Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 10, 2017
Case Laws in this Newsletter:
Income Tax
Benami Property
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
GST - States
- 32 T of 2017 - dated
21-7-2017
Tax Deduction at Source (TDS) as per section 31 of Maharashtra Value Added Tax Act, 2002 in respect of work contracts executed prior to 30-6-2017 for which payments to be made on or after 1-7-2017 and applicability of TDS.
- 31 T of 2017 - dated
15-7-2017
Advisory to trade for issues related to GST Migration and New Registrations.
- Memo No. 1470/ST-5, - dated
14-7-2017
Guidelines on composition and levy on directives/instructions regarding migration.
- 30 T of 2017 - dated
13-7-2017
Designation Of officers under Maharashtra Goods and Services Tax Act, 2017 (Mah. XLIII of 2017).
- 29 T of 2017 - dated
10-7-2017
Submission of Bond/Letter of Undertaking by the Exporter in respect of Exports without payment of Integrated Tax under IGST Act.
- 27 T of 2017 - dated
7-7-2017
Tax Deduction at Source as per section 51 of Goods and Services Act, 2017 and procedure to be followed by Departments or establishments of Local Authority, State Government, Local Authority, Governmental agencies.
Customs
- 14/2017 - dated
30-6-2017
Sub: Launch of Indian Customs EDI System- (ICES 1.5) for Imports and Exports, at Vijaydurg Port (INVYD1), Vijaydurg Village, Taluka : Devgarh, Sindhudurg - 416 806, Maharashtra – reg.
Highlights / Catch Notes
Income Tax
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Agricultural income or not - turnkey contract of plantation - to create and develop plantations, rock gardens etc. for companies/institutions - The consideration received cannot be classified as agricultural income under 2(i)(a)(iii) - HC
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Eligibility to registration to the Assessee u/s 12AA and u/s 80G - The mere fact that the Assessee had received service charges from the various organizations for conducting programmes would not convert its essential function to that of a business - HC
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Accrual of interest income on FD's - compensation and interest was not final, but pending the decision of the High Court - it is an accepted position that the right to receive the interest from the fixed deposits already accrued to the appellant-assessee - amount is taxable in the hands of assessee - HC
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Royalty - exchange gain - Income attributable to royalty and interest remitted from Malaysia after retaining in Malaysia for sometime - income is taxable in India - HC
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Grant of exemption under section 10(23C)(vi) - date of grant of registration - The registration will take effect from the date of application - HC
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Levy of penalty u/s 271FA - failure of the appellant in furnishing AIR in time - appellant had not established any reasonable cause for not filing AIR within time - penalty confirmed - HC
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Deduction u/s. 80-IA(4)(ii) - telecommunication services - infrastructure facilities - A wholesale purchaser of bandwidth cannot be equated with an undertaking providing infrastructure facilities i.e. broadband network and Internet services.
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Eligibility to exemption u/s 10B - whether duty draw back / export incentive is eligible for deduction / exemption - Held Yes
Customs
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Re-export of prohibited goods - The consignment having contained `prohibited goods', which were confiscated in terms of Section 111 (d) of the CA, the Petitioner is not entitled for re-export of the same without payment of demurrage/ground rent - HC
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The “removal” and “clearance” cannot be equated to clear the goods for home consumption under Section 47 of the Customs Act. The permissions to clear the goods would not be in violation of Section 111(j), which is applicable to “removals” and not to the “clearance”. - HC
Service Tax
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CENVAT credit - input service distribution - credit in respect of input services utilised at the R&D centres of the appellant company and transferred to factory through input service distribution mechanism - credit allowed.
Central Excise
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CENVAT credit - appellants are drawing water from various dams in the vicinity of factory and pipelines have been laid from the tanks to the mines - denial of credit on the ground that the pipes were not used in the factory of the appellant - Credit allowed.
Case Laws:
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Income Tax
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2017 (8) TMI 387
Penalty u/s 271AAA - manner of undisclosed income derived - jurisdictional requirement - ITAT deleting the penalty imposed - Held that:-As no specific query had been put to the Assessee by drawing his attention to Section 271 AAA of the Act asking him to specify the manner in which the undisclosed income, surrendered during the course of search, had been derived. The CIT (A), therefore, relying on the decisions of this Court correctly held that the jurisdictional requirement of Section 271AAA was not met and also crightly confimed by ITAT - Decided against revenue.
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2017 (8) TMI 386
Sale of property by the bank under SARFAESI Act of 2002 - Right of the Income Tax department over the property - Attachment order by IT department since 1976 - challenge to the sale conducted by the bank - Held that:- The same has not been produced from any of the pleadings before any of the forai before which the parties are litigating. As noted above, there are at least two writ petitions pending which does not enclose the order of attachment dated February 23, 1976. When the writ petition was taken up for hearing noticing such fact, a request was made to the department to produce such order of attachment. The department had filed a supplementary affidavit. However, the order of attachment dated February 23, 1976 has not seen the light of the day. The order of attachment dated February 23, 1976 is however referred to in the diverse correspondence issued on behalf of the Income Tax Authorities and as late as in 2016. It is not understood how an Income Tax Authority is in a position to write the letter on the basis of an order of attachment dated February 23, 1976 as late in 2016 is unable to produce the same when required at the time of hearing. The order of attachment dated February 23, 1976 is required for the purpose of understanding the scope, ambit and extent thereof. It may or may not relate to an immovable property. It may relate to the rent receivable in respect of the immovable property or anything otherwise. Without the order of attachment being actually placed for consideration any exercise in trying to understand the scope, extent and ambit of the order of attachment would be an exercise in futility. It would be in the rem of speculation. The foundational basis therefore is not available to the Income Tax Department. The bank had proceeded to put up an immovable property for sale under the provisions of Act of 2002. The bank had sold 1/9th share in an immovable property without taking actual physical possession thereof. The act of sale is under challenge in a proceeding pending before the Debts Recovery Tribunal, Kolkata. The borrower has raised various valid points which impinge upon the validity of the sale conducted by the bank. They are however to be looked at by the Debts Recovery Tribunal, in accordance with law.
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2017 (8) TMI 385
Eligibility for exemption u/s 10(20A) - scope of development - assessee is a development authority - commencement of business - functions performed by assessee under the VIDC Act - Held that:- Hon’ble Supreme Court in the case of Gujarat Industrial Development Corporation [1997 (8) TMI 3 - SUPREME Court] held that the word “development” in Section 10(20A) of the Act should be understood in its wide sense and that schemes establishing industries help in accelerating development and that, therefore, in the said case the appellant- Corporation was held as being entitled to the exemption. It was also held by the Hon’ble Supreme Court that Section 10(20A) of the Act was meant for protection of public bodies created under law for the purpose of developing urban or rural areas for public good. It was also held that the said provision if interpreted rigidly and narrowly, would result in the anomaly of bringing such public bodies within the tentacles of income-tax liability. The Tribunal has held that as per the law laid down in the context of Section 10(20A) of the Act, it is not necessary that a direct nexus is to be established with the purpose of satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages and that an indirect nexus would suffice. Tribunal has correctly found that the functions performed by the respondent- assessee under the VIDC Act result in facilitating the “development” of cities, towns and villages because its actions make available drinking water as also electricity through hydro-electric projects. Apart from this, the respondent- assessee- Corporation is involved in activities of flood control and resettlement of displaced persons, thereby showing that there is a nexus with developmental activities. The Tribunal has analysed the provisions of the VIDC Act and rendered a finding that the respondent- assessee falls within the scope of Section 10(20A) of the Act. The Tribunal on fresh consideration of the facts in the impugned order found that the respondent-assessee- Corporation, upon it being set up under the VIDC Act, took over the projects concerning irrigation development in the State. It further found that even before the projects were taken over by the assessee, some portion of the canals were completed and water supplied to various fields and water charges were being collected. In fact it is the assessee's case before the Tribunal that it had received consideration of ₹ 1.12 lakhs on sale of water during the subject assessment year. In fact, the object of the assessee is to promote irrigation projects, supply of water by canal etc. as can be seen from Section 18 of the VIDC Act. This itself is the business of the respondent-assessee. The fact that existing canal networks and other activities for taking forward the irrigation projects were carried out by the respondent-assessee in the subject assessment year, would not detract from the fact that the assessee had already commenced its business. It has been found on facts by the Tribunal that the respondent -assessee- Corporation had commenced business. The question as to when an assessee can be said to have commenced business is a question of fact and no universal test can be laid down. The impugned order is not shown to be perverse. Therefore, we do not find any reason to interfere with the said finding of fact of the Tribunal. - Decided in favour of assessee.
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2017 (8) TMI 384
Agricultural income or not - turnkey contract of plantation - to create and develop plantations, rock gardens etc. for companies/institutions - splitting the income derived from the turnkey contract of plantation in two different stages - income received at the second stage - interest in land - executors of trust - Held that:- Executor had a right to receive remuneration for management of the trust and its properties. The Assessee's contention was that the income received by him is agricultural income was negatived by the Apex Court in Maharajadhiraj Sir Kameshwar Singh .vs. CIT [1960 (10) TMI 5 - SUPREME Court] as it held that he had no interest in the land and what the Executor received was the salary/remuneration to take care of the properties of the trust. The aforesaid decision is sought to be distinguished by the appellant on the ground that the appellant is deriving its income from actually cultivating the land. The income received is for agricultural activity and for no other activity. This distinction does not take note of the fact that the activity carried out by the appellant would not decide whether the remuneration received is agricultural income or not, but whether the income is derived from land. For any income to be classifiable as agricultural income, it has primarily to be derived from land In the present facts, no agricultural income is derived by the appellant from the land. It receives consideration for providing Services under the contract dated 23.7.1999. For providing Services relatable to agricultural operations is still not income derived from the land. The words “derived from” would mean direct linkage/immediate source of income and not an indirect source of income. - Decided in favour of revenue. Income fall under Section 2(1A)(b)(ii) - agricultural income - nature of income - Held that:- So far as activity carried out at Stage-II is concerned, there is no evidence on record to indicate that taking care of the plants after they have been transplanted on the land owned by the WCL would be an activity ordinarily employed by a cultivator in taking care of the plants to render it to be fit to be taken to the market. On a bare reading of subsection, the burden would be upon the appellant to show that it is a cultivator and similar activities are being carried out by cultivators or receiver on rent in kind and this activity of taking care of plants at Stage-II is to render the produce fit to be taken to the market. Therefore, in the present facts, even if one assumes that the appellant is a cultivator, yet, in absence of any evidence on record that the activity carried out by it at Stage-II is ordinarily carried out by a cultivator to render the produce fit to be taken to the market. Therefore, the income cannot fall under Section 2(1A)(b)(ii) of the Act. We note that for Section 2(1A)(b)(iii) of the Act to apply the income should be derived from land by the sale of agricultural produce. In this case, admittedly, the appellant/asseessee has not sold any agricultural produce even if one assumes agricultural produce has derived from the the land of WCL at stage II. The consideration received cannot be classified as agricultural income under 2(i)(a)(iii) of the Act. The income received by the appellant is for rendering of Service and not for carrying out of operations as listed in Section 2(1A)(b)(ii) or (iii) of the Act.- Decided in favour of revenue.
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2017 (8) TMI 382
Entitlement for deductions as claimed under Section 80 IB and 80 HHC - adherence to four conditions contained in Section 80 1B(2) - industrial undertaking manufactures or processing the articles or things - assessee dealing with the software - number of employees recruited - Held that:- Tribunal, after having carefully perused the record, rightly concluded that since case relates to assessment year 2001-02, the number of employees at the time of survey on 19.2.2002 is not important since the previous year relevant to the Assessment year under consideration ended on 31.3.2001, as such, the employees in the year ending on March 31, 2001 were required to be considered to decide whether the assessee employed the requisite number of workers in the industrial undertaking or not. Learned Tribunal, after having peeped into the record, carefully examined/analyzed evidence adduced on record by the assessee vis-à-vis order having been passed by Assessing Officer and concluded that the majority of the employees were having the technical educations who were engaged in the manufacturing process i.e. in development of the software and it is not necessary that each and every employee alone should do all the works in the manufacturing process. Assessing Officer failed to place on record any material to substantiate that assessee had not employed the workers as mentioned in the list dated 31.1.2004 for the period relevant to the assessment year under consideration and merely on the basis that the old employees were not there at the time of survey, rejected the claim of assessee for deduction under Section 80IB. Mumbai Bench ‘C’ in the case of ISBC Consultancy Services Ltd. vs. DCIT (2002 (8) TMI 840 - ITAT MUMBAI) has already held that process of customization of software amounts to manufacture. In case referred above, learned Income Tax Appellate Tribunal held that rendering standard software operational by adding new programs, keeping in view the commercial needs, requirement and applications to be implemented by the customers, would amount to manufacture and further for the purpose of Section 10A, since manufacture includes ‘any process’ and as such customization of software would be eligible for the deduction under Section 10A. Learned Appellate Tribunal in the aforesaid case has categorically held that development of software falls within the definition of production as defined under Section 10A and 10B. It also emerge from the record that similar view has been taken by learned Income Tax Appellate Tribunal Hyderabad Bench ‘B’ in the case of Infotech Enterprises Ltd. vs. JCIT, (2002 (5) TMI 217 - ITAT HYDERABAD-B ). Learned counsel representing the appellant-department was unable to dispute aforesaid findings returned by learned Income Tax Appellate Tribunals Mumbai and Hyderabad Benches in cases referred above and as such ratio laid down in the aforesaid cases were rightly applied in the instant case by the learned Income Tax Appellate Tribunal Chandigarh Bench. Though this Court, after having gone through material adduced on record by appellant-department vis-àvis impugned order passed by learned Appellate Tribunal, is of the view that no substantial question of law arises for determination of this Court, but otherwise also, as has been discussed hereinabove, learned Tribunal has correctly dealt with each and every aspect of the matter. This Court, after having carefully examined the text of questions of law formulated in the appeal vis-à-vis findings recorded by learned Appellate Tribunal, find that questions framed by the appellant-department are pure questions of fact, which definitely cannot be looked into in the present proceedings, and as such present appeal deserves to be dismissed. Section 260-A of the Income Tax Act, 1961 provides that “An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal before the date of establishment of the National Tax Tribunal, if the High Court is satisfied that the case involves a substantial question of law. - Decided in favour of assessee
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2017 (8) TMI 381
Grant of registration u/s 12AA - proof of charitable activities - non commencement of business - Held that:- Issues raised in this appeal are squarely covered by the case in Commissioner of Income Tax-II Vs. R.S. Bajaj Society [2014 (1) TMI 761 - ALLAHABAD HIGH COURT] stating that the registration under section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity - At this stage, only the genuineness of the objects has to be tested and not the activities, which have not commenced - The enquiry of the Commissioner of Income-tax at such preliminary stage should be restricted to the genuineness of the objects - Decided against Revenue.
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2017 (8) TMI 380
Eligibility to registration to the Assessee u/s 12AA and u/s 80G - proof of charitable activities - Held that:- ITAT has observed that the genuineness of the activities of the Assessee stood established and that the ingredients of Section 12AA of the Act stood satisfied. This finding has not been shown to be perverse by the Revenue. It is in fact found by the DIT (E) that the activities carried on by the Assessee did fall under the last limb of Section 2(15) of the Act, that is, for advancement of any other object of general public utility. The mere fact that the Assessee had received service charges from the various organizations for conducting programmes would not convert its essential function to that of a business and this is what has also weighed with the ITAT to finally accept the case of the Assessee. Consequently, the ITAT had rightly directed the DIT (E) to grant registration to the Assessee under Section 12AA and exemption under Section 80G of the Act. - Decided in favour of assessee
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2017 (8) TMI 379
Accrual of interest income on FD's - compensation and interest was not final, but pending the decision of the High Court - Correct Appreciation of judgment of Paragon Construction (I) Private Limited .vrs. C.I.T. (2004 (9) TMI 39 - DELHI High Court) - Held that:- In the present facts although the interim order allowed the assessee to withdraw the amount of ₹ 63.33 lakhs, there was no stipulation in the interim order that in case the appellant loses, she was obliged to return the amount to the State along with interest. Therefore, the facts in the present case are completely distinguishable from the decision of the Delhi High Court in Paragon Construction (2004 (9) TMI 39 - DELHI High Court). The requirement of returning the amount along with interest thereon by a subsequent order of the Court is uncertain. Therefore, such an uncertain event cannot by itself divest the accrual of interest income on the fixed deposit in subject assessment year in the hands of the appellant-assessee. The interest if awarded at the final hearing would not necessarily be related to the interest earned on the fixed deposit in the absence of any such direction being made in the interim order. Thus the impugned order of the Tribunal has correctly held that the decision of the Delhi High Court in Paragon Construction (supra) would have no application in view of the above distinction to the present facts. In the present case it is an accepted position that the right to receive the interest from the fixed deposits already accrued to the appellant-assessee. In such circumstances, the interest on the fixed deposit would be chargeable to tax, as sought to be done by the Assessing Officer under the head income from other sources. Principle of the restitution as provided under Section 144 of the Civil Procedure Code applicability - Held that:- An application for restitution may or may not be made by the successful party. In any event even if application is made, the benefit which the assessee would have gained out of benefit/income out of the amount of ₹ 63.33 lakhs would be net of tax. In those circumstances, the requirement for the appellant to pay to the State would be only the net amount received by her after payment of taxes due. Thus we find no merit in the submission that no tax is payable on the income earned on the fixed deposits as the same could be subject to proceedings of restitution under Section 144 of the Code of Civil Procedure. Appeal decided in favour of revenue.
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2017 (8) TMI 378
Royalty - exchange gain - Income attributable to royalty and interest remitted from Malaysia after retaining in Malaysia for sometime - Taxability in India - Indo-Malaysian DTAA - system of accounting followed - Conversion of Malaysian currency into Indian currency - Held that:- Revenue has correctly placed reliance upon the Accounting Standard AS11 issued by the Institute of Chartered Accountants of India which indicates that any benefit derived on account of currency fluctuation after the year of accrual is to be considered as income/expense in the period in which they arise. The Apex Court in Woodward Governor India (P) Ltd. (2009 (4) TMI 4 - SUPREME COURT) placed reliance upon AS11 to hold that gain or loss made on account of rate difference in foreign exchange post the date of balance sheet has to be taken in the year in which the gain or loss has arisen on account of exchange rate fluctuation subsequent to close of the Accounting Year which records the accrual of income at the rate prevailing on the last date of the accounting year. The income has been earned in Malaysia on account of royalty and interest but the same is retained there and not brought repatriated to India immediately on the same accruing to the Appellant/assessee. This leads to a gain/loss in foreign exchange valuation. This gain/loss on account of foreign exchange variation would not bear the character of income on account of royalty and interest earned in Malaysia. This is so as the gain/loss on account of foreign exchange variation is not a part of royalty and interest nor is it any accretion to it. In this case, it is the generation of further income which is taxable in the subject assessment year when the variation in foreign exchange has resulted in further income in India to the Appellant/assessee. Although the Revenue would in cash system of accounting record the income only on receipt of the same, yet for the purposes of taxation it would split the amount received from Malaysia on account of royalty and interest in the year in which it arose/accrued at the rate prevailing then as one head of income and the income gained on account of exchange rate variation due to passage of time at the time of conversion as the other head of income. The Revenue would bring to tax the later gain arising on account of exchange rate variation to tax as income arising from a different source. The amount attributable to royalty and interest received from Malaysia on the basis of foreign exchange rate existing on the last date of the Accounting year in which this income would be receivable by the Applicant/Assessee as a different head of receipt excluded from tax by ADTT. Thus, we do not accept the above submission made on behalf of the appellant as the source of receipt is different and two fold. Decided in favour of revenue
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2017 (8) TMI 377
Registration of trust u/s 12A rejected - Trust Deed did not provide for a clause regarding dissolution of the trust - Held that:- The registration of the Trust has to be done on compliance of the provisions of Section 12AA of the Act. The authority is required to consider the genuineness of the activities of the Trust and the section does not lay down that unless and until the clause of dissolution of the Trust is incorporated in the Trust Deed, the Trust cannot be registered. The statute takes care of the apprehension as is shown by the Director of Income Tax (Exemptions). The authority has observed that in case the objects / activities of the Trust cannot be carried out and it has to be dissolved, the corpus and properties remain on the date of the dissolution transferred. The absence of the clause of dissolution in the Trust Deed would be in no manner an impediment in the operation of the statute. Section 55 of the Maharashtra Public Trust Act takes care of such contingency. The Tribunal in its order has considered the scope of Section 12A of the Act and has rightly passed the order.- Decided in favour of assessee.
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2017 (8) TMI 376
Addition u/s 14A - Rule 8D(2)(ii) applicability - revision us 263 - Held that:- As observed by the Tribunal that there was no interest expenditure which was available for apportionment in terms of Clause (ii) of sub-rule (2) of Rule 8D of the Rules, as the entire interest expenditure was directly related to earning of taxable income. The interest and loans borrowed were paid out of sale proceeds of land and the balance of the proceeds were invested in mutual funds which yielded income. This explanation is accepted by the Assessing Officer. The Commissioner on the other hand, has not pointed out as to how the said explanation of the assessee was wrong. - Decided in favour of assessee.
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2017 (8) TMI 375
Rejection of books of accounts - Applicability of section 145(3) - additions on account of excessive wastage - input/output ratio inconsistency - Estimation of wastage In Production of bone china wares - Held that:- Inconsistency which has been duly explained by the assessee vide letter dated March 26, 2004 and the second objection by the Assessing Officer was that the sister concern M/s. Bharat Potteries Ltd. has declared more yield and more gross profit, has also been explained by the assessee vide the same letter dated March 26, 2004. Therefore, the inconsistency in the input/output ratio in various months the reasons for which has been explained by the assessee, cannot be the basis for rejection of books of account. The yield and gross profit rate declared by the assessee can also not be the basis for rejection of books of account since M/s. Bharat Potteries Ltd. is manufacturing maximum of stoneware crockery and for many other reasons which were explained by the assessee vide its letter dated March 26, 2004 which was ignored by the Assessing Officer and the Assessing Officer has not pointed out any specific defects in the purchases, sales, opening stock and closing stock of the assessee and the Assessing Officer has not brought on record any cogent material to prove that the assessee has sold the under-production out of the books of account. The objection of the learned Departmental representative that the learned Commissioner of Income-tax (Appeals) has not relied upon the CGCRI report, Calcutta, the learned authorised representative has pointed out that in the same report it has been mentioned that the said organisation is not involved production practice and they are not sure to what extent their opinion will be useful for the purpose of the assessee and in such circumstances and facts of the case, the report of CGCRI, Calcutta alone cannot be the basis for rejection of the books of account and making an estimation of wastage - Decided in favour of assessee.
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2017 (8) TMI 374
Grant of exemption under section 10(23C)(vi) - date of grant of registration - Held that:- The registration will take effect from the date of application. In our considered opinion, in view of the observation made by the Tribunal, the registration will be granted from May 30, 2002. The issue is answered in favour of the assessee.
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2017 (8) TMI 373
Levy of penalty under Section 271FA - failure of the appellant in furnishing AIR in time - Held that:- As categorically recorded by the Tribunal that the assessee had not established any reasonable cause for not filing AIR within time. The assessee also failed to file any documentary evidence supporting the version submitted by him. Thus, the Tribunal rightly held the penalty levied to be valid Learned counsel for the appellant was unable to demonstrate that when show cause notice was issued on 06.9.2010 asking the filer to show cause as to why penalty under Section 271FA of the Act be not imposed and the reply was sought by 27.7.2010, the order imposing penalty under Section 271FA of the Act having been passed on 06.01.2011, it could not be shown that the order was beyond limitation as it was hit by Section 275(1)(c) of the Act. No error in the findings recorded by the Tribunal could be established or it could not be successfully controverted regarding the applicability of the decision rendered in the Joint Registrar, Sangat, District Bathinda’s case (2014 (9) TMI 499 - PUNJAB & HARYANA HIGH COURT ). - Decided against assessee.
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2017 (8) TMI 372
Revision u/s 263 - disallowability of expenditure on account of sales tax - Compound Levy Scheme applicability - Held that:- In the present case, once the assessee had shown that the sales appearing in the balance-sheet were inclusive of sales tax, there was no occasion to disallow the claim made by the assessee relating to payment of sales tax, on the basis of Compound Levy Scheme. The Revenue was unable to produce any material on record to substantiate that the assessee had excluded the amount of sales tax from the sales. Once that was so, it could not be said that the order sought to be revised was either erroneous or prejudicial to the interests of the Revenue. Thus, both the limbs of section 263 of the Act were not satisfied. Consequently, the exercise of revisional jurisdiction by the Commissioner of Income-tax under section 263 of the Act was unwarranted. In view of the above, it is concluded that no illegality or perversity could be shown by the learned counsel for the appellant-Revenue so as to hold that the assumption of revisional jurisdiction by the Commissioner of Income-tax under section 263 of the Act was justified. - Decided in favour of assessee.
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2017 (8) TMI 371
Disallowance of deduction claimed u/s 80P - income of interest from the permanent members - Held that:- The assessee has claimed income of interest from the permanent members and also from the other Cooperative Societies only as deduction u/s 80P of the Act, the case is clearly covered by the above decision in Ranga Reddy Judicial Employees Mutually Aided Co-operative Credit Society Ltd [2015 (5) TMI 751 - ITAT HYDERABAD ] as held Section 80P(2)(d) is applicable to the assessee-society in respect of incomes by way of interest or dividends received by the co-operative society from its investments with any other co-operative society. Therefore, in the case of the assessee-society, sub-section (4) is not applicable and deduction under section 80P(2)(d) is certainly eligible to the assessee. In the assessment of a co-operative bank, the incomes may not be exempt after April 1, 2007 by virtue of sub-section (4), but the assessee is not a co-operative bank. Therefore, the Revenue ground is not only illogical but also not supported by the facts of the case. Moreover as seen, the recommendation made by the Assessing Officer to the learned Commissioner of Income-tax in their internal correspondence is extracted as a ground. This also indicates non-application of mind either by the Assessing Officer or by higher authority like Commissioner of Income-tax. - Decided in favour of assessee.
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2017 (8) TMI 370
Reopening of assessment - Addition u/s 68 - providing bogus entries - receipt of loan / advance - non charging of interest by the lender and cash deposit in the account of the lender immediately before the advancing the loan - Held that:- Necessity of proving the case to the hilt,as required in criminal proceedings,is not required to determine the tax liability of an assessee. AO's are entitled to take notice of human behavior and surrounding circumstances and draw reasonable inferences in matters where the transactions entered in to by an assessee reveal that course of events of such a transaction is not as per the prevailing market practice or as per that particular business Considering the information received from Calcutta about Basant any prudent person will arrive at prima facie belief that the assessee had not disclosed its total income for the year under consideration.The reasons recorded by the AO clearly prove application of mind by him. Not only reasons were supplied to the assessee,the AO had also dealt with objections raised by it. There is no lacunae in the procedure followed by the AO. In this matter intimation was issued u/s.143(1)so,there is no question of formation of any opinion by the AO or change of opinion. The prima facie fact of income escaping assessment was there,so,in our opinion the FAA has rightly upheld the re-opening of the assessment.Juridictional issue raised by the assessee (GOA-1)is decided against it. FAA has given a categorical finding of fact that ₹ 15 lakhs(approximately)were deposited in the bank account of the lender before it issued cheques to the assessee.This fact cannot be brushed aside lightly especially when it is not brought on record that as to a how a Kolkata party agreed to advance loans to the assessee without help of any broker. It is not the case of the assessee that the creditor is also in the same line of business or that their business relationship is very old.Soundness of balance sheet of the lender only proves capacity of the lender but not the genuineness of the transaction. No authority is required to hold that bank transaction do not prove genuineness of the loans. No agreement was produced before the departmental authorities or us that could justify non charging of interest by the lender. There is prima facie evidence against the assessee which it had failed to rebut and being un-rebutted the departmental authorities have used the evidences against the assessees by holding that genuineness of the transaction was not proved. Assessee is trying to convert no proof in to good proof and here is an inherent weakness in the explanation filed by the assessee. So,we hold that the explanation offered by the assessee is unconvincing and deserves to be rejected - Decide against assessee.
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2017 (8) TMI 369
Addition on account of slow moving, non-moving and obsolete stores written off - Held that:- We find that the issue in dispute is squarely covered by the decision of Hon’ble Jurisdictional High Court in the assessee’s own case Once the engineering expert examined all the heads of stock valued them, to the best of his judgment, and in the absence of any finding that the 5% was not relatable to such valuation without an alternative valuation or that it is a flawed method of valuation, the AO could not have rejected what was offered as the reduced value of the Slow- Moving Stock. There is nothing on the record to doubt the bonafides of the valuation. In the event of likelihood of the stocks realizing a higher amount than the value shown, the same would be reflected in the subsequent year in the income or profit of the assessee, the Revenue’s contention is without any merit. Addition on account of defined contribution to Pension Scheme - Held that:- We find that the issue in dispute is squarely covered by the decision of Hon’ble Jurisdictional High Court in the assessee’s own case held that making of a provision to meet a contingent liability need not be in order to meet such liability entirely in the year of its creation. The provision having been made on the basis of an actuarial report, which is not shown by the Revenue to be unacceptable on the ground that it is not based on known accounting of financial principles, the mere fact that the actual pay out in a particular AY may be far less than the provision cannot provide a justification to deny the deduction. The Court concurs with the view of the CIT(A) and ITAT that the provisions does not attract Section 43B of the Act. The concurrent finding of the CIT(A) and the ITAT on the above issue does not give rise to any substantial question of law. Interest accrued on advance given to M/s. Karsan - Held that:- We find that the issue in dispute is squarely covered by the decision of Hon’ble Jurisdictional High Court in the assessee’s own case as held there is no dispute that the ICA has awarded interest to the assessee @5% p.a. on the advance made to M/s. Karsan. It is also not disputed that the assessee could not make recovery against the advance (principal amount) of ₹ 130.69 crores, an amount of ₹ 1.05 crores only could be recovered leaving balance advance of ₹ 129.64 crores which could not be recovered till date. The notational interest awarded by the International Court of Arbitration, which has now attained finality is a hypothetical income which cannot be subjected to tax. Merely because the saie amount has been awarded by way of an order, does not mean that the assessee has received such income. The assessee followed mercantile system of accounting where there cannot be a situation of hypothetical income being taxed. Appeal of the Revenue is dismissed.
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2017 (8) TMI 368
Levy of penalty u/s. 271(1)(c) - non application of mind by AO - Held that:- The notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 is untenable as it suffers from the vice of non-application of mind having regard to the ratio of the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shroff (2007 (5) TMI 198 - SUPREME Court) as well as the judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (2017 (1) TMI 1292 - BOMBAY HIGH COURT). Thus, on this count itself the penalty imposed u/s 271(1)(c) of the Act is liable to be deleted. - Decided in favour of assessee.
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2017 (8) TMI 367
Deduction u/s. 80-IA(4)(ii) - telecommunication services - infrastructure facilities - assessee is mere trader in purchasing and selling of internet services or is engaged in providing ISP - business of dealing in bandwidth - network and support services - eligibility to claim deduction where excess of expenditure is more than income - Held that:- A wholesale purchaser of bandwidth, in our opinion, cannot be equated with an undertaking providing infrastructure facilities i.e. broadband network and Internet services. In case of deductions the onus on the assessee is much more higher. Claiming a deduction and filing necessary evidences in its support are not ‘mundane matters’-rather same are the foundation stones of claim of deduction. There is no credible material on record before any of the authorities, including us, to show that procurement and sale of bandwidth represented rendering Internet services as envisaged by the provisions of section 80IA of the Act. No evidence that could prove that the assessee was not engaged in purchase and sale of bandwidth. In short,income earned by the assessee account of sale of bandwidth is not derived from the eligible business and it is not entitled for claiming deduction in that regard. As far as network and support service fees it is found that same were received from RGSL for providing Internet services to its customers in India. It is also found that the assessee had paid similar fees to RDSIPL for installing PoP for rendering Internet services to its customer. Thus,the only income for rendering Internet services is the network and support fee of ₹ 2.21 crores. But if the expenditure of ₹ 3.06 crores on network and support fees paid is considered it would result in a loss on operation of Internet services provided by the assessee. In these circumstances,we are of the opinion that the FAA has rightly held that assessee was not entitled to any deduction u/s. 80 IA of the Act. - Decided against assessee.
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2017 (8) TMI 366
Capital gain on the total sale consideration received - re-computation - sale of land - taxabiltiy of amount shown in the unregistered MOU - share of other party - STCG - Held that:- The assessee has entered into an unregistered MOU with Shri. Praveen H. Thakkar, and sold the impugned land for a consideration of ₹ 1 crore. As per Clause no. 12 of the said MOU, the parties agreed that any sale consideration received on subsequent sale of the said property over and above ₹ 1 crore could be retained by Shri. Praveen H. Thakkar. Accordingly, the assessee has computed short term capital gain by taking into account sale consideration of ₹ 1 crore, and after reducing the cost of acquisition and expense of transfer, computed short term capital gain of ₹ 31,16,070/-, and disclosed 50% in his return of income. We further observed that the assessee has filed necessary details and also an affidavit from Shri. Praveen H. Thakkar, which indicates that Shri. Praveen H. Thakkar has considered remaining consideration and offered resultant profit for taxation in his return of income. As per the details available on record, we find that the entire sale consideration of ₹ 3,42,78,125/- is suffered to tax in the hands of the assessee and Shri. Praveen H. Thakkar. We further noticed that from the impugned transactions there is no loss of revenue due to the Govt. exchequer. The A.O ignored intermediary MOU between the assessee and Shri. Praveen H. Thakkar, merely on the ground that the said MOU is unregistered. We do not agree with the findings of the A.O, for the reason that merely because the MOU is unregistered, no adverse inference can be drawn in view of other documentary evidences supplied by the assessee which are capable of verification. The assessee has filed all evidences to prove the transaction in his hands as well as in the hands Shri. Praveen H. Thakkar. Assessee’s version is also strengthened from the fact that at the time initial purchase of land by the assessee and his brother Shri. Pravin H. Thakkar had advanced loan to the assessee’s brother Shri. Nitin M. Faria. A.O was completely erred in ignoring the evidences filed by the assessee to recompute the short term capital gain by taking into account total sale consideration received from M/s. Iswar Land Pvt. Ltd. The CIT(A) after considering relevant details, has rightly deleted additions made by the A.O towards recomputation of short term capital gain. - Decided against revenue
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2017 (8) TMI 365
Levy of penalty under section 271(1)(c) - advance from allottees received - no return of income had been filed prior to the date of search, and had been only after the issue of notice under section 153A - Held that:- The assessee having returned the additional income of ₹ 153.99 lakhs in pursuance to notice under section 153A, which it admits as having done voluntarily, how, we wonder, is it not a case squarely governed by the said Explanation 5A. The assessee in fact admits to the sum credited to the account "advance from allottees" as representing its income. The same, it needs to be appreciated, does not explain, much less satisfactorily, the nature and source of the said credit, so that section 68, deeming the same as the assessee's income for the current year, shall apply with full force. Who are the allottees ? What is their creditworthiness? Have they confirmed paying the same, representing the money paid to the sellers of land ? Why, again, if they have, is the amount not reflected as the sale proceeds of the relevant real estate/property, having been recovered from the allottees by the assessee as a part of the cost, or otherwise charged to them ? This is all the more so as the assessee has claimed and been allowed deduction (in computing its regular profit) in respect of expenditure of its business by way of on money paid to the sellers of land, as "development charges". How does it, in any case, represent a liability of the assessee? In fact, to the extent the assessee has received money, duly entered in its books of account, the same is also covered under clause (i), i.e., besides clause (ii), of Explanation 5A. The facts and circumstances of the case are squarely covered by the said provision, even as observed by the Bench during hearing, to no satisfactory answer by the learned authorised representative. The learned Commissioner of Income-tax (Appeals) has in our view completely misled himself in the matter by not considering a direct provision of law, clearly applicable in the facts and circumstances of the case. In fact, that the Assessing Officer has not referred to it is not relevant inasmuch as the provision of law (section), is to be read along with Explanation appended thereto, with there being no estoppel against law (also refer : CIT v. Durga Prasad More [1971 (8) TMI 17 - SUPREME COURT]). The scope for the non-application of the said Explanation is only where the assessee does not admit the same as its income, which then becomes a subject-matter of dispute between the assessee and the Revenue. Considered either way, irrespective of whether the assessee has filed, or not filed, the return of income on November 30, 2006. Both Explanation 5A, as well as Explanation 1 to section 271(1)(c) are, accordingly, attracted in the facts and circumstances of the case for the said sum. Disallowance under section 40(a)(ia) - Commissioner of Income-tax (Appeals) has directed deletion on the basis of the corresponding amount being not payable as at the year-end following Merilyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ). The plea is valid. However, we observe no explanation by the assessee to that effect ; rather, whatsoever. And, consequently, absence of any finding by any authority. The matter would accordingly have to go back to the file of the Assessing Officer to determine as a matter of fact whether the amount disallowed outstands, in whole or in part, as at the year end, so that to the extent it outstands, no penalty would be exigible. Where, and to the extent not, an absence of any explanation would justify the levy of penalty under section 271(1)(c).
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2017 (8) TMI 364
Loan taken utilised for acquisition of debenture - Deduction under section 57 - 'Income from other sources' - CIT-A allowed the claim - Held that:- As per the provisions of section 57 of the Act any expenditure laid out or expended wholly and exclusively for the purpose of making the income under the head "Income from other sources" will be allowed as deduction. The assessee has borrowed the loan in the name of housing loan but it has been utilised for investing in debentures on the interest income. Therefore, the interest expenditure incurred on borrowed loan as an expenditure laid out wholly and exclusively for the purpose of earning the interest of income under the head "Income from other sources". From the judgement of case Rajendra Prasad Moody [1978 (10) TMI 133 - SUPREME Court] held that the expenditure to be deductible under section 57(iii) must be laid out or expended wholly and exclusively for the purpose of making or earning such income. Therefore, we are of the view that the learned Commissioner of Income-tax (Appeals) is justified in allowing the claim of the assessee. We also find that the learned Commissioner of Income-tax (Appeals) has also discussed this issue in his order regarding the corporate veil and we are of the view that the assessee's predominant intention of investment in debentures was to obtain, controlling interest in the company on the ground that rate of interest to HDFC Ltd. is 10.5 per cent. wherein the assessee made the interest at 8.18 per cent. Therefore, the transaction carried out by the assessee cannot be considered to be sham and colourable devices. Therefore, we are of the view that the learned Commissioner of Income-tax (Appeals) is justified in his action. - Decided in favour of assessee Financial expenses disallowed - disallowed on the ground that the assessee has given interest-free advance to the related concern - Held that:- Where an assessee has his own funds as well as borrowed funds, then a presumption can be made that for non-business purposes funds have been made out from own funds and borrowed funds have not been used for the non-business purposes. Moreover, the assessee has established that the borrowings have been utilised for the purpose of which it was borrowed, no part of interest on this borrowing should be disallowed even if the assessee has advanced any interest-free advances. It is also a fact on record that the assessee had interest-free fund to the tune of ₹ 6,77,75,208 and out of interest-free funds the assessee has given the loans on which the interest has not been charged is of ₹ 51,35,817. Therefore, no disallowance can be made. Moreover, we find that the assessee has utilised this borrowings for the purpose of business. Therefore as per the decision of the hon'ble jurisdictional High Court in the case of CIT v. Bombay Samachar Ltd. [1969 (6) TMI 2 - BOMBAY High Court] which supports the case of the assessee, we are of the view that the learned Commissioner of Income-tax (Appeals) is justified in allowing the claim - Decided in favour of assessee Allowable business expenditure - car gifted to to Shefali Garodia ex employee - Held that:- Shefali Garodia was relieved from the assessee's office from August 16, 2008. The car was purchased on September 1, 2008 and in the same month of September 2008 it was transferred to Shefali Garodia's name. The terms of employment does not provide for giving any car to her. We find that the gift of car is purely gratitude. This expenditure was not incurred wholly and exclusively for the purpose of business. We also find during the course of hearing that whether the assessee has given cars to all his employees. The learned authorised representative fairly admitted that we have not given car to every employee. Therefore, we are of the view that it is a personal gift rather than a part of employment or contribution made to his business. We are of the view that every businessman is free to make the expenditure but it must be allowable subject to that it was wholly and exclusively for the purpose of business. Therefore, we are of the view that the learned Commissioner of Income-tax (Appeals) is justified in his action and our interference is not required.- Decided in favour of assessee Disallowance of amount paid to Chatrapati Shivaji Maharaj Vasthu Sangrahalaya and to American India Foundation - Held that:- We find that the assessee had made payment to Chatrapati Shivaji Maharaj Vasthu Sangrahalaya as towards co-publication of the book named Indian Life and Landscape By Western Artists. The assessee has been provided 100 copies of the said book which the assessee has presented to the foreign and Indian clients who are coming to India for professional work such as business law and international taxation. Therefore, we have verified the copy of the relevant pages of the book. We are of the view that this expenditure is a business expenditure, therefore we allow the same. The assessee has paid to International Fiscal Association (IFA) which comprises of tax professionals from world over and NDA has initiated IFA-Nishith Desai Center for thought leadership in international taxation to look into the emerging issues in international taxation and find new generation solutions for cross border tax issues in a fair and equitable manner. Therefore, we are of the view that this is a genuine expenditure for professional development. Therefore, we allow the same. Hence, this ground is allowed in favour of assessee Allowable business expenditure - Held that:- We find that the assessee has given the break-up of the total expenses amount of ₹ 96,70,308 pertains to sponsorship expenses and 20 per cent. amount for gift. The assessee has produced the evidence that out of the total expenses of ₹ 96,70,308 expenditure towards the conference and sponsorship of seminars and all the expenditure pertain to hotel, food and travelling expenses. Therefore, this expenditure was verified by the learned Commissioner of Income-tax (Appeals) and the learned Commissioner of Income-tax (Appeals) has rightly disallowed ₹ 27,35,250 and our interference is not required.- Decided in favour of assessee Allowable electricity expenses - legal owner of property - Held that:- We find that the assessee submitted that though the premises belongs to Prantik Strategic Advisors Pvt. Ltd. but the assessee is one of the shareholders and Swathi Desai is also a director of the said company. Since the assessee-company was facing shortage of space to accommodate their employees, they have used the office premises of Prantik Strategic Advisors Pvt. Ltd. adjoining of the assessee's existing office. Therefore, the entire electricity expenses were borne by Nishith Desai Associates. The Nishith Desai Associates does not pay any compensation to Prantik Strategic Advisors Pvt. Ltd. for using the said office premises, therefore they have paid the electricity bill. We are of the view that the learned Commissioner of Income-tax (Appeals) is justified in allowing the same.- Decided in favour of assessee Disallowance of the financial expenses - CIT-A allowed claim - Held that:- We find that the learned Commissioner of Income-tax (Appeals) has verified how much interest-free fund is available with the assessee and he has verified the balance-sheet at the end of the year and the learned Commissioner of Income-tax (Appeals) was of a view that the assessee has sufficient capital to give interest-free loans, therefore in our opinion the issue in controversy is covered by the decision of the jurisdictional High Court in the case of CIT v. Reliance Utility Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT]. Therefore, in our opinion the learned Commissioner of Income-tax (Appeals) is justified in his action and our inference is not required.- Decided in favour of assessee
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2017 (8) TMI 363
Assessment of income on estimation basis rejecting the books of account - addition @8% - rejection of books of accounts - project completion method - Held that:- As noticed from the learned Commissioner of Income-tax (Appeals) orders that, the assessee has not filed the returns for the assessment year 2014-15 and 2015-16 and not ascertainable whether the assessee has completed the project and admitted the taxable income relating to the above projects in the subsequent years. The authorised representative also did not furnish any information regarding the completion of project and admission of income in respect of the above two projects. In the absence of production of book of account, bills, vouchers true and correct income cannot be deduced. Therefore, we do not find any error in the order of the learned Commissioner of Income-tax (Appeals) and accordingly, we confirm the addition made by the Assessing Officer at the rate of 8 per cent. on the gross receipts. Estimation of income on accumulated gross receipts - Held that:- Since the substantial project works have been completed and the risks were transferred, the Assessing Officer estimated the income on the gross receipts accumulated till the end of the financial year 2009-10. From the commencement of the project till the assessment year 2010-11 and subsequent year, the assessee filed nil return and no income was admitted. The assessee has not submitted the details relating to completion of project and admission of income relating to the above projects. In the absence of books of account, the correctness of the expenditure could not be established. Therefore, only option available to the Assessing Officer is to estimate the income and complete the assessment. The assessee has not admitted any income in the earlier years and no evidence has shown regarding the admission of income in the subsequent years and the Assessing Officer held that the substantial risks have been transferred in the year under consideration. Therefore, we do not find any error in the lower authorities orders and we confirm the order of the learned Commissioner of Income-tax (Appeals) and dismissed the grounds of appeal.
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2017 (8) TMI 362
Revision u/s 263 - sufficient ground for cancelling the assessment - set off of the loss on the sale of ZEEL shares against the profit of sale of Cebbco shares - trustee was holding the shares in the name of the trust - an order erroneous and prejudicial to the interests of the Revenue - Held that:- Where the Assessing Officer do not agree with the assessee he should discuss the same in the assessment order so that the assessee should know the reasons thereon and file the appeal. In this case the Assessing Officer after examining the issue on the points as has been referred by the Commissioner of Income-tax preferred not to make the addition. Therefore, in our opinion there is no error in the order of the Assessing Officer if he has not discussed the issue relating to each and every issue in the assessment order. On this basis, it cannot be concluded that the Assessing Officer has not made any enquiry. It is only the query raised by the Assessing Officer and the submission made by the assessee will speak of where the Assessing Officer has applied his mind or not A perusal of the order passed by the Commissioner of Income-tax indicated that the assessment order passed by the Assessing Officer was cancelled on the ground that the Assessing Officer has not made proper enquiry and verification in respect of the issue as discussed above. This, in our considered opinion, cannot be sufficient ground for cancelling the assessment. While making the assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be touchstone of assessment order passed by him. No cogent material or evidence was brought to our knowledge by the learned Departmental representative which may prove that view taken by the Assessing Officer in the case of the assessee was unsustainable in law. Therefore, we are of the view that the order passed by the Commissioner of Income-tax is illegal and without jurisdiction. If the order passed by the Commissioner of Income-tax is sustained then this will permit the illegality to continue and the subsequent action is carried out on the illegal order is also illegal per se. - Decided in favour of assessee.
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2017 (8) TMI 361
Disallowance of payment of donation / charity - allowable business expenditure - - Held that:- It is to be noted that any expenditure incurred to earn the income is allowable, but the assessee states that it is unavoidable expenses to carry out business. If the assessees want to do any charity it is their wish to do so and cannot be treated as expenditure in the course of business, as there is no business exigency established and also these cannot be treated expended wholly and exclusively for the purpose of business as specified in sec.37(1) of the Act. Many times these donations are made so as to maintain social status rather than business necessity. Therefore, we are of the opinion that the lower authorities are justified in dismissing this ground of appeal. Disallowance of interest u/s.40A(2)(a) - excessive interest payment - assessee firm has paid interest to the relatives @ 18% p.a. as against assessee had availed bank loans for which interest paid is 13% - Held that:- For availing the loans from the banks, assessee has to give main security as well as collateral security and has to execute various loans documents and third party guarantee also. The procedures involved in availing loans from the banks are very cumbersome. While granting the bank loan, they will see the various factors like turnover of the assessee, security, marketing conditions, credit worthiness of the parties etc. and it takes long time to get a loan from banks. The bank is also charging compound interest method. Considering this, assessee availed, when it is required an urgent amount, loans from specified persons and which made the assessee to pay rate of interest @ 18% per annum and which is without executing any documents and assessee is able to get money at call. Being so, there is variation of 5%, which is higher than the bank rate of interest cannot be found that excessive or unreasonable as compared to the prevailing marketing conditions. Any market, provide borrowings interest ranging from 30 to 36%, as such in our opinion, the interest paid by the assessee to specified persons u/s.40A(2)(b) of the Act is very reasonable and the same to be allowed. Accordingly, we do not find any infirmity in the order of the CIT(Appeals) in allowing the claim of assessee. Accrual of liability - Disallowance in respect of claim of bonus redemption - passing of discount - Held that:- We do not find any merit, the assessee has provided the liability as soon as the first customer made first purchase, 1% of the first purchase value and liability to give discount to the customer accrued as soon as the first purchase was made. The only passing of discount to the customers is only at second purchase. The assessee is legally bound to pass the reward or discount to the customer as soon as the first purchase was made and if the customer does not make claim for such a discount, the accrual liability not stopped, the assessee is bound to honour its claim. Being so, the quantification of such liability is already determined. There is no dispute regarding quantification of such liability. In such circumstances, the ratio laid down by Supreme Court in the case of Bharat Earth Movers Vs. CIT (supra) is directly applicable to the facts of the present case. Accordingly, we have no hesitation in confirming the order of the CIT(Appeals) on this issue. Hence, this ground of Revenue stands dismissed.
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2017 (8) TMI 360
Addition of excess AMP expenditure - TPA - international transaction with its AE or not - advertisement marketing and promotion of the products manufactured by assessee for his business in India - Held that:- On perusal of the order passed by Ld. TPO, it is observed that he did not have benefit of judicial precedents now available, while dealing with the issue of AMP expenses. In some of these decisions AMP expenses has been held to be an international transaction and in some others as not, while in some others the matter has been restored for fresh consideration to be decided in the light of the decision of Sony Ericson (2016 (1) TMI 1234 - DELHI HIGH COURT) where there is an acceptance on behalf of the assessee regarding the AMP expenses being an international transaction. Under such circumstances it would be in the interest of natural justice just and proper, if the impugned issue is set aside to Ld.TPO, for fresh consideration of the question, as to whether there exists an international transaction of AMP expenses. - Grounds raised by the assessee stands allowed for statistical purposes. Determination of ALP of interest paid to AE - LIBOR rate - high degree of compatibility for benchmarking the loan rates on the basis of internal CUP - Held that:- Assessee has adopted “rupee” as currency in which interest is repaid. As Hon’ble court has already held that prime lending rate as applicable in India needs to be applied as the currency in which the loan has to be repaid is Indian currency. We agree with the submission advanced by Ld. Counsel for assessee that assessee is within the range of the prime lending rate considered by ld.TPO in the show cause notice. Respectfully following the decision in the case of Cotton Naturals India Pvt. Ltd (2015 (3) TMI 1031 - DELHI HIGH COURT), we do not find any need of adjustment in respect of the interest paid on FCD’s. Accordingly this ground raised by the assessee stands allowed.
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2017 (8) TMI 359
Eligibility to exemption u/s 10B - whether duty draw back / export incentive is eligible for deduction / exemption - Held that:- section 10B(4) of the Act is a complete code which provides a formula/mechanism for computing the profits of the business eligible for deduction u/s 10B of the Act - assessee is eligible for the claim of deduction on the export incentive received by it as per provision of section 10B (I) r.w.s. 10B(4) of the Act. - Decision of the Tribunal in the case of ITO vs. Smt. Shashi Sadh [2015 (1) TMI 512 - ITAT DELHI], wherein, the Tribunal, after considering the decision of ITAT Special Bench, Indore, in the case of Maral Overseas Ltd. vs. ACIT [2012 (4) TMI 345 - ITAT INDORE] - Decided in favor of assessee.
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Benami Property
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2017 (8) TMI 383
Judicial review by adjudicating authority - Prohibition of Benami Property Transaction Act, 1988 - Held that:- After providing due opportunity of hearing to alleged Benamindar, adjudicating authority may pass the order to declare the property as Benami Property and confirm the attachment order or he may hold that the property cannot be treated as Benami Property . In that case, he may revoke the attachment order. Pertinently, as per Sub-section (6) of Section 26, the adjudicating authority may at any stage of proceeding, either on the application of any party or suo-moto strike out the name of any property improperly joined or add the name of any person whose presence before the adjudicating authority may be necessary to enable him to adjudicate upon and settle all the questions involved in the reference. In this view, the principles of natural justice are codified in terms of Subsection (6) of Section 26 of the Act.The impugned order is subject to judicial review before the adjudicating authority. The order passed by the adjudicating authority can be assailed before the appellate tribunal constituted under Section 31 of the Act. The order of appellate tribunal can also be called in question by preferring appeal to the High Court within a period of 60 days. A microscopic reading of provisions make it clear that principles of natural justice are reduced in writing in the shape of amendment in the said act. The amended provisions contains a complete code in itself. In the present case show cause notice has been issued, opportunity has been given to the petitioner. The order impugned is provisional/tentative in nature. It is subject to judicial review by adjudicating authority. If order of adjudicating authority goes against the petitioner, the further forums of judicial review of said order is available to the petitioner before the appellate tribunal and then before this Court. Hence,against the tentative/provisional order, no interference is warranted by this court at this stage. As per the scheme of the Act, the petitioner can raise all possible grounds before the adjudicating authority. The adjudicating authority is best suited and statutorily obliged to consider all relevant aspects. Thus, at this stage no case is made out for interference.
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Customs
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2017 (8) TMI 348
Confiscation - penalty - misdeclaration of imported goods - It was further alleged in the SCN that the importers mentioned in the Bill of Entry were mere name-lenders and not the real persons who had made the imports - Held that: - there is lack of conclusive proof with regard to actual identification of ball bearings - the Revenue had failed to prove the presence of ball bearings in the two consignments covered by the aforesaid two Bill of Entries. The entire findings of the learned Tribunal including the liability imposed on the aforesaid two persons, which have not been challenged by them before this Court, is on a pure appreciation of the evidence and materials on record. The learned Tribunal being the last forum for determination of questions of fact and no perversity in the appreciation of the materials being discernible from the order of the learned Tribunal, we do not see how these appeals can be scrutinized any further. Neither do we find any substantial question of law in the appeals which would require to be authoritatively answered by this Court. We, therefore, do not find the order of the learned Tribunal to be, in anyway, open to correction. Appeal dismissed - decided against Revenue.
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2017 (8) TMI 347
Re-export of prohibited goods - demurrage/rent charges - Whether the Petitioner is permitted to re-export its consignment of health products without payment of demurrage/rent charges owed to the Cargo handling company? Held that: - There is nothing on record to support the case of the Petitioner that there was a bona fide mistake or that the goods were meant for Singapore and were wrongly brought to India. All the documents on record clearly reveal that there was a proper detailed invoice for the health products, which was raised on Visha Enterprises and was meant to be cleared by Visha Enterprises - Under Section 111 (d) of the CA, goods which are prohibited under any law for the time being in force, are liable to be confiscated. Such goods fall in the category of `prohibited goods' under Section 2 (33) of the CA and any import or attempt to import the same, entails confiscation. The ACC (Imports), having confiscated the goods, could not have permitted the reexport of the same, as per law, without the imposition of fine or penalty. The confiscation of goods having not been challenged by the Petitioner, nonimposition of penalty/fine is clearly erroneous and unsustainable. It is the admitted position that the consignment consisted of prohibited goods and the same having arrived in Delhi and having been confiscated, the Petitioner being the owner of the goods, has to take the responsibility for the same. Mere non-imposition of penalty/fine, which is the mandate under Section 125 of the CA in case of confiscated goods, cannot automatically result in letting the Petitioner go scot-free - In the present case, the arrival of the consignment in Delhi, which contains prohibited goods, is clearly not innocent and is contrary to law. The goods being prohibited goods and having been confiscated, even as per Trip Communication, the Petitioner would not be entitled to waiver of demurrage/rent charges. The Petitioner, having accepted the finding that the consignment contained prohibited goods and was liable for confiscation, cannot claim waiver of demurrage/rent charges to the detriment of CELEBI, which was not even heard by the ACC (Imports). The consignment having contained `prohibited goods', which were confiscated in terms of Section 111 (d) of the CA, the Petitioner is not entitled for re-export of the same without payment of demurrage/ground rent - petition dismissed - decided against petitioner.
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2017 (8) TMI 346
Mis-declaration of goods - imported vessels and barges - confiscation - penalty - Held that: - the power and scope of High Court to interfere with the findings so arrived at, by the CESTAT. Having once noted above, we have gone through the reasons while setting aside the order of confiscation and penalty. The CESTAT has considered the issue of “port clearance” and its procedure, as prescribed under Section 42 (2)(d) read with Section 111(j) of the Customs Act. It is noted that the fact of grant of port clearances, which includes the safeguard and security required for the Custom House were never recalled. The goods were permitted to remove from the customs area, by the concerned officers. The importers and/or their agents or employees cannot be held responsible for removal from the Customs area of the port in such situation. The CESTAT has noted that the “removal” and “clearance” cannot be equated to clear the goods for home consumption under Section 47 of the Customs Act. The permissions to clear the goods would not be in violation of Section 111(j), which is applicable to “removals” and not to the “clearance”. There is no justification and explanation on record as to why those permissions and clearance were not revoked or set aside. There is no denial to the fact of granting clearances and permissions and release of vessels with goods. There is no case of declaration or mis-declaration. The necessary documents were with the concerned department, even at the time of such permissions and clearance stage. Both the parties, including the concerned officers have knowledge of the documents and the supportive material. It is an admitted position that the payment of duty has been made before issuing show cause notice itself. It is settled that Section 46 of the Customs Act contemplates, directory procedure. Sections 48 and 46 read together support this aspect. The duties were paid even prior to show cause notices. Every technical breach cannot be treated, as breach for penalty or confiscation - in the present case, the Department /revenue failed to discharge its burden, as required under the law. There is no case made out of any “willful” or intent to evade duty to bring in the case of “fraud” and “collusion”. There is no case of stated “misstatement” or “suppressing of fact”. The impugned order, therefore, needs no interference, even on the ground of stated delayed decision. Appeal dismissed - decided against Revenue.
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2017 (8) TMI 345
Jurisdiction - power of DRI to issue SCN - Held that: - the powers of officers working in these organizations to issue notice under Customs Act, 1962 as proper officers has been subject matter of decision by various High Courts - the matter remanded to the original authority to decide the question of jurisdiction first and thereafter on merit after the matter is settled by the Hon’ble Supreme Court in the pending appeals by the Revenue against the decision of Hon’ble Delhi High Court in the case of Mangali Impex Vs. Union of India [2016 (5) TMI 225 - DELHI HIGH COURT] - appeal allowed by way of remand.
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Insolvency & Bankruptcy
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2017 (8) TMI 343
Insolvency Resolution process - Held that:- It is not the case of respondent that Hon'ble NCLAT has directed stay of operation of the order dated 07.4.2017. Under section 16(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as the 'Code'} the 'Adjudicating Authority is to appoint an Interim Insolvency Professional within 14 days from the insolvency commencement date. As per Section 9(6) of the Code' the Insolvency commencement date in case of the application filed by the 'Operational Creditor' is the date of the admission of the application under sub-section (5) thereof. It needs to be observed that there was a spell of holidays from 08.4.2017 to 16.4.2017 (both days inclusive) and 22.4.2017 and 23.4.2017, were weekly holidays which have to be excluded. It is further directed that the insolvency Resolution Professional shall positively file a report of events before this Tribunal every 10 days in relation to the 'Corporate Debtor'. Copy of this order be supplied to the counsel or the Authorised Representative of applicants and be also supplied to the respondent or its counsel. The Registry is also directed to send copy of this order along with the order dated 7-4-2017 by email to Mr. Alok Yadav, the IRP.
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Service Tax
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2017 (8) TMI 358
CENVAT credit - input service distribution - credit in respect of input services utilised at the R D centres of the appellant company and transferred to factory through input service distribution mechanism - Held that: - the appellant have rightly taken Cenvat credit as permissible under Rule 3 read with Rule 2(l) of CCR, 2004 as the services in question have been admittedly used by the manufacturer indirectly in relation to manufacture of final dutiable products - also, there is no dispute with regard to the distribution of the credit as permitted in the scheme of the Act and the Rules - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 357
Recipient of service - GTA Services - Reverse Charge Mechanism - abatement under N/N. 1/2006-ST dated 01/03/2006 - Held that: - Revenue has not established that the services received by the appellant were qualified to be classified as Goods Transport Agency Service and hence the charges that the appellant had received service of Goods Transport Agency are not proved - demand not sustainable - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 356
Application for Early hearing of appeal - case of appellant is that pendency of the appeal shall cause extreme hardship to the appellant and interest cost will be very heavy in the event the appellant is not successful before the Tribunal - Held that: - Early justice is the right of the litigant and expeditious delivery of justice is the olive branch of the constitution. Unless justice is delivered expeditiously, litigant's confidence on law is shacked. This principle guides for expeditious disposal of litigation - early hearing allowed in the interest of justice - decided in favor of applicant.
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Central Excise
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2017 (8) TMI 355
Valuation - notional interest on advances received - includibility - Held that: - As per CEBC s circular No.404/37/98-Cx dated 22.6.1998, it has been clarified that if the selling price is influenced in that case notional interest on advances received from the buyers, the notional interest is required to be added in the assessable value - in the present case, the selling price of the goods to the buyers who paid duty advance has not been influenced, therefore, notational interest is not required to be added in the assessable value - demand set aside. Valuation - the discounts shown in the invoices is actually not given to the buyers and debit notes raised by the appellant on the buyers - demand of duty on discounts - Held that: - a verification report was sought by the adjudicating authority from the Range Superintendent, who after due verification of the records, has filed report that wherever the appellant has given discount but actually not passed on to the customers, they have paid duty - no demand is sustainable against the appellant. Appeal allowed - decided in favor of appellant.
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2017 (8) TMI 354
Cenvat credit - input services - Clean Development Mechanism Service in relation to Carbon Credit Management Services - Held that: - the matter is covered by the Tribunal’s decision in the case of Heidelberg Cement India Ltd. V/s Commissioner of C. EX., Bangalore-I [2016 (9) TMI 677 - CESTAT BANGALORE], where it was held that the service tax paid for providing Consultancy Services in relation to greenhouse gas emission reduction and carbon credit management service as per guidelines under the Koyoto Protocol falls under the definition of input service and the appellants are entitled to Cenvat credit and the impugned order denying the Cenvat credit on the said services on account of lack of nexus is wrong and not sustainable in law - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 353
CENVAT credit - appellants are drawing water from various dams in the vicinity of factory and pipelines have been laid from the tanks to the mines - denial of credit on the ground that the pipes were not used in the factory of the appellant - Held that: - definition of Capital Goods u/r 2(a) of CCR, 2004 clearly includes the pipes and fittings thereof used in the factory of the manufacturer - It is fairly well settled that captive mines attached to the factory can be considered as a part of the factory premises. Since the pipe line is necessary for manufacturing process, such pipes will have to be considered as having been used in the factory premises - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 352
Demand of Education cess and secondary and higher education cess on cesses imposed under the different statutes by the different Ministries other than the Ministry of Finance - Revenue is of the view that for determination of the aggregate of all duties of excise, the cesses levied by the Ministries of Industry and Labour are required to be included - Held that: - the issue stands decided in favour of the appellant in the case of B. S. Patel v. CCE, Indore [2017 (3) TMI 1140 - CESTAT NEW DELHI], where it was held that Education cess (EC) and Secondary Higher Education Cess (SHEC) cannot be computed on the Cesses, which are levied under the Acts administered by the Departments/Ministries other than the Ministry of Finance (Department of Revenue), though the same are collected by the Department of Revenue as per provisions of those Acts - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 351
CENVAT credit - duty paying invoices - denial of credit on the ground that the commercial invoices and purchase orders placed by the appellant, on the supplier company, mention pump sets, whereas the dealer’s invoices on which credit availed by the appellant, shows only motors - Held that: - nowhere it is brought on record that the appellant was not supplied with the motors which is part of the pump sets - mis-match between the commercial invoice and the excise invoice, as the later one relates only to motors, on which credit has been availed by the appellant, cannot be a ground for denying credit - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 350
Remission of duty - destruction by fire - the excisable goods which were pending clearance were destroyed or lost by unavoidable accident - Held that: - issue is no more res-integra as decided in the case of M/s Honest Bio-Vet Pvt. Ltd. Versus CCE Ahmedabad-I [2014 (11) TMI 579 - CESTAT AHMEDABAD], where it was held that if the goods cleared for export under Bond are destroyed before the export, ownership of the said goods and also duty liability, if any, would be always to the account of appellant assessee and that the said goods could be considered having been destroyed before removal and the benefit of Remission of duty is allowable in such an exceptional situation in terms of Rule 21 of Central Excise Rules 2002 - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 349
CENVAT credit - whether M.S. Bar, M. S. Joints, M. S. Sheets etc, undisputedly used for the repair and maintenance of various capital goods, in the factory premises of the appellant are eligible to CENVAT credit under the definition of ‘input’ as prescribed under Rule 2 (k) of CCR, 2004? - Held that: - similar issue decided in the case of KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX. LUCKNOW [2013 (7) TMI 2 - CESTAT NEW DELHI], where it was held that the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for CENVAT credit - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (8) TMI 344
Valuation - includibility - designing charges - tooling cost - Whether on the facts and circumstances of the case, the Tribunal was justified in law in holding that designing charges and tooling cost reimbursed to the applicant by its customer forms part of sale price as defined u/s.2(29) of the Bombay Sales Tax Act, 1959? Held that: - The payment of designing and tool cost is necessary concomitant of the final sale price of the seating system. The amount of money which goes from the pocket of the vendee to the pocket of the vendor as a consideration for passing of the property in the goods is the “sale price”. It is the amount but for the payment of which the vendor would not transmit his title of the goods in favour of the vendee. The applicant / seller would not deliver / sale the seating system without recovering the cost of designing and moulds required for manufacture of seating system. The cost paid towards designing and tooling is a part of the same series of transaction of sale of seating system. The sale cannot be segregated. It is also not the case that the said tools are provided by the customer / buyer. The design and tools are prepared by the applicant to enable the applicant / vendor to manufacture seating systems. The development charges for design and tooling and price of seating system is artificially being segregated to avoid payment of sales tax. Without payment of designing and tooling cost, the applicant would not part with the seating system. The definition of “purchase price” will have to be read in conjunction with the “sale price”. The production / manufacture of the seating system is only on the basis of the said mould which is designed. Without the said mould, the seating system could not be manufactured. The said mould is retained by the vendor. The said mould cannot be used for any other purpose. The development charges for the mould is agreed to be charged and paid as a part of the contract of supply of seating system. The development charges for designing and tool have inescapable bearing on the delivery of the seating system and, therefore, they will have to be held as part of the sale price of the seating system. The said designing charges and tooling cost reimbursed to the applicant by its customers, would form part of the “sale price” as defined under Section 2(29) of the Bombay Sales Tax Act - appeal dismissed - decided against appellant-assessee.
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Indian Laws
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2017 (8) TMI 342
Application for allocation of spectrums in various areas - auction - grant of interim relief which included extension of permission to the participants in the NIA to be bidded for minimum 4.4 MHz, IN 900 MHz band in the North East service area - Held that:- The grievance raised by the petitioners do not survive as they have participated in the auction and have been successful in some of the areas and the question of alteration of bid condition does not survive. The present petitions have been deliberately kept alive by the telecom service providers only to retain their dominant positions to the detriment of the market and the subscribers. The challenge by the petitioners pertaining to tender conditions formulated by the Union of India invoking the power of judicial review is not tenable as no valid grounds for interference The objectives of the present auction are in consonance with the National Telecom Policy-2012 (NTP–2012). These objectives are the same as in the previous auctions conducted in November 2012, March 2013 and February 2014. The objectives state that the primary objective of the NTP–2012 is maximizing public good by making available affordable, reliable and secure telecommunication and broadband services across the entire country. The main thrust of the Policy is on the multiplier effect and transformational impact of such services on the overall economy. It recognizes the role of such services in furthering the national development agenda while enhancing equity and inclusiveness. Availability of affordable and effective communication for the citizens is at the core of the vision and goal of the NTP–2012, at the same time as being investor friendly and attracting additional investments. The NTP–2012 also recognizes the predominant role of the private sector in this field and the consequent policy imperative of ensuring continued viability of service providers in a competitive environment. Pursuant to the NTP–2012, these principles have guided the decisions needed to strike a balance between the interest of users/consumers, service providers and government revenue. Revenue maximization is not the sole objective of the Government as alleged by the TSPs. The auction terms have been structured in a way keeping in mind the public interest and the fact that the TSPs have to serve the public (consumers) for the years to come, i.e., the spectrum is allotted in a transparent manner for a period of 20 years. In the present case, declining to quash the auction exercise as a whole would occasion no detriment to the public interest since the competing considerations can be balanced by directing remedial and forward-looking reliefs, even while preserving past actions. Further, there is neither allegation of any mala fide in the conduct of the auction, nor has it been alleged that the policy was structured so as to convey benefit to a particular player/players over others. In the case at hand, the Central Government had sought the recommendation and then referred it back. Ultimately, it formulated the policy for auction of the spectrum. Therefore, the criticism that is advanced that once there is a reference back, the Central Government should have been guided by the recommendations has no justification inasmuch as the Central Government has the ultimate authority to take a decision. Of course, such a decision, especially a decision relating to frame a policy for NIA has to be in accord with the norms of Article 14 of the Constitution. The principle of “legitimate expectation” can never override public interest and when there is larger public interest, the question of legitimate expectation does not arise; and in any case, in the present case, if we allow ourselves to say so, this contention is absolutely sans merit. We are inclined to think that when auction is held in respect of spectrum after taking into consideration certain range of facts and circumstances which are founded on economic and social policy factors, it is difficult to unsettle the NIA and the consequential effect thereof by applying the principle of judicial review. The procedure adopted in this kind of auction is neither to be equated nor compared with the process meant for grant of ordinary largesse. It is because of its complexity, technical expertise, enormous financial impact and the larger public interest
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2017 (8) TMI 341
Suit for recovery along with interest - outstanding dues - fuel/diesel purchased by the appellant/defendant no. 1 from the respondent/plaintiff who owns a retail petrol pump outlet of Bharat Petroleum in Delhi - Held that:- No fault can be found with the reasons, discussion and conclusion of the trial court holding that the appellant/defendant no.1 who was in transportation business and owned trucks used to purchase fuel from the respondent/plaintiff’s petrol pump and that he did not clear the outstanding dues as found in the invoices Ex.PW1/2 to Ex.PW1/9. The trial court also was justified in holding that the security cheque was properly presented to recover the outstanding amount and that a presumption was raised of the cheque being issued for consideration as per the Negotiable Instruments Act and which was not rebutted as per the evidence led by the appellant/defendant no.1. Trial court has rightly observed that witness of the respondent/plaintiff was not cross-examined for any alleged inflation of the bills and that on preponderance of probabilities as per the evidence on record the appellant/defendant no.1 had purchased fuel on credit basis. Once two possible views arise as per the record of the trial court, and the trial court has taken one possible and acceptable view, unless such a view is illegal or perverse this Court will not interfere with the said findings and conclusion of the trial court. We cannot agree with the arguments urged on behalf of the appellant/defendant no.1 because invoices Ex.PW1/2 to Ex.PW1/9 are in the nature of serialized details of invoices, however, these documents Ex.PW1/2 to Ex.PW1/9 are definitely the copies of the bill books maintained by the respondent/plaintiff and which is typical of petrol pump business. Slips of payment with respect to petrol purchase are issued but thereafter the bills are reflected in a bill book containing the details of the invoices issued and therefore do not find any illegality in the conclusion of the trial court holding that Ex. PW1/2 to Ex.PW1/9 are the unpaid invoices i.e serialized details of the unpaid invoices. The appellant/defendant no.1 is in transportation business and whose trucks took fuel from the respondent/plaintiff, which was not paid for and therefore the respondent/plaintiff had to deposit the security cheque towards recovery of the outstanding amount and which was dishonored on presentation and therefore the subject suit came to be filed. Appeal dismissed.
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