AIFTP JOURNAL November, 2014

39th Foundation Day Celebration of AIFTP by Western Zone Jointly with STPAM at Mumbai on 15th November, 2014

Dignitaries on dais : Seen from left to right S/Shri Pravin R. Shah, Hon. Secretary (WZ), J. D. Nankani, National President, P. C. Joshi, Past President and Chief Guest, Vipul B. Joshi, Chairman (WZ), Dr. K. Shivaram, Past President and Chirag S. Parekh, Vice Chairman (WZ).

Cutting of cake with the hands of Shri P. C. Joshi and Shri J. D. Nankani.

DIGNITARIES ADDRESSING THE GATHERING

Vipul B. Joshi J. D. Nankani Dr. K. Shivaram P. C. Joshi

Felicitation of Past Chairmen of Western Zone by Chief Guest Shri P. C. Joshi, Past President

Shri K. K. Ramani (1997 to 1999) Shri Pranay H. Marfatia (2000 to 2002) Shri J. D. Nankani (2003 to 2005)

Shri Keshav B. Bhujle (2006 & 2007) Smt. Nikita R. Badheka (2008 & 2009) Shri Kishor Vanjara, Vice President accepting on behalf of

Shri Harish N. Motiwalla (2010 & 2011)

Shri Vinayak Patkar (2012 & 2013)

AIFTP JOURNAL ² November, 2014

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CONTENTS

1. FROM THE EDITOR-IN-CHIEF — Dr. K. Shivaram ...................................................... 5

2. PRESIDENT'S MESSAGE — J. D. Nankani ...................................................................... 8

3. DIRECT TAXES a) Supreme Court .................................................................... 9

b) High Courts ....................................................................... 13

c) Tribunals ............................................................................ 57

4. INDIRECT TAXES a) Sales Tax — D. H. Joshi ................................................... 81

b) Service Tax — Sunil Moti Lala ....................................... 85

5. ALLIED LAWS — Ajay R. Singh ..................................................................................... 105

National Tax Conference, Jaipur – 2014 ......................................................................... 107

311 Case Laws Digested in this issue from 33 journals & www.itatonline.org (July 2014 to September, 2014)

1. DIRECT TAXES a) Supreme Court ...................................................................... 12 b) High Courts ......................................................................... 108 c) Tribunals ................................................................................. 602. INDIRECT TAXES a) Sales Tax ................................................................................. 10 b) Service Tax ........................................................................... 1153. ALLIED LAWS ................................................................................................... 6 311

RESEARCH TEAM – DIRECT TAXESAarti Sathe Jitendra Singh Preeti Shukla Siddharth Ranka

Aliasger Rampurawala

Kalpesh Turalkar Prem Chandra Tripathi Sanjukta Chowdhury

Aasifa Khan Ketan Ved Rahul Hakani Vishwas MehendaleBeena Pillai Neelam Jadhav Rahul Sarda

Dhanesh Bafna Paras S. Savla Sameer Dalal

EDITORIAL TEAMArati Vissanji H. N. Motiwalla Keshav B. Bhujle Subhash Shetty

D. H. Joshi Janak Vaghani M. Subramaniam

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From the Editor-in-Chief

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Supreme Court Benches in four regions – Dream may become real – Honourable Chief Justice of India Mr. H.L. Dattu is in favour of such regional “Benches”. Honourable Prime

Minister’s Vision of Digital India may help the lawyers at Gauhati or Kerala to argue out matters before

Supreme Court Judges sitting in Delhi or before the regional Benches

The Free Press Journal on 13-10-2014 carried a news item that the Honourable Chief Justice of India Mr. H. L. Dattu is in favour of setting up regional Benches of the Supreme Court. The Law Commission of India in its 229threport dated 5th day of August, 2009, after a detailed study strongly recommended having four regional Benches of the Supreme Court. One of the reasons stated by the report is quoted below:

“We are today also in dire search for solution for the unbearable load of arrears under which our Supreme Court is functioning as well as the unbearable cost of litigation for those in far–flung areas of the country. The agonies of a litigant coming to New Delhi from distant places like Chennai, Thiruvananthapuram, Puducherry in the South, Gujarat, Maharashtra, Goa in the West, Assam or other States in the East to attend a case in the Supreme Court can be imagined; huge amount is spent on travel; bringing one’s own lawyer who has handled the matter in the High Court adds to the cost; adjournment becomes prohibitive; costs get multiplied. We suo motu took up the subject for consideration and have recommended that a Constitution Bench be set up at Delhi to deal with constitutional and other allied issues and four *Cassation Benches be set up in the Northern region at Delhi, the Southern region at Chennai/Hyderabad, the Eastern region at Kolkata and the Western region at Mumbai to deal with all appellate work arising out of the orders/ judgments of the High Courts of the particular region”.


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The All India Federation of Tax Practitioners has made a representation to the Government of India from time to time to constitute four Benches of the Apex Court in different regions. The Bar Council of Maharashtra & Goa too vide letter dated 11-4-2000 endorsed the view of the Federation. The Parliamentary Standing Committee on Law and Justice has also repeatedly suggested that in order to promote speedy justice to be made available to the common man, benches of the Supreme Court have to be established in the Southern, Western and North–Eastern parts. Hon'ble Mr. A. B. Vajpayee, then as opposition leader, supported the cause of the Federation. Former Prime Minster of India Dr. Manmohan Singh also endorsed the view of the Federation. However, earlier full Bench of the Apex Court was not in favour of having the Benches of Supreme Court in different regions. However, the reasons were not made available for such a decision.

As the present Chief Justice of India is in favour of setting up Benches in different regions, it is necessary that the Government must act immediately in the interest of the common man of our Country. Incidentally, the Supreme Court has issued notice to the Centre and the Ministry of Law seeking their views on the issue of establishment of a National Court of Appeal with regional benches in major cities to finally decide cases arising from High Courts. This notice was issued in a PIL filed by Puducherry-based Advocate V. Vasantha Kumar on this issue.

A common man of our country cannot think of approaching the Apex Court for justice as it is beyond his reach. Mr. Ashok H. Desai, Sr. Advocate and Former Attorney General of India, in his speech said that every adjournment in Supreme Court costs a litigant minimum of about Rs.1 lakh. If this is the minimum cost for an adjournment, one can imagine how expensive (in the present high inflationary economy) it would be for citizens to approach the Supreme Court for justice.

One may also think of having e-Bench of Supreme Court in different regions. The hearing of the matter before the Apex Court can be done by linking various High courts and affording facilities for arguing the matter before the Apex Court sitting at respective High Court. E-Bench of the Supreme Court can take up the matters state wise e.g. One day could be for matters of Mumbai, one day could be matters from Chennai or other places etc. Initially, an option may be given to the parties to hear the matters through e-Bench or regular Bench. The Income-tax Appellate Tribunal has started the e-Tribunal at Mumbai wherein matters of Nagpur are heard by members sitting in Mumbai at Mumbai Bench. This experience is very satisfactory for both the assessee and the department. An e-Bench of the Supreme Court may be initially started with SLP relating to direct and indirect tax matters. As per the concept, the litigants could be given an option to ‘opt in’ or ‘opt out’. If in case the litigants desire not to be heard by the e-Bench, he may have an option to opt out. This option would be given to him even at the time of hearing of the matter by e-Bench of Apex Court. There will not be any prejudice caused to the assessee by hearing the matter before the e-Bench. Assessee’s can be given a full opportunity to represent the matter. For representing the matter before e-Bench, a lawyer need not be tech savvy, he need not invest any amount on computers etc. for appearing before the e-Bench. According to us, the concept of e-Benches of the Apex Court will help the citizens of this country to go forward with the modern


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technology which is the need of the hour.

We are sure that for this pragmatic and visionary cause, all political parties would whole heartedly support the Government. It is therefore earnestly submitted that the Hon’ble Law Minister, the Parliamentary Committee and the representatives from the Apex Court visit the Income Tax Appellate Tribunal Benches at Mumbai, to evaluate the fruitful result as stated above, to enable them to take proper decision thereafter.

The Law Commission of India also made a reference to Article 130 of the Constitution and stated that “If article 130 is liberally interpreted, no constitutional amendment may be required for the purpose of setting up of Cassation Benches in four regions and a Constitution Bench at Delhi. Action by Chief Justice of India with the President’s approval may be enough. It may also be noted that under Article 130 the Chief Justice of India acts as a persona designate and is not required to consult any other authority/person. Only Presidential approval is necessary. However, in case this liberal interpretation of article is not feasible, suitable legislation /Constitutional amendment may be enacted to do the needful.”

Honourable Prime Minister Mr. Narendra Modi is known for taking quick and bold decision in the interest of the people of India. We hope and trust the Government of India will initiate the process of setting up regional benches of the Supreme Court. When the people has given absolute majority to the present Government and if no action is taken now for the cherished dream to secure speedy justice in a convenient manner and at a bare minimum cost, of constituting regional Benches may remain simply a dream in vacuum. The said issue being of national importance, all of us should try to invite the focused attention of the respective elected Members of Parliament and urge them to take up the matter with Honourable Prime Minister of India.

The above suggestions are made objectively so that the dream of our Hon’ble Prime Minister which is our dream too, to have speedy and inexpensive justice for all may be fulfilled.

The Federation is proposing to send one more representation to Honourable Prime Minister of India and Honourable Law Minister and also proposing to make a presentation to his Honour personally on the subject, if called upon to do so. We are confident to receive an invitation of the Hon’ble PM for this service to the society in general.

Thoughts on similar lines are most welcome!

Dr. K. ShivaramEditor-in-Chief


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GOVT. TO ‘WEED OUT’ NON-PRACTISING LAWYERS

My beloved Members,At the outset, I would like to record our appreciation for the excellent Editorial ‘Tinkering with Tax Appeal Jurisdiction of High Courts’ written by our senior brother Shri N.M. Ranka ji, as a consequence of the Apex Court judgment dt. 25-9-2014 in Madras Bar Association v. Union of India And Anr. wherein the National Tax Tribunal Act, 2005 has been declared as wholly unconstitutional. Reading of the same was a treat to all of us.As per latest information, the Bar Council of India has revised rules to stop fresh lawyers from practicing in the Supreme Court right away. They will have to spend two years in a trial court and three years in the High Court before they become eligible to practice in Supreme Court. The revised norms will restrict license to practice law only for 5 years, after which it may be renewed after a review. The Certificate of Practice and Renewal Rules, 2014, aims to give “due weightage and credence to experience” for practicing in higher courts and also “Weed Out” advocates who have left practice. In this connection, the statement said that the All India Bar Examination introduced on the directions of the Supreme Court of India to improve the standard of legal profession has also failed fully achieve its objective. At the same time, the issue of disconnect between legal education and the profession occupied centre stage at a Bar Meeting addressed by three Supreme Court judges from Tamil Nadu, on the occasion of the inauguration of the building for the Bar Council of Tamil Nadu and Puducherry on 8th November, 2014. Justice F.M. Ibrahim Kalifulla was first off the block when he said, “what we taught and learnt is nothing compared to the present global-level litigations.” He further said, “we should realise that the legal education being offered in India was nowhere near the global trends and standards”. Citing the high performance standards of private law schools, he asked, “Why cannot Bar Councils ensure quality education in all colleges, when private institutions like Jindal Law School are able to achieve excellence.” These remarks of Justice Kalifulla, should be an eye opener for all the concerned thinking improving of legal education in our country.Karnataka’s Commercial Taxes Dept. has proposed a set of amendments to its VAT Act, 2003, which if cleared by the legislature, might well signal the end of American e-commerce giant Amazon’s business in the State. Simultaneously, there is a proposal to amend Consumer Protection Act, 1986 to safeguard the interests of online buyers of goods, so they will be able to file complaints in local jurisdiction.As is usual for the CBDT, it has issued 12 commandments to its field offices, asking them to stick to appointments, address grievances and avoid unnecessary harassment of taxpayers. Such commandments were issued earlier on many occasions. However, sadly, they were not implemented till date as per everyone’s experience while dealing with ground level officers. The higher authorities, sorry to say, are not taking the commandments seriously and the taxpayers suffers year after year. Therefore, to remedy the problem, effective solution is not in sight.I take this opportunity and appeal to all members to attend National Tax Conference at Jaipur scheduled for 20th to 21st December, 2014 to enrich their knowledge and also participate in cultivating brotherhood amongst the participants. Useful reference may be made of AIFTP Times of November, 2014.With best wishes and regards,

(J. D. Nankani)National President

President's Message

DIRECT TAXES – Supreme Court AIFTP JOURNAL ² November, 2014

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DIRECT TAXES – Supreme CourtDIRECT TAXESSupreme Court

Research Team

18. S. 2(31) : Person – Association of persons – Individual – Compulsory acquisition of land – Assessee to be assessed as individuals and not association of persons

The assessee were brothers. Their father died leaving land to the assessee and two others who relinguished their rights in the assessee’s favour. Bequeathed land was acquired by the State Government and compensation was paid to the assessee. AO brought to tax the compensation in the status of Association of persons and taxed the interest in the year of receipt. On appeal High Court held that assessee were to be assessed as individuals and not an association of persons and that the interest was to be spreadover from the year of dispossession of land, that is , the assessment year 1987-88, till the year of actual payment, which was the assessment year 1999-2000. On appel by the revenue the Court held that land inherited by the brothers by operation of law hence assessable as individuals and not association of persons .Interest is taxable in the year of receipt and not spread over.

CIT v. Govindbhai Mamaiya (2014) 367 ITR 498/271 CTR 31/109 DTR 65 (SC)

19. S. 12AA : Registration procedure – Proceedings were dropped – Direction of High Court was not valid

The Apex Court held that where proceedings under section 12AA(3) had already been dropped by Commissioner and this was not an issue before High Court in writ petition, High Court was not justified in issuing direction to

Commissioner to pass an order under section 12AA(3).

Fateh Chand Charitable Trust v. CIT (2014)104 DTR 1 / 268 CTR 483 (SC)

20. S. 14A : Disallowance of expenditure – Exempt income Judgment of Calcutta High Court was set aside and matter remitted to for de novo consideration

The Court observed that issue involved being interpretation of section 14A which was not considered by the High Court in the impugned judgment, matter is remanded to High Court for de novo consideration. (From the judgment ITA No. 389 of 2007 dt. 21-6, 2007)

CIT v. RK BK Fiscal Services (P) Ltd. (2014) 270 CTR 555(SC)

21. S. 45(5) : Capital gains – Compulsory acquisition of land – Accrual –Enhanced compensation – Interest – Taxable in the year of receipt and not to be spreadover

The assessee were brothers. Their father died leaving land to the assessee and two others who relinguished their rights in the assesee’s favour. Bequeathed land was acquired by the State Government and compensation was paid to the assessee. AO brought to tax the compensation in the status of Association of persons and taxed the interest in the year of receipt. On appeal High Court held that assessee were to be assessed as individuals and not an association of persons and that the interest was to be spreadover from the year of dispossession

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of land, that is, the assessment year 1987-88, till the year of actual payment, which was the assessment year 1999-2000. On appeal by the revenue and assessee the Court held that land inherited by the brothers by operation of law hence assessable as individuals and not association of persons. Interest is taxable in the year of receipt and not spread over.

CIT v. Govindbhai Mamaiya (2014) 367 ITR 498 /271 CTR 31/109 DTR 65 (SC)

22. S. 72A : Carry forward and set off of accumulated loss – Amalgamation – Co-operative society – Amalgamating co-operative society cannot carry forward and set-off its accumulated losses against profits of the amalgamated co-operative society. [S.72]

There were four co-operative societies in which the State Government had substantial shareholding. An administrative decision was taken by the State Government to amalgamate all the co-operative societies into the assessee co-operative society. After the amalgamation, a return was filed wherein the assessee claimed to carry forward the losses of those societies so that the same could be set-off against the profits of the assessee under the provisions of section 72. The AO held that since these four societies were not in existence, their accumulated losses could not have been carried forward or adjusted against the profits of the assessee society. The Tribunal as well as the HC confirmed the order of AO. On appeal by the assessee to the Supreme Court, the latter held, dismissing the appeal, that:

All those four societies, upon their amalgamation into the appellant society, had ceased to exist and the registration of those societies had been cancelled. In these circumstances, those societies had no right under the provisions of

the Act to file a return to get their earlier losses adjusted against the income of a different legal personality, i.e., the appellant society. So far as companies are concerned, there is a specific provision in the Act that upon amalgamation of one company with another, losses of the amalgamating companies can be carried forward and the amalgamated company can set losses off against its profits subject to the provisions of the Act. This is permissible by virtue of section 72A of the Act but there was no such provision in the case of co-operative societies. The submission made by the assessee with regard to discrimination and violation of Article 14 of the Constitution of India would thus not help the assessee. The societies and companies belonged to different classes and simply because both had a distinct legal personality, it could not be said that both must be given the same treatment. In view of aforesaid, the appeal was dismissed.

Rajasthan R. S. S. & Ginning Mills Fed. Ltd. v. Dy. CIT (2014) 223 Taxman 259 / 363 ITR 564 (SC)

23. S. 80HHC : Export business – Duty Entitlement Pass Book (DEPB) – Turnover exceeding ` 10 crores – Computation of higher profits

Where an assessee had an export turnover of exceeding ` 10 crores and had made profits on transfer of Duty Entitlement Pass Book under clause (iiid) of section 28 he would not get benefit of addition to export profits under provision to section 80HHC(3), on the contrary he would get benefit of exclusion of a smaller figure from ‘profits from business’ under Explanation (baa) to section 80HHC. In other words where the export turnover of an assessee exceeds ` 10 crores, he does not get benefit of addition of ninety per cent of export incentive under clause (iiid) of section 28 to his export profits, but he gets a higher figure of

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profits of business, which ultimately results in computation of a bigger export profit.

Harnam Syntex (P) Ltd. v. CIT ( 2014) 225 Taxman 182 (Mag.)(SC)

24. S. 113 : Tax – Block assessment – Search cases – Surcharge

Proviso inserted by FA 2002 w.e.f. 01.06.2002 to impose surcharge in search assessments is not clarificatory or retrospective. CIT v. Suresh Gupta (2008) 297 ITR 322 (SC) overruled.

CIT v. Vatika Township(2014) 367 ITR 466/271 CTR1/109 DTR 33 (FB)(SC)

25. S. 144 : Best-judgment assessment – Revision – Assessees uneducated persons not properly represented before Assessing Officer – Commissioner dismissing revision petitions from assessments and refusing to recall his order – High Court affirming – Supreme Court – No interference with assessment but no interest or penalty to be charged

The assessees having failed to appear before the assessing authority, the latter completed the assessments of the assessees for the assessment year 1998-99 under section 144 of the Income-tax Act, 1961. The assessees did not file an appeal, but instead filed a memorandum of revision under section 264 of the Act before the Commissioner who dismissed it as no one attended the office on the fixed date. An application to recall the order was dismissed on the ground that there was no provision under the Act for recalling an order passed under section 264 thereof. On a writ petition contending that the Commissioner should have considered the matter on the merits, the High Court dismissed the petition holding that in the absence of any material to show

that the assessment order was not correctly framed, the Commissioner, in the absence of the assessee, was left with no option but to dismiss the revision petition. On appeal to the Supreme Court, it was held that the assessees, who were not very educated persons, unfortunately could not be properly represented before the Assessing Officer and, therefore, the assessment was made for the assessment years 1998-99. The assessment for the assessment year 1998-99 was over and the assessment order had become final. In these circumstances, the court would not interfere with the assessment order. However, no penalty proceedings were to be initiated and no interest was to be recovered from the assessees if the tax was paid within 60 days. (A.Y. 1998-99)

Tripal Singh v. CIT (2014) 365 ITR 511 (SC)

26. S. 222 : Recovery – Priority of claim –The claim of the stock exchange against the defaulter member has priority over Government claim. [S. 226, Sch. 11, Securities Contracts (Regulation) Act, 1956, Ss, 8, 9, Bombay Stock Exchange Rules, R. 5, 9, 16(iii), (43)

The moment a member of the Bombay Stock Exchange is declared a defaulter, his right of nomination ceases and vests in the Exchange as even the personal privilege given to him is taken away at that point of time. As per rule 16(iii) of the Bombay Stock Exchange Rules, whenever the Governing Board exercises the right of nomination is respect of a membership which vests in the Exchange, the ultimate surplus that may remain after the membership card is sold by the Exchange comes only to the Exchange and not to the member. As per Rule 43, the security provided shall be first and paramount lien for any sum due to the Exchange, such lien is only compatible with the member being owner of the security. Lien possessed by the Bombay Stock Exchange makes it a secured creditor,

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therefore the claim of the stock exchange against the defaulter member has priority over the Government dues.

The Stock Exchange of Bombay v. V. S. Kandalgaonkar & Ors. (2014) 271 CTR 192/109 DTR 225 (SC)

27. S. 245R : Advance ruling – Procedure on receipt of application for Issue pending adjudication. [S.143(2)]

It was held that In Mitsubishi Corporation, Japan, In re [2013] 40 taxmann.com 335/[2014] 222 Taxman 47 (AAR) AAR has held that question raised in advance ruling application will be considered as pending for adjudication before Income Tax Authorities, only when issues are shown in return and notice under section 143(2) is issued and, thus, an application for advance ruling is to be admitted which is filed prior to issue of notice under section 143(2). Hence in light of same, since both parties agreed to, impugned order of High Court in NETAPP B.V. v. Authority for Advance Rulings [2012] 24 taxmann.com 174 (Delhi) was to be set aside and, matter in GTB Invest ASA, In re [2012] 18 taxmann.com 262 (AAR ) was to be restored to file of AAR for fresh ruling.

Sin Oceanic Shipping ASA Norway v. Authority for Advance Rulings (2014)104 DTR 281 / 223 Taxman 102 (SC)

Wealth-tax Act, 1957

28. S. 7 : Valuation of assets – Immovable property – Guest house –Residential flat at Mumbai

Assessee owned a residential flat at Mumbai which was used as a guest house. Assessee disclosed the value at ` 1.55 lakhs. AO referred the value Departmental valuer who valued at

under rule 20 of Schedule III who valued flat at ` 2.61 crores. Appeal of assessee was dismissed by CIT(A) and Tribunal. High Court also affirmed the view of Tribunal. On appeal the Supreme Court held that AO was justified in holding that it was not practicable to apply rule 3 and rightly referred matter to Valuation Officer under section 16A for determination of value of asset. Court held that the AO has discretionary power to determine rule 3 or rule 8 is applicable to a particular case. If AO is of opinion that it is not practicable to apply rule 3, AO can apply rule 8 and value of asset could be determined in manner laid down in rule 20 or section 16A.Appeal of assessee was dismissed. (A.Y. 1993-94)

Amrit Banaspati Co Ltd v. CWT (2014) 126 Taxman 147 (SC)

29. National Tax Tribunal Act, 2005The National Tax Tribunal Act is clearly breach of law declared by Supreme Court, it “crosses the boundary” & and “encroaches the exclusive domain” of the High Courts is unconstitutional. Chartered Accountants and Company Secretaries are specialists on accounts & facts and are not capable of arguing/deciding ‘Substantial questions of Law’ – Not eligible to represent party to appeal in Tribunal. Composition of National Tax Tribunal would have to be on the same parameters as Judges of the High Courts. Appointment of process of members of the NTT was also held to be constitutional. Most of the provisions were held to be unconstitutional the remaining provisions have been rendered otiose and worthless, and as such the provisions of the NTT as a whole set aside. Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted, failure to do so will be violative of “Basic structure” of Constitution.

Madras Bar Association v. UOI (2014) 109 DTR 273 (2014) 209 E.L.T. 209(FB) (SC)

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DIRECT TAXES – Supreme CourtDIRECT TAXESHigh Courts

Research Team

203. S. 2(22)(e) : Deemed dividend – Loan to a share holder – Expenditure on repair and renovation by the company – No deemed dividend in shareholder’s hands

The assessee had let out the premises to the company. The company incurred expenses towards construction and improvement of the factory premises which it continued to use. The AO held that the amount was paid on behalf of the assessee and alternatively the amount spent was treated as perquisite. On appeal Tribunal held that the payment was not a deemed dividend and the amount was also not a perquisite. On appeal by revenue, dismissing the appeal held that no money had been paid to the assessee by way of advance or loan nor was any payment made for his individual benefit. It was a case where the asset of the assessee may have enhanced in value by virtue of repairs and renovation but this could not be brought with in the definition of the advance or loan to the assessee. Nor could it be treated as payment by the company on behalf of the assessee share holder or for the individual benefit of such share holder. Appeal of revenue was dismissed.

CIT v. Vir Vikram Vaid ( 2014) 367 ITR 365 (Bom)(HC)

204. S. 2(22)(e) : Deemed dividend – Advance received in connection with construction work was held not to be taxed as deemed dividend

Where the assessee, a builder and managing director of a company in which he was holding 63 per cent shares, received a construction contract from said company, in view of the fact

that the assessee executed the contract in the normal cause of his business as a builder, the advance received in connection with construction work was held not to be taxed in the assessee's hands as 'deemed dividend' under section 2(22)(e).

CIT v. Madurai Chettiyar Karthikeyan (2014) 223 Taxman 350 (Mad)(HC)

205. S. 2(29A) : Long-term capital asset – Cancellation of original site and allotment of new site – Period of holding to be considered from date of original site allotment – Entitled to exemption as long-term capital gains. [S. 48, 54EC, 54F]

The assessee sold a property for consideration of ` 1.13 crore. Out of the consideration, he invested an amount of ` 28 lakh and ` 22 lakh in REC Bonds and National Highway Authority Bonds. He also purchased an apartment and filed a return by offering the balance amount to tax under the head income from long-term capital gains, after claiming exemption under sections 54EC and 54F. The AO observed that the sale deed executed in favour of the assessee was on 27-2-2008 and he sold property on 29-5-2008, within four months from the date of purchase and, therefore, it was short-term capital gain. Therefore, he disallowed the exemption claimed and thereby raised a demand on the assessee. The CIT(A) upheld the order of the AO. On appeal, the Tribunal observed that the assessee acquired a right to hold the property when the allotment was made for first time on 25-8-1988. Due to some disputes, he could not be conveyed a site without encumbrance and with a clear title. As the sale had taken place beyond the three-year period, capital gains accrued on such

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transfer constituted a long-term capital gain and therefore, the assessee was also entitled to exemption as claimed. On an appeal by revenue, the HC held that the original site was allotted to the assessee prior to 36 months after payment of full value, merely because the said allotment was cancelled, and a new site was allotted, in law, would make no difference, admittedly when the original consideration paid was treated as a consideration for the subsequent allotment. Capital gains arising on the sale of new property would be long-term, and assessee was entitled to the benefit of exemption under sections 54EC and 54F.

CIT v. A. Suresh Rao (2014) 223 Taxman 228 (Karn.)(HC)

206. S. 4 : Income chargeable to tax – Capital or revenue – Profit on repatriation of foreign exchange on account of variation in forex rate – Capital receipt

The assessee had issued Euro Notes in 1997 for raising funds for capital expenditure programmes. The entire proceeds raised abroad were held in interest for a period of three years pending deployment and utilisation. During the year ending 31st March, 2011, the funds were repatriated to India as per the requirement of Reserve Bank of India. As a result of fall in value of the Indian Rupee, a gain in terms of the repatriation of funds has arisen. Assessee credited the same in to P&L account however for taxation the said gain was treated as capital in nature. The AO treated the said gain as revenue in nature. On appeal Tribunal decided the issue in favour of assessee. On appeal by revenue the Court held that the purpose for which the notes were raised was “capital”. The gain arose not in the course of trading activities but due to conversion of the currency of one country in to the currency of another country. The gain is therefore on account of capital and not in the nature of income. Further the gain has arisen at that point of time when the funds were

repatriated to India. If the Notes were issued for meeting capital expenditure, and remained outside India, the taxability has to be determined at the point of time when the profit arose. The subsequent utilisation was irrelevant. (ITA No. 251 of 2012 dt. 11-6-2014.

CIT v. Tata Power Co (Bom)(HC)(Unreported)

207. S. 4 : Charge of income-tax – Lease rentals – Lease or finance –Agreement of lease – Entire lease rent assessable – Lessor was entitle to depreciation [S. 32]

The assessee was engaged in the business of bill discounting, hire purchase and leasing, mutual funds and insurance agency. In the returns, it offered the interest portion in the leasing transaction alone as its income. It stated that according to the amended Accounting Standards 19 dated April 1, 2001, only the income portion of the lease rental shall be offered as income and the lessor cannot claim depreciation. Accordingly, the assessee treated the lease transaction as a financial lease transaction. The Assessing Officer held that the entire lease rent was taxable as income of the lessor and the lessor was entitled to depreciation on the equipment. The Assessing Officer held that the entire lease rent was taxable as income of the lessor and the lessor was entitled to depreciation on the equipment. The Tribunal found on reading a sample lease agreement that in respect of lease of a car, the term of the lease was stated to be three years, with monthly rentals and total rentals payable. During the currency of the lease, the lessee shall insure the subject of lease and protect if from any risk. Clause 10 of the agreement stated that without the prior written consent of the lessor, the lessee shall not make any alterations, additions, or improvements to the equipment and all additions, replacements, attachments and improvements of whatever kind or nature made to the equipment shall be deemed to be parts of the property of the lessor and shall be subject to all the terms and

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conditions of the agreement. Clause 13 spoke about the surrender of the lease equipment upon the expiration or earlier termination of the lease agreement. It also gave the option for renewal on year-to-year basis on mutually agreed terms and conditions. Clause 15 dealt with payment by the lessor and clause 20 stipulated that on expiration of the lease term, if the lessee failed to deliver the equipment to the lessor in accordance with any direction given by the lessor, the lessee would be deemed to be the monthly tenant of the equipment and upon the same terms expressed in the agreement and the tenancy should be terminated by the lessor immediately upon default committed by the lessee by serving seven days' notice. Upon termination of the lease period the lessee had to immediately return the property to the lessor in as good condition as received less normal wear, tear and depreciation. The Tribunal confirmed the order of the Assessing Officer. On appeal to the High Court:

Held, dismissing the appeals that on examination of the terms of the agreement showed that it was a simple lease agreement. If in effect the agreement was a finance agreement, the question of returning the leased item to the assessee would not arise at all. Further, the question of again affixing the name of the assessee on the property also would not arise. The monthly payment of the rent and the number of months of the lease rent payment was also clearly stated in the agreement. The entire lease rent was assessable (A. Ys. 2002-03 – 2008-09)

Simpson and General Finance Co. Ltd v. Dy. CIT (2014) 365 ITR 328 (Mad) (HC)

208. S. 4 : Income chargeable to tax – Capital or revenue – Business income – Sale of carbon credits – No cost of acquisition – Capital receipt [S. 28(i)]

Carbon credits not being an offshoot of business but an offshoot of environmental concern,

amount received on their transfer had no element of profit or gain. Since carbon credit was not even linked with power generation, which was the business of the assessee, Tribunal was justified in its decision. There was no cost of acquisition or cost of production to get entitlement for carbon credit. Income from sale of carbon credits was to be considered as capital receipts and not liable to tax under any head under the Income–tax Act. (A. Y. 2007-08)

CIT v. My Home Power Ltd. (2014) 365 ITR 82 (AP)(HC)

209. S. 5 : Income – Accrual of income – Retention money under contract release on furnishing of bank guarantee – Retains it character as retention money and cannot be equated with the right to receive such amount and resultantly with accrual of income as the dominant control over the amount remained with the contractee. [S. 145]

Money retained under the contract for satisfactory completion of the work which was released only upon the satisfactory completion of the contract and would be adjusted against the amount due if it was found that execution of work was not satisfactory, did not accrue to the assessee, even though the amount was received by assessee by furnishing bank guarantee. (A.Y. 1992-93)

Amarshiv Construction (P) Ltd. v. Dy. CIT (2014) 102 DTR 33/223 Taxman 171 (Mag.)(Guj.)(HC)

210. S. 5 : Total income – Accrual – Advance business receipts – No income could be said to have accrued to assessee on receipt of advance [S. 263]

Assessee which is engaged in the business of hotels, resorts, and clubs offered holiday

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schemes for its card members to utilise ‘rooms nights’ by payment of some advance. In case of non-utilisation of said facility, assessee would refund back said sum to card members along with surrender value. Assessee was required to refund advances more than 99 per cent in cash. Assessee has the said advances as liability in the balance sheet. AO accepted the method of accounting followed by assessee. CIT revised the order and directed the AO to pass fresh order assessing the advance as income. Tribunal allowed the appeal of assessee. On appeal by revenue dismissing the appeal the Court held that since the assessee was required to refund advance is more than 99 per cent in cash, assessee incurred liability and no income could be said to have accrued to assessee on receipt of advance.(A.Y. 2005-06)

CIT v. Pancard Clubs Ltd. (2014) 206 Taxman 141 (Bom)(HC)

211. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Amount received under the licence agreement for allowing the use of software is not royalty – DTAA –India-USA [S. 90, Articles, 7, 12]

Licence Agreement was entered between India & USA. According to which the licence was non-exclusive, non transferable and the software were to be used in accordance with the agreement. The revenue treated the amount received by the assessee under the licence agreement for allowing the use of software as Royalty under DTAA between India & USA. On appeal, the court held in favour of assessee and held that right to use a copyright in a programme is totally different from the right to use a programme embedded in a cassette or a CD which may be a software and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the definition of royalty as given in the DTAA. Amount received under the licence agreement for allowing the use

of software is not Royalty under DTAA between India & USA. What was transferred was neither the copyright in the software nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in a copyright. Right that is transferred is not a right to use the copyright but is only limited to the right to use the copyrighted material and the same did not give rise to any royalty income and would be business income.

DIT v. Infrasoft Ltd. (2014)254 CTR 329 (Delhi)(HC)

212. S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – In absence of any material on record amount received for performing activities outside India cannot be brought to tax in India through PE-DTAA – India-Korea [Article 5, 7]

The assessee, a Korea based company, entered into a contract with O.N.G.C. and L&T as consortium partners. The assessee received certain amount under said contract a part of which was attributable to activities carried out within India. The AO found that in addition to the sum of money shown to have been received, assessee had received some other amount under the contract which were in respect of outside India activities and held that 25% of the revenues so received allegedly for outside India activities would be taxed in India. The Tribunal upheld the order of AO.

The High Court observed that the assessee has a tax identity in India and a tax identity outside India and, accordingly, its tax liability in India is required to be apportioned and in terms of Article 7(1), of DTAA, assessee will acquire its tax identity in India only when it carries on business in India through a permanent establishment situated in India.

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Accordingly, allowing the appeal of the assessee, the High Court held that neither the AO nor the Tribunal had made any effort to bring on record any evidence to tax 25% of the gross receipt is attributable to the said business (A.Y. 2007-08)

Samsung Heavy Industries Co. Ltd. v. DIT(IT) & Anr. (2014) 221 Taxman 315/265 CTR 109 (Uttarakhand)(HC)

213. S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – Agreements prior to 1-4-1976 and approved by Government – Payments received under contracts is in the nature of fees for technical services –Not taxable [Article 12, OECD Convention]

The assessee a non-resident company received in terms of various agreements from various public sector undertakings. The AO held that the payment received fell within the definition of “royalty” given in Explanation 2 to section 9(1)(vi). On appeal the CIT(A) accepted the claim of the assessee by holding the payment received by the assessee were in the nature of technical service fee covered under section 9(1)(vii) and ought to be excluded from taxation in view of the proviso thereto which took away the applicability of section in respect of agreements entered into prior to April 1, 1976 and approved by Government. Tribunal also confirmed the order of CIT(A). On reference by revenue the affirming the view of Tribunal held that as the agreements were entered into prior to 1-4-1976 and approved by Government, payments received under contracts is in the nature of fees for technical services hence not taxable. (A.Y. 1979-80)

CIT v. Montedison of Italy (2014) 367 ITR 179/226 Taxman 128/109 DTR 105 (Bom)(HC)

214. S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – Various services – No sufficient material to suggest – Not fees for technical services – DTAA-India-Netherland [Ss. 90, 195, Article 7, 12]

Holding company of the applicant agreed to provide various services like (a) General management (b) International operations (c) Legal advisory (d) Tax advisory (e) Controlling & accounting & reporting (f) Corporate communication (g) Human Resources & (h) Corporate development, mergers & acquisitions. The Revenue contended that services availed by the applicant were consultancy services & were covered by the definition of fees for technical services even as per Article 12 of the India-Netherland Tax treaty. Authority for Advance Rulings held in favour of the applicant and held that the transaction was for genuine business purpose for the benefit of both the parties. There was no sufficient materials on facts and circumstances made available which suggest that the transaction was an arrangement solely for the purpose of avoidance of tax and therefore requirement of the “make available clause” in the Article 12(5) of India-Netherlands Tax treaty was not satisfied and hence the payment for the services would not come under “Fees for technical services” under the Tax treaty.

In re Endemol India (P) Ltd. (2014) 264 CTR 117 / 223 Taxman 183 (Mag)/ 361 ITR 340 (AAR)

215. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Permanent establishment – Rights in television programmes, motion pictures and sports events and exhibiting same on its television channels from Singapore – Not taxable in India – Not liable to deduct tax at source – DTAA-

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India-Singapore [S. 195, Article 12]]

The assessee is a Singapore based company engaged in business of acquiring rights in television programmes motion pictures and sports events and exhibiting same on television channels from Sigapore. It entered into an agreement with Global Cricket Corporation (GCC) also tax resident of Singpore, under which GCC granted telecast rights to assessee throughout licence territory which included India. AO held that payment made by assessee to GCC for acquisition of telecast rights was royalty and was chargeable to tax in India. In appeal CIT(A) and Tribunal held that payment was not taxable in India inasmuch as liability for payment was incurred by assessee in connection with broadcasting operations in Singapore and that had no connection with marketing activities carried out though its alleged permanent establishment in India. On appeal by revenue, dismissing the appeal the Court observed that the alleged permanent establishment of assessee in India, the Tribunal’s finding of fact is that the economic links entirely with the assessee’s head office in Singapore. The payment to GCC cannot be said to have been incurred in connection with the appellant’s permanent establishment in India. The Court affirmed the view of Tribunal and held that no substantial question of law arise out of order of Tribunal. Order of Tribunal was affirmed.

DIT (IT) v. Set Satellite (Singapore) Pte. Ltd. (2014) 225 Taxman 1 (Bom)(HC)

216. S. 10(19A) : Exempt income – Annual value of any one palace in occupation of ruler – Meaning of "in the occupation" – Not exclusively used not entitled to exemption. [S.2(2), 22, 23, Wealth –tax Act, 1957 5(1)(iii)]

Section 10(19A) of the Income-tax Act, 1961, postulates exemption from income-tax on "the

annual value of any one palace in the occupation of a Ruler". There is substantial similarity in the language of section 5(1)(iii) of the Wealth-tax Act, 1957, and section 10(19A) of the 1961 Act on all relevant aspects except that word "building" has been substituted by "palace" in the latter. The occupation of the Ruler in the palace would, therefore, be a necessary pre-condition for claiming exemption. In a case where the Ruler has not been able to show that the palace declared as his official residence was exclusively in his occupation, he would not be entitled to any exemption.

CIT v. Maharao Bhim Singh of Kota (2014) 365 ITR 485 (FB) (Raj) (HC)

217. S. 10(23C) : Exempt income – Approval after 1-12-2006 continues to remain in force until withdrawn. (R. 2CA, IT Rules, 1962)

Where assessee was granted approval after 1-12-2006 by Chief Commissioner under section 10(23C), same would be a one-time affair and continues to remain in force till it is withdrawn; hence, assessee's application for extension of approval would be redundant (A.Ys. 2008-09 to 2010-11).

Sunbeam Academy Educational Society v. CCIT (2014) 365 ITR 378 (All)(HC)

218. S.10A : Free Trade Zone – Conversion of firm into company – Splitting up or reconstruction – Entitled to exemption

All partners of erstwhile firm became shareholders of company and no outsiders were inducted. Also, all assets and liabilities were transferred to the company. Held, there was no transfer of business upon conversion of firm into company. Since the assessee fulfilled all conditions enumerated in s. 10A, deduction was to be allowed. (A.Y. 2002-03 to 2004-05)

CIT v. Foresee Information Systems P. Ltd. (2014) 365 ITR 335 (Karn)(HC)

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219. S. 10B : Export Oriented Undertakings – In absence of specific definition of term 'manufacture', it includes every process which ultimately results in production of new article having a different character.[S. 2(29B)]

The assessee was engaged in the business of manufacture and export of cut and polished granite building slabs was a 100 per cent Export Oriented Unit. It claimed exemption u/s. 10B. The AO rejected the assessee's claim on the ground that cutting and polishing of granite slabs did not amount to manufacture or production of an article or thing. He further contented that with the deletion of the definition 'manufacture' contained in section 10B from the year 2001, the expression 'manufacture' had to be understood in the normal sense and hence polishing of rough granite was not a manufacture or production of an article or thing. The CIT(A) and Tribunal allowed the appeal filed by the assessee.

On appeal by the department, the High Court observed that even though the definition of 'manufacture' was omitted from section 10B w.e.f. the year 2001, yet u/s. 2(29BA) inserted w.e.f. the year 2009 under the Finance (No. 2) Act, 2009, the term 'manufacture' was defined. However, during the year under consideration, there was no definition of manufacture existing and hence, in the absence of any specific definition, as per common man’s understanding the expression 'manufacture' would include every process, which would ultimately result in the production of new article having a different character in view. Accordingly the appeal filed by the department was dismissed. (A.Y. 2003-04 to 2005-2006)

CIT v. Pallava Granite Industries (I) (P.) Ltd. (2014) 221 Taxman 107 (Mag.)(Mad.)(HC)

Super Auto Forge Ltd v. ACIT (2014) 365 ITR 318 (Mad) (HC)

220. S. 10B : Export Oriented Undertakings – Reconstruction – Conversion of domestic tariff area unit to export processing unit – Not a reconstruction of business –Entitled to exemption

When a domestic tariff area unit is converted into a 100 per cent. Export Oriented Unit, there is neither a transfer nor a creation of a new business to attract clause (iii) of sub-section (2) of section 10B. The status granted to a domestic tariff area unit as a 100 per cent. Export Oriented Unit does not result in a transfer or splitting up or reconstruction of a business already in existence so as to fall under clause (iii) of sub-section (2) of section 10B of the Act. In fact, the Board itself has clarified the position in Circular No. 1 of 2005, dated January 6, 2005 (2005) 272 ITR 6 (St.) (A.Y. 2001-2002)

221. S. 11 : Property held for charitable or religious purposes – Once certificate of registration is granted – Exemption cannot be denied. [S. 12A]

Once certificate of registration is issued to a Trust, the requirements of provision 12A stands fulfilled. Hence, exemption u/s 11 cannot be denied. (A.Y. 2003-2004, 2006-2007)

CIT v. Lucknow Development Authority (2014) 265 CTR 433 /(2013) 219 Taxman 162 (All)(HC)

222. S. 11 : Property held for charitable purposes – Denial of exemption –Denial of exemption only to extent provision violated and not total denial of exemption. [S. 13(1)(d)]

The assessee-trust provided employment to poor women, assisted weaker sections of society for personal development, maintained destitute homes and rehabilitated victim of national calamities. It invested a sum of ` 20,000 in the

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shares in MIOT Hospitals Ltd. Since section 13(1)(d) of the Income-tax Act, 1961, recognises investment only in specified assets, failure to invest in such specified business would disentitle the assessee for exemption. Consequently, the Assessing Officer denied the exemption under sections 11 and 12. Held, denial of exemption should only be to the extent of the income which was violative of section 13(1)(d) and not the total denial of exemption under section 11. (A.Y. 2001-02, 2002-03, 2003-04)

CIT v. Working Women’s Forum (2014) 365 ITR 353 (Mad)(HC)

223. S. 12A : Registration - Trust or institution – Registration cannot be cancelled once the CIT has satisfied himself about genuineness of objects of assessee and has granted registration u/s. 12AA. [S. 12AA]

The assessee was a cricket association registered under the Tamil Nadu Societies Registration Act. The CIT after satisfying himself about the genuineness of the activities/objects of the assessee granted registration to it u/s. 12AA. Subsequently, the CIT noticed that the assessee was deriving income from holding cricket matches which was in the nature of trade or commerce or business. The CIT thereby cancelled the registration on the grounds that the activities of the association were not charitable in nature. The Tribunal confirmed the findings and the order of the CIT.

The High Court observed that the Supreme Court in the case of CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722 had held that if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity.

The High Court further observed that if a particular activity of the institution appeared to be commercial in character but was not dominant, then it was for the AO to consider the effect of section 11 in the matter of granting exemption on particular head of receipt and that the mere fact that the said income did not fit in with section 11 would not by itself lead to the conclusion that the registration granted u/s. 12AA was incorrect and hence had to be cancelled. The High Court held that the cancellation of registration in a given case could be done only under the stated circumstances u/s. 12AA(3) and in the background of the definition of charitable purpose relevant to the particular year of registration and since the CIT had satisfied himself about the objects of trust and genuineness of the activities, the CIT was wrong in cancelling the registration of the assessee without triggering the circumstances stated u/s. 12AA(3).

Tamil Nadu Cricket Association v. DIT (2014) 221 Taxman 275 (Mad.)(HC)

224. S. 13 : Denial of exemption – Investment restrictions – Salaries for teaching and no extra salary for managing work – Denial of exemption was not justified. [S. 11, 12]

The assessee, a registered charitable organisation, carried on work of education through four members, who worked in a dual capacity i.e. as full-time administrators, as also regular time teachers, and were being paid salaries from the earnings of these schools. Members were not being paid separately for managerial work done by them, there was no violation of the provisions of section 13(2)(c), hence, the assessee was entitled to benefit of exemption under section 11. (A.Y. 2003-04 to 2008-09)

CIT v. Idicula Trust Society, Faridabad (2014) 223 Taxman 66 (P&H)(HC)

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225. S. 14A : Disallowance of expenditure – Exempt income – Interest free funds – No disallowance can be made – Restricted to amount of STT

Where the assessee had sufficient profit and interest free funds to be invested in mutual funds from where exempted income was generated and nothing had been charged by bank except STT, disallowance under section 14A was to be restricted to amount of STT. (A.Ys. 2004-05 to 2006-07)

CIT v. Amod Stamping (P.) Ltd. (2014) 223 Taxman 256 (Guj)(HC)

226. S. 14A : Disallowance of expenditure – Exempt income – No disallowance can be made when interest free funds available with the assessee are much higher than investments made to earn exempt income

The assessee received dividend on the units of the Unit Trust of India and the shares of the domestic companies and claimed full deduction for interest expenditure on the ground that investments were made in the previous year out of its abundant interest free funds and no new investments had been made in the current year. The AO disallowed the interest expenditure on the ground that the expenditure in terms of investment which pertained to the exempt income from interest bearing funds was not allowable. The CIT(A) and the Tribunal deleted the addition made by the AO.

The High Court confirmed the Orders of the CIT(A) and the Tribunal and observed that the interest free funds available was much larger as compared to the investment and also that there was no new investment made in the current year. The High Court following its own decision in the case of CIT v. Gujarat State Fertilizers &

Chemicals Ltd. (2013) 358 ITR 323 held that since the assessee's own funds were higher than the investment made by it and with nothing to indicate that borrowed funds were utilised for the purpose of investment in shares and for earning dividends, no disallowance u/s. 14A could be made. (A.Ys 2001-02 and 2002-03)

CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (2014) 221 Taxman 479 (Guj.)(HC)

227. S. 23 : Income from house property – Annual value – Municipal valuation – Interest free deposit – Percentage of interest earned on deposit could not be added for determining the annual letting value – Annual ratable value determined by BMC was correctly directed to be adopted – Decided on the facts of the case. [S. 23(1)(a), 23(1)(b), Maharashtra Rent Control Act]

The assessee has let out the premises to sister concern and received the rent and also interest free deposit. The AO took the view that premises being not covered by Maharashtra Rent Control Act, its annual value was determined under section 23(1)(a). CIT(A) and Tribunal directed the AO to adopt the value determined by Bombay Municipal Corporation (BMC) in accordance with provisions of section 23(1)(b). Revenue has filed an appeal against the said order. Court observed that the revenue has not challenged the order for the assessment year 2005-06 though the facts are identical. The Court observed that situation in previous assessment year and the assessment year under consideration has not changed, therefore larger controversy need not be gone into and does not arise in this appeal. Therefore no question of law arises.

CIT v. Angel Infin (P) Ltd. (2014) 225 Taxman 78 (Bom)(HC)

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228. S. 28(i) : Business income – Short term capital gains – Dealer in shares – Premature redemption of a dividend plan mutual fund scheme – Assessable as business income and not as short-term capital gains. [S.45]

Where the assessee, engaged in the business of dealing in shares, debentures, mutual funds etc., earned income from the premature redemption of a dividend plan mutual fund scheme, the said income was liable to be taxed as business income

CIT v. Pooja Investment (P.) Ltd. 223 Taxman 241 (P&H)(HC)

229. S. 36(1)(iii) : Interest on borrowed capital – Share trading – Interest allowable as deduction

If the main business of the assessee is to trade in shares as per its Memorandum of Association, the interest paid on the borrowed funds to its sister concern is allowable as business expenditure. (A.Y. 2003-04)

CIT v. Peninsular Investment Ltd. (2014) 265 CTR 601 (AP)(HC)

230. S. 37(1) : Business expenditure – Consultancy charges – Parties not traceable – TDS deducted – Expenses cannot be disallowed

Where payment had been made through banking channels, tax was deducted at source on such payments and the parties were not found to be related to the assessee, the AO cannot treat such expenses as bogus.

CIT v. Mundra Port and SEZ Ltd. (2014) 223 Taxman 150 (Guj)(HC)

231. S. 37(1) : Business expenditure – Capital or revenue – Feasibility report – Expansion of existing

business – Allowable as revenue expenditure

Where expenditure is incurred on obtaining a feasibility report for the expansion of existing business and where there is unity of control and common funds, such expenditure would be treated as business expenditure. (A.Y. 1995-96)

CIT v. Euro India Ltd. (2014) 223 Taxman 97 (Delhi)(Mag.)(HC)

232. S. 37(1) : Business expenditure –Depository charges – Held to be allowable

Where consequent to introduction of Demat scheme, the assessee-company paid one-time custody charges to the National Securities Depository Limited (‘NSDL’) on behalf of its share holders, expenditure so incurred was to be allowed as deduction.

CIT v. Infosys Technologies Ltd. (2014) 223 Taxman 469 / 360 ITR 714 (Karn)(HC)

233. S. 37(1) : Business expenditure – Corporate responsibility expenses on Traffic signals – Held to be allowable

Where the assessee incurred expenditure on the installation of traffic signals at various parts of city in order to secure free movement of its employees so that they reached the office in time, the amount so spent being a part of its corporate responsibility, was to be allowed as business expenditure.


234. S.37(1) : Business expenditure –Service tax – Interest – Allowable as deduction

The assessee has not collected and deposited service tax on some services in earlier years. Demand was raised including interest thereon.

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Assessee paid the said amount. AO held that the said amount having been expanded for infraction of law, deduction was not allowable. On appeal disallowances were deleted by the Tribunal. On appeal the court held that the amount was incurred in the ordinary course of business, it is only because the assessee failed recover the service tax the amount was paid by them. Further the said amount cannot be stated to be penalty for infraction of law. Court also held that it is equally well settled that payment of interest is compensatory in nature and would not pertake the character of penalty.(A.Y. 2009-10)

CIT v. Kaypee Mechanical India (P) Ltd ( 2014) 45 taxmann.com 363 (Guj)(HC) 223 Taxman 346 (Guj)

235. S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Salary to foreign citizen as foreign ship crew – Salary was not taxable therefore no tax was deductible at source hence no disallowance can be made. [S. 10(6)(viii), 192]

Assessee-employer paid certain sum on account of salary payable to foreigner-crew members without deducting any tax at source. Assessing Officer disallowed same on ground that it was part of fees for technical services on which no tax was deducted at source. The Tribunal, held that impugned payments were payment of salary and not technical fees. The Court held that since payment in instant case was neither royalty nor fees for technical services or other sum chargeable under Act, section 40(a)(i) would not apply. Payments made to foreigner-crew member of ship who worked for a period of less than 90 days in India, were not income of employees in India liable to TDS as the said was exempt under section 10(6)(vii) of the Act. (A.Y. 2004-05)

DIT v. Dolphin Drilling Ltd. (2014) 97 DTR 227 (Uttarakhand) (HC)

236. S. 41(1) : Profits chargeable tax –Remission or cessation of trading liability – Addition made on the ground that trading liability is outstanding for more than three years is invalid

The AO observed that the assessee had outstanding dues with respect to 14 creditors for more than three years and hence added the amount of dues as income u/s. 41(1). The CIT(A) and Tribunal deleted the addition made by the AO.

The High Court following the decision of the Supreme Court in the case of CIT v. Sugauli Sugar Works (P.) Ltd. (1999) 236 ITR 518 and its own decision in the case of CIT v. Nitin S. Garg (2012) 208 Taxman 16 held that the assessee had continued to show the admitted amounts as liabilities in the balance sheet and the same could not be treated as cessation of liabilities and since the addition was made solely on the basis of number of years the liability remained outstanding, the addition was not justified. (A.Y. 2009-10)

CIT v. Puridevi Mahendrakumar Chaudhary (2014) 221 Taxman 375 (Guj.)(HC)

237. S. 41(1) : Profits chargeable tax –Remission or cessation of trading liability – Premature payment of sales-tax deferral loan by paying an amount equal to the net present value of the deferred tax by which the entire liability to pay tax/loan stood discharged is not a "benefit" taxable u/s 41 (1). [S.43B]

As per an incentive scheme announced by the Government of Maharashtra, the assessee entered into an agreement to avail the benefits under deferral/1993 scheme which provides for deferment of payment of taxes. This agreement not only determined the eligibility

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of the assessee but also laid down the terms and conditions under which the agreement exists. The quantification of this deferment was made by Sicom Limited, a Government of Maharashtra Undertaking, which was an agent for the package scheme of incentives. Sicom quantified the entitlement of deferral of sales tax to the assessee. As against the total amount of ` 20 crore collected by the assessee towards Bombay Sales Tax and Central Sales Tax, the maximum entitlement of sales tax incentives by way of deferment was determined at ` 13.78 crore. The validity period of the deferral was determined as 1-4-2002 to 31-3-2017, thereby the assessee could retain the amount of sales tax collected to the extent of ` 13.78 crore up to 31-3-2017. Consequent to the assessee opting for the scheme of deferment of sales tax, an amount of ` 13.78 crore was deemed to have been paid for the purpose of s. 43B of the Act and the same was allowed as a deduction in A.Y. 2003-04. The Maharashtra Government by way of Maharashtra Tax Laws (Levy and Amendment) Act, 2002 substituted the proviso to s. 38 of the Bombay Sales Tax Act, 1959 which came into effect from 1-5-2002. The proviso provided that notwithstanding anything to the contrary contained in the Act or in the Rules or in any of the package scheme of the incentives or in the Power Generation Promotion Policy, 1998, the eligible unit to whom the entitlement certificate has been granted for availing of the incentives by way of deferment of sales tax, purchase tax, additional tax, turn over tax or surcharge as the case may be, may, in respect of any of the periods during which, the said certificate is valid, at its option, prematurely in place of the amount of tax deferred by it an amount, equal to the net present value of the deferred tax as may be prescribed and on making such payments, in the public interest, the deferred tax shall be deemed to have been paid. In view of the proviso to Section 38 of the Bombay Sales Tax Act, 1959, the net present value was determined at ` 4.25 crore and the same was paid by the assessee. Consequent to the payment

of the net present value, the the balance amount of sales tax payable amounting to ` 9.52 crore was waived. The AO held that the said amount of ` 9.52 crore was taxable u/s 41(1). However, the Tribunal (presumably relying on Sulzer India Ltd v. JCIT 138 ITD 137 (Mum) (SB) upheld the assessee’s claim that the said amount was not chargeable. On appeal by the department to the High Court held by the High Court dismissing the appeal:

As per the scheme the assessee was allowed to retain the sales tax as determined by the competent authority and pay the same 15 years thereafter. The tax collected was deemed to have been paid and, therefore, the tax so collected cannot be construed as income in the hands of the assessee. The tax so retained by the assessee is in the nature of a loan given by the Government as an incentive for setting up the industrial unit in a rural area. The said loan had to be repaid after 15 years. Again it is an incentive. However, by a subsequent scheme, a provision was made for premature payment. When the assessee had the benefit of making the payment after 15 years, if he is making a premature payment, the said amount equal to the net present value of the deferred tax was determined at ` 4,25,79,684 and on such payment the entire liability to pay tax/loan stood discharged. Again it is not a benefit conferred on an assessee. Therefore, section 41 (1) of the Act is not attracted to the facts of this case. Hence, the Tribunal was justified in holding that there is no liability to pay tax. ( ITA No. 899/ 2008, dt. 2-9-2014)

CIT v. McDowell & Co.Ltd. (Karn) (HC); www.itatonline.org

238. S.41(1) : Profits chargeable to tax –Remission or cessation of trading liability – Liability showed in the books – Merely because no response from creditors additions cannot be made

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The assessee showed the liability in the books. It was not proved by the AO as to how the so-called liabilities ceased or crystallised during the previous year. The courts observed that the entire amount has been offered to tax in the A.Y. 2006-07.

The courts held that merely because there was no response by the creditors, it does not prove that the liabilities ceased during the year. The Courts further observed that when the amount has been offered to tax in the subsequent years, it could not be taxed again in year under appeal. (A.Y. 2002-03)

CIT v. Narendra Mohan Mathur (2014) 97 DTR 428 (Raj.) (HC)

CIT v. Rita Mathur (Smt.) (2014) 97 DTR 428 (Raj.) (HC)

239. S. 43B : Deductions on actual payment – Employees' contribution to PF etc. is allowable if deposited before due date of filing ROI. [Ss. 2(24)(x), 28,36(1)(va)

Section 43B made it mandatory for the department to grant deduction in computing the income under section 28 in the year in which tax, duty, cess, etc. is actually paid. However, Parliament took cognisance of the fact that the accounting year of a company did not always tally with the due dates under certain statutes and, therefore, by way of the first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the return under the Income Tax Act, the assessee would be entitled to deduction. It did not apply to contributions to labour welfare funds. The second proviso resulted in implementation problems and which led to deletion of the second proviso in the Finance Act, 2003 and bringing about uniformity in the first proviso by equating

tax, duty, cess and fee with contributions to welfare funds like employees’ provident fund, superannuation. Fund and other welfare funds. The first proviso by Finance Act, 2003 was made applicable with effect from April 1, 2004 and the assessee would argue that it was curative in nature, clarificatory and, therefore, applied retrospectively from 1st April, 1988. The department argued that it was clarificatory and, therefore, applied prospectively. The Supreme Court held that Finance Act, 2003 would be applicable retrospectively and defaulter who fails to pay the contribution to the welfare fund right up to April 1, 2004 and who pays the contribution after April 1, 2004, would get the benefit of deduction under section 43B of the I.T. Act. It is held that the Finance Act, 2003 to the extent indicated above would be curative in nature and hence is retrospective. The reason being to be that the employers should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. We are of the view that the decision of the Supreme Court in CIT v. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) applies to employees’ contribution as well as employers’ contribution (CIT v. Hindustan Organics Chemicals Ltd. (Bom HC) followed).(ITA Nos. 1002 of 2012 and 1034 of 2012, dt. 14-10-2014.)

CIT v. Ghatge Patil Transport Ltd. (Bom) (HC) ;www.itatonline.org

240. S. 43B : Deductions on actual payment – Provident fund – Employees State Insurance – Allowable if payment was made before due date of filing of return. [Ss. 2(24((X), 36(1), 139(1)]

Deduction is allowed u/s. 36(1) r.w.s. 24(x) while computing the income of the assessee if the contribution toward PF & ESI were made on or

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before the due date of filing return u/s. 139(1). [S. 43B]

CIT v. Gujarat State Road Transport Corporation. (2014) 366 ITR 170/265 CTR 64 / 223 Taxman 398 (Guj)(HC)

241. S. 45 : Capital gains – Business income or short-term capital gains – Sale of shares – Assessable as capital gains. [S. 28(i)]

The assessee invested its share holder's funds in shares/units of mutual funds in terms of the decision of its management from time-to-time. These were made in mutual fund units and shares. Whilst the investments were not demarcated and sourced through separate accounts, equally the fact remains that the objects of the company permitted such transactions. What is more, there were only 11 sale and purchase of scrips – these did not indicate any great volume or frequency of share/purchase transactions. Keeping in mind the ruling in CIT v. Associated Industrial Development Co. (P.) Ltd. [1971] 82 ITR 586 (SC) as well as other decisions that undue emphasis cannot be given on one indicating factor alone, the findings of fact arrived at by the Commissioner (Appeals) and confirmed by the ITAT, in the impugned order, do not disclose any error so as to call for interference. Held, income from sale of shares.

The Assessing Officer was considerably influenced by the profit in respect of sale of shares, which, according to him, on analysis of the facts, was business income. One of the primary reasons for his conclusion was the short duration to the extent of the holding period of 10 days. The assessee counters the revenue's submissions here arguing that the shares had been purchased out of its own funds; the activity was duly authorised by its Memorandum of Articles of Association. As regards the volume of share transactions, the assessee points out that it had dealt in only nine scrips during the entire year, which included 17 share purchase

transactions and 22 sale transactions during the year, totalling to 40 transactions in all during the entire year, i.e., one transaction in 10 days. This was not a very high frequency of transactions. The assessee also received dividend on the shares held by it; and its infrastructure was small whereas the business activity required a much larger infrastructure. (A.Y. 2006-07 & 2007-08)

CIT v. Devasan Investment P. Ltd. (2014) 365 ITR 452 (Delhi)(HC)

242. S. 45 : Capital gains – Firm – Partner – Stock-in-trade – Capital asset – Dissolution – Stock-in-trade of firm can be held as capital asset in the hands of partners after dissolution – Sale consideration received by partner is assessable as capital gains and not business income

The correct test to be applied is whether the partnership assets were converted to capital assets of the partners at the time of dissolution. This we find, was provided for in the dissolution deed itself which records in clause (3) that the parties have agreed to take over the plots of land as co-owners and as capital assets and they shall have co-ownership and as a test of conversion if applied, the assessee has indeed provided for conversion. Hence we have no difficulty in concluding that the property does not seem to be stock-in-trade by the execution of the dissolution deed. In our view, there is no mode which provides for conversion of stock-in-trade into capital assets except by agreement of parties.

In the instant case, the deed of dissolution achieves that objective. In the case of Khatau Vallabhdas, the Court was concerned with the division of stock-in-trade i.e. grocery products. In the present case, the business of the partnership was of builders/contractors and not of buying and selling the land and the partners at the material time were not engaged in any

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construction activity and no such construction was being carried out on the land. A building was to be put up on the land purchased by the erstwhile partnership firm but the land remained vacant and nothing is done on the land or to the land so as to show it as stock-in-trade and not treat it as capital assets share of the assessee.

In the circumstances, we answer both the questions in the negative and hold in favour of the assessee and against the revenue. We hold that the Tribunal had no material to come to the conclusion that the land sold by the applicant/assessee was stock-in-trade and the Tribunal was not justified to treat the same as business income. However, we leave open the question whether the amount in the hands of the applicant/assessee is to be treated as long term capital gains or short term capital gains to be decided by the department. (A.Y.)

Arvind Shamji Chheda v. CIT (Bom) (HC); www.itatonline.org

243. S. 45 : Capital gains – Income from sale of shares held as investment in companies which were formed with object to promote agro/horticulture based industry is capital gain and not business income. [S. 28(i)]

The assessee was a Punjab Government Undertaking and its principal object was to promote agro/horticulture based industry in State of Punjab. The assessee made investments in shares of companies which were jointly promoted by assessee along with private entrepreneurs with basic object of promoting agro/horticulture based industry in State of Punjab. The AO held that the surplus/loss resulting to the assessee on sale of the shares was to be considered as a business income/loss since the investments made in shares amounted to a business activity whereas the assessee had declared surplus/loss on the shares as capital gain/loss. The CIT(A) partly upheld

the Assessment Order and ITAT upheld the order of the CIT(A) and dismissed the appeal holding that the sale of investments of shares by the assessee was exigible to tax under the head capital gain instead of business income.

On appeal by the department, the High Court observed that income in a particular case falls under the head of capital gains or business depending upon the nature of business of the assessee and attending circumstances. It further observed that the dividing line for deciding the head of income may be very thin and a transaction was not necessarily in the nature of trade because the purchase was made with the intention of resale. The High Court following its own decisions in case of Saroj Kumar Mazumdar v. CIT (1959) 37 ITR 242 and Janki Ram Bhadur Ram v. CIT (1965) 57 ITR 21 held that a capital investment and resale do not lose their capital nature merely because the resale was foreseen and contemplated when the investment was made and hence the same could be considered as a capital gain/loss. (A.Y. 2005-06)

CIT v. Punjab Agro Industries Corporation Ltd. (2014) 221 Taxman 419/103 DTR 332 (P&H)(HC)

244. S. 45 : Capital gains – Shares – Frequent purchase and sale of shares and magnitude of some transactions being high are not conditions to consider income from sale of shares as business income. [S. 2(29A), 28(i)]

The assessee treated purchase of shares as investment and hence considered sale of shares as long term capital gains. The AO treated the income from sale as business income on the ground that the assessee was indulged in frequent purchase and sale of shares and the magnitude of some transactions was very high. The CIT(A) and the Tribunal directed the AO to consider the income as long term capital gains.

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The High Court observed that a similar issue in the assessee’s own case had come up for hearing in respect of an earlier assessment year wherein the High Court had confirmed that the income was to be considered as capital gains. The High Court following its own judgment in the assessee’s own case for the previous assessment year dismissed the appeal and treated the income as capital gains. (A.Y. 2009-10)

CIT v. Nita M. Patel (2014) 221 Taxman 416 (Guj.)(HC)

245. S. 45(4) : Capital gains – Distribution of capital asset – Dissolution of firm – Retirement – Cash towards the value of shares – No transfer of capital asset and, therefore, no profits or gains chargeable to tax in the hands of the assessee-firm

The assessee-firm had purchased property under a registered sale deed. It was reconstituted and five partners brought in cash by way of capital contribution. Nearly a year thereafter, the erstwhile three partners took their share in partnership assets and left the partnership. The AO held that this was a device adopted to transfer immovable property and therefore, capital gain tax was liable to be paid by the firm. On appeal, the CIT(A) affirmed the order of the AO. On Second Appeal, the Tribunal held that since the assessee-firm had not relinquished any right in property as property was owned by the firm, there was no transfer by the reconstituted firm and the firm was not liable to capital gain tax. On Revenue’s appeal, it was held that in order to attract section 45(4) the capital assets of the firm should be transferred in favour of a partner, resulting in the firm ceasing to have any interest in the capital assets transferred and the partners should acquire exclusive interest in the capital asset. In the instant case, after the retirement of three partners, the partnership continued to exist and the business was carried

on by the remaining five partners. There was no dissolution of the firm or at any rate there was no distribution of capital asset when three partners retired from the partnership firm. Since retiring partners took cash representing value of their shares in partnership, there was no transfer of capital asset in favour of retiring partners and therefore no profit or gain chargeable to tax under section 45(4) arose in hands of assessee-firm. (A.Y. 1995-96)

CIT v. Dynamic Enterprises (2014) 223 Taxman 331 / (2013) 359 ITR 83 / 263 CTR 138 (Karn)(HC)(FB)

246. S. 50B : Capital gains – Slump sale – Consideration received on sale of business as a going concern is capital receipt and not in the nature of non-compete fee.[Ss.28(va), 55(2)(a)]

The assessee received consideration on takeover of her proprietary concern and considered the same as capital gains. The AO however considered the same as business receipt since it represented compensation for not carrying out any activity in relation to the business or profession. The CIT(A) and the Tribunal following the decision of the High Court in the case of CIT v. Mediaworld Publications (P.) Ltd. 2011 200 Taxman 1 held that the right to carry on any business had been recognised by the Legislature as a capital asset, taxable u/s. 55(2)(a) and not u/s. 28(va).

The High Court observed that the agreements entered into for sale had nowhere mentioned that the assessee wanted to continue to carry on the same business and had hence received the consideration as a non-compete fee. The High Court held that the assessee had parted with her controlling interest in the business and had received consideration for the same and hence the same was to be considered as a capital receipt.

CIT v. Sangeeta Wig (2014) 221 Taxman 159 (Mag.) (Delhi) (HC)

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247. S. 54B : Capital gains – Land used for agricultural purposes – Distance to be measured from approachable road. [S. 2(14)(iii)(b)]

For the purpose of determining capital gain on the sale of agricultural land, the existence of the agricultural land should be measured from the approachable road. Not as per sec. 2(14)(iii)(b) stipulations. (A.Y. 2007-08)

CIT v.Shabbir Hussain Pithawala (2014)265 CTR 606 (MP)(HC)

248. S. 54F : Capital gains – Investment in a residential house – Acquisition of five flats in a multi storeyed building having single door no one was held to be eligible to exemption – Prior to amendment Act 2014, w.e.f. 1st April 2005. [S. 45]

Assessee having entered into an agreement with a developer of her land whereby she was entitled to receive 43.75 per cent of the built up area which was eventually translated into five flats having common door no was held to be eligible – exemption in respect of all the five flats. Prior to the amendment of section 54F by Finance (No. 2) Act, 2014, which came into effect from 1st April, 2015. (A.Y. 2007-08)

CIT v. V.R. Karpagam ( 2014) 109 DTR 504 (Mad)(HC)

249. S.69A : Income from undisclosed sources – Investment in shares – Burden discharged by showing circumstantial evidences, though the persons who have sold the shares have not responded to the summons – Deletion was held to be justified

The assessee had purchased shares from a person in the year 1994-95. In the return for the relevant year the AO sought to make addition. On request of the assessee, when notices were handed over to the assessee’s representative and no response was received from the person who were stated to have sold the shares.

The courts held that the details and other evidences like details of payments, cheque numbers and dates, etc., in respect of the persons who had sold the shares to the assessee, which have also been transferred by the company in the name of assessee, and therefore the initial burden on the assessee stands effectively discharged and therefore no addition ought to have been made. The court held that the Tribunal was justified in deleting the addition made u/s. 69A. (A.Y. 1995-96)

CIT v. Sadhana Jain (Smt) (2014) 97 DTR 1 / 224 Taxman 28 (Mag.) (All.)(HC)

250. S. 69C : Unexplained expenditure – Marriage of two daughters –Addition was held to be not justified merely on estimate basis

The AO found that during the year under consideration, marriage of two daughters of the assessee were solemnised but the assessee failed to furnish complete details as regards various expenditures on the marriage/engagement ceremonies. The AO deduced that the assessee had incurred more than the declared expenditure on the ceremonies and thus estimated the expenditure considering the gifts received by the daughters and made addition on account of unexplained and undisclosed expenditure. In appeal CIT(A) deleted the addition. Tribunal also affirmed the order of CIT(A). On appeal by revenue the Court held that when the CIT(A) and the Tribunal has concurrently appreciated the entire evidence on record and have returned concurrent findings against the revenue, deleting addition under sec. 69 C, there is no illegality or

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perversity leading to any substantial question of law. (A.Y. 2005-06)

CIT v. Babulal Agarwal (2014) 97 DTR 284(Raj.) (HC)

251. S. 80G : Donation – Deductions can be claimed for donation as well as exemption under section 10A [S. 10A]

The assessee made a donation of a certain amount, which was debited to its 'K' Unit. In the computation of income, entire donations paid were added back to income of 'K' unit and exemption under section 10A was claimed on the entire income of 'K' unit. The AO opined that once donations debited in the Profit and Loss Account were added back to the Net Profit of the 'K' Unit, it became the income of 'K' Unit on which exemption under section 10A had been allowed. Hence, claiming deduction under section 80G in respect of donation amount would amount to claiming double deduction for a single outgo. The Tribunal, however held that section 10A was an exemption section whereas section 80G was a deduction section and therefore there would be no double deduction of the same item, even if a benefit under both the sections had been claimed. Therefore, the Tribunal held that donation amount qualified for deduction under section 80G. On appeal to the HC, the Court concurred with Tribunal’s view. It observed that as the entire income from the 'K' unit was exempted from tax, debiting the donation in the first instance and adding it back subsequently made no difference. The entire income was exempted. Therefore the deduction under section 80G is claimed from the total income excluding the income of 'K' unit and in law, the assessee is entitled to the said benefit.


252. S. 80HHC : Export business – Derived – Deemed credit under the CENVAT Incentive Scheme is part of the business profits eligible for deduction u/s 80HHC.

Court held that CENVAT incentive being the refund of tax and duty paid on inputs consumed for goods manufactured and exported would automatically reduce the cost of manufacture of the exported goods, thereby necessarily increasing the profit. In view thereof, the deemed credit under the CENVAT Incentive Scheme at ` 89,34,887/- would be a part of the business profits eligible for a deduction under section 80HHC.

In the present case, it can hardly be argued that the deemed credit under the CENVAT Incentive Scheme would not reduce the material / manufacturing cost of the goods exported by the assessee. This was not the case of the Revenue also. That being the case, under the provisions of section 80HHC, the assessee would be entitled to a deduction to the extent of the profits referred to in sub-section (1-B) thereof derived by the assessee from the export of such goods or merchandise. No other provision was brought to our notice that would justify the disallowance of CENVAT incentive whilst computing the admissible deduction u/s. 80HHC of the Act. (ITA No. 435 of 2012)

CIT v. Valiant Glass Works Pvt. Ltd. (Bom) (HC); www.itatonline.org

253. S. 80 HHC : Export business – Exchange rate difference pertaining to exports made in earlier years – Eligible for deduction under section 80HHC of the Act. Such amount of Exchange rate difference could neither be deducted from Export turnover

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nor, ninety per cent thereof can be excluded from business profit

Amount representing the exchange rate difference relating to export of earlier period is eligible for deduction under section 80 HHC of the Act. Further, the amount of exchange rate difference cannot be deducted from the export turnover and ninety per cent (90%) thereof also cannot be excluded from business profit while computing deduction under section 80HHC of the Act. (A.Y. 2003-04)

CIT v. Priyanka Gems (2014) 102 DTR 193 / 267 CTR 480 (Guj.)(HC)

254. S. 80HHC : Export business –Computation – Turnover exceeding 10 crores – Taxation Laws (Amendment) Act, 2005 is wholly valid with retrospective effect from 1-4-1998. [S. 28(iiid), 28(iiie)]

Deduction was not available in respect of profit on transfer of DEPB. It became available to exporters in respect of DEPB credit sale and DFRC referable to section 28(iiid)/(iiie), only when 2nd, 3rd and 4th provisos were inserted in section 80HHC(3) and clauses (iiid)/(iiie) in section 28 by Taxation Laws (Amendment) Act, 2005 with retrospective effect from 1-4-1998. It was held that no one can have grievance against amended provisions inasmuch as such eligible person falling under scope of section 80HHC would have benefit of deduction under section 80HHC with retrospective effect. Classification of exporters having export turnover not exceeding ` 10 crores under one group and exporter having export turnover exceeding ` 10 crores under another group was valid, as classification of exporters was based on intelligible differentia, and, therefore, impugned provision was not violative of Article 14 of Constitution. Thus, provisions of section 80HHC(3) as amended by Taxation Laws (Amendment) Act, 2005 is

wholly valid with retrospective effect from 1-4-1998.

Mentha and Allied Products Ltd. v. UOI (2014) 104 DTR 193(All)(HC)

255. S. 80HHC : Export business – Turnover – For calculating deduction under section 80HHC, the turnover of 10A unit should not to be taken into consideration. [S.10A,80A, 80AB]

The assessee-company was an exporter of manufactured goods and traded goods. It also had a unit exclusively for export at Export Promotion Zones, which was exempt under section 10A. The assessee claimed deduction under section 80HHC. The AO noticed that for computing the said deduction, the assessee included the export turnover of its unit (profit of which was exempt under section 10A) claiming it to be total export turnover. He observed that since the income of the unit did not form part of the assessee's total income within the meaning of sections 80A and 80B, no deduction under section 80HHC was allowable with reference to the export turnover of unit. The Tribunal reversed the order of the AO. On an appeal by the assessee, the HC observed that while computing the claim of deduction under section 80HHC, the assessee itself had not taken into account, the profits of the NEPZ unit, which was exempt under section 10A. The assessee, however, had taken into account the turnover of the unit while calculating deduction under section 80HHC. When the assessee itself accepted that profit of unit had to be ignored for the calculation of deduction under section 80HHC, applying the same logic, the turnover of the unit in Export Promotion Zone will also not be taken into account for calculating the deduction under section 80HHC.

CIT v. Roto Pumps Ltd. (2014) 223 Taxman 51 (All)(HC)

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256. S. 80HHC : Export business – Total turnover – Trade discount – For the purpose of computing deduction trade discount will not form part of total income

The substantial question of law before the HC was whether the Tribunal was correct in interpreting the provision of section 80HHC with special reference to the interpretation of the phrase ‘total turnover’ as existing in the said statutory provisions. Referring to the definitions of ‘sales price’ and ‘turnover’ under the provisions of the Central Sales Tax Act, 1956, and various judicial precedents, the High Court held that the Tribunal committed an error in holding that trade discount given to the assessee should form part of total turnover for the purpose of computing deduction u/s. 80HHC. (A.Y. 1993-94)

Dutron Plastics Ltd. v. Dy. CIT (2014) 223 Taxman 108 (Mag.)(Guj(HC)

257. S. 80HH : Newly established industrial undertakings – Derived – Income from sale of scrap generated from manufacturing activity – Entitled to deduction

Since scrap generated from the three units had direct and immediate nexus with the industrial undertaking and was generated from the manufacturing process itself, section 80HH benefit was to be allowed. (A.Ys. 1993-94, 1994-95)

CIT v. Modi Xerox Ltd. (2014) 365 ITR 200 (All)(HC)

258. S. 80HHE : Export business – Computer software – Turnover – While determining admissible deduction the turnover of software business would only be considered and loss of other

business cannot be adjusted against the profits of eligible business [S. 80HHC]

The assessee was engaged in two different activities. One was the manufacture of gear-boxes coupling and spares and another in software business, profits from which were eligible for deduction u/s. 80HHE. The Revenue sought to compute eligible profit under section 80HHE(3) after deducting loss from gear-boxes etc. from profit of software business by drawing comparison from S. 80HHC(3). On appeal, the Tribunal upheld the same. On further appeal, the High Court held that, S. 80HHC is a provision general in nature intended to encourage export of any goods or merchandise except minerals and mineral oil while S. 80HHE specifically provides for computer related business separately and, thus, it is specific and carved out from the general category of export of goods appearing from section 80HHC, there is, as such, no reason to treat them identically. Therefore, neither turnover nor profit or loss arising out of business activity relating to gear box, etc., had anything to do with the computation of admissible deduction under section 80HHE(3) and accordingly, while determining admissible deduction u/s. 80HHE, the turnover of software business would only be considered and loss of other business ccould not be adjusted against the profits of the eligible business.

Flender Ltd. v. CIT (2014) 223 Taxman 221 (Cal)(HC)

259. S. 80-IA : Industrial undertaking – Set off of brought forward losses and depreciation of earlier years – If before calming deduction under section 80-IA – Losses and depreciation in respect of eligible business is set-off against income from other sources – The same losses and depreciation cannot

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again be notionally set-off against the profits of eligible business

Where before claiming deduction under section 80 IA of the Act, losses and depreciation claimed by the assessee in respect of eligible business is set-off against income from other sources, the said loss or depreciation cannot again be notionally set-off against the profits of eligible business while computing deduction under section 80-IA of the Act. (A.Y. 2008-09)

CIT v. Anil H. Lad (2014) 102 DTR 241 / 45 taxmann.com 98 (Karn.)(HC)

260. S. 80-IA(4) : Profits and gains from infrastructure undertakings – Advertisement revenue – Could not be treated as income derived from 'infrastructure facility'. Hence, assessee was not eligible for deduction

Assessee-company had entered into an agreement with local authority for construction of bus-shelters, putting up of footbridge, beautify road medians and erecting street lights. Assessee was allowed to utilise these bus-shelters, lamp posts, road medians and footbridge, for their advertisement business to recoup expenditure incurred for same. Assessee claimed deduction under section 80-IA(4) contending that it was involved in infrastructure development. It was held that benefit under section 80-IA could be extended only to those assessees who had developed infrastructure facility as defined under sub-section (4) of section 80-IA and income eligible for deduction had to arose from use of such infrastructure facility. Since assessee eventually was an advertising company, and had developed, existing road median, erected bus-shelters and light poles for its advertisement business, activities indulged by assessee were part of its normal activities of advertising and publicity rather than one of infrastructure development. Further since assessee derived

income only from advertisement hoardings erected on bus shelters, road medians and street light poles, said income could not be treated as income derived from 'infrastructure facility'. Hence, assessee was not eligible for deduction under section 80-IA(4).

CIT v. Skyline Advertising (P.) Ltd. (2014) 104 DTR 98 / 225 Taxman 220 / 269 CTR 289 (Karn)(HC)

261. S. 80-IB(10) : Housing project – Limit on extent of commercial area of housing project inserted w.e.f. 1-4-2005 does not apply to projects approved before that date

S. 80-IB(10) was amended by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005 by insertion of clause (d) to provide that the built up area of the shops and other commercial establishments included in the housing project should not exceed five per cent of the aggregate built up area of the housing project or 2,000 square feet, whichever is less. In one case, the assessee’s housing project was approved before 31-3-2005 and completed before 1-4-2005 but the sale of some of the units in the said project took place after 1-4-2005 i.e. in A.Y. 2005-06. In another case, the housing project was approved before 31-3-2005 but completed on or after 1-4-2005, but within the time-frame as laid down in s. 80-IB(10). The High Court had to consider whether the limitation inserted by the said clause (d) of s. 80-IB(10) applied to projects that were approved before 1-4-2005. HELD by the High Court:

(i) Clause (d) of s. 80-IB(10) is a condition that relates to and/or is linked with the approval and construction of the housing project and the Legislature did not intend to give any retrospectivity to it. At the time when the housing project is approved by the local authority, it decides, subject to its own rules and regulations, what quantum of commercial area is to be included in the said project. It is on this basis that building plans are approved

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by the local authority and construction is commenced and completed. It is very difficult, if not impossible to change the building plans and/or alter construction midway, in order to comply with clause (d) of s. 80-IB(10). It would be highly unfair to require an assessee to comply with s. 80-IB(10)(d) who has got his housing project approved by the local authority, before 31-3-2005 and has either completed the same before the said date or even shortly thereafter, merely because the assessee has offered its profits to tax in A.Y. 2005-06 or thereafter. It would be requiring the assessee to virtually do a humanly impossible task. This could never have been the intention of the Legislature and it would run counter to the very object for which these provisions were introduced, namely to tackle the shortage of housing in the country and encourage investment therein by private players. It is therefore clear that clause (d) of s. 80-IB (10) cannot have any application to housing projects that are approved before 31-3-2005.

(ii) The other reason for coming to the aforesaid conclusion is that if the revenue’s contention is accepted, then an assessee following the project completion method of accounting, who has completed the housing project by complying with all the conditions as set out in s. 80-IB(10) as it stood prior to 1-4-2005 would be disentitled to claim the deduction merely because he offers his profits to tax in A.Y. 2005-06 while an assessee following the work-in-progress method of accounting would be entitled to the deduction u/s 80-IB(10) up to A.Y. 2004-05, and denied the same from A.Y. 2005-06 and thereafter. It could never have been the intention of the Legislature that the deduction u/s 80-IB(10) available to a particular assessee would be determined on the basis of the accounting method followed. This would

lead to startling results (CIT v. Brahma Associates (2011) 333 ITR 289 (Bom.), CIT v. G.R. Developers (2013) 353 ITR 1 (Kar.), Manan Corporation v. Asst. CIT (2012) 356 ITR 44 (Guj) followed; Reliance Jute & Industries Ltd. v. CIT (1979) 120 ITR 921, SEBI v. Ajay Agarwal AIR 2010 SC 3466 distinguished). (ITA No. 201 of 2012, dated 19-9-2014 )

CIT v. Happy Home Enterprises (Bom) (HC) www.itatonline.org

262. S. 80-IB : Indutrial undertaking – Film production – Manufacture –An “industrial undertaking” can be formed by taking plant and machinery on hire – Not necessary for the assessee to “own” the plant and machinery Dept’s tendency to try to unsettle matters strongly disapproved

The assessee, a film producer, claimed deduction u/s 80-IB in respect of the profits from his film called ‘Border’. The AO, relying on Textile Machinery Corp. Ltd. v. CIT (1977) 107 ITR 195 (SC), denied the claim for deduction on the ground that as the assessee did not own any plant & machinery, he was not an “industrial undertaking” u/s. 80-IB(2)(ii). However, the CIT(A) & Tribunal allowed the assessee’s claim. On appeal by the department, held dismissing the appeal:

(i) The argument of the department that if an assessee does not own plant and machinery, it cannot be an industrial undertaking is extreme and misconceived. S. 80-IB permits an undertaking to be formed by ‘hire’ of plant and machinery and does not require the assessee to own the same. A film production unit formed by engaging cameraman, editor, sound technicians and using their equipments for filming, processing, sound recording

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and mixing machines on contract basis is an “industrial undertaking” eligible for s. 80-IB deduction (CIT v. D. K. Kondke (1991) 192 ITR 128 (Bom) followed, Textile Machinery Corp 107 ITR 195 (SC) distinguished);

(ii) It is unfortunate that the department does not maintain the rule of consistency and instead disobeys it. As the Tribunal had for the earlier years decided the issue in favour of the assessee and the High Court had dismissed the department’s appeals, the Revenue ought not to have filed an appeal for the present year. We strongly disapprove of the attempt to canvass extreme arguments so as to take a chance and try to unsettle the settled matters and things. This tendency has to be curbed and we must come down heavily on parties to curb it, may it be the Revenue.

CIT v. Jyoti Prakash Dutta (2014) 367 ITR 568/271 CTR 159 (Bom)(HC)

263. S. 90 : Double taxation relief – The suspension of assessment and collection of tax takes place as soon as an application is made to Competent Authorities to settle dispute under MAP proceedings – DTAA-India-USA [Article 27]

The assessee company was incorporated in USA and was also a tax resident of USA and eligible to the benefit under the DTAA. The assessee was engaged in the business of international express delivery and had developed an international network of transporting documents, parcels and other items from one country to another. The assessee had taken a stand that the income which it earned under the agreement entered into from its overseas customers in respect of parcels/documents to be delivered in India were not taxable. The assessee also filed an application to respondent 3 under section 197 requesting to issue nil tax withholding order for assessment

year 2010-11. The assessee also informed that the said year has been also considered while filing application of MAP proceedings with competent authority and providing the bank guarantee.The respondent No. 3 passed an order rejecting the assessee's application for nil tax withholding order/certificate on ground that assessee's request for inclusion of said assessment year was not pending before the MAP authorities as informed by the FTD of the CBDT. Subsequently, the competent authority of USA issued a certificate confirming that withholding tax application in respect of assessment year was being considered under the MAP proceedings.On aforesaid communication, revised application was made by assessee which was rejected.

On a Writ Petition by the assessee, the High Court observed that when respondent was exercising jurisdiction under revision and he does not dispute the fact that MAP proceedings for the assessment year 2010-11 have been admitted and are pending for the assessment year 2010-11 it was obligatory on his part to have directed the grant of certificate of nil withholding tax under section 197. The High Court held that in terms of Article 27 of India-US DTAA read with MoU, suspension of assessment and collection of tax takes place as soon as an application is made to Competent Authorities to settle dispute under MAP proceedings and revenue is secured by taxpayer by furnishing a bank guarantee, therefore, benefit of suspension of assessment and collection of taxes cannot be denied by taking a view that issue raised by assessee has not been admitted for consideration under MAP proceedings (A.Y. 2010-11)

Halliburton Offshore Services Inc. v. Jt. CIT (2014) 221 Taxman 414 (Uttarakhand)(HC)

264. S. 92C : Transfer pricing – Issue of shares at premium – Neither the capital receipts received by the Petitioner on issue of equity shares to its holding company,

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a non-resident entity, nor the alleged shortfall between the so called fair market price of its equity shares and the issue price of the equity shares can be considered as income within the meaning of the expression as defined under the Act – Issue of shares at a premium by the Petitioner to its non-resident holding company does not give rise to any income from an admitted International Transaction. Thus, no occasion to apply Chapter X of the Act can arise in such a case. [Ss. 2(24)(xvi), 56(2)(viib), 144C]

The assessee, an Indian company, issued equity shares at the premium of ` 8,591 per share aggregating ` 246.38 crores to its holding company. Though the transaction was reported as an “international transaction” in Form 3 CEB, the assessee claimed that the transfer pricing provisions did not apply as there was no income arising to it. The AO referred the issue to the TPO without dealing with the preliminary objection. The TPO held that he could not go into the issue whether income had arisen or not because his jurisdiction was limited to determine the ALP. He held that the assessee ought to have charged the NAV of the share (` 53,775) and that the difference between the NAV and the issue price was a deemed loan from the assessee to the holding company for which the assessee ought to have received 13.5% interest. He accordingly computed the adjustment for the shares premium at ` 1,308 crore and the interest thereon at ` 88 crore. The AO passed a draft assessment order u/s 144C(1) in which he held that he was bound u/s 92-CA(4) with the TPO’s determination and could not consider the contention whether the transfer pricing provisions applied. The assessee filed a

Writ Petition challenging the jurisdiction of the TPO/AO to make the adjustment. The High Court directed the DRP to decide the assessee’s objection regarding chargeability of alleged shortfall in share premium as a preliminary issue. Upon the DRP’s decision, the assessee filed another Writ Petition. HELD by the High Court allowing the Petition:

(1) A plain reading of section 92(1) of the Act very clearly brings out that income arising from a International Transaction is a condition precedent for application of Chapter X of the Act.

(2) The word income for the purpose of the Act has a well understood meaning as defined in s. 2(24) of the Act. The amounts received on issue of share capital including the premium is undoubtedly on capital account. Share premium have been made taxable by a legal fiction u/s 56(2)(viib) of the Act and the same is enumerated as income in s. 2(24)(xvi) of the Act. However, what is bought into the ambit of income is the premium received from a resident in excess of the fair market value of the shares. In this case what is being sought to be taxed is capital not received from a non-resident i.e. premium allegedly not received on application of ALP. Therefore, absent express legislation, no amount received, accrued or arising on capital account transaction can be subjected to tax as income (Cadell Weaving Mill Co. vs. CIT 249 ITR 265 approved in CIT vs. D.P. Sandu Bros. 273 ITR 1 followed)

(3) In case of taxing statutes, in the absence of the provision by itself being susceptible to two or more meanings, it is not permissible to forgo the strict rules of interpretation while construing it. It was not open to the DRP to seek aid of the supposed intent of the Legislature to give a wider meaning to the word ‘Income'.

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(4) The other basis in the impugned order, namely that as a consequence of under valuation of shares, there is an impact on potential income and that if the ALP were received, the Petitioner would be able to invest the same and earn income, proceeds on a mere surmise/assumption. This cannot be the basis of taxation. In any case, the entire exercise of charging to tax the amounts allegedly not received as share premium fails, as no tax is being charged on the amount received as share premium.

(5) Chapter X is invoked to ensure that the transaction is charged to tax only on working out the income after arriving at the ALP of the transaction. This is only to ensure that there is no manipulation of prices/consideration between AEs. The entire consideration received would not be a subject-matter of taxation.

(6) The department’s method of interpretation indeed is a unique way of reading a provision i.e. to omit words in the Section. This manner of reading a provision by ignoring/rejecting certain words without any finding that in the absence of so rejecting, the provision would become unworkable, is certainly not a permitted mode of interpretation. It would lead to burial of the settled legal position that a provision should be read as a whole, without rejecting and/or adding words thereto. This rejecting of words in a statute to achieve a predetermined objective is not permissible. This would amount to redrafting the legislation which is beyond/outside the jurisdiction of Courts.

(7) In tax jurisprudence, it is well settled that following four factors are essential ingredients to a taxing statute:– (a) subject of tax; (b) person liable to pay the tax; (c) rate at which tax is to be paid, and (d) measure or value on which the rate

is to be applied. Thus, there is difference between a charge to tax and the measure of tax (a) & (d) above.

(8) The contention that in view of Chapter X of the Act, the notional income is to be brought to tax and real income will have no place is not acceptable because the entire exercise of determining the ALP is only to arrive at the real income earned i.e. the correct price of the transaction, shorn of the price arrived at between the parties on account of their relationship viz. AEs. In this case, the revenue seems to be confusing the measure to a charge and calling the measure a notional income. We find that there is absence of any charge in the Act to subject issue of shares at a premium to tax.

(9) W.e.f. 1st April, 2013, the definition of income u/s 2(24)(xvi) includes within its scope the provisions of s. 56(2) (vii-b) of the Act. This indicates the intent of the Parliament to tax issue of shares to a resident, when the issue price is above its fair market value. In the instant case, the Revenue’s case is that the issue price of equity share is below the fair market value of the shares issued to a non-resident. Thus Parliament has consciously not brought to tax amounts received from a non-resident for issue of shares, as it would discourage capital inflow from abroad.

(10) Consequently, the issue of shares at a premium by the Petitioner to its non resident holding company does not give rise to any income from an admitted International Transaction. Thus, no occasion to apply Chapter X of the Act can arise in such a case. (WP. No. 871 of 2014, dt. 10-10-2014.)

Vodafone India Service Pvt. Ltd. v. UOI (Bom); www.itatonline.org

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265. S. 127 : Power to transfer cases –Co-ordinated investigation – Transfer from Mumbai to Delhi was held to be valid

After considering the objections of assessee the CIT transferred the assesees case from Mumbai to Delhi for co-ordinated investigation on the request of Dy. CIT at Delhi. The assessee challenged the said order by filing writ petition. Dismissing the petition the Court held that, transfer of case was valid.

Amby Valley Ltd v. CIT (2014) 270 CTR 57/106 DTR 457 (Bom)(HC)

266. S.139 : Return – Interest – Due date for filing return extended – Strictures passed against the CBDT for seeking to take advantage of its own wrong and disregarding genuine hardship of taxpayers. Due date for filing ROI extended to 30-11-2014 subject to charge of s. 234A interest. [Ss.44AB, 119, 234A]

The Petitioner filed a Writ Petition claiming that the action of the CBDT/Government in issuing Notification dated 25-7-2014 to extending the due date for filing the tax audit report u/s 44 AB but in not extending the due date for filing Income Tax Returns from 30-9-2014 to 30-11-2014 was arbitrary. It was pointed out that great prejudice was being caused to the taxpayers by the said action of the CBDT. HELD by the High Court:

(i) We are not impressed by the stand taken by the Revenue urging inter alia that the format of the tax audit report nowhere requires certification of the Tax Consultants or Tax Auditors in relation to the information to be furnished for which Tax Audit is conducted …. Though the filing of the return of income is the

responsibility of the taxpayer, that in no manner would make the Tax Auditors and the Consultants who are professionals any less concerned for correct computation of the income and true presentation of entire material before the Tax authorities;

(ii) The change of utility and non-availability of the new version till 20-8-2014 is the cause for the issue to have cropped up. The assessees cannot be put to the hardship nor can the professionals be made to rush only because the department chose to change the utility during the mid-year;

(iii) One of the main objectives of the computerisation programme is to improve the efficiency and effectiveness of the tax administration. If the very computerisation has caused genuine hardship to one and all concerned, CBDT ought to have paid heed to the repeated requests of all concerned in exercise of its statutory powers;

(iv) It would have been desirable for the CBDT to have considered the request for extension of the due date as a very peculiar situation has arisen portraying the genuine hardship to the assessee and the tax consultants;

(v) Non-collection of tax for a period of two months and possible loss of ` 220 crore in terms of interest for a period of two months in the event the self-assessed tax not paid, appear clearly as the reasons in the foundation for CBDT to deny such extension. The Revenue cannot be permitted to take advantage of its own error or delay, by putting forth magnified figures of loss and thereby also possibly in the process of gaining interest for late filing of return in complete disregard to requirement of efficient management;

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(vi) The CBDT ought to have responded to the representation. Instead, it chose not to respond but later before this Court in no uncertain terms has termed such a request impermissible on the ground that the grievances are not sustainable. Therefore, considering the larger cause of public good and keeping in mind the requirement of promotion of justice, we chose to exercise the writ of mandamus directing the CBDT to extend the date of filing of return of income to 30-11-2014, which is due date for filing of the TAR as per the Notification dated 20-8-2014. Such extension is granted with the qualification that the same may not result into non-charging of interest u/s 234A. (SCA No. 12656 of 2014, dt. 22-9-2014.)

All Gujarat Federation of Tax Consultants v. CBDT (2014) 271 CTR 113/109 DTR 177( Guj) (HC)

267. S. 139 : Return – Interest – Due date for filing return – Non-extension of due date for filing ROI will cause “substantial hardship“. CBDT must look into practical difficulties & take “just and proper” decision before 30-9-2014.[S. 44AB,119]

The Petitioner filed a Writ Petition claiming that the action of the CBDT/Government in issuing Notification dated 25-7-2014 to exercise the due date for filing the tax audit report u/s 44AB but in not extending the due date for filing Income Tax Returns from 30-9-2014 to 30-11-2014 was arbitrary. It was pointed out that great prejudice was being caused to the taxpayers by the said action of the CBDT. Held by the High Court:

In view of the fact that the Madras High Court has already directed the CBDT to examine the representation of the assessees in general, before 30-9-2014, we feel it appropriate that the above representation of the Petitioners is also considered by the CBDT. Though we do not

wish to express any view of the legalities of various issues involved, it does appear to us, from the arguments advanced, that there will be substantial hardship caused to the assessees, if the date of filing Return is not suitably extended. We hope and trust that CBDT will look into all these practical difficulties enumerated above and take a just and proper decision on the matter, before 30-9-2014, as already directed by the Madras High Court. In case the Petitioners are entitled to any further relief in view of the orders passed in various petitions filed in other High Courts, this order would not preclude the Petitioners from claiming the same. (WP No. 2492 of 2014, dated 25-9-2014.)(A.Y..2014-2015)

The Chamber of Tax Consultants v. UOI (2014) 271 CTR 155/109 DTR 219 (Bom) (HC)

268. S. 143(3) : Assessment – Breach of principles of natural justice – Alternative remedy – Show cause notice to comply less than 24 hours – Where there is a serious flaw in the decision-making process or prejudice is caused to a party on account of breach of principles of natural justice the Court enjoined to exercise writ jurisdiction. [Ss. 80IA, 246A, Constitution of India, Article 226]

A show cause notice was issued to the assessee, calling upon to show cause as to why its claim for deduction under Sec. 80-IA should not be disallowed. The denial of benefit under Sec. 80-IA was upon various grounds, such as commencement of business and fulfilling the eligibility criteria etc., u/s. 80-IA. The assessee was given less than 24 hours to respond to the notice. The contention of the assessee is there was a breach of natural justice as in the present case there is no fear of the assessment getting time barred. In such circumstances it

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is incumbent upon the authority issuing such notice to grant reasonable opportunity to the assessee to respond to the notice. The court held that granting of an opportunity to respond to the show cause notice in less that 24 hours is a flaw in the decision making process and therefore amenable to judicial review. The court also observed that it has been times without number that justice must not be done but appear to have been done. The non-consideration of the assessee’s response to the notice by making it impossible for the assessee to file a reply for the consideration of AO does cause prejudice to the assessee leading to palpable injustice, thereby warranting to exercise of writ jurisdiction. Impugned order passed by the AO under sec. 143(3) in breach of natural justice was set aside by the Hon'ble Court and restored to the AO for fresh disposal after considering the assessee’s reply and granting assessee a personal hearing. The Court also observed that in fact non-exercise of writ jurisdiction in appropriate cases would amount to abdication of Court’s obligation to ensure that justice is done. Therefore , the alternative remedy would not by itself bar the exercise of writ jurisdiction, if the facts of the case so deserve. (WP No. 3359 of 2013 dated 24-12-2013) (A.Y. 2005-06)

Vodafone India Ltd. v. UOI (2014) 97 DTR 441 (Bom) (HC)

269. S. 143(3) : Assessment – Method of accounting – Addition on the basis of e-mails recovered in the course of search proceedings of third party was held to be not valid. [Ss. 132, 145]

AO made addition on the basis that the assessee received additional sale consideration against sale of land on the basis of an e-mail recovered during the course of search action of third party. CIT(A) and Tribunal deleted the addition on the ground that no independent material was available to support such a claim. On appeal by revenue the Court held that finding recorded

by appellate authorities did not suffer from any perversity, it did not require any interference. (A.Y. 2007-08)

CIT v. Alpha Impex (P) Ltd. (2014) 224 Taxman 211 (Mag) (Bom)(HC)

270. S. 147 : Reassessment – Return of Income – Filing an income-tax return with an office which has no concern or connection with the assessment of income of the assessee, in law, would amount to non-filing of return – Reassessment was held to be valid. [S. 127, 132, 139, 148]

The assessee was being regularly assessed to income tax. Search operations under Section 132 of the Act were also carried out. Thereafter, case of the assessee was centralised under Section 127 of the Act by the CIT, Chandigarh to the office of the Assistant/Deputy Commissioner, Chandigarh. The assessee was thus well aware of the fact that the jurisdiction over her case was with the Assistant/Deputy Commissioner, Central Circle, Chandigarh. In fact, for the last many years, assessment was being finalised under Section 143(3) of the Act by the said officer. Moreover, the assessee during the course of search assessment proceedings before the Settlement Commissioner had also impleaded the said officer as the second party. When the return for the A.Y. 2006-07 was not furnished by the due date, a notice under section 142(1) of the Act was served upon the assessee on 2-1-2007 requiring the assessee to file the return of her income for the A.Y. 2006-07 on or before 2-1-2007 but no compliance was made by the assessee and in fact, return was not filed. Consequently, recording reasons for re-opening the case, a notice under Section 148 of the Act was issued to the assessee on 24-3-2008. In response to the notice, the assessee came up with a plea that the return of income for the A.Y. 2006-07 had already been filed by her on 30-10-2006 with

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Range-IV, Chandigarh. It was found that the return had been filed surreptitiously to an office which had no connection with assessment of income of the assessee.On appeal the HC held that the filing of return by the assessee with an office having no concern or connection with assessment of income of the assessee, in law, would amount to non-filing, justifying action under section 147 read with Section 148 of the Act. (A.Y. 2006-07)Sujata Grover v. CIT (2014) 223 Taxman 44 (Mag.) (P&H) (HC)

271. S. 147 : Reaasessment – Beyond four years – Allocation of expenses – Industrial undertakings – There was full and true disclosure reopening was based on change of opinion – Held to be not valid.[S. 80IB]

Assessee, engaged in business of manufacturing of chemicals, had two manufacturing units – one at Tarapur and another at Silvasa. Assessee claimed deduction under section 80-IB in respect of its Silvassa unit. Said claim had been examined and reduced by Assessing Officer in assessment. Thereafter, assessment was sought to be re-opened on ground that assessee had suppressed expenses incurred in respect of Silvassa unit by debiting expenses to its Tarapur unit which had resulted in increasing profit of Silvassa unit and, thus, assessee had enjoyed excessive deduction under section 80-IB. The assesse challenged the said reassessment notice, allowing the petition the Court held that issue of allocation of expenditure was very much available before Assessing Officer while examining quantum of deduction under section 80-IB in original assessment, initiation of reassessment was bad in law. Reassessment was based on change of opinion which was not permissible. (A.Y. 2006-07)

Lalitha Chem Industries (P). Ltd. v. Dy. CIT (2014) 97 DTR 107 (Bom) (HC)

272. S. 147 : Reassessment – Audit objection – If AO contests the audit objection but still reopens to comply with the audit objection, it means he has not applied his mind independently and the reopening is void. [S. 148]

To satisfy ourselves, whether the reassessment proceedings have been initiated at the instance of the audit party and solely on the ground of audit objections ….. On a perusal of the files, the noting made therein and the relevant documents, it appears that the assessment is sought to be reopened at the instance of the audit party, solely on the ground of audit objections. It is also found that, as such, the AO tried to sustain his original assessment order and submitted to the audit party to drop the audit objections …. … if the reassessment proceedings are initiated merely and solely at the instance of the audit party and when the Assessing Officer tried to justify the Assessment Orders and requested the audit party to drop the objections and there was no independent application of mind by the Assessing Officer with respect to subjective satisfaction for initiation of the reassessment proceedings, the impugned reassessment proceedings cannot be sustained and the same deserves to be quashed and set aside. (SCA No. 7140 of 2014, dated 30-7-2014)

Raajratna Metel Industries Ltd. v. ACIT (Guj)(HC); www.itatonline.org

273. S. 147 : Reassessment – Notice – After expiry of four years – Export business – Subsequent Court decisions by itself would not give jurisdiction to the AO to reopen an assessment beyond four years unless coupled with a failure to disclose truly and full all material

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facts – Reassessment was quashed. [Ss. 80HHC, 148]

Deduction claimed under section 80HHC was allowed under section 143(3). Reassessment notice was issued on the ground that since the assessee did not have profit from export and deduction on incentives was not available. The said notice was challenged by writ petition. Allowing the petition, the court observed that reasons recorded do not indicate even remotely any failure on the part of the assessee to disclose any material facts which is necessary for assessment. Subsequent Court decisions by itself would not give jurisdiction to the AO to reopen an assessment beyond four years unless coupled with a failure to disclose truly and fully all material facts – Reassessment was quashed. (A.Y. 1998-99)

Allanasons Ltd v. Dy. CIT (2014) 107 DTR 62 (Bom) (HC)

274. S. 147 : Reassessment – Notice – After expiry of four years – Survey –Bogus purchases – Writ petition was held to be not maintainable.[S. 133A, 148, Constitution of India, Article 226 ]

The assessee is in the business of trading in various industrial products. The assessment for the relevant year was completed under section 143(3). During scrutiny assessment for the assessment year 2008-09 it was noticed that suppliers were proved to be bogus biller during the course of search/ survey by the investigation wing. Additions were made by the AO which is pending before the CIT(A).For the relevant assessment year after recording the reasons, the AO issued the notice under section 148. The notice was challenged by way of writ petition. The Court dismissed the petition by observing that it was only on account of survey proceedings under section 133A and also during assessment proceedings for the assessment year 2008-09 that information was obtained that

certain purchases were made from non-existing/bogus dealers and satisfaction of the AO to form a reasonable belief that income chargeable to tax has escaped assessment is not unreasonable belief that income chargeable to tax has escaped assessment is not unreasonable. The court also observed that one would necessarily have to read the reasons as a whole to find out whether or not there has been a failure to disclose truly and fully all necessary facts for assessment, hence writ petition was not maintainable. (A.Y. 2005-06)

Nickunj Eximp Enterprises (P) Ltd. v. ACIT (2014) 107 DTR 69 (Bom)(HC)

275. S. 147 : Reassessment – Recording of reasons is mandatory before issue of notice – Information –Statement recorded – Parties denied –Reassessment was held to be valid on the basis of information received in the assessment year 2010-11. [S.148 ]

During the assessment proceedings for the assessment year 2010-11 AO noticed that some of the parties who have received the payments denied the services rendered. On the basis of said information after recording reasons the AO issued notice under section 148. Reasons were recorded before issue of notice, however the recorded reasons were furnished after four and half months. Court held that no prejudice has been caused to the assessee on account delay in supplying the reasons for reopening the assessment. The Court held that facts revealed to the AO during the assessment proceedings for 2010-11 constituted ‘information’ contemplated by section 147 and said information has direct nexus and/or link with the tax liability for assessment year 2006-07 and assessment year 2008-09, that the material in the hands of AO is prima facie sufficient for him to form a belief that income has escaped assessment, therefore the issue of notices were not an outcome of change

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in opinion of the successor AO but is based on tangible material received during assessment proceedings in subsequent year. Notice for reassessment was held to be valid. (A.Y. 2006-07, 2008-09)

Debashu Services (P) Ltd v. Dy. CIT (2014) 107 DTR 41/270 CTR 36( Bom)(HC)

276. S. 147 : Reassessment – Within the period of four years – Change of opinion – Original assessment completed after raising queries on the issue reopened – Reopening suffers from change of opinion – Held reopening invalid. [Ss. 115WG, 115WH]

Where the Assessing Officer proposed to reopen the assessment of the assessee within four years from the end of the assessment year, on the very same issues on which he had raised queries while framing the original assessment. Reopening was held to be invalid as the reopening suffered from change of opinion. Further, the court held that a fringe benefit assessment can be reopened only under the special provisions of sections 115 WG and 115 WH and not under general provisions of section 147 of the Act. (A.Y. 2008-09)

CIT v. P. G. Foils Ltd. (2014) 102 DTR 26 / (2013) 215 Taxman 104 (Mag.) / 356 ITR 594 (Guj.)(HC)

277. S. 148 : Reassessment – Notice – Block assessment – Notice issued 22 days before expiry of limitation – Reassessment was held to be not valid. [Ss. 147, 158BC]

In pursuance of search proceedings, assessment was completed for AYs in question. On an appeal by the assessee, the CIT(A) set aside assessment order and remanded matter back to Assessing Officer for disposal afresh. The time

limit for completion of subsequent assessment proceedings was to expire on 31-3-1990. The A.O. issued a notice under section 148 about 22 days before expiry of period of limitation for assessment. The assessee challenged the validity of the reassessment proceedings. The Tribunal opined that a notice under section 148 had been issued merely to obtain an extension of period of limitation for completing the assessment. The Tribunal also noted that since seized material was available with Revenue, there was no reason to hold that the assessee had failed to disclose fully and truly material facts necessary for assessment. The HC upheld the order of the Tribunal.

CIT v. Pradeep Iron Industries (P.) Ltd. (2014) 223 Taxman 46 (Jharkhand)(HC)

278. S. 153C : Assessment – Income of any other person – Search and seizure – Recording of satisfaction – Recording of satisfaction is necessary even if Assessing Officer of both persons is the same – Notice was held to be invalid and assessment was held to be bad in law. [Ss.132, 132A, 158BD]

The initiation of proceedings against "such other person" is dependent upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the "searched person" or even during the assessment proceedings against him or even after completion thereof, but it must be before issuance of notice to "such other person" under section 153C. Even in a case, where the Assessing Officer of both persons is the same and assuming that no handing over of documents is required, the recording of "satisfaction" is a must, as that is the foundation, upon which the subsequent proceedings against the "other person" are initiated. The handing over of documents, etc., in such a case may or may not be of much relevance but the recording

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of satisfaction is still required and in fact it is mandatory. The word "satisfaction" refers to the state of mind of the Assessing Officer of the person in respect of whom the search was conducted, which gets reflected in a tangible form, when it is reduced into writing. It is the conclusion drawn or the finding recorded on the foundation of the material available.It was the admitted case of the Revenue before the Commissioner (Appeals) and the Tribunal that though the Assessing Officer (of the other person) in the assessment order had stated that satisfaction for issuing notice under section 153C was recorded, on examination, recording of such satisfaction alleged to have been recorded by the Assessing Officer was not available. Thus, the notice was not valid. Order of the Tribunal was confirmed. (A.Y. 1995-96)

CIT v. Gopi Apartment (2014) 365 ITR 411 (All) (HC)

279. S. 179 : Private company – Liability of directors – Unless any evidence to indicate any gross neglect, misfeasance or breach of duty on the part of director in relation to affairs of company is found provision of section 179 could not be invoked. [S.2(43)]

Petitioner a director in a private limited company resigned from directorship of company. Said company had unpaid outstanding tax demands. Assessing Officer proceeded against petitioner on premise that petitioner was a director of said private company and she was liable to discharge such liability under section 179. No effort was made by department to recover tax due of company from trade debtors and shares. The asessee filed writ petition against the said order. Allowing the petition, the Court held that, since, petitioner-director had proved that non recovery of tax due against company could not be attributed to any gross

negligence, misfeasance or breach of duty on her part in relation to affairs of company, section 179 could not be invoked against her.(A.Y. 1984-85)

Pratibha Garg (Smr.) v. CIT (2014) 97 DTR 116 (All) (HC)

280. S. 192 : Deduction at source – Salary – Professional payments to doctors – No employer and employee relationship – Not salary – Not liable to deduct tax at source as salary. [S. 201(1A)]

Mere prohibitory clause that doctors cannot take up any other assignments does not change the basic character of the relationship between parties. Since there was no administrative control over the doctors who were free to come at any time and treat patients. Held, payments to doctors were not salaries. (A.Y. 2008-09)

CIT (TDS) v. Yashoda Super Speciality Hospital (2014) 365 ITR 356 (AP)(HC)

281. S. 194B : Deduction at source – Winning from lottery – Cross Word puzzle – Winnings from advertisement – Provision is not applicable. [Ss.201 & 201(A)]

The assessee company was engaged in the business of manufacture and sale of various consumer goods/products. During the previous year it had conducted certain sale of promotion schemes. The company advertised in packs/ containers of their products. Some of those coupons indicated that on purchase of the prizes that were offered were Santro Car, Maruti Car, Gold Coins, Gold Tables, Silver Coins, emblems etc. The total amount of prizes distributed valued at ` 6,51,238 for A.Y. 2001-02 and ` 54,73,643 for A.Y. 2002-04 . AO conducted survey at assessee’s premises and thereafter passed an order treating assessee as an assessee

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in default u/ss. 201(1) and 201(A) for A.Y. 2001-02 and treated respondent as an assessee-in-default of its obligations in terms of 194B of the Act as although the customers did not pay anything extra to receive the prize, nevertheless they had participated in the schemes by purchasing the products advertised to take a chance at winning the prize. AO further held that what has been paid as prize in kind in various schemes conducted by the respondent was a lottery on which tax was neither deducted TDS nor ensured payment thereof before the winnings were released. CIT(A) affirmed the order of the AO. Tribunal reversed the decision and held that although there was no element of chance, but as no consideration or payment was made by the customers for the purpose of participation in the lottery with the object of winning the prizes, the schemes conducted by the assessee would not fall within the ambit of Section 194B of the Act. On further appeal in HC, HC affirmed the order of Tribunal and held that on conjoint reading of section 201 & 194 would show that if the person responsible fails to pay is deemed to be an assessee-in-default, in respect of tax. Where the payment of the winnings is wholly in kind and not in cash at all, the question of deduction does not arise and in that eventuality, the winner of prize before the prize/winnings was to be released in assessee’s favour. Therefore proceedings against the person u/s. 201, such as the assessee in the assessee’s case, who failed to ensure payment of tax, as contemplated by proviso to section 194B, before releasing the winnings were not maintainable or the proceedings against such person without jurisdiction. (A.Ys. 2001-02, 2002-03)

CIT v. Hindustan Lever Ltd. (2014) 264 CTR 93 / 220 Taxman 177 / 361 ITR 1 (Kar)(HC)

282. S. 194C : Deduction at source – Surcharge – Payments to contractors – Short deduction – No obligation at relevant time on assessee to deduct surcharge in

addition to tax – Assessee not in default for short deduction

Sections 194C(1) and (2) as existed at the relevant point of time had cast no obligation on the assessee to deduct any surcharge during the relevant years when payments were made to contractors. Section 201(1A) had no application.Assessee cannot be held to be in default for short deduction.

CIT v. Municipal Corporation, Visakhapatnam (2014) 365 ITR 254 (AP) (HC)

283. S. 195 : Deduction at source – Non-resident – Freight expenses to foreign carrier – Income of a non-resident is not chargeable to tax in India – Not required to deduct tax at source – DTAA – India –Germany. [S.9(1)(i), Article 8]

During the year under consideration, the assessee made payments of freight expenses to a foreign carrier located in Germany for the export of goods. The A.O. disallowed payment of freight expenses on ground that assessee did not deduct tax at source while making said payments. The appellate authorities confirmed the order of the A.O. On further appeal, the HC observed that, in terms of Article 8 of the India Germany Double Taxation Avoidance Agreement (‘DTAA’), payments in question were not chargeable to tax in India. The assessee, therefore, had no obligation to deduct any tax at source. (A.Y. 2005-06)

Poddar Sons Ex. L (P.) Ltd. v. CIT (2014) 223 Taxman 94 (Cal)(HC)

284. S. 199 : Credit for tax deducted – Refund – Assessee cannot be denied credit for TDS on the ground of Form 26AS mismatch because he is not at fault. Non-grant of TDS credit causes

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harassment, inconvenience & makes the assessee feel cheated. Department to pay interest + costs of ` 25,000. [Ss.154, 237, 243, Form 26AS]

The assessee filed a return in which he claimed a refund of ` 2.32 lakhs on account of excess TDS by the Government department. The return was processed by the Central Processing Centre (CPC) of the Income-tax Department at Bengaluru and a refund of only ` 43,740 was issued. No intimation was given to the assessee as to why the balance amount of ` 1.88,630 was not refundable. The assessee filed an application u/s 154 for rectification of the mistake and asked for refund of the balance amount. As there was no response from the department despite several reminders, the assessee filed a writ petition in the High Court. Held by the High Court allowing the Petition:

On facts, no effort has been made by the AO to verify whether the deductor had made the payment of the TDS in the Government account. On the other hand, the Income-tax department has shown helplessness in not refunding the amount on the sole ground that the details of the TDS did not match with the details shown in Form 26AS. There is a presumption that the deductor has deposited TDS amount in the Government account especially when the deductor is a government department. By denying the benefit of TDS to the Petitioner because of the fault of the deductor causes not only harassment and inconvenience, but also makes the assessee feel cheated. There is no fault on the part of the Petitioner. The fault, if any, lay with the deductor. The mismatching is not attributable to the assessee. The department must refund the amount within 3 weeks with interest. The department must also pay costs of ` 25,000 to the Petitioner.

Rakash Kumar Gupta v. UOI (2014) 365 ITR 143 (All) (HC)

285. S. 220 : Collection and recovery of tax – Stay of demand – When issue was decided in favour of assessee by an order of Appellate Authority for earlier years, assesse would not be considered to be assessee in default – Stay against demand of tax should be granted

The Court held that in spite of the order of the Tribunal and CIT(A) on identical issues for the earlier assessment years 2005-06 to 2011-12, the AO in its order for the assessment year 2012-13 has ignored them. Court held that in hierarchical system of jurisprudence, it is not open to lower authority to ignore the binding decision of a superior authority unless the order of the superior authority has been stayed. When issue was decided in favour of assessee by an order of Appellate Authority for earlier years, assessee would not be considered to be assessee in default-Stay against demand of tax should be granted. (A.Y. 2012-13)

ICICI Prudential Life Insurance Co. Ltd. v. CIT (2014) 226 Taxman 74 (Mag.)(Bom)(HC)

286. S. 226(3) : Collection and recovery – Modes of recovery – The public provident fund (‘PPF’) account of the assessee cannot be attached for recovery of income-tax dues [R.10, Schedule II, Public Provident Fund Act, 1968 ]

The tax recovery officer (‘TRO’) sought to attach the PPF account of the assessee u/s. 226(3). The assessee filed a writ petition before the HC placing reliance on section 9 of the Public Provident Fund Act, 1968 to contend that the amount outstanding in his PPF account could not be attached for the recovery of tax dues. The assessee also relied on rule 10 of Schedule II to the Income tax Act, 1961. The department opposed said petition placing reliance on

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Circular date 7-11-1990. The HC, considering the benevolent provisions of the PPF Act, 1968 and taking the harmonious construction of the relevant provisions of the PPF Act, 1968 read with the provisions of the Civil Procedure Code and the provisions contained in the Income-tax Act, 1961 for recovery of the tax dues, held that as long as an amount remained invested in a PPF account of an individual, the same would be immune from attachment from recovery of the tax dues. Dineshchandra Bhailalbhai Gandhi v. TRO (2014) 223 Taxman 268 / 362 ITR 380 / 267 CTR 243 (Guj)(HC)

287. S. 234A : Interest – Liability to pay –Properties attached – Attachment of properties by operation of statute – Notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992. [Ss. 234B, 234C]

Even though the assessee was a notified person under the Special Court (Trial of Offenses Relating to Transactions in Securities) Act, 1992, it was liable to pay interest u/ss. 234A, 234B, 234C. Merely because the assets and properties were attached did not mean that liability to pay interest would not arise. (A.Y. 2004-05)CIT v. Cascade Holdings P. Ltd. (2014) 365 ITR 84 (Bom)(HC)

288. S. 234B : Interest – Advance tax – Book profit – Interest u/s. 234B can be charged only after allowing credit of MAT

The High Court following the decision of the Rajasthan High Court in the case of CIT v. M.A. Presstressed Works (1996) 220 ITR 226 held that interest u/s. 234B had to be calculated after allowing credit of MAT. (A.Y. 2001-02)

CIT v. Cadila Pharmaceuticals Ltd. (2014) 221 Taxman 155 (Mag.) (Guj.) (HC)

289. S. 234B : Interest – Non-resident – Non-resident cannot escape the liability for interest on the ground that it was for the Indian payers to have deducted the tax and if they had not done so the assessee cannot be liable to pay interest – Held liable to pay interest. [Ss.195]

Assessee filed Return claiming its income not taxable in India as it had no PE in India and equipments were sold outside India, but accepted its taxability before the CIT(A), the issue before the HC was whether Tribunal was correct in holding that assessee was not liable to pay interest in terms of section 234B of the IT Act. Allowing the revenue’s appeal, the court held that it could not escape the liability for interest u/s. 234B on the ground that it was for the Indian payers to have deducted the tax and if they had not done so, the assessee cannot be held liable for the interest. Further the court held that revenue has been deprived of the use of the monies and thereby put to loss for no fault on its part and where the loss arose as a result of vacillating stands taken by the assessee, it is not expected of the assessee to shift the responsibility to the Indian payers. (A.Ys. 2004-05 to 2008-09)

DIT (IT) v. Alcatel Lucant USA, INC (2014) 264 CTR 240 / 223 Taxman 176 (Mag.)(Delhi)(HC)

290. S. 234D : Interest on excess refund – In view of retrospective amendment, s. 234D will apply to assessment orders passed after 1-6-2003. [S. 143(1), 143(3)]

It can also be noted that the Bombay High Court (Commissioner of Income-tax v. Indian Oil Corporation Ltd., reported in 2010 Taxman 466) has in terms held that the decision of the Tribunal in ITO v. Ekta Promoters (P.) Ltd., reported in (2008) 113 ITD 719 (Delhi) (SB)

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was not correct, by holding that till such time, the assessment proceedings are completed in respect of relevant assessment year, the Amended Act would be applicable to the pending proceedings. For all the pending proceedings in regard to which the refund has been provided under section 143(1) of the Act, which are not concluded and finalised, the refunds are held to be granted under section 143(1) of the Act as finally determined when final assessment is passed under section 143(3) of the Act. Explanation 2 to section 234D of the Act applies thus to the pending proceedings, where the assessment in respect of assessment year is not completed on June 1, 2003. The Court held that the provision for charging interest in every case was a part of substantive law and not an arbitrary provision and though in those cases where the refunds have been granted prior to June 1, 2003, section 234D was not applied for not having any retrospective operation, however, in all pending proceedings, where the assessment had not been completed on June 1, 2003, the same has been made applicable. In other words, Explanation (2) to section 234D of the Act has been made applicable to even the assessment year commencing before June 1, 2003. The only requirement in such a case would be that the assessment has to be completed after June 1, 2003. Therefore, after insertion of Explanation 2, the operation of section 234D of charging interest on the excess refund paid to the assessee is not restricted, making operation of such section effective from June 1, 2003. In other words, the refund granted under section 143(1) of the Act in respect of a particular assessment year, is subject to the final determination under subsection (3) of section 143 of the Act. Addition of Explanation 2 to section 234D of the Act when is being held declaratory amendment, what would be relevant for the purpose of charging interest on the refund granted under section 143(1) of the Act is the date of completion of assessment. If the assessment is framed after June 1, 2003, the

said provision shall have applicability. (ITA No. 936 of 2011, dt. 17-2-2014.)

CIT v. Gujarat State Financial Service Ltd. (Guj) (HC); www.itatonline.org

291. S. 244A : Refunds – Interest – Deduction at source – Department is liable to pay interest on the refund of TDS made to the assessee from the date of assessment of ITC in respect of the TDS till the date of refund

Petitioner filed Writ Petition requesting the department to refund the TDS amounts remitted to the account of the ITC, since the ITC had already paid the tax liability in making the TDS amounts remitted by the Petitioner. Thereafter department has refunded TDS amounts to the Petitioner; however, the Petitioner has claimed interest on TDS amounts from the date of remittance till refund. Department contended the petitioner is not an assessee and that the liability to pay interest on the refund arises only in respect of an assessee and in these transactions, the Petitioner is not an assessee and hence is not entitled to interest. Allowing the WP, the court held that assessee having deducted TDS from the payments made to the ITC & remitted the same to the department, it is an assessee and also a deemed assesse and the said TDS being excess payment of tax liability of ITC, department is liable to pay interest on the refund of TDS made to the assessee from the date of assessment of ITC in respect of the TDS till the date of refund.

Raj & Company. v. UOI (2014) 264 CTR 209 (Gau)(HC)

292. S. 244A : Refunds – Interest – Refund of self assessment tax – Interest is payable from the date of assessment order and not

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from the date when assesse paid the self assessment tax. [Ss.140A, 244(IA)]

The court held that prayer on delayed refund of interest of ` 6,76,002 from 1st April, 1988 till payment could not be granted to the assessee, in exercise of powers under Article 226 of the Constitution.The assessee’s claim for compensation is outside the statutory provisions. Even if the principle of moulding of relief is to be applied by the High Court in exercise of its jurisdiction under Article 226 of the Constitution, the same can be done only within statutory framework and not otherwise. Accordingly the assessee is entitled to interest on refund attributable to payment of self assessment tax, however, interest is payable from the date of assessment order and not from the date when the assessee paid the self assessment tax. Interest on delayed payment of interest is not payable.(A.Y. 1986-87)

Merck Ltd v. Tarakehwar Singh, CIT (2014) 270 CTR 355/108 DTR 35 (Bom)(HC)

293. S. 244A : Refunds – Interest – Refund of self-assessment tax is also entitled to interest

The Tribunal held that a refund on account of self-assessment tax was entitled to interest u/s 244A(1)(b). On appeal by the department to the High Court HELD by the High Court dismissing the appeal:

In view of the judgment of the Madras High Court in CIT v. Cholamandalam Investment and Finance Ltd (2011) 294 ITR 438 (Special Leave Petition dismissed by the Supreme Court) and CIT v. Sutlaj Industries Ltd ( 2010) 325 ITR 331 (Del) and the fact that there is nothing contrary, the appeal of the department is dismissed. (ITA No. 801 of 2012, dt. 12-9-2014)

CIT v. Indian Oil Corporation ( Bom) (HC)www.itatonline.org

294. S. 245C : Settlement Commission – Pre-requisite for valid application – Full and true disclosure – Additional disclosure by way of goodwill measure – Does not establish original application did not contain a full and true disclosure – The court would be slow to exercise its power of judicial review of orders of the Settlement Commission interim or final unless there has been a basic flaw in the decision-making process which would include ignoring the statutory provisions. [Ss.245A, 245D(2C), 245D(4)]

At the conclusion of hearing before the Settlement Commission, the assessee made an additional offer of ` 150 crores with an intention to buy peace and avoid protracted litigation. It was particularly mentioned in the application that the income disclosed in the applications represented true and full disclosures and that additional income was declared without any evidence and with an intention to put quietus to the matter. The Special Bench of the Commission was of the view that prima facie that the disclosure was true and full.

Held, that the assessee in no way detracted from their earlier application representing full and true disclosure of its income. This further amount was offered as goodwill gesture and did not establish that the original application did not contain a full and true disclosure of its income by the assessees. The Revenue had not led any evidence to show so. Thus, the further disclosure would not be hit by section 245C to make the entire exercise bad for failure to make full and true disclosure unless a specific finding to that effect is arrived at by the Commission at the time of final hearing stage u/s. 245D(4).

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The court would be slow to exercise its power of judicial review of orders of the Settlement Commission interim or final unless there has been a basic flaw in the decision-making process which would include ignoring the statutory. Petition of revenue was dismissed. (WP No. 559 of 2008 dated 28-2-2014)

DIT (IT) v. ITSC(2014) 365 ITR 108 (Bom)(HC)

295. S. 245D(2C) : Settlement Commission – Settlement of cases – Prerequisite for valid application – Full and true disclosure – Recording of satisfaction before proceeding further – Requirement of full and true disclosure satisfied cannot be postponed to later stage [Ss.245C, 245D(4)]

The error in the order of the Settlement Commission lay in permitting the application to proceed without that satisfaction being recorded by it, which is a fundamental aspect which goes to the root of its jurisdiction to entertain an application u/s. 245C. The Settlement Commission had proceeded on the basis that at this stage it could not hold a view that the income offered in the statement of facts was not a true and full disclosure. In holding so, the Settlement Commission had moved over to the stage of section 245D(4) without entering upon the fundamental issue as to whether the application was or was not invalid. The Settlement Commission was completely in error in holding that unless it was established by a competent authority that the purchases were all bogus, the application at this stage could not be held to be invalid, though the Department may have in its possession certain evidence indicating the fact that the income had not been truly and fully disclosed. (A.Y. 2005-06 to 2009-10) (WP No. 3900 of 2013 dt 13-6-2013)/WP No. 2135 of 2013 dt 28-2-2014)(A.Y.2005-06 to 2012-13)

CIT v. ITSC (No. 1) (2014) 365 ITR 68 (Bom)(HC)

CIT v. ITSC (No. 2) (2014) 365 ITR 87 (Bom)(HC)

296. S. 254(1): Appellate Tribunal –Condonation of delay – Appeal signed by manager of assessee-Defects were removed by filing fresh appeal memo signed by office bearers of the society –Tribunal did not permit advocate to appear on the ground that he did not have a power of attorney – Rejection of appeal by Tribunal was held to be not justified – It would be a travesty of justice to deny assessee reliefs it was otherwise entitled – Tribunal ought to have granted time to advocate to obtain power of attorney

The assessment was reopened and additions were made in respect of amount collected from non-members as contribution towards transfer fees, betterment charges etc. CIT(A) also confirmed the addition. Tribunal rejected the appeal of the assessee on the ground that there was delay of forty five days in filing the same. The Tribunal observed that a defect memo had been issued which required the assessee to rectify defects within ten days, which it had failed to do so. The tribunal therefore dismissed the appeal ‘as unadmitted’ being barred by limitation. Tribunal also did not permit the assessees advocate to appear on the ground that he did not have a power of attorney. Other three years the appeal was heard and relief was granted. The assessee challenged the said order by way of writ petition. Allowing the petition the court observed that; it would be a travesty of justice to deny assessee reliefs it was otherwise entitled to on account of the alleged delay and negligence. The court also

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observed that even assuming that there was some negligence on its part, the same had caused the revenue no prejudice whatsoever. Court also observed that the Tribunal ought to have in these circumstances, permitted the advocate time to obtain a power of attorney. This was a mere formality. (A.Y. 2004-05)

Bajaj Bhavan Owners Premises Co-op-Society Ltd. v. Income-tax Appellate Tribunal. (2014) 224 Taxman 206 (Mag.) (Bom)(HC)

297. S. 254(1) : Appellate Tribunal – Orders – Unnecessary remand by the ITAT causes prejudice and amounts to a failure to exercise jurisdiction

In A.Y. 1997-98 the assessee claimed deduction for service charges paid to a connected party. The AO & CIT(A) disallowed a part of the expenditure on the ground that benefit from the expenditure was derived by the bottler & brand owner. The Tribunal, instead of deciding the issue, remanded the matter back to the AO for fresh consideration. The assessee fi led a Writ Petition on which the High Court held (290 ITR 464) that as the CIT(A) had given specific grounds for the disallowance, the Tribunal ought to have decided the specific issues on merits and not simply remanded it . Thereafter, the Tribunal decided the issue on merits and allowed the assessee’s claim (Coco Cola India (P) Ltd. v. Dy. CIT (2008) 116 TTJ 880). In A.Y. 1998-99, though the CIT(A)’s order was passed on the same date as the order passed for A.Y. 1997-98 and the Tribunal was aware of the High Court’s order for A.Y. 1997-98, it sti l l remanded the issue to the AO for fresh consideration. The assessee filed a MA which was dismissed on the ground that the remand order was a “conscious” decision and not an “apparent mistake”. On a Writ

Petition filed by the assessee held by the High Court:

The Tribunal should not have refused to consider and decide the issue relating to service charges, more so, when an identical view taken by it earlier has not found favour of this Court. This Court repeatedly reminded the Tribunal of its duty as a last fact finding authority of dealing with all factual and legal issues. The Tribunal failed to take any note of the caution which has been administered by this Court and particularly of not remanding cases unnecessarily and without any proper direction. A blanket remand causes serious prejudice to parties. None benefits by non-adjudication or non-consideration of an issue of fact and law by an Appellate Authority and by wholesale remand of the case back to the original authority. This is a clear failure of duty which has to be performed by the Appellate Authority in law. Once the Appellate Authority fails to perform such duty and is corrected on one occasion by this Court, and in relation to the same assessee, then, the least that was expected from the Tribunal was to follow the order and direction of this Court and abide by it even for this later assessment year. If the same claim and which was dealt with by the Court earlier and for which the note of caution was issued, then, the Tribunal was bound in law to take due note of the same and follow the course for the later assessment years. We are of the view that the refusal of the Tribunal to follow the order of this Court and equally to correct its obvious and apparent mistake is vitiated as above. It is vitiated by a serious error of law apparent on the face of the record. The Tribunal has misdirected itself completely and in law in refusing to decide and consider the claim in relation to service charges. (WP No. 3650 of 2014, dt. 14-8-2014.)

Coca-Cola India Private Limited v. ITAT (HC) (Bom)(HC) www.itatonline.org.

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298. S. 254(2A) : Appellate Tribunal – Power of granting stay of demand – Limited to 365 days – Held, stay to operate till disposal of appeal

The Tribunal has power to grant stay only till 365 days. In the instant case, the Tribunal had heard the appeal but had not disposed it of. Held, since the non-disposal was not occasioned due to default of the Petitioner, the stay was to operate till such disposal. The Tribunal was requested to dispose of the appeal expeditiously and preferably within three months of receipt of certified copy of this order.

Adobe Systems India P. Ltd. v. JCIT (2014) 365 ITR 376 (All)(HC)

299. S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Non-consideration of decision of Jurisdictional High Court or Supreme Court constitute mistake apparent on record – Employees contribution of ESI & EPF. [Ss. 43B, 139(1)]

During the course of assessment proceedings, AO added amounts of the employees contributions towards ESI & EPF which was deposited beyond the stipulated period and accordingly made an addition. CIT(A) allowed the appeal. On revenue’s appeal in Tribunal, Tribunal allowed the appeal and sustained the addition made by the AO relying on the CIT v. Avery Cycle Industries (P) Ltd. (2007) 292 ITR 198 while the assessee relied on CIT v. Vinay Cement Ltd. (2007) 213 CTR (SC) 268. Accordingly assesse filed an MA u/s 254(2) citing CIT v. Saurashtra Kutch Stock Exchange Ltd. (2008) 219 CTR (SC) 90 but Tribunal dismissed the Miscellaneous Application. On an appeal in HC, HC allowed the appeal of the assessee wherein the only point in dispute was whether

non-consideration of a decision of jurisdictional HC or can be said to be a “Mistake apparent from the record?” The Hon’ble HC allowed the appeal and held that non-consideration of the jurisdictional HC the SC would constitute mistake apparent from the record. In the present case assessee has deposited the amounts under ESI & EPF contributions prior to the filing of the return u/s. 139(1). (A.Y. 2003-04)

R. M. Exports v. CIT (2014) 264 CTR 206 (P&H)(HC)

300. S. 260A : Appeal – High Court –Condonation of delay – Delay of 117 days in filing of appeal and 1,248 days in filing the review petition – Delay was not condoned – Copy was forwarded to Chief Commissioner and Secretary Finance Government of India for remedial action

Where affidavits filed by revenue for condonation of delay provided misleading statements and failed to offer any explanation for inordinate delay, merely because revenue took plea as large public interest was involved and that its officers had admitted lapses, would not be ground for condonation of delay. Copy of order was forwarded to Chief Commissioner and Secretary in the Department of Finance, Government of India so that suitable remedial action is taken.

CIT v. Harinagar Sugar Mills Ltd. (2014) 226 Taxman 190 (Bom)(HC)

301. S. 260A : Appeal – High Court – Issue covered by Supreme Court –Decision Senior officers of the department summoned and strictures passed for

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‘Irresponsible conduct’ of filing an appeal on a point which is admittedly covered against the department by a judgment of the Supreme Court –Appeal of revenue was dismissed.[Article 261 ]

The department conceded before the Tribunal that the issue in the appeal was covered in favour of the assessee by the judgment of the Supreme Court in CIT v. Tulsyan NEC Ltd. 330 ITR 226 (SC). However, despite this, the department filed an appeal before the High Court to challenge the order of the Tribunal. HELD by the High Court:

These state of affairs can hardly be termed as satisfactory. It is unfortunate that the Revenue is unable to make any distinction with regard to the legal position noted in the judgment of the Supreme Court of India and it is bound by the said judgment of the highest court in the country. The Revenue seems to be unaware of Article 141 of the Constitution of India and mandate thereof. Once there is nothing to the contrary, then, the authoritative pronouncement should bind all. The Tribunal then cannot be approached and equally this Court to complain about an adverse order. We are shocked that when such is the concession recorded that the Appeals of this nature are brought before this Court and its precious judicial time is wasted. Let the concerned Commissioner and who advised that such Appeal should be filed before this Court, remain present before us on the next date of hearing. After giving him an opportunity we would then record our dissatisfaction and proceed to impose costs. It is only to comply with the principles of natural justice and equally fairness and equity that we adopt this course.

… It is very unfortunate that we had to secure the presence of the highest officers in the department of Income Tax, for seeking an

explanation on the points which we have raised in our order dated 12-9-2014.

... The only intent to secure personal appearance of higher officials is to impress on the Revenue that larger public interest mandates and requires it not to waste precious time of the highest Court in the State by engaging it in frivolous Appeals and applications. It may be that, at the departmental level, the officers are not satisfied with adverse orders and desire to contest the issue or raise it before the Income Tax Appellate Tribunal. However, when the Tribunal follows and applies the ratio of a judgment of the Hon’ble Supreme Court of India, then, we would expect the officers to gracefully accept an adverse verdict. Where no distinguishing feature can be pointed out, then, the law of the land must be allowed to prevail. The mandate of Article 141 of the Constitution of India is known to all. The further mandate of the Constitution as enshrined in Article 261(1) is giving of full faith and credit to public acts, records and judicial proceedings of the Union and of every State. Therefore, the law declared by the Supreme Court binds all and cannot be brushed aside. The repeated attempts to raise the same issues and questions in relation to same assessee and year after year results in loss of precious judicial time and public revenue. We do not expect hereafter such an irresponsible conduct from the higher officers. Ordinarily, we would have in the absence of any explanation forthcoming, passed severe strictures against the department and the officers in particular but we refrain from doing so since the concerned officials present in Court sincerely apologised for the lapse and urged that the Appeal may be disposed against the Revenue and in terms of our earlier orders so also the judgment of the Hon’ble Supreme Court of India, both of which are binding on us. Hence, the Appeal is dismissed. (ITA No. 803 of 2012, dt. 12-9-2014.)

CIT v. Reliance Infrastructure Ltd. (Bom) (HC); www.itatonline.org

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302. S. 260A : Appeal – High Court –Substantial question of law – Issue which was not raised before the Tribunal cannot be raised before the High Court for the first time

An issue which has not been raised before the Tribunal and not discussed by the Tribunal , cannot be raised before the High Court for the first time. (ITA No. 874 of 2013 dated 9-6-2014)(AY.?)

CIT v. Parvez Poonawala (Bom)(HC)(Unreported)

303. S. 263 : Commissioner – Revision of orders prejudicial to revenue –Foreign Currency Convertible Bonds – Revision of order was held to be not justified. [S. 37(1)]

During the relevant year assessee issued Foreign Currency Convertible Bonds (FCCBs).FCCB holders have exercised option to convert said bonds into equity shares with in a period of one month from the date of issue of bonds. AO allowed the claim for deduction of expenditure incurred on FCCB. CIT held that FCCB’s in real sense were equity shares right from the beginning and that conversion of bonds was only routine technical compliance as per regulations and guidelines. He accordingly passed an order under section 263 rejecting the assessee’s claim for deduction of expenses. On appeal the Tribunal observed that the conversion is not automatic and that unless option was specifically exercised by bond holders, conversion thereof was not permissible. Accordingly the Tribunal held that the view taken by the AO could not have been termed as prejudicial to interest of revenue. The Order of Commissioner was set aside. On appeal by revenue the Court held that Tribunal was justified in setting aside impugned revision order. (A.Y. 1998-99)CIT v. Tata Teleservices (Mah) Ltd. (2014) 225 Taxman 5 (Bom)(HC)

304. S. 263 : Revision – Revision of orders prejudicial to revenue – Merely because CIT held a different opinion holding that addition ought to be treated as undisclosed income – Revision was held to be invalid

Assessee disclosed the amount received by it as advance towards sale of agricultural land. The A.O. treated the amount as business income of the assessee and taxed the same as such. The CIT invoked jurisdiction under section 263 of the Act and set aside the order of the A.O., merely because he held a different opinion that, the addition ought to have been made by the A.O. as undisclosed income was held not justified as the order of the A.O. could not be erroneous or prejudicial to the interest of Revenue. (A.Y. 1996-97)

CIT v. Hari Singh & Associates (2014) 102 DTR 306 / 267 CTR 442 (Raj.)(HC)

305. S. 264 : Commissioner – Revision of other orders Filing of a revision petition under section 264 cannot be a bar for filing of an appeal before appropriate authority [S.246]

The assessee filed an application for withdrawal of revision petition before the CIT. The CIT rejected the request of the assessee on the ground that he had filed a revision petition waiving his right to file a First Appeal before CIT(A). On filing a writ petition, the HC held that the filing of a Revision Petition could not preclude filing an appeal by the assessee before the appropriate authority, as per the relevant provisions of law. (A.Y. 2008-09)

M. Jayabalan v. CIT(2014) 223 Taxman 128 (Mag) (Mad)(HC)

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306. S. 271(1)(c) : Penalty – Concealment – Disallowance of claim – Liquidated damages on delay in execution of work – Levy of penalty was not justified. [S. 37(1)]

Assessee entered into a contract with a company named HMIL for supply, procurement and erection of automobile assembly equipment. Contract provided for a clause by which HMIL could claim liquidated damages from assessee for delay caused in executing work. Though HMIL did not invoke said provision, assessee took precaution and provided for penalty and, claimed same as deduction in earliest point of time as provision for liquidated damages. Assessing Officer disallowed said claim on ground that no such claim was raised against assessee by HMIL. Further, he levied penalty. Tribunal deleted the penalty. On appeal by revenue the Court held that, penalty being a civil liability, requirement of mens rea is not an essential element, but claim of assessee should be bona fide and mere submission of inaccurate particulars by itself cannot be held against assessee. On the facts the assessee's claim for deduction could not be stated to be lacking in bona fides or with mala fide intention and, thus, concealment penalty was not leviable, therefore deletion of penalty by the Tribunal was held to be justified .(AY.1998-99)

CIT v. Durr India Pvt.Ltd. (2014) 97 DTR 160 (Mad.)( HC)

307. S. 271(1)(c) : Penalty – Concealment-Non-offering of stamp duty/DVO value as consideration for capital gains does not attract penalty if facts are on record. [S.50C]

The assessee was the owner of office premises which were sold in AY 2004-05 for ` 2 crore.

The AO noted that the stamp duty valuation of the property was ` 3,72,42,000 and that the DVO had valued the property at ` 2,70,03,920. The value adopted by the DVO was taken as the consideration for sale of the property u/s 50C and capital gains was assessed on that basis. The assessee accepted the same. The AO levied penalty u/s. 271(1)(c) for furnishing inaccurate particulars of income. This was upheld by the CIT(A) though deleted by the Tribunal. Before the High Court, the department relied on Chuharmal v. CIT ( 1988) 172 ITR 250 (SC) and argued that even though s. 50C created a liability for deemed income, still penalty u/s. 271(1)(c) could be levied. HELD by the High Court dismissing the appeal:

The Tribunal finding that the case was not one of furnishing inaccurate particulars of income or of concealment inasmuch as there was a registered sale deed and the consideration was mentioned therein cannot be faulted. Also, the DVO determined the value at a figure from that of the stamp value. The larger question posed for consideration as to whether s. 271(1)(c) penalty can apply to deemed income is left open for consideration in an appropriate case. (ITA No. 1164 of 2012, dt. 26-9-2014. )

CIT v. Fortune Hotels and Estates Pvt. Ltd. (Bom) (HC) www.itatonline.org

308. S. 271(1)(c) : Penalty – Concealment –Revised return – Long term capital gains on sale of agricultural land – Levy of penalty was held to be not justified. [S. 148]

Assessee filed original return of income. On receiving 148 notice, revised return of income was filed by the assessee which was accepted by the AO. Penalty proceeding was initiated against assesse considering it as deliberate concealment of Income. CIT(A) cancelled penalty. On an appeal in Tribunal, Tribunal

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upheld CIT(A)’s order. On further appeal in HC, HC held that CIT(A) & Tribunal both have considered the matter in detail and finally arrived at conclusion that the income declared by the assessee from the Long Term Capital Gain by selling agricultural land, was disclosed by the assessee in his return of Income filed u/s 148 which was accepted by the assessing authority and there was no material available on record by which there could be inference drawn by the authority that it was a deliberate concealment on the part of assessee and it could not be considered that there was inaccurate particulars of Income that was made the basis for inflicting penalty u/s. 271(1)(c) of Act. (A.Y. 2004-05)

CIT v. Puspendra Surana (2014) 264 CTR 204 (Raj)(HC)

309. S. 271(1)(C) : Penalty – Concealment – Revision – Penalty cannot be levied in the absence of satisfaction recorded by the Commissioner under section 263. [S. 263]

Commissioner directed the AO to complete the assessment. Commissioner neither recorded the satisfaction about the concealment nor gave any such directions to the AO for initiation of penalty proceedings. Assessment in pursuance to revision initiated the penalty proceedings . Court held that in an assessment pursuant to section 263, the AO cannot levy penalty, in absence of any satisfaction recorded by Commissioner. (ITA No. 541 of 2013 dated 27-5-2014) (AY.)?

CIT v. Padmini Mishra (Delhi)(HC)(Unreported)

310. S. 271(1)(C) : Penalty – Concealment – Set-off and carry forward of loss of earlier years – Belated filing of return – No

penalty is leviable. [S. 72, 139(1), 139(4)

The assessee claimed set off and carry forward of loss of earlier years which was dismissing the appeal by the revenue that assessee ought not to have claimed set off of loss carried forward of the A.Y. 1998-99 despite the assessee being informed by the revenue wherein it was clearly informed that he was not entitled to carry forward the business loss since the return of income for the A.Y. 1998-99 was filed belatedly, was not sustainable. The revenue levied penalty u/s. 271(1)(c) of the Act for the concealment and filing inaccurate particulars of income. Dismissing the penalty court held that assessee claimed setoff of the loss carried forward of the A.Y. 1998-99. Merely because the assessee claimed setoff of the loss carried forward would not mean that there was concealment of income as alleged or such claim would amount to furnishing inaccurate particulars. As a matter of fact, the particulars that were furnished were based on the facts of loss. It was not in dispute that the assessee did not suffer loss or the loss shown in the return for A.Y. 1998-99 was not suffered by the assessee. That being so, claiming set off of the loss carried forward of the A.Y. 1998-99 would not amount to furnishing inaccurate particulars of income. That being so, claiming set off of the loss carried forward of the A.Y. 1998-99 would not amount to furnishing inaccurate particulars of income. That would amount to furnishing incorrect return of Income. Court further held that assessee who is otherwise not entitled to claim set off of the loss carried forward of the A. Y. 1998-99 would not amount to furnishing inaccurate particulars of income. Court further held that assessee who is otherwise not entitled to claim setoff of the loss carried forward of the business should avoid making such claim. But such claim would not attract levy of penalty. (A.Y. 2002-03)

CIT v. Makino Asia (P) Ltd. (2014) 264 CTR 172 (Karn)(HC)

2

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DIRECT TAXES – Supreme CourtDIRECT TAXESTribunals

Research Team

158. S. 2(1A) : Agricultural income –Capital gains – Gains from sale of agricultural land is exempt even though purchaser intends to use the land for commercial purposes [S. 2(14), 45]

The only reason the A.O. treated the land as non-agricultural land was that ‘agreement of sale’ read with ‘Irrevocable GPA’ does not indicate that land retained the character of agriculture at the time of transfer. This was also the ground raised by Revenue in the appeal that M/s. Ramky Estates and Farms P. Ltd., may put the property to commercial use, therefore, the land was meant for commercial exploitation and did not have the character of agricultural land at the time of his transfer. There is no dispute that assessee has purchased agricultural land and put to agricultural use as such earlier. The facts indicate that assessee has sold only agricultural land which was also used and put to agricultural use earlier and the purpose for which the purchaser utilised the land cannot be considered as an evidence of change of nature of land as was considered by Assessing Officer. In the case of M. S. Srinivasa Naicker and others v. ITO (supra), the Hon’ble Madras High Court held that a perusal of s. 45 shows that the requirement as on the date of sale of transfer is that the asset must be capital asset, considering the description under the Act. The chargeability to tax under section 45 arises only if on the date of sale, the land in question retained its character as a capital asset, which means, an asset, which does not answer the definition of a capital asset and which is an agricultural land would automatically be outside the scope of s. 45. It is no doubt true that the purpose for which the purchaser had purchased was totally different from what the transferor had intended

to use the land in question but with the admitted finding that the lands in question were under agricultural operation on the date of sale for the purpose of considering the meaning of capital assets, it matters very little how the subsequent purchaser intended the land in question to be put to use. The Hon’ble Delhi High Court in the case of Hindustan Industrial Resources Ltd., v. ACIT has taken a similar view. The CIT(A) in his order has followed the decision of Hon’ble Bombay High Court in the case of CIT v. Debbi Almao and Joaqyam Almao reported in 339 ITR 59 (Bom.) (HC) which also considered similar facts and accepted the contention that no capital gains arises on the sale of agricultural land even though purchaser purchased the property with an intention of selling it for non-agricultural purposes. (ITA No. 729/Hyd/2013, 24-10-2014.) (A.Y. 2008-09).

DCIT v. M. Kalyan Chakravarthy (Hyd.) (Trib.); www.itatonline.org

159. S. 2(24) : Income – Capital or revenue – Carbon credit – Income on sale of Certified Emission Reduction/carbon credit – Chargeable to tax. [S.4, 28(i)]

The value of any benefit or perquisite arising from business or profession forms part of the profit and gains of the business. Therefore, the income on sale of the Certified emission reduction / carbon credit which is admittedly a benefit arising out of the business of the assessee, would fall within the definition of "income" u/s. 2(24))(vd) of the Act. Therefore, income on sale of Certified emission reduction/carbon credit part of the chargeable as income. (A.Y. 2008-09)

Apollo Tyres Ltd. v. ACIT (2014) 149 ITD 756/31 ITR 477 /47 taxmann.com 416 (Cochin)(Trib.)

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160. S. 10A : Free trade zone – Opting out of provisions of s. 10A in terms of sub-section (8) will not extend period of benefit beyond 10 years from previous year relevant to assessment year in which assessee begins to manufacture or produce articles or things. [S. 10A(3), 10A(8)]

The assessee began to manufacture or produce articles or things in the previous year relevant to A.Y. 1995-96. Assessee claimed benefit of section 10A for first time in year 1998-99. By virtue of amendment to section 10A(3) effective from A.Y. 1999-2000, benefit of exemption was granted for ten consecutive years started from assessment year in which assessee began to manufacture article or thing. Since assessee started its manufacturing activities from A.Y. 1995-96, band of 10 years as per amended law would be from A.Y.1995-96 to A.Y. 2004-05 only. Therefore the assessment year from which the begins to get deduction u/s.10A will be consecutive years commencing from A.Y. 1995-96. The law as it existed prior to substitution of Sec.10A of the Act w.e.f. 1-4-2001 was deduction was to be allowed for 5 consecutive assessment years falling within a period of 8 years from the Assessment year in which the industrial undertaking begins to manufacture or produce articles or things. From A.Y. 2001-02 instead of 5 consecutive assessment years out of 8 assessment years from the Assessment year in which the industrial undertaking begins to manufacture or produce articles or things, deduction u/s. 10A of the Act was allowed for a period of 10 consecutive years from the Assessment year in which the industrial undertaking begins to manufacture or produce articles or things. The assessee for A.Ys. 1995-96 to 1997-98 could not get the benefit of deduction u/s.10A of the Act, may be due to absence of profits or by exercise of its option to choose the following 5 years to claim deduction u/s.10A as per the law as it existed then. According to the

law as it existed upto A.Y. 2000-01 the assessee could have claimed deduction only upto A.Y. 2002-03 the end of the 8 year period from 1995-96. The assessee claimed deduction u/s. 10A for A.Ys. 1998-99 to 2001-02. The assessee opted out of the provisions of Sec. 10A of the Act by virtue of the provisions of Sec.10A(8) of the Act which gives such opting out to an assessee for A.Y. 2002-03 to 2004-05. The band of 10 years as per the amended law would be from 1995-96 to 2004-05 only. Out of the provisions of Sec. 10A will not have the effect of extending the band period of 10 years. The assessee could thus get the benefit of the amended law applicable from A.Y. 2001-02 only for 2 more years viz., A.Y. 2003-04 & 2004-05. The provision for opting out of the provisions of Sec.10A of the Act is intended to facilitate an assessee who can get more benefit under any other provisions of the deduction under Chapter VIA of the Act. That provision cannot extend the period of benefit beyond 10 years from the previous year relevant to Assessment Year in which the assessee begins to manufacture or produce articles or things. Claim of assessee was rejected. (A.Y. 2008-09).

Aditi Technologies (P.) Ltd. v. ITO (2014) 149 ITD 515 / 47 taxmann.com 166 (Bang.)(Trib.)

161. S. 10(23C) : Educational institution –Approval of prescribed authority is necessary for claiming exemption only u/s. 10(23C)(vi) and not u/s. 10(23C)(iiiad). [S.12A]

Assessee trust was registered u/s. 12A, running educational activities for school students through its institution. Assessee claimed exemption u/s. 10(23C)(iiiad). A.O. rejected said claim taking a view that assessee had not obtained approval from prescribed authority. Approval of prescribed authority is necessary for claiming exemption only under section 10(23C)(vi) and not under section 10(23C)(iiiad). Assessee existed solely for educational purpose and annual receipts of its institution, namely, ASK BV was less than ` one crore, assessee's claim for

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exemption was sustainable as per the provisions of the section 10(23C). Claim of assessee was allowed. (A.Y. 2009-10).

A. S. Kupparaju & Brothers Charitable Foundation Trust v. Dy. DIT (E)(2014) 149 ITD 531/47 taxmann.com 165 (Bang.)(Trib.)

162. S. 14A : Disallowance of expenditure – Exempt income – For Rule 8D(2)(i) only expenditure relating to investments resulting in tax-free income can be considered. For Rule 8D(2)(iii) all investments, whether yielding tax-free income or not, have to be considered. [R. 8D]

The Tribunal had to consider whether in computing the figure of disallowance under Rules 8D(2)(i) and 8D(2)(iii), it was necessary that the investments had to have yielded income which was not chargeable to tax. Held by the Tribunal:

Rule 8D(2)(i) speaks of expenditure directly relating to income which does not form part of “total income”. In the context of s. 2(45) & s. 5, the expression ‘total income’ in Rule 8D(2)(i) must relate to an income which is sought to be assessed. Therefore, only expenditure directly relating to income which is earned either on receipt basis or on accrual basis and which does not form part of total income of a particular assessment year can be disallowed under clause (i) of Rule 8D(2). However, while computing disallowance under Rule 8D(2)(iii), the average of the total investment of the assessee as appearing in the balance sheet on the first day and last day of the year irrespective of the fact whether it has yielded income or not can be considered for the purpose of disallowance. (ITA No. 1743/Hyd/2013, dated 28-4-2014.) (A.Y. 2009-10)

Bellwether Microfinance fund Pvt. Ltd. v. ITO (Hyd.) (Trib.) www.itatonline.org.

163. S. 14A : Disallowance of expenditure –Exempt income – No disallowance can be made if there is no exempt income. Cheminvest (SB) & CBDT circulars are not good law [R. 8D].

In A.Y. 2009-10, the assessee held investments worth ` 14.05 crore and incurred interest expenditure of ` 34.80 lakhs. The assessee claimed that no disallowance u/s. 14A & Rule 8D could be made as the investments were made out of own funds and no income was derived from the investments. The A.O. rejected the claim and made a disallowance of ` 19.28 lakhs though the CIT(A) deleted it. Before the Tribunal the department relied on Cheminvest Ltd. v. ITO (2009) 121 ITD 318 (SB) & Circular No. 5/2014 dated 11-2-2014 and argued that even if the assessee has not earned any exempt income, still disallowance u/s. 14A read with Rule 8D has to be made and it is mandatory. Held by the Tribunal dismissing the appeal:

No doubt in Cheminvest Ltd. v. ITO (2009) 121 ITD 318 (SB) the Special Bench of the Tribunal has held that disallowance u/s. 14A can be made even in the year in which no exempt income has been earned or received by the assessee. This decision of Special Bench of the Tribunal has been impliedly overruled by the decisions of High Courts in Shivam Motors P. Ltd. (All HC), CIT v. Corrtech Energy Pvt. Ltd (Guj HC), CIT v. Delite Enterprises (Bom. HC), CIT vs. Lakhani Marketing (P&H HC), CIT v. Winsome Textiles Industries Ltd (2009) 319 ITR 204 (P&H) where it has been held that when there is no exempt income and no claim for exemption, s. 14A and Rule 8D have no application and no disallowance can be made. (ITA No. 1717/MDS/2013, A.Y. 2009-10, dated 31-7-2014.) (A.Y. 2009-10)

ACIT v. Baskaran (Chennai) (Trib.) www.itatonline.org.

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164. S. 14A : Disallowance of expenditure – Exempt income – Disallowance cannot be made if there is no exempt income. Cheminvest Ltd. v. ITO 121 ITD 318 (Ahd.) (SB) is not good law [R. 6D]

There is no dispute that the assessee had no exempt income during both the years involved. No doubt as mentioned by the DR, the Special Bench of this Tribunal in the case of Cheminvest Ltd. v. ITO 121 ITD 318, had held that disallowance under section 14A could be made even in a year in which no exempt income was earned or received by the assessee. This decision of Special Bench of the Tribunal has been, in our opinion, impliedly overruled by various decisions of different High Courts, namely, CIT v. Shivam Motors P. Ltd. (All HC), CIT v. Corrtech Energy Pvt. Ltd (Guj. HC), CIT v. Winsome Textile Industries Ltd 319 1TR 204 (P&H), CIT v. Delite Enterprises (Bom HC) & CIT v. Lakhani Marketing (P&H HC). Therefore, unless and until there is receipt of exempted income for the concerned assessment years, s. 14A of the Act cannot be invoked. (ITA No. 220 & 1034 (Bng) 2013 dated 12-9-2014.) (A.Y. 2009-10, 2010-2011)

Alliancce Infrastructure Projects Pvt. Ltd. v. DCIT (Bang.)(Trib.) ; www.itatonline.org

165. S. 14A : Disallowance of expenditure – Exempt income – Interest expenses – In applying Rule 8D(2)(ii) interest expenses directly attributable to tax exempt income as also directly attributable to taxable income, are required to be excluded from computation of common interest expenses to be allocated [R. 8D.]

Tribunal held that in our opinion, it is only the interest on borrowed funds that would be

apportioned and the amount of expenditure by way of interest that will be taken (as ‘A’ in the formula) will exclude any expenditure by way of interest which is directly attributable to any particular income or receipt. Therefore, it is not only the interest directly attributable to tax exempt income, i.e. under Rule 8D(2)(i), but also interest directly relatable to taxable income, which is to be excluded from the definition of variable ‘A’ in formula as per Rule 8D(2)(ii), and rightly so, because it is only then that common interest expenses, which are to be allocated as indirectly relatable to taxable income and tax exempt income, can be computed.Interest expenses directly attributable to tax exempt income as also directly attributable to taxable income, are required to be excluded from computation of common interest expenses to be allocated under Rule 8D(2)(ii). (ITA No. 261/Coch/2014. A.Y. 2008-09. dated 28-8-2014) (A.Y. 2008-09)

Geojit Investment Service Ltd. v. ACIT (Cochin)(Trib); www.itatonline.org

166. S. 14A : Disallowance of expenditure – Exempt income – No disallowance can be made towards exempt income earned on strategic investments [R. 8D].

The assessee had made significant investments in the shares of subsidiary companies which are definitely not for the purpose of earning exempt income. Strategic investment has to be excluded for the purpose of arriving at disallowance under Rule 8D(iii). The disallowance under Rule 8D(iii) has to be computed by excluding the value of strategic investments. No disallowance under Rules 8D(i) and 8D(ii) is also warranted (REI Agro (ITAT Kol.) followed) (ITA No. 1362 7 1032/Del/2013, dated 3-4-2014) (A.Ys. 2008-09 & 2009-10)

Interglobe Enterprises Ltd. v. DCIT (Delhi)(Trib); www.itatonline.org

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167. S. 14A : Disallowance of expenditure – Exempt income – Non recording of satisfaction – Addition was deleted

The Tribunal held that the Assessing Officer has no where commented about working being unsatisfactory or questionable on disallowance of expenses. The addition has been made by applying Rule 8 which is not applicable in this year. The CIT has also made some ad hoc estimate of administration expenses and other heads. The Tribunal deleted the addition on both counts i.e. non-recording of satisfaction and also on merits. (A.Y. 2006-07).

ACIT v. Bharti Teletech Ltd. (2014) 163 TTJ 36(UO) (Delhi) (Trib.)

168. S. 14A : Disallowance of expenditure – Exempt income – Stock in trade – Rules 8D(ii) & 8D(iii) do not apply to shares held as stock-in-trade. Loss arising out of derivatives from the income arising out of buying and selling of shares. [S. 43(5), R. 8D]

(i) Both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of “speculative transaction” exclusively for purposes of sections 28 to 41 of the Act. Again, the fact that both delivery based transaction in shares and derivative transactions are non-speculative as far as section 43(5) is concerned goes to confirm that both will have same treatment as regards application of the Explanation to Section 73 is concerned, which creates a deeming fiction. Now, before application of the said Explanation, aggregation of the business profit/loss is to be worked out irrespective of the fact, whether it is from share delivery transaction or derivative

transaction. Now, this view has been confirmed by the Hon’ble jurisdictional High Court in assessee’s own case in GA No. 3481 of 2013 and ITAT No. 215 of 2013 dated 12th March, 2014, has held as under:

It would, thus, appear that where an assessee, being the company, besides dealing in other things also deals in purchase and sale of shares of other companies, the assessee shall be deemed to be carrying on a speculation business. The assessee, in the present case, principally is a share broker, as already indicated. The assessee is also in the business of buying and selling of shares for self where actual delivery is taken and given and also in buying and selling of shares where actual delivery was not intended to be taken or given. Therefore, the entire transaction carried out by the assessee, indicated above, was within the umbrella of speculative transaction. There was, as such, no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares. This is what the learned Tribunal has done."

(ii) Admitted facts are that the assessee is engaged in composite business of purchase and sale of shares and is a registered stock broker. The main intention of dealing in shares and securities is to earn business profits. During the relevant year under consideration assessee earned dividend income to the tune of ` 28,77,678/-, although the dividends were received by assessee on the shares held as stock in trade. Earning of dividend was merely incidental to the holding of shares for a particular period within which dividend was declared. The CIT(A) as well as we have noticed that the balance sheet of the assessee does not show any investment and all the shares are being held as stock in trade only. The A.O. has calculated the disallowance on the stock in trade/

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inventories held by the assessee. A plain reading of Rules 8D(2)(ii) and (iii) can only be applied, in the situations, wherever shares are held as an investment and this rule will not have any application when the shares are held as stock-in-trade. (ITAT 1183/Kol/2012, Dt. 21-10-2014) (A.Y. 2009-10)

DCIT v. Baljit Securities Private limited (Kol.)(Trib); www.itatonline.org

169. S. 28(i) : Business loss – Forfeiture of deposits – Capital loss not deductible as business loss [S. 36(1)(vii), 37(1)]

Assessee was engaged in business of finance and investment & also engaged in activity of letting or leasing out its premises. It made a deposit with a company (ARCO) towards sub-lease of a premises of which ARCO was sub-tenant. Said deal did not materialise and assessee could not recover said advance. Assessee claimed it as business deduction, said transfer has been materialised, assessee would have been enabled to either use said premises for its business or to generate revenue by letting further and either way assessee would have acquired a capital asset as a source of income, and accordingly, said loss was a capital loss not deductible as business loss.(A.Y. 2006-07)

Blue Chip Business Centre (P.) Ltd. v. ITO (2014) 149 ITD 354 / 42 taxmann.com 112 (Mum.) (Trib.)

170. S. 28(i) : Business loss – Provision for fraud – Embezzlement – Held to be allowable

Assessee, a scheduled bank, claimed deduction of a sum under head 'provision for frauds' in profit and loss account. It was undisputed that incident which resulted in irregularities/embezzlement occurred during relevant previous year. It was also found that vigilance report was prepared after a deeper study and, thus, figure arrived at in said report could be considered as

a loss to assessee. Held claim was allowable as business loss. (A.Ys. 2003-04, 2004-05)

Dy. CIT v. ING Vysya Bank Ltd. (2014) 149 ITD 611 / 62 SOT 26 / 42 taxmann.com 303 (Bang.)(Trib.)

171. S. 32 : Depreciation – Unabsorbed-Period of set off – Available for setting off for a period beyond eight years. [S.32(2)]

During assessment proceedings, A.O. held that unabsorbed depreciation in hands of assessee for relevant assessment years could only be carried forward for setting-off up to eight assessment years. By following the ratio in the General Motors India (P.) Ltd. v. Dy. CIT [2013] 354 ITR 244 (Guj.)(HC) it was held that unabsorbed depreciation relating to assessment years in question was available for setting off for a period beyond eight years. (A.Y. 1999-2000 to 2002-03)

Dy. CIT v. Bajaj Hindustan Ltd. (2014) 149 ITD 709 / 47 taxmann.com 333 (Mum)(Trib.)

172. S. 37(1) : Business expenditure –Disallowance of consent fee paid to SEBI – Not penalty – Payment for technical violation – Allowable as deduction

The Circular issued by SEBI for “Consent appliation” clearly specifies that the action taken under section 11 of the Act falls in the category of “administrative or civil action”. Further, order passed by SAT also clearly states that the irregularities alleged against the assessee are “technical violations”. Most of all, the amount of ` 50.00 lakhs paid by the assessee are not related to the penalty, if any, imposed by the SEBI, rather it was a “Consent Fee” paid by the assessee for settlement of dispute, legal expenses and other administrative charges of SEBI. The said amount was paid clearly specifying that it was paid without admitting or denying the guilt. Hence, in our view, it cannot be said that the

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assessee has paid the amount of ` 50.00 lakhs by duly accepting or upon proving the irregularities alleged against it. On the contrary, it is the case of the assessee that it has taken the decision to settle the dispute on commercial expediency and upon business interests. (ITA No. 274/Mum/2013, dated 22-10-2014.) (A.Y. 2008-09).

ITO v. Reliance Share and Stock Brokers (P) Ltd.(Mum)(Trib); www.itatonline.org

173. S. 37(1) : Business expenditure-Payment to related party without obtaining prior approval of the Central Government – Procedural irregularity – Cannot be disallowed treating the same as offence or prohibited by law.[Companies Act, 1956, S. 297]

A.O. disallowed the payment made to related party on the ground that, the assesse has not obtained the prior permission of Central Government in accordance with section 297 of the Companies Act, 1956 hence the explanation to section 37(1) is applicable. Order of A.O. was confirmed by CIT(A). On appeal the Tribunal held that payments to related parties without obtaining prior approval of the Central Government in accordance with provisions of section 297 of the Companies Act, 1956 was merely an irregularity and cannot be disallowed treating the same as an offence or prohibited by law. (ITA No. 844/Del/2013/ “D” dated 20-6-2014) (A.Y. 2009-10).

Jai Surgicals Ltd v. ACIT (2014) 106 DTR 333/163 TTJ 724 (Delhi) (Trib)

174. S. 40(a)(ia) : Amounts not deductible – Deduction at source – Interest –Amounts not debited to profit and loss account – No disallowance can be made

When an expenditure is not debited to Profit and Loss Account, same cannot be disallowed

by invoking provisions of s. 40(a)(ia). (A.Y. 2008-09)

Dy. CIT v. S.P. Real Estate Developers (P.) Ltd. (2014) 149 ITD 617 / 47 taxmann.com 281 (Hyd)(Trib.)

175. S. 40(a)(ia) : Amounts not deductible – Deduction at source – Second proviso to s. 40(a)(ia) inserted w.e.f. 1-4-2013 should be treated as retrospectively applicable from 1-4-2005 and no disallowance for want of TDS can be made if payee has paid tax thereon. Assessee must be given opportunity to file Form 26A; [S. 44AB, Form 26A]

The undisputed fact is that the assessee has not deducted tax at source on the payments made to Uday Kumar Shetty. The fact that the payee has accounted for these payments in his books of account, financial statements and the same have been offered for tax in his return of income for the period relevant to A.Y. 2005-06, has not been controverted by the authorities below. In our considered opinion, since the payee/recipient has accounted for these payments in his books of account, audited u/s. 44AB of the Act and has offered the same for tax in his return of income for the relevant period, by virtue of the amendment, by way of insertion of the second proviso to section 40(a)(ia) of the Act w.e.f. 1-4-2013, the provisions of section 40(a)(ia) of the Act would not be attracted to the payments made by the assessee to Uday Kumar Shetty. In coming to this view, we draw support from the two above cited decisions of the co-ordinate benches of this Tribunal in the case of DCIT vs. Anand Marakala and S.M.Anand vs. ACIT wherein it was held that insertion of the second proviso to section 40(a)(ia) of the Act should be read retrospectively from 1-4-2005 and not prospectively from 1-4-2013. In this view of the matter, the provisions of section 40(a)(ia) of the

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Act is not attracted to the payments made by the assessee since the object of introduction of section 40(a)(ia) is achieved for the reason that the payee/recipient has accounted for, declared and offered for taxation the payments received from the assessee in his hands. Earlier, we have held that the second proviso to section 40(a)(ia) of the Act is retrospective in operation w.e.f. 1-4-2005. As per this newly inserted proviso, the assessee is required to file Form No.26A as per Rule 31ACB of the IT Rules, 1962 so as not to be held as an assessee in default as per the proviso to section 201 of the Act. As held in the decision of the co-ordinate Bench in the case of S.M. Anand v. ACIT (supra), since the assessee in the period under consideration i.e., assessment year 2005-06, could not have contemplated that such a compliance was to be made, we also in the case on hand, remit the matter to the file of the Assessing Officer for affording the assessee adequate opportunity to file Form No.26A and verification of whether the said payee has reflected the payment/receipt in his books of account and offered the same to tax in the period under consideration. (ITA No. 1832/Bang/ 2013, dt. 10-10-2014.)(AY.2005-06).

G. Shankar v. ACIT (Bang.)(Trib.); www.itatonline.org

176. S. 43(5) : Speculative transaction –Foreign currency forward contracts – Hedging loss – Loss on foreign currency forward contracts by a manufacturer/exporter is a “speculation loss” and not a “hedging loss”.

Unless the assessee shows that there was some existing contract in respect of which he was likely to suffer a loss because of future price fluctuations and that it was to safeguard against such loss that he entered into the forward contracts of sale, he could not claim the benefit of clause (a) of the proviso to section 43(5).

From the principles laid down by above mentioned judgments one thing becomes clear

that for hedging transaction commodity dealt should be the same. If the subject matter of the transactions is different it cannot be termed a hedging transaction.

In order that forward transactions in commodities may fall within proviso (a) to section 43(5) of the Act, it is necessary that the raw materials or merchandise in respect of which the forward transactions have been made by the assessee must have a direct connection with the goods manufactured or the merchandise sold by him. In other words raw material in respect of which the assessee has entered into forward transactions must be the same raw material which is used by him in his manufacturing business. We find that in the case under consideration assessee was not dealing in Foreign Exchange, therefore transactions entered into by it in Foreign Exchange cannot be held to be hedging transactions. As the assessee is dealing in diamonds and FC entered into only for diamonds would have been covered by the proviso (a) to the section 43(5) of the Act. (Contra view in Intergold (I) Ltd, Bombay Diamond Co. Ltd., Friends and Friends Shipping & Badridas Gauridu 261 ITR 256 (Bom) distinguished).

Araska Diamond Pvt. Ltd. v. ACIT (Mum.)(Trib.) ;www.itatonline.org

177. S. 45 : Capital gains – Business income – Transaction of derivatives –Assessable as capital gains [S.28(i)]

Tribunal following the order passed by the Tribunal in assessees own case relating to earlier year, (Platinum Asset Management Ltd. v. Dy. DIT(IT)(2014) 61 SOT 119(Mum.)(Trib.), income arising from transactions on derivatives to assessee a FII could not be treated as business profit rather same had to be assessed under the head capital gains. (A.Y. 2006-07)

Platinum Asset Management Ltd. v. Dy. DIT(IT)(2014) 65 SOT 66 (URO)(Mum)(Trib.)

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178. S. 45 : Capital gains – Dissolution –Firm – Capital gains on transfer of capital assets on dissolution of firm has to be worked out on the basis of the fair market value of the capital asset on the date of transfer. [S. 2(14), 2(47) 45(4), 47(ii), Indian Partnership Act, S.40]

Capital gains on transfer of capital assets on dissolution of firm has to be worked out on the basis of the fair market value of the capital asset on the date of transfer. On the facts the A.O. has adopted the fair value ĪŌon the basis of report of inspector. Tribunal held that Inspector of Income-tax who is not technical person to determine the fair market value. Matter was set a side to the A.O. to refer the matter to DVO and decide accordingly. (ITA No 159 /Coch/2014 dated 19-9-2014) (A.Y. 2007-08)

M. Ahammedkutty v. ITO (Cochin)(Trib); www.itatonline.org

179. S. 45 : Capital gains – Transfer –No transfer merely because development agreement is entered into. [S. 2(47)(v)]

As can be seen from the observations made by CIT(A), he has given specific finding of fact that development agreement has not been acted upon by the developer till date. Therefore, he has concluded that as there is no willingness or part performance of contract by the developer, which has resulted in filing of civil suit seeking cancellation of the development agreement, it cannot be said that there is transfer of capital asset as envisaged u/s. 2(47(v) read with section 53A of the Act. This finding of fact arrived at by CIT(A) has not been controverted by the department by bringing on record documentary evidence or through any other mode to prove that development activity under the development agreement has been started by developer. In the aforesaid factual position,

since there is failure on the part of the developer to perform his part of the contract, it cannot be said that there is transfer of capital asset merely because assessee has entered into development agreement with the developer.

ACIT v. P. Venkatateswara Rao (Hyd.) (Trib.); www.itatonline.org

180. S. 50C : Capital gains – Full value of consideration – Stamp valuation – A.O. cannot straightaway adopt stamp duty value as consideration for capital gains but must offer assessee benefit of reference to DVO for valuation

It is difficult to accept the proposition that the assessee had accepted that the price fixed by the District Sub-Registrar was the fair market value of the property. No such inference can be made as against the assessee because he had nothing to do in the matter. Stamp duty was payable by the purchaser. It was for the purchaser to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub-Registrar, have claimed anything more than the agreed consideration which, according to the assessee, was the highest prevailing market price. It would follow automatically that his case was that the fair market value of the property could not be the value as assessed by the District Sub Registrar. In a case of this nature the assessing officer should, in fairness, have given an option to the assessee to have the valuation made by the departmental valuation officer contemplated under Section 50C. As a matter of course, in all such cases the Assessing Officer should give an option to the assessee to have the valuation made by the departmental valuation officer to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub-Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair

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treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law (Sunil Kumar Agarwal v. CIT (Cal. HC) followed) (ITA No. 1065/Kol/2011, dt. 27-10-2014.) (A.Y.2006-07)

ITO v. Onkarnal kajaria family Trust (Kol.)(Trib.)

181. S. 50C : Capital gains – Full value of consideration – Stamp valuation –Reference to DVO cannot be made if assessee has challenged the valuation by the stamp authorities and even if the said challenge is dismissed on ground that as purchaser paid the duty, assessee had no locus standi to challenge stamp valuation. [S. 45]

The mandate of section 50C is clear and the sale consideration shall be deemed to be the value adopted or assessed by the Stamp Valuation Authority. The only exception provided is that firstly the assessee should claim before A.O. that such value adopted or assessed by the Stamp Valuation Authority exceed fair market value and secondly the assessee should not have disputed such valuation adopted in any appeal or revision and no reference is made before any other authority, court or High Court challenging the value adopted by the Stamp Valuation Authority. In the light of aforementioned facts it can be said that the value adopted and assessed by the Stamp Valuation Authority under sub-section (1) was disputed by the assessee in the appeal, revision and even before Hon’ble High Court. If it is so, then according to the provisions of section 50C the assessee cannot obtain the benefit as provided in sub-section(2) of section

50C as neither of the conditions described in sub-section(2) has been fulfilled by the assessee. In this view of the situation, neither the AO nor Ld. CIT(A) could adopt sale consideration of the property any amount less than the value adopted or assessed by the Stamp Valuation Authority as section 50C does not recognise such curtailment of the sale consideration in any manner. (ITA No. 2835/Mum/2013, dated 31-10-2014.) (A.Y. 2009-10)

Seksaria Industries Pvt. Ltd. v. ITO (Mum)(Trib); www.itatonline.org

182. S. 54 : Capital gains – Investment in a residential house – Cost of construction made in flats on different floors – Entitled to exemption in respect of all flats

Assessee claimed exemption u/s. 54 on account of investment/cost of construction made in flats on different floors which were in his possession as his residential house. Assessee was entitled to exemption in respect of all flats. (A.Y. 2005-06)

Dy. CIT v. Jai Trikanand Rao (2014) 149 ITD 112 / 41 taxmann.com 453 (Mum.) (Trib.)

183. S. 54 : Capital gains – Profit on sale of property used for residence – Expenditure on improvement / renovation for making it habitable it would be eligible as investment in new asset. [S. 54F]

Assessee claimed cost of renovation as part of cost of acquisition of new residential house for purpose of deduction under S. 54 of the Act. The A.O. disallowed cost of renovation holding that renovation was not in connection with any structural damage to house and was only in respect of plastering and renovating of wires which cannot be treated as making house habitable. CIT(A) confirmed disallowance made by A.O. The Tribunal held that the residential house for purpose of section(s) 54 and 54F

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means a habitable house and investment made up to stage of making house as habitable to be considered as investment in purchase of house. Assessee chose to purchase a house and incurred bona fide expenditure on improvement/renovation for making it habitable it would be eligible as investment in new asset for section 54 of the IT Act. (A.Y. 2009-10)

Meher R. Surti v. ITO (2014) 61 SOT 5 (URO)(Mum.)(Trib.)

184. S. 68 : Cash credits – Bogus purchases – Hawala dealer – Fact that alleged supplier is not traceable and has been termed a “hawala dealer” by the VAT authorities is not sufficient to treat the purchases as “bogus”. [S. 133(6)]

The assessee claimed to have made purchases from certain parties. In support of the genuineness of the purchases, he produced bills from the parties and proof of payment by cheque. However, the A.O. treated the purchases as “bogus” purchases u/s. 68 on the ground that the notices u/s. 133(6) sent to the alleged suppliers at the address stated in their bills were returned un-served. Further, the said suppliers were termed as ‘hawala dealers’ (i.e. person who issued a bill for purchase of goods without delivery) by the Maharashtra VAT department. On appeal, the CIT(A) deleted the addition. On appeal by the department to the Tribunal HELD dismissing the appeal:

The fact that the supplier is declared as a “hawala dealer” by the VAT department is a good starting point for making further investigation and taking it to its logical end. However, suspicion of highest degree cannot take place of evidence. The A.O. ought to have called for details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. No such exercise was done. There is nothing

in the order of the AO about the cash trail. Transportation of goods to the site is one of the deciding factor to be considered for resolving the issue. Proof of movement of goods is not in doubt. In the absence of sufficient evidence, the purchases cannot be treated as bogus. (ITA No. 6727/Mum/2012, A.Y. 2009-10, dated 20-8-2014.)(A.Y. 2009-10)

DCIT v. Rajeev G. Kalathi (Mum.) (Trib) www.itatonline.org.

185. S. 69 : Income from undisclosed sources – Bogus purchases – Filing of confirmation of suppliers with PAN and TIN numbers are not sufficient to prove the purchases are genuine if they are not supported by other facts including delivery of goods & presence of suppliers – 15% of bogus purchases was confirmed [S. 143(3), 145]

The department had gathered the information through survey and search seizure in above parties and they categorically admitted that they have provided entries and not doing any purchase and sale of gems and jewellery. Even then Assessing Officer asked to produce these parties for verification which could not be produced by it. The Assessing Officer also issued summons u/s. 131 of the Act, which was partly served and partly returned back unserved. The assessee’s argument that case laws applied by the Assessing Officer i.e., Sanjay Oil Cake Industries and Vijay Protein are not squarely applicable, is not accepted as such because primary onus is on the assessee to produce these parties for verification before the Assessing Officer. In the assessment, the Assessing Officer has a right to estimate the profits on a reasonable basis, adopting the base provided by ITAT judgments cannot to be termed as unscientific, unreasonable or arbitrary. Filing of some confirmation with PAN and TIN numbers

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are not sufficient to prove the purchases are genuine as they are to be supported by other facts including delivery of goods, as held by the various courts. The appellant cannot directly or indirectly put blinkers on investigations of the Assessing Officer to compel him to do it as per sweet will of the assessee. It is not permissible that the assessee will direct the Assessing Officer to enquire his case at his own way, which is not required by law. The assessee wanted to shift his onus on the Assessing Officer on flimsy ground. It is rampant practice in gems and jewellery business in Jaipur that the assessee has been getting accommodation bills to reduce the profitability which has been established by the department. The Hon’ble Rajasthan High Court recently in the case of Venus Arts & Gems v. ITO vide order dated 20-8-2014 has also confirmed the addition on unverifiable purchases @ 21.96% and also found order of the ITAT being purely a finding of fact by the two appellate authorities as to what should be a reasonable G.P. rate after rejection of books of account and various infirmities noticed by the lower authorities and in their view no question of law much less substantial question of law can be said to emerge out of the order of the Tribunal. Tribunal held 15% of bogus purchases was held to be reasonable. (ITA No. 187/JP/2012, Dt. 22-10-2014.) (A.Y. 2007-08)

Anuj Kumar Varshney v. ITO (Jaipur) (Trib.) www.itatonline.org

186. S. 69 : Unexplained investments – Sale of flats – Valuation shown at higher for mortgage – A.O. could not adopt said value in respect of flats sold to other persons. [S.28(i)]

Assessee was engaged in business of developing real estate projects, assessee sold some flats at rate of 1,200 per sq. yd. A.O. noticed that assessee had mortgaged some flats to PUDA where value of flats was shown at rate of 5,000 per sq. yd. accordingly, relying upon value of flats shown in mortgage deed made addition to

total income of assessee. Claim of the Assessee that valuation of flats mortgaged with PUDA was artificially inflated so that less number of flats had to be mortgaged. CIT(A) accepted claim of assessee and held that valuation mentioned in mortgage deed could not be taken to be value of flats so as to reject sale consideration as recorded in registered deeds which was in accordance with stamp duty regulation. Since no other evidence or material on record to justify addition of differential rates as recorded in mortgage deed and registered sale deed, impugned addition was deleted (A.Ys. 2008-09, 2009-10)

Dy. CIT v. Singla Enclave Developers (P.) Ltd. (2014) 149 ITD 177 / (2013) 156 TTJ 1 / 40 taxmann.com 127 (Chand.)(Trib.)

187. S. 74 : Losses – Capital gains –Derivatives – loss incurred from transaction in derivatives by assessee, being sub-account FII, could not be treated as business loss rather it was to be considered as short-term capital loss which was eligible for adjustment against short-term capital gain arising from sale of shares [S.43(5), 115AD(1)(b)]

Following the judgment of Tribunal in Platinum Investment Management Ltd. v. Dy. DIT (IT) in [2013] 33 taxmann.com 298 (Mum (Trib.) the Tribunal held that loss incurred from transaction in derivatives by assessee, being sub-account FII, could not be treated as business loss rather it was to be considered as short-term capital loss which was eligible for adjustment against short-term capital gain arising from sale of shares and held that CIT(A) was not justified in holding that income from Index based or non-Index based derivatives be treated as “business income", whether speculative or non-speculative. The impugned order is, therefore, set aside by holding that income from derivative transaction

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resulting into loss of ` 11.27 crore is to be considered as short-term capital loss on the sale of securities which is eligible for adjustment against short-term capital gains arising from the sale of shares. Accordingly, the income arising from transaction in derivative by assessee(s), being sub-account FII cannot be treated as business profit or loss. S. 115AD (1)(b). (A.Y. 2006-07)

Platinum Asset Management Ltd. v. Dy. DIT(IT)(2014) 61 SOT 119/(2013) 40 taxmann.com 180 (Mum.)(Trib.).

188. S. 80-IA : Profits and gains from infrastructure undertakings – Carbon credit – Derived from- Income on sale of Certified Emission Reduction/carbon credit – Not entitled for deduction

The income on sale of Certified Emission Reduction/carbon credit cannot be treated as capital receipt, therefore, it is to be treated as profits and gains of business or profession; hence liable for taxation. Deduction in respect of profit and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. deduction of an amount equal to 100% of the profit derived from business undertaking is alone eligible for deduction u/s. 80-IA. The industrial undertaking shall be the direct source for earning the profit and not a means to earn any other profit. Therefore, the income on sale of Certified Emission Reduction/carbon credit would form part of the profit and gains of business; cannot be treated as profit derived from the industrial undertaking. The assessee is not entitled for deduction u/s. 80-IA of the Act (A.Y. 2008-09).

Apollo Tyres Ltd. v. ACIT (2014) 149 ITD 756 / 31 ITR 477 / 47 taxmann.com 416 (Cochin)(Trib.)

189. S. 80IB(10) : Housing project – Area of projected terrace, open to

sky is not liable to be included within the meaning of expression “built-up area”

The controversy revolves around the condition prescribed in clause (c) of section 80IB(10) of the Act. As per clause (c) of section 80IB(10) of the Act, the maximum built-up area of the residential units comprised in the eligible housing project shall not exceed 1,000 sq.ft. where such units are situated within city of Delhi and Mumbai or within 25 km. from the Municipal limit of such cities and in other places the prescribed limit is 1,500 sq.ft. The housing project of the assessee before us is located within the Municipal limits of PCMC and therefore in terms of clause (c) of section 80IB(10) of the Act, the maximum built-up area of the residential unit is capped at 1,500 sq. ft.. The dispute before us8 is with regard to six residential units, which have been detailed by us earlier, wherein as per the Assessing Officer, the individual built-up area exceed 1,500 sq. ft.. The working of built-up area done by the Assessing Officer is sought to be resisted by the assessee and the bone of contention is whether or not to include the area of projected terrace (open to sky) for computing the built-up area of the respective units.

The Finance (No. 2) Act, 2004 inserted the definition of built-up area w.e.f. 1-4-2005 in terms of section 80IB(14)(a) of the Act. In terms of the said definition, built-up area means the inner measurement of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. On the strength of the aforesaid definition, the claim of the Revenue is that the terraces in question are projections attached to the respective residential units and also that there is no room under the area of the terrace and such terraces are exclusively used by the respective unit owners. In other words, as per the Revenue the projected terrace falls within the meaning of words ‘projections’ and ‘balconies’ contained

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in section 80IB(14)(a) of the Act and the same is not a common area shared with other residential units and in this manner, in terms of section 80IB(14)(a) of the Act, such an area is liable to be included in the expression ‘built-up area’.

In so far as the applicability of the definition of built-up area inserted by Finance (No. 2) Act, 2004 w.e.f. 1-4-2005 is concerned, it is quite clear that the same is applicable for ascertaining the fulfilment of condition prescribed in clause (c) of the Act in relation to the present project, since the project of the assessee has been approved by the local authority on 29-7-2005 i.e. after the definition of built-up area contained in section 80IB(14)(a) of the Act came into force w.e.f. 1-4-2005. Therefore, in the present case, it is imperative that the meaning of expression ‘built-up area ’ is to be understood having regard to its definition contained in clause (a) of section 80IB(14) of the Act.

Consequently, the A.O. is wrong in including the area of terrace as a part of the ‘built-up area’ in a case where such terrace is a projection attached to the residential unit and there being no room under such terrace, even if the same is available exclusively for use of the respective unit holders( ITA Nos. 18,19 & 20 /PN/2013, dated 28-10-2014.) (A.Y. 2007-08 to 2009-10)

Naresh T. Wadhawani v. DCIT (Pune)(Trib.) www.itatonline.org

190. S. 80IB(10) : Housing project – Bogus purchases – Even in an assessment under section 143(3), r.w.s. 147 addition to income on account of bogus purchases will qualify for deduction. [S. 143(3), 144, 147]

The assessment of the assessee completed under section 144 and addition was made disallowing the fictitious purchases.A.O. has not allowed deduction under section 80IB(10) in respect of enhanced income. On appeal CIT(A) upheld

the order, however following the decision of Tribunal in S.B.Builders & Developers 45 SOT 335 (Mum.)(Trib.) allowed the alternative claim of assesse under section 80IB(10). On appeal by revenue the Tribunal held that the fictitious purchases if it is relatable to profits/receipts which are eligible for deduction under section 80IB(10) of the Act. It cannot be said that the disallowed expenditure cannot be considered as profits derived from housing project or as operational profit. Tribunal confirmed the order of CIT(A). (ITA No. 241/ Bang/2013 Bench “B’ dated 13-6-2014)(A.Y. 2004-05)

ACIT v. Gopalan Enterprises (2014) BCAJ – August-P.25 (Bang.)(Trib.)

191. S. 92C : Transfer pricing – Arm’s length price – Comparables and Adjustments – Functionally dissimilar companies cannot be taken as comparable

As the same comparables had been chosen by TPO as in case of Trilogy E-Business Software India (P.) Ltd. v. Dy. CIT [2013] 140 ITD 540 / 29 taxmann.com 310 (Bang.) Tribunal's order in such case for same assessment year was to be followed regarding comparability of companies. Application of turnover filter of ` 1 crore to ` 200 crore for selecting comparables is justified. Functionally dissimilar companies cannot be taken as comparables. Where company is engaged in varied lines of businesses, segmental profits of comparable line of business should be taken. Companies having related party transaction in excess of 15 per cent of total receipts cannot be taken as comparable. Where margin of assessee was well within +/- 5 per cent range of arithmetic mean of comparables, no TP adjustment was required. (A.Y. 2007-08)

Witness Systems Software India (P) Ltd. v. Dy. CIT (2014) 61 SOT 64 (URO)/ (2013) 34 taxmann.com 183 (Bang.) (Trib.)

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192. S. 92C : Transfer pricing – Arm’s length price – CUP Method-I internal CUP was available in case of assessee itself in form of guarantee charges, charged by bank from assesse – Adjustment made by TPO was deleted

Assessee had given corporate guarantee to its AEs and charged 0.2 per cent of guarantee amount as commission. TPO held that payment of guarantee commission by AEs to assessee was an international transaction which had to be benchmarked with external CUP method and accordingly, he benchmarked ALP for guarantee at rate of 3 per cent of amount of guarantee and made upward adjustment. Assessee submitted that banks in case of assessee itself charged guarantee commission at rate of 0.25 per cent to 0.35 per cent or nil. Since there was an internal CUP in form of bank guarantee charges, charged by bank from assessee, same ought to have been first analysed and examined. Tribunal had deleted similar addition and no question of law on this score had been raised by revenue, adjustment so made by TPO was deleted. (A.Y. 2006-07)Asian Paints Ltd. v. Addl. CIT (2014) 149 ITD 511 / 41 taxmann.com 71 (Mum.)(Trib.)

193. S. 92C : Transfer pricing – Arm’s length price – Data in public domain – Should not have been rejected

When assessee has placed annual reports of companies, should have considered same and should not have rejected it on ground of non-availability of data in public domain as information relating to companies was available. If information relating to the companies are available with the TPO and if the companies satisfy the filter applied by the TPO then there is no justification for rejecting the aforesaid two companies as comparable.

Cordys R & D (India) (P.) Ltd. v. Dy. CIT (2014) 149 ITD 587 / 43 taxmann.com 64 (Hyd.)(Trib.)

194. S. 92C : Transfer pricing – Arm’s length price – Foreign exchange gain related business activities to be treated as operating income while computing operating margins and comparable companies

The TPO has considered the foreign exchange income as non-operating income based on assumptions and surmises. Foreign exchange gain related to business activities is to be treated as operating income while computing operating margins of assessee and comparable companies.

Curam Software International (P.) Ltd. v. ITO (2014) 149 ITD 458 / (2013) 37 taxmann.com 141 (Bang.)(Trib.)

195. S. 92C : Transfer pricing – Arm’s length price – Foreign exchange gains and loss – In computing operating profits, expenditure of other years has to be excluded. Forex gains and losses have to be treated at par

There is a categorical finding by the CIT(A) that superannuation contribution of ` 5,88,254/- pertains to the assessment year 2000-01 and 2001-02. This finding remains uncontroverted. In this view of the matter, there cannot indeed be any rationale in taking into account this expenditure for computation of operating profits of the assessee for the current year. Similarly, there is a categorical finding that Catia software, in respect of which amount of ` 8,21,628 was expended, was not used for the purpose of any work in the relevant previous year and it was only subsequent year that this software was actually used. This finding also remains uncontroverted. Clearly, therefore, this expense cannot be included in the computation of operating profit for the current year. As regards forex gain, the relief granted by the CIT(A) is only a natural corollary to the stand taken by

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the TPO to the effect that the forex losses are to be included in computation of operating income. When he does so, it cannot be open to him to take a stand that income from forex gain is to be treated as non-operational income. In any event, forex gains cannot be considered in isolation of the revenues generated. It is in respect of such revenues that forex gains are received. As for the exclusion of bad debts, amortisations and provisions, in computation of the PLI of the comparables, we are unable to see any rationale in the same nor has it been justified before us. (ITAT 3618/Del/2009, dated 13-10-2014.)(AY. 2003-04)

ITO v. EDAG Engineers & Design India Pvt. Ltd.(Delhi)(Trib); www.itatonline.org

196. S. 92C : Transfer pricing – Arm’s length price – Methodology for working of ALP on selection of CPM and RPM method supported by appropriate comparables, working could only be dislodged by TPO on basis of cogent reasons and objective findings – Method adopted by assessee was upheld

No objective findings had been given to come to a reasoned conclusion that assessee's adoption of CPM for manufacturing segment and RPM for trading segment was factually and objectively not correct. Rejection of methods by TPO as adopted by assessee was bereft of any cogency and objectivity and same was work of guessing and conjectured and similarly adoption of TNM method by TPO suffered from same inherent aberrations as mentioned. Assessee's methods of CPM and RPM respectively worked by applying appropriate comparables. Once assessee had given a methodology for working of ALP on selection of a particular method supported by appropriate comparables, working could only be dislodged by TPO on basis of cogent reasons and objective findings. Method adopted by assessee was upheld. (A.Y. 2008-09)

Frigoglass India (P.) Ltd. v. Dy. CIT (2014) 149 ITD 429 / 45 taxmann.com 101 (Delhi)(Trib.)

197. S. 92C : Transfer pricing – Arm’s length price – RPT filter – Reimbursement of cost – cannot be considered to be part of turnover

Reimbursement of cost actually incurred cannot be considered to be part of the turnover while computing the percentage of RPT to turnover and they are purely in the nature of reimbursement. The assessee is required to establish by producing necessary evidences that they are in the nature of reimbursements only.(A.Y. 2004-05)

Cordys R&D (India) (P.) Ltd. v. Dy. CIT (2014) 149 ITD 587 / 43 taxmann.com 64 (Hyd.)(Trib.)

198. S. 92C : Transfer pricing – Arm’s length price – TPO had accepted segmental results for purpose of computing deduction u/s. 10B, he could not be reject those results while determining ALP of international transactions with its AE

TPO had accepted segmental results for purpose of computing deduction u/s. 10B, he could not reject those results while determining ALP of international transactions with its AE. There is no need for upward adjustment to be made on the AE sales of the assessee. Addition was deleted.(A.Y. 2008-09)

Honeywell Electrical Devices & Systems India Ltd. v. Dy. CIT (2014) 149 ITD 514 / 44 taxmann.com 332 (Chennai)(Trib.)

199. S. 92C : Transfer pricing – Arm’s length price – Transaction with international transaction has to be decided by using current year data

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– Current year data does not give a true picture, multi-year data can be considered

In order to determine ALP, comparability of an uncontrolled and unrelated transaction with international transaction has to be decided by using current year data, when current year data does not give a true picture of affairs and results of comparables due to existence of abnormal circumstances, multiyear data can be considered. An entity cannot be excluded or eliminated from list of comparables solely on basis of high profit making unit or loss making unit until such factor finds place either in Rules 10B(2) or 10B(3) of 1962 Rules. benefit of +/- 5 per cent under proviso to section 92C(2) shall not be allowed as standard deduction for purpose of computation of arm's length price rather such a benefit has to be allowed only when price of international transaction is within tolerance range of +/- 5 per cent of ALP computed by taking arithmetic mean of more than one price. Decided in favour of revenue. (A.Y. 2008-09)

Chrys Capital Investment Advisors India (P.) Ltd. v. Dy. CIT (2014) 149 ITD 566 / 42 taxmann.com 276 (Delhi)(Trib.)

200. S. 92C : Transfer pricing – Arm’s length price – Turnover filter – Company with turnover of ` 13,000 crore cannot be comparable to company with turnover of ` 32 crore

Infosys Technologies limited cannot be considered as comparable as it is not only functionally different but it is a giant company having a turnover of about ` 13,000 crores. M/s Infosys Technologies Limited is a giant in the field of software development services having considerable brand value, it also assumes all the risks related to the business. Further, the turnover of Infosys Technologies during the year is about ` 13,000 crores as against ` 32 crores of the assessee. This itself makes

Infosys Technologies Limited uncomparable to the assessee. The turnover filter by adopting a lower limit of ` 1 crore, he should also have fixed an upper limit while applying the turnover filter. Infosys Technologies Limited cannot be considered to be a comparable to the assessee.(A.Y. 2004-05)

Cordys R & D (India) (P.) Ltd. v. Dy. CIT (2014) 149 ITD 587 / 43 taxmann.com 64 (Hyd.)(Trib.)

201. S. 115JB : Book profit – A.O. entitled to tinker with P&L A/c if assessee's claim not permitted by accounting principles

The question that had arisen was whether the Assessing officer was entitled to disturb the net profit shown by the assessee in the profit and loss account prepared as per the Companies Act, 1956.in order to enable anybody to understand the implication of such deviation, it was made mandatory for the companies to disclose the financial implications of such deviation. Such kind of deviations are acceptable under the Companies Act, however, they are not always acceptable to the income-tax authorities. Under the income-tax, the Assessing Officer is entitled to examine the said deviations, particularly when it has an impact on the book profit. There cannot be any dispute that it is the responsibility of the assessee to substantiate the legality of any item of expenditure/income found debited/credited in the profit and loss account by drawing support from any document or business practices or accounting requirements.It was evident that the assessee had passed the entry for prior period credits/charges in the assessment year only to ensure that the final book profit (surplus) was to be reduced. On making careful observations of the facts of the case, the said intention of the assessee was very much apparent and glaring. Besides, the assessee also could not substantiate the said claim with a legally tenable explanation. It was also not shown that the booking of such kind of entries are permitted under the accounting principles.

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when the assessee could not furnish legally tenable explanation and also could not show that it was in accordance with established accounting principles, then it could not be said that the financial statements had been prepared in accordance with the provision of the Companies Act, even if the management/auditors were silent on that point( ITA No. 375/Coch/2014, dated 17-10-2014.)(AY. 2005-06)

Padinjarekara Agencies Pvt. Ltd. v. ACIT (Cochin)(Trib.); www.itatonline.org

202. S. 115JB : Book profit – MAT provisions do not apply to foreign companies [S.90]

Intention of legislature is very clear that the MAT provisions are applicable only to domestic companies and not to the foreign companies. Even if for sake of argument ld. CIT(DR)’s contention is accepted still in view of the provisions of section 90(2), the assessee’s claim for lower impost of tax will have to be accepted because the provisions of section 115JB are subordinate to section 90(2) and have no overriding effect on the said section.

The Bank of Tokyo-Mitsubishi UFJ Ltd. v. ADIT (Delhi)(Trib); www.itatonline.org

203. S. 143(3) : Assessment – Order giving effect to quashed order of Commissioner – A.O.’s action of giving effect to a quashed s. 263 revision order termed “assault on rule of law” & “contempt of Court”

The CIT passed an order u/s. 263 and held that the assessment order was erroneous and prejudicial to the interests of the revenue. This was set aside by the Tribunal. However, despite being aware of the Tribunal’s order quashing the s. 263 order, the A.O. passed an assessment order to give effect to the s. 263 order. The CIT(A) quashed the assessment order. On appeal by the department to the Tribunal HELD dismissing the appeal:

By the way, we are very much astonished to observe that the A.O. has passed a revised assessment order even after knowing that the revision order passed by the CIT has been set aside by the Tribunal. The action of the A.O. could be treated as assault on the rule of law. His action amounts to contempt of Court as well. The Revenue could have preferred to file an appeal before the High Court against the order of the Tribunal setting aside the revision order passed by the CIT. If such an appeal has been already filed, well and good. Otherwise, Revenue has no remedy when the Tribunal has set aside the revision order of the CIT. The said order no more exists and the A.O. has no substratum to build a second round of revised assessment. We do not think that all these matters are unknown to the Assessing Authority. But giving due consideration to the explanations offered by the learned senior officers appearing for the Revenue and also for the reason that the A.O. might have prompted to act in haste, only in public interest, we do not proceed further in this matter. But we wish that before jumping into such controversial games, the A.O. ought to have taken advice from his seniors. (ITA No. 1173/Bang/2009, A.Y. 2002-23, dated 22-4-2010)

DCIT v. SAP Labs India Pvt. Ltd. (Bang.) (Trib.) www.itatonline.org

204. S. 147 : Reassessment – Export –Retrospective amendment of law – Assessment on the basis of the retrospective amendment of section 80HHC of the Act by the Taxation Law (Amendment) Act, 2005 is bad as the said amendment is struck down in Avani Exports v. CIT (Guj HC). [S.80HHC, 143(1), 143(3)]

Tribunal held that we find force in the contentions of the Assessee as the assessment order which was sought to be reopened by the Assessing Officer was only an intimation under section 143(1) of the Act and not a regular assessment

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under section 143(3) of the Act. Therefore, proviso to section 147 of the Act would not apply, but in the light of the judgment of the Hon’ble Gujarat High Court in the case of Avani Exports v. CIT through which retrospective amendment was quashed, the assessment cannot be reopened on the basis of the said retrospective amendment. Since the basis for reopening of the assessment has been quashed by the Hon’ble High Court of Gujarat, the issue of reopening either before or after four years from the end of the relevant assessment year becomes irrelevant. Therefore, in the light of the aforesaid judgment of the Hon’ble Gujarat High Court in the case of Avani Exports v. CIT, we hold that reopening, on the basis of the retrospective amendment of section 80HHC of the Act by the Taxation Law (Amendment) Act, 2005, is illegal and we accordingly hold that the assessment framed consequent thereto is also illegal and deserves to be annulled. (ITA No. 380 to 384 /LKW/2012, dated 18-9-2014.) (A.Y. 2001-02 to 2004-05 & 2006-07).

ACIT v. Northern tannery (Luck.) (Trib.);www.itatonline.org

205. S. 153A : Assessment – Search or requisition – Assessment cannot be made in the absence of incriminating material found in search. [S.153C]

Tribunal found that it has been held by the ITAT, Kolkata Bench in the case of LMJ International Limited v. DCIT 119 TTJ (Kol.) 214 where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such assessment years cannot be disturbed u/s. 153C of the Act. Thus it is clear that the provisions of section 153C of the Act cannot be invoked automatically in respect of any assessment year unless there exists incriminating documents for that previous year. The provision of section 153C of the Act cannot be invoked on routine information or on income already accounted/disclosed in the original return, the assessment of which is complete. In this regard

we may gainfully refer to the decision of the Mumbai Special Bench of the ITAT in the case of Alcargo Global Logistics Ltd v. DCIT.

(ii) We find that the above interpretation which is with respect to section 153A of the Act should also be extended to assessment u/s. 153C of the Act. It will be an absurd proposition that the person who is searched u/s. 153A of the Act can be assessed only on the basis of incriminating material found and the other person who is assessed u/s. 153C of the Act in connection with the same search should be assessed de hors any incriminating material.

(iii) We find that the above view is supported by the amendment to section 153C of the Act w.e.f. 1-10-2014. The provision to section 153C(1) prior to the amendment and sub-section to the amendment are already reproduced in assessee’s submission herein above. From the above we find that the provision of section 153C(1) was amended to obviate practical difficulties which arose in its interpretation. To put it simply this amendment to proviso to section 153C(1) of the Act debars the A.O. from making any assessment de hors any incriminating material found during the search. Thus in our view this amendment supports the view expressed by us.

Trishul Hi-Tech Industries v. DCIT (Kol)(Trib); www.itatonline.org

206. S. 192 : Deduction at source – Salary – Perquisites –Reimbursement of expenses – Meal coupons – Not liable to deduct tax at source. [S.17]

In the present case, in view of the order passed in case of Asst. CIT v. Infosys BPO (Bang.), assessee was not required to deduct tax at source in respect of payments made to its employees towards reimbursement and leave travel medical allowance. It was also further held that having regard to the decision in case of ITO v. Cedilla Health Care & CIT v. Reliance Ind, providing meal coupons to employees to be used outside

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office premises would not give rise to taxable perquisites and the assessee was not required to deduct tax at source while distributing said coupons. (A.Ys. 2006-2009 to 2010-2011)

ACIT v. Oracle India (P) Ltd (2014) 61 SOT 222 (Bang.)(Trib.)

207. S. 194C : Deduction at source – Contractors and sub-contractors – Transportation contract – Assesee has not hired the truck owners, hence not liable to deduct tax at source. [S. 40(a)(ia)]

Assessee had undertaken contract from a company for transportation of their products. In order to execute assignment given by company, assessee engaged his own truck as well as had hired truck from other owners. A.O. held that payment made by assessee to truck owners amounted sub-contracting transportation work and disallowed payment under section 40(a)(ia). On appeal Tribunal held that since entire payment of transportation was made by company to assessee after deducting tax, same established that there was no nexus between company and owners of truck engaged by assessee. Further since, assessee was responsible for entire transportation job assigned by company to assessee and there was nothing on record to show that assessee had sublet his work to other truck owners, it could be construed that assessee had hired trucks along with drivers and executed work himself, and, hence, provisions of section 194C were not attracted. (A.Y. 2006-07)

Saiyad Saukatali Saiydamiya v. ITO (2014) 61 SOT 110 (URO)/ (2013) 40 taxmann.com 57 (Ahd.)(Trib.)

208. S. 199 : Deduction at source – Credit for tax deducted – Rule 37BA (credit for TDS) inserted w.e.f. 1-4-2009 to mitigate hardship to taxpayers has to be treated as

being retrospective in nature. [R. 37BA]

Rule 37BA of the Rules clearly mentions that credit for tax deducted at source and paid to the Central Government shall be given to the person provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of other person in the information relating to deduction of tax referred to in sub-rule (1) of Rule 37BA of the Rules. Further, sub-rule (3) of Rule 37BA of the Rules provides that for the purpose of giving credit in respect of tax deducted in term of provisions of Chapter XVII for the purpose of giving credit to a person other than those referred to in sub-section (1) and also the assessment year in which such credit may be given. In view of the above provision of section 37BA of the Rules and the provisions of section 199(1) of the Act, the credit for tax deduction could be given to the person from whose income tax has been deducted. The Rule as amended by the Amendment Rules, 2009 w.e.f. 1-4-2009 makes it abundantly clear that the credit will be given based on the information by deductor. The proviso to sub-rule (2) of Rule 37BA of the Rules mitigates the hardship faced by assessee for claiming credit of TDS whereby deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of other person in the information relating to deduction of tax as referred to in sub-rule (1) of Rule 37BA of the Rules. In such provisions of law, the assessee should have been allowed credit for TDS in the given set of facts and circumstances of the case. The only issue is that the amended provision is applicable w.e.f. 1-4-2009 and the relevant assessment year involved is 2008-09. Whether the amended Rule as amended by Amendment Rules, 2009 is a beneficial provision mitigating the hardship of the assessee and in turn the same can be declared as retrospective and will apply to all pending matters. Similar issue was dealt by Hon’ble Supreme Court in the case of Allied Motors Pvt. Ltd. v. CIT (1997) 224 ITR 677 (SC), wherein it has been held that “the provisions of the first proviso, which has newly

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been inserted by the Finance Act, 1987, with effect from 1st April, 1998, to section 43B is remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the assessee and which made the provision unworkable or unjust in a specific situation, and is of clarificatory nature and, therefore, has to be treated as retrospective with effect from 1st April, 1984, the date on which section 43B has newly been inserted by the Finance Act, 1983.” Similarly, here also the Rule was inserted by the Amendment Rules, 2009 to remove the hardship faced by assessees and to give true meaning to the provision of section 199 of the Act. In such circumstances, I direct the A.O. to allow the credit of TDS after verifying declaration to be filed by deductee in term of proviso to sub-rule (2) of Rule 37BA of the Rules. (ITA No. 2417/Kol/2013, dt. 2-9-2014. (A.Y. 2008-09)

Parmanand Tiwari v. ITO (Kol)(Trib); www.itatonline.org

209. S. 220 : Collection and recovery of tax – Stay – When tax payable and when assessee deemed in default – recovery proceeding initiated without expressly rejecting stay application filed by assessee and without giving assessee an opportunity of being heard, was not sustainable. [S.226]

During assessment proceeding AO determined income of assessee at ` 14.49 crore as against returned income of ` 8.29 crore and accordingly, raised demand which included tax component as well as interest segment. Assessee filed an application for stay of recovery, while said application was pending, A.O. initiated recovery proceedings and passed an order under section 226(3) attaching bank account of assessee. Recovery proceeding initiated without expressly rejecting stay application filed by assessee and without giving assessee an opportunity of being heard, was not sustainable, stay application filed

by assessee was to be allowed subject to payment of tax component of demand in instalments. (A.Y. 2007-08)

Capital IQ Information Systems India (P.) Ltd. v. ACIT (2014) 149 ITD 809 / (2012) 26 taxmann.com 31 (Hyd.)(Trib.)

210. S. 249(4) : Appeal – Commissioner (Appeals) – Admitted tax – The only requirement of s. 249(4) is payment of tax due on returned income. There is no time limit prescribed for payment of such taxes. The delay in filing an appeal after payment of SA tax can be condoned

(i) The only requirement of section 249(4) is payment of tax due on returned income and there is no time limit prescribed for payment of such taxes. Therefore, if an appeal is filed after making of payment, it cannot be said that the requirement of section 249(4) has not been complied with. The CIT(A) can use his discretionary power and admit the appeal if he is satisfied about the liquidity crunch or any other reasonable cause for non-payment of taxes. Section 249(3) prescribes the CIT(A) may admit the appeal after the expiration of the said period if he is satisfied that the assessee had sufficient cause for non-presenting the appeal within the prescribed period. While sub-section (3) of section 249 pertains to those assessees who have filed return and paid the tax but belatedly filed an appeal. On the other hand, sub-section (4) of section 249 pertains to those assessees who have defaulted in payment of tax or did not file the return.

(ii) Hence as per section 249(4) of the Act no appeal before CIT(A) should be admitted unless at the time of filing of the appeal, where a return has been filed by the

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assessee, tax due on the income returned has been paid. In this sub-section, there is a clause (b) which is in respect of a condition where no return at all has been filed by the assessee. A proviso underneath the section also prescribes that the cases falling under the said clause (b), the CIT(A) can grant exemption from the operation of the said clause. An inference can be drawn on combined reading of both the sub-clauses of sub-section (4) of section 249 that in case of default of non-payment of tax an appeal is not to be admitted, but on removal of the defect of non-payment of tax an appeal deserves to be admitted and in one of the condition the assessee can be granted exemption by the CIT(A). (ITA No. 238/Hyd/2014, dated 29-10-2014) (A.Y. 2008-09)

Kanchenjunga Greenlands Pvt. Ltd. v. DCIT (Hyd.)(Trib); www.itatonline.org

211. S. 253 : Appellate Tribunal –Departmental appeal – Contempt

Filing appeals in disregard & wilful disobedience to the law laid down constitutes gross abuse of power and deserves to be punished for contempt of Court and by award of exemplary costs. Action not pursued in view of written apology of concerned officials.

ACIT v. Veena Developers (Mum.) (Trib.) www.itatonline.org.

212. S. 254(1) : Appeal – Tribunal – Cross objection – Respondent can raise an additional ground in a Cross-Objection. [Form No. 36A]

The Hon’ble Guwahati High Court in CIT v. Purbanchal Parbahan Gosthi (1998) 234 ITR 663 (Gau) has stated that there is no distinction between an appeal and a cross-objection except for the time limit for filing the appeal being 120 days and that of CO being 30 days. Therefore, the learned DR’s objection that even a pure question

of law cannot be taken up in a cross objection is without any merit.

DCIT v. Silver Line (Delhi)(Trib.); www.itatonline. org

213. S. 254(1) : Appellate Tribunal –Additional grounds – Reassessment – Entitle to raise fresh ground of appeal at the Tribunal stage as the relevant facts were already on records. [Ss. 147, 148]

According to the appellant, the issue relating to the validity of the proceedings initiated under s. 147/148 of the Act goes to the root of the matter and it is further contended that the same being a point of law the assessee is entitled to raise the same for the first time before the Tribunal also having regard to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. It is also pointed out that the facts relevant to adjudicate the aforesaid controversy are on record and prayed that the aforesaid ground be admitted for adjudication. The learned Departmental Representative has not opposed the prayer of the assessee seeking adjudication of the aforesaid ground of appeal, which has been raised for the first time before the Tribunal and was not raised before the CIT(A).

With regard to the admission of the additional ground of appeal referred to as grounds of appeal Nos. 1 and 1.1 in the Memo of Appeal filed by the assessee, it is evident that the same involves a point of law and is emerging from record. The aforesaid ground is also relevant to determine the ultimate tax liability of the assessee and therefore following the ratio of Hon'ble Supreme Court in the case of National Thermal Powers Co. Ltd. (supra) the same is admitted for adjudication. (A.Ys. 2003-04 to 2005-06 )

Nath Developers v. ACIT (2014) 61 SOT 8 (URO)/(2013) 40 taxmann.com 137 (Pune)(Trib)

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214. S. 254(1) : Appellate Tribunal –Affidavit – Chartered Accountants – Delay of 2,984 days was not condoned

ITAT laments severe fall in standards of CA profession. Advises ICAI to take disciplinary proceedings against erring members & tackle issue on war footing

Vijay V. Meghani v. DCIT (Mum.) (Trib.) www. itatonline.org

215. S. 271(1)(c) : Penalty – Concealment –Disallowance on Transfer pricing provision – Levy of penalty was not justified [S.92C]

The Tribunal held that the disallowance of an amount that too on transfer pricing provisions does not attract penalty as it cannot be considered as either the concealment of income or furnishing of inaccurate particulars. (A.Y. 2005-06)

TNS India (P) Ltd. v. ACIT (2014) 163 TTJ 576 (Hyd.)(Trib.)

216. S. 271(1)(c) : Penalty – Concealment-Search and seizure – As there was no addition over and above income declared by assessee in return of income filed in response to notice under section 153A, no penalty under section 271(1)(c) was to be imposed. [Ss.132, 153A, 271(1)(c), Explanation 5A]

The assessee was engaged in the business of jewellery and related activities,. Assessee’s Premises were subjected to search and seizure under section 132(1). In pursuance to notices under section 153A, the assessees filed their returns for relevant assessment years. The income declared by the assessees in the returns filed in response to the notices under section 153A were accepted in all these cases and no further

addition was made. Thereafter, the Assessing Officer imposed penalty for concealment of the particulars of income or for furnishing the inaccurate particulars of income in respect of the additional income offered by assessees in the returns filed in response to notices under section 153A and also in those cases where for the first time in respective assessment years, the returns of income were filed only after issuance of the notices under section 153A. On appeal Tribunal held that, on the perusal of the assessment orders in all these appeals, it is admitted fact that there is no addition over and above the income declared by these assessees in the returns of income filed in response to notices under section 153A. It is also admitted fact that no declaration is based on any money, jewellery, bullion or any other valuable articles detected or seized in the course of the search operation. At the first instance, the counsel pleaded that these assessees are entitled for the immunity in view of Explanation 5 to section 271(1)(c) because the income admitted during the course of the search has been declared in the return of income as well as the tax on the admitted income has also been paid. In all the appeals Explanation 3 cannot be applied, as held in the case of Chandan K. Shewani v. Dy. CIT [IT Appeal Nos. 235 and 236 (PN.) of 2010, dated 29-8-2012]. So far as Explanation 5A is concerned, it is brought on the statute book with effect from 1-6-2007, i.e., from the assessment year 2007-08. So far as the assessments in all these cases are concerned, no addition is made by the Assessing Officer over and above the income declared in the returns of income filed in response to notice under section 153A as the expression 'tax sought to be evaded' appearing in clause (c) to section 271(1) is to be understood as a difference between the income declared by the assessee in the return of income and the income finally assessed. After introduction of section 153A with effect from 1-6-2003, there in no specific penalty provision to deal with the assessments framed in consequence of search and seizure action under section 132. In the present case, as the returned income and income assessed are the same, otherwise also, no penalty can be levied. Therefore, in all the appeals the

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Assessing Officer was not justified in levying the penalty under section 271(1)(c). Accordingly, the penalties levied by the Assessing Officer in all the appeals are to be deleted for the abovementioned reasons. (CIT v. Kirti Dahyabhai Patel (2009) 121 ITD 159 (TM)(Ahd)(Trib) is referred)(A.Ys. 2000-01 to 2004-05 )

Pramila D. Astekar v. ITO (2014) 61 SOT 113/(2013) 39 taxmann.com 103 (Pune)(Trib.)

217. S. 282 : Service of notice – A strict procedure has to be followed for service by affixture. If done improperly, the notice and the resultant assessment order are null and void. [Code of Civil Procedure, 1908 (V of 1908)]

As per sub-section (1) of section 282, the notice is to be served on the person named therein either by post or as if it was a summons issued by Court under the Code of Civil Procedure, 1908 (V of 1908). The relevant provision for effecting of service by different modes are contained in Rules 17, 19 and 20 of Order V of CPC. Rules 17, 19 and 20 of Order V of CPC lay down the procedure for service of summons/notice and, therefore, the procedure laid down therein cannot be surpassed because the intention of the legislature behind these provisions is that strict compliance of the procedure laid down therein has to be made. The expression after using all due and reasonable diligence’ appearing in Rule 17 has been considered in many cases and it has been held that unless a real and substantial effort has been made to find the defendant after proper enquiries, the Serving Officer cannot be deemed to have exercised ‘due and reasonable diligence’. Before taking advantage of Rule 17, he must make diligent search for the person to be served. He therefore, must take pain to find him and also to make mention of his efforts in the report. Another requirement of rule 17 is that the Serving Officer should state that he has affixed the copy

of summons as per this rule. The circumstances under which he did so and the name and address of the person by whom the house or premises were identified and in whose premises the copy of the summon was affixed. These facts should also be verified by an affidavit of the Serving Officer.

The reason for taking all these precautions is that service by affixture is substituted service and since it is not direct or personal service upon the defendant, to bind him by such mode of service the mere formality of affixture is not sufficient. Since the service has to be done after making the necessary efforts, in order to establish the genuineness of such service, the Serving Officer is required to state his full action in the report and reliance can be placed on such report only when it sets out all the circumstances which are also duly verified by the witnesses in whose presence the affixture was done and thus the affidavit of the Serving Officer deposing such procedure adopted by him would also be essential. In the instant case, the whole thing had been done in one stroke. It was not known as to why and under which circumstances another entry for service of notice by affixture was made on 27-7-2012 when sufficient time was available through normal service till 30-9-2012. Nor there is any entry in the note-sheet by the A.O. directing the inspector for service by affixture and had only recorded the fact that the notice was served by the affixture. It appears that the report of the Inspector was obtained without issuing any prior direction for such process or mode. ….. In view of the above, it is clear that there was no valid service of notice u/s.143(2) by way of affixation and the assessment made on the basis of such invalid notice could not be treated to be valid assessment and, hence, such assessment order deserves to be treated as null and void and liable to be quashed and annulled.(SA No. 216/Mum/2014. dated 9-9-2014.) (A.Y. 2008-09),

Sanjay Badani v. DCIT (Mum.)(Trib.); www.itatonline.org

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DIRECT TAXES – Supreme CourtINDIRECT TAXESSales Tax D. H. Joshi

1. AppealEnhancement of Appellate Authority. Earlier, the AO determined raw material consumption of ` 2,94,89,241 in job work production done by appellant for other dealers, and levied entry tax on that basis. However, the Appellate Authority determined such raw material consumption of ` 14,74,46,204 and accordingly enhanced the amount of entry tax. The appellant contended that before making such enhancement, no proper notice has been given to him and that merely on assumption enhancement has been made. In reply, the Govt. Counsel contended that sufficient opportunity has been given to the appellant but the appellant has failed to submit the correct information, and that information about the enhancement was got noted by the Counsel of the appellant, and he did not ask the Appellate Authority to issue notice before making enhancement. Thus, it is tentamount to waiver of notice. However, the appellate Board held that such assumption is uncalled for in law inasmuch as, legal proceedings as required as per law are required to be followed. Merely because the noting on the proceedings sheet is there, the appellate authority’s conclusion is not in accordance with law and the appellant ought to have heard as per the settled position on the merit of the case.Makson Nutrition Food (I) Pvt. Ltd. v. CCT, M.P. (2014) 25 STJ 476 (MP-bd)

2. Condonation of delayThere was delay of about 3 years in filing revision appln. u/s 62 of the MPCT Act. The delay was duly explained, but the Revisional Authority rejected the revision on the ground that there was no provision for condonation of delay. The M.P. High Court held that section 66 of the MPCT Act contemplates that provision of Section 5 of the Limitation Act, so far as may be shall apply to appeals, revisions and references filed under the Act. Once the provisions of Section 5 at Limitation Act are made applicable,

the finding recorded by the Revisional Authority is erroneous and perverse and on this ground alone, the petition has to be allowed. Accordingly, the impugned revision order was quashed and matter was remanded back to the revisional authority for consideration on merits.Kanhiyalal Laxmandas, Satna v. Div. Dy. Commr. of CCT And Ors. (2014) 25 STJ 455 (M.P.)

3. Interpretation of Schedule EntriesI Forgings – obtained after machining, and

sold as machinery parts to BHEL, etc. were covered under residuary entries II/IV/I of the M.P. VAT Act and were liable to tax at 13%.

Saurabh Metal Pvt. Ltd. (Forging Unit), Bhopal v. CCT, (M.P.) (2014) 25 STJ 499 (CCT, M.P.)

II Tread Rubber Strips used in tyre re-treading applying the decision of M.P. High Court in the case of Agrawal Tyres Stores (2014) 25 STJ 329 (M.P.), Appellate Board held, rejecting the appeal, that it was covered in Entries II / III / 43(ii) of the MPCT Act and was liable to tax @13.8%.

Narayan Rubber Factory, Indore v. CCT, M.P. (2014) 25 STJ 496 (MP-BD)

4. Luxury TaxA conjoint reading of Sections 3-C and 4-AA of Karnataka Tax on Luxuries Act, 1979 showed that where luxury was provided in a marriage hall at a concessional rate then tax on such luxury was liable to be levied and collected as if full charges were paid to the proprietor of marriage hall. As per definition of ‘Charges for marriage hall’ given in Section 2(1-A) of Karnataka Tax on Luxuries Act, 1979, it includes any amount received by way of donation or charity or by whatever name called in relation to letting of marriage hall. Therefore, the donations received by petitioner in relation to letting of marriage hall are also liable to Luxury

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Tax. Accordingly, for reasons stated revision was dismissed.

Sri Veerashaiva Sangh (R) v. AC of CT (Transition) Hassan (2014) 25 STJ 464 (Kar)

5. Works ContractI As per Section 2(40) of Uttarakhand VAT Act,

defining “sale” r/w section 2(55) defining works contract, sale of goods would include an agreement for construction of immovable property or commissioning of any immovable property. A person agreeing with another person to make a construction of immovable property for a valuable consideration would be selling the construction made by him as goods. But, if a person sells immovable property after the same has been constructed, then, he would not be selling the goods.

Iravanshi Builders and Developers v. Commissioner CT, Uttarakhand (2014) 25 STJ 474 (Uttra).

II Contract for construction of National Highway under U.P. VAT Act, diesel oil used in the process of any taxable goods could be purchased at concessional rate of 4% on submission of Form D duly authenticated by the Commissioner. the petitioner applied to the Commissioner for authentication of Form D for purchase of diesel for use in manufacture of ‘Hot mix material’ for use in the construction of road, which is denied on the ground that the petitioner being a works contractor and not a manufacturer was not entitled to purchase diesel against Form D. The Allahabad HC on application of the decision of the Supreme Court in the case of P. N. C. Construction Co. Ltd. (2007) 11 STJ 428 (SC), held that the petitioner was manufacturing ‘Hot Mix Material’ of which there was a deemed sale in the execution of works contract for construction of road, and, therefore, the petitioner was entitled to purchase diesel against Form D.

P.N.C. Infratech Ltd. v. State of U.P. and Ors. (2014) 25 STJ 457 (All)

6. PenaltyI Petitioner’s Second Appeal against the

original order of assessment was pending before the Appellate Board. During pendency of the said appeal, Dept. proceeded in the matter of penalty proceeding and levied the penalty. The M.P. High Court by keeping impugned penalty order in abeyance held that no coercive action for recovery of penalty shall be taken, till the Appellate Board decides the petitioner’s Second Appeal. The fate of the order of penalty would depend upon the outcome of the decision as may be taken by the Appellate Board. The Appellate Board was directed to decide the Second Appeal expeditiously.

Titan Industries Ltd., Indore v. Dy. Commr. of CT and Ors. (2014) 25 STJ 451 (M.P.)

II Tribunal confirms the best judgment assessment order passed by the AO and also held the dealer as liable for penalty. In the circumstances, revision filed before the HC. High Court held : in the absence of finding by the Tribunal that tax invoices, for claiming benefit of input tax credit, were not genuine no liability to tax or penalty could have been imposed on the revisionist – firm. Therefore, the order of the Tribunal was set aside and matter remanded for re-consideration.

Laxmi Doors thru: its Proprietor v. Commissioner CT, U.P. (2014) NTN (Vol. 56) – 159 (All)

7. Promissory estoppelIn this 21st Century, when there is a global economy, the question of faith is very important. Govt. offers certain benefits to attract entrepreneurs and the entrepreneurs act on those beneficial offers. Thereafter, the Govt. withdraws those benefits. This would seriously affect the credibility of the Govt. and would show the shortsightedness of the Govt. it would sadly affect their credibility and people would not take the word of the Govt. and would respect it. That would shake the faith of the people in the Govt. Therefore, in order to keep the faith and maintain good governance it was necessary that

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whatever promise / representation was made by the Govt. or its instrumentality which induces the other party to act upon it, the Govt. should not be permitted to withdraw from that because ultimately the matter is of faith.U.P. Power Corpn. Ltd. v. Sant Steels & Alloys (P) Ltd. (2014) 25 STJ 425 (SC)

8. Seizure of truckTruck passing through the State of Uttarakhand – driver neither took the transit pass nor filled the required Trip Sheet. Mobile Squad Authority detained the vehicle and seized under the provisions of Section 43 of the Act. Appln. made u/s 43(7) to the Dy. Commr. for giving directions to the squad authority was rejected. Thereupon, the applicant filed an appeal before the Tribunal against the impugned order for release of truck. Dept. filed Rev. Appln. challenging the impugned order of the Tribunal. High Court on vivid examination of relevant provisions contained in the Uttarakhand VAT Act, 2005, in regard to seizure and appeals held : Apparently, the goods were released pursuant to the order as there was no order of stay, the question of law in regard to the maintainability of the appeal was answered in favour of the revisionist and it the Order of the Tribunal was set aside. The HC also noted that for the revisionist State, their advocate though served was not present when the matter was called out for hearing. Therefore, the HC heard Mr. H.M. Bhatia, Learned Counsel as amicus curiae.2. In the course of judgment, words and phrases i.e. amicus curiae was explained. The court noted from the source - “Wikipedia” as under: “An amicus curiae means literally “friend of

the court” is someone who is not a party to a case, who offers information that bears on the case but who has not been solicited by any of the parties to assist a court. This may take the form of legal opinion, testimony or learned treatise (the Amicus brief) and is a way to introduce concerns ensuring that the possibly broad legal effects of a court decision will not depend solely on the parties directly involved in the case. The decision on whether

to admit the information lies at the discretion of the court. The phrase amicus curiae is legal Latin”

Commissioner, Commercial Tax v. Vijay Pal Singh (2014) NTN (Vol. 56) – 220 (U.K.)

9. Input tax creditPurchases made from Registered dealers against tax invoices. Selling dealers’ TIN not reflected in on NIC-VAT Soft. Upon verification it was reported that the selling dealer was not in existence for the concerned assessment year 2005-06. On examination of the facts of the case, HC held that benefit of ITC is not allowable. Further, input tax credit on purchase of vehicle used for transporting goods in the course of business, ITC on capital goods is held as permissible.

Suma Oil Agencies v. Addl. Commr. CT (2014) NTN (Vol. 56) – 203 (Karn)

10. Schedule entries – “Parachute Pure Coconut Oil”

Revisionist makes a clear marking on the labours as “edible oil”. A.O. treated it as “Hair Oil” as the coconut oil is generally understood to be and taxed the same @12.5% as unclassified item. Tribunal by the order impugned remanded the matter to the First Appellate Authority to return the findings whether the questioned goods would fall under Entry No. 43 or Entry No. 131 of the Schedule-II, Part-A of the Act. Upon filing revision, HC held : “‘Parachute Pure Coconut Oil’ is liable to be taxed @4% as falling under Entry No. 43. Word used in the statute must not be given a meaning which the Legislature itself did not intend and did not say in so many words. The AO’s perception about ‘Coconut Oil’ is more associated with ‘Hair Oil’ as under the brand name ‘Parachute’. And the Tribunal held accordingly following its judgment in the case of M/s Bombay Oil Industries Ltd. v. CCT (2008) 38 NTN-DX – 82. Hence, revision allowed, and order of the Tribunal was set-aside.”

Marico Ltd. v. Commr., CT, U.P. (2014) NTN (Vol. 56)-86 (All)

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DIRECT TAXES – Supreme CourtINDIRECT TAXESService Tax

Sunil Moti Lala*

* Assisted by Sheetal Jain

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A] ClassificationofService

BusinessAuxiliaryServices1 The assessee sold CNG gas to the third party, at the price fixed by the vendor and earned trade margin (mentioned as ‘commission’ in the invoice). The department demanded service tax on the trade margin under the head provision of ‘business auxiliary service’ On appeal, the Hon’ble Tribunal, relying on the judgment of Bhagyanagar Gas Ltd. [2013-TIOL-241- CESTAT-Bang.], held that the transaction between the vendor and the assessee was in the nature of trading of goods on principal to principal basis and no services were provided, irrespective of the fact that the ‘trade margin’ was termed as ‘commission’ and the sale price of the assessee was fixed by the vendor.

M/s. Bharat Petroleum Corpn. Ltd. and Others v. CST [2014-TIOL-1114-CESTAT-Mum.]

2 The Hon’ble Tribunal held that sales / target incentives received by the assessee, a dealer in motor vehicles, from the manufacturer from whom he purchased the vehicles were in the nature of trade discount not liable for service tax under the category of business auxiliary services. However, incentive from banks for promoting their car loan products was liable for service tax under business auxiliary services. But where the latter incentives were received from manufacturer of vehicles who had already paid the tax on the same it was held that demanding duty on the same amounted to double taxation and hence not payable by the assessee.

CST v. Sai Service Station Ltd. [2014] 35 STR 625 (Tri.-Mum.)

3 The assessee purchased Wire Harness and directed seller to ship goods directly to their

principal abroad. The seller made invoice in the name of assessee along with VAT liability. The assessee while selling goods to their principal marked up price by 3% of purchase price. The department contended that, assessee was acting as commission agent for seller and was liable to pay service tax under Business Auxiliary Service. The Hon’ble Tribunal observed that the invoice issued by seller clearly showed that VAT liability was discharged which indicated sale of goods by seller to assessee and assessee also issued export invoices to foreign buyer and realised export proceeds. Therefore, the transaction involved was one of purchase and sales of goods on principal to principal basis and not as an agent of anybody else.

Behr India Ltd. v. CCE [2014] 35 STR 637 (Tri-Mumbai)

BusinessSupportServices4 The assessee was providing the service of supplying tractor trailers along with trained drivers to undertake transportation of containers within the terminal. The Hon’ble Tribunal held that the services would be classifiable under the category of ‘Supply of Tangible Goods for use’ and not under ‘Business Support Services’ and accordingly the demand was not sustainable in law.

Srinivasa Transports v. CCE & ST [2014] 34 STR 765 (Tri.-Bang.)

5 The assessee had entered into an agreement with electricity distribution companies/departments for providing spot billing services like reading of meters and generating bills. The Hon’ble High Court observed that the billing and accounting done by the assessee company was not on behalf of

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the electricity distribution companies but for them and there was no interaction with customer of electricity distribution companies. Further the services being in the nature of transaction processing activities, the same would be covered under the service tax net only w.e.f. 1-5-2006 under the category of business support service and not prior to that date under the category of business auxiliary services

CCE v. Phoenix IT Solutions Ltd. [2014] 35 STR 314 (A.P.)

ManagementConsultancyService6 The assessee provided space to another unit to install machinery in their premises and rendered managerial, technical, administrative and clerical support for undertaking production of “Micanite”. The department contended that service provided was covered under Management Consultancy Service. On appeal, the Hon’ble Tribunal held that the assessee was managing operation of their client by employing their own staff and did not render any management consultancy service. Management of factory is different from management consultancy and such management services which were executory in nature would meet classification under Business Auxiliary Services. Also there was a vast difference between ‘Manager’ and ‘Managing Consultant’ as Manager actually manages things and Consultant provides consultancy / advice as how to manage.

CCE v. Sahney Kirkwood Pvt. Ltd. UOI [2014] 35 STR 609 (Tri.-Mumbai)

CargoHandlingServices7 The assessee contracted to mine lignite for its client in consideration for a remuneration based on per MT of saleable lignite mined by them and its scope of work involved clearing the site for mining, excavation of top soil and its dumping at a specified place, removal of the over burden and raising of saleable lignite. The Hon’ble Tribunal held that the assessee’s

services were liable for service tax under the category of “mining services” w.e.f. 1-6-2007 and not under the category of cargo handling services/site formation services prior to that date since the nature of the contract was for mining and loading/site formation were only ancillary activities.

National Construction Company v. CCE [2014] 34 STR 739 (Tri.-Del.)

8 The Hon’ble High Court held that the handling of the goods in the factory or godown or removing of garbage not being an activity adjunct to transportation of ‘goods’ (cargo), the same would not be liable for service tax under Cargo Handling Services.

CCE v. Prempal Singh [2014] 35 STR 136 (Tri.-Del.)

CateringContracts9 The petitioner, in writ challenged the constitutional validity of section 66E(i) of the Finance Act 1994 which levies service tax on service portion in an activity of supply of food or drink on the ground that such an activity is a sale under Article 366(29A)(f) of the Constitution. The Hon’ble High Court held that:

• The said Article does not indicate that the service part is subsumed in the sale of food but it rather separates the sale of food and drinks from service.

• Section 66E(i) only charges service tax on service part and not on the sales part.

Accordingly, it held that section 66E(i) was intra vires the Constitution.

Hotel East Park v. UOI [2014] 35 STR 433 (Chhattisgarh)

ConstructionServices10 The assessee, a developer of residential complex had paid service tax on the amounts received by it from the prospective flat purchasers during the period December 2005 to October 2006, in respect of which it had

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subsequently claimed refund. The refund claim was rejected by the Department. On appeal, the Hon’ble Tribunal held –

a. Since the construction activities was carried out by the assessee themselves or by appointing contractor who had paid service tax on his services, the construction carried out by the assessee would not be liable for service tax in view of Board Circular No. 332/35/2006-TRU dated 1-8-2006. Such services were brought within the ambit of service tax only w.e.f. 1-7-2010.

b. As regards Department’s contention of unjust enrichment in absence of any evidence regarding collection of service tax from customers, the claim of refund would not be hit by bar of unjust enrichment.

Krishna Homes v. CCE [2014] 34 STR 881 (Tri.-Del.)

CommercialTrainingandCoaching11 The Hon’ble High Court held that training or coaching provided to individuals in the field of flying of aircraft for obtaining Commercial Pilot Licence and Basic Aircraft Maintenance Engineering Licence from Director General of Civil Aviation is not liable for Service Tax under Commercial Coaching or Training Service being training/coaching leading to grant of an educational qualification recognised by law.

CCE v. Garg Aviations Ltd. [2014] 35 STR 441 (All.)

12 The assessee was conducting courses for personality development and orientation programme for enhancing the personal skills of the participants inspiring them to be more effective, aesthetic values, etc. The Hon’ble Tribunal held that since it was imparting skill or knowledge or lessons on any subject or field other than sports the activities would be liable for service tax under the category of ‘commercial training or coaching services’.

Landmark Education India v. CST [2014] 35 STR 537 (Tri.-Mumbai)

ComputerisedReservationServices13 The department held that Computerised Reservation Services (‘CRS’) received by the Indian branch office of foreign airlines from foreign companies was liable to Service tax under the reverse charge mechanism. The Hon’ble Tribunal observed that:

• CRS are in the nature of ‘Online Information and Database Access or Retrieval Service’;

• The Indian branch office and foreign airlines would be construed as different legal persons in terms of the Service tax law;

• The foreign airlines would be construed as the service recipient and not Indian branch office since the contract is between foreign airlines and foreign companies.

Accordingly, it held that CRS received by Indian branch office of foreign airlines from foreign companies would not be liable to Service tax.

British Airways v. Commissioner (ADJN), Central Excise [2014-TIOL-979-CESTAT-Del.]

ClearingandForwardingAgent14 The assessee had entered into an agreement with TATA Motors for transporting their vehicles by railway rakes in course of which they were required to stock the vehicles in their stockyard till availability of rakes with the railway. The Hon’ble Tribunal held that the assessees were engaged in transportation services and were not undertaking clearing and forwarding agent services. Accordingly no service tax would be payable by them under the category of “clearing and forwarding agents services”.

Kishore Transport Services (P) Ltd v. CCE [2014] 34 STR 842 (Tri.-Mum.)

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15 The assessee provided Clearing & Forwarding services to its customer inter alia by ‘arranging for’ loading/unloading and transport. The Hon'ble Tribunal held that the assessee has acted only as an agent of its customer for the said activities and the demurrage/wharfage charges and local transport expenses reimbursed to the assessee at actual would not form part of the value of taxable services provided by them.

CCE v. Surya Transport Co. [2014] 35 STR 115 (Tri.-Del.)

FranschiseServices16 The assessee, a beer brand owner got its beer manufactured by a contract manufacturer who was responsible for bottling, packing and dispatch of assessee’s brand of beer as per the assessee’s specification and formula. The contract manufacturer charged a price fixed by the assessee from the buyers sourced by the assessee, retained a fixed amount and remitted balance to the assessee. The risk of manufacture and sale was borne by the assessee. The Hon’ble Tribunal held that the assessee had not rendered any franchise service or IPR service to the contract manufacturer.

SKOL Breweries Ltd. v. CCE [2014] 35 STR 570 (Tri.-Mumbai)

GoodsTransportAgencyServices17 The assessees in the present case (sugar manufacturers) had availed services of transportation of sugarcane from its collection centre to its factory. The transporters were individual truck owners who did not issue any consignment note (as prescribed u/r. 4B of Service Tax Rules), goods received note, etc. but only issued fortnightly bills to the assessees. The department demanded service tax from the assessee on the grounds that it had availed goods transport agency (“GTA”) services. On appeal, the Hon’ble Tribunal held that –

a. In respect of GTA services provided in relation to transportation of goods the agency not only undertook the service of transportation of goods but also delivery of goods to the consignee and temporary storage of goods till its delivery to the consignee.

b. Fortnightly bills were not consignment notes and in absence of issuance of consignment note by GTA in terms of Rule 4B of Service-tax Rules, 1994, representing the liability to transport the consignment handed over to it as a GTA, the truck owners cannot be considered as goods transport agency. It has merely provided services of transportation of goods in a motor vehicle. Accordingly, it held that no service tax was payable by the assessees as a recipient of goods transport agency services.

Nandganj Sihori Sugar Co. Ltd. v. CCE [2014] 34 STR 850 (Tri.-Del.)

18 The assessee, manufacturer of polished granites monuments/slabs/tiles availed service of Goods Transport Agency for transporting of its goods, both inward and outward. The demand of service tax thereon was set aside by the Hon’ble Tribunal holding that the assessee had engaged only individual lorry or truck operators who could not be considered as commercial concern. On appeal, the Hon’ble High Court set aside the Hon’ble Tribunal’s order and held that individual operator would also be covered within the expression commercial concern and therefore assessee was liable to pay service tax.

CCE v. KMB Granites Pvt. Ltd. [2014] 35 STR 63 (Mad.)

InteriorDecoratorService19 The Hon’ble Tribunal held that the contract for landscaping which includes beautification by way of plantation of trees, shrubs in factory area and also maintenance

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of lawns was not liable for service tax under the category of interior decorator service since these were execution of works and could not be considered as advisory or consultancy or technical assistance.

Shobha P. Bhopatkar v. CCE [2014] 35 STR 78 (Tri.-Mum.)

MandapKeeperService20 The assessee provided mandap keeper services including catering and split the bill into two parts – one part for hall charges on which service tax was charged and the other part for supply of food on which no service tax was paid on the ground that it was sale of food. The Hon’ble Tribunal relying on Sayaji Hotels Ltd. v. Commissioner (2011) 24 STR 177 (Tri.-Del.), held that the entire amount of consideration was liable for service tax under the category of mandap keeper services and there was no sale of food since catering was only incidental.

Hotel Amarjit Pvt. Ltd. v. CCE [2014] 35 STR 140 (Tri.-Mum.)

ManagementConsultancyService21 The assessee was providing consultancy to various member milk unions being an apex state society and nodal agency. On appeal, the Hon’ble High Court confirmed the Tribunal’s order which had held that assessee did not provide management consultancy service mainly on the ground that the assessee was not conducting any commercial activity in a matter of consultancy service.

CCE v. MP State Co-op. Dairy Federation [2014] 35 STR 446 (MP)

ManpowerRecruitmentorSupplyAgencyService 22 The assessee, a composite textile mill engaged in manufacture of fabrics and garments, had deputed its employees to group companies for stipulated work for a limited period of time and thereafter the employees were repatriated

back to the assessee in consideration for which it received certain amounts from the group companies. The Hon’ble Tribunal relying on decision of Paramount Communication Ltd. v. Commissioner [2013-TIOL-37-CESTAT-Del] held that assessee would not be liable for service tax under Manpower Recruitment and Supply Agency Service since it was not a commercial concern engaged primarily in recruitment or supply of manpower.

Arvind Mills Ltd. v. CST (2014) 34 STR 610 (Tri.–Ahmd.)

23 The Hon’ble Tribunal observed that the employees deputed from overseas group companies were also working under the assessee as their employees. Following Volkswagen India (Pvt.) Ltd. v. CCE 2014 (34) STR 135 (Tri.- Mum.), it was held that there was no supply of manpower service rendered to the assessee by the overseas company and accordingly the assessee was not liable to pay service tax on the payments made to the overseas companies for social security benefits of those employees in their home country.

Computer Sciences Corporation India Pvt. Ltd. v. CST [2014] 35 STR 94 (Tri.-Del.)

24 The U.S. based holding company of the assessee had deputed its staff to the assessee in India which paid their salaries after deducting income tax at source and had also reimbursed the social security contribution made by the U.S. company on behalf of the employees. The Hon’ble Tribunal relying on the decision in Paramount Communication Ltd. (2013) 29 STR 317 (Tribunal) & Volkswagen India Pvt. Ltd. (2014) 34 STR 135 (Tribunal) held that just because the social security contribution in respect of the expatriate employees was paid by the holding company, the expatriate employees cannot be treated as the employees of the holding company provided to the assessee company on manpower supply basis and accordingly the assessee would not be liable to pay service tax on the same under Reverse charge mechanism.

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Bain & Co. India Pvt. Ltd. v. CST [2014] 35 STR 553 (Tri-Del.)

25 The assessee had deputed personnel such as executives, secretaries and receptionist to group companies in consideration for which it had received service charges from the said companies. The Hon’ble Tribunal held the said services would be liable for service tax only w.e.f. 16-6-2005 under the category of manpower recruitment or supply agency service and not prior to that date under the category of management consultancy services.

Mahindra & Mahindra Contech Ltd. v. CCE [2014] 35 STR 634 (Tri-Mumbai)

Management,MaintenanceorRepairService26 The Hon’ble Tribunal observed that prior to 16-6-2005 maintenance and repair carried out under a maintenance contract were only liable for service tax. Thus, where the assessee had carried out maintenance and repair of old sugar mill rollers but not under any maintenance contract or agreement, it held that the activities were not liable for service tax under the category of ‘Maintenance or Repair Service’.

CCE v. S. B. Reshellers Pvt. Ltd. [2014] 34 STR 605 (Tri.-Mum.)

27 The assessee repaired parts of motor vehicles like engines, etc. brought to its workshop by other authorised service stations (where the motor vehicle was brought by the customer). The Hon’ble High Court held that during the relevant period when repair of “motor vehicles” was excluded from the definition of ‘maintenance and repair services’, even repairs to motor vehicle parts would be excluded since without the individual parts it does not become a motor vehicle and such parts can only be used for a motor vehicle and normally fitted to the same vehicle.

Kuttukaran Trading Ventures v. CCE [2014] 35 STR 481 (Ker.)

RestaurantServices28 The Hon’ble High Court observed that in a transaction involving supply of food and beverages, the element of service has been brought under the service tax and the Service tax (Determination of Value) Rules, 2006 vide Rule 2C has provided that 40% of bill amount was liable to service tax. It held that no value added tax can be imposed on the said 40% of the value.

Valley Hotel & Resorts v. CCT [2014] 35 STR 28 (Uttarakhand)

SaleofSpaceorTimeforAdvertisement29 The Hon’ble Tribunal held that display / flashing of advertisements in websites would be liable for service tax under the category of sale of space or time for advertisement services only w.e.f. 1-5-2006 and not prior to that date under the category of Business Auxiliary Services.

CCE v. EBAY India Pvt. Ltd. [2014] 35 STR 590 (Tri.-Mumbai)

Site Formation, Cleaning, Excavation,EarthmovingandDemolitionServices30 The assessee had entered into an agreement whereby it undertook activities like excavation and removal of overburden wastes and also undertook mining of ores. The Hon’ble Tribunal held that the demand of service tax by the department on excavation and removal of overburden wastes under the category of Site Formation, Cleaning, Excavation, Earthmoving and Demolition Services was incorrect.

Associated Soapstone Distributing Co. P. Ltd. v. CCE [2014] 34 STR 865 (Tri.-Del.)

ScientificandTechnicalConsultancyServices31 The Hon’ble Tribunal held that manufacturer of textiles cannot be perceived as Scientific or Technology Institution or organisation and therefore Appellate Commissioner was right in holding that services were not covered under impugned head.

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CST v. Just Textiles Ltd. [2014] 35 STR 395 (Tri.-Mumbai)

TransmissionandDistributionofElectricity32 The assessee was engaged in providing services like manning and maintenance of sub-stations; erection of sub-stations; transportation of failed/repaired transformers and other goods by road; establishing of customer service centres for the electricity distribution companies and supply of manpower for maintenance of sub-divisions of electricity companies. The Hon’ble Tribunal held that no service tax would be payable since Notification No. 45/2010 –ST dated 20-7-2010 exempts services provided in relation to transmission and distribution of electricity for the period up to 26-2-2010.

Shri Ganesh Enterprises v. CCE, [2014] 35 STR 348 (Tri.-Bang.)

33 The assessee was engaged in preparation of spot bills by taking reading of electricity consumption, distribution of bills, verifying malfunctioning of meters, theft of power etc. which activities were sought to be taxed under the category of business auxiliary services. The Hon’ble Tribunal held that the services rendered being in relation to distribution of electricity the same would be exempt under Notification No. 45/2012 dated 20-7-2010 up to 21-6-2010.

Sterling Transformers v. CCE, [2014] 35 STR 396 (Tri.-Bang.)

TourOperatorService34 The assessee, a tour operator, entered into contracts with various Principal Tour Operators (‘PTO’). The PTOs provided package tour services (i.e., tours including transport services along with supplementary services like air and rail tickets, food and lodging, guide services etc.) to tourists. The assessee provided the PTOs transport and supplementary services (like guide, monument visit, etc.). The assessee paid service tax on transport Services but not on supplementary services. The Hon’ble High Court

upheld the demand on Supplementary services and held as follows –

a. The contention of the assessee that since PTOs were paying service tax on the entire amount collected on package tours and hence no tax was payable by them was rejected due to lack of evidence being adduced by the assessee to prove that tax was actually paid on the entire amount by the PTOs.

b. The taxable service not only means mere providing of cars, taxis, contract carriages on a temporary basis but it would also include other facilities supplied in relation to tour as a whole. Hence the amount paid to the assessee towards supplementary services, apart from the payments received towards transport services were liable to be included in the gross amount and are part of the value of taxable service which are liable to service tax.

Touraids (I) Travel Services v. CCE [2014] 35 STR 234 (All.)

35 The assessee was engaged in operating contract carriage buses from Hyderabad to Shirdi and also conducting tours subject to availability of vehicles and willingness of tourist. The Hon’ble Tribunal held that the assessee’s services would be liable for service tax under the category of tour operator services.

SVR Tours & Travels v. CCE [2014] 35 STR 378 (Tri.-Bang.)

WorksContractService36 The Honble Supreme Court in this case held that, composite contract for manufacture, supply and installation of lift in a building was a works contract and not a contract for sale of goods. Works contract is indivisible contract but by legal fiction is divided into two parts, one for sale of goods, and other for supply of labour and service. The dominant nature test or degree of intention test or overwhelming

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component test for treating contract as works contract is not applicable. Works Contract in Article 366 (29A) of Constitution of India takes in its sweep all genre of works contract, and is not to be narrowly construed to cover one species of contract to provide for labour and service alone. Once characteristics of works contract are met, any additional obligation in contract would not change nature of contract. Incidental part as regards labour and service pales into insignificance for determining nature of contract.

Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu [2014] 34 STR 641 (SC)

37 The Hon’ble High Court held that the assessee had used Ready Mix Concrete (‘RMC’) captively and supplied to third parties and only service element of use of RMC was amenable to service tax and not the entire RMC.

YFC Projects P. Ltd. v. UOI [2014] 35 STR 8 (Del.)

38 In the instant case, the issue was where composite contract for supply of goods and services can be split into two separate contracts viz., pure supply of goods and for provision of services (which also includes transfer of property in goods), whether such service contract (in isolation) can be constituted as a ‘works contract’ and be eligible for abatement scheme for computation of service tax. The Hon’ble Tribunal held as under:

• For the purpose of classification under ‘works contract’, the individual service contract should be examined regardless of the supply contract.

• It is not merely the nomenclature and form of the contract that should be seen.

• What is material is the form as well as substance of the contract, both have to be examined.

Therefore, a service contract also, involving transfer of property in goods which is subject to VAT, would be construed as ‘works contract’

and accordingly, eligible for the abatement scheme under service tax laws.

M/s. Gammon India Ltd. v. CCE [TS-297-Tribunal- 2014-ST]

B] Valuation39 The assessee was engaged in providing maintenance and repair services of aircraft for Ministry of Defence. It had paid service tax on the service portion of its contract and had also separately disclosed the value of materials and ATF supplied by it in its invoice. It had also not availed CENVAT credit on the material supplied by it. However, the department sought to include the value of materials for the purpose of levy of service tax. On appeal, the Hon’ble Tribunal held that it had complied with the conditions of Notification No. 12/2003 and hence value of materials and ATF was not includible for levy of service tax.

Hindustan Aeronautics Ltd v. CST [2014] 34 STR 874 (Tri.-Bang.)

40 The assessee was engaged in providing clearing and forwarding agency services to a cement company. It paid service tax on the consideration received by it for providing its clearing and forwarding agency services. In addition to the same it also arranged labours for loading and unloading on behalf of the company and were also receiving actual charges for loading and unloading which was paid over by it, without retaining any amount, to the labour board. The Hon’ble Tribunal held that the actual charges received for loading and unloading are not liable to be included for the purpose of levy of service tax in the taxable value of clearing and forwarding agency services.

CCE v. J. A. Bindra C & F Agent [2014] 35 STR 376 (Tri.-Mumbai)

C] CENVAT 41 Input service invoices were addressed to the head office but credit was taken by another

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unit, though head office was not registered as an input service distributor. The Hon’ble Tribunal allowed the credit in absence of any dispute about receipt and use of the services and payment of service tax on the same. It held that ‘procedural violation cannot result in denial of substantive right of CENVAT Credit’.

Anand Nishikawa Co. Ltd. v. CCE [2014] 34 STR 751 (Tri.–Del.)

42 The Hon’ble Tribunal denied the CENVAT credit on goods transport service availed for transporting the vehicles from the supplier’s premises to their premises was not allowed as input services since it pertained to dealing / trading activity as the assessee was a dealer in motor vehicles as well as authorised service station,.

Asst. Comm. C, CE&ST v. Sree Siva Sankar Automobiles [2014] 34 STR 797 (Tri.-Bang.)

43 The Hon’ble Tribunal held that the CENVAT credit of service tax paid by consignor (supplier) of goods on Goods Transport Agency services on behalf of the consignee (buyer) and recovered from the buyer is allowable to the buyer in terms of C.B.E.&C. Circular No. 97/8/2007, dated 23-8-2007.

Rathi Bars Ltd. v. CCE [2014] 34 STR 799 (Tri.-Del.)

44 Where the assessee – unit (one of the two units of the assessee) had taken the entire credit based on invoices that were in the name of the head office located at Mumbai which was not registered as an input service distributor, CENVAT credit was allowed relying on Doshion Ltd. v. CCE (2013) 288 ELT 291 (Tri.-Ahmd.) & Modern Petrofils v. CCE (2010) 20 STR 627 (Tri.–Ahmd.).

Demosha Chemicals Pvt. Ltd. v. Comm. CST [2014] 34 STR 758 (Tri.–Ahmd.)

45 The Hon’ble High Court held that credit of service tax paid on outward transportation of final product from the place of removal till

it is delivered to the customer was admissible as being a service in relation to ‘clearance of final product from the place of removal’ prior to 1-4-2008.

Commissioner v. Ellora Time Ltd. [2014] 34 STR 801 (Guj.)

46 The Hon’ble High Court held that credit of service tax paid on transportation of goods from factory to depot (place of removal) was admissible. The Court concurred with Hon’ble Tribunal’s observation that the submission of the department that CENVAT credit cannot be allowed for service if the value thereof does not form part of the value subjected to excise duty runs counter to the fundamental concept of service tax laid down in All India Federation of Tax Practitioners’s case.

CST v. Grey Gold Cements Ltd. [2014] 34 STR 809 (AP)

47 The Hon’ble Tribunal allowed CENVAT credit of service tax paid on commission paid to agent, hazardous waste material incineration charges, pest control service, xerox machine service, membership fee, professional charges and employee transport charges as the said services cannot be said to have been obtained after removal of goods.

BAL Pharma Ltd. v. CCEC &ST [2014] 34 STR 752 (Tri.-Bang.)

48 The Hon’ble Tribunal held that CENVAT credit was allowable on following services:

• Repair and maintenance of photocopier;

• Rent a cab services used for inspection of goods quality and specification which is required to be completed before removal of goods;

• Freight inwards relating to transport of raw material.

Mersen India Pvt. Ltd. v. CCEC & ST [2014] 34 STR 756 (Tri.-Bang.)

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49 The Hon’ble High Court held as under:

• Welding electrodes used in relation to manufacture of final products was eligible for credit.

• Plastic crates and pallets used for transferring unprinted bottles for printing used in relation to manufacture of final product was eligible for credit.

• Mobile phones and phones, taxi service used in relation to manufacture of final product was also eligible for credit.

CCCE & Ace Glass Container Ltd. [2014] 34 STR 805 (Uttarakhand)

50 The Hon’ble High Court held that assessee was not entitled to claim CENVAT credit on sales commission services obtained by them. If there was any conflict between jurisdictional High Court and CBEC Circular, the decision of jurisdictional High Court is binding on the Department rather than CBEC Circular.

Astik Dyestuff Pvt. Ltd. v. CCE &C [2014] 34 STR 814 (Guj.)

51 The Hon’ble Tribunal considering precedent decisions held that assessee was entitled to claim Cenvat credit of service tax paid on brokerage, air travel bookings, transportation of employees etc.

CCE v. Indorama Synthetics (I) Ltd. [2014] 35 STR 96 (Tri.-Mumbai)

52 The assessee availed credit at manufacturing unit at Mahad of service tax paid on Cargo Handling Agency service by its registered office, Pune. The department sought to deny the same. The Hon’ble Tribunal held that there was no provision in law prohibiting Mahad unit where goods manufactured and cleared for export and Cargo Handling Agency services availed thereof, from availing credit of service tax paid on said services, merely because exporter having registered office at Pune.

Aquapharm Chemicals Pvt. Ltd. v. CCE [2014] 35 STR 113 (Tri.-Mumbai)

53 The assessee, who was engaged in providing works contract services, had paid service tax on the full rate after availing credit of duty paid on cement, channels, CTD/ TMT bars and other items of construction which was sought to be denied by the department on the grounds that the assessee ought to have discharged the service tax liability under the Service tax (Determination of Value) Rules, 2006 or Works Contract (Composition Scheme for payment of service tax) Rules, 2007 without availment of CENVAT credit. On appeal, the Hon’ble Tribunal held as follows:

• Value of taxable service has to be determined only as per section 67 and recourse can be had to valuation rules only if the value is not ascertainable as per the provisions of sections 67(1)/(2)/(3);

• The valuation rules are subject to the provisions of sections 67;

• The composition scheme merely provides an option to the service provider to discharge the service tax liability vis-à-vis the option available under section 67 of the Act.

Hence discharging the service tax liability on the full rate by the assessee was held to be correct and accordingly availment of CENVAT credit on the inputs/ input services was held to be admissible.

S. V. Jiwani v. CCE [2014] 35 STR 351 (Tri.-Ahmd.)

54 The department sought to deny the CENVAT credit on the ground that the services ought to have been classified under different category of services by the service provider. The Hon’ble Tribunal held that what is required to be considered at the service recipient’s end is whether service tax was paid or not and whether it was covered under the definition of input service. It further held that CENVAT credit on outdoor catering services, convention services, event management services etc., received in connection with business promotion and sales

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promotion of the asseessee’s business was admissible.

IBM India Pvt. Ltd. v. CCE [2014] 35 STR 384 (Tri.-Bang.)

55 The Hon’ble Tribunal held that demand for recovery of CENVAT credit cannot be raised against input service distributor under Rule 14 of the CENVAT Credit Rules, 2004. It can be raised only from the unit manufacturing or providing output service who have claimed it.

Indian Oil Corporation Ltd. v. CCE [2014] 35 STR 411 (Tri.-Del.)

56 In instant case, the full value of input service invoiced was not paid to the input service provider on account of discounts but the service tax payable thereon as indicated in the invoice was paid in full. The Hon’ble Tribunal held that denial of CENVAT credit attributable to discounted portion of the invoice value was not permissible in view of Board Circular No. 877/15/2008-CX, dated 17-11-2008 and Board Circular No. 122/3/2010-ST dated 30-4-2010.

Patel Air Freight v. CCE [2014] 35 STR 529 (Tri.-Ahmd.)

57 The assessee rented a premises and provided the same to its jobworker (a separate entity). The Hon’ble Tribunal held that CENVAT credit on the rent paid was not admissible since it was not a service used by the assessee in relation to its business.

New Allenberry Works v. CCE [2014] 35 STR 544 (Tri.-Del.)

58 The Hon’ble Tribunal relying on Karnataka High Court decision in Micro Labs (2012) 26 STR 383 (Kar.) & Stanzen Toyotetsu (2011) 23 STR 444 (Kar.) held that credit of service tax paid on group insurance policy including the family members of employees was admissible. It further held that credit of service tax paid on car parking rentals was also admissible since car parking was a part of the business premises.

PTC Software India Pvt. Ltd. v. CCE [2014] 35 STR 632 (Tri.-Mumbai)

59 The Hon’ble Tribunal held that the services provided to SEZ units / developer would not be subjected to provisions of Rule 6(3) of the CENVAT Credit Rules, 2004 in view Rule 6(6A) of the credit rules which was given retrospective effect vide section 144 of the Finance Act, 2012.

Hewlett Packard India Sales Pvt. Ltd. v. CCE [2014] 35 STR 410 (Tri.-Bang.)

60 The assessee claimed CENVAT credit on service tax paid on maintenance charges collected from tenants. The department denied credit on the ground that renting of immovable property service was not in existence during impugned period. The Hon’ble Tribunal held that credit was admissible on real estate agent service covered by Rule 6(5) of CENVAT Credit Rules, 2004.

Kirloskar Systems Ltd. v. CST [2014] 35 STR 552 (Tri-Bang.)

D] Penalty61 The assessee had paid service tax along with interest prior to issuance of show cause notice and which was recovered by it from the service recipient who had also claimed credit of such tax paid. The Hon’ble High Court held that it was not a case of wilful suppression and hence the assessee was eligible for the benefit of non-imposition of penalty by virtue of section 73(3).

Commissioner v. Tejas Agency [2014] 34 STR 803 (Guj.)

62 The Hon’ble High Court held that confirmation of demand by invoking the extended period of limitation [where there is an ‘intent to evade’ payment of tax] and a waiver of penalty under section 80 on ‘reasonable cause’ ground can co-exist.

Daurala Organics v. CCE 2014 (35) STR 214 (All.)

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63 The Hon’ble High Court held that the penalty under section 76 cannot be reduced below the minimum prescribed limit by invoking section 80 [waiver of penalty on a ‘reasonable cause’ ground] since the latter only permits complete waiver of penalty and not reduction in penalty.

CCE&C v. V.M. Engg. Works [2014] 35 STR 220 (Guj.)

64 The Hon’ble Tribunal held that since assessee was under bona fide belief that no tax liability arises for services rendered to State Government for celebration of national holidays, the penalty under sections 76 and 77 was to be set aside.

Payal Electric Decoration v. CCE&ST [2014] 34 STR 777 (Tri.-Ahmd.)

65 The assessee availed CENVAT credit without being registered as Input Service Distributor (‘ISD’) and without being in possession of requisite documents. The Hon’ble Tribunal held that ISD scheme was a special scheme and if anybody wants to avail the benefit thereof, the terms and conditions have to be complied with completely. Further, service tax credit can be distributed only if the services were received at the manufacturing premises and if it is received elsewhere, it was not permissible to avail the service tax credit. In the instant case, distribution of credit by HO of assessee was without being registered as ISD and without ascertaining receipt of services at its factory, same were against the provisions of CENVAT Credit Rules, 2004. It further held that credit on construction service and insurance service was not available as construction was for storage of imported goods and was in respect of trading activity. Similarly for insurance service, bulk of it being in connection with traded goods, the assessee could not have taken credit in respect of this service.

Nitco Ltd. v. CCE [2014] 34 STR 835 (Tri.-Mum.)

66 The Hon’ble Tribunal restricted the allowability of CENVAT credit of service tax

paid on repair and maintenance services to the extent of area let out and on which service tax was paid under renting of immovable property service.

Treat Convenience Foods v. CCE&ST [2014] 34 STR 854 (Tri.-Del.)

67 The Hon’ble Tribunal observed that the assessee had disclosed the amount of CENVAT credit availed by it in its statutory records and returns filed by it. It held that there being no suppression/mis-statement of facts extended period of limitation was not invokable and accordingly no penalties were imposable.

New Allenberry Works v. CCE [2014] 35 STR 544 (Tri.-Del.)

68 The Hon’ble Tribunal held that since the issue involved was debatable involving interpretation of law and definition of input service imposition of penalty was unwarranted.

IBM India Pvt. Ltd. v. CCE [2014] 35 STR 384 (Tri.-Bang.)

69 The Hon’ble Tribunal observed that the assessee had paid service tax along with interest prior to issuance of show cause notice and informed the Jurisdictional Range Officer. It held that imposition of penalty under section 76 was unwarranted in view of section 73(3) of the Act.

BIPCO Industries (Tools) Pvt. Ltd. v. CCE [2014] 35 STR 394 (Tri.-Ahmd.)

70 The Hon’ble Tribunal held that the fifth proviso to section 78 inserted w.e.f. 10-5-2008, viz., that no penalty under section 78 shall be payable where penalty under section 76 has been imposed, does not have any retrospective effect. Accordingly, where there has been a failure to pay service tax for the period prior to 10-5-2008 for which show cause notices were issued post 10-5-2008 penalties under both section 76 and 78 would be imposable.

CCE v. Om Sai Engineering Works [2014] 35 STR 531 (Tri.-Ahmd.)

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71 The Hon’ble Tribunal observed that the issue involved was one of interpretation of statute and there were several decisions based on which the assessee entertained a bona fide belief that it was not liable for service tax under the category of commercial training or coaching services which was subsequently clarified by insertion of an explanation with retrospective effect by Finance Act, 2010. Accordingly, it held that there was no contumacious conduct or active disregard of the provisions of law and accordingly imposition of penalties was not warranted.

Landmark Education India v. CST [2014] 35 STR 537 (Tri.-Mumbai)

72 The assessee paid the entire tax liability along with interest on being pointed out by the audit team of the service tax department. The Hon’ble Tribunal held that since there was no active suppression on the part of the assessee no notice for imposition of penalty ought to have been issued to the assessee in view of Section 73(3) of the Act.

Shriram EPC Ltd. v. CST [2014] 35 STR 564 (Tri.-Chennai)

E] Others

Appeal73 The Hon’ble High Court held that an appeal against an order of the CCE(A) relating to rebate/refund claims of service tax is maintainable before the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”) though section 35EE of the Central Excise Act, 1944 (providing for revision application to be made to the Central Government against such an order) is made applicable to service tax vide section 83 of the Finance Act,1994.

Glyph International Ltd. v. UOI [2014] 34 STR 727(Del.)

74 The Hon’ble Tribunal laid down the following principles on the issue whether an

appeal against an order of Commissioner of Central Excise (Appeals) [‘CIT(A)’] directing pre-deposit was maintainable before the Hon’ble Tribunal –

a. The CCE(A) must consider an application for waiver of pre-deposit on a careful, good faith and critical analysis of prima facie merits of the case, financial hardships, irreparable injury, etc. as enunciated in ITC v. CCE (2005) 184 ELT 347 (All.) and CCE v. Chaitanya Educational Committee (2011) 22 STR 135 (AP).

b. The CCE(A) has the power to entertain an application for rectification and modification of pre-deposit ordered by him but only for rectification of an error on the face of the record.

c. An appeal to the Hon’ble Tribunal is maintainable against an order of CCE(A)

(i) Directing pre-deposit [“interlocutory order”]; and

(ii) Dismissing an appeal for failure to pre-deposit [“Final order”].

d. While considering an appeal against the final order of CCE(A) referred to in (c)(i) above, the Tribunal can consider the correctness of the interlocutory order passed by CCE(A) and set aside the order if found incorrect; pass an appropriate order as to pre-deposit; and remit the matter to CCE(A) for de novo consideration. It cannot adjudicate upon the merits of the appeal.

Girnar Transformers Pvt. Ltd. v. CCE [2014] 35 STR 97 (Tri.-Del.)

75 The Hon’ble High Court held that Commissioner (Appeals) cannot condone a delay in filing of appeal beyond a period of 6 months from the date of service of the impugned order.

Plaza v. Jt. CCE, [2014] 35 STR 212 (Ker.)

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Amountcollectedasservicetax76 The assessee a developer of residential properties had carried out construction activities during the period 2006 to 2009. In view of the confusion prevailing as to the applicability of service tax on construction services, the assessee had collected the amount of service tax that would be payable by it on the said construction services from the flat purchasers and deposited the same in an escrow account (to be returned to flat purchasers/paid to the Central Government). The department initiated proceedings under section 73A(2) of the Act on the ground that the assessee should have deposited the said amounts with Government. On appeal, the Hon’ble Tribunal held that the provisions of section 73A(2) of the Act would be attracted only in case where the amount representing service tax has been ‘collected’ by the service provider as service tax. Since the amounts were deposited in escrow account which were to be disbursed to the person who was eligible to get the same (i.e. the flat purchasers/Central Government) when the issue attained finality, it cannot be said that the said amounts had been ‘collected’ by the assessee as service tax. Accordingly, same was not payable by the assessee under the provisions of section 73A(2) of the Act.

Sliverline Estates v. CST [2014] 35 STR 425 (Tri.-Bang.)

Abatementonconstructionservices77 The Hon’ble Tribunal held that the value of free supplies by service recipients need not be added to the amounts charged by the service provider for computing the abatement of 67% under Notification No. 1/2006-ST.

ATR Constructions Pvt. Ltd. v. CCE [2014] 35 STR 92 (Tri.-Del.)

Cum-taxBenefit78 The assessee had not collected any service tax from the service recipient. The Hon’ble Tribunal held that the entire consideration received by the assessee will have to be treated as cum-tax and the

same needs to be apportioned between the taxable value and service tax.

Landmark Eductaion India v. CST [2014] 35 STR 537 (Tri.-Mumbai)

Demand79 The department confirmed the liability of a person to pay service tax along with interest post his death on a limited company which had succeeded to his business. On appeal, the Hon’ble Tribunal held that the same was not permissible under section 11 of the Central Excise Act, 1944.

B.H.H Securities Ltd. v. CST [2014] 35 STR 391 (Tri.-Mum.)

80 The assessee a commission agent of liquor products of various manufacturers also undertook promotional activities, provided infrastructural support and also performed clearing and forwarding agent’s services to some of the manufacturers. The Hon’ble Tribunal held that the services were in the nature of business auxiliary services and hence cannot be considered as commission agent’s services exempt under Notification No. 13/2003-ST dated 20/6/2003.

Anupama Wine Distributors v. CCE [2014] 35 STR 392 (Tri.-Bang.)

81 The assessee, a motor vehicle dealer had provided table space to the banks and received a commission from the banks where the vehicles sold by the assessee was financed by the bank which was sought to be taxed by the department on the grounds that the assessee had provided business auxiliary services to the bank. On appeal, the Hon’ble Tribunal held that in absence of any evidence of provision of business auxiliary services, the assessee cannot be said to have provided business auxiliary services to the bank.

Jaika Motors Ltd. v. CCE [2014] 35 STR 417 (Tri.-Mum.)

82 The assessee had provided services in the nature of digitisation of maps, IRS PAN images, computerisation of land plan, and vectorisation

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of village maps. The Hon’ble Tribunal held that the services were not liable for service tax under the category of ‘scientific or technical consulting services’ as it had not provided any advice, consultancy or technical assistance in any discipline of science or technology.

CCE v. ADCC INFOCAD Pvt. Ltd. [2014] 35 STR 421 (Tri.-Mum.)

83 The assessee a merchant banker registered as such with the Securities Board of India had rendered the services of private placement of equity shares which was sought to be taxed by the department under the category of management consultancy services. The Hon’ble Tribunal relying on the Board clarification No. BII/I/2000-TRU dated 9-7-2001 held that the impugned services were in the nature of merchant banking services. Further, since merchant banking services rendered by body corporate were liable for service tax only w.e.f. August, 2002 the impugned services rendered during the month of January, 2000 would not be liable for service tax under the category ‘management consultancy services’.

Triumph International Finance India Ltd. v. CST [2014] 35 STR 338 (Tri.-Mum.)

84 The assessee was engaged in leasing out their Petroleum Products Outlets [equipment plus land] owned by them to dealers who were purchasing the products, storing them and selling the same from the outlets. The Hon’ble Tribunal held that the assessees were only leasing out its facilities to the dealers and was not providing any “storage and warehousing service” to the dealers. Accordingly, the service tax demand on the licence fees received by it from the dealers would not be liable for service tax under the category of ‘storage and warehousing services’.

Indian Oil Corporation Ltd. v. CCE [2014] 35 STR 431 (Tri.-Mum.)

DredgingService85 The Hon’ble Tribunal held that, widening, deepening and desilting of Mithi River is activity

squarely covered under Dredging Service. It also held that penalty under section 78 was unwarranted since no suppression of facts from any public authorities in view of the fact that the service provided in respect of Mithi River was in public domain and contract was awarded by Government of Maharashtra.

Reliance Michigan (JV) v. CCE [2014] 35 STR 620 (Tri.-Mumbai)

Exportofservices86 The assessee provided technical testing services to foreign entities during the period 1-7-2003 to 19-11-2003 (when the exemption for receipts in foreign exchange was not in force). The department sought to demand tax since no exemption was in force. The Hon’ble High Court upholding the Tribunal’s order observed that –

• Though the tests had been conducted in India and the reports may have been prepared in India the services were complete only when the reports were delivered to client abroad since delivery of report was an essential part of service. Hence the services would be considered as exports;

• Service tax being a destination based consumption tax charged on the consumers it is leviable only on services provided within the country. Since service recipient was situated abroad no service tax would be payable during the relevant period.

CST v. SGS India Pvt. Ltd. [2014] 34 STR 554 (Bom.)

87 The assessee had provided the services of marketing of products of overseas principals in India and received their monies in convertible foreign exchange. The Hon’ble Tribunal held that services would be considered as ‘exported’ since the recipients were located abroad; the service was used outside India by the recipients for their business; and money was also received in convertible foreign exchange.

CST v. Menon Associates [2014] 34 STR 793 (Tri.-Del.)

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88 The assessee had rendered security agency services by carrying out activities like verification of antecedents, financial credibility, copyright infringement etc. in India for its clients located abroad. The Hon’ble Tribunal held that since the final report of the activities carried out by the assessee was delivered to the clients outside India the services were partly performed outside India and hence the services would be considered as exported outside India.

C3i Consultants India Pvt. Ltd. v. CCE [2014] 35 STR 556 (Tri.-Bang.)

Limitation89 The assessee was awarded a contract for carrying out loading, shifting and feeding of coal and gypsum by road for which diesel would be provided free of cost. They have paid service tax on amount charged for service provided excluding cost of diesel. The department sought to demand tax on cost of diesel by invoking extended period of limitation. The Hon’ble High Court held that wilful suppression cannot be assumed or presumed merely on failure to declare certain facts unless it is preceded by deliberate non-disclosure so as to evade payment of tax. Further, non-disclosure of fact which, even if disclosed, would not have attracted the charging section, could not be brought within the ambit of suppression of fact for purpose of extension of limitation period. Thus, invocation of extended period was unsustainable and impugned show cause notice was liable to be quashed.

Naresh Kumar & Co. Pvt. Ltd. v. UOI [2014] 35 STR 506 (Cal.)

Interest90 The assessee paid service tax belatedly on maintenance and repair of roads for 2008-09 without interest which was subsequently exempted retrospectively. The Hon’ble Tribunal held that the demand for interest cannot be sustained since the tax itself was not due.

Sree Infra Tech v. CCE [2014] 35 STR 128 (Tri.-Chennai)

Pre-deposit91 The Hon’ble High Court held that where there was a composite order demanding tax and penalty, the Hon’ble Tribunal cannot order pre-deposit of any portion of the penalty since penalty proceedings can be initiated only after assessment of tax is final. The pre deposit can be only of tax. The pre-deposit of penalty will arise only where penalty alone is under challenge.

Spandana Spoorthy Financial Limited v. CCE&ST [2014] 35 STR 183 (AP)

Refund92 The assessee inadvertently paid service tax on services exported but claimed refund of the service tax paid by it under section 11B when it realised the same. The tax was paid for 2006-07 and 2007-08 and refund claim was filed on 28-4-2010. The Department rejected the refund claim as time barred which was upheld by the Hon’ble High Court.

Andrew Telecom (I) Pvt. Ltd. v. CCE [2014] 34 STR 562 (Bom.)

93 The assessee provided Technical Testing services to overseas companies (exempted services) and Business Auxiliary services to overseas clients (taxable services that were exported) and claimed refund of entire unutilized CENVAT Credit. The department sought to deny proportionate refund of credit attributable to exempted services. The Hon’ble Tribunal relying on decision of Zenta Pvt. Ltd. v. CCE (2012) 27 STR 519 (Tri.-Mum.) allowed the entire refund holding that –

• Since no exempt service has been provided in the domestic tariff area, the exempt services turnover was to be added to export turnover; and

• The logic of giving cash refund of taxes used for export of services is to ‘Zero rate’ exports.

Quintiles Technologies (India) Pvt. Ltd. v. CST [2014] 34 STR 753 (Tri. - Ahmd.)

94 The Hon’ble Tribunal held that refund of service tax paid on Terminal Handling Charges

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received in relation to the export of goods under Notification No. 41/2007 was admissible even if the said services were not specifically mentioned in the said notification.

CCE v. Pratap Re-Rolling Pvt. Ltd. [2014] 34 STR 868 (Tri.-Mum.)

95 The Hon’ble Tribunal observed that Notification No. 11/2005 grants rebate of service tax paid on services exported out of India. Though the said Notification does not prescribe any specific time limit within which the assessee is required to file the rebate claim, the period of limitation prescribed under section 11B of Central Excise Act would be applicable. Further, the principles of unjust enrichment would not be applicable to export transactions in view of the specific provisions of section 11B.

Vodafone Cellular Ltd. v. CCE [2014] 34 STR 890 (Tri.-Mum.)

96 The assessee claimed refund of service tax paid on acquisition of residential unit since no tax was payable. The department rejected the refund on the ground that it was barred by limitation. On appeal, the Hon’ble Tribunal held that the amount of service tax paid was a deposit and not tax and hence the provisions of section 11B would not apply.

Jyotsana D. Patel v. CCE [2014] 35 STR 77 (Tri.-Mum.)

97 The assessee had provided its property on rent to CESTAT, Mumbai for the period 2007-08 and paid service tax on the rent received. Subsequently, on realising that the said services were not liable for service tax, it filed a refund claim. However, the department rejected the refund claim pertaining to the period beyond time limit of one year on the grounds that it was time-bared [Section 11B]. The Hon’ble Tribunal held that the provisions of section 11B of the Central Excise Act, 1944 were not applicable since there was no liability to pay tax and hence refund claim was admissible.

Jubilant Enterprises P. Ltd. v. CCE [2014] 35 STR 430 (Tri.-Mum.)

98 The Hon’ble High Court held that the refund of CENVAT credit of service tax paid on ‘scientific & technical consultancy services’ availed by a SEZ unit prior to commencement of commercial production was allowable under Notification No. 9/2009.

CST v. Zydus Technologies Ltd. [2014] 35 STR 515 (Guj.)

99 The Hon’ble Tribunal held that the refund of tax paid on “port services” availed was allowable under Notification No. 41/2007 being a notified service, even though the port charged service tax under the category of renting of immovable property services which was not a notified service.

Sesa Goa Ltd. v. CCE [2014] 35 STR 558 (Tri.-Mumbai)

100 The Hon’ble Tribunal held that the refund of service tax paid on various charges such as THC charges, documentation charges, shut out costs, amendment charges etc., recovered by Cargo Handling Agents availed in relation to export of goods was admissible under Notification No. 41/2007-ST.

CCE v. Spentex Industries Ltd. [2014] 35 STR 562 (Tri.-Mumbai)

101 The assessee in the present case had provided tour operator services. It had not collected service tax on its services from the customers. However on being pointed out by the department it discharged the service tax liability on its entire consideration on a cum-tax basis without taking the abatement of 60% into account. Subsequently when it filed a refund claim in respect of the excess amount of tax paid by it, the same was rejected by the department on the ground of unjust enrichment. On appeal, the Hon’ble Tribunal held that since no service tax was collected by the assessee from the customers the bar of unjust enrichment would not apply to the refund claim.

CCE v. Roopa Ram Suthar [2014] 35 STR 583 (Tri.-Del.)

102 The assessee had paid service tax on the residential flats sold by it in respect of which it had

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subsequently claimed refund in view of the Board Circular No. 108/2/2009-ST dated 29-1-2009. The Hon’ble Tribunal held that since the amount was erroneously paid the department cannot retain the same and accordingly the bar of limitation under section 11B would not be applicable in its case. Accordingly, the refund of tax paid was permissible.

Shravan Banarsilal Jejani v. CCE [2014] 35 STR 587 (Tri-Mumbai)

103 The Hon’ble Tribunal held that the refund of tax paid by the assessee a developer of residential units was allowed where the assessee proved that he had not collected service tax from the flat purchasers and had also produced certificates from them evidencing non-payment of service tax to it.

Vyankatesh Real Estate Developers v. CCE [2014] 35 STR 589 (Tri.-Mumbai)

Jurisdiction104 The Hon’ble Tribunal held that it had no jurisdiction to hear appeal filed against order passed by Commissioner (Appeals) in respect of rebate claim and therefore it was not maintainable. The Registry was directed to transfer the appeal to Joint Secretary to Government of India.

Spanco Telesystems & Solutions Ltd. v. CST [2014] 35 STR 76 (Tri.-Mumbai)

ShowCauseNotice105 The show cause notice had alleged that assessee had wrongly availed credit of service tax paid on group mediclaim of its employees but the adjudicating authority had confirmed the demand on the ground that insurance cover was also for family members of employees. The Hon’ble Tribunal held that adjudicating authority cannot travel beyond the allegation in show cause notice & confirm the demand.

Samruddhi Cement Ltd. v. CCE [2014] 34 STR 592 (Tri.- Del.)

106 The department sought to demand tax on services of facilitating of foreclosure of loans under

Business Auxiliary Services. The Hon’ble Tribunal held that the show cause notice was defective as demand was raised under Business Auxiliary Service instead of Banking & Other Financial services. It also held that the assessee cannot be presumed to be aware of liability of Service Tax hence, the impugned order was unsustainable.

Bank of Baroda v. CCE [2014] 35 STR 359 (Tri-Del)

Others107 The Hon’ble High Court held that, STVCES, 2013 being a package scheme, deposit of 50% declared dues was mandatory and even authorities have not been given discretion to grant extension of time to make the initial pre-deposit of 50% of declared dues. Thus, the claim of the assessee for direction to extend the period or to delete a sum which had been deposited by it prior to March, 2013 from the declaration already filed, could not be granted.

Teknow Overseas Pvt. Ltd. v. ACST (VCES) [2014] 35 STR 488 (Del.)

108 The Hon’ble Tribunal held that if contract value is inclusive of taxes, the tax variation being not part of the contracted value, would not result in any unjust enrichment.

CST v. A. P. Engineers [2014] 34 STR 795 (Tri-Del.)

109 The assessee had paid excess service tax in 2006 but had sought to adjust it under Rule 6(4A) r.w. 6(4B) in June 2007 without satisfying the conditions (viz., adjustment in the succeeding month or quarter and intimation to Superintendent). The Hon’ble Tribunal disallowed the adjustment on the ground that procedure prescribed by the legislation has to be followed strictly and in that fashion only unless the assessee can adduce reasonable explanation.

JCT Electronics Ltd. v. CCE & ST [2014] 34 STR 778 (Tri.-Ahmd.)

110 The Hon’ble High Court held that where the lease deed mentioned that the lessor (service provider) was liable to pay all the “other outgoings

AIFTPJ – 626


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in respect of the property leased”, the service tax liability, in the absence of any specific clause in the lease deed about service tax, must also be borne by the lessor. As between the parties, it is the contract and not the nature of levy that will determine which party, the service provider or the service recipient, that will bear the service tax.

Raghubir Saran Charitable Trust v. Puma Sports India Pvt. Ltd. [2014] 35 STR 225 (Del.)

111 The assessee had paid excess service tax during the period 2001 to 2002 he was allowed to adjust the excess payment against the liability for subsequent period October 2002–March 2003 under Rule 6(3) of the Service Tax Rules since excess payments was not collected from the customers.

B4U Television Network (I) P Ltd v. CST [2014] 35 STR 88 (Tri.-Mum.)

112 The Hon’ble Tribunal held that the dividend paid by the assessee company to its overseas parent out of disposable profits was payment for shares held and cannot be held as “repatriation of” or “sending outside India” of monies received in convertible foreign exchange for taxable services rendered so as to deny the exemption for receipts in convertible foreign exchange under Notification No. 6/99 dated 6-4-1999.

Maersk India Pvt. Ltd. v. CST [2014] 34 STR 894 (Tri.-Mum.)

113 The Hon’ble High Court held that an order under the VCES passed by the Deputy Commissioner was appealable under Section 86 of the Act to the Hon’ble Tribunal.

Barnala Builders & Property Consultants v. Dy. CCE & ST [2014] 35 STR 65 (P&H)

114 In the instant case, the question was that if the declarant has defaulted in discharging the first instalment of the tax declared under the under the Voluntary Compliance Encouragement Scheme (on or before the due date i.e. 31 December 2013), then whether such declaration would be rejected. The Hon’ble High Court held that the scheme makes no difference between tax dues which are short-paid

due to bona fide error and deliberate inaction and the High Court has no power in writ for waiving/relaxing the condition of depositing first instalment flowing from statute. Also, if the shortfall could be accepted with the interest, there was no need to make special provision for extending time deposit for the second instalment along with interest uto 31 December 2014. Therefore, rejection of declaration due to failure to fulfill essential requirement of the scheme was valid.

Ramilaben Bharatbhai Patel v. UOI [TS-190-HC-2014 (Guj.)-ST]

115 The petitioner filed writ petition before the Delhi High Court challenging the validity of Rule 5A (2) of the Service Tax Rules, 1994 (the Rule) requiring production of records to an audit party on demand and the CBEC circular dated 1 January, 2008 (the circular) pertaining to general audit. The Hon’ble High Court held that the Rule and the Circular, both are ultra vires of the Finance Act, 1994 (the Finance Act) and should be struck down. It made the following observations:

• Section 72A of the Finance Act envisages special audit of taxpayer’s records only in special circumstances, for example, in case the taxpayer fails to declare the value of taxable service or when CENVAT credit utilisation is in excess. However, the said section does not intend to provide for a general audit that every taxpayer may be subjected to ‘on demand’.

• Rules must conform to the provisions of the Act and be within the rule making powers of executive authority. Any notice, circular, guideline, etc., contrary to statutory laws could not be enforced.

• In the present case, the circular providing clarification on the Rule which is an attempt to widen the scope of law was contrary to the statute and hence, void.

Travelite (India) v. UOI and others [TS-310-HC-2014 (Del.)-ST]

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AIFTPJ – 627

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ALLIED LAWS AIFTP JOURNAL ² November, 2014

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DIRECT TAXES – Supreme CourtALLIED LAWS

Ajay R. Singh

AIFTPJ – 629

1. Hindu law : Self acquired or coparcenary property

Property originally belonging to brother of claimant. Claimant failed to prove that property actually was belonging to their father thereby entitling him for share in property. Also failed to plead in plaint that property was included in common stock of coparcenary property. Property thus cannot be termed as coparcenary property. Claimant not entitled to share in property.

Smt. Mailata Talukdar & Ors. v. Joy Kanta Talukdar AIR 2014 (NOC) 526 (Gau.).

2. Jurisdiction of Family Court – Suit for recovery of Stridhan: Family Courts Act, 1984

Suit for recovery of Stridhan comes within exclusive jurisdiction of Family Court. After establishment of Family Court in Municipal Corporation area Civil Court would have no jurisdiction to proceed with suit.

Balram Shivhare & Ors v. Smt. Suneeta Shivhare & Anr. AIR 2014 (NOC) 507 (MP)

3. Appeal – Dismissal without re appreciation of evidence – Order of Appellate Court liable to be set aside: CPC Sec. 96

In an appeal filed against dismissal of suit for cancellation of sale deed and restoration of possession the Appellate Court did not give any finding as to performance of respective duties assigned to parties by

agreement and no discussion made as to payment of purchase money, dismissal of appeal without appreciating evidence on these aspects held not proper by Supreme Court. Order of Appellate Court set aside.

Smt. Leela Krishnarao Pansare & Ors. v. Babasaheb Bhanudas Ithape AIR 2014 SC 2867.

4. Auction of Commercial Plot – No provisions in Guidelines / Rules / Regulations authorising Housing Board to realise misc. expenses and development charges: Contract Act, Sec. 7

In case of auction of commercial plot there were no provisions in Guidelines / Rules or Regulations authorising Housing Board to realise misc. expenses and development charges and more particularly lease money at stage of payment of 75% of bid amount by successful bidder on conveyance of information of acceptance of bid. The imposition of penal interest and eventual cancellation of allotment for non-payment of misc. expenses and development charges upheld by Single Judge was held to be improper by Division Bench of Rajasthan High Court.

M/s. Anukampa Builders P. Ltd. v. The Rajasthan Housing Board, Jaipur and Anr. AIR 2014 Rajasthan 129

5. Interpretation – Rule of Construction

When the Legislature uses same word in different parts of the statute, the presumption is that those words have been used in

ALLIED LAWSAIFTP JOURNAL ² November, 2014

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the same sense, unless displaced by the context. State of Punjab and Gurmit Singh AIR 2014 SC 2561

6. Part Performance of Contract: Transfer of Property Act, Sec. 54A

S. 54 of the 1882 Act, categorically states that a contract for sale itself does not create any interest in or charge on such property. S.53A of the Act provide protection to a transferee who in part performance of the contract had taken possession of the property even if the l imitation to bring a suit for specific performance has expired. One of the essential conditions to be fulfilled for being entitled to the said protection is, the transferee must in part performance of the contract taken possession of the property or of any part thereof. Therefore, Section 53A of the Act confers a statutory right on the transferee. This provision has been abused in recent years. Taking note of the recent trends, especially under the guise of those agreements of sale containing a recital to the effect possession is delivered to the transferee, the transferors were dispossessed and protection was sought in a court of law putting forth this statutory right. In those circumstances, Parliament has stepped in and has amended the Registration Act, 2001. The amended provision S. 1A of Section 17 makes it clear that, if the benefits of Section 53A of the Act is to be available then the contract for sale shall be registered. If not

registered then they shall have no effect for the purpose of the said Section 53A. However, this provision is made prospective and it applies to a contract for sale executed on or after the commencement of the Registration and other related Laws (Amendment) Act, 2001. The said amendment came into force on 24-9-2001.A.N. Nagarajaiah v. B. Aravind and Ors. AIR 2014 Kar. 140

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AIFTPJ – 630

FORTHCOMING PROGRAMMESDate & Month Programme Place

20-12-2014 National Executive Committee Meeting Jaipur

20, 21-12-2014 National Tax Conference (Central Zone) Jaipur

10, 11-1-2015 National Tax Conference (Western Zone) Gujarat


107ÜÜAIFTPJ – 631

NATIONAL TAX CONFERENCE, JAIPUR – 2014Jointly organised by

ALL INDIA FEDERATION OF TAX PRACTITIONERS • RAJASTHAN TAX CONSULTANTS ASSOCIATION TAX CONSULTANTS ASSOCIATION, JAIPUR • JAIPUR TAX BAR ASSOCIATION

on 20th and 21st December, 2014 at B.M. Birla Auditorium, Statue Circle, Jaipur

THEME : Make in India – Role of Tax Professionals

PROGRAMME

DAY 1 - SATURDAY, 20TH DECEMBER, 2014

8.30 am to 9.30 am Breakfast and Registration9.30 am to 11.30 am Inaugural Session ChiefGuest – Hon'ble Justice R. K. Agarwal, Judge, Supreme Court of India Presided by Hon’ble Mr. Justice Sunil Ambwani, Acting Chief Justice, Rajasthan High Court11.30 am to 11.45 am Tea Break 11.45 am to 1.15 pm First Technical Session – Income Tax ChiefGuest – Hon’bleMr. JusticeAjayRastogi,Administrative Judge, RajasthanHighCourt Chairman – ShriBharat JiAgarwal, Sr.Advocate,Allahabad KeySpeaker – ShriKapilGoel,Advocate,NewDelhi Speaker – ShriSatishGupta,CA, Jaipur1.15pm to2.00pm Lunch2.00 pm to 3.30 pm Second Technical Session – Panel Discussion on Companies Act ChiefGuest – Hon'ble Mr. Justice Rajesh Bindal, Judge, P & H High Court KeyNoteSpeaker–Mr.NesarAhmed, (PastPresident ICSI,NewDelhi Panellists – IndustryRepresentative–Mr.GopalGupta Expert – 1 –ShriH.N.Motiwalla,CA,Mumbai Expert – 2 –ShriAnilMathur,CA, Jaipur Moderator – ShriRajeevSogani,CA, Jaipur3.30 pm to 4.45 pm Third Technical Session – Service Tax ChiefGuest – Shri S. S. Lenka, Chief Commissioner, Central Excise Chairman – ShriN.K.Gupta,ChairmanManglamGroup, Jaipur KeySpeaker – ShriAtulGupta, (Member,CentralCouncil, ICAI),NewDelhi4.45pm HighTea5.00 pm to 7.30 pm National Executive Meeting of AIFTP at Hotel Clarks Amer7.45pm to9.00pm MusicalProgramme9.00pmonwards GalaDinner

DAY 2 – SUNDAY 21ST DECEMBER, 2014

9.00 am to 9.30 am Breakfast9.30 am to 12.00 noon Fourth Technical Session – Panel Discussion on issues of Income Tax, VAT, Service Tax and Stamp Duty on Real Estate Transactions ChiefGuest – Shri Rajpal Singh Shekhawat, Cabinet Minister (UDH), Govt. of Rajasthan Presidedby – Shri O. P. Agrawal, Conference Chairman Chairman – Dr.K.Shivaram,Sr.Advocate,Mumbai


108ÛÛ AIFTPJ – 632

Panellists – IndustryRepresentative–ShriAtmaRamGupta IncomeTax–ShriV.P.Gupta,AdvocateNewDelhi IncomeTax–Dr.AnitaSumanth,Advocate,Chennai ServiceTax–ShriAshokChandak,CANagpur VAT–ShriH.C.Bhatia,Advocate,NewDelhi VAT–ShriVinayakPatkar,Advocate,Mumbai StampDuty–ShriMahaveerSwami, Jaipur Moderators – DirectTax–ShriPrakashParwal,CA, Jaipur IndirectTax–ShriPankajGhiya,Advocate, Jaipur12noon to1.00pm FifthTechnicalSession AdvanceLawofAttractionand itsApplication KeyNoteSpeaker–Mr.GovindBabu (ChiefTrainer&ManagementGuru)1.00pm to1.45pm Lunch1.45pm to3.15pm SixthTechnicalSession WorksContract andOverlapping issueofServiceTax/VAT ChiefGuest – Hon’bleMr. Justice J.K.Ranka, Judge,RajasthanHighCourt Chairman – ShriAshokSaraf, Sr.Advocate,Guwahati KeySpeaker – Mr.N.Venkatramani,FCA,Bengaluru Speaker – ShriDeepakBapat,Advocate,Mumbai3.15pm to5.30pm Brains’TrustSession Chairman – ShriN.M.Ranka,Sr.Advocate, Jaipur 1. ShriS.K.Poddar,Advocate,Ranchi 2. Smt.PremLataBansal, Sr.Advocate,NewDelhi 3. ShriM.L.Patodi,Advocate,Kota 4. ShriO.P.Agrawal,CA, Jaipur 5. ShriK.L.Goyal, Sr.Advocate,Chandigarh 6. ShriMukulGupta,Advocate,Ghaziabad 7.Dr.M.V.K.Moorthy,Advocate,Hyderabad 8. ShriSanjay Jhanwar,CA, Jaipur 9.Mrs.NikitaBadheka,AdvocateMumbai

FollowedbyHighTea

Delegate Fees :- For Members/Spouse – ` 1,600/- (upto 30th November, 2014 and then ` 2,100/-) For Corporates/Others – ` 2,500/- (upto 30th November 2014 and then ` 3,000/-)KindlyissueDD/Chequeatparinfavourof“NATIONALTAXCONFERENCE2014”payableatJaipur.IfyouwishyoucanmakepaymentonlinebydepositingchequeordemanddraftorbyRTGSin thenameofNationalTaxConference2014AccountNumber:50200008290443 inHDFCBank,AshokMarg,C-SchemeBranch. IFSCCode:HDFC0000054.

Invitation and Request byPANKAJ GHIYA VIKRAM GOGRA AVINASH KHANDELWAL O. P. AGARWAL SATISH GUPTAVice President, AIFTP-CZ President, JTBA President, TCA Conference Chairman President, RTCA9829013626 9829060406 9414240851 9829017765 9828012935

H. N. MOTIWALLA MUKESH BHARDWAJ ABHISHEK SHARMA R.K. GURWALA V.K. JOLLY SecretaryGeneral-AIFTP Secretary-JTBA Secretary-TCA Director-Technical G.Secretary-RTCA 9819422300 9414071216 9829399453 9829014835 9414043300

Conference Secretariat RTCAAssociationBldg.,B-145/13,MangalMarg,BapuNagar,Jaipur•Tel.:0141-2704697e-mail:[email protected]

Hotel Accommodation

Hotel Name Rate @ Double Occupancy Remarks

HotelClarksAmer(5Star) ` 4000.00 + Taxes SpecialNegotiatedRatesinclusiveofBreakFast

109ÜÜAIFTPJ – 633

110ÛÛ

Research Team

Editorial Team

Keshav B. Bhujle

H. N. MotiwallaD. H. JoshiArati Vissanji

Subhash ShettyM. Subramaniam

Janak Vaghani

Aarti Sathe Ajay R. Singh Aliasger Rampurawala

Rahul Hakani Sanjukta Chowdhury

Sameer Dalal

Neelam Jadhav

Rahul Sarda

Paras Savla

Siddharth Ranka

Sunil Moti Lala Vishwas Mehendale

Preeti ShuklaKetan Ved Kalpesh Turalkar

Aasifa Khan Dhanesh Bafna Jitendra Singh

Prem Chandra Tripathi

Beena Pillai

AIFTPJ – 634

AIFTP JOURNAL November, 2014

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