TAX UPDATES

1. Prior to introduction of negative list of service technical testing and analysis and technical inspection and certification of seeds, rendered by notified Central/ State Seed Testing Laboratories /Agency were exempt from Service Tax vide notification No.10/2010-Service Tax

2. The above notification was rescinded by subsequent notification 34/2012 dated 20-06-2012 after introduction of negative list of services

3. In negative list of services, u/s 66D w.e.f. 01-07-2012, (d) services relating to agriculture or agricultural produce by way of— (i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing; was kept outside the tax net

4. However by Finance Act 2013 word “seed” preceeding “seed testing “ was omitted w.e.f. 10-05-2013

5. W.e.f. 10-05-2013, negative list of services read as under (d) services relating to agriculture or agricultural produce by way of— (i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing

6. However agriculture produce under section 65B((5) is defined as under: “ agricultural produce ” means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market

7. Admittedly and apparently seeds are outside the purview of agriculture produce.

8. This resulted in issue of service tax notices to this sector in abundance.

9. However, CBEC vide Circular no. 354/279/2015-TRU dated 26-11-2015 has clarified that purpose of amendmend was to widen its scope and not restrict it a manner to exclude seed testing and other incidental services.

10. The departmental has further clarified that without certification and other services seed testing is futile exercise hence such other services like seed certification, technical inspection, technical testing, analysis, tagging of seeds, rendered during testing of seeds, are covered within the meaning of ‘ testing ’

11. Therefore, such services are not liable to Service Tax.

Thursday, 26 November 2015

SC in Zuari Estate Development & Investment Company Limited has held that intimation u/s 143(1) is not assessment and hence while issuing notice u/s 148 there is no change of opinion and hence notice is valid. Bombay High Court Judgement is set aside and matter restored to ITAT to decide on merits. Comments : In this case the notice u/s 148 was issued for not reflecting capital gain u/s 2(47)(v) rws 53A of Transfer of Property Act in respect of an agreement entered in 1984 by which property was stipulated to be transferred in 1991 only. However section 2(47)(v) has come into operation w.e.f. AY 1988-89 only and high court had held in para 18 of its judgement that “ no prudent or reasonable person, reasonably instructed in law, could have come to the conclusion that an agreement as contemplated by section 53A of the Transfer of Property Act had been entered into for the assessment year 1991-92” and that mere exchange of letters is not agreement u/s 53A. SC has not considered this part of the judgement. How shall now ITAT decide the issue ?

Wednesday, 25 November 2015

Section 153A does not speak specifically about the extension of time to be granted for filling of return u/s 153A. However, with reference to clause 14 of The General Clause Act, 1897 which states that where any power is conferred that unless a different intention appear, that power may be exercised from time to time.

The assessee can make complains to Human Rights authority if harassment is caused to the family during raids or survey. Very recently the human right commission has observed that continuing search without any break at odd hours and forcing the assessee and or his family members to remain awake was a torturers act. The Patna High Court in CCIT v. State of Bihar, Through Chief Secretary (Rajendra Singh) (2012) 205 Taxman 232 / 71 DTR 268 / 250 CTR 304 upheld the decision of the human rights commission that interrogation till late night amounts to “torture” & violation of basic “human rights”

Searches should be carried out only in cases where there is credible evidence to indicate substantial unaccounted income/assets in relation to the tax normally paid by the assessee or where the expected concealment is more than Rs. 1 crore.

Section 132 of the Income-tax Act 1961 - Search & Seizure - matters relating thereto

F.No. 286/77/2003-IT(Inv.II)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

All Director Generals of Income-tax (Inv.)

Subject: Search & Seizure - matters relating thereto

Sir,

With a view to focus on high revenue yielding cases and to make the optimum use of manpower, the Board has decided that officers deployed in the Investigation Wing should restructure their activities. They should henceforth strictly adhere to the following guidelines :

(i) Searches should be carried out only in cases where there is credible evidence to indicate substantial unaccounted income/assets in relation to the tax normally paid by the assessee or where the expected concealment is more than Rs. 1 crore.

(ii) Search operation will also be mounted when there is evidence of hidden

unaccounted assets arising out of a conspiracy to cause public harm, terrorism, smuggling, narcotics, fraud, gangsterism, fake currency, fake stamp papers and such other manifestations;

(iii) Tax payers who are professionals of excellence should not be searched without there being compelling evidence and confirmation of substantial tax evasion.

2. Henceforth, search operations shall be authorized only by the concerned DGIT(Inv.) who will be accountable for the action initiated by the officers working under him. He should also ensure that all the work relating to search & seizure, like post-search enquires, preparation of appraisal report and handing over of seized books of accounts. Etc. should be completed by the Investigation Wing within a period of 60 days from the date on which the last of the authorisations for search was executed.

3. DGsIT(Inv.) are requested to ensure that officers of competence and proven integrity are taken in the Investigation Wing. The officers posted in the Investigation Wing will be trained at NADT in a special course for which arrangements will be separately made.

4. DGsIT(Inv.) are required to ensure strict compliance of the above guidelines/ instructions.

Yours faithfully,
Sd/-
Sharat Chandra
Director (Inv. II & III)

The person searched is not entitled to copy of reasons recorded by the department as it is privileged document And can not be shared with person searched. Only High Court and Supreme Court have that powers Dr. Pratap Singh 155 ITR 166 (SC)

Without referring to any incriminating material found during the course of search, no addition could be made in an assessment under section 153A of the Act in relation to an assessment year for which the assessment did not abate. Smt. Zeenat P. Sanghvi in ITA No. 8026/Mum/2010 dated 19/12/2014, All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 137 ITD 287/23 taxmann.com 103/(Mum) (SB), Gurinder Singh Bawa v. Dy. CIT [2012] 28 taxmann.com 328/[2014] 150 ITD 40 (Mum. - Trib.), CIT (Central) v. Murli Agro Products Ltd. [2014] 49 taxmann.com 172 (Bom.), Hon'ble Bombay High Court in the case of CIT v. Continental Warehousing Corpn. (Nhava - Sheva) [2015] 58 taxmann.com 78 followed in Parag M. Sanghvi [2015] 63 taxmann.com 118 (Mumbai - Trib.) SEPTEMBER 30, 2015

Additional evidence, to further support assessee’s stand taken before the assessing officer that the valuation of its property is adversely affected as a result of restrictive use of its property for industrial purpose only for reflecting capital gain at lesser than stamp duty value for the purpose of S. 50C in Janakiram [2015] 63 taxmann.com 139 (Hyderabad - Trib.) JULY 8, 2015

SC decision on 05-11-2015 on 36(1)(iii) in the case of Hero Cycles (P) Ltd. The apex court observed that interest free advance to sister concern under margin money stipulation by bank for granting of loan to sister concern qualifies the test of commercial expediency. Further loan to director from bank account out of credit balance available on the day of advance can not be said to be advance from borrowed capital. Hence no disallowance u/s 36(1)(iii). Further SC reprimanded P&H High Court for disallowance by mentioning Abhishek Industries only without mentioning facts of the case. SC followed its own judgement in SA Builders 288ITR1 for test of commercial expediency and includes expenditure incurred otherwise than by legal obligation. SC also quoted Malyalam Plantation 53 ITR 140 which held that “for the purpose of business” is wider than “for the purpose of earning profits” SC further quoted Delhi High Court in Dalmia Cement 254 ITR 377 which held that for the purpose of business need not necessarily mean the business of assesee itself. SC also held that the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman.

Tuesday, 24 November 2015

An appeal is a continuation of assessment proceedings. Assessment proceedings complete when appeal against order of assessment is decided by Tribunal CIT vs. Mayur Foundation (2005) 274 ITR 562(Guj.)

Delhi High Court on conversion of stock in trade to capital asset has held that “The conversion of stock-in-trade into investments would not immediately yield any business income/loss as an Assessee cannot be held to trade with itself [Kikabhai Premchand v. CIT: [1953] 24 ITR 506 (SC)]. In the year in which the asset is sold, difference between the value at which the asset was held as stock-in-trade and the market value on the date of its conversion as investment would have to be treated as business income/loss and the difference between the market value of the asset as on the date of conversion and the value at which it is sold would be in the nature of capital gains.[Para 29] Further the period during which asset held as stock in trade not to be included for computing period of holding u/s 2(42A) Abhinandan Investment Ltd. [2015] 63 taxmann.com 263 (Delhi) NOVEMBER 19, 2015

Recovery—Garnishee proceedings—In order to institute garnishee proceedings there should be a subsisting relationship between the garnishee and the assessee of which the ITO gets information and which could reasonably lead to recovery of arrears—Where the garnishee, in response to garnishee order dt. 18th June, 1959, replied that there was no subsisting contract with the assessee, later on entered into contract with the assessee in March, 1960, and made payment of Rs. 20,000 to the assessee and again on second garnishee notice dt. 27th March, 1961, nothing was due from garnishee to the assessee, the ITO was not justified in demanding the payment of Rs. 20,000 on the ground that the same was made in contravention of earlier order dt. 18th June, 1959-BUDHA PICTURES(Supreme Court)(1967) 65 ITR 0620

Guidelines for seizure of jewellery and ornaments in course of search

Instances of seizure of jewellery of small quantity in course of operations under section 132 have come to the notice of the Board. The question of a common approach to situations where search parties come across items ofjewellery, has been examined by the Board and following guidelines are issued for strict compliance.

(i) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need be seized.

(ii) In the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of 500 gms. permarried lady, 250 gms. per unmarried lady and 100 gms per male member of the family need not be seized.

(iii) The authorised officer may, having regard to the status of the family, and the custom and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. This should be reported to the Director of Income-tax/Commissioner authorising the search at the time of furnishing the search report.

(iv) In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes.

These guidelines may please be brought to the notice of the officers in your region.

Instruction : No. 1916, dated 11-5-1994.

JUDICIAL ANALYSIS

EXPLAINED IN - The above instructions are explained in Harakchand N. Jain v. Asstt. CIT [1998] 61 TTJ (Mum.) 223, with the following observations :

“(ii) A perusal of the above circular shows that in case of person not assessed to wealth-tax gold jewellery and ornaments to the extent of 500 gms.per married lady, 250 gms. per unmarried lady and 100 gms. per male member of the family need not be seized. It further provides that having regard to the status of the family and custom and practice of the community to which the family belongs, the officer may exclude a large quantity of jewellery and ornaments and seizure. In the present case, there are four male members in the family, the assessee and his three sons. Similarly, there are two married ladies and one unmarried lady. The learned counsel for the assessee submitted that the jewellery of the assessee and his wife was low and was received by various occasions, like marriage delivery, birth, etc. and the jewellery belonged to the children was also received in similar occasions. On the other hand, the learned Departmental Representative argued that the assessee has not provided any evidence to explain the source of the investment in the jewellery.

(iii) On careful consideration of the rival submission we find that the assessee has not placed on record any evidence to prove that the jewellery has been received as gift by him by producing the GT return or any other evidence. However, we are conscious of the fact that in Indian society everyone receives gifts at the time of marriage and other occasions. Therefore, keeping in view the number of family members we are of the view that further rebate of 500 gms. out of the entire jewellery may be treated as explained. The balance 426 gms. of jewellery may be treated as addition under section 69A of the Income-tax Act.”

Monday, 23 November 2015

Where credit note is not issued post sale by the seller in respect of discounts allowed by him and entire tax collected on sale has been paid , the buyer need not reverse input tax credit for discounts allowed but for which no credit note reversing the tax is issued by the seller. The department’s contention that ITC is allowed only on proportionate purchases net of discount held not tenable. Held by Delhi High Court in Challenger Computers Ltd. On 21-08-2015 [52 PHT 171] [63 taxmann.com 120]

As per Notification No. 02/2015 dated 04-11-2015, by CESTAT Reigonal Bench Chandigarh shall hear the appeals arising on Service tax, Excise and Customs issues from Union territory of Chandigarh, states of Punjab and Haryana, J&K and Himachal Pradesh w.e.f. 01-12-2015

Held by SC in Woodward Governor India (P.) Ltd.312 ITR 254 that an enterprise has to report outstanding liability relating to import of raw material using closing rate of foreign exchange and any difference, loss or gain, arising on conversion of said liability at closing rate should be recognized in profit and loss account for reporting period . Bombay High Court in Vassantram Mehta & Co. (P.) Ltd. [2015] 63 taxmann.com 102 (Bombay) 17-04-2015 has followed the same

Held by Kerala High Court in Thomas George Muthoot on 03-07-2015 that disallowance shall be attracted even on payments not payable on 31st March. High Court has approved Calcutta High Court in Crescent Exports and Gujrat High Court in Sikandarkhan N Tunvar. Allahabad High Court in Vector Shipping Services disapproved by Kerala High Court.

Held by Kerala High Court in Thomas George Muthoot on 03-07-2015, that 40(a)(ia) 2nd Proviso inserted w.e.f AY 2013-14 shall not operate retrospectively. 40(a) (ia) 2nd Proviso says that if assessee furnished a certificate from CA that deductee has paid tax on payment escaping TDS, no disallowance shall be made. Held by High Court that provisions are not curative in nature. Hence Allied Motors (SC) 224 ITR 677 and Alom Extrusion (SC) 317 ITR 306 is not applicable. However subsequent Delhi High Court Judgement in Ansal Land Mark Township dated 26-08-2015 has held the amendmend to be curative and hence held applicable prospectively. It may further be noted that SC in Vegetable Products 88 ITR 192 has held that view favourable to assess should be adopted in case of ambiguity.

Sunday, 22 November 2015

In a search case of Nursing home during block period assessment, looking to the subsequent year cash memo for broken period during which 541 patients were registered and total receipts were taken at Rs 1026000, Presumed rate of Rs. 2000/- per patient and presumed quantum of number of patients were taken at 1000/- per annum even for the periods for which no patient register was found. By so calculating gross receipts , the net profit @ 20% was calculated. Held by Jharkhand High Court in para 2(ii) of Smt. Pratima Prasad [2015] 63 taxmann.com 113 (Jharkhand) AUGUST 26, 2015 “ Such type of additions cannot be permitted, because it is absolutely a baseless calculation and without any evidence.”

Friday, 13 November 2015

Where provision for debts was made in earlier years and then added back to computation of income , any claim of expenditure in the subsequent year is allowable as bad debt u/s 36(1)(vii) because the law does not require that debit towards write off be made in the year of deduction [Rallis India 190 taxman 1 (Bom)]

Reassessment with in four years from the end of relevant assessment year can also not be made for mere change of opinion in the absence of tangible material on the basis of which assessment could have been made [Rallis India 190 taxman 1 (Bom)]Para 12

Gujrat CM Relief Fund gave notice of accumulation u/s 11(2) in F.10 where in general objects of the trust were mentioned . Lower authorities disallowed the claimed of the assessee saying that notice has to be specific following SC in S.RM.M.CT.M. Tiruppani Trust(1998) 230 ITR 636 at p.640 (SC) However Ahemdabad Tribunal in GUJARAT CHIEF MINISTER RELIEF FUND (2015) 45 CCH 0205 04-11-2015, following Delhi High Court in Guru Nanak Vidya Bhandar Trust (2005) 272 ITR 379 (Del) held that where similar notice has been accepted by the department in preceeding and succeeding year, it can not challenge the notice for the year under consideration on the ground of being not specific. ITAT in Para 13 also mentioned that enquiry of AO was not aimed whether time limit for notice issued for earlier years was adhered.

Retrospective Amendment of law not operative on date of order u/s 263 or issue of notice u/s 148

ž If retrospective amendment of law was not enforceable on the day, CIT exercised its powers u/s 263, order u/s 263 is bad in law[Supreme Court in Max India [295 ITR 282]]. In this case amendment in section 80HHC was brought retrospectively on the definition of profit in FA 2005 while order u/s 263 was passed 5-03-1997

ž Similarly notice u/s 148 can also not be issued , held by Bombay HC in Rallis India [Para 18] 190 taxman 1. In this case notice u/s 148 was issued on 16-07-2008 and Finance Act 2009 amended the law on S.115JB requiring increase in book profits by provision on diminution in value of assets w.e.f. 1-4-2001.[Consequent to SC Order in HCL Comet 292 ITR 299 that provision for bad debts can not be equated with amount set aside for meeting liabilities]

Monday, 9 November 2015

Whether grievance mechanism for High Pitched assessments is sheathed to decide the fate of stay of demand applications and bolster recovery mechanism ? Instruction No. 17/2015 dated 09-11-2015

The CBDT has acknowledged that problem of high pitched and unreasonable assessments is persisting .
Committees from amongst Pr CIT, CIT(Judicial), CIT (DR), ITAT . AddllCIT(CCIT Hq) shall be member secy. Sr Most member shall be Chairman
A grievance made shall be immediately acknowledged
Separate record of grievances to be made
The Committee shall check grievance along
whether prima facie case of

a. high pitched assessment

b. non observance of natural justice

c. Non application of mind

d. Gross negligence

e. Lack of Involvement

Whether addition is not backed by sound logic or reason , the provisions of law have grossly been misinterpreted, or obvious and well established facts have been ignored
If assessment is found to be unreasonable or high pitched, administrative action shall be taken and case shall be presented to appellate authorities .
Committee, however not to be treated as alternative /additional appellate channel
Committees to be formed till end of Nov 2015

1 11. Disposal of grievance petition with in two months from the end of month in which grievance is made.

The appellants had collected certain amounts from their customers under the heading 'common area maintenance deposit', which was required to be utilized for maintenance of common area of the society, such as stairs, terrace, parking, water charges, municipal taxes, etc. Till the society is formed of the flat owners, the appellant would maintain a separate account of such collection and outgoings and transfer whatever balance amounts (with interest) available to the society. The amount was collected from the flat owners under the provisions of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, sale, management and transfer) Act, 1963. Cestat Mumbai in Goel Nitron Constructions[2015] 62 taxmann.com 333 JULY 7, 2015 following Kumar Beheray Rathi Appeal Nos. ST/137, 138, 139 & 140/2008 - Mum, dated 18-11-2013 held that no service tax is leviable on such one time maintenance charges till housing society is formed

Sunday, 8 November 2015

Trust not registered with in six months time limit u/s 12AA(2)

U/s 12AA(2), CIT has been required to grant registration with in a period of six months.
It has been held by Full Bench decision of Allahabad High Court in Muzaffarnagar Development Authority on 05-02-2015 reversing its own order in Society for the Promotion of Education, Adventure Sport & Conservation of Environment that Non disposal of an application for registration, by granting or refusing registration, before the expiry of six months as provided under Section 12AA (2) of the Income Tax Act 1961 would not result in a deemed grant of registration
Similar Judgements delivered by Madras High Court in Karimangalam Onriya Pengal Semipu Amaipu Ltd. T.C.(A) No. 1183 of 2010 20.03.2013; Anjuman-E-Khyrkhah-E-Aam [2011] 11 taxmann.com 354; Salem v. Sheela Christian Charitable Trust, T.C.(A) No.315 of 2010 dated 27.2.2013;Orrisa High Court in Srikhetra, A.C. Bhakti-Vedanta Swami Charitable Trust v. Asstt. CIT 2006 (II) OLR
When public duty is to be performed by the public authorities, the time-limit which is granted by the Statue is normally not mandatory but is directory in the absence of any clear statutory intent to the contrary. See Montreal Street Railway Company v. Normandin AIR 1917 PC 142
Also held by ITAT Delhi in the case of Process cum product development centre ITA 5013/ITA /2010 on 17-01-2011that mere because order though passed in six moths is received a few days after 6 months shall not result in deemed registration with in six months

6. Now, CBDT vide Instruction No. 16/2015 dated 06-11-2015 has instructed the CIT(Exemption) to follow the time limit of six months strictly failing which suitable administrative action shall be taken

Wednesday, 4 November 2015

Sales tax payment is not substitute for service tax liability

ž It also cannot be disputed that even if sales tax is wrongly remitted and paid that would not absolve them from the responsibility of payment of service tax, if otherwise there is a liability to pay the same.

ž If the article is not susceptible to tax under the Sales Tax Act, the amount of tax paid by the assessee could be refunded as the case may be or, the assessee has to follow the law as may be applicable. But we cannot accept a position in law that even if tax is wrongly remitted that would absolve the parties from paying the service tax if the same is otherwise found payable and a liability accrues on the assessee.

ž [Para 18 of Supreme Court Judgment in Idea Mobile Communication Ltd [2011] 12 taxmann.com 307 (SC) AUGUST 4, 2011]

Where assessee, an advertising agency, made payments of hoarding charges to different parties, it was required to deduct tax at source under section 194C and not under section 194-I.Ogilvy & Mather (P.) Ltd. [2015] 62 taxmann.com 279 (Mumbai - Trib.) AUGUST 28, 2015 . Supreme Court in Japan Airlines followed where in resting the long drawn disputes ,paymnents for landing charges of aircrafts were held not covered by S. 194I i.e. TDS on rent

Service Tax/ Vat on SIM Cards

In this article an attempt has been made to consolidate the development of tax law on taxability of SIM card transactions

1. Amount received for subscription of SIM card is exigible to service tax only

The charges paid by the subscribers for procuring a SIM Card are generally processing charges for activating the cellular phone and consequently the same would necessarily be included in the value of the SIM Card. [Para 18]

The position in law is therefore clear that the amount received by the cellular telephone company from its subscribers towards SIM Card will form part of the taxable value for levy of service tax, for the SIM Cards are never sold as goods independent from services provided. They are considered part and parcel of the services provided and the dominant position of the transaction is to provide services and not to sell the material i.e., SIM Cards which on its own but without the service would hardly have any value at all. Thus, it is established from the records and facts of this case that the value of SIM cards forms part of the activation charges as no activation is possible without a valid functioning of SIM card and the value of the taxable service is calculated on the gross total amount received by the operator from the subscribers. [Para 19]

Supreme Court Judgment in Idea Mobile Communication Ltd [2011] 12 taxmann.com 307 (SC) AUGUST 4, 2011

2. Taxable Value of service in case of SIM card

a) Supreme Court on taxable Value of service in case of SIM card: In BPL Mobile Cellular Ltd 01-02-2008, it was held by Supreme Court in [2012] 26 taxmann.com 216 (SC) that in case of subscription of SIM cards telecom service providers are liable to pay tax service tax on amount received from distributors and not on MRP

b) Service tax imposed on MRP

With effect from 1-3-2007, an Explanation was inserted below rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, providing that, the value of telecommunication service shall be the gross amount paid by the person to whom telecom service is provided by the telegraph authority.

Thus, the gross amount paid by the subscriber viz. the MRP of the SIM Cards shall be the basis of the valuation and the telecom service providers shall be liable to service tax thereon

3. Liability of Selling agents/Distributers of SIM Cards

The selling agent/distributor does not provide any service to the customer. In some cases the distributor gets his consideration from customer at the time of sale of sim cards through the margin in price. In some cases the distributor gets their consideration from the telecom operator by way of commission on the transaction normally called as sale. In the case before us the second type of situation exists.[Para 13]

Though the correct procedure for discharge of the service tax liability by the two parties is that the distributors raise bills for commissions that is due to them along with service tax and BSNL takes Cenvat credit of tax paid by distributors for discharging liability on the telecommunication service provided by BSNL, such procedure does not result in extra realization of Revenue. [Para 26 of G.R.Movers (Del. Cestat)]

It was held by the Cestat that Considering the special nature of the impugned activities and the fact that it can be easily verified that full taxable value of the service provided by BSNL to customers is subjected to tax, we are of the view that there is no case to undo decisions already taken by the Tribunal in this regard in

(i)		Chetan Traders v. CCE [2008] 17 STT 318 (New Delhi-CESTAT)
(ii)		Hindustan Associated Traders v. CCE [Final order Nos. 673 & 674 of 2007, dated 7-6-2007]
(iii)		South East Corpn. v. CCE& ST [2009] 22 STT 446 (Bang.-CESTAT)
(iv)		Karakattu Communications v. CCE [2009] 21 STT 384 (Bang.-CESTAT)

Madras High Court in Bharat Cell [2015] 62 taxmann.com 295 (Madras) JULY 3, 2015 has followed the Judgment of Delhi Cestat in G.R. Movers (supra)

The services of selling agent or a distributor of SIM cards or recharge coupon vouchers have been exempted from service tax vide entry No. 29 in Notification 25/2012-S.T., dated 20.06.2012.w.e.f. 01-07-2012

Conclusion: The Concept of revenue neutrality discussed in G.R. Movers (supra) can not be followed as a precedent in other cases and the judgements delivered are in the light of special nature of transaction, valuation method under service tax law and future exemption to selling agents/ distributors.

Monday, 2 November 2015

No TDS on reimbursement of guarding and supervisory charges by assessee , rice mill, to bank for payment to NBHC (National Bulk Handling Corporation) against pledge of stock but tds required to be deducted by bank because there is contract between bank and NBHC. Hence 40(a) (ia) not attracted- Luxmi Rice Mills 29-10-2015 (2015) 45 CCH 0153 DelTrib. The Tribunal relied upon the decision of Gujrat High Court in Gujrat Narmada Valley Fertilizer Co. SLP against the decision of Gujrat High Court dismissed by Supreme Court on 17-01-2014 (in SLC CC No. 175 of 2014). Delhi High Court in the case of CIT Vs. DLF Commercial Project Corporation in ITA 627/2012 and 507/2013 vide order dated 15-7-2015 has also held that no TDS is liable to be deducted on reimbursement of expenses

Sunday, 1 November 2015

Where branding of trade mark is obtained by restaurant under Trade Marks Act , then food served by that restaurant can not be treated as unbranded and has to be taxed accordingly under Vat law treating the same as branded- Tvl. Zaitoon Multi Cuisine Family Restaurant [2015] 62 taxmann.com 225 (Madras) AUGUST 4, 2015 Comments: Under Punjab Vat Act Branded and packaged food product under ScheduleE Sr.No. 15(6) are taxable @15.95% in the hands of importer/manufactrer (i.e. hotel/restaurant) and subsequent sale is tax free. The above decision might have bearing on the taxation under Punjab Vat Law also

Saturday, 31 October 2015

Gift made by relatives of the assessee to his minor children amounting to Rs. 371000. Held by Allahabad High Court in Radhey Shyam Bhatia [2015] 62 taxmann.com 123 (Allahabad) “ All the donors are in relation of the assessee and the gifts were made out of love and affection. The details of each donor's return was produced before the Assessing Officer, as all the donors were the income-tax assessees. When it is so then the creditworthiness is proved. The amount was reflected in the books of account. Thus, in the instant case, the identity of the donors has been proved. The transfer of the amount was voluntarily and the amount was transferred by way of entries, so the genuineness of the transaction has been proved. Hence, in the peculiar facts and circumstances of the case, the gifts appears genuine. Also by looking to the amount involved, we accept the gift as genuine. All the ingredients of valid gifts have been proved in the instant case…..”

Where AO having jurisdiction over searched person and other than searched person is same In the case where the AO of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the one searched.[Para 18 2nd line] Allahabad High Court in the case of Commissioner of income Tax v. Gopi Apartments: [2014] 360 ITR 411 “26. Even in a case, where the Assessing Officer of both the 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 of satisfaction is still required and in fact it is mandatory." Madhya Pradesh High Court in Commissioner of Income Tax v. Mechmen: [2015] 60 taxmann.com 484 (Madhya Pradesh) also suggested the same Delhi High Court Judgement in RRJ Securities Ltd [2015] 62 taxmann.com 391 (Delhi) 30-10-2015

Delhi High Court Judgement in RRJ Securities Ltd [2015] 62 taxmann.com 391 (Delhi) 30-10-2015 on Treatment of Concluded Assessments u/s 153A said and quoted that Delhi High Court in Commissioner of Income Tax (Central)-IIIv. Kabul Chawla: ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. [Para 21,22] Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee [Para 36] The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized.[Para 37]

Principles and Procedure of Assessment u/s 153C

1. The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. [Para 13]

2. All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person[Para 13]

3. Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the Assessee to whom such assets/documents belong.[Para 13]

4. The AO of the Assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under Section 153C of the Act.[Para 13]

5. Section 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets or the documents, he is to issue a notice to assess/re-assess the income of such person - that is, the Assessee other than the person searched - in accordance with provisions of Section 153A of the Act.

6. The AO of the person other than the one searched also, is not, at the stage of issuing notice under Section 153C/153A of the Act, required to conclude that the assets/documents handed over to him by the AO of the searched person represent or indicate any undisclosed income of the Assessee under his jurisdiction.[Para35]

7. As explained in SSP Aviation (supra), Section 153C only enables the AO of a person other than the one searched, to investigate into the documents seized and/or the assets seized and ascertain that the same do not reflect any undisclosed income of the Assessee (i.e a person other than the one searched) for the relevant assessment years.[Para 35]

8. If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the AO of the Assessee, are duly disclosed and reflected in the returns filed by the Assessee, no further interference would be called for. Similarly, if the books of accounts/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with [Para 35]

9. Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee [Para 35]

10 The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the Assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years.[Para 36]
11 Whilst, it is not necessary for the AO to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an Assessee before commencing an enquiry under Section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the Assessee for the relevant assessment years.[Para 36]

12 The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized.[Para 37]

Delhi High Court Judgement in RRJ Securities Ltd [2015] 62 taxmann.com 391 (Delhi) 30-10-2015

Working papers of the client stored in the hard disk of the CA can not be said to be belonging to the his assessee. They are property of Chartered Accountant and hence do not “belong to” his client, hence no proceedings against the client of the CA u/s 153C can be undertaken on the basis of such evidence. Delhi High Court Judgement in RRJ Securities Ltd [2015] 62 taxmann.com 391 (Delhi) 30-10-2015 .However this finding of the Court may not sustain post 01-06-2015, scenario , where the words “belong to” have been replaced by “pertain to” and “relates to” by Finance Act 2015.

Wednesday, 28 October 2015

No Vat is leviable on E-Commerce website. They are only facilitators to the transaction of sale and not acting as sellers themselves. The actual sellers have discharged their tax dues in full and therefore place of delivery has no relevance because as per Article 286 and Section 3 of CST Act, tax is payable in the state from where sales have occasioned- Held by Kerala High Court in Flipkart Internet Private Limited WPC 5348/2015 pronounced on 26-10-2015