NOTIFICATION/ CIRCULAR

cnt12_2017

CBEC notifies new Customs Exchange Rate effective from February 17, 2017

sercir204

Applicability of service tax on the services by way of transportation of goods by a vessel from a place outside India to the customs station in India w.r.t. goods intended for transhipment to any country outside India - reg.

CASE LAWS

2017-TIOL-75-SC-IT

PR CIT Vs LH SUGAR FACTORY PVT LTD: SUPREME COURT OF INDIA (Dated: February 13, 2017)

Income Tax - Carbon Credit - Capital in nature - Substantial question of law

The assesee company, had filed its return for relevant AY. Assessment was completed by making certain additions in the income of assessee. During assessment, AO made addition for Carbon Credit as the earning of Carbon Credit was primarily linked with the very activity of generation of electricity and it could not be separated from the same under any circumstances and the income on sale of Carbon Credit would form part of chargeable income under the Act. The assessee preferred appeal. Matter finally reached before Tribunal who passed order in favour of Assessee.

On further appeal, HC held that counsel for Revenue could not show that judgment of Andhra Pradesh HC was taken in appeal. Even otherwise, nothing substantial had been argued on behalf of it so as to pursue the Court to take a view that "Carbon Credit" is not capital in nature but revenue receipt. Therefore HC upheld the view of Tribunal taken in view of the Andhra Pradesh High Court decision in Commissioner of Income Tax Vs. My Home Power Ltd., 2014-TIOL-978-HC-AP-IT.

On appeal by the Revenue, the Apex Court condoned the delay in filing of appeal, granted leave to the Department for further hearing of the appeal along with C.A. No.2108/2016.

Leave granted

2017-TIOL-74-SC-IT

VATSALA SHENOY Vs JCIT: SUPREME COURT OF INDIA (Dated: February 9, 2017)

Income tax - Sections 2(14), (42C) & (47), 45(4) & 50B - Companies Act - Sec 583.

Keywords: AOP - partnership firm - dissolution - consideration - capital gains - capital receipts - ongoing concern - goodwill & slump sale

Whether if a partnership firm is dissolved but is also sold as a going concern, consideration received is to be treated as capital gains - YES: SC

Whether if a sale does not qualify to be a slump sale even then the provisions of Sec 50B get attracted - NO: SC

Assessees were partners of a partnership firm - 'M/s. Mangalore Ganesh Beedi Works', which was sold to three other partners, as a going concern, but after the dissolution of the partnership firm. Certain considerations received were treated as capital gains on which income tax was charged by the Assessing Officer. The case of the assessees was that it was a capital receipt in their hands, not exigible to income tax. Assessees' appeals did not succeed up to the level of High Court.

On appeal, the Apex Court held that, when the Official Liquidator has distributed the amount among the nine partners, including the assessees herein, after deducting the liability of each of the partners, the High Court had rightly held that the amount received by them was the value of net asset of the firm which would attract capital gain.

The Apex Court further held that,

++ upon filing a review petition, the Apex Court has condoned the delay in filing of appeal. The Court has carefully gone through the review petitions & connected papers, find no error much less apparent in the order impugned. The review petitions filed by the assessee are, accordingly, dismissed.

Assessee's appeal dismissed

2017-TIOL-326-HC-DEL-CUS

DRI Vs DR BERND AUGUSTINE: DELHI HIGH COURT (Dated: February 09, 2017)

Cus - Revenue (DRI) filing petition under Section 482 Cr.P.C challenging the impugned orders passed by CMM, New Delhi releasing passport to the respondent and granting permission to the respondent to travel to Germany.

Held: Mr. Frank Thierfelder, German Counsellor and Consul filed a certificate on 19.12.2016 affirming the plea of the respondent that he is a citizen of Germany and his presence can be secured - Respondent was granted permission to go abroad vide order dated 20.12.2016 subject to deposit of Rs.15,00,000/- by way of demand draft/bankers cheque/FDR and in compliance the respondent furnished demand draft for a sum of Rs.15,00,000/- which was accepted by the CMM, New Delhi on 21.12.2016 - Mr. Frank Thierfelder, German Counsellor and Consul is the appropriate guarantor in the present facts of the case, who can assure the presence of respondent, therefore, there is no infirmity in the impugned orders passed by the Court below - Petition dismissed and disposed of accordingly: High Court [para 5, 6]

Petition dismissed

2017-TIOL-325-HC-MP-ST

PROFESSIONAL EXAMINATION BOARD Vs CCC, CE & ST: MADHYA PRADESH HIGH COURT (Dated: February 6, 2017)

ST - Service Tax has been demanded by the department considering that the petitioner is an autonomous corporation/body created by the Government of Madhya Pradesh in view of Section 3(1) of the Madhya Pradesh Vyavshayik Pariksha Mandal Adhiniyam, 2007 - Petitioner challenges the order passed imposing and recovering from them 10% service tax for the service rendered and also challenges the order of CESTAT directing petitioner to deposit 10% of the tax amount.

Held: Judgment in Professional Examination Board vs. Bhopal Municipal Corporation Civil Revision No.1232/2002 decided on 23.07.2003 and Division Bench judgment  in the case of Pratibha Singh (2014 (3) MPJR 178) has held that the Professional Examination Board, namely the petitioner herein, is not constituted under the Adhiniyam, 2007 and, therefore, it continues to be constituted and function as a department of the State by virtue of the notification issued on 17.04.1982 and again on 22.01.2004 - prima facie it seems that the findings recorded in Revenue that it is not a department of the State but is an autonomous body seems to be incorrect, as the notification under Section 3(1) was issued only on 14.03.2016 -Court is of the considered view that in treating the petitioner organization to be an autonomous corporation created under the Adhiniyam, 2007 and rejecting the objection that it is not a department of the State, the respondent No.2 has committed an error and this has been done without taking note of the legal aspect of the matter - since this question has not been decided properly with regard to various legal and factual aspects, therefore, it is a fit case where the impugned assessment order dated 19.03.2014 should be quashed and the matter remanded back to the respondent No.2 for re-consideration and for proceeding with the show cause notice dated 16.11.2011 afresh in accordance with law: High Court [para 7 to 10]

Matter remanded

2017-TIOL-324-HC-AHM-CX

CCE & C Vs SHANOO FASHION PVT LTD: GUJARAT HIGH COURT (Dated: February 8, 2017)

CX - Revenue is in appeal to consider the following substantial question of law - Whether the CESTAT is empowered not to impose penalty under Rule 173-Q of Central Excise Rules, 1944 read with Section 11AC of Central Excise Act, 1944 on the assessee who evaded Central Excise Duty by suppression of facts and in contravention of Rules under Central Excise Law.

Held: To set aside the penalty imposed on the ground that a composite penalty has been imposed under Rule 173Q of the CER, 1944 and section 11AC of the CEA, 1944, shall be giving a premium to the person who has committed the wrong and/or has evaded the duty and/or has contravened the Rules - The consequences in such a case would be that there shall not be any penalty imposed under any of the provisions i.e. either under Rule 173Q of the Rules, 1944 or under Section 11AC of the Act, 1944 - Therefore, the proper remedy in such a case would be to remand the matter to the Adjudicating Authority to determine the amount of penalty and/or to determine quantum of penalty either under Rule 173Q of the Rules, 1944, in case the concerned person is manufacturer, producer, registered person of a warehouse or the registered dealer and if it is found that the said person is a person who is not liable to pay the duty as determined under subsection (2) of section 11A of the Act, 1944 and/or under section 11AC of the Act, 1944 if concerned person is found to be liable to pay the duty as determined under sub-section (2) of section 11A of the Act, 1944 - The penalty is leviable upon the assessee both under Section 11AC of the Act, 1944 as well as under Rule 173Q of the Rules, 1944 - in the facts and circumstances of the case, the CESTAT has materially erred in quashing and setting aside the order of penalty, imposed under Rule 173Q of the Rules, 1944 and Section 11AC of the Act, 1944 -  Order of Tribunal is quashed and set aside - question of law is answered in favour of the Revenue and against the assessee: High Court [para 5.2, 5.3, 6]

Appeal allowed

2017-TIOL-323-HC-RAJ-CX

CCE Vs NATIONAL ENGINEERING LTD: RAJASTHAN HIGH COURT (Dated: February 01, 2017)

CX - Monetary limits for filing appeals - It is conceded by the counsel for the Revenue that the amount involved in the present appeal preferred by the Revenue is less than 15 lacs - Circular dt.01/01/2016 which is in furtherance of the Circular dt.17/12/2015 [F.No.390/Misc./163/2010-JC], clearly envisages that the present instructions will apply retrospectively to all the pending appeals and appeals to be filed henceforth in High Courts/Tribunals - though the above circular only specifies ‘appeal’, the ‘reference’ filed earlier, will also be covered by the Circular - Appeals, therefore, stand dismissed: High Court [para 5, 6, 8]

Appeals dismissed

2017-TIOL-322-HC-AHM-CUS

CC Vs KHANBHAI ESOOFBHAI: GUJARAT HIGH COURT (Dated: February 8, 2017)

Cus - CESTAT dismissed the appeal preferred by the Revenue by relying upon its earlier decision in the case of Shree Dev Krupa Ship Breaking - 2004-TIOL-1208-CESTAT-MUM which subsequently came to be confirmed by the Division Bench of this Court vide order in Tax Appeal No.537/2004 - On remand by the Supreme Court, the appeal in the case of Shri Dev Krupa Ship Breaking (Supra) came to be heard by the Division Bench of this Court and vide judgment and order dated 26.07.2012, the Division Bench of this Court has allowed the said Tax Appeal No.537/2004 and has quashed and set aside the order passed by the CESTAT and has answered all the questions which are common in the present Tax Appeal also, in favour of the Revenue and against the assessee - Substantial question of law raised viz. “Whether in the facts and circumstances of the case M/s. Khanbhai Esoofbhai in whose hands the vessel was actually broken up is liable to pay customs duty that became leviable in accordance with proviso to Notification No.163/65-Cus dated 16.10.1965, or otherwise” in the present Tax Appeal are already answered in favour of the Revenue and against the assessee, by the Division Bench of this Court - It is not open for the assessee to raise the question with respect to levy of additional customs duty on ships and vessels which was never raised earlier - In view of the above binding decision dated 26.07.2012 of the Division Bench of this Court in Tax Appeal No.537/2004, present Tax Appeal deserves to be allowed: High Court [para 3 to 5]

Appeal allowed

2017-TIOL-133-ITAT-KOL

ABU MANSUR ALI Vs DCIT: KOLKATA ITAT (Dated: January 13, 2017)

Income Tax - Sections 132, 143(3), 153A & 271(1)(c).

Keywords - Estimate-based Addition - Search & Seizure - Penalty.

The assessee is an Individual. Search and seizure operation u/s. 132 of the Act was conducted in the M/s. Kaushalya Infrastructure Group. This included search also at the residence of the assessee. During the course of search, some material was found which suggested that M/s Kaushalya Infrastructure Group companies had paid higher amount than cost of land to Abu Mansoor Ali and his associates i.e. Mamud Ali Mondal and Arepan Bibi. Such excess amounts were never given back to the M/s. Kaushalya Infrastructure Group companies but as can be seen from the ledger accounts of Abu Mansur Ali and his associates, maintained by the companies, that in the end all the excess amounts, be it small or big, as standing in the accounts of the associates, were transferred to the account of Abu Mansur Ali in the books of the companies. The argument of the assessee was that there was no element of profit in the said transactions. Based on this incriminating document the AO made the addition and he also levied penalty u/s. 271(1)(c) of the Act. On appeal, CIT(A) confirmed the order of AO.

Upon hearing the parties, the ITAT held,

Whether penalty u/s 271(1)(c) is necessarily warranted even if addition is made on estimate basis - NO: ITAT

++ the assessee had admitted the undisclosed income suo moto during the course of search. In the case under consideration, the AO had made the addition based on the estimate and not based on the seized documents. When the addition is based on the estimate the penalty cannot be levied. In addition to this AR for the assessee relied on the judgment of the jurisdictional ITAT in the case of Suresh Karmakar Vs. DCIT where it was pointed out that the AO did not tick the relevant para of the notice of the penalty u/s. 274 of the Act, therefore, the assessee did not know for which reason he is being penalized. Tribunal was of the view that the penalty imposed by the AO and confirmed by the CIT(A) needed to be deleted. Accordingly Tribunal deleted the penalty u/s. 271(1)(c) of the Act.

Assessee's Appeal Allowed

2017-TIOL-132-ITAT-CHD

ASHUTOSH CHARITABLE TRUST OF EDUCATIONAL AND MEDICAL SCIENCES Vs CIT: CHANDIGARH ITAT (Dated: January 12, 2017)

Income Tax - Sections 11(1)(d), 12A & 12AA

Keywords - Charitable purpose - Registration - Trust

The Assessee claims to be a Trust. The assessee filed application for grant of registration u/s 12AA of the Act. The CIT-Exemption (CIT) noted that objectives of the trust was to start educational institution where course in engineering, technical, medical, management etc. would be taught. However, the predominant purpose of the trust seems purchase of large tracts of land ostensibly with the aim to construct school and hospital premises. CIT further noted that part balance sheets were drawn and also PAN numbers were not provided. The assessee had purchased a land and CIT found anomalies because the land was purchased partly before the establishment of trust and partly after the establishment. Several Loans and advances were also shown in the corpus fund which were unutilized. Assessee also took Overdraft from the bank at chandigarh. On these grounds the Registration was denied by the CIT.

Upon hearing the parties, the ITAT held that,

Whether commencement of charitable activities is sine qua non for seeking exemption u/s 12AA - NO: ITAT

Whether registration is not to be denied if the objects and activities of a Trust look authentic - YES: ITAT

++ the assessee had filed copy of the Trust Deed which clearly revealed that the aims and objectives of the assessee trust were to run and manage educational institution and to run hospitals and dispensaries etc. Therefore, the main aims and objectives of the assessee trust were charitable in nature. Even this fact was not denied by the CIT (Exemption) in the impugned order. At the stage of grant of registration under section 12AA of the Act, CIT was required to examine the objects of the assessee trust and genuineness of its activities. At the time of registration under section 12AA of the Act, which is necessary for claiming exemption under section 11 and 12, the CIT (Exemption) was not required to look into the activities, where such activities have not or are in the process of its initiation. Where assessee trust is set up to achieve its objectives of establishing educational/medical institutions, is in the process of establishing such institution and receives donations, registration under section 12AA cannot be refused on the ground that trust has not yet commenced charitable activities. At this stage only, genuineness of the objects has to be tested and not the activities which have not commenced. The genuineness of the activities of the trust has to be seen keeping in mind the objects of the trust. The CIT (Exemption) has to satisfy himself about the fact that the activities are genuine and in consonance with the objects of the trust. Preparation of the balance sheet for part period is no ground to reject application for registration under section 12AA of the Act. These are not relevant criteria to be considered at the time of grant of registration. Application of income for charitable purposes can be examined at the stage of assessment when trust would file the return of income.

Assessee's Appeal Allowed

2017-TIOL-131-ITAT-CHD

BADDI BAROTIWALA NALAGARH DEVELOPMENT AUTHORITY Vs DCIT: CHANDIGARH ITAT (Dated: January 12, 2017)

Income Tax - Sections 2(31), 10(20), 139, 143(3) & 271(1)(c) - Constitution of India - Article 289.

Keywords - AOP - Immunity from tax - Local Authority - Person & State

The assessee is Baddi-Barotiwala-Nalagarh Development Authority (BBNDA), constituted by H.P. Government. It filed return of relevant year, claiming exemption u/s 10(20) of the Act. Then the Assessment under section 143(3) was framed in the status of AOP and the AO contended that the assessee did not qualify as ‘local authority'. On appeal, CIT(A) upheld the order of AO. Assessee thus brought this matter before the Tribunal.

On appeal, ITAT held that,

Whether a Development Authority constituted by a State is to be constued as 'State' or 'Govt' and thus is entitled to exemption under Art 289 of the Constitution - NO: ITAT

++ in the case of Vidarbha Housing Board v. ITO, it was held that the Board was a distinct entity separate from the State and thus could not enjoy immunity from tax under Article 289 of the Constitution. Thus, every Special Area Development Authority shall be a body corporate with perpetual succession and a common seal unless abolished and shall have power to acquire, hold and dispose of property, both moveable and immoveable to contract and sue and be sued by its own name. Whenever in the opinion of the State Government, the continued existence of any authority constituted under the Act is un-necessary or undesirable, the State Government may by notification declare that such authority shall be dissolved from such date as may be specified therein and the authority shall stand dissolved accordingly.

Assessee's appeal dismissed