TMI Tax Updates - e-Newsletter
August 11, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Import of goods through Courier - duty free Bona fide gifts – Once an authorisation is not produced, courier agent becomes the importer - HC

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• Once there was no excise duty on such goods produced in India, question of levying CVD in form of giving such protection does not arise - SC

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TMI Short Notes

• Income Tax:

  Example:- X, a director-employee of a private sector company based at Indore (population: 24Lakhs), draws ₹ 90,000 p.m. as basic salary. Other allowances and benefits attached to his office are: DA (forming part of Salary): 20% of basic salary; bonus: 30% of basic salary; commission: 800 p.m. and rent free house (lease rent paid by the employer: ₹ 40,000 p.m.) Determine the value of perquisite.

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• Income Tax:

  Example:-X, an employee of ABC Ltd., posted at Ajmer (population: 18 Lakh), draws ₹ 3,00,000 as basic salary, ₹ 10,000 as DA (forming part of salary) and ₹ 5,000 as commission. Besides, the company provides a rent-free accommodation in Ajmer. The house is owned by the company. Fair rent of the accommodation is ₹ 50,000 p.a. Determine the taxable value of the perquisite.

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• Income Tax:

  Example:-X has received following amount during the previous year. Basic Salary 7,000 p.m.; Dearness Allowance (D.A) – 1,000 p.m.;House Rent Allowance (H.R.A.) 3,000 p.m. The Actual Rent Paid is 3,000 p.m. Calculate exemption of HRA u/s 10(13A)

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• Income Tax:

  Example:-Mr. X received voluntary retirement compensation of ₹ 7,00,000 after 30 years 4 months of service. He still has 6 years of service left. At the time of voluntary retirement, he was drawing basic salary ₹ 20,000 p.m.; Dearness allowance (which forms part of pay) ₹ 5000 p.m. Compute his taxable VRS.

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• Income Tax:

  Example:-Mr. X received retrenchment compensation of ₹ 10,00,000 after 30 years 4 months of service. At the time of retrenchment, he was drawing basic salary ₹ 20,000 p.m.; dearness allowance ₹ 5,000 p.m. Compute his taxable retrenchment compensation.

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• Income Tax:

  Example:-Mr. X retired from ABC Ltd. on 11th March 2014 after serving for 30 years and 11 months and the employer has paid him leave salary of ₹ 5,00,000. At the retirement, he was getting basic pay of ₹ 22,000. Further he was getting dearness allowance of ₹ 4,000 and 50% of the DA forms the part of salary for retirement benefits. The employee was entitled for 3 months leave for every year of service, but the employee has availed 7 months leave throughout the service and has encashed 4 months leave. Compute leave salary exemption u/s 10(10AA) for the AY 2014-15.

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• Income Tax:

  Example:-X retires from B Ltd. on 31st July, 2014. He gets pension of ₹ 1,000 per month up to 31st December, 2014. W.e.f 1st January, 2015 he gets 60% of pension commuted for ₹ 1,70,000. Does it make any difference if he also receives gratuity of ₹ 3,000 at the time of retirement?

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• Income Tax:

  Example:-An employee of X Ltd. retires on 10th March, 2015 after service of 26 years and receives ₹ 6,50,000 as gratuity. X Ltd. is not covered by the Payment of Gratuity Act, 1972). If Salary drawn by him during 1st May 2014 and 28th February 2015 is as follows: 1st May 2014 to 31th December 2014 Rs. 26,000 p.m. 1st January 2015 to 28th February 2015 Rs. 26,500 p.m. Besides, he receives ₹ 400 p.m. as dearness allowance (forming part of salary for the computation of retirement benefits). He is also entitled to 6% commission on sales achieved by him (during 1st May 2014 and 28th February 2015, turnover achieved by the employee is ₹ 25,77,860). Is the entire amount of gratuity exempt from tax?

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• Income Tax:

  Example:-X, an employee of A Ltd., receives ₹ 62,000 as gratuity (he is covered under the Payment of Gratuity Act, 1972). He retires on 31st January, 2015 after service of 29 years and 8 months. At the time of retirement monthly salary of X was ₹ 3,100. Is the entire amount of gratuity exempt from tax?

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• Income Tax:

  Example:- X, an employee of Central Govt., receives 9,20,000 as gratuity at the time of his retirement on 31st December, 2014. Is gratuity fully exempt from tax? Does it makes any difference if he joins a company in the private sector on 11th January, 2015?

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Articles

• Exemptions under Service tax are optional unlike Section 5A of the CEA
• MERCHANDISE EXPORTS FROM INDIA SCHEME

News

• Chinese Imports

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• RBI Reference Rate for US $

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• Finance Minister Calls for Prudent Expenditure Management; Asks Officers of Indian Cost Accounts Service to Upgrade Their Professional Skills and Expertise in Order to Play a Proactive Role in Assisting the Government in Achieving the Highest Level of Cost Efficiency in Its Projects, Schemes and Operations; Inaugurates the First Indian Cost Accounts Service Day

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• Government Launches Suraksha Bandhan Drive in a Mission Mode Through Participating Banks and Insurance Companies to Facilitate Enrolment Under Pradhan Mantri Suraksha

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Highlights / Catch Notes

Income Tax

• The receipt in the case of the Assessee is not attributable to transfer of any asset or right and the mere fact that the receipt is not attributable to non-compete covenant it cannot be automatically concluded that the receipt was either from business or income of a casual or recurring nature - AT
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• Tax Audit - prescription of section 44AB of the Act was triggered only after AO rejected the assessee’s methodology of booking profit from its project - aving regard to the provisions of section 273B r.w.s. 271B of the Act, there was a reasonable cause prevailing with the assessee for not getting its accounts audited under section 44AB - penalty waived - AT
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• Capital or revenue expenditure - the expenditure incurred by the assessee for the purpose of establishing a new manufacturing unit in China and the expenses incurred for feasibility status of the company given enduring benefit to the company which proposed to be established by the assessee - held as capital in nature - AT
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• Penalty u/s 271(1)(c) - it is clear that the departmental authorities are not sure as to which limb of the penalty provision is attracted - no penalty - AT
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• Computation of annual value - The three flats which could not be sold at the end of the year was shown as stock-in-trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by letting out the flats - AT
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• Computing book profit u/s 115JB - MAT - The net profit disclosed in the Profit and Loss account prepared in accordance with the Companies Act should be the starting point to which the additions and deductions prescribed in that provision are required to be added and deduction - AT
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Customs

• Suspension of the courier licences - Illegitimate benefit of duty free Bona fide gifts – Once an authorisation is not produced, the courier agent becomes the importer - HC
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• Demand of customs duty from the courier agency - the burden of showing that the consignment was a bona fide gift falls on the appellant and in the absence of discharge of such obligation, the appellant prima facie becomes liable to pay duty.- AT
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• Levy of Countervailing Duty – Once there was no excise duty on such goods produced domestically question of levying additional duty in form of giving such protection does not arise at all - SC
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Central Excise

• CENVAT Credit - distribution of credit by the Input service distributor (ISD) - Cenvat Credit to the appellant cannot be denied on the ground that input service distributor have received services prior to the obtaining registration as input service distributors - AT
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• Denial of SSI Exemption - Manipulation of invoices - Since they have changed the name of the consignee in spite of the fact that the goods were being transported to Viramgam or nearby area in different State, the HR trimmings cleared have therefore become liable for confiscation as discussed earlier and they are liable to penalty - AT
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• SSI Exempiton - whether brand name TEGU, registered in the name of the appellant in India, is not sufficient to claim SSI exemption when the same belongs to a German company - benefit of exemption allowed - AT
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• Concessional rate of duty - bubble gum - bubble gum and chewing gum are two different commodities and, therefore, the word "chewing gum" in heading 170410 of the 8 digit Tariff w.e.f. 28/2/2005 cannot be considered as including bubble gum - benefit of exemption allowed - AT
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• Confiscation of the goods and imposition of redemption fine in respect of the seized goods by the Adjudicating authority in de-novo adjudication cannot be sustained. - AT
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• Refund - area based exemption - Commencement of production of new product after the cut-of date i.e. 31.12.2005 or increased the capacity of the production - Concast Machine was installed for manufacturing of the Billets after 31.12.2005. - Billets and Ingots are not identical - Refund not allowed - AT
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VAT

• Reversal of input tax credit - ITC claimed by the dealers cannot be reversed under Section 19(1) of TNVAT Act on the ground that the sellers have not paid the tax to the department - HC
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Case Laws:

• Income Tax

• 2015 (8) TMI 333
  Participation in Auction - Held that:- The possession of the premises is handed over to the Income Tax Department by the petitioner. In case the said property is put to auction by the Income Tax Department or dispose of the property, it would be open to the petitioner to claim participation therein and whenever such request is made, the same shall be considered.

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• 2015 (8) TMI 332
  Validity of assessment framed u/s 143(3) - whether the assessment ought to have been made under Section 144 and not under Section 143(3) also appellants were not served with the necessary documents - Held that:- Notices were issued and questionnaires were served under Sections 142(1) and 143(2) of the Act on 07.02.1998. Even thereafter, an opportunity was granted to collect the photocopies but the appellants did not avail of the same. Notices under Section 142(1) and 143(2) were again served on 11.03.1998 and the hearing of the case was adjourned. The appellants were informed that if they did not attend, the case would be decided in their absence. The respondents did contend that the appellants did not produce certain documents. In the circumstances, it may well have been open to the appellants to proceed on the basis of Section 144 in view of provisions of Section 144(1)(b). Under Section 144(1)(b), the Assessing Officer is entitled to make a best judgment assessment if the assessee fails to comply with all the terms of a notice issued under Section 142(1). We will assume, therefore, that the Assessing Officer could have done so. However, despite the same, the Assessing Officer completed the assessment under Section 143(3) on the basis of the information provided by the assessee. No infirmity in the action taken by the Assessing Officer. - Decided against assessee

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• 2015 (8) TMI 331
  Slump sale - non-taxability of consideration received on sale of transportation business /undertaking - Held that:- The only way to bring to tax sale consideration received on transfer of "Technical know-how" is to call it "goodwill" and that is probably the reason why the AO preferred to call transfer of Technical know-how as transfer of goodwill. We are of the view that "Technical know-how" and "goodwill" cannot be equated. In fact the statutory amendments to sec.55(2)(a) clearly shows that the legislature has not equated "goodwill" with trade mark or brand name associated with a business or a right to manufacture, produce or process any article or thing or right to carry on any business. The attempt made by the AO to equate transfer of "Technical know-how" with trade mark, trade name, goodwill etc., in our view cannot be sustained. The AO in his order has attempted to give an impression that the Assessee has agreed to treat the receipt on transfer of technical know-how as goodwill. In this regard it is seen that in the Assessee’s letter dated 7.12.2009 to the AO, the contentions were made without prejudice and therefore the observations of the AO in this regard are not correct. "Technical Know How " is a self-generated asset and the Assessee incurred no cost but developed in the course of conducting its business. Even if "Technical Know-how" is to be regarded as "right to manufacture an article or thing or a right to carry on business", the amendment to Sec.55(2)(a) of the Act deeming "Cost of Acquisition" of these assets as "nil" was effective only from 1.4.2003 and prior to that the capital gain on transfer of these assets was incapable of being determined and therefore the charging provisions of Sec.45 read with Sec.48 of the Act were not capable of being applied and the charge to tax would fail on the principle laid down by the Hon’ble Supreme Court in the case of B.C.Srinivasa Setty (supra). We therefore hold that profit on sale of "Technical Know-how" cannot be brought to tax as "Capital gain" u/s.45 of the Act. With regard to the argument of the learned DR praying for a remand of the issue to the AO for a fresh consideration, we are of the view that the AO in the remand proceedings has consciously taken a decision that the gain on sale of Technical know-how was capital receipt chargeable to tax u/s.45 of the Act. By implication he was satisfied that it was not a revenue receipt chargeable to tax either u/s.28 or u/s.56 or Sec.10(3) of the Act. If the revenue deems such conclusion are erroneous and prejudicial to the interest of the revenue than it could have explored the other options available under the Act to rectify the error. Prayer for a remand to the AO, in our view, would not be sustainable. - Decided in favour of assessee. Taxability of Non-compete fee - Held that:- In the present case the claim of the Assessee that the receipt of ₹ 30 crores is in respect of noncompete covenant was not believed by the Revenue. As to how it could be regarded as revenue in nature or receipts from business has not been substantiated by the revenue. The receipt of ₹ 30 crores by the Assessee cannot therefore be regarded as income. It should regarded as capital receipt not chargeable to tax. The prayer for a remand of the issue to the AO for fresh consideration as made by the learned DR before us cannot be accepted for the reasons which we have given while dealing with the first issue of taxability of consideration received on transfer of "Technical Knowhow". The argument of the learned DR that the reasons given by the AO in the original order of assessment should be regarded as reasons given in the order passed by him after remand by the Tribunal, is not acceptable. The original order of the AO has been set aside by the Tribunal and therefore the reasons given therein can no longer be looked into. It is not the case of the AO in the order passed after remand by the Tribunal that the reasons given in the original order will continue to hold good. The receipt in question cannot also be regarded as falling within the ambit of Sec.28(iv) of the Act as the consideration was received in cash and therefore cannot be regarded as value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. The decision of the Hon’ble Bombay High Court in the case of Mahindra & Mahindra Ltd. (2003 (1) TMI 71 - BOMBAY High Court), relied upon by the learned counsel for the Assessee clearly supports the plea of the Assessee in this regard. The receipt in the case of the Assessee is not attributable to transfer of any asset or right and the mere fact that the receipt is not attributable to non-compete covenant it cannot be automatically concluded that the receipt was either from business or income of a casual or recurring nature. In the decision rendered in the case of Madras Carbon Brushes Pvt.Ltd., (2007 (5) TMI 596 - ITAT CHENNAI), the finding of the tribunal was non-compete fee was in fact consideration for transfer of goodwill. In the present case the Tribunal has already held that the payment of ₹ 30 crores is not towards goodwill. Therefore reliance placed by the learned CIT(A) on the aforesaid decision cannot in any way improve the case of the revenue. We therefore hold that the sum of ₹ 30 crores cannot be brought to tax and delete the addition made in this regard and allow the relevant grounds of appeal of the Assessee as indicated above. - Decided in favour of assessee. Manner of treating the Interest under section 244A of the Act granted earlier, while computing the interest under section 220(2) - Held that:- As in the case on hand, the question of undue delay in the case of Revenue does not arise. The interest under section 244A of the Act is granted by the department to the assessee for the delay in giving refund due to the assessee. On a subsequent date, if due to orders of assessment or appellate orders passed, the interest granted to the assessee under section 244A of the Act is to be withdrawn, the assessee cannot be held responsible for any undue delay, thereby requiring any compensation. Hence, the principle of compensatory interest for undue delay in grant of refund can be applicable to the assessee but not to the Department. In view of the above we direct the Assessing Officer to recompute the interest chargeable under section 220(2) of the Act accordingly, by reducing only the principal amount of tax from the refund granted earlier and not to charge interest on the interest granted earlier under section 244A of the Act. - Decided in favour of assessee.

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• 2015 (8) TMI 330
  Unaccounted cash credit - addition u/s 68 - Held that:- In the instant case, although the loan creditors are Private Limited Companies neither they have maintained accounts nor filed their return of income on the ground that the entire financial affairs of the companies/entities of the group were in the total mess, therefore, the genuineness of the transactions and capacity of the loan creditors are doubtful. Therefore, the various case decisions relied on by the Ld. Counsel for the assessee including the decision of the ITO Vs. Jai Bajrang Ginning and Pressing Pvt. Ltd. (2011 (12) TMI 511 - ITAT PUNE) are not applicable to the facts of the present case. In view of the above, we uphold the order of the CIT(A) on this issue and the grounds raised by the assessee on this issue are dismissed. - Decided against assessee. Disallowance of purchases - assessee could not produce the bank account of those parties - CIT(A) deleted the addition in respect of the 3 parties from whom the assessee had made purchases and which was doubted by the AO - Held that:- As find from the assessment order that the main grievance of the AO in the assessment order that although the assessee had made the payments to the above parties by account payee cheque, however, since the assessee could not produce the bank account of those suppliers, therefore, it is not clear as to whether cash has been withdrawn after the cheques were deposited. We find the AO in the remand report has mentioned that complete details/evidences in respect of the purchases effected from the said 2 concerns were furnished. He has not raised any such doubt now. Copy of the remand report has already been reproduced in the preceding paragraphs. Therefore, we do not find any infirmity in the order of the CIT(A) in deleting the additions made on account of purchases from the above 2 parties. So far as the argument of DR that the parties did not appear before the AO is concerned, we find this was not the case of the AO. It was the doubt of the AO that the assessee might have withdrawn cash from those bank accounts after making payment through account payee cheques since 133(6) notices were returned unserved. He has no other doubts. Since the AO in the remand report has specifically mentioned that the assessee has filed the complete details/evidence in respect of the purchases effected from the said 2 concerns, therefore, we do not find any infirmity in the order of the CIT(A). We also concur with the finding of the Ld.CIT(A) that in absence of the impugned purchases it would not have been possible to attain the sales made and the inventory maintained. - Decided against revenue.

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• 2015 (8) TMI 329
  Computation of income - manner in which income of the assessee is liable to be computed from the development of its project named Pranik Garden at Mahavir Nagar, Kandivali(West), Mumbai - Held that:- The project of the assessee was substantially completed in the previous year relevant to the assessment year under consideration. In fact it is seen that the project consisted of construction of Tower-A,B,D & E, Tower –Ekata and shopping arcade/parking space. The AO has noticed that except for Tower-B the occupation certificates for all other buildings were received prior to 31/3/2005 and in fact they have been received in the earlier years. With respect of Tower- B, it is seen that though the occupation certificatewas issued by the Mumbai Municipal Corporation on 21/4/2005 but 30 flat owners out of 40 flats, took possession of the flats before 31/3/2005 and the flats were occupied. The maintenance society confirmed before the AO that the flat owners were occupying the flats even before 31/3/2005. In any case, it is not disputed that assessee approached the Mumbai Municipal Corporation for issuance of occupation certificate, through an Architect on 16/7/2002 itself, which would show that as per the assessee the building Tower-B was completed before it approached the Municipal Corporation for issuance of the occupation certificate. Having regard to the fact-situation and the material on record, we find enough justification for the lower authorities to hold that the project of the assessee was substantially completed in the previous year relevant to the assessment year 2005-06 and, therefore, income from such project was liable to be assessed in assessment year 2005-06 itself by application of the project completion method. - Decided against assessee. Income from other sources - Held that:- Factually speaking, it cannot be disputed that the aforestated incomes, namely, the interest on overdue installments, interest on overdue out comings, interest on bank deposits, transfer charges as transfer of ownership of flats/shops, etc. on resale transactions and brokerage income on resale of flats are not incomes arising in the course of assessees business activity of construction and development of the real estate project. Therefore, in our view, the lower authorities have made no mistake in assessing the aforesaid incomes under the head income from other sources, which we hereby affirm. - Decided against assessee. Corporate expenses disallowed by the AO while computing income from the project - Held that:- Having perused the orders of the authorities below, we find that the entire addition is not based on any evidence or material. In fact, the entire corporate expenses have been incurred by way of reimbursement to a concern, who is maintaining common facilities for all the group concerns operating from a common premise. While the AO cannot be faulted for examining the impugned expenses, so however,, he has made the disallowance without bringing out any material or evidence to say that the expenses were not genuine or that the same were false. Therefore, the Ld. CIT(A) ought to have deleted the entire addition instead of scaling down the disallowance out of the expenses pertaining to the period 1994-95 to 2001-02 and enhancing the disallowance in respect of the period from 2005-06 to 2006-07. As a consequence, we hereby set-aside the order of Ld. CIT(A) and direct the AO to delete the impugned addition. - Decided in favour of assessee. Addition on account of unaccounted interest - Held that:- Interest income assessed by the AO in relation to the flat No.21 in Tower “A” sold to Mrs. Kashmira J. Malavia & Ors. on overdue installments. The addition has been made by AO only on the basis of the document found during survey, which is merely a tabulation showing “interest due” and does not clinchingly establish actual receipt of interest without any corroborative evidence. On the contrary, assessee furnished a confirmation from the flat buyer, a copy of which is also placed in the Paper Book filed before us, which establishes that no interest was paid to the assessee. In the orders of the authorities below, we find no negation qua the aforesaid evidence furnished by the assesse. Therefore, we deem it fit and proper to direct the AO to delete the said addition. - Decided in favour of assessee. Addition on account of 10% of expenses on construction of swimming pool and gymnasium disallowed by the AO - Held that:- It was noticed that construction of some of common amenities was still in progress and the relevant expenditure was incurred in later years. The AO noted that total expenses in the project after 1/4/2005 till 31/3/2007 is ₹ 98,81,184/- and the provision for expenses was ₹ 79,02,200/-, totaling to ₹ 1,77,83,184/-. In the assessment for A.Y 2007- 08 provision for expenses claimed amounted to ₹ 79,02,200/- out of which 10% was disallowed as excess provision leaving the balance of ₹ 71,11,800/-, which was allowed. No reason to interfere in the findings of Ld. CIT(A) confirming disallowance, which are quite fair and proper. Thus, on this aspect assessee fails. - Decided against assessee. Addition made by the AO out of payments to contractor for labour charges - CIT(A) deleted the addition - Held that:- It is notable that the Ld. CIT(A) has relied upon the material before him which proved that M/s. PM Construction had rendered services to the assessee firm and that the payment made by assessee stood duly confirmed in the course appellate proceedings. There is no material led by the Revenue which would enable us to disagree with the finding of the Ld. CIT(A) on this aspect, which we hereby affirm. It is also discernible that the material and evidence relied upon by the CIT(A) for deleting the addition was very much made available to the AO in the remand proceedings and he was also directed by the CIT(A) to conduct enquiries and furnish a remand report. We do not find any adverse finding by the AO in this context. Even before us, no cogent reasoning or material has been lead by the Revenue to establish any infirmity in the fining of the Ld. CIT(A). - Decided against revenue. Penalty under section 273B r.w.s. 271B - assessee failed to obtain the requisite tax audit report prescribed under section 44AB - Held that:- there was a reasonable cause prevailing with the assessee for not getting his accounts audited under section 44AB of the Act as the prescription of section 44AB of the Act was triggered only after AO rejected the assessee’s methodology of booking profit from its project. Therefore, in our view, having regard to the provisions of section 273B r.w.s. 271B of the Act, there was a reasonable cause prevailing with the assessee for not getting its accounts audited under section 44AB of the Act. Accordingly, the penalty levied under section 273B is liable to be deleted. - Decided against revenue.

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• 2015 (8) TMI 328
  Capital or revenue expenditure - Disallowance of expenses by way of professional charges and legal fees paid to Pacific Consultants for the Green Field Project executed in China - CIT(A) deleted the addition - Held that:- We find that the expenditure incurred by the assessee was not for the purpose of exporting goods from India to China. The expenditure incurred by the assessee company to find out the feasibility of proposed new establishment in China. Therefore, the expenditure incurred by the assessee is for the purpose feasibility of establishing a new company i.e. Green Field Project in China cannot be said that it is for the purpose of the business of the assessee. It is not the case of the assessee that the project carried out by the assessee ultimately not materialized. It is only a case of the assessee that the expenditure incurred is revenue expenditure. In our opinion, the expenditure incurred by the assessee for the purpose of establishing a new manufacturing unit in China and the expenses incurred for feasibility status of the company given enduring benefit to the company which proposed to be established by the assessee. Therefore, it has to be treated as capital expenditure in the hands of the assessee company proposed to be established by the assessee and not as revenue expenditure in the hands of the assessee. CIT(A), without considering the facts in proper prospective, simply allowed the ground raised by the assessee by observing that it is for the business expedience of the assessee and directed the Assessing Officer to allow the expenditure under section 37 of the Act. We find that the order passed by the ld. CIT(A) is not correct and he has not considered the facts in right prospective. The ld. CIT(A) proceeded that the assessee company and the subsidiary which the assessee wanted to establish are one and the same. We therefore, reverse the order passed by the ld. CIT(A) on this issue. - Decided in favour of revenue. Consultancy charges paid to M/s. Chaturvedi & Shah, Chartered Accountants - Held that:- The professional charges paid was relating to the proposed green field project to be established by the assessee company in China, which is not relating to the business and we find that it is not a revenue expenses. The ld. CIT(A) has observed that the expenditure incurred in the course of business. The ld. CIT(A) ignoring the material fact that the expenditure incurred by the assessee is not for the purpose of assessee's business or for the purpose of new establishment in China. We find that it cannot be said that it is for the purpose of assessee's own business and the expenditure incurred was relating to the proposed new establishment, which the assessee wanted to establish in China and therefore, it is capital expenditure. Thus, we reverse the order passed the ld. CIT(A) on this issue - Decided in favour of revenue. Disallowance of R&D expenses - CIT(A) allowed claim - Held that:- The Assessing Officer has not commented anything about the supplementary agreement. It appears from the order of the ld. CIT(A) that the assessee has also filed a technical report before the ld. CIT(A). Based on that report, he has made certain observations. Such report was also not placed before us for our consideration. Before us, the ld. Counsel for the assessee has not able to explain the R&D activities carried out by the assessee on the machineries utilized by M/s. Super Sales India Limited or furnished copy of the agreement/supplementary agreement entered into between the assessee and M/s. Super Sales India Limited to consider the actual terms and conditions agreed upon by them or any other technical reports generated by the R&D department. Therefore, under these facts and circumstances, we set aside the order passed by the ld. CIT(A) on this issue and direct the Assessing Officer to examine the issue in detail by considering the terms and conditions entered into between them and the technical report as stated to have filed before the ld. CIT(A) as to whether the machineries installed by the assessee was actually used for R&D activities by the assessee and decide the issue in accordance with law. - Decided in favour of revenue for statistical purposes..

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• 2015 (8) TMI 327
  Reopening of assessment - assessee has inflated the purchases by accepting bogus bills from the market - Held that:- In this case, the order U/s 143(1) was passed. There was a reason to believe that the assessee has inflated the purchases by accepting bogus bills from the market on which this case was reopened and quantified additions were made by the Assessing Officer after verification as the Hon'ble Supreme Court in various cases has held that reason to believe does not have certainty that Assessing Officer in each and every case should have made addition but there should be prima facie believe of escapement of income. The finding given by the ld CIT(A) had not controverted by the AR. The subsequent year finding as held in Siemens Information Systems Ltd. Versus ACIT [2012 (2) TMI 281 - Bombay High Court] can be reason in reopening wherein ld Assessing Officer had made the addition on account of bogus purchases by rejecting the books of account U/s 145(3) of the Act, which has been confirmed by the ld CIT(A), therefore, we dismiss this ground of appeal. - Decided against assessee. Rejection of books of accounts - Held that:- The assessee raised this ground before us. On verification of form No. 35, there was no specific ground on rejection of books U/s 145(3) of the Act. Further the Hon'ble Rajasthan High Court as well as the Coordinate Bench of the ITAT, Jaipur in various cases of gems and jewellery business has held that the book result is not reliable and accordingly Assessing Officer's action U/s 145(3) is justified. The detailed findings on this issue has been given by this Bench in the case of Shri Anuj Kumar Varshney Vs. ITO [2015 (4) TMI 533 - ITAT JAIPUR] - Decided against assessee. Trading addition by applying G.P. rate of 17% as against the G.P. rate of 12.61% declared by the assessee - CIT(A) deleting the addition by applying the G.P. @ 17% as against the disallowance of ₹ 45,03,020/- @ 25% on unverifiable purchases made by the Assessing Officer - Held that:- Similar line of cases, this Bench has decided in the case of Shri Anuj Kumar Varshney Vs. I.T.O. and other cases [2015 (4) TMI 533 - ITAT JAIPUR] where on unverifiable/bogus purchases 15% disallowances has been decided. Accordingly, we also apply 15% disallowances on unverifiable purchases in this case also. The Assessing Officer is directed to recalculate the income as per above direction. - Decided partly in favour of revenue.

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• 2015 (8) TMI 326
  Estimation of rental income - AO arrived at a conclusion that the prevailing rent in the area is ₹ 1,20,000 per month for both the Galas and held that the fair rent value ought to be adopted ₹ 14,40,000 per annum as rental for both the Galas - CIT(A) in restricting the ALV of the property to ₹ 3,12,960/- - Held that:- In this case the peculiar factors have been lucidly brought out by the AO. Moreover, a perusal of the impugned orders reveal that though assessee relied upon Municipal Ratable Value on the same does not appear to have been furnished. Even before us the figure of the Municipal Ratable Value has not been brought out. Under these circumstances the action of CIT(A) in basing ALV for the property for the purpose of section 23(1) of the Act is quite justified which based on the prevailing rentals in the same building. Thus we hold that income from rent should be charged to tax at ₹ 16 per square feet per month being fair rent rate for comparable properties as submitted by society itself where the assessee flat is situated and hence total rental income to be brought to tax shall be ₹ 312960 as held by FAA. We uphold the findings of FAA. We order accordingly. Bogus purchases and sales - FAA held that both bogus purchase to the tune of ₹ 915564 and also bogus sales of ₹ 1605440 are to be added to the income of the assessee - FAA held that the sales are being credited in the books of accounts of the assessee and is treated as un-explained credit u/s 68 of the Act as income of the assessee - Held that:- The assessee is engaged in the business of trading of fabric under name and style of proerietory concern Surya Enterprises. The assessee has made purchase and sale with the parties as mentioned above and hence primary onus is on the assessee to establish that these purchase/sale are genuine. The assessee has merely produced invoices and ledger account. The ledger account of M/s Samundra Polycoats and Supreme Agencies(only these two ledger accounts are submitted before us) reveal that there was an opening balance existing as credit to these parties as on 1-4-2005 which has been mainly squared with the sale of fabric transaction in the month of March 2006, ie at the fag end of financial year(even there is no mention of invoice details). The assessee has made no attempt to substantiate by evidences and cogent material such as delivery challan and proof of movement of goods, IT particulars of these parties, VAT returns filed with respect to these transactions, bank statements, financial statements, etc. In view of the above discussion, we hold that FAA has rightly treated these purchases of ₹ 915564 and sales of ₹ 1605440 as bogus and added the same as income of the assessee chargeable to tax. Since we have already held that sales to the tune of ₹ 1605440 is income of the assessee chargeable to tax , it will be fair that the said income of ₹ 1605440 is reduced from sales declared and disclosed by the assessee in the return of income filed with the Revenue otherwise it will be leading to taxing the same amount twice Unexplained credit u/s 68 - Held that:- It is not clear from the records that the addition of ₹ 9,88,000 is the same addition as held to be bogus sale as referred to in ground no 3 of ground of appeal with respect to sales made to Josh Advertising of ₹ 688000 and M/s G L Investment of ₹ 3,00,000 aggregating to ₹ 9,88,000 .We set aside the addition and restore the matter to the file of Assessing Officer to verify that the addition of ₹ 9,88,000 is same as is held to be bogus sale to Josh Advertising of ₹ 688000 and M/s G L Investment of ₹ 3,00,000 aggregating to ₹ 9,88,000 as per ground no3 of ground of appeal. If it be so , then the addition would stand deleted, as otherwise it will lead to adding the same amount twice Allowance of Interest u/s 24(b) - Held that:- The assessee has borrowed funds for purchase of 2 Galas bearing number unit 302 admeasuring 710 sq feet and unit 303 having area of 920 sq feet at Navyug Industrial Estate, Sewri , Mumbai. The assessee is liable to pay interest on such borrowings , however, no interest is paid during the impugned assessment year and the loan is stated to have become NPA, but as per therecord liability of interest is accruing on the loan borrowed. As per Section 24(b), the deduction of interest is allowed on the interest payable on borrowing for purchase, construction , repair etc of house property . However, from the records,it is not clear about the quantum of interest payable and also about the property on which the assessee is intending to claim deduction u/s 24(b) of the Act vide additional ground raised before us. We restore this issue to the file of assessing officer to verify the claim of the assessee as to the quantum of interest payable and also the property with respect to which such interest is claimed to have been payable before allowing the claim of the assessee for deduction u/s 24(b) of the Act . Rejecting the financial results shown in the books of accounts u/s 143(3) and estimating gross profit at 5% of the total turnover - Held that:- The CIT(A) has categorically noted that Assessing Officer has made specific enquiries and treated the relevant purchases and sales as bogus. At the same time the AO also rejected the books of accounts maintained and estimated gross profit. As per the CIT(A) making of specific additions on one hand and estimating gross profits after rejecting the books of account cannot be done simultaneously. We find no error in the said approach of the CIT(A), which we hereby affirm. Thus, on this aspect Revenue fails.

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• 2015 (8) TMI 325
  Penalty u/s 271(1)(c) - AO observed that since assessee has earned income which he should have declared in the return of income, but, did not do so, he is liable to be visited with penalty u/s 271(1)(c) in view of explanation 1 and 5A of section 271(1)(c) - assessee in the application made before the Settlement Commission had offered additional income - Held that:- there is nothing in assessment order to suggest that additional income assessed at the hands of assessee is as a result of any incriminating material. Neither at the stage of assessment nor at the time of penalty proceeding, AO has brought any material on record to show that additional income really belongs to assessee. Only because assessee offered additional income at his hand that will not automatically lead to the conclusion that assessee has concealed his income or furnished inaccurate particulars of income. For imposing penalty u/s 271(1)(c), AO has to prove the fact of concealment by virtue of willful negligence or deliberate act by assessee. One more aspect which needs deliberation is, though in the penalty order, AO has in clear terms mentioned that imposition of penalty is for concealment of income and not furnishing of inaccurate particulars of income, but, ld. CIT(A) has observed that assessee has furnished inaccurate particulars of income. From the aforesaid facts, it is clear that the departmental authorities are not sure as to which limb of the penalty provision is attracted. Therefore, considering the totality of facts and circumstances and keeping in view, the observations made by Settlement Commission, we are of the opinion that since no conclusive finding or material has been brought on record to prove either concealment of income or furnishing of inaccurate particulars of income, imposition of penalty in the facts and circumstances of the present case is not justified. As far as the decisions relied upon by learned D.R. are concerned, though we fully agree with the principles laid down therein, however, they cannot be applied uniformly to all cases divorced from the facts on the basis of which such principle are decided. After careful analysis of the decisions, we are of the view that they will not apply to the facts of the present case. In aforesaid view of the matter, we are of the opinion that imposition of penalty under section 271(1)(c) in the facts of the present case is not justified. Accordingly, we delete the same. - Decided in favour of assessee.

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• 2015 (8) TMI 324
  Eligibility for deduction u/s.80IA(4) - Held that:- The question that arose between the parties was, whether the assessee could be said to be a developer of such project. The authorities below on facts came to the conclusion that the assessee could be said to be a developer as contemplated by section 80IA(4). We have noticed that the authorities below have considered facts quite meticulously by minutely going through the terms of the contract and came to an unanimous conclusion that the assessee was a developer of the project. - Laxmi Civil Engineering Pvt. Ltd., Kolhapur Vs. Addl CIT-R-2, Kolhapur of IT AT, Pune [2012 (6) TMI 316 - ITAT, PUNE] and CLT Vs. ABG Heavy Industries Ltd. and Ors [2010 (2) TMI 108 - BOMBAY HIGH COURT]. - Decided in favour of assessee.

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• 2015 (8) TMI 323
  Claim of exemption u/s. 10(38) - income arising from transfer of capital asset viz., equity shares of a listed company by name Bhoruka Financial Services Ltd. (BFSL) on sale of which securities transaction tax had been paid - CIT(A) allowed claim - Held that:- The issue raised by the AO in the order of assessment has already been decided in the case of Bhoruka Engineering Industries Ltd. (2013 (7) TMI 543 - KARNATAKA HIGH COURT) upheld the order of the AO holding that the sale of shares by the various entities of Bhoruka group was a colorable device to evade tax and the capital gain on sale of shares was to be regarded as short term capital gain and exemption u/s.10(38) of the Act was not to be allowed. The assessee had carried the matter to the Hon’ble High Court of Karnataka. The Hon’ble High Court of Karnataka was pleased to set aside the order of the Tribunal and held that the transaction of sale of shares were real, genuine and for valuable consideration and were within the framework of law. Consequently, exemption u/s. 10(38) of the Act had to be allowed. It is not in dispute that the facts in the case of assessee are identical with that of the case of Bhoruka Engineering Industries Ltd., (supra) and therefore the decision of the Hon’ble High Court of Karnataka will squarely apply to the facts of the present case. We are therefore of the view that the order of the CIT(Appeals) has to be upheld and the claim of the assessee for exemption u/s. 10(38) of the Act has to be allowed. Decided in favour of assessee.

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• 2015 (8) TMI 322
  Disallowance u/s. 14A r.w.Rule 8D - CIT(A) deleted addition - Held that:- The disallowance has been made by the AO by applying Rule 8D, however, the assessment year under consideration is 2007-08 in which Rule 8D is not applicable but disallowance is to be made on reasonable basis. After giving detailed finding with regard to availability of own funds and interest free funds, the CIT(A) deleted the disallowance on account of interest. However, with respect to administrative expenses, the CIT(A) also applied Rule 8D and computed the same at ₹ 3,65,707/-. We found that the dividend income received by the assessee during the year was ₹ 4,86,684/-, since the relevant assessment year is 2007-08, wherein Rule 8D is not applicable, keeping in view various judicial pronouncements cited at Bar by the ld. AR, we direct the AO to restrict the disallowance to the extent of 10% of the dividend income - Decided partly in favour of assessee. Disallowance of penalty levied by the Stock Exchange - CIT(A) deleted addition - Held that:- We have considered rival contentions and found that exactly similar issue is covered by the order of the Tribunal in assessee’s own case as mentioned by the CIT(A) in his appellate order wherein held that the expenses are in the nature of payments towards violating the prescribed rules/ regulation, short /partial collection of margins, non-maintenance of complete records, delay in payout of funds and securities, incomplete KYC forms, etc which are mere breach of contractual liability and adhere to proper procedure and not for infringement or infraction of any statutory law, therefore not hit by explanation to section 37(1) of the Act. Respectfully following the same, we do not find any infirmity in the order of CIT(A) for deleting the disallowance of penalty alleged to be paid to stock exchange. - Decided in favour of assessee. Disallowance of software expenses - CIT(A) deleted addition - Held that:- CIT(A) after following the order of ITAT Special Bench in case of Amway India Enterprises [2008 (2) TMI 454 - ITAT DELHI-C ], directed the AO to allow Annual maintenance charges as revenue expenditure and allow deduction of the same and treat the software expenditure as capital in nature. No infirmity in the order of CIT(A).- Decided in favour of assessee. Disallowance of club membership fees - CIT(A) deleted addition - Held that:- The issue under consideration is covered by the decision of the Hon’ble jurisdictional High Court in the case of Otis & Lubrizol India Ltd., [2015 (8) TMI 134 - BOMBAY HIGH COURT]. The finding recorded by the CIT(A) has not been controverted. Respectfully following the decision of the jurisdictional High Court in the case referred above, we do not find any infirmity in the order of CIT(A).- Decided in favour of assessee. Disallowance of sundry balance written off - CIT(A) deleted addition - Held that:-Assessee has claimed deduction on account of bad debts which arose in the course of its business of brokerage. As the amount could not be recovered from the clients, who defaulted in payments, the assessee has accounted for the said brokerage income in its books, therefore, debt was incurred as a normal incidence of business. There is no reason to disallow the same even as business loss. The finding recorded by the CIT(A) has not been controverted. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the disallowance.- Decided in favour of assessee.

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• 2015 (8) TMI 321
  Reopening of assessment - unaccounted sale of land - CIT(A) quashed reassessment - Held that:- As at the time of original assessment, all the details and particulars in connection with the sale of such land has been made available to the AO and since all the material facts in this regard were available with the AO while completing original assessment u/s.143(3) on 10-11-2005 and since it is not the case of the AO that the details regarding such sale of land had not been made available to the AO at the time of original assessment nor it is the case of the AO that petitioner had failed to disclose fully and truly all material facts necessary for his original assessment and or that after completion of original assessment any new information or materials had been received by him and which had not been disclosed by the assessee at the time of original assessment and since the proceedings u/s.147 had been initiated on the basis of same set of materials and papers which were available to the AO at the time of original assessment and only from the records of assessee with revenue filed at the time of original assessment u/s.143(3) of the Act and since it is not the case of the AO that assessee had not furnished all the details and particulars in this regard at the time of assessment and since the proceedings in this case u/s.147 of the Act have been initiated after a lapse of more than four years from the end of the assessment year on the basis of same set of materials made available to the AO at the time of original assessment, no valid proceedings u/s.147 were initiated in this case. Accordingly, we are of the view that the CIT(A) has rightly quashed the reassessment proceedings - Decided in favour of assessee.

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• 2015 (8) TMI 320
  Unexplained cash deposits - CIT(A) deleted the addition - Held that:- On perusal of the assessee's ICICI Bank statement of the relevant period reveals that he has made all payments to the contractor by account payee cheques by utilizing the funds deposited in his account by his brother. Thus, there is a complete and clear nexus between the payments made by the assessee to the contractor on the one hand; and the payments received by the assessee from his brother on the other in the present case. The necessity of the funds in the present case, has also been proved beyond any doubt. The identity of his brother, Shri Hari Om Singhal is also, beyond any doubt, since he himself is a tax payer. The ld CIT(A) notes that genuineness of the arrangement cannot be reasonably questioned, as the same is between 2 real brothers, who belong to the same family. The ld CIT(A) appreciates the desire of the elder brother to help his younger brother, particularly, when the funds were needed for a genuine purpose, so according to him it cannot be reasonably questioned. We find that Ld. CTI(A) relied on the ratio of cases Anand Ram Raitani Vs.CIT (1996 (8) TMI 95 - GAUHATI High Court) and CIT, Poona Vs. Bhai Chand H. Gandhi (Born) [1982 (2) TMI 28 - BOMBAY High Court] for concluding that since books of accounts are not maintained by the assessee, there is no legal scope to invoke provisions of Section 68 and as such, addition made on such premise was rightly deleted. In the background of the aforesaid discussions, we do not find any legal infirmity in the order passed by the Ld. CIT(A). In our view, the same does not need any interference on our part, hence, we uphold the same. - Decided against revenue.

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• 2015 (8) TMI 319
  Addition on account of Employee Stock Option Scheme Compensation (ESOS) - CIT(A) deleted the addition - Held that:- As decided in Biocon Ltd. Vs. DCIT [2013 (8) TMI 629 - ITAT BANGALORE] discount on issue of ESOP is allowable as deduction in computing income under the head ‘Profits and gains of business or profession.’ Since it is on account of an ascertained and not contingent liability, it cannot be treated as a short capital receipt. Thereafter, the Special Bench has laid down the mechanism for determining as to when and how much deduction should be allowed as held that the liability to pay the discounted premium is incurred during the vesting period and the amount of such deduction is to be found out as per the terms of ESOP by considering the period and percentage of vesting during such period. Deduction of the discounted premium during the years of vesting should be allowed on straight line basis. Then, dealing with the subsequent adjustment to discount, any adjustment to income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference to the market price at the time of grant of option and market price at the time of exercise of option. Respectfully following the precedent, we set aside the impugned order and send the matter to the file of AO for deciding it in conformity with the decision taken by the Special Bench in the aforenoted case. - Decided in favour of assessee for statistical purposes. Disallowance of depreciation on intangible asset - CIT(A) deleted the addition - Held that:- AO disallowed the claim of depreciation on intangible assets by following his opinion for the AY 2006-07. There is no elaborate discussion about this issue in the assessment order for the instant year. The ld. AR or the ld. DR failed to throw any light on the final view taken by the Tribunal on this issue in its order for AY 2006-07. In the absence of any discussion on the issue on merits, we are handicapped to give our independent opinion. We, therefore, set aside the impugned order and remit the matter to the file of AO for deciding this issue in conformity with the final view taken on this issue for the AY 2006-07.- Decided in favour of assessee for statistical purposes. Disallowance u/s 14A read with Rule 8D - CIT(A) deleted the addition - Held that:- AO has not recorded any satisfaction whatsoever about incorrectness of the assessee’s claim about the expenditure incurred in relation to exempt income. What to talk of recording satisfaction, there is no whisper in the assessment order on this score. He simply noticed the extent of exempt income in first two lines and, thereafter, started computing disallowance by applying Rule 8D. The ld. CIT(A) has ordered the deletion of disallowance and, as such, he had no occasion to make good the deficiency left by the AO in this regard. Once the pre requisite condition of recording satisfaction by the AO before computing disallowance u/s 14A is not satisfied, there can be no computation of disallowance as has been held in several judgments. We find that the absence of satisfaction by the AO in the instant case has the effect of taking away the jurisdiction to make disallowance u/s 14A in this regard. - Decided in favour of assessee.

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• 2015 (8) TMI 318
  Addition being accrued interest on advances given to M/s Karsan - CIT(A) deleted the addition - Held that:- The issue is squarely covered in favour of the assessee by an order passed by the ITAT on the very same issue for the AY 2004-05 and 2005-06 also affirmed by Hon’ble Jurisdictional High Court [2012 (9) TMI 922 - DELHI HIGH COURT] wherein held as having regard to the terms of the repeated Arbitration Act, 1940, an award could not be enforceable. The same was the case with the foreign award, the Court had to first adjudicate as to the enforceability.In these circumstances, the assessee’s right to interest was a mere claim, till the date of the judgement of the Court dt. 4th Dec.2006. In other words, the right to interest crystallised after the judgement of the Court. Till then, it was inchoate. For this reason, the Tribunal’s finding cannot be faulted with - Decided against revenue. Addition being demurrage & wharfage charges - CIT(A) deleted the addition - Held that:- These charges are paid to the railways towards delay in loading and unloading operations beyond the time frame fixed by the Indian railways.The payment in question is not the penalty or fine for violation of any statute. It is compensatory in nature. See Nanhoomal Jyoti Prasad vs. CIT (1979 (8) TMI 38 - ALLAHABAD High Court) - Decided against revenue. Disallowance being provision for post retirement benefits - CIT(A) deleted the addition - Held that:- The Hon’ble Supreme Court in the case of Bharat Earth Movers vs. CIT (2000 (8) TMI 4 - SUPREME Court) has held that liability being a determined one, though to be discharged in future, did not make it a contingent liability and it is an allowable liability. The First Appellate Authority in this case has followed the judgement of Hon’ble Supreme Court. Thus we find no reason to interfere with the same. - Decided against revenue. Disallowance being a provision made for wage arrears - CIT(A) deleted the addition - Held that:- The issue is covered by the decision of the Hon’ble Delhi High Court in the case of CIT vs. BHEL (2012 (9) TMI 515 - DELHI HIGH COURT ) wherein it was held that provision for wage revision was based on past experience, previous Pay Commission’s reports and other relevant factors and the deduction claimed for period, between the expiry of one wage settlement or agreement, cannot be termed as contingent because the wage and the probable revision or rates of revision would be within the fair estimation of the employer thus, deduction claimed on account of wage revision are permissible.- Decided against revenue.

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• 2015 (8) TMI 316
  Disallowance of exemption in respect of capital gains u/s 54 as earned on sale of residential property - whether the deduction under section 54 is allowable in respect of the investment made in the residential property outside India for the assessment year under consideration? - Held that:- Following the order of the co-ordinate bench of the Tribunal in the case of "Mr. Girdhar Mohanani & Mrs. Varsha Girdhar [2015 (8) TMI 212 - ITAT MUMBAI] wherein held as during the year under consideration, assessee was entitled for exemption u/s.54 even if investment was made in residential house situated outside India, provided that assessee has to comply with other conditions of Section 54. Since the AO has out-rightly declined exemption on this plea without examining the other conditions of Sec.54 so as to make assessee eligible, we accordingly restore the appeal to the file of the AO for verifying other conditions to be fulfilled for grant of exemption u/s.54 , we decide this issue in favour of the assessee.

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• 2015 (8) TMI 315
  Addition on Interest income - accrual of interest on the money advanced - Held that:- This issue is squarely covered by the decision of State Bank of Travancore Vs. CIT [1986 (1) TMI 1 - SUPREME Court] wherein Hon’ble Court had accepted the preposition that if the financial condition of the debtor had deteriorated and from the history of its accounts, the recovery of the principal amount had become improbable and extremely doubtful rendering the “sticky” advances and as such interest thereon though debited to them following accrual system of accountancy, the alleged interest income would not be taxable in the hands of the assessee because it is a hypothetical income and not a real income. In the light of this decision, if we examine the facts of the present case, then it would reveal that as far as loan given to M/s. S.S Industries Ltd are concern, these were given in the year 1990. The debtor has paid interest upto 1992, but thereafter stopped payment. The assessee has not recognized interest income from assessment year 1997-98, by that time more than three years have already been expired. Thus, alleged interest income cannot be assumed and deserves to be deleted As far as loan given to M/s. Khaitan Hostombe Spinels Ltd is concern, this loan was given on 08-07-1996. It is also in the same assessment year. The evidence produced by the assessee relates to the AY 2003-04. In AY 1997-98, it cannot be assumed that recovery of the principal amount was doubtful. Therefore, the assessee ought to have recognized the interest income on this loan. The ground of assessee regarding challenging of addition on account of interest on loan given to M/s. Khaitan Hostombe is concern, this ground is rejected in both years. The order of the ld.CIT(A) on this issue is confirmed. Disallowance of depreciation - no manufacturing activity was carried out in the asssessee’s factory premises - Held that:- AO has not brought any evidence on record suggesting that the assessee has closed down its business during the years under consideration. If there is temporary suspension in the manufacturing activity, then depreciation on the factory building cannot be denied. Therefore, we allow this ground of the appeal in both years and delete this addition of ₹ 20,321/- and ₹ 18,992 towards claim of depreciation - Decided in favour of assessee. Disallowance of travelling & conveyance - Held that:- merit in this ground raised by the assessee because the assessee has failed to establish that this expenditure were incurred only and exclusively for the purpose of the business of the assessee. This issue of assessee’s appeal is liable to be dismissed. - Decided against assessee.

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• 2015 (8) TMI 314
  Cash deposits found in the Bank account assessed under section 68 - Held that:- The assessee claims to have maintained regular books and further claimed that sufficient cash balance was available in the books. However, we notice that the tax authorities have made the impugned addition without considering the explanation of the assessee as well as the books of accounts maintained by the assessee, which we consider to be not proper. Accordingly, we are of the view that this issue requires consideration de nova by considering the books of accounts and explanations of the assessee. Accordingly, we set aside the order of ld. CIT(A) on this issue and restore the same to the file of the AO to examine this issue afresh in the light of discussions made supra and take appropriate decision in accordance with the law, after providing necessary opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Computing book profit under section 115JB of the Act by adding Capital loss - Held that:- The assessing officer has proceeded to compute the Book Profit u/s 115JB of the Act against the provisions of the Act. It is well settled proposition that the provision of sec. 115JB is a complete code by itself and hence the book profit should be computed strictly in accordance with the provisions contained therein. The net profit disclosed in the Profit and Loss account prepared in accordance with the Companies Act should be the starting point to which the additions and deductions prescribed in that provision are required to be added and deduction. Accordingly the Book Profit should be arrived. In this connection, we may gainfully refer to the decision rendered by the Hon’ble Supreme Court in the case of Apollo Tyres Ltd (2002 (5) TMI 5 - SUPREME Court ). On the contrary, we notice that the assessing officer has taken the total income computed before setting off of the brought forward business under normal provisions of the Act, as the starting point, which is legally not correct. Accordingly, the Ld CIT(A) was not justified in confirming the same. Accordingly, we set aside the order of Ld CIT(A) on this issue also and direct the assessing officer to compute the book profit strictly in accordance with the provisions of sec. 115JB of the Act, as discussed above.- Decided in favour of assessee for statistical purposes.

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• 2015 (8) TMI 313
  Disallowance of depository charges paid u/s. 40(a)(ia) - Non deduction of TDS under Sec. 194C/194J - whether depository charges paid were for technical services? - Held that:- Tax Authorities had not disputed the fact that the assessee paid depository charges without deducting the tax and taxes are already paid by the recipient. Since the amount was already paid and the taxes are paid by the recipient, in our opinion, the decision of the Special Bench in the case of Marilyn Shipping & Transports ( 2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) to hold that the Tax Authorities have wrongly invoked provisions of section 40(a)(ia) in the instant case. Suffice to say that disallowance made by the AO is not called for in the circumstances of the case, in the light of the decision of the ITAT (supra), which in turn was based upon the decision of Vector Shipping Services (P) Ltd.[2013 (7) TMI 622 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.

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• 2015 (8) TMI 312
  Disallowance on account of software expenses - Held that:- Software expenses are generally revenue in nature, because they are used in running of the business in a more efficient manner. It does not result into creation of a fixed capital or giving any enduring benefit for a longtime, as these software licenses and programs keeps on changing and are updated from time to time as per the requirement and the growing needs of the business. In this case though the assessee claimed it as revenue expenditure, but before the AO it has itself accepted that most of the software expenses can be treated as capital expenditure. Such an admission has been retracted by challenging this issue before the Ld.CIT(A) as well as before us. It is a trite law that mere admission or acquiescence by the assessee cannot the foundation of the assessment, if later on the assessee points out that such an admission was against the facts or provision of law. It is not a case here that on account of admission by the assessee during the assessment proceedings, the AO was precluded to make further enquiry or investigation of facts. Here facts and material for deciding the issue is already on record. Thus in our opinion, this matter should be restored back to the file of the AO to deal and decide this issue afresh after examining the details and nature of software expenses and in accordance with the judicial precedence. - Decided in favour of assessee for statistical purpose. Disallowance u/s 145A - AO held that the unutilized portion of CENVAT credit has to be included in the closing stock and cannot be taken to the balance sheet as done by the assessee, thus added the said amount u/s 145A - Held that:- As per the service tax law, the service tax is payable as and when the payment/fees for under lying services provided by the assessee are realized. The CENVAT credit is available only on account of laws laid down under Central Excise Act. Here there is no valuation of stock of goods. Section 145A is a non obstante clause to section 145 and provides that the valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head profit and gains has to be adjusted so as to include the amount of any tax, duty, cess, or fee paid or incurred by the assessee to bring the goods as on the date of valuation. This section only applies to purchase and sale of goods and inventory for the purpose of valuation of stock on the date of valuation. In the normal circumstances it is at the time of valuation of closing stock and not for the valuation of service contracts. If the provision of section 145A is not applicable on services, then the action of the AO in invoking the provisions of section 145A to make the addition is legally not correct. Accordingly on this reason, the order of the Ld.CIT(A) is set aside and the addition made by the AO is deleted - Decided in favour of assessee. Disallowance of reversal of provisions - Held that:- Erstwhile assessee had made a provision for customer claims of ₹ 71,48,625/- in the A.Y. 2005-06, which was suo motu disallowed in the computation of income of that year. In A.Y. 2006-07 the assessee has included this reversal in its computation of income. Thus the assessee has not claimed any deduction of ₹ 71,48,625/-. The AO has wrongly added back the said provision on some wrong notion that matter was sub-judice in the earlier year. It has been pointed out before us that, this issue was not sub-judice at all. Accordingly, we restore this matter back to the file of the AO to verify the contention of the assessee and decide the issue on facts. Decided partly in favour of assessee for statistical purpose.

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• 2015 (8) TMI 311
  Transaction of shares - short term capital gains or business income - Held that:- In the present appeal, we note that the assessee made investment in shares with intention to earn dividend income on appreciation of price of shares. Therefore, it cannot be said that the assessee was doing business. See Shantilal M Jain vs ACIT [2011 (4) TMI 42 - ITAT MUMBAI], Janak S Ranawala(2006 (12) TMI 261 - ITAT MUMBAI) , CIT vs N.S.S. Investment Pvt Ltd. [2005 (4) TMI 45 - MADRAS High Court ] and CIT vs. Associated Industrial Development Company [1971 (9) TMI 3 - SUPREME Court] Thus we do not find any merit in the action of AO for treating the short term capital gain as business income. - Decided in favour of assessee.

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• 2015 (8) TMI 310
  Income from other sources - addition of ₹ 25 lakh taking recourse to section 56(2)(vi) - assessee was given a sum of ₹ 25 lakh by Ustad Zakir Hussain (an eminent Tabla Artist) in pursuance of a general Power of Attorney dated 01st March, 2002, for the purpose of making investment with HSBC Bank, portfolio management scheme on his behalf - Held that:- If the provisions of the Act, the decision from Hon’ble High Court Punjab & Haryana in Saran Pal Singh (HUF)(2010 (10) TMI 795 - Punjab and Haryana High Court) are analyzed, there is no doubt about the genuineness of the transaction. The assessee never became the beneficiary of the impugned amount i.e. ₹ 25 lakh, thus there is no question of making the addition u/s 56(2)(vi) of the Act. Even otherwise, the amount after liquidating the mutual fund was returned back (Rs.15,58,368/- on 19/10/210 and ₹ 10,37,263/- on 22/03/2011) meaning thereby, the amount was returned back along with profit, consequently, the provision of section 56(2)(vi) is not applicable. Decided in favour of assessee. Addition on estimated ALV of the vacant property - Held that:- As find that the assessee was having two properties one at Baroda and other at Pune in her name. The assessee claimed Baroda property as SOP and has shown the property situated at Pune at ₹ 8,45,226/- in her balance sheet 31/03/2003. The stand of the Revenue is that, keeping in view, the inflation and steep rise in the property prices, the fair market value of the said property should be much higher. The Assessing Officer on conservative basis took the rateable value at 8% per annum of the investment and thus computed the property income at ₹ 45,513/- and taxed the same as ‘income from house property’. The assessee has disputed this valuation. Admitted position is that the assessee did not file any municipal valuation of the said property. The assessee has not explained how the valuation is towards higher side. The formula devised by the Revenue is also based upon personal perception, therefore, to put an end to the litigation, as agreed from both sides, the value is reduced to ₹ 30,000/- against valuation of ₹ 45,513/- done by the Assessing Officer and confirmed by the ld. Commissioner of Income tax (Appeals). - Decided in favour of assessee in part.

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• 2015 (8) TMI 309
  Dis-allowance u/s.40(a)(ia) - commission paid to overseas agents without deduction of tax - CIT(A) deleted disallowance - Held that:- FAA accepting the contentions of the assessee has given a categoric finding that the payments were made to overseas agents for the services rendered outside India in marketing of its products. The foreign agents have no PE in India and the remittances were made to them in foreign exchange through brokers. The Revenue has not been able to controvert the aforesaid findings. Since, the commissions paid to the overseas agents were not taxable in India, there was no question of deduction of tax at source u/s.195 on such payments. The Hon'ble Apex Court in the case of GE India Technology Cen. (P) Ltd., Vs. CIT (2010 (9) TMI 7 - SUPREME COURT OF INDIA) has held that if the remittances is not taxable in India, the question of deducting tax on the said amount does not arise. Also see CIT Vs. Faizan Shoes (P) Ltd., (2014 (8) TMI 170 - MADRAS HIGH COURT). No error in the findings of CIT(Appeals) on the issue - Decided in favour of assessee. Disallowance of expenditure on overhauling of windmills as ‘current repairs’ u/s.37(1) - CIT(A) deleted disallowance - Held that:- The fact that the expenditure has been incurred on overhauling of wind mill machinery has not been disputed by Revenue. It is equally un-disputed that with the overhauling of wind mill machinery, there is no change in the capacity or structure of the wind mill. The overhauling of wind mills was carried out to sustain their production efficiency. We are of the considered opinion that the expenditure on overhauling of windmills is allowable as revenue expenditure u/s.37(1) of the Act. Therefore, this ground of appeal of the Revenue is also dismissed.- Decided in favour of assessee.

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• Customs

• 2015 (8) TMI 354
  Demand of duty from the courier agency - Waiver of pre-deposit - importing non-bonafide unaccompanied baggage and goods intended for trade/business and clearing the same in the guise of bonafide gifts - appellant produce the consignee authorizations - Held that:- Not a single authorization has been produced before the investigating officers or before the Commissioner at the time of adjudication. There is not even a claim that such an authorisation has been collected. Therefore it becomes very clear that in the absence of post facto authorization, the Bill of Entry filed by the appellant has to be considered as filed without any authorization. Once the Bill of Entry has been filed without any authorization, and in contravention of regulations, it has to be considered as the one filed by the appellant in their own capacity. Therefore, the burden of showing that the consignment was a bona fide gift falls on the appellant and in the absence of discharge of such obligation, the appellant prima facie becomes liable to pay duty. Period of limitation - Held that:- , if the authorizations were to be kept for one year and if the appellants were to keep KYC records for one year that would have been sufficient and duty demand for the period beyond one year may have to be considered in the light of statutory provisions, relevant notifications, Boards circulars issued in this regard and documents and records. Therefore, at present we consider that for the purpose of pre-deposit it would be sufficient if the appellant deposits the duty amount for the period of one year from the date of show-cause notice. No breakup is available in any of the records and therefore on a proportionate basis, we consider that the same would amount to ₹ 10,00,00,000/-. Accordingly the appellant is directed to deposit ₹ 10,00,00,000/- (rupees ten crores only) within twelve weeks and report compliance on 04.09.2014 - Stay granted partly.

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• 2015 (8) TMI 340
  Suspension of the courier licences - Illegitimate benefit of duty free Bona fide gifts – Appellant was importing unaccompanied baggages of passengers and goods intended for trade or business in guise of bona fide gifts and illegitimately availing benefit of duty of free – Held that:- once an authorisation is not produced, the courier agent becomes the importer - Tribunal decision following its own decision in the case of Indus Logistics [2015 (8) TMI 354 - CESTAT BANGALORE] cannot be found fault with. As per regulations 12, authorised courier, acts as agent of consignor or consignee and they were bound to furnish bond as contemplated under regulations – As per Regulation 13 obligation was cast on authorised courier to obtain authorisation from each of consignees –Therefore, finding of Appellate Tribunal cannot be found fault with – Subject-matter of case was relating to alleged illegalities committed by appellants while transacting business as couriers carried on by them as per regulation – No reason to interfere with order passed by Tribunal – Appeals dismissed – Decided against Appellant.

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• 2015 (8) TMI 339
  Search and seizure without warrant – Non-Compliance – Appellant alleged his conviction for non-compliance of Section 42 of NDPS Act, 1985 and also that prosecution failed to establish link evidence – Held that :- All prosecution witnesses consistently stated that during nakabandi, appellants-accused were searched and illegal contraband was recovered from their possession – Search was made on public place in transit and not in building or place thus, there was no non-compliance of any statutory provision – As search was made in public place, therefore, Section 42 does not come into play and Section 43 was complied with –PW-2 clearly deposed that after recovery, articles were seized and sealed and deposited in malkhana – FSL Report also reveals that seal remained intact when it reached laboratory for chemical examination – As no offence was registered under Customs Act thus, provisions of Section 108 would not be applicable – No ground to interfere with impugned judgment – Appeal dismissed – Decided against appellant.

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• 2015 (8) TMI 338
  Waiver of pre deposit - Undue hardship - By impugned judgment High Court reported in [ 2015 (1) TMI 630 - BOMBAY HIGH COURT] dismissed appeal filed by appellant and sustained order of Customs, Excise & Service Tax Appellate Tribunal directing appellant to pre-deposit sum towards penalty imposed on appellant - After going through decision rendered by high court it cannot be construed as granting legal right to approach Higher Court on denial of interim relief - Order passed by majority in high case was imminently fair and reasons assigned for same from majority judgment do not raise any substantial question of law.

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• 2015 (8) TMI 337
  Levy of Countervailing Duty – Appellant resisted countervailing duty on ground that locally manufactured/produced goods of similar nature, were exempted from payment of excise duty on unbranded goods, such goods produced in India do not incur any liability of payment of excise duty, thus there was no question of payment of additional duty under Section 3 of Customs Tariff Act, 1975 – Held that:- purpose of additional duty, also known as countervailing duty, was to protect domestic market from unhealthy competition – Once there was no excise duty on such goods produced domestically question of levying additional duty in form of giving such protection does not arise at all – Therefore, appellant was not liable to pay any additional duty under Section 3 – Order of CEGAT accordingly set aside – Decided in favour of Appellant.

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• 2015 (8) TMI 336
  Undervaluation of Cars imported - it was noticed that the cars were actually of higher engine capacity than declared – It was noticed that prices declared by assesse were much lower than actual purchase price/commercial prices – confiscation and levy of Penalty – Charge of abetment - Held that:- Appellant engaged services of importer who committed mischief by disclosing engine capacity of car to be below 1600 CC – It was for this reason adjudication order, while confiscating cars imposed penalty upon importer as well as upon Appellant – Main reason attributed for alleged conspiracy was that it was done to earn commission as per letter dated 12-12-1988 – Apart from that letter, there was no evidence worth name against Appellant-1 – Accordingly, no penalty could have been imposed upon Appellant and hereby set aside – Appeal allowed – Decided in favour of Appellant. Demand of Differential Duty – Vide impugned order of CESTAT show cause notice was issued to appellant for demand of differential duty – Held that:- customs authorities invoked provisions of Section 28 and therefore, took benefit of extended period of limitation of five years – As purchaser, appellant was fastened with liability of differential amount of duty and there was no dispute that it was to be paid by appellant as he was owner of car – Thus no merit appeal found – Appeal dismissed – Decided against Appellant.

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• Corporate Laws

• 2015 (8) TMI 335
  Cancellation/Annulment of trade – NSE held appellant guilty of gross negligence by not installing requisite checks and balances as there was punching of erroneous selling order – Whether mistake of punching erroneous sell order constituted ‘material mistake in trade’ and was annullable under Bye law 5(a) framed by NSE – Held that :- despite issuance of circular dated July 15, 2005 requiring members to incorporate suitable validation mechanism, dealer’s terminal did not contain suitable validation mechanism, as result of which his computer crashed and erroneous order for sale took place – Bye-law 5(a) does not permit annulment of trades executed by mistake, but permits annulment of only those trades having material mistake –Punching erroneous sell order was coupled with breach of duty/negligence – Admittedly there was fall in NIFTY Index by 15.5% on account of erroneous sell orders placed by appellant therefore appellant was not justified in seeking annulment of trades – Appeal disposed of – Decided against Appellant. Violation of Margin money norms - Whether respondent nos:2 to 9 placing buy orders far away from market price and violating margin money norms laid down by NSE vitiated trade – Held that:- NSE vide circular dated January 20, 2004 warns that disciplinary action may be initiated against those members who place orders far away from normal market price – Violating margin money norms was liable for expulsion or suspension or withdrawal of all or any of membership rights and/or to pay fine and/or censure, reprimand or warning – Trades executed due to erroneous sell orders and buy orders placed by respondent nos:2 and 3 in violation of norms, affected adversely NIFTY index, causing loss of appellant and huge profits to respondent nos:2 and 3 – Violations committed by respondent nos. 2 and 3 were serious violations and NSE ought to have appreciated imposing penalty against profits running into several crores wrongfully earned by respondent nos: 2 and 3 – Matter remanded back for fresh consideration in accordance with law.

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• 2015 (8) TMI 334
  Scheme of Arrangement - Dispensing convening meetings of equity and preference shareholders, secured and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Sections 391 Companies Act, 1956 – Held that:- board of directors of transferor companies no. 1, 2, 3, & 5 and transferee company in their separate meetings respectively unanimously approved proposed Scheme of Amalgamation – Equity shareholders, secured creditors and unsecured creditors of transferor company no. 1,2,3 &5 and transferor company have given their consents/no objections in writing to proposed Scheme of Amalgamation and were found in order – Direction issued to Transferee company having 6 secured and 9002 unsecured creditors, to hold their meeting to seek their approval to proposed Scheme of Amalgamation – Application stands allowed – Decided in favour of Applicants.

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• Service Tax

• 2015 (8) TMI 353
  Taxability of incentives & reimbursements received from MUL - authorized dealer of Maruti Udyog Limited (MUL) - Business Auxiliary Service - Held that:- Appellant has mainly argued on the parameters that various incentives given by MUL, on which service tax demand is proposed to be raised under BAS, are of the nature of trade discounts based on performances or are simply certain reimbursements made by MUL for Sales/Joint benefit, which can not be considered as provision of Business Auxiliary Services - There is no evidence on record that in the present appeal also any separate consideration is received by the appellant from either MUL or the customers for providing such free service. Accordingly it is held that no service tax is payable on the free service provided by the appellant. - Appellant also argued that with respect to demands raised; under the head of Workshop Service charges for financial year 2003-2004, 2004-2005 and demand under delayed payment of service tax for financial year 2003-2004; they have been able to reconcile certain payments made which clearly indicate that more service tax has been paid then what is demanded. We find that such a verification of claims made by the appellant can only be properly done by the Adjudicating Authority. - Matter remanded back - Decided in favour of assessee.

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• 2015 (8) TMI 352
  Validity of Tribunal's order - Bar of limitation - Tribunal's power to condone the delay - Held that:- If Tribunal's order are borne in mind, then, the Tribunal's conclusion cannot be said to be perverse or vitiated by any error of law apparent on the face of the record. The Tribunal concluded that the law laid down by the Hon'ble Supreme Court in the case of Singh Enterprises vs. Commissioner of Central Excise, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] concludes the issue against the petitioner and in favour of the Revenue. A similar question in the case of Flemingo (Duty Free Shop) Private Limited vs. Commissioner of Customs (Appeals), Mumbai-I [2015 (1) TMI 22 - BOMBAY HIGH COURT] was considered. The Division Bench following the law laid down by the Hon'ble Supreme Court took the same view. - Court cannot put a premium on the negligent act of the petitioner-appellant of not approaching the Appellate Authority in time by exercising our plenary powers - Decided against assessee.

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• 2015 (8) TMI 351
  Denial of refund claim - Input services - service providers had raised the invoices on the appellant before the service tax registration was granted to the appellant - Held that:- Decision in the case of Commissioner of Service Tax, Mumbai- II vs. J.P Morgan Services India Private Limited [2015 (2) TMI 467 - CESTAT MUMBAI] followed - impugned order is unsustainable - Decided in favour of assessee.

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• 2015 (8) TMI 350
  Waiver of pre deposit - Construction of residential houses - Held that:- Appellant secured the contract for construction of residential houses for Tsunami victims from the Government of Tamil Nadu. On identical issue this Bench in the case of M/s. Jafty Earth Movers and contractors Ltd.(2013 (2) TMI 133 - CESTAT CHENNAI) granted waiver of pre-deposit by relying the Tribunals decision in the case of Macro Marvel Projects Ltd. (2008 (9) TMI 80 - CESTAT, CHENNAI), which has been confirmed by the Honble Supreme Court [2009 (7) TMI 1222 - SUPREME COURT]. Whereas the Revenue relied upon the decision in the case of PSK Engineering Constructions & Co. (supra), wherein pre-deposit has been ordered. - houses constructed for Tsunami victims are individual houses and not a housing complex. Further, in the case of PSK Engineering Constructions & Co. (supra) no reference has been made to the decision of Macro Marvel Projects Ltd. (supra). Considering the above facts and also considering that two decisions of this Bench are in favour of the assessee and taking into account of the judgment of the Hon’ble Supreme Court in the case of Macro Marvel Projects Ltd. (supra) the appellant has made out a prima facie case in their favour for waiver of pre-deposit. Accordingly, stay is granted till disposal of the appeal - Stay granted.

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• 2015 (8) TMI 349
  Condonation of delay - Delay of 60 days - Held that:- A letter for adjournment of personal hearing was submitted by the appellant which was not taken into consideration by the first appellate authority for deciding the appeal and condonation of delay. There is thus, violation of principles of natural justice. The order dated 05.12.2012 passed by the first appellate authority is required to be set-aside and the same is set-aside. The matter is remanded back to the Commissioner (Appeals) for deciding on condonation of delay in filing of appeal. - Matter remanded back - Decided in favour of assessee.

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• Central Excise

• 2015 (8) TMI 346
  Denial of CENVAT Credit - distribution of credit by the Input service distributor (ISD) - Manufacture of exempted goods - Imposition of penalty - whether the credit availed by the appellant is in respect of exempted goods i.e. crude oil etc. is admissible - Held that:- credit can be allowed in respect of services received by the input service distributor before the registration under input service distributor and distributed the same after the registration. - though the crude oil may be exempted but the same is used in the further process as intermediate products in the appellant's own factory and the resultant final product is dutiable, the Hon'ble High Court held that the appellant are entitled for Cenvat credit. However, The Hon'ble High Court has remanded the matter only to decide the issue that whether the credit can be availed on the input service distributor's invoices issued in respect of service received by the input service distributor prior to the registration as input service distributor. Input service distributor should receive invoices under Rule 4(a) of the Service Tax Rules, 1994 towards purchase of inputs services and issues invoices for the purpose of distribution of credit of service tax paid on the said service to such manufacturer or producer or provider, as the case may be. The Rule 2(m) does not stipulates any condition that the invoices issued under Rule 4(a) in respect of purchase of input service should pertain to period prior to the registration or after registration. Therefore it is clear that the purchase of input service by the office of the manufacturer maybe for the period prior to the registration and because of this reason there is no prohibition in the above Rule 2(m) for distributing services and issuance of input service distribution invoices. - services on which the Cenvat Credit was taken by the appellant have been admittedly received and used in or in relation to the manufacture of the dutiable final product which has been observed by the Hon'ble High Court also. Therefore, foremost condition is, input should be received by the appellant and same should be used in or in relation to the manufacture of their dutiable final product is not under dispute. Appellant has availed credit on invoices issued by the input service distributors under Rule 4A, therefore the documents on which credit was taken is the documents covered under the above rule therefore invoices received by the appellant is not under dispute. As regard the input service distributor they are supposed to take credit on invoices issued by provider of input service. In the present case this is also not under dispute that the input service distributor has taken credit on the invoices issued by the service provider. Therefore the documents i.e. invoices issued by input service distributor could not be said to have been issued illegally - Input service was received by the appellant, input service covered by the said invoices has been used in or in relation to the manufacture of dutiable final product. In these facts, we find no fault or contravention of the provisions on the part of the appellant therefore Cenvat credit, irrespective any discrepancy, if any found on the part of the input service distributor, Cenvat Credit to the appellant cannot be denied on the ground that input service distributor have received services prior to the obtaining registration as input service distributors. Invoices issued by input service distributor is in the capacity registered of input service distributor. Therefore facts are different firstly it relates to the unregistered dealer and secondly receipt of inputs and dealers are different entities. In the present case the input service distributor is not different entity, it is part of the same entity and invoices were issued only after obtaining registration therefore facts of this case are entirely different, hence the Balmer Lawrie & Co. Ltd. (2000 (1) TMI 74 - CEGAT, NEW DELHI ) judgment cannot be made applicable in present case. As regard various judgments, Eagle Flask Industries Limited and Hari Chand Shri Gopal (1992 (5) TMI 19 - SUPREME COURT OF INDIA) cases on the issue that condition provided for availing any benefit has to be strictly complied with, in absence of the same, benefit provided under scheme cannot be extended to the assessee. - there is no even procedural lapse on the part of the appellant, Cenvat credit taken on the invoices issued by registered input service distributor is correct and legal - appellant has correctly availed the Cenvat Credit on the strength of invoices issued by input service distributors and we do not find any fault - Decided in favour of assessee.

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• 2015 (8) TMI 345
  Denial of SSI Exemption - Manipulation of invoices - Availment of fraudulent CENVAT Credit - Held that:- Appellant No. 3 and 4 are based in and around Viramgam and are trading in HR trimmings. They have been bidding for the same on the online auction. From the investigation it is very clear that the HR trimmings so bidded were transported to Viramgam. It is obvious that the HR trimmings covered by the invoices was purchased by them and thereafter sold by them. They have definitely involved in the sale, purchase and transportation of HR trimmings there can be no doubt that they actively handled the consignments. Rule 26 of the Central Excise Rules are applicable to any person who acquires possession of or in any way concerned in transporting, removed, depositing, keeping, concealing, selling or purchasing or in any other manner deals with any excisable goods which he knows or has reason to believe are liable to confiscation. H.R. trimmings so diverted to Viramgam were undoubtedly liable to confiscation and the appellants No. 3 and 4 have dealt with such H.R. trimmings and were concerned with such goods and were in the knowledge that such goods are liable to confiscation. Under the circumstances, the penalty imposed on them is correct. Penalty imposed is also not on the higher side. - goods were being transported in the Gujarat registered vehicle while the consignee name and address is that of Maharashtra, and such vehicles cannot take such freight. We also note that from the documents recovered from the premises of appellant No. 7 that they were fully aware that the HR trimmings were consigned to Viramgam based bidder and are being used by SSI units there. Under these circumstances, it was incorrect on their part to indicate the name and address of the M/s. Silver Ispat Pvt. Ltd., as consignee who were based in Mumbai. Since they have changed the name of the consignee in spite of the fact that the goods were being transported to Viramgam or nearby area in different State, the HR trimmings cleared have therefore become liable for confiscation as discussed earlier and they are liable to penalty. - Decided partly in favour of assessees.

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• 2015 (8) TMI 344
  SSI Exempiton - whether brand name TEGU, registered in the name of the appellant in India, is not sufficient to claim exemption of Notification No. 8/2003-CE dated 01/3/2003 when the same belongs to a German company - Penalty u/s 11AC - Held that:- Appellant M/s Parag Enterprises is the registered owner of the Trade Mark TEGU in India. - On the issue of admissibility of Small Scale exemption to registered owner of a brand name in India it is observed that the same is no more res-integra - Decision in the case of ESBI Transmission Private Ltd. vs. CCE [1992 (5) TMI 33 - HIGH COURT AT CALCUTTA] followed - Decided in favor of assessee.

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• 2015 (8) TMI 343
  Concessional rate of duty - bubble gum - whether in the nature of sugar confectionary (excluding white chocolate) not containing cocoa" - Duty exemption under notification no. 6/02 CE dated 1/3/2002 - Held that:- When w.e.f, 28/02/2005 heading 1704 pertaining to "sugar confectionary (including white chocolate) not containing cocoa" had been re-structured and as per the re-structured heading, the sub-heading 170490 covered bubble gum, and during period w.e.f. 28/2/2005, the exemption notification no. 06/02 CE (serial no. 247) continued to prescribe concessional rate of duty for "sugar confectionary (excluding white chocolate) not containing cocoa covered by heading 170490", in our view, the benefit of exemption under this notification cannot be denied as - (a) there is no dispute that bubble gum contains the sugar and is covered by the expression "sugar confectionary (excluding white chocolate) not containing cocoa" and (b) during period w.e.f. 28/02/2005 heading 170490 also covered bubble gum. W.e.f. 1/3/2006 notification no. 06/02 CE was rescinded and was replaced by notification no. 03/06CE dated 1/3/2006 and serial no. 16 of this notification also provided concessional rate of duty of 8% adv. for "sugar confectionary (excluding white chocolate) not containing the cocoa falling under sub-heading 170490" when this notification had been issued on 1/3/2006, the new Central Excise Tariff had already come into existence w.e.f. 28/2/2005 and in this new Tariff, sub-heading 170490 covered bubble gum. In view of this, the department's contention that the sub-heading 170490 mentioned in serial no. 247 of the notification no. 06/02CE must be read with the old Central Excise Tariff as it existed during period prior to 28/2/2005 is not acceptable. It is seen that it is only by notification no. 29/06CE dated 4/5/2006 that serial no. 16 of the notification no. 03/06CE was amended and the entry against serial not. 16 in this notification was replaced by "sugar confectionary (excluding white chocolate and bubble gums" and thus by the amendment notification no. 29/06CE dated 4/5/2006, the bubble gum was excluded from the purview of the exemption. Benefit of this exemption notification cannot be denied to bubble gum. In this regard, we also take note of the fact that in terms of the judgments of the Tribunal in the case of Joyco India Limited Vs. CCE-Chandigarh [2002 (4) TMI 338 - CEGAT, NEW DELHI] wherein it was held that bubble gum and chewing gum are two different commodities and, therefore, the word "chewing gum" in heading 170410 of the 8 digit Tariff w.e.f. 28/2/2005 cannot be considered as including bubble gum and accordingly, the bubble gum would be covered by 170490 and during the period of dispute, "the sugar confectionary (excluding white chocolate) not containing cocoa falling under heading 170490" was eligible for the exemption. - impugned order is not sustainable - Decided in favour of assessee.

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• 2015 (8) TMI 342
  Confiscation and seizure of goods - Shortage of finished goods - Imposition of penalty - Respondents illicitly cleared the goods from their factory - Cross examination not granted - Held that:- Commissioner (Appeals) observed that the Show Cause Notice dt.03.05.1993 in respect of seizure of the goods, has already been adjudicated, the Deputy Commissioner, Surat. The re-adjudication of the said case done by the Adjudicating authority in the present de-novo adjudication order, cannot be sustained. It is noted that the Deputy Commissioner, C.Excise already adjudicated the Show Cause Notice dt.06.05.1996 vide OIO dt.14.11.1996 and therefore, the confiscation of the goods and imposition of redemption fine in respect of the seized goods by the Adjudicating authority in de-novo adjudication cannot be sustained. Regarding demand of duty along with interest and imposition of penalty by the Show Cause Notice dt.28.01.2000, I find that the Respondent challenged authenticity and the preparation of the Panchnama. It has contended that the demand of duty on the basis of the diary has no nexus with the Respondent’s factory. The Respondent also requested for cross examination. Commissioner (Appeals) had discussed the matter in detail on all the issues. Revenue filed this appeal against the impugned order only on the ground that by not producing the witnesses for cross examination, the Panchnama cannot be treated as invalid evidence. The learned Authorised Representative for the Revenue stated that Panchnama was prepared in the presence of the representative of the Respondent Company. Therefore, there is no requirement of cross examination of the Panchas. - statement against the assessee cannot be used without giving them opportunity of cross-examining deponent. Cross-examination is a valuable right of accused/noticee in quasi-judicial proceedings, which can have adverse consequences for them. - No reason to interfere the order of the Commissioner (Appeals) - Decided against Revenue.

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• 2015 (8) TMI 341
  Refund - Benefit of area based exemption - Commencement of production of new product after the cut-of date i.e. 31.12.2005 or increased the capacity of the production - Notification No.39/2001-CE, dt.31.07.2001 - refund claims of the amount which had been paid towards Basic Excise Duty from PLA - whether the manufacturing process of Billets and Ingots are not identical - Held that:- As per Steel Industry Glossary of Terms, Mass of metal obtained from casting liquid steel into a mould. The resulting ingot a semi-finished product - is typically then hot rolled or forted. A Semi-finished long product of upto 150 mm square cross-section with round corners. Billets can be continuously cast or hot rolled from either ingots or larger Concast billets and blooms. On perusal of the Chartered Engineer s certificate, we find that the liquid metal is moulded manually to make Ingots. But in the case of production of Billets, liquid metal is moulded through caster. The Respondents in their Cross Objection No.E/Cross/82/2011 stated that the Billets are being manufactured with the help of automatic moulding machine i.e. Concast Machine. So, it is clearly evident from the records that the Concast Machine was installed for manufacturing of the Billets after 31.12.2005. So, the Respondents are not eligible to avail the benefit of the exemption notification. - we set aside the impugned order of both the authorities below - Decided in favour of Revenue.

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• CST, VAT & Sales Tax

• 2015 (8) TMI 348
  Reversal of input tax credit - Held that:- Court in the aforementioned Judgment viz., Sri Vinayaga Agencies vs. The Assistant Commissioner (CT) (2013 (4) TMI 215 - MADRAS HIGH COURT), has clearly and categorically held that the ITC claimed by the dealers cannot be reversed under Section 19(1) of TNVAT Act on the ground that the sellers have not paid the tax to the department, the writ petition is allowed and the impugned order is set aside - Decided in favour of assessee.

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• 2015 (8) TMI 347
  Validity of Ex-parte orders - Violation of principle of natural justice - Held that:- Petitioner has remained silent even after receipt of the notice dated 30.03.2015, the petitioner, in their letter dated 13.04.2015 has mentioned two things viz., (1) the petitioner has requested the respondent to refer their reply for defect No.10 as recorded in sworn statement and (2) they have asked for personal hearing to produce the remaining F Forms for ₹ 37.37 crores. When that was the request of the petitioner, the respondent, before passing the impugned order, as per the ratio laid down in the case of SRC Projects P. Ltd vs. CCT (Mad) reported in [2008 (9) TMI 914 - MADRAS HIGH COURT], in my considered opinion, should have answered to the letter of the petitioner dated 13.04.2015. Admittedly, in the present case, pursuant to the request made by the petitioner dated 13.04.2015, no opportunity of personal hearing was given to the petitioner. - Matter remanded back - Impugned order is set aside - Decided in favour of assessee.

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