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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter July 27, 2015 Case Laws in this Newsletter: Income Tax Customs Service Tax Articles DIRECTOR GENERAL UNDER COMPETITION ACT 2002 – A STATUTORY AUTHORITY? News 'Make in India' Programme Notifications Income Tax 60/2015 - dated 24-7-2015 - IT Cost Inflation Index for the FY 2015-16 is 1081 - Amendment in Notification Number S.O. 709(E), dated the 20th August, 1998 Highlights / Catch Notes Income Tax Cost Inflation Index for the FY 2015-16 is 1081 - Amendment in Notification Number S.O. 709(E), dated the 20th August, 1998 - Notification Visit to Get Source Penalty u/s 271D and u/s 271E - accepting and repayment of loan in cash in excess of ₹ 20,000/- section 269SS and section 269T - The appellant has not explained as to the urgency, compulsion or any other important circumstance for the breach and that too repeatedly - levy of penalty confirmed - HC Visit to Get Source If the assessee is, otherwise, entitled to a claim of deduction but due to his ignorance or for some other reason could not claim the same in the return of income, but has raised his claim before the appellate authority, the appellate authority should have looked into the same. The assessee cannot be burdened with the taxes which he otherwise is not liable to pay under the law. - AT Visit to Get Source TDS liability u/s 195 - consideration paid by the assessee for purchasing of embedded software was to be treated as consideration for supply of goods and therefore, the same was taxable as business income and not as royalty - not subject to withholding tax u/s 195 - AT Visit to Get Source Treating the agreement for sale of land as sales - transfer of immovable property was considered to have taken place upon conveyancing and not the date of agreement of sale. - AT Visit to Get Source Addition u/s 41(1) - no deduction/allowance has been made in respect of loss, exp/liability in the assessment year or in any earlier years, cessation of such liability cannot be taxed under section 41(1) of the Income Tax Act. - AT Visit to Get Source Remission of loan liability - waiver of the loan amount was a capital receipt not taxable as business income of the assessee - AT Visit to Get Source Assessee is entitled to the claim of depreciation i/s 32 on the gas sweetening plant which was kept ready for use during the entire previous year, though not actually used due to lack of raw material - AT Visit to Get Source Exemption u/s 54F - Capital gain - joint development agreement - assessee are eligible for exemption even though multiple flats were allotted to them in lieu of cost of 60% of the land allotted to the builder, prior to the amendment w.e.f. 1.4.2015 - AT Visit to Get Source Minimum Alternate Tax (MAT) on SEZ units - provisions of section 115JB shall not apply to the income accrued or arisen on or after 1.4.2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. - AT Visit to Get Source Addition on written back liability - there cannot be cessation of liability twice - when the assessee has offered impugned liability to tax in AY 2013- 14 and tax has been paid thereon then the similar addition cannot be upheld for AY 2007-08 - AT Visit to Get Source Customs Denial of duty drawback claim - consideration not received - When the export transaction fails in the sense that there is no accrual of foreign exchange from the overseas buyer, there can be no duty drawback that can be claimed by the exporter - HC Visit to Get Source Fraudulent claim of undue DEPB benefits - adjudicating authority should have given copy of the overseas inquiry conducted by the department, if any, so that the appellant could have defended or put forth his views on the same - matter remanded back - AT Visit to Get Source Suspension of Customs House Broker License - The impugned order dated 03.3.2015 under Regulation 19(2) was issued after about five and half months in a wrong premises that “since the investigation of the case is still in progress” and no enquiry under Regulation 20 was initiated till date and such order can not be sustained and is liable to be set-aside - AT Visit to Get Source Service Tax Computerized Reservation System (CRS) - at prima facie stage, Tribunal should not have rendered any conclusion and particularly that the service rendered by the Assessee merits classification as business auxiliary service as defined in law - HC Visit to Get Source Whether franchiser is required to pay service tax on the sale of various proprietary items such as pizza dough as also cheese, etc. when the same are being sold by him to the franchisees - prima facie, No- AT Visit to Get Source Case Laws: Income Tax 2015 (7) TMI 848 Penalty u/s 271D and u/s 271E - accepting and repayment of loan in cash in excess of ₹ 20,000/- within the purview of the provisions in section 269SS and section 269T - Held that:- The sworn statement recorded from Mr.A.Kannan, Prop. of M/s Vadamalayan Finance, in response to the summons issued under Section 131 on 21.9.2011 shows that the financier has admittedly lent a huge amount of ₹ 74 lakhs to various parties by cash and he has also admitted that he had lent ₹ 2 lakhs to the appellant. When a specific question was posed to him as to whether he was doing the money lending business by cheque or cash, he has answered that till then he has been doing the money lending business only by cash payment and cash repayment. Again Mr.Kannan, Prop. of M/s Vadamalayan Finance has also further admitted that he has been doing money lending business for the last 30 years. The appellant having taken loan amount by cash in contravention of the provisions of Section 269SS and repaying the same by cash in contravention of the provisions of Section 269T, cannot seek the support of Section 273B. The appellant has not explained as to the urgency, compulsion or any other important circumstance for the breach and that too repeatedly. Taking into account the conduct of the assessee, the assessing authority, after giving repeated reasonable opportunities, finding no explanation whatsoever, was unable to exercise his discretion under Section 273B and accordingly imposed the penalty under Sections 271D & 271E of the Act. Penalty orders confirmed - Decided against assessee. 2015 (7) TMI 847 Trading addition - CIT(a) deleted the addition - Held that:- We find that there was no basis for the AO to adopt a G.P. rate of 15% when the fact remains that in the previous year it was only 12.03% which means that this year the profit rate is in any way is 14.25% which is more than the previous year. Further there was no basis for the AO to estimate the receipt at ₹ 4,12,50,000/- in the absence of any allegation that any receipts have been suppressed or there is any error in the profit rate declared by the assessee. In view of the above, the deletion of the addition made by the CIT(A) is correct and justified. - Decided against revenue. Undisclosed closing stock - AO has allowed shrinkage of 50% of the claim and for the rest of the fabric, valuing them on cost, has made an addition for the cost of shrinkage disallowed was to the tune of ₹ 74,500/- - CIT(a) deleted part addition confirming an addition of ₹ 74,500/- made by the AO on account of shrinkage - Held that:- As during the course of assessment proceedings, the assessee vide letter dated 17.12.2009 had provided a copy of the printed chart for leading dyeing house i.e. Creative Dyeing & Printing Mills (P) Ltd. to compare the wastage claimed by the assessee. From the perusal of the said schedule of that company, the rate of shrinkage is much higher than the rate which was claimed by the assessee. The ld. AR pointed out that each processing unit has its own percentage of shrinkage but comparable costs can be considered to evaluate this fact. We find that without any basis, the AO has made the disallowance of 50% and he has not brought any kind of comparables to substantiate his disallowance whereas we find assessee has brought in similar company whose claim of shrinkage has been much higher. In the absence of any evidence to the contrary, the order of the AO to reject the claim of the shrinkage of the assessee amounts to arbitrariness. Therefore, we are of the considered view that the ld. CIT (A) erred in confirming the said disallowance without assigning any reason and it has to be deleted and we order accordingly - Decided in favour of assessee. Disallowance u/s 40A(3) - CIT(a) deleted the addition - Held that:- AO has made addition of ₹ 49,566/- on the ground that the assessee has incurred expenses exceeding ₹ 20,000/- in cash to the extent of ₹ 2,47,828/- and so, 20% of the said sum i.e. ₹ 49,566/- was disallowed under section 40A(3) of the Act. We find that the AO has not held that the transactions with the two firms are not genuine. However, he made the disallowance because the cash transaction is hit by Section 40A(3) of the Act. However, we note that the ld. CIT (A) rightly points out that the AO does not mention the details of specific payments which in his opinion are hit by the provisions of section 40A(3) of the Act, i.e. the date of payments, bill number, mode of payment, amount of payment, name of the party etc. In the absence of these findings, the ld. CIT (A) rightly observed that the contention of the assessee is justified and the addition of ₹ 49,566/- made on this ground is deleted.- Decided in favour of assessee. Addition on account of income from other sources as receipts from insurance company - CIT(a) deleted the addition - Held that:- Documents in the paper book are placed in paper book which are intimation to the Fire Department, copy of the insurance policy, report of the surveyor, correspondence with the insurance company, ledger account of the parties whose goods were destroyed in the fire. In the absence of any proof being adduced or basis to prove that the fire incident was fabricated to claim insurance, the ld. CIT (A), after taking note of the evidences produced by the assessee to establish the fire incident and the losses reflected by it, has rightly deleted the addition. All these evidence proves beyond any doubt about the genuineness of claim and as such the addition has been rightly deleted by the CIT(A)- Decided in favour of assessee. Disallowance of depreciation on machinery - Held that:- The facts recorded by the AO are incomplete because he has not taken in to consideration subsequent letter from M/s Gopal Fabricators Pvt. Ltd. (the machine supplier). A letter dated 17th November, 2009, whereby the supplier has confirmed that the machines are sent for ready to use and it takes only 5 to 7 hours for their engineers to install and guide the assessee’s employees to use the machine. The supplier has confirmed that this machine was started on 29th March, 2007 and has also given the name of the engineer who started this machine viz. Mr. John Mathew.Without contradicting the evidence adduced by the assessee, the AO cannot disbelieve the facts stated by the assessee without assigning any reasons. The observation of the AO in this regard are purely based on surmises and conjecture and stems from the letters answered by the supplier to the effect informing ignorance of the date of supply and who installed the machine. Thereafter, we find that the supplier has come forward with certain documents in their possession to correct themselves and bring evidence to prove the fact in issue and these evidences are on record. - Decided in favour of assessee. Disallowance on account of rent, invoking the provisions of section 40(a)(ia) - non deduction of TDS - Held that:- Both AO and CIT(A) have ignored the fact that the liability to deduct TDS on payment of rent on machinery has been introduced by the Taxation Law Amendment Act, 2006 w.e.f. 13.7.2006 as is evident from the Circular No. 1/2007 dated 27.4.2007 issued by the Central Board of Direct Taxes. The payment of this rent by the assessee was for the period from 1st April, 2006 to 30th June, 2006 as is evident from the confirmation of the party filed with the AO placed in the paper book page no.24; and ₹ 90,000/- paid by cheque on 09.03.2007 also does not attract TDS because it did not cross the monetary limit of ₹ 1,20,000/- for the year under consideration, so the addition made by the AO and confirmed by the CIT (A) is not as per law. In view of the above, we set aside the impugned order and delete the addition of ₹ 1,90,000/- - Decided in favour of assessee. Disallowance of additional depreciation on account of new machinery purchased - Held that:- the activity of processing done by the assessee was "manufacturing". It was immaterial that the assessee was doing the job of processing also for outside customers too and was charging them on job work basis or on the basis of labour charges. We hold that it will still be qualified as carrying eligible business under s.32(1)(iia) of the Act. We hold that assessee is a manufacturer and eligible for deduction u/s 32(1)(iia) of the Act and so we allow the additional depreciation @20% - Decided in favour of assessee. Disallowance u/s. 68 - capital introduced by Sh. Pankaj Gupta, Partner of the assessee firm as unexplained credit - Held that:- We find that before the AO, Mr. Pankaj Gupta (Partner) has led evidence in support of this amount of ₹ 11,00,000/-. This amount, according to him, was received from his father, Shri Om Prakash Gupta, who is an income tax payer for the last 30 years. To prove the identity, creditworthiness and genuineness of the transaction, the source i.e. Shri Om Prakash Gupta’s confirmation affidavit, assessment order passed in his case and computation, balance sheet for the last 10 years were filed before the AO including the balance sheet of the firm, Jagan Nath Tea Co. from where this money has been paid by the father to his son. Copy of the purchase ledger, copy of bank account of M/s. Jagan Nath Tea Co. were also filed and he personally appeared before the AO. However, we find that the AO and the CIT(A) have simply ignored all these evidences and merely on surmises and conjectures without any basis has confirmed the addition. We find that the assessee firm having discharged its burden of proof, the onus was on the AO, thereafter to either accept the same or disprove the evidence produced by the assessee by cogent materials or the impugned addition is bad in the eyes of law and has to necessarily go. Thus we delete the addition of ₹ 11,00,000/- - Decided in favour of assessee. Disallowance of deduction under section 80IB - Held that:- assessee in this regard has filed evidences before the AO in the form of Certificate of registration with the SSI to satisfy that the unit has started production before 31.03.2002. It also filed letter in December 2009 for claiming this deduction u/s 80IB along with various documents and registration certificate. The AO has not adjudicated this issue and the ld. CIT (A) has not allowed the deduction claimed u/s 80IB during appellate proceedings by stating that the claim was submitted before the AO at the fag end of the assessment proceedings. The assessee having made the claim has to prove that it is eligible as per section 80IB. There is no reason why the same has not been adjudicated and if the assessee fulfills all the conditions necessary to qualify for the claim prescribed u/s 80IB then the deduction needs to be allowed, so in view of the aforesaid facts and circumstances, it would be ideal if the issue is remitted back to the file of AO to examine the claim of the assessee afresh - Decided in favour of assessee for statistical purposes. Disallowance of credit of TDS claimed by the assessee along with the return of income - Held that:- as the assessment order has been passed on last date of time barring limitation i.e. 31.12.2009, though the AO has mechanically directed to allow the credit for prepaid taxes, however, it has not been done and the ld. CIT (A) is also silent on this issue. So, it would be ideal for the issue be resolved by the AO himself, so we remit this issue also back to the file of the AO, to give credit to prepaid taxes in accordance to law.- Decided in favour of assessee for statistical purposes. 2015 (7) TMI 846 Disallowance of write off of being forfeiture of surety given by the assessee on behalf of associate concern - CIT(A) allowed claim - Held that:- CIT(A), though, held that the amount in question was earlier given as advance for purchase of machinery but has changed its character to that of guaranty/surety but has not given any finding as to how the amount even given as a guaranty for purchase of machinery would fall in the definition of revenue loss. The Ld. CIT(A) has simply observed that earlier the assessee had paid the amount as an advance with purchase of machinery but later on the same was converted as guaranty for purchase of machinery by M/s. Vinedale Ltd. and thereafter without giving any reasoning treated the same as revenue loss. The Ld. CIT(A) even has not considered that the amount of advance paid to M/s. Alfa Laval (India) Ltd. which was initially treated as advance on behalf of M/s. Vinedale Ltd. was only ₹ 81.30 lakhs. The said amount has never changed its character as a guaranty rather was advance for the purchase of machinery on behalf of M/s. Vinedale Ltd. The remaining amount was paid by the assessee for settlement of the accounts of M/s. Vinedale Ltd. which were on account of outstanding dues for the purchase of machinery by M/s. Vinedale Ltd. The assessee has paid the said amount on behalf of M/s. Vinedale Ltd. being its guarantor/surety which was not relating to any business or trading activity of the assessee in any manner. We therefore do not find any merit in the order of the Ld. CIT(A) and the same is therefore set aside. The action of the AO disallowing the said loss is confirmed. - Decided against assessee. Deduction on account of consumption of containers disallowed - Held that:- CIT(A) ought to have considered the claim of the assessee in exercise of his appellate jurisdiction under section 250 of the Act. Moreover, if the assessee is, otherwise, entitled to a claim of deduction but due to his ignorance or for some other reason could not claim the same in the return of income, but has raised his claim before the appellate authority, the appellate authority should have looked into the same. The assessee cannot be burdened with the taxes which he otherwise is not liable to pay under the law. We, accordingly, restore this issue to the file of the Ld. CIT(A) to consider the claim of the assessee on merits and pass a reasoned order, irrespective of the returned loss/ income of the assessee. The Ld. CIT(A) will be at liberty to call the views/remand report of the AO on this issue and to decide the issue in accordance with law. - Decided in favour of assessee for statistical purposes. Disallowance under section 14A - Held that:- Restore this issue also to the file of the Ld. CIT(A) for adjudication afresh. It is made clear that if the assessee had made no investments for earning of exempt income, no disallowance would be warranted under section 14A. The Ld. CIT(A) will also look into the other contentions raised by the assessee on this issue. Accordingly, this appeal of the assessee is allowed for statistical purposes. 2015 (7) TMI 845 Assessment under section 144A - assessee challenged the orders passed by the AO under section 144 of the Act on the ground that due to personal reasons of the Consultant of the assessee necessary details could not be furnished which resulted in exparte assessment by rejecting retuned loss which is not in accordance with law - Scope of revision u/s 263 - Held that:- The direction given by the Commissioner has to be understood in the context/setting in which such direction is given; in the instant case the show cause notice was issued on specific items and upon calling for the details the Commissioner was satisfied that the AO has not made proper enquiries with regard to certain items which were specifically listed out in the order passed under section 263 of the Act and in this background the matter was set aside with a direction to the AO to make a fresh assessment and thus it has to be assumed that the direction was limited to the issues which were considered by the Revisional Authority. Such being the case the AO has no jurisdiction to touch upon a fresh issue which does not emanate from the notice issued by the Commissioner under section 263 of the Act, while making assessment under section 143(3) r.w.s. 263 of the Act. In the instant case the AO had not treated the entrance fees as revenue receipt despite the fact that the assessee, in the audit report annexed to the return of income, furnished the details with regard to the receipt of entrance fees from members of the club and the mode of recording the same in the books of account. Such being the case it could not have been considered in the proceedings under section 143(3) r.w.s. 263 of the Act. We, therefore, hold that the addition, towards entrance fees, made by the AO, in the proceedings under section 143(3) r.w.s. 263, is beyond the jurisdiction of the AO and therefore deserves to be deleted and we direct the AO accordingly. Though the learned CIT(A) has disposed of the appeals on merits, by following the decision of the Hon'ble Bombay High Court in the case of Diners Business Services P. Ltd.[2003 (4) TMI 56 - BOMBAY High Court] , we need not have to go into the nature of the entrance fees at this stage since the same cannot be subject matter of consideration in the proceedings under section 143(3) r.w.s. 263 of the Act. Addition of ₹ 1 lakh confirmed by the learned CIT(A) under section 14A r.w. Rule 8D in the order passed under section 144 - Held that:- Having regard to the circumstances of the case we accept the plea of the assessee and delete the impugned addition. With regard to the appeal filed by the assessee against the order passed under section 144 of the Act for A.Y. 2006-07 the plea of the assessee was that the learned CIT(A) has no jurisdiction to add the annual subscription of ₹ 15,85,940/- since that was not the subject matter of consideration by the AO under section 144 of the Act. In this case also there is no specific mention about the addition made in the proceedings under section 144 of the Act. Therefore it cannot be inferred that the Commissioner has made the impugned addition afresh while disposing the appeal arising out of the order passed by the AO under section 144 of the Act. We, therefore, do not find any merit in the contention of the assessee. However, going by para 4.1 in the order passed by the CIT(A) it has to be assumed that the CIT(A) has considered this issue. We, therefore, set aside the order of the CIT(A) to that extent since it only arises out of the order passed under section 143(3) r.w.s. 263 of the Act. 2015 (7) TMI 844 Addition on account of press mud - CIT(A) deleted the addition - Held that:- This issue is covered in favour of the assessee by the Tribunal decision in assessee’s own case [2014 (4) TMI 1074 - ITAT LUCKNOW] and for assessment year 2008-09. We decline to interfere in the order of CIT(A) - Decided against revenue Addition on interest payable on loan from Sugar Development Fund - CIT(A) deleted the addition - Held that:- This amount of addition was worked out by the Assessing Officer on the basis that as per Schedule-C of accrued interest, ₹ 3,81,83,228/- has been shown payable as against 3,46,17,476/- shown in the immediately preceding year and on this basis, the Assessing Officer has come to the conclusion that there is accrued interest of ₹ 35,65,752/- relating to the year under consideration. As per the ledger account, available on page No. 9 of the paper book, there is opening balance of ₹ 3,46,17,476/- to which the amount of present years accrued interest of ₹ 51,30,697/- was added resulting into total of ₹ 3,97,48,173/- and against this, there are two payments totaling ₹ 15,64,945/- and after deducting this payment, the net balance has been shown at ₹ 3,81,83,228/-. When the assessee has suo motu added the entire amount of the present year accrual of ₹ 51,30,697/-, no further addition is called for on account of such unpaid interest on secured loans and therefore, the same was rightly deleted by CIT(A) - Decided against revenue Addition on unsecured loan from the U.P. Cooperative Sugar Factories Federation Limited , Lucknow for Cane Price Payment - CIT(A) deleted the addition - Held that:- The Assessing Officer made addition of ₹ 84.20 lac being incremental liability of the present year. Against this objection of the Assessing Officer that the assessee has not established the genuineness of the incremental liability, the CIT(A) has decided the issue on the basis that the assessee received an amount of ₹ 17500000.00 from U.P. Cooperative Sugar Factories Federation Ltd. Lucknow and repaid ₹ 9080000.00 and U.P. Cooperative Sugar Factories Federation Ltd. is regular assessee with JCIT-II Lucknow having PAN-AAAAU 0391D and thus the genuineness of loan cannot be doubted. When this is the admitted position that the assessee has not given any reply to the Assessing Officer regarding genuineness of this liability, CIT(A) was not justified in deleting the addition without obtaining remand report from the Assessing Officer on this aspect and since this was not done by learned CIT(A), we are of the opinion that his order is not sustainable but at the same time, we feel that in the interest of justice, the matter should go to learned CIT(A) to decide the issue afresh after obtaining remand report - Decided in favour of revenue for statistical purposes. Addition on deduction of Share Money from Producer, Members - CIT(A) deleted the addition - Held that:- It is submitted by the assessee before the Assessing Officer that there was opening balance of ₹ 105.88 lac on 01/04/2005 and the amount taken was ₹ 9.46 lac against which allotment of shares was made of ₹ 7.35 lac in the present year and now it has been shown to us that there was further allotment of shares of ₹ 3.75 lac in next year. Hence, if we consider the allotment of shares in the present year and next year, we find that total is more than amount taken in the present year. This is the policy of the assessee that allotment is made when the amount of a grower comes to ₹ 100/- and every year some allotments are made. Considering all these facts, we feel that the addition made by the Assessing Officer is not justified and therefore, we decline to interfere in the order of learned CIT(A) - Decided against revenue Addition on account of nonrefundable deposit - CIT(A) deleted the addition - Held that:- In assessment year 2005-06, this issue was decided by the Tribunal in favour of the assessee by following a judgment of Hon'ble Allahabad High Court rendered in the case of CIT vs. Ramala Sahkari Chini Mills Ltd. [2005 (3) TMI 82 - ALLAHABAD High Court] and also Siddheshwar Sahkari Sakhar Karkhana Ltd. vs. CIT [2004 (9) TMI 6 - SUPREME Court]. No difference in facts could be pointed out by Learned D.R. of the Revenue and therefore, we do not find any reason to take a contrary view in the present year.- Decided against revenue Addition on account of payment of subscription to Federation under section 40(a)(ia) - CIT(A) deleted the addition - Held that:- As relying on assessee previous year judgments wherein held that the services rendered by federation does not come within the definition of any services rendered u/s 194J of the Act, addition correctly deleted by CIT(A). - Decided in favour of assessee. Addition on account of School Fund - CIT(A) deleted the addition - Held that:- From the the order of learned CIT(A), we find that no deduction was made in the present year. We also find that the copy of ledger account is available on page No. 62 of the paper book and as per the same, there is opening balance of ₹ 390062.46 and the same amount is the closing balance and therefore, there is no deduction from cane growers in the present year. In view of this fact that there is no deduction in the present year, the disallowance made by the Assessing Officer is not justified and therefore, we hold that the same was rightly deleted by learned CIT(A). - Decided in favour of assessee. Addition on account of link road - CIT(A) deleted the addition - Held that:- We find that in the assessment order, the Assessing Officer has made addition of ₹ 8,68,560/- by stating that this amount has not been deposited till the filing of return of income and since it is self-generated liability and addition was made. We fail to understand that when this is opening balance then how it can be income of the present year. We decline to interfere in the order of CIT(A). - Decided in favour of assessee. Addition on account of eye relief - CIT(A) deleted the addition - Held that:- We find that this amount was also added by the Assessing Officer by making this observation that this amount of ₹ 6,85,397.79 has not been deposited till the filing of return of income and this is self-generated liability. Copy of ledger account is available on page No. 65 of the paper book and from the same, this is seen that it is opening balance and therefore, this amount also cannot be added in the present year. We, therefore, decline to interfere in the order learned CIT(A).- Decided in favour of assessee. 2015 (7) TMI 843 TDS liability u/s 195 - whether the payment made by the assessee company for purchase of software amounts to royalty and hence the same subject to TDS? - Held that:- The issue is squarely covered in favour of the assessee by the said decision of Hon’ble jurisdictional High Court in the case of DIT Vs. Ericsson AB (2011 (12) TMI 91 - Delhi High Court ) and DIT Vs. Nokia Network Oy (2012 (9) TMI 409 - DELHI HIGH COURT ). We further held that the CIT(A) was quite correct and justified in holding that the consideration paid by the assessee for purchasing of embedded software was to be treated as consideration for supply of goods and therefore, the same was taxable as business income and not as royalty. It was also held that therefore, the payments made by the assessee is not chargeable tax in India and hence not subject to withholding tax u/s 195 of the Act. We are unable to see any perversity ambiguity or any other valid reason to interfere with the finding and conclusion of the CIT(A) and hence we upheld the same. Accordingly, the sole issue/ground raised by the Revenue in both the appeals being devoid of merits is dismissed. - Decided in favour of assessee. 2015 (7) TMI 842 Eligibility of the EOU unit for claiming deduction u/s 10B - AO denied the claim of deduction mainly on the ground that 10B unit was an expansion of business since it was started in F.Y. 1999-2000 and secondly the expenses of 10B unit were shifted to non 10B unit to show and claim higher profits in 10B unit - CIT(A) allowed claim - Held that:- CIT(A) has rightly held that the unit of the assessee was eligible for claim of 10B deduction as per the CBDT Circular No.1/2005 dated 6th January 2005. The Ld. CIT(A) after analyzing the remand reports, details and evidences on the file and considering the submissions of the assessee has very rationally allocated certain expenses of the non 10B Unit to the eligible Unit and thereafter has restricted the disallowance to ₹ 33,54,723/- and has allowed the balance claim of deduction. We do not find any reason to interfere in the well reasoned order of the CIT(A). - Decided against revenue. 2015 (7) TMI 841 Unexplained cash credits in assessee's bank account - addition u/s 68 of the Act, on the ground that the assessee was not able to furnish the explanation regarding the nature and source of cash and other deposits and held the amount as unexplained - CIT(A) deleted the addition - Held that:- CIT(A) after going through the written submissions of the assessee, without seeking a remand report from AO, comes to the conclusion that modus-operandi of the assessee was that first, cash was deposited in the proprietary concern account of assessee in Punjab National Bank ; and in the second stage, it was transferred by the assessee through banking channel to two companies wherein he is the Director ; and in the third stage, the other two Directors, namely, Shri Mukesh Gauam and Shri Chandra Prakash Bhardwaj used to issue cheques to the entry seekers, thus the cash deposited in bank is back in the hands of the depositors. However, we find this modus operandi does not come out of the written submission or emerge from the records before us. We are unable to understand how the CIT (A) accepted the modus simply accepting the version of the assessee without at least calling for the bank statement of the two companies wherein he is the Director to verify whether the contention of the assessee saying that he is only an accommodation entry provider is correct or not; or by calling for remand report and find out to whom accommodation entries were given etc. In the said scenario, we set aside the order of the CIT (A) and remand the matter back to the file of the AO for de novo assessment. - Decided in favour of revenue for statistical purposes. 2015 (7) TMI 840 Validity of re-assessment proceeding - assessee urged that reassessment proceedings were initiated after the expiry of the 4-years from the end of the relevant assessment year without the sanction of the concerned Principal C.I.T. or C.I.T., as the case may be - Held that:- Assessing Officer is not bound to blindly follow the order of Hon’ble Tribunal without applying his mind independently to the facts of the case, as to whether the ingredients that are required to be satisfied before initiation of reassessment proceedings are satisfied or not. The Assessing Officer, in this case, had not applied mind of his own at all and proceeded with reassessment proceedings solely based on the order of the Hon’ble Tribunal. It is trite law that the reassessment proceedings are valid in law only when the Assessing Officer applied his mind independently to the information on hand. In the present case, it is not at all discernible as to whether the Assessing Officer had applied his mind independently and arrived at a belief that on the basis of material, which he had before him, income had escaped assessment. The Assessing Officer had not even recorded his satisfaction about the correctness or otherwise of the finding given by the Hon’ble Tribunal. What is recorded by the Assessing Officer as his “reasons to believe” is nothing but reproduction of a portion of order of Hon’ble Tribunal. The provisions of sub-section (3) of Section 149 mandates that where the income escaping the assessment belongs to a non-resident, and the reassessment is to be made on agent of non-resident in accordance with the provisions of Sec. 163 of the Act, the notice u/s.148 should be issued only within the period of two years from the end of the relevant assessment year up to 30.06.2012 or within a period of six years subsequent to 30.06.2012. In this case, the relevant assessment year is 2006-07. Reassessment notice was required to be issued on or before 31.3.2008. Whereas, in the case on hand the reassessment notice was issued on 30.03.2013, which is clearly beyond the period of limitation prescribed under sub-section (3) of Section 149 of the Act. The amended period of six years is applicable only from the assessment year 2012-13 onwards as per the Explanation to the above sub-section. Thus, viewed from any angle, the reassessment proceedings launched by the Assessing Officer cannot be upheld - Decided in favour of assessee. 2015 (7) TMI 839 Treating the agreement for sale of land as sales - Whether there is a sale of the lands having regard to the terms of agreement of sale and as well as the method of accounting followed by the Respondent-Assessee Company - CIT exercising the power of revision u/s 263 had set aside the assessment to re-examine afresh whether the transaction of the Agreement of Sale, the Respondent Company had with M/s. Leo Edibles and Fats Limited, it amounted to sale or not and to hold this transaction should be treated as a contract of sale - Held that:- The genuineness of the agreement of sale is not doubted by the Assessing Officer. Admittedly, the Respondent-Assessee Company is in the business of real estate. Therefore, the lands which were proposed to be sold were shown / treated as stock-in-trade in the books of the Respondent- Assessee company. Therefore, the definition of term “transfer” as given in the provisions of sub-section (47) of Section 2 of the Act, has no application, because the definition is given in relation to capital asset, which is not clearly applicable to stock-in-trade. Therefore, the law applicable to the immovable property is to be considered to determine whether there is a sale or not. The Hon’ble Apex Court in the cases of CIT vs. Bhurangya Coal Co. [1958 (9) TMI 2 - SUPREME Court] and Alapati Venkatramiah [1965 (3) TMI 21 - SUPREME Court] laid down that the transfer of immovable property was considered to have taken place upon conveyancing and not the date of agreement of sale. In the case on hand, undisputedly it was only an agreement of sale, which was entered into between the Respondent-Assessee Company and M/s. Leo Edibles & Fats Limited. No Sale Deed was either executed or registered. Therefore, applying the law laid down by the Hon’ble Supreme Court in the above cases supra, it cannot be said that there is a sale of lands pursuant to the Agreement of Sale. Therefore, we concur with the order of the learned Commissioner of Income Tax (Appeals) and we do not want to interfere with the order of Commissioner of Income Tax (Appeals). Decided against revenue. 2015 (7) TMI 838 Disallowance of Club membership fee, which included entrance fees and subscriptions paid for acquiring membership in clubs - A.O. disallowed the above amount on the ground that the admission fee gives benefit of enduring nature and hence the same is capital expense in nature - Held that:- Identical issue was considered by the Co-ordinate bench in the case of Skol Breweries Ltd. vs. ACIT (claimed to be present assessee’s old name) [2013 (1) TMI 623 - ITAT MUMBAI] wherein held that similar disallowance made by the Assessing Officer for the AYs 2004-05 to 2006-07 has been deleted by the Commissioner of Income tax (Appeals) and the revenue has accepted the order of the Commissioner Of Income Tax (Appeals. The assessing Officer has not brought out on record that there is a change in the facts and circumstances with respect to the claim of the assessee for the Assessment Year under consideration to that of earlier years 2004-05 to 2006-07. Though, principle of res-judicata is not applicable in the matter of income tax, however, rule of consistency has to be followed as the facts are identical. Since there is no difference in the facts and circumstances with respect to the claim of the assessee for the Assessment Year under consideration vis-a-vis to the Assessment Years 2004-05 to 2006-07 and when the order of the Commissioner of Income Tax (Appeals) has been accepted by the revenue for the AYs 2004-05 to 2006-07, then the claim of the assessee cannot be disallowed for the Assessment Year under consideration. Also see CIT Vs. Samtel Color Ltd (2009 (1) TMI 26 - DELHI HIGH COURT) has held that the admission fee paid to the Clubs is also revenue in nature. - Decided in favour of assessee. Disallowance made u/s 40(a)(ia) - discount given to distributors by way of credit notes for non-deduction of tax at source - Held that:- The relationship between the parties, as per the agreement, in relation to sale and purchase of the product is on principal to principal basis and to that extent the decision of Hon’ble Delhi High Court rendered in the case of Mother Diary (2012 (2) TMI 80 - DELHI HIGH COURT) is applicable. However, the Tribunal took the view that the scheme under which the impugned benefit/incentive is given needs to be examined in order to give a finding as to whether the impugned payment is commission or not. Hence, the matter was set aside to the file of the AO with a direction to verify and examine relevant record and decide the same as per law. Consistent with the view taken in earlier year, we set aside the order passed by AO on this issue and restore the same to his file with the direction to examine the same afresh after affording necessary opportunity of being heard to the assessee and take appropriate decision in accordance with the law. At the time of hearing, the ld A.R placed reliance on the decision rendered by Hon’ble Bombay High Court in the case of CIT Vs. Intervet India Pvt Ltd (2014 (4) TMI 353 - BOMBAY HIGH COURT), wherein it was held that the sale promotion benefit availed by the dealers is not payment of Commission. In the set aside proceedings, the AO should decide the issue by considering the applicability of the above said decision of Hon’ble jurisdictional High Court. - Decided in favour of assessee for statistical purposes. Disallowance u/s 40(a)(ia) r.w.s. 195 and 200 of the Act in respect of depreciation on payment to Foster’s Australia - Held that:- The above said issue is squarely covered in favour of the assessee by the decision of the Tribunal rendered in the case of Skol Breweries Ltd. (supra) to held that the deduction u/s 32 is not in respect of the amount paid or payable which is subjected to TDS; but is a statutory deduction on an asset which is otherwise eligible for deduction of deprecation. Depreciation is not an outgoing expenditure and therefore, the provisions of sec. 40(a) (i) of the Act are not attracted on such deduction.- Decided in favour of assessee . Disallowance made u/s 40(a)(i) of the Act of software charges - Non-deduction of tax at source - Held that:- When it was pointed out that the Explanation 4 is only a clarificatory amendment inserted by Finance Act, 2012 w.r.e.f. 1.6.1976 and hence Explanation 2 may encompass the same under its fold, the Ld A.R submitted that the assessee could not have visualized the amendment that is going to be brought in by Finance Act, 2012, when the impugned payment was made in Financial year 2007-08 and hence the provisions of sec. 40(a)(i) should not be applied on the payments that were hit by prospective amendment. We agree with this contention of the assessee and accordingly direct the AO to delete this disallowance. Decided in favour of assessee . Disallowance of interest on advances given to group entities u/s 36(1)(iii) - Held that:- an identical issue was considered by the Co-ordinate bench in the case of Skol Breweries Ltd. (supra) and restored the matter to the file of the AO to verify the contentions of the assessee that the advances were given out of own funds and not borrowed funds. Consistent with the view taken in the earlier year, we restore this issue to the file of A.O. for fresh examination by duly considering the contentions of the assessee.- Decided in favour of assessee for statistical purposes. Transfer pricing adjustment in respect of royalty payment to Associated Enterprises (AE) - A.R submitted that the assessee has undertaken fresh Transfer pricing study by taking fresh set of comparables, by following the directions given by the Tribunal in AY 2007-08 with regard to the approach to be followed for benchmarking royalty transaction. He further submitted that the TPO has recently passed the order for AY 2007-08 in the set aside proceedings and has accepted the fresh set of comparables furnished by the assessee. Accordingly, he prayed that the assessee may be given one more opportunity in this matter to represent its case in the current year also. Thus restore the same to his file with the direction to examine this issue afresh by making reference to the TPO and decide the same in accordance with the law. - Decided in favour of assessee for statistical purposes. 2015 (7) TMI 837 Assessment of long term capital gain as unexplained cash credits u/s 68 - Held that:- Persuing the decision relied upon by the assessee in the case of “Smt.Rooplata Jain vs. ACIT” (2015 (7) TMI 637 - ITAT MUMBAI), wherein, the Tribunal has considered the identical issues of purchase and sale of shares of M/s Robinson Worldwide Trade Ltd and has observed that the evidences furnished by the assessee with regard to the purchase and sale of shares should have been discreetly examined and then a holistic view of the matter should have been taken by the tax authorities. The Tribunal in the said case has restored the matter for fresh examination to the assessing officer. The Tribunal has also directed the AO to take into account the decision rendered by the co-ordinate bench in the case of “Shri Arvind M Kariya” [2011 (12) TMI 509 - ITAT MUMBAI]. Thus we set aside the order of Ld CIT(A) and restore all the issues to the file of the AO to decide the same a fresh - Decided in favour of assessee for statistical purposes. Unexplained investments in relation to jewellery found during the search action - Held that:- As per the CBDT circular No.1916 dated 11.5.1994, the gold jewellery and ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family need not be seized. In such circumstances, unless the Revenue shows anything to the contrary, it can be safely presumed that source to the extent of the jewellery stated in the circular stands explained. Even as per clause (iii) of the CBDT Circular (Supra), it has been mentioned that the authorized officer may, having regard to the status of the family, and the custom and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. We further find that the AO the addition made by the AO also includes ₹ 61500/- on account of silver items. As observed above, out of the seized jewellery worth about ₹ 24.75 lakhs, the assessee explained the source of acquisition of the jewellery worth about ₹ 8.85 lakhs which has been duly disclosed in the returns of his family members. It is also evident that the assessee is a Charted accountant and his family is having good financial status. The possession of a jewellery worth value of about ₹ 24.75 lakhs by the assessee and his family members cannot be said to be improbable or beyond the source of income of the assessee and his family members. Some of the jewellery had been duly shown by the wife of the assessee in her return even prior to her marriage. His mother has been assessed to income tax for the last 30 years. Assessee himself is assessed to tax for the last 20 years. Assessee and his mother have also disclosed a part of the jewellery purchased in earlier years in their returns. Thus in the light of CBDT circular and decision of “CIT vs. Ratanlal Vyaparilal Jain”(2010 (7) TMI 769 - Gujarat High Court ) as well as the explanation submitted by the assessee, it cannot be said to be a case of unexplained jewellery. - Decided in favour of assessee. 2015 (7) TMI 836 Addition u/s 41(1) - assessee submitted that there was a family settlement between the group members and the assets and liabilities were reallocated - CIT(A) deleted the addition - Held that:- After going through the provisions of section 41(1) of the income tax act, we find that the same are not applicable to the facts of the assessee case. We also find that the AO has made the addition of ₹ 5.64 crore by invoking provision of sec. 41(1) of the income tax without stating how the provision are applicable to the assessee's case. Mere cessation of liability does not result into fit case of sec. 41 (1) of the I.T. Act. Assessee has submitted that assessee was not incurred any loss/expenditure/trading liability which is subsequently recovered by him is taxable as income in the year of recovery. We find that the assesse is squarely covered by the following judgments wherein it has been held that whenever, an amount is borrowed towards capital account and the loan is waived off, the same cannot be brought to tax net either in terms of sec-41 (1) or 28(iv) of the Act. See CIT vs. Tosha lnternational Ltd. [2008 (9) TMI 31 - HIGH COURT DELHI] & CIT vs. Phool Chand Jiwan Ram (1980 (4) TMI 29 - DELHI High Court) We further note that it is well settled law that where no deduction/allowance has been made in respect of loss, exp/liability in the assessment year or in any earlier years, cessation of such liability cannot be taxed under section 41(1) of the Income Tax Act. The assessee has clearly established that the adjustments are on capital side and there is no case for invoking provisions of S.41(1) since the liability waived by the creditor was never claimed as revenue expenditure. - Decided in favour of assessee. 2015 (7) TMI 835 Unexplained cash credit - addition u/s 68 - Held that:- The creditors given loans to the assessees through Demand Draft and the assessees furnished the details of the same alongwith confirmation letter and also explained mode of transaction, which is through banking channel and also repaid the said loan through banking channel. Considering these facts, in our opinion the assessee herein had discharged their onus placed on them. The fact that credit entry shown in the name of a person other than the actual lender of the money would not by itself, be relevant where cogent evidence is independently available. Once the existence of the creditors is proved and such person owed the credits which are found in the books of accounts of the assessees, the onus stand discharged and the assessee is not further required to prove the source of income from which the creditors would have acquired the money and, therefore, addition u/s.68 cannot be sustained in the absence of anything to establish that source of creditors deposit, flew from the assessee itself. In our opinion, creditor having appeared before the Assessing Officer in response to the summons issued u/s.131 of the Act before the Assessing Officer and confirmed by filing of confirmation letter, the transaction cannot be doubted. The assessee discharged onus placed upon them by establishing the identity of the creditor, his credit worthiness, genuineness of the transaction. Being so, in our opinion the addition made in this case u/s.68 is unwarranted. The same is deleted. - Decided in favour of assessee. 2015 (7) TMI 834 Disallowance made under section 14A assessee has agitated the action of the Ld. CIT(A) in sustaining the disallowance on account of administrative expenses at the rate of 0.5% of the average value of investment as per Rule 8D(2)(iii) as against the suo-moto disallowance of ₹ 2 lakh offered by the assessee - Held that:- Considering the nature of investments of the assessee during the year under consideration, we do not find any justification on the part of the AO in straightway applying Rule 8D and without recording any dissatisfaction in relation to the suo-moto working made by the assessee. Even otherwise, facts for the year under consideration are squarely cover with the decision of the Tribunal in the own case of the assessee in the subsequent year. We therefore do not find any justification for the Ld. CIT(A) to confirm the disallowance under Rule 8D(2)(iii) of the Income Tax Rules without considering the working/computation offered by the assessee and also without ignoring the nature of investments made by the assessee. The order of the Ld. CIT(A) confirmed the disallowance under Rule 8D(2)(iii) is therefore set aside. In view of our observations made above, the disallowance under section 14A is restricted to the suo-moto disallowance of ₹ 2 lakh offered by the assessee and the remaining disallowance over and above the disallowance offered by the assessee himself is therefore ordered to be deleted. - Decided in favour of assessee. Remission of loan liability - CIT(A) in holding it as capital receipt and not chargeable to tax - Held that:- CIT(A) has discussed the nature of the loan amount and has held that the waiver was not in respect of any benefit in kind or of any perquisite. The waiver was of the principle loan amount in cash. The assessee had not claimed any deduction in respect of loss, expenditure or trading liability in relation to the loan amount. The waiver was of the principle amount of loan for capital asset. He, thereafter, relying upon the decision of the Hon'ble Jurisdictional High Court, in the case of "Mahindra & Mahindra Ltd. vs. CIT" [2003 (1) TMI 71 - BOMBAY High Court] held that the waiver of the loan amount was a capital receipt not taxable as business income of the assessee. - Decided in favour of assessee. 2015 (7) TMI 833 Eligibility of claim under section 10A - AO disallowed assessee's claim since the assessee did not furnish details about new machinery purchased and used in 10A unit. - CIT() allowed claim - Held that:- On going through the order of the Commissioner of Income Tax (Appeals) we find that assessee has purchased machines after approval of STPI. Computers and stentura machines were imported thereafter. The return of income for the assessment year 2001-02 was filed on 28.3.2002 duly accompanied by audit report and report in Form No.56F and deduction under section 10A was claimed as per law. The Assessing Officer in the remand proceedings except stating that assessee has not co-operated in the assessment proceedings has not offered any comments on the grounds preferred by the assessee before the Commissioner of Income Tax (Appeals). None of the findings of the Commissioner of Income Tax (Appeals) have been rebutted by the Revenue with evidences. In such circumstances, we uphold the order of the Commissioner of Income Tax. - Decided in favour of assessee. Clim of depreciation - CIT(A) denied depreciation for the reason that assessee has not carried on any business during the year and the assets were not put to use - Held that:- As relying on case of ACIT Vs. Chennai Petroleum Corporation Ltd. [2009 (8) TMI 970 - ITAT CHENNAI] in order to claim depreciation under s. 32 it is not necessary that the machinery in question should have been actually used in the relevant previous year for the purpose of business and it is sufficient if the same is kept ready for use during the relevant previous year, though not actually used due to circumstances beyond the assessee's control. See. 32 has received several amendments but there is no amendment which has clarified that depreciation would be allowed only if the asset in question was actually used during the relevant previous year and merely keeping ready for being used in the business was not sufficient. When the interpretation of s. 32, especially of the word "used" appearing in that section was the subject-matter of a judgment of the Bombay High Court as long back in 1937 in the old IT Act, the same word which is used in s. 32 of the 1961 Act must receive the same construction. Therefore, the assessee is entitled to the claim of depreciation on the gas sweetening plant which was kept ready for use during the entire previous year, though not actually used due to lack of raw material - Decided in favour of assessee. 2015 (7) TMI 832 Exemption u/s 54F - Capital gain - joint development agreement - Since the assessees are having multiple flats as their shares from the builder, the Assessing Officer disallowed the claim under Section 54F - whether gain arises for assessment on transfer of the land by all the assessees along with three others - Held that:- The assessees entered into an agreement and handing over the physical possession of the property to builder allowing it to enjoy 60% of the land in lieu of 40% of the constructed area. The transaction between the assessees and the builder is by way of arrangement or agreement which has the effect of transferring the landed property for enjoyment of the builder. In other words, the assessees transferred 60% of the land area to the builder for its enjoyment. Therefore, this Tribunal is of the considered opinion that there was a transfer on 8.12.2006 within the meaning of Section 2(47)(i) and 2(47)(vi) of the Act. Therefore, the relevant transaction took place in the financial year 2006-07 which falls in the assessment year 2007-08. Hence capital gain, if any, is assessable only in the assessment year 2007-08 and certainly not in the year 2009-10. - Accordingly, we hold that no capital gain arises for assessment in the year under consideration. - Decided in favour of assessee. Entitlement to exemption under Section 54F - when the assessees received eight flats/residential units from the builder in lieu of cost of the land transferred to the builder, whether the assessees are entitled for exemption under Section 54F of the Act? - Held that:- The assessee entrusted the construction of the building to the builder in lieu of 60% of the landed area transferred to the builder. Therefore, the assessees, from the date on which the transfer was made by entering into agreement for joint development, are in the process of constructing the residential house. Therefore, this Tribunal is of the considered opinion that the assessees are entitled for exemption under Section 54F of the Act. We have gone through the judgment of Madras High Court in V.R. Karpagam (2014 (8) TMI 899 - MADRAS HIGH COURT) wherein the assessee obtained five independent flats in a multi-storied construction and claimed exemption as independent unit under Section 54F of the Act. The Madras High Court, after referring to the amendment made with effect from 1.4.2015, found that the assessee is eligible for exemption under Section 54F of the Act. In view of the judgment of the Madras High Court, this Tribunal is of the considered opinion that the assessee are eligible for exemption even though multiple flats were allotted to them in lieu of cost of 60% of the land allotted to the builder. - Decided in favour of assessee. 2015 (7) TMI 831 Allocation of expenses of the Non-10A unit to the 10A unit - Minimum Alternate Tax (MAT) on SEZ units - Salary & Bonus Expenses allocated in the ratio of turnover of both the units - Held that:- AO has very scientifically allocated the expenditure of the Non-10A unit to the 10A unit. The assessee had also agreed for allocation of expenditure of Non-10A unit to 10A unit on proportionate basis. The grievance of the assessee that the allocation was on higher side does not seem to be justified. However, so far the contention of the Ld. A.R. that the assessee had already debited the interest expenditure allocable to the 10A unit and that the further apportionment of interest expenditure from that of Non-10A unit was not justified is concerned, we restore this issue to the file of the AO for this limited purpose with a direction to examine as to whether the assessee has itself allocated the interest expenditure towards 10A unit out of the interest expenditure allocated by the AO from Non-10A unit to 10A unit, if found correct, then to take it into consideration and decide accordingly. - Decided partly in favour of assessee for statistical purposes. Disallowance u/s 40(a)(ia) paid to Star India Pvt. Ltd. on account of advertisement - Held that:- Assessee while drawing our attention to the page 76 of the paper book, has submitted that a certificate dated 31.05.07 u/s 197 of the Income Tax Act has been issued in favour of Star Ltd., therefore there was no requirement of deduction of TDS for the sums paid by the assessee to the Star Ltd. Admittedly, the above stated document was not presented by the assessee before the AO at the time of assessment proceedings. This document is the shape of additional evidence and is required to be examined by the AO. We accordingly, restore this issue to the file of the AO for verification as to whether the assessee was not required to deduct TDS for the payments made to Star Ltd. and if found correct, the AO to give relief accordingly.- Decided in favour of assessee for statistical purposes. Setting-off the losses of non SEZ unit with the profit of SEZ unit for the purpose of determining deduction U/s 10A - Held that:- This issue is squarely covered with the decision of Hon’ble Bombay High Court in the case of "CIT vs. Black & Veatch Consulting Pvt. Ltd.” (2012 (4) TMI 450 - BOMBAY HIGH COURT ) wherein held that the deduction under section 10A has to be given at the stage when the profits and gains of business are computed in the first instance and thus the brought forward unabsorbed depreciation of the unit which is not eligible for deduction u/s 10A cannot be set off against current profit of the eligible unit for computing the deduction under section 10A. - Decided in favour of the assessee. Not reducing deduction available u/s 10A of the Income Tax Act, 1961 from the book profit for the purpose of determining total income U/s 115JB - Held that:- This issue is also covered by the decision of the co-ordinate Bench of the Tribunal in the case of "Genesys International Corpn. Ltd. vs. ACIT” [2012 (12) TMI 491 - ITAT MUMBAI] wherein observed that by the SEZ Act, sub-section (6) to section 115JB was also inserted providing that provisions of section 115JB shall not apply to the income accrued or arisen on or after 1.4.2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. Hence, income of units located SEZ will not be included while computing book profit for the purpose of MAT as per section 115JB(6) of the Act.- Decided in favor of assessee. 2015 (7) TMI 830 Addition on written back liability - addition of ₹ 6,94,272/- outstanding in the books in the name of Shri Amir Mohammad (wrongly written as Amit Chand in this year) - assessee submitted that there was a typographical mistake in the books of account of the assessee, wherein wrong name was written as Shri Amir Chand whereas the correct name was Shri Amir Mohd which was correctly shown in the details of books of accounts filed before the AO - Held that:- When the assessee has shown this liability as creditor in the previous assessment year in the name of Shri Amir Mohd then this inadvertent mistake in the entry of name cannot create any doubt about the existing liability of assessee during the relevant period under consideration. We further observe that in the similar set of facts and circumstances, the ITAT Delhi ‘G’Bench has allowed appeal of Shri Sunil Kumar Bhatia (2013 (10) TMI 699 - ITAT DELHI) wherein held that there cannot be cessation of liability twice and the present case is squarely covered in favour of the assessee by this order. We may also point out that when the assessee has offered impugned liability to tax in AY 2013- 14 and tax has been paid thereon then the similar addition cannot be upheld for AY 2007-08 an addition made by the AO and upheld by the CIT(A) cannot be held as sustainable and thus, in accordance with law and we direct the AO to delete the same. Decided in favour of assessee. 2015 (7) TMI 829 Disallowance of interest expenditure u/s 14A - Held that:- When assessee was having enough non-interest bearing surplus fund to make the investment and department has failed to establish any nexus between the borrowed funds and investment, presumption would be that assessee has made investment utilizing its own funds. The decisions relied upon by ld. DR would be of no help to department as they are not on the proposition, whether interest expenditure will be disallowable where assessee proves that investments were out of non-interest bearing surplus fund. In the aforesaid view of the matter, we do not find any reason to sustain the disallowance of interest expenditure made by AO under rule 8D(2)(ii) read with section 14A of the Act. However, as far as disallowance made under rule 8D(2)(iii) is concerned, we are of the view that such disallowance has to be sustained in view of specific provision contained under sub-section (3) of section 14A, which provides that even in a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of total income, still disallowance can be made by AO. In view of the aforesaid, we direct AO to compute disallowance @ 0.5% of the total average investment in terms with rule 8D(2)(iii) of IT Rules. - Decided partly in favour of assessee. Customs 2015 (7) TMI 852 Denial of duty drawback claim - export consignment on which duty drawback was claimed by the petitioner had not been paid for by the foreign buyer - Held that:- once it is inescapable that despite the petitioner’s participation before the revisional authority, no other result could have followed, the complaint of breach of natural justice in declining the adjournment sought is of no merit. - The provision relied on from the Handbook of Procedures does not expressly apply to duty drawback. Indeed, duty drawback is covered by Section 75 of the said Act. The second proviso to sub-section (1) of Section 75 of the said Act clearly stipulates that when the payment for an export transaction is not received with the time permitted by the Indian exporter, the drawback would be deemed to never have been allowed unless exceptions are made by rules by the Central Government. Fundamental premise of the petitioner is completely flawed. It does not stand to reason that an exporter whose export transaction has not been paid for by the foreign buyer would jeopardise the Central Government twice over in not only availing of the cover provided by ECGC, which is a government organisation, but also seeking the benefits of the duty drawback under Section 75 of the said Act despite the failed export transaction. The basis for allowing duty drawback is that the economy would gain in the export transaction that would have been completed by the importer who has used some imported components for ultimately manufacturing the goods that are sought to be exported. When the export transaction fails in the sense that there is no accrual of foreign exchange from the overseas buyer, there can be no duty drawback that can be claimed by the exporter unless there is a specific exemption stipulated in any rules made by the Central Government. - Decided against assessee. 2015 (7) TMI 851 Demand of 1% countervailing duty - Import of muriate of potash - Held that:- Notification No. 12/2012-C.E. dated 17th March, 2012 is quite explicit that the fertilizers imported for the purpose of use in the manufacture of other fertilizers are exempted from countervailing duty. This position is accepted by the department, but it disputes whether the petitioner is utilising such materials for manufacture of fertilizers. - importation of the goods cannot be held up - Respondent-authorities directed to provisionally release the above goods after filing of the manual bill or bills of entry by the petitioner, within five working days of arrival of the goods, upon the petitioner furnishing a bank guarantee to secure the 1% countervailing duty and upon payment of the basic duty. - Petition disposed of. 2015 (7) TMI 850 Fraudulent claim of undue DEPB benefits - willful mis-statement of FOB value of textile article/fabrics exported - Over Valuation of goods - Penalty imposed on officers for abatement u/s 114 - Held that:- while discarding the value of the goods which have been exported, has relied upon mainly the overseas inquiry conducted, certificate of BTRA and the action of the exporters regarding submitting false BRCs for obtaining DEPB licence, is erroneous for more than one reason - Charts C-1 & C-2 annexed to the show-cause notice purportedly supposed to be collated from the overseas inquiry does not have any signature of the officers. It is pertinent to note that these reports as per Chart annexed at C-1 & C-2, the basis was not divulged to the appellant to defend against such inquiry. In our considered view, the adjudicating authority should have given copy of the overseas inquiry conducted by the department, if any, so that the appellant could have defended or put forth his views on the same. To that extent, we find that the order seems to have been passed in violation of the principles of natural justice. - No contemporary value on identical or similar goods were brought on record in order to ascertain the contemporaneous prices of the goods sought to be exported. In the absence of above, we find that the impugned order is passed in violation of principles of natural justice and needs reconsideration by the adjudicating authority in respect of M/s. Ruchika International and their partners. - Matter remanded back. There is no abetment on the part of officers inasmuch as all the shipping bills were signed after examining the documents which were attached. The shipping bills and the documents attached and produced before these three departmental officers were indicating the prices, which they felt were correct in the facts of these cases and being recently posted may have lacked in training in clearance of export goods; even otherwise, the only violation which was highlighted in the impugned order was these officers have indicated that they have drawn the samples and maintained the records, but in fact they have not done so; for the charge of abetment - impugned order imposing penalties on these officers under the provisions of Section 114 of the Customs Act, 1962 is unwarranted and unsustainable - Decided in favour of appellants. 2015 (7) TMI 849 Suspension of Customs House Broker License - Regulation 19 (1) of Customs Brokers Licensing Regulation, 2013 - Misdeclaration of goods - Held that:- Offence was committed on 09.01.2014 and the offence report was submitted on 15.10.2014 and the suspension order was issued on the same day under Regulation 19(1) of the said Regulation and also fixed a post decisional hearing on 30.10.2014. But, the Commissioner of Customs had not issued order for continuation of suspension under Regulation 19(2) within the stipulated period. Proviso to Regulation 19 (1) provides that after passing an order for continuing of the suspension, the further procedure thereafter shall be followed in Regulation 20. - investigation report was submitted on 15.10.2014 as revealed from order dated 15.10.2014, issued under Regulation 19(1) and no order was passed within 30 days from the date of the said order under Regulation 19(2). The impugned order dated 03.3.2015 under Regulation 19(2) was issued after about five and half months in a wrong premises that “since the investigation of the case is still in progress” and no enquiry under Regulation 20 was initiated till date and such order can not be sustained and is liable to be set-aside. - Decided in favour of appellant. Service Tax 2015 (7) TMI 858 Waiver of pre deposit - Penalty u/s 76, 77 & 78 - Bar of limitation - Held that:- Sub-Section (3) of Section 85 of the Finance Act, 1994 provides that an appeal shall be presented within three months from the date of receipt of the decision or order of the Central Excise Officer, relating to service tax, interest or penalty under this Chapter: provided that the Collector of Excise (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of three months, allow it to be presented within a further period of three months. Mr. R Deb Nath, learned CGC appearing for the respondents by referring to the said proviso to Sub-Section (3) of Section 85 of the Finance Act, 1994 strenuously contended that the limitation period of three months for filing the appeal against the order can be extended for a further three months that too only when the Collector of Excise (Appeals) satisfied that the appellant was prevented for sufficient cause from presenting the appeal within 3 (three) months. Appellant contended that the appeal could not be filed against the original order i.e. un-certified copy furnished by the Commissioner under the letter dated 17.08.2010 and it was only for private use. Therefore, the appellant filed the application for obtaining the certified copy of the order dated 17.08.2010, which must bear a court fee stamp for filing appeal. He further contended that the original order i.e. un-certified copy furnished under the said letter dated 17.08.2010 did not bear a court fee stamp - appeal is remitted back to the tribunal to decide the issue indicated - Decided in favour of assessee. 2015 (7) TMI 857 Waiver of pre deposit - Business Auxiliary Service - services rendered to Computerized Reservation System (CRS) companies - Tribunal has found that prima facie the activity is taxable as BAS - Held that:- It may be that the CRS companies receive huge amounts from the airlines so that they access their ticketing systems and to the maximum. Thereafter the system of CRS companies are accessed by these travel agents like the Assessee. The Tribunal will have to ultimately hold that such of the airlines which give incentive to the CRS companies allowing them to get the benefit of payment made to the CRS companies by them. Meaning thereby if travel agents access the system of CRS companies and in most cases to book tickets of the airlines the financial incentives to the CRS companies by the Airlines reveals the marketing and promotional agreement. Tribunal should not have directed that the entire amount which according to it is a demand within the period of limitation needs to be secured. If the Tribunal has to devote at least 5 to 6 paragraphs to find out what is the nature of the service allegedly provided and to whom and whether that falls within the definition, then, this was a imminently arguable case. It could not be termed as absence of a prima facie case in any event. In the circumstances, we think that the Tribunal should not have rendered any conclusion and particularly that the service rendered by the Assessee merits classification as business auxiliary service as defined in law - Patial stay granted. 2015 (7) TMI 856 Classification of service - Clearing and forwarding agent service - whether the services were liable to service tax under the provisions of the Act - Held that:- Assessee is engaged in the business of trading in coal, transportation of coal by road and supervision of coal loading. In the order of the Commissioner as also in the Tribunal's order, it is recorded that the appellant entered into a contract with M/s. Ambuja Cement Limited for movement of coal from various collieries to the latter's plants. The main activity undertaken by the appellant included supervision of coal loading and transportation of coal by road - Decision in the case of M/s. Coal Handlers Private Limited vs. Commissioner of Central Excise, Range Kolkatta-I [2015 (5) TMI 249 - SUPREME COURT] followed - Decided against Revenue. 2015 (7) TMI 855 Disallowance of Composition Scheme for works contract service - benefit of 67% abatement under Notification No. 1/2006-S.T. - Availment of Cenvat credit of input services - whether for ongoing contracts which commenced prior to 1-6-2007 and Service Tax was paid under respective services, Composition Scheme could be availed of with effect from 1-6-2007 classifying the service under works contract service has been decided by Andhra Pradesh High Court in the case of Nagarujuna Construction Ltd. holding that for such ongoing contracts, the assessee cannot switch over to Composition Scheme - Held that:- There can be no doubt that the classification of service is to be determined in terms of the nature of service rendered vis-à-vis the definition of various services as applicable on the date of rendition of service. The Board’s circular dated 4-1-2008 is in disharmony with law to the extent it holds that with effect from 1-6-2007 the classification cannot be changed for ongoing projects even if the service rendered is more specifically covered thereunder. Thus even if the classification of service prior to 1-6-2007 in respect of ongoing contracts was under CICS/CCS, the same would be classifiable as works contract service (WCS) with effect from 1-6-2007 if the service rendered was more specifically covered thereunder and if the classification is held to be under WCS the benefit of Notification No. 1/2006-S.T. would not be applicable with effect from 1-6-2007 as the said notification is not applicable to works contract service. However, the benefit of Rule 2A of the Service Tax (Determination of Value) Rules, 2006 or any other applicable notification can be claimed by the appellants subject to producing the required evidence. As regards denial of the benefit of abatement under Notification No. 1/2006-S.T. on the ground that the appellants had taken Cenvat credit in respect of input services, it is to be pointed out that the said notification does not debar availment of Cenvat credit on input services. - Decided in favour of assessee 2015 (7) TMI 854 Rectification of mistake - Refund claim - Unjust enrichment - Held that:- Tribunal does not appreciate the filing of ROM application at this stage, for meet the ends of justice, we direct the Registry that the ROM application filed on or before 11-11-2014 by the Revenue be listed on top of the Board before the appropriate Bench on 21-11-2014. Further, we direct the concerned Commissioner to file an undertaking before this Tribunal to the effect that in case the Revenue does not succeed in the ROM application, the refund shall be disposed within three working days from the date of disposal of the ROM. - Appeal disposed of. 2015 (7) TMI 853 Demand of service tax - Franchisee service - whether franchiser is required to pay service tax on the sale of various proprietary items such as pizza dough as also cheese, etc. when the same are being sold by him to the franchisees - Held that:- sale of material, on which the appellant has also admittedly discharged sales tax, cannot be included in the value of 'Franchise Services'. Accordingly, we dispense with the condition of pre-deposit - stay granted.
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