Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 21, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Exclusion of interest income for the purpose of computing the deduction u/s 32AB - interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking - interest income not to be excluded for the purpose of computing the deduction u/s 32AB - HC
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Disallowance of amount written off on account of bad intercorporate deposits (ICD) - even if a part of debt is offered to tax, Section 36(2)(i) of the Act, stands satisfied - HC
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Exemption u/s10 (23C)(vi) denied - the petitioner exists solely for educational purposes and not for the purposes of profit - revenue directed to grant approval to the petitioner u/s 10(23C)(vi) - However, AO can certainly go into the question as to whether the conditions stipulated in the third proviso and the 13th proviso to Section 10(23C)(vi) have been met - HC
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Revision u/s 263 - AO has not made inquiry on the issue of interest free advances and proportionate disallowance of interest thereon, on the issue of verification on TDS and on the claim and calculation of deduction u/s 80IB(7A) - revision upheld - AT
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Validity of assessment proceedings u/s. 153C - In this case the exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of Section 153C- AT
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Registration u/s 12AA(3) cancelled - assessee-trust donated a sum of ₹ 45 crores to another trust that is also engaged in the similar activity - cancellation of registration is not proper and accordingly restored - revenue may consider the issue at the time of assessment - AT
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Depreciation on "computer to plate" (CTP) - @20% - the viewpoint of the AO that the computers are not to be considered as part of the machinery for the purpose of additional depreciation, is not sustainable. - AT
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Reopening of assessment - AO has no concrete ‘reason to believe’ except for reopening the case for making the verification of the past records and facts. This cannot be the ground for reopening the assessment even though return of income filed by the assessee has been accepted u/s 143(1) - AT
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Gains arising from sale of shares - Once the assessee has been treated as a trader, then the income arising from bonus shares, split shares etc. is also to be treated as business income only - AT
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TDS u/s 194C - Though, the payments for the entire year was in excess of ₹ 50,000, in the absence of a contractual relationship between the assessee and the publishers, section 194C does not apply to the payments made to the newspaper publishers for the advertisements made by the assessee - AT
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Entitlement to exemption under section 10B - assessee is not in fact bringing convertible foreign exchange and entire of its products are sold in India in Indian rupees. - no exemption - AT
Customs
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Waiver of Pre-Deposit – Reference made by one Bench of Tribunal to Larger Bench, on ground that two Benches of coordinate jurisdiction had come to different conclusions on same issue, was not decision, on which one or other party can be stated to be aggrieved - HC
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Concessional Rate of duty – Export of ROM (Mixture of Iron Ore Fines and Lumps) - As segregation of mixture to arrive at quantity of fine for which concessional, was not possible, higher duty was to be charged - Refund denied - HC
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Suspension of CHA License – After issuance of show cause notice to petitioner had submitted their reply, thereafter, petitioner participated in enquiry and was given opportunity to file their reply – first respondent did not acted contrary to principles of natural justice or beyond his jurisdiction in order to interfere with impugned order - HC
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Group Company – EPCG Scheme - Perusal of definition of “Group Company” reveal that two or more enterprises, ought to be in position directly or indirectly to exercise 26% or more voting rights in other enterprise – Authorities directed to consider utilization of excess exports of group company in computation of export obligation in terms of para 9.28 of FTP - HC
Service Tax
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Works Contract - Levy of service tax prior to 1.6.2007 - Whether service tax can be levied on indivisible works contracts prior to the introduction, on 1st June, 2007, of the Finance Act, 2007 which expressly makes such works contracts liable to service tax. - Held No - SC
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Issue of SCN and payment of penalty - Clarification regarding the provisions of Section 73, 76 and 78 of the Finance Act, 1994 and Section 11AC of the Central Excise Act, 1944
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Adjournment request - tribunal refused to adjourn the hearing and dismissed the appeal - when such requests were received by the Tribunal, seeking an adjournment of the hearing, in the absence of a finding that the request was not made for bona fide reasons, the Tribunal was not justified in rejecting the same - HC
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Refund claim for tax deposited erroneously - agreement stipulates the value inclusive of taxes. The invoices issued also indicate that amount collected is inclusive of service tax - claim is hit by the Doctrine of unjust enrichment - AT
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Denial of refund claim - Export of service / software to sister units - information which has been indicated on the invoice is sufficient to come to a conclusion that the invoice was in respect of the export of software by the appellant to their sister/parent concern - refund allowed - AT
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Business Auxiliary Service - the mere reading of the documents for the purpose of clearance of octroi does not amounts to dealing with or the handling of documents of title of the goods - No demand - AT
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Denial of CENVAT Credit - whether "Training/guesthouse maintenance" services provided to the appellant would qualify as input service for availing Cenvat credit - Held, Yes - AT
Central Excise
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Clandestine removal - appellant in explaining that there was no difference in the quantities and thus, no question of any clandestine removal, the said plea has not been adverted to - Demand cannot be confirmed merely on the basis of wrong interpretation of Confessional statements - SC
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Denial of refund claim - Reopening of factory after Closure and surrender of registration certificate - manufacture of Gutkha and Pan Masala - There is no provision in Rules 2008 that after declaring permanently ceases to work, the manufacturer would not be entitled to re-open his factory - AT
VAT
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Assessment of Tax u/s 29(2) of PVAT - Constitutional validity of Extension of Assessment period - If the books are not available because they were destroyed or are otherwise unavailable, the validity of the amendment cannot be struck down on the ground that it is unconstitutional for this reason - HC
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Payment of Tax at compounding rate – Rejection of benefit due to Shifting of place of business – No opportunity of being heard was given to petitioner – Assessing authority must give valid reason why such shifting deserves such treatment - HC
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Reassessment - levy of entry tax - Once it was held that basis for reassessment was change of opinion, such reassessment was impermissible under law - HC
Case Laws:
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Income Tax
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2015 (8) TMI 722
Validity of reopening of assessment - Held that:- even while sending the proposal/proforma report to the higher authority to grant approval for reopening the assessment, the Assessing Officer continued to maintain that the audit objection raised by the audit party is not acceptable and only with a view to protect the revenue and/or safeguards the interest of the revenue, it was proposed to reopen the assessment under section 147 of the Act. There is no independent formation of opinion by the Assessing Officer that the amount of ₹ 3,26,65,256/- has escaped assessment. The complete assessment has been reopened only at the instance of the audit party and/or on the audit objection raised by the audit party, which is not permissible. Therefore, in the facts and circumstances of the case, formation of opinion by the Assessing Officer while reopening the completed assessment and his reason to believe that the income as escaped assessment has been vitiated and therefore, reopening assessment proceedings for AY 2010-11 is not valid and permissible. - Decided in favour of assessee.
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2015 (8) TMI 721
Reopening of assessment - petitioner assessee was not entitled to the deduction under Section 80IB(10) - Held that:- While finalizing original assessment under Section 143(3) of the Act, the AO along with notice under Section 142(1) of the Act sent questionnaire to the petitioner, more particularly, with respect to deduction claimed under Section 80IB of the Act by the assessee and to which petitioner assessee supplied necessary details as required by the AO and only thereafter when the AO allowed the deduction under Section 80IB of the Act claimed by the assessee, the impugned reassessment proceedings/ reopening of the assessment for AY 2009-10 is nothing but on mere change of opinion of the AO, which is not permissible. Under the circumstances, impugned notice under Section 148 of the Act, to reopen the complete and finalize the assessment for AY 2009-10 in the impugned reassessment proceedings for the reasons recorded is absolutely illegal and invalid. - Decided in favour of assessee.
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2015 (8) TMI 720
Exclusion of interest income for the purpose of computing the deduction u/s 32AB - Held that:- The assessee was compelled to park a part of its funds in fixed deposits under the insistence of the financial institutions. On such funds, the assessee received interest. Such income cannot be treated as income from other sources and must be seen as part of the assessee's business of manufacturing and selling of chemicals. The decision of the Apex Court in the case of Pandian Chemicals Ltd. (2003 (4) TMI 3 - SUPREME Court ) would not be applicable. In the said case, the Apex Court was interpreting the phrase 'derived from' used in section 80HH of the Act. It was in this background that the Apex Court held that the words 'derived from' must be understood as something which has a direct or immediate nexus with the assessee's industrial undertaking. It was on that basis that the Apex Court held that interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking. Before concluding, we may notice that clause (i) of sub-section (2) of section 32AB defines eligible business or profession to mean business or profession other than those specified in sub-clauses (a) and (b) of clause (i) of section 32AB(2). Admittedly, the present case is not in either of the exclusionary clauses. Under the circumstances, we are of the opinion that the Tribunal committed no error directing the Assessing Officer not to exclude interest income for the purpose of computing the deduction u/s 32AB of the Act - Decided against revenue. Separate relief u/s 80HHA and 80I - Whether the Appellate Tribunal is right in law and on facts in directing to allow separate relief u/s 80HHA and 80I of the Act? - Held that:- Issue is concluded against the Revenue by virtue of the judgment of the Apex Court in the case of Joint Commissioner of Income Tax v. Mandideep Eng. & Pkg. Ind. P. Ltd., (2006 (4) TMI 75 - SUPREME Court) wherein held sections 80HH and 80-I, are independent of each other and therefore a new industrial unit can claim deductions under both the sections on the gross total income independently or that deduction u/s 80-I can be taken on the reduced balance after taking into account the benefit taken under section 80HH.- Decided against revenue.
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2015 (8) TMI 719
Disallowance of amount written off on account of bad intercorporate deposits (ICD) - Tribunal deleting the disallowance - whether assessee is neither in the business of banking or moneylending de hors the provisions of Sec. 36(1)(vii) - Held that:- Respondent-Assesee had during the earlier Assessment Years offered to tax an amount of ₹ 42.65 lakhs received as interest on the deposit made with M/s. GSB Capital Market Ltd. The Appellant had since Assessment Year 1998-99 claimed an amount of ₹ 49.82 lakhs as doubtful debts from M/s. GSB Capital Market Ltd. This consisted of the aggregate of principal and interest payable by M/s. GSB Capital Market Ltd. It was in the subject Assessment Year that a settlement was arrived at between the parties and the Respondent-Assessee received ₹ 15 lakhs from M/s. GSB Capital Market Ltd. and the balance amount of ₹ 34.82 lakhs being nonrecoverable was being claimed as bad debts by writing off the same in its books of account. It would thus be noticed the amount of ₹ 34.82 lakhs which constitutes partly the principal amount of the intercorporate deposits and partly the interest which is unpaid on the principal debt. The Assessing Officer's contention that amount of ₹ 34.82 lakhs was not offered to tax earlier and, therefore, deduction under Section 36(2)(i) of the Act is not available, is no longer reintegra. This very issue came up for consideration before this Court in Shreyas S. Morakhia (2012 (3) TMI 103 - BOMBAY HIGH COURT ) wherein the assessee was a stock broker and engaged in the business of sale and purchase of shares. The brokerage payable by the client was offered for tax. Subsequently, it was found that the principal amount which was to be received from its clients would not be received. The assessee sought to claim as bad debts not only the brokerage amounts not received but the aggregate of principal and brokerage amounts not received in respect of the shares transacted. This Court held that the debt comprises not only the brokerage which was offered to tax but also principal value of shares which was not received. Therefore, even if a part of debt is offered to tax, Section 36(2)(i) of the Act, stands satisfied. The test under the first part of Section 36(2)(i) of the Act is that where the debt or a part thereof has been taken into account for computing the profits for earlier Assessment Year, it would satisfy a claim to deduction under Section 36(1)(vii) read with Section 36(2)(i) of the Act. In fact, the Revenue also does not dispute the above provisions as no submission in that regard were made during the course of hearing before us. Therefore in view of the above self evident position in Section 36(2)(i) of the Act as well as decision of this Court in Shreyas Morakhia (supra), no substantial question of law arises for our consideration.It is clarified that in view of the Respondent-Assessee being entitled to deduction on bad debts in view of first part of Section 36(2)(i) of the Act, we have not opined on the second part thereof viz: whether or not the Assessee was engaged in the business of money lending and/or banking. This is so as in the present facts it becomes academic. - Decided in favour of assessee.
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2015 (8) TMI 718
Interest expenditure incurred in relation to construction of various hotel projects - revenue v/s capital expenditure - Held that:- In Deputy Commissioner of Income-Tax v. Core Health Care Ltd. 2008 (2) TMI 8 - SUPREME COURT OF INDIA] the Supreme Court came to the conclusion that Explanation 8 of Section 43(1) only applied to provisions like "Sections 32, 32A, 33 and 41 which deal with concepts like depreciation." It was observed that Explanation 8 of Section 43 (1) had no relevance to Section 36 (1) (iii). On the facts of that case since the AYs in question were prior to 1st April 2004, the Supreme Court concluded that the proviso to Section 36 (1) (iii) of the Act would not apply. The rationale for allowing the payment of interest on borrowings as revenue expenditure was explained as it does not matter whether the capital is borrowed in order to acquire a revenue asset or a capital asset, because all that the section requires is that the assessee must borrow the capital for the purpose of his business. This dichotomy between the borrowing of a loan and actual application thereof in the purchase of a capital asset, seems to proceed on the basis that a mere transaction of borrowing does not, by itself bring any new asset of enduring nature into existence, and that it is the transaction of investment of the borrowed capital in the purchase of a new asset which brings that asset into existence. The transaction of borrowing is not the same as the transaction of investment. If this dichotomy is kept in mind it becomes clear that the transaction of borrowing attracts the provisions of Section 36 (1) (iii). Thus as far as the present case is concerned, the Respondent Assessee was entitled to claim the payment of interest on the borrowings made in relation to the hotel projects at Srinagar, Goa and Mumbai, which were in the nature of expansion of the business Assessee, as revenue expenditure. - Decided in favour of the Assessee
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2015 (8) TMI 717
Exemption under Section 10 (23C)(vi) denied - whether we remit the matter to the CBDT once again for it to decide the question of approval or on the basis of available material, we direct the CBDT to grant the approval? - Held that:- In Digember Jain Society (2009 (10) TMI 61 - DELHI HIGH COURT) this court had in fact issued a mandamus directing the revenue to grant exemption to the petitioner therein under Section 10(23C)(vi) of the said Act. The court, while doing so, also directed that the concerned authority would be free to incorporate stipulations and conditions in terms of the third proviso. We find that it is an admitted fact in the present case that the petitioner exists solely for educational purposes and not for the purposes of profit. These are the only requirements for grant of approval and, therefore, in the same manner as in the case of Digember Jain Society (2009 (10) TMI 61 - DELHI HIGH COURT) we issue a writ of mandamus directing the respondents to grant approval to the petitioner under Section 10(23C)(vi) of the said Act for the Assessment years 1999-2000 to 2001-02. However, we are making it clear that as the assessments for the three years in question are open, the Assessing Officer can certainly go into the question as to whether the conditions stipulated in the third proviso and the 13th proviso to Section 10(23C)(vi) of the said Act have been met and appropriate orders can been passed by the Assessing Officer in accordance with law.
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2015 (8) TMI 716
Entitlement to the benefit of Section 10A - ITAT allowed claim - Held that:- The impugned order of ITAT has merely followed the order of this Court in Western Outdoor and Paul Brothers [2012 (8) TMI 709 - BOMBAY HIGH COURT] in holding that in the absence of withdrawal of benefit of the first year, the benefit cannot be disallowed in subsequent Assessment years. Therefore no fault can be found with the impugned order. - Decided in favour of assessee.
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2015 (8) TMI 715
Reopening of assessment - Held that:- Initiating the re-assessment proceedings by virtue of the notice dated 02.02.2010 issued under Section 148 of the Income Tax Act, 1961 does not survive. Therefore, we are disposing of this writ petition with liberty to both sides to seek revival in case the need arises. We make it clear that in case it is ultimately held in favour of the revenue, then the revenue shall be entitled to revive its proceedings pursuant to the notice under Section 148 of the said Act and the assessee shall not take up the plea of limitation.
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2015 (8) TMI 714
Validity of assessment u/s 153C - Held that:- On a reading of Section 153A and 153C the exercise that is required to be done by the AO has been spelt out by the Coordinate Bench of this Tribunal in the case of DSL Properties Pvt. Ltd. Vs. DCIT [2013 (9) TMI 123 - ITAT DELHI] has held that if the Assessing Officer is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched. Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice u/s 153A read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a ‘sine-qua-non’ to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of Section 153C. We could not find any mention of any seized materials like valuable articles or things or any books of account or documents have been referred even in the impugned assessment orders. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity. - Decided in favour of assessee.
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2015 (8) TMI 713
Revision u/s 263 - interest free advances and proportionate disallowance of interest - Held that:- Assessing Officer conduct the assessment proceeding and passed impugned assessment order accepting the return of income of the assessee we clearly observe that the Assessing Officer has not made inquiry on the issue of interest free advances and proportionate disallowance of interest thereon, on the issue of verification on TDS and on the claim and calculation of the assessee for the purpose of deduction u/s 80IB(7A) of the Act specially on the issue of exclusion of income/receipt on sale of shop and FDR interest. In this situation, we have no hesitation to hold that the order of the AO which is apparently very precise and cryptic, was not passed after due examination and verification of certain or issue and therefore, there was an error on the part of AO which leads to a correct conclusion of the CIT with the order of the AO is not only erroneous or also prejudicial to the interest of Revenue. We may further point out that the assessment order suffers lack of necessary enquiry on certain important issues which have been raised by the CIT in the notice issued to the assessee and impugned order u/s 263 of the Act. Therefore, we reach to a conclusion that the assessment order is not sustainable and in accordance with the provisions of the Act which is not only erroneous but also prejudicial to the interest of the Revenue. Hence, we are inclined to hold that the issuance of notice u/s 263 of the Act and impugned order passed by the CIT u/s 263 of the Act is validly assumed jurisdiction of revisional powers u/s 263 of the Act which cannot be alleged as invalid assumption of jurisdiction or bad in law and we confirm the same. In the result, appeal of the assessee is dismissed. Notice and the impugned order of the CIT u/s 263 of the Act is upheld. - Decided against assessee.
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2015 (8) TMI 712
Transfer pricing adjustment - Computation of Deduction u/s.10A - Held that:- The Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT) has held that while computing the deduction under section 10A of the Act, if the export turnover in the numerator is to be arrived at after excluding certain expenditure, then the same expenditure should also be excluded from the total turnover also. Respectfully following the same, we dismiss this ground of revenue and direct the Assessing Officer to exclude the expenditure incurred in foreign currency towards daily allowance, support allowance and travel both from export turnover as well as from total turnover for computing deduction under section 10A of the Act - Decided in favour of assessee. Selection of comparable - Related Party Transactions (RPT) - Held that:- Respectfully following the decision of 24/7 Customer.Com Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE] wherein held companies with RPT in excess of 15% of total revenues are to be excluded from the set of comparable, we hold that the learned CIT (Appeals) was not correct in holding that companies with any RPT have to be excluded from the set of comparable companies, and direct the TPO / A.O. to apply the RPT filter at 15% of total revenues for including / excluding the comparable companies, excluded by the learned CIT (Appeals), in the final set of comparables. - Decided partly in favour of revenue. Turnover Filter of ₹ 200 Crores - Held that:- This Tribunal in the case of Genisys Integrating Systems (India) Pvt. Ltd. (2011 (8) TMI 952 - ITAT BANGALORE) has held that turnover is an important filter of comparability which has to be adopted for determination of ALP and has determined the upper limit of the turnover filter to be applied at ₹ 200 Crores in cases where the turnover of the assessee is less than ₹ 200 Crores. In the case on hand, the turnover of the assessee being approx. ₹ 7.97 Crores only, falls within the range of ₹ 1 Crore to ₹ 200 Crores. Therefore, following the decision of the co-ordinate bench of this Tribunal in the case of Genisys Integrating Systems (India) Pvt. Ltd. (supra), we hold and direct that only those companies having a turnover of ₹ 1 Crore to ₹ 200 Crores be taken as comparable companies and consequently uphold the decision of the learned CIT (Appeals) in excluding five companies, i.e. IGate Global Solutions Ltd. (Seg), Flextronics Software Systems Ltd.,L&T Infotech Ltd.,Satyam Computer Services Ltd and Infosys Technologies Ltd. from the TPO’s list of comparables. - Decided against revenue. Companies with Abnormal Profits - CIT (Appeals) excluding companies with profit margin of more than 50% from the final set of comparable companies by holding the profit margin in excess of 50% to be abnormal - Held that:- CIT (Appeals) has excluded two companies namely, (1) Enensys Software Solutions Ltd. ;and (2) Thirdware Solutions Ltd., from the list of comparables merely because they have high profits, without examining whether these companies satisfy the comparability analysis. In this factual matrix, respectfully following the decision of the Special Bench of the ITAT, Mumbai in the case of Maersk Global Centres (India) Pvt. Ltd.(2014 (3) TMI 891 - ITAT MUMBAI ), we hold that the learned CIT (Appeals) was wrong in excluding the companies merely because of high profit margins, reverse his finding in the matter and restore the matter to the file of the TPO. The TPO is directed to re-examine - Decided in favour of revenue by way of remand. Standard deduction 5% - CIT (Appeals) granting standard deduction of 5% in computing the ALP of the international transactions - Held that:- The new section 92C(2A) of the Act mandates that if the Arithmetic Mean Price falls beyond + / - 5 % from the price charged in international transactions, then the assessee does not have any option referred to in section 92C(2)of the Act. Thus, as per this amendment, it is clear that the + / - 5 % variation is allowed only to justify the price charged in the international transactions and not for adjustment / standard deduction purposes. The aforesaid amendment has settled the issue and accordingly the 5% standard deduction is not allowable to the assessee in the case on hand. The various judicial decisions cited pertain to the period prior to the retrospective amendment by way of insertion of section 92C(2A) of the Act by Finance Act, 2012 and are therefore not of any help to the assessee. In this view of the matter, we hold that the learned CIT (Appeals) erred in allowing the assessee the benefit of 5% standard deduction and accordingly reverse this order of this issue in view of the retrospective amendment w.e.f. 1.4.2002 brought about by the insertion of Section 92C(2A) of the Act by Finance Act, 2012. - Decided in favour of revenue.
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2015 (8) TMI 711
Validity of assessment u/s 153C - Held that:- On a reading of Section 153A and 153C the exercise that is required to be done by the AO has been spelt out by the Coordinate Bench of this Tribunal in the case of DSL Properties Pvt. Ltd. Vs. DCIT [2013 (9) TMI 123 - ITAT DELHI] has held that if the Assessing Officer is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched. Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice u/s 153A read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a ‘sine-qua-non’ to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of Section 153C. We could not find any mention of any seized materials like valuable articles or things or any books of account or documents have been referred even in the impugned assessment orders. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity. - Decided in favour of assessee.
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2015 (8) TMI 710
Validity of assessment proceedings u/s. 153C - Assessment of income of any other person - Held that:- On a reading of Section 153A and 153C the exercise that is required to be done by the AO has been spelt out by the Coordinate Bench of this Tribunal in the case of DSL Properties Pvt. Ltd. Vs. DCIT [2013 (9) TMI 123 - ITAT DELHI] has held that if the Assessing Officer is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched. Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice u/s 153A read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a ‘sine-qua-non’ to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of Section 153C. We could not find any mention of any seized materials like valuable articles or things or any books of account or documents have been referred even in the impugned assessment orders. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity. - Decided in favour of assessee.
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2015 (8) TMI 709
Registration u/s 12AA(3) cancelled - assessee-trust donated a sum of ₹ 45 crores to another trust that is also engaged in the similar activity, thus this Act of trust tantamount to siphoning of the public money - Held that:- In the case in hand, the assessee-trust has demonstrated that the activities are being carried out as per objects o the trust and being assessed under the relevant provisions of Act. It is not in dispute that the registration u/s.12AA of the Act was granted vide letter dated 2nd July- 1982. No doubt is casted upon the genuineness of the activities, throughout this period. Moreover, the reliance was placed on the decision of Asst.DIT(Exemption) vs. Bhartha Swamukti Samsthe reported at (2008 (12) TMI 310 - ITAT BANGALORE ), wherein it is held that giving of loan to poor women is charitable activity. In the light of above discussion and respectfully following the judgment of CIT Karnataka (Central) vs. Islamic Academy of Education (2014 (7) TMI 909 - KARNATAKA HIGH COURT ), we do not agree with the reasoning of ld.DIT(E) for cancellation of registration. Therefore, the order under appeal is hereby set aside. - Decided in favour of assessee.
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2015 (8) TMI 708
Disallowance under section 14A - whether proportionate disallowance out of interest is not to be made by ignoring the fact that though investments were made in the immediately preceding assessment year out of interest bearing funds? - Held that:- Assessment year under consideration is 2006-07 and, hence, rule 8D cannot be applied for making disallowance under section 14A of the Act. Our view is fortified by the judgment of Maxopp Investment Ltd. v. CIT [2011 (11) TMI 267 - Delhi High Court] wherein held that the provisions of rule 8D can apply only from the assessment year 2008-09 and in a period anterior to that, the disallowance is to be made on a reasonable and acceptable method of apportionment. In the instant case, we find that the AO principally made disallowance under clause (iii) of rule 8D(2) towards administrative and other expenses incurred in earning the exempt income, by picking up rate of disallowance at 0.5 per cent. of the average of the value of investments. There is no specific disallowance made by the Assessing Officer on account of interest expenditure. It is manifest that the CIT(A) has sustained disallowance by apportionment of total of such expenditure in the ratio of exempt income to taxable income. In view of the fact, that neither the Assessing Officer made any disallowance on account of interest under section 14A nor did CIT(A) go into this aspect by making any enhancement, etc., ground No. 1 raised by the Revenue for sustenance of disallowance towards interest is held to be not arising from the impugned order. - Decided against revenue Apportionment of common expenses between exempt income and taxable income - Held that:- It is manifest from the impugned order that the allocation of total expenses has been made in the ratio of exempt income to taxable income. The Revenue argued before the Tribunal in the preceding year that the disallowance under section 14A ought to have been made on the basis of exempt income and taxable income and not the exempt income and gross sales. The viewpoint of the Revenue canvassed for the immediately preceding year seems to have been accepted by the Commissioner of Income-tax (Appeals) who chose to apportion total expenses in the ratio of exempt income to "taxable income" instead of gross sales. The learned Departmental representative could not point out any other more suitable basis for apportioning expenses towards exempt income. We, therefore, approve the view taken by the learned Commissioner of Income-tax (Appeals) in making apportionment of total expenses in the ratio of exempt income to taxable income.- Decided against revenue Proportionate amount of depreciation attributable to furniture, fixture, vehicles, printers and fax machine as a part of the base amount determined at ₹ 2.88 crores - Held that:- Expenditure of ₹ 2.88 crores liable to be bifurcated between exempt income and taxable income, the learned Commissioner of Income-tax (Appeals) did not consider the proportionate amount of depreciation, which is otherwise required to be considered. The learned Departmental representative argued that such proportionate amount of depreciation to be included in the amount of disallowance worked out by the learned Commissioner of Income-tax (Appeals) at ₹ 8,11,948, should not be less than ₹ 50,000. The learned authorised representative did not raise any objection to this. As such, accepting the view point of the learned Departmental representative, we increase the disallowance under section 14A to ₹ 8,61,948.- Decided partly in favour of revenue Amount of disallowance under section 14A at ₹ 8,61,948 should be added while computing book profit under section 115JB Disallowance of club expenses - Held that:- This issue is no more res integra in view of the judgment of CIT v. United Glass Manufacturing Co. Ltd. [2012 (9) TMI 914 - SUPREME COURT] in which it has been held that the club membership fee for employees incurred by the assessee is business expenditure allowable under section 37 of the Act. - Decided against revenue Reduction in the amount of disallowance under section 14A - Held that:- Question of disallowance of interest under section 14A in this case because the amount of shareholders' fund is much higher than the amount of investments yielding exempt income. As such, we uphold the view taken by the learned Commissioner of Income-tax (Appeals) in deleting disallowance under section 14A on account of interest. See CIT v. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] - Decided against revenue Exclude the fringe benefit tax from the net profit while computing book profit under section 115JB - Held that:- The decision taken by the learned CIT (Appeals) to exclude the fringe benefit tax of ₹ 3.65 crores from the net profit while computing book profit under section 115JB accords with the mandate of circular issued by the Central Board of Direct Taxes Circular No. 8 of 2005 dated August 29, 2005 . - Decided against revenue Disallowance of training expenses - CIT(A) allowed claim - Held that:- Training expenses are to be allowed as revenue expenses - Decided against revenue Depreciation on computer peripherals at 60 per cent - claim restricted by the Assessing Officer to 15 per cent - Held that:- The hon'ble Delhi High Court in the case of BSES Yamuna Powers Ltd. (2010 (8) TMI 58 - DELHI HIGH COURT ), has held that depreciation on computer peripherals should be allowed at 60 per cent. instead of 15 per cent. We, therefore, uphold the view taken by the learned Commissioner of Income-tax (Appeals) on this issue.- Decided against revenue Depreciation on "computer to plate" (CTP) - @20% - Held that:- When we look at Appendix to Income-tax Rules, it turns out that Item at Sr. No. III in new Appendix I is : "Machinery and plant". Item at Sl. No. (5) covered under Item III of the Appendix is : "Computers including computer software". Thus, it is ostensible that the viewpoint of the Assessing Officer that the computers are not to be considered as part of the machinery for the purpose of additional depreciation, is not sustainable. The Legislature has not specifically excluded computers used in factory from the ambit of "new plant and machinery" eligible for additional depreciation at 20 per cent. We, therefore, approve the view taken by the learned Commissioner of Income-tax (Appeals) in directing to allow additional depreciation on computer to plate at 20 per cent. - Decided against revenue.
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2015 (8) TMI 707
Reopening of assessment - compensation received by the assessee of ₹ 3 lakhs is inadequate and the provisions of section 23(1)(a) should be invoked and the income received by the assessee should be assessed as income from house property instead of business income - Held that:- As from the “reasons recorded”, we find that there is no material change in the reasons and grounds taken for reopening the case as has been recorded in the earlier years, inasmuch as in this year also the Assessing Officer has sought to reopen the case on the ground that the compensation received by the assessee of ₹ 3 lakhs is inadequate and the provisions of section 23(1)(a) should be invoked and the income received by the assessee should be assessed as income from house property instead of business income. The said reasons again are in the realm of surmises sans any tangible material and information coming to the possession of the Assessing Officer so as to entertain to ‘reason to believe’ that any income chargeable to tax has escaped assessment. The so called information in the form of comparable example as referred by the Assessing Officer in “reasons” lacks credibility because nothing has been brought out regarding its comparability with the assessee. In any case the core issue and deciding factor here in the case of the assessee is that, whether the head of the income in which is to be assessed can be changed sans any tangible material. As discussed in earlier part that it is not trite that income from leased of business assets is to be taxed under the head income from house property only and not under any other heads of income. No facts and circumstances or material has been brought by the Assessing Officer that the income shown by the assessee now in these years has to be taxed as income from house property in contradistinction and complete departure from the past history, where income stood assessed and accepted as business income. In these years also the Assessing Officer has no concrete ‘reason to believe’ except for reopening the case for making the verification of the past records and facts. This cannot be the ground for reopening the assessment even though return of income filed by the assessee has been accepted u/s 143(1). Our finding and reasons given in the appeal in assessment year 2002-03 will apply here also in these years. Accordingly, the reopening of the assessment based on the aforesaid “reasons recorded” is bad in law and consequentially the proceedings initiated vide notices u/s 148 are quashed. Thus, the appeal of the assessee for the assessment year 2005-06 is treated as allowed, whereas the revenue’s appeal for the same year is treated as dismissed as the same has become purely academic in view of our aforesaid finding. - Decided in favour of assessee.
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2015 (8) TMI 706
Estimation of 8% profit on disclosed contract receipts - additional income on account of entries found in the diary seized in the search of Mr.Ashok Kumar Chowta - Held that:- As far as disclosed contract receipts in the books of account are concerned, as already stated, the addition was made only on the basis of statement recorded at the time of survey. The books of account have not been rejected by the AO u/s. 145 of the Act. In such circumstances, we are of the view that the estimation of profits at 8% of the contract receipts disclosed in the books of account cannot be sustained. The profits disclosed by the assessee as per the books of account in respect of disclosed contract receipts for AY 2005-06, 2006-07 & 2007-08 should be accepted as declared by the assessee. We may also add that neither the AO nor the CIT(Appeals) have given any reason for making the aforesaid addition. - Decided in favour of assessee.
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2015 (8) TMI 705
Revision u/s 263 - Revenue filled cross appeals against orders of revision - Held that:- The provisions of the Act does not provide for filing of Cross Objection against the order passed U/s. 263. It is trite law that no appeal is maintainable unless the statute expressly provides for the same. Keeping in view of this settled legal position, we hold that the Cross Objections filed by Revenue are not at all maintainable, hence dismissed as such. - Decided against revenue Directions of CIT for making addition in respect of payments made under the provisions of Section 40A(3) - Held that:- As in the case of M/s. Coramandal Fertilizers Ltd., no cash payments were made and in the case of M/s. Ravindra Agro Service Centre, it is clear that no payments in cash exceeding ₹ 20,000/- were made. This evidence has not been rebutted by the Ld. CIT-DR. Hence, we had no option but to hold that the provisions of Section 40A(3) are not applicable to the present case. - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - Non deduction of TDS on interest payment - Held that:- Neither the AO nor the CIT disputed the fact of filing copy of Form 15H before the AO. No doubt, it is fact that the appellant failed to produce proof in support of dispatch of Form 15H to the CIT. In our considered opinion, this by itself does not entail any addition. It is only technical breach of law and the act provides for separate penal provisions for such default. Therefore, no disallowance can be made and to the provisions of Section 40(a)(ia) of the Act. See Vijaya Bank Vs. ITO [2014 (3) TMI 539 - ITAT DELHI] - Decided in favour of assessee.
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2015 (8) TMI 704
Allowability of interest on refunds due and paid to the assessee - eligibility for interest on interest - the assessee was deferred corpus and was beneficiary of M/s. K. Kachradas Patel Specific Family Trust deriving @5% accumulated beneficiary share, as per Schedule-II attached and forming part of the Trust Deed - Held that:- The assessee in the present case had moved an application under section 154 of the Act for granting of interest on refunds due to the assessee under the provisions of section 244A of the Act. In view of the ratio laid down in the case of Punitaben Karsanbhai Patel Oral Specific Deferred Family Trust [2006 (7) TMI 239 - ITAT AHMEDABAD-A] and also Hon'ble Gujarat High Court [2008 (6) TMI 576 - GUJARAT HIGH COURT] in the hands of the other beneficiaries and also the order of the Tribunal in the case of M/s. Vaibhavi Discretionary Family Trust (2015 (4) TMI 3 - ITAT MUMBAI) we hold that the issue of granting of interest on refunds due to the assessee is squarely covered and consequently we direct the AO to grant the said interest to the assessee. It may be clarified at this juncture that the earlier bunch of appeals decided by the Mumbai Benches of the Tribunal in M/s. Vaibhavi Discretionary Family Trust and others was in respect of the beneficiaries listed in Schedule-I whereas the present bench of appeals relate to beneficiaries listed in Schedule-II on account of deferred corpus where the right to receive the income comes after 18 years. Following the parity of reasoning of the orders of the different Benches of the Tribunal and also following the direction of the Hon'ble Gujarat High Court (supra) we allow the grounds of appeal raised by the assessee vis-a-vis grant of interest on refunds due under section 244(1)(a) of the Act. However, the assessee is not entitled to interest on interest in view of the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Gujarat Fluoro Chemicals [2013 (10) TMI 117 - SUPREME COURT] - Decided partly in favour of assessee.
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2015 (8) TMI 703
Transfer Pricing adjustment - software development services segment - selection of comparable - Held that:- We direct Infosys Technologies Ltd. be excluded from the final list of comparable companies chosen by the TPO the reason being that the latter is giant in the area of development of software and it assumes all risks, leading to higher profit. See Agnity India Technologies Pvt. Ltd. v. ITO [2010 (11) TMI 852 - ITAT DELHI] confirmed by HC [2013 (7) TMI 696 - DELHI HIGH COURT] Satyam Computer Services Ltd. to exclude from the final list of comparables. Margins of Visualsoft Technologies Ltd., which is at Sl.No.15 of the list of comparables chosen by the TPO - the basis on which the DRP came to the conclusion that the segmental details are not available in the public domain is erroneous, as the data taken by the assessee are based on the annual report of this company, a copy of which is placed at page 456 of the assessee’s paperbook. We are therefore of the view that it would be just and appropriate to set aside the directions of the DRP in this regard and direct the TPO/AO to verify the claim of the assessee and if found correct, to take only the segmental margins of this company as pleaded by the assessee. Working capital adjustments - Held that:- The annual reports of the comparable companies chosen for the purpose of calculating working capital adjustment are accepted as additional evidence. The issue, however, requires verification by the TPO/AO and therefore the order of the DRP in this regard is set aside and the issue is remanded to the TPO/AO for fresh consideration in light of the material now made available by the assessee. Allsec Technologies Ltd. should be excluded from the list of comparable companies. Club expenses disallowed as a deduction u/s. 37(1) - as per revenue the same were personal in nature and cannot be regarded as expended wholly and exclusively for the purpose of business - Held that:- As relying on CIT v. United Glass Mfg. Co. Ltd.[2012 (9) TMI 914 - SUPREME COURT] wherein taken the view that club membership fees of employees incurred by the assessee is business expenses u/s. 37 of the Act. In view of the aforesaid decision the claim of assessee in this regard has to be allowed. - Decided in favour of assessee. Disallowance of employee provident fund liability u/s. 36(1)(va) - Held that:- It is not disputed that the aforesaid employees’ contribution to provident fund was paid by the assessee on or before the due date for filing return of income for AY 2006-07. In such circumstances, no disallowance can be made u/s. 36(1)(va). See CIT v. Sabari Enterprises & Ors. (2007 (7) TMI 169 - KARNATAKA HIGH COURT) wherein it was held that employees’ contributions to provident fund are allowable deductions, even though made beyond the due date of furnishing return of income as per section 139(1). Thus the disallowance made by the revenue authorities has to be deleted. Accordingly, the same is directed to be deleted. - Decided in favour of assessee.
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2015 (8) TMI 702
Adoption of value of gold jewellery - Revenue raised the ground with regard to non-adoption of value of 30,000 gms. of gold at the average rate as on 01/04/2008 and 31/03/2009 (i.e. ₹ 10892/- per 10 gms) as per the provision of sec. 69A - Held that:- It is a settled proposition that whenever gold articles are recovered from the assessee, unless there is cogent evidence adduced by the assessee regarding the date on which it was acquired, it should be presumed that the articles belonged to the assessee and were owned by him and it is also to be presumed that the articles were acquired in the year in question and it represented the concealed income of the assessee. The assessee’s Counsel submitted that the gold jewellery was accumulated year after year for the last 15 years, therefore the average rate of ₹ 520 per gram is to be considered. Without prejudice to this argument, the assessee took the plea that the valuation of 26 kg. at ₹ 1,93,44,000/- has been accepted by the Department for the assessment year 2007-08 which was considered as protective assessment and in the substantive assessment for the assessment year 2009-10, the same value is to be adopted. U/s. 69A gold jewellery found during the course of survey is to be valued at the rate prevalent at the time of survey and not at the rate stated by the assessee. In this case, it is to be deemed that the gold jewellery was acquired in the year in question when the survey took place. More so, this view taken by the Assessing officer finds support in the case of CIT vs. K.I. Pavunny (1998 (2) TMI 105 - KERALA High Court) wherein the same ratio was laid down by the Court. In view of this, the jewellery found during the course of survey is to be valued at the rate as applicable in the assessment year under consideration. CIT(A) is not justified in valuing the gold jewellery at the rate prevalent in the assessment year 2007-08. Accordingly, we reverse the order of the CIT(A) and restore that of the Assessing officer. - Decided in favour of revenue. Addition of value of 2 kg. gold - CIT(A) deleted addition on the reason that the assessee himself has offered it for taxation in his return of income at ₹ 19,40,000/- - Held that:- We are of the opinion that the entire value of 30 kg. of gold jewellery is to be taxed in this assessment year at the prevalent rate at the time of survey and thereafter, the value of gold jewellery already offered by the assessee for taxation in his return of income, is to be reduced from the total value and only net balance is to be considered for addition. Admittedly, in this case, the Assessing officer worked out the total value of 30 kg. at ₹ 3,26,76,000/- and he has made deduction towards the value of 2 kg of gold at ₹ 19,40,000/- when it was already offered for taxation by the assessee himself in his return of income filed in this assessment year. Thus, the Assessing officer considered the difference of ₹ 3,07,36,000/-. Being so, in our opinion, the CIT(A) is not justified in making further deduction of ₹ 19,40,000/- on this count. Accordingly, we are inclined to reverse the order of the CIT(A) and restore that of the Assessing officer on this issue also. Accordingly. the Revenue appeal is allowed on this issue also.- Decided in favour of revenue.
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2015 (8) TMI 701
Gains arising from sale of shares - chargeable under the head "Profit and gains of business or profession" instead of "Capital gains" - Held that:- Once the assessee himself had returned the loss in share transactions as business loss so that he may seek set off against the income from share transactions in future assessment years, he at this stage cannot be allowed to claim himself as an investor, only because the benefits to him for treated like that. The decision of the Hon’ble Bombay High Court in the case of “Gopal Purohit” [2010 (1) TMI 7 - BOMBAY HIGH COURT] is applicable in the case in hand. We do not find any infirmity in the order of the lower authorities in treating the assessee as a trader in share transactions. So far as the contention that the gains arising from sale of bonus shares and split shares be charged under the head “Capital gains”, we are unable to subscribe to the said contention also. Once the assessee has been treated as a trader, then the income arising from bonus shares, split shares etc. is also to be treated as business income only - Decided against the assessee. The assessee has agitated that by mistake and oversight an amount of ₹ 25,11,982/- is included in the closing stock as on 31.03.08. This plea requires factual verification by the AO. The AO is directed to verify the said claim and if the contention of the assessee is found correct, to allow the claim accordingly. Addition towards write back of unsecured loan - Held that:- The assessee has claimed that the unsecured loans written back by the assessee of ₹ 4,05,000/- had not been claimed as deduction in the year in which the loan was taken and therefore the write back of unsecured loans could not be considered as part of taxable income under section 41(1) of the Act. The Ld. CIT(A), however, held that any liability of the earlier years which has been written off must be shown as income in the year in which it is written off. We do not find any infirmity in the order of the Ld. CIT(A) in this respect. Accordingly, the said ground is also decided against the assessee.
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2015 (8) TMI 700
TDS u/s 194C - publishing advertisements in the newspapers - Held that:- The assessee has debited expenditure under the head “advertisement” for an amount of ₹ 19,47,817, out of which ₹ 2,47,731 was paid to the electronic media. The assessee on its own admission stated that payments to three electronic medias to the extent of ₹ 1,80,600 attract deduction of tax u/s 194C. The assessee’s stand that it acted as an agent to its customers and that there is no contractual relation with the newspaper publishers for carrying on the advertisement placed by the assessee is correct. The assessee has a contractual relationship with only clients for providing marriage related services for which the assessee placed matrimonial advertisements in the newspapers. Further, the payments made on behalf of the clients and the payments ranged between ₹ 600 to ₹ 1200 each. Hence it appears that the assessee has placed advertisements from time to time as per requirements of its business. Though, the payments for the entire year was in excess of ₹ 50,000, in the absence of a contractual relationship between the assessee and the publishers, section 194C does not apply to the payments made to the newspaper publishers for the advertisements made by the assessee. - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - assessee paid depository charges without deducting the tax - Held that:- Assessee paid depository charges without deducting the tax and taxes are already paid by the recipient. Since the amount was already paid and the taxes are paid by the recipient, in our opinion, the decision of the Special Bench in the case of Marilyn Shipping & Transports [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] is applicable and by following the decision of the ITAT, Mumbai Benches (supra) we hold that the Tax Authorities have wrongly invoked provisions of section 40(a)(ia) in the instant case. We, therefore, set aside the orders passed by the Tax Authorities disallowing ₹ 6,27,423/-. - Decided in favour of assessee.
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2015 (8) TMI 699
Entitlement to exemption under section 10B - Held that:- It has to be seen that assessee is bringing foreign exchange into India as a result of its export. The argument of the assessee is that other concerns to whom assessee has sold its product in India are bringing convertible foreign exchange in India through export of their product contained in the containers manufactured by the assessee. Thus products of the assessee in fact are exported by the other concerns and convertible foreign exchanges are brought by them into India. We are unable to subscribe to this view. It is because phrase mentioned in sub-section (3) is ".....are received in........ or brought into India by the assessee in convertible foreign exchange..." Thus it is the assessee who has to bring convertible foreign exchange in India out of its own export. If other parties are bringing convertible foreign exchange in India then it will not be the fulfillment of the conditions imposed by subjection (3). It is admitted position of facts that assessee is not in fact bringing convertible foreign exchange and entire of its products are sold in India in Indian rupees. Therefore, the assessee will not be entitled to exemption under section 10B. - Decided against assessee.
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2015 (8) TMI 698
Addition u/s 68 - CIT(A) deleted addition - Held that:- AO wrongly considered the whole of the loans pertaining to the earlier as well as the year under consideration amounting to ₹ 31,87,902/- as not verifiable. Later on, he rectified the mistake and considered the creditors of ₹ 25,46,685/- as unverifiable and made the addition u/s 68 of the Act. The assessee due to illness could not produce the evidences before the AO however the same were furnished in the form of confirmation along with proper identification and the copies of acknowledgement of the returns filed by the creditors before the Ld. CIT(A), who after proper verification found that only the loans amounting to ₹ 1,32,000/- were received in this year and the assessee furnished the relevant documents for identification and confirmation. The Ld. CIT(A) forwarded the new evidences to the AO who simply stated that those should not be admitted, however, he had not given the reason as to why those were not admissible. It, therefore, appears that the addition made by the AO was based only on surmises and conjectures which is not enable particularly when during the year under consideration the amount received from the new creditors was only of ₹ 1,32,000/-. We, therefore, considering the totality of the facts do not see any infirmity in the order of Ld. CIT(A) on this issue.- Decided in favour of assessee. Disallowance of expenses - CIT(A) deleted the addition - Held that:- In the present case, it appears that the books of accounts of the assessee were duly audited and the AO while making the ad hoc disallowance did not point out any specific item of the expenses which was not incurred for the business purposes. Therefore, the Ld. CIT(A) was fully justified in deleting the impugned addition made by the AO. We do not see any valid ground to interfere with the findings of the Ld. CIT(A) on this issue. As regards to the cross objection filed by the assessee is concerned, it is noticed that no specific relief has been sought and the assessee mainly supported the order passed by the Ld. CIT(A). and in the former part on this order, we have dismissed the appeal of the department. Therefore this cross objection in support of the order of the Ld. CIT(A) becomes infructuous. Accordingly the same is dismissed as infructuous.
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Customs
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2015 (8) TMI 731
Waiver of Pre-Deposit – Appeal against Reference – Adjudicating authority passed orders imposing duty for importing bituminous coal in name of steam coal – While adjudicating appeal against said order tribunal referred three issues for consideration of Larger Bench under section 130A and granted complete waiver of pre-deposit condition, till disposal of appeals – Whether impugned order of tribunal was justified – Held that:- it was clear from scheme of Act that unless person was aggrieved by order of Tribunal, appeal cannot be maintained – Reference made by one Bench of Tribunal to Larger Bench, on ground that two Benches of coordinate jurisdiction had come to different conclusions on same issue, was not decision, on which one or other party can be stated to be aggrieved – While appeal was not maintainable against reference made to Larger Bench, appeal as against order granting total or partial waiver of pre-deposit condition was maintainable – If Appellate Authority was of opinion that deposit of duty and interest demanded or penalty levied would cause undue hardship to such person, such deposit can be waived off – Since any payment demanded was contested by every assesse as causing hardship, Courts have laid down certain parameters – Tribunal proceeded to follow its own precedents, where, whenever reference was made to Larger Bench, they have granted total waiver – Therefore, exercise of discretion by Tribunal need not be interfered with – Decided in favour of Assesse.
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2015 (8) TMI 730
Concessional Rate of duty – Export of ROM (Mixture of Iron Ore Fines and Lumps) - Benefit of Notification No. 62/2007 – Appellant lodged claim for refund seeking benefit under Notification No. 62/2007-Cus. whereby concessional rate of duty was allowed in respect of iron ore fines – Said claim was rejected by adjudicating authority and rejection was upheld by Commissioner – CESTAT also maintained order of Commissioner (Appeals) – Held that:- commodities exported were declared in shipping bills as ROM (Mixture of Iron Ore Fines and Lumps), and accordingly duty was paid at applicable time rate – As per notification, it exempted iron ore fines of Fe content 62% and below falling under heading No. 11 of Customs Tariff Act, 1975 – appellant has mentioned that exporter purchased iron ore without segregation – They did not have screening facility for segregation of iron in fines and lumps but because of huge demand from China on account of Olympics, appellant was required to export iron ore in its virgin form which was acceptable to buyer – As segregation of mixture to arrive at quantity of fine for which concessional, was not possible, higher duty was to be charged – Thus, order passed by CESTAT was reasoned and accordingly upheld – Decided against Assesse.
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2015 (8) TMI 729
Suspension of CHA License – Non-Compliance of Regulation, 2013 – Respondent-1 suspended licence of petitioners by invoking Regulation 19(1) of Regulations, 2013 on alleged involvement of petitioner in evasion of duty by various importers – Thereafter, show cause notice was issued proposing to revoke licence of petitioner under provisions of Regulation 18 – Vide impugned order licence of petitioner was revoked and forfeiture of amount of security deposit was ordered – Held that:- Admittedly petitioner failed to inform actual import to customs authorities and evaded legitimate customs duty including anti-dumping duty – Hence charge of not informing department, violating provisions of Regulation 11(d) stands proved – After issuance of show cause notice to petitioner had submitted their reply, thereafter, petitioner participated in enquiry and was given opportunity to file their reply – first respondent did not acted contrary to principles of natural justice or beyond his jurisdiction in order to interfere with impugned order Therefore, in view of existence of the aforesaid alternative remedy, this Court is not inclined to exercise its extraordinary power under Article 226 of the Constitution of India. Accordingly, this writ application fails and is dismissed. – Decided against the petitioner.
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2015 (8) TMI 728
Fulfilment of export obligation – Group Company – Export Promotion Capital Goods Scheme – Petitioners alleged that benefit of utilization of excess exports of group company in computation of export obligation was, granted to EPCG License holder –Respondent No. 2 considered case of Petitioners as group company in accordance with paragraph 9.28 of FTP was rejected by observing that M/s. Tin Plate India Ltd. and Petitioners were not group company – Held that:- Policy Interpretation Committee observed that petitioner admitted that they do not hold 26% or more equity in M/s. Tata Consultancy Services Ltd., hence in terms of para 9.28 of FTP, they cannot be treated as group company – Perusal of definition of “Group Company” reveal that two or more enterprises, ought to be in position directly or indirectly to exercise 26% or more voting rights in other enterprise – Committee completely overlooked requirement stipulated in para 9.28 as requirement was not of direct control – Requirement was fulfilled by indirect control as well – If definition was only to allow singular entity to claim benefits and not when it was associated, then one could have understood interpretation placed –However, when it was permitted by policy maker that group company to claim benefits ought to have direct or indirect control in other enterprise then, requirement was fulfilled – Petitioners’ case clearly falling within parameters/ criteria evolved in para 9.28 that we have no alternative but to quash and set aside decision of Policy Interpretation Committee – Decided in favour of Petitioner.
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2015 (8) TMI 727
Levy of Special additional Duty - Tribunal vide impugned order reported in [2005 (12) TMI 181 - CESTAT, BANGALORE] upheld order of commissioner confirming imposition of Special Additional Duty while relying upon ratio of Apex court in LML LTD. Versus COLLECTOR OF CENTRAL EXCISE, KANPUR [2002 (3) TMI 49 - SUPREME COURT OF INDIA](SAD) - Supreme court, in current case, after hearing counsel appearing for parties found no error in impugned judgments of Tribunal - Therefore appeals were accordingly, dismissed.
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2015 (8) TMI 726
Anti-Dumping duty - Rate as applicable to other exporters - Tribunal by impugned order reported in [2002 (8) TMI 232 - CEGAT, CHENNAI] held that documents were very clear that item originated from Korea and manufacturer Kohap Petrochemical Corporation - Duty fixed as ₹ 1130 which should be actual duty and not rate of duty as fixed on 'any other exporter' - Supreme court giving regards to nominal tax effect, dismissed appeal.
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Corporate Laws
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2015 (8) TMI 725
Violation of acquisition of shares/voting rights – By adjudication order of SEBI, penalty was imposed upon appellants for violating Regulation 10 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 read with Regulation 35 of SAST Regulations, 2011 – Held that:- Admittedly appellants acquired shares in excess of limit prescribed under Regulation 10 of SAST Regulations, 1997 and no steps were made to open offer in accordance with Regulation 10 – Taking into consideration all mitigating factors, penalty imposed by adjudicating officer cannot be said to be unreasonable or excessive – Appeal dismissed – Decided against Appellant.
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Service Tax
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2015 (8) TMI 749
Works Contract - Levy of service tax prior to 1.6.2007 - Whether service tax can be levied on indivisible works contracts prior to the introduction, on 1st June, 2007, of the Finance Act, 2007 which expressly makes such works contracts liable to service tax. - Held that:- assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. In fact, the speech made by the Hon'ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts specifically stated:- "State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract. However, I also propose an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract." Absence of valuation rules to determine the correct value - The Delhi High Court judgment in G.D. Builders [2013 (11) TMI 1004 - DELHI HIGH COURT] unfortunately misread the Mahim Patram's judgment [2007 (2) TMI 73 - SUPREME COURT OF INDIA] of this Court to arrive at the conclusion that it was an authority for the proposition that a tax is leviable even if no rules are framed for assessment of such tax, which is wholly incorrect. The Patna, Madras and Orissa High Courts have, in fact, either struck down machinery provisions or held machinery provisions to bring indivisible works contracts into the service tax net, as inadequate. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax "levied" by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. Works contract were not chargeable to service tax prior to 1.6.2007 - Decided in favor of assessee.
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2015 (8) TMI 748
Whether the Tribunal can decide the application for waiver of pre-deposit without having a statement of undue hardship, which is concomitant to exercise the jurisdiction - Held that:- unless the application is made pleading undue hardship the same cannot be entertained, not to speak of passing any order either adversely or beneficially. This sort of exercise is without jurisdiction. - the impugned judgment and order of the learned Tribunal is set aside and also dismiss the application made - it would be open for the appellant to make a fresh application for waiver of pre-deposit setting up the ground as required under the law - Petition disposed of.
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2015 (8) TMI 747
Adjournment request - tribunal refused to adjourn the hearing and dismissed the appeal - Condonation of delay - elay of 185 days - Held that:- Counsel for the appellant was unable to appear on that date, Annexure-B adjournment petition dated 14/11/2013 was sent and the same was received by the Registry of the Tribunal on 17/1/2014. It is further stated that they had also sent an E- mail on 18/1/2014, a copy of which is Annexure-B2, requesting the Tribunal for an adjournment - when such requests were received by the Tribunal, seeking an adjournment of the hearing, in the absence of a finding that the request was not made for bona fide reasons, the Tribunal was not justified in rejecting the same and proceeding with the hearing of the matter. Appellant has satisfactorily explained the reason for delay - Delay condoned - Matter restored before the Tribunal to be heard on merit.
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2015 (8) TMI 746
Refund claim for tax deposited erroneously - unjust enrichment - Commercial Training & Coaching Services - Exemption under Notification No.25/12-ST dated 20.6.2012 - whether the refund claim is hit by the bar of unjust enrichment - Held that:- agreement stipulates the value inclusive of taxes. The invoices issued also indicate that amount collected is inclusive of service tax. Undeniably the presumption under section 12B is raised that the incidence of tax is passed on to the customer. In such circumstances the appellant has to establish by evidence that the service tax passed on was returned to the customer. In the absence of such evidence the presumption stands unrebutted. - fees stipulated in the agreement were inclusive of taxes and the invoices issued indicate that the amount includes service tax the refund claim is hit by the bar of unjust enrichment - Decided against assessee.
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2015 (8) TMI 745
Denial of refund claim - Export of service / software to sister units - Refund of unutilized CENVAT Credit - Adjudicating authority came to a conclusion that the export invoice under which the services are claimed to be exported is not in conformity with the provisions of Rule 4A of Cenvat Credit Rules, 2004 and hence it is not possible to ascertain the exact classification of the services which is said to be exported by them - Held that:- Rule 3 of Export of Service Rules, 2005 specifically indicates that the services in relation to taxable services should be specified in clause (105) of Section 65 of the Act and also provides for exclusion. The appellant herein had registered himself with the service tax authorities for provision of export of services under the category of BAS and ITSS. Once an assessee has registered himself as provider of output services, it cannot be disputed by revenue that the appellant had not exported any services which falls within the meaning of Export of Service Rules, 2005. - appellant had registered with Hardware Technology Park and Software Technology Park of the Central Government which is an indicator that they are providing some services which are exported and do not fall under the exclusion clause of Export of Service Rules. Subject invoices indicate number, date, project for which it has been issued, invoice addressed to the recipient of service, either parent/sister concern and indicates project code. The said invoice as has been issued and the annexures to the invoice indicates the project is in respect of a software developed and the purchase order number of the client who has placed the order. In our view the information which has been indicated on the invoice is sufficient to come to a conclusion that the invoice was in respect of the export of software by the appellant to their sister/parent concern, who had given them the order. - appellant has received the payment in foreign exchange on the invoices raised. We find that the lower authorities have incorrectly appreciated the facts and held that the appellant is not eligible for the refund of the amount of unutilized credit. - Decided in favour of assessee.
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2015 (8) TMI 744
Business Auxiliary Service - Section 65 (19) of the Finance Act, 1994 - assistance to clients in payment of octroi and complying with the provisions of BMC Act - Held that:- Mere reading of the invoices and the challans by the appellant, (the octroi agent) for the purpose of filling up the form and obtaining clearance at the check post, does not amounts to dealing with or handling the documents of title. One can in the normal commercial term "dealing with the title" is possible when a person having authority to transfer the title of such documents. Wherein in the present case it is an admitted fact that the appellant does not have any authority to transfer the title and as such, the mere reading of the documents for the purpose of clearance of octroi does not amounts to dealing with or the handling of documents of title of the goods. Thus, we hold that the learned Commissioner has erred in holding that the appellants have handled or are handling the documents of title - Decided in favour of assessee.
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2015 (8) TMI 743
Denial of CENVAT Credit - whether "Training/guesthouse maintenance" services provided to the appellant by M/s J & G Corporate Solution would qualify as input service for availing Cenvat credit - the appellant did not produce the copy of the agreement with J & G Corporate Solutions (P) Ltd - Held that:- Guesthouse maintenance service qualifies for input service credit if such services are related to the business activity of the assessee. In the present case, the appellants are engaged in rendering telecommunication services and the facility of housekeeping/maintenance of guesthouse is a facility provided for the purposes of its employees or guests who were traveling for work purposes. - services of 'Housekeeping / maintenance of guesthouse provided by M/s J & G Corporate Solution Pvt. Ltd. qualifies as input service and the appellants are eligible for the benefit of Cenvat Credit. - Decided in favour of assessee.
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Central Excise
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2015 (8) TMI 739
Clandestine removal of goods - Seizure of unaccounted goods - Confessional statements - Held that:- from the reading of the statements of Mr. Deepak Das and Mr. J. C. Mansukhani that this aspect is explained in abundance by them in their statements. After reading the statement of these two persons, we find that no such admission was made by them, as recorded in the order of the CESTAT which is extracted above. Mr. Deepak Das had only stated that "In export dies, catalogue weight should be always equal or 10% than the physical weight". This is in reply to Question No. 4 which was put to Mr. Deepak Das. - Court fails to understand how it amounts to admission on the part of Mr. Das that the quantity disclosed was less. To the similar effect is the statement of Mr. Mansukhani which is treated as his admission. - there was no such admission on the part of these two persons which is erroneously read out to be so, entire basis of the impugned orders passed by the Commissioner as well as the CESTAT gets knocked off. - Department had taken only those samples of products with larger quantity and missed out those with lesser quantity and in case all the items are taken together, there would not be any difference in quantities. In spite of the fact that the aforesaid plea was specifically raised by the appellant in explaining that there was no difference in the quantities and thus, no question of any clandestine removal of the goods from the premises, the said plea has not been adverted to and there is no reference made to the aforesaid material produced by the appellant. It is stated at the cost of repetition, that only on the basis of so called admissions made by Mr. Mansukhani and Mr. Deepak Das, the authorities jumped to the conclusion without undertaking any further exercise. Such an order of the CESTAT which is confirmed by the High Court does not stand legal scrutiny and therefore, these orders are liable to be set aside. - Decided in favour of assessee.
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2015 (8) TMI 738
100% EOU - Payment of duty on DTA clearance under Sr. no. 3 of the notification 23/2003 CE dated 31.3.2003 - Procurement of inputs from DTA whereas suppliers were availing deemed export benefits - appellant never stated that they were aware that any supplier of inputs was availing the benefit of Para 8.3 (a) and (b) of the FTP - Invocation of extended period of limitation - Held that:- In view of these amendments carried out in Notification No. 23/2003-CE rate of duty, as per Serial No. 2 of the table to this exemption, was required to be reduced by 75% for the period 01.3.2006 to 28.02.2006 and by 50% with effect from 01.3.208 - No condition so specified in this regard by DGFT has been brought to our notice. As no duty is foregone even Notification No. 23/2003-CE dated 31.3.2003, as amended, does not require execution of a bond for DTA clearances by the appellant when the same is issued under Section 5A(1) of the Central Excise Act, 1944. Main appellant has been filing duty payment returns and all intimations of receipt of inputs which are duly assessed by the jurisdictional Central Excise offices. The duty demand with respect to DTA clearance can not be recovered by enforcing B-17 bond executed by the main appellant, as exemption under Notification No. 23/2003-CE is claimed independently by the appellants and returns filed by the appellants were assessed and debonding allowed. - provisions of Section 11A of the Central Excise Act, 1944 will be applicable for demanding duty from the main appellant in case conditions of Notification No. 23/2003-CE are not fulfilled. It is observed from the statements of Director of the main appellant Ms. Neepa Mehta and Shri Darshak R. Shah that none of them ever stated that they were having knowledge that GHCL was availing the benefit of Para 8.3(a) and (b) of the FTP. It is only after being explained by the investigation that they stated that GHCL was availing the benefit of Para 8.3(a) and (b). However, there is a force in the arguments of the learned Advocate that none of the documents received by them from M/s. GHCL indicate anywhere that GHCL was availing the deemed export benefit - No copy of these DFIA licenses was furnished by the Revenue before the Bench and also there is no indication whether appellants were shown copies of these DFIA licenses during investigation to the fact that these licenses had endorsements of paragraph 8.3(a) and (b) of Foreign Trade Policy on the face of these DFIA licenses. In view of the above, extended period of five years can not be invoked against the main appellant under proviso to Section 11A of the Central Excise Act, 1944 as there is no evidence of prior knowledge and suppression with intention to evade duty on the part of the appellants. - Matter remanded back for quantification of demand for normal period - Decided in favour of assessee.
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2015 (8) TMI 736
Classification of goods - Classification of Baygon Mosquito Specialist - Held that:- product of the appellant herein known as "Baygon Mosquito Specialist" is covered by Serial No. 37 (i.e., 'Mosquito coils, mats and other mosquito repellants') of Notification No.9/2000 CE (NT) dated 01.03.2000. Since this Notification is issued under Section 4A of the Central Excise Act, 1944, the Revenue rightly assessed the excise duty under the aforesaid provision - order of tribunal [2004 (6) TMI 13 - CESTAT, MUMBAI] confirmed - Decided against assessee.
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2015 (8) TMI 735
Clandestine removal of goods - Maintainability of appeal - Held that:- appeal against the order of the Customs, Excise and Service Tax Appellate Tribunal will lie to the High Court under Section 35G of the Central Excise Act and not to this Court - Decided against Revenue.
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2015 (8) TMI 734
Determination if annual capacity of production - Whether the assessees herein who are iron and steel rolling mills which have exercised the option of availing of procedure prescribed under Rule 96ZO(3) for determination of their annual capacity of production under the compounded levy scheme, can opt out of the scheme and claim the benefit of determination of production under Section 3A(4) of the Central Excise Act - Supreme Court declined to deal with the issue where only the remand order was made by the Tribunal. The appeal was filed by the Revenue against the decision of Tribunal [2001 (2) TMI 229 - CEGAT, NEW DELHI].
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2015 (8) TMI 733
SSI Exemption - Clubbing of clearances - Valuation - Depot sale price - Sepreme Court declined to interfere with the order of Tribunal [2004 (1) TMI 534 - CESTAT, new delhi] wherein Tribunal has remanded the matter to Commissioner for fresh adjudication.
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2015 (8) TMI 732
Countervailing duty - Exemption - TV sets - Held that:- Case is covered by the judgment of this Court in Thermax Pvt. Ltd. v. Collector of Customs reported in [1992 (8) TMI 156 - SUPREME COURT OF INDIA] which is rightly relied upon by the Tribunal [2003 (6) TMI 260 - CESTAT, MUMBAI]. - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (8) TMI 742
Assessment of Tax u/s 29(2) of Punjab Value Added Tax, 2005 - Constitutional validity of amendment to section 29 - Extension of Assessment period – Whether the amendment is clarifificary in nature and retrospective or substantive and prospective - Petitioner contends that under unamended Section 29(4), assessment would have been barred by limitation as three years had elapsed after filing of annual statement whereas if amendment was held to have retrospective effect it would not be barred by limitation – Petitioner challenges constitutional validity of Section 29 of PVAT – Held that:- opening part of section 29(4) as amended read by itself would suggest that provision was not retrospective – Period of six years, in place of three years, was mentioned only in amended Section 29(4) – Extended period under unamended section was not as of right but was dependent upon discretion of Commissioner – Settled position of law that if statute was curative or merely declaratory of previous law retrospective operation was generally intended – In absence of clear words indicating that amending Act was declaratory, it would not be so construed when pre-amended provision was clear and unambiguous. Whether the amendment is harsh, unfair, arbitrary and is excessively and unreasonably retrospective and is, therefore, violative of Articles 14 and 19 of the Constitution - Held that:- If the books are not available because they were destroyed or are otherwise unavailable to the assessee prior to the amendment, it would always be open to the assessee to bring this to the notice of the Assessing Authority who must take the same into consideration. It would be open to the assessee to take this factor as a defence and a justification for not having preserved the books. Obviously, in such cases, an adverse inference cannot be drawn against the assessee. The validity of the amendment, therefore, cannot be struck down on the ground that it is unconstitutional for this reason. Whether the provio is contrary of main proviso - Held that:- The proviso does not take away any right given by the main provision. - The extended period for making the assessment in respect of the year 2006-07 is not by implication from the proviso. It arises from the plain and clear language of the proviso. The proviso clearly carves out an exception to the main provision itself. The judgment infact supports the respondents’ case. The proviso is in terms of this judgment as but for the proviso the enacting part of the section would have included the subject matter of the proviso by disallowing the assessment in respect of the year 2006-07. The proviso was enacted to take this part out of the purview of the main/enacting part of the section. The proviso expressly qualified the enacting part of the section and created an exception to it. In the present case, since the assessment were not complete, the various decisions of the Supreme Court relied upon by the assessee are not applicable wherein it was held that, if the assessment period is over, the assessee acquires a vested right which cannot be disturbed by retrospective amendment which extends the period for assessment or reassessment after the original period of assessment or reassessment has expired. Thus, in any event, period of six years under amended section was to apply retrospectively – Explanation (2), therefore, was merely clarificatory – There was no inconsistency between main provision and proviso – Proviso merely grants further period for making assessment – Purpose and effect of entire amendment was to obviate consequences of proviso to unamended section – In view of aforesaid, appeal dismissed – Decided against Assesse.
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2015 (8) TMI 741
Payment of Tax at compounding rate – Rejection of benefit due to Shifting of place of business – Application was filed for payment of tax at compounding rate during which period business premises was shifted – Kerala Value Added Tax Act, 2003 – Held that:- Reasons enumerated in section 8 were only illustrative and not exhaustive –Section 8(f)(i) provides option for dealer in ornaments or articles of gold, silver, platinum group metals to pay tax at compounding rate instead' of paying tax in accordance with provisions of section 6 – Assessing authority for valid and sufficient reason such as shifting of place of business, may refuse permission to pay tax under this section and cancel permission if any granted – In spite of shifting of place of business, dealer had not changed address of business place – Proviso to section 8(f)(ii) requires prior approval of District Deputy Commissioner before proceeding with orders – There was no application of mind so far as, Assistant Commissioner concerned was informed by dealer that they were proposing to shift their place of business. No opportunity of being heard was given to petitioner – Assessing authority must give valid reason why such shifting deserves such treatment – Unless reasoning was mentioned it may not be ground upon which permission can be cancelled without valid and sufficient reason –In light of the said observations, orders of Tribunal lacks consideration and orders deserve to be set aside – Decided in favour of Assesse.
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2015 (8) TMI 740
Reassessment - levy of entry tax - Respondents in original assessment, did not impose tax in matter of purchase of MS steel scrap from seller, who did not make any endorsement that said goods were local goods and not tax paid – Later respondent authorities issued notices under section 28(1) Commercial Tax Act, 1994 and imposed penalty for escaping assessment – Held that:- Admitted that petitioner purchased M. S. steel scrap and while selling those goods, petitioner did not declare goods as local goods – Under Act, 1976, entry tax was leviable on entry of goods in local area for consumption, use or sale therein – Incidence of taxation was not sale and purchase but entry of goods into local area and tax was to be paid by dealer who has effected entry of goods – Once iron and steel items were subjected to entry tax, steel scrap which was generated out of repair and maintenance, in absence of any endorsement, would not create any liability for payment of entry tax by its purchaser – In absence of any such declaration by seller, there was no liability cast on petitioner under section 3 of Act to pay entry tax in respect of purchases made – Assessing authority during original assessment, despite all details, did not form any opinion that goods purchased by petitioner were different items manufactured by seller, thus, were local goods within its meaning – Once it was held that basis for reassessment was change of opinion, such reassessment was impermissible under law, as laid down in case of Sales Tax Officer, Ganjam v. Uttareswari Rice Mills [1972 (9) TMI 109 - SUPREME COURT OF INDIA] – Reassessment proceedings on ground that purchase has escaped assessment, was clearly illegal and unsustainable in law in view of authoritative pronouncement of Supreme Court in case of Commissioner of Income-tax v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] – Reassessment orders set aside – Decided in favour of Assesse.
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Indian Laws
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2015 (8) TMI 724
Bail Application - Section 437 & 439 of the Code of Criminal Procedure - Jurisdiction of High Court to grant bail - Held that:- It cannot be over-emphasised that the discipline demanded by a precedent or the disqualification or diminution of a decision on the application of the per incuriam rule is of great importance, since without it, certainty of law, consistency of rulings and comity of Courts would become a costly casualty. A decision or judgment can be per incuriam any provision in a statute, rule or regulation, which was not brought to the notice of the Court. A decision or judgment can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgment of a Co-equal or Larger Bench; or if the decision of a High Court is not in consonance with the views of this Court. It must immediately be clarified that the per incuriam rule is strictly and correctly applicable to the ratio decidendi and not to obiter dicta. It is often encountered in High Courts that two or more mutually irreconcilable decisions of the Supreme Court are cited at the Bar. High Court is bereft or devoid of power to jurisdiction upon a petition which firstly pleads surrender and, thereafter, prays for bail. The High Court could have perfunctorily taken the Appellant into its custody and then proceeded with the perusal of the prayer for bail; in the event of its coming to the conclusion that sufficient grounds had not been disclosed for enlargement on bail, necessary orders for judicial or police custody could have been ordained. A Judge is expected to perform his onerous calling impervious of any public pressure that may be brought to bear on him. There are no provisions in the CrPC contemplating the committal of a case to the High Court, thereby logically leaving its powers untrammelled. There are no restrictions on the High Court to entertain an application for bail provided always the accused is in custody, and this position obtains as soon as the accused actually surrenders himself to the Court. - surrender may also be accomplished by the commencement of any hearing before the Judge, however brief, where the accused person is formally identified and plainly would overtly have subjected himself to the control of the Court. Incontrovertibly, at the material time the Appellant was corporeally present in the Bombay High Court making Evans applicable to the case of the Appellant rather than the case of the respondent. A further singularity of the present case is that the offence has already been committed to Sessions, albeit, the accused/Appellant could not have been brought before the Magistrate. - Single Judge erred in law in holding that he was devoid of jurisdiction so far as the application presented to him by the Appellant before us was concerned. Conceptually, he could have declined to accept the prayer to surrender to the Courts’ custody, although, we are presently not aware of any reason for this option to be exercised. - The impugned Order is, accordingly, set aside - Decided in favour of appellant.
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2015 (8) TMI 723
Termination of the mining leases of lessees involved in mining - violation of the Forest (Conservation) Act, 1980, the Mines and Minerals (Regulation and Development) Act, 1957, the Mineral Concessions Rules, 1960, the Environment (Protection) Act, 1986, the Water (Prevention & Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981 as well as the Wild Life (Protection) Act, 1972 - Held that:- As the State Government of Goa has taken a stand that no action will be taken against the mining lessees only on the basis of the findings in the report of the Justice Shah Commission without making its own assessment of facts and without first giving the mining lessees the opportunity of hearing and the opportunity to produce evidence in their defence, we are not inclined to quash the report of the Justice Shah Commission on the ground that the provisions of Sections 8B and 8C of the Commissions of Inquiry Act, 1952 and the principles of natural justice have not been complied with. At the same time, we cannot also direct prosecution of the mining lessees on the basis of the findings in the report of the Justice Shah Commission, if they have not been given the opportunity of being heard and to produce evidence in their defence and not allowed the right to cross-examine and the right to be represented by a legal practitioner before the Commission as provided in Sections 8B and 8C respectively of the Commissions of Inquiry Act, 1952. Sub-rule (6) of Rule 24A of the MC Rules will apply to a case of first renewal under sub-section (2) of Section 8 of the MMDR Act other than a case covered under sub-rule (9) of Rule 24A of the MC Rules, but will not apply to renewal under sub-section (3) of Section 8 of the MMDR Act. In our view, the deemed mining leases of the lessees in Goa expired on 22.11.1987 under sub-section (1) of Section 5 of the Abolition Act and the maximum of 20 years renewal period of the deemed mining leases in Goa as provided in subsection (2) of Section 8 of the MMDR Act read with sub-rules (8) and (9) of Rule 24A of the MC Rules expired on 22.11.2007. If Rule 64C of the MC Rules suggests that tailings or rejects can be dumped outside the leased area, it must give way to Section 4 of the MMDR Act, which does not authorise dumping of minerals outside the leased area and must give way to Section 9 of the MMDR Act which does not authorise removal of minerals outside the leased area without payment of royalty. We, therefore, hold that dump cannot be kept by the lessees beyond the leased area. - Rule 16 of the MCD Rules provides that the overburden and waste material obtained during mining operations shall be dumped and stacked separately on the ground earmarked for the purpose and the ground selected for dumping of overburden, waste material shall be away from working pit. There is nothing in sub-rules (1), (2) and (3) of Rule 16 of the MCD Rules, which provides that such overburden or waste material obtained from mining operations shall be kept ‘outside the leased area’. The expression ‘said lands’ in clause (7) of Part II of Form- K quoted above refers to the area of the lease in Part I of Form K and, therefore, is confined to the leased area. Rule 16 of the MCD Rules, therefore, cannot be read to permit dumping of overburden and waste materials obtained from mining operations outside the leased area. - notification issued under subrule (3) of Rule 5 of the Environment (Protection) Rules, 1986 requiring prior environmental clearance covers the activity of mining. Sub-rule (3) of Rule 5 empowers the Central Government to impose prohibition or restrictions on the location of an industry or the carrying on of processes and operations in an area for the purpose of protecting the environment. Inasmuch as the activity of dumping mineral wastes will pollute the environment, it will come within the meaning of activity of mining included in the Schedule to the notification issued under sub-rule (3) of Rule 5 of the Environment (Protection) Rules, 1986. Thus, for dumping of mining waste on a private land, a prior clearance of the Central Government under the notification issued under sub-rule (3) of Rule 5 of the Environment (Protection) Rules, 1986 would be necessary. - No merit in the contention of learned counsel for the lessees that they can dump mining waste outside the leased area. Presently no mining operations are being carried on inside any National Park or Wildlife Sanctuary, and the State of Goa has taken a stand before us that it will not permit any mining operations inside any National Park or Wildlife Sanctuary. - The right to life under Article 21 of the Constitution is a guarantee against the State and for enforcing this fundamental right of persons the State, which alone has a right to grant mining leases of the mines located inside the State, can be directed by the Court by an appropriate writ or direction not to grant mining leases or not to allow mining that will be violative under Article 21 of the Constitution. - submissions of lessees that until a notification is issued under the Environment (Protection) Act, 1986 and the Rules made thereunder prohibiting mining activities in an area outside the boundaries of a National Park/Wildlife Sanctuary, no mining can be prohibited by this Court is misconceived. The intent of the Rule-making authority in making these provisions in Rule 37 is that the liabilities and conditions in a mining lease are also enforceable against the transferee and that the transferee pays his dues towards income tax regularly. Rule 37, therefore, cannot be allowed to be violated by the lessees with impunity and the State Government cannot overlook transfers by saying that the transfers of the mining leases are part of the mining practice in the State of Goa. In our view, if these violations of Rule 37 are allowed, there shall be substantial leakage of revenue and mining operations cannot be effectively regulated and controlled by the State Government. The State Government, therefore, must initiate action against those mining leases who violate Rule 37 of the Rules. - If the State Government has not permitted amalgamation of adjoining leases in the interest of mineral development and has not recorded the reasons for such permission, the State Government cannot allow the amalgamation of the leases. Expert Committee as well as ISM, Dhanbad, after considering the available data and after considering the adverse impact on environment and the limited carrying capacity of the transport system in Goa, are of the opinion that a cap between 20 to 27.5 million tons per annum should be fixed for excavation of iron ore in the State of Goa. In its recommendations, however, the Expert Committee has suggested that till the scientific study by the Expert Committee is completed in about 12 months or so, and more of data including impacts on different ecological environmental parameters is available through monitoring of the impacts by different agencies including the Goa State Pollution Control Board, 20 million tons per annum should be fixed as the annual excavation of iron ore in Goa. Goa State Pollution Control Board had powers to issue any direction including the power to close, prohibit or regulate mining operations or even to stop or regulate supply of electricity, water or any other service with a view to prevent water pollution or air pollution. Yet, from the report of the Expert Committee as well as the reports of ISM, Dhanbad and NEERI, it is clear that iron ore production in Goa has led to massive negative impacts on all ecosystems leading to enhanced air, water and soil pollution affecting quality of life across Goa. Renewal of all the deemed mining leases in the State of Goa had expired on 22.11.2007, the mining lessees will not be entitled to the sale value of the ores sold in e-auction but they will be entitled to the approximate cost (not actual cost) of the extraction of the ores. On account of suspension of mining operations in the State of Goa, the workers who were employed by the lessees claim that they have not been paid their wages. Under Section 25C of the Industrial Disputes, Act, 1947, when a workman whose name is borne on the muster rolls of an industrial establishment and who has completed not less than one year of continuous service under an employer is laid-off, he is entitled to be paid by the employer for all the days which he is so laid-off, except for such weekly holidays as may intervene, compensation which shall be equal to 50% of the total of the basic wages and dearness allowance that would have been payable to him had he not been so laid-off. The entire sale value of the stock of mineral ores sold by e-auction less the average cost of excavation, 50% of the wages and allowances and 50% of the storage charges to be paid to MPT is thus due to State Government which is the owner of the mineral ores which have been sold by e-auction. The State Government will set-aside 10% of this balance amount for the Goan Iron Ore Permanent Fund for the purpose of sustainable development and inter-generational equity. This entire exercise of calculating the average cost of extraction of ores to be paid to the mining lessees, 50% of the basic wages and dearness allowance to be paid to the workers, 10% of the balance amount towards the Goan Iron Ore Permanent Fund and the balance amount to be appropriated by the State Government will be done by the Director of Mines and Geology, Government of Goa, under the supervision of the Monitoring Committee. Till this exercise is over and the report of the Monitoring Committee is filed, the Monitoring Committee will continue and their members will be paid their remuneration allowances as directed in the order dated 11.11.2013. - Decided in favour of Appellant.
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