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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter September 12, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax TMI SMS Provisions relating to GST Council comes into effect from 12-9-2016 - The Constitution (One Hundred and First Amendment) Act, 2016 Articles 1. APPLICATION UNDER SECTION 7(7) OF COMPANIES ACT, 2013 BEFORE NATIONAL COMPANY LAW TRIBUNAL By: DR.MARIAPPAN GOVINDARAJAN Summary: Section 7 of the Companies Act, 2013 outlines the procedure for company incorporation. It mandates filing necessary documents with the Registrar, who then issues a certificate of incorporation. If false information is provided, individuals involved face penalties under Section 447. Section 7(7) allows for applications to the National Company Law Tribunal (NCLT) if a company is fraudulently incorporated. The application must include details of the false information and fraud, along with supporting documents. The NCLT can order management changes, unlimited liability, company removal, or winding up based on the evidence presented. 2. GOODS AND SERVICES TAX LAW – IN THE MAKING By: Dr. Sanjiv Agarwal Summary: The Goods and Services Tax (GST) represents a significant shift in India's tax system, moving the tax incidence from the point of origin to the point of sale. The Constitution (122nd Amendment) Bill, 2014, which facilitates GST, was passed by the Rajya Sabha and requires further approvals before implementation. The GST aims to create a unified market by eliminating tax distortions. The model GST law includes two main acts, the Goods and Services Tax Act and the Integrated Goods and Services Tax Act, detailing the tax framework. Preparations for GST implementation involve comprehensive planning to avoid disputes and ensure a smooth transition. 3. RBI Governor changed - How does it matter? By: Karan Gogia Summary: The article discusses the significance of the Reserve Bank of India's (RBI) governor and the central bank's roles. It emphasizes that the RBI is the sole authority for issuing currency in India, generating profit known as seigniorage, which is transferred to the government. The RBI acts as a banker for the government and other banks, managing deposits and loans. It also regulates the banking system to ensure depositor security and prevent financial instability. The article aims to clarify the RBI's functions and their importance to the economy, avoiding rumors about the appointment of a new governor. Notifications GST 1. S.O. 2915(E) - dated 10-9-2016 - CGST Provisions relating to Formation of GST Council comes into effect from 12-9-2016 - The Constitution (One Hundred and First Amendment) Act, 2016 Summary: The provisions for the formation of the Goods and Services Tax (GST) Council under the Constitution (One Hundred and First Amendment) Act, 2016, became effective on September 12, 2016. This was officially announced by the Central Government through a notification issued by the Ministry of Finance, Department of Revenue, on September 10, 2016. The notification, identified as S.O. 2915(E), was authorized by the Joint Secretary of the department. Circulars / Instructions / Orders Income Tax 1. F.No.225/195/2016-1TA-II - dated 9-9-2016 Order under Section 119 of the Income-tax Act. 1961 Summary: The Central Board of Direct Taxes has extended the deadline for filing Income-tax returns for taxpayers whose accounts are audited and who are required to submit returns for the Assessment Year 2016-17. Originally set for 30th September 2016, the new deadline is now 17th October 2016. This extension aims to alleviate inconvenience and facilitate compliance, coinciding with the final date for declarations under the Income Declaration Scheme 2016. Customs 2. F. No. 450/25/2009-Cus-IV - dated 7-9-2016 Delay in issuing of Sub Manifest Transshipment Permit (SMTP) Summary: The Central Board of Excise and Customs has accepted a recommendation from Niti Aayog to issue Sub Manifest Transshipment Permits (SMTP) for cargo destined for Inland Container Depots (ICDs) by rail without waiting for the full discharge of vessels. The Principal Chief Commissioners and Chief Commissioners in charge of various regions, including Mumbai, Kolkata, Chennai, and others, are instructed to implement this recommendation promptly. It is emphasized that there should be no delays in granting SMTP for cargo clearance at ICDs. 3. F. No. 450/25/2009-Cus IV - dated 7-9-2016 Entry of factory stuffed (including self sealed) export containers into port terminals prior to LEO Summary: The circular from the Central Board of Excise & Customs outlines the policy for allowing factory stuffed export containers to enter port terminals before the issuance of a Let Export Order (LEO). Currently, specific categories like refrigerated containers, over-dimensional cargo, motor vehicles, and certain perishable goods are permitted direct entry. The circular extends this privilege to all manufacturing firms, following recommendations from Niti Aayog, and instructs Customs Houses to coordinate with port authorities to manage the increased container flow. Any implementation challenges should be reported to the Board for resolution. Highlights / Catch Notes GST GST Council Formation Begins: Key Step in India's Tax Reform Under Constitution (101st Amendment) Act, 2016. Notifications : Provisions relating to Formation of GST Council comes into effect from 12-9-2016 - The Constitution (One Hundred and First Amendment) Act, 2016 - Notification Visit to Get Source Income Tax Assessee's Favor: Balance of Convenience Supports Them in Sesame Seeds Shortage Issue with 0.86% Overall Shortage. Case-Laws - AT : Excessive shortage in the Sesame seeds account - assessee has failed to quantify the shortage/loss due to substandards material - Considering the smallness of the overall percentage which is 0.86%, the balance of convenience is tilted in favour of the assessee - AT Visit to Get Source Showroom Renovation Costs Deemed Revenue, Not Capital Outlay, Affecting Financial Classification. Case-Laws - AT : Expenditure incurred on renovation of showroom was not incurred on any capital outlay. Therefore, the expenditure is revenue in nature. - AT Visit to Get Source Taxpayer Denied Exemption for Swimming Pool Construction u/s 54F of the Income Tax Act. Case-Laws - AT : Assessee is not eligible for exemption u/s. 54F of the Act for construction of swimming pool - AT Visit to Get Source Gift Tax Cases Require More Than Donor Identity; Human Probability Test Crucial for Authenticity and Legitimacy Assessment. Case-Laws - AT : Addition in respect of gift receipt - merely by giving evidence of identity and credit worthiness of donor, genuineness cannot be taken to be established automatically, 'therefore, test of human probability assumes importance so as to show that there were reasons which prompted the donor to forgo his hard earned capital in favour of the donee - AT Visit to Get Source Delay Penalty Deductible from Profits Based on Actual Invoices, Adjusted for Price Reduction Annually. Case-Laws - AAR : The delay penalty (price reduction) will be deductable while computing profits on the basis of actual invoices raised, amount earned on these invoices and difference attributable to price reduction on year to year basis. - AAR Visit to Get Source Mauritius Resident Exempt from Indian Capital Gains Tax on Share Transfer Under Article 13(4) of India-Mauritius Treaty. Case-Laws - AAR : Chargeability to capital gains tax in India - Applicant, a tax resident of Mauritius - transfer of 9,870,912 shares of an Indian Company - applicant is not chargeable to tax in India under Article 13(4) of India-Mauritius Treaty. - AAR Visit to Get Source High Court Upholds Validity of Notice u/s 292-BB of Income Tax Act, Despite Issuance and Service Issues. Case-Laws - HC : Notice deemed to be valid in certain circumstances - application of provisions of Section 292-BB in the case of the assessee when the notice though not proved to be issued by the Assessing Officer was also not served on the assessee - Challenge to the notice rejected - HC Visit to Get Source Assessment Reopening Requires Tangible Evidence, Not Audit Opinion, Says Court on AO's Belief. Case-Laws - HC : The action of reopening of assessment can be resorted to by the AO only if he has tangible material at his command to form a reasonable belief that income chargeable to tax had escaped assessment. Such belief of the AO cannot be substituted by that of the opinion of the audit party - HC Visit to Get Source Limited Company Penalized u/s 271D for Receiving Unsecured Loan in Cash; Ignorance of Law Not Accepted. Case-Laws - HC : Penalty u/s 271D - receipt of unsecured loan in cash - a Limited Company right from being formed is assisted by Chartered Accountant and Company Secretary, who are well qualified professionals & the justification tendered that R.P. Goyal being less literate, deserves no indulgence and it goes without saying that ignorance of law is no excuse. - HC Visit to Get Source Customs Importer Gains Refund After Initially Missing Notification No. 12/2012 Benefits on Ferrite Magnets Consignments. Case-Laws - AT : Refund claim - Import of 8 consignments of ferrite magnets - importer did not claim the benefit of Notification No. 12/2012 in the Bill of Entry so filed - refund allowed - AT Visit to Get Source Refund Claim Under Customs Act: Protest Recorded, Limitation Period Not Applicable. Case-Laws - AT : Refund claim - Section 27 of the Customs Act, 1962 - it is not in dispute that irrespective of any type of record in the department, the register by whatever name it is called, the protest was recorded - period of limitation not appliable - AT Visit to Get Source Amendment to Notification No. 37/96 by No. 124/2000 on Nepal imports doesn't apply retrospectively; affects SAD exemption. Case-Laws - SC : Refund of SAD - goods imported from Nepal - Notification No. 124/2000 amending the earlier Notification No. 37/96 and enlarging the scope of exemption from basic customs duty by including SAD does not have retrospective effect - SC Visit to Get Source Corporate Law Tribunal Approves Petitioner's Request to Align Financial Year with Calendar Year for Consolidation with Holding Company. Case-Laws - Tri : Petitioner Company to adopt calendar year as financial year of Holding Company for the purpose of consolidation of accounts permitted - Tri Visit to Get Source Indian Laws Court Clarifies Retailers Can't Charge Over MRP for Beer Under Legal Metrology (Packaged Commodities) Rules 2011. Case-Laws - HC : Charging excess amount than MRP on beer - Legal Metrology (Packaged Commodities) Rules 2011 - the definition of “retail dealer” and “retail sale price” takes in sale of the commodity in packaged form for the use of the ultimate consumer, and no restriction can be placed on its mode of consumption. - HC Visit to Get Source Service Tax Deputation of staff to their own organization is not manpower recruitment; no service tax liability applies. Case-Laws - AT : Deputing the staff to their own organization would not fall under the category of manpower recruitment and supply agency services - No service tax liability - AT Visit to Get Source Court Rules Mid Day Meal Providers Not Liable for Service Tax on Payments from Schools or Government. Case-Laws - AT : There is no service tax liability on the appellant engaged in providing Mid Day Meals to various schools and are getting paid for the same from the Schools/Government - AT Visit to Get Source Refund Claim Rejection: One-Year Period u/s 11B Starts After Quarter Ends Per Rule 5 of CCR, 2004. Case-Laws - AT : Rejection of refund claim - Rule 5 of CCR, 2004 - period of one year provided u/s 11B cannot start on any date before end of the quarter, it has to be reckoned from next date of quarter ends - AT Visit to Get Source Toll Tax Collection by Appellants Under Municipal Agreement Exempt from Service Tax on Retained Amount. Case-Laws - AT : Whether the toll tax collected by the appellants at the toll plaza under an agreement with MCD would call for payment of Service Tax on the amount retained by them under the category of “Business Auxiliary Services" - Held No - AT Visit to Get Source Airlines' Airport Taxes and Fees Excluded from Service Tax Assessment Under New Guidelines. Case-Laws - AT : Airport taxes as also the passenger service fees collected by the airlines on behalf of the airports and paid to them are not includable in the assessable value for the purpose of levy of service tax - AT Visit to Get Source Central Excise Products Classified as Finished Under Central Excise Tariff Act; Subject to Duty as Deemed Manufactured Goods. Case-Laws - AT : Deemed manufacture - marketability - crude items processed out of the blanks - The products which are manufactured by the appellant from raw material/ blanks can be termed as finished product which needs only further processing. Therefore, on merits section Note 6 to Section XVI of the Central Excise Tariff Act will directly apply - AT Visit to Get Source Isolated Soya Protein Manufacturing Process Confirmed as Manufacturing, Liable for Central Excise Duty under Regulations. Case-Laws - AT : Manufacture - Isolated soya protein - the starting point of the making process is de-oiled cake, i.e. de-fatted. The net result is that the final product - isolate soya protein is nutritionally very different from the starting raw material - soya flour - Duty liability confirmed as process is amounting to manufacture - AT Visit to Get Source Section 35E(2) Requires Commissioner to Direct Appeals to Same Adjudicating Authority for Consistent Process in Excise Cases. Case-Laws - AT : The directions to file appeal are required to be given by the Commissioner only to the very same adjudicating authority is the mandate of the Section 35E(2) of the Act - AT Visit to Get Source Cenvat Credit on Capital Goods Cannot Be Denied for Minor Procedural Lapses, Emphasizing Substance Over Form in Tax Matters. Case-Laws - AT : Cenvat credit - the substantial benefit of credit on 'Capital Goods' cannot be denied on some procedural ground - AT Visit to Get Source Area-Based Exemption Applies with 25% Capacity Increase Through New Machinery under Notification No. 50/03-CE. Case-Laws - AT : Area Based Exemption - benefit under Notification No. 50/03-CE - if the plants and machineries are in replacement of the old plant and machinery, but the object of increasing 25% capacity is achieved, then in terms of the said circular itself, the industry achieving the same would come within 4 corners of the notification dated 10/06/2003. - AT Visit to Get Source Re-packing goods with supply order details counts as manufacturing u/s 2(f)(iii) of the Central Excise Act, 1944. Case-Laws - AT : Whether re-packing of the goods after marking the supply order No., No. of objects inside the packet and other necessary details for due identification at the consignee’s end would be tantamount to manufacture as per the definition of manufacture given in Section 2(f)(iii) of Central Excise Act, 1944 - Held Yes - AT Visit to Get Source Appellant can claim CENVAT credit for capital goods sent to sister unit as job worker u/r 4(5)(a). Case-Laws - AT : Whether the appellant is entitled to avail cenvat credit on capital goods which were sent to their sister unit who are job worker under Rule 4(5)(a) of Cenvat Credit Rules - Held Yes - AT Visit to Get Source Cenvat Credit Vital for Factory Cleanliness and Efficiency; Housekeeping Key to Workplace Safety. Case-Laws - AT : Cenvat Credit - Without the factory including the canteen, being clean and tidy, the efficiency would get drastically reduced. Further, it should be borne in mind that housekeeping is crucial for safe workplaces. - AT Visit to Get Source VAT Supreme Court Rules Bitumen and Bitumen Emulsion as Same Commodity for Tax Purposes, Streamlining Business Tax Processes. Case-Laws - SC : Classification - bitumen and bitumen emulsion are one and the same commodity - SC Visit to Get Source Supreme Court Confirms Entry Tax on Tea Packaging Materials Under VAT and Sales Tax Regulations. Case-Laws - SC : Levy of entry tax on packing material of tea upheld - SC Visit to Get Source Input Tax Credit Restriction Cannot Be Applied Retroactively; Protects Dealers' Vested Rights from 2007 to 2010 Transactions. Case-Laws - SC : Restriction on input tax credit - Such a provision cannot have retrospective effect, more so, when vested right had accrued in favour of these dealers in respect of purchases and sales made between January 01, 2007 to August 19, 2010. - SC Visit to Get Source Dealers Must Comply with Statutory Conditions to Avail Input Tax Credit; ITC is Not an Inherent Right. Case-Laws - SC : Restriction on input tax credit - it is not the right of the 'dealers' to get the benefit of ITC but its a concession granted by statute - As a fortiorari, conditions specified for availing ITC must be fulfilled - SC Visit to Get Source Roasted Groundnuts Tax Rate Shifted from 1979 to 2004 Circular for Assessee Transactions. Case-Laws - HC : Declared goods - roasted groundnuts - rate of tax - Prior to the promulgation of the 2004 circular the 1979 circular held the field and all transactions in roasted groundnuts as entered into by the assessee be subjected to tax in accordance therewith - HC Visit to Get Source IMFL Exempt from Multiple Taxes Post Initial Duty; State Government Opts for Single Excise Levy. Case-Laws - HC : Taxability - Indian Made Foreign Liquor - The intention of the rule maker is that the tax is paid only once. It is held that it becomes a tax free good and as the words used in the entries are "goods on which duty may be levied under the Excise Act", this would and could only mean that duty could be levied on the goods in question but the State Government thought it appropriate not to levy duty and once it is a good on which duty could be levied the exemption has to be granted – exemption available on IMFL - HC Visit to Get Source Case Laws: Income Tax 2016 (9) TMI 405 Computation of deduction under section 10 A/10 B - brought forward business losses as well as unabsorbed depreciation - Held that:- In the present case before us the assessee has brought forward business losses as well as unobserved depreciation. The act specifies the sequence in which these allowances can be set off. Section 72 (3) implies that, the set off of unobserved depreciation as per section 32 (2) against business income shall be given effect to only after setting off the brought forward business losses. From the calculation made by the Ld.AO, it is observed that the Ld.AO has adjusted the amount of unobserved depreciation from the business income before making adjustment for brought forward business losses. The circular relied upon by the Ld.AR is not applicable to the present case under consideration as it is applicable where the set off each to be made against the profits of a STP/EOU/SEZ unit, before the deduction under section 10 A/10 B of the Income tax Act is allowed. Allowability of expenses under section 37 (1) - Held that:- CIT (A) was right in allowing the claim of the assessee to treat the stamp duty and registration expenses as revenue expenditure. 2016 (9) TMI 404 Disallowance of previous years expenditure - Held that:- As decided in assessee s own case for assessment year 2006-07 wherein held both the lower authorities have wrongly disallowed assessee s claim or prior period expenditure. The same stands deleted. Disallowance for the alleged excessive shortage in the Sesame seeds account - Held that:- We find that the assessee has closed the business of trading in Sessame seeds during the year under consideration and accordingly wrote off the entire stock which was not saleable as per the standards prescribed by the Government authorities and the same has been destroyed. In our considered opinion, this is a loss and not shortage though claimed as a shortage. The total quantity wrote off was 5940 MT on a total value of Rs. 29.48 crores which comes to 0.86% only. The only reason for upholding the disallowance given by the First Appellate Authority is that the assessee has failed to quantify the shortage/loss due to substandards material. There may be some force in the findings of the First Appellate Authority. Considering the smallness of the overall percentage which is 0.86%, the balance of convenience is tilted in favour of the assessee. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the disallowance Profit on sale of DEPB license for computation u/s. 80HHC - Held that:- As decided in Topman Exports [2012 (2) TMI 100 - SUPREME COURT OF INDIA] DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB and while the face value of the DEPB will fall under clause (iiib) of Section 28, difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 Decided in favor of assessee. Taking net interest as part of indirect cost for the purpose of computation of deduction - Held that:- As decided in ACG Associated Capsules Pvt. Ltd [2012 (2) TMI 101 - SUPREME COURT OF INDIA] Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads PGBP is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Decided in favor of assessee Deduction u/s. 80HHC to the extent of gross total income without restricting the total income derived from export of goods - Held that:- We are of the considered view that the income of the assessee is to be computed as per provisions of the law and simply because an assessee has suffered more amount on tax than what is legally due, then the Department can not assess the income at a higher figure but should assess the income at correct amount as per the provisions of law. We, therefore, do not find any merit in this ground of appeal of the Revenue Decided in favor of assessee 2016 (9) TMI 403 Transfer pricing adjustment - whether the price determined under MAP mechanism can be adopted even in respect of non- MAP transactions? - Held that:- We are of the considered opinion that this issue can be decided only by the TPO after undertaking FAR analysis of non-US transactions with a view to find out whether there is any distinction in the factors influencing the price between US and non-US transactions. Even in the decision relied on by the learned counsel for the assessee, the Hon’ble Tribunal had rendered a categorical finding that there is no such distinction. We, therefore, direct the TPO to adopt the same price. In the present case, no attempt has been made by the learned counsel for the assessee to bring out the similarities of the factors that influenced the price between US and non-US transactions. In the absence of this analysis, comparability may not be in terms of the provisions of rule 10B(1)(2) of the IT Rules, 1962. Therefore, we are of the considered opinion that the matter be restored to the file of the TPO/AO for fresh analysis on the lines between US and non-US transactions and if it is found that factors influencing the price are similar between US and non- US transaction, the price adopted for US transactions may be adopted for non-Us transactions also. Before we part with, we must make it clear that it is open to the TPO to examine the validity of the proposition that price adopted under MAP mechanism can be adopted in respect of other countries also where MAP was not resorted to. Reduction of telecommunication expenses export turnover - Held that:- As now the law is quite settled that while reducing telecommunication expenses from export turnover, the same should also be reduced from the total turnover on the reasons of parity as held by the jurisdictional High Court in the case of CIT vs. Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT ). Accordingly, we direct the TPO/AO to reduce the telecommunication expenses from the export turnover as well as the turnover while computing deduction u/s 10A of the Act. 2016 (9) TMI 402 Addition u/s 68 - unsecured cash credit - Held that:- It is incumbent on the part of the assessee to prove the identity, genuineness and creditworthiness of the loan taken u/s 68 and non-fulfilling of any of the three conditions, makes a question mark on the impugned transaction. Therefore, we are of the view that assessee has been unable to prove the creditworthiness of both the loan creditors and therefore, addition u/s 68 of the Act for unexplained cash credit of is confirmed and order of ld. CIT(A) is upheld. - Decided against assessee. 2016 (9) TMI 401 Expenditures incurred on Crane hire charges, Dredger Transport expenses and Sub-contractor charges - whether are allowable u/s.28 ? - disallowance made u/s.40(a)(ia) - Held that:- CIT(A) had given a relief to the assessee on the reason that no payment is outstanding at the end of the cost of financial year and it is not to be shown as payable in the financial statement of the assessee. Hence, the provisions of the section 40(a)(ia) of the Act is not applicable. However, the Department is not challenging these findings of the CIT(A). The Department challenging only another findings of the CIT(A) in regard to the expenditure on Crane hire charges, Dredger Transport expenses and Sub-contractor allowable u/s.28 of the Act and CIT(A) deleted the disallowance of Rs. 49,69,800/- by overlooking the provisions of the section 37 of the Act which covers these payments. Hence, the ground of Revenue is inappropriate. In our opinion, provisions of the section 40(a)(ia) of the Act cannot be applied in view of the judgment of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ]. Disallowance made u/s.40A(3) - Held that:- We find that though the payments were made in cash in excess of Rs. 20,000/- on account of business expenditure, as the assessee made the payments at the work place for the purpose of purchase of materials and labourers. Further, the drudging work was carried on at odd hours at sea coast and it cannot be accepted that the material suppliers or labourers would take the cheques from the assessee. The provisions of the section 40A(3) of the Act which itself provides for exception circumstances having regard to the nature and extent of banking facilities available and business expenditure and other relevant factors. In the present case, the facts and circumstances show that the assessee has bona fide reasons to make cash payments in respect of above expenditure. In the present case, the assessee and its team went to a far away place for the purpose of TV serial shooting. The assessee had made cash payments to various parties, technicians, artists etc. for the period of 2 to 6 days under business compulsions. We find that the above payment was made under business compulsions and Therefore, by considering all the facts and circumstances of the case and also taking into consideration of the business expediency, we are of the opinion that sec.40A(3) has no application to the facts of the assessee’s case. Unexplained cash credits u/s.68 - Held that:- Regarding sustaining the addition u/s.68 of the Act in respect of current account balance in the name of Shri Alagappa Vandayar, the assessee is not able to show any proof that Shri Alagappa Vandayar has contributed this amount. In view of the insufficiency of evidence, the addition is to be considered u/s.68 of the Act. The same is confirmed. This ground in Cross objection is dismissed. Disallowance of expenditure at 10% in respect of self-made vouchers - Held that:- The total expenditure was claimed at Rs. 2,49,55,733/-. These payments were self-made vouchers. There is every chance of bifurcating expenditure in selfmade vouchers as it is not supported by third party evidence and self-made vouchers is not 100% full proof. Hence, certain adhoc disallowance is made. Being so, the CIT(A) is very reasonable in restricting the disallowance from 20% to 10% with regard to expenditure covered by self-made vouchers. We do not find any infirmity in the order of the Ld.CIT(A) and the same is confirmed. 2016 (9) TMI 400 Computation of capital gain by the AO in respect of two properties sold - valuation by DVO - Held that:- Upon careful consideration note that the said land was sold by the assessee on 10-11-2006 at a consideration of Rs. 51 lakhs to Shri Bandal. The said Shri Bandal sold the said property to the third party M/s Voss Exotech Automatic Pvt. Ltd. for a consideration of R.1,42,65,000/- on 15-12-2006. Thus in a one month period there was an increase in the price of the same land by approximately Rs. 1 crore. In these circumstances, the assessee’s plea that the value of the land sold on 10-11-2006 should be Rs. 47,62,800/- is not at all acceptable. By any stretch of imagination the same property cannot have enhancement of Rs. 1 crore in a one month period. This is beyond preponderance of probability. Further more find that the learned CIT(Appeals) has passed a reasonable order considering all the facts of the case. The DVO also has valued the property at Rs. 1,17,60,000/-. However, since the value adopted by the Stamp Valuation Authority is Rs. 92,50,000/-, the same value has been adopted by the authorities below. Thus this is very fair and the assessee should not be aggrieved on this account. Hence affirm the order of learned CIT(Appeals) and decide the issue in favour of the Revenue qua the first property. Another property has been sold by the assessee for Rs. 2 lakhs. The AO noted that the value adopted by the Stamp Valuation Authority was Rs. 5,47,518/- . The AO in this case has referred the valuation to the DVO. However, there is no whisper in the order of learned CIT(Appeals) regarding the receipt of DVO’s report. Till date the Revenue is not in a position to show the DVO’s report. Thus find that this is a very strange situation. Absence of DVO’s report despite of so much elapse of time is not at all warranted and remit this issue to the file of the AO. The AO shall consider the issue afresh after taking into account and bringing on record the valuation done by the DVO Decided partly in favour of assessee for statistical purposes. 2016 (9) TMI 399 Entitlement depreciation on the written down value of the assets to Rajasthan State Electricity Board - Held that:- As per the balance sheet of the Rajasthan State Electricity Board, the allowable depreciation up to 19/7/2000 was mentioned as Rs. 1,04,82,30,121/-. Since block of assets were transferred to the assessee, therefore, the insistence of the ld Assessing Officer for physical verification of the assets for the purposes of depreciation, in our view, was not warranted. In our view, once the assets are forming part and parcel of the block of assets, which were transferred to the assessee from Rajasthan State Electricity Board, the physical verification for the purposes of depreciation may not be required and therefore, the assessee is entitled to depreciation on the written down value of the assets a per Income Tax Act 1961, subsequent to the transfer from the assets from Rajasthan State Electricity Board. - Decided in favour of assessee Disallowance of depreciation U/s 43(1) - Held that:- A bare reading of the Explanation 10 of Section 43 of the Act, which clearly provides that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government in the form of a subsidy or grant or reimbursement, then, so much of the subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee. Admittedly, the amount has been received by the assessee in the form of grant/reimbursement/subsidy from the state Government therefore, in our view, the order passed by the ld CIT(A) is required to be upheld and the value of the assets shall be taken by the ld Assessing Officer after adjusting the subsidy/grant/reimbursement from the State Govt. or the other government departments. Accordingly, this issue is decided against the assessee and in favour of the revenue. MAT U/s 115JB applacability - Held that:- As gone through the contention raised by the assessee as well as the order passed by the Advance Rulings in the matter of Jodhpur Vidyut Vitran Nigam [2009 (11) TMI 20 - AUTHORITY FOR ADVANCE RULINGS] which is situated on the same pedestal as that of the assessee, have been accepted by the revenue and the revenue has not insisted for application of provisions of MAT U/s 115JB of the Act. Therefore respectfully following the order passed by the Advance Rulings (Income Tax), New Delhi and applying the same to the present facts and circumstance of the case, we decide the issues in favour of the assessee. We also held that the benefit as has been given to Jodhpur Vidyut Vitran Nigam Limited under the provisions of the Electricity Act and the Companies Act be also extend it to the assessee without insisting for the application of Section 115JB of the Act In the light of the above, the issue is decided in favour of the assessee and against the revenue 2016 (9) TMI 398 Claim u/s. 10B - Held that:- Reversion of excess provisions and Exchange gain - Admittedly the foreign exchange gain arisen out of the import of rawmaterials or export of finished goods and not interest from external commercial borrowings. The issue regarding taxability of gain or deduction of loss arising on account of fluctuation in rate of foreign exchange has been subject matter of the decision in the case of CIT v. Woodward Governor India P Ltd. [2007 (4) TMI 118 - DELHI HIGH COURT ] and also the Hon'ble Supreme Court [2009 (4) TMI 4 - SUPREME COURT ]. In terms of the above said judgments the effect of exchange difference in the case of revenue item has to be taken into account in the P&L a/c. As the foreign exchange fluctuation in the case of the assessee relates to import of raw material and export of finished goods the same cannot be excluded and have to be taken in to account while computing deduction under section 10B of the Act. Accordingly, the ld. CIT(A) directed the Assessing Officer to amend the order. With regard to scrap sale, export entitlements, discount received, fixed charges recovery, the ld. CIT(A) has directed the Assessing Officer to amend the order by including all the above receipts while computing deduction under section 10B of the Act. Reversion of excess provisions if it is allowed as deduction in earlier assessment year while computing the business income of the assessee and consequently reversing the same in the assessment year under consideration, it has to be considered as part of the business profit and thereby the assessee is entitled for deduction under section 10B of the Act. Hence, the Assessing officer is directed to verify whether the original provision was allowed as deduction in earlier assessment years and decide the issue afresh accordingly after hearing to the assessee. Thus, the ground raised by the Revenue is allowed for statistical purposes. 2016 (9) TMI 397 Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. The impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee. 2016 (9) TMI 396 Rectification of mistake - all the appeals of the Revenue were dismissed by this Tribunal by orders dated 20.08.2007 and 21.01.2008 on the ground that the Revenue has not obtained the clearance of Committee on Disputes for filing these appeals - Held that:- The petitions filed by the Revenue on 15.01.2013 praying for recall the orders of this Tribunal dated 20.08.2007 and 21.01.2008 is beyond the period of limitation as provided under Section 254(2) of the Act and after lapse of substantial time from the date of judgment of Apex Court in Electronics Corporation of India Ltd. (2011 (2) TMI 3 - Supreme Court ). Therefore, this Tribunal is of the considered opinion that the Miscellaneous Petitions filed by the Revenue has no merit at all. 2016 (9) TMI 395 Penalty u/s 271AAA - Held that:- By way of letters dated 24.12.2010 ad 28.12.2010, the assessee offered additional sum of Rs. 1,05,88,900/- which was accepted by the Assessing Officer without any further addition. The assessee, in fact, telescoped the lease rental received by the assessee against the voluntary contribution received by Sri Vetrivel Educational & Charitable Trust. When the assessee claims that voluntary contribution was received by Sri Vetrivel Educational & Charitable Trust, this Tribunal is of the considered opinion that there was no justification for levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer has to reappreciate the material available on record and find out whether the income actually relates to the assessee. Moreover, by sec. 271AAA of the Act, the Parliament enacted a separate provision for levy of penalty. Sub-section (3) of sec. 271AAA of the Act in categorical terms declares that no penalty can be levied u/s 271(1)(c) of the Act in respect of the income which falls in subsection( 1) of sec. 271AAA of the Act. In the case before us, admittedly, the search was conducted on 29.9.2008, therefore, penalty, if any, has to be levied only u/s 271AAA of the Act and definitely not u/s 271(1)(c) of the Act. Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the penalty levied by the Assessing Officer. Levy of penalty u/s 271(1)(c) - Held that:- This Tribunal is of the considered opinion that mere addition in the assessment order cannot be reason for levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer has to reappreciate the material available on record and find out whether there was any concealment of income. In the case before us, both the lower authorities have not reappreciated the material available on record. Merely because the assessee offered the amount as income, they have levied/confirmed penalty u/s 271(1)(c) of the Act. The fact remains that the search was conducted in the case of Shri A.N. Radhakrishnan on 29.9.2008. Therefore, penalty, if any, has to be levied u/s 271AAA of the Act and definitely not u/s 271(1)(c) of the Act. Sub-section(3) of sec. 271AAA of the Act in categorical terms declares that no penalty can be levied u/s 271(1)(c) of the Act when the income falls u/s 271AAA(1) of the Act. In the case before us, it is not in dispute that the income falls u/s 271AAA(1) of the Act. Therefore, no penalty can be levied u/s 271(1)(c) of the Act. In view of the above, we are unable to uphold the orders of the authorities below. Accordingly, the orders of the lower authorities are set asie and the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act is deleted. 2016 (9) TMI 394 Deduction allowable u/s-80IA - receipts arising from sale of carbon credits - Held that:- The income from sale of carbon credits is ‘capital’ in nature and the said income is not eligible for deduction u/s 80IA of the Act 2016 (9) TMI 393 Transfer pricing adjustment - Held that:- We hold that international transaction of payment of royalty is a separate transaction and therefore should be bench marked separately. The condition to prove that technical service was actually rendered by the AE to assessee-company is a condition precedent for allowance of the same. The TPO had no occasion to examine this aspect, as the assessee-company had not produced any evidence in support of the technical services rendered. Before us, the assessee-company filed certain evidence in an endeavour to establish that actually technical services were rendered. Therefore, we deem it fit to remit the matter back to the file of the TPO/AO for the purpose of de novo determination of ALP after satisfying himself that the services were actually rendered. 2016 (9) TMI 392 TDS u/s 192 - Interest u/s 201(1A) - non deduction of tax at source on payment of salary on monthly average basis - non mentioning of PAN No. of depositors on Form 15G /15H furnished by depositors with Bank - Held that:- The contention of the assessee that at the end of financial year there was no short deduction of TDS on payment of salary to various employees has not been controverted by the authorities below. Further, we find that the TDS on salary was deducted on the monthly average basis by Circle Office of persons responsible and it was automatic and there is no interference by the Brach. We further find that deduction of amount of tax from salary depend upon the various saving schemes adopted by various employees and some time the employees make delay in submissions of their Saving certificates. Further we find from the reply of assessee to learned CIT(A) that the employees had declared the other income to the Bank only in the month of March and further that some times increment and pay perquisites of employees is paid in the last month and therefore, all these reasons could contribute to some short deduction of TDS in some earlier months of the financial year but the fact remains that at the end of financial year there was no short deduction of TDS. We find that the non deduction of TDS on monthly average basis was due to technical reasons and moreover, the issue for non deduction on monthly average basis is decided in favour of assessee in the decision of Hon’ble Delhi High Court in the case of CIT vs. Marubeni India (Pvt.) Ltd. [2007 (8) TMI 40 - HIGH COURT, DELHI] The finding of learned CIT(A) that AR of the appellant has failed to furnish any evidence in support of the contention that the PAN were available with the persons responsible at the time of accepting form 15G/15H, is only a technical breach in view of the fact that learned CIT(A) passed the order dated 26.06.2014 whereas as per the list of persons submitted to Assessing Officer indicating the PAN Nos., it is observed that PAN Nos. of assessees to whom interest was paid without deduction of tax was issued in the years 2008-2011. The list of such payments is placed at (PB page 1 to 2). Therefore, the PAN Nos. of such deductees was available at the time of deduction of TDS, and therefore, the mentioning of the same on the declarations was only a technical breach. - Decided in favour of assessee 2016 (9) TMI 391 Penalty u/s 271(1)(c) - Held that:- As the notice dt:18-12-2007 issued by the AO U/Sec 274 r/w 271 of the Act does not show on which ground the penalty is sought to be imposed, therefore we hold that the order levying penalty is not valid. - Decided in favour of assessee 2016 (9) TMI 390 Disallowance of expenditure incurred on renovation of showroom - Allowability of revenue expenditure - Held that:- We hold that expenditure was not incurred on any capital outlay. Therefore, the expenditure is revenue in nature. Even the provisions of Explanation 1 to section 32 cannot be invoked in the present case as there was no construction of any structure, extension, improvement to the building as involved. Therefore, we direct the AO to allow the same as revenue expenditure. Deemed dividend u/s. 2(22)(e) - Held that:- Condition precedent that advances were not received by shareholders is not satisfied. Therefore, the amount cannot be brought to tax as deemed dividend in the hands of the assessee-firm. However, we make it clear that it is open to the department to initiate appropriate action to bring to tax dividend in the hands of the registered shareholder by the process known to law. Deduction under section 80IA - Held that:- For the purpose of computing eligible profits under section 80IA, losses incurred prior to commencement of initial year should not be reckoned. We hold that since loss incurred prior to the initial year of eligible business need not be deducted for the purpose of computing amount of allowance under section 80IA(5) 2016 (9) TMI 389 Disallowances u/Sec 40(a)(ia) - retrospectivity - Held that:- The Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (I) Pvt. Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT ] has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. Once it is held that the Assessee is entitled to the benefit of 2nd proviso to Sec.40(a)(ia) of the Act, the CIT(A) ought to have directed the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act ought to have been sustained by the CIT(A). The CIT(A) ought to have also directed the AO that in case the recipient parties are not cooperating in providing details, the AO should call for the information u/s. 133(6) or 131 of the Act, for verification of the same. We therefore set aside the order of the CIT(A) to the extent to which he had sustained the order of the AO on the disallowance u/s.40(a)(ia) of the Act and remand the issue to the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act should be made by the AO. In case the recipient parties are not cooperating in providing details, the AO should be directed to call for the information u/s. 133(6) or 131 of the Act for verification of the same. - Decided in favour of assessee for statistical purposes. 2016 (9) TMI 388 Unexplained investment under section 69 - Held that:- Had it been genuine transaction, the assessee should have been explained the entire transaction between the assessee and Shri Prasad Potluri and the circumstances under which it was paid by Shri Prasad Potluri to the assessee on behalf of Indira Production Pvt. Ltd. Further, the Assessing Officer during the course of assessment requested Indira Production Pvt. Ltd. for the personal appearance and explains it. But, instead of personal appearance before the assessing authority, they opted to send the statement of account, which does not explain itself the nature of transaction between the parties. In our opinion, as rightly pointed out by the ld. DR, the evidence brought on record by the assessee, the assessee has not discharged his burden cast upon him to substantiate the source and genuineness of the transaction. In these circumstances, it is appropriate to hold that the deposit of Rs..30 lakhs in the Dena Bank account has not properly explained. Therefore, the provisions of section 69 of the Act was rightly invoked by the Assessing Officer and confirmed by the ld. CIT(A). - Decided against assessee Adhoc addition towards gross remuneration for “Kushi” – Hindi version of movie - Held that:- Admittedly, in this case, the assessee has filed a statement before us confirming the receipt of income from Narasimha Enterprises owned by Shri Bonny Kapoor for Rs..1,15,96,414/-. In addition to this, it is to be noted that the assessee filed revised statement of income before the Assessing Officer on 28.03.2005 at Rs..1,27,28,414/-. The Assessing Officer has not considered this amount. In our opinion, the amount returned by the assessee in the revised computation of statement is to be accepted at Rs..1,27,28,414/- subject to our finding in para 3.5 herein below and instead of making addition of Rs..1.00 crore by overlooking this revised statement. Accordingly, we direct the Assessing Officer to consider the revised computation of income for the assessment year 2002-03 with reference to the income at Rs..1,27,28,414/- subject to our finding in para 3.5 herein below. In other words, the assessee is not entitled for loss of Rs..11 lakhs in respect of “Kushi” Telugu movie. - Decided in favour of assessee 2016 (9) TMI 387 Eligibility to claim deduction under section 10B - whether the assessee is eligible to claim deduction under section 10B of the Act for the assessment year 2011-12 since the assessee got the approval from STPL for setting up of 100% EOU on 07.10.2010 and signed the agreement with STPL on 18.11.2010? - Held that:- Consedring the case of ITO v. Cat Labs Pvt. Ltd [2014 (2) TMI 1247 - ITAT PUNE] wherein, it is apparent that the overwhelming view of various Benches of the Tribunals have been discussed and arrived at a conclusion to treat the approval granted by the STPI to be enough for the fulfillment of condition prescribed in section 10B of the Act for approval of the EOU unit under section 14 of Industries (Development & Regulation) Act, 1951. Therefore, we are of the opinion that the benefit cannot be denied to the assessee despite the fact that the section 10B of the Act specifically talks of only registration under section 14 of Industries (Development & Regulation) Act, 1951. Thus we set aside the order passed by the ld. PCIT and hold that the Assessing Officer has rightly allowed deduction under section 10B of the Act. - Decided in favour of assessee. 2016 (9) TMI 386 Rental income - income from house property or business income - Held that:- The important is the intention of the assessee whether the asset was used to earn the rental income or the intention was to exploit the property for commercial purpose. In the given case, assessee had leased out the property only to be used for the purpose of IT & ITES business purpose. Moreover, there is a condition from the ‘GoWB’ that it has to be leased out only to the IT & ITES business. Accordingly, we set aside the orders of revenue authorities and direct the AO to treat the rental income as business income. - Decided in favour of assessee. 2016 (9) TMI 385 Claim for exemption u/s. 54F denied - construction of swimming pool - Held that:- The assessee has invested in construction of swimming pool and lawn adjacent to the existing House property constructed in the year 2003 and the construction was confirmed by the independent enquiry report of Inspector of Income Tax referred in assessment order. The ld. Authorised Representative could not controvert the finding of the ld. Assessing Officer and relied only on the principles of construction of property on plot adjacent to the Residential House as construction on land apparent to the building. We are not convinced by the arguments put forth on the logical aspects of construction of swimming pool within the definition of Residential House. Considering the apparent facts, materials on record and legal decisions, the assessee though undertakes the construction on the apparent land. But construction works shall not qualify for treating as ‘’Residential Property’’ and the ld. Commissioner of Income Tax (Appeals) dealt on the disputed issue. We are of the opinion that the assessee is not eligible for exemption u/s. 54F of the Act for construction of swimming pool and we uphold the order of the Commissioner of Income Tax (Appeals) - Decided against assessee 2016 (9) TMI 384 Addition on account of purchases made from suspicious dealers - dealers which are allegedly involved in issuing bills and purchases made from the parties in dispute are not genuine - CIT(A) restricted the addition to 5% of the alleged purchases and deleted 95% of the purchases made treating them as genuine purchases - Held that:- It is not in doubt that the assessee has made purchases and also made sales and they are duly accounted for in the books of account and offered to tax therefore entire purchase made cannot be treated as unexplained expenditure. No valid reason to interfere with the observations and to hold that the purchases made are bogus for the reason that none of the findings of the Ld. CIT(A) have been rebutted by the Revenue. Also as there is no basis for sustaining the addition of 5% of purchases u/s. 69C since the purchases have been held to be genuine and there is no scope for sustaining the same partly. Thus, the cross objections filed by the assessee are allowed. 2016 (9) TMI 383 Addition U/S 41(1) - Held that:- From the assessment order, it does not appear that the credit amounting to Rs.,2,81,138/- and the alleged capital receipt amounting to Rs. 3.70 crores has ceased to exist. The contention of the assessee regarding the amounts not being considered in the books of accounts, needs verification for application of Section 41(1) of the Act. We, therefore, in the interest of justice, set aside the issue to the Assessing Officer for verification whether the amounts relating to sundry creditors has been considered in the books of account 2016 (9) TMI 382 Addition u/s 68 on account of unexplained share capital - Held that:- The assessee is a private limited company whose functioning capability strengths etc. would be known only to its close knit circle of friends and Directors and promoters who would be privy to this information. The Private Ltd. Company and such known concerns known to the said company would operate on internal information available to them and it is generally not easily available in the public domain. Thus necessarily the shareholders are limited to persons or concerns managed by the close knit circle of family and friends of the assessee. Accordingly the benefit of arm’s length distance between a shareholder of a Public Ltd. Company with the company cannot be claimed by a shareholder in a Private Ltd. Company as the shareholders necessarily would be companies/entities managed and controlled by friends, relatives, business partners etc. of the Private Ltd. Company The fact that bogus transactions have been accepted by Director, Sh. Rajendra Agarwal in 2009-10 AY and a surrender has been made of Rs. 45 lakhs is sufficient evidence for the Revenue to conclude that such behavior for Director was a norm and not an aberration. Accordingly the company having been given an opportunity to prove that the transactions were genuine the onus in the peculiar facts and circumstances cannot be said to be discharged by placing insufficient evidences. The evidences now on record stated to be filed all along a position disputed by the Revenue and negated by the AO needs to be reconciled and the evidences relied upon need to be addressed. We note that the finding of fact that relevant documents were not filed before the AO has not been assailed by the assessee by way of any affidavit before the CIT(A) or before us that facts are incorrectly recorded. The impugned order in view of these obvious shortcomings is set aside and the matter is restored to the AO for fresh determination. The AO accordingly is directed to pass a speaking order in accordance with law on the jurisdictional aspect first and thereafter if need be on merits after giving the assessee a reasonable opportunity of being heard. 2016 (9) TMI 381 Addition on account of undervaluation of closing stock - CIT(A) deleted the addition - Held that:- It is seen from the bills dated 30.3.2005 and 31.3.2005 that these contain purchases of hatching egg for the period from Ist March to 31st March and the eggs hatched upto 10th March are converted into broiler chicks which were already sold. Therefore, there remains the closing stock of Rs. 35,98,223/- as shown by the assessee in its audited books of accounts. Accordingly, we find the findings of the learned CIT(A) in order. - Decided against revenue Addition being the undisclosed purchases - CIT(A) deleted the addition - Held that:- We find that the Assessing Officer was not able to bring out any evidence that the entries in audited books of accounts were not correct. Moreover, the assessee himself will not show higher figure in the audit report. Therefore, we find that there is a typographical mistake in the audit report alone which cannot be made the sound basis for such addition. Therefore, the findings of the learned CIT(A) are upheld - Decided against revenue Disallowance u/s 40A(3) being 20% of total payment - Held that:- As noted that the payments were made in excess of Rs. 20,000/-. Therefore, we find no infirmity in the orders of the authorities below - Decided against assessee Addition u/s 40(a)(ia) of legal and professional expenses - TDS was not deducted - Held that:- No force in the submission of the learned counsel for the assessee as the total payment under the head “legal and professional charges” fell within the provisions of section 40(a)(ia) of the Act, hence, the disallowance confirmed by the learned CIT(A) is upheld.- Decided against assessee Disallowance on account of various expenses being telephone expenses, vehicle expenses, depreciation, travelling and conveyance expenses - Held that:- The assessee repeated the same arguments and vehemently argued that the disallowances were made without pointing out any specific defect or instance, hence such disallowance need to be deleted nned not to be accepted.- Decided against assessee 2016 (9) TMI 380 Addition in respect of gift receipt - genuineness of gift received from outside India - Held that:- In the matter of gifts, assessee is required to discharge the onus of submitting complete detail 'of gifts before the AO. He should have established (i) the identity of the donor; (ii) credit worthiness of the donor; (iii) genuineness of the transaction; (iv) occasion: (v) relationship of the donor and donee; (vi) evidence of natural love and affections. The human probability has to be considered as to why donor is prompted to give gift to the assessee. This question is required to be answered because as contrary to loan, in the case of gift, donor loses his hard earned capital in favour of the donee for ever whereas in the case of loan the creditor retains the right to recover the money from the assessee. Therefore, onus is heavier on the assessee in a case of gift as compared to the case of credit. In case of credit, if identity of the creditor is known and creditworthiness of the creditor is established then onus is shifted to the Revenue to show that credit is not genuine. But in the case of gift all the three ingredients are necessary to be established by the assesses and merely by giving evidence of identity and credit worthiness of donor, genuineness cannot be taken to be established automatically, 'therefore, test of human probability assumes importance so as to show that there were reasons which prompted the donor to forgo his hard earned capital in favour of the donee. In view of the above we hold that assessee has failed to prove that gift is genuine. Accordingly, we confirm the addition - Decided against assessee 2016 (9) TMI 379 Penalty u/s 271(1)( c) - declaring the income from letting out of the office premises with various facilities under the head “Business Income” which was declared under the head “Income from House Property” in the return filed in the re-assessment proceedings u/s 148 of the Act and assessed accordingly - Held that:- The assessee has fully disclosed all the particulars of income in the return of income filed which can not be termed as inaccurate particulars by the assessee for the income. We are of the considered views that it could not be construed as filing of inaccurate particulars of income. Recalculation of income by the AO which is different from the income returned by the assessee, in that case, it cannot be said that the assessee has concealed the particulars of income or concealed particulars of income. The assessee has fully disclosed all the facts qua his income, and therefore the penalty cannot be levied. In the case of Roborant Investments (P)Ltd (2005 (12) TMI 458 - ITAT MUMBAI ) held that where the full and complete discloser is made by the assessee, and if the income returned by the assessee under a particular head so assessed by the AO under another head of income, penalty is not imposable under section 271(1)( c) of the Act. - Decided in favour of assessee Customs 2016 (9) TMI 417 Recommendations on the maintenance of minimum distance in customs area - between hazardous cargo and general cargo - between hazardous cargo and administrative buildings - Circular No.40/2016-Customs - Held that: - clarification issued that the Circular No.40/2016-Customs may be treated as laying down the prescribed guidelines, for safety and security, across the Board, for maintaining distance, between hazardous cargo and general cargo, as also, hazardous cargo and administrative buildings in the customs area, and elsewhere, subject to one overriding condition, that the same would be subject to any statutory provision(s) expressly provided for the distance to be maintained in such matters - petition disposed off - application for intervention disposed off - all pending applications disposed off. 2016 (9) TMI 416 Refund claim - Import of 8 consignments of ferrite magnets - importer did not claim the benefit of Notification No. 12/2012 in the Bill of Entry so filed by them which came to be finally assessed by the proper officer of the Customs, without considering the applicability or otherwise of the said notification - whether in such facts and circumstances, the non-challenge to the Bill of Entry would be considered as a bar for claiming refund - Held that:- such a situation has already been considered by Hon’ble Delhi High Court in the case of Aman Medical Products Ltd. vs. CC, Delhi [2009 (9) TMI 41 - DELHI HIGH COURT] with which we are bound. Therefore, we are of the view that Commissioner (Appeals) has rightly followed the Delhi High Court decision and has rightly held in favour of the respondent. We find no justifiable reason to interfere in the impugned order of the Commissioner (Appeals). - Decided against the Revenue 2016 (9) TMI 415 Confiscation of seized currencies - section 113 (d), (e) and (h) of the Customs Act, 1962 - imposition of penalty - Section 114 (i) of the Customs Act, 1962 - undeclared currencies - prohibited goods - section 2 (33) - FERA Act - Held that: - it is established that appellant attempted to export by carrying himself as passenger, foreign and Indian currencies without declaration to the Customs authority and without permission from RBI - the same undoubtedly liable for confiscation. Option to pay redemption fine in lieu of confiscation - Section 125 of the Customs act, 1962 - Held that: - it is the discretion vested in the authority whether to allow redemption of confiscated goods on payment of fine or otherwise. The appellant admittedly tried to mislead the officers, investigating the case. The appellant at every stage given wrong statement about source of currencies. As per RBI and FEMA provision export of currencies is subject to approvals and permission. Therefore attempt of export of currencies without such approvals/permissions lead to confiscation - looking to the conduct of the appellant and nature of the offence, the denial of grant of option to appellant is justified. Appeal dismissed - decided against appellant. 2016 (9) TMI 414 Refund claim – demand – part amount paid during investigation process – matter appealed to tribunal– refund of amount claimed before original authority, where it was held that the demand was immature as case not decided yet - having the case decided by the tribunal do appellant require to file fresh refund claim ? – Held that: - the appellant had filed refund claim in respect of deposit made during the investigation. Therefore, the sanctioning authority should not have held that the refund is premature, whereas he was supposed to pass a reasoned adjudication order – no fresh claim required to be filed – matter remanded to original authority for reasoned and speaking order – appeal disposed off. 2016 (9) TMI 413 Refund claim - Section 27 of the Customs Act, 1962 – time-bar - duty under protest in respect of some Bills of Entry not paid – Held that: - it is not in dispute that irrespective of any type of record in the department, the register by whatever name it is called, the protest was recorded. Therefore, there is no dispute that the duty payment made by the respondent is under protest. It is settled legal position that in case of refund arising out of the order settling the demand matter, a period of one year for filing refund is available from the date of the said order – refund claim not hit by limitation – appeal disposed off – decided against Revenue. 2016 (9) TMI 412 Refund - classification - press tool dies - heading 82.05 of the First Schedule to the Customs Tariff Act, 1975 - heading 84.45/48 of the First Schedule to the Customs Tariff Act, 1975 - CVD - tariff item 51A - tariff item 68 - manufacture of jeeps - supply of tools and dies by overseas entity - Held that: - the heading 8205 turns on the expression ‘interchangeable’. Here a peculiar situation arises. While the Tribunal in Purewall & Associates Ltd v. Collector of Customs, Bombay [1983 (10) TMI 254 - CEGAT BOMBAY] interpreted the expression to mean multiple usage of the ‘die/tool’ and guided many subsequent decisions, the Tribunal in Bajaj Auto Ltd. v. Collector of Customs, Bombay [1994 (8) TMI 127 - CEGAT, NEW DELHI] holds that Purewall & Associates was decided, without reference of Explanatory Notes, merely to examine the scope of heading 8205 beyond hand tools - the conflict on the meaning of ‘interchangeable’ requires resolution not merely for expediency but as an unavoidable necessity - matter to be placed before the Hon’ble President for reference to a Larger Bench to resolve whether the decision of the Tribunal in re Purewall & Associates Ltd is the correct proposition of law or that of the view expressed in re Bajaj Auto Ltd. 2016 (9) TMI 411 Unconditional release of the attached properties – restoration of appeals – pre-deposit for hearing of appeal - Held that: - the appeal in respect of which amount of pre-deposit has been deposited by the appellant, the restoration has been granted. For the Order dated 11.8.2014 passed by the Hon’ble High Court in a challenge to the said common order dated 23.7.2013 against the same applicants, inclination shown towards restoration of those remaining appeals for hearing them on merits in respect of which the amounts directed vide earlier Order dated 3.1.2007 are already paid, but subject to payment of total cost of Rs. 1,00,000/- within one week from receipt of this Order. Upon reporting compliance of the same on expiry of one week, these appeals bearing nos. C/790/06, C/794/06, C/791/06, C/793/06, C/795/06 and C/787/06 shall stand restored and recovery under the said Orders-in-original qua the concerned appellants would remain stayed till final disposal of the appeals. In respect of the remaining applications for restoration of appeals, where the applicants have only shown their willingness to make the payment, but have not yet deposited the amounts directed vide earlier Order dated 3.1.2007, appeals are not restored. Liberty granted to them to apply for restoration only after making payment of the amount directed to be deposited under Order dated 3.1.2007.These remaining applications concerning Appeal nos. C/784/06, C/788/06, C/786/06 and C/789/06 are thus dismissed with this liberty. Since all the appeals are restored subject to above payment of cost, immediately upon producing proof of payment of cost as above, the attachment of the properties would be lifted within one week of producing the proof of payment of cost. All applications disposed off. Corporate Laws 2016 (9) TMI 406 Sanction of the Composite Scheme of Arrangement in the nature of Merger and Demerger - Held that:- The observations made by the Regional Director having been addressed and the Official Liquidator having opined that the affairs of the petitioner company have not been conducted in the manner prejudicial to the interest of its members or to the public interest, in the opinion of this court it does not appear to be any impediment to the grant of sanction to the Composite Scheme of Arrangement, in as much as from the material on record and on perusal of the Scheme, the scheme appears to be fair and reasonable and is not violative of any of public policy. The arrangement under the proposed scheme appears to be in the interest of the companies and its members and creditors and, therefore deserves to be sanctioned. Accordingly, the Scheme as proposed by the petitioner companies is hereby sanctioned. The same shall be binding upon all the equity shareholders, preference shareholders, secured creditors, unsecured creditors of the petitioner Companies and all other agencies, departments and authorities of the Central, State and any other local authorities. Service Tax 2016 (9) TMI 435 Cenvat credit - Rent-a-Cab service and Air Travel Agents Service - for the period post 01.04.2011, appellant have reversed the service tax credit and paid the appropriate interest - Ld. Commissioner (Appeals) has allowed the appeal for a prior period involving the services of Rent-a-Cab and Air travel Agent's Service - Held that:- in view of the Tribunal ruling in the case of Goodluck Steel Tubes Ltd. Vs. Commissioner [2014 (1) TMI 37 - CESTAT NEW DELHI] and the ruling of the Tribunal in the case of Innovasynth Technologies Ltd. Vs.CCE, Raigad [2015 (3) TMI 127 - CESTAT MUMBAI] the eligibility for Rent-a-Cab service and Air Travel Agent's service cannot be denied. - Decided in favour of appellant 2016 (9) TMI 434 Demand of differential duty - Consulting Engineering services - consideration received from the client including the reimbursable expenses - two show cause notices issued, first for the demand of Service Tax for the period of 1.10.2002 to 31.3.02 by invoking the longer period of limitation and second for raising differential demand for the period 1.4.2007 to 31.3.08 - Held that:- we agree that inasmuch as the issue involved in both the show cause notice is the same and inasmuch as the first show cause notice stand quashed by the Hon'ble Delhi High Court on merits of the case, ratio of the same has to be applied and the impugned order is required to be held as unsustainable. - Decided in favour of appellant with consequential relief 2016 (9) TMI 433 Waiver of pre-deposit - Demand alongwith interest and penalties - Commercial or Industrial Construction service and Repair and Maintenance services - construction of bathrooms, routine maintenance of station buildings and routine cleaning of plant area - period involved is April, 2011 to September, 2011 - Held that:- admittedly, the painting of residential quarters of Nashik thermal power station are not covered under commercial or industrial services. Therefore, this Tribunal arrived on the decision that painting of residential quarters do not qualify as a service provided is of commercial or industrial in nature, but in this case, all the activities have been provided to thermal power station. Therefore, the appellant is not able to make out a case for complete waiver of pre-deposit. Therefore, we direct the appellant to make a pre-deposit of 25% of the service tax amount in dispute within four weeks. Balance amount of service tax, interest and penalty shall remain stayed off during the pendency of appeal. - Waiver partly granted 2016 (9) TMI 432 Waiver of pre-deposit - Demand alongwith interest and penalties - Advertising Agency Services - activity of painting of banners as per designs and manners prescribed by the clients of the applicant - Held that:- prima facie we are of the view that painting the banners by the applicant is not covered under the category of 'Advertising Agency Services'. Therefore, the applicant has made out a case for complete waiver of pre deposit. Accordingly, we waive the requirement of pre-deposit of entire amount of service tax, interest, penalties, and stay recovery, thereof during the pendency of the appeal. - Waiver granted 2016 (9) TMI 431 Taxability - deputation of employees - Manpower Recruitment and Supply Agency Services - amounts received by the appellant from their associated company for the period 16.06.2005 to 30.11.2008 - appellant providing employees on their payroll to certain associated companies which are having separate legal entities and remuneration to the staff was provided to other associated company was paid by the noticee - Held that:- an identical issue was considered by this Bench in the case of Bhaven Desai v. CST [2016 (2) TMI 806 - CESTAT MUMBAI] and held in favour of the appellant therein by coming to a conclusion that deputing the staff to their own organization would not fall under the category of manpower recruitment and supply agency services. This view of the Tribunal was also endorsed by the Hon'ble High Court of Gujarat in the case of CST v. Arvind Mills Ltd. [2014 (4) TMI 132 - GUJARAT HIGH COURT]. It is on record and undisputed that the appellant received only the reimbursement of the actual amount paid by them to their staff in each case would be covered by the judgement of Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. v. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT]. Therefore, in view of the facts and circumstances of this case and the authoritative judicial pronouncements on the issue, we hold that the impugned order is unsustainable. - Decided in favour of appellant 2016 (9) TMI 430 Service tax liability - outdoor catering services - engaged in providing Mid Day Meals to various schools and are getting paid for the same from the Schools/Government - appellant contended that the School/Govt. organization is not providing any infrastructure, necessary utensils, arrangement for water and sitting arrangements, they themselves are cooking and supplying which is outright sale to the Govt. and there is no service component. Held that:- by applying the decision of Principal Bench of the Tribunal in the case of Ambedkar Institute of Hotel Management v. CCE Chandigarh [2015 (9) TMI 163 - CESTAT NEW DELHI] where after analyzing the provisions to Section 65(76a) and 73 of the Finance Act, 1994, Tribunal came to a conclusion that the service tax liability does not arise on the appellant therein for preparing and supplying food under Mid Day Meal Scheme, the impugned orders are set aside. - Decided in favour of appellant 2016 (9) TMI 429 Refund of service tax – port services – Reference made to the case Ms. Shivam Exports and others vs. CCE, Jaipur 2016 (2) TMI 259 - CESTAT NEW DELHI – Held that: - most of the services involved in the present appeal stand covered by the above referred decision and in respect of balance services, the documents were required to be verified, examined – appellant at liberty to put forth their case and and are at liberty to refer to and rely on any other precedent decision of the Tribunal so as to substantiate their argument – matter remanded – appeal allowed – decided in favor of appellant. 2016 (9) TMI 428 Condonation of delay – outdoor catering services – infirmities in the quantification of demand - rectification of mistakes sought by filing ROM petition - Section 74 of the Act - non-service of ROM order – Held that: - rejection order of ROM was not served on the appellant or their authorized signatory, though it was furnished to the person who was not authorized signatory of appellant - the time taken from the date of impugned order till receipt of rejection of ROM order has been satisfactorily explained by appellant – no deliberate intention on the part of the appellant – delay condoned – decided in favor of appellant. Central Excise 2016 (9) TMI 427 Whether two show cause notices on the same issue, proposing same cause of action, can be issued & whether extended period can be invoked in the second show cause notices - Held that:- it is observed that first show cause notice dt 23/9/97 was issued by AC CCx. Cuttack for 1202.187 MT of Alumina as per auditor s report, demanding duty of Rs. 23,95,091/- under Rule 57 I (2) and proposing penalty under Rule 173 Q of the Central Excise Rules 1944. The same cause is existing in show cause notice dt 28/9/2000, except for the difference that later show cause notice was as a result of one investigation conducted by Central Preventive Unit of HQ. There is no indication that some glaring additional documents were recovered by the department, which were not available while issuing the first show cause notice dt 23/9/97, requiring issuing of a second show cause notice by invoking extended period. It is now a well accepted legal proposition that a second show cause notice on the same issue can not be issued when no additional evidence has been recovered by the investigating agency. Whether a Commissioner can decide show cause notice made answerable to Assistant Commissioner - Held that:- Rule 3 (3) of the Central Excise Rules 2002 allows a Senior Central Excise Officer to exercise the powers and discharge the duties conferred on any Central Excise Officer subordinate to him. This power was earlier available under Rule 6 of the Central Excise Rules 1944. Otherwise also appellant should not have any objection if their dispute is settled at a higher level of Adjudication Rather revenue is losing one level of appeal. It is thus held that preliminary objection raised by the appellant, regarding jurisdiction of Adjudicating authority to decide show cause notice dated 23/9/97, is not sustainable. Whether there was a shortage in the stock of duty paid Alumina received by the appellant as per their auditor's report dt 25/10/1996 - mid year stock taking done by the appellant's auditors indicated a shortage of 1202. 187 MT of duty paid Alumina brought by the appellants as inputs from their sister concern on which Modvat credit was taken - Held that:- it is the case of appellant that midyear stock taking is not accurate as all the standards, followed during year end stock taking, are not followed during midyear stock taking. It is also appellant's case that mid year stock taking is done when appellant's smelting plant is being continuously run and dip measurement taken during such continuous run could be defective. It is observed that this aspect has been highlighted by the appellant before the Adjudicating authority in their reply to the second show cause notice & reply to the first show cause notice. Appellant filed before this bench a chartered Accountant's certificate, alongwith Annual Report of NALCO for the year 1995-96 and other documents, to argue that mid year stock taking done by their auditors is not of much relevance as during the year end reconciliation no shortage was found. Since the above Chartered Accountant certificate and other documents, were not produced before the Adjudicating Authority, therefore, the matter is required to be remanded to the Adjudicating authority to examine whether the mid year audit report done in Oct 1995 can still be relied upon in the light of documents now furnished by the appellant. However, it is observed that appellant being a Public Sector undertaking and has a reasonable explanation for the alleged shortages, can not be fastened with the penal liability. Accordingly penalty imposed upon the appellant under Rule 173 Q of the Central Excise Rules 1944 is set aside. - Appeal disposed of 2016 (9) TMI 426 Deemed manufacture - marketability - crude items processed out of the blanks - goods not mere process of gear teeth cutting on machined blanks sent by the customer which are returned to them after above operation - items like gears, pinions, housing etc. were cleared in crude form and major operation like heat treatment, slotting, broading, grinding, lapping etc. were carried out by the customers and were cleared as finished article - Held that:- the samples produced by the appellants are finished products which only requires few further operations at the hands of the appellant's customer. The products which are manufactured by the appellant from raw material/ blanks can be termed as finished product which needs only further processing. Therefore, on merits section Note 6 to Section XVI of the Central Excise Tariff Act will directly apply. Revenue raised demand by issuing two different show-cause notices. Show-cause notice dated 28.05.1992 is issued for the period 10.12.1991 to 14.01.1992. It is found that this show-cause notice is within the period of limitation and demands as raised in the said show-cause notice are correctly held to be payable by the appellant and we do not see any reason for interfering with such an order. As regards show-cause notice dated 29.09.1993, it is found that this show-cause notice is issued by invoking the extended period of time and demand is for March 1989 to November 1991. In our considered view, this demand which has been worked out by invoking the extended period is unsustainable, inasmuch prior to 1986 when new tariff was introduced, Tribunal had held that the products which are manufactured by the appellant from the same blanks and the machinery used are non-excisable could have created a bonafide impression in the mind of the appellant subsequent to the new tariff act, coming into existence that their products are not excisable. This our view is fortified by the fact the lower authorities have not disputed the fact that the appellant manufactured the same items with the same process, as was done by him prior to 1986. Therefore, the demands raised by the show-cause notice dated 29.09.1993 is confirmed by the impugned order. - Appeal disposed of 2016 (9) TMI 425 Duty liability - Isolated soya protein - process undertaken by appellant amounts to manufacture or not - Held that:- the objective of the process of manufacture of protein isolate appears to be to increase the concentration of the protein while at the same time eliminating the content of carbohydrate. As per the flow chart, the starting point of the making process is de-oiled cake, i.e. de-fatted. The net result is that the final product - isolate soya protein is nutritionally very different from the starting raw material - soya flour. In the landmark judgment on the subject of manufacture in the case of DCM Cloth Mills [1962 (10) TMI 1 - SUPREME COURT OF INDIA] the Apex Court has laid-down the yardstick to determine if an activity or process amounts to manufacture. When we apply such yardstick to the facts of the present case, there is very little doubt that, a new product, viz isolated soya protein which is perceived differently and which has a name, character and use which is totally different from the raw material namely soya flour, has come into existence. Therefore, we have no hesitation in concluding that the process of manufacture has been undertaken by the appellant and that the final products, ‘soya protein isolate’ would be chargeable to duty. Period of limitation - proviso to Section 11A - activity was within the knowledge of the department inasmuch as the appellant were regularly filing declarations as required under the SSI provisions declaring the product as well as the value of clearances made in the financial year - no declaration made of the fact that appellant have other units situated elsewhere in Dholi, Haldia as well as Gadarwara - Held that:- it is found that that the appellant has suppressed the material fact about details of other units. Only during investigation the department could unearth that the appellant’s company is also having other units and when total clearances of all these units are considered together, the appellant were not eligible for the exemption under the SSI notification. Therefore, the extended time limit under provision to Section 11A has been rightly invoked by Revenue. - Decided against the assessee 2016 (9) TMI 424 SSI Exemption - Demand for January 1998 to March 1998 - manufacture of plastic spoon for Complan and Farex - availment of ineligible concessional rate of duty under SSI notification 4/97 - appellant claimed that they had not availed modvat/ cenvat credit in respect of inputs used for manufacture of Farex spoon - Held that:- Notification 4/97 dated 01.03.1997, clearly envisages the exemption to final product to SSI only if modvat credit is not availed. In the absence of any evidence indicating that the appellant had not availed the modvat credit on the inputs, the impugned order confirming the demand of the duty with interest is correct. Imposition of penalty - Rule 173Q of the erstwhile Central Excise Rules, 1944 - Held that:- it is found that the adjudicating authority as well as the first appellate authority has not indicated under which sub-rule of Rule 173Q the penalty has been imposed. It is a settled law that for imposing penalty under Rule 173Q, specific sub-rule needs to be invoked. In any case, we find that the appellant could have entertained a bona fide belief that he can avail the benefit of SSI exemption in respect of Farex spoon which are manufactured out of inputs on which modvat credit was not availed. Therefore, the appellant need not be visited with any penalty under Rule 173Q. - Decided partly in favour of assessee 2016 (9) TMI 423 Whether in terms of the provisions of Section 35 E(2) of the Central Excise Act, 1944, directions to file the appeal are required to be given by the Commissioner only to the very same authority, who adjudicated the case or the same can be given to any other authority - Held that:- The Hon'ble High Court of Delhi in the case of C.C.E. vs. Maza Cosmetics [2006 (8) TMI 65 - HIGH COURT , DELHI] ruled that the Commissioner can direct "the adjudicating authority" to file appeal and in turn, the adjudicating authority can direct any officer to file appeal before Commissioner (Appeals). The ratio of decision of the Hon'ble High Court, which is directly on the point is applicable on all fours and needs to be followed as no contrary decision of any High Court on the provision of Section 35E(2) was brought to our notice. The very same question as is posed to Larger Bench was considered by the Hon'ble High Court of Bombay in the case of Silver Streak Welding Products India Pvt. Ltd. [2007 (9) TMI 222 - HIGH COURT BOMBAY]. Also the decision of the Apex Court in the case of MM. Rubber Co. [1991 (9) TMI 71 - SUPREME COURT OF INDIA] supports the view taken by the Hon'ble High Courts of Bombay and Delhi. Therefore, by following the decision of the Hon'ble High Court of Bombay and Delhi, we hold that the directions to file appeal are required to be given by the Commissioner only to the very same adjudicating authority is the mandate of the Section 35E(2) of the Act. - Decided against the Revenue 2016 (9) TMI 422 Cenvat credit - various inputs - period involved is from 01.04.2007 to 30.04.2009 - duty paying documents were not having full and complete address of the appellants - some items were not classifiable as 'Capital Goods' in terms of Cenvat Credit Rules, 2004 - Held that:- it is found that the duty has been discharged by the appellants and there is no allegation that the goods have been diverted. No credit has been availed by Unit-I located in the same address across the road. Therefore, when all the substantial conditions have been admittedly fulfilled, we find no legal justification in denying credit on mere technicalities. In view of the various decided cases and also in view of the fact that Rule 9 itself recognizes that the Assistant Commissioner may allow the credit even if the duty paid documents do not contain all the particulars but contain essential details like duty payable, description of goods, value, registration number of issuing person etc., we find no justifiable reason for denial of credit on inputs in the present case. Cenvat credit - capital goods like Asbestos, Gasket Sheets, Chequered Plates - classification not fitting into the category of 'Capital Goods' in terms of Rule 2(a) of Cenvat Credit Rules, 2004 - Held that:- the nature of usage, as submitted by the appellants, that these are, in fact, used along with other capital goods for joining the pipes or fabricating the solvent recovery plant, and as such their use justifies their categorization as 'Capital Goods'. Therefore, by following the judgment of Hon'ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills [2010 (7) TMI 12 - SUPREME COURT OF INDIA], the appellants are eligible for the credit on these items. Cenvat credit - other capital goods - ECC Code of the appellants was not figuring in the duty paid documents - Held that:- it is found that denial of credit only on the ground of ECC Code, originally not available in the documents, cannot be sustained. In any case, the said document contained all other relevant details and the ECC Code has been rectified by the suppliers on the request of the appellants. In the absence of any other ground for denial of credit, we find that the substantial benefit of credit on 'Capital Goods' cannot be denied on this procedural ground. - Decided in favour of appellant 2016 (9) TMI 421 Demand and confiscation - excisable goods seized in the factory premises and in the depot and godown premises of various traders - found in excess of the stock recorded in their daily stock account - Appellant contended that inasmuch as the order in the main case of evasion against the appellant has been set-aside by the Tribunal, the present proceedings should also be set-aside inasmuch as it has been held in the other proceedings that the allegation of clandestine manufacture and removal of goods is not sustainable. Held that:- the fact that this Tribunal has set-aside the order of confirming the demand on the allegation of clandestine removal, it would not be proper to consider this unaccounted stock as intended to be removed without payment of duty. Hence, we set-aside the confiscation of the seized goods valued at Rs. 35,730/-. Packing material and perfumery items totally valued at Rs. 10,41,892/- has been seized from the resident of Sh. Varun Gupta, Partner of the appellant, for the reason that these goods have not been accounted in the statutory records. Various quantity of gutka have also been seized from the godown of dealers/ traders under the belief that these goods have been cleared clandestinely without payment of duty from the factory of the appellant. Inasmuch as the entire proceedings initiated by the Revenue separately to establish clandestine clearance and demand of duty stands set aside by this Tribunal, we are inclined to take the view that seizure of these goods is not sustainable and hence the same is set-aside. Consequently, the proceedings for imposition of personal penalty on the concerned persons of the various traders also is liable to be set aside. - Decided in favour of appellant 2016 (9) TMI 420 Area Based Exemption - benefit under Notification No. 50/03-CE, dated 10.06.2003 - manufacture of MS Ingots at Kotdwar (Uttarakhand) - assessee made expansion for increase of production by 25% to avail benefit - entire old plant and machineries were replaced by new one - Held that:- the matter has already been considered and decided in favour of assessee by the Tribunal in the case pf Charu Steels Ltd. Vs. CCE, Meerut-I [2010 (2) TMI 446 - CESTAT NEW DELHI] for the subsequent assessment year wherein it was held that if the plants and machineries are in replacement of the old plant and machinery, but the object of increasing 25% capacity is achieved, then in terms of the said circular itself, the industry achieving the same would come within 4 corners of the notification dated 10/06/2003. The same was upheld by the High Court of Nainital in [2011 (5) TMI 137 - UTTARAKHAND HIGH COURT] and no further appeal has been filed against such order appearing the High Court Order as legal and proper. Therefore, no reasons found to interfere with the impugned order passed by the First Appellate Authority. - Decided against the Revenue 2016 (9) TMI 419 Job-work - Cenvat credit - cutting charges - service tax paid for conversation of paper reel into paper sheet - cutting is done after clearance of goods at the factory gate - duty paid at the factory gate in reel form - Held that:- in this case the respondent is including cutting charges in the assessable value of clearance paper in reel form from factory gate. In that circumstances, I hold that the respondent is entitled to avail cenvat credit of service tax paid on cutting charges, therefore, I do not find any infirmity in the impugned order and the same is upheld. - Decided against the Revenue 2016 (9) TMI 418 Whether re-packing of the goods after marking the supply order No., No. of objects inside the packet and other necessary details for due identification at the consignee’s end would be tantamount to manufacture as per the definition of manufacture given in Section 2(f)(iii) of Central Excise Act, 1944 - Held that:- as per definition packing or re-packing or Labeling or re-labeling container including declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to tender the product marketable to the consumer has been included in the definition of deemed manufacture as the goods are admittedly includes in the “Third Schedule”. Given the wide scope of above definition re-packing of the goods after marking that with the supply order No. and number of objects inside the package and other necessary details for easy identification at the consignee’s end would be squarely covered under the definition of manufacture because without such markings the product could not have been sold to the Customer which in this case is the Defence Department of Government of India because the agreements between the Ordinance Factory and the respondent, required the respondent to do so. Whether the respondent is entitled to the benefit of Notification No.64/95-CE even though, it had not followed the procedure prescribed under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods), Rule 2001 - Held that:- as regards the contention of the respondent that had it been aware that this process would amount to manufacture, it would have taken the benefit of Notification No.64/95- CE because the goods were supplied to Defence Department of Government of India for manufacture of vehicles falling under Chapter heading 87 and that the procedure prescribed, namely, the procedure under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 was just a procedural requirement and therefore, the substantive benefit would not be deniable on account of non-following of the same. Invokation of extended period of limitation - clandestine manufacturing of excisable goods - intentional terming of goods as “Trading goods” just to mislead the department - evasion of central excise duty and education cess - willful clearance of same without the cover of Central Excie invoice/Challan and without payment of Central Excise duty and without following the procedure - Held that:- from the show cause notice, it is difficult to detect the sustainable grounds on which the willful misstatement or suppression of facts can be alleged, leave alone sustained. The facts are that the goods were supplied to the Ordnance Factory, which is a part of Government of India and all the payment received by Cheque. Further, there is force in the contention of the respondent that had it been of the view that the process undertaken by it amounted to manufacture, it was easy for it to follow the Chapter 10 Procedure and claim the benefit of Notification No. 64/95 - CE. In this regard, it is also pertinent to mention that observance of “chapter 10” Procedure for claiming the exemption Notification benefit is a mandatory requirement has been settled by the Five Member Bench of the Hon’ble Supreme Court in the case of Commissioner vs. Harichand Shri Gopal [2010 (11) TMI 13 - SUPREME COURT OF INDIA] and prior thereto there were some decisions of the lower courts to the effect that observance of said procedure was only procedural requirement in which case during the relevant period the appellant could possibly have legitimately claimed the exemption benefit even without following the said Procedure. Thus, there is force in the respondent’s contention that there was no reason for it to indulge in wilfull misstatement or suppression of facts. Thus, the sufficient grounds do not exist in this case to sustain the allegation of willful misstatement or the suppression of facts, and therefore, the extended period cannot be invoked. The show cause notice in this case was issued on 07.05.08 and a period of demand involved is 2006-07 and therefore, the one year period (normal period) expired by the end of April 2008 while the show cause notice was issued in May, 2008. Therefore, the entire demand is beyond the normal period of one year and hit by time bar. - Decided against the Revenue CST, VAT & Sales Tax 2016 (9) TMI 410 Classification - bitumen emulsion - rate of tax - 12.5% - residuary entry - 4% - Serial no. 22 Part A of Schedule II to the VAT Act - 20% - Notification No. 100 dated 15.1.2000 issued under the erstwhile U.P. Trade Tax Act, 1948 - Section 11 of the U.P. Trade Tax Act, 1948 - Sections 81 and 58 of the VAT Act, 2008 - whether the Bitumen and Bitumen Emulsion are one and the same commodity for the purposes of interpretation of Entry No. 22 Schedule II Part A of the U.P. Value Added Tax Act, 2002 as was originaly enacted i.e. upto enforcement of notification no. 2758 dated 29.9.2008 - Held that: - the processes result in improvement of the quality of bitumen and there is no change in the characteristics or identity of bitumen so as to transform bitumen into a new product having an identity, characteristic and use. It has been ruled therein that there is a fallacy in the argument raised by the Revenue that bitumen per se would only include its solid hard form which melts at high temperature and not bitumen emulsion. The two varieties and types carry the same composition, do not differ in character and have the same commercial identity i.e. bitumen. That apart, the use or end use test is also satisfied - bitumen and bitumen emulsion are one and the same commodity - taxable at 4% - appeal dismissed - decided against Revenue. 2016 (9) TMI 409 Exemption from payment of entry tax - packing material of tea - packet tea - tea in tea bags - quick brewing black tea - notification dated 31.3.1993 issued under Section 11A of the Karnataka Tax on Entry of Goods Act, 1979 - Explanation II to a Notification dated 23.9.1998 issued under Section 3 of the said Act - goods - section 2 (4A) - schedule - section 2(7) - tax - section 2(8) - value of the goods - section 8a - goods - Section 2(A)(4a) of the Entry Tax Act - manufacture - levy of tax - whether “packing materials” which enter the local area for consumption therein, that is for packing tea that is manufactured by the appellant, can be said to be raw material, components, or inputs used in the manufacture of tea? - Held that: - the judgement of the case Nestle India Ltd. v. State of Karnataka [2006 (3) TMI 742 - KARNATAKA HIGH COURT], is followed where it was held that when raw materials, component parts and inputs are spoken of, obviously they refer to materials, components and things which go into the finished product, namely, tea in the present case, and cannot be extended to cover packing materials of the said tea which is separately provided for by the aforesaid Entry 66 - appeal dimsissed - decided against appellant. 2016 (9) TMI 408 Restriction on input tax credit - reversal of credit when sale price is lower than purchase price - Scope of sub-section (20) of Section 19 of the Tamil Nadu Value Added Tax Act, 2006 - retrospective or prospective effect - Held that: - It is a trite law that whenever concession is given by statute or notification etc. the conditions thereof are to be strictly complied with in order to avail such concession. Thus, it is not the right of the dealers to get the benefit of ITC but its a concession granted by virtue of Section 19. - As a fortiorari, conditions specified in Section 10 must be fulfilled. Challenge to constitutional validity of sub-section (20) of Section 19 of VAT Act has to fail. When a concession is given by a statute, the Legislature has power to make the provision stating the form and manner in which such concession is to be allowed. Sub-section (20) seeks to achieve that. - Decided against the assessee. Validity of amendment with retrospective effect - Held that:- The entire gamut of retrospective operation of fiscal statues was revisited by this Court in a Constitution Bench judgment in Commissioner of Income Tax (Central) I, New Delhi v. Vatika Township Private Limited [ 2014 (9) TMI 576 - SUPREME COURT] The amendment in-question fails to meet these tests as pronounced in the above decision. - Such a provision, therefore, cannot have retrospective effect, more so, when vested right had accrued in favour of these dealers in respect of purchases and sales made between January 01, 2007 to August 19, 2010. Thus, while upholding the vires of sub-section (20) of Section 19, we set aside and strike down Amendment Act 22 of 2010 whereby this amendment was given retrospective effect from January 01, 2007. - Decided partly in favor of assessee. 2016 (9) TMI 407 Validity of recovery proceedings - attachment of residential property of the surety (mother) of firm in which her son is a partner - Section 12 read with Rule 28(8) of the Andhra Pradesh General Sales Tax Act and Rules, 1957 - Held that: - It is settled law that the surety given by a person, on behalf of the assessee, would remain in force against the tax payable under the APGST Act for a year as estimated by the assessee. As the estimated turnover declared in Form D is Rs. 20,00,000/-, and the rate of tax during the said period was 4%, the liability of the surety, to pay the tax arrears of the partnership firm, is only upto Rs. 80,000/- and not beyond - the impugned demand notice, to the limited extent the surety was called upon to pay an amount in excess of Rs. 80,000/-, is set aside. The respondents may proceed and recover the arrears of tax, due from the partnership firm, upto a limit of Rs. 80,000/- from the petitioner-surety under the Revenue Recovery Act - It is made clear that this order shall not preclude the respondents from proceeding against the partnership firm, or its partners, for recovery of the balance arrears of tax due - petition disposed off - decided in favor of petitioner.
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F: Superintendent's Authority to Issue DRC-07 Summary When Original Deman...

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H: Assessee in Power Business Denied Enhanced 35% Depreciation Under Sect...

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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter September 12, 2016

TMI SMS

Articles

1. APPLICATION UNDER SECTION 7(7) OF COMPANIES ACT, 2013 BEFORE NATIONAL COMPANY LAW TRIBUNAL

2. GOODS AND SERVICES TAX LAW – IN THE MAKING

3. RBI Governor changed - How does it matter?

Notifications

1. S.O. 2915(E) - dated 10-9-2016 - CGST

Circulars / Instructions / Orders

1. F.No.225/195/2016-1TA-II - dated 9-9-2016

2. F. No. 450/25/2009-Cus-IV - dated 7-9-2016

3. F. No. 450/25/2009-Cus IV - dated 7-9-2016

Highlights / Catch Notes

GST

GST Council Formation Begins: Key Step in India's Tax Reform Under Constitution (101st Amendment) Act, 2016.

Income Tax

Assessee's Favor: Balance of Convenience Supports Them in Sesame Seeds Shortage Issue with 0.86% Overall Shortage.

Showroom Renovation Costs Deemed Revenue, Not Capital Outlay, Affecting Financial Classification.

Taxpayer Denied Exemption for Swimming Pool Construction u/s 54F of the Income Tax Act.

Gift Tax Cases Require More Than Donor Identity; Human Probability Test Crucial for Authenticity and Legitimacy Assessment.

Delay Penalty Deductible from Profits Based on Actual Invoices, Adjusted for Price Reduction Annually.

Mauritius Resident Exempt from Indian Capital Gains Tax on Share Transfer Under Article 13(4) of India-Mauritius Treaty.

High Court Upholds Validity of Notice u/s 292-BB of Income Tax Act, Despite Issuance and Service Issues.

Assessment Reopening Requires Tangible Evidence, Not Audit Opinion, Says Court on AO's Belief.

Limited Company Penalized u/s 271D for Receiving Unsecured Loan in Cash; Ignorance of Law Not Accepted.

Customs

Importer Gains Refund After Initially Missing Notification No. 12/2012 Benefits on Ferrite Magnets Consignments.

Refund Claim Under Customs Act: Protest Recorded, Limitation Period Not Applicable.

Amendment to Notification No. 37/96 by No. 124/2000 on Nepal imports doesn't apply retrospectively; affects SAD exemption.

Corporate Law

Tribunal Approves Petitioner's Request to Align Financial Year with Calendar Year for Consolidation with Holding Company.

Indian Laws

Court Clarifies Retailers Can't Charge Over MRP for Beer Under Legal Metrology (Packaged Commodities) Rules 2011.

Service Tax

Deputation of staff to their own organization is not manpower recruitment; no service tax liability applies.

Court Rules Mid Day Meal Providers Not Liable for Service Tax on Payments from Schools or Government.

Refund Claim Rejection: One-Year Period u/s 11B Starts After Quarter Ends Per Rule 5 of CCR, 2004.

Toll Tax Collection by Appellants Under Municipal Agreement Exempt from Service Tax on Retained Amount.

Airlines' Airport Taxes and Fees Excluded from Service Tax Assessment Under New Guidelines.

Central Excise

Products Classified as Finished Under Central Excise Tariff Act; Subject to Duty as Deemed Manufactured Goods.

Isolated Soya Protein Manufacturing Process Confirmed as Manufacturing, Liable for Central Excise Duty under Regulations.

Section 35E(2) Requires Commissioner to Direct Appeals to Same Adjudicating Authority for Consistent Process in Excise Cases.

Cenvat Credit on Capital Goods Cannot Be Denied for Minor Procedural Lapses, Emphasizing Substance Over Form in Tax Matters.

Area-Based Exemption Applies with 25% Capacity Increase Through New Machinery under Notification No. 50/03-CE.

Re-packing goods with supply order details counts as manufacturing u/s 2(f)(iii) of the Central Excise Act, 1944.

Appellant can claim CENVAT credit for capital goods sent to sister unit as job worker u/r 4(5)(a).

Cenvat Credit Vital for Factory Cleanliness and Efficiency; Housekeeping Key to Workplace Safety.

VAT

Supreme Court Rules Bitumen and Bitumen Emulsion as Same Commodity for Tax Purposes, Streamlining Business Tax Processes.

Supreme Court Confirms Entry Tax on Tea Packaging Materials Under VAT and Sales Tax Regulations.

Input Tax Credit Restriction Cannot Be Applied Retroactively; Protects Dealers' Vested Rights from 2007 to 2010 Transactions.

Dealers Must Comply with Statutory Conditions to Avail Input Tax Credit; ITC is Not an Inherent Right.

Roasted Groundnuts Tax Rate Shifted from 1979 to 2004 Circular for Assessee Transactions.

IMFL Exempt from Multiple Taxes Post Initial Duty; State Government Opts for Single Excise Levy.

Case Laws:

Income Tax

Customs

Corporate Laws

Service Tax

Central Excise

CST, VAT & Sales Tax

Quick Updates:

TMI Tax Updates - e-Newsletter
September 12, 2016