this would not in any manner reduce the requirement of the prescribed authority to at least convey to the petitioner the primafacie reason why the assessment was being considered for transfer. Though unaware of the order of transfer of assessment, the petitioner had raised such detailed objections shortly thereafter. However, the fundamental action of the authority was flawed since at no point of time, the petitioner was given any idea why the assessment was under transfer. - orders set aside.

  ---

• 2016 (7) TMI 973
  Addition towards probable speculation income - Held that:- We are of the view that the CIT (Appeals) has rightly appreciated the case based on the sound principles of law and has also considered the statement made by the assessee at the relevant point of time. We are of the view that in light of the observations made by this Court in the case of Kailashben Manharlal Chokshi v. Commissioner of Income-tax (2008 (9) TMI 525 - GUJARAT HIGH COURT ), mere speculation cannot be a ground for addition of income. There must be a some material substance either in the form of documents or the like to arrive at a ground for addition of income. Considering the ratio laid down in the above decision and in the facts of the present case, we are of the view that the issue raised in this Appeal is required to be answered in favour of the assessee and against the Department.

  ---

• 2016 (7) TMI 972
  Reopening of assessment - scheme of amalgamation questioned - Held that:- On question of claim of depreciation and unabsorbed loss of the amalgamating company upon amalgamation was examined by the Assessing Officer thoroughly. In fact the assessee had made as many as three different representations why such claim should be granted. The Assessing Officer accepted such claim in the order of assessment without making any disallowance. The fact that the Assessing Officer did not make any observations with respect to the same in the order of assessment is of no consequence. Coming to the question of validity of the reasons also, we are inclined to accept the petitioner's contention. Few relevant dates which are not in dispute are that the appointed date as per the scheme of amalgamation was 1.4.2008, effective date is referred to as the date on which the final sanction have been granted which in the present case would be 12.10.2010. The fact that the High Court has sanctioned the scheme was brought to the notice of the Assessing Officer particularly in above referred letter dated 16.9.2010. When once therefore, a scheme has been sanctioned by the High Court, which would relate back to the appointed date and such order is passed before the order of assessment is passed, it cannot be stated that the assessee should be denied the benefit of such development merely on the ground that during the accounting period and when the return was filed, the High Court order sanctioning the scheme was not yet passed. The very effect of the order of High Court sanctioned the scheme relating back to the appointed date would be that for all purposes including for recognising the benefit of unabsorbed depreciation and losses of a merging Company with those of principal company would be available from such date. What would be the effect of the High Court order being passed after assessment is framed is not necessary for us to enter in the present case.- Decided in favour of assessee.

  ---

• 2016 (7) TMI 971
  Non-compete fees receipt - taxability under Section 17(3)(iii) or 28(va) as salary income or business income or not - profit in lieu of salary - assessee is an individual and was Financial Director - Held that:- section 17(3)(iii)(b) of the Act pre- suppose the existence of relationship of employer and employee between the assessee and the person who makes the payment of “any amount” in terms of sectin 17(3)(iii) of the Act. The amount received by the assessee after cessation of the employment therefore was held as capital receipt and could not be taxed under the head “Profits in lieu of salary”. As it is clear from the surrounding fact as well as the terms and conditions of the agreement that the payment in question was made by DAL to the assessee for not sharing the assessee's knowledge of the business of airlines and particularly the secrets of the trade with third party in the business of airlines as well as any party who is going to set up the business of airlines. From the so called non-competent agreement dt.1.2.2007 it cannot be inferred that the said agreement in any way intended to compensate the assessee for loss of employment or in lieu of salary. Therefore in the absence of any contrary facts or material either brought on record by the Assessing Officer or by the CIT (Appeals) it cannot be held that the payment received by the assessee under the agreement dt.1.2.2007 is a profit in lieu of salary in terms of section 17(3)(iii) of the Act. Accordingly, we set aside the impugned order of the CIT (Appeals) and delete the addition on this account. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 970
  Validity of reopening an assessment - reasons to believe - undisclosed investment - Held that:- Assessing Officer in the reasons recorded has referred to is the notice issued to assessee for production of details regarding investment of 25 lacs made in Reliance Mutual Funds; that the assessee did not attend or submit the details regarding the transaction. He was therefore, of the opinion that investment remained unexplained and needed to be verified. Such points are required to be examined in detail after obtaining evidence from the assessee and it was for this purpose that the Assessing Officer resorted to reopening of the assessment. The petitioner was granted just about 12 hours of time to respond to the notice for production of material and upon the petitioner failing to do so, the Assessing Officer presumed that such investment required further investigation. Further as pointed out by the assessee, such investment was very much part of the books of audited accounts of the assessee. If the Assessing Officer had perused such accounts, his anxiety that such investment may not have been reflected in the books would have been taken care of. Even when the petitioner pointed out this fact to the Assessing Officer in the letter of objection, the Assessing Officer did not advert to this issue while disposing of such objections. Surely, having once issued the notice for reopening, it was not impermissible for the Assessing Officer to drop the same if through objections the assessee pointed out that the reasons for which the notice was issued are completely erroneous. Even in such a case, the Assessing Officer were to stick to his original position, the entire formula provided in case of GKN Driveshafts (India) Ltd. v. Incometax officer and others (2002 (11) TMI 7 - SUPREME Court ) would fail. The contention that there was sufficient other materials suggesting money laundering or other financial irregularities, has not come in the reasons recorded and such ground therefore, cannot be examined to support the notice for reopening. - Decided in favour of assessee

  ---

• 2016 (7) TMI 969
  Reopning of assessment - dissolution/strike off of the petitioner company - Held that:- The respondent called for documentary evidence in connection with the dissolution of M/s.AGS, names and addresses of the directors at the time of filing of application for dissolution/strike off and also copy of the notice dated 24.2.2014 claimed to have been sent to the Chief Commissioner of Income Tax. In such circumstances, it is appropriate for the petitioner to produce the documents before the respondent. The fact of the dissolution/strike off is to be examined by the respondent and the present attempt on the part of the petitioner is to interdict a legal proceedings at the instance of the respondent even at the threshold. The impugned notice dated 10.6.2016 seeks certain clarifications from the petitioner and admittedly, such clarifications relate to the assessment year 2009-10, which is prior to the dissolution/strike off. Therefore, the petitioner should appear before the respondent and clarify all issues, on which, clarifications have been sought and produce documentary evidence called for.

  ---

• 2016 (7) TMI 968
  Revision u/s 263 - expenditure out of undisclosed source allowed to be set off against the business expenditure by AO - ITAT setting aside the order u/s 263 on the ground that the said order of CIT(A) is a change of opinion - Held that:- Assessing Officer while making the addition as disclosed by the assessee essentially taxed the profit element where as the Revenue desired that it should be the entire amount which should be taxed. By now it is well settled that even in case of unaccounted receipts of a businessman, it is only the profit element embedded in the business which can be taxed and not the entire amount. In other words, if the assessee can point out that even on unaccounted receipts, expenditure was also incurred for the purpose of business, it would be only the reasonable profit on such receipts which should be taxed. In view of this, we do not see any error in the view of the Tribunal particularly considering the fact that the commissioner was exercising limited power of revision under section 263 of the Act. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 967
  Taxable profits of the Project 'Prime Mall' by adopting net profit of 17.08% of the total gross sales - Held that:- We find that the Revenue seeks to substitute the estimated net profit arrived at by the Tribunal with a new figure of net profit. This without in any manner showing that the estimate arrived at by the Tribunal in the impugned order is perverse. It is a settled position of law that in estimated net profit arrived at by the authorities is a question of fact and if the material on record does support the estimate arrived at by the Tribunal then it does not give rise to any substantial question of law (see CIT v/s. Piramal Spinning and Weaving Mills Ltd. 1979 (10) TMI 45 - BOMBAY High Court). In this case, we find that the net profit estimated at 17.08% is a very possible view on the facts found. No substantial question of law Tribunal directing the Assessing Officer to allow deduction towards remuneration and interest, even in case of estimated net profit - Held that:- There can be no quarrel with the submissions of Mr. Kotangale. In any event, the Assessing Officer would need to redetermine the book profits of the respondent-assessee as a consequence of the impugned order of the Tribunal. At that stage the ceiling provided under Section 40(b) of the Act would also be considered while allowing deduction on account of remuneration and interest paid to the partners. No substantial question of law

  ---

• 2016 (7) TMI 966
  Rejection of books of accounts - Held that:- It will not be out of place to mention here that the assessee is a manufacturing unit and it has to pay the excise duty. It is the specific contention of the assessee that the books of accounts maintained by it are tallying and the excise duty is paid on that basis. The stock register is not tallying with the other books of account only because some of the items were not deleted from the stock register. Taking into account the decision of this Court, not maintaining the day-today stock register is not a ground to reject the books of account. The question posed for our consideration is answered in favour of the assessee and it is held that the Tribunal has erred in upholding the action of the Respondent in rejecting the books of accounts of the Assessee under Section 145 (2) of the Act and further erred in confirming the part of the addition on estimated basis against the revenue - Decided in favour of assessee Penalty 271(1)(c) - Held that:- When the Tribunal found that there was neither concealment of income on the part of the assessee nor there was furnishing of inaccurate particulars, but the disallowance was made only on the ground of estimation, no case was made out for levying of penalty and therefore the Tribunal concurred with the findings of the CIT (Appeals). Tribunal has erred in confirming the penalty under section 271 (1) (c) of the Act - Decided in favour of assessee

  ---

• 2016 (7) TMI 965
  Difference in the amount declared in books of accounts and statement furnished to Bank - Addition on difference between the stock shown in the regular books of accounts of the appellant and that declared in the statement furnished to the Bank in respect of hypothecation facility availed of by it - Held that:- As only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities See ALLIANCE INDUSTRIES Versus INCOME TAX OFFICER [2014 (11) TMI 935 - GUJARAT HIGH COURT] - Decided in favour of assessee

  ---

• 2016 (7) TMI 964
  Accrual of income - outstanding amount of commission receivable - cash basis of system of accounting - ITAT allowed the claim - Held that:- In the absence of any perversity in the findings of fact recorded by the Tribunal, the impugned order does not give rise to any question of law, much less, a substantial question of law, so as to warrant interference - Decided in favour of assessee

  ---

• 2016 (7) TMI 963
  Disallowance made u/s 36(1)(iii) out of preoperative expenses - Held that:- As decided in Commissioner of Incometax, Baroda v. Ishwar Bhuvan Hotels Ltd. [2008 (2) TMI 4 - SUPREME COURT OF INDIA] Interest paid in respect of borrowings on capital assets not put to use in the concerned financial year can be permitted as allowable deduction u/s 36(1)(iii) of the I.T. Act, 1961 - Decided in favour of assessee

  ---

• 2016 (7) TMI 962
  Addition in the value of closing stock towards excise duty - Held that:- This issue raised in this appeal is identical to one which has been decided by this Court in case of Assistant Commissioner of Incometax V. Narmada Chematur Petrochemicals Ltd. [2010 (8) TMI 263 - Gujarat High Court ] wherein held that the Tribunal was justified in law in excluding the excise duty at the time of valuation of the closing stock of finished goods at the end of the accounting period in light of what is stated hereinbefore - Decided in favour of assessee

  ---

• 2016 (7) TMI 961
  Sale of shares - Business income or capital gain - Held that:- It is not in dispute that in the previous years, the assessee was held to be an investor. Hence, in the facts of the present case, we are of the view that the assessee should be termed as an investor and therefore, the issue raised in this Appeal is answered in favour of the assessee

  ---

• 2016 (7) TMI 960
  Income Tax Settlement order challenged - assessee has been offered immunity from penalty and prosecution - Held that:- The applicants had initially offered on money rotation of 25 lakhs, 21 lakhs and 30 lakhs respectively and income at the rate of 12.5 per cent thereof by way of interest earned which during the course of assessment proceedings was revised to 50 lakhs, 50 lakhs and 75 lakhs respectively with rate of return at 15 per cent. With respect to revised rate of return, even counsel for the Revenue would not be in a position to argue that the same would form part of declaration of two incomes since whether rate of return should be estimated to 12.5 per cent or 15 per cent would be would be substantially in the realm of estimation of not profit. He would however, strenuously contend that revised declaration of on money should be enough to establish that initial disclosures made by the assessees were not full or true disclosures of such income. In this context, we had called for the letter written by the applicants making such revised offers. Copies of such letters dated 6.2.2014 written by the partners of the firm are produced on record. In such letters, it was conveyed that the applicants had filed a petition for settlement in which offered a sum of 7,75,000/- at the rate of 12 per cent on peak balance of funds deployed in money lending activity. It was further stated that “the applicant during the course of hearing under section 245D(4), in the spirit of settlement, agreed to further additional income of 39,12,667/- Similar declarations were made in the case of other applicants as well. It can thus be seen that these revised offers of tax was in the nature of spirit of settlement and cannot be seen in strict sense of abandoning initial disclosures and replacing the same by fresh disclosures on the basis of such revised offers. What in essence the assessee did was to raise their offers marginally to put an end to the entire dispute through settlement or in the spirit of settlement as is referred to in the said letter. This cannot be seen as accepting that original or initial declaration was not true and full disclosure thereby paving way for the application of judgment in the case of Ajmera Housing Corporation (2010 (8) TMI 35 - SUPREME COURT OF INDIA ). - Decided against revenue

  ---

• 2016 (7) TMI 959
  Disallowance of interest expenses u/s 14A - Held that:- It is an undisputed position in this case that interest free funds available with the assessee are much more than the investments made to earn exempt incomes as in the case of Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ). Thus, the presumption applies. Further, nothing has been shown to us to warrant taking a different view to that taken in Reliance Utilities and Power Ltd. (supra). In view of the fact that the question as raised stands concluded by the decision of this Court in favour of the respondent assessee

  ---

• 2016 (7) TMI 958
  Unexplained cash credit - Held that: - On affirmation by the Tribunal, we find that the burden of proof had been clearly discharged satisfactorily relating to the capacity of the creditors. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 957
  Penalty leviable under Section 158BFA(2) - whether the penalty proceedings initially started by the assessing officer for an undisclosed income of a sum of 491.50 lakhs should be allowed to continue for the sum of 37 lakhs which has ultimately been found to be the undisclosed income of the assessee? - Held that:- There was some sort of understanding between the department and the director of the assessee company as to the person who should disclose the income on the basis of the documents seized. The picture which emerges is that after the search and seizure, the revenue itself was unable to make up its mind as to whether the undisclosed income belonged to the company/assessee or to the director Sri S.N. Shroff. There was in those circumstances an understanding arrived at between the parties on the basis whereof the director made a disclosure of 2.16 crores whereas the company filed a nil return. Ultimately the undisclosed income of the director was assessed at 2.02 crores approximately and undisclosed income of the company was assessed at 37 lakhs. Both the CIT(A) and the Tribunal were of the opinion that in the facts of the case no penalty should be levied upon the company. The understanding arrived at between the revenue, the company and the director has not been disproved nor is that finding assailed. Imposition of penalty, when returns of undisclosed income were filed in consultation with the revenue, would certainly have been inequitable. Question formulated at the time of admission of the appeal is answered in the affirmative and in favour of the assessee

  ---

• 2016 (7) TMI 956
  Entitlement to benefit under section 10(23C)(iiiab) denied - Held that:- It is not in dispute that assessee solely exists for educational purposes. Therefore, assessee is entitled for deduction/exemption under section 10(23C)(iiiab) of the Act. Further, the ld. CIT(Appeals) found that assessee's total receipts were of 1.48 Cr out of which 95% grant-in-aid was 40,01,416/-, vocational course grant was 9 lacs. Grant-in-aid received from the government and from UGC would not constitute the receipts of educational institution. Further, donations are meant for specific purposes i.e. for building purposes and other donations were also specific towards the corpus of the assessee. Therefore, grant-in-aid given by the Punjab Government towards payment of salary could not be constituted as part of the receipts of the assessee. Similarly, receipts from UGC for running vocational course would not be receipt of the assessee. Donations are meant for specific building purposes, therefore, ld. CIT(Appeals) was justified in holding that these are not receipts of the assessee educational institution. When these amounts are reduced from the total receipts of the assessee, the total receipts from educational institution would be less than 1 Crore. Therefore, assessee would be entitled for deduction/exemption under section 10(23C)(iiiad) of the Income Tax Act. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 955
  Claim of depreciation denied to assessee trust - Held that:- We find that Hon’ble jurisdictional High Court in the case of CIT vs Institute of Banking Personal (2003 (7) TMI 52 - BOMBAY High Court) and CIT vs Plot Swetamber Murti Pujak Mandal (1993 (11) TMI 17 - GUJARAT High Court ) decided the issue in favour of the assessee. Income of a charitable trust derived from building, plant and machinery and furniture was liable to be computed in a normal commercial manner although the trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets In all such cases, section 32 of the Income-tax Act providing for depreciation for computation of income derived from business or profession is not applicable However, the income of the trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust - Decided in favour of assessee.

  ---

• 2016 (7) TMI 954
  Estimation of income - Held that:- As regards the estimation made by the Assessing Officer at the rate of 6% on the turnover, no basis of whatsoever kind has been provided by the Assessing Officer and the same is made on the basis of surmises and conjectures and cannot be upheld. Accordingly, Revenue’s appeal is dismissed. Out of the average gross profit of 16.94%, if the gross profit declared by the assessee at 16.50% is reduced, the difference comes to 0.44% which has been directed by the Ld. CIT(A) to adopt on the total turnover. While estimating the income, the Ld. CIT(A) has committed an error that cost of material amounting to 24,39,40,964 and the cost of shuttering materials at 5,05,85,544/-, Kerala VAT at 1,12,17,821/-, Goa VAT at 3,95,726/- and other expenses where no profit element has been involved, were not excluded which totals to 31,07,29,889/-. Therefore, the said amount of 31,07,29,889/- included in the turnover, has to be essentially excluded while estimating the income and accordingly, the Assessing Officer is directed to apply the gross profit rate of 0.44% after excluding the said turnover of 31,07,29,889/- at 59,45,76,475/-. It is ordered accordingly. Thus, assessee gets the part relief and appeal of the assessee is partly allowed.

  ---

• 2016 (7) TMI 953
  TDS u/s 195 - Payment of Euro towards purchase of Basic Engineering Design Package - withholding tax as being a payment for technical services - Held that:- The position of law as it stood then, including the taxing of the income under section 9(1)(vii) was that, if the services which are source of income is sought to be taxed, have to be rendered in India as well has to be utilized in India so as to be held to be taxable in India. Both the conditions have to be satisfied simultaneously, that is, the services which are source of income should be utilized in India and services should have been rendered in India. However, if the second limb is not satisfied that is, services have been rendered outside India, then same was held to be outside the purview of taxability in India. The Ld. CIT(A) has also admitted to this position, however, he held that the Explanation to section 9(1)(vii) inserted by the Finance Act, 2010 with retrospective effect from 01.06.1976 was brought specifically to overcome the said decisions of Hon’ble Supreme Court as well as the other Courts. Once this is an admitted position, then it is very difficult to comprehend that, assessee should have deducted TDS on such payment when law of the land did not permit so or envisage any withholding of tax, on the basis of law which was brought from subsequent date albeit with retrospective date stating that, now all such payment for services even rendered outside India is taxable in India. Here, the maxim of “lex non cogit ad impossibilia, is fully applicable that is, the law does not possibly compel a person to do something which is impossible, that is, when there was no provision for taxing an amount in India at the relevant time then how it can be expected that a tax should be deducted on such a payment. Here in this case, the decision of Hon’ble Supreme Court in the case of Ishikawajma Harima Heavy Industries Ltd vs. DIT (2007 (1) TMI 91 - SUPREME COURT ) was rendered on 4th January, 2007; agreement was entered by the assessee with SP Italy on 26th April; 2007; application was made before the AO on 23rd August, 2007 for the payment to be made in September, 2007; therefore, assessee had a valid reason and reasonable ground for not with holding the tax at that time, because as observed above, there was no such provision or any explanation in the statute. Thus, we hold that, assessee was not liable to deduct TDS under section 195, at the time of making the payment. - Decided in favour of assessee

  ---

• 2016 (7) TMI 952
  Additions made u/s 40A(3) read with Rule 6DD - cash payment for expenditures - bifurcation of payment - Held that:- As the assessee-firm has taken a plea and contended that each payment in a day to the payee’s is less than 20000/- and the case is covered under exception as provided u/r 6DD of Income Tax Rules, 1962 as the individual payment in a day is to be reckoned separately for considering exception u/r 6DD of Income Tax Rules, 1962 and not aggregate payments in a day which is supported by the decisions relied upon by the assessee-firm as set-out above, but the assessee-firm has to bring on record cogent evidences to substantiate the same plea which need examination and verification by the authorities below. It is incumbent for the assessee-firm to bring on record the evidences and circumstances to prove its case that it falls under the exception to Section 40A(3) of the Act provided u/r 6DD of Income Tax Rules,1962. Keeping in view the overall facts and circumstances of the case, we are of the considered view that the matter needs to be set-aside and restored back to the file of the A.O. for fresh adjudication on merits based upon the evidences and explanations filed by the assessee-firm to substantiate and corroborate its pleas which need examination and verification by the authorities below. Accordingly we set aside this matter to the file of the A.O. and direct the A.O. to scrutinize the evidences and explanations filed by the assessee firm and evaluate the attraction of provisions of section 40A(3) of the Act read with exceptions as provided under Rule 6DD of Income Tax Rules, 1962 and de novo redetermine the matter in accordance with law and judicial precedents - Decided in favour of assessee for statistical purpose

  ---

• 2016 (7) TMI 951
  Nature of receipt of Premium on transfer of Market Linked Focus Product Scheme scrips - revenue or capital receipt - Held that:- The Apex Court in the case of Ponni Sugars & Chemicals Ltd (2008 (9) TMI 14 - SUPREME COURT) had an occasion to examine an identical situation and observed that if the object of the subsidy was to enable the assessee to carry on the business more profitably, then the receipt is on the revenue account. On the other hand, if the object of assistance was to enable the assessee to set up a new unit or expand the existing unit, then the receipt is on the capital account. In the case before us, the Government of India provided the incentive for exploring the new markets across the globe. Exploring a new market for a specified area would naturally expand the market area of the assessee. The incentive given to the assessee is not for running the business profitably but for expanding the market area. Therefore, this Tribunal is of the considered opinion that the incentive given by the Government to the assessee for exploring the new market is a capital receipt, hence it cannot be treated as income either u/s 2(24) or 28 of the Act. In view of the above, we are unable to uphold the order of the lower authority. Accordingly, the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 950
  Addition u/s 68 - addition based on report of investigation wing - Held that:- AO has made addition merely based on the investigation carried out by the investigation wing from the order of the Ld. assessing officer without bringing out any material evidence against the assessee and not confronting assessee with that material. Contrarily evidences produced by the assessee of stalwart Realtors Limited of loan given of 46 lakhs, which is supported by the bank statement of the lender, was not anyway found false or an accommodation entry. In view of this, we reverse the finding of the CIT (A) and are of the view that appellant has discharged its onus cast upon him under section 68 of The Income Tax Act by proving the identity, creditworthiness and genuineness of the transactions and therefore the addition of 46 lakhs of loan received by it from M/s Stalwart realtors private limited cannot be added into the hands of the assessee under section 68 of the Income Tax Act, 1961. On the above factual aspects, we delete the addition made by the Ld. assessing officer. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 949
  Validity of reopening of assessment - reasons to believe non supplied - Held that:- It is settled law that the Assessing Officer is duty-bound to supply the reasons recorded in the reasonable time period as held by the Hon’ble Supreme Court in the case of GKN Driveshaft (India) limited Vs. CIT (2002 (11) TMI 7 - SUPREME Court ). We find from the submission of the assessee that despite repeated letters requesting to provide copy of the reasons recorded or the grounds on which the assessment was reopened, no such reasons were provided to the assessee. We find that the Ld. DR could not substantiate whether any reasons were provided by the Assessing Officer to the assessee and merely relying on the fact that general practice was followed in Department of supplying reasons, it cannot be presumed that reasons were supplied in the case of the assessee. On the other hand, the assessee has filed evidences in support of its claim of request for providing grounds of initiation of the reassessment proceedings in almost every submission made before the Assessing Officer. Thus non providing reasons for reassessment within a reasonable time the reassessment completed by the Assessing Officer under section 147 of the Act cannot be sustained in the case of the assessee and quashed - Decided in favour of assessee

  ---

• 2016 (7) TMI 948
  Disallowance towards compounding fees paid by the assessee to the Reserve Bank of India - Held that:- Such a compounding fees charged to the assessee being compensatory in nature as is evident from the fact that though the amount to be charged could be up to 30.25 crores, the assessee was asked to pay sum of 45 lakhs in order to meet the ends of justice, established the case of assessee that the same was not in the form of penalty. Where the amount paid by the assessee is compensatory payment and was not by way of any penalty levied under the provisions of FEMA, then such amount is to be allowed as deduction in the hands of assessee. Coming to the stand of authorities below that such payment is covered by Explanation to section 37(1) of the Act. We find no merit in the said stand of CIT(A). The Explanation to section 37(1) of the Act was inserted in respect of any expenditure incurred for any purpose which was an offence or which was prohibited by law. The Circular of Reserve Bank of India itself provided that where the assessee had committed an irregularity while dealing in foreign earnings or expenditure outgoes, then such an action of applicant could be compounded as per Rules and Regulations provided in the said Circular. It is not a case where the assessee has been held to have committed an offence or the amount has been paid for purpose, which was prohibited in law, hence the provisions of Explanation to section 37(1) of the Act are not attracted. In view thereof, we hold that the assessee is entitled to the claim of deduction under section 37(1) of the Act. - Decided in favour of assessee

  ---

• 2016 (7) TMI 947
  Income for taxation as per section 44BB - taxability of fees for technical services - whether applicability of sections 44D and 44DA got excluded? - AO concluded that assessee’s receipts were effectively connected with the project office of the assessee in India and, therefore, taxable u/s 44DA - Held that:- The Tribunal in the case of Baker Hughes Asia Pacific Ltd.(2014 (7) TMI 601 - ITAT DELHI), has relied on the decision of Hon’ble Jurisdictional High Court (Uttrakhand) in B.J. Services [2011 (8) TMI 477 - UTTARAKHAND HIGH COURT ] for rejecting the department’s contention that section 44DA inserted by Finance Act 2010 w.e.f. 1.4.2011 in section 44BB is retrospective. Moreover, we find that Hon’ble Supreme Court in the case of ONGC (2015 (7) TMI 91 - SUPREME COURT) has set at rest the entire controversy by holding that provisions of various services in connection with the prospecting for, or extraction or production of mineral oils, is taxable on presumptive basis u/s 44BB of the Act. The services carried on by assessee are in connection with the prospecting for mineral oils and, therefore, following the decision of Hon’ble Supreme Court, the assessee’s appeal deserves to be allowed. In view of above discussion, the assessee’s appeal is allowed and the appeal filed by the Revenue stands dismissed. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 946
  Reopening of assessment - Held that:- There was no new material given are produced before the Assessing Officer to start reassessment proceedings is right while going through the reasons annexed to the paper book. There was no mention of a superior authority in the assessment order as well as in the order for rejecting the assessee’s objections related to re-opening. Thus, the Assessing Officer prima facie has not acted upon as per the statute. The test of giving reasons to the assessee and the documents is missing. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 945
  Chargeability of interest u/s 234B - whether the assessee is liable to pay the interest from 01.04.2003 (i.e. from the 1st day of April next following such financial year) or from the date of processing i.e. 28.05.2004 (date of intimation under section 143(1) in terms of section 243B(3) of the IT Act - Held that:- In the present case, settlement petition was filed and thereafter the petition was deemed to have been admitted on 31.07.2007 and thereafter the settlement order was passed on 07.02.2013. But at the time of filing of the settlement petition, the assessee was required to deposit the tax along with interest thereon as if such income would have been disclosed and declared in the return of income. If the assessee has declared/disclosed the same income ( income disclosed in the settlement application), then it would relate back to the date of filing of return of income. The contention of the assessee that the case of the assessee would fall under section 243B(3), in our view is not applicable. In fact, the provisions of section 245C makes it abundantly clear that such tax and interest thereon have to be paid under the provisions of this Act had the income been disclosed in the application but was declared in the return of income before the AO on the date of application. The words referred in 245C clearly shows that the date of application for settlement will relate back to the filing of the return before the AO and, therefore, the tax and the interest thereon is required to be calculated in the manner provided under section 234B. The section 234B(1) clearly mentioned that if there is a difference in advance tax or the tax, then the interest is required to be paid from 1st April following next financial year.- Decided against assessee

  ---

• 2016 (7) TMI 944
  Approval u/s 80G(5) rejected - as per CIT(a) assessee has not started the activities as per the object - Held that:- Having granted registration u/s 12AA, the first condition regarding establishment of institution for charitable purposes is fulfilled. Regarding satisfaction of additional conditions specified in clause (i) to clause (v) of section 80G(5), there is no dispute as apparent from the order of the ld CIT. As can be seen from Revenue’s stand of rejection of earlier applications filed by the appellant, the approval under section 80G is closely linked to approval under section 12AA. Now once, the registration under section 12AA has been granted, the approval under section 80G should not be denied unless the case of the appellant falls under non-fulfillment of one or more of the conditions specified in section 80G(5) which is not the case before us. Regarding the activities carried out by the appellant towards achievement of its object for establishment of the hospital and medical college, it cannot be said that assessee has not yet commenced any activity. The CIT has accepted that assessee has taken steps for implementation of its objects in as much as it has acquired the land, converted the land for institutional use for setting up the hospital project, appointed the architect., carried out soil testing etc. All these activities are towards the achieving the objects of the trust. The registration under section 25 of the companies Act has been granted on 13.10.2012, subsequently the land was acquired on 29.3.2013 and thereafter other activities like conversion of land use, appointment of architects and soil testing has been done. The project of setting up hospital and medical college is a complex project requiring various approvals, clearances etc which the appellant has been complying with. It is critical that as part of fund raising programme for this project, the appellant has sought the approval under section 80G whereby the donations can be accepted for approved purposes and the project can be expedited. The approval under section 80G will thus aid and provide the necessary support in successful completion of the project. In our view, ld CIT (Exemption) was not correct in denying the approval under section 80G(5) to the appellant.- Decided in favour of assessee.

  ---

• 2016 (7) TMI 943
  Invocation of section 144 - estimation of income - Held that:- It is not disputed that assessee failed to produce books of account. It could not furnish various details called for by the AO. Assessee had filed its balance sheet and profit when the liabilities were appearing in the books of account. AO had not issued any summons on the creditors or obtained any statements from them which would show that liabilities were not existing and had ceased. In any case, we find that assessment was completed u/s. 144 of the Act. When an assessment is completed u/s. 144 of the Act by applying the net profit rate on the turnover, addition u/s. 41(1) of the Act, in our opinion, cannot be made. When books of account as such are rejected, the question whether creditors appear in such books were there or had ceased to exist, would become irrelevant. We are of the opinion that ld. CIT(Appeals) was justified in deleting such addition.- Decided in favour of assessee

  ---

• 2016 (7) TMI 942
  ALV of the property remained vacant for the whole year - Held that:- As from a reading of another provision i.e. subsection (3) of section 23 of the Act, where the legislatures in their wisdom have used the word ‘house is actually let’. This also shows that the expression ‘property is let’ cannot mean actual letting out of the property because had it been so, there was be no need to use the word ‘actually’ in sub-section (3) of section 23 of the Act. Applying the purposive interpretation, the expression ‘property is let’ has to be read in contrast to ‘property is self occupied’ to arrive at its true purport. We simultaneously note on facts that the property has been actually let out in the financial year 2006-07 as noted above. It cannot be reckoned to be in the control of the assessee to let out the property throughout necessarily. The decision of Hon’ble Andhra Pradesh High Court in the case of Vivek Jain (2011 (1) TMI 897 - Andhra Pradesh High Court ) relied upon by the revenue cannot be read in a manner that if the property remains vacant throughout the year, section 23(1)(c) do not apply at all more so when the property was let out in proceeding or subsequent year. Therefore, in the totality of the circumstances and having regard to the provisions of the Act, we are of the view that the ALV of the property at Dande Towers which remained vacant for the whole year has to be assigned Nil value in terms of section 23(1)(c) of the Act. Accordingly, the order of the CIT(A) stands modified to this extent.

  ---

• Customs

• 2016 (7) TMI 980
  Pre-deposit of 1% of the total penalty - allegation of illegal export of Muriate of Potash (MOP) Fertilizer grade, without a valid license - Held that:- At this stage, the penalties imposed on the applicants may look very harsh, but, if the gravity of allegation/offence is considered, against the backdrop of evidences and at the stage of final hearing of these appeals, if it could be established by the Revenue that the goods exported was not Industrial Salt but MOP and the said act was possible by diversion of the MOP imported at concessional rate of duty and meant to be used as fertilizer by the Indian farmers, then the case would tilt in favour of Revenue, in as much as smuggling of MOP out of the Country could be a reason for socio economic plight of farmers who are driven to end their life facing insurmountable hurdles like deficit of rain, shortage of fertilizers etc. We have carefully considered the financial hardships pleaded by other applicants. Considering overall circumstances of the case, the financial hardship expressed and also keeping in view the interest of Revenue, and considering the fact that the Hon'ble Gujrat High Court has remanded the matter for reconsideration, we are of the considered opinion that it would be appropriate to direct each of the applicants to make the specified pre-deposit against the penalty imposed as per the table. Partial relief granted - Stay order modified.

  ---

• 2016 (7) TMI 979
  Claim of interest on delayed refund - the interest on delayed refund is directed to be paid which is beyond three months from the date of application for refund. - plea for interest on interest is rejected. - Decided partly in favor of appellant.

  ---

• 2016 (7) TMI 978
  Refund - unjust enrichment - Whether Chartered Accountant certificate alone is sufficient to show that the burden of duty has not been passed on to their customers. - Held that:- t is observed that the said certificate is supported by the entry in the Balance Sheet and ledger account under which the amount is shown as Import Duty, fine and penalty by Customs Department and shown as “Receivable”. The department has not questioned the correctness or accuracy of the said certificate of Chartered Accountant or the entry in the books of accounts - it is clear that the said amount has not been passed on to the customers. - Refund allowed.

  ---

• Corporate Laws

• 2016 (7) TMI 977
  Scheme of Arrangement in the nature of Amalgamation is in the interest of the Shareholders and Creditors of all the three companies as well as in the public interest, therefore, the same deserves to be sanctioned and the same is hereby sanctioned. The Reduction of Issued, Subscribed and Paid up share capital of the Transferee Company viz. Kalthia Engineering and Construction Limited as envisaged under Clause 15 of the Scheme is specifically granted. Prayers in terms of Paragraph No. 15(a) of the Company Petition Nos. 145 and 146 of 2016 for the Transferor Companies viz. Kalthia Investment Private Limited and R. L. Kalthia Engineering and Automobiles Private Limited and prayers made in terms of Paragraph Nos. 17(a) and 17(b) as well as the Minutes under Section 103(1) of the Companies Act, 1956 in terms of Paragraph 14 of the Company Petition No. 147 of 2016 for the Transferee Company viz. Kalthia Engineering and Construction Limited are hereby granted. The petitions are disposed off accordingly.

  ---

• 2016 (7) TMI 976
  Validity of Bid - credibility and capability of the bidding parties - Held that:- In the instant case, SECL is the proposed Employer. The tender was floated by RITES on behalf of SECL. The object of a tender process in respect of work projects is not only to ascertain the lowest price at which the work can be got executed but also to assess the credibility and capability of the bidding parties who are interested to perform the job. The lowest tenderer need not always be awarded the work if it is found that he has a dubious or unsatisfactory track record or if on an overall assessment the authority concerned is of the opinion that his capability is doubtful. It is settled law that the Government and public authorities must have freedom of contract. In the present case, SECL found the financial bid of Jhajharia to be the lowest. It was about 7 crores less than the second lowest bid that was of the appellant. It is not in dispute that Jhajharia carried out work satisfactorily for KSK Mahanadi and this has been verified from KSK Mahanadi by RITES. Being satisfied by the capability of Jhajharia, SECL directed RITES to consider Jhajharia’s financial bid along with the financial bids of others including that of the appellants. We see absolutely nothing illegal or irregular with such action of SECL. In any event, in ascertaining whether a condition in a NIT has been complied with, one has to take a commercial point of view. It is not in dispute that KSK Mahanadi which issued the credential certificate to Jhajharia is a subsidiary of KSK Energy Ventures. In fact, KSK Energy Ventures holds approximately 84 per cent of the shares in KSK Mahanadi. KSK Energy Ventures in its annual report referred to itself and its subsidiaries as a ‘Group’ i.e. a single economic entity. KSK Energy Ventures appears to be in complete control of the management and administration of the affairs of KSK Mahanadi and this is a commercial reality which cannot be lost sight of. Although KSK Ventures and KSK Mahanadi may be separate legal entities in the eye of law, from a practical and pragmatic point of view KSK Energy Ventures operates through KSK Mahanadi being 84 per cent shareholder thereof. The Directors of the two companies are also common. Hence, in our opinion, there is substantial compliance of Note 5 under Clause 2(a) of the NIT since KSK Energy Ventures is undisputedly a listed company. SECL’s decision to consider Jhajharia’s financial bid is an administrative decision made qualitatively by experts in the field. If the writ court interferes with such decision lightly without having the necessary expertise such action is likely to be fallible. It is trite law that the writ court is not concerned with the decision but with the decision making process. We decline to interfere is that the decision of SECL to consider the financial bid of Jhajharia and T & T has not been challenged by the writ petitioners. The Learned Judge reserved liberty to the writ petitioners to challenge such decision of SECL before the appropriate forum. Instead of doing so, the writ petitioners preferred the instant appeal. Prayers in the instant appeal are beyond the scope of the writ petition. Learned Counsel for the appellants argument that SECL and RITES are acting in tandem and collusion with Jhajharia has no substance in such contention and the materials on record also do not support such allegation. Out of the bidders who were initially technically disqualified by RITES, it was not only Jhajharia’s financial bid that SECL directed RITES to consider but also the financial bid of T & T. It was for SECL to finally decide whether those two bidders were technically eligible and no inference of collusion or of SECL or RITES acting hand in glove with Jhajharia can be drawn merely from the decision of SECL to consider the financial bids of Jhajharia and T & T. On the contrary, we are inclined to agree with the submission of Learned Counsel for SECL and Jhajharia that the present litigation is an attempt on the part of the appellant company to scuttle and/or eliminate competition.

  ---

• Service Tax

• 2016 (7) TMI 997
  Levy of penalty - Non payment of service tax - bondafide belief - it was submitted that the appellant was not aware about the fact that the activities undertaken by it were subjected to levy of service tax under the head “Business Auxiliary Service” (BAS), which was brought to the service tax net with effect from 01.07.2003. - Held that:- the period of dispute in this case is from 01.07.2003 to 30.03.2005. Therefore, we are of the view that the appellant should get the benefit of section 80 ibid, and accordingly, Penalty imposed under sections 76, 77 and 78 ibid in the adjudication order should be set aside. However, since the appellant had defaulted in filing the returns and not obtained the registration certificate within the prescribed statutory time frame, we are of the view that imposition of penalty under Section 75A ibid by the authorities below is justified. - Decided partly in favor of assessee.

  ---

• 2016 (7) TMI 996
  Manpower supply services or not - Consequent to the BIFR Scheme, the Lease Agreement was signed between the appellant (PTL) and Apollo Tyres Ltd. (ATL) on May 14, 2005. In the Lease Agreement, it was inter-alia mentioned that in addition to payment of lease rental, ATL will reimburse to the appellant, PTL the actual expenses including the cost of personal. Held that:- even if the appellant (PTL) is called as service provider, we do not find any service recipient in this case as the personnel (manpower), who are manufacturing ATL brand tyres and tubes, continued and continues to be in the pay roll of the appellant (PTL) and from the documents on record, we cannot say that the appellant (PTL) has provided any service in relation to recruitment and supply of manpower in any manner temporarily or otherwise and the appellant company has never been and presently also not in the business of manpower supply or recruitment temporarily or otherwise, in any manner. The appellant has argued that even on the ground of revenue neutrality, they should not be charged any service tax. Revenue has argued that revenue neutrality cannot be a ground for non-levy of service tax, if the activity is otherwise covered under Service Tax law. We do not find any reason to consider this argument of revenue neutrality of the appellant or the counter argument of the Revenue that revenue neutrality cannot be a ground for non-levy of service tax as the subject activities and operations of the appellant have not fulfilled the ingredients of the definition of the manpower recruitment or supply agency service as per the provisions of Section 65 (105) (k) of the Finance Act, 1994, as discussed in earlier parts. The Revenue has tried to make a case to bring the subject activity and operations/transactions of the appellant within the definition of manpower recruitment and supply agency service. However, when facts on the ground and the documents indicate otherwise, the Revenue cannot sustain its case beyond mere statement and it cannot succeed legally. - Demand set aside - Decided in favor of assessee.

  ---

• 2016 (7) TMI 995
  Demand of service tax on passenger service fee and airport taxes - extended period of limitation - Held that:- mere non-payment of duties is not equivalent to collusion or wilful mis-statement or suppression of facts, otherwise there would be no situation for which ordinary limitation period would apply. Inadvertent non-payment is to be met within the normal limitation period and the burden is on Revenue to prove allegation of wilful mis-statement. - the ingredients required for imposing penalty under Section 78 ibid are conspicuously absent in this case. Demand pertaining to passenger service fee and airport taxes is set aside and the penalty under Section 78 ibid is also set aside. - Decided in favor of assessee.

  ---

• 2016 (7) TMI 994
  Cargo handling service - service receiver had deposited the service tax under the category of goods transport agency as the service recipient. It is his submission that since the service tax paid by the recipient of service has been accepted by the department and retained as legitimate tax due, confirmation of demand under the category of cargo handling service is not appropriate as the same amounts to double taxation. Held that:- we are of the prima-facie view that the disputed service is not conforming to the definition of GTA Service. Therefore, we do not find merits in the submissions of the appellant for complete waiver of pre-deposit - stay granted partly.

  ---

• Central Excise

• 2016 (7) TMI 989
  Condonation of delay - Types of duties which are eligible for rebate in terms of rule 18 of the Central Excise Rules, 2002 read with Notification No.19/2004-CE(NT) dated 06.09.2004. - CVD paid on inputs as imported - It is reiterated that non-fulfillment or otherwise of condition No.53 of Notification No.21/2002-Cus would Have no Application for claiming rebate of specified duties which were not exempted but actually been paid by the applicant. - Held that:- it is clear that stipulated period of filing Revision Application is three months from date of receipt of and is deemed to have been submitted only upon receipt of Revision Application in the office of Revision Application Unit. The present Revision Application has been filed beyond three months period. This period may be extended by further three months provided sufficient cause has been shown which prevented the applicant from filing Revision Applications in time. Government finds that the applicant in their Application for condonation of delay has in a general manner mentioned that they had posted the application on the last day of the stipulated 3 months period and that the delay is caused due to postal delay, The applicant has failed to give any documentary evidences to justify that there were sufficient cause, which prevented them from filing Revision Application in stipulated time 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 applicant.

  ---

• 2016 (7) TMI 988
  Cenvat Credit - manufacture of dutiable and exempted final products - revenue submitted that assessee has neither maintained separate accounts nor paid an amount equal to 5%/10% on the value of clearances of exempted final products in terms of Rule 6(3)(i) of the Cenvat Credit Rules, 2004. - Extended period of limitation - Held that:- though the appellant claims that they reversed Cenvat credit on account of input services, the Revenue has not got such proof of reversal of Cenvat credit on input services. It is, therefore, held that in order to get the benefit on the subject payment/reversal of credit, a clear cut proof evidencing reversal of Cenvat credit of inputs has to be produced by the appellant before the Revenue. In case of this demand, we find that the plea of time-bar, where-under the appellant says that the demand for the period prior to July 2011 is barred by limitation is a valid argument as there has not been any clear cut proof available to substantiate any kind of fraud or collusion or any willful mis-statement or suppression of facts or contravention of any provisions of laws concerning Central Excise and/or Service Tax with an intention to evade payment of duty on the part of the appellant for recovery of any short levy or short payment of duty for the period of five years from the relevant date. Here, the Show-cause notice has been issued on 17.8.2012. Therefore, any demand for the period prior to July 2011 is clearly barred by limitation as per the provisions of Section 11A(4) of Central Excise Act, 1944. Consequently, it is held that the Revenue can recover the demand only for the normal period of one year from the relevant date. During this normal period of one year, the demand would be restricted to reversal of the proportionate credit of input services. Decided partly in favor of assessee.

  ---

• 2016 (7) TMI 987
  Demand of duty - manufacture of gutkha - clandestine manufacture and clearance - Held that:- admittedly the various machines required for manufacture of gutkha were installed in the appellants factory. Not only that the visiting officers also found the pouches of gutkha fully manufactured in the manufacturing premises. The statement of Supervisor recorded at the time of visit of the officers is clearly to the effect that they were engaged in the manufacture of Tufan brand gutkha without obtaining any registration from the department and without even intimating the Revenue. Further, the statements of Shri Abhay Kumar Jain, proprietor of the company clearly accepted the fact of manufacture and clearance of gutkha. We otherwise agree with the contention of the learned advocate that a case of clandestine manufacture and clearance cannot be made solely on the basis of a statement but in the present case, we find that the Revenue did not stop there and investigated the matter further. During investigations, the statement of raw material supplier, the transporters as also the buyers were recorded. The said statements clearly showed that the appellant was indulging in clandestine clearance of their final product. These facts further get corroborated from the fact that raw material as also the final product along with a fully manufacturing set up with power backup and employment of 12 persons including production Incharge and Supervisor was found at the time of visit of the officers. As such, we are of the view that there is sufficient material on record to establish beyond doubt that the appellant was indulging in clandestine activities. Regarding valuation, as such, Revenue has adopted MRP of one packet as 1/- and has calculated backwards. Further, if the appellant is been able to establish by production of evidence that the goods were sold at less than 1/- rate, we deem it fit to direct the lower authorities to recalculate the duty. - Decided against the assessee.

  ---

• 2016 (7) TMI 986
  Reversal of cenvat credit on capital goods - loss of capital goods in the fire - Appellant claimed compensation from M/s.Oriental Insurance Co.Ltd. Chennai on which duty element involved on lost capital goods - Held that:- the credit was disallowed only on the premise that the original equipment was purchased in 1991 when no credit scheme was in force. It is an undisputed fact that there was no such provision in Cenvat rules for denial of capital goods credit on the parts imported for replacement, particularly during that period original equipments were not covered under modvat scheme. The assessee has paid the premium for insurance which covered the risk of the capital goods. The insurance company in terms of the policy agreement, has compensated the assessee with the value of goods destroyed in fire, including the excise duty paid by them. The Compensation scheme from the insurance company has no relevance for availment of credit on capital goods purchased in 2006. The fact that the appellant claimed insurance, which is inclusive of Excise Duty, is not at all relevant. Demand set aside - Decided in favor of assessee.

  ---

• 2016 (7) TMI 985
  Cenvat Credit - Duty paying documents - invoices issued by the sister unit - Invoices do not contain all the prescribed particulars required in terms of Rule 9(2) of the Cenvat Credit Rules, 2004. - Held that:- In any case, there is no dispute about the duty paid nature of imported goods, which they have received and used in the factory for manufacture of final products. The case laws cited by the appellant support the view that credit would not be denied on the ground that the document does not contain all the particulars required to be contained under the rules, if the documents contain details of the payment of duty, description of the goods, assessable value, name and particulars of the factory of the receiver. The Chartered Accountant’s Certificate obtained and furnished by the appellant to the Commissioner also convinces us of the fact that the total cenvat credit taken by both units did not exceed the CVD paid in respect of the bills of entries under which the supplier unit imported the goods. Accordingly, we have no hesitation in concluding that the appellant is entitled to cenvat credit and consequently we set-aside the impugned order. - Credit allowed - Decided in favor of assessee.

  ---

• 2016 (7) TMI 984
  SSI exemption - procedural conditions of Notification No.9/2003-CE, dt.01.03.2003, for the period March 2004 and April 2004 to June 2004 not fulfilled - Held that:- A plain reading of the said notification, particularly the condition in clause 2, it is clear that the assessee-manufacturer requires to exercise their option to avail exemption under this notification i.e. to pay duty at 60% of the normal rate of duty at the beginning of the financial year itself and the option once exercised, cannot be changed in the same financial year. The said condition 2 cannot be designated as a mere procedural one and to avail the benefit of the Notification need not be fulfilled. - non-fulfillment of the said mandatory condition would dis-entitle the Appellant in availing the benefit of the SSI exemption notification no. 09/2003-CE dt.01.03.20003. However, we find that the Appellants had recorded all facts in their statutory records and the demand has been issued for the normal period. Thus, in our view, imposition of penalty of 1.00 lakh in the circumstances of the case, appears to be too harsh. - Decided partly in favor of assessee.

  ---

• 2016 (7) TMI 983
  Maintainability of writ petition - alternative appellate remedy - demands of excise duty and customs duty - petitioner submitted that, (i) the Commissioner acted without jurisdiction; (ii) Although the petitioner had responded to the show cause notice dated October 7, 2013 by submitting a detailed written reply, the Commissioner observed that the petitioner had failed to respond;The petitioner was not asked to show cause notice under section 114A of the 1962 Act and by imposing penalty thereunder, it was practically condemned unheard. Held that:- The argument of Mr. Roy, insofar as the jurisdictional point based on notification dated September 16, 2014, prima facie appears to be sound. There is no stipulation in the notification dated September 16, 2014 that any show-cause notice issued prior thereto by a commissioner of a particular region shall be taken to its logical conclusion by such commissioner even though on and from the date of the notification, the jurisdiction of the commissioner might suffer a change. In order to encourage the Bench to go ahead and entertain the writ petition based on the point of error of jurisdiction, the petitioner was required to satisfy the Bench that the error of jurisdiction attributed to the Commissioner, Durgapur Commissionerate is clear, conspicuous and obtrusive. Unfortunately, in its pursuit to satisfy this Bench the petitioner has miserably failed and hence, no exception can be taken to the impugned order by reason of the plea raised by Mr. Sen at least at this stage. It appears from paragraph 55 of the writ petition that presentation of this writ petition has been occasioned to avoid the pre-deposit that is required to be made by the petitioner in terms of section 35F of the 1994 Act. The petitioner ought not to be permitted to abandon the machinery for escaping payment as envisaged in the statute, and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when the remedy open to him by an appeal to the Appellate Tribunal is adequate and efficacious. The writ petition is not entertained and stands dismissed, without costs.

  ---

• 2016 (7) TMI 982
  Rebate claim - export of less quantity of goods - natural loss of goods in transit - The applicant claimed that the difference in quantity cleared from the factory and that exported was due to loss of goods occurred on account of moisture content and transportation handling losses subsequent to clearance from factory. - Held that:- In this regard, Government notes that the applicant could not cite any applicable provisions, where such loss subsequent to clearance from the factory for the impugned goods is allowed under the relevant provisions of the Central Act and Rules thereof. In absence of any such provision for loss of goods on account of moisture loss and fixing of any percentage loss for the purpose, Government finds no ground to interfere with the order to hold as inadmissible the rebate of duty paid over and above actual quantity exported. Further, Government notes that the applicant has failed to declare the moisture content in the goods at the point of taxation viz. the clearance from the factory of export. Hence the lower authorities have rightly observed that any such exercise to determine moisture loss or to argue that the difference in quantity is due to moisture loss is futile. In any case it is a fact on record that the goods have been short shipped for whatever reason and as per provision of law rebate of duty cannot be allowed on the quantity of goods which have not been exported. - Decided against the appliance.

  ---

• 2016 (7) TMI 981
  Condonation of delay in filing revision application - Availing duty drawback while getting rabte/ refund of duty paid on export of goods - Applicants submit that the exporters are eligible for "Duty Drawback" on inputs used in the manufacture of export goods if the same is covered in the Customs & Central Excise Duty Drawback Rules 1995 at the rate prescribed in the drawback schedule. They are also eligible for "Rebate of duty paid on the final products" as these are the two sets of incentives covered under Rule 18 of Central Excise Rules 2002. - Held that:- Government observes that the original authority sanctioned the rebate claims. The department filed appeal before Commissioner (Appeals) on the ground that as the applicant has availed drawback, allowing rebate would amount to double benefit. Commissioner (Appeals) allowed the department's appeal. Now, the applicant has filed this Revision Application on grounds mentioned in para (4) above. The applicant has erred in its contention that as they had posted the application on the last day of the stipulated 3 months period, no condonation of delay is required. The applicant has also failed to give any documentary evidences to justify that there were sufficient cause, which prevented them from filing Revision Application in stipulated time in support of their claim for the delay in filing of the Revision Application. - Revision application rejected - Decided against the applicant.

  ---

• CST, VAT & Sales Tax

• 2016 (7) TMI 993
  Condonation of delay - 548 days in preferring the Appeals - Revenue appeal - Held that:- Merely because applicant is a State, delay cannot be condoned without a proper explanation as Section 5 of the Limitation Act is equally applicable to the State as well. In the instant case, there is absolutely no averment in the Notices of Motion or even in the submissions as to which were those peculiar or distinctive aspects of the Government functioning, which resulted in causing delay of about two years in preferring these appeals. Therefore, having regard to the tenor of the averments in the application, we have no hesitation in our mind to reject these first two Notices of Motion on failure of the Applicant-Appellants to bring their case within the four corners of 'sufficient cause', as contemplated under Section 5 of the Limitation Act. 28. Even as regards the third Notice of Motion, though the details of the various internal correspondence are given and the cause is attributed to the same and also to the fact that the Special Leave Petition was preferred in the Hon'ble Supreme Court of India against the order of the Tribunal and hence there was delay, we are not at all convinced by the same. It is pertinent to note that the impugned decision of the Tribunal is dated 19th June 2009 and the Special Leave Petition was disposed of on 7th February 2011 itself. The Appeals are, however, preferred on 3rd February 2016 along with these Notices of Motion. Thus, even if the period consumed in prosecuting Special Leave Petition filed in the Supreme Court of India, is excluded from consideration, there is a delay of about five years. Such a delay can hardly be explained by attributing the same merely to the functioning of the Government and internal correspondence. In this respect also, it is pertinent to note that the Government has given the sanction to file Writ Petition on 13th December 2011 itself. The Draft Appeal received approval thereafter from the concerned Department on 16th December 2015. No explanation at all is offered for this delay of four years and the subsequent delay of again about two months in preferring this Appeal with Notice of Motion. Such a delay cannot be condoned on the spacious plea of the characteristics of Government functioning.

  ---

• 2016 (7) TMI 992
  Waiver of pre-deposit - appeal was rejected for the reason that the pre-deposit amount that the petitioner is required to make i.e., 25% of the disputed tax is not paid within time - Held that:- After hearing the learned Additional Government Pleader on the above submission, considering the peculiar facts and circumstances of the case and taking note of the fact that the appellate remedy is not only effective but an efficacious remedy in which the petitioner will be entitled to canvass all factual issues, this Court is inclined to grant one opportunity to the petitioner. Accordingly, if the petitioner pays the remaining amount of the disputed tax of 1,03,000/- within a period of 15 days from the date of receipt of a copy of this order, the Appellate Authority may consider the appeal on merits, without rejecting the same on the ground of limitation.

  ---

• 2016 (7) TMI 991
  Power to levy penalty - petitioner refers to Section 67(3)(b)(i) and (ii) of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) and submits that the officer is entitled to only call upon the petitioner to pay the tax and there is no power to levy the penalty. Held that:- The order has been passed by the detention officer, who detained the goods and he has exercised his power under Section 67(3)(b) of the TNVAT Act and released the goods. This is evident from the impugned order itself that he has exercised his power under the said provision. Therefore, he could have directed the petitioner to pay tax and released the goods and left it open to the petitioner to work out other remedies available under the Act. However, this was not done by the respondents. The amount collected from the petitioner cannot be treated as penalty, but should be treated as tax. Accordingly, the writ petition is disposed of by directing the respondents to treat the remittance made by the petitioner, i.e., 2,29,680/- as tax and it is left open to the petitioner to work out his remedies available under the Act in the event they claim for adjustment.

  ---

• 2016 (7) TMI 990
  Rate of Tax on Aluminium Grills, Aluminium Diffusers and Dumpers - manufacture and sale of Aluminium Grills, which are fixed on ceiling or on the wall of the building as ventilators opening. - Held that:- Aluminium Grill cannot be said to be an integral part of the Air Conditioning or Air Cooling plant, and therefore, cannot be taxed at the rate of 15%. The questions raised are answered in favour of the assessee and against the department.

  ---