Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 4, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Taxability of Amounts paid by the ONGC to the non-resident assessees /foreign companies for providing various services in connection with prospecting, extraction or production of mineral oil - assessable under the provisions of Section 44BB and not Section 44D - SC
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The repository of the power i.e. Central Government, had consciously chosen to grant exemption in one particular field i.e. foreign companies covered by sub-section 2(a) of Section 24-AA, the scope of the grant cannot be enhanced or expanded by a judicial pronouncement - SC
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Registration u/s 12AA(3) withdrawn - genuineness of purchase of software or mere accommodation entry - CIT has not brought on record any materials that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust - registration restored - AT
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Whether the provisions of section 292BB of the act come to the rescue of the department, even when the notice u/s 143(2) of the Act is not issued within the stipulated time? - Held No - the issuance of notice u/s 143(2) of the Act is not procedural irregularities and the same is not curable - AT
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Valuation of the property - registered valuer report more acceptable, since the estimate of the DVO is based only on one method of valuation, where as we find that the Registered Valuer’s estimate was based on two different methods; and moreover the fact remains that he could physically examine the property, so it is more acceptable being nearer to correct estimate - AT
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Registration of the trust granted u/s. 12AA withdrawn - even when some of the objects may be hit by the first proviso to Section 2(15) and the assessee's receipts from such activities do exceed specified threshold, no prejudice will be caused to the legitimate interests of the revenue because, notwithstanding the status of registration and by the virtue of section 13(8), the assessee will not be eligible for exemption under section 11 in respect of such income - AT
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Levy of penalty u/s.271(1)(c) - disallowance of depreciation as assets were not put to use for the purpose of running business activity in the years under consideration - it is not a fit case for levy of penalty u/s.271(1)(c) - AT
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Eligibility exemption u/s.54B with regard to the on money received on sale of agriculture land - undisclosed income of the block period - assessee is entitled for getting benefit of exemption under section 54B with regard to the ‘on money’ - AT
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Revision u/s 263 - order has been passed by the Ld. CIT under section 263 without considering the explanation offered by the assessee and without applying his mind. In our opinion, this failure of the Ld. CIT, however, does not constitute any legal infirmity to make the order passed by him under section 263 invalid or void abinitio - AT
Customs
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Appeal before Commissioner (Appeals) - period of limitation - Post Master's report came favorable to the appellant. - However, the acknowledgement card would show the correct reference No and date - we cannot say that the letter issued by the Post Master is helpful to the appellant - appeal has been filed beyond the time limit - AT
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Extension of installation period - import of capital goods for appellant's pollution control treatment plant - the fact that this is a huge plant can be considered as one of the reasons resulting in delay in installation - extension granted - AT
Corporate Law
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Allegedly transfer of shares - Right to transfer the shares - Non compliance with section 108 of the Companies Act, 1956 - company cannot be faulted for non transfer/non registering of shares in the petitioner's name as the petitioner himself has to be blamed for his failure to comply with the relevant provision - CLB
Service Tax
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Reimbursement of expenses - reimbursable expenses received by the assessee need not be added to the taxable value relating to clearing and forwarding agency - AT
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In the wake of the fact that even the Government acknowledged the existence of confusion/ambiguity with regard to the coverage of management, maintenance and repair of software under the Management, Maintenance or Repair Service to such a degree as to warrant addition of an explanation to clarify the issue and also in view of the aforesaid judicial precedents, it is amply clear that the extended period cannot be invoked - AT
Central Excise
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Classification of car air-conditioning kit - if a kit and compressor are sold in a singular invoice or in one pricing, it will go out of item no.8 and duty will be paid separately, but if there are two invoices for separate pricing, the air-conditioning kit would come under serial no.8 and the automotive gas compressor with or without magnetic clutch will be liable to duty separately. - SC
Case Laws:
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Income Tax
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2015 (7) TMI 107
Entitlement for claiming higher depreciation - Held that:- Consedering the decision in the case of CIT v. Hi Tech Arai Ltd. [2009 (9) TMI 60 - MADRAS HIGH COURT] directed the Assessing Officer to allow additional depreciation as claimed by the assessee. The ld. CIT(Appeals), by following the decision of the Hon’ble Jurisdictional High Court supra, directed the Assessing Officer to allow higher depreciation. No material has been brought on record to show that the above decision of the Hon’ble Jurisdictional High Court has been either modified or reversed by the Hon’ble Supreme Court. Therefore, we find no infirmity in the order passed by the ld. CIT(Appeals) on this issue for both the assessment years. - Decided against revenue.
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2015 (7) TMI 106
Disallowance of interest under the provisions of section 36(1)(iii) - Held that:- We find support from the ratio laid down by the Mumbai Bench of Tribunal in DCIT Vs MTZ Polyfilms Ltd. (2013 (3) TMI 459 - ITAT MUMBAI ) wherein it has been proposed that for disallowing interest under section 36 (1)(iii), the total funds i.e. owned funds and borrowed funds, should have been considered for working out the disallowance of interest. Following the abovesaid proposition, we direct the Assessing Officer to recompute the disallowance under section 36(1)(iii) of the Act by adopting the average cost of debt for the year under appeal and applying the same to the interest free advances made by the assessee. Following the abovesaid proposition, we direct the Assessing Officer to recompute the disallowance under section 36(1)(iii) of the Act by adopting the average cost of debt for the year under appeal and applying the same to the interest free advances made by the assessee. Reasonable opportunity of hearing shall be afforded to the assessee by the Assessing Officer - Decided in favour of assessee for statistical purposes. Salary paid to Shri G.S. Saluja, father of one of the partners - AO disallowed claim under section 40A(2)(b) - CIT(A) deleted the addition - Held that:- From the perusal of the assessment order, we find that the Assessing Officer except for doubting genuineness of the said expenditure, has not given a finding that the expenditure was excessive or unreasonable, having regard to the fair market value of goods, services or facilities provided. The excessiveness or unreasonableness of the expenditure cannot be seen apart from the market conditions while invoking the provisions of section 40A(2)(a) of the Act. - Decided against revenue.
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2015 (7) TMI 105
Registration u/s.12AA and 80G(5) refused - There is no dissolution clause in the trust-deed and trust does not have any clause that the trust will not be dissolved and it is a perpetual trust - Held that:- This issue of refusing registration in the absence of dissolution clause in the trust-deed is covered in favour of the assessee with the decision of Co-ordinate Bench of Delhi Tribunal in the case of Shri Sai Samarpan Trust Co.(2007 (6) TMI 507 - ITAT DELHI), wherein held that when the assessee- trust is registered with the sub-registrar as a charitable trust, in the event of failure of the trust the net assets/income would obviously be taken over by the Charity Commissioner and the rejection of registration on this ground was held not on a sound footing and the orders of the DIT(Exemptions) were reversed. We find that the case of the assessee is on more sound footing since it has already applied to the Charity Commissioner for amendment of the trust-deed vide application submitted on 26/02/2013, whereby inserting the dissolution clause providing that the trust shall be irrevocable and in the most unlikely situation, if trust practically stops functioning, it can only be merged/amalgamated with other one or more public charitable trusts or bodies having similar objects subject to the approval of the Office of the Public Charity Commissioner, etc. No other material has been produced on behalf of the Revenue before us to suggest that the aims and objects of the trust are not charitable in nature. Thus there is no justification for refusing the registration u/s.12AA and 80G(5) to the assessee - Decided in favour of assessee.
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2015 (7) TMI 104
Sale of agricultural land - distance of the agricultural land from the municipal limits of city - whether agricultural land in question is not a capital asset as per Section 2(14)(iii)(a) and (b) and surplus arising on sale of the same is not liable to tax - CIT(A) objected to assess the surplus amount on sale of agricultural land as business income - Held that:- Distance of 8 kms. has to be measured through approach road and not by straight line distance on horizontal plane or crow’s flight. Hence, this issue is decided in favour of the assessees. See CIT Vs. Satinder Pal Singh [2010 (1) TMI 752 - Punjab and Haryana High Court] The land in question was shown as agricultural land in the revenue record. Whether there was any agricultural income or not, is not the moot question to decide the issue, however, the important factor is to be decided as to whether the character of the land is agriculture or not. Undisputedly, in the revenue record and as per the Patwari certificate, the land in question is agricultural land. Therefore, the sale consideration was not taxable on the sale of said land i.e. either on account of capital gain or on account of business income. Any consideration received out of sale of agricultural land, cannot be treated as business income for the purpose of capital gain or for the purpose of business income, whatever the case may be.- Decided in favour of assessee.
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2015 (7) TMI 103
Computation of Long Term capital loss - indexation from 24-02-1994 or from 14-02-1999 - Assessing Officer computed loss at ₹ 37,21,902/- by restricting indexation from 1999 i.e. the date of possession 14-2-1999 - Held that:- There is no dispute that the request of the assessee for allotting the flat No.401 at fourth floor in proposed residential complex, was accepted by the builder and a consent letter was given, subject to making the payments in installments. The assessee had paid full amount of consideration in the year of 1994, 1995 and 1996. The major payments have been made upto the Financial Year 1995. Only a payment of ₹ 9,44,000/- was made in the year 1996. Various Benches of the Tribunal have held that if allotment has been done, then the right of the person in the allotted flat is accrued. In this case, there is no dispute that builder consented to allot the flat as per the request of the assessee, however, when the flat was constructed then the agreement was entered into and possession was given to the assessee. There is no dispute in these facts. In the case of Praveen Gupta Vs. ACIT, [2010 (8) TMI 820 - ITAT DELHI] held that an assessee can be said to have held the flat when he made the payment to the builder and received the allotment letter and, therefore, the benefit of indexation of cost of acquisition of the flat has to be granted from the date of payments when he started making payments to the builder and not from the date of execution of conveyance deed. The ratio of the decision is clearly applicable on the facts of the present case for the simple reason that the assessee requested to allot the flat and the builder consented to allot the same vide letter dated 24-2-1994, copy of which has been placed at page 9 of the paper book. The payments have been made by the assessee regularly from 1993 to 1996. Therefore, in my considered view, the assessee deserves to succeed on this issue and eligible for indexation from the respective dates of payments made against the purchase of flat as the assessee got rights in the flat from the first date of payment made as per the schedule given by the builder. - Decided in favour of assessee. Disallowance of cost benefit on account of Stamp Duty, registration charges, brokerage paid and interest on delayed payments - Held that:- The assessee deserves to succeed on this issue also. Whatever the expenditure has been incurred on account of purchase of flat that has to be treated as cost of flat. There is no dispute that interest, Stamp Duty, registration fees and other expenses including brokerage, have been incurred on account of purchase of this flat. Therefore, these expenses cannot be segregated from the cost of flat. Accordingly, I direct the Assessing Officer to treat all these expenses as cost of flat then calculate the gain or loss on account of sale of flat. - Decided in favour of assessee.
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2015 (7) TMI 102
Disallowance under Section 14A r.w.r. 8D - Held that:- While dealing with the issue AO has not considered various factors and has not given any finding about them. Assessee had claimed that borrowed fund of ₹ 3.5 Crores were not used for investing in shares, that loans advanced to various persons were not connected with acquisition of shares. We find that these are crucial issues for deciding disallowance u/s. 14 A of the Act. Assesee himself has made an alternate plea that even if disallowance has to be made it has to restricted to certain amount which is much lower than the actual disallowance made by the AO. Thus matter should be restored back to AO. He is directed to make fresh calculation after considering the submissions of the assessee. - Decided in favour of assessee for statistical purposes. Rebate available u/s. 88E - Held that:- In the case of Ashika Stock Broking Ltd. (2010 (11) TMI 555 - ITAT, Kolkata) it was held that once there was a net surplus from share dealing of market segment and future and option segments together and if there was a net profit therefrom the assessee was entitled for rebate of entire STT. In the case under consideration surplus from share dealing from market segment/ future and option segment is not there, but there is net income after setting off of losses. We are of the opinion that once there was overall profit for the AY under consideration, rebate under section 88E of the Act had to be allowed. Following the order of Ashika (supra) we hold that section 88E does not envisage any restriction for allowing rebate u/s.88E till positive income is filed by the an assessee. We find that while passing the assessment order the AO has not given any finding about applicability or otherwise of Section 87(2) of the Act. We are of the opinion that if the provision of said section are not coming in way to allow the rebate to the assessee, same should be allowed at the rate calculated by the assessee. For this limited purpose we remit the matter back to the file of the AO to decide the issue afresh. - Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 91
Taxability of Amounts paid by the ONGC to the non-resident assessees /foreign companies for providing various services in connection with prospecting, extraction or production of mineral oil - Fees for technical services under Section 44D read with Explanation 2 to Section 9(1)(vii) OR payments be taxable on a presumptive basis under Section 44BB - Held that:- Pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of Section 44BB and not Section 44D of the Act. On the basis of the said conclusion reached by us, we allow the appeals under consideration by setting aside the orders of the High Court passed in each of the cases before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal. - Decided in favour of assessee.
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2015 (7) TMI 90
Purport and effect of exemption notification bearing No.GSR 307(E) dated 31.03.1983 issued under Section 24AA of the Surtax Act - Held that:- Section 24-AA of the Surtax Act was brought into the statute book by Act 16 of 1981 i.e. Finance Act, 1981 with effect from 1.4.1981. The explanatory notes on the provisions of Finance Act [Paragraph 11(4) and 26(1)] clearly goes to show that the legislative intent behind inclusion of Section 24-AA is to encourage foreign companies to enter into participating contracts with the Union Government in the business of oil exploration or production. The further legislative intent was to seek greater participation of foreign companies in the matter of providing services including supply of ships, aircrafts, machinery or plant in connection with business of extraction or production of mineral oils. The aforesaid legislative intent which is two-fold is manifested by the two limbs of sub-section 2 of Section 24AA of the Surtax Act to which the power of exemption was intended to operate i.e. sub-section 2(a) and 2(b) of Section 24AA. If out of the two limbs where the power of exemption was intended to operate, the repository of the power i.e. Central Government, had consciously chosen to grant exemption in one particular field i.e. foreign companies covered by sub-section 2(a) of Section 24-AA, the scope of the grant cannot be enhanced or expanded by a judicial pronouncement which is what the arguments made on behalf of the appellants intend to achieve. Any such interpretation must, therefore, be avoided. Consequently, we see no reason to depart from the basic principles of interpretation, as already noticed, that should govern the present issue.
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2015 (7) TMI 89
Measurement of distance of the agricultural land - Held that:- Distance of the agricultural land belonging to the assessee within the meaning of s. 2(14)(iii)(b) has to be measured in terms of the approach by road and not by the straight line distance on horizontal plane or as per crow's flight. See case of Satinder Pal Singh [2010 (1) TMI 752 - Punjab and Haryana High Court ]. - Decided against revenue.
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2015 (7) TMI 88
Appeal is ADMITTED on the following substantial questions of law- I) Whether on the facts and in the circumstances of the case and in law, the ITAT failed to consider the fact that the area of the plot for Vidhi Complex is below 1 acre and as such the primary condition for claim of deduction under Section 801B(10) of the Income Tax Act, 1961 has not been fulfilled? (II) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in coming to a conclusion that the exclusion of DP Road does not reduce the size of the plot, while on the contrary accepting the fact that the plot in question was originally a larger plot which was trifurcated with passing of two DP roads and thus, treating one of the 3 plots i.e. the plot in question being an independent plot with net area of 3461.68 sq.mtrs.?
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2015 (7) TMI 87
Disallowance of Sales promotion and publicity expenses - Held that:- Facts about assessee’s regular maintenance of accounts, their non-rejection, diverse business activities, contentions, applicable case laws and past litigation history is narrated in details above and needs no repetition. We are inclined to allow grounds raised by assessee relating to retention of disallowances by ld. CIT(A) in all these years on following considerations. i. All disallowances have been allowed in favor of the assesse by ITAT in A.Ys. 1992-93 to 1997-98, 2000-01 and 2001-02 a gist of the orders of the ITAT orders in this behalf finds place onPB 47-50. Series of orders of this bench in assessee’s own case are to be respectfully followed. ii. In addition to above, for AY 2004-05 also the other additions/disallowances stood allowed to assesse and issue of 5% disallowance out of sales promotion was set aside by ITAT for fresh consideration. Ld. CIT(A) in 2nd round of proceedings allowed these expenses by latest order Dtd 29-1-14 in fresh proceedings. Revenue has accepted this order and has become final. iii. Assessee’s books of accounts are maintained regularly on day to day basis and are duly audited; there is no qualification or any material adverse remark by the chartered accounts. iv. Assessee’s books of accounts have not been rejected much less even doubted. v. In view of a series of favorable orders in assessee’s own cases on these issues we are of the view thatthey are no more res integra. vi. Principle of ‘Consistency’ as enunciated by Hon’ble Supreme Court in Radhasoami Satsang (1991 (11) TMI 2 - SUPREME Court) is fully applicable to the assessee’s case which has been reconfirmed by Hon’ble Supreme Court in CIT v Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT] vii. The Hon’ble Gujarat High Court in the case of Sayaji Iron and Eng. Co. (2001 (7) TMI 70 - GUJARAT High Court ) is applicable to disallowance retained alleging personal user by the company. Respectfully following it we hold that in the case of assesse being a limited company which is an inanimate person, there can be no personal expenditure. Consequently the disallowances attributed to be personal user cannot be justified and are deleted. viii. For AY 2006-07 qua the same disallowances assesse has paid more Fringe Benefit Tax (FBT). As over FBT and IT provisions if any expenditure is taxable under FBT it cannot be disallowed again in Income Tax provisions. - Decided in favour of assessee. Disallowance of ‘Marketing and Survey expenses’ - Held that:- As the facts emerge the record and evidence in this behalf has surfaced in piece meal and from time to time as the assessee attempted to fill in the gaps about inferences drawn by the authorities from time to time. Consequently a cohesive verification of material appears to be not made. Assessee has produced the income tax record of the survey agencies which in support of its version; there exist no reasoning as to why they are being ignored by ld. AO & CIT(A). There exist conflicting claims about the existence of such survey agencies coupled with non supply of Inspectors report and non-allowing the customary right of cross examining the denying witnesses. Thus assessee has made out a case for violation of principles of natural justice. In the entirety of facts and circumstances we are inclined to set aside the issues relating to Marketing and Survey expenses back to the file of AO to decide afresh after considering the entire evidence and giving the assessee an adequate opportunity of being heard. - Decided in favour of assessee for statistical purposes. Additional depreciation - whether the activity carried out by assessee i.e. printing and publishing newspaper does not amount to manufacture or production within the meaning of section 32(1)(iia)? - Held that:- news papers and periodicals are distinct commodity than the paper, printing ink and other ingredients used therein. Since a new commercial product comes into existence, the process involved for such transformation amounts to production and manufacture. Our view is fortified by Hon’ble Delhi High Court and ITAT benches of Cochin and Ahmedabad. Respectfully following them we uphold the orders of ld. CIT(A) on this issue of additional depreciation. Apropos AY 2006-07, since relying on Sayaji Iron and Engg. Case (supra), we have already held that, there can be no attribution of personal user in case of a limited company, the order of ld. CIT(A) deleting the disallowance of depreciation in this behalf is upheld. Revenue appeals are thus dismissed.- Decided in favour of assessee
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2015 (7) TMI 86
Deduction u/s.36(1)(viia) - AO disallowed claim for deduction as greater than the amount debited to the profit and loss account as provision - CIT(a)deleted the addition - Held that:- The creation of a special reserve u/s.32A or Sec.36(1)(viii) of the Act cannot be equated with creation of PBDD u/s.36(1)(viia) of the Act. Creation of provision u/s.36(1)(viia) of the Act is governed by certain rules like Rule 6ABA of the rules in respect of rural advances. It cannot be created at the bank's whims and fancy. Moreover the Assessee is not making a claim for creation of PBDD in the books of accounts of PY relevant to AY 08-09. The excess reserve created in the subsequent year cannot be equated to the PBDD created in the books for the present AY. The decisions relied upon by the learned counsel for the Assessee do not lay down a proposition that excess provision created in the subsequent year can supplement the inadequate created in an earlier year. The decisions relied upon by the learned counsel for the Assessee lay down proposition that the Assessee should be given liberty to create a reserve in the books of accounts of the relevant AY. For the reasons given above, we reject the second alternate submission made by the learned counsel for the Assessee. Thus the Assessee will be entitled to deduction u/s.36(1)(viia) of the Act of ₹ 100,55,67,213/- only. - Decided prtly in favour of revenue. Deduction u/s.36(1)(vii)on account of Bad Debts written off in the books of accounts - claim disallowed by the AO on the ground that the credit balance in the PBDD relating to non-rural branches have to be adjusted against the debit to the profit and loss account on account of bad debts - CIT(A) allowed claim - Held that:- Deduction under Section 36(1)(vii) is available for deduction on account of Bad debts written off pertaining to non-rural debts. This deduction is allowed only when the amount of bad debt is actually written off in the books and debited to Profit & Loss account. Deduction cannot be claimed for creating Provision for Bad and Doubtful Debts of Non-rural branches. It is like any other bad debt written off which is allowed as deduction in the case of Assessees who are not in banking business. Deduction u/s.36(1)(viia)(a) is allowed when a Provision for bad and doubtful debts relating to rural advances is made in the books of account subject to the limit laid down therein. When a deduction is allowed u/s.36(1)(viia)(a) of the Act by way of provision, there will be no deduction under clause (vii) for actual write off of bad debts relating to rural advances, until or unless there is a balance lying in the provision account made under clause (viia). This so because of the Proviso to Section 36(1)(vii) which provides that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause. Thus the proviso ensures that there is no double deduction, i.e., firstly getting a deduction when a provision is created and secondly getting a deduction when bad debts are written off. Thus in view of the aforesaid decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank (2012 (2) TMI 262 - SUPREME COURT OF INDIA ), we are of the view that the CIT(A) was right in directing the AO to allow the claim for deduction made u/s.36(1)(vii) of the Act. - Deduction in favour of assessee. Depreciation in the value of investments held by the Assessee in the category of HTM (Held to Maturity) - CIT(A) allowed claim - Held that:- the contentions put forth on behalf of the assessee deserve to be accepted. The Tribunal in assessee's own case on an identical issue for the A.Y. 2005-06 has upheld the claim of the assessee. The later decision of the Hon'ble High Court of Karnataka in CIT v. Vijaya Bank [2013 (10) TMI 1030 - KARNATAKA HIGH COURT] is also in favour of the assessee. In such circumstances, we are of the view that the issue raised by the revenue in its appeal is without merit. - Decided in favour of assessee. Disallowance of penalty paid - CIT(A) deleted penalty - Held that:- According to the Hon'ble Court in the case of CIT Vs. Syndicate Bank (2002 (12) TMI 56 - KARNATAKA High Court) held that shows that the amount in question is not compensatory in nature but definitely penal and that the said amount paid by way of penalty though called penal interest cannot be treated as legitimate item of expenditure. The Hon'ble Court held that permitting penalty paid for the nature of such violations as an item of deductible expenditure under s. 37 of the IT Act will only amount to placing a premium on the commission of infraction of the assessee. Therefore, penalty payable under s. 24(4)(a) and 24(4)(b) could not be allowed as deductible expenditure.- Decided in favour of revenue. Deduction u/s.36(1)(viii) - Held that:- A plain reading of the provisions of Sec.36(1)(viii) of the Act clearly shows that what is relevant is profits derived from eligible business computed under the head "Profits and gains of business or profession" and not the profits derived by the entity as a whole as has been done by the AO and CIT(A). We therefore hold that the method of computation of deduction as done by the AO and CIT(A) is incorrect. The profits derived from eligible business computed under the head "Profits and gains of business or profession" as done by the Assessee has been accepted by the AO and CIT(A). There should be no difficulty in accepting the claim made by the Assessee for deduction u/s.36(1)(viii) of the Act. The Assessee has also filed before us an alternate method of computation of deduction u/s.36(1)(viii) of the Act to demonstrate that such alternate method will result in claim for deduction being made at ₹ 37,14,84,183/-. The said computation is given as Annexure-2 to this order. We deem it appropriate to direct the AO to examine the computation given as annexure-2 to satisfy himself that the claim as made originally was correct. The AO is thereafter directed to consider the claim of the Assessee for the correct amount of eligible deduction u/s.36(1)(viii) of the Act. - Decided in favour of assessee. Computation of disallowance u/s.14A - Held that:- In the present case, the claim of the Assessee before the AO that tax free income for the bank is mainly from investments held by the bank. The investment activities of the bank are carried out by the Treasury Department at Head Office. Even without earning any free income, these expenditure would have been incurred by the bank since the bank has to hold SLR securities to carry on the business and the expenditure is of fixed in nature. Therefore, there is no expenditure incurred directly by the bank for earning any tax free income. Since the expenditure would have been incurred by the bank even without the earning of tax free income, no part of the expenditure can be related to earning the tax free income. In the light of the above undisputed fact and in view of the decision of the Hon'ble Karnataka High Court in the case of CCI Ltd. (2012 (4) TMI 282 - KARNATAKA HIGH COURT), we are of the view that no disallowance can be made u/s.14A of the Act. The addition made in this regard is directed to be deleted.- Decided in favour of assessee. Rejection of the claim that provisions of Sec.115JB of the Act are not applicable to banking companies - Held that:- Provisions of section 115JB of the Act are not applicable to the assessee which is a banking company. The decisions relied upon by the ld. counsel for the assessee of Krung Thai Bank case [2010 (9) TMI 18 - ITAT, MUMBAI] , clearly support the plea of the assessee in this regard. Since the provisions of sec.115JB of the Act are not applicable to banking companies as held by the Tribunal, we are of the view that the computation of books profits made by the AO cannot be sustained. - Decided in favour of assessee.
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2015 (7) TMI 85
Registration u/s 12AA(3) withdrawn - genuineness of purchase of software or mere accommodation entry - validity of statement of various persons recorded during investigation - Held that:- In the present case, the activities of the assessee-trust which are mainly of imparting education to the students under various institutions referred in the order of learned CIT, Jalandhar-II, Jalandhar, have been found to be genuine and no allegation regarding not imparting of education has been framed by learned CIT, Jalandhar-II, Jalandhar, in its order passed under Section 12AA(3) of the Act or by the Assessing Officer in his order passed for the assessment years 2004-05 & 2009-10, referred hereinabove. The activities of the trust are found to be genuine and according to us the activities of the trust are genuine and cannot be said to be for non-charitable purposes, especially that there is not even a whisper from learned CIT, Jalandhar-II, Jalandhar, with regard to the non-genuineness of the activities of the trust which are found to be in consonance with the objects of the trust and therefore, the learned CIT, Jalandhar-II, Jalandhar, is not justified in cancelling and withdrawing the registration granted under Section 12AA of the Act i.e. w.e.f. the assessment year 2004-05. In the present case, learned CIT, Jalandhar-II, Jalandhar, has not brought on record any materials that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust. Thus, the order of learned CIT, Jalandhar-II, Jalandhar, cancelling the registration is bad in law and, therefore, is set aside. The aforesaid statement recorded by the Department was whether under threat of tax liability of 100 crores is not evidenced by any documentary evidence by learned A.R. In the present issue, the assessee has submitted the explanation vide letter dated 14.09.2012 available at page 8 to 10 of the order of learned CIT, Jalandhar-II, Jalandhar, in which it was stated that the software purchased from Washington Software Limited though debited to various institutions, is installed in the central server at the head office of utmost importance and required secrecy. The software includes various modules and various types of reports which include data of students and also about the institutions. It generates reports which are very big and contain large number of pages. Some of the reports were produced before the learned CIT, Jalandhar-II, Jalandhar, and are available on record. Such reports have been stated to be wrong by learned CIT, Jalandhar-II, Jalandhar. The assessee, for supplementing his contention, has enclosed the report of Trident Information System Pvt. Ltd. certifying that the software were duly installed in the central server at the head office and the said report is available on record as mentioned hereinabove. It was argued that the said software system has generated the reports right from 2004 to 2011.In this regard and keeping in view the facts and circumstances as above, it cannot be a case for withdrawal/cancellation of registration granted under Section 12AA(1) of the Act - Decided in favour of assessee.
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2015 (7) TMI 84
Disallowance employees' (staff) contribution to Provident Fund which were not paid on due dates - CIT(A) deleted the addition - Held that:- The contribution of provident fund and ESIC not being paid before the due dates and in the absence of any contrary binding decision and respectfully following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT) we set aside the order of ld. CIT(A) on this issue and uphold the decision of A.O. - Decided against assessee. Addition in respect of long outstanding debts - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that the amounts outstanding in the Assessee’s Balance Sheet were considered as liability by the Assessee and in the absence of any material suggesting that the Assessee had no intention of honoring the debts, no profit could be said to accrue. We further find that the issue in the present case is also covered in Assessee’s favour by the decision of Hon’ble Gujarat High Court in the case of CIT vs. Bhogilal Ramjibhai Atara (2014 (2) TMI 794 - GUJARAT HIGH COURT). Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A) nor has brought any contrary binding decision in its support. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) - - Decided against revenue. Addition on account of welfare expenses - CIT(A) deleted the addition - Held that:- CIT(A), following the order in Assessee’s own case for A.Y. 2000-01 has deleted the addition by a cryptic order. Before us none of the parties have placed the order of ld. CIT(A) for A.Y. 2000-01 that was relied by ld. CIT(A) while deleting the addition nor could throw light as to whether the order of ld. CIT(A) for A.Y. 2000-01 has attained finality. In view of the aforesaid facts, we restore the issue back to the file of ld. CIT(A). In case the order of ld. CIT(A) for A.Y. 2000-01 that was relied by ld. CIT(A) for deciding the present ground has been accepted by Revenue and attained finality, then no interference to the order of ld. CIT(A) for the year under consideration is called for. In case the order of ld.CIT(A) for A.Y. 2000-01 has been decided at a higher forum, ld. CIT(A) is directed to follow the same. - Decided in favour of revenue for statistical purposes. Addition of miscellaneous expenses - CIT(A) deleted the addition - Held that:- A.O has made an ad hoc disallowance of 10% of miscellaneous expenses. While disallowing the expenses, he has not pointed out any expenditure which is not for the purpose of business. At the same time, we find that ld. CIT(A) following the decision for A.Y. 2000-01 has also noted that no such disallowance were made in earlier years and ad hoc addition, in the absence of adverse report by the auditor, cannot be sustained. Before us, Revenue has not brought any material on record to any controvert the findings of ld. CIT(A) nor has pointed out any contrary binding decision. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) - Decided against revenue. Disallowance of bad debts - CIT(A) deleted the addition - Held that:- The issue in the present case is with respect to writing off of bad debts. We find that Hon’ble Supreme Court in the case of TRF Ltd. vs. CIT (2010 (2) TMI 211 - SUPREME COURT) has held as under:- "After the amendment of section 36(i)(vii) of the Income-tax Act, 1961, with effect from April 1 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable, it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Before us, Revenue has not brought any contrary binding decision in its support nor has controverted the findings of ld. CIT(A).- Decided against revenue. Addition on account of repairs to building - Held that:- We find that ld. CIT(A) while upholding the addition has by a very cryptic order upheld the order of A.O. We further find that there is no finding of ld. CIT(A) with respect to the nature of expenses incurred by the Assessee. In such circumstances, we are of the view that the issue needs to be reconsidered and therefore we remit the issue back to the file of ld. CIT(A) to decide the issue afresh after giving a clear finding on the expenses. Needless to state that ld. CIT(A) shall grant reasonable opportunity of hearing to both the parties.- Decided in favour of assessee for statistical purposes. Deletion of charges paid to GEB - Held that:- CIT(A) while upholding the disallowance made by A.O has noted that the deposit with GEB cannot be compared with deposit under OYT scheme which is under different terms and conditions. We find that ld. CIT(A) has not pointed out as to how the scheme of deposit with GEB is different from OYT scheme which was relied upon by Assessee. In such circumstance, we are of the view that the issue needs to be re-examined in the light of the submissions made by ld. A.R, the case law relied upon by ld. A.R. and on the basis of facts and circumstances of the case. Ld. CIT(A) shall give a categorical finding with respect to the nature of expense. The Assessee is also directed to co-operate by furnishing all the required details called for by ld. CIT(A). - Decided in favour of Assessee for statistical purposes. Additions of the payments made towards Credit Cards expenses incurred by the Director - Held that:- The expenses incurred by the Directors of the Company through Credit Cards were considered to be personal in nature by the A.O. On the other hand, it is Assessee’s submission that the expenses have been incurred on behalf of the Company and no personal element is involved. The Assessee has also placed reliance on the decision of Sayaji Iron & Engineering Company vs. CIT (2001 (7) TMI 70 - GUJARAT High Court). Considering the fact that ld. A.R. has also placed reliance on the decision of Sayaji Iron (supra) and in the absence of any finding by ld. CIT(A) on the nature of expenses and in the light of the aforesaid decision of Gujarat High Court which has been relied upon by ld A.R., we are of the view that the issue needs to be re-examined in the light of the aforesaid decision and in accordance with law. We therefore set aside the issue back to the file of ld. CIT(A) to decide the issue afresh in accordance with law. Needless to state that CIT(A) shall grant adequate opportunity of hearing to the Assessee. - Decided in favour of Assessee for statistical purposes. Addition on account of interest payments u/s. 43B(e) - Held that:- On perusing Section 43B(e), it is seen that interest on any loan or advance from a schedule bank, in accordance with terms and conditions of the agreement governing such loans or advance, would be allowed as deduction in the previous year in which sum is actually paid by the Assessee. We further find that Explanation 3D has been inserted by Finance Act, 2006 with retrospective effect from 01.04.1997 and the Explanation 3D states that for the removal of doubt it is declared that the deduction, being interest payable, shall be allowed if such interest has been actually paid and any interest referred to in clause (e) which has been converted into a loan or advance shall not be deemed to have been actually paid. In the present case, it is an undisputed fact that a portion of interest has been converted into loan pursuant to the CDR package approved by the Bankers of the Assessee. Considering the express provision of the Act read along with Explanation 3D and in view of the aforesaid facts, we are of the view that the A.O was right in disallowing the claim of Assessee. - Decided against assessee.
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2015 (7) TMI 83
Reopening of assessment - whether the assessment framed without issuing the notice u/s 143(2) of the Act is a valid assessment? - Held that:- Where notice u/s 143(2) of the Act is not issued to the assessee before framing the assessment u/s 143(3) of the Act, the AO does not have the jurisdiction to make the assessment. In the present case, the AO issued the notice u/s 148 of the Act and the assessee furnished the return of income in response to the said notice. Thereafter the AO asked the assessee to furnish certain details by issuing the questionnaire u/s 142(1) of the Act but nowhere issued the notice u/s 143(2) of the Act. Therefore, the assumption of jurisdiction for framing the assessment was invalid. Whether the provisions of section 292BB of the act come to the rescue of the department, even when the notice u/s 143(2) of the Act is not issued within the stipulated time? - Held that:- Section 292BB incorporates the principles of estoppel. It stipulates that an assessee, who has appeared in any proceeding and co-operated in any enquiry relating to assessment or reassessment shall be deemed to be served with any notice which was required to be served and would be precluded from objecting that the notice was not served upon him or was served upon him in an improper manner or was not served upon him in time. However, the proviso states that the principle of estoppels incorporated in the main section would not apply, if the assessee has raised objection in reply to the notice before completion of assessment or reassessment. In the present case, as we have already noted that the notice u/s 143(2) of the Act was neither issued nor served upon the assessee before making an order of assessment u/s 143(3) r.w.s. 147 of the Act. It is well settled that the issuance of notice u/s 143(2) of the Act is not procedural irregularities and the same is not curable, therefore, the requirement of issuance of notice u/s 143(2) of the Act cannot be dispensed with and no assessment can be framed u/s 143(3) r.w.s. 147 of the Act without issuance of notice u/s 143(2) of the Act. - Decided in favour of assessee.
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2015 (7) TMI 82
Reopening of assessment - Held that:- Assessing Officer in the assessment order has not discussed the issue of interest from investment to M/s. S.P. Apparels Limited Ltd. The Assessing Officer while recording the reasons has formed an opinion that excess interest claim was allowed to the assessee and on that reason assessment was re-opened. Further a perusal of the material on record does not indicate that the assessee had drawn the attention of the Assessing Officer to the fact that the reasons mentioned for re-assessment at the time of completion of original assessment. According to the ld. Authorised Representative for assessee it is not necessary for the assessee to point out the above set of facts to the Assessing Officer and that the assessee is entitled to the claim of interest. Merely because the Assessing Officer mentioned in the original assessment order that E2,46,065/- is under the head other expenses to be disallowed, it does not mean the Assessing Officer is examining the interest allowability also. Thus, the Assessing Officer while framing the original assessment u/s.143(3) of the Act does not appear to have formed an opinion with regard to allowability of interest and he has accepted the claim of the assessee, as the assessee wanted to be accepted by the Assessing Officer. The assessee having failed to draw the attention of the Assessing Officer regarding interest payment, it cannot be said that there is no violation of provisions of the Act. Further, when no opinion has been expressed in the assessment order and no details or explanation in relation to the claim of interest has been called for by the Assessing Officer, it is not possible to accept the contention of the assessee that the Assessing Officer has applied his mind to the said aspect of interest payment. In the light of the aforesaid discussion, we are of the view that in the light of the reasons recorded by the Assessing Officer, there was sufficient material for Assessing Officer to form the requisite belief that income has escaped assessment for the assessment year under consideration.- Decided against assessee. Disallowance of interest - Held that:- If the amount is advanced from a mixed account or share capital or sale proceeds or profits etc., the same would be termed as diversion of borrowed capital and that the revenue need not require to establish nexus of the funds advanced to the sister concerns with the borrowed funds. Once it is borne out from the record that the assessee had borrowed certain funds on which liability to pay tax is being incurred and on the other hand, certain amounts had been advanced to sister concerns or others without carrying any interest and without any business purpose, the interest to the extent the advance had been made without carrying any interest is to be disallowed under Section 36(1)(iii) of the Act. Such borrowings to that extent cannot possibly be held for the purpose of business but for supplementing the cash diverted without deriving any benefit out of it. Accordingly, the assessee will not be entitled to claim deduction of the interest on the borrowings to the extent those are diverted to sister concerns or other persons without interest. - Decided against assessee.
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2015 (7) TMI 81
Transfer pricing adjustment - selection of comparable - AMP expenses - Held that:- Before the PLI determined at entity level is to be taken as the determining factor of bench marking various international transactions along with the AMP expenditure, it is to be clearly demonstrated how the transactions of the advertisement expenditure is closely linked to the other transactions in the distribution segment. Ld. TPO in para 10.4 has observed that assessee company has not been able to demonstrate that there was any prior understanding, design or commercial logic or rational for aggregation of the transactions. He has observed that the assessee company has not been able to demonstrate that there was any logic or rationale for aggregation or that the transactions of the advertisement expenditure and the other transactions in the distribution activity are interdependent. Therefore, the contention of ld. counsel that since PLI at entity level is much more than that of the comparables, therefore, no separate bench marking of the functions is to be carried out, is devoid of any merit. However, at the same time we find that Hon’ble Delhi High Court in the case of Soni Erection has rejected the applicability of bright line test and as noted earlier, ld. TPO and ld. DRP have not pointed out the AMP functions being carried out by the assessee, vis a vis the comparables and applied the bright line test. Therefore, in view of the observations it would be proper to restore this issue to the file of Ld. TPO for bench marking the AMP functions, keeping in view the decision of Sony Ericson Mobile (2015 (3) TMI 580 - DELHI HIGH COURT). We may point out that assessee would be free to demonstrate its claim regarding aggregation of AMP functions with other international transactions, particularly in view of the observations of Hon’ble Delhi High Court in para 101 of the order. We may further clarify that while computing the components of AMP expenditure, direct selling and distribution have to be excluded in view of the decision in the case of Sony Ericson (supra). AS regards the objections of ld. counsel on selection of comparables, we are of the opinion that whole exercise has to be carried out de novo - Decided partly in favour of assessee for statistical purposes only.
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2015 (7) TMI 80
Addition to the income of the appellant in respect of 4 gold diamonds - Held that:- In the light of the rival submissions and the order of the Tribunal in the case of Income Tax Officer vs. Shri. Gopal Verma, Kanpur we find that the explanations furnished by the assessee in the instant case were examined by the Tribunal in the case of Shri. Gopal Verma, the Director of the assessee-company. Being convinced with the explanations of Shri. Gopal Verma, the Tribunal has deleted the addition made in his hands on substantive basis and there is no evidence on record suggesting that the order of the Tribunal was ever reversed. Therefore, no addition is called for in the hands of the assessee on the basis of same facts. There is no evidence that the appellant had made any investment in purchase of these diamonds. The diamonds were property of M/s. Om Enterprises and these findings have been given in the assessment of M/s. Om Enterprises. Shri Gopal Verma had nothing go do with these diamonds in his individual capacity. He was holding these diamonds in the capacity of the Director of Company. It was the onus of M/s Mansingh & Sons Jwellers (P) Ltd. to explain the source of acquisition of diamonds. The nature of possession in his hand was holding the company property in trust, thus legally no addition can be made in the hands of Shri. Gopal Verma. In the present case even on the basis of facts no addition was justified to be made in the case of Shri Gopal Verma because the source of acquisition of diamonds was clearly explained and same was verified by conducting survey at M/s Om Enterprises as well as by making inquiry by deputing ITI to Calcutta and also by making inquiries by the Assessing Officer from M/s. Om Enterprises. The addition made by the AO of ₹ 21,30,372/- in the hands of the appellant cannot be sustained and is directed to be deleted. - Decided against revenue.
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2015 (7) TMI 79
Addition on account of transfer pricing adjustment towards Advertising, Marketing and Promotion (AMP) expenses - Held that:- No detail of the AMP functions performed by the assessee is available on record. Similarly, there is no reference in the order of the TPO to any AMP functions performed by comparables. In fact, no such analysis or comparison has been undertaken by the TPO because of his applying the bright line test for determining the value of the international transaction of AMP expense and then applying the cost plus method for determining its ALP. The ld. AR also failed to draw our attention towards any material divulging the AMP functions performed by the assessee as well as comparables. As such, we are handicapped to determine the ALP of AMP expenses at our end, either in a combined or a separate approach. Under such circumstances, we set aside the impugned order and send the matter back to the file of the TPO/AO for determining the ALP of the international transaction of AMP spend afresh in accordance with the manner laid down by the Hon’ble High Court in Sony Ericson Mobile (2015 (3) TMI 580 - DELHI HIGH COURT). It is, however, made clear that the TPO/AO, while computing adjustment, if any, on account of AMP expenses will not include Selling expenses directly incurred in connection with sales in the overall base of AMP expenses. With the above observations, we send the matter back to the TPO/AO for redetermination of the ALP of AMP expenses in accordance with the above guidelines. Needless to say, the assessee will be allowed a fresh opportunity of hearing in such fresh proceedings. Ex consequenti, the issue raised about the TPO having no jurisdiction to determine the ALP of AMP expenses, is dismissed following the judgment in the case of Sony Ericsson Mobile (supra). Reduction in the amount of deduction u/s 10A - apportionment of certain STP unit specific expenses - Held that:- On a specific query, it was fairly admitted that there were certain non-STP unit specific expenses as well, but the AO aggregated all the specific and non-specific expenses and allocated them in the ratio of turnover of STP and non-STP units. In our considered opinion, this approach adopted by the AO is not correct. We, therefore, set aside the impugned order on this issue and remit the matter to the file of AO for a fresh determination of net profit eligible for deduction u/s 10A of the Act. In such a computation of net profit, the STP unit specific expenses should be considered in the computation of STP unit profit as such and the non-STP unit specific expenses should be considered in the computation of profit of non-STP unit. The remaining common expenses which are not specifically allocable either to the STP or the non-STP units should be bifurcated in the ratio of turnover. Depreciation on computer peripherals - @ 15% as against 60% claimed by the assessee - Held that:- This issue is no more res integra in view of the judgment of the Hon’ble jurisdictional High Court in CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] in which it has been held that the depreciation on computer peripherals should be allowed at 60% instead of 15%. - Decided in favour of assessee.
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2015 (7) TMI 78
Valuation of the property - CIT(A) has upheld the valuation made by Registered Valuer and discarded the DVO Report relied by the AO - Held that:- CIT(A) rightly repells the said reasoning of the DVO and opined that the valuation by the Registered Valuer was not made considering the structure as new one and held that it was an incorrect observation of DVO. The DVO further states in his letter that the cost of construction as on today i.e. in the year 2006 varied between ₹ 550 to ₹ 650 for a load bearing G+1 structure and how the rate could be ₹ 350/- pr sq. ft. as on 1.4.81 for an old building which was built in and around 1940. The Ld CIT(A) takes notes that the DVO's finding that the cost of construction in the year 2006 was between 550 to 650 is not supported with any evidence. The Ld CIT(A) rightly observes that there is a basic difference between determining the cost of construction and valuing the fair market value of any property and the fair market value is always higher than the cost of construction. Ld CIT(A) takes into account that in any case the salvage value of the structure in comparison to the overall value of the property was much less and negligible and even if there is some variation, it would not substantially reduce the value of the entire property as a whole. Finally the DVO finds fault that the Registered Valuer had not given any sale instances for the land and has only stated that the rates available from the registrar were 4-5 times lower as compared to the actual sale rate and so his finding could not be accepted as FMV since it had to be supported by the evidence. Ld CIT(A) agrees to the said observation of the DVO but rightly observes that even the sale instances adopted by him (DVO) also did not serve any purpose for the same reason ; and therefore the valuation of the property was just a matter of estimate of one expert versus another expert. We find considerable force in the observation of the Ld. CIT(A) that from the discussion in the foregoing para it would be clear that the basic purpose for which the case was remanded by the ITAT to the file of the Assessing Officer remained unfulfilled. The DVO ought to have controverted the report of the Registered Valuer's report, so it cannot be acted upon and the failure of the DVO as stated above, give us no other alternative but to uphold the valuation of the registered valuer for the purpose of computation of capital gain. The Ld CIT(A) has rightly taken note of the fact that Registered valuer report is based on the average of two different methods of valuation and DVO failed to controvert the said method nor could clarify as to his selection of single method was better. In the facts and circumstances we find that registered valuer report more acceptable, since the estimate of the DVO is based only on one method of valuation, where as we find that the Registered Valuer’s estimate was based on two different methods; and moreover the fact remains that he could physically examine the property, so it is more acceptable being nearer to correct estimate. - Decided against revenue.
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2015 (7) TMI 77
Registration of the trust granted u/s. 12AA withdrawn - Held that:- If the status of registration is to be declined to an assessee only on the ground that some of the objects may be hit by the first proviso to Section 2(15) but the assessee's receipts from such activities donot exceed specified threshold in a particular assessment year, the assessee will be subjected to undue hardship in the sense that while the assessee will be disentitled to exemption under section 11 due to denial of registration under section 12 A or 12AA which is sine qua non for admissibility of exemption under section 11. On the other hand, if the status of registration is granted to the assessee even when some of the objects may be hit by the first proviso to Section 2(15) and the assessee's receipts from such activities do exceed specified threshold, no prejudice will be caused to the legitimate interests of the revenue because, notwithstanding the status of registration and by the virtue of section 13(8), the assessee will not be eligible for exemption under section 11 in respect of such income. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e., to make it workable rather than redundant. The considerations about the possibilities of the first proviso to Section 2(15) coming into play affecting the grant, decline or withdrawal of registration under section 12AA will thus lead to wholly avoidable undue hardships to the assessee, will be unworkable in practice and be contrary to the scheme of the Act. Thus as the considerations about the possibilities of first proviso to Section 2(15) into play are wholly extraneous in the present context. As the withdrawal of registration is solely based on these considerations, the very foundation of the learned Commissioner's action is unsustainable in law and consists of reasons which are not at all relevant in the context of registration status under section 12A or 12AA of the Act. For this reason also, the action of the learned Commissioner is wholly devoid of any legally sustainable merits. - Decided in favour of assessee.
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2015 (7) TMI 76
Disallowance of trade mark fee - revenue v/s capital - CIT(A) allowed claim - Held that:- As relying on CIT vs. G4S Securities System (India) Pvt. Ltd. [2011 (7) TMI 65 - DELHI HIGH COURT] wherein exactly the similar to the issue involved in the present appeal to hold the ownership rights of the trade mark and knowhow throughout vested with G4F and on the expiration or termination of the agreement the assessee was to return all G4F knowhow obtained by it under the agreement. The payment of royalty was also to be on year to year basis on the net sales of the assessee and at no point of time the assessee was entitled to become the exclusive owner of the technical knowhow and the trade mark. Hence, the expenditure incurred by the assessee as royalty is revenue expenditure and is therefore, relatable under Section 37(1) of the Act. - Decided in favour of assessee. Proportionate rights to use the software - revenue v/s capital - Held that:- The treatment of a particular expense or, a provision in the books of accounts can never be conclusively determinative of the nature of the expense. An assessee cannot be denied a claim for deduction which is otherwise tenable in law on the ground that the assessee had treated it differently in its books. The observation of the Supreme court in the case of Kedar Nath Jute Manufacturing Co. Ltd. vs CIT (1971 (8) TMI 10 - SUPREME Court) puts this beyond doubt and hold whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of accounts be decisive or conclusive in the matter - Decided in favour of assessee. Addition u/s 14A - CIT(A)deleted the addition - Held that:- No expenditure in the form of interest on other expenditure for earning of exempt income was pointed out by A.O. It is an established law that for making disallowance u/s 14A finding of fact with respect to incurring of expenditure is a pre-requisite which has not been done in this case. We find that Ld. CIT(A)'s finding are exhaustive and detailed and we do not find any infirmity in the same.- Decided in favour of assessee. Repair and maintenance expenditure disallowed - CIT(A) allowed claim - Held that:- The assessee had filed necessary details regarding repair & maintenance and had submitted complete break-up of spare parts and labour charges. The non furnishing of information in 1-2 columns out of 26 columns cannot be aground for disallowance of the claim especially in view of the fact that such information was not statutory information. The items which required capitalization were already capitalized by assessee and, therefore, Ld. CIT(A) has rightly deleted the same and we do not find any infirmity in the order of Ld. CIT(A). - Decided in favour of assessee.
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2015 (7) TMI 75
Levy of penalty u/s.271(1)(c) - disallowance of depreciation as assets were not put to use for the purpose of running business activity in the years under consideration - Held that:- Since the assessee in the instant case has disclosed all material facts necessary for completion of the assessment and the assessment was based on the particulars supplied by the assessee in the return of income itself and not on the basis of any independent investigation made by the Assessing Officer to unearth something not disclosed by the assessee, therefore, relying on the decisions of Bhimji and Bhanjee and Co. [1982 (7) TMI 18 - BOMBAY High Court] Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT ] and we are of the considered opinion that it is not a fit case for levy of penalty u/s.271(1)(c) of the I.T. Act. The decisions relied on by the Ld.CIT(A) are distinguishable and not applicable to the facts of the present case. We therefore set aside the order of the CIT(A) and direct the Assessing Officer to cancel the penalty and the grounds raised by the assessee for all the 3 years are allowed. - Decided in favour of assessee.
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2015 (7) TMI 74
Disallowance of deduction u/s. 10B - misinterpreting transfer pricing provisions for making addition - Held that:- It is an undisputed fact that on reference made to TPO, the TPO has not made any adjustment in the international transaction with regard to ALP with it’s AE. The sum and substance of the submissions made by ld. Counsel for the assessee is that once the TPO had accepted the international transaction at ALP, the Assessing Officer cannot step into the shoes of the TPO to make disallowance/addition with regard to international transaction by invoking the provisions of section 10B(7) r.w.s. 80IA(10) of the Act. In all the three assessment years the TPO found that no adjustment is required to be made in ALP of international transaction. The Assessing Officer in assessment proceedings u/s. 143(3) in the preceding and succeeding assessment years did not make any disallowance of deduction u/s. 10B. No cogent reason has been deduced by the Assessing Officer in the impugned assessment year to make disallowance. - Decided in favour of assessee.
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2015 (7) TMI 73
Eligibility exemption u/s.54B with regard to the on money received on sale of agriculture land - undisclosed income of the block period - Held that:- Assessee has received ₹ 1,90,88,759/- (including on money) (Assessing Officer has taken ₹ 95,25,836/- only on which the exemption u/s.54B was claimed) on account of sale consideration of of Gatrad land. The said sale consideration includes mount of sale consideration shown in sale deed and on money received thereon. Out of sale consideration received, assessee has invested ₹ 92,47,100/- (Assessing Officer has mistakenly taken as ₹ 90,90,582/-) in another new agriculture land within the prescribed period. Assessee is entitled for relief of exemption u/s.54B to the extent of his contribution of ₹ 92,47,100/- (which has been mistakenly taken by Assessing Officer as ₹ 90,90,582/-) towards purchase of new agriculture land out of sale consideration received of ₹ 1,90,88,759/- (including on money) (Assessing Officer has taken ₹ 95,25,836/- only) on account of sale of Gatrad agriculture land. Assessing Officer has not allowed the exemption u/s.54B on the ground that basic requirement of claim of exemption u/s.54B is that first condition of land should be used by assessee being an individual or his parent or HUF for agriculture purpose has not been complied with. We have decided this issue in preceding favour in favour of assessee. Regarding allowability of claim of claim of ‘’on-money’’ the ld. AR drew our attention to the decision of Hon’ble Gujarat High Court in the case of CIT vs. Suman Paper & Boards Ltd. (2009 (2) TMI 66 - GUJARAT HIGH COURT) wherein it was held that in view of amendment on the provisions of section 158BB by the Finance Act, 2002 with retrospective effect from 1st July, 1995 the assessee was entitled to claim deduction under sec.80-I or section 80-IA in block assessment of the block period. The Revenue has acknowledged the benefit of deduction with regard to undisclosed income of the block period. Thus assessee is entitled for getting benefit of exemption under section 54B with regard to the ‘on money’. See Commissioner of Income Tax, Central II, Versus M/s. Sheth Developers (P) Ltd. [2012 (8) TMI 159 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2015 (7) TMI 72
Revision u/s 263 - order has been passed by the Ld. CIT under section 263 without considering the explanation offered by the assessee - Registration of Development Agreement - Explanation w.r.t Exemption u/s 54F - Held that:- On the basis of this explanation offered in respect of each and every issue, it was contended on behalf of the assessee before the Ld. CIT that it was not the case of assessments having been completed by the A.O. without making proper and adequate enquiries as required in the facts and circumstances of the case. A perusal of the operative portion of the Ld. CIT's impugned order however shows that he has neither considered this explanation of the assessee nor made any comment/ observation thereon pointing out specifically that it was still a case of failure on the part of the A.O. to make proper and adequate enquiries before completing the assessments as were required in the facts and circumstances of the case. He has not pointed out specifically even a single enquiry which A.O. ought to have made in the facts and circumstances of the case but has failed to do. We, therefore, fully agree with the stand of the assessee that the impugned order has been passed by the Ld. CIT under section 263 without considering the explanation offered by the assessee and without applying his mind. In our opinion, this failure of the Ld. CIT, however, does not constitute any legal infirmity to make the order passed by him under section 263 invalid or void abinitio as sought to be made out by the assessee in the ground raised in these appeals. We are of the view that it would be just and proper in the facts and circumstances of the case, to set aside the impugned order of the Ld. CIT passed under section 263 and remit the matter back to him with a direction to pass fresh order under section 263 after duly taking into consideration the explanation offered by the assessee and after applying his mind. Needless to observe that the Ld. CIT(A) shall pass well discussed and well reasoned order after giving proper and sufficient opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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Customs
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2015 (7) TMI 95
Appeal before Commissioner (Appeals) - period of limitation - Proof of delivery or order in original - Held that:- In the acknowledgement card produced by the department, reference No. is given as 56/13/2001 and on top of the acknowledgement card it is also written 'EPCG' in capitals, the date of the letter is indicated as 14/09. This would show that the reference No. and the date on order-in-original and also the fact that it relates to EPCG are available in the acknowledgement card. We also could make out that the round stamp put on the acknowledgement card is of the appellant's company. It cannot be said that the Post Master has given contrary reports. When the appellants made enquiries, they had asked for a reference under OC No. 4066/2011 and sought information as to whether that letter has been delivered. The postal department also in their records would enter reference No. and the date as mentioned in the acknowledgement card or on the envelope and therefore in the records of the Postal Department, OC No. could not have been found. Therefore, the Post Master's report came favorable to the appellant. - However, the acknowledgement card would show the correct reference No and date since that is written by the Departmental Officers who had sent the letter. In view of the above, we cannot say that the letter issued by the Post Master is helpful to the appellant and we have to go by the acknowledgement card for determining whether the appellants have received the order-in-original or not. Therefore Commissioner's finding that appeal has been filed beyond the time limit prescribed as to be upheld. - Decided against assessee.
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2015 (7) TMI 94
Extension of installation period - import of capital goods for appellant's pollution control treatment plant - Notification No. 97/2004 dated 17.9.2004 - Held that:- Notification in question does not restrict itself to the period for which extension can be granted for installation of the imported capital goods. The genuineness and bona fide of delay on the part of the assessee is required to be assessed from various circumstances available in a particular case. As already observed, the appellant is a Government of Kerala Undertaking and is primarily depending upon the funds to be provided by the Government. Further, the fact that this is a huge plant can be considered as one of the reasons resulting in delay in installation. The appellant has already given an undertaking that all the machineries would be installed by December 2015. Accordingly, we consider the request for extension of period upto December 2015 as genuine and bona fide and accept the same. The appellant would file quarterly reports with the concerned Customs and Central Excise officers indicating the machinery installed by them in the previous quarter and the officers would verify the appellant's claim regularly. - Decided in favour of assessee.
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Corporate Laws
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2015 (7) TMI 101
Application for review of Tribunal order - Held that:- It was argued by the respondent that none of two tests, viz. error manifest on face of judgment or discovery of new facts, exist in present case and hence there is no case for review. This Tribunal has considered the arguments of both Counsel and after thoughtful consideration is of the view that none of the tests of review is present in R.A. under consideration and accordingly R.A. is not allowed and request of Ld. Counsel for Appellant for remanding the case to Respondent for fresh consideration, after affording opportunity of being heard and present documents in support before A.O. is not agreed to.
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2015 (7) TMI 93
Allegedly transfer of shares - Right to transfer the shares - Non compliance with section 108 of the Companies Act, 1956 - Held that:- The Hon'ble High Court categorically held that issuance of such succession certificate cannot ipso facto put Smt Thankam Paul directly in the place of the original holder and she cannot be a Member unless the shares are got registered in her name on submitting necessary application to the Board with requisite proof. The company has made it clear that they have not received any application seeking transmission of shares held by Smt (late) Rubina Paul. In absence of the same the company cannot transmit the shares. Thus it is well established that Smt Thankam Paul is not a registered shareholder of the company in respect of 74 shares. Therefore she has no legal right to transfer the shares in favour of the petitioner or any other person. The so called transfer form is invalid in the eye of law and void abinitio. Accordingly, the petitioner is not entitled to seek the relief No. 1 and the petitioner has no locus standi to maintain petition under section 111 and 111A of the Companies Act, 1956 before this Bench. It is established that the petitioner has not complied with section 108 of the Companies Act, 1956 and the company is not bound to lodge the share certificate along with the share transfer deed within a reasonable time to the company. A person seeking transfer of shares has to mandatorily comply with the provisions of the Companies Act, by submitting a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee along with the certificate relating to the shares and there can be no exception to this mandate prescribed under the Act. In my view the company cannot be faulted for non transfer/non registering of shares in the petitioner's name as the petitioner himself has to be blamed for his failure to comply with the relevant provision laid down under the Act for transfer and registration of shares. - Decided against the assessee.
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2015 (7) TMI 92
Restrained from accessing the securities market - Prohibition from buying, selling or otherwise dealing in securities directly or indirectly for a period of 10 years - Violation of the principles of natural justice - Held that:- We find merit in the contention of the appellants that in the personal hearing granted on August 13, 2013 appellants had argued only on the preliminary issue and that they were under the impression that fresh hearing would be given to them in case the preliminary issue is decided against the appellants. While making it clear that it is open to SEBI to hear on preliminary issue as well as merits together and pass one composite order, in the facts of present case, in our opinion, SEBI was not justified in passing impugned order on merits without making it clear to the appellants that at the personal hearing appellants would be heard both on the preliminary issue and on merits. - In these circumstances, the impugned order is quashed and set aside and the matters are restored to the file of the WTM of SEBI for passing common order on the preliminary issue.
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Service Tax
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2015 (7) TMI 100
Refund of service tax - port service - Customs House Agent service - Held that:- Customs House Agent in addition to handling the documentation and customs formalities, they also handle the goods in the port area and uses the services of various service providers operating in the port area. It is not in dispute the goods were exported, were handled in the port area, terminal handling operation were carried out and service tax on such port services was paid which would have been carried out at the instances of CHA perhaps by some other service provider/authority and under the circumstances it will not be appropriate to deny the refund of the service tax paid on the port service, just because invoices are of CHA who is not authorized to provide port service. In respect of the courier service, I find the objection is only that in the invoices issued by the courier agency service, export invoice number & IEC code of the appellant are not mentioned - Appellant is eligible to get refund of the service tax paid on the courier service. As far as technical testing and inspection service is concerned, appellant has failed to satisfy the conditions of Notification No. 41/2007-S.T., as they have not been able to produce any written agreement between the buyer and themselves or any statutory rules under which the said testing or inspections were carried out. In view of this position, they are not eligible for getting the refund of service tax paid on the Technical testing and inspection service. In respect of the Customs House Agent Service relating to appellant No. 1, the export invoice number is subsequently mentioned. - Matter remanded back - Decided in favour of assessee.
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2015 (7) TMI 99
Denial of refund claim - Non compliance with the condition of the Notification No. 41 /2007-S.T., dated 6-10-2007 - Terminal Handling Charges - Held that:- Refund to the services availed by the appellant on Terminal Handling Charges have been denied on the premise that same does not qualify as Port Charges but as per the C.B.E. & C. Circular No. 112/6/2009-S.T., dated 12-3-2009 where it has been clarified that if it is not in dispute that the service availed by the assessee is in the course of their business of export and the assessee has paid the service tax thereon, therefore it is not required to examine under which category the service tax provider has paid the service tax. - as per the said C.B.E. & C. circular dated 12-3-2009, I hold that as it is not disputed that the appellant has used these service in the course of business of export, and they have paid the service tax thereon, therefore, the appellant are entitled for refund claim. Accordingly, I set aside the impugned order qua rejecting the claim on account of input service on terminal handling charges - Decided in favour of assessee.
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2015 (7) TMI 98
Reimbursement of expenses - whether the appellant is liable to pay service tax on the amount reimbursed to them - Held that:- During the audit of the accounts of the appellant that appellant had been reimbursed expenditure incurred during the period from April 2005 to March 2009. - reimbursable expenses received by the assessee need not be added to the taxable value relating to clearing and forwarding agency - Decision in the case of Sangamitra Services Agency: [2013 (7) TMI 862 - MADRAS HIGH COURT] followed - Matter remanded back - Decided in favour of assessee.
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2015 (7) TMI 97
Services of maintenance of Computer Software - Held that:- Without going into the aspect whether the said explanation expands the trajectory of the existing legislation and hence is inapplicable retrospectively, in the wake of the fact that even the Government acknowledged the existence of confusion/ambiguity with regard to the coverage of management, maintenance and repair of software under the Management, Maintenance or Repair Service to such a degree as to warrant addition of an explanation to clarify the issue and also in view of the aforesaid judicial precedents, it is amply clear that the extended period cannot be invoked making this component of the impugned demand clearly barred by time as it pertains to the period 9-7-2004 to 31-3-2006, while the show cause notice was issued on 15-4-2008. Services of Lease Line connectivity - Held that:- As per Section 105(75) of Finance Act, 1994 “Online Information and Database Access and Retrieval Services means “providing data or information, retrievable or otherwise to a customer, in electronic form through a computer network”. When no data or information was provided by the appellants nor does the show cause notice contain any allegation to that effect, the question of sustaining this component of impugned Service Tax demand under Online Information and Database Access and Retrieval Service simply does not arise. Therefore the demand of ₹ 6,90,674/- under this category is not sustainable on merit itself. Services of Calibration of Machine - Held that:- The appellants have vehemently stressed that the calibration of machines is done by customers themselves on their own and they only sell their software to the customer, which is used by them for that purpose. The show cause notice also does not elaborate as to how it is covered under Management, Maintenance or Repair service. Seen in this light the demand of ₹ 28,800/- also does not sustain on merit. Services of cartridge refilling - Held that:- The show cause notice does not elaborate as to how cartridge refilling would come under the category of Maintenance or Repair service. It is argued by the appellants that refilling of ink in cartridges of customers actually tantamount to sale and therefore cannot be liable to Service Tax. Services of The Technical Support Charges - Held that:- In such a situation and having regard to the fact that the show cause notice or the impugned order does not elucidate as to on what basis this component of demand was covered under Scientific or Technical Consultancy Service and also the fact that this activity specifically became taxable with effect from 15-5-2008, the appellants’ contention that they genuinely did not consider themselves to be science or technology organisation is not without considerable force. Consequently the allegation of suppression of facts and invocation of extended period simply cannot be sustained. As a result, as the period involved for this component of impugned demand is 2002-03 to 2004-05 and the show cause notice was issued on 15-4-2008, this component of impugned demand is fatally hit by time-bar. Mere non-registration and non-filing of returns are totally insufficient to sustain the allegation of suppression of facts when the show cause notice nowhere even remotely brings out as to how the appellants’ bona fides were suspect or what factors indicated the existence of an intention on their part to evade Service Tax. - Decided in favour of assessee.
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Central Excise
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2015 (7) TMI 96
Classification of car air-conditioning kit - Legal substantiality of the judgment and order of tribunal based on Apex court judgment in past - Matter refer to three judge bench for hearing - Whether the car air-conditioning kit is classifiable under item No. 3 or under Item No. 8 of the table to the said Notification No. 166/86-C.E., dated March 1, 1986? - Held that:- The Division Bench has quite categorically stated that if the air-conditioning kit does not contain automotive gas compressor with or without magnetic clutch, duty is paid as per item no.8 and if it contains the automotive gas compressor with or without magnetic clutch, it will not come under item no.8 In our view, the ratio laid down in the said decision cannot be found to be erroneous but as a matter of clarification, we say that if a kit and compressor are sold in a singular invoice or in one pricing, it will go out of item no.8 and duty will be paid separately, but if there are two invoices for separate pricing, the air-conditioning kit would come under serial no.8 and the automotive gas compressor with or without magnetic clutch will be liable to duty separately. We may hasten to clarify that if there is a combined sale, which serial item it will fall, being not necessary in this case, we are not inclined to dwell upon the same. We have only clarified the two-Judge Bench decision in Sanden Vikas (India) Ltd. [2003 (3) TMI 97 - SUPREME COURT OF INDIA] to the above effect. Coming to the case at hand, it is the case of the appellant that the respondent-assessee has sold the kit and compressor separately and that position having been accepted by the tribunal, we do not find any error in the order passed by the authorities and the Tribunal. - Decided against the revenue.
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