NOTIFICATION
it16not84
Income of Business Trust - Forms 64A & 64B notified
CASE LAWS
2016-TIOL-2193-HC-KAR-IT
FATHERAJ SINGHVI Vs UoI: KARNATAKA HIGH COURT (Dated: August 26, 2016)
Income Tax - Sections 200(3), 200A, 206C, 234E, 271H, 271(1)(a) & 272A(2)(k).
Keywords: deduction of TDS - filing of return - interest - penalty for non filing - default of return filing - quid pro quo - intimation u/s 200A - ultra vires - unenforceable in law.
Whether the mechanism provided for enforceability of Section 200(3) or 206C (3) for filing of the statement by making it penal u/s 272A (2) (k) has been done away with after the insertion of Section 271H providing for penal provision for such failure to submit return - YES: HC
Whether if any deductor has already paid the fee after intimation received u/s 200A, this view can permit the deductor to revisit the said question unless he has made payment under protest - NO: HC
Whether if the amendment made u/s 200A which has come into effect on 1.6.2015 is held to be having prospective effect, no computation of fee for the demand or the intimation for the fee under Section 234E could be made for the TDS deducted for the respective AY prior to 1.6.2015 - YES: HC
For the financial year of 2012-13 and 2013-14 TDS was deducted by the respective petitioners and they were also deposited. However, as per the respondent, there was delay in filing of the return/statements with the details of the persons from whom the TDS was deducted including the details of the persons concerned and the transaction etc. Hence, the Department issued demand notices u/s 200A calling upon the respective petitioners to pay late filing fee u/s 234E in purported exercise of the power u/s 200A. More or less, under similar circumstances, all the petitioners approached this Court by challenging the constitutional validity of Section 234E contending inter alia that there is no service being rendered to the deductors by the Department and therefore, consequently, the principles of quid pro quo is not available nor the charging of fee by the Department is having any nexus to any service to be rendered to the deductor. As per the assessees, no service whatsoever is being rendered to the deductor by the IT Department and therefore, the fee provided u/s 234E is lacking the basic element of any services to be rendered to the deductor. As per the petitioners, since the basic requirements are not satisfied for Section 234E, the said Section 234E is ultra vires to the Constitution. It has also been contended by the petitioner in the main petition that the intimation given u/s 200A by the respondent to the respective petitioners for making demand of levy fee u/s 234E for the respective financial year are illegal and invalid and unenforceable in law.
Section 234E has come into force on 1.7.2012. Therefore, one may at the first blush say that, since Section 234E is a charging section for fee, the liability was generated or had accrued, if there was failure to deliver or cause to be delivered the statement/s of TDS within the prescribed time. But, in our view, Section 234E cannot be read in isolation and is required to be read with the mechanism and the mode provided for its enforcement. As observed by us hereinabove, when Section 234E was inserted in the Act simultaneously, Section 271H was also inserted in the Act providing for the penalty for failure of furnishing of statements etc. Therefore, if there was failure to submit the statement for TDS as per Section 234E, the fee payable is provided but the mechanism provided was that if there was failure to furnish statements within the prescribed date, the penalty u/s 271H (1) and (2) could be imposed. However, under sub-section (3) of Section 271H, the exception is provided that no penalty shall be levied for the failure referred to under clause (a) of sub-section (1) if the person proves that after paying TDS with the fee and interest the amount is credited and he had delivered or caused to deliver the statement within one year from the time prescribed for submission of the said statement. To put it in other words, for failure to submit the statements, the penalty provided u/s 271(1)(a) cannot be imposed if the deductor complies with the requirement of sub-section (3) of Section 271H. Hence, it can be said that the fee provided u/s 234E would take out from the rigors of penalty u/s 271H but of course subject to the outer limit of one year as prescribed under sub-section (3) of Section 271H. It can also be said that when the Parliament intended to insert the provisions of Section 234E providing for fee simultaneously the utility of such fee was for conferring the privilege to the defaulterdeductor to come out from the rigors of penal provision of Section 271H. Be it recorded that, prior to Section 271H inserted in the statute book, the enforceability of requirement to file return u/s 200(3) and Section 206C(3) was by virtue of Section 272A(2)(k) which provided for the penalty of Rs.100/- per day for each day of default in filing TDS statements. But, when Section 234E was inserted with effect from 1.7.2012 simultaneously, a second proviso was added u/s 272A(2) with effect from 1.7.2012. This shows that in the clause (k) if the said failure relates to a statement referred to in sub-section (3) of Section 200 or the sub-section (3) of Section 206C, no penalty shall be imposed for TDS after 01.07.2012.
Held that,
++ it can be said that, the mechanism provided for enforceability of Section 200(3) or 206C (3) for filing of the statement by making it penal under Section 272A (2) (k) is done away in view of the insertion of Section 271H providing for penal provision for such failure to submit return. When the Parliament has simultaneously brought about Section 234E, Section 271H and the aforesaid proviso to Section 272A(2), it can be said that, the fee provided u/s 234E is contemplated to give a privilege to the defaulter to come out from the rigors of penalty provision under Section 271H (1) (a) if he pays the fee within one year and complies with the requirement of sub-section (3) of Section 271H. In view of the aforesaid observations and discussion, two aspects may transpire one, for Section 234E providing for fee and given privilege to the defaulter if he pays the fee and hence, when a privilege is given for a particular purpose which in the present case is to come out from rigors of penal provision of Section 271H(1)(a), it cannot be said that the provisions of fee since creates a counter benefit or reciprocal benefit in favour of the defaulter in the rigors of the penal provision, the provisions of Section 234E would meet with the test of quid pro quo. However, if Section 234E providing for fee was brought on the state book, keeping in view the aforesaid purpose and the intention then, the other mechanism provided for computation of fee and failure for payment of fee u/s 200A which has been brought about with effect from 1.6.2015 cannot be said as only by way of a regulatory mode or a regulatory mechanism but it can rather be termed as conferring substantive power upon the authority. It is true that, a regulatory mechanism by insertion of any provision made in the statute book, may have a retroactive character but, whether such provision provides for a mere regulatory mechanism or confers substantive power upon the authority would also be a aspect which may be required to be considered before such provisions is held to be retroactive in nature. Further, when any provision is inserted for liability to pay any tax or the fee by way of compensatory in nature or fee independently simultaneously mode and the manner of its enforceability is also required to be considered and examined. Not only that, but, if the mode and the manner is not expressly prescribed, the provisions may also be vulnerable. All such aspects will be required to be considered before one considers regulatory mechanism or provision for regulating the mode and the manner of recovery and its enforceability as retroactive. If at the time when the fee was provided u/s 234E, the Parliament also provided for its utility for giving privilege u/s 271H(3) that too by expressly put bar for penalty u/s 272A by insertion of proviso to Section 272A(2), it can be said that a particular set up for imposition and the payment of fee u/s 234E was provided but, it did not provide for making of demand of such fee u/s 200A payable u/s 234E. Hence, considering the aforesaid peculiar facts and circumstances, we are unable to accept the contention of counsel for Revenue that insertion of clause (c) to (f) u/s 200A(1) should be treated as retroactive in character and not prospective;
++ the demand u/s 200A for computation and intimation for the payment of fee u/s 234E could not be made in purported exercise of power u/s 200A by the respondent for the period of the respective assessment year prior to 1.6.2015. However, we make it clear that, if any deductor has already paid the fee after intimation received u/s 200A, the aforesaid view will not permit the deductor to reopen the said question unless he has made payment under protest. Since the impugned intimation given by the Department against all the appellants u/s 200A are so far as they are for the period prior to 1.6.2015 can be said as without any authority under law. Hence, the same can be said as illegal and invalid. The intimation given in purported exercise of power u/s 200A are in respect of fees u/s 234E for the period prior to 1.6.2015. As such, it is on account of the intimation given making demand of the fees in purported exercise of power u/s 200A, the same has necessitated the appellant-original petitioner to challenge the validity of Section 234E. In view of the reasons recorded by us hereinabove, when the amendment made u/s 200A which has come into effect on 1.6.2015 is held to be having prospective effect, no computation of fee for the demand or the intimation for the fee under Section 234E could be made for the TDS deducted for the respective assessment year prior to 1.6.2015. Hence, the demand notices u/s 200A by the authority for intimation for payment of fee u/s 234E can be said as without any authority of law and the same are quashed and set aside to that extent. As such, as recorded earlier, it is on account of the intimation received u/s 200A for making computation and demand of fees u/s 234E, the same has necessitated the appellant to challenge the constitutional validity of Section 234E. When the intimation of the demand notices u/s 200A is held to be without authority of law so far as it relates to computation and demand of fee u/s 234E, we find that the question of further scrutiny for testing the constitutional validity of Section 234E would be rendered as an academic exercise because there would not be any cause on the part of the petitioners to continue to maintain the challenge to constitutional validity u/s 234E. At this stage, we may also record that the counsels appearing for the appellant had also declared that if the impugned notices u/s 200A are set aside, so far as it relates to computation and intimation for payment of fee under Section 234E, the petitioners would not press the challenge to the constitutional validity of Section 234E. But, they submitted that the question of constitutional validity of Section 234E may be kept open to be considered by the Division Bench and the Judgment of Single Judge may not conclude the constitutional validity of Section 234E;
++ we find that no further discussion would be required for examining the constitutional validity of Section 234E. Save and except to observe that the question of constitutional validity of Section 234E before the Division Bench of this Court shall remain open and shall not be treated as concluded. In view of the aforesaid observations and discussion, the impugned notices u/s 200A for computation and intimation for payment of fee u/s 234E as they relate to for the period of the tax deducted prior to 1.6.2015 are set aside. It is clarified that the present judgment would not be interpreted to mean that even if the payment of the fees u/s 234E already made as per demand/intimation u/s 200A for the TDS for the period prior to 01.04.2015 is permitted to be reopened for claiming refund. The judgment will have prospective effect accordingly. It is further observed that the question of constitutional validity of Section 234E shall remain open to be considered by the Division Bench and shall not get concluded by the order of the Single Judge. The appeals are partly allowed to the aforesaid extent. Considering the facts and circumstances, no order as to costs.
Assessee's appeal partly allowed
2016-TIOL-2192-HC-P&H-CX
CCE Vs EMSONS ORGANICS PVT LTD : PUNJAB AND HARYANA HIGH COURT (Dated: August 9, 2016)
CX - Tribunal holding that extended period of limitation cannot be invoked - Revenue in appeal. Held: Assessee cannot be said to be at fault at the material time in view of circular of the Board and earlier order of Tribunal in favour of the assessee - as the assessee was not at fault, extended period of limitation was not available - Appeal dismissed: High Court [para 3, 4]
Appeal dismissed
2016-TIOL-2191-HC-P&H-CX
PR CCE Vs NHK SPRING INDIA LTD: PUNJAB AND HARYANA HIGH COURT (Dated: August 9, 2016)
CX - Valuation - Circular dated 30.06.2000 issued by Central Board of Excise and Customs providing that any amount of concession on sales tax retained by the assessee is not required to be added in the assessable value and an earlier order was also passed by the Tribunal in favour of the assessee - issue decided in favour of Revenue by Supreme Court in cases of Maruti Suzuki India Ltd. 2014-TIOL-74-SC-CX & Super Synotex (India) Ltd. 2014-TIOL-19-SC-CX but the ground of limitation was decided in favour of assessee - in view the aforesaid facts, the assessee cannot be said to be at fault - extended period of limitation not available - Revenue appeal dismissed: High Court [para 3, 4, 5]
Appeal dismissed
2016-TIOL-2190-HC-DEL-CUS
ROSA POWER SUPPLY COMPANY LTD Vs UoI: DELHI HIGH COURT (Dated: September 16, 2016)
Cus - DGFT - Petitioner seeks review of order dated 12 August 2014 not on the ground of discovery of new and important matter or evidence which, after the exercise of due diligence was not within the knowledge of the petitioner or could not be produced by the petitioner at the time when the judgment was passed but wants a review on the ground that the decision is erroneous - counsel for the petitioner sought permission to withdraw the Special Leave Petition filed before the Supreme Court with liberty to file review petition and which permission was granted - This does not entitle the petitioner/review applicant to a wider consideration than is permissible in review jurisdiction - no ground for review - Petition dismissed: High Court [para 32, 34, 35]
Petition dismissed
2016-TIOL-2189-HC-MUM-CUS
GRANT INVESTRADE LTD Vs UoI: BOMBAY HIGH COURT (Dated: September 08, 2016)
Cus - Petitioners seek a declaration that no Customs Duty is payable on the licence fee paid to the overseas licensor in connection with import of set-top boxes and that the petitioners have been rightly paying service tax on the said licence fee - Petitioners submit that although orders of provisional release of the seized set-top boxes is permitted, the condition imposed for such release is arbitrary, unreasonable and unfair; that the condition imposed is of furnishing 25 % Bank Guarantee of the re-determined value of Rs.54.55 crores; that means the bank guarantee would be of Rs.13.63 Crores though the differential duty claimed is only in the sum of Rs.54 Lacs; that the orders are harsh, arbitrary and unreasonable and the petitioners were ready and willing to pay the full duty on the redetermined value of the set-top boxes at the time of clearance for home consumption. Held: It is only on the investigation being concluded and appropriate steps taken, that the authorities can issue a show cause notice and demand amounts now styled as a Customs Duty on the licence fee - Once the affidavits only contain a prima facie opinion based on the investigations conducted till date, then all the more it would not be appropriate to accept this as a final version and determine on that basis that any further amounts are payable by the petitioners - order of provisional release of the goods modified - Petition disposed of: High Court [para 17, 18]
Petition disposed of
2016-TIOL-2188-HC-MUM-ST
MUMBAI INTERNATIONAL AIRPORT PVT LTD Vs CST: BOMBAY HIGH COURT (Dated: September 14, 2016)
ST - Court observes that the highest bid of 4.1 Million USD is 81.8% lesser than the Reserve price of USD 22.5 Million - Service Tax Commissionerate has realised that accepting the bid of M/s. SGI Commex Limited would be contrary to the stipulation in that Draft Disposal Manual viz. the limit is that any bid up to 20% lower can be accepted, but beyond the same, no concession and ordinarily can be given - a prayer is made to recall the order and to also conduct the re-auction. Held: Service Tax Commissioner, knowing fully well that the offer of the highest bidder is much below the reserved price, persuaded this court to pass an order and record a statement therein that the Commissionerate be allowed to accept this bid - Secondly, statements were made by the Service Tax Commissioner seeking to confirm the sale without informing the court that a written communication communicating acceptance of the offer has to be released and issued to the bidder -Finally and more importantly that the sale must be concluded within 21 days from the date of such communication was also not a statement and factually made before this court - Pertinently, there is a limit prescribed and that there is a Draft Manual has also not been stated ever before this court - Since everything is now emerging during the course of hearing and the auction purchaser/highest bidder desiring time in addition to what was understood and stipulated by it and seeking leave to file an affidavit to that effect, we place this matter on 19th September, 2016: High Court [para 7, 8]
Matter posted
2016-TIOL-1681-ITAT-MUM + Story
ACIT Vs LIVA HEALTHCARE LTD: MUMBAI ITAT (Dated: Septmeber 12, 2016)
Income Tax - Section 37 - Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 - Regulation 6.4.1
Keywords - business expenditure - doctors - free samples - medical practitioner - revenue expenditure
Whether expenditure incurred by assessee to keep doctors in good humour to seek favours from them by way of recommending the pharmaceutical products being manufactured by the assessee to the patients so as to increase its profitability would amount to illegal gratification & be against public policy - YES: ITAT
Whether such expenses is to be disallowed as being hit by explanation to Section 37 - YES: ITAT
Whether expenses incurred for distribution of free samples to doctors after introduction of medicine in the market, when its uses are established, would be treated as advertisement and sales promotion expenses - YES: ITAT
Whether the aforesaid expenses for free samples would be disallowed in terms of explanation to Section 37 of the Act and also in terms of Regulation 6.4.1 of Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 - YES: ITAT
The assessee is engaged in manufacturing of drugs and pharmaceutical. The AO observed from the P&L Account of assessee that it had incurred a certain amount for sponsoring the Doctors overseas Tour. The assessee claimed that the said expenses are allowable u/s 37 of the Act being incurred wholly and exclusively for the business of the assessee and being revenue in nature and not capital nor personal in nature. Assessee further claimed that the real persons who create the market for a particular drug are the Medical Practitioners and for this purpose the assessee had organized various seminars, group visits at various places. However, since he failed to produce any records to show that whether any seminar was conducted during these trips, therefore, AO rejected the contentions of the assessee and disallowed the expenditure. Upon appeal before the CIT(A), the additions made by the AO were confirmed. Aggrieved assessee preferred an appeal.
Further, the AO observed that assesseee had claimed expenses towards free samples distributed to the physicians. It was submitted that the twin purpose of distributing free samples is to test the efficacy of the products as well as advertisement, publicity or sales promotion. It was also submitted that the assessee had a well established internal control system to monitor distribution of such free samples. He submitted copies of invoices for the physician samples purchased during the relevant previous year. The assessee claimed that the expenditure incurred on distribution of free samples is purely on account of advertisement and business promotion expenses incurred during the course of the business only. The assessee did not furnish the data which could facilitate the co-relation of the date of introduction of products with the quantity of samples provided , nor the assessee provided the list of recipients of samples and amount and monthly break-up of data , which would facilitate the enquiry to prove that the free samples distributed was wholly and exclusively for the purposes of its business activity. Accordingly, AO disallowed the same. Upon appeal, CIT(A) allowed the expenses. Aggrieved Revenue preferred an appeal.
Having heard the parties, the Tribunal held that,
++ these expenses are clearly hit by regulation 6.4.1 of the Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 which existed during the previous year 2008-09 which created bar on the physicians on receiving gifts , gratuities , commissions or bonus in consideration of or return for the referring , recommending or procuring of any patients for medical, surgical or other treatment. The expenditure has been admittedly incurred by the assessee with an objective to keep doctors in good humor to seek favours from them by way of recommending the pharmaceutical products dealt within by the assessee to the patients so that sales and profitability of the assessee company increases more and more which clearly reflect that these are illegal gratification against public policy being unethical prohibited by law. The CBDT circular in this regard is merely clarificatory in nature and creates a bar on such illegal payments being against public policy, the said bar always existed in the statute by virtue of the existence of explanation to Section 37 of the Act and in our considered view based on factual matrix of the case as emerging from the records, the expenses incurred by the assessee company are directly hit by explanation to Section 37 of the Act;
++ there is one more fact which had come to our notice on perusal of the invoices raised by K.V.Travels Private Limited and the invoice which pertained to air tickets and hotel arrangements of Doctors for Istanbul Trip that spouses of the Doctors also accompanied the Doctors to overseas trip to Istanbul and these expenses claimed by the assessee as revenue/business expenditure included the costs incurred for travel overseas to Istanbul of spouses of Doctors also, and also the arrangements included cruise travels to island, gala dinners, cocktails, gala entertainment etc. which clearly reflect that these overseas trips are merely to entertain doctors abroad and lure doctors to solicit business for the assessee by unethical , illegal and prohibited means which is an offence under the regulation 6.4.1 as it existed during the relevant previous year under the Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 and hence is clearly hit by explanation to Section 37 of the Act and is not allowable as revenue/business expenditure in the hands of the assessee;
++ the decision rendered in the case of Eskayef (Now Known as Smithkline Beecham) Pharmaceuticals (India) Limited v. CIT in context of Section 37(3A) of the Act and the assessment year involved therein are prior to insertion of explanation to Section 37 of the Act by Finance Act, 1998 but the ratio of law laid down by Supreme Court w.r.t. to the test of free samples being considered as the stage of introduction of the medicine to test its efficacy being incurred wholly and exclusively for the purposes of business and grant of free samples at the stage after introduction of the medicine in the market when its uses are established , to be treated as advertisement and sales promotion expenses remains very much relevant. The said distinction laid down by Supreme Court read in conjunction with explanation to Section 37 of the Act and regulation 6.4.1. of The Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 makes it clear that such free samples granted post introduction of pharmaceutical products in market when its end use stood established will be hit by explanation to Section 37 of the Act and shall not be allowable as deduction.
Case remanded
2016-TIOL-2470-CESTAT-MUM + Story
SHRI SHIVANI TEXTILES PVT LTD Vs CCE: MUMBAI CESTAT (Dated: August 08, 2016)
CX - Action of appellant in withdrawal of an appeal after disposal of stay petition would amount to seeking remedies elsewhere - since jurisdiction of another fora invoked, no case made out for condonation of delay - Appellant should have followed up the issue with the Central Excise Officer who was directed by the Settlement Commission to decide the case - COD application dismissed - stay application disposed of - appeal dismissed: CESTAT [para 4.1 to 4.3, 5]
Appeal dismissed
