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TMI Tax Updates - e-Newsletter
August 19, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Interest u/s 234B - no direction had actually been given in the assessment order for payment of interest - Form I.T.N.S.150 contained a calculation of interest payable on the tax assessed - this Form must be treated as part of the assessment order in the wider sense - levy of interest confirmed - SC
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Deduction u/s 80-IB - if a small scale industry, in the course of 10 years, stabilizes early, makes further investments in the business and it results in it's going outside the purview of the definition of a small scale industry, that should not come in the way of its claiming benefit under section 80-IB for 10 consecutive years, from the initial assessment year - HC
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Cash credit u/s 68 - whether forms part of the total income cannot be considered as application of income for the purpose of section 11 for the assessment year 2009-10 because the same is not a donation ? - Exemption dened - HC
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Reopening of assessment - the two parts of Section 147 (one relating to 'such income' and the other to 'any other income') are to be read independently - addition can be made on other income even if no addition made for the such income with regard to which reasons have been recorded - HC
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Claim of depreciation on the cages to carry birds produced in the hatchery - where two views of a particular aspect are possible, for an Income-tax Officer, and he has chosen one, the Commissioner cannot reopen the matter on the ground that another view is possible. - HC
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Purchases of the TV Programs/Film rights - Assessee amortised the "inventories‟ as per the method of accounting consistently followed by him over the years - the argument towards applicability of the AS-26 to the TV Programs and Film rights is not supported by any precedents - AO's proposal to invoke the provisions of section 32(ii) rejected - AT
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Entitlement to exemption u/s.11 and 12 - as the assessee is carrying on micro finance business in a commercial manner so as to earn profit and there is no iota of charity carried on by the assessee so as to grant exemption under sec.11 of the Act - AT
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Entitlement to exemption u/s.11 and 12 - The assessee is availing loans from banks and advance the same and admitted that it has advanced the loans to the customers at 13%. It is a commercial rate prevailing in the market - exemption denied - AT
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Depreciation on loose tools - jigs and fixtures - change in the accounting policy without any reason - The rate of deprecation could not be claimed as fixed by the assessee's expert. It could be claimed only at the prescribed rate, i.e. at the general rate of 10%. - AT
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Validity of assessment - assessee has pleaded that the assessment orders have been passed by the AO after 12o clock in the mid-night of 31-12-2009. - Had it been 12:15am after 31st January, then the AO would not have mentioned 31.12.2009, rather it would have been 1st January, 2010. - Decided against assessee. - AT
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Addition on issued capital u/s 68 - share application money - the assessee discharged the onus cast upon it to prove the identity and creditworthiness of the share applicant and genuineness of the transaction - AT
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Validity of assessment - section 292BB of the Act is not applicable to the present case and omission on the part of AO to issue notice u/s 143(2) of the Act within prescribed time limit is not a procedural irregularity and the same is not curable - AT
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Sale of carbon credit - on the sale of excess Carbon Credits the income was received it is capital receipt and it cannot be business receipt or income - AT
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Since the Commissioner of Income-tax (Appeals) has no jurisdiction to decide the issue which is not before the lower authorities at any stage originally, he could have rectified his order on the application filed by the assessee. - AT
Customs
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Project for drinking water supply project for supply of water for human and animal consumption - Ductile pipes were not classifiable under heading 98.01 of Customs Tariff and thus importer was not eligible for exemption under Notification No. 21/2002-Cus. - SC
Service Tax
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Franchise service - Nature of Receipt of course fees - Only because all the fees are provided in one Agreement does not necessarily lead to a conclusion that the different components of fees are only for the purpose of grant of franchise - AT
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Commercial Training and Coaching Services - Assessee contends that they are charitable institute - retrospective amendment - demands raised beyond the limitation period are liable to be set aside - AT
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Erection, Installation and Commissioning Service - installation of HVAC systems (air conditioning systems) - demand under ECIS which pertains to the period prior to 16.06.2005 is not sustainable as installation of air-conditioning was not covered under ECIS prior to 16.06.2005. - AT
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Nature of activity - the expenses charged directly from customers such as Bill of Lading (B/L) reissue charges, switch B/L charges, etc. - Since the services are provided directly to the client, not falling under Business Auxiliary service (BAS) - demand set aside - AT
Central Excise
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Denial of SSI Exemption - Clandestine Removal - Tribunal was clearly in error in holding that merely because no appeal has been filed against M.S. Jain, all the other appeals cannot be maintained - HC
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Validity of order of the tribunal - The matter was heard by the Member (Judicial) of the Tribunal, however, the decision has been delivered by the Member (Technical) of the Tribunal, who had never dealt with the case in past. - matter remanded back before the tribunal with direction - HC
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It was the duty of the tribunal as a last fact finding authority to have considered the backdrop in which the refund claim was made - The failure of the Tribunal to perform this duty and mandated by law itself is a substantial question - matter remanded back - HC
VAT
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VAT in IT products - DVAT - Bracket preceding words 'other than' in Item 15 of Entry 41 A, closing with bracket after words 'digital still image video cameras' was certainly unique to Delhi statute - correct way to read Article 15 in Entry 41A to DVAT Act was to read it without two brackets and to read it in manner that item 'digital still image video cameras' was not excluded from ambit of Entry 15 - HC
Case Laws:
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Income Tax
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2015 (8) TMI 621
Interest under Section 234B - no direction had actually been given in the assessment order for payment of interest - Held that:- It will be seen that under the provisions of Section 234B, the moment an assessee who is liable to pay advance tax has failed to pay such tax or where the advance tax paid by such an assessee is less than 90 per cent of the assessed tax, the assessee becomes liable to pay simple interest at the rate of one per cent for every month or part of the month. The facts of the present case are squarely covered by the decision contained in Kalyankumar Ray's case [1991 (8) TMI 291 - SUPREME COURT] inasmuch as it is undisputed that Form I.T.N.S.150 contained a calculation of interest payable on the tax assessed. This being the case, it is clear that as per the said judgment, this Form must be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of Section 143, which is referred to in Explanation 1 to Section 234B. - Decided in favour of revenue.
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2015 (8) TMI 620
Reopening of assessment - requirement of issuance of notice - exemption claimed by the assessee under Section 10(20) was not tenable as it was not a local authority within the meaning of Section 10(20) - ITAT allowed assessee's appeal - Held that:- It is clear that the essential requirement is "issuance of notice" under Section 143(2) of the Act. The deeming fiction under Section 292BB of the Act is with regard to "service of notice". Since the initial requirement of issuance of notice was not made by the Assesssing Officer, the deeming fiction of service of notice under Section 292BB of the Act, consequently, does not arise and is not applicable. In the light of the aforesaid, since the Assessing Officer failed to issue notice within the specified period under Section 143(2) of the Act, the Assessing Officer had no jurisdiction to assume jurisdiction under Section 143(2) of the Act and this defect cannot be cured by taking recourse to the deeming fiction provided under Section 292BB of the Act. Consequently, the Tribunal was justified in setting aside the order of the Assessing Officer as well as the order of the Appellate Authority. - Decided in favour of assessee.
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2015 (8) TMI 619
Reopening of assessment - reliance on audit objection - as per AO assessee was not entitled to the depreciation at 30% on motor vehicles and the normal rate of depreciation at 15% was allowable to the assessee being a contractor and therefore, escaped assessment - Held that:- Solely on the audit objection raised by the audit party the assessment is reopened and/or it can be said that the opinion of the Assessing Officer and/or Assessing Officer’s reason to believe that there is an escapement of income is solely based upon the audit objections raised by the audit party and there is no independent formation of the opinion by the Assessing Officer. As observed hereinabove even while sending the proposal / communication to grant the approval for remedial action under section 147 of the Act, the Assessing Officer still had maintained that the audit objection raised by the audit party is not acceptable. Therefore, the formation of the opinion by the Assessing Officer and his reason to believe that there is any escapement of income to the tune of ₹ 1,66,42,284/- for AY 2009-10 has been vitiated. Therefore, in the facts and circumstances of the case, the formation of the opinion by the Assessing Officer while reopening the assessment proceedings and his reason to believe that the income has escaped the assessment has been vitiated and therefore, the reopening of assessment proceeding for AY 2009-10 is not valid and permissible. - Decided in favour of assessee.
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2015 (8) TMI 618
Sale of shares - Capital gain or business income - Whether, the Tribunal has committed itself to perversity while concluding that the income of the appellant is "business income"? - Held that:- The Tribunal has recorded a finding that in the present case, Assessee's main source of income is from share transaction. His income from interest is only ₹ 4158/-. Further during the year of assessment in question, Assessee has sold shares of various Companies, i.e. Flex Industries Limited, Rathi Ispat Limited, Maharashtra Fabrics Limited, U.P. Petro Ltd. and has also purchased shares of various Companies of substantial amount. The sale and purchase of shares on the part of Assessee is continuous, periodical and with an intention to earn profit. Profit earned from share transactions have been invested in loan given to Smt. Pushpa Somani, M/s Somani and Co. M/s Jay Dee Investment. There are some further reasons and as a whole, we find ourselves in agreement with the conclusion drawn by Tribunal that the transactions of shares are "adventure in the nature of trade" and shares sold during the assessment year in question are liable to be considered as "stock entry". Thus looking to the nature of commodity, i.e., shares and also continuity of transactions in several years, in our view, the Revenue was justified in treating the income as "business income" and not "capital gain". Decided in favour of Revenue.
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2015 (8) TMI 617
Voluntary disclosure of undisclosed income - VDIS - whether if a search has taken place under section 132 of the Act against an assessee, he is disabled from availing of the benefit under the Scheme in respect of any income referable to any earlier previous years? - Held that:- The non obstante clause contained in Chapter IV of the Finance Act, 1997, is not that wide enough. The net result is that the amount which was the subject matter of search was liable to be dealt with under Chapter XIV-B of the Act notwithstanding the fact that it was mentioned in the declaration filed under the Scheme. The only difference would be that the respondents would be under obligation to pay the differential tax if any. Whenever the search proceedings take place, an assessee would be exposed not only to higher rate of tax but also to the incidence of levy of interest and penalty. In the instant case, a senior official of the Department i.e., the Commissioner, who operated the Scheme itself, was of the view that the amount covered by search can be the subject matter of the benefit under the Scheme. It is only on a close analysis of the relevant provisions of law and the judgment rendered by this court, that it has emerged that the proceedings initiated under Chapter XIV-B of the Act do not get affected by the proceedings under the Scheme. When this is the disparity or complexity as to the understanding of the provisions of those enactments, the respondents cannot be exposed to the obligation to pay penalty or interest. We, therefore, allow the appeals, setting aside the common order dated October 17, 2002, passed by the Tribunal and upholding the orders passed by the Assessing Officer. We, however, direct that the respondents shall not be exposed to the liability of penalty, interest or prosecution. This facility shall be available to them if only they pay the differential tax payable under Chapter XIV-B of the Act within two months from today. - Decided in favour of assessee.
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2015 (8) TMI 616
Entitlement to benefit under section 80-IB - whether the assessee be denied the benefit of the said deduction on the ground that during the said 10 consecutive years, it ceases to be a small scale industry? - Held that:- Section 80-IB is an incentive provision. It provides deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. For an industrial undertaking to be eligible for the said deduction, it has to fulfill all the conditions mentioned under sub-section (2) of section 80-IB. Keeping in mind the industrial growth which is required to be achieved, if two interpretations are possible, the courts have to lean in favour of extending the benefit of deduction to an assessee who has availed of the opportunity given to him under law and has grown in his business. Therefore we are of the view, if a small scale industry, in the course of 10 years, stabilizes early, makes further investments in the business and it results in it's going outside the purview of the definition of a small scale industry, that should not come in the way of its claiming benefit under section 80-IB for 10 consecutive years, from the initial assessment year. Therefore the approach of the authorities runs counter to the scheme and the intent of the Legislature. Thereby they have denied the legitimate benefit, an incentive granted to the assessee . See Ace Multi Axes Systems Ltd. vs. Deputy Commissioner of Income Tax [2014 (8) TMI 596 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2015 (8) TMI 615
Cash credit amount assessed under section 68 - whether forms part of the total income cannot be considered as application of income for the purpose of section 11 for the assessment year 2009-10 because the same is not a donation ? - Held that:- Quite apart from the fact that the issue raised is a pure question of fact, we find from the order of the Commissioner of Income-tax (Appeals) as well as the Assessing Officer that the assessee had not in any manner let in any evidence to show that the amount of ₹ 1 crore received from M/s. India Cements was repaid by further availing of loan from various parties. It is no doubt true that the person who had taken the said loan, expired during the course of the assessment proceedings. Consequently, the names could not be furnished. Nevertheless it is a matter of record that the assessee had not produced any material by way of any resolution passed to avail of such loan to discharge the liability. Thus, in the absence of any material furnished by the assessee, the only other course available to the Assessing Officer was to consider this income as income from other sources. We do not find that the reasoning is faulty or illogical for this court to interfere with the order of the Income-tax Appellate Tribunal.- Decided against assessee.
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2015 (8) TMI 614
Reopening of assessment - disallowing the genuineness of the compensation u/s 40A(3) alleged to have been paid by the assessee to certain parties for vacating the property - whether the Tribunal would be correct in upholding reassessment proceedings when the reasons recorded for reopening of proceedings under Section 148 of the Act itself does not survive? - Held that:- Considering the provision of Section 147 as well as its Explanation 3, and also keeping in view that Section 147 is for the benefit of the Revenue and not assessee and is aimed at garnering the escaped income of the assessee {viz. Sun Engineering ([1992 (9) TMI 1 - SUPREME Court] )} and also keeping in view that it is the constitutional obligation of every assessee to disclose his total income on which it is to pay tax, we are of the clear opinion that the two parts of Section 147 (one relating to 'such income' and the other to 'any other income') are to be read independently. The phrase 'such income' used in the first part of Section 147 is with regard to which reasons have been recorded. Under Section 148(2) of the Act, and the phrase 'any other income' used in the second part of the Section is with regard to where no reasons have been recorded before issuing notice and has come to the notice of the Assessing Officer subsequently during the course of the proceedings, which can be assessed independent of the first part, even when no addition can be made with regard to 'such income', but the notice on the basis of which proceedings have commenced, is found to be valid. No reason to differ with the view taken by the Coordinate Bench of this Court in the case of Govindaraju - vs - Income Tax Officer [2015 (8) TMI 271 - KARNATAKA HIGH COURT] and thus we answer the first question in favour of the Revenue and against the assessee.
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2015 (8) TMI 613
Claim of depreciation on the cages to carry birds produced in the hatchery - CIT reopened the matter by issuing a notice under section 263 to hold that the cost of each cage is less than ₹ 5,000, they can be put to proper use only when they are attached to each other, thus disallowed the depreciation - Held that:- Tribunal discussed the matter at length with reference to the relevant precedents. The principle governing the exercise of power in a revision was taken note of. The principle is to the effect that where two views of a particular aspect are possible, for an Income-tax Officer, and he has chosen one, the Commissioner cannot reopen the matter on the ground that another view is possible. The second ground where the power can be exercised is that the order passed by the Assessing Authority is patently illegal. The Tribunal found that none of the grounds exist in the instant case. Learned counsel for the Department is not able to demonstrate as to how the order passed by the Tribunal is erroneous. At any rate, the question as to whether a particular unit can be used independently or in tandem with similar units, is a pure question of fact and the same cannot be dealt with in an appeal under section 260A of the Act. - Decided in favour of assessee.
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2015 (8) TMI 612
Reopening of assessment - Held that:- On the arguments relating to the existence of new or tangible material for the AO before initiating the re-assessment proceedings, we find from the reasons that it is not the case of Revenue that AO has any such tangible material on the incorrectness of the claim of amortization of the inventories of programs / films or the method of valuation thereof. In the preceding paragraphs, we have extracted ratios of various case laws in the form of the assessee on the requirement of tangible / new material. On these arguments of the Ld Counsel for the assessee also, the Revenue fails. The proceedings initiated by the AO are unsustainable in law. - Decided in favour of assessee. Addition on account of disallowance of intangible assets ie News / TV Program / Film Rights - On the debits relating to the purchases of the News items - Held that:- Regarding the nature of the news items purchased by the assessee and debited to the P and L account, we find it is in the common knowledge of every citizen that the news items do not have enduring benefit. Normally, the news items/non fictional items purchased by the assessee lose its value once they are telecast. Therefore, such items do not have repeat telecast value in terms of the revenue generation by way of advertisement from the sponsors. As such, it is a settled issue at the level of Hon'ble Delhi High Court in the case of Television Eighteen India Ltd (2014 (5) TMI 588 - DELHI HIGH COURT ) that the claims of the assessee relating to news / non-fictional items are allowable. Even otherwise, even if some income generated, that is not criterion for describing the items as „intangible assets‟ for the purpose of invoking the provisions of section 32(ii) of the Act. Further, we find that the assessee has a declared method of accounting relating to accounting of these transactions. He has been consistently following the same without any change. In fact, the Revenue has consistently allowed the claim in the past. This is for the first time, AO disturbed the claim of the assessee and invoked the provisions of section 32 (ii) of the Act, without any sustainable reasoning. Therefore the decision of the AO/CIT(A) is unsustainable legally. Hence, the assessee is entitled to claim the purchases of news items/non fictional items as an allowable expenditure. Accordingly, we direct the AO to delete the relevant addition.- Decided in favour of assessee. On the debits relating to the purchases of the TV Programs/Film rights - Held that:- Assessee amortised the "inventories‟ as per the method of accounting consistently followed by him over the years. In fact, the Revenue has consistently allowed the claim in the past. This is for the first time, AO disturbed the claim of the assessee and invoked the provisions of section 32 (ii) of the Act without any sustainable reasoning. We have perused he judgment of Honble High Court of Delhi and the order of the Tribunal of Chennai Bench in the case of M/s Sun TV Networks Ltd (2013 (10) TMI 1290 - ITAT CHENNAI). We have also extracted the relevant paragraphs and already placed in this order above. We find similar issue of amortization of the TV Programs/Film rights came up before the Chennai Bench of the Tribunal wherein the issue was decided in favour of the assessee and rejected the AO‟s proposal to invoke the provisions of section 32(ii) of the Act in respect of the above programs/rights. As such, the Ld DR's argument on the applicability of the AS-26 to the TV Programs and Film rights is not supported by any precedents and therefore, the arguments raised by the Revenue are not allowed. Thus, considering the covered nature of the issue as well as the consistent method of accounting followed by the assessee in this regard and also in the absence of any contrary material to support the arguments of the Revenue against the assessee‟s claim, we are of the opinion that the decision taken by the CIT (A) in the impugned order is required to be reversed. - Decided in favour of assessee.
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2015 (8) TMI 611
Disallowance of software expenditure by holding it as capital in nature - Held that:- In view of the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Raychem RPG Ltd. (2011 (7) TMI 953 - Bombay High Court), where the expenditure has been incurred for facilitating the business and which does not form part of profit making apparatus, then the software expenditure is to be allowed as revenue expenditure. Where the assessee had incurred expenditure on software which has been acquired to facilitate the smooth functioning of day-to-day business operations of the assessee and which do not form part of its profit making apparatus, then the expenditure is allowable as revenue expenditure in the hands of the assessee. The expenditure incurred by the assessee totaling ₹ 2,33,725/- has been incurred in the ordinary course of carrying on the business and does not form part of its profit making apparatus, hence, the said expenditure is duly allowable as revenue expenditure in the hands of the assessee. - Decided in favour of assessee. Disallowance of deduction on amortised lease premium expenditure, landscaping and development charges - Held that:- This issue was decided against the assessee in earlier year [2015 (8) TMI 557 - ITAT PUNE] wherein the Tribunal after considering the plea of the assessee with regard to amortization of lease hold premium has rejected the same by following the decision of Co-ordinate Bench in the case of M/s. Drillbits International P. Ltd. Vs. DCIT [2011 (8) TMI 1083 - ITAT PUNE ] - Decided against assesse. Disallowance of provision for expenditure in respect of benefit under Bhavishya Kalyan Yojana (BKY) an employee welfare scheme and Disallowance of provision for Medi-claim insuranc coverage scheme - Held that:- Since, the issue in present set of appeals is similar to the one already decided by the Tribunal in earlier year [2015 (8) TMI 557 - ITAT PUNE], we remit this issue back to the Assessing Officer with a direction to determine the deduction on account of BKY scheme and medi-claim insurance in the same terms. Decided partly in favour of assessee way of remand. Disallowance of deduction claimed u/s. 35D in relation to expenditure incurred for increasing authorized share capital - Held that:- Since, the issue in present set of appeals is similar to the one already decided by the Tribunal in earlier year [2015 (8) TMI 557 - ITAT PUNE] wherein held held that undisputedly the expenditure was incurred by the assessee for increasing share capital thus it is capital in nature. Thus, the same cannot be considered for computing deduction u/s 35D of the Act. In the present set of appeals also, it is an admitted position that the expenditure claimed as deduction under section 35D is with respect to increase in authorized share capital. Decided against assessee Disallowance of entrance fee paid to Poona Club - Held that:- This issue is squarely covered in the case of CIT Vs. Groz Beckert Asia Limited (2013 (2) TMI 375 - PUNJAB HARYANA HIGH COURT ) wherein held that the Corporate Membership of the club was obtained for running business with a view to produce profit. Such membership did not bring into existence an asset or an advantage for enduring benefit of business. It is an expenditure incurred for the period of membership and is not long lasting. By subscribing to membership of a club, no capital asset was created, only, a privilege to use facilities of a club, were conferred and that too for a limited period. Thus the expenditure incurred by the assessee towards payment of Corporate Membership fee of the club for its employees is Revenue expenditure - Decided in favour of assessee. Disallowance of deduction u/s. 80HHE - fist limb of submissions is that for computing deduction u/s 80HHE, the export turnover of the unit on which benefit of section 10A has been claimed has to be included - Held that:- This issue has been decided by the Tribunal in assessee's own case for the assessment year 2001-02. The relevant extract of the order of the Tribunal deciding the issue in favour of the assessee and we direct the Assessing Officer to include the export turnover of the EOU unit while computing the deduction under section 80HHE of the Act - Decided in favour of assessee. AMC receipts - whether are integral part of the business income of the assessee? - Held that:- It is an undisputed fact that the assessee has been showing AMC charges in the profit and loss account under the head Income from services . A perusal of the profit and loss account for the year ended 31-03-2004 would show that under the head Income , the assessee has three sub heads viz Income from services , Sale of products and Other income . Under the head Income from services the assessee has included income from various services rendered by it and AMC charges. Under the head Sale of products the revenue generated from sale of own products and trading products is included whereas under the head other income, interest income, foreign currency gain miscellaneous income is reckoned. It is also not disputed that the assessee has been consistently following similar method of accounting in respect of AMC charges for the past several years, as well as, in the subsequent years. It is also not disputed that the assessee is primarily engaged in providing I.T. related services. Therefore, by no stretch of imagination the AMC charges received by the assessee can be held to be income of the assessee under the head Other sources . In view of the above undisputed facts, we are of the considered view that the AMC receipts are integral part of the business income of the assessee - Decided in favour of assessee. Reallocation of expenditure between Software Technology Park (STP) and Non-STP Unit - Held that:- Allocation of depreciation on the basis of turnover is not acceptable. The depreciation on vehicles can be allowed on the basis of use of vehicles for the specific unit. Vehicles are allocated to the staff of the STP and Non-STP unit. The vehicles allocated to two different units can be identified. Depreciation on the asset utilized for a particular unit has to be allocated to that unit alone. We do not find any infirmity in the method of depreciation on vehicles adopted by the authorities below. The submissions of the Ld. AR on this issue are rejected. As regards allocation of travelling assessee and conveyance expenditure has allocated directly identifiable expenditure on actual basis to the STP and Non-STP unit and common expenses on the basis of turnover. We do not find any error in allocating of travelling and conveyance expenditure on actual directly identifiable basis and payments made to Tata Technology (US) since, the expenditure are identifiable unit wise, and have been separately invoiced, we accept the contention of the assessee. we remit the latter two issues back to the Assessing Officer to verify the allocation of both expenses on above noted basis. The Assessing Officer after affording opportunity of hearing to the assessee shall allocate expenditure to STP and Non-STP units - Decided partly in favour of assessee by way of remand. Re-computation of deduction u/s. 10A of the Act - Held that:- he Assessing Officer after reallocation of certain expenditure [depreciation on vehicles, travelling and conveyance and payment to Tata Technology (US)] has restricted the claim of exemption u/s. 10A in the assessment year 2004-05 and 2005-06. Since, the ground of appeals of the assessee with regard to reallocation of the expenses has been partly accepted. We remit this issue back to the Assessing Officer for re-computation of exemption u/s. 10A in accordance with the directions of the Tribunal in respect of allocation of expenses and in line with the decision of Hon'ble Bombay High Court in the case of CIT vs. Gem Plus Jewellery India Ltd. reported as [2010 (6) TMI 65 - BOMBAY HIGH COURT] Decided in favour of assessee by way of remand. Levy of Interest u/s. 234B and 234C is mandatory and consequential. Disallowance u/s. 14A. - CIT(A) delted addition - Held that:- . The assessee has claimed interest expenditure in the assessment years 2004-05 and 2005-06. The Assessing Officer held that the expenditure incurred for earning income exempt from tax is not allowable under the provisions of section 14A. The Assessing Officer estimated the disallowance @ 2.5% and computed interest attributable to long term investment. The Commissioner of Income Tax (Appeals) reversed the findings of the Assessing Officer on the ground that no dividend was earned by the assessee from the investments made in Tata Technology (US). Even if the assessee would have earned dividend on such investment it is taxable in India being dividend earned from foreign country. Therefore, the provisions of section 14A of the Act are not applicable. We are in agreement with the findings of Commissioner of Income Tax (Appeals) - Decided in favour of assessee. Non deduction of TDS - disallowance of taxes claimed to be payments on account of VAT, Advance tax, Employee Cost etc. paid in Korea - CIT(A) delted disallowance - Held that:- It is an un-rebutted fact that the assessee has not claimed any deduction with respect to payment of tax, rates etc. in Korea. The assessee has created provision for the same. The assessee in Profit Loss Account for the period relevant to the impugned assessment year has debited the 'Provision for taxation account' below the line. This factual findings have not been refuted by the Revenue. We do not find any infirmity in the findings of the Commissioner of Income Tax (Appeals) on this issue. Accordingly, this ground of appeal of the Revenue is dismissed.- Decided in favour of assessee.
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2015 (8) TMI 610
Transfer pricing adjustment - DRP deleted the ALP adjustment proposed by the AO - disallowance of payment of royalty and technical service fee to M/s. Kirby Building Systems, Kuwait analysed under the provisions of transfer pricing - Held that:- The assessee had entered into international transactions for payment of royalty and fee for technical services vide agreement dated 1.4.2000. Further we find that this agreement had undergone several amendments and the assessee had started paying royalty only from the P.Y 2005-06 onwards. Therefore, the ALP adjustment of these transactions has arisen only from P.Y 2005-06 onwards. This Tribunal, in assessee’s own case for A.Ys 2006-07 onwards, had considered this issue at length and had come to the conclusion that it is not required by the assessee to demonstrate that payment of royalty is justified as such agreements are periodically approved by the RBI and by the Ministry of Industries and the assessee was paying the amount as per the agreements. For coming to the conclusion, the Tribunal relied upon the decision of the Hon’ble Delhi High Court in the case of CIT vs. EKL Appliances (2012 (4) TMI 346 - DELHI HIGH COURT). This decision of the Tribunal was also followed by the Coordinate Bench of this Tribunal in assessee’s own case for A.Ys 2008-09 and 2009-10 holding that the royalty paid by the assessee was at ALP. DRP has only followed the decision of the ITAT in assessee’s own case for earlier A.Ys. As the DRP has only followed the precedent on the issue in the assessee’s own case and has accordingly issued directions to the AO and the assessment order is in consonance with such directions of the DRP, we do not find any reason to interfere with the same. - Decided against revenue.
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2015 (8) TMI 609
Entitlement to exemption u/s.11 and 12 - CIT(Appeals) observed that the assessee is a company without profit motive and the micro finance business carried on by the assessee falls under the category of ‘relief to poor’ and hence, it is carrying on charitable activity u/s.2(15) of the Act, so as to grant exemption u/s.11 and 12 of the Act - Held that:- In the present case, the assessee is having reserves and surplus at ₹ 50,89,576/-. Contrary to this, the assessee is having revolving fund at ₹ 66,33,800/-, which was availed by hypothecation of their debt to various necessary banks. Further, the assessee raised secured loans and unsecured loans @ 11% totalling to ₹ 16,35,54,090/-. Thus, it means that it has raised loans to advance to the customers by paying interest and the assessee is not having own corpus in a formal capital so as to advance the loan. The assessee is providing loans by association with various commercial banks by raising loans from them. Such kind of micro finance activity cannot be termed as charitable activity rather than it is a business activity. In order to become a charitable activity, the institution must have advance loans at a subsidised rate of interest. The assessee is availing loans from banks and advance the same and admitted that it has advanced the loans to the customers at 13%. It is a commercial rate prevailing in the market. By advancing loans at that rate of interest cannot be considered as an activity carried on by the assessee as charitable and for the benefit of the public. When the assessee carried on micro finance activity in a commercial line, then it is not a charitable activity but an activity to expand the finance business by contracting weaker section of the public and it does not involve any charitable activity. Therefore, looking into the activities carried on by the assessee, we fully agree with the findings of the AO and this view of ours is squarely covered by the decision of the Tribunal in the case of Janalakshmi Social Services (2008 (8) TMI 606 - ITAT BANGALORE ). The assessee relied on various judgments, which cannot be applied to the facts of the present case, as the assessee is carrying on micro finance business in a commercial manner so as to earn profit and there is no iota of charity carried on by the assessee so as to grant exemption under sec.11 of the Act. Accordingly, we are inclined to uphold the order of the AO and reverse the order of the CIT(Appeals). - Decided in favour of revenue.
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2015 (8) TMI 608
Expenses incurred on Life Extension Program (LEP) of Thermal Power Station I (TIPS-I) and expenditure on Rejuvenation of Bucket Wheel extractors - revenue v.s capital expenditure - Held that:- As decided in assessee's own case [2012 (10) TMI 751 - ITAT CHENNAI] wherein held what was replaced was only the parts of machinery and the expenditure was incurred only to preserve and maintain the existing assets and therefore, the expenditure on such repairs is allowable as deduction under current repairs. Following the decision in case of Saravana Spinning Mills P. Ltd. (2007 (8) TMI 16 - SUPREME COURT OF INDIA) that when an expenditure was incurred to preserve and maintain already existing asset and such expenditure is not bringing any new asset into existence or obtaining new advantage such expenditure is allowable as current repairs. - Decided in favour of assessee Whether assessee is entitled to 100% deduction u/s.80IA, as second year in respect of profits earned in the unit VII of TPS II - Stage II which was commissioned in the previous year 1994-1995? - CIT(A) allowed claim - Held that:- We are inclined to dismiss the appeal of the Revenue as the first year of claim of assessee was assessment year 1999-2000 and 80IA(2) permits the assessee to claim deduction for any ten years out of first fifteen years. See Velayudhaswamy Spinning Mills (P) Ltd case [2010 (3) TMI 860 - Madras High Court] - Decided in favour of assessee Reopening of assessment challenged - Held that:- Reopening u/s.147 is held to be valid. The assessee has tried to take shelter under the exception provided by the above stated proviso where an assessment under sub-section (3) of section 143 has been completed, no action after the expiry of four years from the end of the assessment year can be taken. But as stated above, when the assessee has not disclosed fully and truly the facts necessary for the assessment, this proviso will not come to its rescue. Same is applicable to other reasons records for reopening of assessment. Consequently, we hold that the entire reassessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. The assessee fails on this legal issue. - Decided against assessee. Depreciation on loose tools - Whether loose tools would only partake of the character of consumables in regard to an assessee comparable to the assessee - Held that:- Assessee has been claiming loose tools as capital expenditure and claiming deprecation at 25%. Suddenly in the assessment year under consideration there was a change in the accounting policy without any reason. Even before us, the assessee was not able to furnish any reason for change in accounting policy. In the case of Gujarat Small Scale Industries Corporation Ltd vs. CIT (1981 (7) TMI 8 - GUJARAT High Court ), wherein held that the Tribunal perfectly justified in taking the view that the jigs and fixtures were part of the plant and machinery. The deduction was claimed on the ground that the tools, jigs and fixtures were losing their utility fast. It, therefore, amounted to a claim for depreciation. The rate of deprecation could not be claimed as fixed by the assessee's expert. It could be claimed only at the prescribed rate, i.e. at the general rate of 10%. The Tribunal was justified in disallowing the claim of the assessee. The Commissioner of Income Tax(A) in this case followed the above judgment. Being so, we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals). - Decided against assessee. Failure to deduct tax at source on payments made under the supply contract - Held that:- As assessee observed that levy of interest u/s.201(1A) depends on the income computed in the case of recipient as well as date of filing of the return of the recipient. It was brought to our notice that the appeal of the assessee for determining the income accruing in India is pending before appellate authorities/court. In view of this, we remit this issue back to the file of the Assessing Officer to re-compute the interest u/s.201(1A) after verifying the return of recipient and also in the light of judgment of Supreme Court in the case of CIT vs. Hindustan Cocacola Beverages (P) Ltd, [2007 (8) TMI 12 - SUPREME COURT OF INDIA], wherein held that where the payee has already paid tax on the income on which there was a short deduction of tax at source, recovery of tax cannot be made once again from the tax deductor. This issue is remitted back to the file of Assessing Officer for fresh consideration. - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 607
Transfer pricing adjustment - Computation of the arm's length price - selection of comparables - Held that:- As far as comparables list at Sl. Nos. 17 and 25 of the list of comparables chosen by the Transfer Pricing Officer is concerned, viz., Infosys BPO Ltd. and Wipro Ltd., the turnover of these companies are admitted beyond ₹ 200 crores. It has been held by this Tribunal in several decisions like Trilogy E-Business Software India P. Ltd. v. Deputy CIT [2013 (1) TMI 672 - ITAT BANGALORE ] that companies having turnover above ₹ 200 crores cannot be considered as comparable with companies having turnover of less than ₹ 200 crores. Thus we are of the view that the aforesaid two companies cannot be regarded as comparable. With regard to company at Sl. Nos. 19 and 23 of the list of comparable companies chosen by the Transfer Pricing Officer, viz., M/s. Maple E Solutions Ltd., and Triton Corporation Ltd., the Hyderabad Bench of the Tribunal in the case of Stream International Services P. Ltd. v. Asst. CIT (2014 (10) TMI 393 - ITAT MUMBAI ) in para 13(iii) at page-14 of the order held that the promoters of these two companies were involved in fraud for earlier years and hence the financial results of these companies are distorted and cannot be relied upon and in this regard relied on several decisions rendered by the various Benches of the Income-tax Appellate Tribunal. Respectfully following the same, we direct the aforesaid two companies be excluded from the list of comparable companies chosen by the Transfer Pricing Officer. Exclusion of the following four companies from the list of comparable companies by applying the employee cost to sales filter, viz., Asit C. Mehta Financial Services Ltd., (previously known as Nucleus Netsoft and GIS Ltd.), Informed Technologies Ltd., Vishal Information Technologies Ltd. (now known as Coral Hub Ltd.) and Accentia Technologies Ltd. - Held that:- In respect of the percentage of employee cost to turnover there is dispute in the case of Asit C. Mehta about the percentage of the employee cost to turnover. In respect of Asit C. Mehta the learned Departmental representative submitted that the data processing charges mentioned in Schedule 12 of the profit and loss account should also be considered as employee cost and the percentage worked out accordingly. In respect of Accentia technologies Ltd., also the issue should be remanded as the employee cost to turnover issue was not raised before the Dispute Resolution Panel/Transfer Pricing Officer by the assessee and the figures given by the assessee before the Tribunal needs verification. We are of the view that the plea put forth by the learned Departmental representative is acceptable and in respect of these two companies the employee cost to sales should be examined afresh by the Assessing Officer/Transfer Pricing Officer after due opportunity to the assessee. In respect of the other two companies there is no dispute that the employee cost to sales is less than 25 per cent. and therefore these two companies are directed to be excluded from the list of comparable companies. comparable company at Sl. Nos. 5, 14 and 16 of the chart of comparable companies chosen by the Transfer Pricing Officer viz., Appollo Health Street Ltd., M/s. HCL Comnet and M/s. Informed Technologies India Ltd., are concerned, it is not in dispute before us that the related party transaction in the case of companies exceeds 15 per cent. (17.77 per cent. in the case of Appollo Health Street Ltd., 21.52 per cent. in the case of HCL Comnet and 15.93 per cent. in the case of Informed Technologies India Ltd.) and in view of the decision of the Tribunal in the case of 24/7 Customer.Com.Pvt. Ltd. v. Deputy CIT [2013 (1) TMI 45 - ITAT BANGALORE] wherein it was held that where the related party transaction exceeds 15 per cent., such companies should not be taken as comparable companies. With regard to (1) Eclerx Services Ltd. ; (2) Mold-Tek Technologies Ltd. (Seg.) at Sl. Nos. 11 and 20 of the list of comparable companies chosen by the Transfer Pricing Officer, being chosen as comparable companies, the Income-tax Appellate Tribunal, Bangalore Bench in the case of Symphony Marketing Solutions India P. Ltd. v. ITO [2014 (2) TMI 83 - ITAT BANGALORE] these companies were held to be not comparable with companies in information technology enabled services sector Bodhtree Consulting Ltd. (Seg). was into software development and not a pure information technology enabled services company. In our view the objections and the reasons given by the Transfer Pricing Officer for considering this company as a comparable are different and the objections raised by the assessee before the Transfer Pricing Officer were also different. On the facts as it transpired before the Transfer Pricing Officer and the arguments of the assessee before the Transfer Pricing Officer/Dispute Resolution Panel, we are of the view that this company was rightly regarded as comparable. Accurate Data Converters Ltd. - he request made by the assessee has to be accepted in view of the lack of opportunity provided by the Transfer Pricing Officer/Dispute Resolution Panel. Accordingly, the Transfer Pricing Officer/Assessing Officer is directed to furnish a copy of the annual report of this company to the assessee. The assessee will thereafter furnish his explanation as to whether this company can be considered as a comparable company or not. The Transfer Pricing Officer will thereafter decide the comparability of this company after affording an opportunity of being heard to this company. IServices India Ltd. - The Transfer Pricing Officer/Assessing Officer will obtain the annual report of the company for the financial year 2006-07 and also furnish the assessee copies of the same together with the information obtained by the Transfer Pricing Officer pursuant to issue of notice under section 133(6) of the Act. The assessee will thereafter furnish its reply as to why this company should not be considered as a comparable company. The Transfer Pricing Officer/ Assessing Officer will thereafter decide the question of considering this company as a comparable company after affording opportunity of being heard to the assessee. Excluding telecommunication charges while computing deduction under section 10A - Held that:- king into consideration the decision rendered by the hon'ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that it would be just and appropriate to direct the Assessing Officer to exclude telecommunication charges incurred be excluded both from export turnover and total turnover, as has been prayed for by the assessee in the alternative. - Decided partly in favour of assessee.
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2015 (8) TMI 606
Validity of assessment - assessee has pleaded that the assessment orders have been passed by the AO after 12o clock in the mid-night of 31-12-2009. Therefore, the assessment orders are time barred, and consequently be quashed - Held that:- On due consideration of the facts and circumstances, we do not find force in the submissions of the ld. counsel for the assessee. Firstly, the ld. AO has mentioned a time at 12:15 am, meaning thereby, it is morning of 31-12-2009. Rather, the CIT(A) has rightly pointed out that instead of expression “night”, the ld.AO should have recorded “morning”. It is only incorrect use of word at the end of the AO. Otherwise, he has passed the assessment order on 31.12.2009 after 12oclock next day would begin. Had it been 12:15am after 31st January, then the AO would not have mentioned 31.12.2009, rather it would have been 1st January, 2010. - Decided against assessee. Undisclosed investment/expenditure in the property situated at 6, Kaushal Co-op. Hsg. Society - Held that:- The assessee has not submitted any fund flow statement for the purpose of explaining the source before the AO. It is impossible to reconcile this statement with the availability of funds at a given point of time. There is no head and tail of the exact amount available on a particular date, out of which, it can be alleged that the investment was made in the advancement of loans.No doubt, on 21.2.2002, cheque bearing no.0303541 for ₹ 7 lakhs has been cleared. But this cheque number has not been mentioned in the promissory note. It cannot be said that the loan of ₹ 7 lakhs in the Asstt.Year 2002-03 was given through account payee cheques, and that the cheque was bearing no.0303541. In the promissory note, there is a cutting of cash with the cheque, but neither the assessee has alleged the cheque number during the assessment proceedings nor mentioned in the promissory note. This fact can easily be demonstrated before the AO by producing the bank account of the borrower indicating the fact that cheque no.0303541 was credited to his account, but no such effort was made by the assessee during the assessment proceedings. Before us, it is not possible to cross-verify this aspect at this stage. Therefore, we do not find any merit in this contention of the ld.counsel for the assessee - Decided against assessee. Unexplained source of payment - explanation of the assessee is that these documents were issued in lieu of security of the loan earlier advanced by the assessee to Hasubhai Thakkar. According to the assessee, Shri Hasubhai Thakkar has given a declaration that Bhagyodaya Plaza was never constructed and no possession was given to the assessee - Held that:- as far this letter from Shri Hasubhai Thakkar is concerned, it was not taken on record by the ld.CIT(A). The assessee sought to produce this letter by way of additional evidence. But prayer of the assessee was rejected. The copies of the receipts indicate that the payment of ₹ 12.25 lakhs in the accounting year relevant to the Asstt.Year 2004-05. Had the amount was not given, then it was for the assessee to demonstrate, as to why the necessity to execute such type of receipts, in this methodical way, was felt. As far as security of the first loan amount is concerned, the assessee has taken undated cheques from Shri Hasubhai Thakkar. She had also got executed promissory notes. These two sureties were also there in existence. Therefore, in our opinion, the First Appellate Authority has rightly concluded that payment of ₹ 40 lakhs was made by the assessee to Shri Hasubhai Thakkar or his concern. This payment was made during the accounting year relevant to the Asstt.Year 2004-05 and 2005-06. It is a separate amount than the one given in financial year 2001-02 or 2002-03. We do not find any merit in this contention of the assessee.- Decided against assessee. Unexplained investment in shares - Held that:- AO has annexed a list of shares which have been considered by him as unexplained investment of the assessee. The major item of investment worked out by him is with regard to Smt.Pareshaben Shah. The client ID is 10735254. The balance has been shown at ₹ 13,90,888/-. Against this ID, 56 scrips have been noticed by the AO, in the annexure appended with the assessment order. All these shares have been shown pertained to F.Y.2003-04. The ld. Counsel for the assessee failed to pin point, out of these 56 scrips, which were purchased by this person in earlier years. He merely stated that some of the shares which have been included were purchased in earlier years, but after this list, at least the assessee should identify, which are those scrips deserve to be excluded on the ground that the investment does not pertain to this year. No such efforts have been made. The AO has, accordingly, recorded a finding that the assessee did not submit any detail. He has worked out the details on analysis of DEMAT account. No material has been brought to our notice which can suggest this erroneous approach adopted by the Revenue authorities. We, therefore, do not find any merit in this ground of appeal. It is rejected. - Decided against assessee. Addition on deemed dividend u/s 2(22)(e) - Held that:- The assessee has never raised any plea that the company was incorporated on 1.9.2003. The ld.counsel drew our attention towards page no.119 where certificate issued by the Asstt.Registrar of Companies, Gujarat, exhibiting the incorporation of the company has been placed on record. He also drew our attention towards copy of the balance sheet prepared on 31.3.2004. These documents were not brought to notice of the AO during the assessment proceedings. Therefore, we deem it proper to set aside this issue to the file of the AO for re-adjudication. The ld.AO shall determine the date of incorporation of the company, and thereafter, decide whether, there was any accumulated profit or not, out of which it can be alleged that the loans have been given to the assessee. - Decided in favour of assessee for statistical purpose.
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2015 (8) TMI 605
Disallowance u/s 14A - Held that:- It is not disputed that there was no dividend or exempt income claimed by assessee during the relevant previous year. Other income shown by the assessee in its Schedule 15 shows dividend income as nil. No doubt there is a sum of ₹ 160,701,177/- appearing as miscellaneous income in the P & L account. However, this was the subject of an analysis by the AO wherein the AO himself has given a finding that ₹ 16 crores was remuneration received by the assessee for development of properties and not any income considered as exempt. In any case, computation of income of the assessee which appear at page 12 of the assessment order start with the figure of ₹ 2,44,62,794/- in the negative, which is the same figure appearing in the audited profit and loss account as profit (loss) before taxation. Thus, the whole of the other income was a part of the net working results and contention of the assessee that it had not made any claim of exempt income is found to be correct. We are of the view that a disallowance u/s.14A could not have been made when there was no claim for exempt income during the relevant previous year. Such disallowance stands deleted. - Decided in favour of assessee. Disallowance u/s.57 in respect of the interest paid on borrowed funds - Held that:- t. None of the Authorities below have examined the purpose for which loan was borrowed from HDFC. U/s.57(iii) of the Act, expenditure should be incurred wholly and exclusively for the purpose of making or earning the income. The claim of the assessee is that interest earned on debentures is 'income from other sources'. Therefore the test for allowing deduction of expenses against 'interest income' laid down in Sec.57(iii) of the Act has to be satisfied. We are therefore of the view that it would be just and appropriate to set aside the order of CIT (A) on this issue and remand the issue to the AO for the limited purpose of verifying the purpose for which loans were borrowed by the assessee from HDFC Ltd, and which were utilised in making investment in debentures. If the borrowing is for working investments then the deduction u/s.57(iii) of the Act has to be allowed. - Decided in favour of assessee for statistical purposes. Set off of losses suffered in the eligible 80IB unit against the income from non eligible unit - Held that:- he contention that under section 80-I(6) the profits derived from one industrial undertaking cannot be set off against loss suffered from another and the profit is required to be computed as if profit making industrial undertaking was the only source of income, has no merits. Section 80-I(1) lays down that where the gross total income of the assessee includes any profits derived from the priority undertaking / unit / division, then in computing the total income of the assessee, a deduction from such profits of an amount equal to 20 per cent has to be made. Section 80-I(1) lays down the broad parameters indicating circumstances under which an assessee would be entitled to claim deduction. On the other hand section 80-I(6) deals with determination of the quantum of deduction - section 80- I(6) lays down the manner in which the quantum of deduction has to be worked out. After such computation of the quantum of deduction, one has to go back to section 80-I(1) which categorically states that where the gross total income includes any profits and gains derived from an industrial undertaking to which section 80-I applies then there shall be a deduction from such profits and gains of an amount equal to 20 per cent. The words "includes any profits" used by the legislature in section 80-I(1) are very important which indicate that the gross total income of an assessee shall include profits from a priority undertaking. While computing the quantum of deduction under section 80-I(6) the Assessing Officer, no doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at the deduction under Chapter VI-A. However, this court finds that the non obstante clause appearing in section 80-I(6) of the Act, is applicable only to the quantum of deduction, whereas, the gross total income under section 80B(5) which is also referred to in section 80-I(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. See M/s Synco Industries Ltd Versus Assessing Officer [2008 (3) TMI 13 - Supreme court] - Decided against revenue.
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2015 (8) TMI 604
Addition on issued capital u/s 68 - share application money - Held that:- In the present case, it is an admitted fact that the assessee received a sum of ₹ 1.70 crores from M/s Shalini Holdings Ltd. and ₹ 20 lacs from M/s Apoorva Leasing Finance & Investment Pvt. Ltd. on account of share capital. Both the above said companies were registered with ROC and were regularly assessed with the Income Tax Department,copy of assessment order of the assessment year 2010-11 of both the companies is placed which clearly established the identity of both the parties. The aforesaid parties applied in proper application form for allotment of the shares of the assessee company,the amount was paid to the assessee through account payee cheque/RTGS which is reflected in their respective bank account. After receiving the share application money, the shares were allotted to both the parties and copy of Form No. 2 was filed with Registrar of Companies with respective resolution, statement, copies of which are placed and the receipt of the Registrar of companies of the assessee’s compilation. From the above documents, it is clear that the companies who applied for the shares of the assessee were inexistence, those were assessed to tax and filing their regular return of income. The share application money was drawn from their respective bank account and deposited in the bank account of the assessee. Both the companies applied the shares in proper form, the shares were allotted and information was given to the Registrar of Companies after allotment of the shares on the basis of resolution of Board of Directors, therefore, the transaction was genuine. In the present case, the assessee discharged the onus cast upon it to prove the identity and creditworthiness of the share applicant and genuineness of the transaction. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. - Decided in favour of assessee. Addition of adhoc basis towards out car running & maintenance expenses and out of depreciation of the cars - Held that:- In the present case, it is an admitted fact that the assessee maintained the books of accounts which were duly audited and no discrepancy was pointed out in those books of accounts which had also been accepted by the AO. In the instant case, the AO although presumed that the personal use of the vehicle was not ruled out, however no specific instance was pointed out where the vehicles were not used for business purposes or those were used for personal purposes. In the instant case, the assessee is a juristic person which cannot use the vehicles itself and if at all the vehicles were used for the personal purposes by the Directors or the employees then the expenses can be considered as the perquisite in their respective hands but no disallowance can be made in the hands of the assessee. Moreover, no specific instance of personal use was pointed out either by the AO or by the ld. CIT(A) and the vouchers maintained for the expenses had been accepted. Therefore, the disallowance made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the impugned addition is deleted. - Decided in favour of assessee.
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2015 (8) TMI 603
Penalty under section 221(1) read with section 140A(3) - assessee companies had not paid either any advance tax or even self assessment tax before filing their returns of income nor even after issue of intimations under section 143(1) resulting into raising of demand - Held that:- Similar penalties imposed by the Assessing Officer and confirmed by the learned CIT(A) in the cases of other group companies [2014 (12) TMI 431 - ITAT HYDERABAD] involving materially the same facts have been sustained by the Tribunal to the extent of 5% of the admitted tax liability as concluding that on perusal of the penalty here does not reveal the basis on which AO has quantified the penalty. However, considering the fact that assessee has discharged the tax liability along with interest, in our view, liberal approach needs to be taken. More so, when section 221(1) itself empowers AO to increase penalty case of continuing default. Therefore, imposition of penalty at such a high figure at the first instance, in our view, is not justified. Accordingly, we direct AO to confine the penalty u/s 221(1) of the Act to 5% of the admitted tax liability in each case - Decided partly in favour of assessee.
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2015 (8) TMI 602
Addition on refund of money - Held that:- The issue about the refund of money to two parties had attained finality during the first round of litigation. From the order of the Tribunal also,it is evident that the order of the FAA was not challenged by the AO with regard this issue.In these circumstances, addition made by the AO and confirmed by the FAA is held be to unjustified. Reversing the order of the FAA pertaining to the issue under consideration, we decide ground no.1 in favour of the assessee. Deduction being compensation paid on surrender of flats - CIT(A) directed AO to treat the compensation paid to various persons as cost of the project,the profits in respect of which have been assessed in the year under consideration - Held that:- No infirmity in the order of the CIT(A). We find the CIT(A) while directing the Assessing Officer to treat the compensation paid to various persons as the cost of the project has called for the remand report and after considering the same has passed an elaborate order on this issue.The learned DR could not controvert the above factual findings given by the CIT(A). We find the only grievance of the Revenue is that the original agreements or confirmations from the parties to whom the compensation for surrendering of incomplete flats has been paid were not furnished for which it was not possible on the part of the Assessing Officer to verify the genuineness. However, we find the assessee has produced the copies of the bank account and the copies of agreements, etc., before the Assessing Officer. Further the assessee by cancelling the agreements has paid compensation of ₹ 3,67,95,990 and by reselling the flats has received an amount of ₹ 7,03,66,767 which has been disclosed as the receipts and which is much higher than the compensation so paid. In this view of the matter and in view of the detailed discussion by the CIT(A)in his order on this issue, we do not find any infirmity in the same and accordingly, the same is upheld.The FAA had, in the first round,deleted the addition made by the AO,then there was no justification on his part in upholding the same in the second round especially after the order of the Tribunal.Therefore, reversing the order of the FAA on the issue and following the earlier order of the ITAT, we decide ground no.2 in favour of the assessee. Deduction being the expenditure incurred by the appellant in the subsequent years in relation to income assessed for the AY.under consideration - Held that:- Powers of the Assessing Officer during the remand proceedings are limited, Since there is already variation between the figures given before the Assessing Officer and before the CIT(A),therefore, we in the interest of justice, deem,it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction that it has incurred expenditure of ₹ 3,45,69,104 towards cost of the project and which is not in the nature of repairs. As during the first round of hearing the FAA had admitted additional evidence and had called for a remand report from the AO, that he had forwarded the paper submitted before him to the AO, that the AO had submitted the report and had stated that it was difficult to comment upon the admissibility of additional evidences.Thus,the existence of Remand report is proved. If the assessee had supplied all the papers during the first round of litigation and had requested the AO to refer to the order of the then FAA the AO should have considered the documents.We are unable to understand as to how the AO and the FAA had determined the income of the assessee again at ₹ 5.77 Crores especially when the Tribunal had allowed relief to the assessee.It is true that the assessee had not appeared before the AO,but the FAA had all the documents to decide the case on merits.But,he confirmed the order of the AO. Considering the peculiar facts of the case,we are of the opinion that in the interest of justice, the matter should be restored back to the file of the AO for fresh adjudication.He would afford a reasonable opportunity of hearing to the assessee,after considering the documentary evidences admitted by the FAA during the first round of litigation. The assessee is directed to appear before the AO and to extend full cooperation. - Decided in favour of revenue by way of remand. Double taxation - AR contended that disputed amount did not pertain to the year under appeal,that it was already assessed in the year 1999-2000, that same amount has been added twice - The DR also agreed that any item of income cannot be taxed twice - Held that:- The assessee has claimed that the amount in question does not pertain to the year under appeal,therefore the AO is directed to verify the fact and delete it from the computation for the year under consideration,if same has been taxed during the AY.19992000. - Decided in favour of assessee by way of remand.
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2015 (8) TMI 601
Validity of assessment - failure to issue notice under section 143(2) within stipulated time - whether such procedural deficiency being curable under section 292 BB ? - Held that:- Undisputedly, notice u/s 143(2) of the Act should have been issued and served on or before 30.6.2007 as the return of income for the relevant AY 2006-07 was filed on 15.6.2006 but the same was issued on 12.11.2007 and served on 14.11.2007 and the same was issued and served beyond the prescribed time limit as per proviso to section 143(2) of the Act. In this situation, we reach to a logical conclusion that the CIT(A) was right in holding that section 292BB of the Act is not applicable to the present case and omission on the part of AO to issue notice u/s 143(2) of the Act within prescribed time limit is not a procedural irregularity and the same is not curable, therefore, the CIT(A) was justified in holding that the assessment made without notice u/s 143(2) of the Act within prescribed limit was void ab initio. Decided against revenue.
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2015 (8) TMI 600
Entitlement to claim deduction under Section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee Sale of carbon credit - CIT(A) treated it as capital in nature - Held that:- This issue has been decided in favour of the assessee by the co-ordinate Bench of this Tribunal in Prabhu Spinning Mills (P) Ltd. and Sivaraj Spinning Mills (P) Ltd. case [2015 (8) TMI 110 - ITAT CHENNAI] following the decision of CIT v. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] wherein held “Carbon Credit is not an offshoot of business but an offshoot of environmental concerns - No asset is generated in the course of business but it is generated due to environmental concerns -” Carbon Credit is not even directly linked with power generation - on the sale of excess Carbon Credits the income was received it is capital receipt and it cannot be business receipt or income – Decided against Revenue.
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2015 (8) TMI 599
Disallowance of cost of 339 units of yarn clearers - revenue v/s capital expenditure - AO treated the cost of two comber machines and one auto coner as capital expenditure as against the claim of the assessee as revenue expenditure confirmed by CIT(A) and also adjudicated that cost of 339 units of yarn clearers is also capital expenditure - Held that:- Commissioner of Income-tax (Appeals) probably by overlooking the fact that the issue to be decided pursuant to the direction of the hon'ble Supreme Court in the case of CIT v. Sri Mangayarkarasi Mills P. Ltd. [2009 (7) TMI 17 - SUPREME COURT ] is only the disallowance of the cost of two comber machines and one auto coner, proceeded to adjudicate that even the cost of 339 units of yarn clearers is capital expenditure, even though the said issue was not before the hon'ble Supreme Court. Since the issue is not arising out of the orders of any of the lower authorities originally is decided by the Commissioner of Income-tax (Appeals) which is not only incorrect but also beyond his jurisdiction. It is a mistake apparent from record also. Thus we modify the order of the Commissioner of Income-tax (Appeals) restricting the disallowance only to cost of two comber machines and one auto coner. Ground No. (ii) raised by the assessee is allowed. Since the Commissioner of Income-tax (Appeals) has no jurisdiction to decide the issue which is not before the lower authorities at any stage originally, he could have rectified his order on the application filed by the assessee. The assessee preferred an appeal against the order of the Commissioner of Income-tax (Appeals) in rejecting the petition filed under section 154 of the Act. In view of our above findings, we allow the appeal of the assessee filed against the order under section 154 of the Commissioner of Income-tax (Appeals). - Decided in favour of assessee.
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2015 (8) TMI 598
Disallowance u/s 14A - Held that:- Once the facts and circumstances for the assessment year 2008-09 and assessment year under consideration are identical then the basis of disallowance can not be different. Accordingly we direct the AO to restrict the disallowance to 10% of the expenditure incurred for composite activity resulting in exempt income as well as taxable income. The above directions are given in peculiar facts and circumstance of the case and to maintain the rule of consistency, therefore, would not be applied as precedence. Treatment of interest income - income from other sources OR business income - Held that:- There is no dispute that the assessee’s business activity is real estate development inclusive of purchasing, selling, developing, constructing, hiring or otherwise dealing in real estate. Since the assessee has not started the development activity and was having its own fund, therefore, the assessee has invested some of the fund in mutual fund and other part in ICDs. It is apparent from the facts and circumstances of the case that the assessee is earning dividend income and appreciation of investment from the investment in the mutual fund and further certain part of the surplus fund is used for ICDs for earning the interest income. The investment in mutual fund and ICDs is not a regular business activity of the assessee. It is only a time gap utilization of the surplus fund till it is used for business of real estate development. Accordingly we do not find any error or illegality in the orders of authorities below in treating the interest income as income from other sources.
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2015 (8) TMI 597
Valuation of stock - Addition on account of excise duty on closing STOCK of finished goods - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition held that when finished goods are not sold or cleared and element of excise duty thereon has not been incurred and debited to the trading account of the year, there was no question of making any addition to the value of closing stock. Before us, Revenue has not brought any contrary binding decision in its support. We further find that in the case of CIT vs. Loknete Balasaheb Desai SSK Ltd. (2011 (6) TMI 48 - BOMBAY HIGH COURT) has held that in respect of excisable goods manufactured and lying in stock, the excise duty liability would get crystallized on the date of clearance of goods and not on the date of manufacture. Considering the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) - Decided in favour of assessee. Disallowance of interest - CIT(A) deleted the addition - Held that:- We find that ld. CIT(A) while granting relief has given a finding that Assessee was having sufficient interest free funds to cover the interest free advances. Ld. CIT(A) further relied on the decision of Ahmedabad Tribunal and Bombay High Court cited in his order. Before us Revenue has not brought any contrary binding decision on record in its support. We therefore find no reason to interfere with the order of ld. CIT(A). Thus this ground of Revenue is dismissed - Decided in favour of assessee.
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Customs
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2015 (8) TMI 627
Prohibition to work as CHA – Non-payment of Duty – Non-compliance of Regulation, 2004 – Goods were cleared, however, importer had not paid duty and therefore, respondent No. 2 issued show cause notice to importer as well as Custom House Agent-petitioner – By impugned order of respondent No.2, petitioner was prohibited to work as Customs House Agent under regulation 21 of Regulations, 2004 – Held that:- admittedly applicability of penalty under Section 114A of Customs Act, 1962 was pending before authority for adjudication – If regulation 13(d) and 13(e) were perused, question with regard to alleged breach of obligations by petitioner was pending before authority pursuant to show cause notice and which is yet not been finalized – Impugned order was passed and petitioner was prohibited to work as Customs House Agent –It was expected from authority that before passing of such type of orders, citizen should be heard even if there were no specific provisions under Regulations – Citizen cannot be denied his rights to carry out his business for indefinite period on those grounds and on same set of facts when proceedings were going on before same authority – Hence, petition was required to be allowed –Impugned order prohibiting work hereby quash – Decided in favour of Petitioner.
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2015 (8) TMI 626
Prohibition to work as CHA – Non-compliance of Regulation, 2004 – Violation of principle of Natural Justice – Petitioners who were granted license to function as Customs House Agent, were prohibited from functioning as such, by way of orders of prohibition, issued under Regulation 21 of Regulations, 2004 which alleged to have been passed with utter disregard to principles of natural justice – Whether Regulation 21, ultra vires powers of Board under Section 146(2) of Customs Act,1962 – Held that:- Section 146 mandates that CHA is required to be licensed; and no person is entitled to carry on business as agent unless he holds license – Regulation 21 give powers to Commissioner to prohibit any CHA of working in any section or sections of Customs Station on being satisfied that such CHA has not fulfilled his obligations laid down under Regulation 13 – This power of prohibition appears to be essentially that of preventive measure rather than punitive one – Proceeding on guiding principles of scheme of Act, 1962 and Regulations,2004, Regulation 21 cannot be said to be invalid and ultra vires when Board was invested with powers to make regulations generally for purpose of regulating license of CHA. Impugned order was challenged only on ground that before passing prohibitory order, opportunity of hearing was not given to petitioner – On consideration, impugned order cannot be sustained as said order was final – Well-settled law that even administrative orders which affects rights of party can be passed only by following principles of natural justice – Order under Regulation 21 was passed in violation of principles of natural justice on face of it was arbitrary and thus not sustainable in law – Petition allowed – Impugned order set aside – Decided in favour of Petitioners.
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2015 (8) TMI 625
Exemption benefit of Notification No. 64/88-Cus. - Demand, Confiscation and Penalty - Tribunal vide impugned order 2003 (10) TMI 153 - CESTAT, MUMBAI set aside order of Commissioner denying benefit of Notification No. 64/88-Cus. as well as ordering confiscation of imported goods and instead remanded matter back to commissioner for re-consideration - Supreme court held that tribunal had only remanded matter back to Commissioner for fresh adjudication - In said circumstances no interference was called for.
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2015 (8) TMI 624
Duty demand - Clandestine removal of goods - 100 % EOU - DTA clearances - Supreme Court after pursuing the order of Tribunal [2004 (9) TMI 437 - CESTAT, NEW DELHI], dismissed the appeal holding that no substantial question of law arose which needs determination by this Court. Tribunal in the impugned order held that there was no clandestine removal of the goods in question and also that the Department could not produce any evidence to substantiate its allegation that the inputs which were imported had been purchased for the Indian market and not used by the respondent for its own.
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2015 (8) TMI 623
Exemption from Excise and additional duty - Tribunal vide impugned order reported in 2004 (9) TMI 278 - CESTAT, MUMBAI held that "Ductile pipes" were not classifiable under heading 98.01 of Customs Tariff and thus importer was not eligible for exemption under Notification No. 21/2002-Cus. - Supreme Court court after hearing counsel for appellant were of opinion that Tribunal has rightly come to conclusion that appellant shall not be covered by Notification No. 21/2002-Cus., which grants complete exemption from payment of basic excise duty and additional duty falling under Heading 9801 required for drinking water supply project for supply of water for human and animal consumption - Appeal devoid of any merits and thereby dismissed.
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Corporate Laws
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2015 (8) TMI 622
Declaration of interim dividends – Violation of time gap to be maintained in between closure of books and record date – Held that:- Fact that as per clause 16 of listing agreement word ‘and’ used between words ‘two book closures’ and ‘record dates’, cannot be inferred as gap between book closure and record date – In fact time gap was intended between two book closures and two record dates – BSE & NSE directed to announce record date for interim dividend declared by appellant enabling him to make payment to investors –Appeal disposed of – Decided in favour of Appellant.
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Service Tax
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2015 (8) TMI 642
Franchise service - Nature of Receipt of course fees - Invocation of extended period of limitation - Held that:- Authorisation Agreement, under Para 10 Schedule of Fees provides for Authorisation fee and course fees separately and distinctly. Only because all the fees are provided in one Agreement does not necessarily lead to a conclusion that the different components of fees are only for the purpose of grant of franchise. Their very names suggest differently. Under Para 10B, the Authorisation fees is for grant of authorisation for conduct of training at the sites of authorisation training centres as approved under the Agreement. The authorisation fee is paid at the time of signing of the Authorisation Agreement. On these fees the appellant have paid service tax under the category of franchise service. - whole activity is only to impart high standard training. Even clause (iii) of the definition of franchise is not met because the fees is not paid by the training centre to the appellant. Rather the fees collected from the students comes into the account of the appellant who then pay 75% of theshare to the training centre. In this view of the matter, the activity clearly falls outside the scope of the franchise service. No justification for invoking the extended time period as the appellant are an advanced research and development centre under the Ministry of Science and technology and will not indulge in any mis-statement or suppression with an intention to evade duty. - Decision on the cases of assessee's own previous case [2008 (10) TMI 148 - CESTAT BANGLORE] and [2002 (2) TMI 105 - SUPREME COURT OF INDIA] followed - Decided in favour of assessee.
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2015 (8) TMI 641
Commercial Training and Coaching Services - Assessee contends that they are charitable institute - Penalty u/s 78 - Invocation of extended period of limitation - Held that:- Tribunal in the case of Great Lakes Institute of Management (2013 (10) TMI 433 - CESTAT NEW DELHI - LB) has specifically held that the service tax liability arises on the charitable institutes which has now been affirmed by retrospective amendment. To that extent we reject the claim and uphold that they are liable for service tax liability under the category Commercial Training or Coaching Services. - in both the show-cause notices the demands raised beyond the limitation period are liable to be set aside as per the ratio of majority decision in the case of Shri Chaitanya Educational Committee (2015 (6) TMI 627 - CESTAT BANGALORE (LB)). Since the demand for extended period is set aside consequently, interest and penalties are also get set aside. Claim as regards reduction of service tax liability on hotel fees and refund of fees which they have claimed as per the approval of the All India Council of Technical Institute for Indira College of Science needs to be considered in its correct perspective. The claim of the appellant that reduction of hotel fees and refund fees and cum-tax is upheld by the Tribunal in the case of I2IT Pvt. Ltd. (2014 (9) TMI 345 - CESTAT MUMBAI) is correct and we hold that the appellant is eligible for this benefit from the tax liability which needs to be recalculated. - extended period cannot be invoked - Penalty u/s 78 is also set aside - Decided partly in favour of assessee.
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2015 (8) TMI 640
Erection, Installation and Commissioning Service - installation of HVAC systems (air conditioning systems) - Works contract service - Date of taxability of service - Held that:- The later circular makes it absolutely clear that the scope of ECIS was expanded by including specified installation services such as installation of air-conditioning including related pipe work, duct work and metal sheet work. Although Board circular is not binding on the quasi-judicial authorities, it is clear that the later circular of the Board dated 27.07.2005 in a way revised the opinion expressed in its earlier circular dated 21.08.2003. A careful perusal of definition of ECIS also reveals that sub-clause (i) is separated from sub-clause (ii) by "or". Thus, clauses (i) and (ii) represent an "either or" situation, meaning thereby that what is covered in sub-clause (i) is not covered in clause (ii) and vice versa. So as installation of air-conditioning is expressely covered under clause (ii), it cannot be covered under clause (i) and as clause (i) covers everything covered by the definition of ECIS prior to 16.06.2005. it was outside the scope thereof - when, clause (i) of ECIS definition with effect from 16.06.2005 covered everything which was covered by definition of ECIS prior to 16.06.2005. it has to be held that what is contained in clause (ii) of the ECIS definition was not covered under the ECIS definition prior to 16.06.2005. - impugned demand under ECIS which pertains to the period prior to 16.06.2005 is not sustainable as installation of air-conditioning was not covered under ECIS prior to 16.06.2005. - Decided against Revenue.
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2015 (8) TMI 639
Classification of service - Erection, Commissioning or Installation Service (ECIS) or works contract service - Benefit of 67% Abatement - Penalty u/s 76, 77 & 78 - Invocation of extended period of limitation - Held that:- Works contract service was carved out of Services of CICS, COCS and ECIS which were subject to service tax even prior to 01/6/2007. Works contract service was specifically born w.e.f. 01/6/2007. As per the provisions contained in Section 66F (2) of the Finance Act, 1994 a specific heading has to be the appropriate classification of a service. The activities of 'works contract' undertaken by the appellant is therefore classifiable under 'works contract service' w.e.f. 01/6/2007. The same service even if provided under a works contract before 01/6/2007, will be classifiable under Erection, Commissioning or Installation Service (ECIS). Free supplies made by service recipient to the service provider for providing construction service are not includable in gross amount charged as per Section 67 of the Finance Act, 1994. It is observed from case records that appellants are using materials like cement, sand, bricks etc. in providing 'Erection, Commissioning or Installation Service, therefore, benefit of 67% abatement under Notification No. 1/2006-ST dated 01/3/2006 will be admissible for demand for the normal period of limitation. Further benefit of cum-duty has to be allowed to the appellant under Section 67 (2) of the Finance Act, 1994. For quantification of the duty demand, for the normal period of limitation on the basis of above observations, the matter is remanded to the Adjudicating Authority. Extended period was not invokable. Further appellant has claimed the benefit of Section 80 benefit as per their grounds of appeal. As appellants had a bonafide belief that no service tax was payable by them before 01/6/2007, as 'works contract service', there is a reasonable cause for non-payment of tax and benefit of Section 80 of the Finance Act, 1994 is admissible. Accordingly, it is held that no penalites under Section 76, 77 and 78 are imposable upon the appellants in these proceedings. - Decided partly in favour of Revenue.
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2015 (8) TMI 638
Classification of service - Business Auxiliary service or Business Support service - whether the expenses charged directly from customers such as Bill of Lading (B/L) reissue charges, switch B/L charges, B/L surrender charges, advance cargo declaration charges, administration charges on stamp duty, amendment charges, check dishonour charges, destination documents fees, late B/L charges are leviable to service tax under the Business Auxiliary Services - Held that:- The appellant provides end-to-end solutions to the customers and therefore, all charges including those directly paid by customers to the appellant are leviable to service tax. We cannot agree with this contention. The appellant is paying service tax under Steamer Agent services on all activities including some documentation charges and all such charges are credited to the account of the Principal as per the Agency Agreement. The remaining charges i.e. those on which service tax demand has been raised relate to activities performed by the appellant independently for their customers. The appellant did not remit these charges to the Principal. We find nothing in the Agreement which states that the appellant cannot provide such service and cannot receive charges from the customers for such activities. Therefore, we conclude that these activities constitute service provided directly to the customer and do not constitute services provided on behalf of the Principal. Hence, the services would not fall under the category of BAS during the period of dispute - there was bonafide confusion in the mind of assesses about taxability of documentation services during the period prior to 16.6.2005. Having set aside the demand of tax, the penalties are also set aside as the duty was paid for period after 16.6.2005, that is, before the issue of show cause notice - Decided in favour of assessee.
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Central Excise
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2015 (8) TMI 643
Valuation of goods - Undervaluation - PTY Twisted Yarn - Factory gate sale or not - Held that:- Decision in the case of COMMISSIONER OF CENTRAL EXCISE, VAPI Versus SYNFAB SALES [2015 (6) TMI 777 - SUPREME COURT] followed - Decided against Revenue.
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2015 (8) TMI 635
Denial of SSI Exemption - Clandestine Removal and Deliberate Fragmentation of manufacturing activities - clubbing of clearance - tribunal decided in favor of assessee on technical ground - Held that:- Whether the failure to challenge the finding in favour of Shri M.S. Jain in a connected matter would operate on the principle of res judicata on the Tribunal from examining the other cases on merits - Held that:- Records of the various group companies have been perused and on the basis of that, the Department has issued the show cause notice against the group companies and proprietory concerns. The adjudicating authority, according to the Department, had failed to consider that it is a case of wrong availment of the benefits of the notification and all the units were clubbed together and the benefit granted under the exemption notification should be denied. It is of no consequence that merely because M.S. Jain, one of the person who suffered the penalty order, did not file any appeal It is the specific case of the department that the clearances of all these units and the proprietory concerns should be clubbed together for the purpose of denying the benefit of notification. However, the Department can always sustain its allegations, de hors the statement of M.S.Jain, if there are other materials to support its case. Merely because the case of M.S. Jain has not been appealed against, it does not, and would not, dilute the case of the Department. - Tribunal was clearly in error in holding that merely because no appeal has been filed against M.S. Jain, all the other appeals cannot be maintained - Decided in favour of Revenue.
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2015 (8) TMI 634
Housing of CESTAT Bench at Allahabad - Registrar has stated that the jurisdiction of the Bench at Allahabad is yet to be notified by the President CESTAT (under Section 129C of the Customs Act, 1962 (52 of 1962) read with Section 35D of the Central Excise Act 1944 (1 of 1944), Section 86 of the Finance Act, 1994, Section 9C of the Customs Tariff Act, 1975 - Held that:- Government of India, Ministry of Finance, Department of Revenue has issued a notification dated 01.11.2013, which has been issued under the Central Excise Act, 1944, the Customs Act, 1962 and Chapter V of the Finance Act, 1994 notifying the creation of a Bench of Customs, Excise and Service Tax Appellate Tribunal at Allahabad, pursuant to which a communication dated 13.11.2013 was issued to the Registrar, Customs, Excise and Service Tax Appellate Tribunal, New Delhi intimating the creation of the new Bench at Allahabad having jurisdiction to hear the appeals arising out from U.P., which is to be carved out from Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal. The creation of the Bench and the jurisdiction of this Bench at Allahabad has been done by the Union Cabinet by its decision dated 24.10.2013. This creation of Bench prima facie appears to be in exercise of the powers under Section 129 of the Customs Act, 1962. Once this is done, we fail to understand as to how the Registrar of Customs, Excise and Service Tax Appellate Tribunal, New Delhi contend in paragraph 5 of the affidavit that the jurisdiction at Allahabad is yet to be notified under Section 129C of the Customs Act, 1962, which only gives the power to the Appellate Tribunal to regulate its own procedure. Once the Bench has been created and the place has been notified nothing further else is required to be done. Court directed the Registrar, Customs, Excise and Service Tax Appellate Tribunal, New Delhi to issue necessary orders on this aspect on the filing of fresh matters at Allahabad on or before the next date of listing or explain the circumstances for not doing so.
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2015 (8) TMI 633
Validity of order of the tribunal - The matter was heard by the Member (Judicial) of the Tribunal, however, the decision has been delivered by the Member (Technical) of the Tribunal, who had never dealt with the case in past. - Clandestine removal - Recovery of note book - invoice with new serial number inserted - Held that:- when the appeal was already heard and reserved for orders and the Member (Judicial) of the Tribunal had directed the registry for re-listing the matter for the certain clarification, the registry ought to have re-listed the matter before the Member (Judicial) of the Tribunal and not before the Member (Technical) of the Tribunal. The Member(Technical) of the Tribunal ought not to have proceeded with the matter in absence of the petitioner and ought not to have decided the same, which is, in our opinion, contrary to the decisions of the Hon'ble Apex Court in case of Automotive Manufacturers Association V. Designated Authority and Ors. reported in [2011 (1) TMI 7 - SUPREME COURT OF INDIA] and in the case of Union of India & Ors. V. Shiv Raj & Ors. reported in [2014 (5) TMI 1036 - Supreme Court Of India]. The Member (Judicial) of the Tribunal was the best person to decide the matter only after getting some clarification, which he intended to get from the either party as he had put remarks on 25.10.2013. - order impugned in the petition is required to be quashed and set aside - matter remanded back. It is hereby made clarified that the matter shall be heard and decided only by one person either by the Member (Judicial) of the Tribunal or by Member (Technical) of the Tribunal in accordance with law.
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2015 (8) TMI 632
Denial of refund claim - Unjust enrichment - Provisional assessment - Held that:- It was the duty of the tribunal as a last fact finding authority to have considered the backdrop in which the refund claim was made, the documents placed in support thereof, the arguments canvassed on facts before the Assistant Commissioner and the Commissioner (Appeals) and the relevant findings on factual aspect in their orders. None of this has been referred, leave alone considered. If it was duly of the Tribunal to have referred to it, dealt with the issue on facts and after noting the rival contentions, then, it has clearly failed to perform it. The failure of the Tribunal to perform this duty and mandated by law itself is a substantial question and which can be safely termed as one of law and arising from the Tribunal’s order. - order passed by the Tribunal is quashed and set aside - Matter remanded back - Decided in favour of assessee.
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2015 (8) TMI 631
Valuation of goods - Incusion of Commission - Held that:- CESTAT has committed an error in the impugned order in not considering the question of "commission" on the ground that it was not raised in the show cause notice - from the reading of the show cause notice that it was specifically raised therein as an independent issue. However, instead of remanding the case back to the CESTAT, it would be more appropriate that the adjudicating authority decides this issue in the first instance. - Decided in favour of Revenue.
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2015 (8) TMI 630
Demand - Export Oriented Unit - Exemption - Valuation (Central Excise) - Supreme Court decline to entertain the appeals wherein appellant herein had conceded the position before the Tribunal and on the said concessional order was passed. Tribunal in the impugned order held that impugned order regarding the confirmation of duty is modified in respect of Tallow Waste and Bone waste by allowing the benefit of Notification No. 8/97. But regarding the other product in question, the impugned order confirming the duty is upheld.
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2015 (8) TMI 629
Valuation of goods - whether the consideration received by them from their customers for providing linkage facility within their factory premises is includible in the assessable value of Hydrogen Gas manufactured - Supreme Court dismissed the appeal due to low tax effect. The appeal was filed by the asessee against the decision of Tribunal [2004 (10) TMI 169 - CESTAT, NEW DELHI]; wherein Tribunal held that by providing this facility, Hydrogen Gas is brought from the tank to the factory gate for being supplied to the customers site. In a sense these expenses are nothing but handling charges within the factory premises of the appellants. In view of this, these are includible in the assessable value of the Hydrogen Gas.
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2015 (8) TMI 628
Excisability of goods - Requantification of demand - Supeme Court dismissed the appeal as infructuous since the tax effect is low, Tribunal had only ordered remand of the matter and after the remand Commissioner (Appeals) - Appeal was filed against the decision of Tribunal [2005 (1) TMI 169 - CESTAT, NEW DELHI]; wherein Tribunal held that Commissioner (Appeals) has not examined the matter from the angle of the contention raised by both sides - Therefore, the matter deserves to be re-examined by the learned Commissioner (Appeals) on these questions.
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CST, VAT & Sales Tax
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2015 (8) TMI 637
Pre-Determination – Deemed Waiver – Appellant was informed that next date of hearing would be intimated later, but no subsequent date of hearing was indicated by commissioner – Since Commissioner failed to make any determination within prescribed period, proposed determination as indicated by Appellant would have been deemed to be issued by Commissioner – Whether tribunal was justified in holding that there was deemed waiver of application for pre-determination – Held that:- three conditions were to be satisfied for Commissioner having deemed to have issued determination in terms of Section 84(6) – All three condition were not fulfilled in current case – Admittedly, Appellant had already applied to transactions for determination of rate tax at 4% but failed to implements transaction which were subject matter of application as per Section 84 (6)(b) – Therefore, commissioner could not be deemed to have issued 'proposed determination' – Tribunal was not right in holding that there was waiver of deemed application for predetermination – Appellant would nevertheless not have been able to avail benefit of Section 84(6), since Appellant did not satisfy condition (b) under Section 84 (6) – Determination of tax and interest by VATO upheld, but levy of penalty and corresponding interest on such penalty amount set aside – Petition disposed of. Classification of DSCs – Fixation of Taxation rate – Whether Tribunal was right in holding that Digital Still Image Video camera was not classified and covered by Entry No.41 or 41A clause 15 and that there was deemed waiver of application for pre-determination – Held that:- (1st April 2005 to 7th August 2005) Term IT products has been described to include computers, peripherals etc but not DSCs which were distinct species as apparent from Entry 8525 40 listed in ITA – Legislature did not included DSCs in Entry 41 till 29th November 2005 – Prior to change brought DSCs were not part of IT products – Entry as it read could not be said to have included DSCs – Therefore impugned order of AT upholding determination of VAT and interest thereon not interfered with – AT was right in holding that DSCs was not classified and covered by Entry No 41 or 41A – Decided partially in favour of Assesse. (30th November 2005 to 31st December 2007) Bracket preceding words 'other than' in Item 15 of Entry 41 A, closing with bracket after words 'digital still image video cameras' was certainly unique to Delhi statute – Brackets really do not serve any particular purpose – To accept brackets as they are and to try to make some sense out of it would result in acknowledging that DSCs belong to species of transmission apparatus which it obviously was not – DSCs were not transmission apparatus and therefore brackets could not have brought out unintended result of excluding such equipment, viz., DSCs from first item viz., 'transmission apparatus' – Therefore correct way to read Article 15 in Entry 41A to DVAT Act was to read it without two brackets and to read it in manner that item 'digital still image video cameras' was not excluded from ambit of Entry 15 – Thus period between 30th November 2005 to 31st December 2007, Appellant would be liable to pay 4% tax and not 12.5% on turnover of sales of DSCs – Decision of Tribunal and VATO hereby set aside – Neither interest nor penalty would be liable to be paid – Decided in favour of Assesse.
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2015 (8) TMI 636
Rate of tax on pickle – Taxation of goods at lower rate – Pickle sold under brand name or not – KVAT - Appellant seeks declaration that item pickle sold by appellant comes under entry 49, entitling his products to be taxed at 4 per cent – Commissioner found out that pickles sold by appellant under brand name would be taxed at 12.5 per cent – Held that:- goods can be taxed at 12.5 per cent only, if they do not fall under Schedule I or III having regard to section 6(1)(d) of Act – Description of goods which come under HSN Code 2001, was exactly same as given in entry 84(29) – State Legislature specifically provide for pickles and sought to tax it at four per cent unless it was sold under brand name – Word "pickles" as used in entry 49 was distinct food product and not plant or vegetable which was preserved in vinegar or acetic acid – Officer pointed out in notice that in all emblems "Happy", products including pickles were shown with circle with "(x)", no statutory warning was given in labels that pickles were not registered under Trade Marks Act, which indicates that either consumer was wilfully confused or falsely fascinated towards brand – Going by reply given by trade mark registry, assesse obtained registration of its brand in respect of pickles to suffer tax at 12.5 per cent – It was not sufficient that there was general registration obtained – Though appellant may be using brand name "Happy" (label), there was no registration for trade mark for product "pickles" – But, to deprive appellant of benefit of concessional rate of taxation (four per cent.) provided in entry 49, appellant must have obtained registration for trade mark in respect of pickles - Decided against the assessee. The product "pickles" marketed by the petitioner though it may be under a brand name, as the same has not been specifically registered under the Trade Marks Act 1999, the view taken by the assessing officer that the pickles cannot be taxed under entry 49 of the Third Schedule is unjustifiable. - Matter remanded back for adjudication in accordance with law.
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