TMI Tax Updates - e-Newsletter
August 4, 2015

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

TMI SMS

• Import of goods - advance licence - DGFT allowed export through third party - no provision in the customs notification -Demand confirmed -SC

  ---

• Refund - Unjust enrichment - service tax was shown in the invoices but the same was not paid by the service recipient - refund allowed - Tri

  ---

Articles

1. VAT not applicable on transfer of right to use of goods if effective possession and control of the goods are not transferred

   By: Bimal jain

2. PENALTIES UNDER COMPETITION ACT, 2002

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Reviewing the mandate of DG, ST-reg.

2. Promotion of Steel Sector

3. Training by Institute for Steel Development and Growth (INSDAG)

4. Demand and Supply of Iron Ore

5. Performance Of Steel Sector

6. Steel Project of POSCO in Odisha

7. Joint Venture Projects of Sail

8. Revenue secretary Shaktikanta Das and CBDT Chairperson Ms. Anita Kapur to Participate in Talkathon on the New Black Money Law Tomorrow

Notifications

Companies Law

1. G.S.R. 563(E). - dated 20-7-2015 - Co. Law

Amendment to G.S.R.38( E) dated 19th January 2011 -

VAT - Delhi

2. F. 3(11)/Fin(Rev-I)/2015-16/ds-vi/599 - dated 31-7-2015 - DVAT

Amendments in the Third schedule appended to the Delhi Value Added Tax, 2004

3. F. 12(2)/Fin(Rev-I)/2015-16/ds-vi/594 - dated 30-7-2015 - DVAT

Delhi Tax Luxuries Act, 1996 (The turnover of receipt of a proprietor of hotels shall be fifteen percent w.e.f 1st August 2015)

Circulars / Instructions / Orders

FEMA

1. Press Note No. 08 - dated 30-7-2015

Introduction of Composite Caps for Simplification of Foreign Direct Investment (FDI) policy to attract foreign investment

Highlights / Catch Notes

Income Tax

• Assessing Officer Cannot Reassess Finalized Tax Year; Section 292B Offers No Support to Revenue Authority.

  Case-Laws - HC : Power of the AO to pass the Order - AO has no power to frame the assessment in respect of an AY which has already been finalised and concluded. The language of Section 292B of the Act also offers no assistance to the Revenue - HC
  Visit to Get Source

  ---

• AO Classifies Land Transaction Surplus as Profit; CIT(A) Deemed Unjustified in Evidence Conclusion; No Extra Tax Levied.

  Case-Laws - AT : AO treated the surplus as profit of assessee for the reason that, the land in question is stock-in trade and not investment. That being the case, CIT(A) is not justified to concluded that assessee has failed to produce any evidence with regard to payment made to various persons - No addition - AT
  Visit to Get Source

  ---

• Exemption Denied: Insufficient Evidence of Unreasonable Salary u/s 11; No Disallowance u/s 13(1)(c.

  Case-Laws - AT : Eligibility for exemption under S.11 denied - there being no material brought on record by the Assessing Officer to indicate that the salary paid is unreasonable or excessive, no disallowance within the purview of S.13(1)(c)- AT
  Visit to Get Source

  ---

• CIT(A) Invalidates Reopening of Assessment by AO; Annuls Addition Previously Deleted on Merits u/ss 147/148.

  Case-Laws - AT : Reassessment - CIT(A) has not adjudicated on the reopening made by the AO under Section 147/148. He has deleted the addition made on the ground that his predecessor CIT(A) in chair had deleted the same on merits. - Reopening is not valid - AT
  Visit to Get Source

  ---

• Holding Company Expense Reimbursements Not Taxable; No TDS Required on Payments Made Outside India.

  Case-Laws - AT : TDS - Since the reimbursement of expenditure by the holding company is not leading to any accrual of income in the hands of that company, the question of making TDS on such income does not arise. Further the amounts paid outside India in the instant case are not falling under either royalty, interest or fee for technical services, therefore they are not chargeable to tax in India - AT
  Visit to Get Source

  ---

Customs

• DGFT Amends Import License Allowing Third-Party Export Fulfillment, Ensures Fairness in Export Obligations Execution.

  Case-Laws - SC : Import of goods against an advance licence - export obligation - When the DGFT has itself accepted the benefits of the assessee and carried out the amendment in the import licence and further that the assessee could make the exports on the basis of the amendment; albeit through third party, such person should not be left high and dry. - SC
  Visit to Get Source

  ---

• DGFT Allows Third-Party Exports Under Advance License; Notification 30/1997 Cus Lacks Provision, Duty Demand with 9% Interest Confirmed.

  Case-Laws - SC : Import of goods against an advance licence - though DGFT has allowed the export through third party, there is no provision in the notfification no. 30/1997 Cus - Demand of duty with interest @9% confirmed - SC
  Visit to Get Source

  ---

Service Tax

• Refund Granted After Proving No Unjust Enrichment from Excess Service Tax Paid.

  Case-Laws - AT : Denial of refund claim - Unjust enrichment - service tax element was shown in the invoices but the same was not paid by the service recipient - Appellant discharged its onus that excess service tax paid has not been recovered from the customers - refund allowed - AT
  Visit to Get Source

  ---

• Appellant Permitted to Introduce New Legal Grounds at Any Stage of Proceedings, Rules Commissioner (A.

  Case-Laws - AT : Grounds raised by the appellant in appeal filed before the Ld. Commissioner (A) are legal in nature and same can be raised at any point of time. - AT
  Visit to Get Source

  ---

• Rural electrification services like substation and transmission tower installations qualify for service tax exemption under distribution activities.

  Case-Laws - AT : Erection, Commissioning or Installation Service - Rural Electrification - all activities having direct and proximate nexus with distribution of electrical energy. - Distribution of electrical energy cannot be effectively accomplished without installation of sub-station, transmission towers and installation of meters - Benefit of exemption allowed - AT
  Visit to Get Source

  ---

• Service tax paid before show cause notice; penalties u/ss 76 and 78 waived due to Section 80 application.

  Case-Laws - AT : Penalty u/s 76 & 78 - ST was paid before SCN - appellant claim at it initially thought that service tax was not payable on commission as the service was received outside India, though untenable, cannot be held to be malafide. - Section 80 ibid is clearly invokable - penalty waived - AT
  Visit to Get Source

  ---

• Refund Claim Denied; Misclassified Expenditure Not Valid Reason for Rejection.

  Case-Laws - AT : Denial of refund claim - amount was not shown in the current Assets or Loans/ Advances or receivable in the balance sheets but were shown as expenditure in the books of account - that is not a ground for rejecting refund claim - AT
  Visit to Get Source

  ---

Central Excise

• Supreme Court rules interest-free loan insufficient to classify buyers as related u/s 4(4)(c) of Central Excise Act.

  Case-Laws - SC : Valuation of goods - related person - mutuality of interest - No doubt, the two buyers had given ₹ 85.66 crores interest free loan to the assessee. However, that by itself may not be a reason to hold them as related persons within the meaning of Section 4(4)(c) of the Act - SC
  Visit to Get Source

  ---

• Goods Found in Excess but Unfinished, Not Entered in Statutory Records; No Demand Issued.

  Case-Laws - AT : Discrepancy in Finished Goods Register (RG-1) - Goods were found excess were not in complete finished condition as these goods were not packed and could not be entered in the statutory records - no Demand - AT
  Visit to Get Source

  ---

• Court Rules: Electronic Load Survey Report Insufficient to Deny Tax Exemption for Delayed Production Start Date.

  Case-Laws - AT : Area based exemption - merely on the basis of its own interpretation of Electronic Load Survey Report for 30.03.2010 and 31.03.2010 cannot allege that the appellant unit had not commenced commercial production on or before 31.03.2010. - AT
  Visit to Get Source

  ---

• Power Consumption Norm Alone Insufficient to Determine Clandestine Manufacture and Duty Demand, Court Rules.

  Case-Laws - AT : Clandestine manufacture and removal of goods - Merely on the basis of an arbitrarily adopted power consumption norm, the production of an assessee on the basis of his power consumption cannot be estimated and duty demand cannot be affirmed against him on this basis - AT
  Visit to Get Source

  ---

VAT

• Sub Rule (8) of Rule 21's Legitimacy Challenged Over State's Lack of Authority for Tax Credit Denial.

  Case-Laws - HC : Denial of Input tax credit - on the date of introduction of sub Rule (8) of Rule 21 of the Rules, the State did not possess any power, emanating from the Act - on the date of introduction of sub Rule (8) of Rule 21 of the Rules, the State did not possess any power, emanating from the Act - HC
  Visit to Get Source

  ---

• High Court Dismisses Appeals on Sugarcane Purchase Tax, Defers to Supreme Court's Previous Ruling in Jagatjit Case.

  Case-Laws - HC : Levy of purchase tax on the sugarcane purchased from the growers - These are aspects which can be gone into only by the Supreme Court and not by this Court for accepting these submissions would in effect result in this Court holding that the judgment of the Supreme Court in Jagatjit Sugar Mill’s case is not good law - Appeals dismissed - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2015 (8) TMI 55
  Gains out of cancellation of contracts - whether were income from export business and eligible for deduction u/s. 80HHC? - Held that:- Tribunal right in holding that the Gains out of cancellation of contracts were income from export business and eligible for deduction u/s. 80HHC. See Commissioner of Incometax-I vs. Friends and Friends Shipping Pvt. Ltd. [2013 (5) TMI 458 - GUJARAT HIGH COURT] and Commissioner of Income Tax V. Mitsu Limited [2014 (4) TMI 168 - GUJARAT HIGH COURT], CIT v. Badridas Gauridu (P) Ltd. [2003 (1) TMI 61 - BOMBAY High Court] and CIT v. Soorajmull Nagarmull (1980 (9) TMI 69 - CALCUTTA High Court) with Commissioner of Income Tax-II vs. Panchmahal Steel Ltd. [2013 (5) TMI 686 - GUJARAT HIGH COURT] - Decided in favour of assessee.

  ---

• 2015 (8) TMI 54
  Exchange rate difference to exports made in earlier years - Whether was ‘profit of business’ within the meaning of Section 80HHC of the Act? - Held that:- Tribunal was justified in holding that the exchange rate difference to exports made in earlier years was ‘profit of business’ within the meaning of Section 80HHC of the Act. See Commissioner of Incometax-I vs. Friends and Friends Shipping Pvt. Ltd. [2013 (5) TMI 458 - GUJARAT HIGH COURT] and Commissioner of Income Tax V. Mitsu Limited [2014 (4) TMI 168 - GUJARAT HIGH COURT], CIT v. Badridas Gauridu (P) Ltd. [2003 (1) TMI 61 - BOMBAY High Court] and CIT v. Soorajmull Nagarmull (1980 (9) TMI 69 - CALCUTTA High Court) with Commissioner of Income Tax-II vs. Panchmahal Steel Ltd. [2013 (5) TMI 686 - GUJARAT HIGH COURT] - Decided in favour of assessee. Profit on cancellation of forward marketing contract - whether is to be treated as export turnover within the meaning of Section 80HHC? - Held that:- Tribunal was justified in holding that profit on cancellation of forward marketing contract is to be treated as export turnover within the meaning of Section 80HHC of the Act. See Commissioner of Income Tax V. Mitsu Limited [2014 (4) TMI 168 - GUJARAT HIGH COURT] and Commissioner of Income Tax-II vs. Panchmahal Steel Ltd. [2013 (5) TMI 686 - GUJARAT HIGH COURT] - Decided against revenue.

  ---

• 2015 (8) TMI 53
  Power of the AO to pass the Order - CIT(A) held that the Assessment Order dated 21st January, 2010 for AY 1998-99 had attained finality and thus, the AO had no jurisdiction to pass another Assessment Order for the same Assessment Year confirmed by ITAT - Revenue, contends that the order dated 20th January, 2010 was a mistake, as the AO had not implemented the directions of the Tribunal to re-examine the nature of relevant expenditure incurred by the Assesse - Held that:- A plain reading of the language of Section 292B of the Act indicates that it would have no application in the facts and circumstances of the present case. First and foremost, Section 292B of the Act cannot be read to confer jurisdiction on the AO where none exists. The said Section only protects return of income, assessment, notice, summons or other proceedings from any mistake in such return of income, assessment notices, summons or other proceedings, provided the same are in substance and in effect in conformity with the intent of purposes of the Act. Learned counsel appearing for the Revenue has been unable to point out any mistake or omission in the AOs order dated 19th November, 2010. The issue involved is not about a mistake in the said Order but the power of the AO to pass the Order. Clearly, the said Order is not in accordance with provisions of the Act, as the AO has no power to frame the assessment in respect of an AY which has already been finalised and concluded. The language of Section 292B of the Act also offers no assistance to the Revenue in its contention that AO's order dated 20th January, 2010 was a mistake. Unable to accept that the AO's order dated 20th January, 2010 was only an administrative order to give effect to the order of the Tribunal. At this stage, it is also relevant to note that the order dated 20th January, 2010 was captioned as "Order u/s 254/250/147/143(3) of the Income Tax Act, 1961". It is, thus, apparent that the Order itself indicated that it was not an administrative order but an Assessment Order under Section 143(3) of the Act. In the circumstances, it is not be open for the Revenue to contend to the contrary. - Decided against revenue.

  ---

• 2015 (8) TMI 52
  Disallowance made on account of claim for deduction under Section 10A - Held that:- This very issue was covered in favour of the Petitioner by the decision of the Tribunal for A.Y. 2005-2006 in the Petitioner's own case. The departmental representative before the Tribunal also accepted the position. Inspite of the agreed position between the parties, the Tribunal by the impugned order yet remands this very issue to the Assessing Officer for fresh examination/determination. The Petitioner has informed us that the appeal for the subsequent Assessment year i.e. A.Y. 2007-2008 is scheduled to come up before the Tribunal in the month of August 2015 and for A.Y 2010-2011 the date has yet to be fixed by the Tribunal. The Petitioner seriously apprehends, and in our view not unjustifiably that the Tribunal, while dealing with the Petitioner's appeal for the subsequent years may also restore the issue to the Assessing officer for de novo examination disregarding the earlier order. Thus we are constrained to exercise our extraordinary jurisdiction and set aside the impugned order of the Tribunal dated 4 March 2015 and restore it to the Tribunal for fresh consideration and disposal on merits, after addressing itself to it's earlier order passed for the A.Y 2005-2006 in respect of the Petitioners on merits

  ---

• 2015 (8) TMI 51
  Provisional attachment orders passed under Section 281B - Held that:- A mere reading of the proviso clearly shows that the submission made by the learned counsel for the petitioners does not carry any merit. Indeed, the proviso says that the period of extension of provisional attachment shall not in any case exceed two years or sixty days after the date of order of assessment or reassessment, whichever is later. Since the provision of sixty days period after the order of assessment or reassessment whichever is later has been introduced by virtue of the amendment with effect from 1.10.2014, this Court is not able to find fault with the provisional attachment orders passed by the respondent-assessing officer. As per Instruction No.1914 dated 2.12.93, the stay application filed before the assessing officer should be disposed of within a period of two weeks from the date of filing of the petition by the tax payer. But it appears that the petitioners have filed the stay applications only before the appellate authority. Even the guideline B(iii) of the Instruction No.1914 also states that the decision in the matter of stay of demand should normally be taken by the assessing officer and his immediate superior, therefore, the stay applications filed by the petitioners deserve to be taken up for hearing and disposed of within a period of two weeks from the date of receipt of a copy of this order. In view of the above, this Court, taking into account that a sum of 1,33,86,909/- had been realized by the respondents during the pendency of the appeals along with the stay applications, hereby directs the appellate authority viz., the Commissioner of Income Tax (Appeals)-18, Chennai, the second respondent herein to take up the pending appeals for final hearing and dispose of the same on merits and in accordance with law within a period of three months from the date of receipt of a copy of this order. It is made clear that since the stay applications are also pending, the respondents need not resort to any coercive proceedings against the petitioners including the realization of the balance amount of 23,87,948/- till then. With the above direction, all the writ petitions are dismissed.

  ---

• 2015 (8) TMI 50
  Disallowance u/s.40(a)(ia) - assessee had neither deducted TDS nor paid the TDS in the current year - Held that:- As before the lower authorities it was claimed that the expenditure were in the nature of reimbursement for the goods that were exported by the assessee. During the course of hearing a question was put to the Ld. A.R. and he was asked to demonstrate the crystallization of liability vis-à-vis the date of exports of goods as it was claimed that the expenditure were with respect to export of goods and to which the Ld. A.R. could not place any evidence to demonstrate that the goods were exported in the year under consideration or even at the fag end of F.Y. 2006-07. Before us the Ld., A.R. has also not placed any material on record to demonstrate that the liability crystallized during the year nor has placed any material on record to controvert the findings of Ld.CIT (A). Further the case laws relied upon by Ld. A.R. are also distinguishable on facts and in view of the aforesaid facts, we find no reason to interfere with the order of the Ld. CIT (A) in conforming disallowance - Decided against assessee. Addition on account of non deduction of TDS for the payments for purchasing calendars - Held that:- CIT (A) while upholding the disallowance has held that the contract for purchase of calendars was a works contract and therefore, the assessee was liable to deduct TDS. On the other hand before us Ld. A.R. submitted that the assessee had also purchased calendars in earlier and subsequent years and in those years, in the assessments framed u/s. 143(3), no disallowance on account of non deduction of TDS has been made by the Revenue Authorities. We however find that to support the contention of allowing the expenses in earlier and subsequent years, the relevant assessment orders are not on record. We therefore, are of the view that in the interest of justice, the issue needs to be re-examined at the end of A.O. and if no disallowance of similar expenditure has been made in earlier years and or subsequent years, the addition made by the A.O.in the year under consideration be deleted. - Decided in favour of assessee for statistical purposes. Addition on account of prior period expenses - Held that:- CIT (A) while upholding the disallowance has noted that the assessee has not been able to prove that the liability of the expenses which has been claimed has crystallized during the year under consideration and the claim of assessee is not supported by documentary evidence and that there was no evidence to that effect was either placed before the A.O. or before Ld.CIT (A). Before us also the assessee has not placed any material on record to demonstrate the crystallization of liability in the year under consideration. Before us, Ld. A.R. has stated that the prior period expenses is below the line adjustment in the Profit and loss account and therefore it has not been claimed as expenses is contrary to the fact and is not correct because on perusing the computation of income that has been placed on record at page-2 of the paper book, it is seen that assessee has claimed expenses of 5,53,979/- as “prior period expenses crystallized during the year” - Decided against assessee. Addition u/s. 40A(3) - Held that:- Before us it is assessee’s submission that the payment was made to the representative of the foreign company, who was a foreigner and was not having Bank account and on the specific request to meet the expenses have not been controverted by the Revenue. Further the genuineness of the payment has also not been doubted by the A.O. In view of the aforesaid facts and considering the fact that the foreign currency was obtained from the foreign money changer registered with Reserve Bank of India and in view of any contrary material on record to controvert the submissions of the assessee, we are of the view that in the peculiar facts of the case the expenditure be allowed. - Decided in favour of assessee

  ---

• 2015 (8) TMI 49
  Validity of initiation of proceeding u/s 147 - Held that:- From the reasons recorded, it is very much clear that AO was not having in his possession any fresh tangible material which could demonstrate escapement of income. Only on revisiting/reviewing the materials/informations already available on record at the time of original assessment and on reappraisal of the same, AO has formed belief that income has escaped assessment. Therefore, reopening of assessment on re-appreciation or reappraisal of the materials/informations available on record on the basis of which original assessment was completed is legally invalid as it amounts to change of opinion. See M/s. Gayatri Sugars Ltd. Versus Asst. Commissioner of Income-tax [2014 (12) TMI 3 - ITAT HYDERABAD ] On perusal of the materials on record including the reasons recorded as well as observations made by ld. CIT(A), it is very much evident that assessment was reopened u/s 147 of the Act purely on the basis of objections raised by the internal audit party. AO has merely followed the dictat of the internal audit party without independently applying his mind to know whether income has escaped assessment. In our view, for this reason initiation of proceeding u/s 147 of the Act is incorrect. See DCIT Vs. Lee Pharma Pvt. Ltd.(2012 (11) TMI 310 - ITAT, HYDERABAD ). - Decided in favour of assessee. M/s. Gayatri Sugars Ltd. Versus Asst. Commissioner of Income-tax [2014 (12) TMI 3 - ITAT HYDERABAD ]

  ---

• 2015 (8) TMI 48
  Non deduction of TDS on payments made in the nature of royalty - orders passed by the A.O. under section 201(1) and 201(1A) treating the assessee as is in default - whether there was transfer of any rights including the granting of a license in respect of copy right to the assessee in the present case under the license agreements? - Held that:- Orders passed by the Ld. CIT(A), however, shows that although he has passed a very detailed order, he has neither considered nor analysed the terms and conditions of the relevant license agreements so as to ascertain the exact nature of rights acquired by the assessee which is so vital and material to decide the issue under consideration. Moreover, as pointed out by the learned D.R., the scope of the definition Royalty as given in Explanation (2) to Section 9(1)(vi) has been further clarified by inserting Explanation (iv) and Explanation (v) by the Finance Act, 2012 with retrospective effect from 01.06.1976 and the benefit of this amendment made subsequently with retrospective effect was not available to the Ld. CIT(A) while passing the impugned orders. As contended by assessee in this regard, it is also relevant to see whether there is any amendment in the relevant articles of the DTAAs widening the scope of the term Royalty as done in the domestic Law. Keeping in view all these relevant aspects of the matter which have a direct bearing on the issue under consideration, consider it fair and proper and in the interest of justice to remit the matter back to the Ld. CIT(A) for deciding the same afresh on merit in accordance with law, after giving the assessee proper and sufficient opportunity of being heard. - Decided in favour of assessee for statistical purposes.

  ---

• 2015 (8) TMI 46
  Reopening of assessment - addition u/s 68 - whether assessment on the company which is liquidated and struck off by the Registrar of Companies is invalid - Held that:- AO has invoked the provisions of section 147 and served the notice on a company which is altogether a different company and has also issued notice u/s 142(1) to the erstwhile Director who has already submitted that the company which has been assessed has been liquidated on 25.03.2008. We are of the opinion that the issuance of notice u/s 148 on a (different company) i.e. another legal entity namely M/s. SRSR Advisory (P) Ltd makes the proceedings void ab initio as notice has been issued to the wrong entity. Hence we confirm the order of the CIT (A) and dismiss the Revenue’s appeal. - Decided in favour of assessee.

  ---

• 2015 (8) TMI 45
  Claim of deduction u/s 35AD - CIT(A) allowed claim - Held that:- There cannot be any doubt with regard to assessee’s claim that the cold storage has started operating during the relevant FY, irrespective of the fact whether it is in February’10 or March’10. The department has failed to bring any material on record to either controvert the factual finding of ld. CIT(A) or any other contrary evidence to conclusively prove the fact that the cold storage has started operating in April’10. As far as the allegation of AO that some of the farmers have stated that cold storage started operating in April’10, we find merit in the submissions of ld. AR that in absence of confrontation of such statement to assessee and allowing opportunity to cross-examine the farmers, AO could not have used such adverse material for disallowing assessee’s claim of deduction u/s 35AD. Even otherwise also, in the face of substantive evidence brought on record in the form of electricity bill, bonds/receipts issued to farmers, etc. demonstrating that assessee has commenced operation of cold storage in the FY 2009-10, the statement of the farmers cannot be given much credence. In the aforesaid view of the matter, there being no infirmity in the order of ld. CIT(A) - Decided in favour of assessee. Addition u/s 69 - addition deleted by CIT(A) - Held that:- Addition u/s 69 of the Act has been made purely on conjectures and surmises. The department’s contention that bonds were not produced before AO by assessee, though, technically may be correct, but, at the same time, it is to be noted that bank authorities have submitted all informations relating to loan granted to farmers on the basis of the bonds/receipts given by assessee. Therefore, on the face of such evidence, it cannot be said that stocks kept in the cold storage are unexplained investment of assessee. Department having failed to bring any material on record to controvert the aforesaid facts, addition made has no legs to stand. Accordingly, ld. CIT(A) was justified in deleting the addition and, hence, upholding the order of ld. CIT(A), we dismiss the grounds raised by revenue.- Decided in favour of assessee.

  ---

• 2015 (8) TMI 44
  Unexplained cash credit u/s 68 - addition representing share application money - Held that:- Solely on the basis of denial by some commission agents it cannot be concluded that share applicants were not having any agricultural income. More so, when AO has made enquiries with the concerned share applicants and has not found any adverse material to dispute the share applicant’s claim of having agricultural land holding or the fact that they are engaged in agricultural activity. The only thing the statement of commission agents prove, accepting them to be correct, share applicant’s claim that they have not gone to any mandy or commission agents for selling their produce and the produce were purchased by some persons from the place of cultivation itself appears to be genuine. AO also enquired about only Tomato sales whereas the share applicants have paddy cultivation also. Thus, AO having failed to bring any material on record to disprove share applicant’s claim of having agricultural land holding or engaged in agricultural activity, no doubt can be entertained with regard to their creditworthiness. In the aforesaid facts and circumstances, the addition being not based on proper evidence, we are not able to sustain the same - Decided in favour of assessee. Addition on the profit on sale of land - Held that:- As could be seen, at the assessment stage, assessee has claimed that apart from the payment made to original owners, assessee has also paid to various other persons towards surrender of their right over the property. As it appears, AO has not disputed the aforesaid claim of assessee. The only reason, he treated the surplus as profit of assessee is, the land in question is stock-in trade and not investment. That being the case, we are unable to understand on what basis, ld. CIT(A) concluded that assessee has failed to produce any evidence with regard to payment made to various persons. As rightly submitted by ld. AR, whether it is an investment or stock-in-trade, payment made by assessee has to be taken into account for arriving at the cost incurred. Therefore, in either case, there cannot be any surplus to be treated as income of assessee. Since the aforesaid aspect has not been considered either by AO or by ld. CIT(A) in proper perspective, we are inclined to remit the issue back to the file of AO for deciding afresh after due opportunity of being heard to assessee.- Decided in favour of assessee for statistical purposes. Unexplained investment in land - Held that:- AO has made the addition by stating that assessee has failed to explain the two amounts. Before ld. CIT(A) also assessee has not made proper representation. Therefore, considering the nature of dispute and claim of assessee, we are inclined to remit the matter back to the file of AO allowing assessee one more opportunity to explain the amounts in question. Accordingly, the matter is remitted to AO for deciding afresh after due opportunity of being heard to assessee. - Decided in favour of assessee for statistical purposes.

  ---

• 2015 (8) TMI 43
  Transfer pricing adjustment - section of comparable - Held that:- As far as Accentia Technologies Ltd., is concerned, the DRP did not direct to exclude the comparable but directed the AO to verify whether there is any extraordinary event which had an effect on financials. Since it is AO who on verification excluded the comparable, we do not see any reason to interfere with the direction of the DRP. - Decided against revenue. As far as Eclerx Services Ltd., is concerned, DRP has given a clear finding that the said company was providing KPO services which are not comparable to assessee's BPO services. - Decided against revenue. Whether DRP is correct in excluding the Infosys BPO and TCS e-Serve Ltd.? - Held that:- As seen from the order of the panel about Infosys BPO and TCS e-Serve Ltd., they have considered twin conditions of advantageous brand value along with high turnover of 1,000 Crores and above. Assessee has objected on the same twin conditions as far as TCS e-Serve International Ltd., also. There is contradiction in the findings of the DRP in excluding two companies while rejecting assessee's objections in TCS e-Serve International Ltd. DRP also did not give any finding whether there is any influence on the margins of the comparables as there is no higher turnover filter adopted by the AO while selecting the comparables. As we see from the list of final comparables even a company with 1.74 Crores was selected as comparable company [Jeevan Softech Ltd., (Seg)]. Therefore, there seems to be some merit in Revenue's grounds. Since the DRP did not give any detailed reasoning and did not consider the TPO's order in its correct prospective, we are of the opinion that as far as exclusion of these two companies are concerned, DRP should have given a detailed order. For this purpose, we remit the matter to the DRP for limited purpose of giving detailed order on the contentions raised by Revenue in ground No. 2. - Decided in favour of revenue for statistical purposes. Excluding telecommunication charges from the total turnover while excluding the same from the export turnover - Held that:- With reference to ground of amount of communication charges excluded, AO considered an amount of 51,89,321/- i.e., total communication charges spent in India also whereas assessee objected before the DRP that the data link charges were only 39,22,626/-, which required to be reduced from both export turnover as well as from total turnover. The DRP, as can be seen from the direction in page 11 of the order has directed the AO / TPO to verify the correct amount of communication charges after giving due opportunity to assessee. Revenue should not have come in appeal on this direction of the DRP to verify the correct amount. Since verification is with the AO only, he should exclude only the communication charges as covered by the provisions of the I.T. Act. The ground is not maintainable. Accordingly, the same is rejected.- Decided against revenue.

  ---

• 2015 (8) TMI 42
  Addition u/s 2(22)(e) as deemed dividend - CIT(A) deleted the addition - Held that:- As per provisions of section 2(22)(e) of the Act, the liability of tax can be fastened only on the shareholder of the payer company. In the present case, the AO could not bring out any fact to support that the loan taken by the assessee company from M/s R.D. Finlease Pvt. Ltd. satisfies the requirement of section 2(22)(e) of the Act as the assessee company is not a shareholder of M/s R.D. Finlease Pvt. Ltd. In the light of above legal proposition and dicta laid down by the Jurisdictional High Court of Delhi in the case of CIT vs Ankitech Pvt. Ltd.[2011 (5) TMI 325 - DELHI HIGH COURT ], we are of the opinion that the action taken by the AO was not in accordance with law and letter and spirit of section 2(22)(e) of the Act which was rightly directed to be deleted by the CIT(A) by passing the impugned order. - Decided in favour of assessee. Disallowance under section 40(a)(ia) - on perusal of Form 3CD it was seen that the auditors had reported that there was tax deductible at source which was not deducted at all - Held that:- As decided Shri Rajeev Kumar Agrawal vs JCIT dated [2014 (10) TMI 492 - ITAT AGRA] the insertion of second proviso to section 40(1)(ia) is declaratory and curative in nature and hence it has retrospective effect from 1.4.2005 being the date from which sub-clause (ia) of section 40A was inserted by Finance No.(2) Act 2004. We uphold the grievance of the assessee principally and direct that the AO shall give due and fair opportunity of hearing to the assessee and decide the matter afresh in accordance with law by way of a speaking order after carrying out necessary verification regarding impugned payments having been taken into account by the recipients in the computation of their respective income, regarding payment of taxes in respect of such income and regarding filing of related income tax return by the recipients. Accordingly, sole cross objection of the assessee is allowed in principle and deemed to be allowed for verification by the AO in the manner as indicated above. - Decided in favour of assessee for statistical purposes.

  ---

• 2015 (8) TMI 41
  Disallowance u/s. 14A - Held that:- As rightly pointed out before the AO, as well as before us interest arrived at by the AO in the consequential order is pertaining to the banking operations which cannot be disallowed u/s. 14A. Infact in the assessment order AO accepted assessee contention. As seen from the amount of investment and sources of funds, assessee has adequate funds for making the investment. Since, no interest is attributable to the investments, no disallowance is called for under Rule 8D(ii). Out of the treasury expenditure of 65,50,068/- attributable to this activity, as per the earlier appellate orders only two months of treasury expenditure can be considered as directly attributable to exempt income. Accordingly, the disallowance u/s. 8D(i) can be determined at 10,91,678/- as originally disallowed by assessee. That leaves with 8D(iii). One half percent of average value of investment as worked out by assessee comes to 1,03,35,091/-. This amount only can be disallowed under Rule 8D(iii). Therefore, since assessee has already disallowed an amount of 10,91,678/-, further amount to be disallowed u/s. 14A r.w. Rule 8D is to an extent of 1,03,35,091/-. AO is directed to modify the order accordingly. - Decided partly in favour of assessee.

  ---

• 2015 (8) TMI 40
  Adjustment of corporate guarantee provided to Associate Enterprises - Held that:- By following the order of the Delhi bench of this Tribunal in Bharti Airtel Ltd (2014 (3) TMI 495 - ITAT DELHI) and the order of this Tribunal in the assessee's own case for assessment year 2009-10 and for the reasons stated therein, we hold that the corporate guarantee given by the assessee to its AEs does not involve any cost to the assessee, therefore, it has no bearing on the profits, income, loss or assets of the assessee and outside the ambit of international transaction to which ALP adjustment has to be made. According, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition - Decided in favour of assessee. Disallowance of trade mark licence fee - Held that:- For the assessment year 2009-10, an identical issue came up before this Tribunal with regard to adjustment of ALP towards payment of trademark licencee fee. This Tribunal found that there is nothing uncommon in assessee's making payment to the use of the trademark to M/s Redington Distribution Pte. Ltd, Singapore. Referring to the judgment of the Apex Court in S.A.Builders (2006 (12) TMI 82 - SUPREME COURT), this Tribunal found that the expenditure is an allowable business expenditure. In view of the order of this Tribunal for the assessment year 2009-10, this Tribunal do not find any reason to interfere in the order of the lower authority. Accordingly, the same is confirmed.- Decided in favour of assessee. Disallowance of depreciation on temporary structure - Held that:- The assessee claims that expenditure was incurred in wooden partitions, plastering, water proofing treatment, installation charges ad flooring charges etc. Though the ld. Counsel says that the expenditure was incurred in the building taken on rent, no material is available on record to suggest that the abovesaid expenditure was incurred on the building taken on lease/rent. Whatever may the nature of the building, the assessee incurred the expenditure on the temporary structure like office cabins, wooden partitions, plastering, water proofing treatment, installation charges, flooring charges etc. These expenditure are for the purpose of making the building fit for use of the business. Therefore, this Tribunal is of the considered opinion that these expenses are to be allowed as revenue expenditure. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow deduction of 1,18,69,510/- as revenue expenditure Disallowance of payment made to Microsoft Corporation u/s 40(a)(i) - Held that:- This Tribunal is of the considered opinion that in the absence of any details with regard to the credit given by the assessee and the so called returns made by the assessee to M/s Microsoft Corporation, the liability of the assessee to deduct tax cannot be decided. Moreover, the copy of the order of the DRP dated 30.9.2010 on which the DRP placed its reliance is not available on record, therefore, this Tribunal is not in a position to decide on what reasons the disallowance was made by the DRP. Accordingly, the orders of the lower authorities are set aside and the issue of disallowance u/s 40(a)(i) of the Act is remitted back to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes. Disallowance of bad debts written off - Held that:- What is required is that the debt has to be written off in the books of account of the assessee for the previous year as irrecoverable and subject to fulfilling the conditions u/s 36(2)of the Act, the same has to be allowed. It is nobody's case that the debt which was claimed as written off was not included as income in the previous year. Therefore, this Tribunal is of the considered opinion that the lower authorities are not justified in disallowing the claim of the assessee. Accordingly, the order of the lower authorities are set aside and the Assessing Officer is directed to allow the claim of the assessee.- Decided in favour of assessee. Disallowance of expenditure for earning exempt income - Held that:- The total income is nothing but an income assessed under the Income-tax Act, 1961, for the purpose of levy of tax. Sec. 37(1) of the Act provides for allowing the expenditure laid out or expended wholly and exclusively for the purpose of business or profession in computing the income chargeable for taxation. The expenditure incurred by the assessee for the purpose of earning the dividend income or for the purpose of earning profit from the business of the partnership firm or from agricultural income cannot be treated as laid out or expended wholly and exclusively for the purpose of business of the assessee. Therefore, even before introduction of sec. 14A, the expenditure relatable to any incomes which do not form part of the total income cannot be allowed while computing the taxable income under the Income-tax Act, 1961. Therefore, irrespective of the provisions of sec. 14A r.w. Rule 8D, the expenditure claimed by the assessee for earning the exempted income cannot be allowed as deduction for the purpose of computing taxable income. - Decided against assessee.

  ---

• 2015 (8) TMI 39
  Eligibility for exemption under S.11 denied - excess salary paid to Shri Navneet Chabra,Executive Director as during the year - CIT(A) allowed claim - Held that:- As can be seen from the material placed on record, total salary paid in the initial year of appointment to Shri Chabra is 10,80,000 and not 7,20,000 as noted by the Assessing Officer. Therefore, compared to the salary paid in the initial year of appointment of 10,80,000, the salary paid to Shri Chapbra in the year under consideration of 14,51,226 cannot be said to be excessive or unreasonable, so as to bring it within the purview of S.13(1)(c) of the Act. The Assessing Officer has not mentioned any valid reason in the assessment order to indicate that the salary paid to the Executive Director is not commensurate with the responsibilities/duties performed by him. Therefore, there being no material brought on record by the Assessing Officer to indicate that the salary paid is unreasonable or excessive, we do not see any reason to interfere with the order of the learned CIT(A).- Decided against revenue. Violation of Rule 46A of the IT Rules - Held that:- It is a fact on record that assessment for the assessment year 2008-099 has been completed by the Assessing Officer under S.143(3). It is also not disputed that the assessee, being a society registered under S.12A of the Act, is obliged and duty bound to file its return of income for each assessment year. Therefore, it cannot be said that information relating to the payment of salary in the initial assessment year in which the Executive Director was appointed, was not before the Assessing Officer. Moreover, when the Assessing Officer is aware of the basic salary paid to the executive Director, it is highly surprising and appears to be quite improbable that he is not aware of the other allowances paid alongwith the basic pay. Therefore, in these facts and circumstances, we do not find any merit in the submissions of the Learned Departmental Representative that provisions of Rule 46A have been violated - Decided against revenue.

  ---

• 2015 (8) TMI 38
  Disallowance being 30% deduction for repair u/s 24 on rental income - CIT(A) held it as service charges and not rental income - CIT(A)deleting the addition considered by the AO as income from other sources instead of rental income - Held that:- CIT(A) on the issue in question being in conformity with the orders of the ITAT for earlier years and there being no change in facts and circumstances, we see no reason to interfere in the order of ld. CIT(A) to hold that though two agreements had been made for sublicense fee i.e rent and service charges separately, yet the fact remains that no services of any kind were provided by the appellant. To compound the issue, the AO has also failed to bring on record the fact, whether any expenses in respect of the services allegedly provided to Mitsui & Co., were claimed by the appellant. Thus no services were actually provided by the appellant, and factually the so called service charges were nothing but rent received by it. Further, it is settled law that form and substance of the transaction, and not the nomenclature assigned to it, determine the nature of the income . Accordingly, the appellant is eligible to claim standard deduction U/s 24 of the Act from the same and the disallowance so made is deleted - Decided in favour of assessee. Addition of litigation fees paid to some law firms - CIT(A) deleted addition - Held that:- CIT(A) following the Tribunal’s order in assessee’s own case for AY 2007-08 allowed the assessee’s claim as no expenses pertaining to personal litigation or other litigation of the directors were debited in the books of .account of the assessee. If directors were carrying any litigation in: their personal capacity, those expenses were separately debited in the personal account of the partners and not claimed by the assessee company. In the light of categorical finding of ld. CIT (A), in our opinion, it was for the revenue authorities to show from the detail of expenses 'that expenses disallowed related to criminal' proceedings against directors. or were otherwise 'inadmissible and were wrongly claimed by the assessee company.' This has . not been shown, Therefore, on facts and circumstances for the case, we are unable to interfere with the finding of the ld . CIT(A) that no inadmissible expenditure was claimed by the appellant under the head 'litigation expenses'. Addition 'made was rightly deleted - Decided in favour of assessee. Disallowance of depreciation on the basis of a finding given in the block assessment order - CIT(A) deleted addition - Held that:- The order of the ld. CIT(A) on the issue in question being in conformity with the orders of the ITAT for earlier years and there being no change in facts and circumstances, we see no reason to interfere in the order of ld. CIT(A) on the issue in question. - Decided in favour of assessee.

  ---

• 2015 (8) TMI 37
  Disallowance of the deduction claimed u/s 80IC - CIT(A) allowed claim - Held that:- CIT(A) who has deleted the entire addition made by the Assessing Officer on the ground that the predecessor CIT(A) had on merits found out for assessment year 2008-09 that the assessee company is eligible for deduction under Section 80-IC of the Act. Nowhere in the impugned order we find any observation or finding of the learned CIT(A) commenting on the validity of the reopening of the assessment proceedings under Section 147/148 of the Act. Since the ground does not arise from the impugned order, we are unable to state whether the said ground can survive. The ld CIT(A) rightly observed that it is well settled that every change or process cannot be termed as manufacture or production. Well known test applied for determining whether a process amounted to production/manufacture are that a new and distinct commercial product emerges. Commonly accepted meaning given to the word manufacture as held in the judgements by the Hon'ble supreme court is when a new and different article emerges having distinctive name, character and use. After applying the tests laid down in the different judgements and taking guidance from the definition of manufacture in the act, having noted the process involved, the learned CIT(A) rightly held that the assessee company is entitled to deduction u/s 80-IC of the Act. The Assessing Officer has not made any comments with regard to the certificates given by the Government of India, Ministry of Commerce and Industries, and Excise Authorities of the State has not commented upon adversely by the AO. Just because survey team has reported that only 20 people were working in the unit cannot brush aside the evidence that has been placed on record. Taking into consideration the corroborative evidence, we concur with the view of the learned CIT(A) and we find no infirmity in the same. - Decided in favour of assessee. Reopening of assessment - Held that:- CIT(A) who has deleted the entire addition made by the Assessing Officer on the ground that the predecessor CIT(A) had on merits found out for assessment year 2008-09 that the assessee company is eligible for deduction under Section 80-IC of the Act. Nowhere in the impugned order we find any observation or finding of the learned CIT(A) commenting on the validity of the reopening of the assessment proceedings under Section 147/148 of the Act. Since the ground does not arise from the impugned order, we are unable to state whether the said ground can survive.We are constrained to note that the learned CIT(A) has not adjudicated on the reopening made by the AO under Section 147/148. He has deleted the addition made on the ground that his predecessor CIT(A) in chair had deleted the same on merits. Therefore, we do not find any merits in the grounds raised before us. In any case since, we have already up held the finding and decision of the Ld CIT(A) for assessment year 2008-09, that the assessee company’s Rudrapur Unit is engaged in manufacturing and is therefore eligible for deduction under Section 80-IC of the Act, so we uphold the orders of the learned CIT(A) and dismiss the grounds raised by the Revenue - Decided in favour of assessee.

  ---

• 2015 (8) TMI 36
  Disallowance under section 14A - CIT(A) restricted addition to 2% as against 10% disallowed by the Assessing Officer - Held that:- CIT(Appeals) restricted disallowance under section 14A to 2% relying on the decision of the co-ordinate Bench of this Tribunal in assessee’s own case for the assessment year 2001-02. Thus we do not find any infirmity in the order passed by the Commissioner of Income Tax (Appeals) - Decided against revenue. Disallowance u/s 40(a)(i) in respect of the amounts paid by the assessee to M/s. Amalgamation Pvt. Ltd. - Non deduction of TDS - CIT(A) deleted addition - Held that:- It is understood from the facts of the case that Amalgamation Pvt Ltd is a holding company under which several other group companies are working. Whatever expenditure is incurred by the holding company in London to share the office space, advertisement expenses, travelling, telephone charges etc., are being shared by all of them as per the understanding they had with the holding company. The share of expenditure paid by the subsidiary companies are in the form of reimbursement of expenditure incurred by the holding company on behalf of subsidiary companies. Since the reimbursement of expenditure by the holding company is not leading to any accrual of income in the hands of that company, the question of making TDS on such income does not arise. Further the amounts paid outside India in the instant case are not falling under either royalty, interest or fee for technical services, therefore they are not chargeable to tax in India. The decision of the Hon'ble Supreme Court in the case of G.E. India Technology Centre P Ltd, (2010 (9) TMI 7 - SUPREME COURT OF INDIA) comes to the rescue of the appellant.- Decided against revenue.

  ---

• Customs

• 2015 (8) TMI 56
  Exemption claim - import of goods against an advance licence - export obligation - Exemption under Notification No. 30/1997 - It is an admitted case that the raw material was used by the assessee itself for manufacturing the specified products. However, no exports were effected by exporting those goods so manufactured from the raw material that was imported duty-free. - Held that:- it is the case of the assessee that for certain bona fide reasons (as the bona fides of the assessee have been accepted by the DGFT), as the assessee was not able to export same very goods produced by it from the material imported on which he was given exemption from payment of the import duty, the DGFT allowed the assessee to meet the export obligation through third party. Since the conditions of the exemption notification are not fulfilled and the law requires strict compliance of the exemption notification, the assessee becomes liable to pay the import duty which was payable, but for the benefit of exemption Notification No 30/1997, which was obtained by the assessee. - Decision in the case of Sheshank Sea Foods Pvt. Ltd. (1996 (11) TMI 67 - SUPREME COURT OF INDIA) followed. - Decided against the assessee. It necessary to observe that the Government should bestow its consideration and make appropriate provision dealing with such situations. After all, the Exemption Notification No. 30/1997 has been issued to implement and effect the EXIM Policy provisions. Therefore, the purport of the exemption notification is to advance the objectives of the EXIM Policy. When the DGFT has itself accepted the benefits of the assessee and carried out the amendment in the import licence and further that the assessee could make the exports on the basis of the amendment; albeit through third party, such person should not be left high and dry. Therefore, necessary amendments are needed in such notifications making appropriate provisions to meet these types of eventualities. We are hopeful that the competent authority shall look into these aspects and cater for such situations as well so that unnecessary hardship is not caused to the bona fide assessees as well. Insofar as charge of interest is concerned, we are conscious of the fact that as per the bond the assessee had agreed to pay interest @ 24% per annum. However, that would not take away our right to reduce the rate of interest if the ends of justice so warrant. In the peculiar facts of this case, more so when there was an amendment in the licence by the DGFT and DGFT has taken the view that export obligation is fulfilled, we deem it proper to reduce the rate of interest from 24% per annum to 9% per annum. Further, there shall not be any penalty. - Decided in favour of Revenue.

  ---

• Service Tax

• 2015 (8) TMI 68
  Denial of refund claim - Unjust enrichment - Renting of immovable property and sale of space for advertisement - Held that:- Jurisdictional High Court that the facts were identical to the facts of the present case where service tax element was shown in the invoices but the same was not paid by the service recipient. In the present case, Chartered Accountant’s certificate dated 05.3.2014 certifies that service recipient M/s. Reliance Industries Limited has not paid any service tax to the appellant on account services of lease of vacant land for merchandising of on-fuel products and lease of vacant land for erection and display of hoarding. Service recipient M/s. Reliance Industries Limited vide letter dated 06.10.2011 has also confirmed that they had neither paid tax on these services to the appellant nor taken any credit of the service tax paid by the appellant. Appellant has therefore, discharged its onus that excess service tax paid has not been recovered from the customers. There is no evidence on record produced by the Revenue showing any further verification on the part of the Revenue to the effect that the claim of the appellant of not passing on the service tax is not genuine and that the excess service tax paid is actually paid by the service recipient. - Decision in the case of CCE & ST vs. Modest Infrastructure Limited [2012 (11) TMI 924 - GUJARAT HIGH COURT] followed - Decided in favour of assessee.

  ---

• 2015 (8) TMI 67
  Commissioner rejected appeal as no new grounds can be raised - Penalty u/s 76, 77 & 78 - Held that:- Grounds raised by the appellant in appeal filed before the Ld. Commissioner (A) are legal in nature and same can be raised at any point of time. Therefore, the ld Commissioner (A) is required to answer the issue raised by the appellant on merits which Ld. Commissioner has failed to do so. In these circumstances, we do not find any merits with the impugned order. Same is set aside and matter is remanded back to the Ld, Commissioner (A) to decide the issues raised by the appellant - Matter remanded back - Decided in favour of assessee.

  ---

• 2015 (8) TMI 66
  Erection, Commissioning or Installation Service - Rural Electrification - Exemption under Notification No.32/2010-ST, dated 22.06.2010 read with Notification No.45/2010-ST - Held that:- Service tax payable on all services relating to transmission and distribution of electricity provided by the service provider to the service recipient is not required to be paid. We have seen the related contracts entered by the appellant with M/s. UPCL. It is evident from there that the service rendered by the appellant is squarely relating to transmission and distribution of electricity and therefore in the light of the Notification No.45/2010-ST, dated 20.07.2010 no service tax is recoverable in respect thereof. Indeed CESTAT in the case of Noida Power Co. Vs. CCE, Noida [2013 (8) TMI 746 - CESTAT NEW DELHI] has held that "the expression 'in relation to' is of wide import and indicates all activities having direct and proximate nexus with distribution of electrical energy. Distribution of electrical energy cannot be effectively accomplished without installation of sub-station, transmission towers and installation of meters." Indeed similar demands against M.P. Power Transmission Co, Ltd raised by CCE, Bhopal and Pachimanchal Vidut Vitran Nigam Ltd. Raised by CCE, Meerut were set aside by CESTAT in the cases of M.P. Power Transmission Co. Ltd.. Vs. CCE, Bhopal [2011 (2) TMI 982 - CESTAT, NEW DELHI] and Paschimanchal Vidut Vitran Nigam Ltd. Vs. CCE, Meerut- [2012 (8) TMI 688 - CESTAT, NEW DELHI] respectively, in the wake of provisions of Notification No,45/2010-ST, dated 20.07.2010. - impugned demand is not sustainable - Decided in favour of assessee.

  ---

• 2015 (8) TMI 65
  Penalty u/s 76 & 78 - services of overseas commission agents - ST was paid before SCN - Held that:- Commissioner (Appeals) has clearly noted in the impugned order that there was no suppression of facts with intent to evade service tax and the appellant itself informed the department about the liability. Further, the service tax was paid out of the Cenvat credit which was lying with the appellant and it was paid before the issuance of show cause notice. The impugned service tax was paid in cash also before the issuance of adjudication order in order to avoid disputes. Thus the bonafides of the appellant are abundantly demonstrated. In these circumstances the appellant claim at it initially thought that service tax was not payable on commission as the service was received outside India, though untenable, cannot be held to be malafide. - Section 80 ibid is clearly invokable for the purpose of setting aside penalty under Section 76 ibid - appellant paid the impugned service tax before the issue of Show Cause Notice and there was no suppression on its part as held by Commissioner (Appeals) - appellant paid the impugned service tax before the issue of Show Cause Notice and there was no suppression on its part as held by Commissioner (Appeals) - Decided in favour of assessee.

  ---

• 2015 (8) TMI 64
  Denial of refund claim - refund claim was filed consequent to dropping of show cause notice - doctrine of unjust-enrichment - amount was not shown in the current Assets or Loans/ Advances or receivable in the balance sheets but were shown as expenditure in the books of account - Held that:- that is not a ground for rejecting refund claim - Decision in the case of Ranade and Co vs. Commissioner of Service Tax, Ahmedabad (2012 (6) TMI 190 - CESTAT, AHMEDABAD) followed - there is no evidence brought on record that the service tax paid has been shown on the invoices as collected from the service recipients - Decided in favour of assessee.

  ---

• Central Excise

• 2015 (8) TMI 61
  Valuation of goods - related person - mutuality of interest - interest free loan - suppression of facts - willful mis-declaration of Assessable value - Evasion of duty - Held that:- The expression 'in the business of each other' clearly denotes that interest of the two persons have to be mutual, i.e., in each other, in order to treat them as related persons. We find from the order of the Member Judicial that only on the ground that the two companies had given a loan of 85.66 crores to the assessee company, was treated as sufficient to establish the relationship between the assessee and the buyers. That only shows one way traffic whereas requirement is that of two way traffic. The other Member, in our opinion, aptly held that this cannot be the factor which would show the mutuality of interest - The assessee did not have any interest in the business of the buyers (Goodyear Indian Limited and CEAT Limited). Given this, the requirement of 'mutuality of interest' which is a pre-requisite under section 4(4)(c) of the Act does not get satisfied. The matter is squarely covered by the decisions of this Court in the case of Atic Industries Ltd. We have gone through the judgment in the case of Atic Industries Ltd. [1984 (6) TMI 51 - SUPREME COURT OF INDIA] wherein this court categorically held that there should be mutuality of interest in the business of each other. No doubt, the two buyers had given 85.66 crores interest free loan to the assessee. However, that by itself may not be a reason to hold them as related persons within the meaning of Section 4(4)(c) of the Act. In the absence of any mutuality of interest existing between them, giving of this interest free loan could have been a basis to include the notional interest while arriving at the cost of product sold by the assessee to the two buyers. However, instead of doing that, the appellant wanted to make use of this factor to hold that the assessee and the two buyers are “related persons” which position is difficult to comprehend having regard to the principle laid down in Atic Industries Ltd's case. After taking over of the assessee company by Goodyear, more than 70 per cent of the sales by the assessee company are to the third parties. That apart, there was another contention of the assessee, viz., that the goods sold to the outsiders are at a lesser rates than sold to Goodyear. These two contentions have not been refuted by the Revenue - Decided against Revenue.

  ---

• 2015 (8) TMI 60
  Discrepancy in Finished Goods Register (RG-1) - goods were found in excess of the recorded balance in their RG I register - unfinished / incomplete goods - Confiscation of goods - Imposition of redemption fine - Held that:- Findings of the adjudicating authority are at variance with what has been detailed in the said Hand Book. Further, the adjudicating authority has not explained in the impugned order as to why the samples were sent to Guru Nanak Dev University (GNDU), Amritsar, instead of any other designated authority under the law. It is not brought on the record whether the persons who conducted the test were qualified to conduct the test and that whether their test report was acceptable under law and by what authority of law. It is also not brought on record what tests were carried out by the said person/ persons. It is also not brought out on record how the test report conducted on laundry soaps manufactured by the appellants. Thus the test report relied upon by the adjudicating authority becomes inadmissible under the law. Goods were found excess were not in complete finished condition as these goods were not packed and could not be entered in the statutory records. This fact has not been examined at the time of investigation. Therefore, the defence taken by the respondents is acceptable in the absence of corroborative evidence. Therefore, I do agree with the finding of the learned Commissioner (Appeals) that goods are not liable for confiscation. Accordingly, the proposal of confiscation of goods is set aside. Consequently, penalty, redemption fine are not imposable on the respondent. - no efforts were made by the revenue to reveal the truth by examining the manufacturing process to ascertain the raw material consumed and resulted output. Therefore, I hold that charge of clandestinely removal of goods is also not sustainable against the respondent in the absence of any contrary evidence against the respondent. - No infirmity in the impugned order, the same is upheld - Decided against Revenue.

  ---

• 2015 (8) TMI 59
  Area based exemption - commercial production before 31-3-2010 commenced or not - Denial of exemption under notification no.50/2003-CE dated 10.06.2003 - New industrial unit - Held that:- Date of commencing of the commercial manufacture is the date of commissioning of plant when the newly commissioned plant had been run and some goods of the desired quality had been produced. However, once the plant is commissioned, it is not necessary that from the day one it must start manufacture at its full installed capacity, as the quantum of the goods produced would depend upon the supply orders which the manufacturer may have at that time or the quantity of the goods which the manufacturer expects to be sold at that time. - while on one hand, the Department alleges that there was no production of M.S. Ingots during the last week of March, 2010, on the other hand, the show cause notice issued to the appellant has also demanded duty of 90,805/- on 30.4 MTs. of M.S. Ingots cleared during March, 2010 and this duty demand is included in the duty demand of 5,27,66,984/- confirmed by the appellant in the impugned order. Thus, the Department's allegation that there was no production by the appellant unit during March, 2010 and that the appellant have made only bogus entries regarding production during March, 2010, in their records is not compatible with the Commissioner's order confirming duty demand of 90,805/- in respect of the clearance of 30.40 Mts. of M.S. Ingots during March, 2010. When the Department has not disputed the procurement of raw materials during March, 2010 and its consumption and there is no evidence to prove that the sale of about 30 MTs. of M.S. Ingots during the last week of March, 2010 was false and when the Commissioner has confirmed the duty demand on 30.4 MTs. of M.S. Ingots cleared during the month of March, 2010, and thereby accepting the appellant's claim of having commenced production during March, 2010, the Department, merely on the basis of its own interpretation of Electronic Load Survey Report for 30.03.2010 and 31.03.2010 cannot allege that the appellant unit had not commenced commercial production on or before 31.03.2010. - Even though, there is minor discrepancy, between the production recorded on 30.03.2010 & 31.03.2010 of about 29 MT and the goods sold upto 31.03.2010 - 30.40 M.T., the fact remains that on 30.03.2010, the furnace had been commissioned and looking to the power consumption, there was some production on these dates. In this regard, just because the production entry for 29.03.2010 was false, it cannot be presumed that the production entries for 30.03.2010 and 31.03.2010 were also false. Therefore, it has to be concluded that the manufacturing unit of the Appellant company had commenced commercial production on or before 31.03.2010 and is eligible for the exemption under notification no.50/03-CE. - impugned order is not sustainable. The same is set aside - Decided in favour of assessee.

  ---

• 2015 (8) TMI 58
  Denial of CENVAT Credit - Appellants fabricated a Dry Dock for manufacturing ship and repair service - Credit on input services, input and capital goods used for fabrication of the Dry Dock, amongst others - Held that:- CENVAT Credit availed on input service, input and capital goods for setting up Dry Dock would be allowed for providing output service namely repair/refit service. This is also covered in the inclusive part of the definition of ‘input service’. Hence, the finding of the Adjudicating authority, is that the Appellant is exclusively engaged in the manufacture of exempted final product ‘Ships’ and CENVAT Credit on input, capital goods is inadmissible, cannot be sustainable. Nexus between the input/input services and export goods/services - Held that:- it must be borne in mind that the purpose is to refund the credit that has already taken by them. There cannot be different yardsticks for establishing the nexus between taking of the credit and for refund of credit. Even if different phrases are used under different rules of CENVAT Credit Rules, they have to be read in a harmonious manner. Cross utilisation of credit of input and input service - input service credit was denied mainly on the basis that the input service credit availed on the input services was shown in ER-1 return instead of ST-3 returns. - Held that:- The restriction on utilisation of CENVAT Credit stipulated relates only for specific type of duties i.e. education cess on excisable goods or payment of education cess on output service. There is no restriction for utilisation of common input credit availed on the inputs and also on input service for payment of excise duty or service tax. Hence, we do not find any reason to deny the input service credit on the ground that it was shown in the ER-1 return. - creidt allowed. Use of capital goods in immovable property - Held that:- the Appellant is unable to render the repair/refit service without the crane in Dry Dock and which can be treated as capital goods. The case law relied upon by the learned Authorised Representative is in context of excisability of goods, and the Tribunal already considered in earlier decision. - credit allowed. Denial of cenvat credit on the basis of document issued by the ISD (Input Service Distributor). - Held that:- As per CENVAT Credit Rules, the Appellants are eligible to avail the credit on the invoices issued by the ISD. There is no reason to deny the credit on the ground that the address of the ISD was not mentioned in the LOP. - denial of CENVAT Credit alongwith interest and penalties cannot be sustained. Accordingly, the impugned order is set aside - Decided in favour of assessee.

  ---

• 2015 (8) TMI 57
  Clandestine manufacture and removal of goods - Non accounting of goods - whether on the basis of the evidence, the Commissioner's orders confirming the duty demands against the appellants and imposing penalty on them can be upheld - Held that:- Investigation in respect of the appellant unit started when the unit of NIPL was visited by the Central Excise officers on 03/10/05 and their sales of MS Ingots to various rolling mills were ascertained on the basis of the entries in their private ledger books. It was found that NIPL were not showing the entire quantity of MS Ingots sold by them to various customers in the RG-1 register and were paying duty on much lesser quantity. Since the appellant unit - M/s Everest, M/s MPK and M/s Khetan were among the customers of NIPL, the quantity of MS Ingots supplied by NIPL to these units during period from 02/8/05 to 01/10/05 as per the entries of NIPL ledger book was compared with the supplies as per NIPL records in respect of which the invoices had been issued. It is on this basis it is alleged that during the period from 02/8/05 to 01/10/05 M/s Everest, M/s MPK and M/s Khetan have received 143.32 MT, 40.21 MT and 39.93 MT of unaccounted MS Ingots from NIPL. However, the duty demand against M/s Everest, M/s MPK and M/s Khetan is not on this basis Thus the evidence in support of Department's allegation of duty evasion against the appellants is - (a) entries in the private ledger book of NIPL which showed supply of certain quantity of MS Ingots to the appellants during period from 02/8/05 to 01/10/05 for which no invoices have been issued by NIPL and (b) power consumption per MT of rolled products in the case of SSSRM - 102,09 units per MT while the same in the case of the appellant units is from 225 units per MT to 275 units per MT. No experiments or studies have been conducted by the Department in respect of the rolling mills of the appellant companies to determine their average power consumption for production of one MT of rolled products. - Commissioner in the order in the case of M/s Everest has accepted that the rolling mills of SSSRM is automatic rolling mill, but he has still applied the power consumption norm of SSSRM to the appellant unit, on the ground that the products being manufactured by SSSRM are CTD bars which consume more power while the products being produced by the appellant consume lower power. In our view this assumption is an arbitrary assumption without any basis and without conducting any study or experiment in this regard. - not even inspection or study has been conducted to. determine their actual power consumption norm. Beside this, neither any evidence unaccounted purchase of raw material nor there is any evidence of clandestine/ unaccounted clearances of final product. Merely on the basis of an arbitrarily adopted power consumption norm, the production of an assessee on the basis of his power consumption cannot be estimated and duty demand cannot be affirmed against him on this basis. - impugned orders are not sustainable. The same are set aside. - Decided in favour of assessee.

  ---

• CST, VAT & Sales Tax

• 2015 (8) TMI 63
  Denial of Input tax credit - Held that:- Value added tax paid at the rate in force on the date of purchase of goods from a taxable person, becomes input tax credit on the date of purchase, if the purchased goods are for resale etc., in the manner prescribed, thereby providing that input tax credit earned by a taxable person on the date of purchase of taxable goods, at the rate of taxation in force, during a particular tax period would be his input tax credit provided the goods are for resale/sale etc. in the State of Punjab or for inter-state trade or commerce or in the course of export or for use in the manufacture, processing or packing of taxable goods for sale within the State or inter State transaction and in the course of export etc. The respondents do not deny that members of the petitioners-association purchased goods for resale/sale and manufacture etc., in the State of Punjab and had already earned input tax credit, regarding the goods lying in stock, on 21.01.2014. The dispute is confined to Rule 21(8) of the Rules. A perusal of the Act reveals that on 21.01.2014 there was no provision in the Statute that empowered the State to enact a rule to provide that input tax credit already earned on goods lying in stock shall now be availed and calculated by reference to the reduced rate of taxation prevalent on the date of their sale. The amendment conferring such a power by amending the first proviso to Section 13 of the Act, admittedly, came into force on 01.04.2014 by deleting the words "are for sale" etc. and replacing them with the words "unless such goods are sold" etc., thereby for the first time linking the availing of input tax credit to the rate prevalent on the date of the "sale of goods" etc. to the rate of taxation in force on the date of sale. The amendment in the first proviso to Section 13 of the Act introducing the words "are sold" etc. came into effect on 01.04.2014. The State of Punjab was, therefore, empowered in the exercise of its power of delegated legislation to notify a rule linking the availing of input tax credit already earned, to their sale, on 01.04.2014. Rule 21(8) of the Rules which resonates the first proviso to Section 13 of the Act by linking the availing of input tax credit to goods sold and thereby to the reduced rate of taxation, came into effect on 21.01.2014 on which date there was no statutory provision enabling the State, in the exercise of its power of delegated legislation, to notify a rule that input tax credit would be "availed" on the sale of goods lying in stock or their manufacture etc. by reference to the reduced rate of taxation, prevalent at the time of "sale/manufacture" etc. of goods that had already earned a determinate amount of input tax credit. The State may be well within its power to alter the terms & conditions of availing input tax credit by a piece of subordinate legislation but as subordinate legislation may only be notified if it is relatable to statutory power enabling the State to notify such a rule, but the absence of such a provision in the statute, empowering the State to notify such a rule, between 21.01.2014 and 01.04.2014, in our considered opinion, did not empower the State, in the exercise of its power of delegated legislation to notify Rule 21(8) of the Rules on 21.01.2014. - on the date of introduction of sub Rule (8) of Rule 21 of the Rules, the State did not possess any power, emanating from the Act, to confine the availing of input tax credit to the reduced rate of tax on stock in trade i.e. transactions that had concluded with the dealer already earning input tax credit. A further perusal of the amendment in the first proviso to Section 13 of the Act reveals that it is not retrospective but applies to transactions after 21.01.2014. The amendment in the rule, which came into effect prior to the amendment the Act could, therefore, not be enforced, by the respondents before 01.04.2014 to take away a vested right already determined without statutory sanction. - Decided in favour of assessee.

  ---

• 2015 (8) TMI 62
  Levy of purchase tax - whether the petitioner-sugar mill was liable to pay the purchase tax on the sugarcane purchased by it from the growers - Held that:- The respondents therein contended that sugarcane was exempted from purchase tax inter-alia in view of section 4-B of the PGST Act. The Supreme Court noted the definitions in Section 2 of the PGST Act of the terms “dealer’, ‘goods’ ‘purchase’ ‘sale’ and ‘turnover’. The Supreme Court also noted Section 4 of the PGST Act which was the main charging section and section 5 which defines the expression ‘taxable turnover’ - Analyzing the provisions of the Finance Act, the Supreme Court observed that it provides for levy of different types of commercial taxes which are generally leviable in the State of Bihar and that the object of the Sugarcane Act was to regulate the production, supply and distribution of sugarcane intended for use in sugar factories and for taxation of sugarcane and matters incidental thereto. In Suganthi Suresh Kumar v. Jagdeeshan [2002 (1) TMI 1284 - Supreme Court of India], the Supreme Court held that the High Court cannot question the correctness of the decision of the Supreme Court even though the point raised before the High Court was not considered by the Supreme Court. In Director of Settlements A.P. and others v. M.R.Apparao and another [2002 (3) TMI 909 - SUPREME COURT], the Supreme Court held that the decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered by, or that relevant provisions were not brought to the notice of the Supreme Court. - The legislature has imposed the tax. The amounts collected may well be available to the legislature to be spent for the purposes mentioned therein and in the statement of objects and reasons. These are aspects which can be gone into only by the Supreme Court and not by this Court for accepting these submissions would in effect result in this Court holding that the judgment of the Supreme Court in Jagatjit Sugar Mill’s case (1994 (10) TMI 259 - SUPREME COURT OF INDIA) is not good law. - Decided against assessee.

  ---

• Wealth tax

• 2015 (8) TMI 47
  Wealth tax - Claim of exemption - Urban land - Revenue Authorities assessed the value of the land as on valuation date - AO held the assessee to be liable to penalty u/s 18(1)(c) as the assessee was entitled under the ULCA to make an application for regularisation of the land and that the assessee had on the one hand, not even made such an application and on the other, claimed exemption from wealth tax on this ground - Held that:- Out of the total land of 1790 sq.meters, there is no dispute with reference to the fact that the land is subjected to proceedings under the ULCA. There is also no dispute that the ULCA Authorities have declared 790 sq. meters as excess land. Even though the ld CIT (A) has stated that final statement u/s 9 of ULCA had not been prepared, it was the contention that the assessee has preferred to make an application u/s 20 for exemption for surrender of excess land. It is also a fact that the said exemption was granted on 7.4.2008 i.e. beyond the A.Y under consideration. It is also a fact that the assessee is not certain about which portion of the land being 790sq.meters declared excess would be demarcated and acquired by the Govt. Therefore, there is uncertainty not only with reference to the right of construction but also which portion of the land would be allotted to the assessee. In view of this uncertainty, we cannot value the property as per the Sub Registrar valuation adopted by the AO holding that the assessee has complete rights over the property. Further as per Explanation-1 of section 2(ea) it has been categorically stated that where construction of building is not permissible under any law for the time being in force, the same does not come under the definition of asset for Wealth Tax purposes. There is no dispute that the land in question is covered by the ULCA and the assessee can neither alienate the land, nor construct any building thereon. Therefore, since the asset on valuation date is restricted by the ULCA and further exemption was granted only on 7.4.2008, we are of the opinion that the Revenue Authorities wrongly assessed the value of the land as on valuation date at 7.49 crores, we direct the AO to exclude this amount - Decided in favour of assessee.

  ---

• Indian Laws

• 2015 (8) TMI 69
  Central Government by letter dated 3rd November, 2010 stated candidates seeking appointment to post of Lecturer/Assistant Professor must fulfill minimum qualifications, including condition of passing NET test as prescribed by UGC – Held that:- by Section 20 of University Grants Commission Act, 1956, Central Government is empowered to give directions on questions of policy relating to national purposes which shall guide Commission in discharge of its functions. Vested right would arise only if any of Appellants was actually appointed to post – Till date, there is no vested right in any of appellants, at highest, they could only contend that they have right to be considered for post –Merely because additional eligibility condition in form of NET test was laid down it did not mean that any vested right of Appellants was affected – Object of directions of Central Government were to maintain excellence in standards of higher education and there was nothing arbitrary or discriminatory in this – Larger public interest was nothing less than having highly qualified Assistant Professors to teach in UGC Institutions – Decision in the case of Trimbak Damodhar Rajpurkar v. Assaram Hiraman Patil [1961 (11) TMI 65 - SUPREME COURT] followed – Decided against Appellant.

  ---