TMI Tax Updates - e-Newsletter
September 4, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Import of taxable services - reverse charge - As the tax stands paid & credit is admissible, levy of interest & penalties set aside - Tri

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• Printing of metal backed advertisement material/posters, known as Danglers - classifiable as printed products of the printing industry - SC

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Articles

1. Cash discounts deductible while determining Transaction value of excisable goods

   By: Bimal jain

2. AGENDA TO BOARD MEETING

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. During his Ongoing Visit to Ankara, Turkey to Attend G-20 Finance Ministers and Central Bank Governors’ Meeting on 4th and 5th September 2015, the Finance Minister will also Participate in the Joint Meeting of G-20 Finance and Labour Ministers and in the First Meeting of the Governing Council of Brics Contingent Reserve Arrangement (CRA);

2. RBI Reference Rate for US $

3. CBDT further Advised them not to Pursue the Recovery of Outstanding Demands , if any , in such cases

4. Union Finance Minister Shri Arun Jaitley Leaves for Turkey to Attend G-20 Finance Ministers and Central Bank Governors’ Meet

5. CEA: Overall, Economic Growth is Moving in the Right Direction, Although its Pace is Still Below What the Economy Needs But a Pace That is Expected to Pick up in Response to the Ongoing Reforms;

6. Government issues notification to Repeal the FCRA, 1952 and shift the Regulation of the Commodity Derivaties Market to SEBI with effect from 28th September,2015.

Notifications

Customs

1. 84/2015 - dated 3-9-2015 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 4th September, 2015

Circulars / Instructions / Orders

Income Tax

1. 15/2015 - dated 3-9-2015

Clarifications on Tax Compliance for Undisclosed Foreign Income and Assets

2. 09/2015 - dated 2-9-2015

Report on applicability of Minimum Alternate Tax (MAT) on FIIs/FPIs for the period prior to 01.04.2015 and acceptance of the Government thereof- reg.

3. F. NO. 225/154/2015/ITA.II - dated 31-8-2015

Extension of Due Date for Filing of Returns in cases of Income Tax assessees in the state of Gujarat

FEMA

4. 10 - dated 3-9-2015

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR

DGFT

5. 03/2015-20 - dated 2-9-2015

Applicability of Para 5.10 (d) of Handbook of Procedure, 2015-20 relating to third party exports under EPCG Scheme.

Highlights / Catch Notes

Income Tax

• Assessing Officer's Protective Additions Deleted Due to Uncertainty in Tax Liability of Estimated Income.

  Case-Laws - AT : Addition in the hands of the assessee was made on protective basis which means the AO himself was not confident with respect to the tax liability of the alleged income estimated by him in the hands of the assessee - Additions made by AO deleted - AT
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• Assessees must prove creditworthiness, genuineness, and identity in share capital transactions u/s 68 for validation.

  Case-Laws - AT : Additions u/s 68 - in case of share capital, the creditworthiness along with genuineness of transaction, identity of person is also required to be proved by the assessee. - AT
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• No TDS on Payments for Barani Land Acquired by Development Authority u/s 194LA; Classified as Agricultural Land.

  Case-Laws - AT : TDS liability u/s 194LA - payments in lieu of the agriculture land acquired by JDA for carrying out its development plans - Barani land is a type of agricultural land which is clearly evident from Revenue regulations and record - No TDS - AT
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• Capital gains case: Funds withdrawn from Deposit Account A can be added but exemption u/s 54 remains.

  Case-Laws - AT : Capital Gains - exemption u/s 54 -Even if the transfer is not as per law in the year of withdrawal from Deposit account A, it can be considered as amount withdrawn and not utilised and addition can be made as per law but in the present year, the exemption cannot be denied. - AT
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• Debate on Section 10A: Is It a Deduction or Exemption in Income Tax for Assessment Years 2002-03 and 2003-04?

  Case-Laws - AT : Exemption / deduction u/s 10A - If the assessee’s contention is accepted, it would make section 10A a deduction provision for the A.Y. 2002-03 and an exemption provision for the A.Y. 2003-04, which is manifestly impermissible - AT
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Customs

• Court Rules Date of Dispatch as Notice Date u/s 110(2) in Goods Confiscation Case.

  Case-Laws - HC : Confiscation of Goods – Service of notice – Lapse of period – date of sending or dispatching notice by registered post is date of giving notice as contemplated under Section 110(2) - date of service of notice cannot be held as one which entitles petitioner to seek for return of goods on ground that six months period had expired - HC
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• Authorized Courier's Dual Role: Act for Consignor & Consignee on Duty-Free Gifts, Bearing Consequences Per Regulations & Bond.

  Case-Laws - HC : Illegitimate benefit of duty free Bona fide gifts – duty is cast on authorised courier to act on behalf of consignor and consignee and suffer consequences as has undertaken by them under Regulations and bond furnished to statutory authority - HC
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• High Court Upholds Decision: Export Attempt of Non-Conforming Basmati Rice Exceeds Permissible Limits, Violates DGFT Notification.

  Case-Laws - HC : Goods not in conformity with Basmati Rice – presence of other rice, i.e. non-basmati rice, was more than permissible maximum limit of 20% - Additional Commissioner was justified in his conclusion that Respondent had attempted to export non-Basmati Rice prohibited for export in terms of DGFT notification - HC
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Service Tax

• Appellant's Mid-Day Meal Prep Exempt from "Outdoor Caterer" Service Tax Classification.

  Case-Laws - AT : Since the appellant are preparing mid day meals in their Institute and not in the schools where the meals are served are not involved in serving of the meals in any manner, in our view they are not covered by the definition of "outdoor caterer" - AT
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• Appellant Cleared of Service Tax Non-Payment; Consultant Found Guilty of Fraud, Penalty Waived u/s 78.

  Case-Laws - AT : Penalty u/s 77 & 78 - it is not the appellant who has committed an offence of non payment of service tax, it is the consultant, who has defrauded them therefore there is reasonable cause for waiver of penalty under Section 78. - AT
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• Court Overturns Order on Reverse Charge: No Interest or Penalties Due as Duty Paid, Credit Admissible.

  Case-Laws - AT : Import of taxable services - reverse charge - As the duty stands paid and credit of duty paid is admissible, the impugned order is set aside to the extent of recovery of interest and imposition of penalties. - AT
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• Grinding Rock Phosphate Excluded from Cargo Handling Services; Extended Service Tax Period Not Applicable.

  Case-Laws - AT : Activity of grinding of rock phosphate - Overall nature of contract did not make it amenable for coverage under cargo handling service - when the issue involves interpretation of law, extended period cannot be invoked - AT
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Central Excise

• Tribunal Rules Metal-Backed Advertisement Danglers Are Printed Products of Printing Industry.

  Case-Laws - SC : Classification of good - printing of metal backed advertisement material/posters, commonly known as Danglers - Tribunal had rightly decided the case in favour of the respondent-assessee holding that the products were classifiable as printed products of the printing industry - SC
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• Fly Ash Brick Classified as Manufactured Good in India Due to Production and Market Value.

  Case-Laws - HC : The good fly ash brick does involve manufacturing activity, which is admittedly, has marketability also being sold on a considerable price. Therefore, the good 'fly ash brick', having satisfied the test of being manufactured in India and also marketability - HC
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• Fly ash ruled non-manufactured, exempt from excise duty under tax law. No excise duty applicable.

  Case-Laws - HC : The good "fly ash" does not involve any manufacturing activity and it does not fall under the purview of excisable good so as to attract levy of excise duty. - HC
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• Court Affirms Assessee's Right to CENVAT Credit on Capital Goods for Job-Worked Manufacturing.

  Case-Laws - HC : Denial of CENVAT Credit - Job work - assessee utilized Cenvat credit on capital goods and inputs which were used in the manufacture of the job-worked goods - credit allowed - HC
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VAT

• High Court Orders Re-adjudication of Tax Assessment Due to Unexplained 10% Increase in Turnover and Tax Liability.

  Case-Laws - HC : Increase of Turnover and tax liability – AO has not indicated as to how excess stock would affect declared turnover - Assessment Order does not indicate any basis for AO to enhance turnover by 10% - Matter to be re-adjudicated by the AO - HC
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Case Laws:

• Income Tax

• 2015 (9) TMI 141
  Miscellaneous Application seeking to recall the order - whether the order of the ITAT is correct in law in rejecting the miscellaneous application filed by the Department holding that it is barred by limitation? - Tribunal, while dismissing it held that the Department could not prosecute the same without obtaining sanction from the Committee on Disputes (C.O.D) of the Central Government which was held to be mandatory at the relevant point of time - Held that:- there is a total lapse on the part of the appellant in prosecuting the appeal diligently, and in normal circumstances, the appellant ought to have approached the C.O.D immediately after 30.04.2007. Even after the appellant was made aware of the requirement by 30.09.2010 by the Tribunal, no application was made by him before the C.O.D. In other words, there was never any effort made by the appellant in seriously desiring to prosecute the appeal against the order dated 30.04.2007 passed by the Commissioner. These factors were taken into consideration by the Tribunal while refusing to recall the order dated 30.09.2010. Hence, we do not find any infirmity in the order passed by the Tribunal to interfere with. Even assuming for arguments sake, it is only on account of the law declared by the Apex Court in Electronics Corp. of India v. Union of India & Ors (2011 (2) TMI 3 - Supreme Court), dispensing with the requirement of obtaining C.O.D. is taken as starting point, the application made is belated. Further, even on the ground of the absence of diligence shown in approaching the Tribunal to recall the order, we do not find any error in the order of the Tribunal. - Decided in favour of assessee.

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• 2015 (9) TMI 140
  Condonation of delay of 2286 days - as submitted that the delay in filing the Appeals was caused due to the mistaken / erroneous impression of the Appellant that not having agitated the issue before the Tribunal, it was not entitled to agitate the said issue, thereafter - Held that:- We find the affidavits in support are bereft of any particulars, save and except that they have been now advised to file an Appeal to this Court to be considered along with the Appeal filed by the Company. The affidavits do not indicate the date when the advise was given, nor who advised, nor the circumstances in which the advise was given. It is settled position of law that application for condonation of delay should have sound and cogent reasons for explaining the delay with particulars which caused the delay. We find that the affidavits in support have not set out particulars which resulted in the delay. No reason to condone the delay sought by the applicants in both the Notices of Motion.

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• 2015 (9) TMI 139
  Interest on adjustment of cash seized against advance tax liability - Held that:- Decided against the revenue in view of the judgment of Commissioner of Income Tax (Central), Ludhiana vs. Sh. Sandeep Jain and others [2014 (10) TMI 585 - PUNJAB & HARYANA HIGH COURT] . The assessee was entitled to have the cash seized adjusted against its advance tax dues. Whether the explanation to Section 132B was retrospective in operation has been answered in favour of the respondent by this judgment above. The Division Bench expressly held that the explanation is not retrospective in operation. Interest u/s 234C - shortfall in the installments of advance tax - Held that:- Assessee would be liable to pay interest under Section 234C upto the date of the letter dated 20.02.2008 addressed by it to the department requesting the adjustment of the amount seized against its liability. This issue is decided in favour of the appellant by the judgment of another Division Bench of this Court dated 22.07.2010 in the case of Commissioner of Income Tax vs. Arun Kapoor, (2010 (7) TMI 610 - Punjab and Haryana High Court) . The liability under Section 234C shall be computed in accordance with this judgment. - Decided in favour of revenue.

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• 2015 (9) TMI 138
  Addition on account of advertisement & publicity expenses - CIT(A) deleted the addition - Held that:- As decided in assessee's own case for the assessment years 2001-02 and 2002-03 the expenditure on publicity and advertisement is to be treated as revenue in nature allowable fully in the year in which it was incurred. Concededly, there is no advantage which has accrued to the assessee in the capital field. The expenditure was incurred to facilitate the assessee’s trading operations. No fixed capital was created by this expenditure. We may also add here that in the Income Tax laws, there is no concept of deferred revenue expenditure. Once the assessee claims the deduction for whole amount of such expenditure, even in the year in which it is incurred, and the expenditure fulfills the test laid down u/s 37 of the Act, it has to be allowed. - Decided in favour of assessee Addition on account of lease hold improvements expenses - CIT(A) deleted the addition - Held that:- We find that the learned Commissioner of Income Tax (Appeals) has given a categorical finding that the assessee has duly produced all the necessary details and that the assessee has duly identified the capital portion of the expenditure incurred and the amount of the improvements expenses which were of revenue in nature. We also find that it is a settled law that powers and duties of the Commissioner of Income Tax (Appeals) are coterminus with that the Assessing Officer. Hence, in our considered opinion, there is no need to interfere with the finding of the learned Commissioner of Income Tax (Appeals) - Decided in favour of assessee Addition on account of direct selling agent commission expenses - CIT(A) deleted the addition - Held that:- Identical issue has been decided in favour of the assessee in the preceding year wherein held that the expenditure is incurred once for all in the form of stamping duty as well as commission paid to the direct selling agents for procuring the loan assignments and it is not dependent upon the working out of the agreements ultimately entered into between the assessee and the customers. Since the commission is paid to the direct selling agents, for their services in sourcing hire in the year in which the loan is disbursed, it is to be allowed as business expenditure. The Tribunal, to arrive at this finding took into consideration the clauses of the agreement relating to mode of payment of consideration as well as termination clause in the agreement. Thus, as the entire expenditure was incurred which admittedly have nexus with the business of the assessee, it was treated as business expenditure allowable under Section 37 of the Act. - Decided in favour of assessee Addition on loss on sale of repossessed assets - CIT(A) deleted the addition - Held that:- Identical issue having similar facts was a subject matter of the assessee’s appeal for the assessment year 2006-07 wherein held Repossession of the asset was taken by the assessee in the course of normal business operations and such repossessed assets were sold and loss incurred in this process is a normal business loss allowable to the assessee. The same is allowable u/s 36(1)(vii) of the Act also as write off of bad debts because when there is loss on sale of repossessed assets, such deficiency is realizable from the customer but since the assessee has written off the same in the P&L A/c instead of debiting it to the customer account, it is equal to write off of bad debt and by now, it is a settled legal position that after the amendment in section 36(1)(vii) of the Act w. E. F. 01.04.1989, only write off is sufficient and the assessee is not required to show that the debit has become bad - Decided in favour of assessee Disallowance of depreciation on computer peripherals - CIT(A) deleted the addition - Held that:- Identical issue had already been adjudicated by this Bench of the Tribunal in assessee’s own case in the preceding year i. E. assessment year 2006-07 wherein held it should not be disputed by the learned counsel for the revenue that this issue is now settled by the judgment of this Court in the case of CIT Vs BSES Yamuna Powers Ltd. (2010 (8) TMI 58 - DELHI HIGH COURT) holding that on computers and peripherals, depreciation at the rate of 60% is allowable.- Decided in favour of assessee Addition on NCD and Commercial paper issue expense - CIT(A) deleted the addition - Held that:- Similar issue having identical facts has been decided in favour of the assessee in the assessment year 2006-07 wherein held there is no material before us to infer that the aforesaid expenditure resulted in creation of any capital asset, tangible or intangible, and thus, the question of treating the same as capital expenditure does not arise. Also expenses on issue of debentures, whether convertible or not, is allowable as a deduction in computing the income of the assessee.- Decided in favour of assessee Addition on account of loan acquisition costs - CIT(A) deleted the addition - Held that:- As decided in PY The relevant provisions of the act recognize only capital or revenue expenditure. Indisputably, the amount claimed by the assessee in these three assessment years is revenue in nature. Deferred revenue expenditure denotes expenditure for which a payment has been made or a liability incurred, which is essentially revenue in nature but which for various reasons like quantum and period of expected future benefit etc., is written off over a period of time e.g. expenditure on advertisement, sales promotion etc. There is no material before us to infer that the aforesaid expenditure resulted in creation of any capital asset, tangible or intangible, and thus, the question of treating the same as capital expenditure does not arise. - Decided in favour of assessee Addition on account of adjustment Arm’s length price of the international transaction - CIT(A) deleted the addition - grievance of the department only relates to the exclusion of Mega Soft Ltd. and inclusion of Orient Information Technology Ltd. in the set of comparables - Held that:- As regards to the inclusion of Orient Information Technology Ltd. is concerned, the TPO had not given any particular reason for its exclusion. The said company also designs, develops and deploys customized software solution and application so its functionality was comparable with the assessee. The said company was not considered by the TPO because it was a loss making company but that cannot be a reason to exclude it from the set of comparable, in view of the decision of the ITAT Delhi Bench in the case of Yum Restaurants India Ltd. [2011 (5) TMI 852 - ITAT DELHI] wherein it has been held that merely a company showing loss would not lose its status of comparable if other criteria depicted status of comparable. Same view has been taken by the ITAT Delhi Bench in the case of Sony India Ltd. [2008 (9) TMI 420 - ITAT DELHI-H ]. As regards to the exclusion of Mega Soft Ltd. is concerned as directed by the ld. CIT(A), it is noticed that the said company had gone restructuring during the financial year under consideration, its total sales was Rs. 104.17 crores as compared to the fees received by the assessee at Rs. 20.97 crores. It has a strong R&D background alongwith product development expertise which the assessee did not have. The said company also acquired US based Boston Communications Group Inc. in August 2007, which also resulted in high profit margin of the said company. Therefore, CIT(A) rightly held that Mega Soft Ltd. to be excluded from the set of comparables. CIT(A) rightly directed the AO to exclude the Mega Soft Ltd. and include the Orient Information Technology Ltd. in the comparables and worked out the Arm’s lengh price and if it falls within the range of ±5% of the range then no addition is to be made. We do not see any infirmity in the impugned order of the ld. CIT(A). - Decided against revenue.

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• 2015 (9) TMI 137
  Addition on protective basis - coal business carried out by the assessee through the syndicate of Bhutoria Group - assessee contended that this addition was made in the hands of the assessee, solely on the basis of the statement of Shri. Prakash Chandra Bhutoria and some documents seized from his computer - CIT(A) deleted the addition - Held that:- Undisputedly the addition was made in the hands of the assessee on protective basis. Though it was observed in the assessment order that substantive addition is to be made in the hands of the alleged syndicate AOP pointed out by Shri. Prakash Chandra Bhutoria in his statement recorded during the course of search conducted at Bhutoria group or his premises, but nothing has been placed on record to establish whether any substantive addition was made in the hands of the AOP syndicate. Answer to the question whether the addition on protective basis made in the hands of the assessee can be converted into substantive addition in the hands of the assessee in the absence of the fact that no substantive addition has been made in the hands of the syndicate group, the answer is certainly no, as the Assessing Officer himself is not confident with regard to the addition in the hands of the assessee on the basis of the statement of Shri. Prakash Chandra Bhutoria and the seized documents which were neither confronted nor the assessee was allowed to cross-examine Shri. Prakash Chandra Bhutoria whose statement was used to make the addition in the hands of the assessee. It is settled opposition of law that any evidence/statement/declaration cannot be used against a person or the assessee unless and until the same is confronted to the assessee and the assessee is allowed to crossexamine the said witness or person. In the instant case, the assessee has asked the Assessing Officer during the course of assessment proceedings to allow him to cross-examine Shri. Prakash Chandra Bhutoria whose statement was sought to be relied on by the Assessing Officer. Initially the Assessing Officer has summoned Shri. Prakash Chandra Bhutoria and asked the assessee to cross-examine in Kolkata, but on the designated date Shri. Prakash Chandra Bhutoria did not appear and the assessee was forced to come with empty hands. Thereafter though the assessee has requested to afford an opportunity to cross-examine Shri. Prakash Chandra Bhutoria with respect to the documents found during the course of search, but the Assessing Officer did not enforce his attendance for cross-examination and finally despite repeated requests the assessee was not allowed to cross-examine Shri. Prakash Chandra Bhutoria. The Assessing Officer, however, heavily relied upon the statement and the seized documents for making the addition in the hands of the assessee on account of undisclosed receipt from the alleged syndicate group. Thus addition in the hands of the assessee cannot be made on the basis of third party’s statement who was not allowed to be cross-examined by the assessee for any reason. More so in the instant case addition in the hands of the assessee was made on protective basis which means the Assessing Officer himself was not confident with respect to the tax liability of the alleged income estimated by him in the hands of the assessee. - Decided in favour of assessee. Addition made on account of unexplained investment in coal business - CIT(A) deleted the addition - Held that:- Assessing Officer has made addition only on conjectures and surmises. No evidence was brought on record in order to establish that the assessee has earned any other income except commission receipts. Moreover, the assessee worked as an agent of NCCF who sold coal to the consumers. Undisputedly the coal was being supplied directly to the consumers by NCCF and assessee earned only commission thereon. Therefore, addition on account of investment is not sustainable in the eyes of law - Decided in favour of assessee. Addition made under different heads as profit earned by the assessee - profit in trading of coal at Kanpur, Kolkata and Bhubaneswar - CIT(A) deleted the addition - Held that:- the basis for these additions was only the material seized during the course of search from Shri. Prakash Chandra Bhutoria and his statement. Shri. Prakash Chandra Bhutoria was not allowed to be cross-examined by the assessee, therefore, his statement cannot be relied on for making the addition against the assessee. Accordingly, we find no infirmity in the order of the ld. CIT(A) - Decided in favour of assessee.

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• 2015 (9) TMI 136
  Unexplained share application money - accommodation entry in the garb of share capital - CIT(A) deleted the addition - Held that:- There was a search on M/s. B.C. Purohit & Co. on 12.04.2005 and detailed investigation was made by the Department on the basis of evidence collected. During the course of search, it was found that assessee was providing entries in form of gift, loans, share application money, share investment and long term capital gain in shares not only to the assessee but other cases also. On the basis of this search, the assessee was also covered under section 133A of the IT Act in survey proceedings on 03.05.2005 to confront these evidences. As per Annexure-A3 seized from residence of Shri Bal Chand Purohit situated at G-1/103, Kamal Apartments, Bani Park, Jaipur during the course of search revealed that there was an entry of cheque and cash received from various parties. There are number of companies with the details of entries provided with amount. The name of the assessee company also figured on these pages and the modus operandi admitted by Shri Kripa Shankar Sharma in his statement recorded on 12.04.2005 that cash was received from the entry receiver parties and cheques were issued through various companies opened by Shri Bal Chand Purohit Group. He categorically admitted on 21.09.2004 that he received Rs. 6,00,000/- in cash from M/s. Soni Hospital and on 22.09.2004 two entries of Rs. 3,00,000/- each were given to M/s. Soni Hospital which were routed through M/s. Artline Finvest Pvt. Ltd. and M/s. Arpan Agro Pvt. Ltd. Similar other details were also found in seized material. The companies were managed by Shri Kripa Shankar Sharma for providing accommodation entries and he was getting commission by providing accommodation entries. It is further found fact that Shri Sunil Verma, a peon, has been shown as Director in number of companies who had also admitted on 26.04.2005 that these companies did not have any business but providing entries by receiving cash from the beneficiaries and after depositing in the bank account of these companies, cheques are issued to the beneficiaries. Some of the companies’ addresses were found on vacant plots. This group not only providing accommodation entries to the assessee but other persons also. The AO issued notices under section 133(6) of the IT Act for verification but notices were received back with postal remarks “ no such party exists at the given address”, in case of share capital of Rs. 20,00,000/-. The ld. CIT (A) followed the decision in case of M/s. Lovely Exports (2008 (1) TMI 575 - SUPREME COURT OF INDIA). But recently Hon’ble Bombay High Court in the case of M/s. Major Metals Ltd. Vs. UOI, (2012 (4) TMI 227 - BOMBAY HIGH COURT) by following Supreme Court decision in the case of Lovely Exports (supra) has held that creditworthiness and financial standing of the cash creditor is to be proved by the appellant under section 68 of the Act. The Hon’ble Gujarat High Court decision in the case of Blessing Construction (2013 (10) TMI 154 - GUJARAT HIGH COURT) which has been confirmed by Hon’ble Supreme Court in SLP vide [2015 (9) TMI 55 - SUPREME COURT OF INDIA] wherein the creditworthiness in case of cash creditor is to be proved by the assessee. Recently Hon’ble Delhi High Court in case of CIT vs. T. S. Krishna Kumar & Co. Ltd., [2014 (9) TMI 703 - DELHI HIGH COURT] has held that under section 68 the identity, genuineness and creditworthiness of the cash creditor is to be proved by the appellant. Repaying the loan through account payee cheque is not a conclusive evidence. The case law referred by the ld. D/R of Hon’ble Supreme Court in case of N. Tarika Properlty Invest (P) Ltd. (2015 (9) TMI 54 - SUPREME COURT OF INDIA) is squarely applicable in case of assessee. Now, after considering the Hon’ble Supreme Court decision in case of Lovely Exports (supra), we have come to the conclusion that in case of share capital, the creditworthiness along with genuineness of transaction, identity of person is also required to be proved by the assessee. Accordingly we reverse the order of ld. CIT (A). - Decided in favour of revenue.

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• 2015 (9) TMI 135
  Undisclosed turnover difference in Gross Receipts - CIT(A) deleted part addition - Held that:- CIT(A) after considering the submissions of the assessee and the remand report, restricted the addition to the extent of Rs. 9,68,951/-. During the assessment proceedings, the AO admittedly not called for the veracity of the letter of M/s. Ankur Textiles, however, on the basis of conjectures & surmises, submitted the remand report. Therefore, the Revenue has also not placed any contrary material suggesting that the letter of M/s. Ankur Textiles is fake and over the contents of the same are contrary to the material available on record. In the absence of such finding by the AO, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue. Disallowance on account of bogus labour payments - CIT(A) deleted the addition - Held that:- The AO had made disallowance of labour payments on the basis of estimation to the extent of 20% of the expenditure. The AO has not given any basis on which he has based his finding to disallow at 20% of the expenditure on estimate basis. In our considered view, if the payment is bogus, it would be 100%. The ld.CIT(A) has given his finding on the fact that the PAN furnished during the appellate proceedings was found to be correct. Under these facts, we do not see any reason to interfere with the order of the ld.CIT(A) since the Revenue has not placed any contrary material on record - Decided against revenue. Admission of additional evidences in violation of Rules 46A of the IT Rules, 1962 - Held that:- AO has noted that assessee furnished some contra entries. Therefore, it is not the case where the assessee had not taken a stand before the AO and relied upon the evidences. Under these facts, we do not see any merit into the ground raised by the Revenue and the same is rejected. -Decided against revenue. Rejection of Books of Account - Held that:- CIT(A) has not decided the ground while passing appellate order. The ld.CIT(A) has held that the ground would be covered in subsequent grounds while deciding the merits of the addition because of the appellant stated that the book results were rejected. Under these facts, we are of the considered view that the ld.CIT(A) ought to have given a speaking order. Addition of alleged bogus labour payments - Held that:- The contention of the assessee is that the accounts are fully audited, bills/vouchers are certified by the site engineers/supervisor. Merely because the lavourers were not having PANs cannot be the reason for making disallowance. CIT(A) has not considered the submissions of the assessee. Therefore, the ground is restored to the file of ld.CIT(A) to pass a specific finding on the submissions made by the assessee. - Decided in favour of assessee for statistical purposes. Adhoc disallowance of machine repair expenses and supervision charges - Held that:- The authorities below have disallowed the expenditure on the basis that vouchers are self-made and unverifiable. However, there is no finding from both the authorities as to what efforts were made for verifying the same and whether the payments made to the persons were called for examination is not clear from the order. Therefore, we hereby direct the AO to delete both the disallowances. - Decided in favour of assessee.

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• 2015 (9) TMI 134
  TDS liability u/s 194LA - payments in lieu of the agriculture land acquired by JDA for carrying out its development plans - assessee in default - Held that:- From the record, it emerges that the assessee demonstrated its case for no liability of TDs before the ACIT –TDS that not only in terms of plain reading of Section 194LA but also furnished the desired information in the proforma and enclosures as advised by the AO to be furnished in the order to hold JDA as notliable under explanation (i) above. Having complied with the requirement, assessee has discharged its onus. The liability of assessee u/s 194LA cannot be extended to go beyond the plain meaning of the letters of section and infuse such conditions which are not mentioned in the provisions. Thus the assessee complied with requirements asked for by the AO. There is no adverse comment on this issue.Section 194A does not provide any physical verification of the assessee to inspect the fields and find out whether the lands are actually cultivated or not. What section imposes is determination of the record which has been done by the assessee. Barani land is a type of agricultural land which is clearly evident from Revenue regulations and record placed on the paper book. The objection raised by the AO and ld. CIT(A) about Girdawari is irrelevant and no-consequential.Tehsildar appointed by JDA cannot be denied to be a Revenue Officer inasmuch as he works as a Revenue Officer in terms of JDA Act. The language of Section 194LA being plain and simple it provides no physical verification of land by LAO about carrying on of agricultural operations. In the framework of sec. 194LA, there is no need of applying rules of interpretation and imposing further condition to go beyond the scope of obligation as prescribed under the Act In view thereof, we hold that the assessee has been able to demonstrate from the record that impugned agricultural land acquired by the assessee are agricultural land on per records and in terms of Section 194LA, Explanation (i). There is no obligation to deduct any TDS thereon. - Decided in favour of assessee.

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• 2015 (9) TMI 133
  Levy of penalty u/s 271AAA - Held that:- It is seen from the assessment order that the ld. AO had stated that the assessee had no option but to accept the truth and come forward with the disclosure and hence concluded that but for the search the assessee would not have come forward with the offer of undisclosed income and on that ground levy of penalty is justified. We find that if this argument of the ld. AO is to be appreciated, then the very purpose of providing immunity u/s 271AAA(2) of the Act gets defeated. The legislature in its wisdom had provided for granting immunity from levy of penalty in certain circumstances as contemplated in 271AAA(2) of the Act. The levy of penalty u/s 271AAA cannot be made automatic pursuant to the search. It is seen that even though the income of Rs. 27,88,222/- was not offered by him in the regular return filed by the assessee on 31.03.2009 for A.Y. 2008-09, it is of no consequence as in terms of 153A of the Act, it becomes a pending proceeding, which gets abated pursuant to the search. Thus we hold that the assessee had cumulatively satisfied the three conditions contemplated in section 271AAA(2) of the Act and accordingly is eligible for immunity from levy of penalty - Decided in favour of assessee.

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• 2015 (9) TMI 132
  Penalty u/s. 271(1)(c) - CIT(A) deleted the penalty - Held that:- Even though a survey was conducted 22-03-2009 i.e., during the financial year relevant to the AY. 2009-10, even though there was no incriminating material and only certain discrepancies have been found, assessee volunteered to pay additional taxes of Rs. 10 Lakhs. The statement itself, as extracted by the Ld. CIT(A) in the order, do indicate that there was no quantification of concealed income in the course of survey. In fact, what assessee has admitted was payment of Rs. 10 Lakhs as additional tax, accordingly, he worked out the income to be offered which he did in the return filed subsequently. As per the provisions of the Act in order to attract penalty u/s. 271(1)(c) either there should be concealment of income or furnishing of inaccurate particulars. In this case, there is no concealment of income as assessee has returned the correct income which was accepted by the AO in the scrutiny assessment. Question of furnishing inaccurate particulars does not arise on the facts of the case, which was accepted by DR as well. Looking at either way, the conditions specified u/s. 271(1)(c) are not satisfied. Moreover, the returned income and assessed income being the same, the computation of penalty also fails. Explanation-I with reference to expression Concealed income has deemed the amount concealed income indicates that the amount added or disallowed in computing the total income of such person shall for the purpose of Clause-C of this sub-section be deemed to represent the income in respect of which particulars have been concealed”. As already stated, there is no amount added or disallowed in computing the total income of assessee as the returned income was accepted as such. Therefore, under Explanation-I, the amount of concealment is NIL. Therefore, no amount can be considered as concealed income under the facts of the case. There is also no provision in the Act to levy penalty on an income identified/un-earthed in the course of survey proceedings. - Decided in favour of assessee.

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• 2015 (9) TMI 131
  Transfer pricing (TP) adjustment - assessee is seeking exclusion of only 2 comparable companies i.e. Alpha Geo (India) Ltd., and Vimta Labs from the final list of comparables - Held that:- assessee has conducted functional analysis by adopting the companies performing similar functions and activities without any similarity of products or industry. We find that M/s. Alpha Geo Ltd., is also in the business of research and development of seismic data, functions similar to the functioned performed by the assessee herein. There is no human interface or involvement in any of the activities above. The assessee has not brought out any difference in the assets employed or risks assumed by Alpha Geo. Therefore, we do not see any reason to interfere with the order of the CIT(A) on this issue. As regards Vimta Labs is concerned, we find that Vimta Labs is a research and development company researching into effects of various drugs on human beings. Though the function is similar i.e. research and development, there is involvement of living beings both animals and human beings and the margin would definitely depend on the result from such research and development involving human interface. Therefore, the said company cannot be considered as comparable to the assessee herein, particularly since the TPO himself has rejected the said company as a comparable to the assessee in the subsequent assessment year i.e. 2005-06. We are therefore inclined to direct the TPO/AO to exclude this company from the final list of comparables and direct the AO to re-determine the ALP in accordance with law. - Decided partly in favour of assessee. Disallowance of deduction for provision made towards interest payable to Central Excise Department and Sales Tax Department - Held that:- This issue stands covered by the decision of this bench of the Tribunal in the assessee’s own case for assessment years 1994-05, 1999-00, 2000-01 and 2001-02 wherein the action of the CIT(A) in disallowing interest payable to Central Excise Department has been upheld by the Tribunal. - Decided against assessee. Disallowance of deduction u/s 80-O - Held that:- Claim for deduction u/s.80-O are within the exclusive knowledge of the Assessee. It is for the Assessee to let in cogent evidence to substantiate its claim. The Assessee in our view has failed to do so and in the circumstances, the revenue authorities were justified in not allowing the claim for deduction. Assessee is not entitled to deduction u/s.80-O of the Act, is based on the fact that the Assessee has failed to establish its claim for deduction on the basis of the conditions contemplated by the amended provisions of law. - Decided against assessee. Deduction u/s 80HHC - CIT(A) held that the consideration received for development work from Robert Bosch was not liable to be reduced under Explanation (baa) to sec.80HHC - Held that:- Considering the decision of the jurisdictional High Court in the case of assessee’s own case for assessment year 1994-95 to hold that the consideration received for development work from Robert Bosch was not liable to be reduced under Explanation (baa) in computing the profits of the business. Since the issue is covered by the decision of the jurisdictional High Court in the assessee’s own case for the earlier assessment year and the CIT(A) has only followed the judicial precedent on the issue, we do not see any reason to interfere with the same. - Decided against revenue. Exclusion of 90% net interest received from the business profits for the purpose of deduction u/s 80HHC - CIT(A) has followed this Tribunal’s order in assessee’s own case for the assessment years 2000-01 and 2001-02 to hold that only net interest is to be excluded from the business profits for the purpose of computation of deduction u/s 80HHC of the Act. Assessee has also placed reliance upon the judgment of CIT vs Delhi Brass & Metal Works [2008 (11) TMI 42 - HIGH COURT DELHI ]. We find that this issue is now covered in favour of the assessee by the above decision. Therefore, we see no reason to interfere with the order of the CIT(A) which is in consonance with the judicial precedent on the issue. - Decided in favour of assessee.

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• 2015 (9) TMI 130
  Penalty u/s 158BFA(2) - CIT(A) deleted penalty levy - Held that:- CIT(A) mainly granted relief to the assessee by noticing that the SLPs are pending before Hon’ble Supreme Court and issue is debatable but in the light of subsequent order of Hon’ble Apex Court dismissing the SLPs of the Revenue we can safely hold that the issue has attained finality. We also note that the CIT(A) has also not considered the second proviso to Section 158 BFA(2) which is relevant to decide the issue at levy of penalty. Therefore, we deem it just and proper to restore this issue to the file of the CIT(A) for a fresh adjudication for both the APYS in the light of the order of Hon’ble Supreme Court dated 29/10/2012 and second provision to Section 158BFA(2) of the Act and all other relevant provisions of the Act. - Decided in favour of revenue for statistical purposes.

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• 2015 (9) TMI 129
  Eligibility for exemption U/s 10(23C)(iiiad) - whether annual credit receipt is more than one crore is not eligible for exemption U/s 10(23C)(iiiad) ? - CIT(A) found that total receipts were less than Rs. One crore and allowed exemption - Held that:- On verification of the total receipt mentioned by the Assessing Officer there was a transaction of sale of land for Rs. 47,90,000/-. The Hon’ble Madras High Court has considered the issue of annual receipts as envisaged in Section 10(23C)(iiiad) of the Act in the case CIT Vs. Madrasa EBakhiyath -Us-Salihath Arabic College (2014 (8) TMI 565 - MADRAS HIGH COURT ) wherein the annual receipt, the sale proceed of land and Bond held not to be equated to annual receipts as stated U/s 10(23C)(iiiad) of the Act. If the sale of land to the tune of Rs. 47,90,000/- reduced from the total receipt, it comes within the limit prescribed U/s 10(23C)(iiiad) of the Act. Further the Hon’ble Jurisdictional High Court and Hon'ble Supreme Court’s decision referred by the Assessing Officer has been considered by the Hon’ble Gujarat High Court in the case of Gujarat State Co-operative Union Vs. CIT [1992 (2) TMI 74 - GUJARAT High Court] wherein it has been held that word education was not used in a wide or extended sense so as to include addition to the knowledge of a visitor to a zoo or museum, the High Court held that the museum cannot be taken to be an educational institution existing solely for educational purposes. The object of the samiti as mentioned by the Assessing Officer in his assessment order supports the assessee’s claim that it is an educational institution. The Coordinate Bench has allowed the assessee’s registration U/s 12AA of the Act in financial year 2000-01. - Decided in favour of assessee.

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• 2015 (9) TMI 128
  Addition of accumulated income of trust - as per AO appellant trust had not filed the requisite application as contemplated u/s.11 - operation of the injunction of the District Court - whether the period in which the order of the Jt.Dist.Judge was in operation to be excluded for reckoning the period of 10 years as mentioned in section 11(2)(a) of the Act under the facts of the present case? - Held that:- Affairs of the assesseetrust were taken over by the Court appointed Receiver and, therefore, it can be inferred from the material available on record that the trustees of the assessee-trust were restrained from managing the affairs. Sub-section(3A) of section 11 contemplates a situation where due to circumstances beyond the control of the person in receipt of the income, any income invested or deposited in accordance with the provisions of clause(b) of sub-section (2) could not be applied for the purpose for which it was accumulated or set apart. In that situation, the Assessing Officer may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub-section(3) shall apply as if the purpose specified by such person in the application under this sub-section for a purpose specified in the notice given to the Assessing Officer under clause (a) of sub-section(2). In the present case, no such application was made by the assesseetrust or the Court appointed Receiver. However, there is no dispute with regard to the fact that the trustees were restrained from managing the affairs. For the omission on the part of the Court appointed Receiver would not, in our considered, view disentitle the assessee-trust for seeking condonation of delay, if any, in notifying the AO in the terms of provision of section 11(2) of the Act. Therefore, we hereby set aside the orders of the authorities below and restore the issue to the file of AO for decision afresh. The AO would verify the period during which the affairs of the assessee-trust were managed by the Court appointed receiver. He would exclude such period in the light of first proviso to section 11(2) of the Act and would verify whether the money so accumulated or set apart was invested or deposited in the forms or modes specified in Section 11(5) of the Act. - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 127
  Assessment U/s. 153C - Addition towards low withdrawals - Held that:- Even though, the AO did mention that there was some incriminating material, there is no satisfaction recorded about the explanation of the income from the person who was searched and how the document is relevant in assessee’s case. The order sheet entry only indicate that ‘during the course of search incriminating material regarding undisclosed income of the assessee was found’. This statement is common for both assessees. This blank statement can not be considered as satisfaction for initiation of proceedings u/s 153C as it does not indicate the nature of seized material and how income is assessable in assessee hands. As seen from the orders also, there is no discussion about any incriminating material or incomes to be assessed under the provisions of Section 153C. Thus as there is neither any satisfaction recorded by the AO nor there is any incriminating material relevant for making assessments in this case. Therefore, the initiation of proceedings U/s. 153C itself is bad in law. Therefore, consequential proceedings are bad in law and orders are to be cancelled. Even on merits, there is no justification for estimating the low withdrawals on assumptions and presumptions, without there being any basis. In view of that also, the addition made in all the years about the low withdrawals cannot be sustained. Addition on amount received from friend - Held that:- As submitted that assessee was working as software engineer in United Kingdom (UK) during the period September 2000 to October 2001 and before he left for UK, he handed over his personal belongings to his friend for sale and the amount of Rs. 74,980/- sent by his friend was shown in the capital account and treated as ‘income of assessee’. As can be seen from the order of AO, and CIT(A), they only disbelieved assessee’s version. Since this issue does not arise out of any incriminating material and as assessee has shown the amount as a receipt in 2002-03 itself in the capital account, we are of the opinion that addition cannot be made in the proceedings U/s. 153C, without any evidence to contrary to disbelieve assessee’s contentions. Be that as it may, as we have already held that initiation of proceedings U/s. 153C are itself bad in law, these issues become academic in nature. - Decided in favour of assessee.

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• 2015 (9) TMI 126
  Disallowance u/s.14A read with Rule 8D - Held that:- It is true that CIT (A) had followed his own order for A. Ys. 2009-10 and 2010-11 for confirming the disallowance made by the AO u/s.14A read along with Rule 8D(2)(ii) and 8D(2)(iii). Assessee had moved in appeal before this Tribunal for A. Y. 2009-10. This Tribunal held as seen from the facts on record that the assessee has not deducted any expenses direct or indirect, while computing its income from dividend income which is exempt under section 10(34) of the Act. In this regard on a similar issue, a co-ordinate bench of this Tribunal in the case of Jindal Aluminium Ltd.(2015 (9) TMI 107 - ITAT BANGALORE), has held that it is necessary for the assessee to point out how each item of expense debited to its profit and loss account is wholly incurred for the purpose of earning income which is taxable and therefore remanded the matter for re-examination to the file of the Assessing Officer. In the case on hand too, similarly, we find that the position is that the assessee has merely taken the stand that it has not incurred any direct or indirect expenditure in earning its dividend income which is exempt under section 10(34) of the Act. We are therefore of the view that it would be in the interest of equity and justice if the assessee makes its claim in this regard before the Assessing Officer. The Assessing Officer will examine the claim of the assessee and thereafter decide the issue in accordance with law and as explained in the judicial decisions referred to (supra). Thus remit the issue regarding disallowance u/s.14A of the Act, back to the file of the AO - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 125
  TDS liability u/s 194C - expression “work” includes advertisement and the assessee has debited the expenditure under the head ‘advertisement’ as held by AO - plea of the assessee that it was payment made to the principal from time to time and M/s. Hero Honda Motors is not an advertising agency and hence it cannot said to have been payment made to any advertising agency - Held that:- Claim of the assessee that M/s. Hero Honda Motors having engaged a contractor for advertisement of motorcycle and on payments made to such contractor, tax was deducted at source under the provisions of sec.194C of the Act was not disputed by the learned Departmental Representative. It is also not in dispute that the assessee made reimbursement of its share to the principal company and it had not directly entered into advertisement contract with any the advertising agency. Under these circumstances, in the light of the decision of DLF Commercial Project Corporation [2015 (7) TMI 576 - DELHI HIGH COURT] and also on the plain reading of the provisions of sec.194C of the Act, thus the provisions of sec.194C are not applicable in the instant case and consequently, the AO was not justified in making addition by applying the provisions of sec. 40(a)(ia) of the Act. In the result, the addition made by the AO is hereby deleted. - Decided in favour of assessee. Not accounting amount received from HDFC bank - assessee stated that he has received only commission of Rs. 45,348/- from the bank and the same has been credited to profit and loss account - Held that:- AO, in the proposal dated 19/9/2011, specified that the assessee received Rs. 33,185/- u/s 194A of the Act, Rs. 13,333/- u/s 194C of the Act which was not accounted in the books of account whereas the assessee was referred to the commission of Rs. 45,348/-received from the bank and credited to the profit and loss account which is different from the amounts referable to 194A and 194C of the Act. Since no explanation was filed even before the CIT(A), the CIT(A) affirmed the action of the AO. Even before the Tribunal, assessee could not furnish proper explanation to highlight that it has not received any commission and whatever was offered to tax was only the amount received from HDFC referable to taxes u/s 194A and 194C of the Act. In fact, the total sum referred by the AO works out to Rs. 46,518/- whereas the assessee offered to tax commission amount of Rs. 45,348/-. Even at this stage, no satisfactory explanation was forthcoming. - Decided against assessee. Addition on excess credits in partners account - Held that:- Since amount was credited in the name of Shri Sukhdev and the assessee could not furnish convincing explanation with regard to the same, it is of the view that the addition as made by the AO and confirmed by the CIT(A) is in accordance with law. - Decided against assessee.

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• 2015 (9) TMI 124
  Sale of the agricultural land - whether the assessee had no other sources of income and the amount of Rs. 1/-crore advanced by him to Shri Seethapathy Naidu on 13.08.2008 must be the amount received on account of sale of the agricultural land? - Held that:- The amount of Rs. 1/- crore received by the assessee which was advanced to Mr. Seethapathy Naidu on 13.08.2008 would be the on-money received by the assessee towards the sale of his land on 11.8.2008, since the Revenue has not established any other source of income that could have been earned by the assessee during the relevant previous year. The only transaction of the assessee during the relevant previous year was sale of agricultural land. The Ld. Assessing Officer has also not made any finding with respect to the other activities of the assessee for earning income from any other source. Moreover it is a common practice to accept on-money on real estate transactions. Therefore, we do not find it necessary to interfere with the order of the Ld. CIT (A) on this count. - Decided against revenue. Denial of exemption u/s.54F - investments in agricultural land made in the name of the assessee’s son - Held that:- From the sale deed, it is evident that the property belonged to the HUF of the assessee because the land sold was inherited by the assessee and the entire members of the assessee’s HUF are entitled to the property inherited by the assessee from his father’s HUF. Since the existence of the HUF cannot be denied who owned the land sold, the assessment made in the hands of the assessee in the individual capacity is bad in law. Moreover as per section 171 of the Act, partial partition is not recognized for the purpose of assessment under the provisions of the Act. Hence it is apparent that the Revenue has assessed the assessee as “individual” wrongly for the sale of land owned by the assessee’s HUF. Therefore we hereby quash the order of the Ld. A.O. Further we make it clear that the Revenue is at liberty to assess the assessee’s HUF subject to complying with provisions of limitations stipulated in the Act and in accordance with our decision in this order on various issues raised by both the parties. We also make it clear that while assessing the assessee’s HUF, the HUF assessee shall be entitled to the benefit u/s.54B of the Act for Rs. 2,92,140/- with regard to investments in agricultural land made in the name of assessee’s son because property of a HUF can be legally held by any of the coparceners or Kartha of the HUF and in the instant case the assessee’s son is one of the coparcener of the HUF and no partition in the HUF has taken place. It is ordered accordingly. Denial of exemption u/s.54F of the Act in regard to construction of a building in the land purchased at Vallingadu by holding that only extension in the existing building has been carried out - Held that:- there are no details before us with respect to the construction made by the assessee toward the extension of the existing house. If the new asset constructed can be construed as a separate dwelling unit and if the conditions stipulated in Section-54F of the Act are complied, then the assessee would be entitled to the benefit of Section-54F of the Act. Therefore, if a fresh assessment is made in the hands of the assessee’s HUF as observed by us in the earlier paragraph of this order, the Ld. Assessing Officer shall examine these aspects and pass appropriate order as per law and merit. Needless to mention that deduction U/s.54F of the Act can be availed by the assessee’s HUF even if the new asset is purchased in the name of any of the coparceners of the HUF or the Kartha of the HUF subject to the fulfillment of the other relevant provisions of the Act. - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 123
  Addition on account of Capital Gains - denial of the exemption u/s 54 - CIT(A) deleted the addition - Held that:- As per the scheme of Section 54 of the Act and Circular No 495, it is clear that capital gains cannot be charged to income tax in the previous year in which the transfer of the original asset takes place if the amount of capital gain is utilised by the assessee for acquisition of new asset and the balance, if any, is deposited on or before the due date for filing of return of income u/s 139(1) in the specified Capital Gains Account Scheme and if the amount is not utilised fully for acquiring the new asset within the prescribed period, the unutilised amount can be taxed in the year in which the period expires. On facts of the case, exemption u/s 54 cannot be denied to the assessee in the year in which the transfer of asset took place as far as the assessee has invested Rs. 54,40,000/- in purchase of land on which the house has been constructed. The issue of disallowance, if any, will have to be considered in the previous year in which the period of three years from the date of the transfer of the original asset expires. - Decided against revenue. Investment in the Capital Gains Accounts Scheme, 1988 - Held that:- It is very much evident and an admitted fact that the deposit of Rs. 63,00,000/- was made in the Savings Account or Deposit Account A before 31/07/2008 i.e. before the due date of filing of return u/s 139(1) of the Act and thus such deposit was well within the parameters laid down in clause 4(4)the Capital Gains Account Scheme, 1988 (supra). Therefore, the contention of the Department that the transfer from this Deposit Account A to another Deposit Account B (Fixed Deposit Account) on 06.08.2008, i.e. after the due date of filing of return of income u/s 139(1), does not conform to the parameters laid down in clause 4(4) of the Capital Gains Account Scheme, 1988 (supra) is based on an incorrect interpretation. Since the entire initial deposit in the savings bank (Deposit A account) amounting to Rs. 63,00,000/- was made within the prescribed period, it is immaterial that a further transfer from this account was made to Deposit B account (Fixed Deposit Account) after the prescribed due date, the exemption on this count also cannot be denied to the assessee. Even if the transfer is not as per law in the year of withdrawal from Deposit account A, it can be considered as amount withdrawn and not utilised and addition can be made as per law but in the present year, the exemption cannot be denied. We accordingly hold that the assessee cannot be denied the benefit of exemption u/s 54 on deposited in the savings account of the Capital Gains Scheme, 1988 and we dismiss the appeal of the revenue on this issue also - Decided against revenue.

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• 2015 (9) TMI 122
  Disallowance u/s 40(a)(i) - non deduction of TDS on payment of commission to non-residents - revision u/s 263 - Held that:- This Tribunal is of the considered opinion that it is incumbent on the part of the Assessing Officer to disclose the reasons in the assessment order for allowing or disallowing a claim of the assessee. This Tribunal is of the considered opinion that the CIT has rightly exercised his jurisdiction u/s 263 of the Act. However, the CIT has directed the Assessing Officer to disallow a sum of Rs. 19,54,363/- said to be paid to the non-residents for non-compliance of provisions of section 40(a)(i) of the Act. This Tribunal is of the considered opinion that an opportunity shall be given to the assessee to explain the nature of payment before the Assessing Officer. Accordingly, the order of the CIT is modified and the Assessing Officer is directed to examine the payment of commission to the non-residents independently and decide the same in accordance with law. It is made clear that the Assessing Officer shall examine the issue independently without being influenced by the observation made by the CIT(A) in the impugned order or by this Tribunal in this order and decide the same in accordance with law after giving a reasonable opportunity to the assessee. - Decided partly in favour of assessee.

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• 2015 (9) TMI 121
  Validity of reopening of assessment - credit balance in the account of two parties - Held that:- AO reproduced the observation of the CIT(A) and thereafter has recorded that there is a credit balance in the account of Bansal Polyvin (P) Ltd.; and M/s Ek Onkar Foundry, amounting to Rs. 5,40,175/-, which was created for the first time during the FY 2001-02 relevant to AY 2002-03. Thereafter, he recorded the finding that- “Therefore, on the basis of above referred observations made, I have reason to believe that income to the extent of Rs. 5,40,175/- had escaped assessment”. Thus, it is evident that the assessment had been reopened on the basis of observations of the ld. CIT(A) and the claim of the ld. DR that the AO had applied his mind independently, is not correct. The AO has simply found that there is credit balance in the account of two parties during the financial year, relevant to AY 2002-03. The credit balance itself cannot be a ground to arrive at the conclusion of escapement of income. In view of above, in our opinion, the decision of M/s Tejaskiran Pharmachem Industries Pvt. Ltd. (2015 (3) TMI 985 - BOMBAY HIGH COURT ) and M.B. Traders (2009 (7) TMI 1097 - ITAT NAGPUR ) would be squarely applicable to the facts of the assessee’s case. Respectfully following the same, we hold that the impugned reopening of assessment was not valid. - Decided in favour of assessee.

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• 2015 (9) TMI 120
  Computation of amount of deduction u/s 10A - reducing the amount of brought forward loss for the A.Y. 2002-03 from the profits and gains of the undertaking for the current year - Held that:- We are confronted with a situation in which the assessee suffered loss from the eligible unit for the assessment year 2002-03, when section 10A is a deduction provision as is the case for the A.Y. 2003-04 under consideration. Not only the assessee suffered a loss of Rs. 72.70 lac in such preceding year from the eligible unit, it claimed and the Revenue allowed its carry forward to the subsequent year(s) as per law. Now, when there has arisen positive income for the year under consideration, such brought forward loss from the eligible unit suffered during the immediately preceding year is required to be reduced from the amount of eligible profits for the current year before granting deduction u/s 10A. The assessee cannot be allowed to eat the cake and have it too, by claiming on one hand that there is a business loss from the eligible unit for the preceding year which should be allowed to be carried forward and, at the same time, claim that such brought forward business loss should not be set off against the income of the eligible unit for the succeeding year while allowing deduction u/s 10A. If the assessee’s contention is accepted, it would make section 10A a deduction provision for the A.Y. 2002-03 and an exemption provision for the A.Y. 2003-04, which is manifestly impermissible because section 10A has been statutorily made a deduction provision from the A.Y. 2001-02. As the assessee rightly claimed the carry forward of loss from the eligible unit for the immediately preceding year, such loss is required to be set off against the income for the current year before allowing deduction u/s 10A. - Decided against assessee. Reopening of assessment - Held that:- It is a matter of record that the AO, without separately disposing off such objections, proceeded to make an assessment u/s 147 of the Act. This course of action followed by the AO is in contravention of the law laid down by the Hon’ble Supreme Court in GKN Driveshafts (I) Ltd. Vs. ITO (2002 (11) TMI 7 - SUPREME Court ). It has been held in this judgment that the AO is obliged to first dispose of the objections raised by the assessee by way of a separate order before proceeding to finalize the assessment. Since the AO has not disposed off the assessee’s objections, we set aside the assessment order and the impugned order and remit the matter to the file of AO for first disposing the assessee’s objections against the initiation of re-assessment proceedings by a separate order. It is only if he comes to a conclusion that the reasons are valid and the objections are not sustainable, that he will proceed to frame the assessment as per law. - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 115
  Addition under Section 68 on bogus share capital - whether there was any incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A? - CIT(A) deleted the addition - Held that:- Order of the CIT(Appeals) correctly reveals that there is a factual finding that “no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO.” Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. - Decided against revenue.

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• 2015 (9) TMI 114
  Deletion of unexplained investment – Tribunal had remitted matter to the AO - Held that:- For orders, see The Commissioner of Income Tax III, Ludhiana vs. Shri B.K.Jain,[2014 (7) TMI 48 - PUNJAB & HARYANA HIGH COURT] wherein it is clarified that telescoping can only be done to the extent there is direct nexus of receipt of amount on account of sale of shares which has been invested in the purchase of shares during the period from 1.4.2002 to 31.3.2003 and 1.4.2003 to 31.3.2004 - for the AY 2003-04 and 2004-05, benefit of telescoping shall only be allowed by the AO after recording a finding that there is direct nexus resulting from sale of shares and investment in shares made by the assessee. Deletion of surrender during survey u/s 133A of the Act – Held that:- Tribunal noticed that the assessee had surrendered a sum of Rs. 15 lacs, the credit of which was allowed to him - once the assessee had surrendered the amount, necessary credit could not be denied to him - It could not be shown that the approach of the Tribunal was erroneous in any manner - thus, no interference is called for in the findings recorded by the Tribunal – Decided against Revenue.

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• 2015 (9) TMI 111
  Penalty u/s 271D - CIT(A) deleted the penalty as time barred - Held that:- When we examine the objection raised by the assessee on the issue of limitation in view of the provisions laid down u/s 275 (1) (c) of the Act, we find that in the present case penalty order has been passed beyond 6 months from the end of the month in which assessment was completed. The assessment in the present case was completed on 30.12.2009 and the penalty order u/s 271D has been passed on 10.3.2012 which is undisputedly beyond the 6 months and if we compute the time limit from the show cause notice dated 7.3.2011 as referred in the penalty order, six months expires on 30.9.2011., hence the order of the penalty levied u/s 271D is barred by time limit. - Decided in favour of assessee.

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• 2015 (9) TMI 110
  Rejection of books of accounts - Held that:- There is no dispute to the fact that the assessee is not maintaining day to day consumption register, stock register and any details for opening stock and closing stock. Therefore, the ld. CIT(A) has rightly upheld the rejection of books of account. Moreover, against the rejection of books of account, there is no ground raised by the assessee before us, though the ld. CIT(A) has rightly rejected the books of account Estimation of food sales - Held that:- We have seen earlier that in the assessment order for the A.Y. 2008-09 the AO has applied the ratio of 1:3 to estimate the food sales of the assessee after rejecting the book results. I do not find any irregularity in the decision arrived at by the AO on this account. The reason for the rejection of the book results are the non-maintenance of day to day consumption register and stock register and the nonproduction of the details of the opening and closing stock. For these very reason the rejection of book results for the A.Y. 2004-05 and 2005-06 have been upheld by the CIT(A) and the ITAT. Even if it is not possible to maintain a day to day stock register, in the absence of the particulars of the valuation of the stock at the beginning and at the end of the relevant accounting period, the income of the accounting period cannot be determined. Hence, the addition of Rs. 24,06,296/- on account of suppression of food sales is upheld. The Ld. counsel for the assessee relied upon the assessment made by the AO for the A.Y. 2010-2011 where wastage of 15% has been allowed. In this regard, first of all, it is not a past practice of the assessee. Normally past trend is followed in the case of present assessment. Moreover, every year is an independent year and the decision of the AO in the following year cannot be a guide while deciding the appeal in the present case. Therefore, the said submissions made by the assessee is rejected and the ld. CIT(A) as mentioned hereinabove has rightly upheld the findings of the A.O. in confirmation of addition of Rs. 24,06,296/-. Lawn charges or proceeds of banquets - addition to income - estimation of number of functions - CIT(A) applied the ratio of 1:3 as against the ratio of 1:5 applied by the AO - Held that:- The number of functions claimed by the assessee is only 24 during relevant previous year which appears to be very low considering the past history of the case and excellent location of the appellant’s hotel. Taking into account the general fall in number of function over the years, the number of function during the relevant previous year is estimated at 40 instead of 50 estimated by the AO. The estimate of receipts of Rs. 55,000/- per function taken by the AO is held to be reasonable since this is only a 10% increase over the rate estimated in AY 2002-03. The assessee will consequently get relief of Rs. 5,50,000/- out of the addition of Rs. 15,72,472/- made by the AO on this account - no infirmity in the above order of the ld. CIT(A) which is a well reasoned order. As regards the findings of AO in the subsequent year where the AO has allowed 15% wastage, as argued by Ld. AR, the same cannot be applied in the present facts and circumstances for the reasons, each year is independent year in Income Tax proceedings and the following year having its own facts and circumstances and decision of AO for following year cannot be a guide on the Tribunal as in the present case, which has its own circumstances. - Decided against assessee.

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• Customs

• 2015 (9) TMI 146
  Confiscation of Goods – Service of notice – Lapse of period – Petitioner seeking quashing of communication/letter, Annexure- F, issued by third respondent, contending that non issuance of notice under Section 124 of Customs Act, 1962 within period prescribed under Section 110(2) has given right to petitioner to seek for return of seized goods – Held that:- Section 110(2) indicate giving of notice within six months from date of seizure of goods is condition precedent to retain seized goods by department and in absence of such notice being issued to owner, goods seized to be returned – Annexure-F issued by third respondent would clearly indicate that Show Cause Notice-Annexure-A came to be issued within period of six months from date of seizure of goods as contemplated under Section 110(2) – Goods came to be confiscated by proper officer, show cause notice came to be issued before expiry of six months period – Section 153 provides that notice issued under Act should be served in manner as provided under said Section – It does not even remotely suggest that such person should be served with such notice to hold service of notice as complete – Dispatching of notice by registered post would constitute valid service – Thus, date of sending or dispatching notice by registered post is date of giving notice as contemplated under Section 110(2) – Once authority concerned makes out case for confiscation within time-limit, it cannot sit idle – It has to make concerned person aware of such case by giving written notice – Therefore, date of service of notice cannot be held as one which entitles petitioner to seek for return of goods on ground that six months period had expired – Decided against assesse.

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• 2015 (9) TMI 144
  Goods not in conformity with Basmati Rice – Confiscation of Goods – Tribunal by impugned order allowed appeal of Respondent and set aside order of Commissioner whereby direction was issued to confiscate seized goods as samples were not conforming to Basmati Rice – Held that:- test reports of RAL clearly stated that percentage of other Rice in consignment was more than 20% which was maximum permitted under Basmati Rules – Sample also did not possess natural fragrance in both raw and cooked stages – Once there was report of RAL clearly stating that samples did not conform to requirements of Basmati Rules then Customs Authority was bound by such report – If Respondent wanted to show that other rice found present to consignment was also Basmati Rice then burden was on Respondent – It was justified in proceeding on strength of test report that presence of other rice, i.e. non-basmati rice, was more than permissible maximum limit of 20% – Since consignment was not entirely of Basmati Rice, it was not sufficient that grains confirmed to length and length/breadth ratio prescribed for Basmati Rice in order to pass test – Therefore Court of opinion that Additional Commissioner was justified in his conclusion that Respondent had attempted to export non-Basmati Rice prohibited for export in terms of DGFT notification – Impugned order of Tribunal hereby set aside – Decided in favour of Revenue.

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• 2015 (9) TMI 143
  Suspension/Cancellation of License to undertake foreign trade activity - power of DGFT – Issuance of Show cause notice - Petitioner alleged that show cause notice was issued then, there was no need or necessity for passing suspension order that too without giving reasonable opportunity of being heard, such being contrary to section 9(4) and principles of natural justice – Held that:- show cause notice was issued and Petitioner was called for personal hearing – If authority was of opinion that explanation given on record was inadequate and that certificate was renewed by collusion or by perpetrating fraud, no basis found for suspension order – Nothing, in suspension order, which would hold that some situation which required immediate and emergent attention had taken place – If authority suspended licence, it must make order in writing that must indicate some application of mind and relevant material – There was absolutely no material in order of suspension –Mere pendency of cancellation proceedings without anything could not be foundation for such order – Impugned order quashed and set aside – Petitioner to co-operate with authority in early conclusion of proceedings initiated pursuant to show cause notice – Decided in favour of Petitioner.

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• 2015 (9) TMI 142
  Claim for refund - Respondent had imported 20 Rolls Colour Graphic film and filed Bill of entry for assessable value under CTH 3702 – However refund claim of respondent was rejected – Tribunal by impugned order allowed claim of assesse by upholding order of commissioner – Held that:- undisputedly tribunal had directed Commissioner (Appeals) to examine issue as to whether respondents/assessee makes out case and remanded for fresh decision on issue of unjust enrichment – Commissioner (Appeals) on basis of certificate of Chartered Accountant and details of balance sheet found that claim of refund as granted by original authority requires no interference – In that view of matter, proceedings before Commissioner (Appeals) were limited only for examination of issue as to whether case of unjust enrichment on basis of material placed on record – Present appeal only arises out of concurrent finding of fact as recorded by three authorities and as such no substantial question of law arises – Thus, Appeal rejected – Decide against revenue.

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• 2015 (9) TMI 113
  Application for waiver of pre-deposit condition – Petitioners preferred appeal within period of limitation, however, was negligent in proceedings with appeal and application filed for waiver of pre-deposit – Tribunal recorded that in spite of given reasonable opportunity to petitioners, petitioners failed to turn up and dismissed matter – Tribunal was intimated about change of address but same was not recorded – Since respondent authorities till date did not initiate any proceeding for realisation of customs duty along with interest and penalty imposed by impugned order, Tribunal directed to consider application for waiver of pre-deposit.

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• Service Tax

• 2015 (9) TMI 163
  Outdoor catering service - Mandap Keeper service - Appellant Institute prepares cooked food as per the fixed menu and supplies the same to various schools for which they received payment at certain rates - appellant were also making available the space in their premises to various persons for their functions - Held that:- Since the appellant are preparing mid day meals in their Institute and not in the schools where the meals are served are not involved in serving of the meals in any manner, in our view they are not covered by the definition of "outdoor caterer" and hence their activity of preparing and supplying meals for mid day scheme would not be covered by the definition of taxable service under Section 65(106(zzt). As regards the mandap keeper service alleged to have been provided by them during the period of dispute, we find that during each financial year during the period of dispute its turnover is well within the threshold limit of Notification No. 6/2005-ST and therefore they will be exempted from service tax. - Decided in favour of assessee.

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• 2015 (9) TMI 162
  Penalty u/s 77 & 78 - Evasion of duty - Malafide intention - Held that:- Commissioner (Appeals) has discussed in details that regarding the fraud committed by the consultant with the appellant for not depositing service tax in the government's account for which FIR proceedings also initiated against consultant by the department, which clearly shows that it is not the appellant who has committed an offence of non payment of service tax, it is the consultant, who has defrauded them therefore there is reasonable cause for waiver of penalty under Section 78. - Commissioner (Appeals) has correctly set aside the penalty imposed under Section 78 - However, penalty u/s 77 is reduced - Decided partly in favour of Revenue.

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• 2015 (9) TMI 161
  Commercial or industrial construction service - abatement of 67% under notification 15/2004 ST/notification No. 1/2006-ST - Held that:- benefit of the said notification (no. 12/2003-ST) can be extended only if the appellant satisfies the conditions subject to which the benefit thereunder can be granted. CESTAT has held in the case of Mehta Plastcorporation [2014 (9) TMI 178 - CESTAT NEW DELHI] that to claim exemption under notification 12/2003-ST it is not necessary that invoices should separately indicate the value of the goods sold and the benefit of the said notification can be granted when there is transfer of possession of goods. Both sides have agreed that this case may be remanded to the original adjudicating authority with a direction that the appellant should be given an opportunity to claim the benefit of notification No. 12/2003-ST. - matter remanded back - Decision in the case of BSNL (2014 (10) TMI 419 - CESTAT NEW DELHI) followed - Decided in favour of assessee.

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• 2015 (9) TMI 160
  Import of taxable services - reverse charge - entire exercise is revenue neutral - Banking and other Financial Services - Invocation of extended period of limitation - Levy of Penalties under Sections 76, 77 and 78 - Mens rea - Held that:- Service tax was paid by the appellant after the issue of the show cause notice and before the passing of the adjudication order. Revenue relies on the decision of the Apex court in the case of Kitply Industries (2011 (4) TMI 523 - SUPREME COURT OF INDIA). - The revenue neutral situation comes about in relation to the credit available to the appellant himself and not by way of availability of credit to anyone else. Therefore the case of Jay Yushin Ltd [2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI] applies in the present situation after considering the guidance drawn by the Supreme Court in the case of KitPly Industries (supra). In this view of the matter, as the entire exercise is revenue neutral we find that mens rea is not established for imposition of penalties. - As the duty stands paid and credit of duty paid is admissible, the impugned order is set aside to the extent of recovery of interest and imposition of penalties. - Decided in favour of assessee.

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• 2015 (9) TMI 159
  Demand of service tax - Cargo handling service - activity of grinding of rock phosphate - Penalty u/s 76, 77 & 78 - Held that:- Payment rates were composite rates not amenable to identification as to what rate/amount was paid to those components of services which were arguably in the nature of cargo handling service. When quantification is not possible, the levy fails. However, without elaborating on this judicial principle, we find that in the case of Commissioner of Central Excise Bhubaneswar versus B.K. Thakkar [2007 (10) TMI 147 - CESTAT, KOLKATA] CESTAT while deciding a similar issue held that excavation, transportation and feeding of iron ores to crusher plant for processing were incidental activities for processing, and therefore, the entire contracted activities did not get the character of cargo handling service. Further, it is seen that from 10.09.2004, appellant has been paying service tax on the entire consideration received under business auxiliary service on account of the fact that "production of goods on behalf of the client" was added to the definition of BAS from the said date Overall nature of contract did not make it amenable for coverage under cargo handling service - when the issue involves interpretation of law, extended period cannot be invoked. Also, the conditions for imposing penalty under Section78 are identical to those required for invoking extended period. Therefore, when 78 penalty has been found to be unimposable, invocation of extended period also cannot be sustained and as a consequence thereof, the entire demand is hit by time-bar. - Decided in favour of assessee.

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• 2015 (9) TMI 112
  Denial of benefit of exemption under Notification No.12/2003-ST dated 20.6.2003 - Classification of service - supply, erection, commissioning and installation service or works contract service - Appellants have not discharged VAT liability on actual value of the goods and also discharged service tax liability on notional value of 20% - Held that:- The order for classifying the activity under works contract and then imposing composition scheme is not justifiable. Service tax cannot be demanded on the portion of value which is the value of goods involved in the execution of the contract. Evidence has been presented by the appellants evidencing that VAT has been paid on the material component. Certified documents show that the material component has suffered VAT. In view of this, the matter needs re-verification by the adjudicating authority. Accordingly, the matter is remanded to the Commissioner to decide the case afresh considering the evidence presented by the appellants. The Commissioner may decide the case within three months of the receipt of this order. - Matter remanded back - Decided in favour fo assessee.

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• Central Excise

• 2015 (9) TMI 154
  Classification of good - printing of metal backed advertisement material/posters, commonly known as Danglers - Whether the respondent/assessee's product was classifiable under Chapter 49 sub-Heading 4901.90 attracting nil excise duty or it is to be classified under Chapter 83 sub-Heading 8310 of the Central Excise Tariff Act Chapter 49 deals with "Printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans" - Held that:- assessee is engaged in the business of printing metal backed advertisement material/posters, commonly known as Danglers, placed at the point of sale, for customers information/advertisement of the products brand etc; the entities have calendars, religious motifs also printed in different languages. - products cannot be treated as Printed Metal advertisement posters. The Tribunal [2005 (3) TMI 237 - CESTAT, MUMBAI] has considered this aspect in detail. In its impugned judgment the Tribunal had rightly decided the case in favour of the respondent-assessee holding that the products were classifiable as printed products of the printing industry. - Decided against Revenue.

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• 2015 (9) TMI 153
  Validity of order of the HC - Held that:- Court had observed in the Order dated 4.04.2012 [2012 (4) TMI 576 - SUPREME COURT] that the High Court had to decide the case on merits but without going into the merits of the case, the High Court has disposed of the appeals - it was not proper on the part of the High Court to dispose of the appeals without going into the merits of the case. In the circumstances, the appeals are allowed, the impugned judgment is set aside and the appeals shall be restored at their original numbers and shall be heard by the High Court on merit. - Decided in favour of assessee.

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• 2015 (9) TMI 152
  Levy of duty on fly ash and fly ash bricks - whether the 'fly ash' and 'fly ash bricks' included as items in the entries to the First Schedule to the Central Excise Tariff Act, per se make the same exigible to excise duty - Held that:- It has already been held by this Court that the fly ash has not gone under the process of manufacture and it cannot be said to be a manufactured product. However, as regard the applicability of exemption Notification No.85/95-CE to the product 'fly ash' on the ground that it is a waste arising in the course of manufacture of 'electricity' which is exempted good, no excise duty can be levied is concerned, it is to be noted that it could be applied only if the waste, parings and scrap arise in course of manufacture of excisable goods which are exempted goods i.e. goods chargeable to nil rate of duty or the same are fully exempt from duty under an exemption notification. Electricity has been specified in the First Schedule of the Central Excise Tariff under heading 27160000, but it is not subjected to a duty of excise since under the 'rate column' the duty of excise is indicated as 'nil'. Merely, rate of duty is mentioned 'nil', it cannot be construed that it is non-excisable good. In "CCE, Hyderabad versus Vazir Sultan Tocacco Co.Ltd., reported in [1996 (2) TMI 138 - SUPREME COURT OF INDIA] the Hon'ble Supreme Court has held that though by virtue of an exemption notification, the rate of duty was nil, this does not mean that they were not excisable goods. They were excisable goods. Nil rate of duty is also a rate of duty. Therefore, electricity is excisable good and can be construed as exempted goods by virtue of the above notification No.89/95-CE, dated 18.05.1995 as it has been clearly clarified in the Explanation that "....for the purpose of this notification, the expression "exempted goods" means excisable goods which are chargeable to "Nil" rate of duty. Therefore, as rightly contended by the learned counsel for the petitioner, the exemption Notification No.89/95-CE would squarely applicable to the product 'fly ash', which is a waste arise during the course of manufacture of electricity, which is an excisable good chargeable to "nil" rate of duty. Commodity 'fly ash' cannot be subjected to levy of excise duty because it is not an item of goods which has been subjected to process of manufacture, it may not be necessary for this Court to delve upon any other related issues. Accordingly, the issue is answered, holding that the good "fly ash" does not involve any manufacturing activity and it does not fall under the purview of excisable good so as to attract levy of excise duty. - since fly ash does not itself get shaped as bricks unless some manufacturing activity is involved. Since the raw material fly ash undergoes a change since an operation performed on it, resulting into fly ash brick, such operation would certainly amount to processing of the commodity and such commodity is recognized as a new and distinct article, i.e. 'fly ash brick' and therefore, it can be said that the good fly ash brick does involve manufacturing activity, which is admittedly, has marketability also being sold on a considerable price. Therefore, the good 'fly ash brick', having satisfied the test of being manufactured in India and also marketability, I am of the view that it is leviable to excise duty. - Decided partly in favour of assessee.

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• 2015 (9) TMI 151
  Whether Rule 5 of the Rules is liable to be declared unconstitutional, violative of Article 14 and/or ultra vires Section 3A of the Central Excise Act, 1944 - Rule 5 of the Hot Re-rolling Mills Annual Capacity Determination Rules, 1997 - Held that:- Thus, challenge to Rule 5 is based on the scheme contained in Section 3A of the Act and Rules 1 to 4 of the Rules. This rule according to the appellant, not only runs counter to Section 3A but is also violative of Article 14 of the Constitution. - taxation laws are also subject to fundamental rights guaranteed under the Constitution. It is also settled that tax law cannot be challenged merely on the ground that the rate of tax is very high unless the tax is a colorable devise to confiscate the property. The principle that a tax which is discriminatory is void as violating Article 14 is also indisputable. Though the principle is not in dispute, its application is open to judicial review. Rule provides that if the production during the year 1996-97 was more than the production determined by the formula in Sub-rule (3) of Rule 3 of the Rules, then that has to be taken as the annual capacity for the financial year 1997-98 and the subsequent years. This rule, it seems, was introduced keeping in view the fact that without there being any change in the plant and machinery, including man power, there should not be any reason why factory should have more production in 1996-97 than 1997-98. In other words, without there being any change in the plant and machinery and the other infrastructure including man power, if class 'A' manufacturer in 1996-97 could produce 150 bars/rods there was no reason for him to produce less number of bars/rods in 1997-98 unless there is a reason and the evidence in support thereof and if there is any such reason or evidence the manufacturer can take recourse to sub-section (4) of Section 3A of the Act. It was also to check mischief, if any, on the part of manufacturer to show or go for lower/less production to gain an advantage of the scheme. We find that the classification have a rational nexus with the object sought to be achieved by the law. The State, in the exercise of its governmental power, has, of necessity, to make laws operating differently in relation to different groups or class of persons to attain certain ends. - Rule 5 is neither violative of Article 14 of the Constitution nor ultra vires the provisions contained in Section 3A of the Act - Decided against assessee.

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• 2015 (9) TMI 150
  Disallowance of deemed credit - Suppression of value of goods - Held that:- There is a specific finding of fact that there is nothing on record which would show that the processors had personal knowledge regarding inflation of valuation of goods. Perusal of the impugned Judgment would also reveal that the learned Tribunal has found that except the statement of the Dyeing Master, no material was placed on record by the Revenue to substantiate their contention with regard to fraud or suppression. As to whether the Dyeing Master has a specialised knowledge regarding valuation of goods or not is also purely a question of fact. It also appears that nothing has been placed on record to substantiate the contention that the Dyeing Master has expertise in valuation of goods. In that view of the matter, it cannot said that the view taken by the learned Tribunal is either an impossible or perverse. - Decided against Revenue.

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• 2015 (9) TMI 149
  Challenge to Rule 8(3) of the Central Excise Rules - Violation of Articles 14, 19(1)(g), 50 and 265 of the Constitution of India - whether interest is chargeable in terms of Rule 8(3) Central Excise Rules or under the provisions of Section 11AB of the Central Excise Act - Held that:- Rule 8(3) of the Central Excise Rules in respect of levy of interest at the rate of Rs. 1000/- per day is held to be invalid. Consequently, the demand raised at whatever stage insofar as levy of interest at Rs. 1000/- per day in terms of Rule 8(3) of the Central Excise Rules is also set aside. - Decision in the case of Lucid Colloids Limited V. Union of India [2005 (8) TMI 134 - HIGH COURT OF RAJASTHAN] - Decided in favour of assessee.

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• 2015 (9) TMI 148
  Benefit of Modvat credit - credit on lubricants used in the mines of the respondent - Held that:- It is evident that a fact is in dispute, as has been raised by the Department. Further, the finding of the Tribunal that the mine of the assessee is a captive mine is not supported by any materials. In such view of the matter, this Court is unable to take a decision on the questions of law raised. In view of the dispute in fact and the finding rendered by the Tribunal, in the light of ground (a), raised by the appellant, i.e. Tribunal by allowing the credit on the ground of use in the captive mines has followed the ratio of the decision of the Apex Court in the case of Vikram Cements Ltd. - Vs CCE, Indore (2006 (2) TMI 1 - Supreme court), where credit of duty paid on capital goods used in the captive mines were allowed, this Court is inclined to set aside the order of the Tribunal and remand the matter back to the Tribunal for reconsideration on the plea for modvat/cenvat credit claimed by the assessee. - Order of Tribunal is set aside - Decided in favour of Revenue.

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• 2015 (9) TMI 147
  Denial of CENVAT Credit - Whether the Tribunal has committed an error of law in denying the credit on welding electrodes solely on the ground that they are classified under Heading 83 of Central Excise Tariff which is not covered under the definition of Capital Goods - Held that:- Question formulated, in fact does not arise at all in the present appeal, since appellant did not press it before the Tribunal and it has been decided accordingly by the Tribunal against it. Even otherwise, in view of this Court’s judgment in M/s. Upper Ganges Sugar & Industries Ltd. v. Commissioner Customs & Central Excise (2015 (5) TMI 569 - ALLAHABAD HIGH COURT), the question has to be answered on merits also, against the appellant. - Decided against assessee.

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• 2015 (9) TMI 119
  Denial of CENVAT Credit - Job work - Whether in the facts and circumstances of the case, the first respondent Appellate Tribunal is right in holding that the second respondent is entitled to Cenvat credit on the capital goods/inputs used in the manufacture of goods which are exempted and which are cleared without payment of duty on Job work basis - Held that:- assessee had manufactured machine forgings on job work basis and supplied the same to the principal manufacturers without payment of duty. The assessee were also manufacturing similar goods on their and the same were cleared on payment of duty to independent buyers. In such duty payments, the assessee utilized Cenvat credit on capital goods and inputs which were used in the manufacture of the job-worked goods, which was objected to by the Department. Hence show cause notice was issued alleging that as the inputs have been used in the manufacture of final products which were cleared without payment of duty, any cenvat credit of the duty paid on such inputs would not be available. The Adjudicating Authority sustained the allegations and ordered recovery of the cenvat credits in question. On appeal, at the instance of the assessee, the Commissioner (Appeals) upheld the order of the Adjudicating Authority, against which appeal has been filed before the Tribunal by the assessee. - Both sides fairly conceded before this Court that the issue involved in these appeals are decided by this Court reported in [2014 (9) TMI 444 - Madras High Court](Commissioner Versus Hwashin Automotive India Pvt. Ltd.), wherein by following the unreported decision, similar question raised by the Revenue was answered against the Revenue. - Decided against Revenue.

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• CST, VAT & Sales Tax

• 2015 (9) TMI 158
  Increase of Turnover and tax liability – Best judgment assessment – AO held that two challans, showing sale of goods to certain dealers could not be explained as Assesse had neither produced relevant sale records nor entered sales reflected in said challans in sales tax account registers – Appeal preferred by Assessee was also rejected – Held that:- order passed by Appellate authority and tribunal does not consider any of Assessee’s contentions – Clearly, two challans cannot be basis for rejecting assesse’s books and increasing taxable turnover – In absence of any purchases by Assessee, it was doubtful whether Trading Account could be prepared – AO enhanced turnover principally on basis that Assessee had failed to produce Trading Account – Also turnover was increased on basis of excess stock allegedly found at premises of Assessee, AO has not indicated as to how excess stock would affect declared turnover – While making best judgment assessment, AO did not examine records pertaining to commission received/receivable by Assessee – Assessment Order does not indicate any basis for AO to enhance turnover by 10% – Matter remanded to AO to decide afresh in accordance with law – Decided in favour of Assesse.

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• 2015 (9) TMI 157
  Levy of tax, surcharge and AST – Suppression of Sale slips – Asst. Commissioner while entertaining appeal, sustained actual suppressions of slip numbers 1, 2 and 4, but deleted entire estimation with regard to slip No.3 holding that appellant was suffering from nervous disorder at time of enquiry and it related to only jottings made by appellant – Joint Commissioner revised order of Asst. Commissioner restoring turnover involving tax, surcharge and additional sales tax on grounds that – Whether suppression of sales under Slip No.3 could be deleted or not – Held that:- Appellate Assistant Commissioner erred in allowing contentions of assessee on grounds of nervous disorder of assessee, while giving deposition and that slip denoted only jottings – Plea of ill health during time of enquiry and subsequent dates was only after thought, as was rightly observed by Revisional Authority – Assesse had full knowledge of details contained in Slip No.3 and he had given statement before Authority, which formed basis of original assessment order – From facts, it was clear that it was suppression of sales – No reason to interfere with order passed by Joint Commissioner in suo motu proceedings – Decided against Assesse.

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• 2015 (9) TMI 156
  Condition for Imposition of Penalty – Wilful non-disclosure of turnover – On failure of appellant to respond to notices orders of assessment were issued confirming proposal, completing assessment and imposing penalty – Whether imposition of penalty under section 25(3) r/w section 67 of kerela value added tax act could only be exercised if assessing authority was satisfied that escape of turnover was due to wilful non-disclosure by assesse – Held that:- provision says that penalty can be imposed if assessing authority was satisfied that escape from assessment was due to willful non-disclosure of assessable turn over by dealer – Satisfaction can be arrived either on completion of assessment or during course of assessment as made for finalising best judgment assessment – It cannot be said that there was any bar against imposition of penalty only when there was wilful non-disclosure of assessable turnover – None of legal precedents persuade this to be accepted – Therefore no reason to interfere with judgment impugned – Appeal dismissed – Decided in favour of Assesse.

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• 2015 (9) TMI 155
  Implementation of judgment – Petitioners seek implementation of order and judgment passed by Bombay high court in Bombay Tarpaulin Merchants' Association v. State of Maharashtra [2009 (8) TMI 1081 - BOMBAY HIGH COURT] – Held that:- From reading order and judgment, it is clear that it was held that communication was one under section 52(1) – Order of Division Bench requires Commissioner to comply with procedure under section 52(2A) if communication dated October 1, 2001, was passed after approval of Commissioner – It is only member whose activities conformed to those mentioned in communication dated October 1, 2001 who would be entitled to benefit mentioned therein – Petition disposed off.

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• Indian Laws

• 2015 (9) TMI 118
  Abuse of bail - Appointment of Amicus Curiae - Held that:- A perusal of the impugned order makes it abundantly evident that the High Court has considered the case in all its complexities. The argument that the High Court was duty-bound to appoint an amicus curiae is not legally sound. Panduranga [2015 (8) TMI 1139 - SUPREME COURT OF INDIA] correctly considers Mohd. Sukur Ali v. State of Assam [2011 (2) TMI 514 - SUPREME COURT OF INDIA] as per incuriam, inasmuch as the latter mandates the appointment of an amicus curiae and is thus irreconcilable with Bani Singh [1996 (7) TMI 562 - SUPREME COURT]. In the case in hand the High Court has manifestly discussed the evidence that have been led, and finding it of probative value, has come to the conclusion that the conviction is above Appellate reproach correction and interference. In view of the analysis of the law the contention raised before us that it was essential for the High Court to have appointed an amicus curiae is wholly untenable. The High Court has duly undertaken the curial responsibility that fastens upon the Appellate Court, and cannot be faulted on the approach adopted by it. Appellant granted opportunity to argue the Appeal on its merits.

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• 2015 (9) TMI 117
  Condonation of delay - Sufficient cause - Held that:- admittedly earlier objection filed by the Respondent-State under Section 47 of the Code was dismissed on 17.8.2010. Instead of challenging the said order the Respondent-State after about one year filed another objection on 15.9.2011 under Section 47 of the Code which was finally rejected by the executing court. It was only after a writ of attachment was issued by the executing court the respondent preferred civil revision against the first order dated 17.8.2010 along with a petition for condonation of delay. Curiously enough in the application for condonation of delay no sufficient cause has been shown which entitle the respondent to get a favourable order for condonation of delay. Decree passed in the year 1967 was in respect of declaration of title and permanent injunction restraining the Respondent-State from interfering with the possession of the suit property of the plaintiff-appellant. It is evident that when the State tried to interfere with possession the decree holder had no alternative but to levy the execution case for execution of the decree with regard to interference with possession. In our opinion their delay in filing the execution case cannot be a ground to condone the delay in filing the revision against the order refusing to entertain objection under Section 47 CPC. This aspect of the matter has not been considered by the High Court while deciding petition for condoning the delay. Merely because the Respondent is the State, delay in filing the appeal or revision cannot and shall not be mechanically considered and in absence of ‘sufficient cause’ delay shall not be condoned. - Decided in favour of appellant.

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• 2015 (9) TMI 116
  Challenge to promotion list - Promotion on the basis of seniority list - Held that:- The rules of administrative interpretation/executive construction, may be applied, either where a representation is made by the maker of a legislation, at the time of the introduction of the Bill itself, or if construction thereupon, is provided for by the executive, upon its coming into force, then also, the same carries great weightage. - one may reach the conclusion that administrative interpretation may often provide the guidelines for interpreting a particular Rule or executive instruction, and the same may be accepted unless, of course, it is found to be in violation of the Rule itself. - The Statute is not to be construed in light of certain notions that the legislature might have had in mind, or what the legislature is expected to have said, or what the legislature might have done, or what the duty of the legislature to have said or done was. The Courts have to administer the law as they find it, and it is not permissible for the Court to twist the clear language of the enactment, in order to avoid any real, or imaginary hardship which such literal interpretation may cause. It becomes crystal clear that, under the garb of interpreting the provision, the Court does not have the power to add or subtract even a single word, as it would not amount to interpretation, but legislation. - If the contention of the appellants is accepted, it would amount to fixing their seniority from a date prior, to their birth in the cadre. Admittedly, the appellants (17th batch), joined training on 2.7.1993 and their claim is to fix their seniority from the Ist of February, 1993 i.e. the date on which, the 16th batch joined training. Such a course is not permissible in law. - Decision in the case of Dinesh Kumar v. UOI & Ors. distinguished - Decided against appellant.

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