TMI Tax Updates - e-Newsletter
September 6, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws FEMA Service Tax Central Excise Wealth tax Indian Laws

TMI SMS

• Import of services - Mere transfer of funds by gross outflow or by netted inflow by overseas branch to Parent Co. in India is not taxable

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Articles

• Goods and Service Tax - Improving Ease of Doing Business
• Goods Vs. Services in GST: Concept and Open Issues
• Transfer Pricing - Interest on Excess Credit Period/ Delayed Payment

News

• Income Declaration Scheme 2016 – Government issues Clarifications in the form of Sixth Set of Frequently Asked Questions (FAQs)

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• Dr. Urjit R. Patel takes over as RBI Governor

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• The Independence of the Central Bank (Raghuram G. Rajan, Governor - September 3, 2016 - at St. Stephen's College, New Delhi)

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• Special Investigation Team (SIT) on Black Money asks RBI to develop institutional mechanism to track illicit financial flows out of country in light of identified gaps in the regulatory framework

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Notifications

Service Tax

• 39/2016 - dated 2-9-2016 - ST
  Seeks to Amend Notification No. 25/2012 - Service Tax, dated the 20th June, 2012

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Highlights / Catch Notes

Income Tax

• Taxability in India - offshore supply of goods and materials - The contract in this case is a composite one and the entire amount received by the applicant from L&T is taxable in India. - AAR
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• Taxability as a result of amalgamation - A foreign company has a branch in India holding shares in India company - The Revenue has given a strange method of working out capital gains which is completely on notional basis and is based on presumptions. Capital gains have to be calculated on real gains and not on the basis of some notional values. - AAR
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• Capital gain on transfer of shares - The applicant is a resident of Mauritius and a valid tax residency certificate has been produced before us. Therefore, the treaty will apply and the applicant is not liable to tax in India. - AAR
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• Provision for transit breakages - The provision would, in the circumstances, be a provision for a contingent liability and, therefore, in terms of the AS 29 ought not be recognised. - SC
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• Waiver of interest u/s 220 - Waiver itself is a discretion to be exercised in terms with the statute, and once such a discretion has been exercised, the scope of judicial review is very limited. - HC
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• Deemed owner u/s.22 - rental income - Assessee is only a licencee - the provisions of Sec.22 read with Sec.27(iiib) of the Act are not attracted and hence the income in question cannot be assessed under the head “Income from House Property”. - AT
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• Capital gain from transfer of shares - such a capital gain cannot be held to be taxable in India in terms of para 6 of para 13 of India-Singapore-DTAA. - AT
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• Disallowance of whole of finance charges - accrual of incremental liability - the obligation for repayment of enhanced liability corresponding to the financial charges has crystallized with the efflux of time. - claim of expenditure allowed - AT
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Customs

• Valuation – joint venture – related parties - merely by holding 40% equity by the foreign company, Indian company cannot become a related person to the foreign company - AT
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• Valuation - rejection of transaction value due to fluctuating prices of the goods - the order was passed without going into the contemporaneous imports of the material time - matter remanded back - AT
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• Availment of exemption under Advance License Scheme - Classification of imported goods - goods imported by the appellant qualifies as crude iodine, hence eligible for exemption claimed by them under Advance License Scheme - AT
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• Valuation - Commission is not available to third party, which is quite clear from the clauses of the agreement. Hence the same is includible in invoice value - AT
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• Imposition of Redemption Fine - re-import of rejected assorted tea exported earlier - reimported goods failed to get clearance from health officers and held as unsafe and was liable to confiscation - imposition of redemption fine upheld. - AT
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Corporate Law

• Eviction of persons - There was no legal handicap in the occupants, who came into picture during winding proceedings, being evicted by the Company Court so as to restore the possession of the assets of the Company, after the winding up order was recalled. - SC
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Service Tax

• CENVAT credit - erection/construction of pipeline or conduit cannot be considered as part of construction of building of civil structure or part thereof. Thus, appellant is eligible for credit on service tax paid - AT
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• Imposition of penalty - failure to furnish list of relevant documents - it cannot be concluded that appellants contravened the provisions of Rule 5(2) of the Act, which came into effect only on 31.1.2008. - AT
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• Import of services - are branches and head offices separate entities so as to attract service tax on outflow by head office to branches? - The transfer of funds by gross outflow or by netted inflow is nothing but reimbursements and taxing of such reimbursement would amount to taxing of transfer of funds which is not contemplated by Finance Act, 1994 - AT
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• Rejection of VCES declaration - non-payment of requisite 50% amount before the due date - there is no provision in the scheme to condone the delay in payment - AT
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• Set top boxes are integral part of the services provided by the appellant as the same enhanced the receipt of the signals by the customers of the appellant – service tax to be levied. - AT
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• Extended period was invoked, not for recovery of non-levied tax but, merely to impose penalties under section 76 and 78 of Finance Act, 1994. The finding of the first appellate authority that demand is barred by limitation is, therefore, legal and proper. - AT
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• Cenvat Credit - The department cannot blow both hot and cold. When the department has accepted tax on the services provided by sister concerns to appellant, then they cannot deny credit saying that no services were rendered - AT
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Central Excise

• Transfer of unutilized credit - shifting of a factory - a shifted unit if dealt discriminately under Rule 10(1) of CENVAT credit Rules, 2004, use of the word shifts in the beginning part of the said sub-rule shall be otios. - AT
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• Cenvat credit - service tax paid on input services of technology development received - this project of technology development for liquid filled hard gelatine capsule didn't give any result makes this full transaction of input service a suspect and put it in the category of sham transaction - demand confirmed - AT
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• Valuation - inclusion of unutilized credit in the cost / assessable value of grey fabrics - their final product was being sold by the assessee at the transactional value in which case the question of adding any credit element would not arise. - AT
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Case Laws:

• Income Tax

• 2016 (9) TMI 164
  Taxability in India - amounts received/receivable by the applicant from Larsen & Toubro towards offshore supply of goods and materials - DTAA between India and Singapore - whether the contract is divisible into offshore supply of goods and materials and services rendered, whether obligations under the work as per the contract are distinct, i.e. whether off shore supply is an independent scope of work in the contract? - PE in India - Held that:- The present contract is clearly a composite one for providing services. Appendix V describes the nature of work in detail and a simple reading of work and responsibilities of the applicant shows that contract is one. As in the present case payment is not separately linked with services and supply but is to be made on the basis of stages of completion of the contract irrespective of goods and materials brought in the premise. The contract is a composite one and offshore supplies are not an independent scope of work. All parts of the transaction relating to sale of goods to L & T were not completed outside India. No separate price of goods supplied by way of offshore supply or sale of goods to L & T outside India is specified in the contract. PE played a role in design, selection and procurement of materials to be used in the fagade related work. The fact pattern of this case is not at all similar to that of Ishikawajima Harima [2007 (1) TMI 91 - SUPREME COURT ] and the law as enunciated herein does not apply to the facts of the present case. The contract in this case is a composite one and the entire amount received by the applicant from L&T is taxable in India.

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• 2016 (9) TMI 163
  Taxability as a result of amalgamation - A foreign company has a branch in India holding shares in India company - Determination of the fair market value of shares of SSBS - Held that:- Explanatory Notes to Finance Act 1967 clarifies that tax liabilities are attracted in the case of both amalgamating company and shareholders. But even if such cases are treated transfer within the meaning of section 2(47) of the Act, the important question is whether in the absence of any consideration flowing to the amalgamating company can such transfer be taxed for capital gains? The notional market value of SSIPL cannot be treated as cost of consideration for the purpose of capital gains in the hands of SSBS which could not receive any consideration before it merged and lost its identity. In the absence of consideration capital gains cannot be computed. The decision of the apex court in the case of CIT v. B C Srinivas Setty [1981 (2) TMI 1 - SUPREME Court] is applicable here. If the applicant succeeds on this issue there is no need to deal with other issues. However, in the question the applicant has raised the issue of discrimination also as per Article 25(3) of DTAA and therefore it needs to be addressed. Article 25 very specifically talks about 'personal allowances, reliefs and reduction for taxation purposes'. The revenue has put emphasis on 'reduction for tax purposes' and 'in the same circumstances and under same condition' We are of the opinion that this Article basically means that there is no discrimination between locals and foreigners in the matter of taxation and no preferential treatment be given to local taxpayers. The exception is only in cases of personal allowances, relief, reduction etc and we agree with the applicant that these are in the context of individuals and not in case of companies as the starting word 'personal' denotes. If a case of amalgamation results in some special benefits to a local company and its shareholders, there is no reason to deny the same to a foreign company and its shareholders in similar case of amalgamation. We are of the opinion that non discrimination clause seeks to ensure that both countrio do not decline any allowance or exemption only on the ground of nationality of taxpayers. Therefore, we feel that exemption under section 47(vi) is available to SSBS also. In the case of BSS it is established that it is case of transfer because admittedly the apex court has settled the issue in the case of Grace Collis. As regards the definition of 'substantial' in explanation 5 to section 9(1) (i) of the Act we feel that Applicant's counsel had tried to attach the issue too far by saying that meaning of 'substantial' should be taken as 'close to whole'. We do not agree. 'Substantial' will always mean at least 50%. Its dictionary meaning is 'of considerable importance, size or worth'. Moreover, Delhi High Court has settled this issue that it should mean more than 50%. We respectfully agree. However, the most important issue is whether BSS has received any consideration. The answer is in negative. The Revenue has given a strange method of working out capital gains which is completely on notional basis and is based on presumptions. Capital gains have to be calculated on real gains and not on the basis of some notional values. In this case no consideration accrues to the amalgamated company and no capital gains is chargeable to tax. We need not go into other issues. Shareholders of SSBS - Held that:- In this case admittedly there is consideration received by shareholders. Therefore, the only issue remains to be decided is whether shareholders get the benefit of Article 14 of DTAA. The applicant says that according to Article 14(5) the gains are taxable in Italy. The Revenue contends that Article 14(2) is applicable because SSBS had a PE in India in the form of its branch. What is important is to see what has been parted with by shareholders. They have parted with their shares in SSBS and not the movable property of the branch. Therefore, we are not influenced by Revenue's contention and we are of the opinion that though capital gains accrue to shareholders, the same is not chargeable to tax in India in view of Article 14(5). Issue of transfer pricing - Held that:- In the course of the hearing the Revenue also submitted that the transfer pricing provisions would be applicable even if there is no liability to tax. The Applicant has relied on the ruling of this Authority in Amiantit International Holding Limited in re: [2010 (2) TMI 123 - AUTHORITY FOR ADVANCE RULINGS ] where this Authority following its earlier ruling categorically held that the transfer pricing provisions are inapplicable if there is no charge. We respectfully agree.

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• 2016 (9) TMI 162
  Capital gain on transfer of shares - Tax liability in India - India-Mauritius DTAA - Held that:- This is a matter of fact and can be examined from share purchase agreement and other documents filed by the applicant. Sinshei Bank is a party to, the share purchase agreement because it is the sponsor and settler of the mutual fund in India and as required under the mutual funds regulations, Sinshei Bank Ltd. executed a trust deed dated 16. 7.2008 with the trustee company whereby Sinshei Bank Ltd. had established the mutual fund and contributed to the initial corpus. As Sinshej Bank was the existing sponsor it was required to be part of the SPA for transfer of the sponsorship to the new sponsor i.e. Daiwa Asset Management Company Ltd. It is also noticed that in terms of mutual fund regulation the trustee Sinshei Bank Ltd. is subject to certain requirements and responsibilities and on sale of shares it is required to be released from its obligation and responsibilities. This is the reason that the SPA contains such provisions. The applicant has given para wise reply to the Department's contentions and the essence of the reply is that Sinshei Bank Ltd. in its capacity as sponsor of the mutual fund is party to SPA and has borne certain responsibility to the regulations, investors of the individual sponsor. The matters regarding place of arbitration, sharing of responsibility to obtain the tax withholding order etc are not relevant particularly in view of the fact that shares have been subscribed by the applicant in its own name and the bank statements filed show that the applicant has paid for such subscription of shares. In these circumstances the applicant cannot be termed as a 'permitted transferee' as was the case in Aditya Birla Nuvo [2011 (7) TMI 60 - BOMBAY HIGH COURT ]. The facts in Aditya Birla Nuvo were entirely different where AT&T had paid for and subscribed to the shares of JV Company in India and obtained the shares in the name of AT&T Mauritius as a 'permitted transferee'. Here the facts are very clear that the applicant had paid for shares. Once it is established that the applicant has made investment on its own and Sinshei Bank Ltd. was party to SPA only in its capacity as sponsor and in order to comply with mutual funds regulations, there is no bar on application of Article 13(4) of the India-Mauritius DTAA in this case. The applicant is a resident of Mauritius and a valid tax residency certificate has been produced before us. Therefore, the treaty will apply and the applicant is not liable to tax in India. The applicant is not liable to tax in India under India-Mauritius DTAA. There is no liability to withhold tax. The applicant is not required to file Income-tax returns in India.The applicant is not liable to tax under the provisions of section 115 JB of the Income-tax Act.

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• 2016 (9) TMI 161
  Provision for transit breakages - whether has a scientific basis or is contingent in nature and as such is not an allowable deduction while computing the total income of the Assessee? - Held that:- We find no reason to entertain this Special Leave Petition, which is, accordingly, dismissed. As decided by HC [2015 (10) TMI 491 - DELHI HIGH COURT] there is no reasonable scientific method adopted by the Assessees to estimate the transit breakages so as to justify creating of provision for such breakages. The provision would, in the circumstances, be a provision for a contingent liability and, therefore, in terms of the AS 29 ought not be recognised. The actual transit breakages as and when they occur are allowable as revenue expenditure in the accounting year in which such breakages occur.

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• 2016 (9) TMI 160
  Waiver of interest u/s 220 - discretionary power - Held that:- There is no doubt about the proposition that the interest being charged is compensatory in nature. The power given under sub Section (2A) of Section 220 is to reduce or to waive the interest paid or payable. The reasons to reduce or waive interest, should be either the payment of such amount has caused or would cause genuine hardship, whether the default in payment of the amount on which interest has been paid or was payable was due to the circumstances beyond the control of the assessee and the assessee has co-operated with the enquiry relating to the assessment or any proceeding for the recovery of any amount due from him. All these three conditions have to be satisfied. On facts, it has to be verified whether these conditions have been fulfilled. In Ext.P6 order, it is found that all the conditions under Section 220(2A) for reduction or waiver of interest has been satisfied. This was a case in which payment was already made in instalments and what remained to be paid was a portion of interest. The Commissioner, having arrived at a finding, granted waiver for the balance interest payable i.e. ₹ 11,31,040/- and did not waive the entire interest, though it was found that the petitioner had satisfied all the conditions. As already indicated, statute permits reduction of interest or waiver of interest in full. This is a case in which the Commissioner has found that the interest payable can be waived thereby reducing the quantum of interest. Waiver itself is a discretion to be exercised in terms with the statute, and once such a discretion has been exercised, the scope of judicial review is very limited.

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• 2016 (9) TMI 159
  Deemed owner u/s.22 - rental income - income from house property - Held that:- Applying the tests to the facts of the present case, especially in the light of clause-2 and 7 of the leave and license agreement, we have no hesitation in coming to the conclusion that on the facts of the present case the assessee was only licencee of the premises owned by M/s. East India Hotels Ltd., and the parties intended it to be license and the agreement did not create an interest in the property owned by the licensor and that the licensee did not have exclusive possession of the property. As a licensee it had granted sub-licence to various parties and derived income there from. Once we come to the conclusion that the Assessee is only a licencee, then it can safely be said that the provisions of Sec.22 read with Sec.27(iiib) of the Act are not attracted and hence the income in question cannot be assessed under the head “Income from House Property”. Similarly even for A.Y.2007-08, the consideration received by the Assessee as licensor from the sub-licensee, comprised of licence fees and service fee and air condition fees. Keeping in mind the objects of the assessee and keeping in mind the facts and circumstances of the present case, it can be safely concluded that the assessee carried on a systematic and regular activity in the nature of business and therefore the income from granting the premises on sub-license was to be assessed under the head income from business. The latest judicial pronouncement in the case of Chennai Properties and Investments Ltd. Vs CIT (2015 (5) TMI 46 - SUPREME COURT) was not available for consideration before the Tribunal when the Tribunal passed its order in the case of another group company based on which the CIT(A) confirmed the action of AO. With the change under law laid down by the Hon’ble Supreme Court, we are of the view that the income in question has to be assessed under the head income from house property. In view of the decision of the Hon’ble Supreme Court in the case of Chennai Properties and Investments Ltd. (supra), we are of the view that the question whether the Assessee is a deemed owner u/s.22 read with Sec.27(iiib) of the Act, no longer assumes importance. For the reasons given above we allow the appeals of the assessee.

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• 2016 (9) TMI 158
  Capital gain from transfer of shares - DTAA between India–Singapore - Held that:- No actual shares which has been transferred or alienated albeit a substantive and valuable right has been given in the shares, which has to reckoned as capital asset or property as per our discussion herein above. Hence, it is gains from the alienation of an asset or property and any gain from alienation of such kind of “property” will fall within the scope of Para 6 of Article 13, whereby, the taxing right has been given to the resident state, that is, the state of the alienator, which here in this case is Singapore. The allocation of taxing right under Article 13(6) cannot be attributed to India but to the resident state. Thus, on the facts and circumstances of the case as discussed above, we hold that, firstly, the consideration received by the assessee is arising from the assignment of substantive and valuable rights in the shares of an Indian company which is assessable under the head “capital gain”; and secondly¸ such a capital gain cannot be held to be taxable in India in terms of para 6 of para 13 of India-Singapore-DTAA. With these observation, the addition made by the AO and as confirmed by the CIT(A) is directed to be deleted.

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• 2016 (9) TMI 157
  Disallowance of whole of finance charges - accrual of incremental liability - assessee is stated to be an Investment Company investing in shares and securities - Held that:- In the present case, the assessee by virtue of assignment agreement has received certain amount which is to be replenished and repaid by higher sum computed by applying Net Present Value method at a discounting factor of 10%. The corresponding finance costs debited to Profit & Loss Account during the year represents incremental increase in the liability with the efflux of time where the liability gets accrued as it inches towards maturity. Thus, it is manifest that the incremental liability has accrued to the assessee in presenti with the efflux of time notwithstanding the fact that increase in the liability is required to be actually discharged on a future date. The gradual increase liability is dependent on the time horizon that has elapsed and therefore not an uncertain event by any stretch of imagination. The Assessing Officer has disallowed the deduction for the liability on the ground that sum will have to be incurred and accordingly in his view the liability has not accrued. We do not find any rationale for holding such view. As noted, the obligation for repayment of enhanced liability corresponding to the financial charges has crystallized with the efflux of time. Thus, the facts of the case clearly indicates that enhanced liability and consequential differential costs i.e. finance charges is accrued indeed. In our considered view, the liability has definitely accrued in presenti against future outflow of resources which obligation in the present case can be determined with great reliability. Therefore, we find considerable merit in the arguments propounded on behalf of the assessee. - Decided in favour of assessee

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• 2016 (9) TMI 156
  Benefit under section 10B - Whether on a true and correct interpretation of Section 80 HHC the Tribunal has erred in law in holding that the export turnover of the unit whose profits are exempt under section 10B is not to be included in the ‘export turnover’ for the purposes of calculating the deduction under section 80HHC? - Held that:- The Tribunal held that the turnover of sales made by the assessee for which deduction under section 10B had been claimed did not answer the description of the turnover eligible for deduction under section 80HHC and therefore, the Assessing Officer rightly excluded such turnover from export turnover while computing relief available to the assessee under section 80HHC of the Act. We are unable to agree. Section 80 HHC clearly defines the terms export turnover, total turnover and profits of business. None of these definitions exclude the export turnover in respect whereof benefit has been derived under section 10B. To accept the respondent’s contention would require the section to be rewritten and the expression to be redefined which is not permissible. In the circumstances, the first question of law is answered in affirmative in favour of the appellant.

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• 2016 (9) TMI 155
  Reopening of assessment - grant of exemption under Section 54F - Held that:- The expression a residential house used in Section 54, should not be taken to convey the meaning that it refers to a 'single residential' house and if that was the intention of the legislature, the framers of the statute would have used the word one instead of a . In fact, the facts of the case in Smt.V.R.Karpagam (2014 (8) TMI 899 - MADRAS HIGH COURT) is more or less identical to that of the case on hand, which also pertained to a development of a property, originally owned by the assessee and the consideration was that the owner/assessee was to receive 43.75% of built up area after development, which translated into five flats. In the instant case, there is no doubt raised by the respondent with regard to the petitioner's eligibility to claim exemption under Section 54F, but the dispute is as to whether the petitioner is entitled to claim such exemption for all the five flats or for only one flat. In the light of the above it is held that the petitioner is entitled to the benefit of exemption under Section 54F as claimed by him and the reasons for reopening the assessment for the relevant assessment year is unsustainable. - Decided in favour of assessee.

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• 2016 (9) TMI 154
  Liability under MAT provisions - effect of insertion of clause (i) to explanation (1) of subsection( 2) of section 115JB of the Income Tax Act, 1961 with effect from 1.4.2001 - Held that:- Having gone through the judgement of the Supreme Court in case of Vijaya Bank (2010 (4) TMI 46 - SUPREME COURT ) and decisions of Karnataka High Court in cases of Kirloskar Systems Ltd. (2013 (12) TMI 9 - KARNATAKA HIGH COURT ) and Yokogawa India Ltd.(2011 (8) TMI 766 - KARNATAKA HIGH COURT ), we are of the opinion that irresolvable conflict has arisen between the two judgements of Division Benches of this Court which cannot be resolved by having resort to the decision of the Supreme Court in case of Vijaya Bank (supra). In the said decision Supreme Court interpreted explanation(1) to section 36(1)(viii) of the Act which provides that for the purposes of the said clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee, shall not include any provision for bad and doubtful debts made in the account of the assessee. The Supreme Court held and observed that said explanation would not govern a situation where there was an actual write off by the assessee in his books in the manner explained in the judgement. Counsel for the assessee would therefore, contend that in the present case also the same legal philosophy would apply and clause(i) of explanation below subsection( 2) of section 115JB would not come into play. Undisputedly, the decision of the Supreme Court in case of Vijaya Bank (supra), was not rendered in context of newly inserted clause(i) of explanation(1) below subsection( 2) of section 115JB. In that sense it cannot be said that the decision of this Court in case of Deepak Nitrite Limited(supra) was rendered per incuriam though it is true that the said decision of the Supreme Court was available by the time judgement of High Court in case of Deepak Nitrite Limited(supra) was rendered, was not noticed. In view of the judgement of the Supreme Court in case of Vijaya Bank (supra), whether this Court would have taken a view as was adopted by Deepak Nitrite Limited(supra), is neither possible nor proper on our part to speculate upon. The situation therefore, has arisen where the decision in case of Deepak Nitrite Limited(supra) was rendered without the aid of Supreme Court judgement in case of Vijaya Bank (supra), which though may have some bearing on the interpretation of the relevant statutory provisions, would not render the decision in case of Deepak Nitrite Limited(supra) per incuria. Let there be a reference to the Larger Bench to consider the following question : “Whether in view of decision of the Supreme Court in case of Vijaya Bank (supra), judgement in case of Deepak Nitrite Limited (2011 (8) TMI 1209 - GUJARAT HIGH COURT ) was not correctly decided and, therefore, later judgement in case of Indian Petrochemicals Corporation Ltd. (2016 (9) TMI 110 - GUJARAT HIGH COURT) lays down the correct law?

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• 2016 (9) TMI 153
  Attachment orders - recovery proceedings - Held that:- The petitioner has raised an objection to the attachment of the subject-property. In such circumstances, it has to be seen as to what has to be done by the Tax Recovery Officer. Rule 11 of the Rules provides for the procedure to be adopted by the Tax Recovery Officer and he is required to investigate the claim or objection. Therefore, it is incumbent upon the first respondent to take note of the objection raised by the petitioner, vide representation dated 26.07.2016 and proceed to investigate into the matter. One another issue, which would also fall for consideration of the first respondent is with regard to the property, which has been mentioned by the petitioner in the representation, said to be belong to another partner of the firm. Therefore, under the scheme and the Rules, the first respondent is bound to take note of the petitioner's objection and proceed in accordance with Rule 11 of the Rules, by investigating into the objection. Writ petition stands disposed of, by directing the first respondent to investigate the claim / objection made by the petitioner, dated 26.07.2016, on merits and in accordance with law, after affording an opportunity of personal hearing, and pass orders within a period of eight weeks from the date of receipt of a copy of this order. It is needless to state that the petitioner should cooperate in the process of investigation and if any details or documents are called for by the first respondent, the same shall be produced by the petitioner.

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• 2016 (9) TMI 152
  Carbon credit receipt - nature of receipt - revenue or capital - Held that:- "Carbon Credit" is capital in nature. See The Commissioner of Income Tax – IV, Hyderabad Versus M/s. My Home Power Ltd [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT ]

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• 2016 (9) TMI 151
  Sale and purchase of shares - short term capital gain or Business Income - Held that:- Mere volume or magnitude does not alter the nature of transaction, which are consistently assessed as income from capital gains from past years and even in future years by revenue. Where the assessee was holding large magnitude of shares as investment from year to year and transaction of shares in preceding years as well for the future years had been held as income from capital gains both on long term and short term basis, there was no basis for holding assessee as trader in shares for the year under consideration when his intention is clear that he want to hold the shares as investment ans not stock in trade. Accordingly, we are of the view that the Revenue has wrongly treated the transaction of sale and purchase of shares of Munjal Auto as business income, whereas actually it is an investment and income arising out of the same is capital gains. We direct the Assessing Officer to assess the same as short term capital gain. - Decided in favour of assessee

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• 2016 (9) TMI 150
  Disallowance of interest expenditure under section 14 A read with Rule 8D - Held that:- AO has disallowed ₹ 9,31,500/-working out @ 1.5% of the interest bearing funds relatable to investment in shares which is 17.68%. The assessee has contended that it had not incurred any expenditure directly or indirectly, on earning dividend income since, the investments therein were made from its own funds in the early years. This contention of the assessee, it appears, has not been controverted by the authorities below. However, even then it cannot be said that no expenses at all were incurred for earning exempt income. In this view of the matter, and going by the decisions of the coordinate Bench, we direct the AO to restrict the disallowance u/s 14A of the Act to 10% of the dividend income. Disallowance of bad debts - Held that:- The debt in question has been written off as irrecoverable in the accounts of the assessee. Hence, in our considered view, this issue is covered by the ratio laid down by the Hon’ble Supreme Court in TRF vs. CIT (2010 (2) TMI 211 - SUPREME COURT ). We, therefore, set aside the findings of the Ld. CIT(A) and allow the claim of bad debts Eligibility for the claim of depreciation in case of assets put on lease allowed Bogus long term capital loss - Held that:- Since the assessee is unable to establish its claim and has failed to control the findings of the authorities below that the long term capital loss is bogus in view of the brokers note produced not being genuine, we uphold the findings of the learned CIT (A) and consequently dismissed these grounds raised by the assessee.

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• 2016 (9) TMI 149
  Fringe benefit tax - whether the assessee employer is liable to be charged with FBT, notwithstanding the fact that the assessee’s income derived only from agriculture was exempt from income tax under section 10(1) of the Act? - Held that:- The assessee in the case on hand is not liable for imposition of FBT, since its only income i.e., agricultural income is exempt from income tax under section 10(1) of the Act and this income does not form part of and is not to be included in total income. See Apeejay Tea Ltd. vs. CIT and Another [2014 (7) TMI 1118 - CALCUTTA HIGH COURT].

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• 2016 (9) TMI 148
  Transfer pricing adjustment - MAM - Held that:- CUP method provides the most direct comparison for the purpose of determining the arm's length price of international transactions and is to be preferred over the other profit based methods. Accordingly in the instant case internal CUP method should be preferred over the external CUP method. Hence, we hold that in the instant case, the CUP Method (internal) is the most appropriate method in determining the arm's length price of the international transaction involving export of PCBs by the assessee to AE and accordingly, delete the adjustment made in the assessment order. Disallowance on account of diminution in the value of inventories - Held that:- In the instant case, the assessee inadvertently added back the negative balance of the opening and closing provisions made for diminution in the value of inventories in the return filed which should have otherwise reduced from the total income of the appellant. Later on, realizing the inadvertent mistake, the assessee filed a written submission before the AO dated 2nd March, 2015 praying before the AO to allow the deduction of the excess provision which was inadvertently added back. The same was turned down by the Assessing Officer on the alleged ground that the same could only be rectified by a revised return and as the appellant has not filed the revised return the same could not be entertained even after accepting the fact that the appellant should have been allowed with the claim. Now the question before us arises whether the deduction can be allowed without filing the revised return. We are inclined to reverse the order of authorities below and delete the disallowance made by the Assessing Officer / DRP amounting in respect of the negative provisions for diminution in the value of inventories.

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• 2016 (9) TMI 147
  Penalty under section 271FA - whether there is sufficient cause for the assessee for non-compliance with the requirement of Section 285BA of the Act till the notice was served? - Held that:- The order of the Director of Income Tax (Intelligence and Criminal investigation) does not speak as to how the assessee stood to gain by contravening with the provisions of Section 285BA of the Act or the act of assessee resulted in any loss to the Revenue. Further, it is an acknowledged and judicially recognized fact that the tax laws of this country are complex and complicated and often require for compliance, therewith the assistance of tax practitioners specialising in this field, is a well known fact, and it is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments. In these circumstances, no mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA of the Act and the learned Director of Income Tax (Intelligence and Criminal investigation) should have taken note that the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bonafide ignorance of the assessee that he is liable to act in the manner prescribed by the statute, and should not have invoked the penalty proceedings. We find every force in the argument of the learned AR and hold that the Penalty proceedings are liable to be set aside. - Decided in favour of assessee.

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• 2016 (9) TMI 146
  Transfer pricing adjustment - adjustment under the head interest - Held that:- TPO was not justified in making adjustment under the head interest to be charged. The rate of interest was higher than LIBOR, so, we hold that the IT in question was at arm’s length. Allowability of expenditure - Held that:- AO/FAA had not given any plausible reasoning for making the ad hoc addition. The assessee had filed audited accounts and the auditors had not qualified any item for disallowance out of the Miscellaneous Expenses. The AO had also not rejected the books of accounts of the assessee. It is also not clear from the order that as what was the basis for adopting 10% of the expenditure as not allowable. There is finding to show that the expenditure in question was not incurred wholly and exclusively for the business purposes. We find that the FAA had simply followed the order of his predecessor and had not met any of the arguments advanced by the assessee before him. Therefore, reversing his order, we decide ground in favour of the assessee. Computation of deduction u/s.80IB/80IC - Held that:- Gain on account of fluctuation in foreign exchange rate is entitled for deduction u/s.80IB of the Act. So, confirming the order of the FAA, issue is decided against the AO. Order of the FAA does not suffer from any legal infirmity as far as claim with regard to insurance receipt is concerned FAA was not justified in denying the 80IB/80IC deduction to the assessee on sale of scrap. Lease rent income of blow moulding machine - Held that:- It is a fact that the machine was not used by the assessee, that it was given to a contractor, that the contractor was performing certain activities that were related to the manufactured goods of the assessee. In our opinion for claiming deduction u/s.80IB/80IC there should be close nexus of the income and the business carried out by an industrial undertaking. Anything and everything indirectly linked to the business of the assessee cannot be held to an eligible activity for claiming deduction. Confirming the order of the FAA, we decide the issue before us, against the assessee. Disallowance made under section 14 A - Held that:- We find that the AO had made a disallowance of ₹ 4.45 lakhs, that the FAA had restricted the disallowance, that the assessee had claimed that it had not incurred an expenditure to earn the exempt income, that the AO/FAA had not brought on record any fact to prove that certain expenditure was incurred for earning dividend income. Therefore, the action taken by both the authorities cannot be endorsed. However, considering the judgement of Godrej Boyce and Mgf. Company Ltd.[2010 (8) TMI 77 - BOMBAY HIGH COURT ] we are of the opinion that a reasonable disallowance could be made for the year under consideration also with regard to disallowance to be made under section 14A of the Act. We are of the opinion that in the interest of justice the disallowance should be restricted to 5% of the dividend income, as held in the case of Godrej Agrovet (2014 (8) TMI 457 - BOMBAY HIGH COURT ). Ground number seven is allowed in favour of the assessee, in part.

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• Customs

• 2016 (9) TMI 176
  Condonation of delay - Imposition of penalty - Section 116 of the Customs Act, 1962 – MTS of heavy melting scrap – short landing of goods – Held that: - The Act does not confer power on the Appellate Authority to condone the delay beyond the period of thirty days. Though this has been the rule, there have been certain exceptions where this Court has exercised its extraordinary jurisdiction, considering the peculiar facts and circumstances of the case. The Order-in-Original which was passed on 10.11.2004, is yet to be given effect to and it has not attained finality, in spite of lapse of nearly one decade. This Writ Petition has been pending before this Court from the year 2005 and eleven long years has lapsed and nothing has happened. Therefore, this is a good and sufficient reason for this Court to exercise its extraordinary jurisdiction – delay condoned – appeal allowed – decided in favor of ppellant.

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• 2016 (9) TMI 175
  Valuation – joint venture – related parties – relationship influencing the price - transaction value - Rule 4(3)(b) of the Customs valuation Rules – Held that: - merely by holding 40% equity by the foreign company, Indian company cannot become a related person to the foreign company. Therefore, when there is no relationship, transaction value cannot be questioned. Rule 4(3)(b) does not apply – appeal dismissed – decided against Revenue.

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• 2016 (9) TMI 174
  Demand of differential duty - Section 110A of the Customs Act, 1962 – provisional release of goods – execution of bond – security in the form of bank guarantee equal to 25% of value of seized goods – seeking of provisional release on the basis of bond and bank guarantee only – Held that: - provisional release of the goods is allowed on execution of Bond for the value of the goods and on furnishing a Bank Guarantee only in case where matter is pending for adjudication. Since confiscation of the goods has not yet concluded, therefore, the Bond for full value of the goods and Bank Guarantee of 25% is required. After the assessment of the Bill of Entry, the release cannot be allowed without payment of duty as assessed in the Bill of Entry in addition to execution of Bond for the full value of the goods and furnishing of Bank Guarantee for 25% - conditions imposed for provisional release upheld – appeal disposed off – decided against appellant.

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• 2016 (9) TMI 173
  Valuation – declared value accepted as transaction value - Rule 3(3)(b) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 – Helukabel products – rejection of transaction value due to fluctuating prices of the goods – prices of similar/identical products - Held that: - the order dated 16.1.2008 was passed essentially on the ground that the importer was able to establish that the contemporaneous imports were at a price lower than the transaction value in their case. The order dated 9.2.2011 has been passed without going into the contemporaneous imports of the material time i.e. 2010. It is apparent from the order that no such data was submitted by the appellant or examined by the Assistant Commissioner. The letter dated 02.01.2008 from the foreign supplier, itself admits to the fact that the prices are fluctuating as per the international copper rates - the contemporaneous import prices of identical/similar goods to be considered before accepting the transaction value under Rule 3(3)(b) of the Customs Valuation Rules, 2007- matter remanded to original authority – appeal disposed off.

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• 2016 (9) TMI 172
  Availment of exemption under Advance License Scheme - Classification of imported goods – crude Iodine – pure Iodine – advance license scheme – benefit under Exemption Notification No. 43/2002-Cus. – SION of pure iodine and iodine crude different – Held that: - the iodine having 99.8% purity has been considered as crude iodine, which indicates that the iodine having 100% purity can only be considered as pure or refined iodine, which is other than the crude iodine. The imported goods admittedly having iodine assay 99.9% also contain chlorine and bromine and non-volatile matter, therefore, it contains some impurities, and is not pure iodine - goods imported by the appellant qualifies as crude iodine, hence eligible for exemption claimed by them under Advance License Scheme – appeal allowed – decided in favor of appellant.

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• 2016 (9) TMI 171
  Valuation – addition of commission amount to the declared price as mentioned in the price list – agents of foreign supplier - 100% subsidiary of foreign supplier - agreement for Distribution of foreign supplier goods – Held that:- In terms of Rule 9(1)(a)(i) of the Customs Valuation Rules, 1988, the commission and brokerage except buying commission will be added to the invoice value. Commission is not available to third party, which is quite clear from the clauses of the agreement. Hence the same is includible in invoice value – appeal dismissed – decided against appellant.

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• 2016 (9) TMI 170
  Imposition of Redemption Fine - re-import of rejected assorted tea exported earlier - Duty Entitlement Pass Book Scheme – export rejected due to quality reasons – Section 125 of the Customs Act, 1962 - failure to get clearance from the Health Officers and the sample does not conform to FSSAI Standard and the same was unsafe as the sample is not free from extraneous matter - Held that: - the import of edible food products require mandatory clearance from the Port Health Officer and Local Health Authority. Such imports would also include the re-import and those food articles found unsafe cannot be allowed to be cleared from home consumption. The unsafe goods being not permitted to be released as per the Food Safety and Standards Act, 2006 are prohibited under the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1092), for not being as per the standards laid down by the Food Authority under the provisions of the Act and the Rules and Regulations made thereunder - reimported goods failed to get clearance from health officers and held as unsafe and was liable to confiscation - imposition of redemption fine upheld. Imposition of penalty - Section 112(a) of the Customs Act, 1962 – Held that: - no intention of fraud involved – penalty not imposable - appeal disposed off – partly allowed in favor of appellant.

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• 2016 (9) TMI 169
  Rejection of Refund claim – time-bar - Notification No.102/2007-Cus. dated 14.09.2007 as amended by Notification No.93/2008-Cus. dated 01.08.2008. Ld – Held that: - the original Notification NO.102/2007-Cus. dt. 14.09.2007 was not having any time limit for filing refund claim and time period of one year from the date of payment of said additional duty of customs was added to the original Notification No. 93/2008-Cus. dated 01.08.2008. Amending Notification No. 93/2008-Cus. dated 01.08.2008 cannot be said to have retrospective effect. Refund claim of additional duty of customs paid on imported goods with the jurisdictional customs officer is required to be filed within one year from the date of payment of said additional duty of customs. In the present appeal the dispute is from 25.03.2011 to 18.09.2012 which is after 01.08.2008 when Notification No. 93/2008-Cus. dated 01.08.2008 was issued and operative. Time limit of one year applicable – refund claim barred by period of limitation - appeal disposed off – decided against appellant.

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• Corporate Laws

• 2016 (9) TMI 168
  Eviction of persons - whether the Company Court could evict persons, who have occupied property of a company after commencement of winding up proceedings, on such company being revived under the order of the Company Court? - Held that:- Once the Company was ordered to be wound up, the assets of the Company came in the custody of the Company Court and no arrangement, after winding up order, without permission of the Company Court could be recognized in respect of assets of the Company. There was no legal handicap in the occupants, who came into picture during winding proceedings, being evicted by the Company Court so as to restore the possession of the assets of the Company, after the winding up order was recalled. In view of the above, we allow these appeals, set aside the impugned order and hold that the respondents-occupants are liable to be evicted. The official liquidator may hand over possession of the said assets to the appellant within three months. Further dispute, if any, including the implementation of this order may be raised before the Company Court.

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• 2016 (9) TMI 167
  Restoration of the company’s name - Held that:- The respondent had sent notices under S.560 to the petitioner on the address of its registered office but the same may not have been received by the petitioner. Looking to the fact that the petitioner is stated to be a running company; and that it has filed this petition within the stipulated limitation period, and to the decision of the Bombay High Court in Purushottamdass and Anr. (Bulakidas Mohta Co. P. Ltd.) v. Registrar of Companies, Maharashtra, & Ors. (1984 (4) TMI 247 - HIGH COURT OF BOMBAY ); it is only proper that the impugned order of the respondent dated 23.06.2007, which struck off the name of the petitioner from the Register of Companies, be set aside. At the same time, however, there is no gainsaying the fact that a greater degree of care was certainly required from the petitioner company in ensuring statutory compliances. Looking to the fact that annual returns and balance sheets were not filed for almost seventeen years, the primary responsibility for ensuring that proper returns and other statutory documents are filed, in terms of the statute and the rules, remains that of the management. Accordingly, the petition is allowed. The restoration of the company’s name to the Register maintained by the Registrar of Companies will be subject to payment of costs of ₹ 22,000/- to be paid to the common pool fund of the Official Liquidator, and the completion of all formalities, including payment of any late fee or any other charges which are leviable by the respondent for the late deposit of statutory documents within 8 weeks; the name of the petitioner company, its directors and members shall, stand restored to the Register of the respondent, as if the name of the company had not been struck off, in accordance with S.560(6) of the Companies Act, 1956.

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• FEMA

• 2016 (9) TMI 166
  Defective notice - Whether the Tribunal was right in holding that the notice is defective and unsustainable? - Whether the Tribunal was right in holding that the independent properties of a relative of a convict or detenu,cannot be forfeited? - Held that:- As already held that the notice does not establish any link between the convict and the properties. It is also not the case of the petitioner that the properties were purchased out of illegal income earned in India by the convict. It is also pertinent to point out that the proceedings against the detenu was dropped on 10.02.1991. Had there been any nexus or link, the petitioner would not have dropped the proceedings. Though the burden of proof lies on the person affected under section 18, the statutory requirement for commencement of the proceedings cannot be forfeited to forfeit the properties. That stage would arise only when the notice is as per the statute. What by law requires to be express, cannot be left to be inferred. This court after careful consideration of the relevant provisions accepts the findings of the tribunal and holds that the notice under section 6 must establish the link or nexus and in the absence of the same, the entire proceedings would stand vitiated. The returns and the explanations must have been considered. The notice itself, proceeds on the basis that many properties are agricultural lands. There is also a reference to revenue records. The income tax authorities have also accepted the agricultural income. The conduct and the findings only reflect the non suiting of the legal norms by the authority. It is also not in dispute that the remittances from Malaysia was made through proper banking channel and the properties were purchased from agricultural income and remittances. Indisputably the properties are individual properties without any nexus to the convict/detenu. The object of the act is to ensure that the properties purchased out of smuggling activities or by illegal means in violation of the provision of the SAFEM Act cannot be permitted to be enjoyed by the convict/detenu or a relative holding the property as benami. The forfeiture of a relative’s property has to be read in the context and objects of the Act. It is only when the link or nexus of the properties with the convict/detenue or to the income from such illegal activity is established, the properties standing even in the name of a relative can be forfeited. Therefore, this court concurring with the view of the tribunal holds that the individual properties of a relative, as defined under section 2 of the SAFEM Act cannot be forfeited.

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• Service Tax

• 2016 (9) TMI 194
  CENVAT credit reversal – works contract service – construction / execution of the works contract of a building or a civil structure or a part thereof - whether the works of laying of pipes comes within the ambit of works contract which is expressly excluded in the definition of input services ? - construction service - Section 65(25b) of the Finance Act, 1994 – Held that: - Wherever the legislature wanted to include the construction of a pipeline or conduit, it has been specifically mentioned separately in the definition. This itself would indicate that erection/construction of pipeline or conduit cannot be considered as part of construction of building of civil structure or part thereof. Thus, appellant is eligible for credit on service tax paid - appellant not liable to pay interest on the credit which was reversed before utilization as held in the case Bill Forge (P) Ltd 2011 (4) TMI 969 - KARNATAKA HIGH COURT – appeal disposed off – decided in favor of appellant.

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• 2016 (9) TMI 193
  Cenvat credit - service tax paid on security services, courier services CHA services and renting of immovable property services received and used in their other units - Held that:- the term “input services” used in Rule 2(l) of CCR 2004 is much wider in as much as it is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product as has been held by various judicial pronouncements. By respectfully following the ratio of the decision of this Tribunal in the case of Greaves Cotton Ltd. Vs CCE [2014 (8) TMI 654 - CESTAT CHENNAI] after taking into consideration the ruling of the Hon’ble Karnataka High Court in the case of CCE Bangalore Vs Ecof Industries Pvt. Ltd. [2011 (2) TMI 1130 - KARNATAKA HIGH COURT], the appellant is entitled to input service tax credit subject to verification of cenvatable invoices and other relevant records by the adjudicating authority. For this purpose, the impugned order is set aside and appeal is remanded to adjudicating authority. - Appeal allowed by way of remand

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• 2016 (9) TMI 192
  Imposition of penalty - Section 77(2) of the Finance Act, 1994 – business auxiliary services – failure to submit list of records maintained - Rule 5(2) of the Finance Act, 1994 – SCN – Held that: - the show cause notice itself is vague in as much there is no evidence on record that they have not submitted the list of relevant documents at the time of filing of return for the first time, in terms of Rule 5(2) of S.T. Rules, 1994. Based on a mere premise that appellant appeared not to have filed the returns and imposing penalty after a period of 10 years is not legally sustainable – appeal allowed – decided in favor of appellant.

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• 2016 (9) TMI 191
  Import of services - taxability of services rendered by subsidiaries to the parent company – reverse charge mechanism - section 66A of Finance Act, 1994 - are branches and head offices separate entities so as to attract service tax on outflow by head office to branches? - Held that: - The proposition that the intent of section 66A in taxing the activity rendered by an overseas branch to its headquarters in India is limited to the local commercial or business activities of the head office is thereby confirmed. Consequently, mere existence as a branch for the overall promotion of the objectives of the primary establishment in India which is essentially an exporter of services does not render the transfer of financial resources to the branch taxable under section 66A. A branch, by its very nature, cannot survive without resources assigned by the head office. The business of the appellant assessee is such that credibility in the eyes of its overseas clients lies in the name and style of the appellant assessee. It cannot be substituted by any other entity. The activity of the head office and branch are thus inextricably enmeshed. Its employees are the employees of the organization itself. There is no independent existence of the overseas branch as a business. The economic survival of the branch is entirely dependent on finances provided by the head office. Its mortality is entirely contingent upon the will and pleasure of the head office. The transfer of funds by gross outflow or by netted inflow is, therefore, nothing but reimbursements and taxing of such reimbursement would amount to taxing of transfer of funds which is not contemplated by Finance Act, 1994 – demand of tax and interest set aside – imposition of penalties on appellant and other officers set aside – appeal allowed – decided in favor of appellant.

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• 2016 (9) TMI 190
  Short payment of tax – demand of tax with interest – clearing and forwarding agent services – GTA services – business support services – rent-a-cab services - reverse charge mechanism – non-production of documents by the appellant – Held that: - similar issue decided in the case CCE, Raipur Versus M/s Supreme Warehousing Corporation [2015 (5) TMI 1064 - CESTAT NEW DELHI] where it was held that the transportation charges reimbursed to its C&F agent was not included in the assessable value. It was also held that Chartered Accountant certificate certifying the discharge of the duty liability under the category of GTA was not considered by the adjudicating authority. Even the other documents were not considered by the adjudicating authority - case remanded to adjudicating authority for consideration of all documents – appeal allowed.

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• 2016 (9) TMI 189
  Rejection of VCES declaration - Section 107 of the VCES scheme – non-payment of requisite 50% amount before the due date – reason given by appellant for non-payment – Held that: - Even if the reason given is accepted there is no provision in the scheme to condone the delay in payment, therefore time line prescribed under the scheme cannot be extended in absence of any provision for condoning the delay. Issuance of show cause notice – Held that: - Provision for issuance of show cause notice has been provided under the circular is only under Section 106(2) which provides that if any deficiency or error is found in the declaration filed under Section 106(2) notice required to be issued, whereas in case of deposit of an amount as provided under 107 there is no provision for issuance of any notice. Since, the date of deposit is later than the filing of declaration, it cannot be expected from the designated authority to issue any notice. But, following principles of natural justice, opportunity of being heard can be provided to appellant by issuing the SCN – issuance of SCN not required by law – appeal rejected – decided against appellant.

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• 2016 (9) TMI 188
  Evasion of service tax – business auxiliary services – broadcasting services - multi system operator - cable operator services – erection, installation and commissioning – advertisement and channel promotion receipts - Demand of service tax on set top boxes – Held that: - the amount is charged as lease rentals from the customers and the same is received by the appellant. Set top boxes are integral part of the services provided by the appellant as the same enhanced the receipt of the signals by the customers of the appellant – service tax to be levied. Extended period of limitation – interest – Held that: - appellant had not recorded the amounts received by him and declared to the department in the returns filed by them. In the absence of any such declaration of the amounts in their returns, Revenue would not be in a position to come to a conclusion that the said amounts are taxable - extended period correctly invoked – demand of interest upheld. Imposition of penalties – Section 76, 77 and 78 of the Finance Act, 1994 – Held that: - penalties cannot be imposed simultaneously under Sections 76 and 78. Here, penalty is imposed under Section 76 up to May 2008 and for the subsequent period he has not imposed any penalty under Section 76 but under Section 78 – penalty rightly imposed. Appeal rejected – decided against appellant.

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• 2016 (9) TMI 187
  Imposition of penalty – section 76 of the Finance Act, 1994 - Business auxiliary services - section 65(105)(zzb) of Finance Act, 1994 – extended period of limitation – Held that: - marketing of financial products by automobile dealers is taxable as ‘business auxiliary service’. The assessee is not in dispute over that. The records indicate that tax was being paid by assessee at least after investigation commenced. The activities of the assessee are not new, tax liability was being discharged by the assessee and the varying categorisation of taxable service did not impact the rate of tax. From the facts on record, it would appear that the extended period was invoked, not for recovery of non-levied tax but, merely to impose penalties under section 76 and 78 of Finance Act, 1994. The finding of the first appellate authority that demand is barred by limitation is, therefore, legal and proper. Refund claim - classification - support service of business or commerce – Held that: - The appeal relating to refund claim has not brought out any evidence that tax has been paid in excess of dues. Setting aside of the order of adjudicating authority on ground of limitation does not entitle the assessee to refund – appeal disposed off – decided against appellant.

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• Central Excise

• 2016 (9) TMI 195
  Transfer of unutilized credit - shifting of factory - Whether unutilized CENVAT credit lying in appellant's account prior to its shifting from Hosur to Bangalore shall entitle it to avail the same consequent upon such shifting - held that:- the dispute arises only due to interpretational error under Rule 10(1) of CENVAT Credit Rules, 2004. It is well settled that law is to be interpreted in a manner to make that workable without creating any absurdity or ambiguity. Therefore a shifted unit if dealt discriminately under Rule 10(1) of CENVAT credit Rules, 2004, use of the word shifts in the beginning part of the said sub-rule shall be otios. Therefore, for reduction of litigation, learned CDR may take up the matter with the Government for appropriate legislative measure in sub-rule (1) of Rule 10 of CENVAT Credit Rules, 2004 to achieve the legislative mandate of shifting of a factory for any internal, external or statutory reasons. - Decided in favour of appellant

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• 2016 (9) TMI 185
  Fixation of Special Rate of the Actual Value Addition in terms of Notification No.20/2007-CE dated 25.04.2007 - Commissioner rejected the application only on the ground of period of limitation - Held that:- Commissioner of Excise, Shillong has failed to examine the reasons assigned by the petitioner and has also failed to consider the requirements that ordinarily, the matters are preferred to be decided on merits rather than on technicalities. The petitioner had given out all the reasons in a forthright manner wherefor the application could not be filed in the office of the Commissioner by 30.09.2015. In any case, the application was indeed filed in the office of the Commissioner on 01.10.2015. So far supporting documents are concerned, mere non-filing of the same with the application could not have been taken as fatal to the cause nor the application could have been declined on that ground alone, particularly when such documents/records were also presented on 16.10.2015 i.e., within 15 days of moving the application and well within the period of 30 days, the extent to which the Commissioner has been authorized to condone the delay and to consider the matter on merits. In the totality of circumstances, the respondent has rightly not attempted to justify the order impugned that does not carry the requisite reasons and requisite consideration. Therefore, the application moved by the petitioner for Fixation of Special Rate, as presented on 01.10.2015 and supported by the documents/records filed on 16.10.2015, is restored for consideration of the Commissioner of Central Excise, Shillong and for disposal by way of a reasoned and speaking order on merits. - Decided in favour of petitioner

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• 2016 (9) TMI 184
  Availment of modvat/cenvat credit - duty paid on various inputs on the basis of the supplementary invoices raised by the suppliers - supplementary invoices/57E certificates were never considered as valid duty paying documents during the period 1.4.2000 to 29.8.2000 - Held that:- it is undisputed that the supplementary invoices/57E certificates were issued by the concerned range authorities in respect of discharge of duty liability of goods which were already dispatched from the factory of the supplier and the supplementary invoices were raised to pay the differential duty due to either finalization of their provisional assessment or due to payment of amount by the appellant to the supplier as per the price escalation clauses. The appellant was correct in stating that the Notification 51/2000-CE(NT) is clarificatory in nature inasmuch, prior to 1.4.2000, cenvat credit was available on the supplementary invoices raised by the supplier as also on the 57E certificates. It is well settled law that cenvat credit is a beneficial legislation, hence the benefit which is due to the appellant should not be curtailed due to want/error of the drafting in legislation. It is found that this error of eligibility to avail cenvat credit on the 57E certificates/supplementary invoices was rectified by issuance of Notification 51/2000-CE(NT) on 29.8.2000 which was considered by the Tribunal in the case of Eicher Ltd. vs. CCE, Chennai [2003 (7) TMI 113 - CESTAT, CHENNAI]. So, by following the sae, the impugned order is set aside - Decided in favour of appellant with consequential relief

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• 2016 (9) TMI 183
  Period of limitation - returned goods - availed cenvat credit in terms of Rule 16 of the Central Excise Rules, 2002 on 5 duty paid machines received - machines brought back to the factory of the appellant but have not been subject to any process whatsoever for a very long time - Held that:- the reasons cited by the appellant for return of such goods is either brought back for repair or returned after exhibition outside the factory. I am of the view that such reasons will be covered by the expression for any other reason. My views find support in the order of the Tribunal in the Apollo Tyres Ltd. vs. CCE, Pune III [2010 (2) TMI 846 - CESTAT, MUMBAI]. In the decision of the Tribunal in the Crompton Greaves Ltd. vs. CCE, Mumbai III [2007 (1) TMI 353 - CESTAT, MUMBAI] it has also been categorically held that Rule 16 does not prescribe any time limit within which the goods are required to be cleared. It is also pertinent to mention that at the time of visit of the Central Excise officers to the factory, the goods were found within the factory. It is also on record that subsequently the goods stand cleared from the factory and the credit availed have already been reversed. Also intimation in Format D-3 stand filed by the appellant on receipt of each of these machines. Consequently the show cause notice issued by Revenue on 04/7/2013 for credits taken during the period 26/8/09 to 31/3/11 would be hit by time bar. - Decided in favour of appellant

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• 2016 (9) TMI 182
  Cenvat credit - service tax paid on input services of technology development received - project didn't yield any result - service provider has returned back the same money as unsecured loan - mention of third party MERCK in the agreement made between the appellant and the service provider - Held that:- considering the facts of repayment by the service provider of service charges of ₹ 6,61,80,000/- as unsecured loan to the appellant; mention of a third party namely MERCK in the agreement; and the fact on record that this project of technology development for liquid filled hard gelatine capsule didn't give any result makes this full transaction of input service a suspect and put it in the category of sham transaction . Consequently, Revenue has rightly confirmed the demand of ₹ 6,61,80,000/- (alongwith interest) relating to cenvat credit wrongly availed by the appellant. Period of limitation - notice given by the Revenue was issued in January 2013 for the credit availed during March, 2010 - it is found that there has been wilful mis-statement and suppression on the part of the appellant with intention to wrongly claim the ineligible credit and Revenue could notice this fact only through their audit. Therefore, the Revenue has rightly confirmed the demand and imposed equivalent penalty on the appellant. - Decided against the appellant

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• 2016 (9) TMI 181
  Cenvat credit - procurement of scrap - availed inadmissible Cenvat credit - getting invoices without receiving the goods in the factory premises with the aid of other noticees - Held that:- it is found that the investigation proceedings, modus operandi and players involved were mostly common. From the order dated 26.6.2005, it is also found that the allegations and the defense of the various appellants are also the same. Therefore, by following the decision of division Bench of this Tribunal in case of Amar Ispat Pvt. Ltd. [2015 (11) TMI 373 - CESTAT MUMBAI], the Cenvat crdit is not admissible. - Decided against the appellant

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• 2016 (9) TMI 180
  Imposition of penalty - belated payment of duty under Rule 8 of Central Excise Rules - duty liability discharged belatedly with interest in April 2001, December 2001 and July 2002 on their own for the month of March 2001 to November 2001 - Held that:- the respondent having discharged the duty liability and interest thereof, before issuance of show-cause notice, provisions of Section 11A(2) of the Central Excise Act, 1944 will apply in its full force that the said provisions clearly amended for issuance of show-cause notice by the lower authorities once the amount of duty liability and interest is discharged by an asseessee. Though we may agree with the findings recorded by the Commissioner (Appeals), the issue is covered by the judgement of the Larger Bench of this Tribunal in the case of Machino Montell (I) Ltd. [2004 (4) TMI 101 - CESTAT, NEW DELHI], at the same time the provisions of Section 11A (2B) of the Central Excise Act, 1944 needs to be considered. Hence, the conclusion reached by the Commissioner (Appeals) that no penalty is imposable is correct albeit the reasoning being erroneous. - Decided against the Revenue

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• 2016 (9) TMI 179
  Demand alongwith interest and penalty for the month of September, 1997 - duty liabiliy calculated on proportionate production capacity in respect of two furnaces - appellant contended that although they had two furnaces in their factory but only one was running in condition, and/or use - Held that:- it is an admitted fact that the appellant had intimated by their option letter that they will be operating only one furnace and it appears that Revenue failed to seal the other furnace. Accordingly, in absence of evidence that the appellant operated both their furnaces for the month of September, 1997, the demand for the two furnaces together have been raised on assumption and presumption, which is not tenable. Hence, the appellant is liable to pay duty on the basis of production capacity only for one furnace for the month of September, 1997, or ₹ 7.5 lakhs. The appellant will be liable to pay only the balance demand, after adjustment of the amount of ₹ 3,20,000/- and ₹ 2,11,857/- and any other payment if made. We further hold that in view of the Law clarified by the Hon'ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills and others Vs. Commissioner of Central Excise [2015 (11) TMI 1172 - SUPREME COURT], the appellant is not liable to pay any interest and penalty. - Decided partly in favour of appellant

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• 2016 (9) TMI 178
  Captive consumption - core pipes manufactured and captively used - Kraft Paper was cleared or sold from the factory and was also used for manufacture of core pipe which was used for packing of Kraft paper - appellant submitted that, there is no application of Notification No. 67/95-CE and they have also not claimed any benefit under the said notification. - Held that:- the Ld. Commissioner (Appeals) have erred in imposing the application of notification No. 67/95-CE wherein it has no application in the facts of this case wherein the appellant have claimed exemption under a different notification being 06/02-CE. We also hold that the said two exemption notifications are not correlated under any provisions of the Act or the Rules. Further, the order of Ld. Commissioner (Appeals) is vitiated as he has wrongly concluded that 36.5 MT of core pipes have been captively consumed, whereas the fact is that neither the core pipe is intermediate product nor it can be said to be captively consumed, as first Kraft paper comes into existence and thereafter, from Kraft paper, core pipe is manufactured for packing purposes. Further, the appellant have included the weight of core pipe in the weight of paper cleared. Therefore, the impugned order is set aside. - Decided in favour of appellant

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• 2016 (9) TMI 177
  Valuation - inclusion of unutilized credit in the cost / assessable value of grey fabrics - Whether the additional excise duty credit which the appellant has availed but has not been used by them in as much as their final product did not attract any AED, is required to be added in the assessable value of the final product or not - Held that:- The issue is no more res integra and stands settled by the Hon’ble Supreme Court decision in the case of Collector of Central Excise Pune Vs. Dai Ichi Karkaria Ltd. [1999 (8) TMI 920 - SUPREME COURT OF INDIA]. It stands held that the excise duty paid on raw material if modvatted not to be included in determining the cost of production of excisable product. In the present case we note that it is not the appellant who is seeking deduction of AED from the cost of their final product but it is the revenue who seeks to add the same in the cost of the final product. Therefore, in view of the decision of the Supreme Court such credit is not required to be added back to the assessable value of the final product. Even otherwise also we find from perusal of the invoices produced before us that their final product was being sold by the assessee at the transactional value in which case the question of adding any credit element would not arise. - Decided in favour of assessee

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• Wealth tax

• 2016 (9) TMI 186
  Nature of land - whether the said lands fall within the definition of ‘Urban land’, so as to bring it to wealth tax? - Held that:- The issue whether the said lands fall within the definition of ‘Urban land’, so as to bring it to wealth tax require re-examination by the Assessing Officer in the light of the fact that Bachupally village is not in the Qutubullapur Municipality and also not one among the 8 Gram Panchayats notified in 16.04.2007 notification. Moreover, the said notification was also cancelled and later developments indicate that the said village is still outside GHMC limits. So the Assessing Officer is directed to examine all aspects afresh, after giving due opportunity to the assessee.. In case the lands in question are not ‘Urban Lands’ for the purpose of Wealth Tax, Assessing Officer is free to drop the proceedings by passing a well reasoned order. With these observations/directions, the orders of Assessing Officer and CIT(A) are set aside and the assessment of wealth is restored to Assessing Officer for fresh consideration.

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• Indian Laws

• 2016 (9) TMI 165
  Eligibility of appointment - caste reference - Whether the subject appointment of the appellant to the post of Chemical Examiner in Customs and Central Excise Department has in fact become final? - held that:- In none of the cases pressed into service by the appellant, the appointment, as in this case, was on provisional basis and subject to verification of caste certificate through proper channel. It necessarily follows that the principle expounded in the three decisions referred to above, can have no application to the case on hand. Indubitably, if the argument of the appellant was accepted, it would inevitably mean that all appointments made before 28.11.2000 must be protected even though it had not become final. That would also mean that all caste certificates issued to persons belonging to Koshti community, as being Halba Scheduled Tribe in Maharashtra, prior to November 28, 2000 (the day on which Milind s case was decided by the Constitution Bench), have been validated irrespective of the opinion of the Scrutiny Committee qua those certificates. That cannot be countenanced. For, caste Koshti is neither a synonym nor part of a notified Scheduled Tribe Halba in Maharashtra. Considering the above, the appellant is not entitled for any relief on the finding that his appointment as Chemical Examiner in the Customs and Central Excise Department vide appointment letter dated 16th June, 1995 had not attained finality. Notably, the Caste Certificate Scrutiny Committee has finally answered the factum of caste claim of the appellant on the basis of relevant material, which is indicative of the fact that in the relevant official record pertaining to even the close relatives of the appellant (grandfather and uncle), the caste recorded is Koshti and occupation shown as weaving separately. The appellant has allowed that decision of the Caste Certificate Scrutiny Committee dated 10th February, 2003/22nd April, 2004 to attain finality. The Scrutiny Committee has unambiguously held that the appellant does not belong to Halba Community, a notified Scheduled Tribe in Maharashtra. The High Court was, therefore, right in allowing the writ petition filed by the Department and to restore the termination order dated 8th June, 2004.

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