CCI approves of combination of two banks as resultant business would have insignificant impact on competition

Proposed combination was to be approved when presence of acquirer in mortgage and banking business in India after proposed combination was insignificant and same did not have any appreciable adverse effect on competition.

Facts:

a)  A notice was given under section 6 of the Competition Act, 2002 (‘the Act’) to the Commission for the proposed combination relating to the acquisition by Ratnakar bank of the 'Relevant Business' of RBS, which included credit card business, mortgage portfolio business and banking business, pursuant to the Master Sale & Purchase Agreement;

b)  Mortgage portfolio included housing loans and loans against property and banking business' includes providing small and medium sized enterprises with high end products and services.

The Competition Commission of India held as under:

1)  Both Ratnakar Bank and RBS have a relatively small number of branches operating in India. They provide banking and financial services in India;

2)  After the proposed combination comes into effect, RBS would exit the credit card business, mortgage portfolio and business banking segment;

3)  The Ratnakar Bank has no presence in the credit card business. Its presence in the mortgage and banking business in India would be insignificant after the proposed combination;

4)  Thus, the proposed combination was not likely to have an appreciable adverse effect on competition in India and, therefore, it was to be approved under sub-section (1) of section31 of the Act -  Ratnakar Bank Ltd., In re [2014] 41 taxmann.com 331 (CCI)

Hiring of vehicle on hourly basis shifts TDS obligations from sec. 194C to sec. 194-I front yard

Where assessee entered into an agreement with a contractor for hiring of vehicles and made use of vehicles and paid hire charges on number of hours of use, section 194-I and not section 194C would be attracted.

Facts:

1)  The assessee entered into an agreement with contractor for hiring of vehicles to be used for loading, unloading and transportation of goods. It applied provisions of section 194C and deducted tax at 2 %;

2)  However, the Assessing Officer (‘AO’) held that the assessee was to deduct tax at source under section 194-I;

3)  On appeal, the CIT(A) confirmed the order of AO which was further affirmed by the Tribunal. Aggrieved-assessee filed the instant appeal.

The High Court held in favour of assessee as under:

1) The agreement entered into by assessee was composite agreement for hiring of vehicles to be used for loading, unloading and transportation of goods;

2) The owner of the vehicles was to retain ownership and possession of the vehicles. The vehicles were to be driven and operated by the persons who were to be paid by the owner;

3) The agreement did not require the owner of the vehicles to do any work at all. It was the assessee who made use of the vehicles. He paid hire charges on the number of hours of use and, thus, clearly the assessee was not justified in contending that section 194C was applicable;

4) What the assessee was permitted to do with the vehicles alone was mentioned in the contract. All those works were done by the assessee and no work within the meaning of section 194C was actually done by the owner;

5) Section 194-I specifically contemplates liability of person paying rent to deduct income tax at the rate of ten per cent for the use of any machinery or plant or equipment. Thus, in the instant case section 194-I was attracted instead of section 194C - Three Star Granites (P.) Ltd. v. ACIT [2014] 41 taxmann.com 91 (Kerala)

Small service provider's exemption was available to each co-owner on letting out of jointly owned properties

If a property, jointly owned by two or more persons, is rented out by such persons separately to a single person, all such co-owners would be eligible for small service provider's exemption of Rs. 10 lakh separately.

Facts:

a)  The assessees, being co-owners of a building, rented out such building to a tenant and rent was received by all such co-owners separately through different cheques;

b)  Since rent received separately by each co-owner did not exceed Rs. 10 lakhs, they claimed threshold exemption under Notification No. 6/2005-ST, as amended;

c)  The Department argued that amount was to be assessed collectively and sought to club all receipts alleging that separation was made with a view to gain tax benefit.

The Tribunal held in favour of assessee as under:

1) Rental agreement between parties clearly provided that all co-owners were individually renting out such building to a single person. Cheques were also separately received by them;

2) Small service provider’s threshold exemption speaks of aggregate value of taxable services and if, individually, all co-owners were considered as separate service providers, their aggregate value did not exceed exemption limit;

3) Hence, prima facie, case was in favour of the assessee and pre-deposit requirement was waived off accordingly-  Dilip Parikh v. Commissioner of Service-tax [2014] 41 taxmann.com 311 (Ahmedabad - CESTAT)

SC relies on ratio of Mitsubishi’s case that filing of return doesn’t attract bar on advance ruling; sets aside two orders

1)  The assessee, Sin Ocean Shipping ASA Norway, filed the instant SLP, seeking to set-aside the orders passed by AAR [GTB invest ASA, In re [2012] 18 taxmann.com 262 (AAR- New Delhi)] and High Court [NETAPP B.V. v. AAR [2012] 24 taxmann.com 174 (Delhi)];

2)  In case of GTB (Supra), applicant's application for advance ruling was rejected by the authority. In case of NETAPP (supra), the High Court dismissed assessee's writ. The writ was filed by petitioner to challenge the order of AAR which rejected its request for advance ruling;

3)  In both these cases it was held that that applicant was debarred from seeking advance ruling if return was filed prior to date of filing of application before the authority;

4)  The Supreme Court admitted the instant SLP on the basis of case of Mitsubishi Corporation, Japan, In re [2013] 40 taxmann.com 335 (AAR- New Delhi);

5)  In case of Mitsubishi, the authority admitted the application of applicant, seeking advance ruling and it held that mere filing of return prior to filing of application of advance ruling does not attract bar on filing of application under Section 245R(2);

6)  Accordingly, orders of High Court and Authority, [i.e., order of GTB and NETAPP B.V] were set aside. Case of GTB was restored to authority, to give afresh ruling in accordance with law - Sin Oceanic Shipping ASA Norway v. Authority for Advance Rulings[2014] 41 taxmann.com 444 (SC)

HC treats revised return of income as application for condonation of delay; allows legitimate tax refund

Revised return of income to be considered as application for condonation which consequently results in refund of legitimate taxes

The High Court held as under:

1)  The application of petitioner for condonation of delay under section 119(2)(b) was denied by adopting a very hyper technical view that it was made beyond 6 years from the date of the end of the assessment year 2004-05;

2)  In the instant case the revised return of income filed on 8 September, 2011 would be considered as application for condonation of delay and tax refund would be granted - Devdas Rama Mangalore v. CIT [2014] 41 taxmann.com 508 (Bombay)

De-facto ownership of asset to be considered for computing holding period of capital assets, rules HC

Facts:

a)  The assessee, a Chartered Accountant, sold the property on 29.05.2008 for certain consideration. He worked out long-term capital gain and claimed exemption under section 54EC and section 54F;

b)  The assessing authority was of the view that the sale deed executed in favour of the assessee was on 27.02.2008 and he sold the property on 29.05.2008, i.e., within four months from the date of purchase and, therefore, the capital gains arising therefrom could not be construed as long-term capital gain;

c)  Accordingly, he disallowed the exemption claimed under Sections 54EC and 54F. On appeal the CIT(A) upheld the order of AO. Further, the Tribunal set aside said order. Aggrieved revenue filed the instant appeal

The High Court held in favour of assessee as under:

1)  For the purpose of computing 36 months holding period of a capital asset under section 2(42A), there is no requirement in section that holding period should only include the period for which assessee was the owner of the asset with a registered deed of conveyance conferring title on him;

2)  The words "held by the assessee" in section 2(42A) does not mean vesting of legal title in the property to the assessee;

3)  As Bangalore Development Authority allotted plot to assessee in 1988, due to legal disputes between it and the original owners of site, it cancelled the booking and allotted another plot in 2007 and that was also cancelled for same reason and fresh plot was allotted in 2008 and same was registered in assessee's name;

4) The consideration paid in 1988 was to be treated as consideration for the sale deed and capital gains resulting from plot sold in 2008, was long-term capital gains and eligible for benefits under sections 54F and 54EC – CIT v. A. Suresh Rao [2014] 41 taxmann.com 475 (Karnataka)

PANs are issued without de-facto verification, these can’t solely divulge real identity of individuals

Facts:

a)  On basis of some information from the Investigation Wing that assessee was identified as one of beneficiaries who had received bogus entries; notice under section 148 was issued to the assessee and it was required to furnish information in respect of persons who had been allotted shares;

b)  The assessee filed confirmation from the respective persons who had subscribed to the share capital;

c)  The Assessing Officer (‘AO’) held that the assessee had failed to discharge the onus in proving the identity of subscribers, genuineness of the transactions and the creditworthiness and, accordingly, made an addition in the hands of the assessee;

d)  The CIT (A) deleted the addition. Further, the Tribunal confirmed the said order. Aggrieved revenue filed the instant appeal.

The High Court held in favour of revenue as under:

1)  PAN is allotted on the basis of applications without actual de facto verification of the identity or ascertainment of the active nature of business activity;

2)  PAN is allotted as a facility to revenue to keep track of transactions and, thus, the PAN cannot be treated as sufficiently disclosing identity of the individual;

3)  The mere filing of share application was not enough as the said application was not an unimpeachable document and did not on its own prove the genuineness or authenticity of the transaction;

4)  Mere production of PAN or assessment particulars does not establish the identity of a person. The identification of a person includes the place of work, the staff and the fact that it is actually carrying on business and further recognition of the said company in the eyes of public;

5) Assessee had not been able to discharge the initial onus and had not been able to establish its identity and creditworthiness of the share applicants and the genuineness of the transaction. Thus, the assessee had not discharged the onus satisfactorily and the additions made by the AO were justified – CIT v. N Tarika Properties Investment (P.) Ltd [2013] 40 taxmann.com 525 (Delhi)

No collection of CST at higher rate if rate of tax on Intra-State sales of same goods was reduced unconditionally

Where rate of tax on intra-state sale of Hydraulic Excavators was reduced by way of an unconditional exemption to 2 per cent, Inter-State sale of such goods without C-Form could not be charged to a higher rate, viz., 4 per cent and would be liable to tax at 2 per cent

The assessee was engaged in sales of Hydraulic Excavators and was paying tax at rate of 2 per cent on such sales as per Notification, dated 30-3-2000. The Department found that the assessee had made Inter-State sales of such goods and rate of tax on such Inter-State sales without C-Form was at 4 per cent, as per Notification dated 27-8-1992 and, accordingly, raised demand.

The High Court held assessee liable to tax at 2 per cent with the following observations:-

1.    Notification dated 27-8-1992 issued under section 8(5) of the Central Sales Tax Act, 1956 provided for rate of tax at 4 per cent on Inter-State sales without C-Form. However, Notification dated 30-3-2000 issued under section 15 of the Rajasthan Sales Tax Act, 1994, which was general and unconditional in nature, provided for exemption from tax and provided for rate of tax on said goods at 2 per cent without any condition as to furnishing of C-Form.

2.    Once rate of tax for Hydraulic Excavators was provided under Notification dated 30-3-2000 at 2 per cent, there was no occasion for assessee to obtain 'C-Form' so as to pay tax under section 8 of the Central Sales Tax Act, 1956, which was at 4 per cent.

3.    Hence, fact that sale was an Inter-State transaction and assessee had not furnished 'C-Form' was of no consequence.

4.    Since rate of tax was reduced to 2 per cent by way of exemption, notification dated 27-8-1992 had no application to case. Accordingly, the demand was set aside - Assistant Commissioner v. Telco Construction & Equipment Co. Ltd. [2014] 41 taxmann.com 130 (Rajasthan)

Sec. 13 not violated if firm owned by trustee won tender floated by trust or when trustee got business advances

Where firm of managing trustee won construction bids on competitive basis and sum was advanced to said firm, neither section 13(2)(c), nor section 13(1)(d) was violated.

The Tribunal held as in favour of assessee as under:

1)  The Assessing Officer (‘AO’) declined to grant benefit of section 11, as in the present case construction of building had been carried out by the firm of a managing trustee and, thus, derived direct benefit from the assessee-trust;

2)  A perusal of section 13(2)(c) would show that the income or property of the trust or any part of it had be deemed to have been used or applied for the benefit of the person referred to in sub-section (3), if any amount was paid by way of salary, allowance or otherwise to any person referred to in sub-section (3) out of the resources of the trust for services rendered and the amount so paid was in excess of what might be reasonably be paid for such services;

3)  In the instant case, the AO had outrightly held that the assessee was not entitled to the benefit of section 11 without ascertaining the reasonableness of the amount paid for the services rendered;

4)  The construction contract had been awarded to the firm on the basis of open bid. Since the firm quoted lowest rates, the contract was awarded to the firm. Since the contract was awarded on competitive basis and the profit earned was reasonable, the provisions of section 13(2)(c) were not violated;

5) The CIT (A) had given a well reasoned finding that the sum advanced by the assessee to the firm was business advance. The amounts were advanced for the on-going construction work in the normal course of business activity. The order of CIT(A) was to be confirmed and the appeal of the revenue was to be dismissed – Dy. DIT(Exemptions) v. Sri Vekkaliamman Educational & Charitable Trust [2013] 40 taxmann.com 478 (Chennai - Trib.)

Central Excise Rule providing for interest rate in excess of rate specified in Excise Act is ultra vires: HC

Rule cannot provide for rate of interest in excess of that provided in section/Act itself; Rule 8(3) of the Central Excise Rules providing for interest at rate exceeding that provided in erstwhile section 11AB of Central Excise Act was held ultra vires

Facts:

a)  On delay in payment of duty, the assessee discharged interest at rate of 2 per cent per month;

b)  Department argued that interest, as per rule 8(3), was to be paid at the rate of 2 per cent per month or Rs. 1,000 per day, whichever was higher and accordingly raised demand for differential interest;

c)  The assessee argued that rule 8(3) was ultra vires erstwhile section 11AB (now, section 11AA), as said rule provided for interest at rate exceeding rate provided in said section 11AB.

The High Court held in favour of assessee as under:

1)  In view of judgment of the Rajasthan High Court in Lucid Colloids Ltd. v. Union of India 2006 (200) ELT 377, the expression "or rupees one thousand per day, whichever was higher" in rule 8(3) ibid were invalid, being ultra vires the erstwhile section 11AB;

2)  Therefore, interest chargeable on delayed payment had to be only at rate of 2 per cent per month or 24 per cent per annum, as notified for purpose of erstwhile section 11AB;

3)  Thus demand for differential interest was to be set aside. - K.C. & Sons Appliances (P.) Ltd. v. Union of India  [2014] 41 taxmann.com 177 (Gujarat)