Section 3 of the Conservation of Foreign Exchange And Prevention of Smuggling Activities Act, 1974

COFEPOSA : Non-supply of vital documents which were considereed by detaining authority while passing detention order vitiated detention order passed against petitioner

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[2015] 53 taxmann.com 28 (Delhi)

HIGH COURT OF DELHI

Pooran Chand Sharma

v.

Union of India

MS. REVA KHETRAPAL AND S.P. GARG, JJ.

W.P. (CRL) NO. 2066 OF 2013

CRL. M (BAIL) NO. 829 OF 2014

AUGUST  20, 2014

Section 3 of the Conservation of Foreign Exchange And Prevention of Smuggling Activities Act, 1974, read with section 37 of the Foreign Exchange Management Act, 1999 and Article 226 of the Constitution of India - Power to make orders detaining certain persons - Whether where documents on basis of which detention order of petitioner under section 3 was passed were not supplied to petitioner, petitioner's right to make an effective representation was gravely impaired and this in itself was sufficient to vitiate detention order - Held, yes [Paras 23 & 27]

Section 48, read with section 49, of the Uttar Pradesh Value Added Tax Act, 2008

CST & VAT : U.P. VAT - Where transported goods were duly recorded in books, it was accompanied with challans and there was no intention to evade payment of tax, no penalty could be imposed

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[2015] 53 taxmann.com 201 (Allahabad)

HIGH COURT OF ALLAHABAD

Commissioner, Commercial Tax, U.P. Lko.

v.

N.K.G. Infrastructure Ltd.*

SURYA PRAKASH KESARWANI, J.

SALES/ TRADE TAX REVISION NO. 446 OF 2014†

SEPTEMBER  16, 2014

Section 48, read with section 49, of the Uttar Pradesh Value Added Tax Act, 2008 - Goods - Power to seize - Machine was purchased by assessee and duly recorded in books of account - Said machine was being shifted from one plant to another - It was accompanied with a challan on letter pad which contained required particulars - O.C. Stamp was also affixed on said challan - Whether once goods were duly recorded in books of account, and were traceable to bona fide dealer and there was no intention to evade payment of tax, imposition of penalty under section 48(5) was wholly unwarranted - Held, yes [Para 5] [In favour of assessee]

In case of composite accounts, estimation of expenditure incurred to earn exempt income was to be made as per of Rule 8D

IT-I : In case of composite accounts, estimation of expenditure incurred to earn exempt income was to be made as per of Rule 8D
IT-II : Where assessee's claim for set off of long-term capital loss was not accepted in earlier assessment year, there was no question of same being carried forward for set off subsequent year/s
IT-III : Where property taken on lease was not used for business purpose and it was returned to lessor, assessee's claim of depreciation for renovation expenses incurred in respect of said property was to be rejected
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[2015] 53 taxmann.com 34 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'B'
Metro Exporters (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Circle 6 (3), Mumbai*
I.P. BANSAL, JUDICIAL MEMBER
AND SANJAY ARORA, ACCOUNTANT MEMBER
IT APPEAL NO. 7315 (MUM.) OF 2012
[ASSESSMENT YEAR 2008-09]
SEPTEMBER  30, 2014
I. Section 14A of the Income-tax Act, 1961 , read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to income not includible in total income (Rule 8D) - Assessment year 2008-09 - Whether where assessee's accounts were composite and it was not possible to ascertain therefrom expenditure incurred in relation to earn exempt income, estimation of said expenditure had to be made in accordance with provisions of rule 8D of 1962 Rules - Held, yes [Para 3][Matter remanded]
II. Section 74 of the Income-tax Act, 1961 - Losses under head capital gains - Set off of (Applicability of) - Assessment year 2008-09 - Whether where assessee's claim for set off of long-term capital loss was not accepted in earlier assessment year, there was no question of same being carry forward for being allowed to be set off against income for subsequent year/s - Held, yes [Para 4][Matter remanded]
III. Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of (Leasehold premises) - Assessment year 2008-09 - Whether where assessee incurred expenses or renovation of premises taken on leave and licence basis, since said property had been vacated and handed over back to lessor and not used by assessee for business purpose during relevant year, assessee's claim for depreciation in respect of renovation expenses was to be rejected - Held, yes [Para 7] [In favour of revenue]

Comparable companies should have comparable normal profit

IT/ILT : Comparable companies should have comparable normal profit, functional similarity and similar employee skill sets and performance
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[2015] 53 taxmann.com 43 (Hyderabad - Trib.)
IN THE ITAT HYDERABAD BENCH 'B'
HSBC Electronic Data Processing India (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Circle 2 (2), Hyderabad*
B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SAKTIJIT DEY, JUDICIAL MEMBER
IT APPEAL NO. 1647 (HYD.) OF 2012
[ASSESSMENT YEAR 2008-09]
OCTOBER  24, 2014
Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments) - Assessment year 2008-09 - Whether extraordinary events like merger or demerger in a company during relevant year warrants exclusion of said company as comparable - Held, yes - Whether a BPO company providing CAD/CAE services could not be compared with a company which is performing engineering design services (High end services) - Held, yes - Whether company which fails employee cost filter cannot be accepted as a comparable company - Held, yes - Whether company earning super normal profits could not be selected as a comparable - Held, yes - Whether where a company is having different employee skill sets and performing research and development services and also owns intangible, it is functionally dissimilar to BPO services provider - Held, yes - Whether where assessee paid certain expenses of AEs and AEs paid those of assessee for administrative convenience and reimbursed each other which had been adjusted at cost without mark up, while working out operating cost, reimbursement costs should be excluded as they did not involve any functions to be performed so as to consider it for profitability purposes - Held, yes [Partly in favour of assessee/Matter remanded] [Paras 14 and 16]

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Commission)

IT: In absence of any supporting evidence, regarding rendering of services by agent for import of bullion by assessee, payment of commission could not be allowed
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[2015] 53 taxmann.com 29 (Bombay)
HIGH COURT OF BOMBAY
Sureshkumar G. Hundia
v.
Assistant Commissioner of Income-tax, Central Circle-14*
S. C. DHARMADHIKARI AND A.K. MENON, JJ.
IT APPEAL NO. 832 OF 2012
SEPTEMBER  12, 2014
Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Commission) - Assessment year 2004-2005 - Assessee, who was in a business of import and export of bullion, claimed deduction of commission paid to HBL on ground that services of director of HBL were utilised for purchasing bullion - However, on enquiries made by Tribunal, assessee stated that no such commission was paid in earlier or later year to HBL and assessee could have procured bullion without assistance of any agent - In order to satisfy itself about services rendered by HBL, Tribunal required presence of director of HBL but assessee could not produce him - There being no supporting evidence concerning services rendered by HBL, Tribunal disallowed commission - Whether finding of fact recorded by Tribunal could not be held to be perverse or vitiated by any error of law apparent on face of record and, therefore, could not be interfered with - Held, yes [Paras 5 & 6][In favour of revenue]

Goods transport agency's services, exemption limit of Rs. 1,500

Service Tax : In case of goods transport agency's services, exemption limit of Rs. 1,500 relates to 'all consignments' relating to 'all consignees' while exemption limit of Rs. 750 relates to 'single consignee'; hence, where goods are transported for a single consignee, exemption limit of Rs. 750 is applicable and if freight exceeds Rs. 750, it is liable to service tax, even if it is upto Rs. 1,500
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[2014] 52 taxmann.com 339 (Madras)
HIGH COURT OF MADRAS
Commissioner of Central Excise, Salem
v.
Suibramania Siva Co-op. Sugar Mills Ltd.*
CHITRA VENKATARAMAN AND T.S. SIVAGNANAM, JJ.
CIVIL MISC. APPEAL NO. 3079 OF 2011
M.P. NO. 1 OF 2011†
OCTOBER  4, 2013
Section 65(50b), read with sections 65B(26) and 66D(p), of the Finance Act, 1994, read with rule 2(1)(d)(v) of the Service Tax Rules, 1994 - Taxable Services - Goods Transport Agency's Services - Period from 1-1-2005 to 31-3-2007 - Assessee argued that since services were received from individual truck operators, said operators could not be regarded as Goods Transport Agency - HELD : Section 65(50b) defines 'Goods Transport Agency' as 'any person' who provides service in relation to transport of goods by road and issuing consignment note, by whatever name called - 'Any person' includes every person engaged in an activity providing service of transport of goods by road - Thus, any commercial or a proprietary concern carrying on business of Goods Transport would fall under definition of 'Goods Transport Agency' - In absence of any words of restriction, definition 'any person' thus would have application to any concern providing service - Hence, individual truck operators are also covered and Budget Speech cannot be relied on to hold otherwise [Paras 16 to 20] [In favour of revenue]

CENVAT Credit - Exempted and Dutiable Goods or Exempted and Taxable Services, Obligation of assessee

Cenvat Credit : If percentage payment at 8 per cent/10 per cent of exempted goods has been made as per rule 6(3) of CENVAT Credit Rules, 2004, assessee cannot be asked to reverse credit pertaining to common inputs
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[2015] 53 taxmann.com 23 (Madras)
HIGH COURT OF MADRAS
Commissioner of Central Excise, Chennai IV Commissionerate
v.
Bonfiglioli Transmissions (P.) Ltd.*
R. SUDHAKAR AND MRS. PUSHPA SATHYANARAYANA, JJ.
C.M.A. NO. 1945 OF 2008†
NOVEMBER  27, 2014
Rule 6, read with rule 2(d) and rule 2(e), of the Cenvat Credit Rules, 2004 - CENVAT Credit - Exempted and Dutiable Goods or Exempted and Taxable Services, Obligation of assessee - Period from 1-6-2001 to 31-10-2006 - Assessee was manufacturing gear motor assembly using 19 components and was clearing them : (a) under claim for exemption, for use in windmills, and (b) also, on payment of duty - Assessee did not keep separate accounts and paid 8 per cent /10 per cent of exempted goods as per rule 6(3)(b) taking entire credit - Department argued that 16 out of 19 components were used exclusively in exempted goods and were ineligible for credit - Tribunal found that since same final product was cleared under exemption as well as on payment of duty, inputs were commonly used in making exempted as well as dutiable goods - HELD : Rule 6(1) or Explanation III to rule 6(3) applies when inputs are exclusively used in manufacture of exempted goods - In view of specific finding of Tribunal that inputs were used both in exempted and dutiable goods, which is not challenged by revenue : (a) payment of 8 per cent/10 per cent under rule 6(3)(b) was valid; and (b) Explanation III to rule 6(3) would not apply; and (c) rule 6(1) would also not apply [Paras 6 to 9] [In favour of assessee]

No offence can be said to have been committed unless and until period of 15 days, as prescribed under clause (c) of proviso to section 138, has in fact, elapsed

Negotiable Instrument Act : No offence can be said to have been committed unless and until period of 15 days, as prescribed under clause (c) of proviso to section 138, has in fact, elapsed and, therefore, a Court is barred in law from taking cognizance of such complaint
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[2014] 52 taxmann.com 473 (SC)
SUPREME COURT OF INDIA
Yogendra Pratap Singh
v.
Savitri Pandey
R. M. LODHA, CJI
KURIAN JOSEPH AND ROHINTON FALI NARIMAN, JJ.
CRL. A. NO. 605 OF 2012 & 1924 & 1925 OF 2014
SEPTEMBER  19, 2014
Section 138, read with section 142, of the Negotiable Instruments Act, 1881 - Dishonour of cheque for insufficiency etc., of funds in account - Whether a complaint filed before expiry of 15 days from date on which notice has been served on drawer/accused cannot be said to disclose cause of action in terms of clause (c) of proviso to section 138 - Held, yes - Whether no offence can be said to have been committed unless and until period of 15 days, as prescribed under clause (c) of proviso to section 138, has in fact, elapsed and therefore, a Court is barred in law from taking cognizance of such complaint - Held, yes - Whether as a complaint filed before expiry of 15 days from date of receipt of notice issued under clause (c) of proviso to section 138 is not maintainable, complainant cannot be permitted to present very same complaint at any later stage, his remedy is only to file a fresh complaint within one month from date of decision in criminal case and, in that event, delay in filing complaint will be treated as having been condoned under proviso to clause (b) of section 142 - Held, yes [Paras 37 and 42] 

CENVAT Credit - Exempted and dutiable goods or exempted and taxable

Excise & Customs : When there are no changes in circumstances, either factual or legal, it would not be open to department to upset apple-cart and come to a new conclusion; therefore, department cannot be permitted to take different stands, unless there are good and cogent reasons for a change in future
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[2014] 52 taxmann.com 343 (Madras)
HIGH COURT OF MADRAS
Kothari Petrochemicals Ltd.
v.
Union of India, Ministry of Finance (Department of Revenue)*
V. RAMASUBRAMANIAN, J.
WRIT PETITION NO. 34636 OF 2013
M.P. NOS. 1 & 2 OF 2013
SEPTEMBER  24, 2014
Rule 6, read with rule 2(d) and 2(e), of the Cenvat Credit Rules, 2004 and section 5A of the Central Excise Act, 1944 - CENVAT Credit - Exempted and dutiable goods or exempted and taxable services, obligation of assessee - Assessee purchased 'Poly Butylene Feed Stock (PBFS)' from CNPL for use in manufacture of Poly Iso Butylene and returned back remnants (83 per cent of input) to CNPL, claiming exemption under Notifications/Orders, dated 17-7-1989, 24-6-1994, 24-3-1995, 1-3-2006 and 17-3-2012 over more than 23 years - Department issued show-cause notice demanding payment under Cenvat rule 6 on ground that assessee was manufacturing dutiable as well as exempted goods and was not maintaining separate records and was therefore, liable to make reversal - HELD : Since exemption was operative for more than 23 years and there was no such objection and even Government of India was fully aware of nature of exemption, manufacturing process and assessee's entitlement, hence, department was bound by exemption notification - Since there was no change in facts and circumstances over so many years, department could not come to different conclusion - Impugned notice had effect of destroying exemption itself - Hence, impugned notice was without jurisdiction and was abuse of process of law and was set aside [Paras 21 to 40] [In favour of assessee]

Allowance of service charges

IT : Where there was enough material on record enabling Tribunal to decide issues raised in respect of allowance of service charges, matter was to be decided by Tribunal; it should not have remanded same to Assessing Officer
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[2014] 52 taxmann.com 399 (Bombay)
HIGH COURT OF BOMBAY
Coca-Cola India (P.) Ltd.
v.
Assistant Registrar representing Income Tax Appellate Tribunal*
S.C. DHARMADHIKARI AND B.P. COLABAWALLA, JJ.
WRIT PETITION NO. 3650 OF 2014
AUGUST  14, 2014
Section 37(1), read with section 254, of the Income-tax Act, 1961 - Business Expenditure - Allowability of (Power of Tribunal) - Assessment years 1998-99 to 2004-05 - Assessee sought for allowance of service charges that included travelling expenses - Assessing Officer disallowed 10 per cent of said expenditure - On appeal, Commissioner (Appeals) remanded matter to Assessing Officer and called for report on basis of report of Assessing Officer and vouchers, documents etc. placed by assessee, Commissioner (Appeals) concluded that not only disallowance was justified but it should also be enhanced to 25 per cent - Though for immediately preceding assessment year, in similar facts, claim of assessee was allowed by Tribunal, for current year, Tribunal observed that assessee had not furnished details before Assessing Officer except copy of service agreement and debit notes and therefore, without making reference to record available before Commissioner (Appeals), Tribunal remanded matter back to Assessing Officer - Whether since there was enough material on record enabling Tribunal to decide issue, matter was to be restored to file of Tribunal - Held, yes [Paras 18 and 20] [In favour of assessee/Matter remanded]

Where only there was a survey under section 133A, penalty under section 271AAA could not be levied

IT : Penalty under section 271(1)(c) could not be levied in respect of returned income which had been filed in response to notice under section 153A
IT : Where during search, assessee undisclosed income, explained source and paid tax, penal provision of section 271AAA(2) would apply, and not section 271AAA(4)
IT : Where only there was a survey under section 133A, penalty under section 271AAA could not be levied
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[2014] 52 taxmann.com 438 (Cuttack - Trib.)
IN THE ITAT CUTTACK BENCH
Sarat Chandra Sahoo
v.
Deputy Commissioner of Income-tax, Circle-2 (2), Bhubaneswar*
S.V. MEHROTRA, ACCOUNTANT MEMBER
AND GEORGE MATHAN, JUDICIAL MEMBER
IT APPEAL NOS. 130 TO 137 (CTK.) OF 2013
[ASSESSMENT YEARS 2003-04 TO 2009-10]
OCTOBER  17, 2014
I- Section 271(1)(c), read with sections 64 and 153A, of the Income-tax Act, 1961 - Penalty - For concealment of income (Section 153A notice, effect of) - Assessment years 2003-04 to 2008-09 - Assessee had not filed any return of income - Return was filed only in response to notice under section 153A - Whether return filed would be deemed to be a return furnished under section 139 and it would be considered as first return and no penalty under section 271(c) could be leived in respect of returned income which had been disclosed in said return - Held, yes [Para 6][In favour of assessee]
II-Section 271AAA of the Income-tax Act, 1961 - Penalty - Where search has been initiated [Subsection (2) v. sub-section (4)] - Assessment year 2009-10 - During search, assessee submitted undisclosed income and explained manner in which said income had been derived - He had also specifically recorded that taxes had been paid for all assessment years - Revenue had not dislodged said facts - Whether provisions of section 271AAA(2) applied to assessee's case and provisions of section 271AAA(4) would not be invoked - Held, yes [Para 10][[In favour of assessee]
III-Section 271AAA of the Income-tax Act, 1961 - Penalty - Where search has been initiated (Condition precedent) - Assessment year 2009-10 - Whether primary condition for levy of penalty under section 271AAA is initiation of a search in case of assessee - Held, yes - Whether where there was merely a survey under section 133A, and no search had been conducted, penalty under section 271AAA could not be levied - Held, yes [Para 14][In favour of assessee]
P.R. Mohanty, AR for the Appellant. K. Ajay Kumar, CIT D.R. for the Respondent.

Assessee had not claimed any expenditure in relation to exempt income, onus is on Assessing Officer

IT : Where assessee had not claimed any expenditure in relation to exempt income, onus is on Assessing Officer to prove that out of expenditure incurred under various heads, some were related to earning of exempt income and not only this he has also to give basis of such calculation
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[2014] 52 taxmann.com 94 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'I'
Assistant Commissioner of Income-tax
v.
Iqbal M. Chagala*
VIJAY PAL RAO, JUDICIAL MEMBER
AND RAJENDRA, ACCOUNTANT MEMBER
IT APPEAL NO. 877 (MUM.) OF 2013
[ASSESSMENT YEAR 2009-10]
JULY  30, 2014
Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to exempt income not includible in total income (Conditions precedent) - Assessment year 2009-10 - Whether where assessee had not claimed any expenditure in relation to exempt income, onus is on Assessing Officer to prove that out of expenditure incurred under various heads, some were related to earning of exempt income and not only this he has also to give basis of such calculation - Held, yes - Whether provisions of rule 8D cannot and should not be applied in a mechanical way and facts of case have to be analyzed before invoking them - Held, yes [Para 7] [In favour of assessee]