Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 28, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
TMI Short Notes
News
Notifications
Customs
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71/2015 - dated
24-7-2015
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Cus (NT)
Appoints the Additional Commissioner of Customs - Kolkata
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70/2015 - dated
24-7-2015
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Cus (NT)
Appoints the Joint or Additional Commissioner of Customs - Hyderabad
Income Tax
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163/2015 - dated
4-6-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure on Akshayapatra Foundation, Bangalore
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146/2015 - dated
4-6-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On Narayan Seva Sanstha, Rajasthan
VAT - Delhi
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No. F.3 (11)/Fin.(T & E)/2009-10/ds VI/584 - dated
22-7-2015
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DVAT
Appointment of Sh.Vijay Kumar, IAS as Commissioner, Value Added Tax
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Taxability of the receipts by a cooperative housing society from a portion of sale consideration received by its member at the time of transfer of the plot - Addition on account of premium account received for transfer of plots - Not taxable - HC
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Disallowing the claim u/s. 80IC - The same business was continued but only a part was shifted to Kala Amb. Therefore, it is a reconstruction of the existing business and assessee has failed to establish its claim before the revenue authorities. - AT
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Remuneration paid to director - Since there is no evidence that he has rendered any services to the assessee company, we are of the view that no remuneration can be paid to the assessee only for the simple reason that the Board has passed a resolution in this regard. - AT
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Disallowance of repayment of gold loan to SBI - As the payment has to be made by assessee company on the basis of market value of the gold on the date of closure of account, excess expenditure incurred on such date of payment is allowable expenditure - AT
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Since AO has not conclusively proved the fact that there is an arrangement between assessee and its AE by which the transactions were so arranged as to produce more than the ordinary profits in the hands of assessee, disallowance of part deduction claimed by applying the provisions of section 80IA(10), in our view is not justified - AT
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Disallowance of donation given to flood victim collected from the employees’ salaries - The assessee has not claimed any deduction as such from its business profit, the amount collected from the employees’ salaries does not involve element of income in the hands of assessee because the assessee has only acted as a facilitator - AT
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The expenditure, if incurred in an earlier year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year - AT
Service Tax
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Tribunal's order granting conditional stay has been complied with albeit belatedly - Tribunal could not have dismissed the appeal preferred by the assessees without adjudication on merits. - HC
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Denial of Refund claim - Unjust enrichment - The Assistant Commissioner while dealing with the application for refund was not justified in sitting in judgment over the findings of Commissioner (Appeals) - HC
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Business Auxiliary service - service being rendered by the assessee for the Transport Department under the Motor Vehicle Act - Not liable to service tax as BAS - HC
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Cenvat Credit - Trading activity - trading became an exempted service only after 1.4.2011 (deemed). Therefore during the relevant period, the appellant was required to reverse the proportionate credit - prima facie case is not in favor of assessee - AT
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Repair work of shop floor in the Ordinance factory owned and control by the Government of India, Ministry of Defense, does not qualify under the category of 'commerce or industrial construction service' and accordingly - not taxable - AT
Central Excise
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Classification - Manufacture of Pulp from the waste of jute bags or gunny bags - Revenue could not point out to a single dictionary or could take us through any technical literature which even remotely suggests that jute gunny bags come under the category of 'rags' in the context of paper technology - SC
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Condonation of delay - Order served on unauthorised person who was a ‘Kitchen boy’ employed on daily wages - Order must be tendered on the concerned person or his authorized agent, in other words, on no other person, to ensure efficaciousness - SC
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Condonation of delay - Revenue appeal - eight days delay in issue of the review order under Section 35-E(1) by the Committee of Chief Commissioners - Full Bench decision of the tribunal in the case of Monnet Ispat & Energy Ltd. (2010 (8) TMI 50 - CESTAT, NEW DELHI) endorsed and held has correct in favor of revenue. - SC
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Valuation - Captive consumption - Whether the provision of Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 are applicable to the case at hand or not - notional profits could be taken into consideration and added while arriving at the value of captive material - SC
VAT
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Partial exemption scheme - to increase inter-State sales and decrease the quantum of branch transfers - constitutional validity of Sections 26 and 82(3) of the Rajasthan Value Added Tax Act, 2003 - declared illegal - HC
Case Laws:
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Income Tax
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2015 (7) TMI 878
Transfer exigible to tax by reference to Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Whether there was grant and assignment of various rights in the property by the appellant in favour of THDC alongwith handing over physical and vacant possession, the same tantamount to “transfer”? - Whether ITAT has ignored rights emanating from the JDA, legal effect of non registration of JDA, its alleged repudiation etc.? - Held that:- Perusal of the JDA dated 25.2.2007 read with sale deeds dated 2.3.007 and 25.4.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-rata transfer of land. No possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.2.2007 so as to fall within the domain of Section 53A of 1882 Act. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.2.2007 having been executed after 24.9.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. In view of cancellation of JDA dated 25.2.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic. The Tribunal and the authorities below were not right in holding the assessee-appellant to be liable to capital gains tax in respect of remaining land measuring 13.5 acres for which no consideration had been received and which stood cancelled and incapable. - Decided in favour of assessee.
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2015 (7) TMI 877
Taxability of the receipts by a cooperative housing society from a portion of sale consideration received by its member at the time of transfer of the plot - Addition on account of premium account received for transfer of plots - Held that:- It could be seen that in various decisions, this Court as well as Bombay High Court consistently held that contribution made by the members to the general fund of the society in various forms would be governed by the principle of mutuality. Particularly, in case of premium collected by the society from its outgoing member from out of a portion of his profit, the principle of mutuality would apply and the receipt would not be taxable as income of the society. The Supreme Court in case of Chelmsford Club (2000 (3) TMI 4 - SUPREME Court , further held that surplus of a club which provided recreational and refreshment facilities etc. to its members and guests cannot be taxed on the principle of mutuality since such surplus would be used for maintenance and development of the club. Individual plots are allotted to its members who enjoy occupational right, but ownership of the land always remains with the society. On the plots of land so allotted, the member would be allowed to construct his residential unit. Upon transfer of the plot by a member, the society would collect 50% of the excess or popularly referred to as 'premium'. The fund so collected would be appropriated in the common fund of the society to be utilised as per the byelaws which envisage development of common facilities and expenditure for common amenities. A part of the surplus would be diverted to the reserve fund of the society. Surplus could also be utilised for waiver of the lease amount or for the health, education and social activities of the members. It can thus be seen that there is total identity of contributors of the fund and recipients from the fund. The contribution comes from the outgoing member in the form of a portion of the premium and it is utilised for the common facilities and amenities for the members of the society. Different modes of application of the funds make it clear that the funds would be expended for common amenities or for general benefit of the members; or be distributed amongst the members in the form of dividend or lease rent waiver. It can thus be seen that it is impossible for the contributors to derive profit from contribution made by themselves to a fund since such fund could only be expended or returned to them. Creation of the society was primarily for the convenience of the members to create a housing society where individual members could construct their residential units and common facilities and amenities could be provided by the society. It was essential thus that a combined activity is carried on by a group of persons who would be the members in the cooperative society. All the tests referred to in the Privy Council decision in case of The English & Scottish Joint Cooperative Wholesale Society Ltd. (1948 (4) TMI 2 - PRIVY COUNCIL ), stand fulfilled. Decided in favour of the assessee
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2015 (7) TMI 876
Provision made towards anticipated warranty claims - whether an allowable deduction - whether Tribunal was correct in holding that a provision for warranty claim made by the assessee for any claims made by the assessee's customers in future in respect of defect on repairs towards goods sold should be allowed as an expenditure during the current assessment year itself? - Held that:- It is discernable that the assessee takes into consideration the past historical cost, cost escalation, length of warranty with regard to the equipment and spares, increase in volumes over such period etc. It is also clear that the actual expenses incurred on warranty are debited to provisional account and not to the Profit and Loss Account. On consideration of the entire facts and circumstances the provisions made reflect accrual of liability that the impugned provisions is computed on scientific and reasonable basis and hence they declined to interfere with the conclusions drawn by the first Appellate Authority which had granted the relief. This is the basis on which the assessee was expected to put forth his claim for warranty by virtue of the impugned orders where an order of remand was passed. The said order is in conformity with the law declared by the Apex Court in the case of Rotork Controls India (P) Ltd. v. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA ] and therefore once a claim of warranty is made after undertaking the aforesaid exercise before putting forth a claim, we are satisfied from the material on record that the claim made by the assessee is in accordance with law and in accordance with the judgment of the Supreme Court and therefore no case for interference with the said order is made out much less for remanding the case to the Assessing Authority - Decided in favour of assessee. Entitlment to deduction under Section 80HHC - without including the sales tax and excise duty collected during the assessment year by the assessee when computing the total turnover before computing the deduction? - Held that:- The Apex Court in the case of CIT v. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME Court] held that the excise duty and sales tax cannot form part of turnover in the formula contained in Section 80HHC of the Act and therefore the order passed by the Tribunal is in accordance with law and no case for interference is made out. Accordingly this question of law is answered in favour of the assessee Whether Tribunal was correct in holding that the assessee which manufactures motor spares, has also interest income which cannot be excluded to an extent of 90% while computing the profits of the business as per explanation (baa) to Section 80HHC of the Act and Section 80HHE of the Act? - Held that:- As decided in case of ACG Associated Capsules (P.) Ltd., v. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] ninety per cent of neither the gross rent nor gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "profits and gains of business or profession", was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business - Decided in favour of assessee. Whether the Tribunal was correct in holding that 90% of fee refund from Robert Bosch cannot be treated as business income of the assessee but should be treated as other income and consequently deduction as per section 80HHC was not allowable? - Held that:- As decided in CIT v. Motor Industries Co. Ltd. [2010 (8) TMI 333 - Karnataka High Court] The disputed income was earned by the assessee for its fees towards developmental work from the foreign enterprise. The developmental work was intimately connected with the business of manufacture and sale of goods by the assessee. There was immediate nexus between the activity of export and the developmental work. The consideration received for developmental work was not liable to be deducted under clause (baa) in computing the profits of the business - Decided in favour of the assessee. Whether the Tribunal was correct in holding that the assessing officer cannot exclude expenditure incurred in foreign exchange for providing technical services in working out the export turnover as well as total turnover for the purpose of deduction under section 80HHE of the Act? - Held that:- The assessee is engaged in the business of export out of India of computer software and its transmission to places from India outside India. Before a computer software is exported, the Software Engineers of the assessee would have initial discussion with regard to the requirements, specifications etc. Thereafter computer software is manufactured and then it is transmitted from India to a place outside India. The software Engineers deputed abroad who among other things have to do testing, installation and monitoring of software supplied to the client. Though the said services are technical in nature it does not fall within clause (ii) of sub-section (1) of section 80HHE of the Act of providing technical services outside India in connection with the development or production of computer software. It falls under sub-clause (i) of sub-section (1) of Section 80HHE of the Act. Therefore, the said expenditure cannot be excluded in computing export turn over. In that view of the matter we do not see any merit in this appeal. Accordingly, the said question of law is answered in favour of the assessee Whether the Tribunal was correct in holding that Scrap Sales Turnover cannot be included in the total turnover for the purpose of computation of deduction under Section 80HHC and 80HHE of the Act? - Held that:- In the instant case the assessee is in the business of export of computer software. For the purpose of Section 80HHC of the Act the income generated from the sale of scrap cannot be included in the total turnover and that is precisely what the Tribunal had held. We do not see any error in the said finding. In view of the law declared by the Apex Court in the case of CIT v. Punjab Stainless Steel Industries [2014 (5) TMI 238 - SUPREME COURT ] the said question of law is answered in favour of the assessee.
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2015 (7) TMI 875
Entitlement to depreciation in respect of the hotel building, WTT and WTC under Section 32 - Held that:- The Court is satisfied that the during the AYs in question Assessee was indeed in full control of the three buildings, viz., the hotel building, the WTT and WTC and that in any event, notwithstanding the clarificatory amendment inserted as Explanation No. 1 in Section 32 with effect from 1st April 1988, the Assessee would be entitled to claim depreciation in respect thereof, including depreciation on the plumbing and sanitary ware installed therein. - Decided in favour of assessee. Amounts received from sub-licensees - Held that:- After reference to the clauses of the sub-licence agreement it was concluded that the benefit derived by the Assessee on received finances by way of interest pre-deposit “stands merged with the income declared by the Assessee during business”. Accordingly, it was held that “no separate addition on account of benefit derived by the Assessee out of the deposits is separate payment of taxes.” In view of the discussion hereinbefore of the clauses of the sub-licence agreements, the Court concurs with the view expressed by the ITAT.- Decided in favour of assessee. Foreign exchange rate fluctuation - The direction of the CIT (A) to the AO to allow depreciation on the increase in liability on account of exchange rate fluctuation on notional basis was also upheld by ITAT - Held that:- Questions stand covered in favour of the Assessee and against the Revenue by the decision of the Division Bench of this Court in Commissioner of Income Tax v. Woodward Governor India P. Ltd. (2007 (4) TMI 118 - HIGH COURT , DELHI ) which has been affirmed by the Supreme Court in Commissioner of Income Tax v. Woodward Governor India P. Ltd. (2009 (4) TMI 4 - SUPREME COURT) - Decided in favour of assessee.
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2015 (7) TMI 874
Entitlement for deduction under Section 80P(2)(a)(i) - Whether the Tribunal failed in law to appreciate that the interest earned on short-term deposits in banks were only investment in the course of activity of providing credit facilities to members and that the same cannot be considered as investment made for the purpose of earning interest income and consequently passed a perverse order denying the deduction under Section 80P(2)(a)(i)? - Held that:- In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to its members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of Commissioner of Income Tax-III, Hyderabad Vs. Andhra Pradesh State Cooperative Bank Ltd., reported in (2011 (6) TMI 215 - ANDHRA PRADESH HIGH COURT). In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial questions of law are answered in favour of the assessee
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2015 (7) TMI 873
Interpretation of the provisions of Section 115JA - whether the interest under Sections 234B and 234C is to be charged under Section 143(1)(a) as a prima facie adjustment whereby no such charge made under Section 143(3)? - Held that:- The matter is no longer res integra. This Court in Commissioner of Income Tax v. Nahar Spinning Mills Limited, (2011 (7) TMI 961 - Punjab and Haryana High Court) following the judgment of CIT(Joint) v. Rolta India Limited, (2011 (1) TMI 5 - SUPREME COURT OF INDIA ) came to the conclusion that interest under Sections 234B and 234C of the Act would be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB of the Act. Thus it is held that the appellant was liable to pay interest under Sections 234B and 234C of the Act in respect of tax determined on the basis of Section 115JA of the Act. Decided against the assessee and in favour of the revenue
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2015 (7) TMI 872
Disallowing the claim u/s. 80IC - Not treating the activity at Kala Amb as a manufacturing activity by revenue - definition of manufacture u/s. 2(29BA) - whether a mosquito repellant is distinct from the parts constituting it such as mould, plug, wire, porcelain, led etc. and therefore is manufacture? - Held that:- Revenue Authorities has given a sufficient opportunity to the assessee for filing the Satisfaction Note for filing the eligibility condition for claiming deduction u/s. 80IC of the I.T. Act, with the proof of documentary evidence. The assessee failed to produce the sufficient evidence before the revenue authorities. Revenue Authorities has considered the reply dated 12.12.2007 and has rightly held that it is apparent that dies and moulds which form bulk portion of the plant and machinery are being used at Delhi because there is no tool room facility at Kala Amb. Dies and moulds are very heavy so their movement is restricted. If this is true, then machincery wort of ₹ 10,400/- odd is being used at Kala Amb (HP). So it can be visualized what portion of the complete manufacturing process is being carried out at Kala Amb. We fully agree with the findings given by the revenue authorities. Secondly, the assessee has also not produced the electricity bill issued by the concerned electricity department. After examining the details of electricity bill, we find that as much as ₹ 35,124/- were incurred for electricity in Delhi whereas as paltry sum of ₹ 3135/- has been incurred on electricity at Kala Amb. For this also assessee has not produced any electricity bills received from the electricity department. In our considered view that no manufacturing activity is being carried out at Kala Amb. If there is any activity i.e. neglible activity was carried out. Therefore, the Revenue Authorities has rightly denied the deduction u/s. 80IC of the I.T. Act to the assessee. Assessee has not filed any documentary evidence for substantial its claim before the Assessing Officer, Ld. CIT(A) as well as before us establishing that assessee is in manufacturing of Mosquito Repellant machines etc. The entire machine was not made at Kala Amb. Only assembling of machine was done at Kala Amb (HP). The assessee has also not furnished any purchase bills of machinery to show that it was a new purchase. The assessee was in the business of manufacturing of Mosquito Repellant machine from the year 1998, that means the business of manufacturing and export of Mosquito Repellant was already in existence. A unit was set up at Kala Amb where the same activity or rather part of the activity was done. The entire machine was not made in Kala Amb. Only the assembly of the machine was done at Kala Amb. The same business was continued but only a part was shifted to Kala Amb. Therefore, it is a reconstruction of the existing business and assessee has failed to establish its claim before the revenue authorities. The company at Delhi is doing major part of the work and the unit at Kala Amb gets the article in the same condition in which it is to be sold. The cabinet or the main part of the machine is made at Delhi. The plug is made in the moulding machines and the pins in the plug are procured. The resistance wire and LED are procured from Delhi and the machinery is assembled at Kala Amb (H.P.). The main machines for making this item are moulds which are used to give shape to the plugs and heaters. Therefore conditions uls 80IC 4(i)& (ii) are not satisfied. - Decided against assessee.
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2015 (7) TMI 871
Transfer pricing adjustment - most appropriate method - CIT(A) deleted addition - Held that:- Nothing has been placed to justify that the TPO has rightly adopted the resale method to determine the Arm's Length Price whereas the assessee is 100% exporter. Since the CIT(A) has adopted the TNMM method following the method adopted by TPO in succeeding year to determine the Arm's Length Price, we find no infirmity in his order. Moreover, having noticed the difference between two PLIs in the range of +5%, the CIT(A) has rightly deleted the additions as no adjustment was required for such difference. Since we find ourselves in agreement with CIT(A), we confirm the same. T.P.O. himself has adopted the TNMM method for determining the Arm's Length Price but while determining the same he has not taken into account the variation in closing stock. Before the CIT(A), the assessee took a specific plea that while determining the Arm's Length Price as per the TNMM method, the TPO has not considered a sum of ₹ 22,57,58,291/- being variation in closing stock in order to arrive on the figure of operating cost. The assessee has given the figure of correct calculation before the CIT(A) and CIT(A) has examined both the calculations i.e. assessee as well as TPO and having noticed that there was factual error in the TPO's calculation, the CIT(A) has held that the average PLI of other comparables, as compared by TPO himself, comes to 8.11%. Since the PLI of the assessee is 9.56%, which is more than the average PLI of comparables, there was no reason for the TPO for any adjustment. No defect in the order of CIT(A) was pointed out by learned D.R. therefore, we find ourselves in agreement with his order and accordingly we confirm the same. - Decided against revenue. Disallowance of the expenses incurred on study to abroad of Shri Hammad Rahaman, son of the Director and Shri Ebbad Rahman - CIT(A) allowed claim - Held that:- A clear finding is given by CIT(A) that no finding has been recorded by the Assessing Officer that the expenditure claimed by the assessee was excessive in relation to any other such case of the expenditure on the professional course of B. Tech. in U.K. from University, College, Northampton (U.K.). In the absence of any such finding of the Assessing Officer on the basis of some material available on the record that the expenses claimed by the assessee are excessive or unreasonable, the disallowance made by the Assessing Officer u/s 40A(2)(b) is not sustainable. Hence, we do not find any reason to interfere in the order of CIT(A). - Decided against revenue. Disallowance of remuneration of ₹ 1,20,000/- paid to Shri Hammad Rahaham - disallowance on the ground that Shri Hammad Rahaham was studying in abroad and was doing whole time course of technical education then how he could spare time for business activities - CIT(A) has reexamined the entire issue and allowed the salary of ₹ 1,20,000/- per month - Held that:- Shri Hammad Rahaham is also one of the Directors of the assessee company who was sent abroad for doing a technical course. Undisputedly, Shri Hammad Rahaham was not available in India for rendering any services to the assessee company therefore, any payment of remuneration for the services rendered by him for the company, cannot be allowed in the light of the fact that the assessee has borne all the expenses for his technical course to be undertaken in abroad. Since there is no evidence that he has rendered any services to the assessee company, we are of the view that no remuneration can be paid to the assessee only for the simple reason that the Board has passed a resolution in this regard. Only those expenses can be allowed, which are incurred for the business purposes of the assessee. We, therefore, do not agree with the finding of CIT(A) and accordingly set aside his order in this regard and restore that of the Assessing Officer. - Decided in favour of revenue.
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2015 (7) TMI 870
Disallowance under Section 14A - Held that:- It is an undisputed fact that for the year under consideration the method prescribed under Rule 8D for working the disallowance u/s. 14A would not be applicable in view of the decision of Hon’ble Bombay High Court in the case of Godrej & Boyce [2010 (8) TMI 77 - BOMBAY HIGH COURT ] wherein held that the method prescribed under Rule 8D would be applicable to A.Y. 08-09 and subsequent assessment years. We further find that the coordinate Bench of Tribunal in Assessee’s own case for A.Y. 06-07 had held that Rule 8D is applicable only with effect from A.Y. 08-09 and therefore disallowance u/s. 14A cannot be made as per the formula given in Rule 8D. With respect to working out the disallowance whereby A.O considered the entire depreciation, we find that ld. CIT(A) has noted that depreciation for factory building and other direct equipments and machines are not related to investments and earning of exempt income and therefore the depreciation cannot be considered for making proportionate disallowance. Before us, Revenue has not placed any material on record to demonstrate as to how the aforesaid finding of ld. CIT(A) is wrong. We further find that the Assessee had suo motu worked out the disallowance u/s. 14A at ₹ 16,30,762/- and in the aforesaid working of Assessee also no mistake has been pointed out by the Revenue - Decided in favour of assessee. Disallowance of employees contribution to ESIC - CIT(A) deleted disallowance - Held that:- In the present case, it is an undisputed fact that the employees contribution of ESIC was paid after the due date prescribed under ESI Act. We find that the issue of delayed payment of ESIC contribution has now decided in favour of the Revenue by the decision of Hon’ble Gujarat High Court in the case of GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT]. Thus in the absence of any contrary binding decision brought on record by ld. A.R, we are of the view that A.O was justified in treating the delayed deposit of Employees contribution of ESIC as income of the Assessee and accordingly uphold the order of A.O on this ground. - Decided against assessee. Addition by income from investment in Free Trade Zone - CIT(A) deleted addition - Held that:- CIT(A) while deleting the addition has followed the decision of Tribunal for A.Y. 06-07 in Assessee’s own case. Before us, Revenue has not pointed out any distinguishing feature in the facts of the case for the year under consideration as compared to that of A.Y. 06-07 which was relied by ld. CIT(A) nor has placed any material on record to demonstrate that the aforesaid decision of Co-ordinate Bench of Tribunal for A.Y. 06-07 in Assessee’s own case has been overturned by Hon’ble High Court. In view of the aforesaid facts, we therefore find no reason to interfere with the order of ld. CIT(A) and thus the ground of Revenue is dismissed. - Decided against revenue.
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2015 (7) TMI 869
Revision u/s 263 by CIT(A) - amount of income covered by TDS was not offered to tax, disallowance of deprecation and unaccounted personal drawings - Held that:- In this case, there was survey during the course of accounting year itself and also on the basis of the survey, the case was selected for scrutiny. The TDS made on behalf of assessee was itself reflected in 26AS of the department and the same amount was given credit. In view of this, the Ld. CIT’s presumption that this amount of income covered by TDS was not offered to tax and assessee’s concealed income cannot be accepted. With reference to the depreciation claimed of ₹ 5,698/- it was the contention that assessee purchased a scooter and the same was being used in the business. In the event the asset is not figuring in assessee’s Balance sheet or accounts schedules, one can doubt the claim of depreciation. Assessee is doing small business of bill discounting and use of scooter by assessee in the proprietary concern business cannot be doubted. Personal drawings at ₹ 20,000/- per month, the same was also found debited in the personal account. In view of the above, considering the fact that AO has completed the assessment u/s. 143(3) after issuing the show cause notice dt. 15-02-2013 u/s. 142(1) calling various details under 11 heads including confirmation of loans and advances in respect of cheques discounted, source of advances made in the finance business etc. These indicate that all aspects have been examined by the AO. Therefore, the CIT’s observation that AO has not examined these issues does not have any basis. Moreover, when assessee has pointed out the same before the CIT in the proceedings u/s. 263, it is incumbent upon the CIT to examine the contentions and give findings rather than setting aside the assessment, which is already subject matter of appeal before CIT(A) on other issues. As can been seen from the notice issued and the assessment order by AO do indicate that he has applied his mind to the issues. If there was an enquiry, even if it is inadequate that would not by itself give occasion to the CIT to pass order u/s. 263. Respectfully following the principles laid down Spectra Shares and Scrips Pvt. Ltd., Vs. CIT [2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT ] proper case has not been made out by the Ld. CIT in exercising jurisdiction u/s. 263. Not only that considering the explanation given by assessee, he should have dropped proceedings rather than directing the AO to make unnecessary enquiries which are not warranted in this case. - Decided in favour of assessee.
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2015 (7) TMI 868
Disallowance for alleged excess remuneration paid to the Directors - Held that:- Issue before us is covered by a co–ordinate bench of the Tribunal, Mumbai Benches, in assessee’s own case for the assessment year 2008–09 and 2009–10 wherein held the assessee had made excessive payment of remuneration to the Director but same was approved by the central government, as required by the Companies Act.1n these circumstances, we are of the opinion that there was no contravention of the provisions of the Act. During the course of hearing, our attention has been drawn upon two letters issued by Ministry of Corporate Affairs, Government of India, dated 31st August 2010 and 30th September 2010, wherein sanction has been granted by the Government of India for the remuneration payable to Shri Mahadevan Gopalakrishnan Iyer, the Managing Director of the company for ₹ 72,10,996; and Shri S.G. Rao, Whole-Time Director, for ₹ 51,00,000, respectively. Thus, after these approval letters, it cannot be said that the remuneration paid to the director is in excess of the limits prescribed under the relevant law. - Decided in favour of assessee.
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2015 (7) TMI 867
Unaccounted cash purchases - CIT(A) deleted the addition - Held that:- Addition by Assessing Officer has been made on the basis of statement of partner of assessee recorded u/s.133A(1)(iii) of the IT Act, 1961. In statement recorded, no mention has been made about any sales out of unaccounted purchases. Assessing Officer did not make sufficient inquiry to come to the reasonable conclusion that unaccounted purchases of cotton was also sold before the date of survey. In view of above, it was found by CIT(A) that unaccounted purchases of cotton made by assessee as evidenced by the recordings in the loose sheets of paper was available on the date of survey by assessee. Same was included in the stock, which was found excess during course of survey. In view of above, separate addition of ₹ 11,46,000/- made by Assessing Officer was not justified. Same was rightly deleted by CIT(A). This factual finding of CIT(A) needs no interference from our side. - Decided against revenue. G.P addition - addition of ₹ 1,77,010/- representing the G.P., made to the total income of assessee as undisclosed income - CIT(A) deleted the addition - Held that:- Addition has been made relating to unaccounted purchases made in cash prior to the date of survey. There is nothing on record to suggest that unaccounted sale of these goods purchased in this had been affected prior to the date of survey. Assessing Officer was not able to establish that sales of unaccounted purchases had been made prior to the date of survey. So, there was no question of making addition on account of Gross Profit on above unaccounted purchases. In view of above, addition of ₹ 1,77,010/ was rightly deleted by CIT(A). We uphold the same. - Decided against revenue. Addition u/s.40A(3)- CIT(A) granted relief to assessee - Held that:- Assessee has made payments in cash to Gujarat State Electricity Board on several occasions in cash. Such payments are covered under the exemptions provided under Rule 6DD of IT Rules. In view of above, CIT(A) was justified in deleting the disallowance made u/s. 40A(3) of the Act amounting to ₹ 56,759/-. Same is upheld. ₹ 1,77,010/ was rightly deleted by CIT(A). We uphold the same. - Decided against revenue.
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2015 (7) TMI 866
Addition under the head “Income from Other Sources” - amount does not represent the sale consideration of the property sold and consequently, the exemption u/s. 54F of the Act was also denied by AO - Held that:- There is nothing on record to suggest that the appellant was having any other source of income or the appellant is capable of earning that much of money. Having regard to her state of health, age and qualification etc., it is highly improbable that appellant could have earned so much of income from undisclosed sources. The preponderance of probability is more in favour of explanation of the appellant. The Assessing Officer also failed to contradict the explanation furnished by the appellant with some positive evidence and, therefore, it can safely be said that the explanation furnished by the appellant cannot be doubted. Moreover, this kind of addition can be made by the Assessing Officer by using his discretionary power under the provisions of Sec. 69 of the Act and the Assessing Officer is not obliged under law to make addition in every case where the explanation offered by the assessee is found to be not satisfactory. This ratio was laid down by the Hon’ble Supreme Court in the case of [CIT vs. P.K.Noorjahan - 1997 (1) TMI 6 - SUPREME Court] which is squarely applicable to the facts of the present case. Therefore, we hold that the Assessing Officer is not justified in holding that the sum of ₹ 3,00,00,000/- is not attributable to sale of property and making addition of the same. Thus, we accordingly direct the Assessing Officer to delete the addition of ₹ 3,00,00,000/-. As held in the para supra that the money of ₹ 3,00,00,000/- was receive as a part of sale consideration of the house property sold, the same is, therefore, eligible for consequential relief u/s.54 of the Act to the extent of the actual investment made in the new house. - Decided in favour of assessee.
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2015 (7) TMI 865
Disallowance of repayment of gold loan to SBI - Held that:- There is no doubt to the fact loan as per the scheme was not in terms of cash but in terms of gold. Therefore, the gold obtained under the loan scheme form part of the stock-in-trade of the erstwhile firm and was converted into ornaments for trading purpose. Therefore, the purpose of loan is for the working capital for conducting business. When assessee took over assets and liabilities of erstwhile firm along with the loan, cost incurred by assessee at the time of closure of account on account of appreciation of gold value is an allowable expenditure since it is linked to the trading activity. In other words, the amount incurred by assessee is part of cost of loan to assessee. It is to be noted that one of the reason on which AO has disallowed the deduction claimed is since assessee is following mercantile system of accounting, the expenditure incurred for prior period cannot be allowed. In this regard, we are of the view that though the amount has been termed as interest but it is not interest in strict sense of the term. As far as interest payment is concerned, definitely they have accrued to assessee in the respective AYs. However, as far as the repayment of principal amount is concerned, as per the terms of the agreement with bank it has to be on the basis of value of gold as on the date of repayment. Therefore, the liability on that account cannot be an ascertained liability, which could be said to have accrued to the firm in the respective AYs when the loan continued. As the payment has to be made by assessee company on the basis of market value of the gold on the date of closure of account, excess expenditure incurred on such date of payment, in our view, is allowable expenditure. In view of the aforesaid, we allow the claim of assessee by deleting the addition of ₹ 28,80,338. - Decided in favour of assessee.
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2015 (7) TMI 864
Disallowance of a part of deduction claimed u/s 10A - main plank of AR’s submission is even assuming that provisions of section 10A(7) are applicable, still AO without satisfying the conditions of section 80IA(1) cannot estimate the profit for computation of deduction u/s 10A - whether disallowance of deduction u/s 10A of the Act by applying the provisions of section 80IA(1) is valid? - Held that:- As relying on AT Kearney India Pvt. Ltd. Vs. Add. CIT [2014 (9) TMI 128 - ITAT DELHI] it is noticed that in the present case also AO has simply relied on the TP study report of assessee to conclude that the profit earned by assessee cannot be considered to be reasonable profit earned from eligible business and on that basis has disallowed part of the deduction u/s 10A. Therefore, since AO has not conclusively proved the fact that there is an arrangement between assessee and its AE by which the transactions were so arranged as to produce more than the ordinary profits in the hands of assessee, disallowance of part deduction claimed by applying the provisions of section 80IA(10), in our view is not justified. Since ld. CIT(A) upheld the disallowance without examining the aforesaid aspect, order of ld. CIT(A) deserves to be set aside. The conditions of section 80IA(1) having not been fully complied by AO, disallowance of deduction claimed u/s 80IA(10), in our view is not justified. Accordingly, we delete the addition made by AO in this regard. - Decided in favour of assessee.
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2015 (7) TMI 863
Unexplained deposit in bank account - CIT(A) after applying the peak credit theory on the bank account restricted this addition - Held that:- CIT(A) has worked out the peak credit in both the accounts. These credits are on 14th July, 2006 in the current account and 27th January, 2007. He worked out the total of the cash deposits and thereafter computed the GP on turnover of cash deposits after 14th July, 2006 in current account and after 27th January, 2007 in savings account. The CIT(A) has worked out the GP element in these transactions. He has added the profit earned by the assessee in the business after working out the peak credit. In other words the maximum amount of the peak deposits is ₹ 3,82,688/-. This was considered as representing the investment in this activity which has been carried out with these two bank and thereafter worked out the profit element. He made an addition of ₹ 9,41,557/- which is total of Rs, 5,58,872/- + ₹ 3,82,685/- i.e. profit on the turnover + alleged initial investment in the shape of peak credit. This factor can take care of both these issues. The assessee in his C.O. has submitted that net profit shown by him is 3.36% in AY 2007-08. The maximum profit shown by him is 5.05% in AY 2010-2011 whereas the lowest is 1.94% in 2014-2015. Considering this subsequent history of the assessee the profit ought to be worked out by adopting a reasonable figure and not as high as 15.50% considered by the CIT(A). However, we do not see any merit in this contention of assessee because he is unable to support his claim with any authentic books of account. It is not discernible whether these net profits have been accepted in the scrutiny assessment or not. Considering the facts and circumstances of the case we do not find any reason to interfere in the order of CIT(A) - Decided against revenue and assessee. Ad hoc disallowance at 20% of the expenses - Held that:- Since the assessee is running a proprietorship concern, element of personal benefits out of the use of these facilities i.e. phone(s) and car cannot be ruled out. The assessee was not maintaining any log book nor produced any other details, in support of his claim. Therefore, ld. revenue authorities have rightly disallowed the expenditure on an estimate basis. We do not find any reason to interfere with the order of CIT(A). Both the grounds are rejected. Decided against assessee.
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2015 (7) TMI 862
Addition under section 68 - CIT(A) deleted the addition - Held that:- The assessee has produced copies of income-tax returns as well as PAN of the investors. Therefore, as far as the creditworthiness is concerned there is no dispute. Similarly the amounts have been received through account payee cheques. It is to be assumed that transactions are genuine unless proved otherwise by the AO. The solitary grievance of the AO is that he has tried to serve the notice upon the investors but failed to serve. In this connection it is pertinent to note that in AY 2007-08 effort was made by the AO after 18.12.2009 and before 22.12.2009, because he passed the assessment order on 31.12.2009. The list of the customers is available on pages 318 to 322 of the Paper Book. All the customers are from Surat but appears to be from different areas. The addresses given in the list is also the address reflected on the income-tax returns. Then why the ld. AO could not service notices upon these persons is specifically not discernible. According to the AO the process server has reported that addresses are in complete. In these situation we have two sets of evidences –one the alleged assertions of the AO on the basis of alleged report of the process server which has not been placed on record by the Revenue nor reproduced by the AO in the assessment order. He has not even made reference to any particular witness in whose presence process server had tried to locate the alleged investors. On the other hand, copies of the income-tax returns, bank statement, PAN coupled with the fact that the amounts have been returned through account payee cheques and ld. first appellate authority had accepted this explanation. If we weigh both these sets of evidences then the scale would tilt in favour of the ld. CIT(A) because the assertions of the AO is not supported with any concrete material on the record. The time gap of 2-3 days referred by the A.O. for service, gives a doubt to our mind also whether, practically the process server had actually made an attempt to effect the services on all the investors in different corners of the city in that short time. Therefore, on an overall analysis of the record we are satisfied that ld. first appellate authority has appreciated the facts and circumstances in right perspective and no interference is called for - Decided against revenue.
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2015 (7) TMI 861
Disallowance u/s 43B - late payments of employees’ contribution to the PF fund - Held that:- The issue in dispute is squarely covered against the assessee by the decision of Gujarat Road Transport Corporation reported in [2014 (1) TMI 502 - GUJARAT HIGH COURT] wherein held that employees’ contribution if not paid within the due date provided in the PF and ESI Act then, deduction will not be admissible to the assessee. The view of the ld. Commissioner of Income Tax (Appeals) is in line with the hon’ble High Court’s decisions therefore, we do not find any merit in this ground of appeal.- Decided against assessee. Disallowance u/s 40(a)(ia) - amount of expenses on which Tax Deducted at Source (TDS) was not deposited into the Government account within due date - AO submitted that the disallowance be confirmed and it be excluded from the exemption of section 10B - Held that:- It is not in dispute that the disallowance is in respect of appellant's unit eligible for deduction under section 10 B. Since by disallowing expenses on account of non-deduction of TDS or not depositing TDS to government account in time, assessing officer only increased business profit. Such increased business profit is eligible for deduction under section 10 B, appellant is eligible for deduction under section 10 B for addition of expenses disallowed under section 40(a) (ia) of IT Act. Accordingly the disallowance of expense on account of default under TDs provisions will not affect appellant's taxable income. In view of this, the applicability of TDS provisions and disallowance under section 40 (a) (ia) is not discussed here. Once the expenses which are to be disallowed with the aid of section 40(a)(ia) then it will enhance the taxable income of the assesse which will fall in the eligible profit for exemption u/s. 10B.- Decided against assessee. Disallowance of donation given to flood victim collected from the employees’ salaries - CIT(A) deleted the addition - Held that:- A specific deduction was made from the salary and after collecting that amount it was given as a donation. The assessee has not claimed any deduction as such from its business profit, the amount collected from the employees’ salaries does not involve element of income in the hands of assessee because the assessee has only acted as a facilitator between the amounts collected vis-à-vis remitted to the flood victims. Therefore, ld. Commissioner of Income Tax (Appeals) has rightly deleted the disallowance..- Decided against assessee.
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2015 (7) TMI 860
Loss under the head other income - CIT(A) allowed relief to assessee - Held that:- Held that:- Considering the finding, in the light of the submissions advanced where admittedly no verification on facts has been done by the Ld. CIT(A) accepting the arguments of the Ld. Sr. DR, we deem it appropriate to restore the issue back to the file of the AO with the direction to verify the claim of the assessee from the vendor balances and bank advances which has not been done by the CIT(A). The AO is directed to consider the facts and decide the issue by way of a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of revenue for statistical purposes
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2015 (7) TMI 859
Depreciation claim on on scientific research - whether deduction u/s 35(2)(iv) is allowed in respect of capital expenditure on scientific research, no depreciation is allowable u/s 32 on the same asset? - Held that:- If depreciation is not allowed as a necessary deduction for computing income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income as it is nothing but a decrease in the value of property through wear, deterioration, or obsolescence. Since income for the purposes of section 11(1) has to be computed in normal commercial manner, the amount of depreciation debited in the books is deductible while computing such income. It was so held by the Hon’ble Karnataka High Court in the case of CIT Vs. Society of Sisters of St. Anne (1983 (8) TMI 44 - KARNATAKA High Court). It was held in CIT vs. Tiny Tots Education Society (2010 (7) TMI 377 - Punjab and Haryana High Court) following CIT vs. Market Committee, Pipli (2010 (7) TMI 374 - Punjab and Haryana High Court ) that depreciation can be claimed by a charitable institution in determining percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to double benefit. - Decided against revenue. Entitlement to carry forward expenditure incurred in excess of its income for setting off against income of the succeeding years? - CIT(A) allowed claim - Held that:- The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent year, would not amount to an incidence of loss of an earlier year being set off against the profit of a subsequent year. The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust, and the income from out of which that expenditure is incurred, would not be liable to tax. The expenditure, if incurred in an earlier year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other. The High Court relied on the decision in the case of CIT Vs. Society of Sisters of ST. Anne( supra). - Decided against revenue.
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Customs
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2015 (7) TMI 882
Revocation of CHA License - Contravention of Regulations 13(a), 13(d) and 13(e) of CHALR, 2004 - Held tat:- CHA have not met the client at all and they have received the documents through a freight forwarder. Therefore, the question of advising the client would not arise at all. As regards the third charge of not exercising due diligence in ascertaining the correct of the any information, to undertake this task, the CHA should know his client. If he does not know who the client is, he cannot exercise any diligence in ascertaining the correctness of the information furnished. Therefore, the charge of contravention of regulation 13(e) also stand clearly established. It is also relevant to note that in the customs proceedings in respect of the impugned transaction, both Sri. Prakash Charatkar, Manger of the appellant CHA firm as also Shri. Baburao K Chinta, Proprietor of Max Shipping Services, the freight forwarder have been found guilty and penalised under the provisions of section 114 of the Customs Act vide order dated 29-6-2007. We are informed that this order has not been appealed against and has become final. Thus the order of the adjudicating authority in the customs proceedings also support the department's case in the CHALR proceedings. Therefore, we do not find any fault in the conclusion drawn by the Licensing authority that the appellant CHA had contravened the provisions of Regulation 13(a), (d) and (e) of CHALR, 2004. Whether the punishment of revocation of licence is proportionate to the gravity of the offence committed - Held that:- goods sought to be exporter were banned items. The exporter was found to be fictitious and not existing in the address given. Thus the facts are different and distinguishable. As regards the reliance on Ashiana Cargo Services decided by the hon'ble High Court of Delhi, in the said case there was a concurrent finding by the Licensing authority and the Tribunal that the CHA did not have knowledge that illegal exports and smuggling of narcotics was effected using G cards given to the employees of another firm. In that context, it was held that revocation is not justified. In the facts of the case before us, it is the appellant's Manager who was found abetting the illegal exports of a banned item. Further the exporter was also found to be fictitious. - Decision in the case of Commissioner of Customs vs. Worldwide Cargo Movers [2006 (11) TMI 281 - BOMBAY HIGH COURT] - No reason to interfere with the findings and decision of the Licensing authority in the impugned order - Decided against the appellant.
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2015 (7) TMI 881
Revocation of license - Violation of the CHALR Regulations - Non-compliance to the specific time limits - Subletting of license - whether the time line periods laid down in Regulation 22 are directory in nature or mandatory in nature - Held that:- No evidence to show that there has been sale or transfer of the license. No consideration is shown for such transfer nor any transfer agreement. The only evidence is that the appellant was receiving fixed amounts per container from Shri Pandey. We find no provision in the Regulations that the CHA should receive payments directly from the importers/exporters for the services rendered. We also find that Section 147 of the Customs Act allows for an agent to work on behalf of the principal. Therefore, if the importers/exporters have contracted an intermediary person for Customs clearance work, no contravention of the CHALR is proved if the CHA is satisfied about the credentials of the importer for whom he is doing the Customs clearance work. Entire case is based on the original statements of Shri Vishal Madan and Shri Pal Singh Lohia and their statements at the time of cross examination have been discarded. In the relied upon documents, only statement dated 09.10.2012 of Shri Madan is considered and his other statements have not been made relied upon documents. Therefore, unless the original statements are corroborated by other material evidence it is difficult to sustain the charge of subletting of license. More so when the Commissioner has placed no reliance in his Order on the statements of Shri Pandey, taken on 7.11.2012 and 09.11.2012, to whom the license is said to be sublet. This method of relying only on some statements lends bias to the decision. In the circumstances we are of the view that the charge of subletting of license is not proved and it cannot be said that the license was transferred. Further, in the absence of any charge of violation of Regulation 13 (a) which requires the Custom House Agent to obtain an authorization from each of the companies for whom he is employed as a CHA, we do not find any reason to sustain the violation of Regulations 13(d) and 13(e) which require imparting correct information and rendering proper advice to the clients. The charge that the CHA advised the importer to stack thinner material in the front of the container is not supported by the physical examination of the containers nor by any other corroborative evidence. - Therefore the retraction of statements appear to carry weight due to lack of supporting evidence for the violation of the Regulation. Similarly the charge of violation of Regulation 22(n) which requires the CHA to be efficient is not on a strong footing and cannot be sustained. Except for a statement regarding undervaluation no concrete evidence is forthcoming against the CHA. Revenue has not been able to establish with any reasonable degree of certainty the violation of the Regulations for which they have charged the appellant. The circumstances do not call for revocation of the License which will deprive the CHA and his employees of the source of their livelihood. We therefore set aside the revocation as well as the forfeiture of the security deposit. - Decided in favour of appellant.
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2015 (7) TMI 880
Suspension of Custom Broker License - perpetration of fraudulent clearance of the goods - the goods were not valid for duty free clearance - Held that:- In the given facts and circumstances and peculiar to the Petitioner and as the Petitioner has been carrying on business from 1905, as claimed in the Writ Petition, it being a sole proprietary concern and the sole proprietress depending for her livelihood on this business that the suspension of the license till date will serve the ends of justice. In other words, we do not think that any further suspension is required when the Petitioner has assured us that she would attend the adjudication proceedings and co-operate with the adjudicating authority in early conclusion of the same, that this is the sole instance in the entire career is also a factor and peculiar to the Petitioner, which leads us to direct that the order dated 10th December, 2014 suspending the license shall come to an end on 24th December, 2014. Thereafter, the license shall be taken to be in force and pending the remaining period for which it was issued - Petition disposed of.
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2015 (7) TMI 879
Confiscation of goods - Provisional release of gold - Held that:- Single Judge passed an interim order directing that the petitioner be permitted to release of the gold on executing a simple bond. - such an interim could not have been passed, especially when there was no lack of jurisdiction in passing the order and the order has not been prima facie perverse. We are, thus, of the view that sufficient ground has been made out to set aside the order passed by the Single Judge. - Decided in favour of Revenue.
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Service Tax
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2015 (7) TMI 891
Demand of service tax - Business Auxiliary Services - benefit of exemption Notification No 13/2003-ST dated 20.6.2003 - held that:- Adjudicating Authority vide Order dt 31.8.2006 in first appeal observed that in terms of the different clauses of the agreements, the appellants were providing after sales service in relation to the equipments sold to the clients within the appellants territory, installation, maintenance, care etc., of such equipments which are major components of the services, to be rendered by the appellant to the client. In fact, the payment of service charge to the appellant is depending on the appellants satisfactorily discharging after sales service components of the agreement. Pertinently, all these components of services are covered under Business auxiliary Services (BAS) in their own right and covered under Clause 3 (iii) and (iv) of the definition of BAS. Clause 3(iii) and (iv) of the definition of BAS provides any Customer Care Service provided on behalf of the client or any incidental or auxiliary support service such as billing, collection or recovery of cheques/accounts and remittance, evaluation of prospective customer and public relation service. The show cause notice dtd 1.9.2004 was issued for the period 1.7.2003 to 31.3.2004 proposing demand of tax under the category of BAS. But, the second show cause notice dtd 21.10.2004 was issued for the period October 1999 to June 2004 proposing the demand of tax under the category of C&F agent for the same activities, rendered by the appellant. The facts of the case in both the adjudication orders are contrary and misconceived. - findings of both the adjudicating authorities are contrary on facts and law of the case, which cannot be improved by letter dtd 18.5.2015 of the Joint Commissioner of Central Excise, Customs and Service Tax. In our considered view, the Adjudicating Authority should have decided both the show cause notices together and after determining the facts of the case in proper manner, the classification of the service would be decided. It should be noted that reasons are the links between the materials on which certain conclusions are based and the actual conclusions. So, both the impugned orders cannot be sustained. - Decided in favour of assessee.
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2015 (7) TMI 890
Condonation of delay - Held that:- delay has occurred not because of any deliberate or intentional act but because the Solapur Division and the senior most official there has not been authorized to take decision on his own when there are huge financial repercussion. He has referred the matter to the Head Quarters and that is how the matter was referred after meeting of the Senior Divisional Managers in August 2012. The issue raised was fundamental and pertaining to the service that the Railway offers to the travelling public. In these circumstances, we are of the opinion that the Tribunal erred in refusing to condone the delay. - Matter remanded back - Delay condoned.
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2015 (7) TMI 889
Waiver of pre deposit - Security services - Non compliance with pre deposit order - Held that:- Thereafter two affidavits have been filed by counsel of both parties and compliance is reported by the assessee of the order passed by the Tribunal while granting a conditional stay. However, the revenue insists that such a compliance will not in any manner mean that further recurring liability is effaced or wiped out. The argument that neither the liability nor recovery of the sums in relation thereto can be stopped or interfered with merely because, an appeal for earlier period is pending. This court is not required to go into these contentions or any wider controversy simply because in this statutory appeal, this court is only concerned with the correctness of the order passed by the Tribunal. - The statutory mandate is clear. So long as the Parliament has not intervened and to take any steps to amend or clarify the legal position, we are obliged to hold that the Tribunal could not have dismissed the appeal preferred by the assessees without adjudication on merits. Tribunal's order granting conditional stay has been complied with albeit belatedly. We also find that presently the Appellant is facing difficulties on account of the attachment of their bank accounts. They have also found that certain recoveries and from their customers are effected by the revenue directly. - without deciding the legal issue or questions in further details, we quash and set aside the impugned order - Decided in favour of assessee.
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2015 (7) TMI 888
Denial of Refund claim - Unjust enrichment - Goods Transport Operator service - Held that:- if the revenue was aggrieved by the OIA No.237/2005 CE, it ought to have taken such further action in accordance with law. It is trite law that once the appeal is allowed in favour of the assesse, the assessee must be entitled to all the benefit flowing there from. The Assistant Commissioner while dealing with the application for refund was not justified in sitting in judgment over the findings of Commissioner (Appeals), firstly because the Commissioner (Appeals) had passed the appellate order in a different jurisdiction and secondly because the Commissioner (Appeals) is a superior to the Assistant Commissioner. By recording a finding extracted supra, the Assistant Commissioner has clearly traversed beyond his jurisdiction. Similarly, the Appellate Authority was also not justified in rejecting the appeal filed against the order passed by the Assistant Commissioner. Thus, no exception can be taken to the order passed by the CESTAT by allowing the appeal. No substantial questions of law arises for consideration of this case - Decided against Revenue.
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2015 (7) TMI 887
Validity of Tribunal's order - Order of remanding the matter back - onsite services rendered directly at the customers premises abroad - Held that:- If the issues which are vital and for the adjudication have not been examined at all by the Adjudicating Authority, then its order can be said to be prima facie erroneous. That would have to be demonstrated by the party applying for Tribunal's intervention in appellate jurisdiction. If the appellant makes out a case for remand and in this case in the alternative, then, possibly we could have understood the Tribunal's order of remand or remittance back to the Adjudicating Authority. - specific issue necessitating a remand. Merely observing that the issues considered by the Tribunal in paragraph 5.1 and 5.2 have not been examined at all by the Adjudicating Authority would mean a blanket and complete remand of the original case. All this, in revenue matters, ought to be avoided. It is in the interest of the public that matters concerning public revenue attain finality and expeditiously. In these circumstances, we are of the view that this appeal raises a substantial question of law - Matter remanded back for fresh consideration - Decided in favour of Revenue.
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2015 (7) TMI 886
Business Auxiliary service - service being rendered by the assessee for the Transport Department under the Motor Vehicle Act - service rendered to public authorities - Held that:- Work done by the respondent assessee pertains to discharge of statutory function by the Department under the Motor Vehicle Act and the same does not amount to customer care, promotion, marketing of services, incidental or auxillary to the support services - In the case of Commissioner of Central Excise, Indore Vs. Ankit Consultancy Limited, [2006 (10) TMI 61 - CESTAT, NEW DELHI], the Tribunal under similar circumstances has held that service rendered for preparation of voter identity card is not a 'business auxillary service' coming within the purview of section 69(19) of the Finance Act, 1994. - definition of 'business auxillary service', as is defined under section 65(19) and on evaluating the same in the backdrop of the service being rendered by the assessee for the Transport Department under the Motor Vehicle Act, we find no error in the order passed by the Tribunal warranting reconsideration nor does any substantial question of law arises for consideration in this matter - Decided against Revenue.
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2015 (7) TMI 885
Penalty u/s 78 - Outdoor catering service - Held that:- As the purpose of providing snacks and foods has clearly mentioned in the agreement entered into between the appellant and M/s. Lafarge India Pvt. Ltd. therefore, on merits we hold that the appellants are liable to pay Service Tax under the category of Outdoor Catering service on the activity undertaken by them. We further find that as the appellant immediately paid Service Tax when investigation started against them. We are also convinced by the argument that they were under the bona fide belief that they are not liable to pay Service Tax. In these circumstances, the penalty under Section 78 of the Finance Act is set aside. - Decided partly in favour of assessee.
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2015 (7) TMI 884
Waiver of pre deposit - Cenvat Credit - Trading activity - Held that:- Appellant is rendering both taxable output service and is also undertaking trading activity and trading became an exempted service only after 1.4.2011 (deemed). Therefore during the relevant period, the appellant was required to reverse the proportionate credit since trading activity was not a service and credit could have been taken but separate account was not required to be maintained. Therefore, I find that appellant cannot be said to have a prima facie case in their favour - Partial stay granted.
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2015 (7) TMI 883
Demand of service tax - Construction of residential complex service - Held that:- Repair work of shop floor in the Ordinance factory owned and control by the Government of India, Ministry of Defense, does not qualify under the category of 'commerce or industrial construction service' and accordingly, I hold that no tax is payable by the appellant under the category of 'commercial or industrial construction service'. The demand confirmed vide the impugned order is set aside and all the penalties are deleted. - Decided in favour of assessee.
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Central Excise
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2015 (7) TMI 895
Classification - Whether pulp of waste gunny bags/jute waste is to be treated as the pulp made from the material 'rags' - Benefit of Notification No. 22/94-CE dated 01.03.1994 - Concessional rate of duty - . According to the Tribunal, pulp out of rags was specifically excluded from the Notification. - Held that:- Pulp from the waste of jute bags or gunny bags would not be covered by the term 'rags' appearing in Notification dated 01-03-1994 as it could never be the intention to exclude non-conventional material from the benefit of the aforesaid Notification when that was precisely the purpose for which this Notification was issued to encourage use of non-conventional material for the purposes of manufacturing paper or paper products. Still, we would now like to take note of the dictionary meaning that is assigned to the aforesaid terms, that too from the 'Dictionary of Paper' by American Paper and Pulp Association, which obviously is the most relevant and authenticated dictionary for the purpose of the present case as what is in vogue and understood in paper industry is contained in such a dictionary. Thus, almost all the books on the subject uniformly define 'rag' or 'rag pulp' as one which is made from cotton waste or cotton textile material. On the other hand, the learned counsel appearing for the Revenue could not point out to a single dictionary or could take us through any technical literature which even remotely suggests that jute gunny bags come under the category of 'rags' in the context of paper technology. - Tribunal has simply brushed aside the aforesaid material with a mere observation that it is not relevant and this approach of the Tribunal cannot be justified. - impugned decision of the Tribunal does not stand judicial scrutiny and warrants to be set aside - Decided in favour of assessee.
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2015 (7) TMI 894
Condonation of delay - Order served on unauthorised person who was a ‘Kitchen boy’ employed on daily wages - Held that:- Order had not been passed in the presence of the Appellant, so as to render its subsequent service a formality, and secondly, that the Order came to be passed after an inordinate period of eight months should not have been ignored. This fact should not have been lost sight of by the Authorities below as it has inevitably led to a miscarriage of justice. The Inspector of the Department should have meticulously followed and obeyed the mandate of the statute and tendered the Adjudication Order either on the party on whom it was intended or on its authorized agent and on one else. - miscarriage of justice has taken place, in that the Authorities/Courts below have failed to notice the specific language of Section 37C(a) of the Act which requires that an Order must be tendered on the concerned person or his authorized agent, in other words, on no other person, to ensure efficaciousness - Decided in favour of assessee.
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2015 (7) TMI 893
Condonation of delay - Revenue appeal - eight days delay in issue of the review order under Section 35-E(1) by the Committee of Chief Commissioners - Denial of CENVAT Credit - Clandestine removal of goods - Invocation of extended period of limitation - Confiscation of seized goods - Held that:- Sub-section (4) of Section 35-E(4) provided that appeals should be filed within a period of three months from the date of communication of the order under sub-section (1) or (2) to the adjudicating authority. The Court has taken note of the fact that period that was given by the legislature to the revenue was one year which is more than adequate to take appropriate action in proper cases in comparison with the much shorter period within which the assessee has to exercise his right of appeal. The Court gave emphasis on the administrative chaos that would result if a further period was granted and accordingly opined that the statutory provision was to be given a literal meaning. As is noticeable, the amendment made by the Finance Act, 2008, the Committee of Chief Commissioners was required to pass an order within three months from the date of communication of the decision or the order. This period of three months is identical to the period of three months stipulated in Section 35-B of the Act. As per the scheme of the Act, sub-section (4) of Section 35-B(5) of the Act authorises the appellate tribunal to admit an appeal or permit filing of memorandum of cross-objections after expiry of relevant period if the tribunal is satisfied there was sufficient cause for not presenting the appeal within that period. As stated earlier, the power under sub-section (4) of Section 35-B has been made applicable to appeals preferred following the administrative procedure prescribed under Section 35-E of the Act. The statutory position as it existed in 1984, as we find, has undergone a change by the amendment made under the Finance Act, 2008. Under the changed circumstances, it would not be appropriate to restrict and bar an application of the provisions of sub-section (4) of Section 35-E to the period after passing of an order under sub-sections (1) and (2) of Section 35-E of the Act - Full Bench decision of the tribunal in the case of Monnet Ispat & Energy Ltd. (2010 (8) TMI 50 - CESTAT, NEW DELHI) endorsed and held has correct - Decided in favour of Revenue.
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2015 (7) TMI 892
Valuation - Captive consumption - Whether the provision of Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 are applicable to the case at hand or not - Held that:- Under clause (i) of Rule 6(b), the value is to be based on the value of comparable goods produced or manufactured by the assessee or any other assessee. Since there was no such commodity or material available to show the value of any chargeable goods, the case was covered under sub-rule (ii) of Rule 6(b). That is, thus, the only provision under which the value could be determined. The only statement of the appellant is that since it was incurring losses in the production of yarn in the previous year it did not include any notional profit while dealing with price of goods under Rule 6(b)(ii) by the Department. That cannot be accepted inasmuch as sub-clause (ii) of Rule 6(b) does not deal with the situation where profits should be actually earned which is clear from the language "which the assessee would have normally earned on the sale of such goods". Thus, the notional profits could be taken into consideration and added while arriving at the value of captive material. This is exactly the exercise that was undertaken by the Department and has been upheld by the CESTAT. - No infirmity in impugned order - Decided against assessee.
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CST, VAT & Sales Tax
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2015 (7) TMI 897
Default Assessment Orders - Sales in the course of import - inter-State sale or not - Section 9 (2) of the CST Act read with Section 32 and penalty assessment orders under Section 33 of the Delhi Value Added Tax Act, 2004 (DVAT Act) - Held that:- the default assessment orders of the VATO give no indication of any detailed examination of the documents. It is not clear which document the VATO is referring to when he concludes that the description of the commodity is different or when he concludes that there is “diversion of movement of goods from original destination to some other/different destination.” Even the OHA and the AT make no reference to any particular transaction or document pertaining to inter-state sales and have simply repeated the reasoning of the VATO. At least the documents produced for the sample transaction concerning the PO placed on the Appellant by Ramgarh Chini Mills do not show that there is any diversion of the goods to some other destination. Also, if indeed it is correct that 'Duolite' is the brand name for 'Cation' or 'Anion' resin, then the exemption cannot be denied on the ground of the description of the commodity not matching that mentioned in the PO. The Court finds that the general cursory approach of the authorities and the VATO, in particular, is unhelpful when the High Court is called upon to examine the correctness of their orders. They must reflect application of mind to the materials on record. Consequently, even in respect of the transactions of inter-state sales, the Court finds that the impugned order of the AT and the corresponding orders of the VATO and the OHA require to be set aside and the matters remanded to the VATO for a fresh determination - Matter remanded back.
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2015 (7) TMI 896
Partial exemption scheme - to increase inter-State sales and decrease the quantum of branch transfers - constitutional validity of Sections 26 and 82(3) of the Rajasthan Value Added Tax Act, 2003 - method of calculations - Held that:- under the notification dated 6.5.1986 incentive is given with a view to enhance inter State sales with a view to enhance State revenue in the form of sales tax and that object can be served with the cooperation of dealers only. The purpose of the notification can very well be failed, if the dealers do not act as desired by the State by increasing inter State sales and reducing branch transfers. The State Government only to have support of the dealers extended partial exemption to them. This incentive is given to the dealers by the State from its own revenue in the form of exemption to have a positive action by the dealers for shifting to inter State sale from branch transfers, as such, the notification dated 6.5.1986 though uses the term “partial exemption” but in fact is a“partial disbursement of State revenue” earned due to the efforts made by the dealers for its enhancement. In view of whatever stated above, these petitions for writ deserve acceptance, accordingly, the same are allowed. The initiation of impugned proceedings against the petitioner as per Section 26 of the VAT Act is declared illegal and the notices issued thereunder and orders made thereon are also declared illegal, hence are quashed - Decided in favor of assessee.
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