TMI Tax Updates - e-Newsletter
July 9, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Validity of order passed by the JCIT - HC granted permission to the petitioner to withdraw the application filed u/s 144A of IT Act

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• Special audit u/s 142(2A) - whole process of granting approval is illegal & invalid - the assessment so made is barred by limitation - Tri

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Articles

1. Odisha VAT on builders and work contractors

   By: Tarun Agarwalla

2. “LAST SEEN TOGETHER” THEORY

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Direct Tax Collections upto June, 2016 indicate net revenue collections of ₹ 1.24 lakh crore; registering an increase of 24.79% over the corresponding period last year.

2. Indirect tax collection for the 1st quarter of 2016-17 indicates a growth rate of 30.8%

3. Apparel Training Centre Set up in Kaduna (Nigeria) for Promoting Skill Development in Apparel Manufacturing

4. India Is The Partner Country of INNOPROM 2016: Commerce Minister Smt Nirmala Sitharaman To Lead The Delegation Of 110 Indian Companies To Russia

Highlights / Catch Notes

Income Tax

• Income Assessment for Shipping Companies: Slot Charters as "Operating Ships" u/s 115VB of the Income Tax Act.

  Case-Laws - SC : Assessment of income of shipping companies - Qualifying ship - whether a slot charter can be treated as 'operating ships' within the meaning of Section 115VB of the Act? - slot charter is specifically included as an instance of a ship chartered by the company. - SC
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• Court Rules: No Double Tax Deduction for Single Payment u/s 194C, Protects Principals from Penalties.

  Case-Laws - HC : TDS u/s 194C - When the agent has complied with the provision, the principal cannot be visited with penal consequences. For one payment there could not have been two deductions - HC
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• High Court Allows Withdrawal of Application Filed u/s 144A Concerning Joint Commissioner's Order.

  Case-Laws - HC : Validity of order passed by the Joint Commissioner u/s 144A - petitioner prays that they may be permitted to withdraw the application filed u/s 144A - permitted - HC
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• No TDS Needed if Form 15G/15H Received: Section 194A & 197A Exempt Section 40(a)(ia) Disallowance.

  Case-Laws - AT : Once Form No,15G/Form 15H were received by the persons responsible for deducting tax, there is no liability to deduct tax at source in view of section 194A r.w.s. 197 A. - Accordingly, the mischief provided under section 40(a)(ia) is not attracted. - AT
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• Settlement Payment for Not Using "Longman" Deemed Capital Receipt, Not Taxable u/s 28(va)(b) as Business Income.

  Case-Laws - AT : Compensatory sum received in terms of settlement agreement for not using the word ‘Longman’ in the name or trade mark of the assessee - business income or a capital receipt not liable to tax - The consideration is not falling u/s 28(va)(b) - not taxable - AT
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• Court Confirms: One Lawbreaker Avoiding Detection Doesn't Justify Others Doing the Same; Evidence from Seized Documents Validated.

  Case-Laws - AT : It cannot be the case that if one person could not be caught while infringing the law then, other one has also right to infringe or to break the law. - Addition on the basis of noting found in the seized paper confirmed - AT
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• Capital gains can't offset carried forward losses; only business losses are eligible u/s 72 of the Income Tax Act.

  Case-Laws - AT : Capital gains on sale of capital assets is not to be set off against the brought forward loss of earlier years. Only the business loss can be carried forward u/s 72 of the Act and it can also be set off only against the business income of the assessee - AT
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• Court Rules on Income Accrual: Transportation Receipts Not Fully Assessee's Income, Received on Behalf of Truck Owners.

  Case-Laws - AT : Accrual of income - Addition on account of undisclosed transportation receipts - as the amount were received by the assessee on behalf of the truck owners and therefore the entire amount cannot be treat as income of the assessee. - AT
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• Appeal outcomes alone don't prove income concealment; no penalty u/s 271(1)(c) applicable.

  Case-Laws - AT : Mrely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income - No penalty u/s.271(1)(c) - AT
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• Cash Labor Charges Disallowed for Lack of Evidence; Assessee Fails to Prove Transaction Authenticity.

  Case-Laws - AT : Disallowance of labour charges etc. paid in cash - non-availability of documentary evidences on the part of the assessee - the primary onus to establish the bonafides of the transactions always lies with the assessee, which has not been discharged in the instant case - AT
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• Payments to Subsidiary Not Pass-Through Costs; AO Right to Include in Operating Cost Calculation.

  Case-Laws - AT : TPA - the payments to the subsidiary and other independent units by the assessee cannot be treated as pass through cost as it is not the payment from A.E to subsidiary of the assessee. - AO is justified in considering the pass through cost also for arriving at the operative cost/operating cost - AT
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• Special Audit Order u/s 142(2A) Invalid: CIT Failed to Provide Basis, Assessment Barred by Limitation.

  Case-Laws - AT : Validity of order u/s 142(2A) - special audit - despite the appellant seeking the basis on which directions for special audit is proposed to be issued, the learned CIT dispensed with that precondition and granted approval which itself vitiates the whole process of granting approval - illegal, invalid and not in accordance with law and thus the assessment so made is barred by limitation - AT
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Customs

• Refund Approved for Excess Duty on Bunker Fuel Use in Coastal Trade; Unjust Enrichment Ruled Out.

  Case-Laws - AT : Refund of excess duty paid on actual consumption of bunkers on the vessel during coastal trade - Unjust enrichment - Refund allowed - AT
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• Refund of Special Additional Duty Allowed Even Without Endorsement If No Evidence of Credit Passed to Buyer.

  Case-Laws - AT : Refund of SAD - Even if there is no endorsement regarding non-admissibility of credit, refund cannot be denied if there is no allegation with supported evidence regarding actually passed on credit and the availment thereof by the buyer. - Refund allowed - AT
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• Customs Authorities Fail to Prove Undervaluation; Importer's Declared Transaction Value Accepted, Revenue Demand Rejected.

  Case-Laws - AT : Valuation - rejection of transaction value - Revenue is not able to prove any undervaluation or mis-declaration and thus able to convincingly reject the transaction value declared by the importer. - demand set aside - AT
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Corporate Law

• Company Winding Up Halted by Section 22 of SICA Until Pending Reference is Resolved.

  Case-Laws - SC : Winding up of a company - the provisions of Section 22 of the SICA would come into play and that the Company Court could not proceed further in the matter pending a final decision in the reference under the SICA. - SC
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Service Tax

• Court Denies Petitioner's Request to Bypass Mandatory Pre-Deposit Requirement for Tribunal Stay Application.

  Case-Laws - HC : Waiver of pre-deposit - the submission of the learned counsel for the petitioner is that the petitioner should be permitted to go before the Tribunal with a direction to the Tribunal to take up the stay application, thereby bypassing the pre-deposit condition, which has been made mandatory with effect from 6.8.2014. - submission cannot be acceded to - HC
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• Service Tax Credit Permissible on Input Services for Management, Maintenance, Repair, and Consulting Engineer Services.

  Case-Laws - AT : Cenvat Credit - credit of service tax paid on various input services for providing output services of management, Maintenance and Repair service and also Consulting Engineer’s Service allowed - AT
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Central Excise

• Show-cause notice invalidated for being issued over a year post-audit revealing cenvat credit irregularities.

  Case-Laws - AT : Show-cause notice is time-barred because the same was issued after more than one year from the date of the audit which was conducted in November 2007 and it came to the knowledge of the Department during that time regarding irregular availment of cenvat credit - AT
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• Cenvat Credit Allowed for Medical Staff Services Under Factories Act and Mines Act Compliance.

  Case-Laws - AT : Cenvat Credit - input services - the posting of Doctors and Nursing staff is at the behest of the appellant in order to comply with statutory obligation under the Factories Act, 1948 and Mines Act 1952, the same cannot be considered as the procurement from personal consumption of the workers. - Credit allowed - AT
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• Vehicle Seating Determines Ambulance Classification Under Heading 87.02 of CETA: Seats 14 Including Driver.

  Case-Laws - AT : Valuation - Classification - building body of ambulances on chassis - Primary test is that sitting capacity of the vehicle. Admittedly vehicle in question can carry more than 12 persons excluding the driver or 14 persons including the driver - classifiable under heading 87.02 of CETA - AT
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Case Laws:

• Income Tax

• 2016 (7) TMI 341
  Assessment of income of shipping companies - Qualifying ship - whether a slot charter can be treated as operating ships within the meaning of Section 115VB of the Act? - The question that has arisen for consideration pertains to slot charter i.e. should the slot charter operations of a Tonnage Tax Company be carried on only in qualifying ships to include the income from such operations to determine the tonnage income under TTS in terms of the provisions of Chapter XIIG of the Act? - Binding nature of CBDT circular upon revenue authorities. Held that:- This provision specifically provides that for the purpose of Chapter XIIG, a company would be regarded as operating a ship if it operates any ship whether owned or chartered by it and includes a case where even a part of the ship has been chartered by it in an arrangement such as slot charter, space charter or joint charter . It is clear from the above that slot charter is specifically included as an instance of a ship chartered by the company. Non Production of valid certificate - Whether it would be treated as a qualifying ship as defined under Section 115VD of the Act? - Held that:- Whenever the question of a tonnage of a ship crops up and the said tonnage is to be determined, it has to be in accordance with the valid certificate indicating its tonnage and it is a compulsory obligation of the assessee to produce such a certificate. However, this requirement of producing a certificate would not apply when entire ship is not chartered and the arrangement pertains only to purchase of slots, slot charter and an arrangement of sharing of break-bulk vessel. The contention of the senior counsel for the assessee is right that the legal fiction created by sub-section (4) of Section 115VG is to be given its proper and sensible meaning. This position becomes abundantly clear by reading Rule 11Q of the Rules which specifies the basis/formula of computing deemed tonnage in respect of arrangement of slot charter When the scheme of the aforesaid special provision for computation of income under TTS is exempted, we find the balance tilted in favour of the assessee as that was the precise purpose in introducing TTS in India. It may be stated in brief that in view of the stiff competition faced by the Indian shipping companies vis-a-vis foreign shipping lines, and in order to ensure an easily accessible, fixed rate, low tax regime for shipping companies, the Rakesh Mohan Committee in its report (of January, 2002) recommended the introduction of the TTS in India, which was similar to, and adopted some of the best global practices prevalent. The whole purpose of introduction of the Scheme was to make the Indian shipping industry more competitive in the global space by rationalising its tax cost. For the reason that it is impossible to cater to all shipping routes on owned ships, it is an accepted and widely prevalent practice globally and in India that shipping companies engage in slot charter operations. If such slot charter arrangements are not entered into, then Indian shipping companies will not be able to take up contract of affreightments and these contracts would have fallen to only foreign shipping lines thereby making Indian shipping industry uncompetitive. Such slot charter arrangements being with a shipping company but not in relation to or for a particular ship, it is impossible for the Indian shipping company to identify the cargo ship, which carried the goods. Accordingly, there is no requirement of the certificate under the Scheme in relation to the vessel on which slot charter operations are carried out. The Circular No. 05/2005 clarifies that the Scheme is a preferential regime of taxation . It also clarifies that charging provision is under Section 115VA read with Section 115VF and Section 115VG. Circulars of CBDT explaining the Scheme of the Act have been held to be binding on the Department repeatedly by this Court in a series of judgments. Decided in favor of assessee - Revenue appeal dismissed.

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• 2016 (7) TMI 340
  TDS u/s 194C - non deduction of tds in respect of freight charges paid - disallowance u/s 40(a)(ia) - responsibility to pay tax - Held that:- Answering the question who was responsible for paying any sum to any resident for carriage of goods? the answer obviously is that it was the seller who was responsible for paying and the seller admits to have done that. Therefore, the liability to deduct tax was that of the seller. In case seller is unable to show that he had made the deduction, Section 40(a)(ia) may be applied to his case but not to the case of the buyer/assessee. Even assuming that the supplier in transporting the goods to the assessee acted “as an agent of the assessee and the assessee has reimbursed the freight charges to the suppliers, who in turn have paid to the concerned transporters” as held by the learned Tribunal is conceptually correct, no other conclusion is possible. The agent being the supplier in this case has admittedly paid to the transporters and has also deducted tax at source. When the agent has complied with the provision, the principal cannot be visited with penal consequences. For one payment there could not have been two deductions. Moreover, when a person acts through another, in law, he acts himself. Thus the question, quoted above, is answered by holding that the Tribunal was wrong in holding that the appellant was liable to deduct tax at source in respect of the freight component. When the assessee was not liable to make any deduction under Section 194C, the rigours of Section 40(a)(ia) could not have been applied to him. - Decided in favour of assessee.

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• 2016 (7) TMI 339
  Validity of order passed by the Joint Commissioner u/s 144A - petitioner prays that they may be permitted to withdraw the application filed u/s 144A - Held that:- As no prejudice would be caused if the petitioner if permitted to approach the Assessing Officer and raise all the issues. In fact Section 144A is a provision which empowers the Joint Commissioner to give guidance to the Assessing Officer to enable him to complete the assessment. Thus, the ultimate object to be achieved is to complete the assessment. Therefore, if the petitioner is ready and willing to appear before the Assessing Officer and cooperate in the assessment proceedings, that would be in the interest of revenue and sufficient compliance of the statutory provisions. Considering the peculiar facts and circumstances of the case, the petitioner is permitted to withdraw the application filed before the first respondent dated 11.01.2016 under Section 144A of the Act and consequently, the impugned order dated 19.03.2016 is set aside. The observations made therein is vacated and the petitioner is directed to appear before the second respondent and raise all the issues before the second respondent, who shall consider the same independently, uninfluenced by any observations contained in the order passed by the first respondent dated 19.03.2016.

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• 2016 (7) TMI 338
  TDS u/s 194A - non-deduction of tax on interest paid by the assessee - Held that:- The amount cannot be allowed as deduction only in the event when tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid. Section 194A is further qualified by section 197A(1A) which is a non-obstante clause. Setion 197A(1A) provides that liability to deduct tax under section 194A ceases when a declaration in writing in duplicate in prescribed form and verified in the prescribed manner received by a person responsible for paying income to the payee. The remedy towards default for non-furnishing of the declaration to the Commissioner of Income Tax as prescribed has been addressed under section 272A(2)(f) of the Act by imposing suitable penalty thereon. However, once Form No,15G/Form 15H were received by the persons responsible for deducting tax, there is no liability to deduct tax at source in view of section 194A r.w.s. 197 A. Once, it is held that tax is not deductible at source under section 194A on receipt of prescribed form, the mischief provided under section 40(a)(ia) is not attracted. - Decided in favour of assessee

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• 2016 (7) TMI 337
  Compensatory sum received in terms of settlement agreement for not using the word ‘Longman’ in the name or trade mark of the assessee - business income or a capital receipt not liable to tax - Held that:- The agreement was towards settling various disputes on the use of name ‘ Longman’ and does not relate to any transfer of trade mark etc. While the assessee is precluded from using the name ‘Longman’, the corresponding Pearson Group is also precluded from using the name ‘Orient’. Thus, mutual obligations exists on both parties to the agreement. Section 28(va)(b) only deals with payment received for not sharing trade mark etc. this would presuppose that the assessee should own the trade mark and for a given consideration, has agreed no to share it with any other person. The word ‘sharing’ postulates there must be someone to use the trade mark. But in the present case, the sharing or otherwise is not possible when trade mark itself ceases to exist. We note that the settlement agreement has not been entered into in the ordinary course of business, therefore compensation received under a negative covenant for impairment of right to use the word ‘LONGMAN’ is in the nature of capital receipt. We find support for this proposition from the decision of coordinate bench in case of Govindbhai C. Patel vs. Dy. CIT Ahmedabad bench (2009 (10) TMI 637 - ITAT AHMEDABAD) wherein it was held that compensation received towards relinquishment of the assessee's right to sue it in the Court of law cannot be treated as revenue receipt taxable as business income under S. 28(va). - Decided in favour of assessee.

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• 2016 (7) TMI 336
  Assessment u/s 153A - Addition on the basis of noting found in the seized paper - Held that:- The document was found exhibiting transactions in respect of division of asset. The onus was upon the assessee to explain the position of this document. The assessee did not deny the document. His bald statement was that Rs. 75 lakhs was not received by him or the family members. Now this statement is to be tested in the light of other circumstantial evidences, which suggested the execution of this document, and fulfillment of the obligations for the purpose of this document, then, how the weight can be given to a simple denial of the assessee vis-à-vis the evidence suggesting that transactions performed in compliance of the documents. The next reason given by the ld.counsel for the assessee is that no inquiry was made in the case of Shri Ramesh S. Kasat. The assessment has been framed under section 153A r.w.s. 143(3) of the Act. It is pertinent to note that there is no negative equity in law. It cannot be the case that if one person could not be caught while infringing the law then, other one has also right to infringe or to break the law. Even if no inquiry was made in the case of Shri Ramesh S. Kasat how the assessee would discharge his onus to prove that in compliance of page no.129, he has not received the payments. Thus, taking into consideration of the facts, we do not see any reason to interfere in the concurrent finding of the ld.Revenue authorities. Addition confirmed by the ld.CIT(A) to the extent of Rs. 75 lakhs are upheld. - Decided against assessee Unexplained investment in shop - addition made on the strength of DVO’s report - Held that:- As during the course of search no incriminating material was found which can help the AO to make additions. Thus additions deleted - Decided in favour of assessee

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• 2016 (7) TMI 335
  Set off of brought forward business loss against deemed S.T.C.G. u/s. 50 - Held that:- As decided in case of Nandi Steel Ltd., V. ACIT [2011 (12) TMI 162 - ITAT BANGALORE] held that the capital gains on sale of capital assets is not to be set off against the brought forward loss of earlier years. Only the business loss can be carried forward u/s 72 of the Act and it can also be set off only against the business income of the assessee - Decided in favour of revenue

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• 2016 (7) TMI 334
  Accrual of income - Addition on account of undisclosed transportation receipts - hiring v/s ownership - Held that:- The balance sheet of the assessee shows that the assessee has no fixed assets in the form of trucks. Therefore, the contention of the assessee seems to be correct whereby he has submitted that he has been hiring the trucks from the truck operators/truck owners and providing them on rent to the company namely Ruchi Soya. The accounts of the assessee have duly been examined and it reveals that neither the maintenance nor the other charges for running of the trucks have been debited to the accounts of the assessee. In our view, the addition sustained by the ld CIT(A) are required to be deleted as the amount were received by the assessee on behalf of the truck owners and therefore the entire amount cannot be treat as income of the assessee. However, since the assessee is claiming commission on each builty to the extent of Rs. 500/- is confirmed. The Assessing Officer is directed to calculate the receipt of the assessee @ Rs. 500/- per builty for the trucks supplied to Ruchi Soya Industries. We hereby clarify that the assessee shall not be entitled to any deduction on account of brokerage, commission, telephone expenses, employees expenses or any other expenses whatsoever against the income so calculated by the ld Assessing Officer. The assessing officer is further directed to give the benefit of any payment made by the assessee (one during the proof of payment) to the truck owners who have supplied the trucks to M/s Ruchi Soya. - Decided in favour of assessee.

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• 2016 (7) TMI 332
  Rectification of mistake - Held that:- The first respondent has issued the impugned corrigendum in exercise of powers under Section 154 of the Act and it has to be seen whether notice is required to be issued to the petitioner in terms of sub-section (3) of Section 154 of the Act. The stand taken by the first respondent is that such notice is required to be issued only if the rectification has the effect of enhancing an assessment or reducing the refund. Further, in terms of Section 246(1)(c), and 246(2)(d), opportunity has been provided and ordered under Section 154 of the Act. In the light of the above, this Court is of the view that it would be in fitness of things and appropriate for the petitioner to pursue the matter before the Appellate Authority. Apart from the discussion in the preceding paragraphs, the issue as to whether the assessment orders are made on best of judgment basis or otherwise is a factual issue to be gone into by examining the assessment orders and the background facts and this has to be done by the petitioner before the appellate authority in the pending appeals. The effect of the rectification by way of the impugned corrigendum is equally an issue relatable and touching upon whether the assessment orders were passed on best judgment basis. Therefore, the petitioner should pursue their challenge to the impugned corrigendums before the Commissioner of Income Tax (Appeals)-II, before whom the appeals filed against the assessment orders are pending, since April 2013. In the light of the above, the Writ Petitions are dismissed and the petitioner is permitted to challenge the correctness of the impugned corrigendums by raising additional grounds before the Commissioner of Income Tax (Appeals) in the appeal petitions which were filed on 22.04.2013, against the assessment orders dated 28.03.2013, for the years 2010-11 and 2011-12 and the Commissioner of Income Tax (Appeals) is directed to consider the additional grounds raised along with the other grounds already raised in the appeals and after hearing the parties, dispose of the appeals as expeditiously as possible preferably, within a period of three months from the date of receipt of a copy of this order

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• 2016 (7) TMI 331
  Deduction u/s 80HHC and 80I allowed without adjusting loses of its other division - Held that:- Allahabad High Court in the case of Commissioner of Income-Tax and another vs. Modi Xerox Ltd. [2010 (4) TMI 858 - Allahabad High Court] wherein two principles of law emerge one for the purposes of computation of gross total income the losses of other units are to be taken into account but for the purposes of calculating the deduction of industrial undertaking, the loss sustained in another unit cannot be taken into account and only the profit shall be taken into account as if it was the only source of income of that unit. We respectfully agree with the view expressed by Allahabad High Court. This view is not in conflict with the decision of the Supreme Court in the case of Synco Industries Ltd. (2008 (3) TMI 13 - Supreme court ) wherein the Supreme Court observed that while computing quantum of deduction under section 80I(6), the Assessing Officer, no doubt, has to treat the profits derived from an industrial unit as the only source of income in order to arrive at a deductions under chapter VI. It was further observed that section 80I(6)deals with actual computation of deduction whereas section 80I deals with treatment to be given to such deductions in order to arrive at total income of the assessee and therefore, while interpreting section 80I(1) as also the gross total income, one has to read expression “gross total income” as defined under section 80B(5). It was therefore,concluded that the loss from oil division was required to be adjusted before determining gross total income and as gross total income was nil, the assessee was not entitled to claim deduction under sections 80I(6) which includes section 80I also. This judgment nowhere provides that while computing the deduction under section 80HH or 80I or any other similar provision, loss of another unit is first to be set off. It only provides and in fact, reinforces that such deduction has to be computed as if the unit was an isolated industry. However, thereafter while computing gross total income, even the loss has to be accounted for and only if the income is positive, can the assessee claim deduction for its profit making eligible industry. - Decided against revenue

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• 2016 (7) TMI 330
  Disallowance of pre-operative expenses - nature of payment of interest on loan taken for expansion of the Steel Project - Held that:- Considering the decision of this Court in the case of Gujarat State Fertilizer and Chemicals Ltd. (2008 (8) TMI 313 - GUJARAT HIGH COURT) the question, which is raised in the present appeal is required to be answered in favour of the assessee. We are not giving any elaborate reasons for the same as in the case of Gujarat State Fertilizer and Chemicals Ltd. (Supra) it is held by this Court that since there was no dispute about the fact that the capital borrowed was used for the purpose of the business, the interest on the borrowed capital was deductible under Section 36(1)(iii). - Decided in favour of the assessee

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• 2016 (7) TMI 329
  Reopening of assessment - proceedings initiated after the expiry of 4 years from the end of the relevant assessment year - non disclosure - reasons to believe - Held that:- t during the course of the hearing, on 27th March, 2006 for Assessment Year 200203 in regular assessment proceedings, the Assessing Officer sought for certain details. In response, the Respondent-Assessee gave details as sought, pointing out that an amount of Rs. 1.16 Crores shown as bad debts in the subject Assessment Year had been received from the State Bank of India in the Financial Year 2005-06 and had offered it to tax under Section 41(1) of the Act for the Assessment Year 2006-07. Thus, we find that there has been a full and true disclosure of all material facts during the regular assessment proceedings by the Respondent-Assessee. Consequently, the condition precedent for issuing a notice beyond a period of four years from the end of the relevant Assessment Year is not satisfied. The submission made on behalf of the Revenue that as the information was given on 30th March, 2006, it would amount to nondisclosure of information, is beyond our comprehension. The requirement of law is that the Respondent-Assesse should have made true and full disclosure of all material facts necessary for Assessment. This has been certainly done. In this case, letter dated 29th March, 2006 indicates that the details filed by the Respondent-Assessee consequent to the query and directions of the Assessing Officer. This also indicates that there has been an opinion formed during the regular assessment proceedings by the Assessing Officer. Thus, the notice dated 16th March, 2009 would also be a case of change of opinion, which is not permissible. - Decided against revenue

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• 2016 (7) TMI 328
  Reopening of assessment - reasons to believe - Petitioner is a Trust - Held that:- So far as first and second submissions of the Petitioner viz: change of opinion and no failure to disclose all facts are concerned, both are unsustainable. This is for the reason that no scrutiny Assessment was done of the Petitioner Trust for the subject Assessment Year. The return of income was only processed under Section 143(1) of the Act. Therefore, there was no formation of opinion on the part of the Assessing Officer for change of opinion to take place. Similarly, the condition precedent in case of notices issued beyond four years of the end of the relevant Assessment Year viz: the failure to disclose truly and fully facts, would have no application as no Assessment under Section 143(3) of the Act, has been done in this case. So far as the third submission of the Petitioner viz: a notice on identical grounds issued to the Society for the subject Assessment Year being withdrawn, it does not/ cannot enure for the benefit of the Petitioner Trust. Each Assessee is independent and the reasons recorded for reopening have to be independently examined in the context of the Assessee whose Assessment is sought to be reopened. The fourth submission of the Petitioner that income which is alleged to have escaped Assessment has already been disclosed in the return of the Society and tax paid on the same, therefore no income chargeable to tax, has escaped Assessment is not sustainable. This for the reason that it is the prima facie view of the Revenue that the deduction claimed under Section 80P of the Act by the Society as a Cooperative is not available to the Petitioner Trust. Thus the chargeability to tax has to be seen in the context of the Assessee whose income it is. Last submission of the Petitioner the principle of consistency applies is concerned, it is to be noted that the undisputed position is that no scrutiny Assessment was carried out in the case of the Petitioner Trust. The return was processed under Section 143(1) of the Act. In that view of the matter, there has been no occasion to consider the taxability of interest income and income from the house property on merits in the hands of the PetitionerTrust. Thus, the Rule of Consistency may not apply to the present facts. This Rule of Consistency presupposes a decision on identical facts and law in an earlier and/or Assessment Year to that under consideration. This contention would require examination. This is to be done in adjudication proceedings. Therefore, it is open to the Petitioner Trust to urge the same before the Assessing Officer in the reassessment proceedings. This is not an issue which would make the impugned notice one without jurisdiction. The view of the Assessing Officer at the time of issuing the impugned notice as found in the reasons recorded, is only a prima facie view. This view is subject to correction during the Assessment Proceedings after hearing the Petitioner Trust. Further, the Petitioner Trust is not remedy less. In case, the order of the Assessing Officer, is prejudicial to it, an appeal under the Act, is provided. Therefore, in the present facts, no interference is warranted. - Decided against assessee

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• 2016 (7) TMI 327
  Bogus expenditure claimed - Held that:- Even as per the petitioner-appellants, there was neither any proof of payment in terms of the voucher for the expenditure claimed as deduction nor such documents were produced at any point of time before the revisional authority. When the matter was heard before the learned Single Judge in writ proceedings, such documents were not produced nor are they produced in the present appeals. Under these circumstances, when proper legal evidence regarding proof of expenditure was not produced either before the Assessing Officer nor at subsequent stages of the revision petition or writ petitions before the learned Single Judge nor in the present appeals, we do not find that there would be any prejudice caused to the appellant on the alleged ground of breach of principles of natural justice nor any useful purpose would be served in remanding the matter as sought to be canvassed. The aforesaid in any case is coupled with the aspect that reasonable opportunity was given before the Assessing Officer but the petitioner-appellants did not avail of the same by producing the requisite voucher for the expenditure claimed. In view of the above, it cannot be said that the learned Single Judge committed an error in not interfering with the matter when no legal evidence was produced for expenditure claimed. - Decided against assessee

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• 2016 (7) TMI 326
  Stay of demand - Non applicability of the first proviso to Section 201(1) - Held that:- As Revenue submitted that the appellant has now furnished a certificate dated 11.06.2015 contemplated under the first proviso to Section 201(1) of the Act in our opinion, the impugned order of the learned Single Judge as well as the order passed by First Appellate Authority rejecting the appellant’s application filed for interim stay are liable to be set aside and the matter requires to be reconsidered by the Appellate Authority, namely the Commissioner of Income Tax (Appeals), in accordance with law. Ordered accordingly. The Appellate Authority shall inter alia consider as to whether the first proviso to Section 201(1) of the Act is applicable to the facts of the case or not. All contentions of both the parties are kept open. The appeals stand disposed of in the above terms.

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• 2016 (7) TMI 325
  TDS u/s 194C - Addition u/s 40(a)(ia) - expenses incurred on the purchase of software related to computers whereas assessee has claimed the same as computers maintenance expenses - Held that:- We find that AO has made the assessment u/s. 144 of the Act by disallowing the expense claimed by assessee under head “computer and software maintenance” on the ground that no documentary evidence in support of such expenses were furnished. However, Ld. CIT(A) has deleted the addition by holding that provision of TDS are not applicable to this transactions as the expense was incurred for the purchase of software. In remand report AO submitted that payment made to M/s Shilpi Software and M/s Financial Technologies (India) Ltd. were subject to TDS and same has not been complied with. However, the bills submitted on its perusal, we find that these expenses have been incurred towards the purchase of software and as such no service was involved. Therefore, in our considered view, that such transactions were out of purview of TDS provision. The assessee has also submitted the ledger copy of computer and software maintenance which is at page 276 of the assessee’s paper book where the payment details through banking channel has also been placed. Therefore, the genuineness of the expense cannot be doubted. Accordingly, in our considered view, we uphold the order of Ld. CIT(A) and this ground of Revenue’s appeal is dismissed. Capital expenditure incurred for purchase of software expense - CIT(A) has treated the same as revenue in nature and deleted the same - Held that:- We find that expense incurred on account of maintenance of computer and software or update them do not create any asset of enduring benefit but merely assist the assessee to carry out its activities in the manner desired by statutory regulator. As such, we find that no fixed asset is coming into existence out of the expense incurred for the purchase of software. Hence, in our considered view, the issue of capitalizing the same expense does not arise and we uphold the order of Ld. CIT(A). Addition on account of bogus sundry creditors - Held that:- From the facts of the case, we find that once the purchase/ sales claimed by assessee had accepted by AO then corresponding sundry creditors/ debtors claimed by assessee cannot be doubted. In the instant case, AO has not accepted the purchase/sales as claimed by assessee without bringing any relevant fact but the corresponding credit has been disallowed. Therefore, in view of the facts of the present case, the addition made by AO on account of bogus sundry creditor is not sustainable in law. CIT(A) is justified in deleting the additions made by the AO. Therefore, we uphold the order of Ld. CIT(A) as correct and in accordance with the law. It is ordered accordingly. Hence, appeal of the Revenue is dismissed.

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• 2016 (7) TMI 324
  Entitlment to depreciation on the written down value as per Section 32 for the entire period - asset put to use - Held that:- Admittedly the assessee has shown the production for an amount of Rs. 9900/- in the month of September 1996. (The records of central excise sales Range-1 on 28/09/1996, 29/09/1996 and 30/09/1996.) This register of excise was maintained by the assessee as mentioned by the Assessing Officer in the assessment order. Moreover, once it is submitted by the assessee that the block of assets have been put to use for a period of more than 180 days then the assessee is entitled to depreciation at the rate mentioned in Section 32 of the Act during the relevant assessment year. In our view, the failure of the Assessing Officer to ascertain the usage of plant and machinery in the month of September, 1996, cannot be a ground to disallow the depreciation for the period of more than 180 days. As per Section 32 of the Act, if the asset is put to use for a period of more than 180 days, then the assessee is entitled to depreciation on the written down value as prescribed by the Act. Since the assets were put to use for the period of more than180 days, therefore, the assessee is entitled to depreciation for full year. - Decided in favour of assessee Addition U/s 68 - investment in shares and unsecured loans received by the assessee company - Held that:- Once the identity of the creditor has been established and there is no doubt about the genuineness of the transaction, therefore, the source of the source cannot be enquired by the Assessing Officer prior to 2003 amendment under section 68. Accordingly, the addition made with respect to Smt. Premlata Madhok is hereby directed to be deleted. Once the shares have been allotted to Shri Satish Kumar Bhayana and the address has been given then the Assessing Officer is duty bound to conduct the necessary inquiry U/s 131 of the Act to establish or disprove the identity of the person. Since the assessee has discharged the initial onus of disclosing the identity and address of the person, therefore, in our view the ingredients of Section 68 are met and the addition is required to be deleted. Accordingly, we delete the addition in respect of Shri Satish Kumar Bhayana. The identity of the person has been roved by the assessee, address has been provided and the amounts invested by Smt. Bhagyawati and Mr. Rakesh Malhotra were Rs. 50,000/- and Rs. 40,000/-, in our view, this were small amount and there is no positive evidence brought on record by the AO suggesting that these persons are not having means to file share application. In fact, the report suggests that Shri Rakesh Malhotra is a teacher in school, therefore, means of Shri Rakesh Malhotra cannot be doubted. Therefore, in our view the addition is required to be deleted. Accordingly, we delete the addition in respect of Smt. Bhagyawati and Mr. Rakesh Malhotra. Neither the address have been given in respect of this share applicant nor applicant was found as mentioned in the report of the Inspector nor the confirmation has been given by this share allottee. In our view, the assessee has failed to discharge his initial onus to prove the identity of the person, genuineness of the transaction and creditworthiness, therefore, the addition of Rs. 50,000/- in respect of Shri K.K. Nangia is hereby confirmed. Once the identity of the creditor has been established and there is no doubt about the genuineness of the transaction, therefore, the source of source cannot be enquired by the Assessing Officer. Accordingly, the addition made with respect to Shri Ashok Solanki is hereby directed to be deleted.

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• 2016 (7) TMI 323
  Levy of penalty u/s.271(1)(c) - Held that:- The assessee had disclosed the material facts before the AO. When the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant thereto, the disallowance of such claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing inaccurate particulars thereof. It is settled law that penalty proceedings and assessment proceedings are two independent proceedings and the penalty order cannot be solely based on the reasons given in the original order of assessment. Further apart from the falsity of the explanation given by the assessee, the Department must have before it before levying the penalty, cogent material or evidence from which it could be inferred that assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars of income. It is well settled that the parameters of judging the justification for addition made in the assessment case of the asssessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of the Act on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated to reduce its tax liability. Further merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Considering the aforesaid facts, we are of the view that in the present case no case for levy of penalty u/s. 271(1)(c) of the Act has been made out. We thus direct the deletion of penalty u/s. 271(1)(c) of the Act - Decided in favour of assessee

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• 2016 (7) TMI 322
  Disallowance of labour charges etc. paid in cash - according to the Assessing Officer, the bonafides of such expenses could not be proved by the assessee - summons were issued under section 131 - Held that:- The impugned claim towards expenses is not substantiated by cogent evidence. When these factors are tested on the touchstone of preponderance of probabilities, the claim appears unfounded. It is true that once the summons under section 131 of the Act has been served on the parties concerned, adverse inference cannot be drawn against the assessee merely owing to non-compliance of the summons. However, in the instant case, the disallowance made is sustainable primarily on account of non-availability of documentary evidences on the part of the assessee and not for the reasons of non-appearance of the parties summoned. Therefore, case laws cited by the assessee are of no assistance to the assessee. Needless to say, the primary onus to establish the bonafides of the transactions always lies with the assessee, which has not been discharged in the instant case. In the totality of circumstances, we find no infirmity in the order of the CIT(A). - Decided against assessee.

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• 2016 (7) TMI 321
  Transfer price adjustment - payment of subsidiaries - Pass through cost consideration for arriving at operative profit or operating profit margin of the assessee - Held that:- As it is an admitted fact that the assessee itself included the pass through cost in its Profit and Loss Account. It is not the case of assessee that it is charged only mark up receivable from A.E in its P&L A/c. It is also admitted fact that assessee raised bills upon its A.E as payment from its A.E and received the payments from its A.Es. It is also brought on record that for the work got done by the assessee from its subsidiary and other independent units, the bills have been raised by these entities on the assessee and the assessee has made the payments to them on its own accounts and not on behalf of the A.Es. Thus, the payments to the subsidiary and other independent units by the assessee cannot be treated as pass through cost as it is not the payment from A.E to subsidiary of the assessee. Being so, the AO is justified in considering the pass through cost also for arriving at the operative cost/operating cost and the decision relied upon by the ld.A.R cited above have no application. - Decided against assessee. Suitable adjustments to account for differences in the risk profile of the assessee and its comparables - Held that:- We direct the TPO to allow risk adjustment at 1% as decided in the case of M/s.HELLOSOFT INDIA (P.) LTD. Vs. DCIT. [2014 (4) TMI 72 - ITAT HYDERABAD ] Carry forward of current year unabsorbed depreciation - Held that:- It is held by the Hon’ble Karnataka High Court in the case of CIT Vs. Himatsingka Seide [2006 (8) TMI 125 - KARNATAKA High Court] held that brought forward depreciation had to be adjusted against the profit of the EOU before computing exemption allowable u/s.10B of the Act

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• 2016 (7) TMI 320
  Validity of order u/s 142(2A) - special audit - whether assessment is barred by limitation which is based upon the audit report - Held that:- Despite the appellant seeking the basis on which directions for special audit is proposed to be issued, the learned CIT dispensed with that precondition and granted approval which itself vitiates the whole process of granting approval. It is thus apparent that neither the AO nor the learned CIT disclosed the basis of approval after the objection as raised by the appellant to the show cause notice u/s 142(2A) of the Act and hence the order dated 9.12.2011 is a vitiated order. In view of the above discussion and conclusion we hold that directions dated 9.12.2011 by the learned Addl. CIT, Range-18, New Delhi for special audit u/s 142(2A) of the Act were illegal, invalid and not in accordance with law and thus the assessment so made is barred by limitation and is thus quashed as such. - Decided in favour of assessee

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• 2016 (7) TMI 319
  Rectification of mistake - CIT(A) confirming the action of the AO in cancelling the registration of firm under provision of section 186(2) - application to Settlement Commission - Held that:- In the present case, there is no dispute that the ld.Settlement Commission has taken cognizance under section 245D in both these cases, and the applications of the assessees were proceed with. Clause 2(A) has been inserted with section 245D by Finance Act, 2007. This clause contemplates that where the application was made under section 245C before the first day of June, 2007, but an order under sub-section (1) of section 245D was not passed, i.e. the application was not proceed with, then, such application will be deemed to have been allowed to proceed with, but, the condition is that the additional taxes on the income-tax disclosed in such application ought to have been paid before 31st day of July, 2007 In the present case since no order has been passed by the Settlement Commission, therefore, it is to be construed that the applications of the assessee have abated on 31.3.2008, i.e. the time limit provided in sub-section-4(A). In our opinion, this is the erroneous construction of provision at the end of the ld.CIT(A). Sub-clause 4(A) is applicable on those applications, where the taxes were paid by an assessee before 31.7.2007. In all these applications, the order ought to be passed by 31.3.2008. A perusal of the provisions extracted (supra), it is clear that in case where taxes were not paid by 31.7.2007, then, the application will be deemed to have been abated on this date. In order to find out whether the assessees have paid taxes before 31st July, 2007 or not, we have directed the ld.counsel to demonstrate this fact. The ld.counsel for the assessee for the applicants before the Settlement Commissioner try to demonstrate the tax liability and the amounts paid by both these assessees. However, we find that both the orders are totally silent on this issue. If we arrive at a conclusion that the taxes were not paid by the assessee before 31.7.2007, then, the application before the Settlement Commissioner would abate on 31st July. But if it is established that tax liability was discharged in spite of that no specific order has been passed by the Settlement Commission, the application would be considered as abated on 31.3.2008. This situation would goad us to record a different finding on the limitation. If the applications are abated on 31st July, then, the assessment orders are time barred. But if the applications are abated on 31.3.2008, then, the assessment orders are within the time limit. Therefore, for limited purpose, we restore the dispute to the file of the ld.CIT(A). The ld.CIT(A) shall determine the tax liability on the basis of disclosure made by both the assessees in the settlement application. After determination of the tax liability, he would find out how much amounts have been paid by both the assessees before 31st July, 2007. After conclusively arriving on the figures of both these aspects, she would decide whether the assessment orders should be termed as time barred or not. - Decided in favour of assessee for statistical purpose.

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• 2016 (7) TMI 318
  Transfer pricing adjustment - adjudication of AMP expenditure - Held that:- In the year under consideration the FAA had not passed a speaking order.He has just confirmed the adjustment. In the next year the DRP has dealt with all the arguments raised by the assessee before the TPO and before the DRP itself. We find that except for the issue of non admission of additional evidences the assessee has advanced all most all the arguments while arguing the matter for the subsequent year. Therefore, we would like to adjudicate the AMP expenditure issue, while deciding the appeal for next AY. Adjustment under the head Corporate Guarantee Commission(CGC) - Held that:- Considering the entirety of facts and circumstances of the case and on the basis of the material available on record, we, therefore, proceed to uphold the rate of 0.50% for the purpose of determining the arm's length rate of the guarantee commission fee. In this view of the matter, we setaside the order of CIT(Appeals) and direct the Assessing Officer to determine the addition in view of our aforesaid direction Disallowance on claim of depreciation on printers data, cable router and scanner - Held that:- Identical issue was decided by the Tribunal while deciding the appeal in A.Y. 2008-09 it is hereby directed that Assessing Officer shall allow depreciation @ 60% Disallowance of claim of depreciation on Jodhpur property - Held that:- Tribunal had decided the above issue against the assessee while adjudicating the appeal for AY 2008-09 Disallowance made u/s. 14A - Held that:- AR stated that assessee had made strategic investments, that it had sufficient own funds, that FAA had not admitted the additional grounds. DR left the issue to the discretion of the Bench. After considering the available material we are of the opinion that in the interest of justice matter should be restored back to the file of FAA for fresh adjudication. He is directed to afford a reasonable opportunity of hearing to the assessee Adjustment in relation to the travel related segment - Held that:- We hold that the TPO had wrongly rejected the comparables. Considering the peculiar facts and circumstances of the case, we hold that the TP adjustment made by the TPO and confirmed by the DRP has to be deleted. First effective ground of appeal is decided in favour of the assessee. TP adjustment under the head AMP expenses - Held that:- The factors like payment under the head AMP expenditure to the third independent parties, promoting own business interest by way of AMP expenses take away the alleged ‘internationality’ of the transact - tion. In absence of any direct or direct evidence of incurring of AMP expenses by the assessee for the benefit of the AE or on behalf of the AE, it is has to be held that the transaction in dispute is not covered by the provisions of section 92B or 92B(1)of the Act and hence is not an IT. Once it goes out of the ambit of being an IT, FAR analysis of comparables or any other adjustment will and cannot come in picture. Folk wisdom of rural India the says that mother(Maa)is must for existence of her sister(Mausi). Similarly the existence of an IT is the pre-requisite of applying the provisions of chapter X of the Act. The assessee from the very beginning was arguing that it is not an IT, but, the TPO and the DRP did not deal with the core issue. In these circumstances, we are of the opinion that the matter should not be remitted back to the file of the TPO/ AO. Litigation has to be put to an end at some stage. Judicial time of every authority, including the TPO/DRP, is very precious and it should not be wasted for dealing with mere academic arguments. The recourse of remanding of matters/issue to the AO.s has to resorted rarely and selectively. In the case before us, no reasonable cause has been shown to justify the setting aside the issue. Thus where the existence of an international transaction involving AMP expense with an ascertainable price is- unable to be shown to exist, even if such price is nil, Chapter X provisions cannot be invoked to undertake a TP adjustment exercise. Thus merely because there is an incidental benefit to the foreign AE, it cannot be said that the AMP expenses incurred by the Indian entity was for promoting the brand of the foreign AE Adjustment in relation to insurance cost - Held that:- As decided in assessee's own case in AY 2005-06 it is a fact that the assessee has not charged from AE. Further, it is also equally true that AE charges counting fees also on the transactions of the assessee. If both are taken into account quantitatively, it is the claim of the assessee that the assessee will put to losses and the same is not accounted by the income fact of figures. These kind of accounting issues are outside the scope of TP principles. The discontinuance of earlier arrangement of not paying any counting fees to it's AE at Mauritius and also foregoing the corresponding service / incentive fees, does not erode the tax base if one keeps in mind the ratio of such receipts and payment made which is tilted in favour of the payment side. Moreover, the appellant has demonstrated by an Internal CUP (HSBC / Travelex) on this aspect to establish its case. The adjustment is therefore, deleted.

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• 2016 (7) TMI 317
  Deduction claimed u/s.10B denied - Held that:- The tone and tenor of the judgment of Tata Elxsi Ltd [2015 (10) TMI 634 - KARNATAKA HIGH COURT ] says that benefits u/s.10A of the Act could not be denied even to a manufacturer who was supplying goods to a STP unit which had exported and received foreign exchange. Considering this judgment of Hon’ble jurisdictional High Court, we are of the opinion that the matter requires a fresh look by the AO. The AO has to verify whether Exim Policy cited by Hon’ble jurisdictional High Court, while giving a finding that benefit u/s.10A would be available even to an assessee which was not directly into exports, is applicable to an assessee preferring a claim u/s.10B of the Act, as well. We therefore set aside the order of the authorities below and remit the issue regarding availability of deduction u/s.10B of the Act, back to the AO for consideration afresh in accordance with law. - Decided in favour of assessee for statistical purpose.

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• 2016 (7) TMI 316
  Reopening of assessment - Held that:- It is quite clear that the Assessing Officer has to issue and serve a notice under section 148 of the Act to the assessee before making assessment under section 147 of the Act. The notice under section 148 of the Act requires the assessee to furnish his return of income within the time specified in the notice. This return has to be in the prescribed form and in the prescribed manner. It has been very categorically provided in the section that afterwards the provisions of this Act shall 'so far as may be, apply accordingly as if such return were a return required to be furnished under section 139' of the Act. Therefore, the provisions of section itself negate the arguments taken by the learned D.R. that once issuing notice under section 148 of the Act, the Assessing Officer cannot go into the provisions of other sections. Once the assessee files return in pursuance of notice under section 148 of the Act, which is deemed to be filed under section 139 of the Act and in case the Assessing Officer wants to proceed with the return filed by the assessee, he has to issue a notice under section 143(2) of the Act. Any assessment framed without issue of notice under section 143(2) of the Act, suffers from Jurisdictional error. In view of the above, we hereby quash the order of the Assessing Officer, which was made without issue of notice under section 143(2) of the Act. - Decided in favour of assessee.

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• 2016 (7) TMI 315
  Allowability of deduction u/s.80IA - Held that:- The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under sec.80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. The learned counsel for the assessee stated before the Bench that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know how, expertise and financial resources. After the amendment the section 80IA(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, prior to amendment the “or” between three activities was not there, after the amendment “or” has been inserted w.e.f.1-4-2002 by Finance Act 2001. Therefore, in the considered view of the Bench, the assessee should not be denied the deduction under sec.80IA of the Act, if the contracts involves design, development, operating & maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction u/s 80IA of the Act. In the opinion of the Bench the contracts which contain above features to be segregated on this deduction u/s.80IA has to be granted and the other agreements which are pure works contracts hit by the explanation to sec.80IA(13), those work are not entitled for deduction u/s.80IA of the Act. The profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be computed by Assessing Officer on pro-rata basis of turnover. The Assessing Officer is directed to examine the contracts accordingly and grant deduction on eligible turnover as directed above. Disallowance u/s 14A r.w.r. 8D - Held that:- 2% of the exempt income is allowed. More so, Rule 8D is not in the statute book in the assessment year 2006- 07 which was introduced w.e.f. 24.3.2008. Being so, we do not find any infirmity in the order of the CIT(Appeals) Addition towards license fee - revenue or capital expenditure - Held that:- This issue is squarely covered by the judgment of the Jurisdictional High Court in the case of CIT v. Southern Roadways Ltd. (2007 (6) TMI 193 - MADRAS HIGH COURT ), wherein it was held that the expenses incurred by the assessee for installation of software packages which revolves on the modern communication technology enables the assessee to carry its operation effectively, efficiently, smoothly and profitably and it does not work on a stand alone basis. Such software enhances the efficiency of the operation being an aid in the manufacturing process rather than the tool itself. Therefore, the payment for such application software, though there is an enduring benefit, does not result in acquisition of any capital asset and it merely enhances productivity or efficiency of the assessee. Hence, it is to be treated as revenue expenditure

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• 2016 (7) TMI 314
  Penalty levied under section 271(1)(c) - addition of depreciation relating to "decapitalised" value of assets - Held that:- We notice that the assessee has voluntarily decapitalised the assets by examining its liabilities position in the assessment year 2003-04. The undisputed fact remains that the Assessing Officer has added the liabilities reversed by the assessee to the total income of the assessee in the assessment year 2003-04. The amount of Rs. 44.34 lakhs is already included in the amount assessed in the assessment year 2003-04, meaning thereby the tax authorities have only changed the year of assessment in respect of the amount of Rs. 44.34 lakhs. Even though the assessee has not carried out the necessary adjustments in the Income-tax depreciation schedule in the assessment year 2003-04, in our view, the concealment, if any, has to be examined only in that year. Accordingly, we are of the view that the addition made by changing the assessment year will not result either in concealment of particulars of income or furnishing of inaccurate particulars of income. - Decided in favour of assessee Addition on account of valuation of eutectic oil - Held that:- We find merit in the submissions of the assessee that the amount realised by the assessee after the expiry of four years cannot be a ground to disturb the closing stock value estimated by the assessee, particularly when the assessee is valuing the eutectic oil stock as nil for the past several years. It is not shown by the Assessing Officer that the assessee did not have any basis for valuing the oil stock at nil value. Even otherwise, we notice that the assessee has offered proper explanations in this regard and it is not the case of the Assessing Officer that the assessee has concealed the particulars relating to eutectic oil stock. Accordingly, we find merit in the contentions of the assessee that the addition made by the Assessing Officer on estimated basis would not give rise to penalty under section 271(1)(c) of the Act - Decided in favour of assessee Disallowance of depreciation on plant not put to use - Held that:- There is merit in the contentions of the assessee that the assets shall lose their individual identity once it enters the block. Otherwise also, we notice that the assessee has offered explanations as to why it was constrained to claim depreciation on these assets. Thus, we notice that the disallowance of depreciation claimed on assets, which had already lost their individual identity by entering into the block, is a debatable issue. Hence, we are of the view that the assessee cannot be levied with the charge of concealment of particulars of income or furnishing any inaccurate particulars of income in respect of this addition.- Decided in favour of assessee Penalty on prior period expenses - Held that:- CIT (Appeals) has given a finding that the claim made by the assessee was not an ingenuine claim and it is a case of postponement of claim only. The learned Commissioner of Income-tax (Appeals) has also taken note of the submissions made by the assessee that these expenses got crystallised during the year under consideration. Hence, there is merit in the view taken by the learned Commissioner of Income- tax (Appeals) that it is a case of mere change of accounting year in which expenses should be claimed and, hence, this issue becomes a debatable issue. It is well-settled proposition of law that penalty under section 271(1)(c) of the Act cannot be levied on debatable issue. Accordingly, we do not find any infirmity in the decision of the learned Commissioner of Income-tax (Appeals) in deleting the penalty levied - Decided in favour of assessee Penalty levied on the addition relating to reversal of excess liabilities - Held that:- Since the liabilities relate to the capital assets, the question as to whether such kind of liabilities can be assessed as income of the assessee under section 41(1) shall become a debatable one. Accordingly, we are of the view that the penalty cannot be levied on the capital portion of the reversed liability and the same should be restricted to the depreciation portion alone. Accordingly, we modify the order of learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to restrict the penalty on the addition relating to depreciation portion alone, which was claimed by the assessee over the years.- Decided in favour of assessee in part Addition relating to closing stock value of eutectic oil - Held that:- The assessee has sold a portion of the oil at Rs. 4,000 per metric tonne. Thus, the claim of the assessee, that it did not have any market value has been disproved in this year. However, the assessee has chosen to declare the market value as nil. Hence, the explanation of the assessee stands disproved by the facts available in its records itself. Accordingly, we are of the view that the learned Commissioner of Income-tax (Appeals) was justified in confirming the penalty levied on this addition. - Decided against assessee Disallowance of loans and advances written off - Held that:- The question as to whether debt has become bad or not, is a debatable issue. The learned authorised representative also contended that there is no requirement of proving that the debt has become bad, after the amendment made in section 36(1)(vii) of the Act. Hence, we are of the view that the penalty could not be levied on a debatable issue. Accordingly, we set aside the order passed by the learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to delete the penalty levied thereon.- Decided in favour of assessee Disallowance of depreciation claimed on the research and development equipment - Held that:- As the assessee submitted that it had included the value of research and development equipment as part of block but did not claim depreciation at all. Accordingly, the learned Commissioner of Income-tax (Appeals) directed the Assessing Officer to verify the contention of the assessee and delete the penalty, if the assessee's claim is found to be correct. Since the issue is restored back to the Assessing Officer to verify the claim of the assessee, we do not find any infirmity in it. - Decided in favour of assessee by remand Disallowance of depreciation on stores and spares - Held that:- The assessee has capitalised certain stores and spares and, accordingly, claimed depreciation thereon. The question as to whether the assessee could capitalise its stores and spares is a debatable issue and, hence, the disallowance of depreciation claimed thereon also becomes debatable one. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) passed on this issue and direct the Assessing Officer to delete the penalty levied on this addition.- Decided in favour of assessee Disallowance made under section 43B - Held that:- This issue is debatable one and, hence, the penalty cannot be levied on this addition.- Decided in favour of assessee Addition made under section 145A - Held that:- As the learned Commissioner of Income-tax (Appeals) deleted the identical additions made in the earlier years. Since the facts are identical and since the Assessing Officer has made the addition on estimated basis, we are of the view that the learned Commissioner of Income-tax (Appeals) was justified in deleting the penalty levied on this addition, even though the assessee has accepted the addition by not contesting the same.- Decided in favour of assessee

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• 2016 (7) TMI 313
  Revision u/s 263 - Interest free loans and advances have been given to one of the Directors and to the related companies in which the Directors are interested - interest dis allowance - Held that:- The loans availed are basically for specific purposes like purchase of assets, i.e., cars and it was explained that HDFC Inventory Floor Funding amounting to Rs. 382.33 lakhs was sanctioned during the year for the purpose of purchase of goods and the corresponding interest for the loan availed is only Rs. 10,81,911/- which is marked in Schedule-15. Whereas, the proportionate interest disallowance has been worked out by the Ld. CIT(A) at Rs. 72,83,333/-. It was explained that there is no diversion of funds to related parties other than normal business transaction and the amount shown as advance to Koyenco Autors (P) Ltd. is in the nature of rent advance and classified under “Loans & Advances”. The building belongs to them and the assessee is pay in grent of Rs. 60 lakhs for that building. The building is used as show room and service centre. As regards advance in the name of the Director, it was in connection with business requirements of the Company and the loan advances were not paid out of borrowed funds. The Assessing Officer was satisfied that there was no diversion of funds during the assessment proceedings. Since the loans/advances have been given for the specific purpose, therefore, the view taken by the Ld. CIT(A) is not a correct view and there cannot be any occasion to come to the conclusion that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Ld. CIT(A) himself in para 5 of his order reproduced hereinabove has mentioned that the assessee was paying heavy interest to the financial institutions for acquiring capital assetsand for working capital requirements. No finding has been given as to how theorder of the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue - Decided in favour of assessee

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• 2016 (7) TMI 312
  Eligibility of deduction u/s 80IB - ownership of land - Held that:- Hon’ble Gujarat High Court in case of CIT vs. Radhe Developers (2011 (12) TMI 248 - GUJARAT HIGH COURT ) held that for deduction u/s.80IB(10) of the Act it is not necessary that the assessee must be the owner of the land and secondly looking to the provisions contained in Setion 2(47) of the Act r.w.s. 53A of the Transfer of Property Act, by virtue of the development agreement and agreement to sell, assessee had for the purpose of income tax become the owner of the land. Considering the terms and conditions of the development agreement and other documents on record, assessee had acquired dominion over the land, which he had developed by constructing housing project incurring expenses and also takings risks. Thus, on the point of ownership and dominion of the property as a project, CIT(A) rightly granted relief to the assessee. - Decided in favour of assessee

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• 2016 (7) TMI 311
  Scope of assessment u/s 158BD - Held that:- Without any contrary evidence or incriminating material, AO had brought to tax the opening balance and some investments which are explained by the assessee in the cash flow statement. As can be seen from the orders, AO disbelieved certain investments without questioning the source of funds. Details of submissions made by the Ld. Counsel extracted in the above do indicate that for every investment made by the assessee there is corresponding source of the amount, so they cannot be considered as unexplained. It is to be noted that AO did not make any enquiry to disprove the source of funds. He has simply disbelieved the assessee’s explanation, which cannot be accepted in the search proceedings, particularly, in the case of assessee where the proceedings are consequential u/s 158BD. The action of the AO in disbelieving the sources can also be evident from the additions made on the so-called investments in the Chit funds. Not only that assessee has explained that he has separate assessment in the status of HUF and some of the investments are made by the HUF, but, without disproving the same AO simply brought to tax all those investments also in the hands of assessee. There is evidence on record that assessee also offered incomes in HUF status, having its own sources of income and those were not disproved. In view of the above, keeping in mind the limited jurisdiction for making assessment u/s 158BD and the fact that assessee could explain various investments in cash flow statement itself which was accepted by the AO in the proceedings, we have no hesitation in allowing grounds taken by the assessee. Since all the investments brought to tax are either explained in the cash flow statement or belonging to third parties which have brought to tax as benami, we direct the AO to delete all of them - Decided in favour of assessee.

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• 2016 (7) TMI 310
  Reopening of assessment - Held that:- Reopening of assessment in the impugned AY is bad in law. The issues considering the merits are purely academic in nature and therefore it is not necessary to consider the disallowance/ addition made by the AO in the assessment. Considering the above facts and the law on the issue, the orders of AO and CIT(A) are set aside. Assessee’s grounds on reopening is accepted and appeal is accordingly allowed in favour of assessee

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• 2016 (7) TMI 309
  Disallowance of claim on deduction u/s.80IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee

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• 2016 (7) TMI 308
  Addition on account of interest overdue on NPA - Held that:- Since the Tribunal has already decided the issue in favour the assessee by deleting the disallowance of overdue interest on NPA in A.Yrs. 2008-09 and 2009-10, therefore, following the order of the Tribunal in assessee’s own case in the preceding 2 years and in absence of any contrary material brought to our notice by the Ld. Departmental Representative against the order of the Tribunal, the order of the CIT(A) on this issue is set aside and the grounds raised by the assessee are allowed Interest on Agricultural Credit Stabilisation Fund added as income of the Bank - Held that:- At the above ground has been decided against the assessee by the order of the Tribunal for A.Yrs. 2008-09 and 2009-10. In view of the above submission of the Ld. Counsel for the assessee the ground of appeal by the assessee is dismissed.

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• Customs

• 2016 (7) TMI 362
  Refund of SAD - Notification No.102/2007-Cus. Dated 14.9.2007 - The claims were disallowed on the ground that the said duty element appears to have been passed on to the consumer which is in violation of the said Notification. - Held that:- The facts of the case as available on record reveals that the invoice mentions the price of the goods and VAT on the same along with the endorsement as reproduced above. We find that based on such invoice no credit of SAD can be availed by the buyer. The verification as alleged by Revenue is neither categorical nor to the point of credit available on duty paid under section 3(5) of the Tariff Act. Even if there is no endorsement regarding non-admissibility of credit, refund cannot be denied if there is no allegation with supported evidence regarding actually passed on credit and the availment thereof by the buyer. - Refund allowed - Decided in favor of assessee.

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• 2016 (7) TMI 361
  Classification of import of (I) INTEL 200 MMX CPU BOX, (II) INTEL PII 233 CPU BOX - Claim of exemption / concessional rate of duty available to Integrated Circuits classifiable under CTH 8542.30 in terms of Sl. No. 205 of Notification No. 23/98-Cus - Department entertained a view that the said concession is not available to the importer as the product under assessment is new generation microprocessor for CPU of an automatic data processing machine. As such the classification was sought to be done under CTH 8473.30 denying the concession as claimed. Held that:- present appeal does not contain any grounds for interfering with the concurrent findings of the lower authorities. - Pentium - II / Celeron Micro Processors are nothing but parts of computers classifiable under 8473.30 and not as a Populated Printed Circuit Board - Decided against the appellant.

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• 2016 (7) TMI 360
  Valuation - Classification of imported goods - whether to be classified as “Integrated Receiver Decoder” also known as setup Box or “Digital Satellite Receiver” - benefit of exemption contemplated by Notification No. 21/2002-Cus dated 01.03.2002 - Appellant only contested against the redemption fine and penalty imposed without disputing the duty demanded. Held that:- Without going into the details of the duty liability which remained undisputed by the appellant, it has become necessity to look into the circumstances of imposition of redemption fine and penalty. While both sides are on rivalry submission as to the declaration of goods as presented and the appellant does not dispute classification as well as description of the goods, ld. Adjudicating authority had not conducted market enquiry to determine the market value for imposition of redemption fine. He acted arbitrarily and imposed of redemption fine @ 50% of the assessed value. The goods imported were supplied by the appellant to the cable operators. To reduce the litigation and also considering that imposition of redemption fine @ 5% of the assessed value would be justified in absence of market value determined by the adjudicating authority, that is ordered. Similarly levy of penalty of Rs. 1,00,000/- lakh would be justified for the technical breach of law on the facts and circumstances of the case. In the result, the appeal filed by the appellant company is partly allowed reducing the redemption fine from 50% to 5% of assessable value of the goods as well as penalty reduced to Rs. 1,00,000/-.

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• 2016 (7) TMI 359
  Valuation - rejection of transaction value - contemporaneous import of similar goods at another port - Held that:- nowhere the original adjudicating authority and the Commissioner (Appeals) in their orders have been able to convincingly reject the transaction value declared by the appellants in their import documents. We find that the Revenue has not been able to convincingly prove that the contemporaneous imports quoted by the original adjudicating authority in the orders were of ‘identical goods’. The Revenue’s contention that the Customs were justified in enhancing the value based on contemporaneous imports do not have any force when we find that the price quoted cannot be proved that they were of “identical” goods and when there was no evidence to justify the rejection of the invoice values declared by the appellants. Revenue is not able to prove any undervaluation or mis-declaration and thus able to convincingly reject the transaction value declared by the importer. - demand set aside - Decided in favor of assessee.

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• 2016 (7) TMI 358
  Recovery of dues - Since the appellant is the sole proprietor and this sole proprietor has died, therefore no recoveries of duties can be effected from his legal representatives. - department cannot proceed against legal representatives of the deceased.

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• 2016 (7) TMI 357
  Refund of excess duty paid on actual consumption of bunkers on the vessel during coastal trade - Unjust enrichment - Held that:- The main contention raised by the appellants is that the respondents did not furnish a Chartered Accountant Certificate to establish that the incidence of duty has not passed on. On examination of records, it is seen that this submission is factually incorrect. The respondents have furnished the Chartered Accountants Certificate dated 10-03-2012. Further, the Board Circulars adverted to by the Consultant appearing for respondent clearly states that refund claim can be made by the Steamer agent. - Refund allowed.

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• Corporate Laws

• 2016 (7) TMI 345
  Winding up order - HC stayed further proceedings before the Company Court consequent upon a winding up order passed against the respondent (Modi Rubber) till a final decision is taken on a reference made by Modi Rubber to the Board for Industrial and Financial Reconstruction - Held that:- Dfferent situations can arise in the process of winding up a company under the Companies Act but whatever be the situation, whenever a reference is made to the BIFR under Sections 15 and 16 of the SICA, the provisions of the SICA would come into play and they would prevail over the provisions of the Companies Act and proceedings under the Companies Act must give way to proceedings under the SICA. In this state of the law, in so far as the present appeal is concerned, we do not find any error in the view taken by the High Court in concluding that the winding up proceedings before the Company Court cannot continue after a reference has been registered by the BIFR and an enquiry initiated under Section 16 of the SICA. Consequently, the High Court was right in concluding that the provisions of Section 22 of the SICA would come into play and that the Company Court could not proceed further in the matter pending a final decision in the reference under the SICA. Quite apart from the above, we are also of opinion that in view of the subsequent developments and the fact that Madura Coats had participated before the BIFR and has taken its dues in terms of the rehabilitation scheme approved and sanctioned by the BIFR, nothing really survives for consideration in this appeal. Strictly speaking, we have merely undertaken an academic exercise pursuant to a reference made to a larger Bench.

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• 2016 (7) TMI 344
  Composite Scheme of Arrangement is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned. The Scheme is hereby sanctioned. The Restructure of Share Capital including Utilisation of Securities Premium Account as well as Reduction of Issued, Subscribed and Paid up Capital of the Petitioner Companies as envisaged vide Clauses- 25, 26.3, 39.3, 52.3 and 78 of the proposed Scheme are hereby sanctioned. The Minute as presented vide Paragraph 16 (a) is hereby approved. Prayers in terms of paragraph 17 (a) and (b)) of the Co. Petitions No. 173, 174 and 175 of 2016 are hereby granted. Prayers in terms of Paragraph 20 (a) of the Co. Petition No. 232 of 2016 and paragraph 19 (a) of the Com. Petition No. 233 of 2016 are hereby granted. Prayers in terms of paragraph 19 (a), 19 (a-1) and 19 (a-2) are hereby granted.

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• 2016 (7) TMI 343
  Composite Scheme of Arrangement involving Demerger and Transfer of Two Demerged/ Transferor companies to the Resulting Company - Held that:- The present Composite Scheme of Arrangement is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned. The Scheme is hereby sanctioned.

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• 2016 (7) TMI 342
  Winding up petition - non payment of dues - Held that:- In light of the fact that the dispute exists regarding the amount claimed by way of a statutory notice even for winding up, in opinion of this Court, a dispute exists between the parties and therefore, it cannot be said that the respondent has neglected to pay. Considering the statutory notice and the reply given by the respondent-Company and so also, the other correspondence between the parties, it appears that the debt is not an admitted debt and bonafide disputes have been raised by the respondent-Company and therefore, the case would not fall under Section 433(e) or 434 of the Act. It is not even urged by the learned advocate for the petitioner that the respondent-Company is not a going concern and therefore, it cannot be said that the respondent-Company has lost its financial substratum. The jurisdiction under Sections 433 and 434 of the Companies Act, 1956 cannot be permitted to be used as a substitute for deciding the bonafide dispute which can only be done by way of filing an appropriate Civil Suit before the competent Court. The petition is liable to be dismissed in limine and is hereby dismissed.

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• Service Tax

• 2016 (7) TMI 365
  Waiver of pre-deposit - Maintainability of writ petition against the order confirming the demand of service tax with interest and penalty - alternative appellate remedy - the submission of the learned counsel for the petitioner is that the petitioner should be permitted to go before the Tribunal with a direction to the Tribunal to take up the stay application, thereby bypassing the pre-deposit condition, which has been made mandatory with effect from 6.8.2014. Held that:- this Court is of the view that the relief sought for to direct the petitioner to approach the Tribunal and file a stay application with a further direction to the Tribunal to hear the same thereby waiving the condition of pre-deposit of 7.5%, cannot be acceded to. - Accordingly, the writ petition is dismissed as not maintainable. - Decided against the petitioner.

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• 2016 (7) TMI 364
  Cenvat Credit - input services for providing output services of management, Maintenance and Repair service and also Consulting Engineer’s Service - credit was availed on Scheme operator’s service, Outdoor Caterer’s service and Group Insurance Service for the period October, 2009 to September, 2010 - Held that:- the issue is covered by the judgement of the Karnataka High Court in the case of CCE, Bangalore Vs. Bell Ceramics Ltd. [2011 (9) TMI 792 - KARNATAKA HIGH COURT] - Credit allowed - Decided in favor of assessee.

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• 2016 (7) TMI 363
  Cenvat Credit - Eligibility of Input services received at Head Office - ISD - Jurisdiction - The adjudicating authority confirmed the demand on the ground that appellant is not eligible to avail cenvat credit on the services; the ISD has distributed services which are not in accordance with Rule 7 of the Cenvat Credit Rules, 2004. - Held that:- the question of jurisdiction as raised by the ld. Consultant is non-starter as the adjudicating authority has recorded that they are disputing only the eligibility of cenvat credit at the factory level in respect of services. There is no dispute at ISD level on availment of cenvat credit. Services on which cenvat credit sought to be demanded is eligible to be availed as cenvat credit by the appellant as well as ISD as per various case law cited by the ld.Consultant. In view of this, the finding of the adjudicating authority that appellant is not eligible to avail cenvat credit on those services is incorrect and this finding needs to be set aside. However, cenvat credit can be availed at Bhiwadi factory shall be as per formula under Rule 7(d) of the Cenvat Credit Rules, 2004. In order to arrive at correct cenvat credit that can be availed by the appellant, the matter is remanded back - Decided partly in favor of assessee.

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• Central Excise

• 2016 (7) TMI 356
  Rebate/ refund claim - export of goods - Jurisdiction - The said rebate claim was rejected by Assistant Commissioner(Rebate), Central Excise, Raigad on the ground that Maritime Commissioner Raigad, have no jurisdiction over the exports made from the ICD Sabarmati, Ahmedabad. - Held that:- Government observes that Commissioner (Appeals) has rightly held that in terms of Notification 19/2004 CE(NT) dated 06.09.2004 which provides the procedure for filing rebate, the claim of rebate shall be lodged with original copy of application to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction over the factory of manufacture or warehouse or as the case may be Maritime Commissioner. It is a fact on record that the goods were exported from ICD, Sabarmati and in such case the original authority i.e. Maritime Commissioner will have no jurisdiction. The applicant was pointed out regarding the discrepancy but they neither filed any reply nor withdrew their claim to file before the proper authority. As such, the claim has rightly been rejected as filed beyond jurisdiction by the original authority. - Revision application rejected.

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• 2016 (7) TMI 355
  Condonation of delay in filing appeal before Commissioner (Appeals) - he rebate claim was partly rejected by the original authority on the ground that the assessable value was more than FOB value and rebate claim is admissible only to extent of duty payable on FOB value. - Held that:- The Commissioner (Appeals) has considered this aspect of delay in detail and observed that the reason advanced by the applicant was not a sufficient cause which could have prevented the applicant from filing the appeal within sixty (60) days. Such detailed findings of the appellate authority have not been controverted in the grounds of Revision Application by any substantial documentary evidences or submission. As such, Government finds force in the observations of Commissioner (Appeals). - Revision application rejected.

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• 2016 (7) TMI 354
  Condonation of delay in filing revision application - Rejection of rebate/ rebate claim over and above FOB value - export of goods - ground of dis-allowance of appeal is that the assessable value was more than correct FOB value and therefore, there was excess payment of duty and excess rebate could not sanctioned by the adjudicating authority to the extent of said excess payment of Rs. 1,16,603/- - Held that:- On perusal of the same, Government notes that the details contained therein does not categorically substantiate the claim of the applicant that the impugned Revision Application was delivered on 24.04.2012 to this office. Revision Application as per receipt stamp was received in the department on 01.05.2012 vide report Dy. No. 3415/12. As such, the applicant has failed to give any documentary evidences in support of their claim for the delay in filing of appeal. Under such circumstances, Government is of the considered opinion that onus to show cause for not filing application is on the applicant who has failed to show sufficient cause that prevented him from filing Revision Application within stipulated period of three months. The Revision Application has been made contrary to the provisions of Section 35EE (2) and is, therefore, liable for rejection. - Decided against the applicant.

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• 2016 (7) TMI 353
  Rebate/ refund - export of goods - adjudicating authority allowed the same to be taken as Cenvat Credit under respective head as the duty was debited originally in the Cenvat account and ordered rejection of Rs. 2,19/253/- as inadmissible claim in respect of 4 number of ARE-Is. - Held that:- Government observes that the part rebate claims of Rs. 261381/- was rejected on ground that there is huge variation of weight between ARE-Is, and Air Way Bills, the sealing date is not correct in one of the ARE-I and the vessel/make, flight No. does not tally with Airway Bill, Bill of Lading and as such, it cannot be proved beyond doubt that the goods under the said AREs-1 have been exported. - during this revisionary proceedings also no such documentary evidences were produced to controvert above said observation of-lower authorities. - rejection of rebate claim on these grounds is correct. - Decided against the applicant.

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• 2016 (7) TMI 352
  Rejection of rebate/ refund claim - discrepancies in export/excise documents - the part rebate claims of Rs. 261381/- was rejected on ground that there is huge variation of weight between AREs-1 and Air Way Bills and as such, it cannot be proved beyond doubt that the goods under the said AREs1 have been exported. - Held that:- Government notes that neither before original authority nor before Commissioner (Appeals), the applicant could give any valid reason for such vast difference of weight. As, such, the orders of lower authorities which has duly allowed substantial portion of rebate and only part claim was rejected on above said ground, is just and proper - Revision application rejected - Decided against the assessee.

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• 2016 (7) TMI 351
  Cenvat Credit - input services - credit of service tax paid in respect of housekeeping services and supply of drivers under the man power supply agency service - nexus with manufacturing activity - Held that:- appellant succeeds in respect of availment of credit on Housekeeping services. - As regards the availment of credit in respect of hiring of drivers under man power supply service, the allegations and its rebuttal is not backed with proper documents or evidences on record to prove the admissibility of credit by the appellant or its denial by the Ld. Appellate Authority. It is, therefore, difficult to ascertain proper facts in the absence of evidence. In the interest of justice, matter remanded back. - Decided partly in favor of assessee.

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• 2016 (7) TMI 350
  Recovery of erroneous refund - period of limitation for levy of penalty - proceedings were initiated for recovery/appropriation of the said amount and for imposing penalty under Section 11AC - during the transitory period of 2006-2007 when the tyres were brought under MRP based assessment they have cleared tyres on payment of duty under Section 4. The refund relatable to discounts were also claimed which was sanctioned by the Department. - Held that:- However, adopting Section 4 Valuation earlier resulted in certain refund which was paid back by the appellants with interest in April 2009. There is no allegation that the refund claim was filed and obtained fraudulently by mis-representation of facts. Apparently, the refund claim sanctioned during the material period by the Department was under the belief that transaction value under Section 4 was applicable to the appellants. Considering the above factual details and payment of the full amount with interest by the appellants, the show cause notice issued more than two years after such payment is without merit. The notice itself is very cryptic without any details of basis for issuing demand for already paid amount and for proposing equal penalty under Section 11AC. Levy of penalty set aside. - Decided in favor of assessee.

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• 2016 (7) TMI 349
  Cenvat Credit - discrepancy in duty paying documents - levy of interest and penalty - appellant on his own reversed the credit inadvertently availed - extended period of limitation - Held that:- appellant has specifically taken the ground that he has sufficient document to prove that he has rightly availed the credit but at the instance of the audit party he reversed the same and the learned Commissioner (Appeals) has not considered this submission at all and has not given any findings - matter remanded back on this ground. Further the show-cause notice is time-barred because the same was issued after more than one year from the date of the audit which was conducted in November 2007 and it came to the knowledge of the Department during that time regarding irregular availment of cenvat credit - Decided partly in favor of appellant.

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• 2016 (7) TMI 348
  Cenvat Credit - input services of manpower supply services for the benefit of employees - The Revenue is of the view that manpower that has been supplied by the service provider, consists of Nurses and Doctors and hence it falls under Exclusion Clause category of the definition of Rule 2(l)(C) of the Cenvat Credit Rule, 2004. - Held that:- It is can be seen from the above reproduced clause both the authorities are relying Exclusion clause which provides for excluding cenvat credit in respect of health services; in the entire provisions of the Finance Act, 1994, there is no definition of health services. At the same time, it is also being undisputed that the posting of Doctors and Nursing staff is at the behest of the appellant in order to comply with statutory obligation under the Factories Act, 1948 and Mines Act 1952, the same cannot be considered as the procurement from personal consumption of the workers. - Credit allowed - Decided in favor of assessee.

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• 2016 (7) TMI 347
  Undervaluation by way of not declaring correct value of grey fabrics. - job work - it was noticed that the merchant manufacturers were under valuing the grey fabrics sent to main appellant for processing and the main appellant has discharged the duty liability on the value given by the merchant manufacturers and their processing charges. - Held that:- It is seen in this case that the merchant manufacturer had stated the same value of grey fabrics, and the same was declared by main appellant, cannot be held against the main appellant to demand the Central Excise duty from him. In the entire case records, there is nothing to show that the main appellant was aware of the fact that the merchant manufacturers have not stated the correct value of grey fabrics. - demand set aside - Decided in favor of assessee.

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• 2016 (7) TMI 346
  Valuation - Classification - manufacturing chassis for ambulances and sending it to the second appellant for building body of the ambulances on such chassis. - Classifiable under chapter heading 87.02 or 87.03 - whether it should be valued on cost construction basis or on the basis of the sale price of the ambulances to independent buyers, by the second appellant - Held that:- Primary test is that sitting capacity of the vehicle. Admittedly vehicle in question can carry more than 12 persons excluding the driver or 14 persons including the driver. Therefore, we hold that the vehicle in question is classifiable under heading 87.02 of CETA. With regard to valuation, valuation to be made under Rule 10A of Central Excise (Valuation) Rules, 2000. Therefore, we hold that the appellants are liable to pay duty on the value arrived at under Rule 10A of the said rules. - As contended by the learned Counsel that they have paid duty as per Rule 10A, this fact has to be examined by the adjudicating authority whether the appellants have paid duty as per Rule 10A or not. - Matter remanded back.

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• CST, VAT & Sales Tax

• 2016 (7) TMI 370
  Condonation of delay in filing appeal before the tribunal - lapse of 8 years - bonafide circumstances - Held that:- There appears to be no malafide intention behind it since the rectification application was very much pending and therefore, the reason which has been raised for seeking condonation of delay appears to be bonafide. In addition thereto, the learned Tribunal appears to be on the wrong premise that there is no reference about the application for rectification. Before us also, an affidavit has been filed by Shri Prashant Pujara, Deputy Commissioner dated 25.06.2014 in which the fact of filing of application for rectification in the year 2004 has been admitted. While considering this appeal, it has come to the notice of this Court that the main amount which has been assessed i.e. Rs. 1,21,38,534/- is long back deposited by Challan dated 03.10.1994 and therefore, if the appeal is ordered to be heard on merits, no serious prejudice is likely to be caused to the department and it is settled position of law that when a substantial justice is pitted against technical consideration, the substantial justice must be given predominance and therefore, since the bonafides are appearing to be genuine, there is no likelihood of any prejudice to the department and the main reason assigned by the Tribunal is clarified by the department itself. - Matter restored before the tribunal.

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• 2016 (7) TMI 369
  Writ petition challenging the order of assessment dated 31.7.2014 - The specific case of the petitioner is that they filed Form W by way of e-filing and it is well within the time limit prescribed under Rule 11 of the Tamil Nadu Value Added Tax Rules, 2007. (TNVAT) - Held that:- it is clear that the respondent is well aware of the fact that Form W has been filed by the petitioner within the time frame. If that be the case, the observations contained in both the impugned orders are wholly erroneous. Accordingly, the writ petition is allowed, the impugned orders are set aside and the matter is remitted back to the respondent to consider Form W, which has been filed by the petitioner online and which has been admitted by the respondent himself to have been filed within the time frame. - Decided in favor of petitioner.

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• 2016 (7) TMI 368
  Levy of VAT where service tax has been charged - erection of power switchyards - whether movable or not - Maintainability of writ petition - an alternative and efficacious remedy to prefer an appeal under Section 62 of the Karnataka Value Added Tax Act, 2003 was available - The contention raised on behalf of the appellant was that the property in question cannot be termed as movable property and further on the entire construction, service tax is being charged by the Union Government. Therefore, no sales tax can be charged under KVAT Act for the very transaction in question. - The power-switch yards are made up of power transformers, current transformers, potential transformers, isolators, control and relay panels, circuit breakers, insulators, steel towers etc., and ‘the said goods assembled as switchyards’ can be installed, re-installed, dis- assembled, re-assembled, re-used and can be shifted from one place to other. Held that:- if the learned single Judge is gone by the well settled principles of law for exercise of the power under Article 226 of the Constitution by way of self- imposed restriction and has relegated the appellant to the alternative remedy, it cannot be said that exercise of power is perverse or that any error is committed which may call for interference by this Court in an intra court appeal. Under the circumstances, no case is made out. - Petition dismissed.

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• 2016 (7) TMI 367
  Levy of luxury tax - whether the exhibition halls come within the definition Section 2(5-B) of the Karnataka Tax on Luxuries Act, 1979 - The premises consist of three exhibition halls, four AC conference halls of different dimensions with flexible seating arrangements in the halls, classroom, theatre and roundtable, auditorium seating four conference halls, CCTV link between four conference halls, green room and video conferencing facilities. The appellant has described the nature of activities with details, it discloses that the premises includes exhibition halls, convention centre and the events conducted by them and also stated that they provide exhibition halls, conference centre/ convention centre along with helipad area to the exhibitors for conducting exhibitions. Further, the photographs produced in the case which are not in dispute and the write up shows that the exhibition and conferences facilities at the appellant’s premises are the first of its kind in India which offer services and amenities of the highest quality at par with international standards. Held that:- With the facilities the appellant has already hosted an exhibition of over 1,10,000 sq.mt. of exhibit area. It has been able to cater to over 20,000 business visitors per day on several exhibition days. In this background, the argument of the learned counsel for the appellant that the word accommodation as mentioned in the other provisions which is consecutively missing in Section 3, the accommodation provided by the appellant cannot be levied with tax is without any substance Once the premises of the appellant falls within the definition of marriage hall and charges levy is more than Rs. 5,000/-, Section 3-C is attracted and luxury tax is leviable. Realising this fact, the appellant had approached the Government with a request to exempt from payment of tax. The power under Section - 2A could be exercised by the Government to exempt tax only when act is applicable. If the Act itself is not applicable, the question of exempting the appellant from payment of tax does not arise. In that view of the matter, viewed from many angle, as rightly held by the learned Single Judge, the appellant contention that the demand of tax is ultra vires and Act is not applicable to them is without any substance. - Decided against the petitioner.

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• 2016 (7) TMI 366
  Demand of purchase tax - Section 14 of the Karnataka Sales Tax Act - Held that:- The impugned order dated 18/04/2011 passed by the learned Single Judge in W.P.Nos.10618/2011 & 11656-662/2011, Assessment order dated 30.10.2010 as per Annexure-L, demand notice dated 2.11.2010 vi de Annexure-K and the attachment orders dated 10.1.2011 as per Annexures-A to C under Section 1 4 of the Karnataka Sales Tax Act, issued by the respondent No.5/appellant No.5 are hereby set aside and the matters stand remitted back to the appellant No.3 for reconsideration afresh, with a direction to pass appropriate orders, in accordance with law.

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