IT : Scholarships is 'education&# 39;, not 'any other object of general public utility' . Trust cannot be denied exemption by invoking the first proviso to sec 2(15) where its activities in fact fall within the heads 'education&# 39;, 'medical relief' and 'relief of the poor' even if its objects allow it to carry on any activity for 'advancement of any other object of general public utility'
[2015] 61 taxmann.com 262 (Delhi)
HIGH COURT OF DELHI
Hamdard Laboratories India
v.
Assistant Director of Income-tax (Exemption)
[2015] 61 taxmann.com 262 (Delhi)
HIGH COURT OF DELHI
Hamdard Laboratories India
v.
Assistant Director of Income-tax (Exemption)
Competition Act: Where complainant had booked for allotment of office space in proposed building of respondents and respondents continuously suppressed facts relating to rejection of building plans, demanded instalments of price and also forced complainants to accept car parking by paying additional sums, it amounted to unfair trade practice
Competition Act: Where no evidence had been produced by complainants to show that acts of respondents in not supplying relevant information relating to construction of office space booked by them and also unilaterally reducing area, had potential of preventing, distorting or restricting competition, respondents could not be held guilty of restrictive trade practice
[2015] 61 taxmann.com 78 (CAT)
COMPETITION APPELLATE TRIBUNAL
R. N. Grover
v.
Rawal Apartments (P.) Ltd., New Delhi
Competition Act: Where no evidence had been produced by complainants to show that acts of respondents in not supplying relevant information relating to construction of office space booked by them and also unilaterally reducing area, had potential of preventing, distorting or restricting competition, respondents could not be held guilty of restrictive trade practice
[2015] 61 taxmann.com 78 (CAT)
COMPETITION APPELLATE TRIBUNAL
R. N. Grover
v.
Rawal Apartments (P.) Ltd., New Delhi
Service Tax on services provided by Government
Service tax is payable by the Government or local authority on provision of the services which are not specified in the negative list i.e. section 66D of the Act.
Clause (a) of Section 66D provides that the services by government or a local authority are negatively listed. However, it excludes the following services –
Services by the Department of posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;
Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
Transport of goods or passengers; or
Any service (substituted for 'support services' * – w.e.f. date yet to be notified), other than services covered under clauses (i) to (iii) above, provided to business entities.
* Section 65B(49) which used to define support services now stands omitted with a date yet to be notified.
It means any service provided by the Government or local authority will not be chargeable to service tax except aforesaid four categories of services.
As per sub-clause (iv) of clause (a) of section 66D, any service, (other than services covered under sub- clauses (i) to (iii) above), provided to business entities by government or local authority are taxable as these are excluded from the negative list. But if the service recipient is other than business entity, then service tax shall not be payable as it is not excluded from the negative list.
The terms Government and Local authority are defined in sections 65B(26A) and (31) of the Act respectively.
However, in terms of Notification No. 30/2012 – ST dated 20.06.2012, in respect of services provided or agreed to be provided by Government or local authority 'by way of support services' (highlighted words to be omitted from a date yet to be notified) except renting of immovable property service and services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D, service tax is payable by service receiver i.e. business entity under reverse charge mechanism. It means in the instant cases, the government departments will not have to get registered because service tax will be payable on such services by the service receiver (i.e. the business entities receiving the service).
As and when these amendments are given effect to, all the services provided by the Government or local authority to a business entity, except those services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax. The date from which these amendments would come into effect shall be notified in due course.
Madhav Kalani
INCOME FROM SALE OF SEEDS AMOUNTS TO AGRICULTURAL INCOME
Section 10(1) of the Income Tax Act, 1961 provides that in computing the total income of a previous year of any person, agricultural income shall not be included. Section 2(1A) of the Act defines the term 'agricultural income' as-
any rent or revenue derived from land which is situated in India and is used for agricultural purposes;
any income derived from such land by- agriculture; or the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause ;
(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on:
Provided that-
the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and
the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated-
in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand; or
in any area within the distance, measured aerially,-
not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or
not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or
not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh.
Explanation 1.-For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section ;
Explanation 2.-For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or sub-clause (b) shall not be agricultural income;
Explanation 3.-For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income;
Explanation 4.-For the purposes of clause (ii) of the proviso to sub-clause (c), "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.
In this article the issue to be decided is whether the income from the sale of seeds amounts to agricultural income with reference to decided case law.
In 'Assistant Commissioner of Income Tax V. Prabhat Agri Biotech Limited' - 2015 (9) TMI 640 - ITAT HYDERABAD the assessee is a company engaged in the business of seed production, research, marketing of field, vegetable crops and wind power generation. The assessee declared an agriculture income of ₹ 37,54,466 from the production of basic seeds and claimed exemption under Section 10(1) of the Act. The same was disallowed by the assessing officer. On appeal the Commissioner of Income Tax (Appeals) allowed the appeal of the assessee.
The Commissioner (Appeals) allowed the appeal on the basis of earlier decisions of Tribunals. The Tribunals have held that the income from seed production as agricultural income and eligible for exemption under Section 10(1) of the Act and delete the addition on the income generated from the production of basic/foundation seeds by the appellant which were generated out of the cultivation made by the appellant.
Against the order of Commissioner (Appeals) the Revenue filed appeal before the Tribunal. The assessee contended the following:
Right from the assessment year 2003 – 04 the same dispute with regard to the claim of exemption under Section 10(1) is going on;
For the previous assessment years it has been held that the income generated on cultivation of basic foundation seeds is agricultural income and as such is exempt under Section 10(1) of the Act.
The High Court considered the question for discussion as to whether the assessee's claim of exemption under Section 10(1) of the Act by treating the income generated from sale of basic/foundation seeds as agricultural income. The High Court observed that during the assessment proceedings the Assessing Officer has stated that the claim of the assessee was allowed by the Income Tax Appellate Tribunal for the assessment years 2003 – 04 to 2006 -07. The Assessing Officer has disallowed the claim of the appellant stating that the Department had not accepted the decision of the Hon'ble Tribunal and filed further appeals before the High Court of Andhra Pradesh.
The Tribunal found the decision in the case of 'Swagath Seeds Private Limited' relied upon by the assessee. In this case the Tribunal observed that the assessee is cultivating by performing agricultural operation in order to generate basic foundation seeds. The same were distributed to farmers for further generation of seeds. The assessee is not claiming any exemption for the seeds which are purchased from other farmers. The assessee claimed exemption under Section 10(1) in respect of basic foundation seeds which were generated by performing agricultural operation on the land by the assessee.
Following the above said order of the Tribunal in 'Swagath Steels Private Limited' case the Tribunal held that the assessee is entitled to exemption under Section 10(1) of the Act and that income generated on cultivation of basic/foundation seeds has to be treated as agricultural income. The Tribunal did not found any reasons to interfere with the orders of the Commissioner (Appeal).
By: Mr. M. GOVINDARAJAN
Section 10(1) of the Income Tax Act, 1961 provides that in computing the total income of a previous year of any person, agricultural income shall not be included. Section 2(1A) of the Act defines the term 'agricultural income' as-
any rent or revenue derived from land which is situated in India and is used for agricultural purposes;
any income derived from such land by- agriculture; or the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause ;
(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on:
Provided that-
the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and
the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated-
in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand; or
in any area within the distance, measured aerially,-
not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or
not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or
not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh.
Explanation 1.-For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section ;
Explanation 2.-For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or sub-clause (b) shall not be agricultural income;
Explanation 3.-For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income;
Explanation 4.-For the purposes of clause (ii) of the proviso to sub-clause (c), "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.
In this article the issue to be decided is whether the income from the sale of seeds amounts to agricultural income with reference to decided case law.
In 'Assistant Commissioner of Income Tax V. Prabhat Agri Biotech Limited' - 2015 (9) TMI 640 - ITAT HYDERABAD the assessee is a company engaged in the business of seed production, research, marketing of field, vegetable crops and wind power generation. The assessee declared an agriculture income of ₹ 37,54,466 from the production of basic seeds and claimed exemption under Section 10(1) of the Act. The same was disallowed by the assessing officer. On appeal the Commissioner of Income Tax (Appeals) allowed the appeal of the assessee.
The Commissioner (Appeals) allowed the appeal on the basis of earlier decisions of Tribunals. The Tribunals have held that the income from seed production as agricultural income and eligible for exemption under Section 10(1) of the Act and delete the addition on the income generated from the production of basic/foundation seeds by the appellant which were generated out of the cultivation made by the appellant.
Against the order of Commissioner (Appeals) the Revenue filed appeal before the Tribunal. The assessee contended the following:
Right from the assessment year 2003 – 04 the same dispute with regard to the claim of exemption under Section 10(1) is going on;
For the previous assessment years it has been held that the income generated on cultivation of basic foundation seeds is agricultural income and as such is exempt under Section 10(1) of the Act.
The High Court considered the question for discussion as to whether the assessee's claim of exemption under Section 10(1) of the Act by treating the income generated from sale of basic/foundation seeds as agricultural income. The High Court observed that during the assessment proceedings the Assessing Officer has stated that the claim of the assessee was allowed by the Income Tax Appellate Tribunal for the assessment years 2003 – 04 to 2006 -07. The Assessing Officer has disallowed the claim of the appellant stating that the Department had not accepted the decision of the Hon'ble Tribunal and filed further appeals before the High Court of Andhra Pradesh.
The Tribunal found the decision in the case of 'Swagath Seeds Private Limited' relied upon by the assessee. In this case the Tribunal observed that the assessee is cultivating by performing agricultural operation in order to generate basic foundation seeds. The same were distributed to farmers for further generation of seeds. The assessee is not claiming any exemption for the seeds which are purchased from other farmers. The assessee claimed exemption under Section 10(1) in respect of basic foundation seeds which were generated by performing agricultural operation on the land by the assessee.
Following the above said order of the Tribunal in 'Swagath Steels Private Limited' case the Tribunal held that the assessee is entitled to exemption under Section 10(1) of the Act and that income generated on cultivation of basic/foundation seeds has to be treated as agricultural income. The Tribunal did not found any reasons to interfere with the orders of the Commissioner (Appeal).
By: Mr. M. GOVINDARAJAN
ST - Banking Service - RBI is not a client as far as securities are concerned because they are not owners of bonds - Without rendering of custodian services, it would not be correct to hold that appellant is liable to ST for consideration received from RBI: CESTAT
MUMBAI : THE issue concerns relief and savings bonds issued by the Reserve Bank of India wherein M/s ICICI Bank acts as "agency bank" for sale of bonds to the public. In this role as "receiving office" , subscribers to the bonds, detailed in the Bond Ledger Account (BLA), are enrolled directly by M/s ICICI Bank or through brokers. This "receiving office" registers brokers, accepts forms and payments, issues certificates, maintains Bond Ledger Accounts, pays interest at specified intervals, redeems the bond at the end of tenor and pays brokerage. In return, they are remunerated by the Reserve Bank of India which, as per their agreement, is brokerage for sale effected directly by M/s ICICI Bank to subscribers and a separate commission for the handling of sale, payment of interest and redemption value and keeping accounts.
On the brokerage, commission and service charge received from Reserve Bank of India, M/s ICICI has paid service tax of Rs. 40,76,137/- as provider of "Business Auxiliary services" for the period between 1st July 2003 and 31 st March 2004 .
However, according to the SCN dated 17 th October 2006 issued by ADG, DGCEI , M/s ICICI Bank has carried out securities brokering for which commission of one percent of total bond value has been remunerated by RBI and has also rendered custodial service by maintaining the Bond Ledger Account and services incidental thereto, both of which were liable to Service Tax as "Banking and other financial services" .
The Commissioner of Service Tax, Mumbai-II confirmed the service tax demand of Rs.91,80,371/ - against ICICI Bank Ltd . for allegedly rendering "Banking and other financial services" valued at Rs. 15,83,07,200/ - during the period 16th July 2001 to 31 st March 2004 .
Although appellant has been held liable to pay interest, the adjudicating authority was magnanimous in refraining from imposing any penalty under the FA, 1994.
Nonetheless, the appellant is before the CESTAT and the department too joins them in knocking the doors of the Tribunal for they are aggrieved by the impugned order to the extent that "cum-tax" value has been adopted for determining the value of the taxable service and also penalty.
Both the appeals were heard together, recently.
The appellant assessee, inter alia , submitted that Bond Ledger Account is merely a system of account of receipts and disbursements and that such an accounting arrangement cannot, ipso facto , change the status of the "receiving office" from an agency bank to that of custodial service provider because custodial service as defined in clause 2(e) of the SEBI (Custodian of Securities) Regulation, 1996 involves safe-keeping of securities on behalf of, and rendering services incidental thereto, a client; in the matter of relief bonds, there is no agreement for such service with the bond-purchaser who alone can be described as client; that the "receiving office" has entered into an agreement only with Reserve Bank of India which is not the owner of the bond and is, therefore, not a client. Following case laws were cited in support Diebold System (P) Ltd. - 2008-TIOL-489- CESTAT-MAD, HDFC Bank Ltd - 2014-TIOL-27- CESTAT-MUM, Enam Securities Pvt. Ltd. - 2014-TIOL-2205- CESTAT-MUM & Canara Bank - 2012-TIOL-790- CESTAT-AHM.
The AR submitted that the cited decisions are in dispute before the Supreme Court and, furthermore, the appellant having issued Certificate of Holding to subscribers of relief bonds cannot claim to be anything other than custodian. In the matter of the "cum-tax" benefit extended by the adjudicating authority and against which the department is in appeal, the following decisions were cited in support Rampur Engineering Co Ltd. - 2006-TIOL-994- CESTAT-DEL, Amrit Agro Industries Ltd. - 2007-TIOL-244- SC-CX.
The Bench observed -
+ Assessee has discharged service tax of Rs.40,76,137/ - for the period after 1 st July 2003 on the entire remuneration earned from RBI with the introduction of tax on "business auxiliary service" . In connection with the demand on brokerage earned prior to 1 st July 2003, this Tribunal has held in the cases cited that brokerage earned on sale of government securities is not taxable. The confirmation of tax of Rs.31,92,050/ - on brokerage earned for the period from 16 th July 2001 to 30 th June 2003 in the impugned order is, therefore, not sustainable. Hence, the sole issue for determination is whether the gamut of activities performed by M/s ICICI Bank after sale of bonds is tantamount to custodial services and, therefore, renders them liable to tax of Rs.44,62,861/ - on the handling commission, turnover commission and service charge for rendering of "banking and financial services" from 16 th July 2001 to 31 st March 2004 of which there is no dispute on Rs.25,50,678/ - already paid by assessee as taxable under "business auxiliary service" for the period from 1 st July 2003 to 31 st March 2004.
+ All activities of a banking company may not be within the ambit of section 65(12) and in choosing between two different taxable services, the test of specificity laid down in section 65A cannot be validated merely by reference to its status as a banking company while ignoring the rest of a particular definition as the original authority appears to have done.
+ It can be seen (from the definition 65(12)) that custodial services find specific mention in the description as a part of "banking and other financial services" .
+ From the definition of Custodial service as given in clause 2(e) of the SEBI (Custodian of Securities) Regulation, 1996, it is clear that custodial services in relation to securities is primarily the safekeeping of the securities of a client; the secondary function is that of providing services incidental thereto - a few of such services are included in the definition. Sans client-custodian relationship and sans entrusting of securities for safekeeping, the incidental services are not relevant. Once a client has entrusted the safekeeping of securities to a custodian, the custodian may maintain accounts relating to the security and collect the benefits accruing to the client as incidental activities. Without such entrustment the relationship is not one of custodianship.
+ Examining the scheme of "receiving office" in relation to government bonds, it appears that Reserve Bank of India utilizes the reach of specified banking companies to garner subscribers. The numbers would have been restricted if the Reserve Bank of India were to route the sale through its own offices across the country. These identified banks maintain details of subscriber, pay out interest as and when due and record the disposal of the bonds. In return, they are compensated with certain commission by the Reserve Bank of India as laid down in the agreement with the Reserve Bank of India. The relationship with Reserve Bank of India exists because of the potential for reaching out to vast number of subscribers. The Reserve Bank of India is not a client as far as the securities are concerned because they are not the owners of the bonds. The agreement between Reserve Bank of India and assessee-appellant for handling the administrative minutiae of managing the bond issue does not fall within the scope of custodianship.
+ There is no evidence of subscribers handing over custody of bonds to ICICI Bank; on the contrary, the subscriber details are entered in a register by the "receiving office" and interest is paid out at specified intervals to the bond-holder. A custodian, under a specific contract with security-owning clients, performs incidental services. In return for a fee, the custodian will receive the security, collect the interest or dividend on behalf of the investor from the borrower and obtain the redemption or sale value of the security on instruction from the investor. A perusal of the scheme of the Reserve Bank of India also eliminates such a scenario. The bond subscriber does not pay the ICICI Bank anything more than the bond price and it is from the Reserve Bank of India that assessee-appellant obtains the remuneration. And the assessee-appellant pays out interest and redemption value on behalf of the Reserve Bank of India. In short, there is no client-beneficiary relationship with the bond-subscriber. Without rendering of custodian services, it would not be correct to hold that the appellant is liable to service tax for the consideration received from the Reserve Bank of India as handling commission, turnover commission and service charge in the category of "banking or other financial service.
Held: The appeal of assessee is allowed by setting aside the demand for tax prior to 1 st July 2003. The claim of the assessee to be taxed as provider of "business auxiliary service" is upheld. There being no differential tax to be collected, the departmental appeal on valuation and penalty is dismissed.
MUMBAI : THE issue concerns relief and savings bonds issued by the Reserve Bank of India wherein M/s ICICI Bank acts as "agency bank" for sale of bonds to the public. In this role as "receiving office" , subscribers to the bonds, detailed in the Bond Ledger Account (BLA), are enrolled directly by M/s ICICI Bank or through brokers. This "receiving office" registers brokers, accepts forms and payments, issues certificates, maintains Bond Ledger Accounts, pays interest at specified intervals, redeems the bond at the end of tenor and pays brokerage. In return, they are remunerated by the Reserve Bank of India which, as per their agreement, is brokerage for sale effected directly by M/s ICICI Bank to subscribers and a separate commission for the handling of sale, payment of interest and redemption value and keeping accounts.
On the brokerage, commission and service charge received from Reserve Bank of India, M/s ICICI has paid service tax of Rs. 40,76,137/- as provider of "Business Auxiliary services" for the period between 1st July 2003 and 31 st March 2004 .
However, according to the SCN dated 17 th October 2006 issued by ADG, DGCEI , M/s ICICI Bank has carried out securities brokering for which commission of one percent of total bond value has been remunerated by RBI and has also rendered custodial service by maintaining the Bond Ledger Account and services incidental thereto, both of which were liable to Service Tax as "Banking and other financial services" .
The Commissioner of Service Tax, Mumbai-II confirmed the service tax demand of Rs.91,80,371/ - against ICICI Bank Ltd . for allegedly rendering "Banking and other financial services" valued at Rs. 15,83,07,200/ - during the period 16th July 2001 to 31 st March 2004 .
Although appellant has been held liable to pay interest, the adjudicating authority was magnanimous in refraining from imposing any penalty under the FA, 1994.
Nonetheless, the appellant is before the CESTAT and the department too joins them in knocking the doors of the Tribunal for they are aggrieved by the impugned order to the extent that "cum-tax" value has been adopted for determining the value of the taxable service and also penalty.
Both the appeals were heard together, recently.
The appellant assessee, inter alia , submitted that Bond Ledger Account is merely a system of account of receipts and disbursements and that such an accounting arrangement cannot, ipso facto , change the status of the "receiving office" from an agency bank to that of custodial service provider because custodial service as defined in clause 2(e) of the SEBI (Custodian of Securities) Regulation, 1996 involves safe-keeping of securities on behalf of, and rendering services incidental thereto, a client; in the matter of relief bonds, there is no agreement for such service with the bond-purchaser who alone can be described as client; that the "receiving office" has entered into an agreement only with Reserve Bank of India which is not the owner of the bond and is, therefore, not a client. Following case laws were cited in support Diebold System (P) Ltd. - 2008-TIOL-489- CESTAT-MAD, HDFC Bank Ltd - 2014-TIOL-27- CESTAT-MUM, Enam Securities Pvt. Ltd. - 2014-TIOL-2205- CESTAT-MUM & Canara Bank - 2012-TIOL-790- CESTAT-AHM.
The AR submitted that the cited decisions are in dispute before the Supreme Court and, furthermore, the appellant having issued Certificate of Holding to subscribers of relief bonds cannot claim to be anything other than custodian. In the matter of the "cum-tax" benefit extended by the adjudicating authority and against which the department is in appeal, the following decisions were cited in support Rampur Engineering Co Ltd. - 2006-TIOL-994- CESTAT-DEL, Amrit Agro Industries Ltd. - 2007-TIOL-244- SC-CX.
The Bench observed -
+ Assessee has discharged service tax of Rs.40,76,137/ - for the period after 1 st July 2003 on the entire remuneration earned from RBI with the introduction of tax on "business auxiliary service" . In connection with the demand on brokerage earned prior to 1 st July 2003, this Tribunal has held in the cases cited that brokerage earned on sale of government securities is not taxable. The confirmation of tax of Rs.31,92,050/ - on brokerage earned for the period from 16 th July 2001 to 30 th June 2003 in the impugned order is, therefore, not sustainable. Hence, the sole issue for determination is whether the gamut of activities performed by M/s ICICI Bank after sale of bonds is tantamount to custodial services and, therefore, renders them liable to tax of Rs.44,62,861/ - on the handling commission, turnover commission and service charge for rendering of "banking and financial services" from 16 th July 2001 to 31 st March 2004 of which there is no dispute on Rs.25,50,678/ - already paid by assessee as taxable under "business auxiliary service" for the period from 1 st July 2003 to 31 st March 2004.
+ All activities of a banking company may not be within the ambit of section 65(12) and in choosing between two different taxable services, the test of specificity laid down in section 65A cannot be validated merely by reference to its status as a banking company while ignoring the rest of a particular definition as the original authority appears to have done.
+ It can be seen (from the definition 65(12)) that custodial services find specific mention in the description as a part of "banking and other financial services" .
+ From the definition of Custodial service as given in clause 2(e) of the SEBI (Custodian of Securities) Regulation, 1996, it is clear that custodial services in relation to securities is primarily the safekeeping of the securities of a client; the secondary function is that of providing services incidental thereto - a few of such services are included in the definition. Sans client-custodian relationship and sans entrusting of securities for safekeeping, the incidental services are not relevant. Once a client has entrusted the safekeeping of securities to a custodian, the custodian may maintain accounts relating to the security and collect the benefits accruing to the client as incidental activities. Without such entrustment the relationship is not one of custodianship.
+ Examining the scheme of "receiving office" in relation to government bonds, it appears that Reserve Bank of India utilizes the reach of specified banking companies to garner subscribers. The numbers would have been restricted if the Reserve Bank of India were to route the sale through its own offices across the country. These identified banks maintain details of subscriber, pay out interest as and when due and record the disposal of the bonds. In return, they are compensated with certain commission by the Reserve Bank of India as laid down in the agreement with the Reserve Bank of India. The relationship with Reserve Bank of India exists because of the potential for reaching out to vast number of subscribers. The Reserve Bank of India is not a client as far as the securities are concerned because they are not the owners of the bonds. The agreement between Reserve Bank of India and assessee-appellant for handling the administrative minutiae of managing the bond issue does not fall within the scope of custodianship.
+ There is no evidence of subscribers handing over custody of bonds to ICICI Bank; on the contrary, the subscriber details are entered in a register by the "receiving office" and interest is paid out at specified intervals to the bond-holder. A custodian, under a specific contract with security-owning clients, performs incidental services. In return for a fee, the custodian will receive the security, collect the interest or dividend on behalf of the investor from the borrower and obtain the redemption or sale value of the security on instruction from the investor. A perusal of the scheme of the Reserve Bank of India also eliminates such a scenario. The bond subscriber does not pay the ICICI Bank anything more than the bond price and it is from the Reserve Bank of India that assessee-appellant obtains the remuneration. And the assessee-appellant pays out interest and redemption value on behalf of the Reserve Bank of India. In short, there is no client-beneficiary relationship with the bond-subscriber. Without rendering of custodian services, it would not be correct to hold that the appellant is liable to service tax for the consideration received from the Reserve Bank of India as handling commission, turnover commission and service charge in the category of "banking or other financial service.
Held: The appeal of assessee is allowed by setting aside the demand for tax prior to 1 st July 2003. The claim of the assessee to be taxed as provider of "business auxiliary service" is upheld. There being no differential tax to be collected, the departmental appeal on valuation and penalty is dismissed.
IT : Where Assessing Officer sought one month time for due verification of additional evidence produced by assessee by stating that he was on election duty and number of cases of assessment in which time limitation was going to expire was pending, Commissioner (Appeals) should accept his demand
[2015] 61 taxmann.com 87 (Madhya Pradesh)
HIGH COURT OF MADHYA PRADESH
Commissioner of Income-tax
v.
Essence Commodities Ltd.
[2015] 61 taxmann.com 87 (Madhya Pradesh)
HIGH COURT OF MADHYA PRADESH
Commissioner of Income-tax
v.
Essence Commodities Ltd.
IT/ILT : A captive unit of a comparable company which assumes only a limited risk, cannot be compared with a giant company in area of development of software who assumes all types of risks leading to higher profits
[2015] 60 taxmann.com 345 (Delhi - Trib.)
IN THE ITAT DELHI BENCH 'I'
Fiserv India (P.) Ltd.
v.
Deputy Commissioner of Income-tax, Circle-11(1) , New Delhi
[2015] 60 taxmann.com 345 (Delhi - Trib.)
IN THE ITAT DELHI BENCH 'I'
Fiserv India (P.) Ltd.
v.
Deputy Commissioner of Income-tax, Circle-11(1) , New Delhi
IT : Even if a claim for 100 per cent deduction under section 10A was not made by assessee before Assessing Officer, it could be made before Commssioner (Appeals)
[2015] 61 taxmann.com 82 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'G'
Income-tax Officer
v.
XS Cad India (P.) Ltd.
[2015] 61 taxmann.com 82 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'G'
Income-tax Officer
v.
XS Cad India (P.) Ltd.
Central Excise : Merely because price at godown (or in stock statements) was here, department cannot allege undervaluation in case of factory-gate sales
[2015] 61 taxmann.com 163 (SC)
SUPREME COURT OF INDIA
Commissioner
v.
Emtee Poly Yarn
[2015] 61 taxmann.com 163 (SC)
SUPREME COURT OF INDIA
Commissioner
v.
Emtee Poly Yarn
IT : Where difference between income declared under section 139(1), additional income offered under section 132(4) and assessed income under section 153A being identical with income returned under section 153A, no penalty under section 271(1)(c) is leviable
[2015] 61 taxmann.com 180 (Calcutta)
HIGH COURT OF CALCUTTA
Commissioner of Income-tax, Central-III, Kolkata
v.
Brijendra Gupta
[2015] 61 taxmann.com 180 (Calcutta)
HIGH COURT OF CALCUTTA
Commissioner of Income-tax, Central-III, Kolkata
v.
Brijendra Gupta
Credit availed on inputs cleared to job worker and credit also availed on processed goods returned by job worker on payment of duty - No double benefit: High Court
CHENNAI: THE respondents availed credit on inputs, namely, 'plastic components&# 39; and cleared them to their job worker for painting, under challans in terms of Notification No.214/86 dated 25.03.1986. The job worker returned the inputs after painting, on payment of duty under invoices, instead of returning the goods under a challan specified under the notification. The appellants took credit on the 'plastic components&# 39; cleared by them as well as on the processed inputs, which was objected to by the department on the ground that credit had been availed twice. The assessee got a favourable order in Tribunal. So, revenue is in appeal before the High Court.
After hearing both sides, the High Court held:
What happened in this case was that the first respondent/assessee handed over plastic materials during the period from July 2006 to December 2006 to a Company by name Nypro Forbes Products Private Limited for carrying out certain job works. The goods were handed over after availing credit for inputs, but, not actually paying duty. The Company which undertook the job work, while returning the goods, after carrying out the job work, raised invoices, for amounts including the duty that they paid. Even according to the Department, the job worker was not liable to make payment of duty. But, since the duty was paid by the job worker and also claimed from the first respondent/assessee , the first respondent/assessee claimed credit.
But, the Department went on a wrong presumption that credit had been claimed twice by the first respondent. As a matter of fact, the assessee did not claim credit twice over. At the time when the goods were supplied, they availed the credit. After the Company which undertook the job work, had paid the duty, even according to the Department, the job worker was not liable to pay it. The original authority and the appellate authority wrongly construed the same as a double benefit by applying the theory of unjust enrichment. This is what was rectified by the Tribunal. Hence, the order of the Tribunal is in accordance with law. Therefore, the question of law is answered in favour of the assessee.
CHENNAI: THE respondents availed credit on inputs, namely, 'plastic components&# 39; and cleared them to their job worker for painting, under challans in terms of Notification No.214/86 dated 25.03.1986. The job worker returned the inputs after painting, on payment of duty under invoices, instead of returning the goods under a challan specified under the notification. The appellants took credit on the 'plastic components&# 39; cleared by them as well as on the processed inputs, which was objected to by the department on the ground that credit had been availed twice. The assessee got a favourable order in Tribunal. So, revenue is in appeal before the High Court.
After hearing both sides, the High Court held:
What happened in this case was that the first respondent/assessee handed over plastic materials during the period from July 2006 to December 2006 to a Company by name Nypro Forbes Products Private Limited for carrying out certain job works. The goods were handed over after availing credit for inputs, but, not actually paying duty. The Company which undertook the job work, while returning the goods, after carrying out the job work, raised invoices, for amounts including the duty that they paid. Even according to the Department, the job worker was not liable to make payment of duty. But, since the duty was paid by the job worker and also claimed from the first respondent/assessee , the first respondent/assessee claimed credit.
But, the Department went on a wrong presumption that credit had been claimed twice by the first respondent. As a matter of fact, the assessee did not claim credit twice over. At the time when the goods were supplied, they availed the credit. After the Company which undertook the job work, had paid the duty, even according to the Department, the job worker was not liable to pay it. The original authority and the appellate authority wrongly construed the same as a double benefit by applying the theory of unjust enrichment. This is what was rectified by the Tribunal. Hence, the order of the Tribunal is in accordance with law. Therefore, the question of law is answered in favour of the assessee.
IT/ILT: Where there is no transfer of technology, technical know-how or any technical knowledge or skill that assessee can apply in furtherance of his business objects, payments for same to a Singaporean company does not fall within scope of 'fees for technical services' as per India-Singapore DTAA
[2015] 61 taxmann.com 186 (Pune - Trib.)
IN THE ITAT PUNE BENCH 'B'
Bramhacorp Hotels & Resorts Ltd.
v.
Deputy Director of Income-tax, (International Taxation-I), Pune
[2015] 61 taxmann.com 186 (Pune - Trib.)
IN THE ITAT PUNE BENCH 'B'
Bramhacorp Hotels & Resorts Ltd.
v.
Deputy Director of Income-tax, (International Taxation-I), Pune
Negotiable Instruments Act : Where borrowings were effected for development of college, Chairman of college could not be proceeded against under section 138 on dishonour of cheque issued towards repayment of loan, if college was not arrayed as an accused
[2015] 61 taxmann.com 66 (Madras)
HIGH COURT OF MADRAS
R.Vivekanandan
v.
Chandrakanthan
[2015] 61 taxmann.com 66 (Madras)
HIGH COURT OF MADRAS
R.Vivekanandan
v.
Chandrakanthan
CL : Where scheme of demerger as approved by Company Court was subject matter of issue before Division Bench in appeal, limitation was to be determined from date on which petitioner was furnished with certified copy of judgment of Division Bench; hence petitioner was entitled to seek registration of order
[2015] 61 taxmann.com 171 (Madras)
HIGH COURT OF MADRAS
Laxmi Selvaraaj Tex. (P.) Ltd.
v.
Inspector General of Registration
[2015] 61 taxmann.com 171 (Madras)
HIGH COURT OF MADRAS
Laxmi Selvaraaj Tex. (P.) Ltd.
v.
Inspector General of Registration
If creeping acquisition limit of 5% exceeded in a FY at any time, obligation to make public announcement is triggered under the 1997 Takeover Code even if shares acquired are divested subsequently
• The concept of permitting creeping acquisitions by permitting not more than 5% of the shares or voting rights in a company limits the period for such acquisition to a financial year ending by 31st March.
• But such concept does not dilute the requirement of making a public announcement within the time mentioned in Regulation 14(1) if the acquisition even if only once made and divested, is of more than 5% of shares or voting rights in the target company.
• In other words, even if such acquisition is followed by sale in the same financial year, the liability of making the public announcement would remain unaffected and shall attract action, as in this case.
• Let us conceptualize the case of an entity holding 20 per cent of shareholding in a target company on 1st April of a given year. If it were to increase its holding by say 3 per cent and subsequently reduce it to 2 per cent.
• It at that point it intended to purchase 4 per cent shares again, whether by way of fractions or otherwise, it would cross the threshold of 5 per cent. It would then have to make compliance with Regulation 11.
• If the aggregate percentage of acquisitions at any point of time during the financial year exceeds 5 per cent, the provision would get triggered. In other words, the provision of Regulation 11 mandating a public announcement will kick in at any stage whence the shareholding of the said entity in the target company would exceed 25 per cent.
[2015] 61 taxmann.com 264 (SC)
SUPREME COURT OF INDIA
Kosha Investments Ltd.
v.
Securities & Exchange Board of India
P-Notes not illegal, adequately regulated by SEBI; Dismisses writ challenging its legality
HC dismisses writ petition filed by an Advocate challenging legality of Participatory Notes ('P-Notes'), which are offshore derivative instrument ('ODI') issued by foreign portfolio investor ('FPI') to overseas investors to invest in Indian stock markets; Observes that SEBI (Foreign Portfolio Investors) Regulations, 2014 ('the Regulations') prescribe definition of FPI, eligibility criteria of FPIs, issuance of ODIs, thus states that, "The said Regulation clearly indicates that the foreign portfolio investor does not function in an unregulated environment, but operates under a regulated regime"; Also observes that the Regulations empower SEBI to direct FPI to fully disclose any information concerning terms of and parties to ODIs, which include P-Notes, and also empowers SEBI to take corrective action in case of default by FPI under the Regulations; Thus, holds "it becomes clear that participatory notes, by themselves, are not illegal and are regulated in the manner prescribed under the said Regulations"; Further rejects allegation against Finance Minister's statement on stricter norms for P-Notes, observes that, "The Finance Minister has only stated that the Government would not take any 'knee-jerk' reaction with regard to stipulating or not stipulating any norms stricter than what are already in place under the said SEBI Regulations, 2014. This does not give the petitioner any cause for filing the present petition and seeking the multifarious reliefs that the petitioner has sought" :Delhi HC
The ruling was delivered by Justice Badar Durrez Ahmed and Justice Sanjeev Sachdeva.
Advocate Manohar Lal Sharma argued for petitioner. Respondents were represented by ASG Sanjay Jain alongwith Mr Akshay Makhija, Mr Sidharth Thakur, Mr Vidhur Mohan, Ms Pallavi Shali, Mr Shresth Jain, Ms Sanjugeeta Mokkan and Ms Mahima Behl.
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