Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 8, 2016
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
News
Notifications
Highlights / Catch Notes
Income Tax
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Penalty u/s 271(1)(c) - the claim of the assessee was found to be false claim and explanations offered by the assessee were found by the Revenue to be false and clearly explanation1 to Section 271(1)(c) - penalty confirmed - AT
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TDS u/s 194G - the amount in question was not in the nature of commission as defined in clause (i) of Explanation to Section 194H so as to attract the provision of section 40(a)(ia) read with section 194G. - AT
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The assessee is eligible for the claim of depreciation u/s 32(1)(ii) on the amount of intangible assets acquired by it as per Business Transfer Agreement - AT
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MAT - Addition being excise subsidy received to the book profits, as a reserve according to Explanation (b) to Section 115JB - Since the reserve was not created by debiting the profit and loss account, the assessing officer had no power to go behind the accounts. Income-tax Appellate Tribunal is correct in deleting the addition - HC
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Reopening of assessment - To declare the order of assessment illegal and to permanently prevent the Assessing Officer from passing any fresh order of assessment, merely on the ground that the Assessing Officer did not dispose of the objections before passing the order of assessment, in our opinion would be not the correct reading of the judgement of Supreme Court - HC
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Tribunal was right in holding that the expenses incurred by the assessee in maintaining the Thiruvalluvar statue is revenue in nature on the ground that the statue did not belong to the assessee - HC
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Nature of receipts - The expenses such as processing fees, damage charges, verification charges, reimbursement charges and lease rent etc are expenses and they cannot be added to the income. The character of the receipts above is not synonymous to interest on loans and advances. - HC
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When the AO found mistakes in the books of accounts of the assessee on verification and consequently, rejected the same, then it ought not to have made additions by relying upon the same books of accounts. Instead, the AO ought to have made the best judgment assessment on the basis of the history and nature of business and the net profit rate as shown by the assessee in the previous year. - HC
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Calculation of deduction under Section 80IA - forfeiture of advance - income ‘derived from’ from the running of eligible industrial undertaking or not - Deduction allowed - HC
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Accrual of income - Only when a corresponding liability arises on the ONGC to pay up the accrued amount, the income will become taxable. Thus, the authorities below as also the Tribunal seriously erred in holding that the disputed income is exigible to tax - HC
Corporate Law
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Rectification of the Register of Members - the transfer of shares in a third company pursuant an order sanctioning a scheme of amalgamation does not require compliance with the provisions of Section 108(1) of the Act of 1956 - HC
Service Tax
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Levy of service tax on person manufacturing alcoholic liquor for human consumption on job work basis - Constitutional validity upheld - HC
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Cenvat credit – refund – export of services - relevant date is receipt of inward remittances. In determination of the last date commencing with the date of receipt of inward remittance, due regard must be had to the last day of the quarter as a practical unavoidability - AT
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Cenvat credit – reversal - refund - 100% EOU - The allegations brought forward by earlier SCN was not brought on record as a result of such investigation by subsequent SCN - impugned order set aside - AT
Central Excise
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Suo-mot availing credit of excess duty paid - The appellant mistakenly paid the excise duty on the transportation which was otherwise not required to be paid - suo moto credit not permissible. Remedy available is refund claim under section 11B - AT
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Scrap generated during the repair of the capital goods, cannot be said that the capital goods were cleared as waste and scrap. - Not liable to duty - AT
VAT
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Input tax credit - purchases of pet coke where it is used for generation of electrical energy for captive consumption - Punjab VAT - credit allowed - HC
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Constitutional validity of Rule 11B(2)(c) of the Central Sales Tax (Kerala) Rules, 1957 - Interest sale sale - the dealer should produce documents, the details of some of which are already required to be specified in form E-I and E-II vide clause (4) thereof. - Validity upheld - HC
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Rate of tax on the Mango Juc-Fit in liquid form and Mango Fruit Booster, Rasna Utsav and Orange Juc-up in powder form - expression "all processed fruit and vegetables" - scheduled goods or not - Section 4(1)(b) of the Karnataka Value Added Tax Act, 2003 (KVAT) - HC
Case Laws:
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Income Tax
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2016 (8) TMI 231
MAT - Addition being excise subsidy received to the book profits, as a reserve according to Explanation (b) to Section 115JB - Held that:- As decided in Apollo Tyres Ltd. Vs. CIT [2002 (5) TMI 5 - SUPREME Court] Assessing Officer while computing the income under section 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J. Since the reserve was not created by debiting the profit and loss account, the assessing officer had no power to go behind the accounts. Income-tax Appellate Tribunal is correct in deleting the addition - Decided against the revenue.
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2016 (8) TMI 230
Reopening of assessment - AO did not dispose of the objections before passing the order of assessment - Held that:- It is true that when the Assessing Officer proceeds to pass the final order of assessment without disposing of the objections raised by the assessee, he effectively deprives the assessee of an opportunity to question the notice for reopening itself. However, the assessee is not left without the remedy when the Assessing Officer proceeds further with the assessment without disposing of the objections. Even before the final order of assessment is passed it would always be open for the assessee to make a grievance before the High Court and to prevent the Assessing Officer from finalizing the assessment without disposing of the objections. The issue can be looked from slightly different angle. Validity of the notice for reopening would depend on the reasons recorded by the Assessing Officer for doing so. Similarly, the order of reassessment would stand failed on the merits of the order that the Assessing Officer has passed. Neither the action of the Assessing Officer of supplying reasons to the assessee nor his order disposing of the objections if raised by the assessee would per se have a direct relation to the legality of the notice of reopening or of the order of assessment. To declare the order of assessment illegal and to permanently prevent the Assessing Officer from passing any fresh order of assessment, merely on the ground that the Assessing Officer did not dispose of the objections before passing the order of assessment, in our opinion would be not the correct reading of the judgement of Supreme Court in case of GKN Driveshafts (India) Ltd vs. Income Tax Officer and ors (2002 (11) TMI 7 - SUPREME Court ). In such judgement, it is neither so provided nor we think the Supreme Court envisaged such an eventuality. - Decided in favour of the Revenue.
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2016 (8) TMI 229
Expenses incurred in maintaining the Thiruvalluvar statue - enduring benefit - revenue or capital expenditure - Held that:- Asset Thiruvalluvar statue is not owned by the Tamil Nadu Tourism Development Corporation Ltd. Corporation has been entrusted with the only work of maintenance of the statue from out of the contribution made by Poompuhar Shippping Corporation. Business of the Corporation is tourism. Though Mr.M.Swaminathan, learned counsel for the appellant submitted that the Tribunal went wrong in adjudging the issue, with reference to the ownership of the statue and should have confined itself only to the issue as to whether, the expenditure incurred is capital or revenue, in the light of the judgments extracted supra, as to how ownership or acquisition of capital asset, but the expenditure incurred, has a bearing on the decision, as to whether the expenditure is capital or revenue, submissions to the contra, cannot be countenanced. Maintenance of the statue, may endure some benefit towards the conduct of the assessee's business, but the expenditure incurred cannot, at any rate, to be said as an advantage to the assessee in its capital field and thus the expenditure would be capital in nature, so as to disallow the expenditure incurred for maintenance of Thiruvalluvar statue by security charges, electricity charges, establishment charges and expenses for providing protective coating with poly silicon to the statue. Tribunal was right in holding that the expenses incurred by the assessee in maintaining the Thiruvalluvar statue is revenue in nature on the ground that the statue did not belong to the assessee - Decided against revenue Receipt of grants - revenue or capital - Held that:- When the details of the grant, clarificatory letters dated 22.06.2002 of the Commissioner of Tourism, Chennai and 04.12.2008 of the Ministry of Tourism, Government of India, respectively, produced before the Appellate Authority, have been considered as to how the expenses towards security charges, electricity charges, establishment charges and expenses for providing protective coating with poly silicon to the statue have been incurred and when the assessee, by producing the letter dated 04.12.2008, had convincingly explained as to how the grant has been made for specific purposes, some of which were dropped, and the obligation of the state government to return within six months and when the assessee has offered a reasonable explanation, both the Appellate Authority and Tribunal, have rightly held that the expenditure from the grant was capital in nature. When the grants were to be utilised for a capital asset, but some of the projects, dropped, receipts should be treated only as capital in nature. Reasoning of the Tribunal, on the issue as to whether the expenditure incurred from the grant is capital receipt or revenue is convincing. On both the issues discussed supra, finding recorded are concurrent with reasons. Revenue has not made out a case for answering the substantial questions of law raised in its favour.- Decided against revenue
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2016 (8) TMI 228
Interest payable to NHB on financing scheme - amount on this account considered chargeable under the Interest Tax Act by the Assessing Officer was directed to be deleted by the CIT(A) confirmed by ITAT - Held that:- Tribunal is justified in dismissing the claim of the revenue inasmuch as whatever is collected by the Bank has to be passed over to the NHB and it is in the nature of repayment with regard to the money advanced by NHB alone and therefore in such a situation the concerned amount cannot have the legal requirement of ‘Chargeable Interest’ as it cannot be said that on the said amount interest has accrued. Similarly, so far as EMI is concerned, the Tribunal is right in holding that after selling and transferring the loan portfolis the assessee has no right over the same but by virtue of agreement it is entitled to receive agreed percentage of interest component of each EMI towards the service of collection and rendering them to HDFC. Therefore the amount received is not in nature of interest but in the nature of service charges and therefore the same cannot be subjected to interest tax. Therefore we answer both the questions in favour of assessee and against the revenue. Amount being processing fees, reimbursement charges and damage charges and interest portion of lease rental deleted from the chargeable interest - Held that:- The expenses such as processing fees, damage charges, verification charges, reimbursement charges and lease rent etc are expenses and they cannot be added to the income. The character of the receipts above is not synonymous to interest on loans and advances. Thus, we are of the view that the Tribunal has rightly answered the questions in favour of assessee and against the revenue.
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2016 (8) TMI 227
Addition on processing profit and loss account - rejection of books of accounts - Held that:- It is a matter of fact that the Assessing Officer rejected the books of accounts of the assessee but, has made additions by relying upon the same books of accounts. The facts in these cases are similar to the facts narrated in CITII v. Dhiraj R. Rungta’s case (2014 (4) TMI 711 - GUJARAT HIGH COURT ). When the Assessing Officer found mistakes in the books of accounts of the assessee on verification and consequently, rejected the same, then it ought not to have made additions by relying upon the same books of accounts. Instead, the Assessing Officer ought to have made the best judgment assessment on the basis of the history and nature of business and the net profit rate as shown by the assessee in the previous year. In view of the same, the matters are required to be reconsidered by the Assessing Officer keeping in mind the principle rendered in the aforesaid decisions.
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2016 (8) TMI 226
Calculation of deduction under Section 80IA - forfeiture of advance - income ‘derived from’ from the running of eligible industrial undertaking - Held that:- Advances were taken from the customers and on receipt of advance deposit, the assessee company commences manufacturing of such specific equipments for which expenditure in excess of the advance deposit received has to be incurred by the assessee company. In case, when the customer fails to take the delivery due to his inability to pay the balance price of equipment manufactured, the assessee company has already incurred huge expenditure for manufacturing such equipments which cannot be sold to any other customer for the reasons that the same has been manufactured as per specific requirement of the customer who has placed order. The assessee had to incur loss in this regard. If the expenses are not allowed, it will be contrary to well settled principles. He must get the deduction from the expenses for which he has received the advance. Further, the decisions which have been relied upon by learned advocate for the revenue will not apply in the facts of the present case since the amount which has been received by the assesse is for the same unit of which they have commenced manufacturing. Having heard learned advocates for the revenue and the question posed for consideration for us reproduced hereinabove and considering the decisions cited, the question which is raised in the present appeal is required to be answered in favour of the assessee.
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2016 (8) TMI 225
Accrual of income - whether that disputed income is exigible to tax even when the same has not accrued to the assessee as held by ITAT - Held that:- In view of the fact that ONGC had disputed the liability, it cannot be said that there was any corresponding liability on the ONGC to pay the accrued amount to the assessee. Only when a corresponding liability arises on the ONGC to pay up the accrued amount, the income will become taxable. Thus, the authorities below as also the Tribunal seriously erred in holding that the disputed income is exigible to tax. - Decided in favour of the assessee
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2016 (8) TMI 224
Penalty u/s 271(1)(c) - assessee has claimed deduction u/s 54F seeking exemption of long term capital gains amounting to ₹ 1,13,73,000/- arising on account of surrender of sub-tenancy - Held that:- The claim of the assessee made in the return of income to declare the income as long term capital gain on surrender of tenancy vide registered deed dated 12-04-2007 was in-fact wrong claim lodged to reduce the tax liability. The assessee himself withdrew the said claim when cornered and confronted by the Revenue and the contentions of the assessee that he withdrew the claim voluntarily in order to avoid long and protracted litigation with the Revenue and to buy peace of mind are not correct. The assessee has also not challenged the assessment order framed by the Revenue u/s 143(3) of the Act in the appellate forums which was framed after claims as set out by the assesssee in return of income was withdrawn by the assessee after being cornered and confronted by the Revenue. As the assessee made a wrong claim in the return of income of having sub-tenancy in the said premises while the fact of the matter in the present case before us is that the assessee did not had any such sub-tenancy in the said property as the assessee failed to prove the existence of sub-tenancy and the claim of the assessee was found to be false claim and explanations offered by the assessee were found by the Revenue to be false and clearly explanation1 to Section 271(1)(c) of the Act is hit and the assesse is liable for penalty u/s 271(1)(c) of the Act - Decided against assessee
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2016 (8) TMI 223
TDS u/s 194G - Disallowance under section 40(a)(ia) - payment of disbursed prize monies - whether the assessee was liable to deduct tax at source from the amount in question disbursed as prize monies on lottery tickets under section 194G - revision u/s 263 - Held that:- As rightly contended by the ld. counsel for the assessee, the amount in question can be considered as in the nature of commission for the purpose of section 40(a)(ia) read with section 194G only if the same represents payment received or receivable, directly or indirectly, by a person acting on behalf of another person for any services rendered, inter alia, in the course of buying or selling of goods. As per the terms and conditions of the agreements entered into between the assessee and its stockists (copy of Stockist Agreement placed), the assessee-firm and the stockists were acting on principal to principal basis, inasmuch as, the stockists were free to act in their capacity and once the lottery tickets were sold to them, such lottery tickets stood transferred to the stockists. The stockists were mainly concerned with their shares on sale of lottery tickets and they were not entitled to receive any commission on sale of lottery tickets from the assessee. They were free to sale the lottery tickets to any sub-stockists or retailers at the self determined prices as per their free will and the contract between the assessee and the stockists was that of purchase and sale of lottery tickets and not that of rendering services on commission. In the matter of lottery business as governed by the relevant agreements, the stockists were to act on their own and not for or on behalf of the assessee. The relationship between the assessee and the stockists thus was that of principal to principal and there being no principal – agent relationship between them as held by the Hon'ble High Court of Sikkim in the case of Future Gaming and Hotel Services Pvt. Limited (supra), we agree with the contention of the ld. counsel for the assessee that the amount in question was not in the nature of commission as defined in clause (i) of Explanation to Section 194H so as to attract the provision of section 40(a)(ia) read with section 194G. In our opinion, the amount in question representing the disbursal of prize monies on lottery tickets thus was not liable to be disallowed under section 40(a)(ia) in the facts and circumstances of the case and there was no error in the order of the Assessing Officer not making such disallowance as alleged by the ld. CIT justifying revision under section 263. - Decided in favour of assessee
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2016 (8) TMI 222
Pre-payment of deferred sales tax - taxability of surplus arising to the assessee on repayment on deferred sales tax liability - AO held this surplus to be taxable as a revenue receipt liable to be taxed u/s 41(1) whereas Ld. CIT(A) has treated the same as ‘benefit’ liable to be taxed u/s 28(iv) - Held that:- By making payment of net present value of a future liability it cannot be said if any financial benefit, in real terms, has accrued to the assessee. It is noted that none of the authorities had gone into this aspect and did not quantify, in financial or monetary terms, if any amount could be worked out which could be said to be a ‘benefit’ that had accrued to the assessee. Under these circumstances, we are of this considered opinion that the impugned amount cannot be brought into tax either u/s 41(1) or u/s 28(iv). Benefit of depreciation u/s 32 denied on intangible assets - Held that:- There was a proper valuation report specifying separate value of each and every asset of tangible or intangible nature. It is also noted that the AO made direct inquiries with OAL in response to which proper reply was given by the OAL confirming the transactions. The OAL submitted letter dated 21.02.2009 to the AO wherein it was inter alia confirmed that the said company transferred its abrasive division situated at Bhiwadi (Rajasthan) to the assessee company for a total consideration of ₹ 26.17 crores. It is also brought to our notice that subsequent to the take- over, the assessee company filed petitions with the concerned departments for registration of trademarks in the name of Assessee Company. It is further noted by us from the perusal of the order of Ld. CIT(A) wherein it has been accepted that the assessee had produced before him (i.e. CIT(A)) more than 26 files containing evidences with regard to acquisition of technical know-how. Under these circumstances, we find that there was no basis with the lower authorities to hold that no intangible assets were acquired by the assessee. Thus the assessee is eligible for the claim of depreciation u/s 32(1)(ii) on the amount of intangible assets acquired by it as per Business Transfer Agreement, and thus action of lower authorities was not factually or legally justified while making disallowance of the depreciation on the intangible assets. The AO is directed to grant the benefit of depreciation in terms of section 32(1)(ii) upon the intangible assets acquired by the assessee. Thus, these grounds are allowed in favour of the assessee. Disallowance made u/s 14A - Held that:- The disallowance on account of expenses under section 14A should be restricted to 2% of the dividend income. The disallowance with regard to interest should be made after excluding those mutual funds which are debt funds. Thus, assessee gets part relief and these grounds are partly allowed in favour of assessee
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2016 (8) TMI 221
Reopening of assessment - Claim of deduction under section 54EC not to be allowable - Held that:- The Assessing Officer has gone a step beyond. He not only accepted the claim of the assessee in the order of assessment, he gave brief reasons for the same. He recorded that he was convinced about the classification adopted by the assessee and that the respective incomes were correctly classified. There is no scope for the Revenue to argue at this stage that this issue was not examined by the Assessing Officer in such assessment and that reopening within a period of four years was permissible. When we find that the Assessing Officer has no jurisdiction to reopen the assessment, question of relegating the assessee to the gamut of submitting to the reassessment proceedings simply would not arise. This suggestion of the counsel for the Revenue is therefore turned down. - Decided in favour of assessee
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2016 (8) TMI 220
Disallowance made u/s 36(1)(v)(a) - delayed employees contribution to P.F. and on account of technical know how fees - Held that:- Considering the decision of this Court in the cases of Amoli Organics (P) Ltd. (2013 (11) TMI 971 - GUJARAT HIGH COURT ) and Sayaji Industries Ltd. (supra), the questions which are raised in the present appeals are required to be answered in favour of the assessee as the facts are akin in these appeals and the said decision will inure to the benefit of the assessee as held that the assessee was entitled to the exemption as the amount was paid during grace period permissible / available under the Provident Fund Act - The asseessee shall be entitled to exemption / deduction under section 43 to the extent payment was made within the grace period - Decided in favour of assessee.
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2016 (8) TMI 219
Addition under section 68 - source of amount deposited into the bank account - whether the Tribunal was justified in invoking the provisions of section 68 of the Act, although the assessment order and the order of CIT(A) were based on section 69-A? - applicability of section 292-B - Held that:- As rightly held by the CIT(A) the fact that there were several other transactions in Dhruv Parti’s account does not carry the assessee’s case any further for there is nothing to indicate the source of such funds, namely, whether the funds belonged to Dhruv Parti or that he was acting as a conduit for others. It is the assessee who claims to have received the amount as a loan. The burden, therefore, was on him to establish the same. The assessee has failed to discharge this burden. The authorities have infact established that the facts and circumstances of the case militate against the assessee’s case that the amounts were lent and advanced to him by said Dhruv Parti. On facts, therefore, the inference drawn by the authorities under the Act cannot be faulted. In these circumstances, the direction issued by the CIT(A) for the addition of ₹ 30 lacs to be made to the assessee’s return is well founded. The Tribunal upheld the findings of the CIT(A) on facts. For the reasons already stated these findings cannot be held to be absurd or perverse. The assessee has not been prejudiced in any manner whatsoever on account of the Assessing Officer having mentioned the wrong section. Where in the assessment proceedings the enquiries are made by the Assessing Officer of facts and the Assessing Officer after considering the facts and circumstances of the case including the assessee’s response, if any, thereto, makes an addition, which is justified and permissible under the provisions of the Act but inadvertently or even wrongly mentions a wrong provision of the Act, the assessment order cannot be set aside on that ground. It is open in such circumstances to the Appellate Authority or to CIT(A) or the Tribunal to uphold the addition under the correct section. This ofcourse would be in circumstances where the error has not prejudiced the assessee in any manner whatsoever. At the cost of repetition it is not even the assessee’s case that during the assessment proceedings he was given to understand that the queries were raised by the Assessing Officer and/or that he responded to the same only on the basis of the provisions of section 69-A of the Act. In this view of the matter, it is not necessary to consider the applicability of section 292-B of the Act.
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2016 (8) TMI 218
Reopening of assessment - Held that:- We are concerned only with the question of failure on part of the assessee to disclose fully and truly all material facts. It is not even the case of the Assessing Officer that he noticed the disproportionate allegation/allocation of expenditure in the accounts of non eligible business through any material extraneous to the assessment records. In fact, his entire observations contained in the reasons recorded are borne out from the data available in the assessment records. Further, as pointed out by the assessee in the objections, full separate accounts of both divisions were maintained and also presented before the Assessing Officer during the course of assessment. This is therefore, a clear case where, there was no failure on part of the assessee to disclose truly and fully all material facts necessary for assessment. Notice for reopening which was issued beyond a period of four year must therefore, fail. The same is therefore quashed. - Decided in favour of assessee
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2016 (8) TMI 217
Reopening of assessment - Held that:- As in the present case on hand, it is quite clear from the record that as and when required, the petitioner assessee has truly and fully supplied all material before the authority and scrutiny assessment has already been undertaken and even during the course of hearing also in details annexures were furnished indicating that the issue pertaining to brokerage as well as commission was forming part of the record and the same has been examined. Therefore, in the background of these facts, the decision relied by the learned counsel for the revenue is of no avail. In the background of aforesaid facts, in the case of hand, we have examined all material facts. The reasons recorded have also been examined by this Court and on the basis thereof, this Court is of the opinion that the impugned action on the part of the respondent authority to issue notice under section 148of the Act initiating reopening of assessment is without authority of law and therefore, requires to be quashed and set aside. - Decided in favour of assessee
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2016 (8) TMI 216
Penalty imposed u/s. 271(1)(c) - Held that:- As the assessee is not found to be guilty of concealment or misappropriation but was found to be negligent in furnishing the accurate facts. Therefore, the entries which were made by the assessee were not found to be acceptable. The explanation with regard to the same surfaces at Paragraphs 12 and 13 of the findings of the Tribunal which have been reproduced hereinabove. Therefore, we are in complete agreement with the findings of the Tribunal. Consequently, we answer the question raised in this Appeal in favour of the assessee and against the Department
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2016 (8) TMI 215
Claim for bad debt disallowed - business carried on by the assessee in respect of which the debts were written off had been discontinued - Held that:- So far as the business activities carried on by the assessee, namely, pharmaceutical and commission agency, are concerned, since there was common management, common fund, common staff administration, consolidated accounts, balance sheet, complete unity of control in the management and administration of both business activities, we find that both the activities constitute same business. We are, therefore, in complete agreement with the view taken by the Tribunal. - Decided in favour of the assessee Disallowance of interest on account of interest free advance given to Sardar Patel Foundation - Held that:- As the assessee was having surplus amount to give interest free advance to Sardar Patel Foundation. The Assessing Officer could not prove that there is a direct nexus between the borrowed funds and the loan given. In that view of the matter, we are of the opinion that the Tribunal has rightly deleted the disallowance. - Decided in favour of the assessee Disallowance of interest on account of interest free advance given to M/s. Madhavdas Tulsidas & Co. - Held that:- Since the principal amount itself is doubtful and there was pending civil and criminal litigation, the disallowance of interest is required to be deleted. We are, therefore, of the view that the Tribunal has rightly deleted the disallowance. - Decided in favour of the assessee
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2016 (8) TMI 214
Block assessment passed u/s.158BD r/w. Section 158BC - period of limitation - Held that:- In the present case, the first Notice u/s.158BC of the Act was issued to the assessee on 17.10.1996, which was served upon the assessee on 04.11.1996. Therefore, assessment could have been framed latest by 30.11.1997. However, on 29.08.1997, the Assessing Officer withdrew the Notice issued u/s.158BC of the Act and issued a fresh Notice u/s.158BD of the Act on 29.08.1997. On 17.10.1996 the Notice issued u/s.158BC of the Act was a valid notice. However, the proceedings initiated on the basis of this Notice stood concluded on 29.08.1997, when the A.O. informed the assessee of having withdrawn the Notice u/s.158BC of the Act, meaning thereby, that the proceedings initiated on 17.10.1996 was valid for all intent and purposes but, stood concluded on 29.08.1997. Therefore, there was no question of reviving those proceedings by way of issuing a fresh Notice under any other Section of the Act. On this count also, there could not have been any assessment on 01.12.1997. Thus, the Revenue’s claim that Notice u/s.158BD of the Act issued on 29.08.1997 was a valid Notice and that the consequential assessment framed on 24.12.1997 was within limitation cannot be accepted and is void ab initio being barred by time. Thus, the action of the A.O. of withdrawing the Notice u/s.158BC and issuing fresh Notice u/s.158BD of the Act is illegal and bad in law. There is no provision in the Act for initiating reassessment proceedings for block period, either u/s.147 or 158BC or 158BD of the Act. Therefore, both the actions of the Assessing Officer are illegal and bad in law. Tribunal was completely justified in holding that the block assessment passed u/s.158BD r/w. Section 158BC was barred by time and therefore, void ab initio. Thus, we answer the question in the affirmative, i.e. in favour of the assessee
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2016 (8) TMI 213
Payment to GEDA - revenue expenditure or capital expenditure - Held that:- The payment is made to GEDA towards electric connection, in our view, the expenditure incurred by the assessee is in the nature of revenue expenditure. The Tribunal as well as the Commissioner (Appeal) has, therefore, rightly held the expenditure as revenue expenditure. In that view of the matter, we answer the question in favour of the assessee and against the revenue.
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2016 (8) TMI 212
Grant of an interim order of stay - petitioner being a Society registered under the Co-Operative Societies Act - Held that:- The cardinal principles which have to be taken note of while granting interim order are three fold viz. (i) prima facie case (ii) balance of convenience and (iii) irreparable hardship. The facts of the present case have been set out in the preceding paragraphs, which clearly show that all the aforesaid three parameters have been fulfilled by the petitioner as they have established a prima facie case, as the Commissioner of Income Tax (Appeals), for the assessment year 2009-10, has passed an order in their favour on 31.12.2015. The balance of convenience is also in favour of the petitioner, since they have got a prima facie case before the Appellate Commissioner. The third aspect viz. irreparable hardship is also in their favour, as the petitioner is a Co-operative Society and in the earlier proceedings the petitioner have succeeded in their Appeal before the Commissioner (Appeals) for the assessment year 2009-10. For all the above reasons, the Writ Petition is allowed, the impugned order is set aside and there will be a stay of demand pursuant to the orders of assessment dated 31.03.2016 for the assessment years 2008-09, 2010-11, 2013-14, till the Appeals filed by the petitioner for those three years are heard and disposed of by the second respondent in accordance with law. No costs. Consequently, connected Miscellaneous Petition is close.
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2016 (8) TMI 211
GP estimation - no material defects in the books of accounts - Held that:- It is not in dispute that the assessee is carrying on his business with his own fleet as well as the hired fleet of trucks / tankers and for that, the profits have been correctly shown under the different heads. In view of the turnover, the assessee would surely not prefer to go for the hired fleet. Considering the ratio laid down in the decisions in the cases of Commissioner of Income-tax-XII v. Smt. Poonam Rani (2010 (5) TMI 57 - DELHI HIGH COURT ) and Commissioner of Income-tax-IV v. Symphony Comfort System Ltd. (2013 (10) TMI 258 - GUJARAT HIGH COURT ) and in the facts of the present case, we are of the view that once it is established that there is no defect in the books of accounts, it will not be appropriate for us to judge or presume the estimated profit for trucks / tankers which were operated on a hired basis. The books of accounts as furnished by the assessee are required to be accepted and therefore, the question raised in this Appeal is answered in favour of the assessee and against the Department.
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2016 (8) TMI 210
Allowbility of expenditure - whether the old business had come to an end and the new business had not started? ? - Held that:- As looking to the facts on record and in view the fact that amendment in the Memorandum of Article was made, we are of the opinion that the company has utilized its property, which was available in the books of account, as also the company has tried to come out from the gross expenditure and another activity is carried out. However, the nature of business may be different but that would not make the appellant disentitle and therefore the Tribunal has committed an error in holding that old business come to an end and new business has not started Allowability of carry forward of loss - Held that:- Not allowing to carry forward of loss suffered after November 7, 1990 as the business of real estate had been commenced thereafter, in this regard it is required to be noted that activity of the construction has been started after taking title from the Bank and payment was made after approval and new activity was started from the date when they have cleared all the dues and this fact is clearly established from the letter issued by the Bank dated April 16, 1987. Thus, the tribunal has committed an error and we accordingly answer this question in favour of assessee and against the revenue. Disallowance of interest paid to the Directors - Held that:- We are of the opinion that the loan amount was taken by the company from the Director and that was for the beginning of new activity and if such payment could not have been made, the Bank will not issue title for new activity and the company might have suffered a great loss. Thus, taking into account the fact that since the new activity is for the benefit of the company and loan amount is taken from the Director, the interest of which is required to be paid to the Director, the question is accordingly answered in favour of assessee by allowing payment of interest as expenses under the Act.
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2016 (8) TMI 209
Nature of loss - business loss or capital loss - Held that:- As far as write off of export benefit (DEPB) we observe that ld. CIT(A) has given specific finding that he has verified the books of account of assessee and has found that the export benefit (DEPB) has been shown by the assessee as an income in the earlier years/this year. We further observe that the reason given by assessee for write off of this expenditure was that the amount of export benefit was calculated at its level and income of ₹ 8,94,971/- was booked and the same was shown receivable from the Government department but thereafter on account of recalculation it was found that this impugned amount of ₹ 8,94,971/- has been booked excessively as income and which is not receivable and the same was transferred to balance written off account. On going through these facts, we are of the view that assessee has rightly claimed ₹ 8,94,971/- as business expenditure. Moving ahead to examine the balance write off of ₹ 172402/- of Esbee Electricals, ₹ 1139020/- of R.P. Construction and ₹ 2313118/- of Sangam Construction, on perusal of records relating to ledger account of these three parties, we find that there have been regular business transactions in the form of payment through bank and by cash towards supply of material and labour, free supply of goods to the contractors for job work purposes, income-tax has been deducted at source on regular job works bills. We observe that there have been continuous business transactions with a bona fide belief of consistency of business relation with these three parties. However, at one point of time when these three parties were not traceable even after necessary efforts last resort left with the assessee was to transfer these irrecoverable amounts as business loss. We, therefore, are of the view that these advances of ₹ 36,24,540/- (Rs.172402 + ₹ 1139020/- + ₹ 2313118/-) being irrecoverable business advances have been rightly claimed as business expenditure by the assessee. We find no reason to interfere with the order of ld. CIT(A). We uphold the same
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2016 (8) TMI 208
Validity of invoking the provisions of section 153A by issuing a notice under Section 153A - Held that:- The notice under Section 153A(1)(a) was issued on 24.9.2009 wherein the Assessing Officer has given time period for furnishing the return as 30 days from the date of service of notice. Even otherwise the period of 30 days provided by the Assessing Officer for furnishing the return of income is a reasonable period. Further the assessee furnished its return of income in response to the said notice under Section 153A only on 3.2.2010 which is more than 4 months after the date of issue of notice under Section 153A. In view of the facts and circumstances when the Assessing Officer has granted 30 days to furnish the return in response to the notice under Section 153A and thereafter the assessee furnished the return only after more than 4 months which was accepted by the Assessing Officer, the objection raised by the assessee is devoid of any merit or substance and therefore rejected. Invalid notice issued under Section 143(2) - Held that:- The Assessing Officer has discussed this issue in para 6 and pointed out that in the return filed in response to the notice under Section 153A the assessee has declared les income than income declared in the original return filed under Section 139 of the Act and therefore the Assessing Officer took the total income returned by the assessee as declared in the original return while computing the total income. When the notice under Section 143(2) was issued after the return of income filed by the assessee in response to notice under Section 153A and further there was no time available to the Assessing Officer to issue notice on the original return of income then in the facts and circumstances of the case we find that the notice in question was issued only in respect of the return filed by the assessee under Section 153A of the Act. Hence this ground of the assessee is rejected. Income earned on sale of agriculture land - assessed as income from business instead of capital gains - deduction under Section 54B denied - Held that:- We find that there is no tax effect even if the income from sale of this property is treated as STCG instead of business income treated by the Assessing Officer and the only difference is because of the claim under Section 54B of the Act. There is no dispute that the land in question was not used for agriculture purpose in the two years immediately preceding the date on which the transfer took place. Therefore mandatory condition of use of the land for agriculture purposes for two years immediately prior to the sale is not specified. Once the assessee failed to satisfy the condition under Section 54B for availing the deduction then the issue of treatment of the income as business income or STCG becomes academic in nature being revenue neutral. Accordingly, in the facts and circumstances of the case, we dismiss these grounds of the assessee's appeal. Addition on account of income for performing Pooja - Held that:- The assessee in the statement had estimated the undisclosed income of ₹ 75 lakhs for 3 assessment years under consideration which matches the figures and amounts shown in the seized document relating to Pooja income of ₹ 35 lakhs, ₹ 20 lakhs and ₹ 20 lakhs for the Assessment Year 2006-07 to 2008-09 respectively. We find that there is no ambiguity in the statement of assessee regarding the Pooja income which has been clearly corroborated by the seized material. Thus when there is a sufficient evidence being seized material which corroborates the statement of the assessee recorded under Section 132(4) on 23.2.2009 then the subsequent retraction of the statement by the assessee withut any corroborating evidence cannot be accepted as the assessee has not explained the facts and circumstances under which he had admitted a wrong income in the statement and how the income shown in the seized material is not correct. Therefore mere retraction of statement without explaining the circumstances as well as corroborating evidence, it cannot be accepted being an after thought. Accordingly, we do not find any substance in this ground of the assessee and the same is dismissed. Addition on account of loan from Mr. Sunil Patil as unexplained credit - Held that:- Though the assessee has submitted that the Assessing Officer accepted the credit in the name of Mr. Sunil Patil of ₹ 42 lakhs and there is no evidence or seized material found during the search to support the undisclosed income. However from the record produced before us, we find that the assessee has filed a return of income on 3.2.2010 along with the Balance Sheet wherein this amount of unsecured loan in the name of Mr. Sunil Patil has been shown and it is not clear whether this record was filed by the assessee along with the return of income filed on 24.11.2006 on which the assessment was completed for the year under consideration. Accordingly, we direct the Assessing Officer to verify whether this unsecured loan in the name of Mr. Sunil Patil was duly disclosed in the return filed on 24.11.2006 or during the assessment proceedings completed vide order dt.21.11.2008. This issue is set aside to the record of Assessing Officer for proper verification and re- adjudication. Disallowance made under Section 40A(3) - expenses claimed in excess of ₹ 20,000 - Held that:- Assessing Officer made the addition under Section 40A(3) of the Act when the assessee has not furnished the details of the expenditure of more than ₹ 20,000 in cash. The Assessing Officer took the figures from the ledger account however, the assessee claimed that the amount was not claimed as a business expenditure therefore it cannot be disallowed. Further the assessee also claimed that this is a double addition of the same amount of ₹ 3 lakhs in the name of Smt. Vani Mahesh as the Assessing Officer has made an addition on additional investment under Section 69B of ₹ 3 lakhs. Since the relevant record has not been examined by the Assessing Officer and also not available before us therefore in the facts and circumstances of the case, we set aside this issue to the record of Assessing Officer for proper examination of the relevant record as well as the details to be filed by the assessee and then decide the same after affording an opportunity of hearing to the assessee. Addition made on seized material - whether the abbreviated or coded amounts written in the margins of the diary at page 75 of the seized material represents the amounts in lakhs or in thousands? - Held that:- From the numbers written in the margin it is clear that the Assessing Officer took the first number being 19 as sum total of ₹ 18 lakhs + ₹ 1 lakh, the payment made by the assessee on 7.8.2006 and on 8.8.2006 respectively. The other numbers mentioned in the margins are not recorded in the books of accounts therefore those were considered by the Assessing Officer as payment out of books. As it is apparent from these numbers written in the margin that a proper care was taken for distinguishing the amounts in thousands by putting a point (.) before the number as in the case of last number written as 0.5. Therefore the other numbers written in the margin with the dates clearly indicates the payment made by the assessee in lakhs. Therefore we do not find any error or illegality in the orders of the authorities below on this issue and confirm the addition of ₹ 19 lakhs as sustained by the CIT (Appeals). Addition under Section 69B of the Act being investment in Flat - Held that:- We find merits in the submission of the learned Authorised Representative that when there is an addition on account of Pooja income for ₹ 20 lakhs for the year under consideration then the benefit of telescoping of the said amount shall be given against the addition of unexplained investment. Even otherwise if an addition of ₹ 20 lakhs was made by the Assessing Officer and was sustained by the CIT (Appeals) on account of unaccounted Pooja income then to the extent of the addition the source of investment stand explained. Therefore we direct the Assessing Officer to allow the telescoping benefit of the Pooja income against the addition if it is not allowed against some other addition. Income of sale of property - assessed as business income as against capital gains - Held that:- There is no dispute that this land was purchased in the year 2004 and was sold in the year 2007 therefore the assessee retained this land for more than 3 years. It is not the case of the revenue that the land was shown as stock in trade. Therefore even if the land was shown as business asset and it was sold prior to the completion of construction work. It would not partake the character of business undertaking or asset on which depreciation is allowed. Therefore this land was sold as an individual asset and not as a particular unit of business of the assessee. Accordingly, we are of the view that the gain arisen from the sale of land will be assessed as ‘Long Term Capital Gain’ (LTCG). However if any gain is earned on the construction part of the property, the same will be assessed as STCG. Accordingly, principally we allow the claim of the assessee and direct the Assessing Officer to accept the claim of LTCG to the extent of the land and if any gain is earned by the assessee on account of construction of the property, the same will be treated as STCG. Addition on account of contract receipts - Held that:- We find that the assessee has offered the income from this project for the Assessment Year 2009-10. Therefore the addition made by the Assessing Officer from this project for the year under consideration is required to be reduced from the income for the Assessment Year 2009-10 to avoid double taxation of the same income. Accordingly, we direct the Assessing Officer to take necessary step in this aspect. Addition under Section 41(1) - amounts standing to the credit as on 31.3.2008 - Held that:- We are of the view that if this amount of ₹ 22,444 is part of sum of ₹ 2,22,444 being an addition made by the Assessing Officer under Section 41(1) of the Act for the Assessment Year 2006-07 then this addition cannot be made for the year under consideration. Hence, we direct the Assessing Officer to verify the fact as pointed out by the assessee and then decide the same accordingly. Claim of setting off of STCG from sale of mutual fund units disallowed - Held that:- We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. There is no dispute that the income from Mutual Fund in question is exempt under Section 10(35) of the Act therefore, any loss from the same source cannot be allowed to be set off against the taxable income. Accordingly, we do not find any error or illegality in the orders of the authorities below. Setting off of the income estimated by the Assessing Officer on percentage completion method for the Assessment Year 2008-09 against the income offered during the year on completion of the project - Held that:- While dealing with an identical issue for the Assessment Year 2008-09, we have directed the Assessing Officer to set off the income assessed in the said assessment year based on the percentage of uncompleted project against the income of the project offered by the assessee on completion during the year under consideration. Accordingly this ground stand disposed off. Assessability of deposits in the names of the family member - Held that:- We are of the view that the dates of deposits is matter of record as per the seized material available with the Assessing Officer and therefore if the deposits or part of the deposits were made in the earlier year then the addition to that extent cannot be made in the year under consideration. Accordingly, we direct the Assessing Officer to verify the dates of deposit in question and then decide this issue.
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2016 (8) TMI 207
Penalty u/s. 271AAA - failure to explain the manner in which undisclosed income is derived as required u/s. 271AAA(2)(ii) - CIT(A) deleted the penalty - Held that:- If we examine the answer of the questions of specifying the manner in which the income has been derived, the answer is yes. No question was posed by authorised officer while recording the statement of Subash Vincent u/s132(4) in respect income of ₹ 1.33Crore (approx) . Thus the alleged failure on the part of the assessee to specify and substantiate in respect of undisclosed income of ₹ 1.33 Crore(approx) , was due to the reason that no such question was posed to Subash Vincent. So it was not expected from the person who has once voluntarily offered the income and substantiated part of it, so far as confronted to him and remaining was neither pose to him nor he voluntarily substantiated. The argument of AR of assessee that the amount surrendered has been accepted suo-moto by the Revenue itself leads to the irrefutable conclusion that the question of specifying and substantiating the manner in which it has earned has been answered to the satisfaction of the authorised person as well as assessing officer. Moreover it needs to be understood that in absence of any specific procedure prescribed in the Act, for specifying and substantiating the undisclosed income, the fact that the same has been accepted without any variation by the AO is by itself enough evidence of the said criteria is having been met and satisfied. And this of our view is duly supported with the decision of Delhi tribunal in Ritu Singhal case (2015 (3) TMI 310 - ITAT DELHI ) - Decided in favour of assessee
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2016 (8) TMI 206
Interest on delayed grant of refund in terms of section 244A(1) - delay in grant of refund - Held that:- Relevant TDS certificates were furnished alongwith the return of income and it is also irrefutable that the tax was deducted and deposited in the account of the Central Government within the stipulated period. Therefore, in our view, income-tax authorities have erred in construing that the proceedings resulting in the refund are delayed for reasons attributable to the assessee within the meaning of Sec. 244A(2) of the Act. Section 245RR prescribes that no income-tax authority or the Appellate Tribunal shall proceed to decide any issue in respect to which an application has been made to the AAR, so however, such a restriction is placed only for an assessee-applicant who is a resident of India as per the Act, whereas the appellant-assessee before us is a non-resident. Apart therefrom, we do not find any provision which places restrictions on any income-tax authority to proceed to decide any issue before it, in case an application is pending before the AAR. Be that as it may, in our view, if the proceedings resulting in refund are delayed on account of pendency of an application before the AAR, the same cannot be construed as ‘reasons attributable to the assessee’ within the meaning of Sec. 244A(2) of the Act. Therefore, the aforesaid stand of CIT(A), in our view, is untenable in law. In this view of the matter, in our considered opinion, in the present case, the provisions of Sec. 244A(2) of the Act cannot be invoked by the Assessing Officer to deny interest u/s 244A(1) of the Act on account of delay in grant of refund from the period 1.4.2003 up to the date of grant of such refund, i.e., 20.7.2006. - Decided in favour of assessee.
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2016 (8) TMI 205
Computation of net income - return of income filed by the assessee was accompanied by the report of an accountant u/s.44AB - Held that:- Following the decision CIT v. Balchand Ajit Kumar (2003 (4) TMI 76 - MADHYA PRADESH High Court ) and CIT v. Hariram Bhambhani (2015 (2) TMI 907 - BOMBAY HIGH COURT ), it is of the view that the lower authorities ought to have determined the net income of the assessee on the basis of net profit earned by the assessee and ought to have adopted the net profit @ 5.80%.
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2016 (8) TMI 204
Transfer pricing adjustment - MAM - TNMM v/s RPM - Held that:- We find that there is a substance in the reasons assigned by the TPO while rejecting the resale price method and particularly in view of the fact that the assessee has incurred huge expenditure on account of sale and distribution as well as sales promotion. The assessee has carried out the trading activity only in the goods imported from the AE and such expenditure incurred by the assessee it is not found in the comparable cases would be relevant factor. As regards the resale price method accepted by the TPO for the Assessment Year 2006-07, we are of the view that res judicata is not applicable in the matter of taxation and further when there is no such similar expenditure on account of selling and distribution expenses and sales promotion expenses in the said year then the rule of consistency cannot be applied. Accordingly, we do not find any error or illegality in the orders of the authorities below in adopting the TNMM as MAM instead of RPM. Appropriate adjustment towards the extra-ordinary expenses - Held that:- There is no dispute on the fact that the assessment under consideration is the initial years of the distribution activity of the assessee and therefore it cannot be ruled out that the expenditure incurred by the assessee towards the marketing, advertisement and sales promotion activity is substantially higher because of the initial year. We do agree with the view taken in the case of Skoda Auto India Pvt. Ltd. [2009 (3) TMI 249 - ITAT PUNE-A] that if the abnormal expenditure towards the advertisement, marketing and sales promotion is only on account of the beginning of the activity of distribution-ship then an appropriate adjustment has to be allowed while determining the ALP under TNMM. We may clarify that the Assessing Officer has to verify by comparing this expenditure during the year with the subsequent years to find out that the significant expenditure towards the marketing, advertisement and sales promotion is only during the initial year and not in the later year. Accordingly, we set aside this issue to the record of the A.O./TPO for re-examination and adjudication in the above terms.
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2016 (8) TMI 203
Rental income received on letting out warehouses - income from house property OR business income - Held that:- Authorities below in the present case were not justified in holding the rental income received from the business assets as income from house property.
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2016 (8) TMI 202
Trial run expenditure incurred in the process of expansion of its existing manufacturing facilities - revenue or capital expenditure - Held that:- The mere fact that there was no common place of business because the Bangalore unit was situate many miles away from Baroda was not a matter of any consequence because the head office of the assessee was at Baroda and it was the head office which controlled the affairs of both the businesses. It was pointed out that the closure of any of the two units would surely affect the working and the business of the remaining unit for the simple reason that a larger liability of the whole business would obviously have to be borne by the other unit on the closure of one unit. Having regard to all these circumstances, it was held that the factory at Bangalore did not constitute a new business but was only an establishment of a new unit of the existing business and that the amounts in question were allowable as revenue expenditure. Taking into consideration the fact that the expense was incurred by the assessee for trial run with regard to expansion of present unit, to increase its installed capacity of the tile manufacturing plant from 35000 MT to 42000 MT, we find merit in the submissions of Mr.Soparkar. We are of the opinion that the question posed for our consideration is required to be answered in favour of the assessee and against the revenue. Accordingly, it is held that the Tribunal has committed an error in treating the trial run expenditure incurred by the appellant in the process of expansion of its existing manufacturing facilities as capital expenditure.
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Corporate Laws
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2016 (8) TMI 240
Rectification of the Register of Members - transfer of shares - Held that:- The transfer of shares in the instant case occurs automatically by operation of law. The respondent Company acquired an interest in the shares by operation of law without any voluntary act on its part. The question of law is answered with the observation that the transfer of shares in a third company pursuant an order sanctioning a scheme of amalgamation does not require compliance with the provisions of Section 108(1) of the Act of 1956. The order of CLB directing rectification of shares is upheld.
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Service Tax
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2016 (8) TMI 251
Restoration of appeal – non-compliance of section 35F of the Central Excise Act,1944 - stay application filed after statutory time limit – tax, interest and penalties not paid – Held that: - the appellant did not file any stay application along with their appeal within the statutory period under Section 35F of the Central Excise Act, 1944. The Commissioner (Appeals) was correct in rejecting the letter-cum-stay application, which was submitted after one year and four months of the filing of the appeal and much beyond the statutory period laid down in the Central Excise Act. The only option left for the appellant in such a situation was to deposit the entire amount of tax with interest and penalties before filing of the appeal, as the appellant had not sought waiver of pre-deposit – The Commissioner (Appeals) has therefore rightly rejected the appeal for non-compliance of Section 35F – decided against the appellant.
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2016 (8) TMI 250
Constitutional validity - levy of service tax on person manufacturing alcoholic liquor for human consumption on job work basis – Section 66B of the Finance Act, 1994 read with 65B(40) and section 66D - Notification No. 14/2015/-ST dated 19th May 2015 – Held that: - what is sought to be made amenable to service tax is the activity of contract manufacturing of alcoholic liquors fit for human consumption by one entity for another. Such provision of service which is in pith and substance not covered under Entry 51 of List II of the Seventh Schedule to the Constitution of India is certainly amenable to levy of service tax by Parliament which is competent to legislate on that aspect with reference to Entry 97 of List I. The challenge to the Notification No.14/2015/-ST dated 19th May 2015 and the SCN is, therefore, negatived leaving it open to the Petitioner to urge all contentions available to it on merits before the adjudicating authority - writ petition dismissed – decided in favor of revenue
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2016 (8) TMI 246
Recovery – demand – valuation - includibility of value of free supply in gross amount charged - Held that: - The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged. Appellants have been able to establish a prima case in respect of demand pertaining to includibility of value of free supply in the gross amount charged. However, the appellants have not been able to make out a case in respect of demand of service tax on the activity related to construction of housing and power house, etc. The pre-deposit of ₹ 5 lakh would be sufficient to comply with the provisions of section 35F of Central Excise Act, 1944. - stay granted partly.
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2016 (8) TMI 245
Service tax on commission – demand – business auxillary service – Held that: - activity of purchase and sale of SIM card belonging to BSNL where BSNL has discharged the Service Tax on the full value of the SIM cards, does not amount to providing business auxiliary services and confirmation of demand on the distributors for the second time is not called for - Decided in favor of appellant.
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2016 (8) TMI 244
Reverse charge mechanism – services received from commission agents located outside India – SCN issued for appropriation of amount with interest and penalty – Held that: - The appellant is receiving services from foreign based commissions agent located outside India and the appellant was required to pay services under reverse charges mechanism. It is not a case where the appellant is providing some service and required to pay service tax thereon. In that circumstances, benefit of doubt goes in favor of the appellant, therefore, the charges of suppression of facts cannot be alleged on the appellant - provisions of section 73(3) of the Finance Act, 1994 are attracted – no SCN – no penalty – decided in favor of appellant.
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2016 (8) TMI 243
Waiver of penalty – reverse charge mechanism – short payment due to non-inclusion of miscellaneous charges like Hamali, loading/unloading, carting and octroi etc. – no intention to evade service tax – no other contraventions by appellant – Held that: - appellant has been able to show reasonable cause for non payment of service tax on due date. On pointing out short payment, admittedly paid the service tax along with interest. Penalty waived – decided in favor of appellant.
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2016 (8) TMI 242
Cenvat credit – refund – relevant date - export of services – Held that: - relevant date is receipt of inward remittances. In determination of the last date commencing with the date of receipt of inward remittance, due regard must be had to the last day of the quarter as a practical unavoidability . Claims not time barred - eligibility for refund to that amount of credit as is the proportion that the export turnover bears to the total turnover - Appeal dismissed – cross objection disposed off.
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2016 (8) TMI 241
Cenvat credit – reversal - refund - 100% EOU – same issues raised by subsequent SCN. - Held that: - subsequent SCN is bad in law being repeat litigation of the issue already covered by the earlier SCN. The allegations brought forward by earlier SCN was not brought on record as a result of such investigation by subsequent SCN - impugned order set aside – decided in favor of appellant.
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Central Excise
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2016 (8) TMI 239
SSI Exemption - Availing of exemption under notification no.8/2003 when appellant using brand name of others prior to its registration – Held that:– brand name is a common brand and appellant used it prior to the other person registration – impugned order deserves no merit - appeal allowed. Demand of duty from the firm dissolved on the death of the partner – Held that:– demand of duty not sustainable. Both issues decided in favor of appellant – impugned order set aside – appeal allowed with consequential relief.
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2016 (8) TMI 238
Imposition of penalty under rule 25 – payment of duty during the default period under Rule 8(3A) - Held that:- Utilization of cenvat credit for payment of duty during default period permissible. Gujarat High Court judgment in case of Indsur Global Ltd (2014 (12) TMI 585 - GUJARAT HIGH COURT) apply. As per the interpretation drawn by the Honble High court in the above judgment regarding the imposition of penalty under Rule 25, in the present case also it is not the case of non levy/ short levy, non payment/short payment of duty by suppression or willful mis-statement, fraud and collusion or contravention of any provision of this act or rule made with intent to evade payment of duty, therefore applying the ratio of this judgment appellant is not liable for penalty under Rule 25. - penalty set aside – decided in favor of appellant.
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2016 (8) TMI 237
Reversal of cenvat credit – appellant not reversed the cenvat credit attributable to the stock of raw material, and inputs contained in work in progress and in final products when the final product became fully exempt – Held that:- on the date when the final goods become exempt from payment of duty, for the inputs received on and after the said date, no credit can be taken – decided in favor of assesse.
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2016 (8) TMI 236
Suo-mot availing credit of excess duty paid - The appellant mistakenly paid the excise duty on the transportation which was otherwise not required to be paid – extended period of limitation - Held that:– suo moto credit not permissible. Remedy available is refund claim under section 11B. No suppression of fact on the part of appellant. Demand cannot be raised under proviso to Section 11A(1), accordingly extended period cannot be invoked – appeal allowed on ground of limitation. - Decided in favor of assessee.
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2016 (8) TMI 235
Rejection of refund claim on the ground of unjust enrichment - Recovery of erroneous refund – Valuation - allowing quantitative discount - evidence found from the records that incidence of duty on the discount amount has not been passed. Lower authority mentioned in the order that the appellant has not produced all the credit notes – Held that:– matter remanded to adjudication authority for fresh decision on production of relevant documents . Both the appeals remanded back. Adjudicating authority to give the decision within three months from the date of receipt of this order.
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2016 (8) TMI 234
Clearance of various item of scrap generated during the course of manufacture of excisable goods. - Held that:- scrap generated during the repair of the capital goods, cannot be said that the capital goods were cleared as waste and scrap. - Not liable to duty - decided against revenue.
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2016 (8) TMI 233
Reversal of cenvat credit taken on capital goods, on inputs lying on stock,inputs contained in the goods under process and inputs contained in finished goods lying in stock. - It started clearing goods at 'nil' rate of duty w.e.f. 26.09.2003 availing benefit of Exemption Notification No.50/2003 dated 10.06.2003 - Held that:- There is no provision in the rules which provides for a reversal of the credit by the Excise Authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilized, has to be paid for – appeal allowed – decided in favor of appellant.
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CST, VAT & Sales Tax
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2016 (8) TMI 249
Input tax credit - purchases of pet coke where it is used for generation of electrical energy for captive consumption - Punjab VAT - Held that:- While the scope of goods to be used in captive generation of power has been extended in Section 13(5)(i) of the Act, the same has to be given full meaning. The only restriction is that the benefit has to be subject to the provisions of Section 13(4) of the Act. While harmoniously constructing both the provisions, the only conclusion which can be arrived is that on the goods specifically mentioned in Section 13(4) of the Act, the benefit shall be available to the extent provided therein, whereas on the other goods, there would be no restriction as such for claiming the benefit of input tax credit, except those specifically mentioned in Section 13(5)(b) of the Act, namely, petrol, diesel, aviation turbine fuel, liquefied petroleum gas and condensed natural gas, as even many of those goods may be used in generation of power for captive consumption. The substantial question of law is answered in positive in favour of the assessee holding that the appellant shall be entitled to full input tax credit of the tax paid on purchase pet coke, where it is used for generation of power for captive consumption. - Decided in favor of assessee.
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2016 (8) TMI 248
Constitutional validity of Rule 11B(2)(c) of the Central Sales Tax (Kerala) Rules, 1957 - Interest sale sale - Reading of this provision would show that a purchasing dealer claiming the benefit of Section 6 (2) shall, in respect of such claim, furnish to the assessing authority a photocopy of the consignee copy of the lorry receipt, railway receipt, bill of lading bearing endorsement made by such dealer or cash receipt in favour of the purchaser taking delivery of the goods. Held that:- by Section 13(3), power is conferred on the State Government to make rules to carry out the purposes of the Act and the only limitation therein is that such rules shall not be inconsistent with the provisions of the CST Act or the rules made by the Central Government under Section 13(1) thereof. The scope of such power is enlarged by section 13(4) which provide that in particular and without prejudice to the powers conferred as per 13(3), the State Government may make rules for all or any of the purposes enumerated therein. The purposes enumerated in clause (c) thereof include rules for furnishing of any other information relating to the business of a dealer as may be necessary for the purposes of the Act. According to us, such expansive power conferred on the rule making authority takes within its sweep, power to prescribe production of the documents that are mentioned in Rule 11B(2)(c) also for the purpose of availing of the exemption provided under section 6 of the CST Act. Even apart from that, the net result of Rule 11B(2) is that the dealer should produce documents, the details of some of which are already required to be specified in form E-I and E-II vide clause (4) thereof. In our view, these provisions of rule 11B(2)(c) do not, in any manner, run either inconsistent with the provisions of Section 6(2) nor can that rule be said to be framed in excess of the rule making power conferred under Sections 13(3) and 13(4) of the CST Act. Viewed in this manner, we are unable to sustain the judgment under appeal. Decided in favor of revenue.
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2016 (8) TMI 247
Rate of tax on the Mango Juc-Fit in liquid form and Mango Fruit Booster, Rasna Utsav and Orange Juc-up in powder form - expression "all processed fruit and vegetables" - scheduled goods or not - Section 4(1)(b) of the Karnataka Value Added Tax Act, 2003 (KVAT) - Held that:- entry No.3 of Third Schedule of the Act transpires that all processed fruits and vegetables including fruit jams, jelly, pickles, fruit squash, paste, fruit drinks and fruit juice (whether sealed in container or otherwise) are included in the said entry. The basis of the aforesaid entry is that the items contained therein must be processed fruit or processed vegetables. Further, if the colour or the meaning of the expression "processed fruit or vegetables" is to be considered, one may be required to consider the other parts of the entry which may throw light on the intention of the legislature. Jams, jelly, pickles, squash, paste, drink, juice, would show that such processed foods may be in liquid or semi-liquid form or in the form of a paste in contradistinction to the concentrated power form. Unless a strict meaning is given to the expression "all processed fruit and vegetables" in the form of liquid, semi-liquid paste or squash form, they would not get included in Entry No.3 of Second Schedule . In any case, concentrated powder form, by applying the common parlance test would stand on an altogether different position than any fruit or vegetable found in liquid or semi liquid, paste or squash form. Under circumstances, the contention raised that "all types of processed fruits and vegetables" would also include concentrated form of powder cannot be accepted. In so far as liquid form of Mango Juc Fit is concerned, the revisional authority has committed an error in excluding the same from Entry 3 of Third Schedule, since it is a concentrated form of mango fruit juice which is in liquid form. In view of the discussion and observation made by us hereinabove the said item would be included in the entry. However, insofar as Mango Fruit Booster, Rasna Utsav, Orange Juc-up in powder forms are concerned, since all such items are in concentrated powder form, as per the observation and discussion made by us hereinabove, such would not get included in Entry No.3 of Third Schedule. The decision of the revisional authority cannot be said to be erroneous or illegal on this aspect of the matter. Decided partly in favor of assessee.
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Wealth tax
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2016 (8) TMI 232
Nature of asset - ITAT held that the properties at Worli, Mumbai owned by the assessee was outside the purview of the `asset' because this property was commercial property, ignoring the fact that sub-clauses (4) and (5) of clause (i) of Section 2(ea) were brought on the statute only with effect from 01.04.1999 through the Finance (No.2) Act, 1999 - Held that:- Since the subject property did not fall within any of the three excluded categories enumerated under clause (i) of Section 2(ea), the said property cannot be considered to be outside the purview of the expression ‘assets’.
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