TMI Tax Updates - e-Newsletter
August 6, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Assessee in this case is not a sub-contractor & cannot escape the tax liability on the ground that main contractor has paid service tax - HC

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• Circular cannot be issued for foreclosing discretion or judgment that may be exercised by the quasi judicial authority - No service tax - SC

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• Gift from HUF - HUF can be treated as a relative u/s 56(2) so as to exclude the amount received from HUF by the assessee-individual - Tri

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Articles

1. Refund of pre-deposit is permissible though a simple letter and no need to file refund claim u/s 11B of the CEA

   By: Bimal jain

2. GST KNOWLEDGE SERIES # 4: COMPARISON OF GST BILL 2014 AND RECOMMENDATIONS OF SELECT COMMITTEE OF RAJYA SABHA,2015

   By: Chitresh Gupta

News

1. Roping in States to Boost Exports

2. SEZs Operational in the Country

3. Overhauling of Import and Export Policy

4. FDI in 2015-16

5. Government Defers the proposed talks between the Chief negotiators on India –EU Broadbased Investment and Trade Agreement (EU-BTIA)

6. Strategy for Expansion of E-Commerce

7. Growth of Organised Manufacturing Production

8. Setting up of Industrial Townships

9. New Initiatives to Attract Foreign Investment

10. Industrial Development Centres in Uttar Pradesh, Bihar and Maharashtra

11. Increase in FDI Cap in Some Sectors

12. RBI Reference Rate for US $

13. Third Bi-monthly Monetary Policy Statement, 2015-16 By Dr. Raghuram G. Rajan, Governor

Notifications

Customs

1. 43/2015 - dated 4-8-2015 - Cus

Seeks to further amend notification No. 12/2012-Customs so as to delete the requirement of registration of Ship Repair Unit with Director General of Shipping

Circulars / Instructions / Orders

VAT - Delhi

1. 17/2015-16 - dated 4-8-2015

Filing of online return for 1st quarter of 2015-16 – extension of period thereof

DGFT

2. 29/2015-20 - dated 4-8-2015

Amendment in paragraph 3.05 of Handbook of Procedures of FTP, 2015-2020

Customs

3. 20/2015 - dated 31-7-2015

Grant of reward to informers and Government Servants - Review of Policy, Procedure and issue of revised Guidelines - regarding

Highlights / Catch Notes

Income Tax

• Compensation for management services under India-UK DTAA is not technical; no TDS required u/s 195.

  Case-Laws - AAR : India-UK DTAA - Compensation received for providing “Management Services” - These are routine managerial activities and cannot be classified as technical or consultancy services - Not chargeable to tax - No TDS is required u/s 195 - AAR
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• Software Sales Payments Classified as Royalties; TDS Deduction Required Under IT Act Section 9(1)(vi) and DTAA Article 12.

  Case-Laws - AAR : The payments received by the applicant from the distributor for sale of the software product are in the nature of royalty both within the meaning of section 9(1)(vi) of the IT Act and within the meaning of Article 12 of the DTAA - TDS required to be deducted u/s 195 - AAR
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• Bonus Disallowance Upheld: Payment Not Made Before Due Date Per Section 43B; Claim Rightfully Denied by Lower Authorities.

  Case-Laws - AT : Disallowance of bonus payable to employees u/s 43B - Since the assessee has not made payment before the due date of filing of the return, the lower authorities have rightly disallowed the claim of payment of bonus - AT
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• Director's Travel Expenses Partially Disallowed Due to Lack of Evidence; 25% Cut Upheld by Authorities.

  Case-Laws - AT : Travelling & conveyance (Director) expenditure - assessee shown its inability to produce any documentary evidence - Disallowance of 25% made by the AO is not unreasonable - AT
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• Taxpayer Penalized for Non-Voluntary Income Surrender u/s 271 of Income Tax Act After Investigation.

  Case-Laws - AT : Nature of surrendered income - Penalty u/s 271 - it is not a case of voluntary surrender where the assessee has came forward and made a surrender statement. It is a case where the Assessing Officer has made detailed investigation and when the assessee was cornered, he come forward with the proposal of surrender - penalty confirmed - AT
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• Failure to Deduct TDS on Salaries Transferred to UP Cooperative Union Leads to Disallowance, Upheld on Appeal.

  Case-Laws - AT : TDS u/s 192 - Payment of salary by transfer to UP Cooperative Union for deputed persons / supervisors - TDS was deductible and since it was not done by the assessee, the disallowance made by Assessing Officer and confirmed by CIT(A) is proper - AT
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• Interest Disallowed on Borrowed Funds Used for Interest-Free Loans; Section 11AA Exemption for SEZ Unit Denied.

  Case-Laws - AT : Disallowances of interest - part of borrowed funds has been utilized in providing interest free loans to M/s Eros Exports - assessee, itself admitted that direct nexus between borrowings and advancing loan - AO's order for Disallowance interest and exemption and u/s 11AA (SEZ unit) confirmed - AT
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• Taxpayer Allowed Exchange Loss Deduction on Export Goods Adjusted Against Export Advance.

  Case-Laws - AT : Disallowance of exchange loss incurred on export of goods - exchange loss on export of goods adjusted against the export advance is allowable to the assessee - AT
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• Leave Encashment Allowed When Based on Proportional Scheme Aligned with Employee Entitlements.

  Case-Laws - AT : Premium towards leave encashment - provision for leave encashment was held to be allowable if the same was based on a particular scheme proportionately with the entitlements earned by the employees - AT
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• Gifts from Hindu Undivided Families Excluded from Taxable Income u/s 56(2) of Income Tax Act.

  Case-Laws - AT : Gift from HUF - HUF can be treated as a ‘relative’ under the provisions of section 56(2) so as to exclude the amount received from HUF by the assessee-individual - amount of gift is not taxable - AT
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• Sales via Bank Channels Using Cheques Not Subject to Additions Without Specific Inquiry by Assessing Officer.

  Case-Laws - AT : Once all the sales have been made through banking channel, i.e., through account payee cheques and there is no specific inquiry by the AO to rebut the assessee’s explanation, then no addition on account of differential sale price and variation in the profit margin can be made - AT
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• No Exempt Income, No 14A Disallowance: MAT Book Profit Calculation Clarified u/s 115JB.

  Case-Laws - AT : Recalculation of the profit for purpose of computing the MAT u/s 115JB - Book adjustments - in the absence of any exempt income, section 14A disallowance cannot be added to book profit u/s 115JB of the Act - AT
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• Revenue Authorities Confirm Tax Additions Due to Assessee's Failure to Prove Creditor's Capacity in Unexplained Gifts Case.

  Case-Laws - AT : Unexplained gift/loans received - Gift received - the capacity of the creditor alone was questioned by the revenue authorities. This cannot be equated as calling upon the assessee to furnish source of source - assessee failed to prove the capacity - additions confirmed - AT
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• Credit card facility payments to banks are bank charges, not commissions; no TDS u/s 194H required.

  Case-Laws - AT : TDS provisions u/s 194H - credit card charges - payments to banks for utilization of credit card facilities are in the nature of bank charges and not commission and, therefore, no tax is deductible at source u/s 194H - AT
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Customs

• Court Finds License Revocation for Forged Certificate Too Harsh; Cites Clause 19 and Regulation 20 in Decision.

  Case-Laws - HC : Revocation of CHA license - Submission of forged certificate - appellant cannot be absolved of his lapse of supervision attracting Clause 19 of the Regulations warranting action against him under Regulation 20 - however, termination of the license is too harsh and disproportionate - HC
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• Penalty on Customs House Agent Overturned After Unintentional Involvement in Fraudulent Import Scheme Found Unjustified.

  Case-Laws - AT : Imposition of penalty on CHA - Import of prohibited goods - After finding that the appellant has become unknowingly party to fraudulent import, the imposition of penalty is unjustified - AT
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• Appellant Penalized u/s 114 for Abetment in Attempted Illegal Export; Penalty Upheld Due to Involvement and Goods Nature.

  Case-Laws - AT : Penalty u/s 114 for abetment - Having regard to the fact and the role played by the appellant in the attempted illegal export and the nature of the impugned goods, levy of penalty confirmed - AT
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Service Tax

• High Court Reviews Legality of Service Tax Circular on Mutual Funds Citing Section 37B Proviso of Central Excise Act.

  Case-Laws - SC : Levy of service tax on the activity of mutual fund distribution - validity of circular - The High Court referred to the proviso to Section 37B of the Central Excise Act, 1944, which categorically states that such kind of circulars cannot be issued - SC
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• High Court Confirms Cenvat Credit Availment for Input Services on Outdoor Catering by Assessee is Valid.

  Case-Laws - HC : Cenvat Credit - input services - outdoor catering service - the issue that the Cenvat Credit can be properly availed by the assessee in respect of outdoor catering services is clearly settled now - HC
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• Assessee in clearing services can't escape service tax by arguing main contractor's payment; avoids double taxation.

  Case-Laws - HC : Clearing and Forwarding Services - the assessee in this case is not the sub-contractor and cannot escape the service tax liability on the ground that main contractor has paid the service tax and there will be double taxation - HC
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Central Excise

• Appellants face duty demand over fabric shortage; committees formed post-CAG Audit Report fail to justify deficit.

  Case-Laws - AT : Duty demand - shortage of fabrics - Suppression of facts - appellant themselves have constituted two committees, as directed by CAG Audit Report, proves that there was huge shortage where the appellants were unable to explain the reasons with clear evidence - demand confirmed - AT
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• Permission Granted After Initial Refusal to Remove Goods for Processing u/r 16C of Central Excise Rules, 2002.

  Case-Laws - AT : Refusal to grant of permission to remove the goods for further processing under Rule 16C of the Central Excise Rules, 2002 - The order does not mention any specific reasons as to how the appellant is not found deserving for grant of permission under Rule 16C of the Rules - permission granted - AT
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• Show Cause Notice Invalidated: Lack of Evidence for Fraudulent Intent Bars Use of Extended Limitation u/s 11A.

  Case-Laws - AT : Validity of SCN - no specific findings have been recorded regarding the involvement of the appellant in any fraudulent activities concerning fraud, collusion, miss-appropriation etc. with intent to evade payment of duty - SCN could not be issued u/s 11A invoking expended period of limitation - demand set aside - AT
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VAT

• High Court Invalidates APVAT Assessment Order Due to Procedural Violations, Urges System-Generated Methodology to Avoid Arbitrary Decisions.

  Case-Laws - HC : Validity of assessment order - APVAT - Authority of AO - reading of the Circular leaves no manner of doubt that the effort of the higher authorities is to create definite system generated methodology to avoid the allegations of the arbitrariness - there being admitted violation of the procedure prescribed by the authorities themselves, the assessment order passed is set aside - HC
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Case Laws:

• Income Tax

• 2015 (8) TMI 136
  India-UK DTAA - Compensation received for providing “Management Services” - Whether is not in the nature of Fees for Technical Services (FTS) under Article 13 of India-UK Tax Treaty? - According to the Revenue the applicant is providing management consultancy through the analysis of existing organizational problems and development of plans for improvement - Held that:- The services under agreement No.1 relate to review by GD and general guidance given by him on financial, operational, human resource, setting up targets and performance appraisal related matters. GD is providing these services from the UK mainly, his visits during a year are generally for short duration having aggregate number of days of visit in a year never exceeding 30 days. The applicant has provided sample e-mails sent by GD to MTL India which show that his services generally related to human resource matters, cost control, fund management, quality and design reviews etc. These are routine managerial activities and cannot be classified as technical or consultancy services. This authority had ruled in the case of Invensys Systems (2009 (8) TMI 6 - AUTHORITY FOR ADVANCE RULINGS ) that even though some of the services may have the trappings of technical or consultancy service, looking at the nature and the predominant nature of the services, they primarily fall under the category of managerial services. Similar is the case in respect of services provided by GD. Moreover, by providing such services he is not making available any technical knowledge of enduring benefit in nature which would enable employees of MTL India to apply them on their own in future. Also analyzing the procurement services provided through agreement No.2, procurement team travels to different countries to visit suppliers and distributors to determine the best price that would be available to entire MTL Group including MTL India. These types of services can never be classified as technical or consultancy in nature and surely are not making available any technical knowledge, experience, know-how etc. The reliance of the Revenue on the rulings in the case of Intertek Testing Services (2008 (11) TMI 9 - AUTHORITY FOR ADVANCE RULINGS) and GVK Industries (supra) is misconceived and out of place. As regards PE the Revenue has not offered any comments in the absence of facts but the applicant has stated that GD has never visited India for more than 30 days in a year and, therefore, his visit would not constitute a ‘service PE’. As regards visits by other employees, the applicant has also agreed that the Income-tax Department may ascertain the facts in the course of assessment proceedings and determine the applicability of Article 5(3)(k) of the India-UK Tax Treaty. The far-fetched argument of revenue that services provided may be covered under ‘Royalties’ because various services provided by the applicant are of commercial experience which involved confidential information or experience from commerce, business, science or industry because services provided under both agreements are general and routine in nature and do not create any intellectual property. It cannot even be imagined that rendering of such services would qualify as ‘Royalties’ as per the provisions of Article 13 of the India-UK Treaty. Thus the amount received by the applicant for services rendered as per agreement No.1 is not chargeable to tax in India as per the provisions of the India-UK Tax Treaty. The amount received for services rendered as per agreement No.2 is not chargeable to tax in India as per the provisions of the India-UK Treaty. - Decided in favour of assessee.

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• 2015 (8) TMI 135
  ‘Fees for technical services’ under Article 12(3)(b) of the Agreement between the Government of the Republic of India and the Government of Ireland - whether payments received by the Applicant would be characterized as ‘royalty’ under Article 12(3)(a) of the India-Ireland Treaty? - Permanent Establishment (“PE’) - whether the payments received by the Applicant for the SkillSoft Products would be subject to withholding tax in accordance with the provisions of section 195 ? - Held that:- A SkillSoft Product consist of two components. The first is course content and the second is the software through which the course is delivered to the end customer. The applicant enters into a Reseller Agreement with the SkillSoft India for sale of SkillSoft Products. SkillSoft India buys the SkillSoft Product from the applicant and sells the same to the Indian end-users under the master license agreement, which is primarily in the nature of a software/content license agreement whereby the Indian endusers are permitted to access the e-learning platforms and the educational content. SkillSoft India provides to the end-users the access code/web-link by which they could access the SkillSoft Products. We have also gone through a demo of the website of the applicant and could see that they were marketing several copyrighted software containing simulation exercises and such software simulations were especially designed by them. Such especially designed software are not available in public domain. It is clearly mentioned by them that these products are ‘licensed by the Applicant to SkillSoft India under the Agreement and further sub-licensed/distributed to end customers in India under the Customer Agreement.’ It is not correct to say that the applicant’s case is completely different from the facts of a case surrounding software. The fact is that software and computer databases created by the applicant are included within the ambit of ‘literary work’ and therefore covered under Article 12(3)(a). The payments received by the applicant from the distributor for sale of the software product are in the nature of royalty both within the meaning of section 9(1)(vi) of the IT Act and within the meaning of Article 12 of the DTAA As regards definition of royalty under DTAA, it was held in the case of Synopsis [2013 (2) TMI 448 - KARNATAKA HIGH COURT ] that under the DTAA to constitute royalty there need not be any transfer or any rights in respect of any copy rights and it is sufficient if consideration is received for use of or the use to any copyright. Therefore if the definition of royalty in the DTAA is taken into consideration it is not necessary that there should be a transfer of any exclusive right. In terms of the DTAA the consideration paid for the use or right to use the said confidential information in form of computer programme software itself constitutes royalty. We respectfully agree with the findings of Hon’ble Karnataka High Court in the case of Synopsis. No permanent establishment is created for the applicant in India under the provision of Article 5 of the DTAA. The payment received by the applicant would be subject to withholding tax in accordance with the provisions of the section 195 of the IT Act. - Decided in favor of revenue.

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• 2015 (8) TMI 134
  Expenses incurred in obtaining club membership - revenue v/s capital expenditure - Held that:- It is not in dispute that various decisions of the Tribunal had followed the decision of this Court in the matter of Otis Elevator Co. (India) Ltd. (1991 (4) TMI 53 - BOMBAY High Court a) and allowed entrance fees of club as revenue expenditure. Further, this Court has also in numerous matters applied the decision of Otis Elevator Co. (India) Ltd. (supra) to the cases were entrance fees of club membership was an issue in dispute and held that the same is allowable as revenue expenditure - Decided in favour of assessee. Computer software expenses - revenue v/s capital expenditure - Held that:- The expenses were incurred to obtain the application software which gets upgraded from time to time due to change in technology. This licence being for limited period would have to be renewed from time to time. In the aforesaid circumstances, the Tribunal held that considering the nature of the software licence i.e. application software, the same has to be allowed as a revenue expenditure. In view of the finding of fact arrived at further by the Tribunal that the expenses have been incurred on application software which is for a limited time frame and has to be renewed from time to time, we see no reason to entertain question B as framed by the revenue.- Decided in favour of assessee. Compensation paid by the assessee for pre-closure of agreement entered with M/s. Industrial Oxygen Limited (INOX) for supply of nitrogen - revenue v/s capital expenditure - Held that:- The contract was terminated by the respondent-assessee for commercial expediency as the quality if nitrogen gas and timely supplies by M/s. INOX was an issue leading to respondent setting up its own plant. The agreement was cancelled by the respondent-assessee approximately 10 months prior to the culmination of the agreement. Further the break up of the compensation which was paid to INOX for cancellation of the agreement was for compensation for fixed facility charges for the balance period of 10 months; compensation for short lifting of gas for the balance period of 10 months and compensation for pipe line rental paid to MIDC. Thus, the aforesaid heads of compensation were in the nature of revenue expenditure and not capital expenditure.- Decided in favour of assessee. Diallowance of Bad debts - ITAT allowed claim - Held that:- Yhe issue stands covered in favour of the assessee and against the revenue by the decision of TRF Ltd. (2010 (2) TMI 211 - SUPREME COURT). Accordingly, no reason to entertain question.- Decided in favour of assessee.

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• 2015 (8) TMI 133
  Disallowance of bonus payable to employees u/s 43B - the same was not paid before the due date of filing of return - Held that:- As find from the balance sheet as on 31.3.2009 that an amount of Rs. 30 lakhs was appearing under the head Bonus payable (2008-09) and this amount was not paid till 30.9.2009. When this fact was confronted to the assessee, the assessee vide reply dated 26.12.2011 admitted that the bonus payable at Rs. 30 lakhs could not be paid before the due date of filing of the return i.e. 30.9.2011. He, however, claimed that a provision under section 43B of the Act is applicable in the present case, but this argument cannot be appreciated as the provision for bonus payable cannot be allowed under section 43B of the Act. Since the assessee has not made payment before the due date of filing of the return, the lower authorities have rightly disallowed the claim of payment of bonus - Decided against assesee. Whether Bonus pertaining to earlier year actually paid during the year under appeal should have been allowed as per provision of section 43B - Held that:- This amount was not disallowed in earlier years, therefore, it cannot be allowed and adjusted in the current year. Accordingly, the order of the ld. CIT(A) on this issue is confirmed.- Decided against assessee. Disallowance of amount deposited under the Group Gratuity Scheme of LIC of India - the Gratuity Fund of the appellant was not approved by the Competent Authority for recognition of the gratuity fund as provided under the provisions of section 36(l)(v) - Held that:- In the absence of proper recognition by the competent authority, the expenditure under the head employers contribution towards provident fund, cannot be allowed. We accordingly confirm the order of the ld. CIT(A) on this issue.- Decided against assessee. Addition being the difference between deposits and deduction of employees' provident fund - Held that:- As during the course of assessment proceedings, the Assessing Officer has noticed that total deduction on account of employee’s contribution towards EPF from April, 2008 to March, 2009 was Rs. 58,87,417/- whereas the amount deposited was Rs. 59,52,666/-. The difference of Rs. 65,249/- was added as income by the assessee treating the same as penal interest, against which an appeal was filed before the ld. CIT(A), but no submission was advanced and the ld. CIT(A) has correctly confirmed the addition. - Decided against assessee.

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• 2015 (8) TMI 132
  Disallowance of telephone expenses - CIT(A) restricted it to 7.5% of the total expenses - Held that:- We find force in the submissions of Learned A.R. of the assessee that no disallowance is called for in the case of the assessee out of telephone expenses on the basis that it was partly used for personal purposes by the Directors/ employees of the assessee company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Hence, by respectfully following this judgment of Sayaji Iron and Engg. Co. vs. CIT [2001 (7) TMI 70 - GUJARAT High Court ] we hold that no disallowance is justified out of telephone expenses on the basis that it was used for personal purposes by the Directors/employees of the assessee company. - Decided against revenue. Disallowance of freight & cartage (outward)- CIT(A) held that the genuineness of expenditure incurred in cash and on self-made vouchers cannot be doubted in all cases and held that disallowance of 5% as against 30% made by the AO is reasonable - Held that:- The order of CIT(A) is not sustainable because this is not the basis of the Assessing Officer that the expenses were incurred in cash. The main basis is that the expenses are abnormally high. When such abnormal increase in the expenses is considered in the light of the facts that majority portion of increase in expenditure is incurred in cash, the disallowance of 30% is not excessive and unreasonable. We, therefore, reverse the order of CIT(A) and restore that of the Assessing Officer. - Decided in favour of assessee. Disallowance of vehicle running & maintenance - CIT(A) restricted it to 10% of the total expenses - Held that:- We find force in the submissions of Learned A.R. of the assessee that no disallowance is called for in the case of the assessee out of vehicle running and maintenance on the basis that it was partly used for personal purposes by the Directors/ employees of the assessee company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Hence, by respectfully following case of Sayaji Iron and Engg. Co. vs. CIT [2001 (7) TMI 70 - GUJARAT High Court ] we hold that no disallowance is justified out of vehicle running and maintenance on the basis that it was used for personal purposes by the Directors/employees of the assessee company. - Decided in favour of assessee. Disallowance of consumable stores - Held that:- In the present year, the assessee has claimed an amount of Rs. 2206.85 lac under the head consumable store as compared to Rs. 2286.27 lac in assessment year 2003-04. The Assessing Officer made disallowance of 10% on the basis that the expenses were not open to complete verification. The CIT(A) has held that the disallowance of 5% will meet the ends of justice. While deciding the appeal of the assessee and Revenue for assessment year 2003-04, we have held that no disallowance is justified because increase in turnover in assessment year 2003-04 as compared to assessment year 2001-02 was more than increase in claim of expenses under this head in assessment year 2003-04 as compared to assessment year 2001-02 and therefore, it was held that no disallowance is justified. In the present year we have seen that although there is increase in turnover of 5%, the expenses under this head have gone down to Rs. 2206.85 lac as compared to Rs. 2286 lac in assessment year 2001-02. Under these facts, in our considered opinion, no disallowance is justified - Decided in favour of assessee. Disallowance on account of travelling & conveyance (Director) - Held that:- it is noted by the Assessing Officer in the assessment order that the assessee has debited Rs. 2,60,605/- under the head ‘travelling & conveyance (Director)’ and when the Assessing Officer asked the assessee to explain this expenditure, the assessee could not produce any documentary evidence and the assessee shown its inability to produce any documentary evidence. Under these facts, the Assessing Officer made disallowance of 25%. The CIT(A) also held that the assessee could not produce any documentary evidence. Before us also, no documentary evidence was produced therefore, we do not find any reason to interfere in the order of CIT(A). - Decided against assessee Disallowance on account of general expenses - CIT(A) restricting the disallowance to 5% of the total expenses - Held that:- the expenses debuted under the head ‘general expenses’ are small day to day expenses incurred for newspaper, journals, magazines, refreshment for customers, typewriter repairing expenses as noted by the Assessing Officer in para 8 of the assessment order and incurring of such expenses in cash is quite normal and therefore, merely for this reason that the expenses are incurred in cash, no disallowance is justified. - Decided in favour of assessee. Disallowance on account of repairs & maintenance (building) - CIT(A) upheld the disallowance of 5% as against 10% made by the Assessing Officer - Held that:- expenses incurred is not dependent on turnover and the same can be very high in one year and very low in some other year and therefore, only for this reason that the expenses incurred on account of repairs & maintenance of building is very high, no disallowance can be made. Since no other reason is given for making the disallowance, we hold that no part of this disallowance can be confirmed - Decided in favour of assessee. Disallowance of generator expenses - CIT(A) upheld the disallowance of 5% - Held that:- no abnormal increase in the expenses in the present year and considering the ratio laid down by Hon'ble Gujarat High Court in the case of Sayaji Iron (supra), that for personal use of the assets/facilities of the assessee company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Therefore, we decline to interfere in the order of CIT(A) on this issue - Decided against revenue.

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• 2015 (8) TMI 131
  Addition on account of excess stock of gold jewellery found during the course of search - CIT(A) deleted the addition - Held that:- CIT(A) has taken note of all the relevant entries found in the seized documents and since no remand report was furnished by the Assessing Officer to the explanations of the assessee, the ld. CIT(A) has rightly held that this amount of Rs. 22,91,212/-was available with the assessee in the shape of jewellery and balance as cash in hand. We accordingly find no infirmity in the order of the ld. CIT(A)on this issue and we confirm the same. - Decided in favour of assessee. Addition for the difference worked out relating to silver jewellery weighing 40.462 Kg and the same was treated to be unaccounted and added to the total undisclosed income of the assessee - Held that:- Since there is no specific finding in this regard in the order of the ld.CIT(A), this ground does not arise from the order of the ld. CIT(A).Moreover, there is nothing in the order of the ld. CIT(A) whereby addition made by the Assessing Officer has been deleted. Accordingly this ground is not maintainable and we reject the same. Addition on account of peak cash credit entries found in the diary during the course of search - CIT(A) deleted the addition - Held that:- CIT(A) has noted totaling error in Annexure A-4 to the extent of Rs. 1.35 lakhs and while making addition onaccount of aggregate credits, relief of Rs. 1.35 lakhs was given to theassessee. Since it was a totaling error, there is no infirmity in the order ofthe ld. CIT(A). Accordingly we confirm the same.- Decided in favour of assessee. Undisclosed investment in elevation of showroom at Birhana Road, Kanpur - CIT(A) deleted the addition - Held that:- The issue was examined by the ld. CIT(A) and he has taken note that the assessee has already declared investment of Rs. 2,82,989/- towards renovation of shop at Birhana Road, Kanpur as against Rs. 3.42 lakhsestimated by the valuation cell. The ld. CIT(A) has noted that thedifference between the investment as declared by the assessee andestimated by the valuation cell is on account of variation in PWD and CPWDrates. The valuation between the two is around 10 to 15% and if thebenefit is given to the assessee the cost estimated by the valuation celltowards renovation of showroom would stand reduced by 15% and in sucha circumstances it would come to Rs. 2,90,700/- as against Rs. 2,82,989/- bythe assessee. Therefore, no addition is called for. The ld. CIT(A)accordingly deleted the addition in this regard. No infirmity has beenpointed out in the order of the ld. CIT(A). We accordingly confirm theorder of the ld. CIT(A) on this issue.- Decided in favour of assessee. Unexplained investment in house property - CIT(A) deleted the addition - Held that:- CIT(A) has correctly observed that the difference between the figures as declared by the assessee and estimated by the valuation cell was on account of variation in CPWD and PWD rates. The ld. CIT(A) accordingly allowed a rebate of 15% and total investment in property comes to Rs. 10,97,350/- as against declared investment at Rs. 11,29,500/-. The ld. CIT(A) accordingly correctly deleted the addition in this regard.- Decided in favour of assessee. Addition on account of Moti Nagine found during the course of search - CIT(A) deleted the addition - Held that:- Since nothing has been pointed out by the Revenue on this issue, we find no infirmity in the order of the ld. CIT(A) on this issue. Accordingly we confirm the same.- Decided in favour of assessee.

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• 2015 (8) TMI 130
  Disallowance of manufacturing and other expenses - CIT(A) allowed part relief - Held that:- Undisputedly the assessee has gone to BIFR for revival of its industry and since there is temporary suspension of the business activities, therefore, minimum expenditure should be allowed. We accordingly find no merit in the arguments of the ld. D.R. Being convinced with the findings of the ld. CIT(A), we confirm the same. - Decided against revenue. Disallowance of Director’s remuneration - CIT(A) allowed relief - Held that:- CIT(A) has allowed the remuneration paid to the whole time Managing Director of the company, having observed that the assessee’s business is temporarily suspended and there is every possibility of its revival, as the assessee has gone in BIFR for revival of its business. We, therefore, find no infirmity in the order of the ld. CIT(A) on this issue and accordingly we confirm the same. - Decided against revenue.

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• 2015 (8) TMI 129
  Non compete Fee - revenue v/s capital receipt - Nature of surrendered income - voluntary or not - Penalty u/s 271 - Held that:- In the statement of Director of Shri. Deepak Babbar, it has been clearly stated in response to question No.2 as noted by the ld. CIT(A) that the company has no business activities since 1997 much before the year 1998 in which it has been claimed by the assessee company that it has entered into an agreement with Swiss company for not doing any business to Russian Federation on account of which, it is being claimed that the assessee company has received a compensation of Rs. 32,51,697/- as non-complete fees. The ld. CIT(A) accordingly observed that a collusion between the assessee company and the USA company cannot be ruled out and even on query no document has been produced from the USA company to show that Shri. Rajiv Gosain was authorized by them as being their authorized signatory. It was also observed by the ld. CIT(A) that during the course of assessment proceedings, the Assessing Officer has raised certain queries and asked the assessee to furnish the details of USA company along with name and address, balance sheet, etc. But nothing was submitted before the Assessing Officer and he accordingly doubted the genuineness of the USA Company. It was concluded by the ld. CIT(A) that Shri. Deepak Babbar was a dummy Director of the assessee company and he has no knowledge of the affairs of the assessee company, as all its affairs were managed by Shri. K.K. Gosain and his son Shri. Rajiv Gosain. When the assessee was cornered with all these facts collected by the Assessing Officer, the assessee came forward and made a surrender of Rs. 32,51,697/- through its letter dated 10.3.2003 though with certain conditions. On the basis of the surrender statement, the Assessing Officer has made addition of this amount of Rs. 32,51,697/-. Assessing Officer has no power or jurisdiction to enter into an agreement with any of the assessee. He has no right to waive the interest or penalty. He has to act in accordance with the law. Therefore, where the assessee has surrendered the aforesaid amount, the Assessing Officer has taxed the same. Moreover, it is not a case of voluntary surrender where the assessee has came forward and made a surrender statement. It is a case where the Assessing Officer has made detailed investigation and when the assessee was cornered, he come forward with the proposal of surrender. Therefore, the contention of the assessee that it was conditional surrender and cannot be accepted in part, cannot be accepted. - Levy of penalty confirmed. Thus we are of the considered opinion that the lower authorities have rightly doubted this transaction and treated it to be sham. Accordingly we find no infirmity in the order of the ld. CIT(A) who has rightly confirmed the addition made by the Assessing Officer. - Decided against assessee.

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• 2015 (8) TMI 128
  Credit of brought forward losses - whether CIT(A)erred in not allowing the additional ground of the appellant for giving credit of brought forward losses? - Held that:- As for assessment year 2004-05, 2006-07 and 2007-08, the return of income was filed by the assessee within due date prescribed u/s 139(1) and the assessment was completed by the Assessing Officer at a loss of Rs. 16.14 lac, Rs. 11.56 lac and Rs. 159.56 lac respectively and these losses were not set off in assessment year 2008-09 and therefore, losses of these are year are eligible for set off in the present year if there was no set off in A.Y. 2005 – 06 of the loss for A.Y. 2004 – 05. The assessment order for assessment year 2005-06 is not available and therefore, this is necessary to find out as to what was the assessed income in that year although the return of income was filed within the due date for this year also and if it is found that there was any loss assessed in that year, such loss should also be eligible for set off in the present year. We we feel that the order of CIT(A) is not sustainable but at the same time, the issue has to go back to the file of the Assessing Officer for fresh decision after finding out the outcome of the assessment in assessment year 2005-06. - Decided in favour of assessee for statistical purposes. Payment of salary by transfer to UP Cooperative Union - deputed persons / supervisors - Non deduction of TDS - Held that:- From the Para from the order of CIT(A), we find that a clear finding has been given by him that the payment of salary by transfer to UP Cooperative Union of Rs. 1,75,000/- each in the case of 3 supervisors is without deduction of TDS and so is the case with other supervisors to whom part of the salary is disbursed by the assessee and part is transferred to UP Cooperative Union for statutory dues. This finding is also given that there is no evidence of any claim of deduction under section 80C of the Act which could have reduced the income to below taxable limit. Hence, it is seen that the TDS was deductible and since it was not done by the assessee, the disallowance made by Assessing Officer and confirmed by CIT(A) is proper.- Decided against assessee. Disallowance of professional charges paid to Shri R.K. Nigam - Non deduction of TDS - Held that:- From the the order of CIT(A), we find that the claim of the assessee is regarding payment of Rs. 94,234/- including the amount of Rs. 36,233/- for reimbursement of expenses. This is by now a settled position of law that if the bill raised for reimbursement of expenses is separate and the bill for service charges is raised separately then there may be case of no deduction of TDS from the reimbursement but the assessee could not produce details that the bills for service charges was raised separately and the claim for reimbursement of expenses was made separately. In the absence of separate bill, composite amount has to be considered for TDS purposes and under these facts, we do not find any reason to interfere in the order of learned CIT(A).- Decided against assessee. Computing the taxable income - Whether profit was inclusive of reversal of NPAs provisions? - Held that:- The matter should go to the file of the Assessing Officer for fresh decision after examining this aspect as to whether the write back of the provision in the present year is out of provision of which year and whether the provision in the respective year was allowed or not and if it is found that the provision in the year of creation of provision was disallowed then the reversal of the provision in the present year should not be taxed and this should be excluded from the profit as per profit & loss account. - Decided in favour of assessee for statistical purposes.

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• 2015 (8) TMI 127
  Disallowance of commission - Held that:- Such ad hoc disallowance without any basis is not justified and hence, we hold that no disallowance is called for out of these expenses claimed by the assessee under the head commission expenses because no basis has been indicated by the Assessing Officer in the assessment order for making this disallowance and the same was made by making a general observation that complete supporting evidence was not brought on record without indicating even one particular evidence, which was asked for by the Assessing Officer and could not be produced by the assessee. Similarly, in assessment year 2003-04 also, the Assessing Officer has made similar observations that the assessee failed to produce complete supporting evidence without pointing out even one particular evidence, which was required by the Assessing Officer and could not be produced by the assessee. Considering all these facts, we delete the complete disallowance under the head commission payment in both the years. - Decided in favour of assessee. Disallowance of telephone expenses - Held that:- As per the judgment of Sayaji Iron and Engg. Co. (2001 (7) TMI 70 - GUJARAT High Court), even if there is personal use of telephone and vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Thus we hold that the disallowance made by the Assessing Officer under the head telephone expenses on the allegation that there may be personal use by the Directors/employees of the assessee company is not justified. Accordingly, we delete the entire disallowance made by the Assessing Officer in both the years under the head telephone expenses. - Decided in favour of assessee. Disallowance of freight & cartage (outward) - Held that:- Even if we compare the expenses claimed by the assessee and turnover of assessment year 2003-2004 and assessment year 2001-2002, the increase in expenditure in assessment year 2003-04 over and above the expenditure of assessment year 2001-2002 is excess about 30% but since the expenses of assessment year 2001-02 itself are excessive and we feel that the disallowance of 30% out of expenses in assessment year 2001-2002 is not excessive, the disallowance of 30% in assessment year 2003-2004 is also reasonable because in assessment year 2003-2004 also, it is noted by the Assessing Officer that freight & cartage outward payment of Rs. 51.57 lac have been made in cash, which was not verifiable as per the Assessing Officer in Para 7 of the assessment order for that year. Hence, in both the years, we find that the disallowance made by the Assessing Officer of 30% of expenses under the head freight and cartage outward is reasonable and justified - Decided against assessee. Disallowance of vehicle running & maintenance - Held that:- We find force in the submissions of Learned A.R. of the assessee because as per this judgment of Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. (supra), even if there is personal use of vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. Therefore, by respectfully following this judgment of Hon'ble Gujarat High Court, both these grounds of the assessee are allowed - Decided in favour of assessee. Disallowance of consumable stores - Held that:- When we compare the turnover of assessment year 2000-01 to assessment year 2001-02, we find that the increase in turnover is around 50% but when we compare the increase in expenses under the head consumption of consumable stores, the increase is around 127%, which is quite abnormal and the same could not be explained by the assessee and this is also worth noting that the expenses under this head were incurred in cash as noted by the Assessing Officer. When we compare the turnover of assessment year 2003-04 with that of assessment year 2001-02, we find that the increase in turnover is about 200% and the increase in consumption of consumables stock in assessment year 2003-04 as compared to assessment year 2001-02 is about 75%. Hence, it is seen that the increase in expenses in the assessment year 2003-04 is not abnormal even if the same is compared with the expenses for assessment year 2001-02 after considering 30% disallowance in that year. Thus the disallowance in assessment year 2001-02 made by the Assessing Officer and confirmed by learned CIT(A) to the extent of 30% in that year is proper and reasonable but no disallowance in assessment year 2003-04 is called for in the facts of the present case in view of the fact that the increase in expenses under this head in assessment year 2003-04 as compared to the reduced expenses of assessment year 2001-02 is about 150% when the turnover increase in assessment year 2003-04 as compared to assessment year 20001-02 is about 200%. - Decided partly in favour of assessee. Disallowance of unabsorbed depreciation - Held that:- When we go through the order of learned CIT(A) for assessment year 2001-02, we find that the issue regarding unabsorbed depreciation is not arising out of order of CIT(A) in that year because the ground raised by the assessee before CIT(A) was regarding disallowance out of commission, out of telephone expenses, out of freight cartage outward, out of vehicle running expenses, out of consumable stores and out of previous years expenses and this issue has been raised by the assessee before us by way of normal grounds and not by way of additional ground and therefore, this ground of the assessee does not call for any adjudication because this issue is not arising out of the order of learned CIT(A). - Decided against assessee. Disallowance of depreciation on machinery - Held that:- It is noted by learned CIT(A) for assessment year 2003-04 that the Assessing Officer has disallowed the claim of depreciation on the basis that the assessee could not produce the bill being the cost of new addition to plant & machinery. The said bill was not produced before learned CIT(A) also and the same is also not produced before us and therefore, we do not find any reason to interfere in the order of learned CIT(A) on this issue. - Decided against assessee.

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• 2015 (8) TMI 126
  Disallowance of exemption U/s 10AA - No manufacturing activities were executed in premises of the assessee firm situated in SEZ on or before 31/10/2006 - CIT(A) allowed claim - Held that:- The assessee was issued first LOP vide letter dated 31/10/2003 for one year, which was later on extended for three years vide letter dated 06/12/2005. As per this letter, the assessee has to manufacture or produce the article/goods in SEZ unit on or before 31/10/2006. The AR has furnished the evidence for purchase of rough stones and had also furnished the evidence to issue for the same to the Karigars on 24/10/2006. The assessee has exported the goods on 28/10/2006 to M/s Fine Gems, New York, USA. These details were provided to the Assessing Officer during the assessment proceedings for A.Y. 2007-08. However, certificate of commencement of production issued by the Assistant Development Commissioner on 19/12/2011 were produced during the assessment proceedings for A.Y. 2009-10. - Without machinery the assessee could not have been started production but as claimed by the assessee that the assessee's activity is as such that it can be done by Karigars with the help of hand tools, which are made and carried by themselves. The assessee also produced the gate pass entry maintained by the SEZ authority to demonstrate that old Nageena machine was brought to the unit of the assessee. The final produce was exported by the assessee on 28/10/2006. The goods were shipped by flight NO. IC 612 dated 29/10/2006, which is evident from the noting on the back of the shipping bills. The invoice and shipping bill was duly signed by the Superintendent, Custom, Jaipur SEZ on 28/10/2006. Therefore, we are of the considered view that the ld CIT(A) was right to allow 10AA deduction in A.Y. 2007-08 and 2009- 10. - Decided in favour of assessee. Disallowances of interest - part of borrowed funds has been utilized in providing interest free loans to M/s Eros Exports - assessee, itself admitted that direct nexus between borrowings and advancing loan - CIT(A) deleted the addition - Held that:- There was no credit entry in the account as claimed by the assessee that there was a business transaction with the proprietory concern namely M/s Eros Craft. The ld CIT(A) has wrongly concluded that these payments were for business purposes. - the order of the ld CIT(A) is not justified. We confirm the order of the Assessing Officer. Further the assessee's claim that deduction U/s 10AA is to be allowed on disallowance of interest is not accepted as this income has not been derived from SEZ unit, therefore we reverse the order of the ld CIT(A) and confirm the order of the ld Assessing Officer. - Decided against assessee.

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• 2015 (8) TMI 125
  Disallowance of exchange loss incurred on export of goods - CIT(A) directed AO to allow claim - Held that:- Hon'ble Rajasthan High Court in assessee's own case for A.Y. 90- 91 has held that under the mercantile system of accounting, the claim of a liability is required to be worked out at the close of the accounting year and in our view the assessee appellant had correctly claimed the said amount as a liability as there was fluctuation of exchange on account of Dollar vis-a-vis India Rupee. Exchange loss at the close of the financial year is allowable expenditure u/s 37(1) of the Act. In the case before the Hon'ble Rajasthan High Court, foreign exchange liability is against purchase of goods wherein it has been held that assessee has to shell out the excess amount, therefore, the said amount is allowable. The Hon'ble Rajasthan High Court has relied on the judgment of Hon'ble Apex Court in case of CIT Vs. Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT]. In the present case also, the export advance received by the assessee was a liability which was to be adjusted against the export of goods or by actual remittance on receipt of RBI permission. The Hon'ble ITAT in A.Y. 93-94, has given a direction to allow the exchange loss on the basis of the permission of RBI to remit the export advance and also to allow the exchange loss on account of exports actually effected by the assessee during the year if it is not allowed elsewhere. The AO has allowed the exchange loss on the basis of RBI permission for remittance but he has not allowed the exchange loss on account of exports actually effected without giving any finding that such loss has been allowed elsewhere by simply stating that it is a notional loss. The Ld. CIT(A) after considering the entire material on record has therefore rightly held that exchange loss on export of goods adjusted against the export advance is allowable to the assessee. Similarly, for A.Y. 95-96, the CIT(A) has rightly allowed the exchange loss on actual remittance of US $ 37,81,155 out of the sales proceeds from PPI, Russia as per the permission of RBI received on 18.09.94 and directed to allow the exchange loss with reference to the remittance of US $14,41,332.58 in A.Y. 96-97 on the basis of the permission issued by RBI on 25.03.96. Therefore, the order of CIT(A) is upheld by dismissing the grounds of the department. - Decided in favour of assessee.

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• 2015 (8) TMI 124
  Disallowance of deduction claimed under section 80IA - CIT(A) allowed claim - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee

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• 2015 (8) TMI 123
  Disallowance on a/c of payment of premium for group gratuity made to LIC under section 36(1)(v) - Held that:- Similar issue came up for consideration before the Tribunal in the earlier year 2005-06 and 2007-08 [2015 (8) TMI 171 - ITAT CHANDIGARH] wherein held that if particular fund is not approved then Section 36(1)(iv) would come into operation and such expenditure cannot be allowed. In such situation Sec 37 is not applicable because deduction admissible u/s 30 to 36 cannot be claimed u/s 37. Therefore in our opinion, in view of this decision the claim of the assessee has been correctly denied by the authorities below and accordingly we confirm the order of the Ld. CIT(A) Premium towards leave encashment - Held that:- This issue came up for consideration in the earlier year wherein held the amount has not be paid by way of provision but by way of premium under a particular scheme under which the Insurance company had computed the leave encashment dues. Therefore it cannot be called a payment towards a provision. In any case once the payment has been made the same is allowable under clause (f) of Sec 43B. Otherwise also the issue stands settled in favour of the assessee in view of the decision of Hon'ble Supreme Court in case of Bharat Earth Movers V. CIT, [2000 (8) TMI 4 - SUPREME Court ] in which provision for leave encashment was held to be allowable if the same was based on a particular scheme proportionately with the entitlements earned by the employees. - Decided in favour of assessee. Disallowance of interest on FDRs - Held that:- This issue came up for consideration in the earlier year wherein held that there was no profit motive as the entire fund entrusted and the interest accrued on the deposits in the bank, though in the name of the assessee, had to be applied only for the purpose of welfare of the nation as provided in the guidelines. The whole of the funds belonged to the State Exchequer and the assessee had to channelise them to the objects of the Centrally sponsored scheme of infrastructural development for the mega city of Bangalore. The entire money was received for a public purpose and the end scheme was implemented in accordance with the guidelines of the Central Government. Therefore, in computing the total income of the assessee the interest accrued on the bank deposits could not be treated as income - Decided in favour of assessee, Allocation of cost - whether CIT(A) has erred in holding that the A.O. was not right in apportioning the development cost incurred on 159868 sq. mtrs of marketable land to whole piece of land of 317803 sq. mtrs purchased and developed by the assessee for sale? - Held that:- There is found no logic in the method of calculation of cost of the stock-in-trade adopted by the A.O. He is not found justified in apportioning the development cost incurred on 159868 sq. mtrs. of marketable land to 317803 sq. mtrs. of land purchased by the assessee Corporation. Therefore the adjustment made by him in the average cost of plots taking it at Rs. 1453.22 per sq. mtrs. is not found to be sustainable. The addition of Rs. 6,41,11,013/- on account of the so-called "short profit" is accordingly directed to be deleted. CIT(A) has correctly adjudicated this issue because cost cannot be allocated to the area which could not be sold ultimately. Further AO has nowhere disputed that this portion of land was not saleable. Therefore, we find nothing wrong in the order of Ld. CIT (A) and confirm the same. - Decided against revenue.

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• 2015 (8) TMI 122
  Disallowance of brought forward business loss/ unabsorbed deprecation - Assessee has filed the Application u/s. 154 - Held that:- We are of the view that assessee has elaborately disclosed in the Application u/s. 154 of the I.T. Act to the AO regarding income assessed by the AO as well as the income declared by the assessee. In the Application, the Assessee’s Authorised Representative has submitted that the assessee is in receipt of assessment order wherein income declared by the assessee (before adjustment of brought forward losses/unabsorbed deprecation claimed of Rs. 10,52,533/-) has been shown in the last page of the assessment order at Rs. 13,10,582/-. Whereas the income declared by the assessee before such adjustment. The Assessee has also enclosed the computation of income for the assessment years 2005-06, 2006-07, 2007-08 & 2008-09 with the said letter dated 25.8.2011 to the AO. The Assessing Officer and the Ld. First Appellate Authority has not appreciated the contention of the assessee. Thus the issue involved regarding the disallowances of brought forward business loss/ unabsorbed deprecation are required to be reexamined at the level of the AO. Therefore, we set aside the issue involved to the file of the AO to decide the same afresh, under the law, after giving adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Adhoc disallowance on account of telephone expenses and vehicle expenses - Held that:- The issue involved are covered in favor of the assessee, in view of the decision of SGS India Private Limited vs. Addl. CIT [2012 (8) TMI 255 - ITAT, MUMBAI]. We also find that this issue has already been decided by the Ld. CIT(A) in the case of the assessee in assessee’s own case for the assessment year 2007-08 and 2008-09 which have attained finality. Thus we are of the view that the adhoc addition on account of telephone expenses and vehicle maintenance expenses are not required in the case of the assessee - Decided in favour of assessee.

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• 2015 (8) TMI 121
  Gift from HUF - Holding that HUF is not a ‘relative’ under section 56(2), A.O. treated the amount as income of the assessee - Held that:- The issue of HUF being treated as ‘Relative’ so as to get exemption as per the provisions of section 50(2)(vi) has been considered in the case of Vineetkumar Raghavjibhai Bhalodia vs. ITO (2011 (5) TMI 584 - ITAT RAJKOT ) wherein similar issue was considered to hold that HUF can be treated as a ‘relative’ under the provisions of section 56(2) so as to exclude the amount received from HUF by the assessee-individual. Accordingly, we set aside the order of the Ld. CIT(A) and A.O. on this issue and direct the A.O. to treat the amount of Rs. 2,25,000 received from the HUF as an amount exempted under section 56(2). The addition is accordingly deleted. - Decided in favour of assessee. Amount credited to the loan account which is not reflected the firms accounts - Held that:- Prima facie assessee has source for the above amount and this cannot be treated as a gift under the provisions of section 56(2). However, since A.O. did not examine the ledger account nor Ld. CIT(A) consider it in his order, we set aside the same to the A.O. to verify the ledger accounts of the firm and delete the same. With these directions, the issue is restored to the file of A.O. to do accordingly. - Decided in favour of assessee for statistical purposes.

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• 2015 (8) TMI 120
  Unexplained expenses in respect of Motia Khan Property - CIT(A) deleted the addition - Held that:- It is clear that the Settlement Commission has not made any further addition in respect to the Property at Motia Khan, Karol Bagh. The Settlement Commission has however made an addition of Rs. 5 crores in the hands of both Pradeep Aggarwal Group and Dinesh Jain group on account of unexplained transactions (recorded on loose papers) in respect of the properties brought before the Settlement Commission and hence any further addition made by the Assessing Officer would result in a case of double addition. Thus the addition of Rs. 47,02,750/- made by the Assessing Officer has rightly been deleted by the Ld. CIT(A). Therefore, we do not see any reason to interfere with the well reasoned order of the Ld. CIT(A), accordingly, we uphold the same and decide the issue against the Revenue - Decided in favour of assessee.

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• 2015 (8) TMI 119
  Deemed dividend under section 2(22)(e) - Held that:- The transactions between group companies are in the nature of current account transactions and cannot be regarded as deemed dividend. In this case, the admitted position is that there was opening balance of Rs. 4,33,000/- in the books of M/s. Magnum International of M/s. Courage Financial Services Pvt. Ltd. This opening balance of Rs. 4,33,000/- increased to Rs. 21,62,000/- on account of fresh amount of Rs. 17,29,000/- received during the instant year. Likewise in the audited balance sheet of M/s. B.R. Associates, there was opening balance of Rs. 36,52,000/- of M/s. Courage Financial Services Pvt. Ltd. which balance increased to Rs. 43,25,000/- at the close of the year on account of Rs. 7,00,000/- received during the year. Thus, apparently, these are transactions between group companies which are on year to year basis and therefore, the current account transactions and business transactions. We have already held above following the judgment of CIT vs. Arvind Kumar Jain [2011 (9) TMI 363 - DELHI HIGH COURT] that business transactions did not constitute deemed dividend under section 2(22)(e) of the Act Following the above findings, additions made for deemed dividend are deleted - Decided in favour of assessee. Unexplained cash credit under section 68 - Held that:- The ld. counsel in his arguments submitted that such surrender was never acted upon and no sum was offered for tax or assessed to tax on the basis of such said surrender given by Shri I. C. Jindal. A chart tabulating the various additions made in all the four companies has also been placed on record. It was contended that no addition has been made on the basis of surrender but on independent examination of the claim. He alternatively contended that such surrender in any case has no bearing on the advance received by the appellant. We find that there are no factual findings vis-à-vis the above submission of the appellant. We therefore direct that the issue regarding addition of Rs. 45,00,000/- be decided de-novo by the Assessing Officer after granting adequate opportunity of being heard to the appellant. - Decided in favour of assessee for statistical purposes.

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• 2015 (8) TMI 118
  Disallowance is called for u/s 14A - assessee has submitted that when the working under rule 8D gives contradictory result to the actual fact then the provisions of Rule 8D cannot be applied for the purpose of disallowance under section 14A - Held that:- Having regard to the facts that the disallowance made by the AO by applying Rule 8D exceeds the amount of total expenditure debited by the assessee to the profit and loss account, we are of the view that for the purpose of disallowance u/s 14A, the computation made under Rule 8D cannot be accepted. So far as the provisions of Rule 8D(2)(iii) are concerned, the same cannot be applied in the case of assessee when the disallowance made u/s 14A on account of administrative expenses exceed the total expenditure debited on this account to the profit and loss account. Hence, Rule 8D cannot be applied for making disallowance u/s 14A on account of administrative expenses. The ld. AR submitted that the disallowance on account of interest expenditure is strategic one and the investment in question strategic in nature and not made with the intention of earning exempt income because the investment have been made in the sister concern and for commercial expediency. The authorities below have not examined this issue by considering fact that the investment in question are in the sister concern and are in the nature of strategic investment. However, the assessee itself has made a disallowance of Rs. 62.17 lakhs under section 14A which covers the interest expenditure of Rs. 50,58,468/- for the assessment year 2008-09, therefore, no further disallowance is called for u/s 14A. Similarly for the assessment year 2009-10, the assessee made suo motu disallowance Rs. 50.58 laksh u/s 14A no further disallowance is called for. - Decided in favour of assessee.

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• 2015 (8) TMI 117
  Disallowance under Sec. 14A r.w. Rule 8D - CIT(A) deleted part addition - Held that:- DR could not controvert the finding of the fact by the Ld. CIT(A) that the interest has been paid on term loan taken for the purchase of the fixed assets and therefore there cannot be any disallowance of interest as the Ld. CIT(A) has categorically stated that no direct expenditure has been incurred. We, therefore, decline to interfere with the addition sustained by the Ld. CIT(A) and simultaneously we also decline to interfere with the deletion of the addition made by the Ld. CIT(A). - Decided against revenue.

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• 2015 (8) TMI 116
  Addition as long term capital gain on sale of his share in the property - AO based his conclusion on the plea that one of the co-owners have sold his shares in the said land for a higher consideration, as compared to the consideration shown by assessee - Held that:- We found that without making any independent enquiry from the market, the AO has assumed that assessee has received the same amount of sale consideration as was received by other co-owners. No cogent material was brought on record to substantiate its stand by the AO, nor the CIT(A) to the effect that assessee has actually received sale consideration more than what has been mentioned in the sale deed. In the interest of justice and fairplay, we restore this ground back to the file of AO with a direction to the AO to make enquiry so as to find out any sale consideration received by the assessee in excess of sale consideration mentioned in the sale deed. It is pertinent to mention here that as per contention of ld. AR the sale consideration received by the assessee as per the sale deed was more than the registration value determined by the sub-registrar, therefore, it is more important to bring cogent material on record for arriving at a definite conclusion with regard to the excess amount received on sale which has not been recorded in the books of account - Decided in favour of assessee for statistical purposes.

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• 2015 (8) TMI 115
  Deduction u/s 80HHC on transfer of DEPB - Held that:- Allow the appeals of the assessee on this issue and remit the issue back to the file of the AO for re-computing the deduction admissible u/s 80HHC by keeping in view the judgment of the Hon’ble Jurisdictional High Court in the case of M/s Priknit Exports Vs ACIT (2013 (10) TMI 315 - PUNJAB AND HARYANA HIGH COURT).- Decided partly allowed in favour of assessee for statistical purposes.

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• 2015 (8) TMI 114
  Addition on account of income from joint venture - differential sale price and variation in the profit margin - addition in the profit of the assessee by the AO as the assessee has sold its product on different rates to various parties and there is a huge variation in the profit margin in different kinds of material sold - CIT(A) deleted addition - Held that:- It is undisputed fact that all the items have been imported by the assessee and the payment of the same have been made in foreign exchange. In support, the assessee has brought on record that there was a huge foreign exchange fluctuation in the financial year 2008-2009, which varied up to 33%. This is a major factor for determining the purchase and sale price. The other factors which have been noted by the CIT(A) like nature of buyers, i.e., whether material has been sold to bulk buyers or retail buyers or spot buyers etc., terms of credit, i.e., whether the assessee has received the payment immediately or after a credit period of few months, whether the sales are inclusive of excise duty or not and host of other factors taking into consideration commercial and market factors are relevant for determining the sale price. The AO cannot disturb the sales figure as mentioned in the sale bill and substitute with his own price without carrying out any inquiry from the buyers as to whether the sale prices as mentioned in the bills have been inflated or suppressed. Even the net profit margin of the assessee as compared to earlier years is also ranging between 7.88% and 8.37%. If the over all profit margin is taken into consideration, then there cannot be any reason to disbelieve the assessee’s margin on the sales in this year, which is in conformity with the past results. We thus, agree with the conclusion and finding arrived by the CIT(A) that, once all the sales have been made through banking channel, i.e., through account payee cheques and there is no specific inquiry by the AO to rebut the assessee’s explanation, then no addition on account of differential sale price and variation in the profit margin can be made. Thus, the entire finding of the CIT(A) is not only legally correct but also factually correct based on the material on record, and therefore, we do not find any reason to deviate from such a finding. Accordingly, the order of the CIT(A) is affirmed - Decided against revenue.

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• 2015 (8) TMI 113
  Disallowance u/s 14A of the Act r.w.r. 8D - recalculation of the profit for purpose of computing the MAT u/s 115JB of the Act - Held that:- We are inclined to hold that the issue disallowance u/s 14A of the Act r.w.r. 8D of the Rules in both the appeals is squarely covered in favour of the assessee by the decision of Hon’ble jurisdiction High Court of Delhi in the case of Holcim India Pvt. Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT) and hence, we reached to a logical conclusion the disallowance calculated and made by the AO and upheld by the CIT(A) in both assessment years are not sustainable and we direct the AO to delete the same. Accordingly, Ground Nos. 1 & 2 of the assessee in both the appeals are allowed. We respectfully follow the decision of Minda Sai Limited, C/o. RN. Saraf & Co. Versus Income Tax Officer [2015 (1) TMI 555 - ITAT DELHI] wherein it has been held that in the absence of any exempt income, section 14A disallowance cannot be added to book profit u/s 115JB of the Act. Accordingly, we are inclined to hold that the direction of the CIT(A) in this regard are not sustainable in view of our conclusion in the earlier part of this order where we have hold that no disallowance u/s 14A of the Act r.w.r. 8D of the Rules is sustainable.- Decided in favour of assessee.

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• 2015 (8) TMI 112
  Unexplained gift/loans received - Gift received - explaining source or source - capacity to give gift/loans - Held that:- It is clear from the material on record that donor as well as creditors could not show prima facie the source of funds out of which gift/loans were given. Added to this is the circumstance that on the date when the gift/loans were given, there were cash deposits made in the bank accounts. It is in these circumstances that the donor/creditors were called upon to show their capacity to give gift/loans. We are satisfied that the explanation given with regard to capacity of the donor/creditors is unsatisfactory. With regard to the argument of the ld. counsel for the assessee that the assessee has been called upon to explain the source of source, we are of the view that the said stand taken by the ld. counsel for the assessee is unsustainable. As already stated, the capacity of the creditor alone was questioned by the revenue authorities. This cannot be equated as calling upon the assessee to furnish source of source. The capacity of the creditors has not been prima facie established by the assessee. It is only when credible evidence is let in regarding capacity of the creditor that this argument of calling upon the assessee to explain source of source can be advanced. In this regard, the law laid down by the Hon’ble Calcutta High Court in Shankar Industries (1978 (3) TMI 91 - CALCUTTA High Court ) clearly explains the legal position wherein held that capacity of the creditor has to be established by the assessee.- Decided against assessee.

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• 2015 (8) TMI 111
  TDS provisions u/s 194H - credit card charges recovered by HDFC Bank from the assessee as commission - Disallowance u/s 40(a)(ia) - Held that:- The matter stands squarely covered by ‘Jet Airways (India) Ltd.’ (2013 (8) TMI 586 - ITAT MUMBAI ), wherein it has been held, under similar circumstances that payments to banks for utilization of credit card facilities are in the nature of bank charges and not commission and, therefore, no tax is deductible at source u/s 194H. No decision to the contrary has been brought to our notice by the department. Now, once no tax is deductible at source u/s 194H of the Act on the payment made to bank for utilization of credit card facility and such payment is in the nature of bank charges, obviously, the provisions of Section 40(a)(ia) of the Act do not get attracted. That being so, the addition, being unsustainable in law, is hereby deleted. - Decided in favour of assessee.

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• Customs

• 2015 (8) TMI 144
  Restoration of appeal - dismissal of appeal for non compliance with pre deposit order - Cancellation of EPCG authorisation - Imposition of penalty under section 9(4) and 11(2) - Held that:- during personal hearing, the appellant-petitioner's representative has not informed the Appellate Authority about the correct factual position. The files may have been despatched from Delhi to Mumbai and surely the records must be containing a proof or a document such as the acknowledgement copy, which is at page 82. In the face of the stay application, the petitioner could not have been visited with the extreme consequences of a dismissal of the appeal without adjudication on merits. That could have been done provided any conditional order was made on the stay application. The stay application having not been taken up but kept as it is, the dismissal of the appeal has caused serious prejudice and we agree with the petitioner's counsel to that extent - petitioner to deposit a sum of Rs. 2 lakhs in the office of the Additional Director General of Foreign Trade and the amount should be deposited within a period of four weeks - Decided conditionally in favour of assessee.

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• 2015 (8) TMI 143
  Revocation of CHA license - Submission of forged certificate - Held that:- The license issued to the appellant is under the provisions of the Regulations 2004. Clause 19 of the Regulations regulates 'Employment of Persons'. As per Clause 19(8), it is the responsibility of the Customs House Agent to exercise such supervision as is necessary to ensure the proper conduct of his employees in the transaction of his business as agent. This provision further provides that the agent shall be held responsible for all acts or omissions of his employees in regard to their employment. The consequence of breach of Clause 19(8) is provided in Regulation 20, which provides that the Commissioner may revoke the licence of a Customs House Agent and order forfeiture of part or whole of the security, or only order forfeiture of part or whole of security. - It was while working in that capacity that he has forged the signature of the proprietor of the appellant on the Bill of Entry, in the applications for issue of 'H' card and 'G' card and various other documents submitted to the Customs Department. He was enabled to do all the forgeries and derive the benefit thereof only because of his employment under the appellant and obviously on account of the failure of the appellant in effectively supervising the activities of his employees to ensure that they conduct themselves properly in the transaction of his business as a Customs House Agent. Therefore, the appellant cannot be absolved of his lapse of supervision attracting Clause 19 of the Regulations warranting action against him under Regulation 20. Even though the appellant functioned as a Customs Office of Agent on the basis of the license that was issued under the Regulations and was liable to be proceeded against under Clauses 19 and 20 of the Regulations penalty to be levied on the appellant should certainly be proportionate to the gravity of the breach proved to have been committed by him. While examining this issue, the fact that the appellant did not have any role in what was done by Sri.Vipin Kumar and his team and that the lapse found is supervisory lapse assumes importance the absence of any previous misconduct on the part of the appellant has also to be considered. - termination of the license ordered in Annexure A8 order and confirmed in Annexure A9 order of the Tribunal is too harsh and disproportionate. This view that we take, is supported by the principles laid down in the judgment in Ashiana Cargo Services v. Commissioner of Customs (I & G) 2014 (302) ELT 161 (Del) - Revocation of license is set aside - Decided in favour of appellant.

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• 2015 (8) TMI 142
  Revocation of CHA License - violations of the Customs House Agents Licensing Regulations, 2004 and particularly Regulations 12 and 13 (a), (d) and (n) - Held that:- Since the Commissioner expressed his disagreement with the findings recorded by the Inquiry Officer in their entirety, the Regulations though permit him to hold a de novo inquiry, that could be only after due notice to the respondent in that behalf. In other words, a notice indicating the disagreement with the findings of the Inquiry Officer, the extent of such disagreement and the prima facie reasons for such disagreement, ought to be communicated and that notice should be served on the agent like the respondent. After such an agent responds to the notice and if the Commissioner is further satisfied that the explanation does not deserve acceptance, he is free to hold a de novo inquiry and into all charges. This is not merely a matter of procedure but one of substance. - Matter remanded back - Appeal disposed of.

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• 2015 (8) TMI 141
  Imposition of penalty on CHA - Import of prohibited goods - Held that:- When there is no evidence to establish that the appellant had prior knowledge of the goods imported and also when there is no evidence to establish any wrongful intent on the part of the appellant then there is no reason to impose penalty. After finding that the appellant has become unknowingly party to fraudulent import, the imposition of penalty is unjustified. - Impugned order is set aside - Decided in favour of appellant.

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• 2015 (8) TMI 140
  Penalty u/s 114 for abetment - Misdeclaration of goods - Held that:- Appellant has confessed in his statement under Section 108 ibid that he contacted Shri Sanjiv Rana to get IE code of a reputed company to export the impugned goods. He was aware that the impugned goods were not auto parts as he had a role in their transport and packing. The impugned goods have been confirmed to be prohibited for exports under the Antiquities & Art Treasure Act, 1972. The statements of Shri Rajiv Gupta and Shri Mukesh Rana, even if arguably not admissible as evidence in the absence of cross-examination, clearly corroborate the appellant’s own statement which further adds to the credibility of his (i.e., the appellant’s) statemen). It is, thus, obvious that the appellant was fully aware of the illegal nature of the goods attempted to be exported and the mis-declaration thereof. In the light of the foregoing analysis, I am of the view that the appellant is guilty of abetment of the attempted to export which attracts penalty under Section 114 of the Customs Act, 1962. Having regard to the fact and the role played by the appellant in the attempted illegal export and the nature of the impugned goods, I find that the penalty imposed is neither excessive nor arbitrary or perverse. Therefore, I do not find any reasonable ground warranting appellate intervention in the impugned order - Decided against the appellant.

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• Corporate Laws

• 2015 (8) TMI 139
  Violation of Disclosure of shareholding – Penalty was imposed for violating of regulation 7(1) & 7(2) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 and regulation 29(2) & 29(3) SAST Regulations, 2011 – Held that:- making disclosures under SAST Regulations, 1997 and SAST Regulations, 2011 was mandatory – In 2011 there was delay of two days, while in 2012 there was delay of six days in compliance after due date – Default was repetitive in nature and evident that appellants instead of being more careful were more carefree – Appellants who were seeking to acquire control over company ought to have been vigilant about their mandatory obligation – Penalty imposed by AO cannot be said to be harsh or unreasonable, especially when default was repetitive – Appeal hereby dismissed – Decided against Appellant.

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• 2015 (8) TMI 138
  Scheme of Amalgamation and Arrangement - Dispensing convening of meetings of equity shareholders and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Sections 391 to 394A of Companies Act, 1956 read with Rule 9 of Companies (Court) Rules, 1959 – Held that:- board of directors of transferor and transferee companies in their separate meetings unanimously approved proposed Scheme of Amalgamation – 87 out of 92 equity shareholders of transferor company, being 98.95% in value and 324 out of 406 equity shareholders of transferee company, being 99.56% in value, have given their consents/no objections in writing to said proposed Scheme – Direction issued upon Transferee company having 6200 unsecured creditors to hold meeting to seek their approval to proposed Scheme – Application stands allowed – Decided in favour of applicants.

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• 2015 (8) TMI 137
  Scheme of Arrangement - Dispensing convening of meetings of equity shareholders and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Section 391 of Companies Act, 1956 read with Rule 9 of Companies (Court) Rules, 1959 – Held that:- board of directors of transferor and transferee companies in their separate meetings unanimously approved proposed Scheme of Amalgamation – Equity and preference shareholders and secured creditor of transferor company and transferee company have given their consents/no objections in writing to proposed Scheme of Arrangement and were found to be in order – Direction issued upon Transferor company having 03 unsecured and Transferee company having 04 secured and 04 unsecured creditors to hold meeting to seek their approval to proposed Scheme – Application stands allowed – Decided in favour of applicants.

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• Service Tax

• 2015 (8) TMI 159
  Levy of service tax on the activity of mutual fund distribution - validity of circular - vide circular dated 05.11.2003, it was clarified that the commission received by distributors on mutual fund distribution would be liable to service tax as it would not fall within the expression 'business auxilliary services' - High Court in [2004 (9) TMI 604 - ANDHRA PRADESH HIGH COURT] has set aside the circular on the ground that it amounts to foreclosing discretion or judgment that may be exercised by the quasi judicial authority while deciding a particular lis under particular circumstances. Held that:- The High Court referred to the proviso to Section 37B of the Central Excise Act, 1944, which categorically states that such kind of circulars cannot be issued. - Decided against the revenue.

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• 2015 (8) TMI 158
  Cenvat Credit - input services - outdoor catering service - canteen services, providied in the factory - Held that:- The Bombay High Court came to the conclusion that the decision of the Larger Bench of the CESTAT in the case of CCE V. GTC Industries Ltd. [2008 (9) TMI 56 - CESTAT MUMBAI] is a correct law, however, with a rider that where the cost of the food is borne by the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. - various High Courts have concurred with the above-said principle of the Bombay High Court and followed the above-said decision. - herefore, the issue that the Cenvat Credit can be properly availed by the assessee in respect of outdoor catering services is clearly settled now. - Decided against the revenue.

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• 2015 (8) TMI 157
  Clearing and Forwarding Services - evasion of service tax - whether the appellant is subcontractor - Settlement Commission rejected the the claim made on behalf of the petitioner that the petitioner is a subcontractor of M/s.MLL and that M/s.MLL was the main contractor of M/s.AMW Ltd. - Held that:- We are in complete agreement with the view taken by the learned Settlement Commission while confirming the service tax liability of Rs. 31,01,599/- with respect to the services provided by the petitioner to M/s.MLL. It is rightly held that with respect to the service / transportation service / buses provided by the petitioner to M/s.MLL, the petitioner is liable to pay service tax on the same. The Settlement Commission has rightly held and even as observed by us hereinabove, the petitioner cannot be said to be a subcontractor for providing transportation services to M/s.AMW Ltd. There is an independent contract for providing transportation services / bus services, between the petitioner and M/s.MM / M/s.MLL and even between M/s.MM / M/s.MLL and M/s.AMW Ltd. The petitioner cannot be said to be a sub-contractor with respect to the transportation services provided to M/s.AMW Ltd. and therefore, the contention on behalf of the petitioner that M/s.MM / M/s.MLL paid service tax on the transportation services rendered to M/s.AMW Ltd. and therefore, the petitioner is not liable to pay service tax and/or the contention that there shall be double taxation if the tax is recovered from the petitioner, has no substance and the same cannot be accepted. The service tax paid by M/s.MM / M/s.MLL with respect to transportation services provided to AMW is with respect to the separate and independent contract entered into between M/s.MLL and M/s.AMW Ltd. and the services rendered by M/s.MM / M/s.MLL to M/s.AMW. The agreement / contract entered into between the petitioner and M/s.MM / M/s.MLL is an independent contract for providing services of transportation and therefore, the petitioner is not a subcontractor and therefore, the petitioner is liable to pay service tax on the transportation services / bus services provided by the petitioner to the M/s.MM / M/s.MLL. Under the circumstances, the petitioner is not entitled to any of the reliefs sought in the present petition. - Decided against the assessee.

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• 2015 (8) TMI 156
  Reversal of CENVAT Credit - Trading activity - Exempted services or not - Held that:- stay order [2015 (1) TMI 223 - CESTAT NEW DELHI] was issued at a time when the explanation under Rule 2(e) specifically stating that “exempted services includes trading” was not in existence. In view of the amendment to Rule 2(e) specifically mentioning that “exempted services” includes trading, we are of the view that the case does not deserve full waiver from pre-deposit. However, having regard to the fact that the said explanation was added for removal of doubts, we order pre-deposit of only Rs. 64,82,994/- with proportionate interest within four weeks - Partial stay granted.

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• 2015 (8) TMI 155
  Waiver of pre deposit - business auxiliary service - given space for furniture for the representatives of banks/insurance companies - Receipt of commission from the insurance/banking companies - Held that:- In the case of Pagariya Auto Centre (2014 (2) TMI 98 - CESTAT NEW DELHI (LB)), the CESTAT held that with regard to providing table space to financial institutions, the classification of transaction under BAS or otherwise must depend upon analysis of relevant transactional documents and where mere space is provided along with furniture for facilitation accommodation of representatives of financial institutions in premises of automobile dealers and consideration is received for that singular activity, it may perhaps constitute a rent and not amount to be business auxiliary service but if the transactional documents and other evidence on record indicated substantial activity falling within Section 65(19) of Finance Act, 1994, then it would legitimately classifiable under business auxiliary service. The issue involves proper analysis of the nature of transactions - Partial stay granted.

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• 2015 (8) TMI 154
  Denial of exemption claim - Benefit of abatement under Notifications No. 19/2003-ST and 1/2006-ST - Held that:- Prima facie, the benefit of exemption Notifications No. 19/2003-ST and 1/2006-ST providing for 67% abatement has been denied on the ground that the value of free supply materials was not included in the gross amount received for providing erection, commissioning or installation service - prima facie the issue is covered in favour of the appellant by the judgement of CESTAT Larger Bench in the case of Bhayana Builders (2013 (9) TMI 294 - CESTAT NEW DELHI (LB)). - Stay granted.

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• Central Excise

• 2015 (8) TMI 150
  Denial of CENVAT Credit - Input service - activities relating to business - 100% of services covered under Rule 6(5) of the Cenvat Credit Rules 2004 - utilization of common input services - Trading activities - Held that:- Definition of Input service given under Cenvat Credit Rules 2004 is very wide and it covers services used directly or indirectly in or in relation to manufacture of final products. The inclusive part of definition of input service at the material time in 2007-08 allowed credit of services used in any activity relating to business. Regarding cenvat credit pertaining to canteen services no evidence exists on record that any amount has been recovered from the employees of the appellant. The scope of ‘activities relating to business’ is wide for admissibility of cenvat credit at the material time which was correctly allowed by Adjudicating authority. Accordingly, service tax paid on any activity relating to business of manufacturing will be available as Cenvat Credit to the appellant. Commissioner (Appeals) finding for not following the case law of Coca Cola India Pvt Ltd [2009 (8) TMI 50 - BOMBAY HIGH COURT], is not correct because, there is no stay on the operation of that decision and only filling appeal against the decision is not enough for not following the said decision which is also followed in CCE v/s Parth Poly Wooven Pvt. Ltd. - [2011 (4) TMI 975 - GUJARAT HIGH COURT] and many other cases like [2014 (3) TMI 921 - GUJARAT HIGH COURT]- CCE v/s INDUCTOTHERM INDIA P. LTD. Appellant claims that they are entitled to 100% credit in respect of services covered under Rule 6(5) of the Cenvat Credit Rules 2004, but they have also not come out with clarity on the actual services availed by them. Therefore, this factual aspect needs proper verification of the records of the appellant by the original adjudicating authority. The original adjudicating authority is directed to verify and examine whether such Cenvat Credit is covered under Rule 6(5) for the above 17 services and that these services are not used exclusively in or in relation to the manufacture of exempted goods or providing exempted services. Needless to mention that appellant will be granted an opportunity of personal hearing to produce necessary documents to prove eligibility to credit claimed by them following principles of natural justice. - impugned Order demanding duty with equal penalty deserves to be modified - Decided in favour of assessee.

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• 2015 (8) TMI 149
  Penalty u/s 11AC - valuation of physician samples - Intention to evade duty - willful mis-statement or suppression of facts - Held that:- Appellant-assessee was paying excise duty on cost construction method ever since they started clearing physician samples of P&P medicines and there was no provision in ER-I return to provide such information. The appellants have maintained that there is no intention on their part to evade central excise duty inasmuch as physician samples have been cleared on payment of duty. The Adjudicating Authority has himself dropped the penalty under section 11AC and also under Rule 25 for the extended period, as there is no malafide intention or suppression of facts considering the fact that the appellants have already paid the differential duty. The appellants are not liable for penalty under Rule 25. - By following the judgments of the Hon’ble High Court of Gujarat (2010 (9) TMI 422 - GUJARAT HIGH COURT) and the Hon’ble High Court of Madhya Pradesh (2014 (2) TMI 1192 - MADHYA PRADESH HIGH COURT), the impugned order insofar as it pertains to imposition of penalty of Rs. 7,92,529/- under Rule 25 is set aside - Decided in favour of assessee.

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• 2015 (8) TMI 148
  Duty demand - shortage of fabrics - Suppression of facts - Invocation of extended period of limitation - Held that:- Show-cause notice was issued for confiscation of the excess goods seized at their units. The adjudicating authority had decided the said show-cause notice and imposed penalty under Rule 173Q for improper maintenance of statutory records. From the above, we find that the proceedings initiated in the show-cause notice dated 14.8.2000 was entirely different and it is only related for the excess stock found in the premises which was not accounted in the RG-I Register and there was no demand since the physical goods were available, the adjudicating authority has not ordered for confiscation as there is no likelihood of removing clandestinely whereas in the present case the show-cause notice relates to the demand of excise duty on the shortage of goods for the past period and the facts in the first show-cause notice are different from the facts in the present show-cause notice. - demand of duty on the shortage of goods confirmed by the adjudicating authority is sustained. As regards limitation, the present show-cause notice is issued for demand of duty on the shortage of goods noticed for the period in dispute and has no relevance with the first show-cause notice dated 14.8.2001. Therefore, appellant’s reliance on the Hon’ble Supreme Court’s decision is not applicable to present case. Statements recorded from various persons clearly prove the continued shortage of goods over the period. The very fact that the appellant themselves have constituted two committees, as directed by CAG Audit Report, proves that there was huge shortage where the appellants were unable to explain the reasons with clear evidence. Therefore, we hold that the adjudicating authority has rightly confirmed the demand and invoked the extended period as there was clear suppression of facts. - demand of excise duty on the huge shortage of finished goods and imposition of equal penalty with interest is liable to be upheld. - Decided against Assessee.

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• 2015 (8) TMI 147
  Refusal to grant of permission to remove the goods for further processing under Rule 16C of the Central Excise Rules, 2002 for financial year 2015-16 - Held that:- Appellant has been granted the permission under Rule 16C of the Rules to remove the goods without payment of duty for carrying out certain processes not amounting to manufacture from the financial year 2011-12 till 2014-15. The only ground for refusal to grant permission for the year 2015-16 as mentioned in the impugned order is that the appellant's case was not found to be a deserving case for grant of extension. Further the impugned order does not mention any specific reasons as to how the appellant is not found deserving for grant of permission under Rule 16C of the Rules. Revenue has also failed to prove that the appellant has committed any violation of the terms and conditions and procedure prescribed by the learned Commissioner while granting the permission. In view of these circumstances, we hold that denial of permission under Rule 16C is not legally sustainable. - Decided in favour of assessee.

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• 2015 (8) TMI 146
  Disallowance of CENVAT Credit - non-receipt of material - allegation that supplier has no manufacturing facility - principle of natural justice - cross examination not allowed - extended period of limitation - levy of penalty - Held that:- It is beyond comprehension that a man will get invoices without inputs and separately acquire inputs clandestinely from other sources to manufacture his goods. There is no whisper about M/s. Dhakad Metal Corporation to be indulging in clandestine removal of finished goods in these proceedings. It is now well settled legal position that a case can not be established on the basis of few confessional statements without other corroborative evidences like shortage of raw materials, cash transactions, alternative procurement of raw materials. Appellant requested for cross-examination of the persons whose statements are relied upon but the same was not extended. It is now well settled law that cross-examination of the persons whose witness are relied upon by the Revenue should be extended to the appellant and in the absence of such cross-examination extended, the statements of such persons can not be relied upon as evidence. - appellant M/s. Dhakad Metal Corporation can not be held to have any malafide intention to take wrong credit and extended period of demand cannot be invoked in the present case against them. In this case, the demand is for the period 2005-06 whereas the show cause notice was issued on 20.02.2009. As the extended period is not invokable, therefore, the demand is also time barred in addition to credit being admissible on merits. Penalties under Rule 15 of Cenvat Credit Rules, 2004 are required to be imposed upon the persons who has taken or utilised CENVAT credit in respect of inputs or capital goods wrongly in contravention of any of the provisions of Cenvat Credit Rules. Appellant M/s. Bhavna Metal Company has not been shown to have taken any credit wrongly. Further from the case records it is observed that it is not brought out by the Revenue that at the time of issuing cenvatable invoices registered dealer did not receive inputs alongwith duty paying documents. The fact of duty being paid by M/s. Prasun Ferro Alloys & Metal Casting Pvt. Limited has not been denied by the Revenue. Though later investigations done by the department does raise a strong suspicion of not receiving the inputs but the same is not corroborated by any independent evidence, except few statements. - In the absence of cross-examination of relied upon witness given the evidentiary value of the relied upon statements is lost - Decided in favour of assessee.

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• 2015 (8) TMI 145
  Extended period of limitation - Denial of CENVAT Credit - Manufacture of final product - Receipt of the disputed goods, their duty paid nature and utilization within the factory premises have not been disputed by the authorities below - Held that:- upon verification of the detailed accounts maintained by the appellant, the Chartered Engineer has certified the quantum of usage of the disputed goods for the said intended purpose. The documents available in the case record prove beyond any shadow of doubt that the fact regarding taking of cenvat credit by the appellant on the disputed goods were known to the Department beforehand. Such fact is evident from the SCN, wherein the duty demand has been computed based on the records maintained by the appellant. In view of the fact that the activities of the appellant regarding taking of cenvat credit on the disputed goods and use of the same for manufacture of the capital goods within the factory was known to the department way back in 2002, the show cause notice ought to have been issued within one year from the relevant date (i.e. taking of credit and furnishing of information by way of filing the ER-I return). Since the show cause notice has been issued in 2008, covering the period from June, 2002 to January, 2006, and no specific findings have been recorded regarding the involvement of the appellant in any fraudulent activities concerning fraud, collusion, miss-appropriation etc. with intent to evade payment of duty, the proviso to section 11A, in my opinion, cannot be invoked, justifying issuance of show cause notice, beyond the limitation period of one year. Further, the issue regarding taking of cenvat credit on the disputed goods is contentious one, because there are divergent views by different Benches of the Tribunal. According to my view, appellant entertaining a bonafide belief regarding eligibility of disputed goods for the purpose of taking cenvat credit, in view of conflicting decisions, are genuine and justified - proceedings initiated by the Department for recovery of the cenvat amount is barred by limitation of time and, accordingly, the impugned order is set aside - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (8) TMI 153
  Validity of assessment order passed under APVAT - Authority of Assessing Officer - authorisation in Form ADM-1C with unique number through VATIS only. - Held that:- It is necessary to notice Circular dated 05.11.2012 wherein it is categorically stated that Any authorisation (ADM-1C) issued outside VATIS or without unique number shall not be a valid authorisation for Assessment. Further, this aspect is further clarified by the Circular dated 27.08.2012 wherein the Commissioner had stated that Effective from 1.9.2012, all the Deputy Commissioners concerned and Additional Commissioner/Joint Commissioner, Enforcement shall issue Audit authorisations in Form ADM-1B with Unique No.through VATIS only. Any authorisation (ADM 1B) issued outside VATIS or without unique No.shall not be a valid authorisation for audit/assessment. Any officer conducting audit/assessment without valid authorisation shall be liable for disciplinary action. - Further reading of the Circular leaves no manner of doubt that the effort of the higher authorities is to create definite system generated methodology to avoid the allegations of the arbitrariness - there being admitted violation of the procedure prescribed by the authorities themselves, the assessment order passed is set aside - Decided in favour of assessee.

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• 2015 (8) TMI 152
  Challenge to constitutional validity of Explanation (i) to Section 2(1) (zg) of the Haryana Value Added Tax Act, 2003 and Rule 25 (2) of the Haryana Value Added Tax Rules, 2003 - Inclusion of value of land for charging VAT on developers - Held that:- decision in the case of CHD Developers Limited, Karnal Vs The State of Haryana [2015 (4) TMI 784 - PUNJAB AND HARYANA HIGH COURT] followed - Petition disposed of.

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• 2015 (8) TMI 151
  Duty demand - Failure to furnish the statutory forms - Held that:- Court in MRF Ltd. v. The Commercial Tax Officer (IAC-I), after examining the provisions of the Sections 6A, 8(4) and 13 of the Central Sales Tax Act, 1956; Rules 5(1) and 14(4) of the Central Sales Tax (Pondicherry) rules, 1967, and Rule 12(1), (5) and (7) of the Central Sales Tax (Registration & Turnover Rules) held that there is no provision for the present under the Puducherry Value Added Tax Rules to submit the declaration forms in the electronic mode as has been suggested by the Department and, therefore, the department's insistence on online uploading of declarations forms is not in consonance with any of the Rules either under the Central Sales Tax Rules or Puducherry Value Added Tax Rules. That apart, it was also held that the approach of the Department should be to ensure that what the assessee is rightfully entitled to should be extended to the assessee without harping on technicalities. - Decided in favour of assessee.

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