Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 7, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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TDS u/s 194-I - Payment of charges for landing the aircrafts and parking thereof at New Delhi Airport - whether landing and take-off facilities on the one hand and parking facility on the other hand, would mean to 'use of the land'? - Held No - No TDS required - SC
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Disallowance of deduction claimed under section 80IA - 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. - HC
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Registration under Section 12AA declined - The purpose to provide education to the children would fall very much within the charitable purpose and predominant purpose of the appellant has to be seen - HC
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Once the accounts and the assessment order were disapproved by this Court and held it to be un-reliable, even if these documents were pressed into service by the appellant, the Tribunal could not have taken cognizance of these documents. Therefore, if the Tribunal has eschewed these documents from its consideration, the Tribunal was perfectly justified in doing so. - HC
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Computation of the quantum of deduction under section 33AB - in rare cases, where a very few fortunate assessees who grow and manufacture different varieties of tea and consequently, do not require purchase of any tea for blending with the final product, can only get the benefit of section 33AB of the Act - HC
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Validity of revision u/s 263 - The question of the assessee having to face multiple proceedings, in the present case, cannot be the basis to hold that jurisdiction u/s.263 of the Act cannot be invoked. - AT
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Disallowance of insurance premium paid on housing loans of customers - These expenses are related to the housing products which are very much a part of the assessee's business activities and the payment of insurance premium on the housing products is also not capital in nature. - AT
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Validity of assessment order u/s. 153C/143(3) - On the same date i.e. 23.7.2010, similar satisfaction note, only with the change in the name of the assessee’s has been issued arbitrarily which does not in any manner satisfy the requirement of section 153C of the I.T. Act. - AT
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Eligibity for exemption under section 11 - the assessee association's primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. - AT
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TDS on interest paid on deposits by its members u/s 194A(3)(i)(b) - CBDT circular cannot over-ride the prescription of statute passed by the parliament. And, there is no quarrel that assessee is a co-operative society engaged in banking business - No TDS - AT
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Disallowance on account of lease payment made by the assessee - Lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure u/s 37 - AT
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Business and interest income - Section 168 - once an income has arisen from the estate of a deceased and there are provisions under the Act mandating the charge thereon, such income cannot go tax free. - AT
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Unaccounted investment - addition u/s 69B deleted by CIT(A) - it is reasonable to accept that the assessee may be having some cash as personal savings and he accepted this claim to the extent of ₹ 80,000/-. - the amount of personal cash accepted by CIT (A) is not excessive - AT
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Claim of assessee for depreciation @ 80% of energy saving devices denied - after the introduction of concept of “block of assets”, the assets loose identity the moment they enter the block and therefore the rate of depreciation of a particular item of depreciable asset cannot be tampered with in a subsequent assessment year - AT
Customs
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Computation of CVD on MRP basis - importer himself is selling the tiles at a price higher - Tax payer cannot be permitted to himself misdeclare the RSP - demand of duty invoking extended period of limitation confirmed - AT
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Admissibility of CVD exemption on imported goods - import of silk yarn, silk fabrics - respondents are eligible for CVD exemption under Notification 30/2004-CE dt. 9.7.2004 - AT
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Import of prohibited goods - the scull and slags are not prohibited items - If item in question is restricted item, same can be allowed to be imported on payment of redemption fine and penalty. - AT
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Import of Hazardous goods - If revenue want to say that these slags appears to be non hazardous in nature is a vague report then the observation by the Chartered Engineer that these waste contain irregular shape material appearing in shape of scull and lump is also vague. Further, the scull and slags are not prohibited items. - AT
Wealth-tax
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Enhancement in value of net wealth - sub-clause(5) of clause(i) of section 2(ea) nowhere requires that a commercial establishment or a complex cannot be established in a house property - it nowhere provides that only if such commercial complex is occupied by the owner then alone the exclusion shall take effect. - AT
Service Tax
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Demand of service tax - sub-contractor - CBEC Circular No. 96/7/2007-ST dated 23.08.2007 - if the main contractor has paid Service Tax of the entire contract value, including the value for which contract was given to the present appellant then no Service Tax is required to be paid by the appellant due to revenue neutrality - AT
Central Excise
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Valuation - Place of removal - Section 4 - contracts contain a clear stipulation that in case of any damage to the goods during transit, the supplier will lodge the claim and obtain compensation from the insurance company - The perfunctory manner in which the appeal of the assessee is allowed, by the tribunal, cannot be countenanced - Matter remanded back to CESTAT - SC
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Cenvat / MODVAT Credit - Duty paying documents - Duty paid by Railway on scrap - document do not indicate the rate and amount of duty paid on the scrap/inputs at the time of clearance/sale by the Railways - appellant satisfies all the eligibility conditions contained in notifications dated 13.07.1992 and 01.03.1994 for availing the deemed MODVAT credit - credit allowed - SC
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Concessional rate of duty on Cement - installed capacity - CESTAT should have considered the material placed by the Revenue and only then come to a conclusion as to whether the certificate issued by Commissioner of Industries should be acted upon or not - SC
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Mere cutting of the lengthy conveyor belt into smaller sizes would not amount to manufacture, ipso facto, unless it is shown that as a result of the said cutting, it was transferred into a new product which was a marketable product - SC
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Classification of waffles and wafers - Classification under Entry 1905.31 or under 1905.90 - if only cocoa is added or is contained in these products, that would not make it chocolate. Thus, there has to be a difference between cocoa and the chocolate that is made out of cocoa. - SC
VAT
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Denial of exemption claim - fixing and providing of Works Profile Safety Barrier - part of road construction activity or not - The words “relating to” has a wide meaning and cannot be restricted only to putting of concrete, grit, coal tar etc but it should mean everything relating to road - HC
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Rectification of mistake - rectification implies the correction of an error or removal of defects or imperfections and could not be used to appreciate the evidence on new facts which were not placed earlier. - HC
Case Laws:
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Income Tax
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2015 (8) TMI 185
TDS u/s 194-C or under Section 194-I - Payment of charges for landing the aircrafts and parking thereof at New Delhi Airport - whether landing and take-off facilities on the one hand and parking facility on the other hand, would mean to 'use of the land'? Held that:- The charges which are taken from the aircrafts for landing and even for parking of the aircrafts are not dependent upon the use of the land. On the contrary, the protocol prescribes a detailed methodology of fixing these charges. Chapter 4 of Airport Economics Manual issued by International Civil Aviation Organization deals with 'Determine the cost basis for charging purposes'. The charges on air-traffic which includes Landing Charges, Lighting Charges, Approach and Aerodrome Control Charges, Aircraft Parking Charges, Aerobridge Charges, Hangar Charges, Passenger Service Charges, Cargo Charges etc. are to be fixed applying the formulae stated therein. A reading thereof would clearly point out the cost analysis which is to be done for fixing these charges. Thus, when the airlines pay for these charges, treating such charges as charges for 'use of land' would be adopting a totally naove and simplistic approach which is far away from the reality. We have to keep in mind the substance behind such charges. When matter is looked into from this angle, keeping in view the full and larger picture in mind, it becomes very clear that the charges are not for use of land per se and, therefore, it cannot be treated as 'rent' within the meaning of Section 194-I of the Act. The nature of charges that are paid by the airlines for landing and parking charges which is not, in substance, for use of land but for various other facilities extended by the AAI to the airlines. Use of land, in the process, become incidental. Once it is held that these charges are not covered by Section 194-I of the Act, it is not necessary to go into the scope of Section 194-C of the Act. View in COMMISSIONER OF INCOME TAX, CHENNAI Versus M/s SINGAPORE AIRLINES LTD [2012 (8) TMI 643 - MADRAS HIGH COURT] confirmed while Commissioner of Income-tax Versus Japan Airlines Co. Ltd. [2008 (10) TMI 341 - DELHI HIGH COURT] rejected - Decided in favour of assessee.
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2015 (8) TMI 184
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 183
Registration under Section 12AA declined - Whether the educational society run by the particular community is debarred for registration under Section 12AA even if it is carrying out charitable activities which benefit the community at large including persons belonging to other religion? - Held that:- Memorandum of Association and the objective of the trust have not been into consideration in a proper perspective. A perusal of the same would go on to show that the purpose of association apart from the imparting of education to the children of a particular religion was also to provide sound education to persons belonging to other communities regardless of caste, creed, colour or distinction of any kind in order to produce enlightened and responsible citizens for the country. The object also further provided that each child was to discover and develop his/her potential as an individual by encouraging enquiry and creativity and to provide a well rounded education and high academic standard and to develop responsible citizenship in the students and to encourage appreciation of national and cultural heritage. A perusal of the information supplied in the reply to the show cause notice would go on to show that less than 10% of the students of a particular community were studying in the last year and for the earlier period, the percentage was even less. In such circumstances, the reasoning given that the appellant was only imparting education to a particular religion, sect or group was not based on any sound footing. The objects of the society have already been reproduced above which go on to show that society was to provide sound education to persons regardless of caste, creed, colour or distinction of any kind and help the children to and discover and develop potential as well as individuals by providing a well-rounded education. The charitable purpose under Section 2(15) of the Act provides for relief of the poor pertaining to education and the advancement of any other object of general public utility. The purpose to provide education to the children would fall very much within the charitable purpose and predominant purpose of the appellant has to be seen. See Commissioner of Income-Tax Vs. Jodhpur Chartered Accountants Society [2002 (4) TMI 28 - RAJASTHAN High Court] and Ahmedabad Rana Caste Association Vs. CIT [1971 (9) TMI 8 - SUPREME Court] - Decided in favour of assessee.
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2015 (8) TMI 182
Addition to income - whether the Hon'ble Income Tax Appellate Tribunal was right in disposing the appeal filed by the appellant without verifying records of the hospital company and order of assessment of the hospital company in spite of a specific directions by this Hon'ble Court? - according to the Tribunal the income assessed in the hands of the appellant herein was already assessed at the hands of the hospital - Held that:- This Court has in categorical terms disapproved the accounts maintained by the hospital and also Annexure - 7 assessment order passed against the hospital. It was on that basis that the matter was remitted to the Tribunal, directing it to re-consider the appeals. Once the accounts and the assessment order were disapproved by this Court and held it to be un-reliable, even if these documents were pressed into service by the appellant, the Tribunal could not have taken cognizance of these documents. Therefore, if the Tribunal has eschewed these documents from its consideration, the Tribunal was perfectly justified in doing so. Counsel then referred us to the statements recorded during the course of survey and contended that there was no evidence of un-accounted payments made to the doctors. Reading of the assessment order and the Tribunal's order shows that there was sufficient indications in the statements recorded during the survey. These findings, being purely factual, we decline to undertake its appreciation afresh. One additional fact which was pointed out by the learned Senior Counsel for the appellant therein was Annexure - 6, certain bills, certain letters of third parties and bills issued by the hospital to those persons. It was contended that no cash payments were made to the doctor who is the appellant in this case, who is also permanently employed in the hospital. In our view, when the Revenue had sufficient other materials to sustain a finding of cash payments made by the hospital, these documents now produced are inadequate to upset those factual findings.Appeal dismissed.
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2015 (8) TMI 181
Addition on account of sale of scrap in A.Y. 2005-06 - ITAT deleted the addition by holding it to be pertaining to assessment year 2007-08 - Held that:- It was conceded that even in the present case, the rate of tax remained the same in both the assessment years i.e. 2005-06 and 2007-08. Following the above judgment of Commissioner of Income Tax v. Excel Industries Limited [2013 (10) TMI 324 - SUPREME COURT] it must be held that the dispute raised by the revenue is essentially academic. The issue may have some tax effect in that if the department is correct and the amount ought to have been brought to tax two years earlier, there would be loss of interest for two years on the amount of ₹ 31,10,000/-. The department has not raised the claim in that regard. We do not wish to express any opinion as to the right of the department to claim interest.
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2015 (8) TMI 180
Holding share in the DSE as also membership of DSE - whether were property/assets and transfer thereof was exigible to tax under the Gift-tax Act, 1958? - Whether the Tribunal was justified in opining that composite value of share and ticket was to be adopted? - Held that:- In view of the settled legal position as decided in Stock Exchange, Ahmedabad v. ACIT (2001 (3) TMI 2 - SUPREME Court), Techno Shares and Stocks Limited v. ACIT (2010 (9) TMI 6 - SUPREME COURT OF INDIA ), Vinay Bubna v. Stock Exchange, Mumbai AIR [1999 (7) TMI 115 - SUPREME COURT OF INDIA], DCIT v. Ashwin C. Shah (2001 (12) TMI 195 - ITAT BOMBAY-WT) and in light of its analysis of the relevant provisions of the AoA of the DSE, the Court is of the view that the first question requires to be answered in favour of the Assessee. It is accordingly held that the ITAT was not justified in holding that membership of the DSE was an asset of the Assessee and transfer thereof was exigible to gift tax under the taxation under the Gift Tax Act, 1958. Membership of the stock exchange is in the nature of personal permission and is not a tangible asset. The second question is answered in the negative. It is accordingly held that the ITAT was not justified in adopting the composite value of the share as well as the ticket for the purpose of gift tax. This Court is not called upon to examine the correctness valuation of the shares transferred by the assessee in favour of his son for the purposes of gift tax.
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2015 (8) TMI 179
Computation of Book Profits for the purpose of Section 115 JA - whether AO was right in adding a sum which was directly credited to the 'Capital Reserve' Account on account of revaluationof 4000 Equity Shares in Shri Ramalinga Mills Ltd. by transfer to its subsidiary company confirmed by ITAT? - Held that:- The Tribunal in this case, relied upon the decision rendered in the case of Kumudam Printers Pvt. Ltd. came to be challenged before this Court [2011 (3) TMI 889 - MADRAS HIGH COURT ] and this Court had set aside the order passed by the Tribunal and remanded the matter back to the Tribunal as held that assessee had raised a specific ground on the validity of reopening of the assessment on the ground of limitation and jurisdiction under Section 147 before reversing the order of the Commissioner of Income Tax (Appeals) and succeeded therein, the Tribunal should have considered the issue on limitation and jurisdiction under Section 147 before reversing the order of the Commissioner of Income Tax (Appeals). Since the issue on jurisdiction and limitation touch on the very reopening of the assessment, we feel, the proper course herein would be to set aside the order of the Tribunal, remand the matter back to the Tribunal with a direction to consider the issue of limitation and the jurisdiction under Section 147 to reopen the assessment - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 178
Disallowance on account of deduction in respect of writing off of the irrecoverable advances and other debit balances u/s.36(1)(vii) - tribunal restricted the disallowance to the extent of ₹ 1 Lac - Held that:- The actual amount with respect to provisions for Provision for Gratuity, salary payable, PF payable, staff loan, etc., and to satisfy ourself as to, whether the learned tribunal was justified in restricting the disallowance to ₹ 1 Lac, we called upon the learned advocate appeasing on behalf of the appellant - revenue to place before us. However, despite number of opportunities granted to the revenue, the revenue has failed to produce the same for perusal of this Court. However, considering the findings recorded by the learned tribunal, we confirm the disallowance restricted to ₹ 1 Lac. - Decided against revenue.
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2015 (8) TMI 177
Non deduction of tds u/s 195 - payment of commission made to agents viz. of Turkey and of Mauritius - CIT and the Tribunal set aside AO order of disallowance - Held that:- CIT and the Tribunal corectly set aside the order of the Assessing Officer in view of the circular No. 786 dated 07.02.2000 issued by the Central Board of Direct Taxes which inter alia states that no tax is deductible under Section 195 of the Act in respect of expenditure on export commission and other related charges payable to a non-resident for services rendered outside India - Decided in favour of assessee. Addition on shortage in production - ITAT deleted addition - Held that:- The CIT found, as a matter of fact, that the assessee had been maintaining the complete details/particulars of opening stock, purchase, consumption, production and sales, which were in fact verified and accepted by the Assessing Officer. The finding is that the addition was made purely on imagination and assumptions without bringing any documentary material on record. The finding is neither absurd nor perverse.- Decided in favour of assessee.
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2015 (8) TMI 176
Computation of the quantum of deduction u/s 33AB - legislative purpose, purposive interpretation versus literal construction - activities of sale of tea manufactured out of bought green leaves and sale of purchased tea after blending with the tea manufactured by the appellant were other business activities or were not part and parcel of the business of growing and manufacturing tea - Held that:- As decided in case of Goodricke Group Ltd. vs. Commissioner of Income-Tax(No.1) [2011 (4) TMI 863 - CALCUTTA HIGH COURT] the assessee has utilized his entire tea grown by it in its garden and by blending the same with some other amount of tea purchased from outside has manufactured the final product and, thus, the entire profit arising out of such manufacture will get the benefit of section 33AB notwithstanding the fact that for the purpose of blending, some small amount was purchased from outside. It appears that the purchased amount is very trifling in comparison to the amount grown by the assessee and thus, it is not a case where it can be alleged that the purpose of maintenance of the garden by growing insignificant amount of tea in comparison to the final product is only a device to get the benefit of the section. In our opinion, a purposive interpretation of the aforesaid provision should be made instead of literal construction of the same otherwise, the legislative purpose will be frustrated and in rare cases, where a very few fortunate assessees who grow and manufacture different varieties of tea and consequently, do not require purchase of any tea for blending with the final product, can only get the benefit of section 33AB of the Act - Decided in favour of assessee.
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2015 (8) TMI 175
Condonation of the delay of 395 days in re-filing the appeal - Held that:- The first ground is entirely unconvincing. Much prior to the initial filing of the appeal, the Court Fees Act applicable to Delhi stood amended. As regards the second ground, again sufficient advance notice had been given to the litigants and Advocates about the filing of soft copies of the paperbooks. Further, the Registry of the Court had made appropriate arrangements for scanning services at the filing counters to facilitate the making of soft copies so that the inconvenience if any caused to the Advocates and the litigants is minimised. In any event the change could not have entailed a delay of more than a year and a month. Third reason as the change of Standing counsel for the Department is again, does not impress the Court. It is not possible to accept that no one followed up on the filing of appeals and allowed a period of more than one year and five months to elapse before the appeal could be re-filed. The Department has a cell in the High Court which is under the supervision of a Deputy CIT. He ought to be keeping track of the filing of appeals and should be able to know if any appeal entrusted to the panel counsel for filing has not been listed even once before the Court for a long time. - Decided against assessee.
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2015 (8) TMI 174
Validity of revision u/s 263 - Whether the provisions of section 68 can be attracted if share capital with premium is not properly explained by the assessee company? - Whether the failure of the AO to give a logical conclusion to the enquiry conducted by him gives power to the CIT to revise such assessment order? - Held that:- We hold that the contention of the ld. AR that since the AO of the assessee-company is not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment by the Finance Act, 2012 w.e.f. A.Y. 2013- 14 and hence the CIT by means of impugned order u/s 263 could not have directed the AO to do so, is unsustainable. Whether the enquiry conducted by the AO can be construed as a proper enquiry? - Held that:- The circumstances as discussed indicated that the apparent did not prima facie appear to be real and further investigation was called for. It is highly improbable for any person having sound mind to purchase at arm s length the shares of a private limited company, hardly having any worth, with face value of ₹ 10 at a premium of ₹ 190. This mere fact should have been cornerstone for the AO to embark upon further enquiry to unearth the truth. The genuineness of transactions of issue of share at such hefty premium in this background of the matter was under dark cloud and it skipped the attention of the AO. The contention of the assessee that the capacity of the share subscribers was proved as they subscribed to shares through banking channels after offloading their investments in shares of other companies, needs to be weighed properly in the background of the transactions in the instant cases. In so far as the establishment of genuineness of payment made through banking channels is concerned, we need not go anywhere else except looking at the judgment of the Hon ble jurisdictional High Court in CIT Vs. Precision Finance P. Ltd. (1993 (6) TMI 17 - CALCUTTA High Court ), in which it has been held that : `Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine . In our considered opinion, the AO miserably failed to examine all such relevant aspects, which must have been gone into during the course of assessment proceedings. AR unsuccessfully tried to justify the premium by submitting that the break-up value of the shares of the assessee companies is quite substantial, somewhere close to the premium. This break-up value has been computed by adding the share capital (say, face value of ₹ 10) and Reserve surplus (say, premium of ₹ 190) and then divided with the number of shares issued. This exercise leads us to nowhere. The reason is obvious that break-up value is being computed after taking into consideration the share premium received with this issue or an earlier issue on the same pattern. Such a break-up value at the close of the year after issue of shares at premium, is bound to remain close to the issue price of shares with premium. What is required to be shown is the break-up value of shares de hors the issue of any shares at premium. Since none of these companies has any other business activity except circulation of money from one company to another and by subscribing to or purchasing shares of other companies at premium/market price, there can be no justification of such a huge premium We agree with the contention of the ld. AR that the mere fact of completing an assessment within a short period of say one or two months, per se, cannot lead to an irreversible conclusion that the assessment was done in undue haste. But where the primary facts themselves point out objectively towards the need to carry out further investigation, as is there in all the cases under consideration, which the AO fails to carry out, it will be called as a case of passing assessment orders in undue haste without application of mind. All the cases under consideration have the same common feature of passing assessment orders in undue haste. When we consider the above factual matrix, there can be no escape from an axiomatic conclusion that in all these cases the enquiry conducted by the AOs is exceedingly inadequate and hence fall in the category of `no enquiry conducted by the AO, what to talk of charactering it as an `inadequate enquiry . In our considered opinion, the highly inadequate enquiry conducted by the AO resulting in drawing incorrect assumption of facts, makes the orders erroneous and prejudicial to the interests of the revenue. Whether CIT can set aside the assessment order and direct the AO to conduct a thorough enquiry, thereby interfering with the jurisdiction of the AO conferred on him in terms of section 142(1) and 143(2) of the Act? - Held that:- We are extantly not concerned with a situation in which the CIT is directing the AO to make assessment in a particular way, when the assessment proceedings are underway. Rather, the assessment already stands finalized and now the CIT is examining whether the AO properly examined the facts of the case. In such circumstances, it is impermissible to have a recourse to the provisions of section 142(1) and 143(2) for demolishing the order u/s 263 of the Act. We, therefore, refuse to uphold this contention as a reason for setting aside the order passed u/s 263 of the Act. No hesitation in holding that the present case is a glaring example of not making relevant enquiry, which amounts to `no enquiry and hence it becomes a case of non-application of mind by the AO. When we approach the facts of the cases under consideration, it is obvious that the extent of enquiry conducted by the AO, being as good as no enquiry, is sufficient in itself to empower the CIT for invoking his jurisdiction u/s 263. Under such circumstances, we cannot cast an impossible burden on the CIT to show the positive leakage of income in concrete terms, when he has simply set aside the assessment order and restored this aspect of the assessment to the file of AO for making a proper enquiry and then deciding. Where the AO fails to conduct an enquiry or proper enquiry, which is called for in the given circumstances, the CIT is empowered to set aside the assessment order by treating it as erroneous and prejudicial to the interests of the revenue. In such circumstances, it is not further required on the part of the CIT to expressly show where the assessment order went wrong. The very fact that no enquiry was conducted or no proper enquiry was conducted in the required circumstances, is sufficient in itself to invoke the provisions of section 263. Non-service of show cause notice u/s. 263 - Held that:- The conclusion which necessarily follows is that the requirement of service of notice u/s. 263 of the Act stands on a different footing and cannot be compared to cases where notice is required by law to be mandatorily served on assessee in terms of section 282 of the Act. Accordingly, the cases cited by the learned AR pertaining to service of notice in different contexts, where the Act mandates service of notice in accordance with section 282, lose their significance. Coming back to the language of section 263(1) requiring the passing of order `after giving the assessee an opportunity of being heard , it transpires that it refers to giving opportunity of hearing. If despite genuinely giving opportunity of hearing by the CIT, the assessee tries to hoodwink by evading the service of notice as has been done in the cases before us, then the requirement of giving `opportunity of hearing gets fully satisfied with. As such, we do not find any lack of opportunity of hearing by the ld. CIT in all such cases. Whether order u/s 263 is barred by limitation? - whether the issue of share capital by the assessee during the previous year was subject matter of reassessment proceedings? - Held that:- Nevertheless in the reassessment proceedings in all the cases, the AOs ventured to issue notices u/s. 133(6) of the Act to some of the shareholders for examining as to whether the ingredients of sec. 68 were satisfied. As to whether such enquiry was adequate or not, is a different issue. The fact remains that by issuing notices u/s. 133(6) of the Act, the AOs tried to examine the question of genuineness of share capital in proceedings u/s 147. It thus follows that by holding that the issue of share capital at premium was not properly examined by the AOs, the ld. CIT revised the orders u/s 147 and not the Intimation u/s 143(1) of the Act. The scope of reassessment is no more confined to the issues referred to in notice u/s 148, but also extends to other issues which come to the notice of the AO during the course of reassessment proceedings indicating the escapement of income. No doubt the issue of share capital at premium was not subject matter of notice u/s 148, nevertheless the AO proceeded to examine this aspect, thereby bringing it within the ambit of the order u/s 147. Hon ble Kerala High Court in CIT Vs. K.V. Mankaram Co. (2000 (4) TMI 25 - KERALA High Court ) has held that Intimation u/s 143(1) is an order only for sections 154, 246 and 264 and for all other purposes is only notice of demand. Similar view has been taken in MTNL Vs. CBDT (2000 (8) TMI 53 - DELHI High Court ) holding that Intimation u/s 143(1) is not an assessment order. Since the subject of revision u/s 263 can only be an `order passed.. by the Assessing Officer , we fail to see as to how `Intimation issued u/s 143(1) in all such cases, which can by no stretch of imagination be treated as an `order for the purposes of section 263, can be considered for the purposes of limitation. Viewed from any angle, it is clear that the subject matter of revision in all the cases under consideration were the orders passed u/s 147 of the Act. Going by the admission of the ld. ARs, if limitation is counted from the date of orders u/s 147, then the orders u/s 263 are within the limitation period Territorial jurisdiction of the CIT - whether the jurisdiction in respect of the order of assessment passed u/s. 147 r.w.s. 143(3) of the Act on 21.5.2010 in relation to AY 2008-09, much prior to even the making of request by the competent authority for transfer of cases for co-ordinated investigation and that too, for search matters, could also be said to have been transferred to ACIT/DCIT, Central Circle-XIX, Kolkata? - Held that:- The Commissioner transferring jurisdiction has power to transfer all proceedings under the Act, which are pending, completed or which may be commenced after the date of transfer, but that does not mean that he does not have powers to restrict his order of transfer only to a particular case for which request was made, thereby, leaving the jurisdiction in respect of other cases pertaining to an assessee to be exercised by the AO/CIT who already had it. The power to do a particular act also includes a power to restrict the exercise of power partly. In this case there is no dispute that the CIT, Kolkata-II, Kolkata, who passed the order u/s. 263 of the Act had jurisdiction over the assessee. There is no order transferring jurisdiction from ITO, Ward 6(1), Kolkata under CIT, Kolkata-II, Kolkata. The ld. AR, however contended that PAN data in the public domain showed that the assessee s jurisdiction at the relevant time was with ITO, Ward 8(2), Kolkata, who was under the jurisdiction of CIT, Kolkata-III, Kolkata.In our view this objection is frivolous. In the absence of any actual transfer of jurisdiction, the argument is without any force. The jurisdiction as per PAN data in public domain may inadvertently show a wrong feature, but that would not amount to transferring the jurisdiction, which is there in reality. The objection is rejected. Whether an addition in the hands of a company can be made u/s 68 in its first year of incorporation ? - Held that:- The decision in Bharat Engineering (1971 (9) TMI 14 - SUPREME Court) relied to submit that it cannot be possible for a newly incorporated to earn undisclosed income of such a magnitude in the very first year of its formation is in the case of a partnership firm and not a private limited company. There is a fundamental difference between a company vis-avis shareholders on one hand and a firm vis-a-vis partners on the other. Whereas a company is a separate legal entity distinct from its shareholders or directors, it is not so in the case of partnership firm. The Hon ble Supreme Court in Malabar Fisheries Company Vs. CIT (1979 (9) TMI 1 - SUPREME Court ) has held that partners and firm are one and the same thing and a firm is nothing but a compendious name given to partners. In view of the above precedents, it becomes manifest that the ratio laid down in Bharat Engineering (supra) cannot be applied to the facts of the present case, which is a company. The contention is rejected.In the absence of any actual transfer of jurisdiction, the argument is without any force. The jurisdiction as per PAN data in public domain may inadvertently show a wrong feature, but that would not amount to transferring the jurisdiction, which is there in reality. The objection is rejected. Effect of order passed u/s 263 in the case of amalgamating company after amalgamation - Held that:- It is observed in the instant case despite its amalgamation, the assessee chose to file its return of income after the date of amalgamation, in its earlier name and that is how the assessment got completed u/s 147 in the same name. It is obvious that in such circumstances, the assessee cannot be allowed to take advantage of its own manipulation. It is further interesting to note that the assessee also allowed the proceedings u/s 147 to complete in its earlier name, but is now seeking to object to the order of the ld. CIT on this aspect of the matter. Law does not permit a person to both approbate and reprobate. This contention is therefore, rejected. Whether order u/s 263 becomes invalid for being passed on a closed day? - Held that:- It is noted that from the above decision rendered by the Hon ble Allahabad High Court in the case of Kuldip Oil Industries Ltd. (1958 (12) TMI 35 - ALLAHABAD HIGH COURT), that in case of urgency, a trial can be conducted even on a closed holiday. In the present case, the time limit for passing the order u/s. 263 of the Act was expiring on 31.3.2013 and therefore, there was an urgency to pass the order before that date. The objection of the assessee deserves to be and is hereby rejected. Whether the order u/s 263 can be declared as a nullity for the notice having not been signed by the CIT ? - Held that:- We have noticed above that there is no requirement under the law for giving a notice for the proceedings u/s 263 in conformity with the provisions of section 282 of the Act. It has been noticed that the assessee should be given an opportunity of hearing and once this is done, the proceedings cannot be challenged on this score. When an assessee is made aware of the proceedings u/s 263, no such objection can be allowed to be taken. As the assessee in the instant case was afforded opportunity of hearing that would suffice compliance with the requirements of audi alterm partem contemplated by the provisions of sec. 263 of the Act. The objection raised by the assessee in this regard, to say the least, is frivolous. Consequences of refusal by the Revenue to accept the written submissions of the assessee - Held that:- Coming to the facts of the instant cases, the fact remains that such replies were sent by these assesses when the ld. CIT had given last opportunities and such opportunities were not availed by them. That apart, not giving a proper opportunity of hearing can be no reason for declaring the order void ab initio. The Hon ble Supreme Court in several judgments including Guduthur Brothers Vs. ITO (1960 (7) TMI 5 - SUPREME Court), CIT Vs. Jai Prakash Singh (1996 (3) TMI 7 - SUPREME Court ) and Kapurchand Shreemal Vs. CIT (1981 (8) TMI 2 - SUPREME Court) has held that lack of opportunity is simply an irregularity which does not render the order passed a nullity. In our considered opinion, it is at best an irregularity which will not affect the jurisdiction of the CIT u/s. 263 of the Act. We hold accordingly and dismiss the plea raised by the assessees on this issue. Search proceedings and revision of abated order u/s 263 - Held that:- it is clear that if an assessment is completed prior to initiation of search u/s.132 of the Act and if no incriminating material is found regarding a particular item of income during the course of search, then no addition can be made in the assessment of such year u/s. 153A of the Act. If we accept the contention of the ld. AR, then the Revenue would be left without any remedy if such an order passed by the AO is found to be erroneous and prejudicial to the interest of the revenue. In our considered view, in such cases it would be open to the Revenue to explore remedies open to it in law u/s. 263 of the Act, subject to satisfaction of the conditions precedent for exercise of jurisdiction under that provision, even after the initiation of search u/s.132 of the Act. In such circumstances, we are of the view that the plea put forth by the assessee cannot be accepted. The question of the assessee having to face multiple proceedings, in the present case, cannot be the basis to hold that jurisdiction u/s.263 of the Act cannot be invoked. The proceedings u/s. 263 of the Act to revise the order dated 21.2.2013 passed by the AO u/s. 147 of the Act, are valid and cannot held to be without jurisdiction. - Decided against the assessee.
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2015 (8) TMI 173
Disallowance of claim made u/s.10(23G) - failure to produce the necessary certificate required under the said section - assessee is a scheduled bank and carries on banking business - Held that:- The limited request of the learned counsel for the assessee was that the necessary approvals from the CBDT is available and will be provided to the Assessing Officer. He prayed that the order of the Assessing Officer may be set aside and the assessee allowed opportunity of providing the necessary approvals for grant of exemption u/s.10(23G) of the Act. We are of the view that it would be just and appropriate to set aside the addition made by the Assessing Officer in this regard and allow opportunity to the assessee to produce the required certificate which will enable the assessee to claim exemption u/s.10(23G) of the Act. - Decided in favour of assessee for statistical purpose. Disallowance of expenditure claimed for software - revenue v/s capital expenditure - Held that:- Respectfully following the decisions of the Hon'ble High Court of Karnataka in the case of IBM India Ltd. (2013 (10) TMI 1225 - KARNATAKA HIGH COURT ) and the coordinate bench of this Tribunal in the assessee's own case for Assessment Year 2001-02 we hold that the expenditure incurred by the assessee for purchase of application software is revenue in nature - Decided in favour of assessee. Disallowance of expenditure incurred for employee stock option plan - Held that:- We set aside the orders of authorities below and remit the issue back to the AO for considering it afresh in the light of directions given by of the Tribunal in A. Y. 2004-05 wherein held the claim of the assessee for deduction has to be allowed in principle. - Decided in favour of assessee for statistical purpose. Expenditure relating to rights issue disallowed u/s.35D - Held that:- Evidently, the sum of ₹ 5,37,45,182/- from which the AO started his computation and made the disallowance did include income of ₹ 3,53,58,063/-, from business, which amount was arrived at after adding back the inadmissible operating expenditure, which inter alia included the rights issue expenditure of ₹ 1,38,98,183/-. In other words, when the AO made an addition of ₹ 1,65,83,020/-. The result was that what was already suo motu added back by the assessee was once again aggregated, as pointed out by the Ld. AR. This had resulted in a double disallowance. Hence, the disallowance of ₹ 1,38,19,183/- is deleted. However, in respect of the balance amount of ₹ 27,63,837/-, as admitted by the Ld. AR in the case of Andhra Bank (2013 (4) TMI 701 - ITAT HYDERABAD ), this Tribunal had held that amortisation of rights issue u/s.35D of the Act in the years prior to A. Y. 2009-10 was not allowable. Therefore, the disallowance to the extent of ₹ 27,63,837/- has been rightly made and is hereby confirmed. - Decided against assessee. Application of Sec.115JB - MAT applicability - whether the banking companies were not required to prepare their accounts in accordance with Parts II & III of the Companies Act, 1956? - Held that:- On a perusal of the cited decision in the assessee's own case for Assessment Year 2002- 03, we find that the issue of whether or not the provisions of section 115JB of the Act are applicable to Banks has been considered and held in favour of the assessee to hold that provisions of section 115JB of the Act are not applicable to the assessee which is a banking company. - Decided in favour of assessee. Addition of claim of dimunition in value of investment - CIT(A) deleted addition - Held that:- The facts of the assessee in the case on hand are similar to that of the cited case, i.e. Corporation Bank Ltd. (2012 (9) TMI 753 - ITAT, BANGALORE) followed by the learned CIT (Appeals) in the impugned order, we concur with the decision of the learned CIT (Appeals) in allowing the assessee's claim of diminution in the value of investments under the AFS/HFT categories - Decided in favour of assessee. Depreciation on conversion of securities - CIT(A) allowed claim - Held that:- In view of the clear-cut guidelines of the RBI the claim of the assessee towards provision of depreciation on account of transfer of securities from AFS category to HTM category is allowed.- Decided in favour of assessee. Disallowance of insurance premium paid on housing loans of customers - CIT(A) deleted addition - Held that:- We concur with the finding of the learned CIT (Appeals) in the impugned order that the expenditure incurred on insurance premium on housing loan are revenue in nature and is an allowable deduction. It is not the case of the Assessing Officer that these expenses are not for the purposes of the assessee's business or that they are capital in nature. These expenses are related to the housing products which are very much a part of the assessee's business activities and the payment of insurance premium on the housing products is also not capital in nature. Once the expenditure is accepted to be revenue in nature and incurred for the purposes of business, then it is allowable in the year in which it is incurred. Thus we concur with the finding of the learned CIT (Appeals) that the expenditure incurred as insurance premium in connection with their housing loan scheme is revenue in nature and is eligible for deduction - Decided in favour of assessee. Addition made for broken period interest - Addition deleted by the CIT (A) - Held that:- Broken period interest does not constitute income in the year under consideration as it has not become due and payable / receivable as per the provisions of the Act. - Decided in favour of assessee.
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2015 (8) TMI 172
Validity of assessment order u/s. 153C/143(3) - Held that:- Satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a ‘sine-qua-non’ to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of Section 153C. On the same date i.e. 23.7.2010, similar satisfaction note, only with the change in the name of the assessee’s has been issued arbitrarily which does not in any manner satisfy the requirement of section 153C of the I.T. Act. We could not find any mention of any seized materials like valuable articles or things or any books of account or documents have been referred even in the impugned assessment orders. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity. - Decided in favour of assessee.
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2015 (8) TMI 171
Disallowance on account of premium of group gratuity holding the same not to be allowable u/s 36(1)(v) - CIT(A) confirmed disallowance - Held that:- As find in the earlier round, the matter was referred to the Assessing Officer for verification of the fate of application of the assessee for registration of gratuity scheme. The Assessing Officer enquired from the office of the Commissioner who clearly informed that no such application was pending in that office. In such circumstances in our opinion, the assessee should have taken caution to pursue the matter in the office of the Commissioner or should have produced some evidence before us to show that the application was really pending. In the absence of such evidence only conclusion which can be reached is that the gratuity fund of the assessee is not approved. It was common ground that the funds to which the assessee had contributed were not approved either during the year under consideration or at any time up to the date of making the contributions. Therefore, the contributions made did not qualify for deduction under section 36. Further the deduction which the assessee claimed was admittedly of the nature described in section 36(1)(iv) and (v). Therefore section 37 would not come to the aid of the assessee. From above it becomes clear 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 Hon'ble High Court in case of Sony India P. Ltd V CIT [2006 (6) TMI 76 - DELHI High Court ] has very clearly held that 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). - Decided against assessee. Addition of provisions for bad and doubtful debts written off in the computation of book profit u/s 115JB - Held that:- Section 115JB of the Act, provides that any amount credited to the profit and loss account on account of amounts withdrawn from the reserve or provision had to be reduced from the book profit with an exception that if such reserve or provision is out of reserve created prior to or before 1.4.1997 and, such reserve has been created not by way of debit to the profit and loss account, then the same will not be permitted to be reduced from the net profit as per profit and loss account. We have verified the figures from profit and loss account as well as the computation of income and it becomes clear that in all those years the return was filed on the basis of profit and loss account before reducing the provisions of doubtful debts. Therefore these are clearly the provisions made in the earlier years and in the present year the assessee has withdrawn certain sum out of this provision and therefore the same are deductible in terms of proviso to clause (i) to Sec 115 JB. - Decided in favour of assessee. Disallowance on account of premium paid for leave encashment - Held that:- 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 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. Later on effect of this judgment was nullified by insertion of clause (f) to Sec 43B providing that the amount would be allowable only if the same has been paid. Since the amount has been paid, therefore same is, in our opinion, allowable. Accordingly we set aside the order of the CIT(A) and direct the Assessing Officer to allow this amount. - Decided in favour of assessee. Addition on account of the interest under the ASIDE scheme - Held that:- Interest income does not accrued to the assessee and the assessee is not liable to be taxed on such interest. Therefore we set aside the order of the CIT(A) and delete this addition. See CIT And Another Versus Karnataka Urban Infrastructure Development And Finance Corporation [2006 (2) TMI 114 - KARNATAKA High Court ] - Decided in favour of assessee.
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2015 (8) TMI 170
Eligibity for exemption under section 11 - CIT(A) allowed claim - whether the assessee association is not hit by amended provisions of section 2(15) of the Act under the object of general public utility? - Held that:- In the given facts and detailed reading of the various judicial decisions through the years, interpreting the definition of "charitable purpose" as laid out in section 2(15) of the Act and also the definition of "business" in relation to the said section amply revels that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the Institution is Charitable in nature or not. Where the main object of the Institution was "charitable" in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non members, were all held to be "charitable" in nature. Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce (1964 (10) TMI 19 - SUPREME Court) had clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. In our view the basic principle underlying the definition of "charitable purpose" remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01/04/2009, though the restrictive first proviso was inserted therein. Accordingly, in the given facts of the case as discussed above in detail, the assessee association's primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. Hence, assessee is not hit by newly inserted proviso to section 2(15) of the Act - Decided in favour of assessee.
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2015 (8) TMI 169
TDS on interest paid on deposits by its members as per provisions of section 194A(3)(i)(b) - Appellant is a Cooperative Bank - assessee in default - Held that:- A plain reading of the provisions of Section 194A(3)(i)(b) above clearly indicates that exemption for interest paid by co-operative society engaged in banking business is exempt from deduction of tax at source up to an amount of ₹ 10,000/-. Therefore, exemption for interest is up to ₹ 10,000/-. Thus we can see a threshold limit of ₹ 10,000/- has been prescribed by the said provision, meaning any interest disbursal above ₹ 10,000/- attracts TDS. The ld. AR’s contention that since section 194A(3)(v) exempt any interest paid by co-operative society to its members irrespective of nature of deposit or amount, the action of the assessee society engaged in banking, not to deduct Tax at source is valid, is according to us not correct AR heavily relied on the CBDT circular (NO.9 dated 11.9.2002), to bolster his case, which cannot be countenanced because it is a trite law that CBDT circular cannot over-ride the prescription of statute passed by the parliament. And, there is no quarrel that assessee is a co-operative society engaged in banking business and the exemption for deducting tax at source for payment of interest is only up to ₹ 10,000/-. So the assessee had to deduct TDS for payment of interest above 10,000/-. In the said scenario, the ld CIT(A) has rightly confirmed the order of the ITO (TDS) and we do not find any infirmity in the said order. Therefore, we confirm the order of the ld. CIT (A). - Decided against assessee.
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2015 (8) TMI 168
Disallowance on account of lease payment made by the assessee - Held that:- AS-19 on accounting for "Leases" issued by the ICAI is only applicable for accounting the lease transaction in the books of accounts. It is a settled law that treatment in the books of accounts is not determinative of liability towards income-tax for the purpose of the Act. The liability under the Act is governed by provisions of the Act and is not dependent on the treatment followed for the same in the books of accounts. For above proposition, reference is made to Sutlej Cotton Mills Ltd. vs. CIT (1978 (9) TMI 1 - SUPREME Court) and Kedarnath Jute Mfg. Co. Ltd. vs. CIT [1971 (8) TMI 10 - SUPREME Court] Finance Lease, in AS-19, is described as a lease that transfers substantially all the risks and rewards in respect of ownership of an asset; title may or may not be transferred under such lease. An operating lease, on the other hand, is described as a lease other than a finance lease. The aforesaid Accounting Standard provides that under the finance lease, the lessee should recognize the asset in its books and should charge depreciation on the same. In the case of operating lease, the Accounting Standard provides that the lessee should recognize the lease payments as an expense in the profit and loss account and the lessor should recognize the asset given on lease and charge depreciation in respect of the same. The aforesaid distinction between finance lease and operating lease is not recognized under the Act. Under the provisions of the Act, depreciation is admissible under section 32 of the Act only to the 'owner' of the asset. Lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure under section 37 of the Act. Thus we hold that disallowance is not justified on facts and circumstances of the case. - Decided in favour of assessee.
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2015 (8) TMI 167
Unexplained investment u/s 69 - entire addition made by the AO rests on the valuation report of the DVO, who estimated the value of property at ₹ 40.50 lac against the purchase price at ₹ 34,65,000/- - CIT(A) deleted addition - Held that:- A mere DVO’s report, which is nothing more than an estimate of the value of the property, cannot be a substitute for an evidence directly indicating unexplained investment. A fair market value determined by the DVO need not necessarily match with the actual price paid inasmuch as there can be several reasons for the sale of a property at a higher or lower price than its fair market value. Unless the AO brings on record some authentic material divulging the assessee having made investment over and above that declared in the registered sale deed, there can be no question of invoking the provisions of section 69 of the Act. Here is a case in which the assessee claimed to have purchased the property for a sum of ₹ 34.65 lac and the AO has made addition of ₹ 5.85 lac simply on the basis of difference between the DVO’s report and apparent sale consideration. No attempt has been made for verifying the price from the seller of the property. CIT(A) correctly deleted the addition.- Decided against revenue. Unexplained expenditure u/s 69C - CIT(A) deleted addition - Held that:- As regards the other amount of ₹ 3,81,999/-, we find that the assessee made a categorical claim before the authorities that this amount was spent on furniture and fixtures during renovation of building which was recorded in the books of account for the AY 2008-09. This fact has not been denied by the authorities that the assessee, in fact, recorded this amount of ₹ 3,81,999/- in his books of account of M/s NGK Trading Company. Once this amount has been duly recorded in the books of account of a subsequent year and there is no material to indicate that such furniture and fixture was purchased in the year in question, we countenance the action of the ld. CIT(A) in deleting the addition to this extent - Decided against revenue. Addition on account of the interest on loans - CIT(A) deleted addition - Loans advanced to sister concerns, namely, Exotic Fresh Produce Pvt. Ltd., and Narco Exports - Held that:- The assessee charged interest on such advances to sister concerns at 11% against the payment of interest at 10% to 11% on loans and advances taken by him. As such, there can be no question of making any disallowance of interest towards the use of interest bearing funds for non-business purpose.- Decided in favour of assessee. Additional payment made by the assessee for purchase of shop at South City, Gurgaon, which was shown as Investment in the balance sheet of M/s NGK Trading Company - Held that:- The case of the assessee is that the shop was acquired for carrying on business from this premises. There is no material on record manifesting the date from which such shop was actually put to use. Going by the proviso to section 36(1)(iii), any interest paid for the period up to the date of actual use of the shop, cannot be allowed as deduction. The AO is directed to ascertain the date from which the assessee took possession of this shop and then put it to use. Interest up to the date of putting such shop of South City-II, Gurgaon to use shall not be allowed as deduction, but, will be capitalized. In the absence of any material throwing light on the above issues, we set aside the impugned order and remit the matter to the file of AO for deciding this issue in conformity with our above observations.- Decided in favour of assessee by way of remand. Cash and bank balance which includes demand drafts in hand - Held that:- The very fact that this much cash and bank balance is available with the assessee at the year end, can’t be a ground for making any disallowance towards the interest paid on interest bearing loans taken by the assessee for the simple reason that retaining of amount in cash and bank balances does not in any manner indicates the diversion of funds for non-business purpose. It is for the assessee to decide as to how he has to conduct his business by keeping the borrowed funds in cash or otherwise. If loan is taken for business purpose and the loan is still in the possession of the assessee, the interest paid thereon has to be allowed as deduction.- Decided in favour of assessee. Repayment of old unsecured loans - Held that:- The assessee repaid these loans taken earlier for business purpose on which he was paying interest @ 11.33%, as against fresh loans taken on interest @ 10% to 11% per annum. It is, therefore, self evident that there is no loss of revenue in the repayment of unsecured loans. Even otherwise, the repayment of business loans taken earlier out of the fresh interest bearing funds borrowed by the assessee, cannot be a reason for making any disallowance of interest paid on fresh funds taken as loan.- Decided in favour of assessee. Disallowance u/s 69B - Unaccounted investment in proprieties - Held that:- t is obvious that the assessee instead of separately showing Investments in these four properties has withdrawn the amount from his capital account, which fact was stated before the AO and has remained un controverted. There is hardly any difference in showing investment in properties either by way of separate asset in the balance sheet or by reducing it from the capital account by means of withdrawals. Once an amount is withdrawn from capital account, which is utilized for making an investment, it cannot be brought within the purview of sections 69/69B in any manner.even after making the above investments, which are meant for non-business purpose, the assessee has still credit balance of his capital account in both the proprietorship concerns. It shows that these investments were made by the assessee for non-business purpose by withdrawing the amounts from his capital account and even after such withdrawals, there was some credit balance of his capital available with him. Under such circumstances, there can be no question of making any addition u/ss 69/69B - Decided in favour of assessee. Disallowance of foreign travel expenses - CIT(A) deleted addition - Held that:- the assessee filed all relevant details with the AO about the foreign visits undertaken by him, meeting the suppliers of fruits and attending various conferences related to fruits in various countries. The assessee also furnished names of parties or companies with whom he interacted during his foreign visits. These findings recorded by the ld. CIT(A) have not been controverted by the ld. DR. Under such circumstances, we are of the considered opinion that there can be no basis for making any ad hoc disallowance towards foreign travel expenses - Decided in favour of assessee.
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2015 (8) TMI 166
Business and interest income - whether should be included in the assessee HUF’s total income? - Held that:- Hon’ble Delhi High Court vide its interim order dated 17.2.1984, determined 60% share as undisputed leaving 40% as disputed. Accordingly, a Receiver was appointed to collect rent from all the tenants and also make inventory of goods in the business of M/s Gupta Sports House. A final settlement was arrived at amongst all the family members only in the year 2004. It shows that up to November, 2014, there were no determined shares of the litigants in the house properties and business under the name and style of Gupta Sports House. Going by the prescription of section 168, total income from the estate of late Shri B.D. Gupta, except to the extent of distributed to or applied for the benefit of specific legatees, is required to be charged to tax in the hands of the executor and not the assessee HUF. It is obvious that once an income has arisen from the estate of a deceased and there are provisions under the Act mandating the charge thereon, such income cannot go tax free. Therefore, direct the AO to tax the income from the estate of late Shri B.D. Gupta for the year under consideration in terms of section 168 of the Act. In so far as the assessee under consideration is concerned, there cannot be any inclusion of business or interest income in its hands.
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2015 (8) TMI 165
Addition u/s 40A (3) - CIT(A) deleted addition on the ground that payments of ₹ 132,000/- made on 21.03.2010 and ₹ 167,620/- on 28.03.2010 fall on Sundays and banks were closed which was one of the exceptions provided in Rule 6DD(j) - Held that:- We find that learned CIT (A) has allowed relief only in respect of two payments which were made on Sundays and he has confirmed the balance disallowances u/s 40A (3). We also find that it is noted by the A.O. in the assessment order that these are cash purchases. Therefore, there is no requirement to find out the due date of the bill. This is not the case of the A.O. that these two dates are not on Sunday. Considering all these facts, we decline to interfere in the order of CIT (A) on this issue - Decided against revenue. Unaccounted cash credit - unaccounted deposits in saving bank account of HDFC Bank - CIT(A) deleted addition - Held that:- A clear finding is given by CIT (A) that the balance sheet was prepared for business affairs and this bank account was a personal account. It is not shown by the revenue that any business transaction was carried out through this bank account and hence, we find no merit in the objection of the A.O that the HDFC Bank Account is not incorporated in Balance Sheet. Even if the assessee fails to establish the purpose for which the loan was stated to have been taken by the assessee, it cannot be said that for this reason alone, the loan is bogus and addition is called for. There is no merit in any of the objections of the A.O. The assessee has filed affidavits of all 98 persons and the A.O. called 10 person out of them and 9 appeared and confirmed. Hence, in our considered opinion, in the facts of the present case, there is infirmity in the order of CIT (A) on this issue - Decided against revenue. Unaccounted investment - addition u/s 69B deleted by CIT(A) - Held that:- CIT (A) has decided this issue on this basis that this difference is with regard to payment of stamp paper purchased in cash and it was explained before CIT (A) that this payment was made out of cash available in personal capacity. Learned CIT (A) held that in the facts of the present case, it is reasonable to accept that the assessee may be having some cash as personal savings and he accepted this claim to the extent of ₹ 80,000/-. In our considered opinion, the amount of personal cash accepted by CIT (A) is not excessive and hence, we hold that there is no infirmity in the order of CIT (A) on this issue. - Decided against revenue.
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2015 (8) TMI 164
Claim of assessee for depreciation @ 80% of energy saving devices denied - CIT(A) deleting the disallowance - Held that:- The CIT(Appeals) has not given any finding as to whether the plant in question formed part of energy saving plant. He has given relief only on the basis that the effluent treatment plant was installed during the F.Y. 2008-09 relevant to A.Y. 2009-10 and the AO in the assessment order dated 28.3.2011 has accepted the fact that effluent treatment plant was to be treated as energy saving plant on which higher rate of depreciation at 80% has to be allowed. The CIT(A) allowed relief only on the reasoning that in the year of installation; classification of an asset falling within a particular block and being eligible for depreciation at a particular rate; has to be ascertained. Once that is done, in a subsequent year it is not possible for the AO to review the correctness of grant of depreciation in an earlier year. In other words, after the introduction of concept of “block of assets”, the assets loose identity the moment they enter the block and therefore the rate of depreciation of a particular item of depreciable asset cannot be tampered with in a subsequent assessment year. In our view, the reasoning adopted by the CIT(Appeals) is just and proper and calls for no interference. - Decided against revenue. Disallowance of purchases - CIT(A) deleting the disallowance - Held that:- It is no doubt true that it is the duty of assessee to furnish evidence to substantiate expenses in the trading, profit & loss account. According to the assessee, the AO only called for sample vouchers and ledger of purchases and therefore purchase bills were not produced. This fact has not been denied in the remand report filed by the AO before the CIT(Appeals). Therefore, there was sufficient reason for the assessee to file purchase bills evidencing purchase of raw materials and coal before the CIT(A). In the remand report, there is no complaint by the AO that the purchase bills were not believable or the AO did not think it fit to make any further enquiry on the supporting bills filed by the assessee before the CIT(A). In these circumstances, the very basis on which disallowance was made by the AO no longer survives. Even on that basis, the CIT(A) could have allowed relief. Nevertheless, the CIT(A)’s conclusion was on the basis that the AO should have cross-verified from the parties from whom the assessee claimed to have made purchases. In our view, the ultimate conclusions of the CIT(Appeals) that disallowance cannot be sustained is just and proper and calls for no interference. - Decided against revenue. Addition on account of share application money u/s. 68 - CIT(A) deleting the addition - Held that:- It is clear from a reading of the grounds of appeal of the Revenue that, Revenue is satisfied with regard to identity and creditworthiness of the transaction. On this aspect, in the remand report filed by the AO before the CIT(Appeals), no facts have been stated as to why the claim of the assessee and genuineness of the transaction should be doubted. As we have already seen, a sum of ₹ 1.35 crores was received by Balkrishna Malkani from Jitendra Virwani by cheques and the same have been reflected in the income tax returns of Balkrishna Malkani as loans and the corresponding investment in the share application money of the assessee is also reflected. In such circumstances, there is no merit in ground raised by the Revenue - Decided against revenue.
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2015 (8) TMI 163
Computation of deduction u/s. 10A - excluding the telecommunication charges and expenses incurred in foreign currency from the export turnover and total turnover - According to the Revenue, the aforesaid expenses should be excluded only from the export turnover and not from the total turnover - Held that:- As of today, law declared in Tata Elxsi Ltd., [2011 (8) TMI 782 - KARNATAKA HIGH COURT] in which it was held that whatever is excluded from the export turnover, should also be excluded from the total turnover which is the jurisdictional High Court is binding on us. We therefore hold that the order of CIT(A) does not call for any interference and accordingly the same is confirmed. - Decided against revenue. Brought forward unabsorbed losses of earlier years - Whether should be set off against the profits of the 10A unit and deduction u/s. 10A should be allowed only after such set off? - Held that:- The Hon’ble Karnataka High Court in the case of Yokogawa (2011 (8) TMI 845 - Karnataka High Court ) was concerned with similar situation as set out above. In view of the aforesaid decision of the Hon’ble Karnataka High Court, we are of the view that the claim as made by the Assessee for carry forward of loss of the non-eligible unit had to be allowed without set off of profits of the 10A/10B unit. - Decided against revenue.
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2015 (8) TMI 161
Assessment proceedings transferred - Held that:- Disposed of in terms of order, of even date, passed in M/s Kuantum Papers Limited versus Union of India and others (2015 (7) TMI 1025 - HIGH COURT OF PUNJAB AND HARYANA).Persuing the impugned order we satisfied that it does not meet the parameters of an order required to be passed under Section 127(2) of the Act.
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2015 (8) TMI 160
Disallowance of employees contribution towards PF and ESIC and provision for employees’ contribution towards PF and ESIC paid beyond due date - CIT(A) deleted the addition u/s.36(1)(va) - Held that:- There is no fallacy in the findings of learned CIT(A) because now this issue is squarely covered by the decisions of Alom Extrusions (2009 (11) TMI 27 - SUPREME COURT ) and P.M. Electronics, (2008 (11) TMI 3 - DELHI HIGH COURT) because the PF and ESIC contribution of employees was deposited before the due date of the filing of the return, no disallowance to be made - Decided against revenue. Disallowance u/s 40(a)(ia) - CIT(A) deleted the addition following an order of the Special Bench pronounced in the case of Merliyn Shipping (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) - whether Section 40(a)(ia) of the Act can be invoked only to disallow expenditure of the nature which is shown as “payable” as on the date of the balance sheet and it cannot be invoked if amount is not outstanding even if payment has been paid without deduction of tax? - Held that:- The issue now stood covered by few orders of the Hon’ble High Court, wherein it is held that if the payment is made before the due date of filing of the return and the TDS deducted has duly been paid within that period then the same is allowable as an expenditure. In view of these orders, we hereby hold that although the decision of Merliyn Shipping (supra) was followed by learned CIT(A) is no more a good law but otherwise the issue now stood covered in favour of the assessee
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Customs
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2015 (8) TMI 192
Valuation of goods - Computation of CVD on MRP basis - Re-labelling of boxes of Vitrified and Glazed tiles with higher MRP - Scope of Section 4A of Central Excise Act, 1944 for computing CVD on import of goods - Extended period of limitation - Confiscation of goods - Imposition of redemption fine and penalty - Difference of opinion - Majority order - Held that:- There is no dispute that goods are covered by scheme of Section 4A of the Central Excise Act and CVD is to be paid based upon RSP minus abatement. The appellants were also following Section 4A of the Central Excise Act as also Section3(2) of the Customs Tariff Act inasmuch as they were declaring certain retail sale price on the goods. Abatement was given on the so declared retail sale price and duty was being paid with reference to the value so arrived. However, later on, it was found that appellants themselves were selling some goods at a price higher than retail sale price declared by them to the Customs. The declaration relating to RSP has to be true and correct declaration and not a false declaration. If importer himself is selling the tiles at a price higher than the declared RSP, declared RSP is not true - Tax payer cannot be permitted to himself misdeclare the RSP, thereby evade payment of correct amount of duty. Reference to Section 4A of the Central Excise Act to affix RSP is not to affix any RSP but true and correct RSP - Section 4A(1) and 4A(2) of the Central Excise Act is fully applicable to the Explanation to Section 3(2) of the Customs Tariff Act, and disagree with Member (Judicial) that reference to Section 4A of the Central Excise Act is for very limited purpose i.e. to affix RSP and abatement with respect to the Explanation to Section 3(2) of the Customs Tariff Act. In effect, even the Rules introduced in 2008 provide certain steps and if the price cannot be determined under those steps, then it has to be determined based upon the best judgment method which should be in accordance with Section 4A. - provisions of Section 3(2) of the Customs Tariff Act will not become ineffective in the absence of Section 4A(4) of the Central Excise Act, 1944 for the imports made prior to 14.5.2003. In taxation of law, it is not unusual to use the best judgment method keeping in view the purpose and object of the law/particular provision. There are number of bills of entry where declared RSP has been accepted as based upon FIFO method, there was no transaction exceeding the declared RSP. While what has been done is correct, it is possible that some of the good covered by such RSPs might have been sold during the subsequent period or earlier period. For example, in respect of bill of entry No. 304782, the goods were cleared on 24.10.2002 and as per FIFO principle, these have been sold between 30.11.2002 to 7.1.2003. It is possible that part of the goods might have been sold between 24.10.2002 to 29.11.2002 or any time after 7.1.2003. Appellants will be entitled to the benefit of doubt in such cases. Appellant has declared a MRP at the time of import and subsequent to the clearance, sold the goods himself at a price higher than the declared MRP. In my view, the present case is equally strong footing if not better than the case of Planet Sports (2004 (10) TMI 209 - CESTAT, NEW DELHI). Decision in the case of Media Industries (2006 (4) TMI 275 - CESTAT, NEW DELHI) followed. There was a clear-cut wilful misstatement or suppression of facts by the importer and his employees and the requirements of Section 28 for invoking extended period are satisfied. The fact that provisional assessments were finalized during the investigation period is of no relevant or consequence for invoking proviso to Section 28. The reasoning followed by the Hon'ble Gujarat High Court in the case of Neminath Fabrics Pvt. Ltd. [2010 (4) TMI 631 - GUJARAT HIGH COURT] is equally applicable in the present case. Appellants had declared certain RSPs and sold the goods both below the declared RSP in some cases above the declared RSP. However, as discussed, with reference to para 4, it has not been possible to clearly pinpoint the consignments or part of the consignment where goods have been sold at a price more than the declared RSP and hence RSP is misdeclared. Even the computation of the duty short paid is based upon number of assumptions. - confiscation of the goods and consequently imposition of redemption fine and penalties under Section 112 (a) & (b) of the Customs Act, 1962 on the appellants are not sustainable. As far as penalty under Section 114A is concerned, the same is sustainable only to the extent of duty computed - Decided partly in favour of assessee.
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2015 (8) TMI 191
Admissibility of CVD exemption on imported goods - import of silk yarn, silk fabrics - Benefit of Notification No.30/2004-CE dt. 9.7.2004 - Held that:- Supreme Court has clearly considered all the previous decisions of Apex Court including the decision in the case of Motoram Tolaram Vs UOI (1999 (8) TMI 68 - SUPREME COURT OF INDIA). Therefore, the revenue relying on the above case law and also the LB decision in the case of M/s.Priyesh Chemicals & Metals (2000 (5) TMI 72 - CEGAT, NEW DELHI) are not relevant. In view of the latest decision of Apex court in SRF case [2015 (4) TMI 561 - SUPREME COURT] & AIDEK Tourism Services Pvt. Ltd. [2015 (3) TMI 690 - SUPREME COURT], the issue of CVD exemption under Notfn. 30/2004 on imported goods has attained finality. This Tribunal Bench decisions in the case of M/s.Prashray Overseas Pvt. Ltd. Vs CC Chennai [2008 (9) TMI 666 - CESTAT, CHENNAI] stands confirmed by the Hon'ble Supreme Court. By respectfully following the ratio of the Apex Court decisions, we hold that the respondents are eligible for CVD exemption under Notification 30/2004-CE dt. 9.7.2004. There is no infirmity in the orders of LAA - Decided against Revenue.
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2015 (8) TMI 190
Import of prohibited goods - Misdeclaration of goods - Hazardous goods - whether the goods can be redeemed on the basis of the report of Chartered Engineer which states that the items in question appears to be non hazardous in nature or not - Held that:- Waste contain irregular shape material, appearing in shape of scull and lumps shaped slag having ferrous material mixed with impurities like floor dust, stone, sand, dirt, etc.. Also held that these slags and sculls appears to be non hazardous in nature. In fact, the Chartered Engineer has not done any chemical test on the goods in question and he has given his expert opinion. Revenue has accepted the Chartered Engineer report in parts holding that it appears to be containing sculls and slags but never accepted the part of the report that these slags appears to be non hazardous in nature. In fact, report is to be accepted in toto and not in parts. If revenue want to say that these slags appears to be non hazardous in nature is a vague report then the observation by the Chartered Engineer that these waste contain irregular shape material appearing in shape of scull and lump is also vague. Further, the scull and slags are not prohibited items. - If item in question is restricted item, same can be allowed to be imported on payment of redemption fine and penalty. - Impugned order is set aside - Decided in favour of assessee.
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Corporate Laws
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2015 (8) TMI 189
Fraudulent transfer of shares – Non-compliance of provisions – Held that:- transfer of 536 shares was made purportedly as part of family arrangement, Annual Report of Respondent company of 2003-2004 reflects this transfer and shows names of all transferees –Appellants had to show that such alleged transfer was not only oppressive act but that it was just and equitable to wind up company on account of such act – Appellants failed to make out any such case – As per Article 10 of article of association, shares may be transfered by member to another member or person in any of the enumerated relationships with transferor member – It was admitted position that transferees of these 536 shares was brothers of deceased and fall within this clause – Therefore transfers cannot be said to be in contravention of Articles. Representation on board of directors – CLB directed adequate representation of appellant on board of directors on Appellants claim of having 46.71% shareholders – Held that:- Whether or not Appellants hold over 46% shareholding in Respondent company, was matter of serious dispute between parties – If 536 shares of Respondent company was treated as correctly transferred, total shareholding of Appellants comes to about 26.46% – Therefore direction that adequate representation should be given to Appellants was clearly impermissible and cannot be sustained – Cross-objections allowed – Impugned order giving adequate representation to Appellants set-aside – Decided against appellant.
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2015 (8) TMI 188
Scheme of Amalgamation - Dispensing convening meetings of equity and preference shareholders, secured and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Sections 391 and 394 of Companies Act, 1956 read with Rules 6 & 9 of Companies (Court) Rules, 1959 – Held that:- board of directors of transferor companies no. 1, 2, 3, 4, 5, 6 & 7 and transferee company in their separate meetings respectively unanimously approved proposed Scheme of Amalgamation – Equity shareholders, secured creditors and unsecured creditors of transferor company no. 1,3,4,5,6 & 7 have given their consents/no objections in writing to proposed Scheme of Amalgamation and were found in order – Direction issued to Transferor company no.2 having 366 unsecured creditors, to hold their meeting to seek their approval to proposed Scheme of Amalgamation – Application stands allowed – Decided in favour of Applicants.
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FEMA
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2015 (8) TMI 187
Violation of provisions of Sections 47(1) & (2), 9(1)(c) and 8(1) - Permission from RBI for advertisement of ‘Kingfisher’ brand name on racing cars during Formula-I World Championships - Failure to appear against the summon issued - Held that:- Complaint is maintainable if there is default in not carrying out summons lawfully issued. The averments in the complaint show that the summons dated 21st December, 1999 were refused by the appellant and earlier summons were not carried out deliberately. - From the tenor of the letter, it appears that it was not a case of mere seeking accommodation by the appellant but requiring date to be fixed by his convenience. Such stand by a person facing allegation of serious nature could hardly be appreciated. Obviously, the enormous money power makes him believe that the State should adjust its affairs to suit his commercial convenience. The fact that the adjudicating officer chose to drop the proceedings against the appellant herein does not absolve the appellant of the criminal liability incurred by him by virtue of the operation of Section 40 read with Section 56 of the Act. The offence under Section 56 read with Section 40 of the Act is an independent offence. If the factual allegations contained in the charge are to be proved eventually at the trial of the criminal case, the appellant is still liable for the punishment notwithstanding the fact that the presence of the appellant was required by the adjudicating officer in connection with an enquiry into certain alleged violations of the various provisions of the Act, but at a subsequent stage the adjudicating officer opined that there was either insufficient or no material to proceed against the appellant for the alleged violations of the Act, is immaterial. An appeal against the conclusion of the adjudicating officer that the proceedings against the appellant herein for the alleged violation of the various provisions of the FERA Act are required to be dropped has not even attained finality. Admittedly, such an order of the adjudicating officer confirmed by the statutory appellate authority is pending consideration in an appeal before the High Court. Though, in our opinion, the result of such an appeal is immaterial for determining the culpability of the appellant for the alleged violation of Section 40 read with Section 56 - entire approach adopted by the appellant is a sheer abuse of the process of law - Decided against Appellant.
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Service Tax
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2015 (8) TMI 208
Waiver of pre deposit - Renting of Immovable Property Service - suppression of facts - Held that:- In the case of M/s Greater Noida Industrial Development Authority (2014 (9) TMI 306 - CESTAT NEW DELHI) the Tribunal referring to the judgement in the case New Okhla Industrial Development Authority (2014 (1) TMI 1203 - CESTAT NEW DELHI) held that renting of vacant land by way of lease or licence for construction of a building or a temporary structure for use at a later stage in furtherance of business or commerce would be taxable service only with effect from 1.7.2010 and not during the period prior to 1.7.2010. In view of the said judgement, we are of the view that the appellant has a prima facie case in its favour. Therefore, we waive the requirement of pre-deposit and stay recovery of the impugned adjudicated liabilities during pendency of the appeal. - Stay granted.
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2015 (8) TMI 207
Waiver of pre deposit - C&F Agent and GTA service - Held that:- Tribunal in the case of M/s. Prakash Agencies Vs. Commissioner of Service Tax, Chennai (2013 (1) TMI 740 - CESTAT CHENNAI) has already granted stay following the decision of the Hon’ble High Court of Delhi in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India (2012 (12) TMI 150 - DELHI HIGH COURT), prima facie, the service tax demand on C&F agency is waived and recovery thereof stayed during the pendency of the appeal. - During the period in dispute the appellants were unregistered partnership firm and the unregistered partnership firms were brought into service tax net with effect from 1.7.2012. Prima facie, the appellants have made out a case for waiver of predeposit. Accordingly, waiver of predeposit is granted on GTA services availed and recovery thereof stayed during the pendency of the appeal - Stay granted.
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2015 (8) TMI 206
Denial of refund claim - C&F Charges and Sales Commission (Foreign) - Notification No. 41/2007 dated 06.10.2007 - exemption from service tax - export of goods - Held that:- Authorised Representative (ADC) for the Revenue has no objection for remanding the issue, as no personal hearing was granted by the Commissioner (Appeals) and since it has to be verified whether the appellants produced the said documents before the original adjudicating authority or not - matter is remanded to the first appellate authority for getting the documents verified and to issue an appropriate order, after following the principles of natural justice - Decided in favour of assessee.
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2015 (8) TMI 205
Waiver of pre deposit - construction of residential quarters to TNSTC, construction of residential quarters to Taminadu Police Housing Corporation, construction of staff quarters for Tuticorin Medical College etc - Held that:- Appellants have provided construction of residential complex services and the same was elaborately dealt in the miscellaneous order dated 31.12.2014. The appellant did not provide any break up value of each project. This Bench vide miscellaneous order dated 31.12.2014 has already appreciated the facts and has come to a conclusion that balance of convenience tilting in favour of Revenue and appreciating no undue hardship may be caused directed for predeposit. - Partial stay granted.
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2015 (8) TMI 204
Waiver of pre deposit - Business Support Service - whether as per the agreement signed by the appellant with regard to hiring of high quality custom built equipment and facilities for R&D/software/BPO/IT operations would make it a provider of Business Support Service - held that:- equipment and facilities like lifts, air-conditioning etc. went along with the building which was given on rent by it and therefore the service rendered was renting of immovable property service on which the service tax has been paid. Having regard to the facts that the dispute relates to classification of taxable service and an amount of ₹ 86,29,621/- towards impugned demand along with interest of ₹ 17,49,460/- stands deposited as acknowledged in the related show cause notice dated 13.9.2010, we are of the view that these deposits are sufficient to meet the requirement of Section 35F Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Requirement of pre-deposit of the remaining adjudicated liabilities and stay recovery thereof during pendency of the appeal. - Stay granted.
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2015 (8) TMI 203
Waiver of pre deposit - Business Auxiliary service - service was imported from abroad - Reverse Charge Mechanism - Held that:- While as per Section 66A (2) explanation (1) a person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country, we find that CESTAT in the case of M/s Torrent Pharmaceuticals Ltd. CST, Ahmedabad has held that no service tax is leviable on the remittances made to the branch office abroad. Having regard to the said judgment, we are of the view that the appellant has made out a good case for full waiver of pre-deposit of demand relating to Business Auxiliary Service. Advertizing on Newspaper - The appellant’s plea that the demand of ₹ 2,29,150/- confirmed under advertising agency service in respect of Show Cause Notice dated 18.4.2013 is not sustainable because this amount was paid directly to the newspapers for advertisement and not to any advertising agency and no such agency was engaged for providing any service connected with making preparation, display or exhibition of advertisement and therefore it did not fall within the scope of 65(3) read with 65(105)(e) is prima facie persuasive. - we waive the requirement of pre-deposit of the remaining adjudicated liability and stay recovery thereof during pendency of the appeal. - Stay granted.
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2015 (8) TMI 162
Demand of service tax - sub-contractor - Exemption as per CBEC Circular No. 96/7/2007-ST dated 23.08.2007 - Service tax on entire contract value - Held that:- Facts of the present case are similar to the facts in the case of National Building Construction Corpn. Limited vs. CCE & ST, Patna (2011 (5) TMI 399 - CESTAT, KOLKATA) relied upon by the appellant, where the sub-Contractor was having a contract with NBCC who in turn was the main contractor and providing services to M/s. NTPC. M/s. NBCC (main contractor) had paid the Service Tax of the entire contract value between M/s. NBCC and M/s. NTPC. It was held that sub-Contractor has not rendered direct Service to M/s. NTPC and if any tax was paid by the Sub-Contractor the same was available as credit to NBCC and that was held to be a case of revenue neutrally and that no tax is demandable from the Sub-Contractor. - On the basis of the same ratio if the main contractor has paid Service Tax of the entire contract value, including the value for which contract was given to the present appellant then no Service Tax is required to be paid by the appellant due to revenue neutrality - Matter remanded back - Decided in favour of assessee.
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Central Excise
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2015 (8) TMI 200
Valuation - Place of removal - Section 4 - Determination of transactional value - inclusion of transportation charges and transit insurance charges - supply of transformers to the State Electricity Boards - Held that:- If the goods are cleared at the factory gate, then the excise duty has to be charged on the valuation of the goods to be arrived at the factory gate as that would be the place of removal of goods. It would mean that the expenses which are incurred after the removal of goods from the factory gate namely freight, insurance and unloading charges etc. are not to be included in the valuation of the goods for the purposes of excise duty. The reason is that the sale of goods to the buyer is at the factory gate when the property passes to the buyer and the aforesaid expenditure are thereafter incurred by the buyer. It is this aspect which was gone into by this Court in the case of Escorts JCB Ltd. (2002 (10) TMI 96 - SUPREME COURT OF INDIA). Machinery which was handed over to the career/transporter on receiving the payment was as good as delivery to the buyer in terms of Section 39 of the Sale of Goods Act and, therefore, possession of the sold goods was handed over to the buyer at the factory gate. In this manner, the transaction was full and complete and nothing remained to be done after the goods left the factory premises. On these facts, provisions of Section 4 of the Act, which deals with valuation of excisable goods for the purposes of charging of duty of excise was taken note of and analysed, holding that the aforesaid charges could not be included for the purpose of arriving at valuation of excisable goods. Commissioner, Central Excise while deciding that the transportation charges as well as transit insurance charges are to be included for fixing the transaction value. The order reveals that the Commissioner had scanned through the agreements entered into between the assessee and with various customers and other documents on the basis of which the Commissioner concluded that the property in goods was passed on to the customers only at the destination. According to him, there was a specific condition in the contracts that the goods will be dispatched from freight pre-paid by road and up to the destination of the customers. It was also stated that material should be dispatched duly insured by the assessee up to the customers' destination and the cost towards obtaining insurance was included in the price. These contracts further contain a clear stipulation that in case of any damage to the goods during transit, the supplier will lodge the claim and obtain compensation from the insurance company - The perfunctory manner in which the appeal of the assessee is allowed, cannot be countenanced. If the Tribunal was confirming the decision of the Authority below, may be detailed discussion was not required as the reasons given in detail could be found in the order appealed against, though even in such a case brief reasons are to be given by the Tribunal, in particular, to meet the arguments which are advanced by the appellant while challenging such an order - matter remanded back - Decided in favour of Revenue.
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2015 (8) TMI 199
Cenvat / MODVAT Credit - Duty paying documents - Duty paid by Railway - only reason for denying the MODVAT credit is that the purchase bills of scrap from Railways in auction do not indicate the rate and amount of duty paid on the scrap/inputs at the time of clearance/sale by the Railways - whether the appellant is entitled to claim the credit of the said duty paid by the Railways - Held that:- Appellant was claiming MODVAT credit on deemed basis, viz., the excise duty that was paid by the Railways at the time of purchase of the said material which was sold as scrap to the appellant herein. This claim, was attracted on the basis of the aforesaid two notifications dated 13.07.1992 and 01.03.1994 coupled with Rule 57G(2) of the Rules. That aspect, we find, has not even been touched upon or dealt with by the Commissioner. Same error, we find, is in the order of the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as 'CEGAT') where appeal was preferred by the appellant against the order of the Commissioner and the CEGAT also dismissed the appeal observing that the appellant had not paid any duty at the time of purchase of the material from the Railways. The High Court vide the impugned judgment has dismissed the appeal of the appellant and while doing so, it has again fell into the same error as was committed by the CEGAT or the Commissioner, viz., denying the deemed MODVAT credit to the appellant on the ground that the appellant had not paid duty on the unserviceable raw material - appellant satisfies all the eligibility conditions contained in notifications dated 13.07.1992 and 01.03.1994 for availing the deemed MODVAT credit - Decided in favour of assessee.
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2015 (8) TMI 198
Concessional rate of duty on Cement - installed capacity - Benefit of Notification No. 24/91-CE dated 25.07.1991 - whether the respondent, an industrial unit, is having a plant with installed capacity of less than 1,98,000 tonnes per annum for manufacturing ordinary Portland Cement to enable it to get the benefit of Notification No. 24/91-CE dated 25.07.1991 and Notification No. 5/93 dated 28.02.1993 - Held that:- CESTAT in this behalf relied upon the certificate issued by the Commissioner of Industries which had certified the installed capacity to be 1,94,040 tonnes per annum. - Some of the material produced is that of respondent itself and it is argued that the respondent had accepted that its installed capacity was more than 1,98,000 tonnes per annum. In a case like this, we are of the opinion that the CESTAT should have considered the material placed by the Revenue and only then come to a conclusion as to whether the certificate issued by Commissioner of Industries should be acted upon or not. - Matter remanded back - Decided in favour of assessee.
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2015 (8) TMI 197
Duty demand - Duty on aluminium dross and aluminium ash that arises during the manufacture of die-casting of aluminium parts - Held that:- CESTAT's later judgment [2008 (1) TMI 869 - CESTAT MUMBAI] in the appellant's case itself, clinches the issue. In the decision, the CESTAT has held that during the manufacture of die-casting of aluminium parts, dross and ash emerge as by-products and, therefore, insofar as these by-products are concerned, no manufacturing process is involved and on that basis, it has held that no excise duty shall be payable thereupon. It is pertinent to mention that this decision has been accepted by the Revenue - Accordingly, the impugned order of the CESTAT is set aside - Decided in favour of assessee.
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2015 (8) TMI 196
Duty demand - cutting of the conveyor belting into required sizes - Manufacturing activity or not - Held that:- Decision of the CESTAT does not call for any interference. Mere cutting of the lengthy conveyor belt into smaller sizes would not amount to manufacture, ipso facto, unless it is shown that as a result of the said cutting, it was transferred into a new product which was a marketable product. Revenue has failed to bring out these aspects. We, therefore, are of the opinion that the matter is squarely covered by the judgment of this Court in 'Servo-Med Industries Pvt. Ltd. v. Commissioner of Central Excise, Mumbai' [2015 (5) TMI 292 - SUPREME COURT] - Decided against Revenue.
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2015 (8) TMI 195
SSI Exemption - clubbing of units - extended period of limitation - Wrongful availment of exemption in Notification No. 175/86 dated 01.03.1986 and Notification No. 1/93 dated 28.02.1993 - Suppression of facts - held that:- extended period of limitation was invoked on the ground that the respondents had not stated about the proprietory interest in any other factory. It was argued by the respondent that there was no such requirement and therefore, by not mentioning the aforesaid fact, no suppression was made of any material. This contention was accepted by the CESTAT holding the show cause notice to be time barred. The CESTAT has also recorded that Revenue could not show that disclosure of financial matters by the assessee to the Department was legally required during the material period. - order of the CESTAT is without any blemish. - Decided against Revenue.
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2015 (8) TMI 194
Classification of waffles and wafers - Classification under Entry 1905.31 or under 1905.90 - Held that:- In fact, to put it precisely, it is known as waffles and wafers. It is also not in dispute that the aforesaid products are not coated with chocolate. Therefore, the only dispute is as to whether these products contains chocolate or not. It may be noticed that out of all the products under Chapter heading 19.05, viz., biscuits, cakes and pasteries, or waffles and wafers, some contains cocoa, as is clear from the description contained in the main Heading and if only cocoa is added or is contained in these products, that would not make it chocolate. Thus, there has to be a difference between cocoa and the chocolate that is made out of cocoa. CESTAT has not gone at all into the aspect, viz., as to whether the product contains only cocoa or it contains chocolate. We may record that it is not in dispute that there is either cocoa or chocolate which is sandwiched between the two wafers. Thus, it was incumbent upon the CESTAT to see that the said ingredient is cocoa simplicitor or it is chocolate. - Matter remanded back - Decided in favour of Revenue.
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2015 (8) TMI 193
Clandestine removal of goods - Misdeclaration of goods - Shortage of goods - Supreme Court after going through the order of CESTAT found no reason to interfere with the impugned order [2002 (10) TMI 191 - CEGAT, MUMBAI]; wherein Tribunal held that polyester waste was subjected to weighment and for moisture content checking. After this, waste was also subject to heat setting to set the undrawn content in the waste. The entire process has been described by the deponent regarding the waste. When this piece of evidence is there, the department has not produced any evidence to contradict the same. When direct evidence is emerging in this case, the department has failed miserably to prove that what is sold was only staple fibre.
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CST, VAT & Sales Tax
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2015 (8) TMI 202
Denial of exemption claim - fixing and providing of Works Profile Safety Barrier - part of road construction activity or not - Assessing Officer came to the conclusion that certificate of exemption though was related to every part of Roads but fixing and providing of Works Profile Safety Barrier could not be said to be relating to roads but these were safety steel barriers and could be used for the other purposes, other than road, therefore, withdrew the benefit available to the respondent-assessee granted vide Certificate of Exemption No.6/45 Held that:- The AO, in the last part of the assessment order, has observed that as per notification dt.28/04/1993. Exemption fee @1% was chargeable on the entire work related to Roads. Therefore, when the entire work relating to Roads has been charged @ 1% as per notification dt.28/04/1993, then to say that fixing of “W. Profile Safety Barrier” was not used for the purposes of Roads, is unjustified on the part of the AO. When the notification itself says that exemption fee is to be charged @1%, relating to safely work of road, then in my view, it is part and parcel of providing and fixing, may be at Toll Plaza but it is certainly part of a road. Merely putting concrete, grit, coaltar cannot be said to be a road but in the present day conditions, when Mega Highways are being constructed, as in the present case, which is National Highway No.8, relating to Jaipur-Delhi National Highway, certainly one is required to have latest technology and safely measures installed which would certainly be part and parcel of roads. To say that fixing of W. Profile Safety Barrier is not relating to road, in my view, is contrary to what can be said to be part of a road. - Developing/constructing a road over the years require latest technology and it is not merely putting concrete, grit, coal tar etc but many more things. The words “relating to” has a wide meaning and cannot be restricted only to putting of concrete, grit, coal tar etc but it should mean everything relating to road. The expression such as “arising out of“ or “in respect of the” or “in connection with” or “in relation to” or “in consequence of” or “concerning” or “relating to” the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope). When both the appellate authorities have come to a definite finding of fact, then even otherwise, placing reliance on Rule 14 by the counsel for the Revenue, is not proper. What fraud has been played, counsel was unable to plead. - Decided against Revenue.
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2015 (8) TMI 201
Rectification of mistake - Tax Board changes the order stating it to be rectification - Held that:- Tax Board was not justified in passing the impugned order by holding that a mistake apparent on the face of record, was committed by the Tax Board in order dt.08/05/2007 and has corrected the earlier order of the Tax Board dt.08/05/2007 - Tax Board in the impugned order has considered what was not before the Tax Board who decided the appeal vide order dt.08/05/2007. In my view, only a mistake apparent on the face of record can be rectified but I notice in the present order that the Tax Board has reviewed its own order which is impermissible in law. - scope of rectification, in my view, is limited and the matter though can be rectified on a mistake apparent, obvious and glaring but every mistake cannot be corrected/rectified by the Tax Board. Even re-appreciation of same material is not permissible - mistake apparent on record must be an obvious and patent mistake and the mistake should not be such which can be established by a long-drawn process of reasoning. Under the Act Review is impermissible or coming to a totally different conclusion what was reached earlier. Earlier view cannot be changed in the garb of rectification unless there is a glaring and obvious mistake apparent on the face of record - rectification implies the correction of an error or removal of defects or imperfections and could not be used to appreciate the evidence on new facts which were not placed earlier. Rectification implies an error, mistake or defect which after rectification is made right. - Decided in favour of Revenue.
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Wealth tax
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2015 (8) TMI 186
Enhancement in value of net wealth - Denial of exemption claim - AO denied the exemption claimed on the ground that these are single immovable properties and do not quality as commercial establishment - CWT(A) allowed exemption claim - Held that:- sub-clause(5) of clause(i) of section 2(ea) nowhere requires that a commercial establishment or a complex cannot be established in a house property. It only provides that any property in the nature of commercial establishment or complexes shall be excluded from the term 'assets' as defined in clause (i) of section 2(ea). Further that it nowhere provides that only if such commercial complex is occupied by the owner then alone the exclusion shall take effect. In view of the decision of Hon’ble Gujarat High Court and the decision of the Pune Bench of the Tribunal cited (2013 (9) TMI 957 - GUJARAT HIGH COURT) and [2013 (3) TMI 611 - ITAT PUNE] and in view of the detailed reasoning given by the CWT(A) who has also followed the above decisions while deciding the issue in favour of the assessee we find no infirmity in the order of Ld.CWT(A) excluding the 3 properties from the ambit of net wealth. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed. - Decided against Revenue.
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