TMI Tax Updates - e-Newsletter
July 6, 2016

Case Laws in this Newsletter:

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

Articles

1. No wealth tax from assessment year 2016-17 – confusions prevails

   By: DEVKUMAR KOTHARI

2. Video on key highlights of Draft Model GST Law

   By: Bimal jain

News

1. The Union Finance Minister Shri Arun Jaitley chairs the 15th Meeting of the Financial Stability and Development Council (FSDC)

2. Cabinet approves increase of foreign investment in M/s. Axis Bank Limited

3. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, others – Palm Oil, Crude Palmolein, RBD Palmolein, others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver notified

4. CBEC issues a Circular on recovery of confirmed demands during the pendency of stay application of duty

5. RBI Reference Rate for US $

6. India maintains its supremacy over China in Pharmaceuticals

7. Auction for Sale (Re-issue) of Government Stocks

Notifications

Customs

1. 29/2016 - dated 5-7-2016 - ADD

Seeks to amend notification No. 7/2016-Customs (ADD) dated 08.03.2016 so as to exclude Expanded Polypropylene beads and ter-polymer from the description of goods attracting anti-dumping duty

2. 28/2016 - dated 5-7-2016 - ADD

Seeks to impose definitive anti-dumping duty on "Purified Terephthalic Acid" including its variants Medium Quality Terephthalic Acid (MTA) and Qualified Terephthalic Acid (QTA), originating in or exported from China PR, Iran, Indonesia, Malaysia and Taiwan, for a period of five years from the date of imposition of provisional anti-dumping duty

3. 95/2016 - dated 5-7-2016 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Gold and Sliver

Highlights / Catch Notes

Income Tax

• Interest Payments to Non-Residents on Foreign Bonds Not Taxable in India u/s 9 of Income Tax Act.

  Case-Laws - AT : Where not only the bonds were raised outside India, but the interest payments were also made to non-residents outside India from a bank account held by the assessee outside India, no part of the transaction relating to payment of interest has taken place in India. Therefore, it cannot be said that the interest payment made to non-residents has accrued or arisen in India u/s 9.
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• New Vehicle Unit Setup Costs Classified as Capital Expenditure; Depreciation Qualifies u/s 32 of Income Tax Act.

  Case-Laws - AT : Expenditure on setting up a new unit to roll out new types of vehicles is capital expenditure, entitled to depreciation u/s 32.
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• Rental Income from Telecom Tower on Terrace Falls Under "Income from House Property" as per Section 24.

  Case-Laws - AT : Rental income from telecommunication tower installed on the terrace of Assessee to be assessed under head "Income from House Property" u/s 24 as against under head "PGBP" or "Income from Other Sources".
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• Advance with Sufficient Cash Balance Not Unexplained Income u/ss 68 or 69 of Income Tax Act.

  Case-Laws - AT : Addition su/s 68 / 69 - When the person who has given advance to the assessee, has sufficient cash balance in its books, the advance cannot be treated as unexplained income of the assessee.
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• Date of Allotment Letter Determines Holding Period for Capital Gains When No Separate Flat Purchase Agreement Exists.

  Case-Laws - AT : When there is no separate agreement executed by assessee for the purchase of the flat and the letter of allotment is the only document which gives right of ownership in the flat, date of allotment letter will be taken for working out the period of holding to compute capital gains.
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• Liquor business financial records accepted; 8% estimated profit rate rejected due to minor discrepancies. Accurate audited results preferred.

  Case-Laws - AT : Assessee's business (Liquor business) is such that it cannot maintain proper sale bills and the profit varies from area to area and small variation of the profit cannot be ruled out. No ground for rejecting the book results. Therefore, declared audited results are to be accepted and estimation of income by applying profit rate of 8% was not proper.
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• Company's Share Income Classified as Investment, Not Business Income, Due to Consistent Categorization and Own Fund Acquisition.

  Case-Laws - AT : During the last few years assessee company followed the same practice of holding certain shares under the head “Investment” and some shares as “Stock in trade”. Therefore, as the assessee was holding the shares as investment consistently and the same were acquired out of own funds, there was no reason to treat the same as business income.
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• Section 194C Exemption: Joint Venture Payments to Members Not Taxable, Confirms ITAT Hyderabad in KCEL-MEIL Case.

  Case-Laws - AT : Provisions of section 194C are not attracted in the case of payments made by the Joint Venture to its constituent members - Relied upon KCEL-MEIL (JV) [2015 (1) TMI 744 - ITAT HYDERABAD].
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• Court Rules Student Payments as Capitation Fees, Not Corpus Donations; Not Exempt u/s 11 of Income Tax Act.

  Case-Laws - AT : Where it was found that amount paid by parents of students admitted to assessee’s educational institution was not corpus donation amount, but it was collected only by way of capitation fees, such capitation fees was not exempt u/s 11.
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• Court Bars Re-opening of Tax Assessment Without Necessary Evidence; No Fishing Inquiries Allowed u/s 147.

  Case-Laws - HC : Re-opening of assessment which was framed after scrutiny would not be permissible for a fishing inquiry. In the present case, we find the vital link missing from the reasons recorded, such link being the material at the command of the Assessing Officer to form such a belief
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• Section 40A(2)(b) Requires Detailed Review for Payments to Related Entities, Not Just Automatic Application Under Income Tax Act.

  Case-Laws - HC : Provisions of section 40A(2)(b) couldn't be invoked mechanically and simply for the reason that the payment was made to a group concern
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• Supreme Court Allows Depreciation on Goodwill: Smifs Securities Case Defines Goodwill as Cost-Asset Difference.

  Case-Laws - HC : Depreciation on goodwill allowed relying on Supreme Court in Smifs Securities [2012 (8) TMI 713 - SUPREME COURT] wherein it was held that the difference between the cost of assets and the amount paid constituted goodwill
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• Section 154: Only Applied for Clear Mistakes, Not Debatable Issues in Income Tax Cases.

  Case-Laws - HC : When the issue is debatable the provisions of Section 154 cannot be invoked. The provisions of Section 154 can be invoked when there is apparent mistake which is glaring and patent.
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• Re-assessment Notice Requires "Reason to Believe" Not Proof; Investigation Wing Info Deemed Relevant, Not Mechanical.

  Case-Laws - HC : At the stage of issue of re-assessment notice, what is required is “reason to believe” and not the established fact of escapement of income. Reasons recorded on the basis of information received from investigation wing cannot be stated to be irrelevant or mechanically recorded.
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• Expenses Not Fully for Earning Other Income Are Non-Deductible Under Income Tax Act Section 57.

  Case-Laws - AT : Expenses, which were not incurred wholly and exclusively for the purposes of earning the income from other sources, cannot be allowed deduction u/s 57.
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• Trust Registration Denial Limited to Non-Genuine Activities or Misalignment with Stated Objectives; Commercial Nature Not Evaluated.

  Case-Laws - AT : Registration can be rejected only when (a) activities of the trust are not genuine, and (b) that the activities of the trust or the institution are not being carried out in accordance with the objects of the trust or the institution. Whether the activities of the assessee-trust are in the nature of commerce and trade is not to be analysed at the time of granting the registration.
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• Trust Registration u/s 12A Not Denied for Late Filing; Allowed Prospectively.

  Case-Laws - AT : Rejecting the Trust registration application u/s 12A on the ground that it is filed late is not correct because, registration can be granted prospectively
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• Reopening Tax Assessments After Four Years: Prove Taxpayer's Failure to Fully Disclose All Material Facts Required.

  Case-Laws - AT : Merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond 4 year period. Escapement should be linked with failure on the part of assessee to fully and truly disclose all the material facts necessary for assessment.
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• Disallowances on Brokerage, Legal, Maintenance, and Insurance Expenses for Rented Property u/s 24 of Income Tax Act.

  Case-Laws - AT : While computing annual value of property which has been let out - disallowance made on account of brokerage charges, legal expenses, maintenance charges and insurance expenses being not as per section 24.
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• No Additions Based on Spouse's Disclosures Without Incriminating Evidence of Undisclosed Income or Assets Found During Search.

  Case-Laws - AT : If no incriminating material (representing undisclosed income or undisclosed assets belonging to the assessee) found during the course of search - addition cannot be made on the basis of disclosure made by assessee’s husband
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• Gujarat High Court Upholds Addition u/s 68, Rejects "Peak Credit Principle" in Unexplained Bank Deposits Case.

  Case-Laws - AT : Assessee unable to substantiate the money deposited in his bank accounts - Addition u/s 68 confirmed - The benefit of "peak credit principle" not extended Note:- On further, appeal the said addition was affirmed by Gujarat High Court in its order dated June 28, 2016
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Customs

• Passenger Denied Free Baggage Allowance for Electronic Goods; Fails to Prove Items as Bona Fide Baggage.

  Case-Laws - CGOVT : Import of electronic goods in a baggage - bonafide baggage or not - whether re-import of goods earlier taken away - crossing through green channel - passenger produced local purchase invoices which were not in his name thus he failed to prove the identity of the impugned goods - The passenger has rightly been denied the free baggage allowance by both the lower authorities - CGOVT
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• Individual Denied Transfer of Residence Benefit for Concealed Gold Bracelets; Violates Section 79(2) and Baggage Rules.

  Case-Laws - CGOVT : Import of gold bracelets concealed - crossing through green channel without declaring the goods - As per Section 79(2) read with the Baggage Rules the benefit can only be extended to bonafide baggage and truly declared to Customs - applicant is not entitled for benefit of TR - CGOVT
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• Passenger Denied Benefits for Gold Import: Failed to Meet Section 79(2) and Baggage Rules, 1998, Conditions.

  Case-Laws - CGOVT : Import of gold / gold jewellery - passing through green channel - As per Section 79 (2) read with Baggage Rules, 1998 the benefit can be extended to the passenger who brought the bonafide goods and truly declared to the Customs. In the instant case both the conditions were not fulfilled by the passenger - CGOVT
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• Customs Appeals Commissioner Upholds Discounted Import Prices as Accurate Transaction Values; Revenue Fails to Disprove Declared Values.

  Case-Laws - AT : Valuation - Commissioner of Customs (Appeals) accepted the discounted price of import which was in the range of 87% to 97.35% - adoption of transaction value of contemporaneous imports - Revenue failed to prove that the value declared by the Respondents is not correct transaction value. - AT
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Service Tax

• Court Denies Waiver of Pre-Deposit for Partnership Firm in Service Tax Case, Citing No Undue Hardship.

  Case-Laws - HC : Waiver of pre-deposit - undue hardship - assessee himself disclosed the claim for depreciation, Sundry Debtors and loans and advances in the account books - Even otherwise, the assessee is a partnership firm, the partners are liable to pay statutory dues to the Government - No relief - HC
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• Cenvat Credit Validity Examined: Fire-Damaged Invoices Not Sole Proof; Books of Account Can Substantiate Payments.

  Case-Laws - AT : Cenvat Credit - original duty payment document / invoices were lost / destroyed in the fire - It is not only the invoice or ledger entry but the respondent might have paid invoice value to the service provider which can also be verified from the books of account - matter remanded back - AT
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• Refund of Unutilized CENVAT Credit Allowed for Period Before April 1, 2011; Interest Also Granted.

  Case-Laws - AT : Refund of unutilized cenvat credit - Commissioner (Appeals) denied refund disallowing the credit on some input services, observing that the input services do not have nexus with output services. - the period involved is prior to 01-04-2011 - refund of the credit allowed with interest - AT
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Central Excise

• PVC Foils vs. Films: Classification Under Tariff Headings 3920.11 & 3920.12 Leads to Exemption Benefits Due to Undefined 'Foil'.

  Case-Laws - AT : Classification of FOIL - PVC foils versus PVC films - heading 3920.11 and 3920.12 read with chapter notes - rate of duty / benefit of exemption - Revenue has not given any definition of the term 'Foil' - Benefit of exemption allowed - AT
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• Case Remanded: Violation of Natural Justice Cited Due to Late Document Submission and Denial of Witness Cross-Examination Opportunity.

  Case-Laws - AT : Demand of duty - Admittedly non relied upon documents have supplied after final hearing of the case. In the circumstances, the impugned order has been passed in gross violation of principles of natural justice. - Further, the adjudicating authority has not given an opportunity of cross examination of witness. - Matter remanded back - AT
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VAT

• High Court Grants Exemption for Ready-Mix Concrete Supply in Special Economic Zone Under TNVAT Act 2006 Transition.

  Case-Laws - HC : Claim of benefit of exemption on supply of Ready-mix concrete to the developers of Special Economic Zone (SEZ) - authorized operations - Migration from sales tax regime to VAT regime - TNVAT Act, 2006 - Benefit of exemption allowed - HC
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Case Laws:

• Income Tax

• 2016 (7) TMI 176
  Reopening of assessment - issuance of share at premium - reasons to believe - Held that:- Question of issuance of share at premium, to whom such shares were allotted and the premium received, the resultant increase in the share premium were all placed before Assessing Officer for his verification of original assessment proceedings. He however, raised no further question and accepted the stand of the assessee. Any re-visit of such an issue without there being additional or undisclosed information would be merely in the nature of change of opinion. In reasons recorded AO referred to some information received from CCIT as per which the assessee company had allotted shares at a high premium. Further, AO observed from the balance sheet of assessee-company that it had received share premium of 1.45 crores during the year under consideration. He therefore, recorded that “the assessee has not explained the nature of such credit and has failed to prove the genuineness and justification of huge share premium received in its books of accounts. Hence, such receipts need detailed verification.” The approach of AO cannot be approved. His entire focus is on share premium amount of 1.45 crores and without any tangible material on record, he proceeds on the basis that shares were issued at a high premium. For any re-assessment, AO must have some tangible material to enable him to form a belief that the income chargeable to tax had escaped assessment. We find reference to no such material in the reasons recorded. There is no basis even to prima facie proceed on the premise that the allocation of shares was at an artificially high premium. Merely because a sizeable sum was received in the nature of share premium during the year under consideration, would not automatically mean that the same was artificially increased. Re-opening of assessment which was framed after scrutiny would not be permissible for a fishing inquiry. In the present case, we find the vital link missing from the reasons recorded, such link being the material at the command of the Assessing Officer to form such a belief - Decided in favour of assessee.

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• 2016 (7) TMI 175
  Disallowance u/s 40A (2)(b) - payment for consultancy services provided by group companies - unreasonable and excessive expenditure - Held that:- From the record, it is clear that the technical people of Araham Developer Pvt. Ltd. have rendered the services for helping the appellant (assessee) in rendering the consultancy services to Bakeri Group. Without the help of the employees of M/s. Araham Developer Pvt. Ltd. it would not have been possible for the appellant (assessee) to render the services to various associations of Bakeri Group. The entire payment of 10 lakhs to Araham Developer Pvt. Ltd. can be considered as reasonable, looking to the services rendered by them. Therefore, we find that the Tribunal has committed an error while passing the impugned order. Payment of R.10 lakhs to M/s. Araham Developer Pvt. Ltd. was wholly and exclusively for the business purpose and the same could not be disallowed simply by invoking the provisions of Section 40A(2)(b). Provisions of section 40A (2) (b) couldn't be invoked mechanically and simply for the reasons that the payment was made to a group concern - Decided in favour of assessee

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• 2016 (7) TMI 174
  Depreciation u/s 32 on Goodwill - Held that:- Depreciation on goodwill allowed relying on Supreme Court in Smifs Securities [2012 (8) TMI 713 - SUPREME COURT] wherein it was held that the difference between the cost of assets and the amount paid constituted goodwill and that the assessee-Company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee-Company stood increased - Decided in favour of assessee.

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• 2016 (7) TMI 173
  Payment of commission - Held that:- From the orders of the subordinate authorities we arrive at our considered view that in the ledger a/c there is no definite rate of commission that is paid, the commission is not paid on weekly basis or monthly basis. We find that it is mostly paid towards the end of the year. It has been already decided by the subordinate authorities after thorough inquiries that the assessee has paid commission which has no nexus either direct or indirect with his business. After verifying the ledger a/c, we are of the opinion that it is a way to increase expenses and to reduce the level of profit. The assessee has also not discharged before us the correlation between the business activities conducted by him and the commission paid which therefore, signifies that the payment of commission has nothing to do with the business. One of the argument raised was that assessee was paying commission in earlier years and the same should be allowed. We are not informed whether the AO made enquiry in earlier years or not. In this year the AO made enquiries and found that no services were rendered by the persons who were paid commission. We are convinced that there is no justification for payment of commission. Under the circumstances, we uphold the order of the learned CIT (A) in this regard and this issue of commission payment is dismissed. Claim of agricultural income rejected and treated as taxable income - Held that:- Regarding the agricultural income, the AO sought the details of land owned, crops grown and evidences for sale of agricultural produce. The assessee has given only the details of land holdings and stated that the income is from sale of mangoes and no evidence as to sale of agricultural produce nor evidence to claim that agricultural operations were carried were produced before the AO. In the absence of documentary evidence, the claim of agricultural income was disbelieved and the same was added to the income. Addition on account of unproved gifts - Regarding the alleged gifts, assessee has not given any details, hence the AO has made addition of 48,200. Before the learned CIT (A) the AR could not justify his claims and accordingly the CIT(A) confirmed these additions as done by the AO. As per our considered view, since there is nothing on record to support the claim of the assessee and the subordinate authorities after conducting necessary inquiry have confirmed the said addition, we accordingly see no reason to interfere with the order of the learned CIT (A) and therefore upheld the said additions. Addition of outstanding towards suspense a/c under sundry creditors u/s 41(1) - Held that:- For invoking of provisions of section 41(1) the AO has to prove that the amount was allowed as expenditure in any of the earlier A.Ys. Further, there should have been a remission of such amount by the party concerned. Both the conditions are not prevalent in the facts mentioned in the order of the AO. Further, for invoking the deeming provision, the onus rests on the AO and not on the assessee. The AO himself mentioned that the liability was outstanding for more than 3 years which facts confirms that the amount does not partake the nature of income of the assessee for the A.Y under consideration. Therefore, this addition is deleted.

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• 2016 (7) TMI 172
  TDS u/s 194C - TDS liability - Joint Venture (JV) assessee has given the entire contract to its constituent member M/s. Pallavi Constructions. - Held that:- As per Hon'ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township P Ltd (2015 (9) TMI 79 - DELHI HIGH COURT ), once the payee had filed his return and offered the sum received to tax, no disallowance can be made u/s 40(a)(ia) and the assessee would not be treated as an assessee in default. Further the decision of in the case of KCEL-MEIL (JV) [2015 (1) TMI 744 - ITAT HYDERABAD] we observe that the provisions of section 194C(2) are not attracted in the case of payments made by the assessee to its constituent members, there was no question to treat the assessees in default u/s 201(1). Following above judicial pronouncements, we are of the view that the relief granted to the assessee by the order of the CIT (A) is just and proper and therefore shall be sustained - Decided in favour of assessee.

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• 2016 (7) TMI 171
  Profit derived from share trading - business income OR long term capital gain exempt u/s 10(38) - Held that:- Once the assessee was consistently showing the shares as its investment, the same cannot be converted into stock-in-trade, unless the intention is proved otherwise. Ld. CIT(A) has pointed out that from the record it is evident that assessee company had distinct port-folio of shares and mutual funds under two categories i.e. investments and stock-in-trade. He has observed that during the last few years too the assessee company had followed the same practice of holding certain shares under the head “Investment” and some shares as “Stock in trade”. Therefore, as the assessee was holding the shares as investment consistently and the same were acquired out of own funds, there was no reason to treat the same as business income. - Decided against revenue Applicability of section 14A - Held that:- In view the decision of Hon’ble Bombay High Court in the case of Godrej 63,352/-. Having heard both the parties, we do not find any reason to interfere with the order of ld. CIT(A) on this count, as he has made a reasonable disallowance of 5% of the expenditure incurred under the head administrative and personal expenses - Decided against revenue Addition of deemed dividend u/s 2(22)(e) - Held that:- Admittedly, the assessee was not a shareholder of Radhika Securities Pvt. Ltd. and, therefore, no deemed dividend could be added in the hands of the assessee company. Accordingly, we see no reason to interfere with the order of ld. CIT(A) in deleting the addition - Decided against revenue

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• 2016 (7) TMI 170
  Exemption u/s 11 - Assessee society (registered u/s 12A) was running several educational institutions - During survey proceedings AO found that capitation fee/donation was collected by the assessee society from the students and such amount was disclosed in the return as voluntary donations and claimed exempt u/s 11. AO relied upon Apex Court ruling in the case of Islamic Academy of Education vs. State of Karnataka [2003 (8) TMI 469 - SUPREME COURT] wherein the Hon’ble Supreme Court heavily deprecated the practice of collecting capitation fee from students and held that the collection of capitation fee is contrary to the constitutional framework of India and collection of any such fee by educational institution cannot be recognized as a charitable activity within the meaning of section 2(15). The only issue in the present appeal is whether the amount collected by the management of the society over and above the prescribed fees charged by the Government is in the nature of capitation fees or voluntary contribution. It is undisputed fact that the assessee has been collecting amounts over and above the fee prescribed by the Government. Assessee-society had not led any evidence on record in support of the proposition that contributions are voluntary and made forming part of corpus of the society. Even before us, the assessee-society made no efforts to prove that the contributions are voluntary in nature. Therefore, the said capitation fees is not exempt u/s 11 - Decided against the assessee.

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• 2016 (7) TMI 169
  Capital gain computation - selection of period of holding - whether the date of allotment should be taken for the period of holding for the working of capital gain? - Held that:- From the facts of this case, we find that there is no separate agreement executed by assessee for the purchase of the flat and the letter of allotment which is in the paper book at pages 23 to 33 is the only document which gives right of ownership in the flat. Therefore, in our view with the date of allotment letter will be taken for working out the period of holding in the instant case. Thus we reverse the orders of Authorities Below and direct the Assessing Officer to take the date of letter of allotment for working out the period of holding. In the instant case letter of allotment is on 01.01.2006 and accordingly the right was acquired on that date. The assessee sold the right acquired by way of letter of allotment is to be dated on 07.03.2009. accordingly the period of holding exceeds 36 months in the present case. So the period of holding in the instant case exceeds 36 months and income arising on the sale of said property will be treated as LTCG. - Decided in favour of assessee.

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• 2016 (7) TMI 168
  Addition relating to the cash seized by the department - Held that:- AO has taken statement from the carrier Shri Ashok Kumar Singh also, who has also confirmed that the amount that was handed over to Shri Anup Kumar Shah, was received by him from shri S.K.Jain. The statements taken from the three persons clearly show that the amount of 15.00 lakhs belonged to the assessee-company herein. The statement of Shri S.K.Jain, who was holding the responsible position of “Vice President” has not been rebutted by the assessee company. In view of the above, there was no necessity for the AO to invoke the presumption provided u/s 132(4A) of the Act in the hands of Shri Anup Kumar Shah. Further there is no compulsion under the Act that the AO should necessarily invoke the provisions of sec.132(4A) of the Act, as the words used in that section are “may be presumed”. In view of the above, we are unable to agree with the view expressed by the Ld CIT(A) on this issue. We also notice that the assessee has failed to furnish any credible explanation with regard to the unaccounted cash referred above. In view of the above, we set aside the order of ld CIT(A) on this issue and restore the addition made by the AO. - Decided against assessee Addition pertaining to the unaccounted payments claimed to have been paid to the officials of NHAI - addition was deleted by the Ld CIT(A) on the ground that the AO did not confront the NHAI officials and the assessee company’s officials - Held that:- AO presumed that the amount mentioned above represent “amount in lakhs of rupees”. Accordingly, the AO has taken “1.00” as “One lakh rupees”. Considering the quantum of work undertaken by the company and the position of the officials mentioned above, in our view, it would be reasonable to presume that the amounts noted in the seized materials represent “amounts in lakhs”. The assessee, having failed to rebut the presumption, in our view, the AO was justified in making the addition of 30,25,850/-. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the addition made by AO.- Decided against assessee Addition on non finding the vouchers - Held that:- In the relevant vouchers, it was mentioned that the sum of 12.50 lakhs was paid to Shri S.K.Jain. Before Ld CIT(A), the assessee filed bank statements. On verification of the same, the Ld CIT(A) has given a clear finding that the transactions pertaining to 12.50 lakhs could not be identified in the bank statements. Ld CIT(A) has also given a finding that the amount of 12.50 lakhs was not accounted in the books of account of Joint venture concern. Before us, though the assessee reiterated its claim that the transactions pertaining to 12.50 lakhs belong to the Joint Venture concern, yet no material was produced to contradict the findings given by Ld CIT(A). Accordingly, we do not find any reason to interfere with the decision reached by Ld CIT(A) on this issue.- Decided against assessee

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• 2016 (7) TMI 167
  Receipt of rental income - “profit and gains of business or profession” OR “income from house property” - Held that:- We have gone through the decision of Mumbai Bench of the Tribunal in the case of Matru Ashish Co-operative Housing Society Ltd (2010 (8) TMI 1035 - ITAT MUMBAI), which is exactly on identical facts decided the issue that the income of the assessee-society is to be assessed as income from house property and not business income. Accordingly, respectfully following the decision of coordinate bench, we are of the view that the assessee has rightly treated the income from property, and we hold so. - Decided in favour of assessee

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• 2016 (7) TMI 166
  Addition as undisclosed income made u/s 68 - Held that:- M/s Swaminarayan Enterprise had sufficient cash available in their books of account, which was in turn used to give business advances to the assessee society and, therefore, the sum of 23,86,030/- should not be treated as unexplained income and, accordingly, we delete the impugned addition made by ld. Assessing Officer and allow the ground of assessee. Addition on unexplained investment u/s.69 - Held that:- Additions were made by the assessing Officer on assumption, conjectures and surmises and without bringing any material on record with certainty and conviction that there was an unexplained investment in the land in excess of the price mentioned in the purchase documents and, therefore, we find no reason to interfere with the order of ld. CIT(A)in delting the addition - Decided in favour of assessee

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• 2016 (7) TMI 165
  TDS u/s 195 - Disallowance of claim of interest paid on Foreign Currency Convertible Bonds (FCCB) for non deduction of TDS - Held that:- Not only the bonds were raised outside India, but the interest payments were also made to non-resident Indians outside India from a bank account held by the assessee outside India. Therefore, since no part of the transaction relating to payment of interest has taken place in India, it cannot be said that interest payment made to non-residents has accrued or arisen in India in terms of section 9. In our view, therefore, the provisions of section 195 would not apply to such payments, thereby requiring the assessee to deduct tax at source. - Decided in favour of assessee Restriction of claim of Bank interest and financial charges - Held that:- As investment in equity shares were made from out of surplus interest free funds available with the assessee, disallowance of interest expenditure is not sustainable.- Decided in favour of assessee Restriction on claim of depreciation u/s 32 - Held that:- In the present case, the subsidy was issued in reference to the machinery. Assessee submitted letter of approval of subsidy but from that letter it could not be established whether the subsidy was issued for the benefit of business or for the expansion of business. Moreover, the letter of approval was addressed to VVS Pharmaceuticals & Chemicals Pvt. Ltd., which is the previous name of the assessee, as claimed by the AR. We, therefore, remit the matter back to the file of the AO to check the above deficiencies. AO may check the type of subsidy from the policy of the Central Government on investment subsidy scheme and how the subsidy was received by the assessee when the same was addressed to old name of the assessee. Assessee may be given proper opportunity of being heard. Addition on account of delay in payment of PF & ESI - Held that:- It is a fact that the remittance of PF & ESI were made before filing of return of income. The Hon’ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT ] held that the amendments to section 43B brought out by the Finance Act, 2003 with effect from 01/04/2004 are retrospective in nature and would operate from 01/04/1988. Various benches of ITAT and coordinate benches of this Tribunal have followed the above decision and held that the amendment to section 43B brought out by the Finance Act, 2003 is retrospective in nature and justified in deleting the additions made on account of delayed payment of Provident Fund of employees contribution. Since, PF & ESI are same, respectfully following the decisions of coordinate benches of this Tribunal we direct the AO to delete the addition made on account of PF & ESI Payments. Disallowance of claim of deduction u/s 35(2AB) - Held that:- Assessee had submitted the letter of approval from DSIR, but, the AO had disallowed the expenditure mainly due to no order of approval of DSIR containing the quantification of the expenditure entitled for deduction u/s 35(2AB) of the Act, has been submitted by the assessee. Even before us, assessee had not submitted any records, which is required as per section 35(2AB)(3) but contested that all the relevant approvals were submitted. We remit the issue back to the file of the AO to verify the approval of quantification by the DSIR along with the audited financial records. Assessee may be given proper opportunity of being heard. Disallowance u/s 40(a)(ia) - assessee has not deducted tax at source on the remuneration paid to auditors - Held that:- AO had made addition due to non-submission of proof for payment made on gratuity and leave encashment. Ld. AR submits that the payments were made. Ld. AR relied on the case of Sri Krishna Pharmaceuticals. On perusal of order, we find that the facts of this case are different. The disallowance was made due to creation of unrecognized gratuity fund, which was allowed u/s 37 as deduction. But, in the present case, disallowance was made due to non filing of proof of payment. We remit this issue back to the file of the AO to verify the proof of payment as claimed by the assessee on payment of gratuity and leave encashment. If found proper, he may allow this expenditure, otherwise, the disallowance may be sustained. Assessee may be given proper opportunity of being heard Disallowance of the claim of Foreign exchange fluctuation - Held that:- The issue is squarely covered by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Woodward Governer India Pvt. Ltd, [2009 (4) TMI 4 - SUPREME COURT ] wherein held that loss suffered by the assessee in respect of revenue liability on account of exchange difference as on the date of the Balance Sheet is an item of expenditure allowable under section 37(1). As per AS 11, exchange difference arising on foreign currency transactions have to be recognized as income or expense in the period in which they arise. An enterprise has to report the outstanding liability relating to import of raw-material using closing rate or exchange and the same has to be recognized in the prof it & loss account for the reporting period. Hence, the same may be allowed. Revision u/s 263 - Held that:- CIT re-examined the issues which are already considered by AO during the assessment proceedings. Since AO already considered and taken a stand and formed an opinion, may be a possible view at that point of time, passed the assessment order based on the above opinion. The CIT cannot exercise the revisional jurisdictional power on the same issue again and take different view. The co-ordinate bench of this tribunal has taken a stand that the re-examination of assessment orders on the same set of facts is against the law and even the honorable jurisdictional high court and honorable apex court has opined that this is against law and as per accepted principle of assessments. Thus we are of the opinion that CIT cannot review the order of AO, who has applied his mind on the issues which are subject matter of dispute now. Hence we quash this order of CIT passed u/s 263 of the Act.

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• 2016 (7) TMI 164
  Disallowance of claim for deduction of development expenditure u/s. 37(1) or in the alternative, u/s. 35(1) of the Act, allowing depreciation thereon instead - Held that:- The expenditure was toward setting up a new, dedicated unit to roll out new types of vehicles, which commenced commercial production in May, 2010. The expenditure was accordingly capital expenditure, entitled to depreciation u/s.32(1)(i) of the Act. The company was here-in-before manufacturing only Light Commercial Vehicles (LCVs) (at Zaheerabad, Andhra Pradesh), and the new project entailed transfer of the technical know-how, again, a capital asset depreciable u/s. 32(1)(ii) and, accordingly, allowed depreciation thereon. At the outset, the ld. AR would concede that the issue stands squarely covered against the assessee by the order by the Tribunal in the case of its’ associate concern.In our view, the Revenue’s stand, upheld by the tribunal in the cited decision, is in consonance with the first accounting and legal principles. We, accordingly, endorse same. - Decided in favour of revenue Disallowance u/s. 40(a)(ia) - non-deduction of tax at sourceon ‘service coupon commission’ - Held that:- we only consider it fit and proper that the matter is restored back to the file of the AO for allowing an opportunity to the assessee to satisfy him of being not in default under the amended section 201. That is, in respect of the tax deductible on the payment against service coupons, which it was liable to deduct u/s. 194C and has admittedly failed to deduct in whole. The burden of proof is clearly on the assessee, even as the AO shall decide the matter by issuing definite findings of fact and, further, separately for each dealer, whose cases could well be different in-as-much as the date of furnishing of return of income (for the relevant year) could be different, and may have perhaps also accounted for the income (on services) for different years. We decide accordingly.

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• 2016 (7) TMI 163
  Estimation of GP rate - Assessee was running liquor, wine and beer shop - AO rejected the books of account by invoking section 145(3). - Held that:- Purchases made by the assessee are duly supported by proper vouchers and are regulated by the Excise Authorities and payment of liquor is made through Government on the basis of the auction conducted by the Government. In the case of Laxmi Narain Ramswaroop Shivhare [2008 (12) TMI 290 - ITAT AGRA], the majority view was that as regards the sale, the nature of the assessee's business was such that it cannot maintain proper sale bills. In this case also, the nature of assessee's business is such that it cannot maintain proper sale bills. In the case of Laxmi Narain Ramswaroop Shivhare (supra), the majority view was that the profit varies from area to area and the bid money and small variation of the profit cannot be ruled out. Thus, we do not see any ground for rejecting the book results. Therefore, the declared audited results are to be accepted and estimation of income by applying the net profit rate of 8% was not proper. Accordingly, we delete the addition - Decided in favour of assessee

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• 2016 (7) TMI 162
  Capital gains on the transfer of plot of land - STCG or LTCG - Held that:- The assessee-appellant ‘held (owned)’ the property only upon the order being passed upon filing of the Consent Terms in Court on 11th March, 1988. The said land was sold on 29th November, 1988. Therefore it falls beyond the scope of long term capital gains and within the province of short term capital gain. Accordingly, we are of the view that the gains resulting from the sale of the said land in November 1988 would be a short term capital gain. - Decided in favour of the Revenue and against the assessee

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• 2016 (7) TMI 161
  Disallowance on account of prior period expenses - CIT(A) deleted the disallowance - Held that:- Bills were dated 1.4.2009 and the expenses were made in the Month of January 2.30 crore. In P 2.30 crore was shown below the line which is taken as the profit on sale of fixed asset in the computation of income ('COI'). Similarly, gain on sale of such rights was offered in the computation income as short term capital gain. In view of the above, it was rightly held by the Ld. CIT(A) that disallowance of expenditure ignoring the income from selling of publishing right is not justifiable and addition was rightly deleted - Decided in favour of assessee.

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• 2016 (7) TMI 160
  Remuneration paid to the partners disallowed - higher remuneration of partnership - Held that:- Assessee claimed the deduction of higher remuneration of partnership based on supplementary partnership deed dated 02-04-2003 in the assessment years 2005-06 and 2006-07. AO disallowed the remuneration paid to partners on the ground that certified partnership deed dated 2-4-2003 was not produced before the AO. Assessee submitted that the changed partnership deed was duly furnished to the Revenue in the year of change as well in the assessment proceedings as well in appellate proceedings before the learned CIT(A) as well before the Tribunal. It is the say of the assessee which is not controverted by the Revenue that all these years, the remuneration so claimed per supplementary partnership deed dated 02-04-2003 stood allowed by the Revenue and no disallowance has been made by the Revenue authorities. Thus there is no reason to disallow the remuneration paid to the partners in the impugned assessment year on the grounds that the partnership deed dated 02-04-2003 was not filed by the assessee as contemplated by the Revenue on the facts as are emerging from the records and the disallowance made by the revenue authorities is not sustainable - Decided in favour of assessee Remuneration paid to Mrs. Kiran R. Puri disallowed on the grounds of that the said Mrs Kiran R Puri is not a working director and the remuneration is excessive - Held that:- It is the case of the assessee that for all the years the Revenue has allowed the remuneration paid to Mrs Kiran R Puri while this is the only year when disallowance of the Remuneration paid to Mrs Kiran R Puri was made by the Revenue. It is brought on record vide return of income for the assessment year 2005-06 and 2006-07 that the remuneration was claimed by the said Mrs Kiran R Puri. The explanation submitted by the assessee is bona fide which has not been controverted by the Revenue and there is no valid reason to disallow the remuneration paid to Smt. Kiran R. Puri in this year alone based on the bald statement without bringing on record cogent incriminating material on record.No enquiry has either been conducted by the Revenue nor any incriminating material is brought on record to support the contention of the Revenue. It is also the averment which has remained uncontroverted by the Revenue that the revenue has allowed the higher amount of remuneration paid to Mrs Kiran R Puri in the preceding years and the said Mrs Kiran R Puri has duly paid taxes in her personal return of income filed with the Revenue. Hence, in our considered view, the addition made by the Revenue needs to be deleted - Decided in favour of assessee Non-payment of TDS u/s 40(a)(ia) read with Section 194J - Held that:- The assessee itself voluntarily disallowed the amount of 44,944/- paid for professional fee in the computation of income filed with the Revenue, while the Revenue has disallowed 63,650/- towards professional fee by invoking Section 40(a)(ia) of the Act read with Section 194J of the Act. We have observed that both the figures could not be reconciled in the absence of complete details of the break-up of 63,650/- albeit the assessee is contending that the said disallowance is a double addition which is not permissible.In our considered view, this matter needs to be set aside to the file of the A.O. and the assessee is directed to appear before the A.O. with all the supporting material to prove the basis and working of voluntary disallowance of professional fee of 44.950/- u/s 40(a)(ia) of the Act read with Section 194J of the Act so that the double additions can be eliminated. The A.O. is also directed to provide the details and working of disallowance of professional fee of 63,650/- so that the reconciliation of both the workings is undertaken and no double additions of the same income be made which is not permissible under the provisions of the Act.- Decided in favour of assessee Motor car and telephone of 20% disallowed - Held that:- It is observed that the assessee firm has duly paid the FBT on these expenses , the details of which are produced on record which is part of the tax audit report. In our considered view, if the said expenses are subjected to FBT, no further disallowance is called for in the absence of any incriminating material on record - Decided in favour of assessee

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• 2016 (7) TMI 159
  Activity of trading of shares - taxed under the head 'Income from Business & profession' or 'Short Term Capital Gains' - Held that:- From the details of purchase and sale and period of holding of shares, it is observed that the assessee has held 11 transactions of shares for more than 50 days and the balance were held for more than 100 days in total number of 30 transactions. In the previous year and the subsequent years relevant to the Assessment Year under consideration the Department has been consistently accepting the investment in shares held by the assessee. During the year under consideration, the assessee has sold shares of two companies being Hindustan Construction and GMR Infra Structure. The remaining shares relate to purchases made in the previous years. Thus we do not find any reason to hold that the short term capital gain or long term capital gain as declared by the assessee should not be assessed under these heads of income. - Decided against revenue

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• 2016 (7) TMI 138
  Rectification of mistake - Chargebility of Bank interest on Fixed Deposit - Held that:- Admittedly, where the Bank interest on Fixed Deposit which are pledged for Performance Guarantee is chargeable under the head ‘business income’ is supported by the decision of High Court in the case of CIT vs. Jaypee DSC Ventures Ltd. (2011 (3) TMI 309 - Delhi High Court). There are other contrary decisions also available and therefore, the issue becomes debatable with respect to the taxation of such interest income. When the issue is debatable the provisions of Section 154 cannot be invoked. The provisions of Section 154 can be invoked when there is apparent mistake which is glaring and patent. In the present case, we do not find any such apparent mistake and, therefore, the Ld. CIT(A) has erred in upholding the provisions of section 154 invoked by the AO - Decided in favour of assessee

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• 2016 (7) TMI 137
  Reopening of assessment - reasons to believe - receipt of accommodation entries - Assessee's return was accepted without scrutiny - 148 notice issued - Held that:- If AO had reasons to believe that income chargeable to tax had escaped assessment, it would be open for him to re-open assessment by recording proper reasons and issuing notice. Since the original assessment was without scrutiny, the question of change of opinion would not arise. At the stage of issue of notice, what is required is “reason to believe” and not the established fact of escapement of income. Relied on Rajesh Jhaveri Stock Brokers P. Ltd. (2007 (5) TMI 197 - SUPREME Court) In the instant case, in reasons recorded AO pointed out that from the information received from the investigation wing, one Hawala entry operator stated on oath that he had provided accommodation entries to many companies including assessee company. In our opinion, such reasons cannot be stated to be irrelevant or mechanically recorded. This is not a case for quashing notice for re-opening. Merely because the order disposing of objections raised by assessee does not satisfy the assessee, would not be a ground to invalidate notice for re-opening - Decided against assessee.

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• 2016 (7) TMI 136
  Registration application u/s 12AA denied for 2 reasons, (I) delay in filing the registration application and (II) activities of the assessee-trust are in the nature of commerce and trade Held that:- (I) Rejecting the registration application on the ground that it is filed late is not correct because, L’d CIT has power to grant registration prospectively and exemption Sections 11 & 12 will be available from the first day of assessment year immediately following the financial year in which the application is made. (II) Registration can be rejected only when (a) activities of the trust are not genuine, and (b) that the activities of the trust or the institution are not being carried out in accordance with the objects of the trust or the institution. Whether the activities of the assessee-trust are in the nature of commerce and trade is not to be analysed at the time of granting the registration.

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• 2016 (7) TMI 135
  Validity of reopening proceedings u/s 147 - Held that:- It is the duty of AO to show prima-facie, and establish in the reason recorded, that income chargeable to tax has escaped assessment by the reason of failure on the part of assessee to disclose fully and truly all material fact necessary for assessment. In the instant case there is no allegation or stipulation showing that income chargeable to tax has escaped assessment due to failure on the part of assessee to disclose fully and truly all material fact necessary for assessment. Relied on Delhi High Court in the case of CIT v. Vishishth Chay Vyapark Ltd. (ITA No.1108-1109/2010)wherein inter-alia it was held that "Merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond 4 year period. The escapement also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to Sec. 147. If this condition is not satisfied, the bar would operate and no action under Section 147 could be taken.” In view of above, we are inclined to hold that AO did not assume valid jurisdiction for initiation of proceedings u/s 147 beyond 4 years. Hence, we quash the same - Decided in favour of assessee.

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• 2016 (7) TMI 134
  Addition on account of undisclosed income - introduction of unaccounted money in the guise of loan or gift or capital gain - disclosure made by the assessee’s husband - Held that:- We find that the entire addition of 1 crore made by the Learned AO was merely based on the disclosure made by the assessee’s husband while making total disclosure of 7.5 crores for the total group as a whole and the assessee’s name has been included in the figure of 1 crore only in order to make the total disclosure to 7.5 crores. We find that no incriminating materials whatsoever was found during the course of search representing undisclosed income or undisclosed assets belonging to the assessee justifying the disclosure made in the sum of 1 crore. Under these circumstances, it is right on the part of the assessee to have retracted from the earlier disclosure while filing her return of income for the Asst Year 2010-11. Thus we hold that the Learned CIT-A had rightly deleted the addition made in the sum of 1 crore. Cash deposit in the bank account - Held that:- We find that the assessee had claimed that no such cash deposits to that extent was made in her bank accounts. We also find that this claim of the assessee was never verified by the Learned AO for want of time which is not disputed by the revenue before us. We find that the Learned AR had fairly agreed for setting aside of this issue to the file of the Learned AO to enable him to make a detailed verification of this factual aspect for which the Learned DR before us agreed for the same. We direct accordingly.

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• 2016 (7) TMI 133
  (I) While computing annual value of property which has been let out - disallowance made on account of brokerage charges, legal expenses, maintenance charges and insurance expenses being not as per section 24. (II) Expenses, which were not incurred wholly and exclusively for the purposes of earning the income from other sources, cannot be allowed deduction u/s 57 Held that:- The claim of the assessee in respect of brokerage charges and legal expenses, of the property are not as per the provisions of section 24 of the Act which deals with allowable deductions while computing the income of the house property. We therefore, do not find any merit in the case of the assessee and the arguments as advanced by the ld.AR and dismiss this ground of assessee by upholding the order of ld. CIT(A) on this issue. - Decided against assessee Allowability of expenditure u/s 57 - nature of income - assessee had claimed the expenses against the receipt of interest of FDRs, commission, speculative profit and loss from shares - AO was of the opinion that only receipt in the nature of business arising out of speculation in shares and the remaining receipts were in the nature of income of other sources and accordingly held that the expenses were not allowable u/s 57 - Held that:- the activity of the assessee of investing money in the FDRs in the banks in no way can be treated as receipt from the business and we agree with the view taken by the lower authorities that the same has to be taxed under the head income from other sources and was rightly assessed so. So far as admissibility of various expenses aggregating to 21,06,469/- is concerned, we are of the view that having regard to the nature of expenses, these were not incurred wholly and exclusively for the purposes of earning the income from other sources in order to be qualified for deduction u/s 57 of the Act which deals with the deduction of expenditure from the income and other sources. After considering facts and circumstances, we are of the opinion that the order passed by the ld. CIT(A) is correct and accordingly, we uphold he order of the ld. CIT(A) by dismissing the appeal of the assessee on this issue.- Decided against assessee

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• Customs

• 2016 (7) TMI 148
  Smuggling of goods from Hong Kong via Bangkok in connivance with certain staff deployed at the IGI Airport. - Commissioner (Appeal) has ordered revaluation of goods by allowing 40% abatement instead of 25% allowed by the Adjudicating Authority. Further he reduced the redemption fine from 4 lakhs to 1.50 lakhs and penalty from 2.50 lakhs to 1.50 lakhs, imposed under Sections 125 & 112(a) of the Act, ibid upon Shri Surinder Singh Arora. - Revenue filed this revision application. Held that:- The modus operandi attempted by the pax to clear the impugned seized goods clearly reveal the intention of the Notices. The abatement of 25% on the market value of the goods already given is not on the lower side as tariff rate of duty on memory card is 15.033% and the pax cannot be allowed to make profit out of his act of attempted smuggling." The Commissioner (Appeals) on the other hand has allowed abatment of 40% on the ground that no market enquiry was conducted in the instant case. However as is seen from proceeding para market enquiry was conducted in a similar case and the same has not been taken into consideration in the appellate order. Government therefore finds that the abatment of 40% on market value allowed by Commissioner(Appeals) is on the higher side and the Order-in-Original allowing abatment of 25% is upheld. Further, Government finds that Appellate Commissioner's decision to reduce the quantum of redemption fine and penalty as a result of re-determination of value for duty purpose is thus also incorrect. Government therefore, restores quantum of redemption fine under Section 125 and penalties under Section 112 as imposed under the Order-in-Original. Decided partly in favor of revenue.

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• 2016 (7) TMI 147
  Import of electronic goods in a baggage - bonafide baggage or not - whether re-import of goods earlier taken away - crossing through green channel - He was intercepted by the Customs Officers while walking through the Green Channel along with his baggage and diverted to Red Channel Counter. - Held that:- Government observes that there is no dispute about the fact that goods were undeclared as are not bonafide baggage and that the passenger opted for the green channel.The main contention of the passenger is that some of the goods (watch, chowki and lahanga) were carried by the passenger at the time of departure and were brought back to India and there is no justification for charging duty on goods exported from India. It is therefore, pleaded that while these items may not be charged to duty, the television may be allowed under duty free allowance and on rest of the goods duty be charged. In the instant case, the passenger produced local purchase invoices which were not in his name thus he failed to prove the identity of the impugned goods as per Section 20 of the Act, ibid and it also proved that the goods carried by the passenger did not constitute his bonafide baggage under the provisions of Section 79 of the Customs Act, 1962, as the goods did not belong to him and he carried the same on others' behalf. The passenger has rightly been denied the free baggage allowance by both the lower authorities. - Decided against the applicant.

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• 2016 (7) TMI 146
  Import of gold bracelets concealed - crossing through green channel without declaring the goods - when the baggage was screened and the officers found some suspicious image indicating the presence of gold. - applicant passenger has mainly contended that he reported at the Red channel to prove his bonafideness that he had got dutiable goods and that true declaration was made before the Customs officers - Held that:- it is a fact on record that the applicant had imported the said gold bracelets by way of concealment in the chocolate box, which was kept inside his hand bag, with motive to smuggle the same into India with culpable mind to evade customs duty by not declaration the same as required under Section 77 of the Customs Act, 1962. Also, that the seized Customs declaration card of the passenger did not bear any description of impugned goods and its value thereon. The plea of the applicant that he reported at the Red Channel and declared the impugned goods is not tenable and is a after thought to escape from the penal action at the hands of Customs authorities for his acts of omission and commission committed by him. Government further finds that the plea of the applicant for extending benefit of TR to the applicant cannot be acceded to in view of the fact that he has not lived abroad for the required period and for the aforesaid offense committed by the applicant. As per Section 79(2) read with the Baggage Rules the benefit can only be extended to bonafide baggage and truly declared to Customs. - Decided against the applicant.

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• 2016 (7) TMI 145
  Import of electronic goods & cigarettes in a baggage - attempt to walk through green channel without declaring the goods - habitual offender - confiscation and redemption fine - Held that:- Government opines that any oral submission made before the adjudicating authority will be a material piece of evidence. In View of the specific admission made by the applicant before the adjudicating authority, Government is inclined to hold that the applicant attempted to walk through green channel without declaring the impugned goods that too in commercial quantity. The impugned electronic goods had been rightly confiscated by the adjudicating authority under Section Ill(d), (l), (m) of the Customs Act, 1962 and allowing them on payment of redemption fine which also renders the applicant liable for imposition of penalty under Section 112(a) of the Act, ibid. He is also a habitual offender. Government therefore, finds no merit in the plea of the applicant to set aside the redemption fine and personal penalty. - Decided against the applicant.

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• 2016 (7) TMI 144
  Smuggling - Import of gold / gold jewellery - passing through green channel - benefit of free allowance as per baggage rules denied - applicant had not declared the impugned gold - redemption fine and penalty - the main contention of the applicant for revision is that the respondent failed to see the true declaration made by the applicant on reporting at red channel before the concerned Customs officers at airport and nothing was concealed nor misdeclared by the applicant. Applicant had no past record of offense and she brought the goods not for trading but as gifts for relatives and friends. Held that:- Applicant failed to prove its contention - in view of the facts and circumstances of the case penalty under Section 112(a) of the Act has been rightly imposed on the applicant for the offense committed by the applicant. The quantum of penalty is reasonable and commensurate to the nature of the offense. Government also finds no merit in the plea of the respondent to extend the benefit of free allowance to the passenger. As per Section 79 (2) read with Baggage Rules, 1998 the benefit can be extended to the passenger who brought the bonafide goods and truly declared to the Customs. In the instant case both the conditions were not fulfilled by the passenger. - Decided against the applicant.

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• 2016 (7) TMI 143
  Valuation - Commissioner of Customs (Appeals) accepted the discounted price of import which was in the range of 87% to 97.35% - adoption of transaction value of contemporaneous imports - Held that:- The Department’s stand is that burden of proof to prove that the transaction value is as per contemporaneous imports is on the importer but it is not so. Actually here the onus is on the Department- Revenue to prove that the value declared by the Respondents is not correct transaction value. This burden of proof has not been discharged by the Revenue and as the facts stand the transaction value declared by the Respondents has to be accepted by the Customs. Considering the fact of assessment of identical goods as done by Kolkata Customs, which is in line with the respondent’s declaration filed with the Bangalore Customs (Air Cargo Complex), and which has been sustained by the Commissioner (Appeals) in his impugned order dated 22.6.2010 and considering the above discussions and the case laws referred above, we reject the appeal filed by the Revenue and uphold the impugned order passed by the Commissioner (Appeals). - Decided against the revenue.

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• Service Tax

• 2016 (7) TMI 158
  Waiver of pre-deposit - demand of service tax - undue hardship - Tribunal concluded that the assessee has failed to establish prima facie case and dismissed the said application on the ground that the assessee failed to prove undue hardship and ordered substantial amount of pre-deposit - Section 35-F of the Central Excise Act, 1944 - the main grievance of the assessee is that the assessee is running in loss for the last many years prior to the demand and on the date of demand for payment of duty or service tax. To substantiate the said contention, the assessee produced profit 11.35 crores besides Sundry Debtors to a tune of 08.58 crores. The assessee can realise the amount from the Sundry Debtors and loans and advances, and make pre-deposit as required under Section 35-F of the Central Excise Act. Therefore, the reasoning recorded by the Tribunal to decline waiver of predeposit is in accordance with law for the reason that the assessee himself disclosed the claim for depreciation to a tune of 6.80 crores, Sundry Debtors to the tune of 8.58 crores and loans and advances of 11.35 crores. Even otherwise, the assessee is a partnership firm, the partners are liable to pay statutory dues to the Government. Therefore, the order of the Tribunal does not indicate that the assessee can sell away the assets and make predeposit. On an overall consideration of the material on record, the assessee possessed sufficient means to comply with the requirement of Section 35-F of the Central Excise Act and that the assessee would not be put to financial hardship for compliance of the same. - No relief - Writ Petition shall stand dismissed - Decided against the petitioner.

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• 2016 (7) TMI 157
  Levy of service tax on import of services under reverse charge mechanism - for the period August 2002 to December, 2004 - Held that:- This issue was settled by Bombay High Court judgement in the case of Indian National Ship-Owners Association vs. UOI [2008 (12) TMI 41 - BOMBAY HIGH COURT]. - In view of the above Service Tax on Reverse Charge Mechanism for the services received from abroad cannot be charged for the period prior to 18.04.2006. - Decided in favor of assessee.

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• 2016 (7) TMI 156
  Cenvat Credit - original duty payment document / invoices were lost / destroyed in the fire - department contended that respondent were not having original input invoices to be produced for verification and the Cenvat credit was availed in respect of non existing invoices - Held that:- even though invoices have been destroyed in fire but if invoices have been recorded in the ledger and books of accounts of the respondent the Cenvat credit can not be denied. Respondent could not have recorded the invoice in the ledger unless physical invoices were available. It is not only the invoice or ledger entry but the respondent might have paid invoice value to the service provider which can also be verified from the books of account. Since this verification have not been conducted by the lower authority matter needs to be remanded to the original authority. Extended period of limitation - Held that:- Even intimation of fire incidence is of no help to the respondent as from the intimation itself it cannot be said whether the invoices were existing or not therefore if it is proved that invoices were received by the respondent, longer period of demand is correctly invokable. As per my above discussion, I set aside the impugned order and remand the matter to the original adjudicating authority to pass a denovo adjudication order after verification of books of accounts, ledger and payment particulars towards such invoices. - Decided partly in favor of revenue.

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• 2016 (7) TMI 155
  Refund of unutilized cenvat credit - Commissioner (Appeals) denied refund disallowing the credit on some input services, observing that the input services do not have nexus with output services. - the period involved is prior to 01-04-2011. - Held that:- As rightly submitted by the consultant appearing for the appellant, the definition of input services during the relevant period had a wide ambit as it included the words activities relating to business . The Tribunal as well as the Courts in numerous judgments have laid that almost all services would be eligible for credit /refund, if such services were needed for the business of the service provider. Appellants are eligible for refund of service tax paid on the impugned services - further interest on delayed refund shall be granted to the appellant. - Decided in favor of assessee.

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• 2016 (7) TMI 154
  Refund of accumulated input service tax Cenvat credit. - Department denied Cenvat credit mainly stating that the activity of extraction, crushing, grinding, sorting and washing of iron ore undertaken by the assessee does not amount to manufacture under Section 2(f) of the Central Excise Act and therefore, no duty is payable under Section 3 of the Central Excise Act and the goods, therefore, cannot be termed as excisable. Held that:- In this regard, there are number of decisions of the higher Judicial Fora, wherein it has been made clear that wherever exempted products are exported outside India, provisions of Rule 6(6) (v) of the Cenvat Credit Rules, 2004, will be applicable which states that provisions of Rule 6 (1) to (4) will not be applicable for the excisable goods removed without payment of duty after they are cleared for export under bond in terms of the provisions of Rule 2 of the Central Excise Rules. Eligibility of credit on input services upto the place of removal - Held that:- here exports are on FOB basis, place of removal is port and not factory gate. Therefore, in the present case, M/s MSPL Ltd. are entitled to the Cenvat credit for all the input services for bringing the goods upto the port of shipment. Revenue's appeal dismissed - Assessee's appeals accepted - Decided in favor of assessee.

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• Central Excise

• 2016 (7) TMI 153
  Cenvat Credit - availing credit without receipt of goods - It was also alleged in the show cause notice that the appellant had diverted the said inputs with the help of transporters and utilized the cenvat credit - Held that:- Admittedly non relied upon documents have supplied after final hearing of the case. In the circumstances, the impugned order has been passed in gross violation of principles of natural justice. - Further, the adjudicating authority has not given an opportunity of cross examination of witness. Order set aside - matter remanded back to the adjudicating authority - The adjudicating authority shall be at liberty if so desire to re-adjudicate the matter after following the procedure laid down under section 9D of the Act as discussed above, and following the principles of natural justice. - Decided in favor of assessee.

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• 2016 (7) TMI 152
  Classification of FOIL - PVC foils versus PVC films - heading 3920.11 and 3920.12 read with chapter notes - rate of duty / benefit of exemption - respondent / assessee argued that the films is generic and foils is species thereof, he argued that all foils would be covered in the description of films - Revenue asserted that the impugned product which was classified and sold by the assessee as foils is totally different from films thereby the exemption under Sr. No. 35 of Table of Notification No. 53/88 and under Sr. No. 30 of the table of the Notification No. 14/92 is not available. Held that:- The entire argument of the revenue is based on the fact that for some period the product has been described as Foil in the invoices. On the basis of this fact, it was argued that in commercial parlance the product is known as foil. It is not a correct conclusion reached on any reasonable basis. It is noticed that the same invoice also describes the product as PVC Films. If revenue wanted to distinguish Film from Foil they have to first describe the attributes of both Film and Foils. It is undisputed that the product in question answers to the definition of Films given in the Chapter Notes. In absence of any definition of Foil, it is not reasonable to assert that the product, which does answers to the description of Film, is a Foil. Revenue has not given any definition of the term Foil. The invoices describe the product both as Foil and Film at different places during certain period and as Film only for the rest of the period. The sole ground of the revenue that invoices for a part of the period described the product as both Foil and Film, is not sufficient to discharge the burden. - Decided against the revenue.

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• 2016 (7) TMI 151
  Clandestine removal of goods - manufacture of Cotton yarn falling under Chapter 52 - for the period from 01.01.1999 to 17.09.1999 - whether the appellant herein had indulged in the manufacture of dutiable cotton yarn in cones without accounting the same in the statutory records and clearing the said cotton yarn in cones clandestinely without payment of duty and without recording the said transactions in the statutory records. Held that:- This is not just a case where there is a demand arisen on account of difference between the private records and the RG.1 registers but as per the record that there has also been corroboration with the shortages noticed in the raw material account. In the instant case, there have been confessional statements although there has been a retraction of the said statements. It is to be noted that retractions, as rightly observed by the lower authorities were merely an after-thought and if the case of the department is just based on the retracted statements, the appellant could possibly have a reasonable case to contest but in the instant case, there have been confessional statements, private registers and those private registers also substantially matched with the shortages. All these factors cumulatively would show that the conclusion arrived at by the authorities cannot be faulted with. While it is true that the burden to prove clandestine removal is on the department, it cannot be expected of the department to prove the same with mathematical accuracy and precision as clandestine removal is a suruptious activity and in such type of cases, direct evidence would very rarely be forthcoming which would prove a case beyond all reasonable doubts. - Demand confirmed - Decided against the assessee.

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• 2016 (7) TMI 150
  Cenvat Credit of service tax paid on GTA services - outward transportation of goods - Held that:- the place of removal is to be considered as the buyer’s premises and, hence, this gets covered within the definition of input service under Rule 2 (l), since the outward transportation service is used by the manufacturer for clearance of the products up to the place of removal. Consequently the Cenvat credit will be allowable as input service. - Decision in the case of CCE, Kolkata IV vs. Vesuvious India Ltd. [2013 (12) TMI 1025 - CALCUTTA HIGH COURT] distinguished - Decided in favor of assessee.

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• 2016 (7) TMI 149
  Restoration of appeal before the Tribunal - CESTAT dismissed the appeal for non prosecution - due to inadvertance the counsel for the assessee could not remain present before the Customs, Excise & Service Tax Appellate Tribunal - SC restored the appeal before the tribunal subject to the condition that entire amount of duty as demanded shall be pre-deposited.

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• CST, VAT & Sales Tax

• 2016 (7) TMI 142
  Claim of benefit of exemption on supply of Ready-mix concrete to the developers of Special Economic Zone (SEZ) - authorized operations - Migration from sales tax regime to VAT regime - TNVAT Act, 2006 - Held that:- Though the above notification came into force from 29.01.2016, by reading G.O.Ms.No.193, dated 30.12.2006 and Circular No.25 of 2014, dated 30.05.2014, it is clear that, in respect of these types of transactions, there is exemption provided by the Government. - Decided in favor of petitioner.

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• 2016 (7) TMI 141
  Waiver of pre-deposit - Denial of Input tax credit - petitioner submitted that the disallowance of the input tax credit was solely on account of what the authority believed was nonconciliation of input tax credit. However, the authorities never brought such materials to the notice of the petitioner enabling the petitioner to point out the reasons for the discrepancies if at all. - The Tribunal by order dated 28.4.2016 required the petitioner to deposit 20% of the tax demand latest before 10.6.2016 but relieved the petitioner from the responsibility of providing bank guarantee for the remaining 80 per cent. Under these circumstances, the petitioner has approached the High Court. Held that:- Before the Tribunal also, the report was not placed on record, obviously it was not made available to the petitioner. If that be so, a serious question would arise how such materials could have been utilised to make such substantial additions. - The Tribunal was also of the opinion that the transactions of the petitioner appeared to be genuine. Full wavier granted to the petitioner - entire proceedings sent back before first appellate authority to be decided on merits - Decided in favor of petitioner.

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• 2016 (7) TMI 140
  Input tax credit - invisible loss during manufacturing - Held that:- the assessing authorities are not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the input-tax credit availed of to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input-tax credit to the extent of either four percent or five percent or on ad hoc percentage stands set aside. However, liberty is granted to the concerned assessing officer to issue appropriate show-cause notices to the petitioners clearly setting out under what circumstances they propose to revise or call upon the petitioner to reverse refund sanctioned and after inviting objections proceed in accordance with law. - Decision in the case of Interfit Techno Products Ltd. [2015 (4) TMI 935 - MADRAS HIGH COURT] followed. - Matter remanded back - Decided in favor of petitioner.

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• 2016 (7) TMI 139
  Rate of tax on bulk drugs - Classification - Tribunal rejected the rectification application - Earlier Tribunal has held that there is no price fixation of bulk drugs manufactured by the appellant and therefore, the appellant is liable to pay tax @ 12.50% as mentioned in the Residuary Entry. - Held that:- It transpires from the impugned orders that before the Tribunal the appellant had put into service the submission regarding applicability of the provision of Section 4 of the Drugs (Price Control) Order to its case. However, the Tribunal dismissed the Rectification Application holding that it was an issue of law and that the Tribunal cannot enter into disputed questions of law in such Application. The submission regarding applicability of Section 4 of the Order goes into the root of the matter and the Tribunal was required to deal with the same. However, the Tribunal committed serious error by merely citing it as a disputed question of law. Hence, the matter requires reconsideration by the Tribunal. - Matter remanded back to the Tribunal for consideration afresh - Decided in favor of assessee.

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• 2016 (7) TMI 132
  Stay on the refund granted to the petition on the ground that revenue has filed an appeal before the Supreme Court - Held that:- the Commercial Tax Officer, should not have passed the order staying the refunds of the petitioner merely on the ground that the department is in the process of filing appeal before the Supreme Court. The High Court had dismissed the department's appeal on 16.04.2015. The department had to thereafter take recourse in law in order to avoid refunding the amounts pursuant to the orders of the Tribunal and the High Court. The Commercial Tax Officer, at any rate cannot, unilaterally decide that since the department is in the process of filing appeal before the Supreme Court, the refund should not be released. Such order is, therefore, quashed. However, now that the department has filed appeal before the Supreme Court in which the Supreme Court has issued notice on application for delay condonation, on the application for leave to appeal and interim relief, there would be no further question of granting refund at this stage still such proceedings are disposed of by the Supreme Court or some interim order is passed directing the department to release fully or partially such refund amounts.

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