TMI Tax Updates - e-Newsletter
September 12, 2015

Case Laws in this Newsletter:

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

Articles

1. EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME UNDER NEW FOREIGN TRADE POLICY

   By: DR.MARIAPPAN GOVINDARAJAN

2. NEGATIVE LIST OF SERVICES: PROCESSES AMOUNTING TO MANUFACTURE

   By: Dr. Sanjiv Agarwal

News

1. Financial Consumer (Depositor) Protection – Reflections on Some Lingering Questions (M R Pai Memorial Lecture delivered by Shri R. Gandhi, Deputy Governor on Sep 8, 2015 at IMC, Mumbai)

2. FM: Government committed to make Namami Ganga a resounding success; Efforts on to provide toilets in all Houses in the country

3. RBI Reference Rate for US $

Notifications

Companies Law

1. F.No.1/5 /2001-CL-V (Part V) - dated 10-9-2015 - Co. Law

Notification for amendment in S.O. 2425(E) dated 18.09.2014 - section 210A of Companies Act 1956.

2. F. No. 1/19/2013-CL-V - dated 9-9-2015 - Co. Law

Companies (Filing of documents and forms in XBRL) Rules, 2015

Circulars / Instructions / Orders

VAT - Delhi

1. 24/2015-16 - dated 10-9-2015

Reassessment in respect of system generated default assessment notices dated 19/06/2015.

2. 25/2015-16 - dated 10-9-2015

Online Form Delhi Sugam-2 (in short DS2) will come into force with effect from 15th September 2015.

Highlights / Catch Notes

Income Tax

• Court Rules No Tax Withholding Required on Royalty Payments: Section 195 Inapplicable Due to No Chargeable Income.

  Case-Laws - HC : TAS deduction - withholding tax u/s 195 - In the absence of any income chargeable to tax arising on account of royalty in the hands of TLME at the material time, the question of withholding TAS would not arise - HC
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• Court Denies Section 80P(2)(a)(vi) Deduction: Society's Income From Toddy Sales Not Linked to Members' Labor Disposal.

  Case-Laws - HC : Benefit of deduction under section 80P(2)(a)(vi) denied - income of the society has nothing to do with the collective disposal of the labour of its members, but is entirely from out of the price realised by it for the sale of toddy through the society's own toddy shops - No deduction - HC
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• ITAT Wrongly Dismisses Appeal for Non-Prosecution; Required to Decide on Merits After Hearing Respondent's Side.

  Case-Laws - HC : Dismissal of appeal for non-prosecution by ITAT - Tribunal could not have dismissed the appeal for non-prosecution but ought to have disposed of the appeal on merits after hearing the respondent. - HC
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• Assessing Officer Justified in Rejecting Books Due to Missing Stock Register and Unsatisfactory Explanation by Assessee.

  Case-Laws - HC : Rejection of books of account merely for absence of stock register - o satisfactory explanation had been furnished by the assessee for not maintaining the stock register. The rejection of books of account of the assessee by the Assessing Officer was, thus, justified. - HC
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• Profits from Sludge or Waste Oil Sales Qualify for Deduction u/s 80IA, Despite Initial Disallowance for Power Manufacturing.

  Case-Laws - AT : Claim for deduction under section 80IA disallowed - , manufacture of power - the profits and gains derived by the assessee from the sale of sludge/waste oil is eligible for deduction under section 80IA of the Act - AT
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• Insurance Authority Lacks Power to Adjust Actuarial Surplus for Income Calculation in Life Insurance Business.

  Case-Laws - AT : Addition of negative reserves to the actuarial surplus for determining the profit from business of Life Insurance - AO has no power to make any adjustment against Actuarial surplus determined as per Insurance Act while making computation of total income - AT
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Customs

• High Court Orders Prompt Correction of Countervailing Duty Error: 10% Paid Instead of 6% on Bills of Entry.

  Case-Laws - HC : Re-assessment of Bills of entry – CVD mistakenly paid at 10% instead of 6% – revenue directed to respondents to dispose of representations of petitioners - Needful will be done by respondents / revenue as expeditiously as possible - HC
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Service Tax

• Superior Courts Grant Refunds Despite Section 11B Time Limits; Central Excise and Customs Act Entities Lack Discretion.

  Case-Laws - AT : Denial of refund claim - even if the Superior Courts in some cases having regard to the specific facts/circumstances ordered refund to be granted ignoring the time limit prescribed under Section 11B ibid, the creatures of Central Excise Act or Customs Act 1962 can not arrogate to themselves similar powers - AT
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• Court Rules Service Tax Applies on Gross Amount for Clearing Services; No Deductions for VSAT & Delivery Charges Allowed.

  Case-Laws - AT : Clearing & Forwarding services - appellants have claimed deductions towards reimbursable charges under the head "VSAT Allowances & Delivery Charges" - service tax is demandable on the gross amount and the same cannot be vivisected. - AT
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• Service Tax Demand Invalid if Based Solely on Overlapping Periods Without Proof of Identical Transactions.

  Case-Laws - AT : Demand of service tax - Mere overlapping of certain period is no evidence that the service tax has been demanded on the same transactions - AT
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• Automobile Dealer's Commission Subject to Service Tax Under Business Auxiliary Service Regulations; No Evidence for Accommodation Claims.

  Case-Laws - AT : BAS - automobile dealers - the amount received by the respondent was for providing accommodation and space is not supported by any evidence with regard thereto. That such commission/incentive is liable to service tax under business auxiliary service - AT
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Central Excise

• Court Rejects Appeal: Assessee's Attempt to Reappraise Facts Under Central Excise Law Fails to Justify Case Reopening.

  Case-Laws - HC : Extended period of limitation - The attempt of the Assessee is nothing but to seek a reappreciation and reappraisal of a factual finding with an intention to delay meeting the demand. The attempt of this nature does not result in the Appeal being entertained by this Court - HC
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• Cenvat credit allowed for Spent Sulphuric Acid cleared at nil duty rate as it's classified as waste or by-product.

  Case-Laws - HC : Cenvat Credit - Final product being Spent Sulphuric Acid was cleared at nil rate of duty - assuming it is a waste, refuse or by-product, it is chargeable to nil rate of duty - cenvat credit cannot be denied - HC
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• Revenue Appeals Tribunal's Refund Order; No Interim Stay; Law Supports Immediate Refund Approval.

  Case-Laws - HC : Denial of refund claim - Department has not accepted the Tribunal's order and has filed an appeal against the same in this Court - In the teeth of the clear language of law and there being no interim stay in favour of the Revenue, we find no justification for keeping the refund application either pending or rejecting it with the aforesaid endorsement. - HC
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• Warranty Charges Cannot Be Excluded from Retail Sale Price in MRP-Based Valuation u/s 4A; Demand Confirmed with Extended Limitation.

  Case-Laws - AT : MRP based Valuation u/s 4A - there is no provision under the law to exclude warranty charges from the retail sale price while computing the assessable value - Demand confirmed invoking extended period of limitation - AT
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• Interpretation of "Non-Excisable" in Clause 6 of Notification No. 22/2003-CE and Clause 3 of Notification No. 52/2003-Cus.

  Case-Laws - AT : 100% EOU - non-excisable words used in second proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 and Proviso to Clause 3 of Notification No. 52/2003-Cus, dt.31.03.2003 will embrace in its expression all zero rated finished goods where on account of full exemption, or Nil / Free rates, or where no rate is specified under the relevant tariffs - AT
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• Extended Limitation Under Central Excise Not Triggered by Duty Non-Payment Alone; Requires Proof of Collusion or Suppression.

  Case-Laws - AT : Extended period of limitation - Manufacture - SSI Exemption - mere non payment of duty is not equivalent to collusion or wilful suppression of facts and in order to invoke extended period specific and explicit allegation must be proved by the Revenue - AT
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• Manufacturer Seeks Refund After Factory Closure Due to Plastic Pouch Ban u/r 16 of 2008 Rules.

  Case-Laws - AT : Refund claim - manufacture of Gutkha and Pan Masala - Reopening after Closure of factory due to banning the use of plastic pouches - refund claim filed by the Appellant would come within the purview of Rule 16 of Rules 2008 - AT
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VAT

• High Court Criticizes DVAT Default Orders for Incorrect Fourth Quarter Date in 2015-16 Tax Returns.

  Case-Laws - HC : DVAT - the default assessment orders for the late filing of returns for the financial year 2015-16 for the fourth quarter is given as 30.09.2015 when the fourth quarter itself begins in January 2016. We deprecate such kind of mindless orders - HC
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Case Laws:

• Income Tax

• 2015 (9) TMI 507
  TAS deduction - amount was credited on account of royalty payable to Telefonaktiebolaget L.M. Ericsson, Sweden (hereafter ‘TLME’) - said entry was subsequently reversed, as according to the Assessee, the payment of royalty to TLME was not permissible as per the Industrial policy in force at the material time - accrual of income - Whether the Tribunal was right in law in holding that the assessee was not liable to deduct TDS under Section 195 ?- Held that:- Indisputably, the Assessee neither paid royalty during the period nor reflected the same as payable. In such circumstances, it is difficult to accept that there was any income chargeable to tax which had accrued in favour of TLME. In any view, the Assessee cannot be held to have acknowledged the same by crediting the account of TLME, as admittedly, that entry had been reversed. In our view, mere passing of the book entries, which are reversed, would not give rise to an obligation to deduct TAS by the Assessee, as clearly, there is no debt that can be said to be acknowledged by the Assessee. Imposition of an obligation to deduct TAS in these circumstances would amount to enforcing payments from one person towards a tax liability of another, even where the person does not does not acknowledge that any sum is payable. This, in our view, is contrary to the scheme of provisions relating to collection of TAS under the Act. It is also not disputed that TLME had not claimed royalty payable from the Assessee and, concededly, no royalty for the period has been paid either. In the circumstances, we are unable to accept that any income had accrued or arisen or deemed to have accrued or arisen, which is chargeable to tax in the hands of TLME. It is not disputed that the agreement dated 1st January, 1997 was not acted upon at the material time. In the absence of any income chargeable to tax arising on account of royalty in the hands of TLME at the material time, the question of withholding TAS would not arise. - Decided in favour of assessee.

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• 2015 (9) TMI 506
  Benefit of deduction under section 80P(2)(a)(vi) denied - CIT(A) allowed claim - whether the appellant societies cannot be considered as co-operative societies engaged in the collective disposal of labour of its members as contemplated under section 80P (2) (a) (vi) of the Act and therefore, ineligible for deduction under section 80P (1) as held by ITAT? - Held that:- The collective disposal of the labour of the members of the society is not resulting in the generation of any income to the society. On the other hand, toddy tapped and delivered by the members of the society and nonmembers are purchased by it and remuneration is paid to them at agreed rates. The toddy thus purchased is sold through the Toddy Shops established by the society. Therefore, the income of the society has nothing to do with the collective disposal of the labour of its members, but is entirely from out of the price realised by it for the sale of toddy through the society's own toddy shops. When that is the activity of the society, it cannot be said that the sum referred to in section 80P(1) entitling the society for deduction is generated out of the collective disposal of the labour of the appellant societies. For the aforesaid reasons, the Tribunal is fully justified in holding that the appellant societies are not eligible for the benefit of section 80P(2)(a)(vi) - Decided in favour of the Revenue

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• 2015 (9) TMI 505
  Revision u/s 263 - whether Tribunal holding that the order of the CIT(A) under section 263 satisfies the precondition of prejudice to the revenue is proper and correct? - Held that:- Commissioner held that the Assessing Officer has passed Annexure A order without any application of mind and without conducting any enquiry and also without even calling for or verifying the records. The Commissioner has also found that hire charges were paid but no tax has been deducted. Admittedly, the assessment order does not reflect any reason for the conclusions of the Assessing Officer. These findings of the Commissioner fully justified his conclusion that Annexure A order was erroneous in as much as it is prejudicial to the Revenue. In our view, the findings of the Commissioner satisfies the requirements of section 263 of the IT Act and therefore, the order of the Tribunal confirming Annexure A order of the Commissioner passed under section 263 does not merit interference. - Decided in favour of revenue.

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• 2015 (9) TMI 504
  Breach of the principles of natural justice - whether oral submissions are to be advanced as in case oral arguments are not heard it would lead to the breach of the principles of natural justice - Held that:- In the present case, it is not disputed that the Appellants were not given an opportunity to advance oral arguments before the Tribunal. The letter dated 08.01.2015 has also not been examined nor placed before the Tribunal whilst passing the impugned Order dated 23.01.2015. Not giving an adequate hearing to the Appellants would itself vitiate the impugned Order for breach of the principles of natural justice. In the present case, we find that even the contentions raised in the written submissions filed by the Appellants have also not been duly noted nor considered by the Tribunal whilst passing the impugned Order. Thus The impugned Order dated 23.01.2015 passed by the Income Tax Appellate Tribunal, Panaji, is quashed and set aside. - Decided in favour of assessee.

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• 2015 (9) TMI 503
  Dismissal of appeal for non-prosecution by ITAT - proceedings before the Tribunal came to be conducted ex parte in view of the fact that the petitioner had not informed the Tribunal about the change of its address - Held that:- On the day fixed for hearing or any other date to which the hearing may be adjourned, the appellant does not appear in person or through an authorised representative when the appeal is on for hearing, the Tribunal may dispose of the appeal on merits after hearing the respondent, as well as in the light of the decision of the Supreme Court in the case of CIT v. S. Chenniappa Mudaliar (1969 (2) TMI 10 - SUPREME Court), has held that rule 24 of the Rules makes it abundantly clear that the Tribunal cannot dismiss the appeal without adverting to the merits. Therefore, though the petitioner assessee who was the appellant before the Tribunal has failed to appear before it during the course of hearing of the appeal, in the light of the provisions of rule 24 of the Rules, the Tribunal could not have dismissed the appeal for non-prosecution but ought to have disposed of the appeal on merits after hearing the respondent. The impugned order being contrary to the provisions of rule 24 of the Rules as well as the above referred decision of this court in the case of Sanket Estate & Finance (P.) Ltd. v. Commissioner of Income tax (2012 (12) TMI 991 - GUJARAT HIGH COURT) cannot be sustained. The impugned order passed by the Tribunal for assessment year 1991-92 is hereby quashed and set aside and the appeal is restored to the file of the Tribunal which shall decide the same afresh on merits - Decided in favour of assessee.

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• 2015 (9) TMI 502
  Rejection of books of account merely for absence of stock register - non-fulfillment of ingredients u/s 145(3) - Held that:- No substance in the argument raised by the learned counsel. AO passed the assessment order under Section 143(3) of the Act by applying GP rate of 10% on gross sales of 11.74 crores after rejecting the books of account under Section 145(3) of the Act on the ground that no stock register was maintained by the assessee and, thus, made an addition of 41,09,728/-to the total returned income. The CIT(A) held that the figure of closing stock declared by the assessee in the profit and loss account was not verifiable in the absence of stock register and so the GP rate was not verifiable and accordingly restricted the GP rate to 9% and upheld the rejection of books of account. The Tribunal while upholding the orders of the Assessing Officer as well as the CIT(A) qua rejection of books of account, estimated the GP rate at 8% instead of 9% as ordered by the CIT(A). The assessee was trading in the items of well established companies and is also a wholesaler C&F agent. In order to check veracity of the gross profit disclosed by the assessee, maintenance of stock register by the assessee was essential. The Assessing Officer had compared the gross profit rate of the assessee viz-a-viz other similar concerns. No satisfactory explanation had been furnished by the assessee for not maintaining the stock register. The rejection of books of account of the assessee by the Assessing Officer was, thus, justified. - Decided against assessee.

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• 2015 (9) TMI 501
  Speaking order - excess exemption of income under Section 13A claimed by assessee as per AO - CIT(A) allowed assessee claim do confirmed by ITAT - Held that:- According to the revenue, the assessee had initially claimed that the books of account were lost and the same were not produced on that count. Lateron, the books of account were recovered. However, no date and time etc. were given as to when they were lost and when they were recovered. The entirety of the facts were required to be gone into to test the veracity of the plea taken by the assessee. The order dated 30.6.2014 (Annexure A-III) passed by the Tribunal is not a speaking order giving the detailed reasons dismissing the appeal except mentioning that we find no infirmity in the findings of the CIT (Appeals). The Tribunal being final fact finding authority was required to deal with all aspects of factual matrix and then record its conclusions based thereon. Thus ITAT order set-aside as it does not satisfy the requirements of being a reasoned order as enunciated by the Apex Court in M/s Kranti Associates Pvt. Ltd's case [2010 (9) TMI 886 - SUPREME COURT OF INDIA] - Decided in favour of revenue.

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• 2015 (9) TMI 500
  Rectification of mistake - interest under Section 220(2) of the Act was charged from the date of the original Assessment Order dated 26.3.1992.- Held that:- In the instant case, the original demand pursuant to the first Assessment Order dated 26.3.1992 was duly satisfied and the amount was refunded pursuant to the first rectification order passed under Section 154 on 15.9.1994. In similar circumstances, the Supreme Court in the case of Vikrant Tyres Limited ( 2001 (2) TMI 129 - SUPREME Court ) the Supreme Court held that where the original demand was satisfied and the amount was paid by the assessee interest could not be payable from the original date of demand if levied subsequently. The Supreme Court found that the condition precedent for invoking the said Section was only if there was a default in payment of the amount demanded under a notice by the revenue within the stipulated period therein and if such a demand was not satisfied then Section 220(2) could be invoked. In the light of the aforesaid decision, we find that the original demand pursuant to the Assessment Order dated 26.3.1992 was paid by the assessee and the demand was satisfied. Subsequently when a fresh order was passed by the Assessing Officer on 1.12.1995 imposing a fresh demand interest could only be levied, if any, after 30 days from 1.12.1995, if it was not paid within the said period. No substantial question of law arises.

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• 2015 (9) TMI 499
  Additions made on account of brick production, clay excavation, carriage expenses and expenditure on water courses - CIT(A) partly allowed the Assessee's appeal and deleted certain additions made by AO. The CIT (A) also increased the gross profit rate by 1%, resulting in an addition of Rs. 2,95,000 - Held that:- It appears that the Revenue's appeal before the ITAT, Delhi was for some reason not heard for many years and it was only on 25th August 2014 that it was taken up for hearing. In the impugned order, the ITAT Delhi notes that the ITAT, Jodhpur had already adjudicated, in the Assessee's appeal, the issues sought to be urged by the Revenue in its appeal regarding the additions made on account of brick production, clay excavation, carriage expenses and expenditure on water courses. It also took note that no application had been filed by the Revenue against the said order dated 21st September 2007 of the ITAT, Jodhpur. The ITAT, Jodhpur already having dealt with the order of the CIT (A) on merits in the Assessee's appeal, and having passed the order dated 21st September 2007 which attained finality, the ITAT, Delhi was right in taking the view that it could not decide the Revenue's appeal assailing the same order of the CIT (A). - Decided against revenue

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• 2015 (9) TMI 498
  Trading addition - assessee failed to justify the adoption of sale price at less than opening stock price with documentary evidence - ITAT restricted the addition to Rs. 2,00,000/- as against Rs. 41,24,000/- made by AO - Held that:- The Assessing Officer made an addition of Rs. 41,24,000/- on the ground that the assessee failed to justify the adoption of sale price at less than opening stock price with documentary evidence. Further, the Assessing Officer held the said addition was the only income which the assessee got out of books of account and had not declared in his returned income. On appeal by the assessee, the CIT(A) upheld the order of the Assessing Officer and dismissed the appeal. On further appeal by the assessee, the Tribunal held that the Assessing Officer could not have estimated the sale price on the basis of rates of closing stock or some other notional basis without pointing out any defect in the sale price. The Tribunal while partly allowing the appeal of the assessee had sustained the addition of Rs. 2,00,000/- in the trading account. A perusal of para 8 of the order of the Tribunal shows that no legally justified reasons have been recorded for arriving at the said conclusion. In view of the above, the matter requires to be remanded. The matter is remitted to the Tribunal to decide the same afresh on merits in accordance with law. - Decided in favour of revenue for statistical purposes.

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• 2015 (9) TMI 497
  Forward contracts in respect of forex transactions entered into by the assessee with the banks - whether will not fall under the definition of speculative transaction and holding that assessee is entitled to claim such loss as business loss as held by CIT(A) - Held that:- Forex transactions entered into by the assessee are not derivative transactions. However, it was held that transactions considered for determining the business loss from derivative transactions cannot be more than the total export turnover of the assessee for the assessment year under consideration and if derivative transactions are in excess of export turnover then the loss suffered in respect of portion of that excess transactions are to be considered as speculative loss only since the excess derivative transaction has no proximity with the export turnover. In this case also, it appears that forex transactions entered into by the assessee are more than the export turnover. Therefore, we direct the Assessing Officer to follow the decision of this Tribunal in the case of Majestic Exports (2015 (7) TMI 936 - ITAT CHENNAI ) and recompute the business loss in line with the order of the Tribunal, after calling for details from the assessee and giving opportunity of being heard - Decided partly in favour of revenue for statistical purposes.

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• 2015 (9) TMI 496
  Transfer pricing adjustment - selection of comparable - Held that:- The issue relating to comparability of companies objected by assessee are covered by various decisions of different benches of the Tribunal for the very same AY. In case of Ness Innovative Business Pvt. Ltd. Vs. DCIT [2014 (7) TMI 303 - ITAT HYDERABAD] the coordinate bench rejected Bodh tree consulting ltd. Exensys Software Solutions Ltd., Sankhya Infotech Ltd., Foursoft Ltd., Thirdware solutions Ltd. Tata Elxsi Ltd. and Infosys Technologies Ltd. In view of the aforesaid, accepting the submissions of ld. AR, we direct A.O./TPO to exclude aforesaid companies from the list of comparables. - Decided in favour of assessee. Mapple E Solutions, Nucleus Net Soft and GIS India Ltd., Vishal Information Technologies Ltd. and Wipro BPO Solutions Ltd. for various reasons are not comparable to a captive ITES provider. See M/s HSBC Electronic Data Process India Ltd. Vs. DCIT [2013 (9) TMI 485 - ITAT HYDERABAD ] Inclusion of reimbursement cost in the operating cost for the purpose of determining ALP of software development services segment - Held that:- reimbursement cost should be excluded from the OC for determining ALP. As far as the contention of ld. DR that TPO may be directed to determine the ALP of the reimbursement cost on stand alone basis, we are unable to accept the same as the same does not arise out either from the order of TPO or ld. CIT(A). Since, while considering assessee’s appeal we have to restrict ourselves to the grounds raised by assessee, this issue raised by ld. DR is left open to be decided in an appropriate case. See M/s HSBC Electronic Data Process India Ltd. Vs. DCIT [2013 (9) TMI 485 - ITAT HYDERABAD ] Disallowance of foreign exchange fluctuation loss - Held that:- As could be seen from the discussions made by A.O., he has disallowed assessee’s claim of loss on foreign exchange by treating it as notional. He has not said that loss is not connected with assessee’s business. Therefore, if assessee can prove that loss on account of foreign exchange fluctuation was not notional but actually incurred same cannot be disallowed. We, therefore, remit this issue to the AO for deciding afresh after due opportunity of being heard to assessee. Decided in favour of assessee for statistical purposes. Disallowance of leave encashment expenses - Held that:- We failed to locate any disallowance on account of leave encashment made by AO. As observed by ld. CIT(A), there is absolutely no mention of this issue in the assessment order. That being the case, we fail to understand how and why this ground was raised by assessee. When this factual position was pointed out to the ld. AR, he also agreed that no specific disallowance has been made by AO. In the aforesaid view of the matter, we find no reason to interfere with the decision of ld. CIT(A) on this issue. - Decided against assessee. Disallowance of expenditure incurred on purchase of software - Held that:- No infirmity either in the order of A.O. or in the order of ld. CIT(A). As could be seen, assessee itself, before A.O. had agreed for allowance of depreciation on the expenditure claimed on software. That being the case, we do not see any reason to interfere with the order of ld. CIT(A) on this issue. - Decided against assessee.

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• 2015 (9) TMI 495
  Reopening of assessment - assessee has not fulfilled the required conditions of section 80IB(10) - Held that:- While framing the assessment for the assessment year 2006-07 the Assessing Officer found that the assessee has not fulfilled the required conditions of section 80IB(10) of the Act and the Assessing Officer recorded certain failure on the part of the assessee for not fulfilling the conditions as narrated u/s 80IB(10) of the Act which also include the built up area and amended provisions of the Act. The reassessment was not based on change of opinion but based on new material came into knowledge of the Assessing Officer during the assessment proceedings for the assessment year 2006-07. Considering all these aspects, we hold that the Assessing Officer was having sufficient material to make a belief for reopening of the assessment proceedings.- Decided against assessee. Claim of deduction u/s 80IB(10) - Held that:- The facts of the assessee's case show that the assessee was not a mere work contractor but it was a developer of the project. In none of the projects, the assessee has acted for fixed price for executing the work as in the case of works contract the work is awarded at a fixed consideration. Thus, the assessee cannot be held to be a mere contractor. Further, the assessee has not only constructed the houses but it has developed the roads, electrical work and also water connection system in whole of the project. There is no requirement that the project shall be approved in the name of assessee or assessee shall be land owner - Assessee is a developer as assessee has undertaken not only the development of the house but also of the road, water and electricity - Decided in favour of assessee.

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• 2015 (9) TMI 494
  Disallowance of loss incurred by the assessee on forward contracts and other derivative contracts as speculation loss - Held that:- Both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of "speculative transaction" exclusively for purposes of section 28 to 41 of the Act. Again, the fact that both delivery based transaction in shares and derivative transactions are non-speculative as far as section 43(5) is concerned goes to confirm that both will have same treatment as regards application of the Explanation to Section 73 is concerned, which creates a deeming fiction. Now, before application of the said Explanation, aggregation of the business profit/loss is to be worked out irrespective of the fact, whether it is from share delivery transaction or derivative transaction. One has to see whether the assessee entered into these derivative within the period stipulated for payment of export proceeds or within the time period allowed for payment of interest to the concerned bank. Further, it is to be seen whether the volume / quantum of derivative transaction entered by the assessee is more than the total export turnover and payment of interest to bank and volume of transaction cannot be more than these two components. Accordingly, we are directing the Assessing Officer to keep these facts in mind and decide the issue in the light of the Tribunal order in the case of M/s. Majestic Exports (2015 (7) TMI 936 - ITAT CHENNAI ). With these observations, we are remitting back this issue back to the file of the Assessing Officer for fresh consideration. - Decided partly in favour of assessee for statistical purposes.

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• 2015 (9) TMI 493
  Claim for deduction under section 80IA disallowed - profits and gains derived by the assessee from the sale of sludge/waste oil - CIT(A) deleted addition - Held that:- Profits and gains derived from such business considered to include the sale of sludge, which is the product of the business undertaken by the assessee i.e., manufacture of power and the sludge is generated out of such activity and is held to be directly attributable to the business activity of the assessee. Hence, we are of the firm view that the profits and gains derived by the assessee from the sale of sludge/waste oil is eligible for deduction under section 80IA of the Act and we do not find any infirmity in the order of the Ld. CIT(A) and accordingly, we confirm the same. - Decided against revenue.

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• 2015 (9) TMI 492
  Disallowance of expenses in agricultural activity - CIT (Appeals) ought to have seen that assessee is running farm tourism - Held that:- No good reason to interfere with the findings of the Commissioner of Income Tax (Appeals) in sustaining the disallowance of agricultural expenses . Thus, we affirm the order of the Commissioner of Income Tax (Appeals) on this issue and reject the grounds raised by the assessee for both the assessment years. - Decided against assessee. Disallowance of depreciation claimed on temporary structures - assessee submits that structures were only temporary structures and therefore claim of depreciation at 100% is justified - Held that:- Before us, the assessee could not substantiate as to whether the structures are temporary and what kind of construction was erected and when it was demolished, therefore in the absence of any such details the Assessing Officer appears to be justified in restricting the claim of depreciation to 5%.- Decided against assessee. Dispute relating to grant of interest under section 244A - whether is to be decided by jurisdictional Commissioner or the Chief Commissioner? - Held that:- In view of the decision of Tata Communications Ltd. Vs. ACIT [2014 (1) TMI 1277 - ITAT MUMBAI ] the grounds of appeal raised by the assessee is a valid one warranting adjudication by the Commissioner of Income Tax (Appeals). Since the Commissioner of Income Tax (Appeals) has not gone into merits and held that matter is not appealable, we restore the issue back to the Assessing Officer to decide the issue in accordance with law, after providing adequate opportunity to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of advertisement & publicity expenses and office expenses - Held that:- Expenses were disallowed by the Assessing Officer stating that assessee incurred these expenses as donation to church. The Commissioner of Income Tax (Appeals) however partly allowed such expenses holding that certain payments were made for publicity and such expenses are to the extent of Rs. 1,55,000/- and confirmed expenses of Rs. 55,000/-. We do not see any infirmity in the order of the Commissioner of Income Tax (Appeals) in partly allowing the expenses incurred for publicity. Thus, we affirm the order of the Commissioner of Income Tax (Appeals) - Decided against assessee.

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• 2015 (9) TMI 491
  Unaccounted investments in purchase of properties - purchase price of the property invested in item No.2. - Held that:- Sale consideration shown at transaction mentioned at Sl No 2 of Rs. 8,92,000/- is the total of the transactions mentioned at Sl No.2 of Rs. 8.92,000/- is the total of the transactions mentioned at Sl.Nos.1 & 3 (i.e.Rs 6,90,000 + Rs. 2,02,000). Thus, there is a duplication of the amounts considered by the Assessing Officer in his order to the extent of Rs. 3,90,000/- (i e Rs. 1,90,000+ Rs. 2,00,000) shown in the transaction mentioned at Sl No. 1, which finally culminated in the transaction mentioned at Sl No 2. Therefore the unexplained investments in the properties computed by the Assessing Officer are excess by Rs. 3,90,000/- which needs to be deleted. The issue has been considered by the Ld. CIT (A) in detail and an amount of Rs. 3,90,000/-is deleted. Before me, no further materials were produced in order to justify the claim of the assessee. - Decided against assessee. Non-consideration of the opening cash balance - assessee has claimed an amount of Rs. 2,88,000/- as the opening cash available with him for making the investment rejected by AO - Held that:- We do not subscribe to view of the Revenue. Any individual will definitely have some accumulated amount with him especially when such individuals are in business earning income year after year. Considering the financial status of the assessee, the amount claimed by the assessee appears to be reasonable. Therefore, hereby direct the Revenue to treat Rs. 2,88,000/- as the genuine source available with him for making the investments and the same should not be treated as undisclosed income.- Decided in favour of assessee. Agricultural income - assessee has claimed Rs. 2,50,000/- as his agricultural income from the extent of 6.73 acres agricultural land in Tuticorin District, which was available with him for making the investments - CIT (A) accepted Rs. 1,50,000/- and disallowed the balance - Held that:- The claim of the assessee appears to be reasonable because on an acre of land agricultural income of Rs. 30,000 to Rs. 40,000 per annum can be rationally estimated.- Decided in favour of assessee.

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• 2015 (9) TMI 490
  Addition on unexplained share capital under section 68 - CIT(A) deleted addition - Held that:- CIT(A) was not justified in deleting the addition made by the AO particularly when the assessee failed to produce the concerned parties. At the same time, it also appears that the AO without considering the documents furnished by the assessee in the form of share applications, copy of bank account from where money was paid, copy of acknowledgment of Income Tax Return, copy of the balance sheet etc. and made the addition. It is also noticed that the confirmation furnished by the assessee were doubt full which is evident from the confirmation placed at page no. 28 of the assessee's paper book, claimed to have been received from M/s Chandra Buildcon Pvt. Ltd. and had been signed by Kavita, but it was mentioned that the said confirmation was given by Surbhi Jain, Director. We, therefore, by considering the totality of the facts as discussed here in above deem it appropriate to remand this issue back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunities of being heard to the assessee. - Decided in favour of revenue for statistical purposes. Disallowance of salary - CIT(A) deleted addition - Held that:- AO while making the disallowance @ 50% had not given any basis or cogent reasons. The ld. CIT(A) also accepted the contention of the assessee by simply stating that a business is in a running stage and the employees were paid actually and that the quantum of income cannot decide as to whether the entire salary paid was for the purpose of business or not. He also observed that the employees will have to be paid to keep business activities alive. However, nothing was brought on record to substantiate that the payment on account of salary was made for the business purposes in regular course of business. Accordingly, this issue is also set aside to the file of the AO. - Decided in favour of revenue for statistical purposes.

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• 2015 (9) TMI 489
  Disallowance of deduction claimed u/s. 80IB - Held that:- There is no doubt with reference to the fact that assessee's claim pertains to AYs. 2009-10 to 2011-12 as recorded by the Revenue authorities. The Ld.CIT(A) also gave a factual finding that issues are similar to AY. 2009-10, therefore, since the issue was decided in favour of assessee in AY. 2009-10 wherein held there was no violation of any condition in respect of the project developed by the assessee for the purpose of claiming deduction under S.80IB(10) and the learned CIT(A) was not justified in confirming the disallowance made by the Assessing Officer on account of assessee’s claim for deduction under S.80IB(10), we direct the AO to grant deduction u/s. 80IB(10) for present AY - Decided in favour of assessee.

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• 2015 (9) TMI 488
  Reopening of assessment - as per section 115B the tax rate of 12.5% should have been applied only to the income earned from insurance business and for the other income, the tax at the rate of 35% should have been applied - Held that:- Since, the AO inadvertently, had applied lower tax rate of 12.5% on the entire income, hence, the AO had reasonable belief that the income of the assessee has escaped assessment. We find that this issue has been unsuccessfully contested by the assessee in appeal before the Ld. CIT(A). However, before us, the assessee has not raised any ground of appeal relating to rejection of his contention by the Ld. CIT(A) on this issue. Hence, it can be safely said that the belief of the AO regarding escapement of income in relation to the rate of tax leviable on income other than insurance income was correct and bonafide. Second reason relating to the escapement of income because of the assessee offering negative reserves at 'zero', had not come into the knowledge of the AO and no discussion had taken place in this respect. The AO was under bonafide belief that the assessee had wrongly adopted the value of negative reserves at 'zero'. It was therefore not a case of change of opinion. The case law cited by the assessee is, thus, not applicable to the present facts and circumstances of the case. We therefore, do not find any infirmity in the order of the Ld. CIT(A) so far the issue of reopening of the assessment is concerned. - Decided against the assessee. Addition of negative reserves to the actuarial surplus for determining the profit from business of Life Insurance - Held that:- Issue restored the matter to the file of the AO for fresh adjudication considering the decision of the Tribunal in the cases of "ICICI Prudential Co. Ltd." (2012 (11) TMI 13 - ITAT MUMBAI ) and "LIC" [1963 (12) TMI 5 - SUPREME Court] wherein held the Surplus has to be determined as per the report of the appointed Actuary as per the provisions of the Insurance Act. The AO has no power to make any adjustment against Actuarial surplus determined as per Insurance Act while making computation of total income - Decided in favour of assessee for statistical purposes. Applicability of provisions of section 14A while determining the income of the Life Insurance Company - Held that:- n view of the special provisions applicable to the insurance companies as provided under section 44 of the Act, the provisions of section 14A would not be applicable to the insurance companies. Respectfully, following the decision of the Tribunal in the own case of the assessee for subsequent assessment year, this issue is accordingly decided in favour of the assessee.

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• 2015 (9) TMI 487
  Additions of unexplained cash deposits - Held that:- The assessee had deposited Rs. 4 lakhs on 18.09.2009. A sum of Rs. 3,90,000/- is stated to have been returned by her husband. The CIT(Appeals) does not reject veracity of this plea. It is further seen that the assessee had deposits a sum of Rs. 2 lakhs as on 20.10.2009 over and above the aforesaid sum of Rs. 4 lakhs. Remaining amounts are corresponding deposits and withdrawals instances. The assessee claims to be earning a monthly milk book income of Rs. 20,000/-. She failed to substantiate it in the course of assessment. The Assessing Officer does not reject this plea altogether. But only cites lack of sufficient material. It is also an undisputed fact that the CIT(Appeals)’s findings do not specifically deal with that of Assessing Officer’s conclusion. In these circumstances, we feel that interest of justice would be met in case this peak credit of Rs. 6 lakhs is further modified to Rs. 3 lakhs only. More so, when the lower appellate order accepts genuineness of Rs. 4 lakhs deposited on 18.09.2009 leaving behind a sum of Rs. 2 lakhs only. We reiterate that peak credit in this case is `6,27,500/-. These peculiar circumstance result in modification of this addition to Rs. 3 lakhs only. The assessee’s ground partly succeeds. Unexplained fixed deposit of Rs. 3 lakhs made in Tamilnad Mercantile Bank made in cash - Held that:- The assessee submits that neither of the authority below has summoned her maternal grand father. This procedural plea is not supported by any material. Once the Assessing Officer had examined all of her pleas at length in assessment order, it was incumbent on the assessee to have prayed for necessary remand report in the lower appellate proceedings or to take sufficient measures for proving authenticity of her claim. This was never done. In these circumstances, we observe that this procedural plea deserves to be rejected in the absence of sufficient material on record. It is also not her case that of the lower authority has not complied with principles of natural justice and denied sufficient opportunity of hearing. Therefore, the assessee’s corresponding ground fails. Third addition of interest income of `4,052/- on said fixed deposits is also decided against her. - Decided against assessee.

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• 2015 (9) TMI 486
  Interest disallowance made u/s 36(1)(iii) - CIT(A) restricted disallowance - Held that:- There is no dispute that the very interest disallowance had been restricted to the extent of diversion of interest bearing funds @ 15% in the past. It has already come on record that the ‘tribunal’ has also decided this ground in assessee’s favour to the extent indicated hereinabove. No distinction much less a justifiable one on facts is forthcoming. In these circumstances, we uphold the CIT(A)’s findings and reject the Revenue’s ground. CIT(Appeals) correctly restricts the impugned interest disallowance @ 15% of the interest relatable to diversion of interest bearing funds to Rs. 3.25 Crores - Decided against revenue. Addition u/s 28(iv) arising from waiver of principal amount in one time settlement - CIT(A) deleted addition - Held that:- There is no dispute on facts. Undisputedly, purpose of the loan in question is acquisition of capital assets only. The lower appellate order records a finding of fact that one time settlement scheme in question does not give rise to any revenue or trading receipt under Section 28(iv) of the Act in the nature of remission of a corresponding trading liability under Section 41(1) of the Act. It also refers to case law of hon'ble jurisdictional high court In the case of CIT v. Tosha International Ltd. (2008 (9) TMI 31 - HIGH COURT DELHI) and Mahindra & Mahindra Ltd. v. CIT [2003 (1) TMI 71 - BOMBAY High Court ] deciding the very substantial question of law against the Revenue. In the course of hearing, the appellant-Revenue fails to draw any distinction on facts as well as law. Thus, we uphold the finding under challenge. The Revenue’s corresponding ground is dismissed.- Decided against revenue.

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• 2015 (9) TMI 485
  Reopening of assessment - deemed dividend addition - CIT(A) deleted the addition - Held that:- We find from the case file that the assessment order is completely silent on the nature of the impugned loans in the shape of business advances. The CIT(Appeals) had examined all material on record for concluding that loans in question in the shape of business transactions / advances could not be treated as deemed dividends. The Revenue neither challenges the CIT(Appeals)’s order on the ground of admitting any additional evidence nor does it refer to any material rebutting the said factual conclusion. Therefore, the lower appellate findings categorizing the impugned loans as business advances have to be sustained. It has been held in case law CIT v. Creative Dyeing and Printing Private Ltd. (2009 (9) TMI 43 - DELHI HIGH COURT), that business advances cannot be treated as deemed dividends u/s 2(22)(e) of the Act. The Revenue does not quote any case laws to the contrary. This makes us to affirm the findings under challenge. - Decided in favour of assessee.

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• 2015 (9) TMI 484
  Transfer Pricing adjustment - TPO/AO/DRP held that advertising, marketing and promotional (“AMP”) expenditure as a separate international transaction under Section 92B - Held that:- TP issue on the same facts and circumstances i.e., AMP expenses, arose in the case of the assessee in the preceding year i.e. AY 2008-09 which has been set aside and restored to the file of the Assessing Officer to decide the same afresh in view of the Special Bench judgment of ITAT in the case of LG Electronics (2013 (6) TMI 217 - ITAT DELHI) - Decided in favour of assessee for statistical purposes. Disallowance of 10 percent of total advertisement and selling expenses on the ground that it resulted in enduring benefit to the appellant, and was, thus, capital in nature - Held that:- Since the corporate tax addition has direct connection with the TP addition inasmuch as it is claimed that because of the TP adjustment it is claimed to be double disallowance, this issue is also restored to the file of the Assessing Officer for deciding the same afresh in the light of TP addition and Hon’ble High Court judgment in the case of associated concern i.e. Sony India P.Ltd.[2012 (2) TMI 493 - DELHI HIGH COURT]- Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 483
  Transfer pricing adjustment - whether there is no agreement for the use of brand name between the overseas AE and the assessee and the assessee has not made any payment to its AE for using the brand name? - application of Bright-line test - Held that:- The grounds qua the application of Bright-line test is decided against the assessee, thereafter holding that the assessee has rendered higher intensity functions qua the comparables by which the AE of the assessee has been benefited by brand building exercise on the part of the assessee affecting the profit of the assessee thereby eroding the tax base by the said international transaction. On consideration of facts, the issue for calculating the correct AMP expense is resorted to the TPO/AO who is further directed to consider on facts whether compensation was still due on account of the pricing adjustment considering TP study report available on record and the credit notes of Rs. 78 crore odd received by the assessee . Thus L.G. Electronic case [ 2013 (6) TMI 217 - ITAT DELHI] keeping in mind our finding that the assessee is a distributor whose remuneration model is not only supported by International Tax Jurisprudence as available in the OECD Guidelines and Australian Tax Guidelines but is also found supported by Questions 1,9 10 of the L.G. Electronics case as considered by the Special Bench. The assessee has made a reference to its Global Pricing Policy on which the TP study is based, the same may be produce before the TPO/AO. As such the arguments of the assessee to the above extent are upheld. On the issue of mark-up if still so warranted on facts the arguments of the Ld. AR have been that the same is excessive. It is seen that there is no discussion in the TPO s order as to why a mark-up of 15% is adequate. Similarly DRP also does not give any justification for reducing the same to 12.5%. We refrain from substituting the arbitrary mark-up by our own arbitrary estimate in the absence of any facts or material on record. Even estimates have to have some rationale and reasoning which is completely absence in the orders and arguments advanced before us. Accordingly, we deem it appropriate to set aside the orders and restore the issue back to the TPO/AO with the direction to give a rationale basis for applying a mark-up after hearing the assessee, if so warranted on facts. In principle the departmental stand that over and above compensation of costs incurred mark-up factoring in the profits for application of its funds, resources and efforts in terms of time and energy needs be considered also. Whether on facts, the adjustment in arm s length price is still warranted or not shall be decided on the facts of the case, considering the guidelines of the Special Bench which need to be considered for calculating the correct AMP and the Question Nos.-1, 9, 10 12 in para 17.4 of the Special Bench. Decided in favour of the Revenue. Depreciation on computer peripherals - @ the rate of 60% or 15% - Held that:- AO is directed to grant necessary relief in accordance with law following the judgement and decision of the Jurisdictional High Court in CIT vs. BSES Yamuna Power [2010 (8) TMI 58 - DELHI HIGH COURT] wherein held computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60%. - Decided in favour of assessee. Disallowance of 10% of the expenditure of advertisement and selling expenses on the ground of enduring benefit - Held that:- It is seen that the reliance placed upon Sony India Pvt. Ltd. Vs DCIT (2008 (9) TMI 420 - ITAT DELHI-H) by the assessee was not considered by the DRP on the ground that the matter has not attained finality. The said approach is neither correct nor can it be upheld. The assessee has also argued that it results in double disallowance. On consideration of facts on record, we hold the DRP s order a non-speaking order. The reasoning adopted for rejecting the claim of the assessee and refusing to apply its mind to the facts and law cannot be given judicial sanctity. The issue is restored to the AO with the direction to decide the same in accordance with law by way of a speaking order, after giving the assessee a reasonable opportunity of being heard. - Decided in favour of assessee for statistical purposes.

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• Customs

• 2015 (9) TMI 513
  Monetary limit – Redemption fines and penalty being less than monetary limit – Confiscation of goods and consequent imposition of redemption fine and penalty was imposed by adjudicating authority – Tribunal found that confiscation ordered under Section 111-D of Customs Act is not maintainable and as result, allowed appeal filed by assesse – Held that:- seen from records that assessing officer initially imposed Rs. 3,00,000/- as redemption fine and Rs. 70,000/- as penalty, which, on appeal, was subsequently reduced by Commissioner and on further appeal by assessee, Tribunal set aside order of Commissioner – Therefore, very clear from records that monetary limit having been fixed at Rs. 2 Lakhs, even as per order of Commissioner (Appeals), redemption fine and penalty being less than Rs. 2 Lakhs, appeal is not maintainable – Therefore, Court not inclined to entertain appeal – Appeal dismissed – Decided against revenue.

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• 2015 (9) TMI 512
  Re-assessment of Bills of entry – CVD mistakenly paid at 10% instead of 6% – Petitioner from time to time imported Reverse Osmosis (RO) membrane element for household type filters – Petitioner claims that, at import stage Counter Veiling Duty (CVD) was paid; though mistakenly at rate of 10% – Assertion of petitioner is that, notification had been issued by respondents, whereby CVD, on RO membrane, for household type filters, had been reduced to 6% – Petitioner seeks direction for reassessment of 7 bills of entries – Held that:- Court inclined to direct respondents to dispose of representations of petitioners –Needful will be done by respondents as expeditiously as possible – Petition disposed of.

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• 2015 (9) TMI 511
  Utilisation of Advance Licensing Scheme – Matter Remanded back for De-Novo consideration - Tribunal vide impugned order remanded matter back to Commissioner for denovo consideration, and to re-¬adjudicate show cause notice in its entirety – Whether tribunal was justified in remanding matter back for de-novo consideration – Held that:- Tribunal clearly concluded issue that activity of respondent assessee could be termed as “manufacture” – Only limited issue which was being dealt with by Tribunal is whether assessee has produced documents to satisfy that imported materials under Advance Licensing Scheme have been correctly utilised as per terms and conditions of scheme read with relevant notifications – Tribunal noticed in order under Appeal that adjudicating authority did travel beyond its earlier direction – Therefore, present court of opinion that Appeal does not raise any substantial question of law – Decided against revenue.

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• 2015 (9) TMI 510
  Penalty imposed for improper importation of goods - Withdrawal of penalty - Whether Tribunal is right in law in setting aside penalty imposed under Section 112(2) of Customs Act, 1962 – Held that:- Once assessee is recognized as sole proprietorship concern, then, imposition of penalty on firm/concern or proprietorship concern and sole proprietor separately was not permissible in given facts and circumstances – Therefore, tribunal was justified in setting aside penalty upon sole proprietor-respondent while affirming penalty imposed upon company - In these state of affairs, we do not see that appeal raises any substantial question of law – Appeal dismissed – Decided against revenue.

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• 2015 (9) TMI 509
  Imposition of Pre-deposit – Rejection of Waiver – Whether Tribunal was justified in directing Appellant to deposit amount as pre-deposit when appellant’s goods were still lying under control of Revenue and rejecting total waiver of pre-deposit – Held that:- Authority rejected value declared in bill of entry and re-determined value under Section 28(4) of Customs Act, 1962 – Goods valued at Rs. 33.5 lakhs were directed to be confiscated and allowed to be redeemed on payment of redemption fine – Taking into consideration fact that appellant had already paid sum and appellant undertook not to clear goods till disposal of appeal, it was appropriate to direct deposit further sum of Rs. 50,000/- instead of Rs. 2,00,000/- as directed by Tribunal – Decided partly in favour of Assesse.

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• Corporate Laws

• 2015 (9) TMI 508
  Mismanagement or oppression - CLB has found that, the case of oppression made out by the Mehras against EG is proved and as per provisions of Section 397, 402 and 403 of the Companies Act, 1956 (the Act), buyout by Mehras of the shareholding of EG is necessary. - CLB has directed EG to sell it's share holding to Mehras, laying down certain modalities as regarding appointment of facilitator and for valuation. - Held that:- if one takes overall view of the decision, it clearly appears that the manner in which the learned member has proceeded to record conclusion and pass the operative order does not indicate that there was an application of mind and there is substance in the charge of extreme hurriedness and lack of fairness in decision making. Matter remanded back to tribunal for reconsideration.

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• Service Tax

• 2015 (9) TMI 536
  Waiver of pre-deposit - Challenge to the Explanation to clause (ii) of Section 65(19) of the Finance Act, 1994 - promotion or marketing of games of chance, organised, conducted or promoted by the client - Held that:- It has been inter alia, held by the Sikkim High Court [2013 (11) TMI 1002 - SIKKIM HIGH COURT] that the activity of promotion, marketing, organising or in any other manner assisting in organising games of chance, including lotteries is an activity falling under “betting and gambling” which is the subject matter of Entry 62, List II of the Seventh Schedule to the Constitution of India. Consequently, it has been held that the State Legislature alone is competent to levy any tax on such activity under the said Entry 62, List II of the Seventh Schedule to the Constitution of India. It has been stated by the learned counsel for the petitioner that the explanation which has been impugned was earlier operating as part of the business auxiliary service till 30.062010 when it was deleted and new Section 65 (105) (zzzzn) was introduced as a specific service. - explanation which operated as a part of the business auxiliary service and is in pari materia with Section 65 (105)(zzzzn) is also liable to the struck down as being ultra vires the Constitution and beyond the legislative competence of Parliament - Notice issued. In the meanwhile, no coercive measures be taken. Also, non-compliance with the interim direction given by the Tribunal with regard to the pre-deposit would not, ipso facto, render the appeal filed by the petitioner liable to the dismissed by the Tribunal.

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• 2015 (9) TMI 534
  Denial of refund claim - Bar of limitation - Held that:- in the present case the date of filing the refund claim electronically, which is 5.7.2012, is to be taken as the date of filing the refund claim and with reference to that date the impugned amount rejected is not barred by time. - for the creatures of the Statute (including the Deputy Commissioner and the CESTAT Tribunal) the time limit prescribed under Section 11B ibid is sacrosanct - even if the Superior Courts in some cases having regard to the specific facts/circumstances ordered refund to be granted ignoring the time limit prescribed under Section 11B ibid, the creatures of Central Excise Act or Customs Act 1962 can not arrogate to themselves similar powers, they remain bound by the boundaries of the statute which created them while the Superior Courts not being creatures of the said statutes are not so bound. - Decided in favour of assessee.

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• 2015 (9) TMI 533
  Valuation - reimbursement of expenses - Clearing & Forwarding services - appellants have claimed deductions towards reimbursable charges under the head "VSAT Allowances & Delivery Charges" - Held that:- appellants have entered into a contract agreement with Castrol India Ltd. which covers entire functions of clearing and forwarding of the appellant. Therefore, service tax is demandable on the gross amount and the same cannot be vivisected. - LAA has rightly upheld the demand - Decided against the assessee.

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• 2015 (9) TMI 532
  Demand of service tax - Inclusion of value of material supplied free of cost - Overlapping of periods - Held that:- Mere overlapping of certain period is no evidence that the service tax has been demanded on the same transactions. Therefore it will be open for the appellant to take this plea during de novo adjudication to show that there is overlapping of transactions inasmuch as certain transactions have been included in both the show cause notices for charging of service tax. - Matter remanded back - Decided in favour of assessee.

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• 2015 (9) TMI 531
  Business auxiliary service or Business support service - automobile dealers - appellant was providing space and accommodation to the financial institutions - Held that:- Appellant was receiving incentive/commission from bank and other financial institutions of providing services to them in relation to granting loans to its customers and that it was not charging any rental from them (i.e. banks/financial institutions). In the light of the said statement, we find that the inference by Commissioner (Appeals) that the amount received by the respondent was for providing accommodation and space is not supported by any evidence with regard thereto. That such commission/incentive is liable to service tax under business auxiliary service has been held by various judicial pronouncements including in the cases of M/s Roshan Motors Ltd. Vs. CCE, Meerut [2008 (11) TMI 55 - CESTAT, NEW DELHI], Pagariya Auto Center Vs. CCE, Aurangabad [2014 (2) TMI 98 - CESTAT NEW DELHI (LB)] and TVS Motor Co. Ltd. Vs. CCE, Chennai-III [2012 (7) TMI 227 - CESTAT, CHENNAI] - Impugned order is set aside - Decided in favour of Revenue.

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• 2015 (9) TMI 530
  Denial of refund claim - SEZ unit - receipt of services - egal Consultancy Services were not included in the list of services approved by the developer during the relevant period when services were availed - Held that:- It is observed from Clause 2 of Notification No. 9/2009-ST, dated 03.03.2009 and later claim considered under Notification No. 17/2011-ST, the exemption by way of refund is admissible if, the services are approved by the developer or unit of SEZ. It is claim of the appellant that communication of approved services, communicated to them by the developer on 02.01.2012 already stood approved during the period of September 2010 to January 2011 which included ‘Legal Consultancy Services’. However, on perusal of letter dated 02.01.2012 issued by the Assistant Development Commissioner, Dahej SEZ, it is not clear whether the list 91 services approved by the developer were existing in the approved list during the period September 2010 to January 2011 for which refund has been claim by the appellant. In the interest of Justice, as the refund relates to export of goods by the appellant, a certificate should be produced by the appellant from the developer that the approved services by the approval committee of the developer communicated to the appellant Vide Letter Dated 02.01.2011 stood approved and were applicants for the period September 2010 to January 2011. - Impugned order is set aside - Decided in favour of assessee.

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• 2015 (9) TMI 529
  Denial of refund claim - Notification No. 9/2009-ST dated 3.3.2009 - duty paying documents were not furnished - Held that:- appellant while making the rebate claims furnished a calculation sheet showing the documents under which the duty payment has been made to the service providers and also the cheques through which such payments were made. Serial No. 5 of their refund application dated 25.03.2011 also indicates that the invoices/bills evidences payment of service tax are enclosed. Serial No. 1 of the calculation sheet is for Bill No. 7850397 issued by Indian Institute of Technology Bombay and the corresponding copy of invoice/bill furnished by the appellant indicates the service tax registration No. of the service provider and also the amounts of service tax paid by the service provider are available. Such documents indicating payment of service tax and constitute sufficient evidence on the part of the appellant to claim the benefit of Notification No. 9/2009-ST dated 03.03.2009 as amended. However, appellant has not furnished all such duty paying documents in the appeal memorandum or during the course of hearing. The matter is, therefore, required to be remanded back to the Adjudicating Authority. Appellants should furnish all the duty paying documents to the adjudicating authority as indicated in their calculation chart furnished along with the refund application dated 25.03.2011. - Matter remanded back - Decided in favour of assessee.

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• 2015 (9) TMI 528
  Denial of refund claim - whether appellant will be entitled to refund as per Notification No. 41/2007-ST dated 06.10.2007 for Custom House Agents Services availed under Section 65 (105) (h) and transport of goods under Section 105 (zzp) of the Finance Act, 1994. - Held that:- In view of the case laws relied upon by the appellant, services availed in relation to exports on account of REPO Charges, Transportation from factory to place of export, Terminal Handling Charges etc., are eligible for refund under Notification No. 41/2007-ST dated 06.10.2007 - Decided in favour of assessee.

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• Central Excise

• 2015 (9) TMI 523
  Extended period of limitation - assessee would be disputing the classification as approved by the Revenue. However, in spite thereof the goods were not cleared as per the classification approved by the Revenue but at a lower rate on the basis of classification which the assessee thought was the correct classification. Thus on the basis of the misstatement larger period of limitation was invoked. We find that action of the Commissioner on limitation has been upheld by the Tribunal as well after giving the detailed reasons. - Decision of tribunal [2006 (3) TMI 736 - CESTAT MUMBAI] confirmed - Decided against the assessee.

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• 2015 (9) TMI 522
  Extended period of limitation - wilful suppression of fact or commission of any fraud - suppression of production of goods and clandestine removal - Held that:- firstly the assessee had not produced invoices etc. despite being demanded by the Central Excise Officers vide letters dated 10.1.1990, 23.1.1990, 5.3.1990, 27.3.1990, 24.4.1990 and 14.5.1990 and when the Central Excise Officers visited the manufacturing unit on 17.5.1990 then the appellant took the stand that the records have burnt in a fire accident on 20.4.1990. The inquiry made by the Central Excise Officers revealed that neither fire brigade was called in the alleged incident of fire accident nor any furniture in the premises get damaged. It is also relevant to note that although the appellants were knowing well that the Central Excise Officers are repeatedly asking certain documents to be produced yet they had not given any intimation with regard to the alleged fire accident to the concerned Central Excise Officers about the alleged fire accident except stating that the intimation was sent by letter under Certificate of Posting. The concurrent findings of fact recorded by the fact finding authorities, as briefly noted above, clearly attracted the proviso to Section 11- A(1) of the Act. Removal of goods in the name of dummy unit and unestablished purchases from one M/s. Ajay Traders for trading purposes were clearly the result of suppression of facts and fraud by the appellants and, therefore, the Adjudicating Authority has not committed any error of law to invoke the extended period of limitation under the proviso to Section 11-A(1) of the Act. - Decided against the assessee.

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• 2015 (9) TMI 521
  Extended period of limitation - jurisdiction of the authorities - question of fact or question of law - Appellant would submit that if the point of limitation involves jurisdiction of the authorities, then, the findings, though mixed in character, raise a substantial question of law - Held that:- It is unfortunate that this technical defence has resulted in repeated remands and the Revenue and its officers being engaged endlessly by the Tribunal and their superiors in considering the issue. In the given facts and circumstances, the Tribunal would have been well advised to decide the issue itself and in the first instance. In the circumstances, we do not think that the Assessee can derive any benefit by mere filing of the classification lists or any endorsement thereon. Here the issue was whether the audit party was given an opportunity to inspect the materials and which came to be claimed as evidence of dutiable inputs. It is the Assessee who had relied upon such specific audit inspection. The matter had to be therefore decided in the light of the audit party inspection and the finding in the report thereof. Such being the nature of the controversy, no assistance can be derived from the authorities and rulings even if they are rendered by the Hon'ble Supreme Court in the case of O. K. Play India Ltd. [2005 (2) TMI 114 - SUPREME COURT OF INDIA] and other Judgments. The attempt of the Assessee is nothing but to seek a reappreciation and reappraisal of a factual finding with an intention to delay meeting the demand. The attempt of this nature does not result in the Appeal being entertained by this Court. That is because it raises no substantial question of law. - Decided against the assessee.

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• 2015 (9) TMI 520
  Cenvat Credit - Final product being Spent Sulphuric Acid was cleared at nil rate of duty - in the nature of by-product or waste - Held that:- Spent Sulphuric Acid is not a final product, as has been held in the decision of the Supreme Court and assuming it is a waste, refuse or by-product, it is chargeable to nil rate of duty - cenvat credit cannot be denied - Decision in the case of Hindustan Zinc Ltd. [2014 (5) TMI 253 - SUPREME COURT] followed. - Decided against the revenue.

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• 2015 (9) TMI 519
  Denial of refund claim - Department has not accepted the Tribunal's order and has filed an appeal against the same in this Court - Held that:- There is no legal provision which is brought to our notice enabling the Revenue to keep refund applications pending merely because an order passed by the Tribunal has been challenged by the Revenue in further appeals. In the teeth of the clear language of law and there being no interim stay in favour of the Revenue, we find no justification for keeping the refund application either pending or rejecting it with the aforesaid endorsement. - we dispose of this writ petition with a direction to the respondents to consider the refund application in Form-R filed on 2nd September, 2013 and dispose of the same in accordance with law as expeditiously as possible - Petition disposed of.

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• 2015 (9) TMI 518
  Condonation of delay - Delay of 132 days - Held that:- Even assuming that there was negligence on the part of the consultant, considering the extent of delay, the appellant ought not to be visited with such drastic consequences. There was nothing to indicate that there was any negligence on the part of the appellant who had engaged the consultant and not furnished him the instructions to file the appeal. - Delay condoned.

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• 2015 (9) TMI 517
  Duty demand - Valuation - Whether warranty charges can be allowed to be deducted from the MRP for the purpose of valuation under Section 4A - Held that:- From the reading of section 4A in subsection (2) it is very clear that while arriving at the assessable value for the retail sale price an amount of abatement is specified by notification can only be deducted. In the present case, on CTVs the abatement during the relevant period was provided within the range of 30% to 35% in terms of Notification 2/2006-CE (NT) dated 1/3/2006 as amended from time to time. From the subsection (2) is can be seen that except notified abatement no other deduction such as warranty or any other charges are allowed to be deducted. It is also seen from explanation 1 under subsection (4) of section 4A that as per the definition of retail sale price, the price at which the goods is sold in packaged form to the ultimate consumer which includes, local or other taxes, freight, transportation charges, commission payable to dealer and all charges towards advertisement, delivery, packaging, forwarding and the like. Price which affixed on the package of CTVs is undisputedly maximum retail sale price and no deduction can be allowed from the said retail sale price other than the abatement as statutorily provided under the notification. In the instant case, the fact is that the RSP was declared by the appellant including the warranty charges and the same was affixed on the package. Thus as per the appellant's declaration itself the retail sale price includes the warranty charges. It that is so the abatement ranging from 30% to 35% as notified by the government shall only be allowed and in term of subsection (2) of section 4A no any other deduction is permissible to arrive at the assessable value. Therefore there is no provision under the law to exclude warranty charges from the retail sale price while computing the assessable value. Statutory provision under Section 4A cannot be altered or influenced merely because the appellant has chosen to discharge service tax on portion of the retail sale price. Therefore merely because the service tax was paid, deduction of the said value cannot be allowed as no such option has been provided either under the Central Excise Act, or under the Finance Act, 1994. Appellant during to a particular period were including warranty charges in the RSP and discharging the excise duty accordingly, but on their own they changed the system and started deducting warranty charges from the RSP, however this was done knowingly by the appellant which was neither declared to the department nor any opinion was sought for from the department, this act of the appellant is clearly amounts to suppression of fact. Excise duty has been calculated on full MRP minus abatement, whereas excise duty at the time of clearance has been paid after deduction of 150/- from the MRP. This shows that the appellant was in full knowledge that the excise duty was required to be paid on full MRP minus abatement but they paid less duty intentionally therefore this is clear case of suppression of fact and the appellant's submission that the demand being time bar is not tenable. - Decided against assessee.

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• 2015 (9) TMI 516
  100% EOU - Export / DTA clearance of non-excisable / exempted goods - exempted goods versus Zero rated goods or Nill rated goods - interpretation of an exemption notification - Notification No.22/2003-CE or No.52/2003-Cus - Whether a 100% EOU is entitled to exemption on inputs used in the manufacture of finished goods, which are either non-excisable or if imported, are chargeable to Nil or exempted rates, in view of second Proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 or Proviso to Clause 3 of Notification No.52/2003-Cus, dt.31.03.2003. Held that:- If this strict interpretation is not followed, then the provisos under consideration can never be made applicable for the recovery of input duty where finished goods are cleared at Nil , Exempted or free rates because all of them will be excisable as per the definition of excisable goods under Section 2(d) of the Central Excise Act, 1944. Such an interpretation will be discriminating to DTA units as all such inputs could be routed through 100% EOU to claim full exemption when similar clearances by DTA units will affect duty at intermediate stage. It has to be held that non-excisable words used in second proviso to Clause 6 of Notification No.22/2003-CE, dt.31.03.2003 and Proviso to Clause 3 of Notification No. 52/2003-Cus, dt.31.03.2003 will embrace in its expression all zero rated finished goods where on account of full exemption, or Nil / Free rates, or where no rate is specified under the relevant tariffs. - Decided against the assessee.

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• 2015 (9) TMI 515
  Extended period of limitation - Manufacture - SSI Exemption - activities of drilling, punching holes, welding and bending etc. on job work basis - bonafide belief - appellant categorically stated inter alia that they are only job worker carried out fabrication and received labour charges and also stated that he was not aware that such fabrication undertaken by them would attract excise duty - Held that:- the appellants genuinely believed that mere cutting, bending, welding of steel rods/sheets not amount to 'manufacture' and held no new commodity emerged out and there is merit in appellant's justification. It is pertinent to state that the dutiability of structurals and parts thereof was held in favour of Revenue only by the Tribunal's Larger Bench decision in the case of Mahindra & Mahindra Ltd. Vs CCE (2005 (11) TMI 103 - CESTAT, NEW DELHI ). Therefore, there is enough justification in favour of the appellant and there was no suppression of facts with intent to evade non-payment of duty. Hon'ble Supreme Court in the case of Uniworth Textile Ltd. Vs CCE (2013 (1) TMI 616 - SUPREME COURT) clearly ruled that mere non payment of duty is not equivalent to collusion or wilful suppression of facts and in order to invoke extended period specific and explicit allegation must be proved by the Revenue. In the present case, the adjudicating authority has not brought out any such allegation of suppression of facts. - Demand set aside.

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• 2015 (9) TMI 514
  Refund claim - manufacture of Gutkha and Pan Masala - Reopening after Closure of factory due to banning the use of plastic pouches - Abatement under Rule 10 of Rules 2008 - Assessee reopened the factory - Held that:- It is revealed from the letter dt.08.02.2011 of the Appellant, as referred above, that the Appellants had given intimation to the Assistant Commissioner of Central Excise that they closed down their factory due to the notification issued by the Ministry of Environment & Forest, Government of India, banning the use of plastic pouches with immediate effect. There is no dispute that the Superintendent of Central Excise was acted upon on the basis of intimation by letter dt.08.02.2011 and sealed the machine on 10.02.2011. Thus, on 10.02.2011, the Appellant closed down their factory. The intimation given by the Appellant to the Assistant Commissioner of Central Excise by letter dt.08.12.2011 would show that the Appellant permanently ceases to work in respect of all the machines installed in the factory and it would be followed for surrender of registration. Incidentally, by order dt.17.02.2011, the Hon'ble Supreme Court directed that the ban will be effective from 01.03.2011. As per the direction of Hon'ble Supreme Court, the Appellant re-opened the factory on 17.02.2011. The jurisdictional Superintendent of Central Excise, de-sealed the machines. In such a peculiar facts and circumstances of the case, in our considered view, the refund claim filed by the Appellant would come within the purview of Rule 16 of Rules 2008. - impugned order is liable to be set aside. Accordingly, it is set aside - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (9) TMI 535
  Issuance of notices under Section 59(2) of the Delhi Value Added Tax Act, 2004 - Held that:- Two notices read together make out a very depressing story insofar as the functioning of the Department of Trade and Taxes, Government of NCT of Delhi is concerned. We had indicated that, on the one hand, on the same day, a notice for production of records on 26.06.2015 is issued and on the other hand, on that very day, the default assessment notices were issued in which it is stated that the dealer has not filed any reply / satisfactory reply. Apart from the fact that the principles of natural justice have been violated, there is also the serious concern that the notices under Section 59(2) of the DVAT Act as well as the default assessment notices have been ‘system generated’ and have not, in fact, been ‘human generated’ by the concerned VATOs. - On going through the circular dated 29.07.2015, a direction has been given for system generated orders. This is clearly in the teeth of our directions given earlier. Consequently, this circular is also quashed. Interestingly, before we part with this discussion of this circular, we note that the default assessment orders for the late filing of returns for the financial year 2015-16 for the fourth quarter is given as 30.09.2015 when the fourth quarter itself begins in January 2016. We deprecate such kind of mindless orders and circulars which has been issued by the respondent / Department. - Decided in favour of Assessee.

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• 2015 (9) TMI 527
  Levy of Interest – Delayed payment – Whether Tribunal was right in law in holding that applicant was liable to pay interest as assessed by Sales Tax Officer under section 47(4A) of Gujarat Sales tax Act, 1969 – Held that:- Similar question was discussed in case of Brook Bond India Ltd Vs. State of Gujarat [1998 (11) TMI 632 - GUJARAT HIGH COURT] – On considering ratio laid down in said case as similar facts and questions of law were involved, assesses would not be liable to pay any interest as assessed by Sales Tax Officer under section 47(4A) of Gujarat Sales Tax Act, 1969 – Interest was not to be levied upon appellants under section 47(4A)(A) of amended Act – Therefore appeals allowed – Decided in favour of Assesse.

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• 2015 (9) TMI 526
  Violation of Principle of natural Justice – Non Supply of Invoices – Incorrect and Incomplete exemption claim – Second respondent issued notice, alleging that exemption claimed by petitioner was incorrect and incomplete, thereafter passed impugned assessment order, confirming proposal in notice – It was alleged that respondent did not furnish copies of documents sought for by petitioner and without giving any opportunity of personal hearing to petitioner, impugned order was passed violating principles of natural justice – Held that:- perusal of impugned order would clearly reveal that no such opportunity of personal hearing was given to petitioner while passing impugned order – No doubt, Section 22(4) of TNVAT Act, 2006, contemplates reasonable opportunity of being heard to dealer before taking any action and in absence, it would cause great prejudice to assesse as there was violation of principles of natural justice – Since it was mandatory to provide copies of certain invoices, same cannot be denied to petitioner and on that score alone, impugned assessment order warrants interference – Impugned proceedings of respondent quashed – Respondent directed to furnish copies to petition – Decided in favour of Assesse.

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• 2015 (9) TMI 525
  Extension of Time to submit documents – Rejection of Application – Assessing authority issued notice for framing assessment – Petitioner produced declaration forms out of which some declaration form was disallowed by assessing officer on ground that said form was not filled with complete details – Assessing authority rejected plea of petitioner for extension of time – Tribunal also dismissed appeal against said order of authority – Held that:- not disputed that one C form was returned by Department for making necessary corrections in said form and that it shall be resubmitted to authority who be directed to give benefit of same after verifying its authenticity – Therefore petitioner allowed to resubmit C form after making necessary corrections – Authority shall be entitled to verify said form and give effect to same if found to be in order in accordance with law – Decided in favour of petitioner.

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• 2015 (9) TMI 524
  Determining rate of tax to be levied – Assessing authority had passed assessment order determining gross turnover and taxable turnover and levied tax – Tax was levied at rate of 1.5 per cent. under section 6B of KST Act though it was case of assesse that as per Government notification, tax payable under section 6B of KST Act on turnovers relating to sale of iron and steel was specified at 0.3 per cent – Held that:- Admittedly revisional authority while taking into consideration fact that amount was paid before date of service of assessment order and fact that assessing authority did not take notification into consideration, in exercise of powers under section 22A(1) set aside order of appellate authority mainly on ground that form 32B prescribed under provisions of section 6A(2) was not filed by assesse – Proviso on which revisional authority relied upon was omitted by Act – This was overlooked by revisional authority – Keeping this in view and having regard to amount involved court inclined to allow appeal – Decided in favour of appellant.

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