TMI Tax Updates - e-Newsletter
September 14, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Trust - Registration u/s 12A r.w.s 115BC - anonymous donations qualify for deduction and it cannot be included in its assessable income - HC

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• MAT - 115JA - amount withdrawn from reserves - so long as the express language is in its favour, mischief or no mischief cannot be cured -HC

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• CENVAT Credit not allowed on duty paid on towers, parts of towers, shelters/ prefabricated structures as neither input nor capital goods -HC

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Articles

• Fast Track Exit
• Procedure for Registering Section 8 Company
• Doing business in India to get easy, registration in just a day

News

• IIP at 4.2 per cent for July 2015 is the Second Successive Month of over 4.0 per cent Growth : Manufacturing Sector is Slowly Emerging as a

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Circulars / Instructions / Orders

DGFT

• 35/2015-2020 - dated 11-9-2015
  Amendments in Appendix 4J and Appendix 4B of Appendices and Aayat Niryat Forms of FTP 2015-20.

Highlights / Catch Notes

Income Tax

• Disallowance under Sec.36(1)(va) r/w Sec.2(24)(x) - assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is not credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) of the Act - HC
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• Escaped income u/s 115JA - MAT - amount withdrawn from the reserves created or provisions made - The assessee may fall within the ambit of the mischief sought to be undone by Section 115JA. But so long as the express language is in its favour, the mischief or no mischief cannot be cured - HC
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• Scope of Section 115 BBC on trust - Registration under Section 12A denied - anonymous donations received by the Assessee would qualify for deduction and it cannot be included in its assessable income. - HC
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• Cost of Project u/s.35D(3)(a) - industrial undertaking - shares acquired cannot be treated by any stretch of imagination as land or building, plant or machinery etc., and treated as "cost of project" for the purpose of allowing deduction u/s.35D - AT
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• Disallowance of depreciation on land on which assessee had leasehold rights - depreciation cannot be allowed - the lump sum rent paid for the entire period of 30 years has to be considered as revenue expenditure - AT
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• Income under the head “Long Term Capital Gain” (LTCG) on surrender of tenancy rights - leasehold rights have been acquired by the assessee’s predecessors in interest in the year 1907 - The assessee would therefore be entitled to claim deduction of cost of acquisition of leasehold interest as on 1.4.1981 - AT
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• Applicability of provisions of 10A(7) - without establishing through positive evidence that assessee and its related party have arranged their business transaction in a manner to produce more than ordinary profit to assessee, AO cannot invoke the provisions of section 10A(7) read with section 80IA(10) on mere presumptions and surmises. - AT
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• Anonymous donations - addition u/s 68 as unexplained cash credits - once donation received was taken as income of the assessee which was applied for charitable purposes, provisions of section 68 of the Act cannot be invoked - AT
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• Denial of deduction u/s.80P - the amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest - it is liable to be deducted u/s 80P(1) - AT
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• Penalty u/s. 272A(2)(c) - non-submission of information as willful default - Addl. CIT initiated penalty proceedings by issuing only one notice but levied penalty for three notices - This indicates that without issuing notice, the Addl. CIT, CIB levied penalty three times for the same default. This cannot be justified. - AT
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• Disallowance of interest expenditure u/s 36(1)(iii) - Unless the department establishes a nexus between investment made and the borrowal of funds, no disallowance of interest expenditure on presumptive basis can be made. - AT
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• Interest received from bank deposits/balances - whether is covered by ‘Principles of mutuality’ or not? - interest received from third parties cannot be exempted under the ‘Principles of mutuality’ - AT
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• Meaning of expression “such income” in section 11(1)(a) - the expression “such income” means gross income and not the net income after deducting the administrative expenditure. - AT
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• Sale of depreciable assets - computation of capital gains r.w.s 50C - The WDV would have to be necessarily computed in terms of section 43(6), and for which section 50C has no application. how we wonder the opening WDV could be altered without first changing the depreciation for the immediately preceding year and, concomitantly, the WDV at the close of that year. - AT
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Service Tax

• Denial of refund claim - Unjust enrichment - Onus to prove - service tax which has been recovered from the customer, who has taken cenvat credit of the said service tax - refund not allowed - AT
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• CENVAT Credit - duty paid on towers (in CKD/SKD form), parts of towers, shelters / prefabricated buildings - Goods are neither ‘capital goods' as defined in rule 2(a)(A) of the CENVAT Credit Rules, 2004 and nor do they fall within the definition of ‘input' as defined in rule 2(k) thereof - credit not allowed - HC
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Central Excise

• Recovery of excise duty - Liability of successor - Purchase of immovable property assets - though the under taking is given by the appellant, the same is not sufficient for enforcing the recovery of arrears as the appellant is not legally liable for payment of arrears of previous owner - AT
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• Cenvat Credit - Input services - in view of the circular dated 29-4-2011, though it is in respect of definition of "input service" during period w.e.f. 1-4-2011, commission agents service would be cenvatable as the term "advertisement and sales promotion" was there in the definition of input service even during period prior to 1-4-2011. - AT
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• Denial of exemption claim - tribunal has clubbing the three appeal and delivered different decisions - If there was justification for rendering a separate finding in the case of the Petitioner's Appeal, then, in the first instance it is not clear as to why it was clubbed along with other Appeals - HC
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• The detailed conditions prescribed in Notification No.214/1986 are substantive conditions, which require fulfillment so as to ensure that the goods manufactured by the assessee suffer duty of excise at the hands of the customer who has supplied the inputs free of cost to the job worker.- HC
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• Request for quashing of complaint - Section 9AA of the Central Excise Act, 1944 - without impleading the partnership firm, prosecution initiated against the partners is not maintainable and on that ground, these petitions may be allowed - HC
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• Duty demand u/s 11D - sale of goods as inclusive of duty - appellant is not the manufacturer of the goods and has not paid any excise duty. They are only trading and working with the profit on the discount extended by the manufacturer on the price fixed by NPPA - No demand - AT
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• Cenvat Credit - use of oxygen and acetylene gases as input - assessee is entitled to avail CENVAT credit on oxygen and acetylene gases which are being used in repair and maintenance of plant and machinery as inputs - AT
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• Demand of interest u/s 11AB - interest on reversal amount of cenvat credit - appellant cannot take the shelter of Rule-6(3A)(e) of the CCR to avoid payment of interest. Once a monthly payment mode is prescribed the same is required to be discharged by the appellant. - AT
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• Duty evasion - Whether or not the appellant collected in the name of excise duty any amount from their buyers which they failed to deposit to the Government - appellant did collect amounts representing Central Excise duty and retained the same - demand and penalty confirmed - AT
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VAT

• Detention of Goods – Non availability of E-Transit passes – TNVAT - petitioner's vehicles need not carry E-Transit pass in middle of transit - when subject vehicles, have accompanied with KK Forms, Bill of Entry and Sale Bill of Seller in Bombay against C Forms, first respondent could have released vehicles, along with goods, after verifying above documents - HC
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Case Laws:

• Income Tax

• 2015 (9) TMI 560
  Disallowance under Sec.36(1)(va) r/w Sec.2(24)(x) - remittance of employees' contribution to Provident Fund and ESI has been delayed beyond the due date of payment prescribed under the respective Acts - ITAT deleted the addition - Held that:- If the intention of a particular provision of a statute can be gathered from the language used by the legislation, then we are bound to abide by the language used therein in order to ascertain the intention. We are also of the opinion that there was a clear logic behind Sec.36(1)(va) and Explanation thereto since the Legislature intended that the amount received towards contribution of the employee was money belonging to the employee and the assessee was not entitled to utilise the said fund and enrich himself. So also, both the provisions supra will co-exist harmoniously without disturbing each other. Therefore, the distinction drawn to credit the amount of the employer and the employee was with a clear objective and there is no illegality or other legal infirmity in classifying the contributions of employees and employer in the matter of crediting the same to the appropriate statutory authorities. In that view of the matter, we are of the considered opinion that the view taken by the Tribunal which affirmed the decision of the 1st Appellate Authority that the Respondent was entitled to get deduction of the contributions received from the employees if paid on or before the filing of the return under Sec. 139(1) was not correct. We are inclined to agree with the judgment of the Gujarat High Court in 'Gujarat State Road Transport Corporation's case (2014 (1) TMI 502 - GUJARAT HIGH COURT) wherein held There is no amendment in Section section 36(1)(va) of the Income Tax Act and considering section 36(1)(va) of the Income Tax Act as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 applies, assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is not credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) of the Act - By deleting Second Proviso to section 43B by Finance Act, 2003, it cannot be said that Section 36(1) (va) is amended and/or explanation below clause (va) of sub-section (1) of section 36 is deleted, which is with respect to employees' contribution - Decided in favour of revenue.

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• 2015 (9) TMI 559
  Reopening of assessment - escaped income under Section 115JA - assessee had written back depreciation wrongly in their profit and loss account and that therefore the income chargeable to tax had escaped assessment - Tribunal held that books profit is not to be reduced by the excess provisions of depreciation credited in the profit and loss account? - Held that:- The proviso under clause (i) of the Explanation makes it clear that in case where Section 115JA is applicable to an assessee in any previous year, the amount withdrawn from the reserves created or provisions made "in a previous year relevant to the assessment year commencing on or after the first day of April, 1997", shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions out of which the said amount was withdrawn under the Explanation. It is not the case of the assessing officer that the provisions made by the assessee in this case were relatable to a previous year relevant to the assessment year commencing on or after the first day of April, 1997. Pointing out the object behind Section 115JA, it was contended by Mr.J.Narayanasamy, learned standing counsel that by a jugglery of the accounting methods, the assessee cannot always make it a "zero tax" company even while making profits or at least showing profits to certain stakeholders. We appreciate the concern. But the law relating to income tax being what it is, we do not think that the Court is entitled to go in for a purposive interpretation when the plain language of the taxing statute is clear. Explanation (i) is very clear in its purport. The assessee may fall within the ambit of the mischief sought to be undone by Section 115JA. But so long as the express language is in its favour, the mischief or no mischief cannot be cured. - Decided in favour of assessee.

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• 2015 (9) TMI 558
  Scope of Section 115 BBC on trust - Registration under Section 12A denied - receipt of anonymous donations - whether the case of the Assessee is clearly hit by the provision of Section 115BBC? - the case of the Assessee is not of public religious trust but a case of spiritual organization as held by AO - Penalty proceedings under Section 271(1)(c) were directed to be initiated separately - ITAT allowing the Assessee’s appeal concluded that the Revenue had wrongly applied Section 115 BBC of the Act to the case of the Assessee and accepting that the Assessee-Trust was carrying out various religious activities Held that:- What can constitute religious activity in the context of the Hindu religion need not be confined the activities incidental to a place of worship like a temple. The Supreme Court in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar [1954 (4) TMI 29 - SUPREME COURT] held that “a religious denomination or organization enjoys complete autonomy in the matter of deciding as to what rites and ceremonies are essential according to the tenets of the religion they hold and no outside authority has any jurisdiction to interfere with their decision in such matters.” It might well be that a Hindu religious institution like the Assessee is also engaged in charitable activities which are very much part of religious activity. In carrying on charitable activities along with organising of spiritual lectures, the Assessee by no means ceases to be a religious institution. The activities described by the Assessee as having been undertaken by it during the AY in question can be included in the broad conspectus of Hindu religious activity when viewed in the context of the objects of the Trust and its activities in general. No legal infirmity in the conclusion of the ITAT that for the purpose of Section 115 BBC (2) (a) anonymous donations received by the Assessee would qualify for deduction and it cannot be included in its assessable income. - Decided against revenue.

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• 2015 (9) TMI 557
  Income on account of short term capital gains on sale of property - selection of assessment year for taxation - Tribunal accepting the additional evidences setting aside the entire issue of Short Term Capital Gain - Held that:- Even where an assessee has offered tax in the subject assessment year, it was open to the assessee before the Appellate Authority to raise additional grounds to the effect that same should not be included in the total income for the purposes of taxation. The entire issue is with regard to the year of taxability has been restored to the Assessing Officer for fresh consideration. Therefore, the issue raised herein would also be a subject of consideration of the Assessing Officer while passing the order on remand. In fact, the chargeability to tax as shortterm capital gain is not in dispute, only the year of taxability is to be examined. The Assessee itself has offered the above amount to tax as short-term capital gain - No substantial questions of law. - Decided against revenue. Depreciation on leased assets - Tribunal restoring the issue - Held that:- CIT(A) while following the order for the Assessment Year 1995-96 has not followed the same in its entirety. The CIT(A) after holding that the assessee is not entitled to its claim for depreciation as the lease transactions under reference, were not genuine did not consider the alternative submission made with regard to Finance Transaction. Besides, the order passed by the CIT(A) for the Assessment Year 1995-96, had not dealt with the genuineness of the lease transaction. Nevertheless, for the subject Assessment Year, he holds, it is not genuine without giving any notice to the Respondent-Assessee. Therefore, by the impugned order, the Tribunal held that CIT(A) has decided on the issue of the lease transaction not being genuine without having given a hearing to the RespondentAssesee. The CIT(A) ought to have given Respondent-Assessee an opportunity to meet the same.It is in the above view that the impugned order of the Tribunal has restored the issue as raised in Question No.3 to the Assessing Officer for fresh consideration - No substantial questions of law. - Decided against revenue.

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• 2015 (9) TMI 556
  Revision u/s 263 - as per CIT(A) AO did not verify the claim of the Assessee for deduction u/s.35D of the Act, by taking note of the definition of capital employed and as to whether share premium can be considered as part of the capital employed and whether FCCBs can be considered as debentures and taken as part of capital employed for the purpose of allowing deduction u/s.35D of the Act - Held that:- In the present case, the 1st year in which relief was allowed u/s.35D of the Act has since been modified. Though such modification happened after the order u/s.263 of the Act, which order is impugned in this appeal, it cannot be said that the 1st year of allowance of deduction u/s.35D of the Act stands allowed as claimed by the Assessee. In none of the decisions relied upon by the Assessee, it has been held that even if the 1st year of allowance of a claim is withdrawn at a later point of time, still the revisional order would be bad in law on the ground that the 1st year a claim had been allowed. We are of the view in such circumstances, the exercise of jurisdiction cannot be attacked on the ground that it is only in the 1st year of allowance of a claim which is to be allowed over a period of time that jurisdiction u/s.263 can be exercised. We therefore reject this argument of the learned counsel for the Assessee. - Decided against assessee. Relief on the basis of "Cost of Project" u/s.35D(3)(a) - Held that:- It is only the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are acquired or developed in connection with the extension of the industrial undertaking or the setting up of the new industrial unit of the Assessee that should be considered. The Assessee issued GDRS and FCCBs and incurred expenditure in this regard. The proceeds of the issue were used to acquire shares of two foreign companies and thereby gain control of the two foreign companies. Therefore there were no fixed assets that were acquired or developed in connection with the extension of the industrial undertaking or setting up of the new industrial unit of the Assessee. The argument of the learned counsel for the Assessee cannot therefore be sustained and shares acquired cannot be treated by any stretch of imagination as land or building, plant or machinery etc., and treated as "cost of project" for the purpose of allowing deduction u/s.35D - Decided against Assessee. Share Premium - whether can be regarded as part of the Issued Share capital while computing "Capital Employed"? - Held that:- Sec.254(2) and the regular assessment proceedings, cannot be applied in the context of provisions of Sec.263 of the Act. The power u/s.263 of the Act is a supervisory power and protection of the interest of the revenue owing to an erroneous order is the salutary purpose of those provisions. The provisions of Sec.78 of the Companies Act, 1956 on which the decision of Sirhind Steel Ltd. (2005 (9) TMI 218 - ITAT AHMEDABAD-D) proceeded provides for a limited fiction of treating share premium as part of paid up capital for the purpose of reduction of the same. Sec.78(2) of the Companies Act, 1956 prohibits use of share premium for any purpose other than the purposes set out therein. Can it be said that share premium could be employed in the business of the Assessee as share capital? In our view therefore there is no merit in the contention of the learned counsel for the Assessee that share premium should be regarded as part of the "issued share capital" for allowing deduction u/s.35D of the Act - Decided against the Assessee. Treatment to FCCB - whether FCCBs can be considered as "Debentures" and taken as part of capital employed for allowing deduction u/s.35D? - Held that:- Conclusions of the CIT are unsustainable. In the light of the definition of Debentures as contained in the Companies Act, 1956 to include Bonds and in the light of the fact that the FCCBs in question are in the nature of bonds as defined in the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 wherein the meaning FCCBs is given as "bonds issued in accordance with the said scheme and subscribed by a non-resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments, we are of the view that FCCBs are to be regarded as debentures and consequently be considered as part of "capital Employed" for allowing deduction u/s.35D of the Act. - Decided in favour of the Assessee. Unrealised foreign exchange gain - Whether should be treated as "Income" or not? - Held that:- In our view the facts of the case in the decision of the Madras High Court in the case of PVP Ventures Ltd. (2012 (7) TMI 696 - MADRAS HIGH COURT ), is identical to the facts of the case of the Assessee in this appeal. FCCBs are instruments issued to investors for raising funds which is repayable after certain period. It is a debt instrument. The increase or decrease in liability on account of fluctuation in foreign exchange as on the date of the Balance sheet would increase or decrease the liability of the Assessee and such liability would be on capital account. Therefore the gain or loss would be on capital account and not taxable. - Decided in favour of the Assessee.

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• 2015 (9) TMI 555
  Transfer pricing adjustment - selection of comparable - Held that:- Maple eSolutions Ltd. be excluded from the set of comparable companies as objection of the assessee with reference to this company is with regard to the financials of the company, on the ground of unreliability of data being acceptable. Vishal Information Technological Services Ltd., Asit C Mehta Financial Services Ltd. (earlier known as Nucleus Netsoft & GIS (India) Ltd.) - Admittedly, as pointed out by the ld. D.R., there is no disputing the fact that the assessee had never objected to the inclusion of these companies in the set of comparables in earlier proceedings both before the TPO and the CIT(A). It is also seen that even in the grounds of appeal raised before us, the assessee has not raised any grounds or any additional grounds of appeal challenging the inclusion of these two companies in the list of comparables. In this factual matrix, since no cause of grievance arises to the assessee from the impugned order, on the inclusion of these companies as comparables, this claim of the assessee is not maintainable as there is no adverse finding in the impugned orders calling for or requiring us to adjudicate thereon. We, therefore, finding that the contentions raised by the learned Authorised Representative of the assessee in respect of these companies are not maintainable, reject the same. Consequently, the inclusion of these two companies i.e. Vishal Information Technological Services Ltd. and Asit C Mehta Financial Services Ltd. in the final list of comparables is upheld. Computation of Operating Cost of the assessee - assessee's claim for treating its claim for additional depreciation to be treated as an item of extra-ordinary expenditure and therefore should be reduced from operating cost - Held that:- If, as contended by the assessee, this expenditure pertains to earlier assessment year's also, then in the fitness of things this issue ought to be re-examined afresh by the TPO to ascertain whether and how the assessee's claim has been applied to the comparable companies also so that there will be parity when the said expenditure is proportionately applied to the operating cost of the assessee and comparable companies. In this view of the matter, we set aside the issue of the assessee's claim of additional depreciation being an item of extra-ordinary expenditure to the file of the TPO for fresh examination and adjudication thereon in the light of our observations above, after affording the assessee adequate opportunity of being heard and to file details/submissions required. Contingent expenses in the nature of provision for telecom expenses - Held that:- As it is seen that the assessee has itself disallowed these expenses in the computation of taxable income on the ground that it is contingent liability. We find that the assessee's reliance on the decision in the case of Haworth India Pvt. Ltd. (2013 (8) TMI 421 - ITAT DELHI), wherein it has been held that expenses disallowed should be excluded from operating cost, is well placed and therefore agree with the assessee's contention that expenses disallowed in computation of taxable income should be excluded from operating cost.- Decided in favour of assessee. Foreign exchange income/loss to be non-operating income/loss and excluded the same while computing the margins in the case of comparables - it is submitted that on grounds of parity the same should be excluded from operational income/loss while computing the margins of the assessee also - Held that:- On consideration we are unable to accept the assessee's claim. We find that there are several decisions of this and other Tribunals which hold that foreign exchange gain/losses related to the assessee's business activities are to be treated as operating income/expense for computing the operating margins of both the assessee and the comparable companies and therefore, we uphold the TPO's action in including the same while computing the assessee's margins - we direct the TPO to recompute the margins of both the assessee and the comparable companies by treating the foreign exchange gain/loss as operating income and to compute the margins of both the assessee and the comparable companies accordingly - Decided against assessee. Deduction under Section 10A - assessee contended that the Assessing Officer erred in not appreciating that income which is eligible for exemption under Section 10A of the Act does not form part of total income at all and therefore does not enter the normal computation mechanism so as to enable a reduction of business losses and unabsorbed depreciation of other STP units - Held that:- The Hon'ble High Court of Karnataka in the case of CIT v. Yokogawa India Ltd. [2011 (8) TMI 845 - Karnataka High Court] has held that deduction under Section 10A of the Act is to be given without setting off the unabsorbed brought forward losses. In the case on hand, the Assessing Officer has computed the eligible deduction under Section 10A of the Act after setting off brought forward unabsorbed business losses. Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Yokogawa India Ltd. (supra), we direct the Assessing Officer to allow the deduction under Section 10A of the Act without setting off the brought forward unabsorbed business loses.- Decided in favour of assessee.

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• 2015 (9) TMI 554
  Disallowance of depreciation on land on which assessee had leasehold rights - alternate claim of assessee that the payment had to be allowed as revenueHeld that:- As decided in assessee's own case for AY 2006-07 to 2008-09 the lease rent paid for acquiring leasehold rights over the land can never be treated as cost of the plant (windmill). The functional test cannot be extended to a case of lease rent for acquiring leasehold rights over the land, whatever be the technical requirement of erecting a plant. The law is well settled that no depreciation is to be allowed on land. By placing reliance on the functional test, it is not possible to allow depreciation on land indirectly. If such a claim were to be allowed, then it could be extended to a case of a land over which a shopping mall is constructed. A shopping mall requires a good area/location, main road for good business. Can it be said that the rent paid for the land over which the shopping mall is constructed is part of the building on which depreciation is to be allowed? In our view, by applying the functional test, it is possible to contend in all the cases that the land is a tool of trade and has to be regarded as plant or building. We therefore decline to accept the proposition canvassed on behalf of the assessee. Hon’ble High Court of Karnataka in the case of HMT Ltd. (1992 (11) TMI 37 - KARNATAKA High Court), has considered the premium for acquiring leasehold rights as nothing but rent paid in advance. The rent paid in advance was for acquiring leasehold rights over the land. Such payment had been considered by the Hon’ble Court as revenue expenditure. In view of the aforesaid decision of the Hon’ble High Court which is in pari materia with the facts of the present case, we are of the view that the lump sum rent paid for the entire period of 30 years has to be considered as revenue expenditure. The CIT(A) wrongly distinguished this decision as a case of lease of factory building. We therefore accept the alternative prayer of the assessee. - Decided partly in favour of assessee. Disallowance u/s.14 of the Act read with Rule 8D - Held that:- It is crystal clear that assessee had a number of transactions in mutual fund units and equity shares during the relevant previous year. It would be naive to presume that assessee would not have incurred any expenditure, but for the brokerage. Claim of the assessee that no indirect expenditure was incurred and there was no necessity of any management inputs in taking decisions regarding the investment portfolio that were to be maintained during the year, cannot be believed.The rule of preponderance of probability can be applied in such circumstances, and the onus to show that no expenditure was indeed incurred falls back on the assessee. The circumstances here are such that the note given by the assessee before the AO was prima-facie incorrect and unbelievable. At the same time it is true that the AO had not called upon the assessee to prove its claim that no expenditure was indeed incurred by it for earning the exempt income. We set aside the orders of authorities below and remit the issue regarding disallowance under Section 14A back to the file of AO for denovo consideration after obtaining the explanation of the assessee. - Decided in favour of assessee for statistical purposes. Interest u/s.234B - assessee contested as paid advance-tax of more than 90% of the assessed tax - Held that:- It is clear that if the assessee had paid more than 90% of the assessed tax, then levy of interest u/s.234B cannot be done. Assessed tax has also been defined in the said section - In our opinion none of the lower authorities had applied their mind to the relevant section before charging interest u/s.234B of the Act. CIT (A) had considered it simply as a consequential ground. We set aside the issue of levy of interest u/s.234B of the Act, back to the file of the AO for consideration afresh in accordance with law. - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 553
  Income under the head “Long Term Capital Gain” (LTCG) on surrender of tenancy rights - Whether the CIT(Appeals) was right in coming to the conclusion that there was no transfer of leasehold rights by the assessee in favour of the lessors? - Held that:- Admittedly, the compromise decree was registered and a sum of ₹ 8,49,639 was incurred as stamp duty and registration expenses in registering the compromise decree. A further sum of ₹ 5,81,090 had also been incurred to demolish the structure on the area surrendered to the lessors by the Assessee. It may be true that the compromise decree does not refer to the payment of the sum of ₹ 33 lacs as a payment for surrender of leasehold rights by the Assessee, but the circumstances of the case clearly show that the said payment was towards surrender of leasehold rights. The only modification is that the said sum of ₹ 33 lacs was to be taken by the Assessee after incurring expenses for registration of compromise decree and expenses of demolition of structures. The sum of ₹ 33 lakhs is therefore rightly assessable to tax u/s. 45 of the Act and not under the head ‘income from other sources. The fact that the compromise decree does not refer to the payment of ₹ 33 lacs cannot be the basis to hold that the said sum is not towards surrender of leasehold rights. There was no necessity for the lessors to pay the aforesaid sum but for the Assessee relinquishing leasehold rights over part of the property in favour of the lessors. We therefore hold that the sum of ₹ 33 lacs was paid in lieu of the Assessee surrendering his leasehold rights in favour of the lessors subject to certain directions for incurring of certain expenses by the Assessee and therefore the said receipt by the Assessee is attributable to release of leasehold rights in favour of the lessors. Consequently the sum of ₹ 33 lacs is assessable to tax under the head “Capital Gains” subject to the computation provisions of Sec.48 of the Act. We hold accordingly. Tax the FMV of 42 guntas of land & building obtained by the assessee under compromise decree in the form of perpetual leasehold right under the head ‘income from other sources’ - Held that:- As far as the assessment of FMV of 42 guntas of land & building which was given on a permanent lease to the assessee under the compromise decree as income from other sources, we are of the view that the assessee was already having leasehold interest over the said area of the land and the compromise decree only reaffirms the said position. The assessee has not acquired any right whatsoever over this property by virtue of compromise decree. Therefore, conclusion of the CIT(Appeals) to tax the FMV of this property is without any basis. There is no provision under the Act, under which the sum in question can be brought to tax. U/s. 56(2)(vii) which was inserted by the Finance Act, 2009 w.e.f. 1.10.2009, the FMV of immovable property which is transferred without consideration, can be brought to tax in the hands of transferee. Even assuming that there was a transfer of leasehold rights in favour of the assessee by virtue of compromise decree, the provisions of section 56(2)(vii) are not applicable for the assessment year 2006-07 and therefore assessment directed by the CIT(Appeals) cannot be sustained and the same is hereby deleted. Expenses towards dismantling structures of leasehold property - Held that:- U/s. 48 of the Act, there is no requirement that expenditure incurred wholly and exclusively in connection with the transfer, has to be incurred only by the assessee. Since the factum of expenditure having been incurred is not disputed and since, admittedly, this was an expenditure incurred wholly and exclusively in connection with such transfer, the deduction claim, in our view, had to be allowed. We hold and direct accordingly. We also find merit in the contention of the learned counsel for the Assessee that since this expenditure was specifically required to be incurred by the Assessee under the receipt cum acknowledgement dated 27.6.2006, it constitutes a diversion of income at source and cannot be construed as income that accrued to the Assessee. Deduction being the indexed cost of acquisition of the structure - Held that:- We are of the view that the said claim for deduction is unsustainable for the reason that the subject matter of transfer by assessee in favour of the lessors did not include any structure and therefore the claim would fail to satisfy the test as laid down in section 48(ii) of the Act. Cost of acquisition of leasehold rights disallowed - Held that:- The capital asset transferred was a leasehold right. Evidence on record goes to show that leasehold rights have been acquired by the assessee’s predecessors in interest in the year 1907 i.e., 07.12.1907 by paying a sum of ₹ 8,500. The assessee would therefore be entitled to claim deduction of cost of acquisition of leasehold interest as on 1.4.1981. The assessee will also be entitled to benefit of indexation of this cost upto the date of transfer of the leasehold rights. The assessee has not quantified this sum and therefore, in our view, it would be just and proper to direct the assessee to make a claim before the AO in this regard. The AO is directed to examine such a claim and allow deduction in accordance with law. - Decided partly in favour of assessee.

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• 2015 (9) TMI 552
  Applicability of provisions of 10A(7) - AO is of the view that assessee has declared unreasonably high rate of profit only for the purpose of claiming exemption u/s 10A - arrangement between assessee and its AE resulting in higher margin of profit, disallowance of part of deduction u/s 10A by invoking the provisions of section 10A(7) read with section 80IA(10) - Held that:- Profit margin declared by assessee at 97.40% cannot be considered to be unreasonable or unbelievable considering other factors pointed out by assessee like limited nature of expenditure incurred by assessee and the amount of risk involved as well as niche business area. Moreover, when comparable companies selected by AO himself show profit margin of 88% and 85%, there is not much variance between profit margin shown by assessee. Further, it has been brought to our notice by ld. AR, which has not been controverted by ld. DR, in the subsequent AY also assessee has declared profit at 96% and has also paid taxes of about 15 crores since the tax holiday has already expired. Considered in the aforesaid perspective, AO’s conclusion that only for the purpose of claiming higher exemption u/s 10A, assessee enhanced its profit margin, cannot be accepted. On plain reading of section 80IA(10), which is referred to in section 10A(7) of the Act, it is very much clear that the basic condition to be satisfied by AO is, he must establish it on record that assessee and its related party have arranged the business transaction in such a way that it produces more than the ordinary profit to the assessee carrying on the eligible business. Only when AO establishes on record such arrangement, he can proceed to estimate the profit of assessee at a reasonable rate. In the facts of the present case, on careful reading of the assessment order, we do not find any conclusive finding of AO that assessee and its AE have arranged business transactions in a manner to generate more than ordinary profit to assessee. At least, there is nothing mentioned in the assessment order to suggest that AO has satisfied such condition. Therefore, without establishing through positive evidence that assessee and its related party have arranged their business transaction in a manner to produce more than ordinary profit to assessee, AO cannot invoke the provisions of section 10A(7) read with section 80IA(10) on mere presumptions and surmises. See Aquila Software Services Hyderabad Pvt Ltd. Vs. DCIT [2015 (7) TMI 864 - ITAT HYDERABAD] - Decided in favor of assessee.

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• 2015 (9) TMI 551
  Deduction u/s 80IB on account of transport and other subsidies - CIT(A) allowed the claim - Held that:- Interest subsidy, transport subsidy and power subsidy received by the assessee are eligible for deduction u/s 80IB of the Act - See Commissioner of Income-tax Versus Meghalaya Steels Ltd. and M/s Pride Coke Pvt. Ltd. [2013 (7) TMI 175 - GAUHATI HIGH COURT ] - Decided in favour of assessee. Addition on account of closing stock valuation of raw materials - CIT(A) deleted the addition - Held that:- Fortunately the ld. DR had brought the assessment records at the time of hearing and on verification of the same, it was found that the assessee had indeed filed a reply letter containing the month-wise quantitative details together with its values, consumption details etc. for raw materials vide reply to question no.4 in his letter dated 26.12.2007. It is also seen that the revenue had not raised any ground before us for violation of Rule 46A and hence the contention raised by the ld. DR in this regard is dismissed. It is also seen that the assessee has been consistently following the weighted average price for valuation of closing stock of raw materials and similar addition made for A.Y.2004-05 in the hands of the assessee had been deleted by this Tribunal in assessee’s own case reported in [2008 (1) TMI 424 - ITAT CALCUTTA-A] - Decided in favour of assessee.

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• 2015 (9) TMI 550
  Eligibility for deduction u/s 54F - AO was of the view that the value shown in the registered sale deed can be considered as investment in a residential house for allowing exemption u/s 54F - Held that:- Assessee has parted with a sum of ₹ 54,70,887 to acquire a “ residential house”, in the sense, a house which is habitable. Therefore as far as proceedings under the Act are concerned, the Assessee cannot be denied the benefit of deduction u/s.54F of the Act. The fact that there was undervaluation of the value of the property for the purpose of stamp duty, is an issue which is alien to the question of allowing deduction u/s.54F of the Act, when the evidence on record clearly shows investment in construction of “residential house” to the extent of ₹ 54,70,887. The AO and the CIT(A) have ignored the fact that the Assessee has in fact made investment to the extent of ₹ 54,70,887 and therefore the deduction claimed u/s.54F of the Act ought to be allowed. The fact that there was discrepancy between the amount set out in the registered document and the agreement with the builder has already been noticed by the State Registration Authorities and the Assessee is contesting those proceedings. Those proceedings will not have any bearing with regard to the claim of the Assessee for deduction u/s.54F of the Act, as the factum of investment in acquiring a residential house and payment of ₹ 54,70,887 has been established and not disputed by the Revenue. - Decided in favour of assessee.

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• 2015 (9) TMI 549
  Eligibility to claim deduction u/s 80IB(10) - Held that:- Provisions of section 80IB(10) being beneficial in nature, too technical a approach, would defeat the purpose for which provision has been brought into the statute. Moreover, as far as ld. CIT(A)’s observation that the housing project should have been completed by 31/03/2011, we do not find the same to be acceptable. As assessee’s housing project has been approved after 1st April, 2005, the stipulated period within which assessee has to complete the project is five years. Assessee having completed blocks A, B & F within five years from the date of approval, in our view, it is eligible to claim deduction u/s 80IB(10) in respect of blocks A, B & F. Though, in principle, we agree that assessee is eligible to claim deduction u/s 80IB(10) in respect of blocks A, B & F, however, the quantum of deduction has to be verified. As could be seen, assessee has been recognizing revenue from Sadguru Krupa project by following percentage completion method and project of the assessee has started in FY 2007-08. As it appears, assessee in the years under consideration i.e. AYs 2010-11 and 2011-12 has recognized revenue on percentage completion method and has also claimed deduction u/s 80IB(10) on that basis. Therefore, it is very much necessary and essential to verify whether deduction claimed in these two AYs is for the entire project (all six blocks) or only blocks A, B & F. Neither the AO has examined this aspect nor the assessee has brought any material on record to indicate that deduction claimed u/s 80IB(10) for these two years is only in respect of blocks A, B & F. While computing assessee’s claim of deduction u/s 80IB(10), AO has to examine this aspect. With the aforesaid observations, we set aside the impugned orders of ld. CIT(A) and remit the matter back to AO for deciding afresh - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 548
  Anonymous donations - addition u/s 68 as unexplained cash credits - assessee trust - invoking provisions of section 115BBC - CIT (A) deleted addition on account of donations, not found explained by the Assessing Officer - Held that:- Though the Revenue has taken a plea that for anonymous donation, provisions of section 115BBC of the Act can be invoked but in the instant case where the assessee has filed various documents to prove the identity of the donors, these donations cannot be called to be anonymous. So far as applicability of provisions of section 68 of the Act is concerned, it has been held by various High Courts including the jurisdictional High Court that once donation received was taken as income of the assessee which was applied for charitable purposes, provisions of section 68 of the Act cannot be invoked. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm the same as he has adjudicated the issue in the light of various judicial pronouncements. Accordingly we confirm his order.- Decided against revenue.

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• 2015 (9) TMI 547
  Penalty u/s. 271(1)(c) - vlidity of notice u/s. 274 - unaccounted sales - entire sale value was treated as income of the Assessee and brought to tax rejecting assessee contention that only the gross profit on these unaccounted sales can be added as income of the Assessee and not the entire sales - Held that:- On the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of tin the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT ] wherein held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income.we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee.

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• 2015 (9) TMI 546
  Denial of deduction u/s.80P(2)(d) - assessee is a cooperative society - interest received by it on deposits placed with cooperative banks - Held that:- Deposits placed with banks could be considered only as investments irrespective of the classification done by an assessee. All deposits will be investments, unless the context otherwise suggest, whereas all investments may not be deposits. Therefore assessee was eligible for claiming deduction u/s.80P(2)(d) of the Act. As to whether interest income earned on surplus kept as deposit, was eligible for deduction u/s.80P(2)(a)(i) of the Act, issue has been settled in favour of the assessee by the judgment of Hon’ble jurisdictional High Court in the case of Tumkur Merchants’Souharda Credit Cooperative Society v. ITO [2015 (2) TMI 995 - KARNATAKA HIGH COURT ] wherein held the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act - Decided in favour of assessee.

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• 2015 (9) TMI 545
  Penalty u/s. 272A(2)(c) - CIT considered the non-submission of information as willful default and levied penalty - default in issuing notice - Held that:- There is no need for levy of penalty in the given cases. First of all, the notice issued u/s. 136 is a general notice asking for information which is not in the domain of the ITO, CIB. The CBDT itself has prescribed certain limits for calling for information and Income tax Act also prescribes various limits for furnishing information on a regular basis from the banks in annual returns. The details asked in various codes is neither prescribed by the Act nor supported by the Board’s circular. This information is specifically asked by ITO, CIB in a particular format may be on the strength of internal instructions. For example, the Time Deposits exceeding ₹ 2 Lakhs under code No. 003 is not to be generally furnished by the banks to the department in the presribed annual return, likewise, other codes also for which different amounts were prescribed by the Act. This indicates that this information was specifically asked for by the ITO, CIB. Instead of giving this separate notice for each code, a common notice was issued for all the three codes. Addl. CIT initiated penalty proceedings by issuing only one notice but levied penalty for three notices as extracted above. This indicates that without issuing notice, the Addl. CIT, CIB levied penalty three times for the same default. This cannot be justified. Not only that, there were various notices which are mentioned in the order which are not in the knowledge of assessee, therefore service of the notice also is to be doubted. Thus there is reasonable cause for non- compliance as required and therefore, penalty u/s. 272A(2)(c) cannot be levied, where there is bonafide and reasonable cause for non-compliance to the notice. Decided in favour of assessee.

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• 2015 (9) TMI 544
  Disallowance u/s 14A - Held that:- The issue in dispute is squarely covered by the decision of the ITAT in assessee’s own case for AY 2009-10 [2014 (11) TMI 229 - ITAT HYDERABAD ] wherein the Tribunal sustained the disallowance under Rule 8D(2)(ii) by observing as so far as disallowance @ 0.5% on the average value of investment under rule 8D(2)(III) is concerned, we are of the view that the same is in order. Reading of the provision contained u/s 14A and more specifically sub-section(3) of section 14A read with rule 8D(2)(iii) makes it clear, even where the assessee claims that he has not incurred any expenditure for earning exempt income, disallowance of expenditure deemed to have been incurred has to be worked out @ 0.5% on the average value of investments. As the AO has correctly computed disallowance in terms with rule 8D(2)(iii), the same deserves to be upheld. Accordingly, we sustain the addition made u/s 14A by the AO. - Decided against assessee. ESI contribution from the employees - disallowance u/s 36(1)(va) as amount deposited beyond prescribed due date - Held that:- As observed that different high courts while considering identical nature of dispute have held that employees contribution to PF and ESI, if, have been remitted to govt. account within the due date of filing of return u/s 139(1), the same will be an allowable deduction. See CIT Vs. Nipso Polyfabriks Ltd.[2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT] and CIT Vs. Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] - Decided in favour of assessee. Disallowance of interest expenditure u/s 36(1)(iii) - CIT(A) delted the addition - Held that:- It is well settled principle of law that unless a nexus is established between borrowed funds and the investment made for earning exempt income, no disallowance could be made on notional basis. In the present case, there is no dispute to the fact that borrowed funds were for specific purpose. It is not the case of the department that assessee during the year has not lent any money to its customers. That being the case, it cannot be said that borrowed funds were utilized for non-business purpose. Unless the department establishes a nexus between investment made and the borrowal of funds, no disallowance of interest expenditure on presumptive basis can be made. Further, it is not disputed that assessee was having enough surplus and reserves to make the investment in mutual funds. The Hon’ble Bombay High Court in case of CIT Vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) has held that if assessee is having own funds as well as borrowed funds, the presumption would be own funds have been utilized for making investment. In view of the aforesaid, since the revenue has failed to establish that borrowed funds were utilized for making investments, no disallowance of interest expenditure can be made notionally.- Decided in favour of assessee.

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• 2015 (9) TMI 543
  Interest received from bank deposits/balances - whether is covered by ‘Principles of mutuality’ or not? - assessee is a housing co-operative society and has claimed certain incomes as exempt on ‘Principles of mutuality - Held that:- Since jurisdictional High Court in the case of Secunderabad Club [2011 (8) TMI 752 - Andhra Pradesh High Court] has clearly held that interest received from third parties cannot be exempted under the ‘Principles of mutuality’, we reject assessee’s contentions, as the interest earned is not from the Members but from the third person i.e., bank in which assessee’s surplus funds are placed. Since the income received is from third party, we are of the opinion that ‘Principles of mutuality’ does not apply to the present facts. There is no merit in assessee’s grounds. Accordingly, they are rejected - Decided against assessee.

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• 2015 (9) TMI 542
  Meaning of expression “such income” in section 11(1)(a) - Held that:- Identical issue was considered by the Apex Court in Commissioner of Income-Tax Versus Programme For Community Organisation (2000 (11) TMI 4 - SUPREME Court ) which was also applied by the Special Bench of the ITAT Mumbai in Bai Sonabai Hirji Agiary Trust. Versus Income-Tax Officer. [2004 (9) TMI 300 - ITAT BOMBAY-E] holding that the expression “such income” means gross income and not the net income after deducting the administrative expenditure. Thus to hold that the claim of assessee is in accordance with law. Since the expenditure incurred by the assessee was more than 93% of the gross receipts, no part of the gross receipts are liable to be taxed in the year under consideration, since the balance amount was set apart for application in the next year. With these observations, the appeal filed by the assessee-trust is allowed. - Decided in favour of assessee.

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• 2015 (9) TMI 541
  Addition on gross profit difference between server copy and books of accounts - Held that:- Admittedly, there is a difference of ₹ 25,84,844/-, when the assessee’s books of account compared with the stock. There is no dispute on this issue. Therefore, the ld. AR’s submission that net profit to be considered, cannot be accepted, as all the expenditure is relating to the business of the assessee and already debited in the profit and loss account. There is no iota of evidence to suggest that any further expenditure incurred relating to unaccounted business. Being so, we are not in a position to uphold the argument of the ld. AR. He also submitted that since, the assessee has offered huge income of ₹ 7,20,07,082/- to the next A.Y., which also includes sale of this impugned stock, separate addition not to be made in this A.Y. In our opinion, each A.Y. is an independent A.Y. There is difference in stock which said to be unaccounted in this A.Y. and on that basis un-accounted sales are arrived for this assessment year and the income was estimated by applying GP rate, which is justified. - Decided against assessee. Benefit for telescope of addition made in immediately preceding year, as income on excess sales, against excess stock denied - Held that:- Commissioner of Income-tax(Appeals) confirmed the addition of ₹ 67,015/- but he failed to give any finding regarding telescope of addition of ₹ 2,47,630/- which is added as income in the earlier assessment year and not adjudicated ground Nos. 1 & 2 raised before him which reads as follows: “(1) the Commissioner of Income-tax(Appeals) ought to have given a finding on the ground of appeal praying for telescope of addition made in immediate preceding year, as income on excess sales, against excess stock found on 29-01-2009 (2) Though excess stock found as on 29-01-2009 was included in returned for assessment year 2009-10, the Commissioner(Appeals) ought to have discussed the submission made to reduce it by the amount of such addition made in assessment year 2008-09. Accordingly, we remit this issue to the file of the Commissioner of Income-tax(Appeals) to decide the issue in accordance with law. - Decided in favour of assessee for statistical purposes. Addition toward excess stock of jewellery - Held that:- AR wanted the basis for preparation of this excess stock. The stock was taken in the presence of the assessee, compared with the letter dated 27.1.2009 issued by it. Actually, the entire process was taken place in front of the assessee, without challenging the difference of stock, the assessee wanted to know the basis for excess stock. In our opinion, the plea of the assessee is devoid of merit. The computation stated above is self-explanatory and based on the physical stock as well as the letter issued by the assessee. Being so, there is no merit in the argument of the ld. AR and this ground is rejected. - Decided against assessee.

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• 2015 (9) TMI 540
  Disallowance u/s.14A in respect of direct expenditure, including by way of interest on borrowings, in relation to income/s not forming part of the total income - CIT(A) deleted addition in part - Held that:- Both the interest cost being allocated, i.e., as between the incomes forming and not forming any part of the total income, as well as the said incomes themselves, it needs to be noted, are for the whole year. This, even otherwise patent, becomes inevitable in the instant case as the assessee neither before us nor before the first appellate authority has made out any case against the disallowance of interest u/s.14A(1) r/w r. 8D(2)(ii). We, accordingly, consider it a serious lapse on the part of the ld. CIT(A) in not so directing the A.O. So much so, in our view, the parties themselves should have pointed out this during hearing, which exhibits or reflects smugness on the part of the assessee and a lack of preparation on the part of the ld. Departmental Representative (DR). We direct accordingly, so that the disallowance of interest u/s.14A r/w Rule 8D(2)(ii) shall be with reference to the interest cost for the entire year, i.e., ₹ 204.52 lacs, and not ₹ 136.35 lacs. As regards our competence to so direct, we rather consider it our bound and duty to do so. Sale of depreciable assets - Disallowance of deprecation - the assessee found favour with the ld. CIT(A) in-as-much as section 50C only applies for computing 'capital gains' arising to the assessee on the transfer of capital assets specified therein, so that the same would have no implication toward computing the WDV of the relevant block of assets - Held that:- Section 50C shall apply equally in respect of depreciable assets; it being the assessee's claim in that case that immovable property, the asset class specified in section 50C, would yet not apply in-as-much as the same is a depreciable asset being used for the purposes of its business by the assessee. We are in complete agreement with the ld. CIT(A). The deeming of section 50C is for the limited purpose for computing the capital gains u/s.45 r/w s. 48 on the assets specified under the said section. The only purport of section 50C is the extent of the matter specified therein, providing (to that extent) an alternate basis to that specified u/s.48, for computing the capital gains chargeable u/s.45. The WDV would have to be necessarily computed in terms of section 43(6), and for which section 50C has no application. how we wonder the opening WDV could be altered without first changing the depreciation for the immediately preceding year and, concomitantly, the WDV at the close of that year. The Revenue's case is wholly untenable in law. - Decided against revenue.

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• 2015 (9) TMI 539
  Membership fee receipt - accrual of income on proportionate basis - CIT(Appeals)’s action in allowing the assessee’s claim offering only 1/8th of membership receipts received during the relevant previous year as its income - Held that:- The Revenue had sought to tax the similar membership advances in the relevant year of receipt in earlier assessment years as well. The assessee produces copy of the co-ordinate bench decision (supra) rejecting this course of action. The Revenue only submits that the issue has not attained finality as its appeals are pending before the hon'ble jurisdictional high court. We observe that this plea does not form a valid ground to adopt a different action in the present case. The CIT(Appeals)’s findings are affirmed. - Decided against revenue Disallowance of safety bonus claim - CIT(A) deleted disallowance - Held that:- CIT(Appeals) has followed the tribunal’s decision for the assessment years 2001-02 to 2007-08 in deleting the impugned disallowance of safety bonuses written off as per Actuarial valuation. The Revenue neither draws any distinction on facts nor does it quote any case law to the contrary directly covering the issue. We follow consistency in these circumstances and reject the Revenue’s arguments. - Decided against revenue.

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• 2015 (9) TMI 538
  Eligibility for immunity under provision of Explanation 5 to Section 271(1)(C) - whether the assessee had offered the undisclosed income in the statement recorded u/s. 132(4) during the course of search or in a separate letter filed to the department on 02.08.2006? - CIT(a) allowed immunity - Held that:- The only objection of the Revenue that the assessee has not specified in its statement, the manner in which such income has been derived is baseless as it has been categorically observed by the ld. CIT(A) that in answer to question nos. 14 to 17, it has been specifically mentioned the manner, in which the undisclosed income has been derived. Under these facts and circumstances, we do not find any infirmity in the order of the CIT(A) and he has rightly followed the decision of CIT vs. Mahendra C. Shah [2008 (2) TMI 32 - GUJARAT HIGH COURT]. Decided against revenue. 6. In the result, the Revenue’s appeal is dismissed.

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• 2015 (9) TMI 537
  Suppression of sales - CIT(A) deleted the addition - Held that:- This Tribunal is of the considered opinion that Commissioner of Income-tax(A) is not justified in deleting the addition for the assessment years 2002-03 to 2007-08. However, the statement recorded from the cashier and other persons and the material collected by the Commercial Tax Department needs to be examined after giving an opportunity to the taxpayer. The taxpayer had no occasion to respond to the material collected by the sales-tax department during their inspection on 24-02-2006. It is also pertinent to note that the impugned assessment proceeding was initiated u/s 153A of the Act. In proceedings u/s 153A, the assessing officer can take into account all the evidences / materials including materials found during the course of search operation. Therefore, in all fairness, this Tribunal is of the considered opinion that one more opportunity shall be given to the taxpayer to present his case before the assessing officer. - Decided in favour of revenue for statistical purpose. Suppression of sales - For assessment year 2008-09 the Commissioner of Income-tax(A) confirmed the addition - Held that:- The decision that may be taken for the assessment years 2002-03 to 2007-08 may have its impact for the assessment year 2008-09 also. Therefore, for the sake of consistency and to have comprehensive adjudication, this Tribunal is of the considered opinion that the issue for the assessment year 2008-09 also needs to be considered. Accordingly, the orders of the lower authorities for assessment year 2008-09 are also set aside and the issue of suppressed sales turnover and profit is remitted back to the file of the assessing officer. The assessing officer shall decide the issue afresh in line with the direction issued for the assessment years 2002-03 to 2007-08 after providing opportunity of hearing to the taxpayer.- Decided in favour of assessee for statistical purpose. Addition with regard to the credit received from George Joseph - Held that:- This Tribunal finds that giving one more opportunity to the taxpayer to prove the identity of the creditor, genuineness of the credit and capacity of the creditor may not prejudice the interest of the revenue. In respect of suppression of sales for all the assessment years the matter was remitted back to the file of the assessing officer. Therefore, for the sake of consistency, this addition also needs to be reconsidered after giving reasonable opportunity to the taxpayer,The assessing officer shall examine the issue afresh and thereafter decide the issue in accordance with law after giving reasonable opportunity to the taxpayer. - Decided in favour of assessee for statistical purpose.

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• Customs

• 2015 (9) TMI 564
  Entitlement to the Duty Credit scrip under the Served From India Scheme - Denial on the ground that Petitioner is promoting 'Thyssenkrupp' brand which is not an Indian brand and that Petitioner is not an Indian service provider - Held that:- persons providing a service from India to any other country, from India to service consumer of any other country in India, supply of a service from India through commercial or physical presence in territory of any other country, supply of a service in India relating to exports paid in free foreign exchange or in Indian rupees as having being paid for in free foreign exchange by RBI are all referred to. It is to promote a unique 'Served from India brand instantly recognized and respected world over that the definition has been worded accordingly. If the main object and purpose sought to be achieved, on which emphasis is placed is noted, then, only as a corollary or analogy to the main object and to accelerate growth of exports from India, that nationality of the share holders comprising of the Petitioner company has been referred to. That is not held to be determinative for availing benefits of 'Served from India Scheme.' Rather the definition and reading thereof would indicate how it is worded so as to achieve the object. 'Served from India Scheme' is a policy and that is set out in Chapter 3 of Foreign Trade Policy. The application for grant of Duty Credit Scrip has to be made to whom, with what details and the forms which are required to be filled in for evaluation of duty credit Scrip entitlement. Non-entitling remittances and services for SFIS scheme are set out in paragraph 3.6.1. That is how the criteria is evolved and provided for. We are of the opinion that once the object and purpose of the Foreign Trade Act, the relevant paras of the FTP are placed in the forefront and duly noted, then, a Indian Brand projecting a Unique Indian Identity and commanding respect and recognition world over is sought to be created. If that is what is held and concluded, then, that it is a imminently possible and reasonable view. It is only when they fulfill the criteria and the provisions of the nature carved out that they would be entitled to the benefits. It is not possible for us to agree with the view recorded in paragraphs 12 to 16 of the judgment. The learned Judge has construed the expression “Indian Service Providers' narrowly. He has not construed it in the backdrop of the policy measures and by interpreting them in a holistic manner. The learned Judge, once again, with great respect reads the paragraphs in the policy in isolation. We are not persuaded to agree with the views of the Delhi High Court and the challenge cannot be construed to be arising in the backdrop of section 5 of the Foreign Trade Act. There is no other view and which has been brought to our notice. Petitioner apprehends that recoveries would be effected for the past several years from 2005-06 by forfeiting prior incentives. If anything is recoverable in relation to prior policies and earlier to 2009-14 FTP that is surely something which cannot be taken away by making a adjudication order in 2015. We would therefore, hold that it will not be permissible for the authorities adjudicating the claims or issues arising therefrom to recover from the Petitioner in Writ Petition No.1755 of 2014 and all petitioners the SFIS benefits granted till 2007-08. They are clearly falling within earlier policy framework and to that extent all petitions succeed. - Petition dispose of.

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• 2015 (9) TMI 563
  Imposition of Pre-deposit Condition for hearing – Onerous and excessive – Appellant contended that Tribunal’s condition for hearing of pre-deposit (to extent of 20% of penalty amount), is onerous and excessive – Held that:- no dispute that merely week after, appeal was filed, notification requiring pre-deposit fixed to tune of 7.5% of determined duty and penalty liability came into force – In light of this fact and further circumstance that director made admissions with respect to forgery, Court of opinion that interest of justice would be served if pre-deposit amount is reduced to half instead of 20% – Pre-deposit condition shall be deemed to be satisfied if appellant deposits 10% of penalty determined as against it within six weeks – Impugned order of CESTAT modified – Decided partially in favour of Assesse.

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• 2015 (9) TMI 562
  Import of used/Second hand Machinery - Mis-declaration/under-valuation - Aggrieved by the order of tribunal reported in 2003 (6) TMI 140 - CESTAT, KOLKATA, Revenue had filed current C.E.R.C.- While relying upon the observation made, on current case, in Commissioner Versus East India Commercial Co. Ltd.[2015 (1) TMI 753 - ANDHRA PRADESH HIGH COURT] that age of machinery was more than 10 years old – Conclusion arrived at by Commissioner was not fully supported by evidence inasmuch as even as per reports, it was only in respect of 2 machineries and 42 accessories, year of manufacture was found to be more than 10 years old while in respect of 277 machineries and electrical/accessories of 237 machines there was no material or proof to support claim of department that these machines were more than 10 years old – Hence report cannot be made applicable to machines/accessories on which there was no report – Therefore tribunal was justified in setting aside confiscation order - There was no order necessary in current case.

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• 2015 (9) TMI 561
  improper importation of goods - Confiscation of goods - stay of recoveries - Appeals filed against order confiscating goods and imposing penalty upon appellants were upheld by tribunal, however Demand of duty of ₹ 48,03,968/- and levy of interest were set aside, Penalty imposed under Section 114A were set aside, but penalty of 50% duty demanded was sustainable under Section 112 - Confiscation and imposition of fine was also set aside - Appeal against said order of tribunal was filed by appellant claiming stay of recovery of penalties - High court granted interim stay of recovery of penalty for a period of six months.

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• Service Tax

• 2015 (9) TMI 589
  Recording of Satisfaction u/s 86 - clearance from the Committee of Chief Commissioners of Central Excise - Supreme Court dismissed the appeal filed by the assessee against the decision of Delhi High Court [2014 (4) TMI 403 - DELHI HIGH COURT] wherein Tribunal held that Chief Commissioners did not, on the record, record independent reasons for concurring with their respective subordinates does not render the authorization void. There is no such requirement in Section 86(2), and this Court does not propose to add another layer to these administrative proceedings. Rather, it is important to view the proceedings as a whole - detailed notes considering the issue of appeal were prepared by those in the office of the Chief Commissioner delegated with such tasks, and the final decision or approval was taken by the Chief Commissioner.

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• 2015 (9) TMI 588
  Waiver of pre deposit - Reimbursement of railway freight - Business Auxiliary Services and Goods Transport Agency Services - Held that:- The taxable service and rendered in taxable territory, which is provided or to be provided, that is brought within the purview of this enactment. The Tribunal ought to have indicated at least prima facie as to how in this case the Railway Freight and which is charged by Railway for transportation of coal from the mines to the destination, namely Karnataka Power Corporation Limited could be brought to tax even if the expenses by way of freight and incurred by the Appellant on behalf of the Karnataka Power Corporation Limited are reimbursed by the said Corporation. The taxable service is prima facie of supply of coal and the mode chosen for supply is by Railway - Tribunal should have indicated as to how this demand by the adjudicating authority in the order impugned before it is prima facie sustainable, particularly when the argument of the Appellant was that the demand of ₹ 18,45,17,212/- is confirmed after including the freight paid to the Railway in respect of transportation of coal. Unless and until the Tribunal could have sustained this part in the adjudication order with reference to a specific legal provision, it was not justified in imposing a condition of 25% of the above sum to be deposited. There is a prima facie case and arguable point made out by the Appellant/Applicant to this extent. It is open to the Tribunal to hold that even if the argument has some substance and prima facie, yet, this is not a case for complete waiver of the condition of pre-deposit. However, while granting partial waiver in the facts and circumstances, the Tribunal was obliged to take into account and consideration the plea of the Appellant/Applicant - this part of the order passed by the Tribunal cannot be sustained. It will have to be quashed and set aside. - Decided partly in favour of assessee.

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• 2015 (9) TMI 587
  Condonation of delay - delay of 26 days - failure to give sufficient reason for delayed filing of the statutory appeal before commissioner (appeals) - Demand of service tax u/s 77 - Penalty u/s 78 - Held that:- The right of filing appeal under Section 85 (3A) of the Finance Act is a statutory right conferred on the person concerned by appropriate legislation enacted by the Parliament. Right of appeal, it is well established, is a very valuable right which cannot be taken away by adopting such an approach which is reflected from the impugned order passed by the Commissioner (Appeals) in the instant case. The legal and judicial approach requires the statutory authority to adopt the course which farthers the cause of justice and which enables the person intending to file an appeal not only to exercise that right but to actually avail the same. The endeavour, in such matters, should be to give opportunity to avail the right of appeal, which is a statutory right; rather than to shut it. - The Commissioner is directed to reconsider the application moved by the petitioner for condonation of delay in preferring the appeal and decide the same expeditiously in the light of the observations made above. In case the said application finds favour with the Commissioner, the proceedings of the appeal itself will be expedited. - Decided in favour of assessee.

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• 2015 (9) TMI 586
  Waiver of pre deposit - business auxiliary services - inclusion of the reimbursement expenses as the value of the taxable services - Held that:- Intercontinental Consultants (2012 (12) TMI 150 - DELHI HIGH COURT) held that rule 5 (1) - which sought to include expenditure or costs incurred by the service provider in the course of providing taxable services in the value for the purpose of charging service tax - to be contrary to Section 67 of the Finance Act. That judgment was delivered on 30.11.2012. The Order in Original was made on 10.10.2012. It prima facie contains indications that the adjudicating authority premised the demand on the operation and validity of Rule 5 (1). Given these circumstances, the Court is of the opinion that the order of the CESTAT imposing a substantial burden as a condition for hearing of the appeal before it, cannot be sustained. The order to the extent it directs deposit of 50% of the impugned demand is consequentially set aside. - Decided in favour of assessee.

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• 2015 (9) TMI 585
  Denial of refund claim - Unjust enrichment - Onus to prove - Held that:- Appellant had filed refund claim claiming it to be consequent upon the CESTATs Final Order [2008 (7) TMI 47 - CESTAT, NEW DELHI]. We find that the Commissioner (Appeals) has given clear finding that amount of refund claim is in respect of service tax which has been recovered from the customer namely M/s. J.P. Cement, Rewa and M/s. J.P. Cement has taken cenvat credit of the said service tax and utilized for payment of Central Excise Duty on its finished products and therefore the refund claim is hit by the doctrine of unjust enrichment under section 11B of Central Excise Act, 1944 made applicable to the service Tax matters by virtue of section 83 of the Finance Act, 1994. It is pertinent to mention that the onus is on the appellant to establish that the burden of service tax for which refund is claimed had not been passed on to others and that onus has clearly not been discharged by the appellant. - Decided against assessee.

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• 2015 (9) TMI 584
  Commercial or industrial construction services - Benefit of Notification No.15/2004-ST dated 10.9.2004 - abatement under Notification No.15/2004-ST - Held that:- It has been held by the CESTAT in case of Bhayana Builders (2013 (9) TMI 294 - CESTAT NEW DELHI (LB)) that value of free supplies need not be included for claiming abatement under Notification No.15/2004-ST. In the wake of the said judgement, even the impugned demands would not be sustainable and consequently the question of penalty would be preposterous. Accordingly, notwithstanding the absence of the appellant, we are of the view that the penalties are not sustainable - Decided in favour of assessee.

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• 2015 (9) TMI 583
  Availment of CENVAT Credit - duty paid on towers (in CKD/SKD form), parts of towers, shelters / prefabricated buildings purchased by them and used for providing output service - Held that:- Goods are neither ‘capital goods' as defined in rule 2(a)(A) of the CENVAT Credit Rules, 2004 and nor do they fall within the definition of ‘input' as defined in rule 2(k) thereof. This Court has further held that in any event the towers and parts thereof are in the nature of immovable property and are non-marketable and non-excisable and therefore, they cannot be classified as ‘inputs' so as to fall within the definition of rule 2(k) of the CENVAT Credit Rules, 2004. - Bharti Airtel's case decision [2014 (9) TMI 38 - BOMBAY HIGH COURT] squarely applies to the case of the Appellant - no substantial questions of law that need to be answered - Decided against assessee.

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• 2015 (9) TMI 582
  Demand of service tax - Effect of retrospective validation of service tax on GTA services for the period prior to 1-6-1998 - issuance of SCN u/s 73 - Supreme Court dismissed the appeal filed by the Revenue against the decision of Tribunal [2004 (8) TMI 7 - CESTAT (NEW DELHI)] since the issue raised in these appeals is squarely covered by the judgment of this Court in ‘Commissioner of Central Excise, Meerut-II v. M/s. L.H. Sugar Factories Limited and Others’ [2005 (7) TMI 106 - SUPREME COURT OF INDIA] and subsequent judgment of this Court in the case of ‘Commissioner of Central Excise, Vadodara-I v. Gujarat Carbon & Industries Limited’ [2008 (8) TMI 4 - SUPREME COURT].

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• 2015 (9) TMI 581
  Recording of Satisfaction u/s 86 - clearance from the Committee of Chief Commissioners of Central Excise - Supreme Court dismissed review petitions finding no reason to interfere with impugned order [2015 (9) TMI 589 - SUPREME COURT].

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• Central Excise

• 2015 (9) TMI 576
  Recovery of excise duty - Liability of successor - Purchase of immovable property assets - Held that:- In the present case it is not under dispute that firstly the duty is recoverable from M/s. Sumit Rerolling Mills Pvt. Ltd but the assets was purchased by the appellant, not from M/s. Sumit Rerolling Mills Pvt. Ltd but from Zia Iron Stores. As per the provisions, if the asset is sold by M/s. Sumit Rerolling Mills Pvt. Ltd to the appellant then only proviso to provisions of Section 11 will attract. The asset was neither sold by M/s. Sumit Rerolling Mills Pvt. Ltd, nor it was purchased by appellant from M/s. Sumit Rerolling Mills Pvt. Ltd, for this reason the proviso to Section 11 shall not attract. I also observed that in the whole chain of transaction of the immovable assets M/s. Sumit Rerolling Mills Pvt. Ltd has no locus standi because the assets was not sold by M/s. Sumit Rerolling Mills Pvt. Ltd whereas it was first acquired by the bank, who under auction sold the asset not to the appellant but to the Zia Iron Stores and subsequently the appellant has purchased the assets from M/s. Zia Iron Stores. In this transaction, neither M/s. Sumit Rerolling Mills Pvt. Ltd is the predecessor nor the appellant is successor. It is undisputed fact that firstly appellant has not taken over the business or trade which was being run by M/s. Sumit Rerolling Mills Pvt. Ltd. For this reason also proviso Section to 11 is not applicable. I am in agreement with the submission of the Ld. Counsel that in view of the Krishna Lifestyle Technologies Ltd (2008 (2) TMI 2 - HIGH COURT, BOMBAY) case the recovery from the successor can only be made when the business or trade is transferred either in whole or in part from the predecessor to the successor. - Immovable assets were first sold in auction by the bank to Zia Iron Stores and thereafter the appellant has purchased the property from Zia Iron Stores. It has been held in the numerous judgment that if any property is sold under auction buyer cannot be held liable for payment of the arrears of the previous owner of the property. Therefore the deed and agreement and terms and conditions thereof have no relevance in the present case. Moreover even if any such clause exist the same cannot be used for making recovery. For recovery of arrears of the M/s. Sumit Rerolling Mills Pvt. Ltd if at all can be made in terms of proviso to Section 11 which under the present set of the facts does not apply. On going through the under taking given by the appellant while obtaining registration regarding the payment of arrears, I find that the appellant has given such under taking without prejudice to the legal rights of the appellant therefore in my considered view though the under taking is given by the appellant, the same is not sufficient for enforcing the recovery of arrears as the appellant is not legally liable for payment of arrears of M/s. Sumit Rerolling Mills Pvt. Ltd. - appellant is not liable for payment of dues which is pending against M/s. Sumit Rerolling Mills Pvt. Ltd. therefore impugned order is set aside - Decided in favour of assessee.

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• 2015 (9) TMI 575
  Cenvat Credit - Input services - Business auxiliary services being provided by the commission agents - Nexus with manufacturing activity - impact of the amendment to Rule 2(l) w.e.f. 1.4.2011 - The demands raised were confirmed by the Commissioner by distinguishing between the activity of "Sales Promotion" and "Sales" - Held that:- the decisions of this Tribunal in the case of Rosa Sugar Works vs. CCE, Lucknow [2013 (11) TMI 1074 - CESTAT NEW DELHI] is clearly applicable to this case. - Credit allowed. According to the circular dated 29-4-2011, the service of commission agents (Business Auxiliary Service) is covered by the term "advertisement or sales promotion". In my view, there is nothing in this circular which is contrary to the provisions of law and hence the same would be binding on the Departmental officers. Thus, in view of this circular also, though it is in respect of definition of "input service" during period w.e.f. 1-4-2011, commission agents service would be cenvatable as the term "advertisement and sales promotion" was there in the definition of input service even during period prior to 1-4-2011.

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• 2015 (9) TMI 574
  Denial of exemption claim - Whether the Load Spreading Plates (LSP) manufactured by the three Appellants and Towers can be considered to be covered under "Wind Operated Electricity Generator, its components and parts", which are exempted under Notification No. 6 of 2006 - tribunal has clubbing the three appeal and delivered different decisions - Held that:- Tribunal held that various judicial pronouncements have, according to the Counsel, allowed exemption to Towers and their parts. However, no judicial pronouncement regarding exemption to foundation parts, namely, Anchor Rings and LSP has been brought to the Tribunal's notice. It is thereafter that the Tribunal attempted to distinguish the case of the present Petitioner. It concluded that a foundation cannot be said to be covered by the Notification. Prima facie , the Tribunal lost sight of the fact that it has to first conclude that all the products, namely, LSP and Anchor Rings, Tower Doors are foundational parts or not. There was no justification for giving different treatment to the case of the Petitioner. The Tribunal was aware of the controversy, the issue before it and stated to be common to all the Appellants. If there was justification for rendering a separate finding in the case of the Petitioner's Appeal, then, in the first instance it is not clear as to why it was clubbed along with other Appeals. If all three Appeals involve similar question and issue, then, it is nor clarified as to what distinguishes only the present Petitioner's case from the other two Appeals. If the issue was of the Exemption Notification, its construction and interpretation, the intention of the Government in granting the exemption, then, it is common to all the Appellants. Order of tribunal set aside - the special Bench of the Tribunal shall call for the records of the Petitioner's Appeal and allow the Petitioner to participate in the proceedings/Reference. - Decided in favour of Assessee.

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• 2015 (9) TMI 573
  Waive of pre-deposit - Denial of benefit of Notification No.83/94-CE - Whether the non- fulfillment of conditions of Notification No.214/86-CE as also Notification No.83/94-CE, dated 11.4.1994 can be held to be procedural violation so as to extend the benefit of the Notification to the appellant - Held that:- Appellant admittedly has not followed the substantive conditions of the Notification in question which require the supplier of the raw material or semi-finished goods to give an undertaking to the proper officer of Central Excise having jurisdiction over the factory of the job worker to the effect that such goods shall be used in or in relation to the manufacture of the final product in his factory and removed from his factory either on payment of duty or without payment of duty under bond for export or to units in free trade zone or to 100% EOUs etc. Hence, we do not find any ground to interfere with the impugned order, inasmuch as it is seen that the detailed conditions prescribed in Notification No.214/1986 are substantive conditions, which require fulfillment so as to ensure that the goods manufactured by the assessee suffer duty of excise at the hands of the customer who has supplied the inputs free of cost to the job worker. - Partial stay granted.

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• 2015 (9) TMI 572
  Duty demand - suppression of facts - duty evasion - Held that:- Pointing out certain lapses and contraventions of the provisions of the Act and Rules, related to the actual production of finished goods, the respondent alleged suppression and duty evasion. Since the respondent has taken the ground of suppression, etc., it is appropriate for this court to direct the petitioner to file necessary objections to the show cause notice impugned herein. Hence, the petitioner company is directed to file their objections within a period of two weeks from the date of receipt of a copy of this order and on such filing, the authority concerned shall consider the same and pass appropriate orders on merits and in accordance with law, within a period of six weeks thereafter, after affording an opportunity of personal hearing to the petitioner. - Petition disposed of.

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• 2015 (9) TMI 571
  Duty demand - Violation of principle of natural justice - Denial of Opportunity of cross examination of officer who have allegedly conducted surveillance of the petitioner factory - Held that:- It is not the case of the revenue that Sohanraj Mehta who made the statements in the enquiry is examined as a witness in the case before the Court and that the court was of the opinion that having regard to the circumstances of the case his submission should be admitted in evidence, in the interest of justice - it is too farfetched for the revenue to contend that the statements made by Sohanraj Mehta in the course of the investigation would tantamounts to statements made in a court. Be that as it may, if Sohanraj Mehta is examined as a witness for the revenue, it is needless to state that the said witness should be tendered for cross examination by the petitioner. - Merely because Sohanraj Mehta allegedly implicated the petitioner by making a statement in writing does not necessarily mean that proof of implication of the petitioner, in the transaction. It is for the revenue to establish such implication if at any time Sohanraj Mehta is examined as a witness for the revenue to prove the implication of the petitioner, it is needless to state that he ought to be tendered for cross examination by the petitioner. - there is no justification, in law, for the petitioner to seek a direction to the revenue to tender/or cross examination the persons who have not been examined in the case. - Decided against assessee.

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• 2015 (9) TMI 570
  Request for quashing of complaint - petitioner has not complied with the order of the Commissioner of Central Excise - Held that:- Though the judgment in Anil Gupta v. Star India Pvt. Ltd. & Another [2014 (7) TMI 545 - SUPREME COURT] was delivered on 07.07.2014, the Hon'ble Supreme Court only laid down the law and did not state in the order that the order will have only prospective operation. Therefore, having regard to the provisions of Section 9AA of the Central Excise Act, 1944, which is in parimateria with Section 141 of the Negotiable Instruments Act, without impleading the partnership firm, prosecution initiated against the partners is not maintainable and on that ground, these petitions may be allowed. - Decided in favour of assessee.

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• 2015 (9) TMI 569
  Duty demand u/s 11D - sale of goods as inclusive of duty - according to the revenue, in such cases appellant is deemed to have collected excise duty from their customers and hence are liable to deposit the same under the provisions of Section 11D of Central Excise Act, 1944. - Held that:- Appellant is only trading in the goods under dispute. They are selling the goods at price fixed by NPPA. Further they are purchasing the same goods from the manufacture at the price fixed by NPPA with a discount of 12% or 26.5%. Prices are composite one and there is no separate indication of excise duty in the invoices either of appellant or loan licencee - appellant is not the manufacturer of the goods and has not paid any excise duty. They are only trading and working with the profit on the discount extended by the manufacturer on the price fixed by NPPA. We also find strength in the submission of the ld. counsel for the appellant that if at all there has to be any liability to pay any amount under section 11D it will be with the manufacturer of the goods and not with them in the facts and circumstances of the case. - Decided in favour of assessee.

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• 2015 (9) TMI 568
  Utilization of Cenvat Credit for making deposit of 7.5%3 u/s 5F of the Central Excise Act, 1944 as pre-deposit before filling of appeal - Department claims that the disputed is related to cenvat credit itself and the action of the assessee is amount to reversal of the credit and not the payment of 7.5% amount - Held that:- the said amounts have not been reversed during the course of investigation but were paid by the appellant themselves and are a matter of dispute with reference to the duty demand confirmed. We also agree with the contention of the learned Commissioner (AR) that considering these amounts at this stage will amount to going into the merits of the case, particularly as these are points of grievance of the appellant. In view of above analysis, in our view, the appellant is required to deposit 7.5% of the duty demanded and since they have not paid the said amount, the appeal is not maintainable. - However, in the interest of justice, we give two week's time to the appellant to deposit the same and report compliance on 10th August 2015.

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• 2015 (9) TMI 567
  Cenvat Credit - use of oxygen and acetylene gases as input - appellant stated that oxygen and acetylene gases are used for repair and maintenance of machineries which are used in the manufacture of final product and hence are eligible inputs - Rule 2K of CENVAT Credit Rules, 2002. - Held that:- appellant-assessee is entitled to avail CENVAT credit on oxygen and acetylene gases which are being used in repair and maintenance of plant and machinery as inputs - Decision in the vase of CCE, Coimbatore Vs. Madras Aluminium Company Ltd. [2008 (1) TMI 198 - HIGH COURT MADRAS] followed. - Decided in favor of assessee.

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• 2015 (9) TMI 566
  Demand of interest u/s 11AB - interest on reversal amount of cenvat credit - whether interest is payable by the appellant under Central Excise Law when a monthly payment prescribed is not paid by the appellant, but entire payment of a Financial Year is paid subsequently within the specified due date under Rule-6(3A) of CCR - Held that:- In a situation when common inputs are used for making dutiable and exempted Final Products and separate accounts are not maintained, then appellate is required to follow a prescribed procedure. As per this procedure prescribed appellant was required to determine and pay every month of a Financial Year an amount provisionally on the basis of certain parameters of the preceding Financial Year. At the end of the current Financial Year exact amount of inadmissible Cenvat Credit was required to be worked out and paid before 30th June of the Succeeding Financial Year. - It has thus been correctly observed by the first appellant authority in para-10 of the OIA Dated 10/01/2013 that appellant cannot take the shelter of Rule-6(3A)(e) of the CCR to avoid payment of interest. Once a monthly payment mode is prescribed the same is required to be discharged by the appellant. By not doing so interest is payable from that due date of payment till the amount is paid as per the provisions of Section 11 AB (upto 30/03/2011) or Section 11 AA of the Central Excise Act 1944. I find no reason to interfere with the order of the first appellant authority on merits and appeal to that extent is rejected. - Matter remanded back - Decided in favour of assessee.

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• 2015 (9) TMI 565
  Duty evasion - Whether or not the appellant collected in the name of excise duty any amount from their buyers which they failed to deposit to the Government - Held that:- The plea of the appellant is that in all inclusive price purchase order they have only charged concessional rate of excise duty which they have deposited with the Government. However, the facts of the case as revealed from the records indicate that the rate mentioned in the purchase order is per piece price + Central Excise duty of 10% or 13%. - The preparation of invoices in two sets with different details of assessable value and Central Excise duty for the same clearance was admitted by Shri D.K. Mattoo, Partner of the appellant firm. These details were elaborated in the impugned order-in-appeal also. The appellant s plea that preparation of different sets of original duplicate and triplicate or quatriplicate is only a procedural lapse is not at all tenable. The single clearance document having different factual details in original and triplicate cannot be considered as procedural lapse. The idea behind such act is to represent the price and Central Excise duty differently to the buyer. This is further corroborated by the fact that the appellant were also supplying oil filters to M/s Escorts Ltd. (CTD Division, Faridabad) who were availing Modvat credit and in that case, the appellant raise invoices in one set only giving all particulars correctly. The facts as narrated clearly establish that the appellant did collect amounts representing Central Excise duty and retained the same. As such we find that the same is to be paid to the credit of the Central Government in terms of Section 11D of the Central Excise Act, 1944. It is apparent that the appellant made documentation deliberately to this end and as such are liable for penalty under Rule 173Q. Regarding confiscation of the goods loaded into tempo, we find the same was in the factory premises and the confiscation was apparently ordered on the grounds of incomplete particulars in the records and discrepancy between the copies of invoice. We find since the goods are still in the factory premises and the documentation were required to be completed at the time of clearances, there is no sufficient cause to order the confiscation of said goods. Accordingly, we set aside that portion of impugned order regarding confiscation of goods. - Decided partly in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (9) TMI 580
  Detention of Goods – Non availability of E-Transit passes – Respondent by impugned order detained goods of petitioner on transit on grounds that goods were not accompanied with E-Transit passes and amount mentioned in Invoices differ from amount mentioned in K.K.Forms – It was alleged by petitioner that accompanied with KK Forms and sale invoices, mentioning destination with Tax Identification Number and hence, first respondent ought not to have interfered with transit of goods – Held that:- Section 70(1)(b) of TNVAT Act, r/w. Rule 15(17)(bb) of TNVAT Rules, shows that owner of goods vehicle, shall deliver within prescribed period, transit pass to officer in charge of last check post or barrier, before exit of goods vehicle from State – In view of above, petitioner's vehicles need not carry E-Transit pass in middle of transit – Therefore, considering fact that when subject vehicles, have accompanied with KK Forms, Bill of Entry and Sale Bill of Seller in Bombay against C Forms, first respondent could have released vehicles, along with goods, after verifying above documents – Therefore impugned orders hereby set aside and directs to release goods – Decided in favour of Petitioner.

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• 2015 (9) TMI 579
  Pre-deposit Condition – Deposit of partial amount – Vide order passed by Appellate Authority demand was raised directing dealer to deposit 25% of total demand raised as pre-deposit – On ground of failure to comply with order of pre-deposit, Appellate Authority dismissed appeals – Tribunal directed appellant to deposit total sum of ₹ 20 lacs, on non-compliance of which Tribunal dismissed both appeals – Held that:- Admitted that appellant had deposited total sum of ₹ 14 lacs, therefore appellant to be given some more reasonable time to appellant to deposit balance amount as pre-deposit and on that Appellate Authority directed to decide and dispose of appeals in accordance with law and on merits – If appellant fails to make deposit of aforesaid amount, Appellate Authority’s order on noncompliance of pre-deposit stands – Decided in favour of assesse.

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• 2015 (9) TMI 578
  Failure to issue Show-Cause notice – Before passing impugned orders, respondent failed to issued show-cause notice to petitioner as per circular, therefore, impugned orders are not sustainable in law – Held that:- admittedly, impugned proceedings have been issued without issuing show-cause notice to petitioner –As per circular issuance of notice is desirable since there may be disputes on actual amount of arrears, number of days of delay and calculation of penalty – From reading of said circular, it is clear that before imposing penalty, notice has to be issued to assesse and said notice should also contain details of amount of arrears, due date of payment, date of payment, number of days delay and penalty payable – Without issuing such notice as contemplated under circular, respondent has straightaway passed impugned proceedings, which is not correct – Therefore, impugned orders passed in violation of said circular, cannot be sustained – Petitioner directed to submit their reply by treating impugned proceedings as show-cause notices – Decided in favour of petitioner.

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• 2015 (9) TMI 577
  Benefit of input tax credit – Whether dealer can file tax invoices and Forms VAT C-4 claiming benefit of input tax credit at appellate stage and in that eventuality liability of dealer is to be re-determined – Held that:- In view of observation made by current in M/s Vijay Cottex Limited, Panipat v. State of Haryana and others [2013 (12) TMI 1447 - Punjab and Haryana High Court] it has been held that dealer is entitled to produce Form VAT C-4 and tax invoices before assessing authority who shall verify same and pass fresh order, in accordance with law – Therefore appeal disposed of – Decided in favour of Appellant.

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