TMI Tax Updates - e-Newsletter
July 5, 2016

Case Laws in this Newsletter:

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

Articles

1. REGISTRATION PROCEDURE – MODEL GST LAW

   By: DR.MARIAPPAN GOVINDARAJAN

2. READING DOWN MODEL IGST ACT (PART-1)

   By: Dr. Sanjiv Agarwal

News

1. Shri Sudarshan Sen takes charge as new Executive Director at RBI

2. Bilateral meeting between Commerce and Industry Minister and Sri Lankan Minister of Development Strategies and International Trade

3. RBI Reference Rate for US $

Notifications

Central Excise

1. 31/2016 - dated 4-7-2016 - CE (NT)

Amendment of notification no. 17/2004-CE (NT) dated 04.09.2004 for supply of exempted bunker fuel to the specified Indian Ships / Vessels from the warehouse

VAT - Delhi

2. F3 (643)/Policy/VAT/2016/419-31 - dated 1-7-2016 - DVAT

Filing of returns through Digital Signatures

Circulars / Instructions / Orders

VAT - Delhi

1. 10/2016-17 - dated 1-7-2016

Description of Goods/Items along with their Item codes

Central Excise

2. 1035/23/2016-CX - dated 4-7-2016

Recovery of confirmed demands during the pendency of stay application

Highlights / Catch Notes

Income Tax

• Penalty u/s 271(1)(c) Not Imposed Due to Debatable Foreign Travel Expenses of Married Directors.

  Case-Laws - AT : Assessee has claimed the expenses of foreign travelling of both the directors who are husband and wife - Allowability of said expense is a debatable issue - penalty u/s 271(1)(c) can not be imposed
  Visit to Get Source

  ---

• Donor Confirmations Remove Anonymity of Donations u/s 115BBC; Previously Disputed Donations Now Identified.

  Case-Laws - AT : Section 115BBC - Anonymous Donations - Confirmation obtained from donors during the course of remand proceedings, therefore, impugned donations are no more anonymous in nature.
  Visit to Get Source

  ---

• Income Tax Act sections 194J, 194C, and 40(a)(ia) don't apply for payments unrecorded by sole selling agents.

  Case-Laws - AT : Since the assessee is working as sole selling agent the provisions of section 194J or 194C and 40(a)(ia) not attracted where the payment is made directly to the principal without reflecting in the books of accounts.
  Visit to Get Source

  ---

• Gift Addition Upheld: Donor's Poor Financial Background Doesn't Justify Large Gift u/ss 68 & 56(2)(v.

  Case-Laws - AT : Addition u/s 68/56(2)(v) - Donors very grim financial background does not justify gift of such a large sum, creditworthiness/financial capacity of donors not proved. Moreover, such gift is covered by section 56(2)(v) - Addition confirmed
  Visit to Get Source

  ---

• Section 271(1)(c) Penalty Removed: Section 68 Addition Not Proven, Based on Assumptions, Lacked Verification Evidence.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Since the entire addition u/s 68 has not been conclusively proved and it is based on assumption and not by verification, penalty u/s 271(1)(c) deleted
  Visit to Get Source

  ---

• Income Taxed by Accounting Method, Not TDS Year; Include Loan Processing Fees in Car Purchase Cost.

  Case-Laws - AT : (i) Year of taxability of income - as per regular method of accounting and not as per the year in which TDS has been deducted (ii) Loan processing fees paid for purchase of Car to be added in car cost
  Visit to Get Source

  ---

• Maximum Marginal Rate Tax Applies to Specific Section 13 Violations, Rest Benefits from Section 11 Provisions.

  Case-Laws - AT : Rate of tax - Maximum Marginal Rate (MMR) - If there is violation of Section 13 read with Section 11, MMR can be applied only to that sum which was considered u/s 13 and benefit of Section 11 shall be allowed for remaining amount
  Visit to Get Source

  ---

• Charitable Status Upheld for Associations Primarily Serving Public Good, Even with Incidental Profitable Activities.

  Case-Laws - AT : Assessee association having primary purpose of advancement of objects of general public utility, therefore it would remain charitable even if an incidental activity for achieving the main purpose was profitable in nature
  Visit to Get Source

  ---

• Penalty Imposed for Concealing Income and Inaccurate Details u/s 271(1)(c) of Income Tax Act.

  Case-Laws - AT : Assessee neither challenged reopening nor has been able to disprove the finding of AO - penalty leviable u/s 271(1)(c) as assessee furnished inaccurate particulars and also concealed income
  Visit to Get Source

  ---

• House with Mother's Life Interest Excluded from Residential Property Count for Section 54F Tax Exemption Eligibility.

  Case-Laws - AT : House property conveyed to the assessee by means of settlement deed subject to his mother's life interest over such property cannot be considered as one of the residential houses for the purpose of denying exemption u/s 54F for counting more than one house property
  Visit to Get Source

  ---

• Section 195: Technical Services Classified as FTS or FIS Only When Knowledge is Accessible and Service is Rendered.

  Case-Laws - AT : TDS u/s 195 - Technical service would be FTS/FIS only when technical knowledge made available i.e. only if the twin test of rendering services and making technical knowledge available are satisfied at the same time
  Visit to Get Source

  ---

• Payment for Use of Technical Know-How and Trademarks Considered Revenue Expenditure, Not Capital Expenditure.

  Case-Laws - AT : Payment for use of technical know-how and trademark/logo - it is patent that the payment has been made by the assessee for ‘use of ’ trademarks and not for acquiring trademarks as an owner - Held as Revenue expenditure
  Visit to Get Source

  ---

Customs

• Show Cause Notice and Recovery Proceedings Quashed Due to Jurisdiction Issues and Retrospective Amendment to Section 28.

  Case-Laws - HC : Proper officer - Validity of Show cause notice issued by the Additional Director General, Directorate of Revenue intelligence - retrospective Amendment to Section 28 w.e.f. 8.4.2011 - the impugned show cause notice dated 13.3.2005, the adjudication order dated 25.6.2010 and consequential recovery proceedings, are rendered non est and void ab initio on the vice of jurisdiction and are as such quashed and set aside. - HC
  Visit to Get Source

  ---

Service Tax

• Court Invalidates Tax Recovery Against Successor Due to Non-Adjudicated SCN Issued to Deceased Proprietor u/s 87.

  Case-Laws - HC : Recovery of tax u/s 87 from successor of deceased proprietor - SCN was issued to the deceased but could not be adjudicated during his life time - garnishee notices - Division bench confirmed the decision of learned Single Judge of quashing the recovery notice - HC
  Visit to Get Source

  ---

• Subcontractor's Service Tax Demand Confirmed; Interest Due, But Penalties Waived u/s 80 Provisions.

  Case-Laws - AT : Demand of service tax from the Sub-contractor - Demand of service tax with interest confirmed - Levy of penalty u/s 77 & 78 waived invoking the provisions of section 80- AT
  Visit to Get Source

  ---

Central Excise

• Chennai CESTAT Order Remanded for Failing to Address Natural Justice Violation Plea Properly. Specific Findings Required.

  Case-Laws - HC : When a specific plea regarding violation of principles of natural justice is raised, CESTAT, Chennai, is bound to record a specific finding, which is conspicuously absent in the order - Matter remanded back. - HC
  Visit to Get Source

  ---

• Tribunal Grants Relief on Cenvat Credit for Captive Power Plant; Remands Case for Detailed Item Evaluation.

  Case-Laws - HC : Cenvat credit on inputs / capital goods used in installing the Captive Power Plant and Captive Power Plant is a Turnkey project which was not excisable - Tribunal granted relief without discussing the eligibility of individual items involved in the Appeal - Matter remanded back - HC
  Visit to Get Source

  ---

• Criminal prosecution u/ss 9/9AA of Central Excise Act can proceed alongside unresolved adjudication proceedings, says High Court.

  Case-Laws - HC : Prosecution proceedings u/s 9/9AA of the Central Excise Act, 1944 - the adjudication proceeding has not been finally determined in favour of the revisionists, criminal prosecution can go-on simultaneously with the adjudication proceeding. - HC
  Visit to Get Source

  ---

VAT

• High Court Rules Company, Not Directors, Liable for Tax; Vacates Attachment of Director's Personal Property.

  Case-Laws - HC : Provisional attachment of personal property of the director in case of company - recovery of tax - Input tax credit - dealer would be the company and not the directors - order of attachment vacated - HC
  Visit to Get Source

  ---

• Court Rules Wire Mesh Tax Classification Unchanged Despite Potential Alternative Uses Under Intended Entry.

  Case-Laws - HC : Classification of the product Wire Mesh - an article manufactured to serve as a part of a particular kind of apparatus would not cease to be covered by the intended entry simply because it is capable of being used for any other purpose. - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2016 (7) TMI 113
  TDS on hiring charges paid for equipment hire charges before 01.06.2005 - held that:- Revenue does not seriously dispute that prior to 01.06.2005, as Section 194C stood, requirement of TDS on equipments higher charges did not arise. As the requirement of deducting tax at source for such charges arose only after the amendment post 01.06.2005, we have no hesitation in upholding the judgement of the Tribunal - in favour of assessee

  ---

• 2016 (7) TMI 112
  Addition of profit margins on alleged unaccounted sales - disallowance of bogus purchase - Held that:- As decided in Sanjay Oil Cake Industries v. Commissioner of Incometax [2008 (3) TMI 323 - GUJARAT HIGH COURT ] though the purchases are shown to have been made by making payment thereof by Account Payee Cheques, the cheques have been deposited in Bank Accounts ostensibly in the name of the apparent sellers, thereafter entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank Accounts – decided in favor of revenue.

  ---

• 2016 (7) TMI 111
  TDS u/s 194C - non deduction of tds on printing charges - whether the assessee was a trader and not a works contractor? - Held that:- Liability under Section 194C will arise if he was a contractor. Such liability shall not be there if he was a trader. The learned Tribunal, after considering the evidence, took a view that the assessee was a trader. That finding is a finding of fact which has become final. It is, therefore, not possible to find that there has been any lapses or violation on the part of the assessee in not complying with the requirement of Section 194C. Consequently, there is no application of Section 40(a)(ia) of the Income Tax Act. - Decided against revenue

  ---

• 2016 (7) TMI 110
  Scope of enquiry for granting registration u/s 12A - Held that:- Enquiry shall be confined to the objects of the trust or institution & genuineness of its activities and cannot travel to the extent that whether the income of the trust from the property is wholly applied for the charitable purposes or not so as to make them entitle to claim exemption under Section 11 & 12. While considering registration application, CIT has transgressed its jurisdiction in recording that it is not proved that the assessee has applied 85% of its income. ITAT has rightly observed that it was nowhere found by the CIT that the objects mentioned in the trust deed are not charitable or non genuine. Entire factual & legal position examined by the ITAT and only after being satisfied about the genuineness of the objects and activities of the assessee trust, granted the application for registration preferred by the appellant u/s 12A of the Act. Decided in favour of assessee

  ---

• 2016 (7) TMI 109
  Payment for use of technical know-how and trademark/logo - Revenue expenditure or capital expenditure - Held that:- All the salient features of transfer of technical know-how, show that the assessee paid 3% of selling price of the Joints sold by it for the ‘use of’ technical know-how provided by the Licensor, which is not a consideration for acquiring any know-how. It is a case of parting by the Licensor, for consideration, with the partial ownership of technical know-how, that is, for allowing only a right to use to the assessee; and not a case of parting with full ownership of technical know-how, that is, for transferring the ownership to the assessee. Hence, the amount so paid is eligible for deduction as a revenue expenditure. When we consider all the relevant clauses of the Agreement, it becomes clear that the assessee did not acquire any ownership right in trademarks and payment was simply for the use of the trademarks, and that too, by means of a non-exclusive License. It has been made clear in the Agreement that the ownership in the trademarks shall remain the intellectual property of the Licensor and the assessee shall have a mere right to use them. Further, upon the termination, the Licensee shall cease to make any use of such trademarks. Thus, it is patent that the payment has been made by the assessee for ‘use of ’ trademarks and not for acquiring trademarks as an owner. It goes without saying that any payment made for a mere use of an asset falls in the realm of a revenue expenditure and cannot be treated as a capital expenditure. - Decided in favor of assessee.

  ---

• 2016 (7) TMI 108
  Addition U/s 115BBC - Anonymous donations - Held that:- Confirmation obtained from donors during the course of remand proceedings, therefore, impugned donations are no more anonymous in nature (II) Voluntary contributions made with a specific direction to form part of the corpus is not treated to be as income - The impugned donations are no more anonymous in nature. Decided in assessee’s favour. Addition of admission fees - Held that:- The assessee-trust passed resolutions for obtaining admission fee separately from its students with specific stipulation that the same would be used in educational funds. The Revenue has not been able to dispel correctness thereof in course of arguments. There is further no evidence that assessee’s students or for that their parents were ever forced to pay the impugned admission fees as alleged by the lower authorities. It is thus clear that the assessee has obtained the impugned admission fees as per its resolutions to be utilized in its educational activities only. Hon’ble jurisdictional high court in CIT vs. S.V. Vanik Jain Sangh [2002 (7) TMI 34 - GUJARAT High Court] is of the view that a voluntary contribution made with specific direction to form part of the corpus is not treated to be as income. Same appears to be the ratio of hon’ble Delhi high court DIT vs. NASS COM [2012 (5) TMI 204 - DELHI HIGH COURT ] holding that a one time admission fee paid by members to be spent only for acquiring capital asset is a corpus donation not taxable as income. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 107
  Exemption u/s.11 declined - whether proviso to section 2(15) was applicable to the assessee which was introduced w.e.f. assessment year 2009-2010? - The main objects of the assessee trust inter alia are to promote, advance and protect trade, commerce and industry in India - Held that:- Respectfully following the decision of co-ordinate bench in the case of Indian Chambers of Commerce & Industry [2014 (12) TMI 256 - ITAT KOLKATA ], wherein after discussing various High Court and Supreme Court judgement the Tribunal reached to the conclusion that even after amendment of section 2(15) of the Act w.e.f. 01.04.2009, assessee association’s having primary purpose of advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. Hence, assessee is not hit by newly inserted proviso to section 2(15) of the Act. - Decided in favour of assessee

  ---

• 2016 (7) TMI 106
  Method of accounting - Disallowance u/s 40(a)(ia) - short accounting of receipts in the books of accounts vis-à-vis in the TDS certificates - rejection of books of accounts - Since the assessee working as sole selling agent make direct payment to principal which was received from various parties without reflecting in its books of accounts - assessee booked only its commission in its books of accounts - Held that:- Assessee was acting as sole selling agent of M/s S S Films and make payment to M/s S S Films after deducting various expenses which were of the nature of dubbing, mixing and recording etc. including the publicity and his commission. Since the assessee is working as sole selling agent of M/s S S Films the provisions of section 194J or 194C and 40(a)(ia) of the Act were not attracted and the observations of the AO that 60,33,735/- was paid without deduction of TDS and disallowed u/s 40(a)(ia) is wrong and against the provisions of law. Order of AO set aside and addition deleted - Decided in favour of assessee

  ---

• 2016 (7) TMI 105
  TDS u/s 194C - payment made to advertising agency without deduction of tax at source - 2nd proviso to section 40(a)(ia) inserted by the Finance Act, 2012, w.e.f. 1.4.2013 applicable retrospectively - Held that:- Assessee accepting the tds liability has raised an alternative contention that the issue may be restored to the file of the AO for the limited purpose by considering the same in the light of second proviso inserted in sub-clause (ia) of clause (a) of section 40 by the Finance Act, 2012, w.e.f. 1.4.2013 which is applicable retrospectively. In support of this alternative contention, the ld. Counsel for the assessee has relied on the decision of the Coordinate bench of this Tribunal in the case of New Alignment [2016 (5) TMI 753 - ITAT KOLKATA ] wherein the similar alternative prayer made on behalf of the assessee was accepted by the Tribunal and the matter was restored to the file of the AO for deciding the same afresh in the light of second proviso to section 40(a)(ia) inserted by the Finance Act, 2012, w.e.f. 1.4.2013 holding that the same was applicable retrospectively. We, therefore set aside the impugned order of the ld. CIT(A) giving relief to the assessee on this issue and restore the matter to the file of the AO for the limited purpose of deciding the same in the light of second proviso to section 40(a)(ia) which is applicable retrospectively - Decided in favour of revenue for statistical purposes. TDS u/s 194H or 195J - payments made by the assessee to various parties towards collection of advertisement - Held that:- At the time of hearing, the ld. DR has taken us through the relevant portion of the orders of the AO and the ld. CIT(A) to show that going by the services rendered by the concerned parties, the nature of payment is commission only as covered by section 194H and not professional charges covered by section 194J and the ld. Counsel for the assessee has not been able to controvert this position. He however has raised an alternative contention by relying on the second proviso to section 40(a)(ia) as done in respect of issue involved in ground no.1 with a request to restore the matter to the file of the AO for the limited purpose of deciding the same afresh in the light of the said proviso. We, therefore set aside the impugned order of the ld. CIT(A) giving relief to the assessee on this issue and restore the matter to the file of the AO for the limited purpose. Appeal filed by the Revenue is treated as allowed for statistical purposes.

  ---

• 2016 (7) TMI 104
  TDS u/s 195 - FTS/FIS - fee for technical services / fees for included services - AO Passed order u/s.201(1) & 201(1A) r.w.s.195 on the basis that the assessee had made payments to non-resident parties on which he has not deducted the tax. - Article 12(4)(b) of DTAA - Held that:- Payment of consideration would be regarded as 'fee for technical/included services' only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. In the present case, the non-resident renders Bio-analytical services which, no doubt, are very sophisticated in nature, but it does not reveal to the assessee as to how it conducts those tests or the inputs that have gone into it, so as to enable them to carry out those tests themselves in future. A broad description or indication of the type of test carried out to reach this conclusion does not enable the assessee to derive requisite knowledge to conduct the tests or to develop the technique by itself." Thus, the said services were not made available to the assessee and therefore, the services provided to the appellant by the non-resident parties of USA and Canada did not fall within the purview of 'included services' under Article 12(4)(b) and hence there was no liability on the appellant to deduct TDS u/s. 195 of the I.T. Act, while making payment for such bio-analytical services rendered to it. - Decided against the revenue.

  ---

• 2016 (7) TMI 103
  Addition u/s 68 - gifts received from two donors - bonafides and genuineness of gifts - Donors financial capacity to make the gift not established - Held that:- Statement of donors when read with underlying documents 5 lacs or 7 lacs which is equivalent to his income of nearly 4 to 5 years. The purported gift would lead to almost total erosion of the capital of the person concerned. Apparently, the overall behaviour of the so called donors is thus very intriguing and does not accord with ordinary human conduct. When seen in totality, facts and circumstances are squarely against the assessee. Logical conclusion that follows from above is that the claim of receipt of gift from these 2 parties remains unproved and explanation offered in respect of credit towards gifts received is not credible or satisfactory. The credit in the form of gift is thus rightly assessed to tax as deemed income of the assessee. We also find merit in the alternative contention of AO that the Gift so made falls within the ambit of section 56(2)(v) which provides that the recipient of gift from a non-relative is assessable to tax. Assessee failed to show as to how section 56(1)(v) not applicable in the instant case. CIT(A) in our view, has rightly endorsed the contention of AO on applicability of S. 56(1)(v) also. - Decided against assessee.

  ---

• 2016 (7) TMI 102
  Penalty u/s 271(1)(c) - Assessee has claimed the expenses of foreign travelling of both the directors who are husband and wife - Held that:- the assessee has fully disclosed the particulars of claim which in no way can be termed as furnishing of inaccurate particulars and is a debatable point. - Levy of penalty set aside in view of the decision in the case of M/S Vistar Construction Pvt Ltd Vs DCIT [2012 (10) TMI 845 - ITAT, DELHI] - Decided in favour of assessee.

  ---

• 2016 (7) TMI 101
  Delayed payment of TDS - addition under section 40(a)(ia) - retrospectivity - Held that:- Assessing Officer himself has returned a finding of fact that the TDS has been deposited with the Government Treasury albeit after the prescribed due date. We also notice from the order of the CIT(A) that except for one or two instances involving paltry amount, the entire amount has been paid during the relevant financial year itself. The other two small payments were also found by the CIT(A) to be made in the month of April 2008 only. In the background of the aforesaid facts, we find no infirmity in the order of the CIT(A) in deleting the addition - Decided in favour of assessee. Addition u/s 40(a)(ia) - assessee had not proved that TDS was deducted and paid before the end of the financial year - Held that:- Having regard to the facts of the case, we set-aside the issue to the file of the Assessing Officer for de novo examination. AO is directed to delete the addition on being satisfied that the TDS on the aforesaid payment has been deducted and paid on or before the due date of filing of the return of income. The assessee shall be given reasonable opportunity of being heard while deciding the issue. - Decided in favour of revenue for statistical purposes. Some expenses were not fully verifiable - Ad-hoc disallowance made @ 10% of such expenses.

  ---

• 2016 (7) TMI 100
  Disallowance of 30% of “Common expenses” reimbursed by the assessee to its group concern - Held that:- A careful perusal of the orders passed by the tax authorities would show that they have made the adhoc disallowance mainly for want of particulars, i.e., the details furnished by the assessee were not considered to be sufficient by them. There should not be any dispute that the initial onus to prove the claim rests upon the assessee. It is noticed that the assessee did not furnish the basis of allocation of expenses before the AO and hence he has made the adhoc disallowance. The basis of allocation was furnished by the assessee before the Ld DRP. However, the DRP has taken the view that the assessee has not substantiated the reimbursement, when the assessee itself has incurred a sum of 30.21 crores towards employee cost. These observations show that the claim made by the assessee has not been properly explained by the assessee to the satisfaction of the tax authorities. Under these set of facts, in the interest of natural justice, we are of the view that the assessee should be provided with one more opportunity to explain the claim made by it. Accordingly, we restore this issue to the file of the DRP/AO for considering the same afresh. Assessment of Rental and circuit charges incurred by the assessee on behalf of its group concern - Held that:Orders passed by tax authorities do not bring out exact nature of services provided by the assessee and hence we are unable to appreciate the above said contentions of the assessee. However, we are of the view that the said contentions of the Ld A.R may require proper examination, as it may bring out the factual aspects relating to this issue. We notice that the factual aspects have not been brought on record by the tax authorities. Accordingly, we are of the view that this issue also requires fresh examination. Accordingly, we set aside the order of Ld CIT(A) and restore the issue to the file of AO/DRP for fresh examination. The assessee is also directed to furnish all the information and explanations that may be called for by the AO/DRP. Decided in favour of assessee for statistical purposes.

  ---

• 2016 (7) TMI 99
  Year of taxability of income - as per regular method of accounting and not as per the year in which TDS has been deducted - Revenue wants to assess the income in the year in which TDS deducted on the income, whereas assessee wants to offer the income to tax according to method of accounting regularly followed by the assessee - Held that:- The issue in dispute is squarely covered by the finding of the Hon’ble third member of the Tribunal in the case of Smt. Varsha G Salunhke Vs. DCIT (2005 (9) TMI 226 - ITAT BOMBAY-F ). Thus, the Tribunal has clearly held that the provisions related to TDS cannot decide the year of taxability of the income and it is decided according to the method of accounting employed u/s 145 of the Act. In the case in hand, also the assessee has followed the regular method of accounting of income and accordingly declared its income. Thus, respectfully following the ratio of the above said decision, we delete the addition made in the year under consideration and direct the AO to assess the income in accordance with the regular method of accounting followed by the assessee. Further, the credit of TDS should also be given in the respective assessment year in which the income is offered to tax - Decided partly in favour of assessee Loan processing fee - revenue or capital expenditure - Held that:- As a loan processing fee has been paid for the purpose of purchase of a car, which is a capital asset and paid or accrued before the capital asset was put to first use, therefore, this amount being connected with the purchase price, it was part of actual cost of the asset to the assessee thus deserves to be capitalized and not allowed as a Revenue expense, accordingly, we find no infirmity in the finding of the learned Commissioner of Income-tax(Appeals) on the issue in dispute and accordingly we uphold the same. - Decided against assessee

  ---

• 2016 (7) TMI 98
  Penalty u/s 271(1)(c) - Quantum addition, @0.1% of turnover on account of low G.P. in the year under consideration vis-a-vis the immediately preceding year, upheld by Tribunal - Further, assessee failed to bring on record material evidence to controvert the findings of the learned CIT(A) in upholding the levy of penalty - Held that:- In these circumstances, we uphold the CIT(A)’s action in confirming the levy of penalty u/s 271(1)(c) - Decided against assessee

  ---

• 2016 (7) TMI 97
  Penalty u/s 271(1)(c) - unaccounted sales - Held that:- In the case of assessee, since initiation of assessment proceedings u/s 143(3) r.w.s. 148 of the Act assessee has not challenged nor has been able to disprove the finding of the ld. Assessing Officer about the unaccounted sales at 10,82,958/- and has only requested for application of GP rather than making the addition to unaccounted sales. Penalty u/s 271(1)(c) of the Act is imposed if an assessee conceals income or furnishes inaccurate particulars of income and both these conditions are being fulfilled by the assessee by way of furnishing inaccurate particulars of sales and also concealing income earned on the unaccounted sales and, therefore, we are of the view that ld. Assessing Officer has rightly imposed the penalty u/s 271(1)(c) of the Act and we do not find any reason to interfere with the order of ld. CIT(A) - Decided against assessee

  ---

• 2016 (7) TMI 96
  Rate of tax where the Benefit of Section 11 denied - violation of Sec. 13 - Held that:- It is undisputed fact that during the year, the assessee has shown surplus income over the expenditure at 20,51,064/-. There is violation of Sec. 13 that the assessee had made advances to the office bearer, which was coming as opening from 01/4/2008 and also as on 31/3/2009 for 1,54,880/- . The assessee’s explanation was that it was advances for payment was to be made for the services provided by the third person but as such the assessee has not established any nexus with evidence that these amounts were really provided and kept with the office bearer for the purposes of services rendered by the third person to the assessee society as same has been adjusted in the month of April, 2011. Therefore, it is clear cut default U/s 13 but as various ITATs as well as Hon'ble High Courts held that if there is violation of Section 13 read with Section 11, MMR can be applied to that sum, which was considered U/s 13 as violated during the year, the assessee’s advance 1,54,880/-. Therefore, by following the decision cited by the assessee particularly decision of Hon'ble Supreme Court in the case of DIT Vs Working Women’s Forum (2015 (9) TMI 1447 - SUPREME COURT) and Jurisdictional ITAT decision in the case of M/s Santokba Durlabh Ji Trust Fund Vs ITO (2014 (11) TMI 444 - ITAT JAIPUR) are squarely applicable. Accordingly, the ld Assessing Officer is directed to tax @ MMR for 1,54,880/- and allow the benefit of Section 11 for remaining amount as claimed in the return by the society. - Decided in favour of assessee

  ---

• 2016 (7) TMI 95
  LTCG computation - AO enhancing the income under the head" Long Term Capital Gain" earned during the year in the Intimation U/S 143(1) - Held that:- We find that both the Learned AR and Learned DR fairly agreed for ascertaining of real facts by the Learned AO with regard to the disclosure of LTCG by the assessee from the electronically filed return of income. Accordingly, in the facts and circumstances, we deem it fit and appropriate in the interest of justice and fair play to set aside this issue to the file of the Ld. AO to have a revisit on the impugned issue afresh, by verification of the figures of LTCG in the return vis a vis the workings of the assessee and dispose the issue in accordance with law. Needless to mention that, the assessee should be given reasonable opportunity of being heard. - Decided in favour of assessee for statistical purposes.

  ---

• 2016 (7) TMI 94
  Claim of exemption u/s 54F - Whether assessee owns another house property - nature of partial interest into property - The assessee claims that the property conveyed by her mother by means of settlement deed is only a partial interest on the property and such partial interest cannot be considered to be full ownership for the purpose of denying the exemption u/s 54F Held that:- Assessee owns the house subject to life interest retained by the assessee’s mother, namely, settlor. Therefore, it cannot be said that the assessee owns a house fully and wholly. The ownership of the assessee over the property is subject to life interest retained by the assessee’s mother. Therefore, this Tribunal is of the considered opinion that the house property conveyed to the assessee by means of settlement deed subject to life interest over the property cannot be a reason for denying deduction under Section 54F of the Act. AO is directed to grant exemption u/s 54F of the Act. - Decided in favour of assessee.

  ---

• 2016 (7) TMI 93
  Addition of unexplained cash credit under section 68 - Held that:- Commissioner of Income Tax (Appeals) has simply brushed aside the arguments advanced before him by the assessee and his learned Authorized Representative but only relied upon the audit report furnished under section 44AB of the Act and thereby came to a conclusion that the accounts drawn by the assessee is genuine with respect to the stock, however held certain sundry creditors to be bogus without further verification. It would have been proper on the part of the learned Commissioner of Income Tax (Appeals) to obtain a remand report from the learned Assessing Officer on the explanation advanced by the assessee before confirming the addition of 19,39,677/-. At the same time, we are not able to appreciate the conduct of the assessee whose intentions are malafide by furnishing unrealistic statement of accounts intended for different purposes and to gain undue advantage. We are further of the view that no purpose will be solved by remanding the case back to the file of the Assessing Officer because of the long lapse of time. Considering the facts and circumstances of the case and in the interest of justice, we are of the considered view that sustaining the addition by 50% of 19,39,677/- will suffice to meet the ends of justice. - Decided partly in favour of assessee Penalty under section 271(1)(c) - Held that:- Since the entire addition has not been conclusively proved and it is based on assumption and not by verification of the explanation presented before the learned Commissioner of Income Tax (Appeals), we are of the considered view that levy of penalty under section 271(1)(c) of the Act will not be appropriate. While arriving at this conclusion we place reliance in the case of Hari Gopal Singh Vs. CIT [2002 (8) TMI 65 - PUNJAB AND HARYANA High Court ] wherein it was held that the onus to prove there is concealment is on the part of the Department. Therefore, we hereby delete the penalty levied by the learned Assessing Officer which is further confirmed by the learned Commissioner of Income Tax (Appeals). - Decided in favour of assessee

  ---

• Customs

• 2016 (7) TMI 123
  Proper officer - Validity of Show cause notice issued by the Additional Director General, Directorate of Revenue intelligence - Scope of Section 2(34) read with Section 17 and 28 of the Customs Act, 1962 - Amendment to Section 28, whether retrospective or prospective - Held that:- The retrospective application of Section 28 (11) is limited in time with use of the words “this section” read with the Explanation 2, which necessarily means reference only to the now existing Section 28 which was inserted w.e.f. 8.4.2011 after substitution of the earlier provision. Thus, retrospective applicability is only since 8.4.2011, not prior thereto. In the instant case, the impugned show cause notice was issued much prior to 8.4.2011. Thus, the findings recorded on this jurisdictional issue by the Hon'ble Supreme Court in Sayed Ali [2011 (2) TMI 5 - Supreme Court] as also those recorded by the Hon'ble Delhi High Court in the aforesaid judgment dated 3.5.2016 in M/s Pace International [2016 (5) TMI 225 - DELHI HIGH COURT] are mutatis mutandis applicable to the case of the present petitioners. Therefore, the impugned show cause notice dated 13.3.2005, the adjudication order dated 25.6.2010 and consequential recovery proceedings, are rendered non est and void ab initio on the vice of jurisdiction and are as such quashed and set aside. - Decided in favor of the assessee.

  ---

• 2016 (7) TMI 122
  Recovery of erroneous refund - validity of the ex parte judgment and decree in favor of respondent - Held that:- The approach adopted by the officers of the petitioner is not appreciable but the fact remains that exchequer of the Central Government is involved and serious allegation have been made with regard to non-adjustment of the refund of money, thus, in my view that petitioner-defendant should be given effective opportunity to file the written statement putforth defence by limiting them to lead evidence within time frame. Accordingly, impugned orders are set aside. Impugned judgment and decree dated 12.02.1999 is set aside. The petitioner-defendant is granted one month's time to file written statement and thereafter parties at the trial Court shall be granted 3-3 effective opportunities to lead evidence in support of their claim and trial court shall decide it afresh preferably within a period of eight months from the date of receipt of certified copy of the order, subject to the cost of 10,000/-. - Decided in favor of revenue.

  ---

• Corporate Laws

• 2016 (7) TMI 117
  Oppression and mismanagement - maintainability of petition - Held that:- Admittedly as per the documents filed by the petitioner the Company has 13 shareholders as on 30.09.2011 even without taking into the additional members of the Rl Company. From the documents it is evident that the Rl Company is having 14 shareholders as on the date of filing of the petition. Accordingly, the first criteria i.e. 1/10 of the shareholders to maintain a petition is not fill filled. Even the petitioner as per her own averments as made in the details of shareholding she is holding 32.808 shares constituting 6.63% of the paid up share capital of the company and hence the 2nd requirement i.e. 10% of the paid up capital is also not fulfilled. Accordingly, the petitioner failed to fulfill the required qualification as contemplated under Section 399 of the companies Act, 1956, to file a petition under Sections 397/398, the petition is not maintainable and liable to be dismissed. Hence, the CP is dismissed as not maintainable and accordingly the issue is answered against the petitioner It is evident from the letter dated 24.05.2013 that the petitioner has the knowledge of all the prior board meetings and it could be concluded that the said meetings are within the knowledge of the Petitioner and with her consent. Further the respondents have sent a notice dated 14.08.2013 to the petitioner informing her, the conduct of the board meeting to be held on 22.08.2013. One of the agenda item is to revise the remuneration payable to P1. The petitioner attended the board meeting on 22.08.2013 and in the said meeting the previous minutes of the board held on 26.06.2013 were confirmed. The remuneration of the petitioner was revised in this meeting. In view of the participation in the board by the petitioner, do not see any merit in the submissions made by the petitioner in this regard. Hence the board meeting held on 11.04.2013 is legal and valid. Hence the issue is answered against the petitioner. in the light of the undertaking given by the Company and its directors to the Company Law Board in C.P. No.36/2014, her continuation (and/or subsequent cessation) as a director shall be subject to further orders of the Company Law Board. It is recorded that the resolution were put to vote by show of hands and passed unanimously. In the said meeting the R5 was reappointed as director and R3 was appointed as whole time director for a period of three years. The general body also appointed M/s Brahmawa and Co. Chartered Accountants as statutory auditors of the Company. As per the additional documents filed by the respondents, it is seen that the Company held its 62 AGM on 08.12.2015, From the sequence of events it is an admitted fact that the company is in regular in conducting the AGMs and the same is in due compliance of Law. Accordingly the issue is answered against the petitioner. The petitioner failed in providing the ingredients to seek the reliefs under Section 307 and 398 further the petitioner miserably failed to establish any acts of oppression and mismanagement in the affairs of the company. In the present case there is not a single act of oppression and mismanagement made out by the petitioner. The Petition is miserably failed and liable to be dismissed.

  ---

• 2016 (7) TMI 116
  Scheme of Amalgamation - Held that:- Upon perusal of the report of the Official Liquidator and the Regional Director, the reply affidavit filed on behalf of the petitioner transferee company and having considered the Scheme of Amalgamation together with relevant documents on record, the Court finds it appropriate to grant sanction to the present Scheme of Amalgamation. In view of the above, the Scheme of Amalgamation is sanctioned. It is, however, directed that the petitioner Transferor Company shall preserve its books of accounts, papers and record and shall not dispose of the records without the prior permission of the Central Government under Section 396A of the Companies Act, 1956. It is further observed that the petitioner transferor company shall ensure statutory compliance of all applicable laws. It is also observed that the sanction of the present Scheme would not absolve the company from any of its statutory liability, if applicable.

  ---

• Service Tax

• 2016 (7) TMI 131
  Recovery of tax u/s 87 from successor of deceased proprietor - SCN was issued to the deceased but could not be adjudicated during his life time - garnishee notices - Validity of decision of learned Single Judge of this Court quashing the recovery notice - Held that:- we are not impressed by the submission of the learned Counsel for the appellants that the power under Section 87 of the Finance Act is independent and irrespective of the procedure under Section 73 nor can we accept the contention that when the power under Section 87 of the Finance Act is to be invoked, no procedure under Section 73 is to be undertaken. If we entertain the contention, the resultant situation would be that the power under Section 87 of the Finance Act would be without an adjudication mechanism under Section 73 of the Finance Act which is neither conceived by the legislature nor can be the accepted position. In view of the above, read with the reasons recorded by the learned Single Judge, we do not find any case made out for interference. - Decided against the Revenue.

  ---

• 2016 (7) TMI 130
  Restoration of appeal - delayed pre-deposit of amount as directed by the tribunal - Validity of order refusing to restore the order which was dismissed for non-compliance of stay order and for want of prosecution - Held that:- we answer the substantial question by holding that in peculiar facts and circumstances of the case, we are of the considered view, that the learned Tribunal was not right in dismissing the appeal for want of prosecution or non-compliance of the interim order for deposit of pre-deposit amount. - Appeal restored before the Tribunal.

  ---

• 2016 (7) TMI 129
  Waiver of pre-deposit - Valuation - works contract service - the distinction to be drawn between of value of the goods supplied as works contract and the value of service rendered for the purpose of service tax - reconsideration of its earlier order by the tribunal - Held that:- 67% abatement was duly allowed (as the value of the goods was included in the gross receipts) for the purpose of arriving at the value of service. As regards the issue of taxability under the CICS/construction service when the service was rendered under Works Contract, while this issue was touched upon in para 3 of the stay order No. 51340/2014 dated 28/07/2015 (partially quoted above) it was considered in greater detail, taking due note of the Hon’ble Supreme Court judgment in the case of CCE, Kerala vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] and others mentioned in para 4 of the Hon’ble High Court order, in the CESTAT order passed in appellant’s miscellaneous application on 09/2/2016 Thus, with due respect to Hon’ble High Court’s order, we find that the CESTAT stay order dated 28/7/2015 readwith the CESTAT’s miscellaneous order dated 09/2/2016 adequately covered the two points mentioned in para 4 of the High Court’s order for the interlocutory purpose of arriving at the amount of pre-deposit. Accordingly, we are of the considered view that there is no ground to alter the amount of pre-deposit ordered earlier vide stay order dated 28/7/2015.. Stay order not modified - assessee directed to comply with the order of pre-deposit - Decided against the assessee.

  ---

• 2016 (7) TMI 128
  Demand of service tax from the Sub-contractor - levy of penalty - there was a written agreement between the appellant and main contractor to the effect that the main contractor would discharge the service tax liability of the subject work. That on the strength of such agreement appellant neither paid tax nor filed returns for the subject work. - Held that:- the contention of the appellant that the failure to pay tax was because the appellant bona fidely believed that the main contractor would discharge service tax liability as stated in the agreement is not without merits. The second issue is the penalty imposed on account of failure to take registration. it has to be stated, that this is not a case where the appellant totally failed to take registration. Appellant had registration under the category Works Contract Service and not under commercial or industrial construction service. Department is of the view that the service would fall under Commercial or Industrial Construction Service. Both being construction services, the contention of the appellant that they believed that services would fall within the category of works contract service is probable and acceptable. Demand of service tax with interest confirmed - Levy of penalty u/s 77 & 78 waived invoking the provisions of section 80 - Decided partly in favor of assessee.

  ---

• Central Excise

• 2016 (7) TMI 127
  Clandestine removal of goods - violation of principles of natural justice in not permitting the appellant to cross examine the persons from whom statements were recorded - Held that:- After going through the impugned order made in appeal No.E/40772/2014 dated 02.11.2015 of the CESTAT, Chennai, we find that the plea regarding violation of principles of natural justice, in not permitting the appellant to cross examine the persons from whom statements were recorded / witnesses, has not been dealt with and answered, by the tribunal. When a specific plea regarding violation of principles of natural justice is raised, CESTAT, Chennai, is bound to record a specific finding, which is conspicuously absent. CESTAT, Chennai, directed to pass appropriate orders only on the specific aforesaid issue - Decided partly in favor of appellant.

  ---

• 2016 (7) TMI 126
  Cenvat credit on inputs / capital goods used in installing the Captive Power Plant and Captive Power Plant is a Turnkey project which was not excisable - violation of Rule 2(a)(A)(i) and (iii) of the cenvat credit rules - Held that:- The Tribunal has not considered the matter while allowing the appeal with reference to in allowing credit for the entire co-generation plant, without examining the eligibility of the individual items of capital goods for taking CENVAT Credit as per CCR 2004. The Tribunal has simply followed the earlier order passed by the Tribunal and granted relief without discussing the eligibility of individual items involved in the Appeal. Therefore, to meet the interest of justice, the Appeal has to be allowed and remanded to the CESTAT. - Decided in favor of Revenue.

  ---

• 2016 (7) TMI 125
  Waiver of pre-deposit - validity of order directing 50% amount to be deposited - As per the amendment by the Finance Act, 2014 the pre-deposit is kept limited to 7.5% of the demand to maintain an appeal - scope of section 35F - Held that:- Taking into consideration the legislative intent in making amendment in the year 2014, we find that due to the condition of predeposit and discretion given to the Commissioner/ CESTAT to grant exemption, the hearing of the appeals has been delayed. To overcome with that difficulty, amendment was brought through the Finance Act, 2014. The condition of pre-deposit of 7.5% of the amount of duty without any provision for exemption has been provided. It is to avoid any litigation on the issue of pre-deposit so that hearing of the appeals can be expedited. Taking into consideration the aforesaid and the orders passed by this court in the cases referred above, we are of the opinion that the orders passed by the Commissioner/ CESTAT need interference. Thus, taking into consideration the facts available on record, we are of the opinion that on deposit of 15% of the amount of duty or the penalty, as the case may be, appeals would be heard by the Commissioner/ CESTAT. The amount of 15% of the duty or the penalty, as the case may be, would be deposited within a period of one month from today. - Decided partly in favor of appellant.

  ---

• 2016 (7) TMI 124
  Prosecution proceedings u/s 9/9AA of the Central Excise Act, 1944 - it was argued that the criminal prosecution in the present matter could also not go on for the reason that the departmental proceeding started against the revisionists to realize the fine/tax has been quashed. - Held that:- it is evident that the revisionists have not been exonerated from the penalty/tax liability etc. but the case was remitted back for fresh decision for fixing liability of each and every individual separately after giving opportunity of hearing to the revisionists. The revisionists establishment/company have been registered, as required, under the Central Excise Act and they come under the purview of the said Act. In the present matter, the adjudication proceeding has not been finally determined in favour of the revisionists, criminal prosecution can go-on simultaneously with the adjudication proceeding. Thus, from the evidence available on record, no illegality, infirmity or impropriety is found in the impugned order and it cannot be said that no prima facie case is made out against the revisionists. The findings recorded by the concerned Magistrate in the impugned order does not require interference by this Court. There is no violation of any law or rule. The revision lacks merits and is liable to be dismissed. - Decided against the petitioner.

  ---

• CST, VAT & Sales Tax

• 2016 (7) TMI 121
  Provisional attachment of personal property of the director in case of company - recovery of tax - Input tax credit - TIN number of the supplier was cancelled - GVAT - Held that:- Sub-section (1) of section 45 of the VAT Act provides that where during pendency of any proceedings of assessment or re-assessment of turnover escaping assessment, the Commissioner is of the opinion that for the purpose of protecting interest of the Government revenue, it is necessary so to do, he may order in writing attach provisionally any property belonging to the dealer. Thus, in the present case, dealer would be the company and not the directors. Section 86 of the Act pertains to the offence by companies and contains certain provisions where for the offence of the company, every person who at the time the offence was committed was in-charge of, and was responsible to the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence. In essence, this provision makes the person incharge of the company responsible for the offence vicariously liable for the criminal action for which the company may have been charged. In the present case, we are not concerned with any such situation. The respondents have not disputed that the properties under attachment under the impugned order are the personal properties of the directors. Attachment order set aside - Decided in favor of petitioner.

  ---

• 2016 (7) TMI 120
  Waiver of pre-deposit - Input tax credit - petitioner submitted that the Assessing Officer had not given sufficient opportunity to the petitioner and the order of Assessing Officer was passed in great hurry. In any case, there was no material on record to suggest that the petitioner's transactions with Diamond Oil Industries were bogus. Merely because Diamond Oil Industries did not reflect its full sales to the petitioner in the tax returns, would not automatically imply that the petitioner had not made such purchases or not paid corresponding tax. Held that:- Even if we were to accept the statement made by the Director of Diamond Oil Industries in the said affidavit and discard the assertions made in the letter dated 24.9.2015, it would emerge that the entire sale turnover of Diamond Oil Industries during said period was to the petitioner of which he admits that the sale of 24.38 crores was not shown in the returns. The pre-deposit condition is modified by providing that the petitioner shall deposit 30 per cent of the principal tax with interest excluding penalty. - Decided partly in favor of petitioner.

  ---

• 2016 (7) TMI 119
  Classification of the product Wire Mesh - whether the Tribunal is right in holding that the product Wire Mesh cannot be considered as article of Stainless Steel (covered by entry 182(iv), nor can it be considered as accessory or spare part of machinery as mentioned in entry 55, but it can be considered as hardware item for which there is no specific entry and therefore the same is covered by residuary entry 195 of Schedule II Part A of the G.S.T. Act, 1969?” Held that:- an article manufactured to serve as a part of a particular kind of apparatus would not cease to be covered by the intended entry simply because it is capable of being used for any other purpose. In the present case, the product in question is of stainless steel and shall fall under Entry 132(iv). We are of the view that the Tribunal has erred in classifying the product in question in the residuary clause i.e. Entry No. 195. Considering the customized manufacturing undertaken by the assessee, the product could not be put to any other use. Decided in favor of assessee.

  ---

• 2016 (7) TMI 118
  Interstate sale or not - challenge to the order on the ground that the said order is one unfairly passed recklessly non compliant with the principles of natural justice - Held that:- The matters are remanded to the Commercial Tax Officer, Works Contract and Leasing Tax Zone-II Jaipur to address the question as to whether the transactions in issue were “intra state sales” or “inter state sales”, taking into consideration the respective submissions of the parties. The assessing officer is directed to pass a reasoned and speaking order. - Decided in favor of petitioner.

  ---

• Indian Laws

• 2016 (7) TMI 115
  Prosecution proceedings under the NDPS act - Held that:- the witnesses examined by the prosecution were able to prove the prosecution case beyond reasonable doubt and hence even if one or two witnesses though cited initially were later given up by the prosecution, the same did not adversely affect the prosecution case in any manner. In other words, the conviction could be sustained on the evidence adduced and was rightly held to sustain in this case. - Indeed, in the light of evidence adduced by the prosecution, which indisputably remained un-rebutted, the two Courts below were justified in placing reliance on such evidence for recording the finding of conviction against the appellant. - Decided against the petitioner.

  ---

• 2016 (7) TMI 114
  Prosecution proceedings under the NDPS act - Held that:- We find from the record of the case that the recovery of contraband was made from the appellant in the public place. In this view of the matter, the case in hand fell under Section 43 of the NDPS Act. So far as compliance of Section 50 is concerned, the prosecution proved that PW-5-who was a gazzetted officer, was called and then in his presence the recovery of contraband was made from the appellant. - the two Courts below, in our opinion, rightly held that the prosecution was able to prove their case beyond the reasonable doubt against the appellant and hence the appellant had to suffer conviction as awarded by the Trial Court. - Decided against the appellants.

  ---