ctariff16_054
Includes two ICDs in list of Customs stations from where Export/Import under EP schemes can take place
CASE LAWS
2016-TIOL-167-SC-IT
CIT Vs GUJARAT INDUSTRIAL INVESTMENT CORPORATION: SUPREME COURT OF INDIA (Dated: September 29, 2016)
Interest Tax Act, 1974 - Section 2(7)
Keywords - Advances made to corporates - chargeable interest - debentures & upfront fees
Whether the provisions of Interest Tax Act, 1974, would have any application while determining 'chargeable interest on upfront fees, debentures and advances made to corporates' - NO: SC
The Revenue had preferred the present appeal challenging the order of ITAT which had been confirmed by the High Court, by reiterating that the provisions of Interest tax Act, 1974, would have no application while determining chargeable interest on upfront fees, debentures and advances made to corporate entities.
Having heard the parties, the Supreme Court held that,
++ this court has read and considered the order of the ITAT and the order of the High Court reiterating the view taken by the ITAT on the questions of interest liability on upfront fees and treatment of interest on debentures as an advancement of loans. Therefore, after taking into account the definition of the term "interest" as contained u/s 2(7) of Interest Tax Act, 1974, this court holds that the provisions of the said Act by virtue of the definition would have no application to the transactions in question making the Assessee liable to pay tax under the said Act. Consequently, it is held that the decision of the ITAT as upheld by the High Court insofar as questions in issue are concerned would not require any interference.
Revenue's appeal dismissed
2016-TIOL-2366-HC-MUM-CUS
GANDHAR OIL REFINERY INDIA LTD Vs CC: BOMBAY HIGH COURT (Dated: September 26, 2016)
Cus - Appellant contends that though miscellaneous applications were filed by the appellants and claiming provisional release of the goods seized, the tribunal, on the understanding of the assesses as also the Revenue, decided to take up all the appeals for final disposal; that Tribunal was obliged to pass a reasoned order dealing with all contentions and on the merits of the controversy but instead, the tribunal, by a cryptic and virtually unreasoned order dismissed the appeals holding that imported products should be subject to the provisions of the Hazardous Waste (Management, Handling and Trans Boundary Movement) Rules, 2008. Held: High Court is not happy with the manner in which the tribunal has dealt with the appeals - Tribunal has not, beyond one paragraph, adverted to the factual exercise and which was permitted by the tribunal by its interim orders - By consent, certain directions were issued and what has resulted therefrom and whether that aids and assists the tribunal in arriving at the final conclusion has not been adverted to - What facts and circumstances have been carefully examined has not been clarified - Tribunal should focus its attention on the core issue, must refer to all the factual matters, including any findings by the laboratories after a test of the samples, the rival contentions and whether the legal provisions, including the Rules having a bearing or impact on the same should be clearly indicated - Tribunal must assign reasons for the conclusion that it reaches either way – Impugned order is quashed and set aside - appeals stand restored to the file of the tribunal - Tribunal should take up these appeals for expeditious disposal and endeavour to dispose of the same preferably by 31st December, 2016: High Court [para 9, 10]
Matter remanded
2016-TIOL-2365-HC-P&H-ST
GENERAL MANAGER TELECOM DISTRICT Vs CESTAT: PUNJAB AND HARYANA HIGH COURT (Dated: September 23, 2016)
ST - Appellant cannot be left without any remedy - At present, there is no Committee on Disputes in existence, which would take further view on the aspect that the matter already referred by it for settlement between the parties, in fact, could not be settled, hence, the appellant should be permitted to pursue the appeal - In these circumstances, the order dated 25.10.2012 passed by the Tribunal declining to restore the appeal is set aside - Matter is remitted back for re-consideration thereof on merits – Appeal disposed of: High Court [para 10, 11]
Matter remitted
2016-TIOL-2364-HC-P&H-ST
CCE & ST Vs JAI JAWALA PROCESSORS: PUNJAB AND HARYANA HIGH COURT (Dated: September 28, 2016)
CX - Maintainability - Whether value of Corrugated Boxes not exported but cleared for Home Consumption to manufacturers, who had further used the same in packing the goods exported by them, is to be included for computing the aggregate value of clearances under SSI notification - Interpretation is of notification granting SSI exemption limit - Issue involved being regarding valuation of goods and the rate of duty, appeal is not maintainable before the High Court - Appeal dismissed: High Court [para 7]
Appeal dismissed
2016-TIOL-2619-CESTAT-MUM + Story
TATA TELESERVICES LTD Vs CST: MUMBAI CESTAT (Dated: March 31, 2016)
ST - IPR service - In case of 'reverse charge' liability to tax, the demand relating to the period prior to 18 th April 2006 does not have the authority of law - Nature of 'technical knowhow' transferred to appellant from among trade mark, design, patent, etc. has not been identified in the SCN/o-in-o and which is a critical flaw; demand for the period after 18 th April 2006 is also without sanctity of law - Order set aside and appeal allowed : CESTAT [para 5 to 7]
Appeal allowed
2016-TIOL-1752-ITAT-DEL
DCIT Vs GALILEO INDIA PVT LTD: DELHI ITAT (Dated: September 22, 2016)
Income Tax - Sections 14A, 28, 32, 147, 154 & rule 8D
Keywords - business activities - fixed assets - depreciation - put to use - advance - securities written off - income from house property & proportionate disallowance
Whether the condition precedent for AO to determine the amount of expenditure incurred in relation to exempt income for making disallowance u/s 14A is that, such AO must record that he is not satisfied with the correctness of the claim of assessee in respect of such expenditure - YES: ITAT
Whether the expression "used for the purpose of business" would mean & imply that the use of asset would be relevant in previous financial years with respect to the discarded assets forming part of the block, on which depreciation is allowable - YES: ITAT
Whether if the assessee decided to write off advances/securities given in ordinary course of business, the claim of assessee can be discarded simply because substantial evidences were not placed to prove its efforts of their recovery - NO: ITAT
The assessee is a private company. AO noticed that the assessee company earned dividend income on shares and mutual funds, which was claimed as exempt income. However, as per AO since no expenses were claimed to have been incurred for earning this exempt income, the assessee was required to explain as to why the disallowance u/s. 14A be not determined as per Rule 8D of the IT Rules. In response, assessee explained that out of the aggregate expenses of Rs.5.57 crores claimed in the profit and loss account, expenses aggregating to Rs.4.96 crores were already disallowed and added back in the computation of income and therefore, no further disallowance out of balance expenses of Rs.60,77,000/- claimed against the business income, is warranted u/s. 14A. AO was not convinced with the explanation of the assessee and observed that bulk of investment of assessee was in shares and mutual funds only amounting to Rs.2,90,96,41,000/-. AO, therefore, relying on the decision of Special Bench of ITAT, New Delhi in the case of Cheminvest Ltd. v. ITO, 2009-TIOL-515-ITAT-DEL-SB and another order of ITAT in Daga Capital Pvt. Ltd. 2008-TIOL-509-ITAT-MUM-SB, invoked the provisions of Rule 8D and worked out the disallowance thereunder of an amount of Rs.1,38,31,112/-. However, noticing that the assessee had claimed expenses only to the tune of Rs.60,77,000/-, the AO disallowed such expenses in proportion of total exempt income to the total taxable income and accordingly made disallowance of Rs.56,44,511/- u/s. 14A r.w.r. 8D of the IT Rules. On appeal, CIT(A) after considering the elaborate submissions of the assessee, deleted the addition.
Disallowance of depreciation
AO disallowed the depreciation of Rs.56,86,641/- on the furniture & fixtures, office equipments and computer items. As per AO, all the above fixed assets were used by the assessee for the business of Data Processing and Export thereof, which as per assessee stood already ceased to exist in July, 2008. He accordingly observed that the business of Data processing and export was stopped in F.Y. 2008-09 and the above fixed assets on which depreciation was claimed by assessee were not used for the purpose of business during the year under consideration. He therefore, concluded that the assessee had claimed depreciation on the assets which were not used for the purpose of business to minimize the taxable income from house property. He accordingly disallowed depreciation of Rs.56,86,641/- out of total claim of depreciation of Rs.58,08,280/-. The assessee carried the matter to the CIT(A), who after relying on the decision of Delhi High Court in the case of CIT vs. Yamaha Motor India Pvt. Ltd. 2009-TIOL-427-HC-DEL-IT, deleted the disallowance.
Disallowance with regard to advances written off
AO disallowed advances and security deposits written off by assessee. These expenditures were also considered by AO while computing the proportionate disallowance u/s. 14A, which according to the CIT(A) amounted to double disallowance. The contention of the assessee had been that a sum of Rs.3,80,700/- was given to M/s. Reliance Infocom for VPN connections five years back as advance and since such connections were not sanctioned nor the above amount was returned to assessee, it had decided to write off the same. Similarly, a sum of Rs.10,18,356/- was given to various authorities/parties for taking utility connections such as telephone, internet etc. and since the assessee closed its business of Data Processing and Export and the above amount was not recoverable or its recovery was fetching substantial time and inordinate cost, hence, the assessee had written of the same in its books of accounts. AO disallowed the claim of assessee on the ground that no evidence was laid on record to substantiate any effort of recovery. CIT(A) deleted the addition observing that in view of the nature of business of assessee i.e., IT enabled services, such advances were given in the course of ordinary course of business and hence, the claim of written off amounts was allowable u/s. 28.
Having heard the matter, the Tribunal held that,
++ AO has returned any finding that he is not satisfied with the correctness of the expenditure claimed and offered for taxation in relation to exempt income. We further observe that the AO did not at all consider the assessee’s submissions and straightway proceeded to work out the disallowance as per Rule 8D. There is complete lack of finding by the AO that he is not satisfied with the expenditure suo moto offered by assessee in the computation of income for disallowance u/s. 14A. For this proposition, we stand fortified by the decision of HC in the case of Maxopp Investment Ltd., 2011-TIOL-753-HC-DEL-IT wherein HC has held that the requirement of AO embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if AO returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for AO entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the AO must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. We further find considerable force in the contention of counsel for assessee that once the assessee had offered 89% of the total expenditure for disallowance in the computation of income, it was imperative on the AO first to show as to how the suo motu disallowance offered by the assessee in the computation of income is incorrect and to record the satisfaction as regards the incorrectness of the assessee’s claim. If the same is not done, the AO cannot resort to the re-computation of disallowance as per section 14A read with Rule 8D. We also find no material on record to discard the finding of CIT(A) that the AO has failed to find out as to how the balance expenditure of Rs.60.77 lacs claimed by assessee was incorrect or had any nexus with earning of exempt income. The AO also did not examine the stand of the assessee that administrative expenses of Rs.10,70,000/- were in respect of a thin strength of employees who were working for providing IT enabled BPO Services and were not involved in the activity of making investment in shares or mutual funds. We also find substance in the observation of CIT(A) that the AO has disregarded the fact that he had also disallowed individual expenses embedded in the claim of Rs.60.77 lakhs separately, such as disallowance of depreciation of Rs.56,86,641/-, disallowance of rental expenses Rs.8,23,166, disallowance of bad debts Rs.2,66,243 and disallowance of advances and security deposits written off Rs.13,99,056/-. In view of what has been discussed above, we do not find any justification to interfere with the order of ld. CIT(A) on this count. Accordingly, ground No. 1 of the Revenue is liable to be dismissed;
Disallowance of depreciation
++ we find no substance in this ground of appeal. It is a fact that the assessee had computed the depreciation on the reduced WDV only after reducing the assets sold. There is no material on record to assail the finding of CIT(A) that once an asset becomes a part of a block of assets, it loses its individual identity. However, the depreciation on that block of asset is continued and claimed until the entire block ceases to exist. The finding of CIT(A) is also found supported by the decision of jurisdictional HC in the case of CIT vs. Yamaha Motor India Pvt. Ltd. In view of the above legal position, it is clear that the expression "used for the purpose of business" would mean & imply that the use of asset would be relevant in previous financial years with respect to the discarded assets forming part of the block. Furthermore, the nature of assets in the present case comprises of general items such as furniture & fixtures & office equipments which were "ready for use". Such passive user is also entitled for depreciation in view of various decisions of jurisdictional HC relied by AR. Following the above decisions, and having found no contrary material, we do not find any justification to interfere with the conclusion reached by the CIT(A) on this issue. Accordingly, ground No. 2 of the Revenue is also dismissed;
Disallowance with regard to advances written off
++ we find that it is not in dispute that substantial material was placed before the AO that the said advances/securities were outstanding for last 5-10 years. The nature of these payments, i.e., towards advances and securities for getting VPN and utility connections, as noted above, is also not doubted by the Assessing Officer. In such state of affairs, if the assessee decided to write off the said advances/securities given in ordinary course of business, in its books of accounts, the claim of assessee cannot be discarded simply because substantial evidences were not placed to prove its efforts of their recovery or that the said debts became irrecoverable, by way of stepping into the shoes of business. This view of ours is fortified by the various decisions relied by Counsel for the assessee. In view of these decisions, and in the totality of facts and circumstances, we do not find any justification to interfere with the order of CIT(A) on this count. Accordingly, this ground of appeal also deserves to fail. In the result, the appeal of the Revenue is dismissed.
Revenue's appeal dismissed
