Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 25, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
TMI SMS
TMI Short Notes
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Where supply of goods without transfer to title has to be treated as service, whether on importation of such goods i.e. deemed services, customs duty and GST would be levied simultaneously?
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Meaning and scope of supply under GST (Part 2) - Import of services will be treated as supply and will subject to GST under reverse charge.
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Meaning and scope of supply under GST (Part 1) - Since CGST, SGST or IGST will be levied on supply of goods or services, it is important to understand this term first
Income Tax
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Exemption u/s 11 - charitable purpose u/s 2(15) - merely because profits have resulted from the activities of imparting education, it would not result in change of character of the education that it was solely for educational purpose. - AT
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Continuance of registration under section 12A denied - if it is found that the assessee was accepting bogus donations, then that fact can only lead to an inference that the activities of the trust are not genuine or are not carried out in accordance with the objects of the trust. - AT
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Disallowance of loan processing charges and pre-payment charges paid to the bank - so long as the expenses incurred by the assessee are genuine and not part of any colorable device to make tax evasion, then such expenses should be allowed under the relevant provisions of the Act. - AT
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Penalty u/s 271B - threshold limit for getting its account audited u/s 44AB - Business activity or professional activity - gross receipts were only ₹ 42 lakhs - penalty quashed - AT
Customs
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Classification of soyabean oil – by-product in the course of manufacture of lecithin – classifiable under 15071000 as crude oil, whether or not degummed - AT
Service Tax
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Cenvat Credit - It is neither possible nor practical for any service recipient to verify the fact of payment of service tax by the service provider. Remedy of the Revenue lies at the hands of the service provider and not at the hands of the service recipient. - AT
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Levy of penalty - the assesse's stand that they were under a bonafide belief that no tax liability would fall upon them as the same stands discharged by the sub-contractor is required to be appreciated in which case, the provisions of section 80 of the Finance Act, 1994 would get invoked – no penalty - AT
Central Excise
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Cenvat credit - availed input services credit without payment of value of input service and service tax on such service to the provider of services - violation of Sub Rule (7) of Rule 4 of Cenvat Credit Rules 2004 - If payment is made later, credit will be eligible - however, interest liability to be computed, if any. - AT
Case Laws:
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Income Tax
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2016 (8) TMI 871
Addition of expenditure with regard to unaccounted sales from Avalon Pub though no evidence of these expenses were produced by the assessee - CIT(A) allowed claim - Held that:- CIT(A) considering the submissions of the assessee and the seized documents directed the Assessing Officer to allow deduction of 15% from the Avalon Pub sales towards cost of liquor observing that the seized materials contains the recording of sales and payments were made for purchase of liquor outside the books of account and further on verification of the Foreign Liquor Register (FLR) each and every bottle of liquor sold is accounted for in the FLR. He further observed that if there were any unaccounted sales of liquor, it has to come out of unaccounted purchases of liquor only. The Ld. CIT(A) also held that as per the regular books of accounts, the cost of Bar sales is around 19% to 26% and therefore the deduction claimed by the assessee @ 15% is reasonable and in fact it is less than what has been allowed by the Assessing Officer in computing the income from Avalon Pub as per the regular books of account. Therefore, he concluded that 15% of the sales claimed by the assessee towards cost of liquor is very much reasonable. The findings of the Ld. CIT(A) are very much logical and it is commonsense that unless there are unaccounted purchases, there cannot be unaccounted sales. The Revenue is not disputed that in the regular books of account assessee has claimed the cost of Bar sales in the range of 19 to 26% and such cost of sales were allowed as deduction in computing the income. It is also evident from the seized materials that the assessee paid amounts to liquor shops i.e. Vishal wines. This shows that there are unaccounted purchases of liquor. In the circumstances, we find that the claim of the assessee 15% towards cost of liquor is very much reasonable. Thus, we sustain the order of the Ld. CIT(A) in directing the Assessing Officer to allow deduction of 15% from the gross sales made from Avalon Pub towards cost of purchases of liquor. This ground of the Revenue is rejected. Disallowance u/s. 36(i)(iii) out of bank interest paid - CIT(A) allowed claim - Held that:- In this case it is the finding of the Ld. CIT(A) that the utilization of funds for non-business purposes stood at ₹ 8,47,88,382/- and the available funds with the assessee stood at ₹ 8,29,13,964/- and therefore it is reasonable to conclude that a sum of ₹ 18,74,418/- only has come out of interest bearing funds. He further concluded that since assessee himself has disallowed ₹ 10,68,637/-, there is no reason for making further disallowance and directed to delete the disallowance of interest of ₹ 36,99,211/-. We do not find any infirmity in the order of the Ld. CIT(A) and valid reason to interfere with the findings of the Ld. CIT(A) in deleting the disallowance. Therefore, in view of our above discussion, we uphold the order of the Ld. CIT(A). This ground of the Revenue is dismissed. Addition made u/s. 2(22)(e) as deemed dividend - Held that:- Admittedly, the assessee is not a shareholder in M/s. Gunjyot Properties Pvt. Ltd., and therefore the provisions of Sec. 2(22)(e) are attracted only to register shareholders and since assessee is not the shareholder of lending company i.e. M/s. Gunjyot Properties Pvt. Ltd., no addition can be made u/s. 2(22)(e) of the Act in the hands of the assessee. See Kewal Kumar Jain (2013 (6) TMI 751 - ITAT PUNE) Rental income received - business income OR income from house property - Held that:- The income received by the assessee from letting out of terrace space for erection of antenna tower for Reliance Infocom is to be assessed under the head income from house property only and not under the head income from business or under the head income from other sources as was assessed by the Ld. CIT(A)/Assessing Officer . This ground of the assessee is therefore allowed. Determining amount taxable u/s. 2(22)(e) - Held that:- Admittedly, there is no business relation between the assessee company and M/s. Jagjit Singh & Co.. The advances received by the assessee company are not in the course of any business connection between these two companies. In the circumstances, we do not find any substance in the submissions of the Ld. Counsel for the assessee that the transaction is outside the purview of the provisions of Sec. 2(22)(e) of the Act. We direct the Assessing Officer to exclude loan/advances given to the assessee in earlier years which are assessable as deemed dividend in the hands of the assessee in the past years while computing the deemed dividend taxable u/s. 2(22)(e) of the Act during this assessment year. This ground is partly allowed. Disallowance of benefit of telescoping in respect of unexplained income against the substantial disclosure of income in the hands of group of concerns of the assessee - Held that:- We failed to understand why the Assessing Officer has not made additions based on seized materials rather than going by the additional income offered by the assessee. We also see that the income from suppressed sales of Avalon Pub have been fully taxed as suppressed income and the very same income is disallowed in the hands of the Director i.e. assessee treating the same as unexplained income which would result in double addition. Therefore, we are of the considered view that it is unjust in denying telescoping of these amounts among the group of the assessee. However, we make it clear that if Vijaydeep Hotels Pvt. Ltd utilized these amounts for any other sources other than for advancing such amounts to the Director Mr. Karanveer Singh Bawa, to that extent it cannot be used for telescoping. Therefore, the Assessing Officer shall examine these aspects. In the circumstances, we direct the Assessing Officer to allow telescoping of these amounts subject to verification after calling for necessary details and providing adequate opportunity of being heard to the assessee. This ground is therefore partly allowed.
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2016 (8) TMI 870
Unexplained investments - non furnishing on clarifications on the Balance loan amount - Held that:- Authorised Representative drew our attention to the certificate dated 19.02.2010 issued by the Karnataka Bank Ltd that ₹ 40,29,328/- was received from Standard Chartered Bank towards loan account of assessee on 22.03.2007 and the assessee’s saving bank account was credited with ₹ 66,21,768/- on 30.03.2007 and supported the loan transactions with bank statements, certificates and loan against properties letter dated 15.03.2007. Further, we found that on comparison with the value of property disclosed by the assessee as on 31.03.2006 is ₹ 49,03,162/- and the said value as of 31.03.2007 is ₹ 1,24,45,907/- and the differential value of construction cost spent during the financial year is ₹ 75,42,745/- and the assessee supported the cost with Karnataka Bank loan and disbursement from the Standard Chartered Bank Housing loan amount of ₹ 1,07,00,000/-. Further, the loan source cannot be treated as income for assessment. Therefore, we are of the opinion that Commissioner of Income Tax (Appeals) has elaborately discussed viz-a-viz considered the assessee submissions and the loan documents and allowed the appeal. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) and dismiss the grounds of the Revenue. - Decided in favour of assessee.
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2016 (8) TMI 869
Disallowance of the entire purchase - CIT(A) sustaining the disallowance made by TPO and treatment of purchase consideration for trademark as NIL - Held that:- It is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred “wholly and exclusively” for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OECD guidelines. As far as the objection of the Ld. TPO that whether there is any need for purchase of such intangible or not is concerned, we are of the view that what is to purchase and what not to purchase is not in the domain of the TPO/AO, because it is a business decision of the assessee company and accordingly, when assessee purchased an intangible asset, what is required under the law is to examine whether the price paid by the assessee is arms length price or not. The TPO has no role to play in examining the decision of commercial nature. Under the guise of TPO provisions, the TPO cannot determine the ALP at NIL as held by the Hon'ble Delhi High Court in the case of EKL Appliances Ltd., {2012 (4) TMI 346 - DELHI HIGH COURT }. Therefore, rejecting the entire payment without there being any analysis on the CUP method cannot be accepted. In the guise of analyzing the transactions in the CUP method, the TPO has not brought any evidence on record to reject the payment made to Fab India Inc. In the instant case, the TPO did not examine the arms length price of the impugned royalty payment in accordance with the provisions of Sec.92C of the Act. Accordingly, we are of the opinion that the ALP of the impugned payment for trademark and the issue relating to the depreciation on trade mark need to be examined afresh. Accordingly we set aside the order of Assessing Officer/TPO/CIT (A) on this issue and restore the same to the file of the TPO for examination of the same afresh in accordance with the law, after affording necessary opportunity of being heard. - Decided in favour of assessee for statistical purposes.
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2016 (8) TMI 868
Reopening of assessment - non deduction of tds - Held that:- The original assessment was completed U/s 143(3) of the Act on 13/12/2007. Notice U/s 148 of the Act was issued on 25/3/2011 for A.Y. 2005-06, which is after four years from the end of the assessment year. As the assessee has disclosed all the particulars of income in the return as well as audit report and there is no failure on the part of the assessee in disclosing full and true all material facts necessary for his assessment in the assessment year under consideration, therefore, we uphold the order of the ld. CIT(A) on ground No.1. On merit in ground No. 2 of the appeal, the ld CIT(A) had given details findings by considering the amended provisions of Section 40(a)(ia) and the Hon’ble Calcutta High Court decision in the case of CIT Vs. Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT ). The assessee had paid TDS deducted on due date of return, accordingly, we uphold the order of the ld CIT(A). Hence, the revenue’s appeals for the A.Y. 2005-06 is dismissed. Trading addition - Held that:- The assessee has not challenged the rejection of books of account before the ld CIT(A) and also before us, therefore, it is admitted fact that the assessee’s books are not reliable. In past, the assessee in A.Y. 2007-08 has been disclosed NP rate @ 7.17% on turnover of ₹ 5.7 crores. In A.Y. 2008- 09, the assessee has disclosed NP rate @ 6.13% on turnover of ₹ 10.00 crores. Now turnover has gone up to ₹ 13.26 crores on which the assessee has disclosed NP rate @ 6.31%, which is better than NP disclosed in immediate preceding year but lower than A.Y. 2007-08. Therefore, under this head, we confirm a lump sum addition of ₹ 5.00 lacs in the interest of justice. Loss assessed by the Assessing Officer as positive income - CIT(A) followed the Hon’ble ITAT Jaipur Bench decision in assessee’s own case for A.Y. 2006-07 where addition has been restricted to ₹ 35,000/- - Held that:- It is undisputed fact that in liquor business, the assessee has shown positive income in A.Y. 2007-08 and 2008-09. However, in A.Y. 2009-10, the assessee had disclosed net loss at ₹ 2,41,520/- and the GP rate compared to A.Y. 2006-07 has gone down whereas sales are more or less same. In A.Y. 2008-09, the assessee had shown total sale of ₹ 82.01 lacs on which the assessee has shown GP rate @ 14.94%. The NP rate also gone in minus compared to preceding year even NP rate of preceding year is applied, the addition goes much more than made by the Assessing Officer, therefore, we reverse the order of the ld CIT(A) and order of the ld Assessing Officer is confirmed. Hence, revenue’s appeal on this ground is allowed.
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2016 (8) TMI 867
TDS u/s 194A - “loan processing fees” - non deduction of TDS - Held that:- The first payment is on account of “loan processing fees” paid to the Nationalized Bank. This fee is charged by the bank for, processing the application filed by the borrower and for any inspection of title deeds and documents relating to properties and to verify and creation of charge etc. on the property. The Ld. Counsel’s case before us is that, such a payment does not entail deduction of tax, because it is in the nature of service fee on borrowed money and hence it is covered within the meaning and definition of “interest” as defined under section 2(28) and consequently, falls within the exclusion clause provided under section 194A(3). Further, AO has also treated these charges as payment for “managerial services” rendered by the bank and therefore, tax was required to be deducted under section 194J r.w. section 9(1)(vii). The Counsel’s case before us is that, such a payment of processing fee cannot be treated for rendering of “managerial services” and in support various decisions have been filed before us. Rather it falls within the ambit of interest as defined under section 2(28A), which provides that, interest includes any service fees or other charge in respect of all monies borrowed. Thus, there was no requirement to deduct the TDS on account of rendering of managerial services. As regards the payment of “processing fee” paid to Nationalized Bank, we agree with the contention of Ld. Counsel that, “loan processing fee” is charged by the banks for processing the application when a borrower approached the bank for a loan. Such a service fee or charge it has been included in the definition of “interest”, as given in section 2(28A). The definition of interest will include any service fee or any other charge in respect of money borrowed. Here, processing fee definitely falls within such definition and, therefore, it cannot be reckoned as payment for rendering of any managerial services by the bank as held by the AO. Thus the assessee is not required to deduct TDS on such payment of income paid to any banking company. Accordingly, the finding of the CIT(A) deciding in favour that the payment of processing fee does not require deducting of TDS is upheld and revenue’s ground on this score is dismissed. TDS u/s 194H - “guarantee fees” paid - Held that:- We are unable to accept the contention of the AO, because the assessee has sought its banks like HDFC Bank, Dena Bank and Yes Bank to issue guarantee in its favour for which bank has charged certain amount as ‘guarantee fee’. To fall within the ambit and scope of section 194H, the payment has to be in the nature of “commission or brokerage”.The contract of guarantee does not give any rise to principal - agent relationship between the assessee and the bank and, therefore, the consideration received by the bank on account of guarantee commission cannot be reckoned as commission as contemplated under section 194H and accordingly, there was no requirement to deduct TDS on this payment. Thus, on this score also, the order of the Ld. CIT(A) is affirmed. Before us, the Ld. Counsel had also brought to our notice a CBDT Circular No.56 of 2012 wherein it has been clarified that ‘guarantee fee’ paid to a nationalized bank will not be subject to withholding tax. Thus in view of the CDBT Circular also the ground raised by the revenue cannot be sustained and accordingly, the same is dismissed. TDS u/s 194I - Payment on hoarding and display expenses - Held that:- As from the impugned order it is seen that the Ld. CIT(A) has directed the AO to remove the expenditure which has been capitalized by the assessee in its books of accounts. Once an item of expenditure has been capitalized then there is no requirement for deducting the TDS. Thus, to this extent, there cannot be any infirmity in the order of the CIT(A) and the same is affirmed. For the balance amount he Ld. Counsel submitted that, assessee has filed a breakup of expenditure before the AO and it was explained that these payments were in the nature of Ground level and beatification;Material purchased and installation charges; and Purchase of Wall laminated units. Once that is so, then definitely there is no requirement of deducting TDS under section 194I on such payment, because it does not fall within “rent”. Since CIT(A) has already directed the AO to verify, therefore, we also reiterate the same direction that AO should look into the nature of expenses and if the contention of the Ld. Counsel is correct that these are in the nature of aforesaid payments, then there would be no requirement of deducting tax under section 194I. With this direction, this ground of the revenue is treated as dismissed.
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2016 (8) TMI 866
Computation of interest u/s 234B and adjustment of seized cash towards tax liability - Adjustment of seized cash towards the tax liability aroused on account of filing of revised returns u/s 153A - Held that:- Charging of interest without adjusting the seized cash is unjustified when the funds of the assessee are already with the department and the assessee had not enjoyed these funds from the date of search. We find force in the arguments of the assessee for the reason that as per the provisions of section 132B of the Act, the seized assets are to be adjusted towards any existing tax liability under the direct taxes and towards any liability that arises on completion of assessment etc. In the present case on hand, on perusal of the documents available on record, we find that at the time of search the department has seized about ₹ 15.99 crores. The assessee has made several requests even before the investigation department towards adjustment of seized cash towards the tax liability aroused on account of filing of revised returns u/s 153A of the Act. The A.O. without adjusting the seized cash computed the interest up to the date of assessment. As per the provisions of section 234B of the Act, interest is required to be charged up to the date of filing of return u/s 153A of the Act. It is due to the fact that in the returns of income, the assessee had clearly made a request to adjust the seized amount towards the liability of self assessment tax. Once the return is filed, any tax due on account of income disclosed is amounting to existing tax liability and the department is bound to adjust the seized cash towards the existing tax liability of the assessee to the extent of liability of self assessment tax. Therefore, the A.O. is not correct on charging interest on total income assessed up to the date of assessment. The CIT(A) after considering the relevant facts directed the A.O. to charge the interest on returned income, up to the date of filing return of income in response to notice u/s 153A after adjusting the seized cash, and wherever there is a tax liability on account of additions made to assessed income, the interest is to be charged up to the date of assessment. We do not see any error or infirmity in the order passed by the CIT(A). Therefore, we are inclined to uphold the CIT(A) order and reject the ground raised by the revenue. The assessee has filed cross objections for all the years challenging the order of CIT(A), confirming the levy of interest u/s 234B up to the date of filing return of income in response to notice under sec. 153A on returned income and up to the date of assessment wherever there is additions to returned income. Therefore, for the reasons recorded in the preceding paragraphs, we dismiss the cross objections filed by the assessee for all the assessment years.
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2016 (8) TMI 865
Denial of exemption claimed under section 11 & 12 - as the assessee society does not fall within the scope of charitable purpose defined in section 2(15) of the Act and therefore, benefit of section 11 and 12 of the Act was not allowed to the appellant in the instant year - Held that:- The appellant society has engaged in education which has been accepted in the preceding assessment years consistently by the Revenue in assessments framed under section 143(3) of the Act. Mere fact that there was a surplus could not be a basis to conclude that activities of the society were in the nature of trade, commerce or business or any activities rendered in connection with service or business for any other consideration. The activities of the appellant have been accepted to be within the scope of education under section 2(15) of the Act and also under section 10(22) of the Act. In such circumstances, the conclusion of the Assessing Officer to hold that the activities of the assessee are not in the nature of education only on the pretext that income from education is confined to Distance Learning course fee of ₹ 20.65 lacs out of total receipts of ₹ 21.45 crores is incorrect. On the contrary, we notice that the activities of the appellant are in the nature of participatory research. In the order of assessment of the appellant for assessment year 1983-84, it has been observed that the participatory research is a new development of the last decade and was arisen out of the experience of grassroots educational efforts in the Third World Countries. It has been noted that the Participatory Research can be utilized depend upon the needs of the poor and deprived. It has been noted that it has worked on the problems of forest, land, rural development, drinking water, primary health care, women’s income generating efforts, occupational and environmental health etc. The appellant has also emphasized that it work with the community organizers, adult educator, health care workers, social workers etc. in training them to use participatory research methodology in their work. The appellant produces own educational materials for use in educational programmes and for wider dissemination. Punjab & Haryana High Court in the case of Pinegrove International Charitable Trust v. UOI [2010 (1) TMI 49 - HIGH COURT OF PUNJAB AND HARYANA AT ] wherein it was held that merely because profits have resulted from the activities of imparting education, it would not result in change of character of the education that it was solely for educational purpose. The invocation of proviso to section 2(15) of the Act to deny claim of exemption under section 11 and 12 of the Act is not justified. Accordingly, grounds of appeal are allowed in favour of assessee.
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2016 (8) TMI 864
Penalty levied u/s 271AAA - income of the assessee treated as “Unaccounted investment” - Held that:- Since the penalty u/s 271AAA has been levied on identical set of facts in both the cases, we prefer to dispose both the appeals instead of sending the appeal of Mrs. Peidade Perinchery to the file of the Ld CIT(A). According to the Ld CIT(A), these assesses have not satisfied the conditions specified in sec. 271AAA with regard to the payment of taxes, i.e, the above said section specifies that the assessee should pay the tax together with interest, if any, in respect of undisclosed income. The facts of the case would show that the undisclosed income declared by the assessee consisted of investment in shares, mutual funds and Government securities. The cash and bank balances available with the assessee were not sufficient to pay the taxes on undisclosed income. Hence the assessee has filed an application with the AO, requesting him to encash the Kisan Vikas Patras and to adjust the proceeds thereof against the tax payable by the assessee on the disclosed income. It is a settled proposition of law that a person cannot be forced to do impossibility. Since the assessee was not having liquid funds to pay the taxes, he had no other option, but to encash the securities. Accordingly, he has requested the AO. In our view, the request so made by the assessee and subsequent encashment of the securities satisfies the conditions prescribed in sec. 271AAA of the Act for payment of tax. Accordingly, we modify the order of Ld CIT(A) and hold that the assessees have satisfied the condition relating to payment of tax also. Accordingly we direct the AO to delete the penalty levied u/s 271AAA of the Act in both the cases under consideration. - Decided against revenue.
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2016 (8) TMI 863
Penalty under section 271(1)(c) - write off of capital work in progress - Held that:- Assessee has duly disclosed the fact of write off of capital work in progress in the audited financial statements by way of a note and hence, there cannot be any allegation of furnishing of inaccurate particulars. It is not the case that the write off has been found to be bogus. The AO has himself accepted that it was a loss, albeit a capital loss, rather than a revenue loss as claimed by the assessee. In the case of CIT vs. Vamchampigons & Agro Produce (2005 (11) TMI 47 - DELHI High Court ) held that “Assessee having shown the income from sale of debentures as capital gains, penalty under s. 271(l)(c) could not be levied on the basis that the AO has assessed the said income as business income and not as capital gains. The Hon’ble Apex Court in the matter of CIT Vs Reliance Petroproducts Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT ] held that where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. A mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. - Decided in favour of assessee.
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2016 (8) TMI 862
Continuance of registration under section 12A denied - as per revenue the activities of the assessee were not genuine - Held that:- From the statement of Shri Dinesh Kumar Agarwal of M/s. Quadeye Securities Pvt. Ltd. it appears that there is prima facie ground to believe that the donation of ₹ 50,00,000 given by M/s. Quadeye Securities Pvt. Ltd was not genuine. Based on this statement alone it cannot be conclusively said that the donation in question was bogus. When the statement of Shri Dinesh Kumar Agarwal was confronted to the assessee and when the assessee was asked to appear before the respondent, the assessee chose to avoid appearing before the respondent. This conduct of the assessee was not justified. It is no doubt true that the statement of Shri Dinesh Kumar Agarwal without being subjected to cross-examination by the assessee and further corroborated by evidence of the persons who are stated to have arranged for bogus gifts cannot be believed in toto. Nevertheless the fact remains that there are grounds to believe that the donations received by the assessee had to be decided with regard to its genuineness. The fact that opportunity of cross-examination of Shri Dinesh Kumar Agrawal and the person who are alleged to have arranged the bogus gifts was not afforded to the assessee cannot be the basis to quash the order under section 12AA(3) of the Act. As rightly contended by the learned Departmental representative if it is found that the assessee was accepting bogus donations, then that fact can only lead to an inference that the activities of the trust are not genuine or are not carried out in accordance with the objects of the trust. We, therefore, are of the view that it would be proper in the interest of justice to set aside the order of the respondent and remand the issue of cancellation of registration to the respondent for fresh consideration. - Decided in favour of assessee for statistical purposes.
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2016 (8) TMI 861
Transfer pricing adjustment - exclusion of ANG Industries Ltd. from final list of comparables while benchmarking the international transaction undertaken by the assessee - Held that:- The assessee was a manufacturer of auto components. However, ANG Industries Ltd. had undergone major restructuring, wherein the subsidiary ANG Auto Tech Pvt. Ltd. was amalgamated with ANG Industries Ltd. w.e.f. March, 2007. After amalgamation, ANG Industries Ltd. became well diversified company and was engaged in the manufacture of trailers in addition to auto components. The CIT(A) had referred to the page 17 of the Annual Report of the said concern, wherein the said fact has been reported by the company. Further, the reason for growth in business was also attributed to the growth in trailer business. The turnover of ANG Industries Ltd. was ₹ 143 crores as against the turnover of assessee at ₹ 54 crores declared by the assessee, which is not the sole criteria to reject the said concern. However, where the concern had entered into other line of business and in the absence of segmental profits in respect of two businesses carried on by the said concern, we hold that the said concern ANG Industries Ltd. is not functionally comparable to the assessee and hence, the same is to be excluded from the final set of comparables. Upholding the order of CIT(A) in this regard, we dismiss the grounds of appeal raised by the Revenue. - Decided in favour of assessee.
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2016 (8) TMI 860
Disallowance of loan processing charges and pre-payment charges paid to the bank - whether ‘prepayment charges’ and ‘processing fee’ shall form part of the word ‘interest’ as used in section 24(b) of the Act? - Held that:- As far as the prepayment charges are concerned, these have been paid for the loans which have been refunded and thus no more utilised by the assessee. It has been clearly provided that any charges incurred even for any credit facility which has not been utilised shall also form part of the term ‘interest’. Even, otherwise, both of these payments have been made for the purpose of availing of the loan at lower interest cost. It is for the assessee to plan its financial affairs in the best possible manner. It is none of the business of the revenue to guide the assessee or put any obstacle in the management of its financial affairs. The assessee appears to have done the restructuring of its loans and changed its lenders for the purpose of reducing its interest burden by availing loan from the lenders at lower rate of interest. The prepayment charges and processing fee borne by the assessee at this stage were be compensated subsequently by payment of lower amount of interest. In any case, so long as the expenses incurred by the assessee are genuine and not part of any colorable device to make tax evasion, then such expenses should be allowed under the relevant provisions of the Act. The legal position is clear that these payments are allowable u/s 24(b) and therefore, AO is directed to grant the benefit of the same the disallowance made by the AO is directed to be deleted. - Decided in favour of assessee Claim of maintenance charges recovered by the assessee from its tenants - Held that:- a claim can be allowed to assessee which is valid as per law and made by the assessee in accordance with law and in a complete and rightful manner. In case the assessee wants its income to be assessed under different head as per the provisions of law, then, the minimum duty expected from the assessee is to at least file a revised computation sheet of income offering the income in proper heads and making appropriate claims against each and every head separately. This exercise is not expected to be done by the AO on behalf of the assessee. But nonetheless, with a view to meet the ends of justice and in view of these peculiar facts and circumstances of the case, we find it appropriate to give an opportunity to the assessee to file revise computation sheet of income before the AO making out its claim in an appropriate and complete manner. Grant of full TDS - Held that:- We send these grounds back to the file of the AO with the direction to allow opportunity to the assessee to file requisite details and documents. The AO shall grant credit of TDS certificate after verifying requisite facts. these grounds may be treated as allowed for statistical purposes.
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2016 (8) TMI 859
Penalty u/s 271(1)(c) - Held that:- In the case of K. C. Builders v. Asst. CIT [2004 (1) TMI 7 - SUPREME Court] which has authoritatively laid down that where the additions made in the assessment order on the basis of which penalty for concealment was levied has been deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive. We find that no Departmental appeal has been filed assailing the relief granted by the Commissioner of Income-tax (Appeals) and in the face of the relief granted by the Income-tax Appellate Tribunal in the quantum proceedings the penalty order is dismissed as infructuous and the impugned order is set aside. - Decided in favour of assessee.
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2016 (8) TMI 858
Penalty u/s 271B - threshold limit for getting its account audited u/s 44AB - Business activity or professional activity - receipts from the pathological laboratory have to be considered as business receipts - Held that:- Without first holding that the assessee was a professionally qualified medical doctor the Revenue cannot avoid the conclusion that the receipts from the pathological laboratory have to be considered as business receipts, as for earning professional receipts holding of a professional qualification would be sine qua non. The threshold limit for getting accounts audited in the case of business receipts admittedly for the year under consideration have been set by the statute at Rs. one crore. The occasion for imposing penalty under section 271B did not arise. In such a situation, where the assessee does not hold any professional medical qualification, we do not see how it can be held that the assessee is carrying on a profession as the venture carried on with the help of technically qualified people necessarily would fall in the category of "carrying on business" wherein the statutory threshold for getting accounts audited has been fixed at Rs. one crore. Accordingly, we find that in the facts of the present case, considering the claim of the assessee put forth before the Commissioner of Income-tax (Appeals) stated to have been identically made before the Assessing Officer also, we hold that the penalty under section 271B wherein the gross receipts were only ₹ 42 lakhs. Accordingly, examining the issue from all angles, we find that in the facts of the present case, the penalty imposed under section 271B deserves to be quashed. As not only on facts, it could not have been imposed but even otherwise considering the explanation of the assessee in the facts of the present case, it should have been quashed on the grounds of reasonable cause. - Decided in favour of assessee
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2016 (8) TMI 857
Truck running expenses disallowed - Held that:- We find that the truck running expenses claimed in this AY is commensurate with the turn-over of the assessee compared to A.Y.2010-11 and 2011- 12. The truck running expenses from A.Y.2007-08 to 2011-12 shows the increasing trend. This increase in the percentage of the expenses to the turn-over is understandable and commensurate with the rate of inflation. No adverse inference ought to have been therefore drawn against the assessee. We therefore are of the view that CIT(A) was justified in deleting the addition made by AO. Godown Expenses disallowed - Held that:- Expenditure in question was for the business of the Assessee and the order of CIT(A) on this issue in allowing the claim does not call for any interference Retainer fee paid disallowed - Held that:- The contention of the revenue before us was that since the assessee was having its own vehicle there was no need for any retainer fee. In our view this contention of the revenue is not acceptable because the nature of this fee is wages and not any retainer fee paid in the process of transportation. We therefore do not find any reason to interfere with the order of CIT(A) in allowing the claim does not call for any interference. Tansportation charges disallowed - Held that:- Before us the contention of the revenue is that the truck running expenses and transportation charges are one and the same. We are of the view that in the light of the evidence brought before CIT(A), the contention of the revenue cannot be accepted Addition on increase in the loan amount in the balance sheet of the assessee - Held that:- in the light of the evidence to show that the loan amount was availed from the sister concern, the order of CIT(A) in allowing the claim does not call for any interference. Decided against revenue
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2016 (8) TMI 856
Transfer pricing adjustment - upward adjustment of the international transactions in respect of valuation of capital asset purchased from AE - Held that:- TPO has made upward adjustment of the international transactions in respect of valuation of capital asset purchased by the assessee from its AEs. The said adjustment has been made by the TPO without making reference to the DVO and rejecting the valuation report from an independent Chartered Engineer furnished by the assessee. Undisputedly the valuation report was accepted by the Customs Authorities for the purpose of levy of import duty. We do not concur with the action of TPO for making such adjustment. The Act provides for reference to Valuation Officer for valuation of capital assets in case of any doubt. The TPO has erred in extrapolating avg. operating margin of Indian manufactures and applying CUP method to markup import price and determine ALP. In so far as objection of TPO with respect to variation in the book value of capital asset and the price at which assessee has purchased the capital asset is concerned, it is not necessary that book value and market value of the capital asset are at par. As observed that the DRP while dealing with the objections of the assessee in respect of valuation of capital asst has not properly appreciated the facts and circumstances. The DRP has merely examined one aspect of the transaction relating to pricing of capital asset i.e. the price paid by assessee to acquire old machine viz-a-viz price of new model of same machine. The DRP has failed to take holistic view of the transaction. Thus we set aside the findings of the authorities below on this issue and direct the Assessing Officer to delete the addition made on account of adjustment in the value of capital asset - Decided in favour of assessee.
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2016 (8) TMI 855
Applicability of Section 115JB - assessee is an electricity company Held that:- In view of the legislative change brought about by the introduction of Explanation 3 in section115JB of the Act by the Finance Act, 2012, the assessee's conten tion in fact stands more fortified. Explanation 3 to section 115JB makes it evidently clear that section 115JB is applicable only to entities registered and recognised to be companies under the Companies Act, 1956. Since the assessee is not a company within the meaning of the Companies Act, 1956, section 211(2) and the proviso thereon is not applicable and, therefore, consequently, we hold that the provisions of section 115JB of the Act are also not applicable. The basic intention of MAT under section 115JB is only to tax the book profits irrespective of nil or lesser taxable income due to various exemptions/deductions like section 10A/10B/80-IA/80-IB, etc. The intention of MAT is that the companies were declaring huge profits as per their Companies Act and declaring dividends to its shareholders but paying nil tax or lesser tax under the Income-tax Act due to various exemptions/ deductions like sections 10A/10B/80-IA/80-IB. To justify the imposition, the real income theory was stressed and it was held that the companies cannot be allowed to have two faces, one for the shareholder and another for the tax man. Section 115JA was enacted by restructuring the provisions of section 115J with certain minor changes and, thereafter, section 115JB was enacted by bringing minor changes in section 115JA. The provisions of sections 115J, 115JA and 115JB are by and large similar to each other. We find that the accounts laid before the annual general meeting have followed the accounting policies which are required to be followed under the Electricity Act read with the West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2005, which are admittedly not in accordance with the Companies Act, 1956. We find that there are major differences with regard to the treatment of several items in the accounts in the Electricity Act vis-a-vis the Companies Act, 1956. Hence, it can safely be concluded that the accounts of electricity companies are not prepared in accordance with Parts II and III of Schedule VI to the Companies Act, 1956 and, hence the provisions of section 115JB of the Act cannot be made applicable to the said companies.
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2016 (8) TMI 854
Income from sale of property - business income or capital income - Held that:- In the absence of any facts indicating that the assessee has converted capital asset into ‘stock in trade during the relevant A.Y [or during some any other earlier financial period] it has to be held that same fact continue to A.Y 2009-10. It is relevant to note that the AO has not raised any objection and has not disputed the sale price and cost [including indexation] and only dispute for our consideration was with regard to head of income under which it is taxable. On the basis of foregoing discussion, we are inclined to hold that in the totality of the facts and circumstances of the case as noted and observed above, the treatment given by the assessee to the property from its acquisition to sale i.e. during the period when the property was within the assessee it is amply clear that the assessee shown the said property as investment in capital asset and the AO could not establish that it was ever held as stock in trade or one point of time during the period of acquisition it was converted from capital asset to stock in trade. In this situation, we decline to accept and approve the conclusion of the AO to treat the income from sale of said property as business income. Per contra, we are of the considered opinion that the finding and conclusion of the ld. CIT(A) in the impugned first appellate order are quite justified, correct and sustainable and we are unable to see any perversity, ambiguity or any other valid reason to interfere with the same and thus we uphold and confirm the same. Consequently ground of the Revenue being devoid of merits is dismissed. Transaction of sale of shares - Held that:- Transaction of sale of shares had actually taken place with Shri Lalit Jain and he actually paid consideration of ₹ 79 lakhs through two account payee cheques. It is also very clear that after purchase of these shares, that the shares were actually transferred in the name of the buyer Shri Lalit Jain on 29.3.2009 and also that the shares were physically received by the buyer immediately after such sale and that reason to make investments including distinctive number of shares had been admitted by the buyer Shri Lalit Jain in his statement. On the basis of foregoing discussion, we are of the considered view that the assessee could very well substantiate the fats indicating the genuineness of the transaction by submitting all relevant facts and documents showing that the assessee actually sold these shares against consideration of ₹ 79 lakhs and the same was paid by the buyer through two account payee cheques and shares were physically handed over to the buyer and the same were transferred in the name of the buyer on 29.3.2011. Per contra, the AO failed to demonstrate and establish that the assessee had given financial support in the form of interest free loans to Shri Lalit Jain for the purchase of shares to the effect the paper or sham transaction with an intention to reduce tax liability. Furthermore, the allegation of the AO, that the assessee repurchased these shares in the next financial period, has no legs to stand in the absence of any further enquiry from the allotter companies viz PFL and KFL regarding status of share holders pertinent to these shares by the AO and the fact was also fairly accepted by the ld. DR during arguments. Hence above noted allegations levelled against the assessee, by the AO, were rightly demolished by the ld. CIT(A) and his conclusion in this regard is valid and sustainable. We are unable to see any valid reason to interfere with the conclusion of the ld. CIT(A) in this regard on this issue and thus we uphold the same. Accordingly, Ground No. 2 of the revenue being devoid of merits is dismissed. Allowable deduction u/s 36(1)(vii) - Held that:- AO made disallowance and addition by taking a hyper approach whereas the ld. CIT(A) after considering the entire facts and circumstances of the case and the nature of transaction held that the bad debts arose from inter corporate deposit is allowable deduction u/s 36(1)(vii) of the Act and the rider created by the Legislature u/s 36(2)(i) does not come into play in the facts and circumstances of the case as the assessee advanced interest bearing loan to VHEL Industries under normal course of business which was actually inter corporate deposits. Accordingly, we are unable to see any valid reason to interfere with the conclusion arrived at by the ld. CIT(A) on this issue.Ground No. 3 of the Revenue being devoid of merits is also dismissed
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2016 (8) TMI 853
Lease rent estimation - Determination of the value as assessed by Stamp Valuation Officer - Held that:- It is clear that full value of consideration of the impugned asset has been determined at ₹ 3,22,334/- based upon value as was assessed by the stamp valuation authority. The action of Ld. CIT(A) has been accepted by the assessee. Under these circumstances, once the amount of sales consideration has been determined keeping in view particular provisions of law which were applicable in a given situation, then no further question arises of estimating the value of consideration once again. Thus, in our view, the action of Ld. CIT(A) in estimating lease rent was not only self-contradictory but also beyond the provisions of law. The assessee firm gave said land to charitable trust that could run school effectively. It is further noted that the said lease was approved by the BMC and Maharashtra Government. The property records were still in the name of the assessee firm, indicating that the assessee firm did not transfer full-fledged rights and interest in the said land to the lessee. Detailed discussion in this regard has been made by us at Para 7.1. of this order, which should read here also. Thus, keeping in view these facts also, we find that estimation of lease rent in substitution of actual lease rent received by the assessee was not justified in the given facts and circumstances of the case. Keeping in view the decision of Ld. CIT(A) in determining the full value of consideration of the asset at ₹ 3,22,334/-, we find that action of the Ld. AO in estimating the lease rent at ₹ 13,74,353/- was self contradictory and unjustified, and therefore the same is reversed - Decided in favour of assessee Guenity of lease transactions entered into by the assessee with Shradha Gyanpeeth Trust - Held that:- T(A) has recorded detailed findings for holding that impugned transaction was a transactions of lease only. Taking into account facts on record, it has been noted by the Ld. CIT(A) that lease deed is properly registered and stamp duty was paid as per Bombay Stamp Act, 1958. The lease deed was approved by BMC and State Government Authorities. The title of the property continued to remain in the name of the assessee. Nothing has been brought before us to negate the detailed findings of the Ld. CIT(A). The transactions cannot be held to be sham merely on the basis of some doubts and apprehensions. Duly registered documents cannot be brushed aside or rewritten by the revenue authorities that too without bringing any contrary material on record. It is further noted that as per terms of the lease deed, if any additional TDS/FSI is allowed by the Government on the said land, then, the same shall be within the exclusive right and ownership of the lesser assessee. All these facts indicate that the absolute title has not yet been transferred by the assessee to the lessee. - Decided against revenue Adoption of market value of the property on the basis of stamp value of the lease deed as was assessed by the Stamp Valuation Authority as per Bombay Stamp Duty Act, 1958 - Held that:- Lease Deed has been registered on which Stamp Valuation Officer has assessed the value for the purpose of ascertaining amount of stamp duty payable and therefore the same value should be adopted in the case before us. The clear mandate of the law is that the value adopted or assessed by the Stamp Valuation Authority shall be adopted for determining full value of consideration. Even, otherwise the word ‘assessable’ has been added w.e.f. 01.10.2009, and the case before us pertains to A.Y. 2003-04 i.e. prior to 01.10.2009 and therefore only preamended law shall be applied in the case before us. Thus action of Ld. CIT(A) in adopting the value as adopted by the Stamp Valuation Authority under the Bombay Stamp Act 1958, for the purpose of determining full value of consideration is justified. - Decidd against revenue Eligibility of claim of deduction u/s 80- IB(10) - Held that:- It is well known fact that no project can be started without requisite approval. Under these circumstances, it has been held by the Ld. CIT(A) that it cannot be inferred that housing project was commenced prior to 1st October 1998. During the course of hearing before us, Ld. Counsel has drawn our attention to the commencement certificate exhibited in the paper book showing that the same was granted by the local authority on 15.03.2002 and a separate notice was given to BMC thereafter only. It has been further shown to us that the land was earlier an agricultural land, which was got converted to non-agricultural land, vide permission dated 15th September 2001. Thus, development and constructions work was not permissible unless such conversion was done. It has been further shown to us that development/construction expenses were incurred from A.Y. 2002-03 on words. It is further shown that payment to BMC or property tax or architect fee etc. have been incurred only after the commencement, development and construction of the project. We find that findings recorded by the Ld. CIT(A) are in accordance with law and facts on this issue. During the course of hearing before us it has been submitted that the requirement of the law is that project should be on the size of plot of land of minimum one acre, and here the area ‘project’ means project as proved by the local authority. It was shown to us on the basis of the document enclosed in the paper book that entire plot admeasuring 8612.40 sq. mts. was approved by the local authority as ‘housing project’, and commencement certificate was issued in respect of the entire plot. It was further shown to us that plot was sub-divided by BMC and some portion out of the total land was segregated for the purpose of common amenities in terms of rules and regulations of a local body. It was submitted that when a portion has been earmarked as per the mandate of the law for the purpose of common amenities then that portion of land should also to be considered as part of the project. It has been further submitted that limits on the extent of commercial area of housing project was inserted w.e.f. 01.04.2005 and does not apply to projects approved before that date, and since project of the assessee was approved prior to 01.04.2005, therefore, these restrictions were not applicable on the case of the assessee. - Decided against revenue
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Customs
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2016 (8) TMI 877
Provisional clearance of seized goods - Valuation of imported goods – misdeclaration – IEC code – sub-woofers – amplifiers – CD players – search – seizure under Section 110 of the Customs Act – summon of a petitioner – petitioner one of the partner – statement recorded under section 108 of the Customs Act – whereabouts of other partner not known – Held that: - provisional release of goods permitted. The petitioner is directed to remit the entire duty as assessed by them and the differential duty . The petitioner is directed to execute a bond for the remaining amount to the satisfaction of the respondents. The petitioner shall execute an indemnity bond stating that in the event of missing partner raising any claim over the goods or concerning the use of IEC code issued in favour of M/s.Green Line, the petitioner alone would be fully responsible for the same and no liability can be fastened on the respondent Department and the indemnity bond should be furnished in the form approved by the respondents – goods released - The respondent Department directed to proceed with the adjudication and while issuing show cause notice, notices should be issued to the Firm as well as to both partners and all the parties should co-operate with the adjudication proceedings – petition disposed off – decided in favor of petitioner.
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2016 (8) TMI 876
Restoration of appeal - appeal returned on ground of insufficient documents on limitation aspect without going into the merits of the case - Section 129D(3) of the Customs Act, 1962 – Notification No.102/2007-Cus., dt. 14-09-2007 - refund of SAD – principles of unjust enrichment – Held that: - the Adjudicating authority observed in the adjudicating proceedings, that the respondent-assessee has fulfilled all the conditions of Notification No.102/2007-Cus., dt. 14-09-2007 read with Board's Circular No.6/2008 dt. 28.4.2008 and 16/2008-Cus. and accordingly, sanctioned refunds of 4% Additional Customs duty, which was paid under various TR-6 challans in respect of bills of entry mentioned in the OIO. The Asst. Commissioner of Customs(Refunds) has discussed the issue in details and has also given detailed findings on the entire matter while sanctioning the 4% SAD Refund. No infirmity in the order passed by the Asst. Commissioner of Customs (Refunds) vide OIO No.12529/2010 dt. 3.8.2010 – appeal rejected – decided against Revenue.
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2016 (8) TMI 875
Levy of interest – provisional assessment – subsequent finalization – interest brought into force w.e.f. 13/07/2006 subsequent to which finalization done - Ministry of Finance vide Circular No. 20/2006-Cus dated 21 July 2006 clarified that interest should be levied from the date of provisional assessment – Held that:- it was held in the case Commissioner of Customs (Preventive) vs. Goyal Traders 2011 (8) TMI 720 Gujarat High Court that prior to introduction of sub-section (3) of Section 18 of the Act in the present form, there was no liability to pay interest on difference between finally assessed duty and provisionally assessed duty upon payment of which the assessee may have cleared the goods. It was only with effect from 13-7-2006 that such charging provision was introduced in the statute. Upon introduction therefore such provision created interest liability for the first time w.e.f. 13-7-2006. In absence of any indication in the statute itself either specifically or by necessary implication giving retrospective effect to such a statutory provision, we are of the opinion that the same cannot be applied to cases of provisional assessment which took place prior to the said date. Any such application would in our view amount to retrospective operation of the law – interest not levied - appeal not maintainable – decided against Revenue.
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2016 (8) TMI 874
Imposition of penalty - Sec 117 of the Customs Act 1962 – export of plastic ball pens – export goods examined by appellants not exported – no notice issued within time limit for demand of penalty under Sec 155(2) of the Customs Act, 1962 – Held that: - the protection under section 155(2) is applicable to all legal proceedings. Further, if protection to officers against proceedings in courts can be given, there is no reason why such a protection cannot be given to proceedings before quasi judicial authorities. Also, held that protection under Section 155 of the Customs Act is available even in respect of adjudication proceedings. However, in terms of Section 155(2), in order to initiate any proceedings, the time limit indicated therein should be adhered to. This is held in the case CC & CE Hyderabad-II Vs. Rajiv Kumar Agarwal 2007 (5) TMI 471 - CESTAT, BANGALORE. Thus, provisions of Sec 155(2) of the Customs Act 1962 were not complied with before initiating action against the appellants – appeal allowed – decided in favor of appellant.
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2016 (8) TMI 873
Classification of soyabean oil – by-product in the course of manufacture of lecithin – SEZ unit - classified under Customs Tariff heading 15079090 as other than crude oil - classified under 15071000 as crude oil, whether or not degummed – Held that: - the essence of the dispute is that the soya oil emerging as a by-product continues to be a crude soya oil even though it has undergone many chemical process during the course of manufacture of lecithin powder. Admittedly, it is not of edible grade. However, that is not the only reason for classifying it as crude oil. The nature of the product has to be arrived at by its chemical quality and standards, if any, applicable to them. The lower authority examined the nature of the product as per the chemical report; applied the parameters mentioned in Indian Standards specification. Thereafter the findings were recorded to the effect that the impugned product is to be correctly classified as “crude oil, whether or not degummed" – appeal dismissed – decided against Revenue.
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Corporate Laws
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2016 (8) TMI 872
Winding up petition - ex-Director of the respondent company seeking winding up of the respondent company on account of the alleged failure to pay interest at 24% p.a. on the admitted liability of ₹ 75.50 lakhs due by the respondent company to the petitioner, against the loan advanced by the petitioner to the respondent company - Held that:- This Court is of the clear opinion that no ground as is set out in S. 433(e) of the Act viz., the inability to pay the admitted debt of the company, has been established in the present case to the extent of interest of 24% claimed by the petitioner, an ex-director of the company and therefore, the winding up petition has no merit and the same is liable to be dismissed.
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Service Tax
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2016 (8) TMI 897
CENVAT credit – manufacturer of oil seeds – input services under Rule 2(l) of CENVAT Credit Rules 2004 - outdoor catering – rent-a-cab – hotel booking expenses – car maintainance charges – Held that: - the issue is no more res-integra and is already covered in various decisions. In the appellant’s own case, the Tribunal vide its order dated 14.08.2013 has allowed the credit of CENVAT on outdoor catering and rent a cab services and similarly by other decisions of the Tribunal, hotel booking services and car maintenance services were also allowed as they are directly related to business and hence CENVAT Credit is available being input service – appeal disposed off – decided in favor of appellant.
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2016 (8) TMI 896
Interest on delayed refund – business auxiliary services – Held that: - the issue has been decided in a Supreme Court judgement in Union of India and ors. vs. M/s Hamdard (Waqf) Laboratories 2016 (3) TMI 68 - SUPREME COURT. The interest for delayed payment of refund will be payable from the date of expiry of the period of three months from the date of receipt of the refund claim till the date of payment of refund – appeal allowed – decided in favor of appellant.
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2016 (8) TMI 895
Imposition of penalty - Rule 15(2) of CENVAT Credit Rules 2004 - manufacture of pistons, pistons rings etc., - receive management consultancy services - payment of management fee and sole selling commission – CENVAT credit on input services – delay in deposit of service tax by service provider – Held that: - the appellant who has paid the service tax to the service provider is entitled to avail the credit of the same without finding whether such service tax paid by him to the service provider stands further deposited by him to the exchequer. It is neither possible nor practical for any service recipient to verify the fact of payment of service tax by the service provider. Remedy of the Revenue lies at the hands of the service provider and not at the hands of the service recipient. Further, the provisions of Rule 15(2) cannot be invoked as the issue was of credit on input services as held in the case Davangere Sugar Company Vs CCE Bangalore II 2011 (2) TMI 553 - CESTAT, BANGALORE – no penalty imposed – decided in favor of appellant.
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2016 (8) TMI 894
Restoration of original order - Imposition of penalty – security services - valuation – benefit under section 80 of the Finance Act, 1994 - bonafide belief – Held that: - during the relevant period the issue as to whether the value of the security services would include the salary, PF etc. of the security personnel was the subject matter of various decisions of the Tribunal and the interpretations was not free from doubt. Tribunal's decision in all such types of matters has extended the benefit of section 80 of the Finance Act 94 to the assessee. No penalty imposed as bonafide belief and benefit under section 80 availed – impugned order set aside – original order restored – decided in favor of appellant.
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2016 (8) TMI 893
Imposition of penalty under section 78 of the Finance Act, 1994 – respondent entered in a contract for Site Formation, Clearance and Excavation Services – work further sub-contracted by respondent – confusion regarding the liability of service tax - service tax paid by respondent when demanded and thereafter penalty imposed – section 80 of the finance act, 1994 – Held that: - the category having been introduced recently on the services in question, there was a lot of confusion and chaos in the field, giving a bonafide belief to the assesee that there would not be any tax liability on him. The actual services was duly provided by sub-contractor and he was discharging the full service tax liability. In such a scenario, the assesse's stand that they were under a bonafide belief that no tax liability would fall upon them as the same stands discharged by the sub-contractor is required to be appreciated in which case, the provisions of section 80 of the Finance Act, 1994 would get invoked – no penalty imposed – appeal disposed off – decided against Revenue.
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Central Excise
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2016 (8) TMI 892
Demand and imposition of penalty - cleared saw dust and wood waste/scrap arose during course of manufacture of final products without payment of Excise duty under Rule 6(3)(i) of Cenvat Credit Rules, 2004 - realized an amount during August 2010 to March 2011 by sale of saw dust - Held that:- the issue is squarely covered in favour of the appellant by the various decisions relied upon by the appellant. In similar facts and circumstances of the case, I have already taken a decision in favour of the assessee in case of M/s MAS Furniture Vs. C.C.E., Mysore [2016 (8) TMI 753 - CESTAT BANGALORE]. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 891
Whether the duty paid copper tubes purchased from outside and subjected to various processes by the appellant would continue to be classified under 74.11 as copper tubes or pipes or whether it has undergone manufacture and would be classifiable under 8414.91 as parts of gas compressor - Held that:- Copper tubes and pipes covered under 74.11, as commonly understood in trade parlance, would include tubes and pipes of various diameters which satisfy the note 1(h) to Chapter 74 which are generally sold in running length. Whereas in the case of appellant the pipes are cut to different dimension, subject to process of bending and also process such as grinding and smoothening would no longer be understood in trade parlance as simple tubes and pipes. These goods can only be used as parts of the equipment for which they were made. The above processes have transformed, the copper tubes into new products described as charging tubes, discharge tubes, second tubes etc. which are nothing but parts of gas compressors. These products have character, use and name which are distinctly different from the generic term of copper tubes. Therefore, the process amounts to manufacture as defined in Section 2(f) of the Central Excise Act, 1944. The assessee having declared fairly their view in the classification list filed before the proper officer, it was open to the Revenue to carry out verification and initiate proceedings for demand if necessary within the normal period of six months under Section 11A of the Central Excise Act. Keeping this in view, we find that the first show cause notice covering the period 27.02.1989 to 31.03.1993 involving demand of about ₹ 10.84 lakhs, issued on 16.02.1994 would be hit by limitation under Section 11A. However, the subsequent three notices would fall within the normal period of limitation and accordingly the demands of duty raised in these three notices are upheld. However, there is no justification to impose any penalty on the assessee and hence penalty imposed in the impugned order is set-aside. - Decided partly in favour of assessee
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2016 (8) TMI 890
Whether the value of goods bearing the brand name of another person manufactured in a rural area be included in the aggregate value of the clearances so as to extend the benefit of SSI exemption Notification No.9/2003-CE, dt.01.03.2003 - Held that:- undisputedly in the present case, the Appellant had manufactured the branded goods in rural area, hence, its value cannot be excluded in computation of aggregate value of clearance. Accordingly, we do not find any error in the reasoning of the learned Commissioner (Appeals) in computing the aggregate value of the clearances under Clause (3) of the said notification. - Decided against the appellant
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2016 (8) TMI 889
Classification - whether the appellants’ final product is required to be classified as Plant Growth Regulator falling under Tariff Sub-heading 3808.10, as contended by the Revenue or the same is required to be classified as Bio-fertilizer falling under Chapter Sub-heading No. 3808.20 of CETA, attracting nil rate of duty - Held that:- the Commissioner (Appeals) in the present impugned order has followed the earlier Order-in-appeal passed by him. Admittedly, the earlier Order-in-Appeal has not been challenged by the Revenue and stands accepted. In such a scenario no infirmity can be found in the present order of the Commissioner (Appeals) wherein he has simplicitor followed the earlier order on the classification. - Decided against the Revenue
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2016 (8) TMI 888
Cenvat credit - duty paid on various iron and steel articles like plates, rounds, sheets, bars, joist and angles etc. - goods used in fabrication of the capital goods as supporting structures - Held that:- the items in question were used in fabrication of the capital goods in which case even Larger Bench decision of Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)], which allows the credit, does not stand rebutted or even challenged by the Revenue, the point also stand decided by recent decision of Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. vs. CCE & Cus [2015 (5) TMI 663 - GUJARAT HIGH COURT]. It stand observed in the said decision of the Hon'ble High Court that the decision of the Larger Bench in the case of Vandana Global Ltd. is not appropriate. - Decided against the Revenue
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2016 (8) TMI 887
Cenvat credit - benefit of Notification No. 1/93 - assessee was not registered with the Directorate of Industries of the Development Commissioner (SSI) as a small scale manufacturer - Held that:- even if the assessee claimed the benefit of clause 1 in the classification list, which was admittedly not available to them, the benefit of clause 2 of the notification cannot be denied to them. After availing the exemption in respect of first clearance of aggregate value of ₹ 10 lakh, the appellant started availing the cenvat credit of duty paid on the inputs and started paying full tariff rate on their final product. Such course of action adopted by the appellant cannot be faulted upon. Clause 2 clearly permits the assessee to do so. Therefore, credit cannot be denied. - Decided in favour of assessee
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2016 (8) TMI 886
Condonation of delay - one year 10 months - Manager remained busy in re-allocation/shifting of their factory to Ambernath, Maharashtra - Held that:- it is found that even though the order was communicated to the appellant immediately two days after passing of the order, probably by hand delivery, and issues of similar nature of earlier period as claimed had been under litigation, the appellant failed to submit the appeal within the prescribed statutory period nor within a reasonable period, thereafter. The reason for delay in filing in the appeal as stated in the application as well as in the affidavit, cannot be accepted as sufficient cause warranting condonation of the inordinate delay inasmuch as the same is marred by gross negligent approach on the part of the applicant. Therefore, delay cannot be condoned. - Decided against the appellant
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2016 (8) TMI 885
Modvat credit - Job-work - raw materials sent out to the premises of job worker for conversion into aluminium wire and PVC compound - suppression of exact quantity of input used - an unreasonable amount of invisible loss at the hands of the job worker while conversion of PVC resin into PVC compound has been claimed - Held that:- the observation of excess process loss is supported by testing of a few samples of finished products. There is no justification for taking such percentage across the board for all products in the light of the contention of the appellant that they manufacture different types of goods and the process loss may vary depending upon the design of the product and even the reasons. There is nothing on record to substantiate clandestine clearance of finished products or even diversion of inputs without using the same in the manufacture of the finished products. Therefore, demand is unsustainable. - Decided in favour of appellant
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2016 (8) TMI 884
Invokation of extended period of limitation - Revarsal of Cenvat credit - Steel Structure material - bonafide belief that capital goods credit can be availed on structural - goods were received classifiable under Chapter 84 - no dispute regarding use of the said goods within the factory of manufacture - Held that:- the decisions cited by Revenue are in case where the inputs have been received classifiable under Chapter 72/73 of the Central Excise Tariff. The said chapters are not specifically included in the definition of capital goods. Moreover, it is found that the Commissioner (Appeals) has, in his order, recognized that this was an issue of interpretation. In such circumstances, when different Benches of Tribunal has different view and the matter was referred to the Larger Bench, it cannot be held that there was any mala fide involved in taking of credit. In such circumstances, extended period cannot be invoked. - Decided in favour of appellant
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2016 (8) TMI 883
Maintainability - Demand of interest and imposition of penalty under Section 11AC - Whether Section 35F require payment of any pre-deposit in case of interest or not - Held that:- Section 35F specifically lays down that pre-deposit under Section 35F is required when penalty has been disputed. In the instant case, there is a specific dispute of penalty, therefore, provisions of Section 35F have to be invoked. - Decided against the appellant
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2016 (8) TMI 882
Cenvat credit - service tax paid on various input services - recovery of credits wrongly taken along with interest and imposition of penalty under Rule 15(1) of CCR 2004 - Held that:- the law has recognized that in case of Banking Company, it is neither possible nor practical for the said company to provide an invoice for the charges it levies and vide Notfn No.30/2004-ST dt. 22.09.2004, it has been provided that a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, providing service to a customer, in relation to banking and other financial services, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, and whether or not containing address of the person receiving taxable service but containing other information in such documents as required under this sub-rule. In view of the amendment brought vide circular , the appellant had rightly availed credit on the basis of the certificate issued by the Bank - Decided partly in favour of appellant
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2016 (8) TMI 881
Cenvat credit - availed input services credit without payment of value of input service and service tax on such service to the provider of services - violation of Sub Rule (7) of Rule 4 of Cenvat Credit Rules 2004 - Held that:- we have perused certain sample entries of verification made by original authority with reference to date of payment of value for service / service tax to the provider of services. It is very clear that at least in respect of some of the bills the respondent have availed and even utilized credit before the service tax was paid by them by cheque. In terms of the above legal position it is necessary for the respondent to establish with documentary evidence that they have availed Cenvat Credit on input services after the date on which they made payment of value for such services and also service tax has been paid to the provider of services before that date. This obligation has clearly been stipulated under Sub Rule (6) of Rule 9. Accordingly, we find that it is necessary to establish the payment of value as well as tax before availing the credit by supporting documentary evidence, as we have seen at least a few instances of availing credit before actual payment. The case has to go back to the original authority for verification of all entries to arrive at a proper decision about the eligibility of respondent for this credit. If the credits are availed prior to payment then necessarily the question of interest liability is to be examined, if otherwise, the credit become eligible on a later date (after payment of tax). - Appeal allowed by way of remand
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2016 (8) TMI 880
Demand alongwith interest and penalty - sale of free samples to pharmaceutical companies - appellants had determined the value of physician samples under Section 4(1)(a) and adopted a notional transaction value for payment of duty under Section 4 rather than partly assessed under Section 4A on the basis of MRP and partly assessed under Section 4 on the basis of transaction value under Circular No.625/16/2002-CX dt. 28/02/2002 - Held that:- the issue is squarely covered vide the Final Order passed by Tribunal in appellants' own case for different/subsequent period. The appellant also submitted that the issue is covered by the judgment laid in CC Vs. Sidmak Laboratories (India) Ltd. [2008 (9) TMI 360 - CESTAT, AHMEDABAD] which was also upheld by the Hon'ble Supreme Court [2009 (7) TMI 1233 - SUPREME COURT]. By applying the dictum of judgments, the demand is unsustainable. - Decided in favour of assessee with consequential relief
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2016 (8) TMI 879
Imposition of penalty - Rule 25 of the Central Excise Rules, 2002 - cleared SS Pipes and Tubes to other units without payment of duty against letter of invalidation of EPCG licence issued by DGFT - cleared finished goods to 100% EOUs also under CT-3 certificate - paid full duty liability alongwith interest much before issuance of SCN - Held that:- no malafide could be attributed in the present case against the appellant. They have intimated the non-duty paid clearances in all the three instances to the Jurisdictional officer. These clearances were indicated in the ER-1 though under the wrong category. The fact that full duty amount alongwith interest has been paid well before the issue of notice and the notice was issued covering the normal period only will go to show that the penalty in the present case may not be warranted. In fact the case could have been closed under the provisions of sub-Section (2B) of Section 11A of Central Excise Act, 1944. - Decided in favour of appellant
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2016 (8) TMI 878
Eligibility - concessional rate of duty under notification No. 10/03 dated 1.3.03 - disposable plastic syringe and disposable hypodermic needles cleared separately - syringes and needles are for specific function and are complementary to each other, hence, when presented separately should be considered as parts of medical appliances - Held that:- the only ground on which the concession was sought to be denied by the Revenue is that syringes or the needles cannot work independently. However, we are in agreement with the original authority regarding specific classification of the syringes and needles as instruments and appliances used in medical science. The syringe with or without needle and needle for different uses have been classified separately. There is no separate classification of parts and accessories of these items in the said Chapter. - Decided against the Revenue
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