TaxTMI Updates e-Newsletter
Mar 11,2014

Taxability of interest as income from other sources - inextricably linked test - capitalisation of income against capital work in progress - distinction between Tuticorin and Bokaro precedents - source of funds irrelevant to characterisation of income

Taxability of interest as income from other sources - inextricably linked test - source of funds irrelevant to characterisation of income - Whether interest earned on funds invested under a portfolio management scheme during project pre operative period is taxable as income from other sources or must be adjusted against capital work in progress as not being assessable separately. - HELD THAT: - The Tribunal erred in treating the interest as non-taxable by relying on Bokaro Steel Ltd. because it placed emphasis on the source of funds (promoter contributions) rather than on the utilisation and the nature of the investment. The Court applied the principle in Tuticorin Alkali Chemicals and Fertilizers Ltd. , holding that income generated by productive use of capital is revenue in nature irrespective of whether the funds were raised by shares, debentures or borrowing. Bokaro is distinguishable: in Bokaro the various receipts were found to be inextricably linked to the construction process and thus reduced the cost of the asset, but that rationale only applies where a direct and inextricable connection between the income and the process of setting up the project is established. Here the assessee deliberately invested funds in a bank run portfolio management scheme which provided an assured return; such investment was not inextricably linked to construction activities. Therefore the interest is not a capital receipt to be capitalised but a revenue receipt taxable under the residual head.

The interest earned on the invested funds is taxable as income from other sources and cannot be adjusted against capital work in progress.

Final Conclusion: The appeal is allowed in favour of the revenue: the Tribunal's order was set aside and the interest earned on investments under the portfolio management scheme during the pre operative period is held taxable as income from other sources rather than being capitalised against project costs.

Allowability of expenses incurred for promotion of charitable objects under Section 57(iii) - Exemption under Section 11 and registration under Section 12A - Principle of mutuality

Allowability of expenses incurred for promotion of charitable objects under Section 57(iii) - Exemption under Section 11 - Whether expenditure actually incurred by the assessee for promotion of sports could be allowed as deduction when receipts were treated as income under a residual head and the assessee was not registered under Section 12A for the years in question. - HELD THAT: - The Tribunal and CIT(A) found on facts that the assessing officer produced no adverse material to disprove genuineness or purpose of the expenditures and that full details and books of account were produced. The CIT(A) allowed the expenditures in computing taxable income rather than treating grants as wholly taxable receipts. The High Court held that where exemption under Section 11 is denied (for want of registration under Section 12A), the assessing officer may assess the receipts under the residual head but must still allow deductions which are allowable under the Income-tax Act; in particular Section 57(iii) permits a broad allowance of expenditure incurred for the purpose of making or earning such income. The Court relied on the principle that disallowing genuine expenditures would amount to taxing gross receipts rather than income and noted earlier recognition of a broad construction of Section 57(iii). There was no challenge to the Tribunal's findings of fact about the genuineness and purpose of the expenditures. [Paras 4, 5, 7]

Expenditures genuinely incurred for promotion of sports were correctly allowed as deductions under the Act (having regard to Section 57(iii)) and the Tribunal's upholding of the CIT(A)'s allowance is sustained.

Principle of mutuality - Exemption under Section 11 and registration under Section 12A - Whether the Tribunal's order effectively conferred exemption under Section 11 on the assessee or applied the principle of mutuality to exclude receipts from tax. - HELD THAT: - The Court observed that the CIT(A) did not hold the assessee entitled to exemption under Section 11 and did not decide eligibility for exemption because that ground was not taken before him. The additional contention invoking mutuality was considered and rejected by the CIT(A), and the Tribunal's decision was confined to allowing legitimate expenditures. The High Court held that the Tribunal's order did not amount to conferring Section 11 exemption; it simply allowed deductible expenditure while leaving the question of exemption (linked to Section 12A registration) intact. The Court also noted the factual position that the assessee had been exempt under Section 10(23C) up to AY 2002-03 and was granted registration under Section 12A w.e.f. AY 2006-07, but those facts did not alter the conclusion that the present orders did not grant Section 11 relief. [Paras 3, 6, 7]

The Tribunal's order does not indirectly confer exemption under Section 11; it merely upholds allowance of genuine expenditures, and the principle of mutuality was not accepted.

Final Conclusion: The appeals filed by the revenue against the consolidated Tribunal order for AYs 2003-04, 2004-05 and 2005-06 are dismissed; there is no substantial question of law requiring interference with the factual findings that genuine sports-promotion expenditures were allowable, and the Tribunal did not confer Section 11 exemption.

Setting aside impugned order - restoration to Authority for Advance Rulings - fresh ruling in accordance with law

Setting aside impugned order - restoration to Authority for Advance Rulings - fresh ruling in accordance with law - The impugned order of the High Court and the earlier ruling of the Authority for Advance Rulings were set aside and the A.A.R. applications were restored to the Authority for fresh consideration. - HELD THAT: - The parties agreed, in light of the Authority's later order dated December 13, 2013 in A.A.R. No. 1309 of 2012, that the impugned orders should not stand. The Supreme Court accepted this position, set aside the ruling given by the Authority and the High Court's order dated 14.08.2012, and directed that A.A.R. Nos. 932-933 of 2010 be restored to the file of the Authority so that those applications may receive a fresh ruling in accordance with law. The Court's order restores the matter for fresh adjudication rather than deciding the substantive tax issues on merits.

Impugned orders set aside; A.A.R. Nos. 932-933 of 2010 restored for fresh ruling in accordance with law.

Final Conclusion: Leave to appeal granted; civil appeals disposed of by setting aside the High Court order and the Authority's ruling and restoring A.A.R. Nos. 932-933 of 2010 to the Authority for fresh consideration, with no order as to costs.

Disallowance for unsubstantiated expenses - self-generated vouchers - opportunity of being heard - interest under Section 234B of the Income-tax Act

Disallowance for unsubstantiated expenses - self-generated vouchers - Addition of 2% of repairs, maintenance and spare-parts expenditure was sustained. - HELD THAT: - The Assessing Officer, on test check, found that certain bills/vouchers were self-generated and in some cases unsigned, and concluded that such large-quantum expenses were susceptible to inflation; accordingly 2% of the aggregate expenditure was disallowed. The Commissioner (Appeals) requested production of supporting vouchers and, despite giving the assessee thirteen opportunities, the vouchers were not produced and the assessee offered no explanation that satisfied the appellate authority. The Tribunal, after hearing the Revenue and perusal of the record, found no infirmity in the approach of the authorities: in the absence of bills and vouchers and given the finding of self-generated documents, the limited ad hoc disallowance was justified and the addition was accordingly upheld. [Paras 4, 5, 6]

Addition of 2% of the claimed repairs and spare-parts expenditure is confirmed.

Opportunity of being heard - Whether the assessee was denied a reasonable opportunity of being heard by the Assessing Officer/CIT(A). - HELD THAT: - The CIT(A) afforded the assessee multiple opportunities (thirteen in all) to produce supporting vouchers and to substantiate the claimed expenditure. The assessee failed to produce the vouchers before the CIT(A), stating they were at site, and did not appear before the Tribunal. Given the repeated chances granted by the appellate authority and the continued non-production of documentation, the Tribunal found that the appellate process had provided ample opportunity to the assessee and there was no denial of reasonable opportunity to be heard warranting interference. [Paras 5, 6]

Ground alleging denial of reasonable opportunity is rejected; no interference with the orders below.

Interest under Section 234B of the Income-tax Act - Validity of charging interest under Section 234B was sustained. - HELD THAT: - The assessee challenged the levy of interest under Section 234B but did not demonstrate any error in the computation or applicability of the provision before the Tribunal. The Tribunal, on the material placed before it and submissions of the Revenue, found no justification to interfere with the interest charged and therefore upheld the levy under Section 234B. [Paras 7]

Interest charged under Section 234B is sustained.

Final Conclusion: All grounds of the assessee's appeal are rejected and the appeal is dismissed.

Deemed dividend liability under section 2(22)(e) of the Income tax Act - requirement of shareholder status of the recipient for invocation of deemed dividend - scope of payments to concerns in which a shareholder has substantial interest (CBDT Circular No.495/1987) - precedential effect of Special Bench decisions of the Tribunal - binding effect of a jurisdictional High Court decision on identical controversy

Deemed dividend liability under section 2(22)(e) of the Income tax Act - requirement of shareholder status of the recipient for invocation of deemed dividend - precedential effect of Special Bench decisions of the Tribunal - binding effect of a jurisdictional High Court decision on identical controversy - Whether the amount received by the assessee from M/s B.R. Arora & Associates Pvt. Ltd. was taxable as deemed dividend under section 2(22)(e). - HELD THAT: - The Tribunal noted that the assessee was not a shareholder of the lender companies in the requisite percentage and therefore could not be assessed to deemed dividend under the principle that section 2(22)(e) can be invoked only in respect of a shareholder of the lender company. The Tribunal followed the Special Bench decision (cited in the orders relied upon) which holds that deemed dividend can be assessed only in the hands of a person who is a shareholder in the lender company (both registered and beneficiary shareholder). The Tribunal declined to follow contrary division bench decisions and accepted the binding effect of the earlier ITAT decision in the assessee's own case, which was furthermore approved by the jurisdictional High Court; accordingly the addition was deleted and the CIT(A)'s order was upheld. [Paras 3, 4, 5]

The amount was not taxable as deemed dividend under section 2(22)(e); the CIT(A)'s deletion of the addition is upheld.

Final Conclusion: Following the Tribunal's earlier decision in the assessee's own case and the approval of that view by the jurisdictional High Court, the appeal by the Revenue is dismissed and the order of the CIT(A) is upheld.

Disallowance of interest on interest-free advances - nexus between borrowed funds and interest-free advances - business purpose of advances - disallowance under Section 14A - Rule 8D of Income Tax Rules - proximity of expenses to exempt income - Section 50C - adoption of stamp valuation or Valuation Officer valuation - obligation to refer to Valuation Officer where assessee disputes stamp valuation

Disallowance of interest on interest-free advances - nexus between borrowed funds and interest-free advances - business purpose of advances - Validity of deletions by CIT(A) of interest disallowances made by AO on account of long-standing interest-free advances - HELD THAT: - The Tribunal upheld the CIT(A)'s deletions of the interest disallowances. The CIT(A) found that (a) substantial own funds were available with the assessee (about Rs.10.39 crores) compared to the advances (circa Rs.0.52 crore and Rs.1.29 crore), (b) the advances related to the assessee's business (finance, real estate, share trading) and were supported by agreements/allotment letters, (c) several advances were given in prior years without any earlier disallowance, and (d) the AO did not establish any nexus between borrowed funds and the interest-free advances. On these factual findings, uncontroverted before the Tribunal, and applying the principles cited by the CIT(A), the disallowances were held unjustified and were deleted; Revenue's grounds attacking those deletions were rejected. [Paras 3, 4, 5]

Deletions of interest disallowances upheld; Revenue's appeals in respect of these grounds rejected.

Disallowance under Section 14A - Rule 8D of Income Tax Rules - proximity of expenses to exempt income - Correct method of computing disallowance under Section 14A and applicability of Rule 8D for the three assessment years - HELD THAT: - For AY 2006-07 and AY 2007-08 the CIT(A) held that Rule 8D was not applicable and directed the AO to compute any disallowance under Section 14A by examining the proximity of expenses to earning exempt income; the Tribunal sustained that direction, following the jurisdictional High Court authority (Maxopp Investment Ltd.). For AY 2008-09 the CIT(A) accepted the disallowance in principle under Rule 8D but directed verification of the expenditures and correctness of the Rule 8D computation; the Tribunal found no infirmity in that direction and sustained it. Accordingly, the Revenue's grounds on Section 14A/Rule 8D were rejected. [Paras 6, 7, 8]

Directions of CIT(A) on computation under Section 14A/Rule 8D sustained; Revenue's appeals on these grounds rejected.

Section 50C - adoption of stamp valuation or Valuation Officer valuation - obligation to refer to Valuation Officer where assessee disputes stamp valuation - Validity of addition under Section 50C based on stamp duty valuation for sale of the property at Chintels House - HELD THAT: - The CIT(A) deleted the addition for one property after relying on a DVO report and directed recomputation accordingly. As to the Chintels House property, the record did not clearly show whether the assessee had objected to the stamp valuation for both properties or only for one, nor whether the AO had referred the matter to the Valuation Officer (DVO) for the second property as required by sub-section (2) of Section 50C when the assessee disputes stamp duty valuation. Given these lacunae in the assessment record, the Tribunal set aside the matter to the Assessing Officer to verify the record; if the assessee had objected, the AO was directed to refer to the Valuation Officer (if not already done) and compute capital gains taking the lower of the stamp valuation or the DVO valuation as mandated by Section 50C. The matter was remitted for such verification and consequential computation. [Paras 11, 12, 13, 14, 15]

Issue remanded to the AO for verification and, if warranted, reference to the Valuation Officer and recomputation of capital gains; Revenue's ground is deemed partly allowed for statistical purposes.

Final Conclusion: The Tribunal dismissed Revenue's appeals in ITA Nos.1436/Del/2013 and 1437/Del/2013, upheld the CIT(A)'s deletions and directions regarding interest disallowances and Section 14A/Rule 8D, and remitted the Section 50C issue in ITA No.1438/Del/2013 to the Assessing Officer for verification and, if required, reference to the Valuation Officer for recomputation of capital gains.

Deduction under section 80P(2)(a)(i) - application of section 80P(4) to co-operative banks - definition of "primary co-operative bank" under the Banking Regulation Act, 1949 - concept of "banking" under section 5(b) of the Banking Regulation Act, 1949

Deduction under section 80P(2)(a)(i) - application of section 80P(4) to co-operative banks - definition of "primary co-operative bank" under the Banking Regulation Act, 1949 - concept of "banking" under section 5(b) of the Banking Regulation Act, 1949 - Assessee entitled to deduction under section 80P(2)(a)(i) as it is not a co-operative bank within the meaning of Part V of the Banking Regulation Act, 1949 and therefore section 80P(4) does not apply. - HELD THAT: - The Court construed section 80P(2)(a)(i) as conferring deduction where a co-operative society carries on banking or provides credit facilities to its members, while section 80P(4) bars the benefit only in relation to a "co-operative bank" (except specified primary agricultural credit societies). Reading the provisions together shows that not every co-operative society carrying on banking-like activity for members becomes a "co-operative bank" for the purpose of section 80P(4). The definition of "primary co-operative bank" in section 5(ccv) of the Banking Regulation Act, 1949 requires satisfaction of three conditions: (1) the primary object/principal business is the transaction of banking business (as defined in section 5(b) - acceptance of deposits from the public, repayable and withdrawable, for lending or investment); (2) paid-up capital and reserves of not less than one lakh; and (3) bye-laws disallow admission of other co-operative societies as members. The assessee failed the first condition because its objects and bye-laws do not permit acceptance of deposits from the public repayable and withdrawable as contemplated by section 5(b); merely lending to members does not make the principal object "banking". The assessee satisfied the second condition but there was no basis to find compliance with the third condition on the record; in any event failure of the first condition was decisive. Consequently the assessee is not a "primary co-operative bank" and therefore not a "co-operative bank" within the meaning of Part V of the Banking Regulation Act; section 80P(4) is inapplicable and the assessee is entitled to deduction under section 80P(2)(a)(i) in respect of income attributable to providing credit or banking facilities to its members. [Paras 3]

Set aside the orders of the CIT(A); allow deduction under section 80P(2)(a)(i) as section 80P(4) does not apply to the assessee.

Final Conclusion: Both appeals are allowed: the assessee, being not a co-operative bank as defined in Part V of the Banking Regulation Act, 1949, is entitled to deduction under section 80P(2)(a)(i); the CIT(A)'s order is set aside.

Deemed transfer under section 2(47)(v) of the Income-tax Act - Section 53A of the Transfer of Property Act - readiness and willingness to perform - possession and part performance in development agreements - taxability of capital gains on date of development agreement

Deemed transfer under section 2(47)(v) of the Income-tax Act - Section 53A of the Transfer of Property Act - readiness and willingness to perform - possession and part performance in development agreements - taxability of capital gains on date of development agreement - Whether the Joint Development Agreement dated 13.11.2007 gave rise to a deemed transfer under section 2(47)(v) so as to attract short-term capital gains tax in Assessment Year 2008-09. - HELD THAT: - The Tribunal examined the terms of the development agreement and the factual matrix and held that the essential conditions for invoking Section 53A of the Transfer of Property Act were not satisfied in the year under consideration. The developer was only given limited/symbolic entry for carrying out construction and absolute possession was not handed over; no consideration had accrued to the assessee under the agreement; and the developer had neither performed nor demonstrated an unconditional willingness to perform its obligations within the relevant period. The Tribunal applied the established principle that mere execution of a development agreement does not inevitably result in a deemed transfer unless the transferee has performed or is willing to perform its contractual obligations in the same sequence as required by Section 53A. On the facts, there was no material to show actual construction, accrual of consideration, or readiness by the developer to perform, and time being of the essence the failure to adhere to the schedule negated invocation of Section 53A. Consequently, the condition precedent for treating the agreement as a deemed transfer under section 2(47)(v) was absent and the Assessing Officer's reliance on the date of the development agreement to tax capital gains in AY 2008-09 was unsustainable. The Tribunal therefore followed its coordinate decisioning and set aside the taxability for the year in question. [Paras 9, 10, 11]

The development agreement did not amount to a deemed transfer under section 2(47)(v) in AY 2008-09; capital gains could not be taxed in that year and the assessee's appeal is allowed on this issue.

Final Conclusion: The Tribunal held that the Joint Development Agreement did not satisfy the conditions of Section 53A and therefore could not be treated as a deemed transfer under section 2(47)(v) for Assessment Year 2008-09; the appeal was partly allowed and the addition of short term capital gain for AY 2008-09 set aside.

Fee for technical services - business profits attributable to a permanent establishment - Article 12(2) of the Indo Japan DTAA - Article 12(5) read with Article 7(3) of the Indo Japan DTAA - permanent establishment - supervisory activities / aggregation rule under Article 5(4) - no force of attraction principle - effective connection / 'effectively connected' test

Fee for technical services - Article 12(2) of the Indo Japan DTAA - Article 12(5) read with Article 7(3) of the Indo Japan DTAA - Characterisation and taxability of the supervision fees - whether taxable under Article 12(2) or under Article 12(5) read with Article 7 of the Indo Japan DTAA. - HELD THAT: - The Court accepted the High Court's framing that the admitted receipts are 'fees for technical services' and held that the determinative question is whether those fees are taxable as FTS under Article 12(2) or as business profits under Article 12(5) read with Article 7. Applying the treaty tests, Article 12(5) applies only if (i) the beneficial owner carries on business in India through a PE in respect of which the FTS arise, and (ii) the contract in respect of which FTS is paid is effectively connected with that PE. Article 12(5) in the Indo Japan DTAA follows the OECD model and adopts the 'no force of attraction' approach; 'effectively connected' requires a real substantive connection between the income producing activity and the PE. On the facts before the Tribunal and on the material available on record, the supervisory receipts were not shown to be effectively connected to any PE in India. Consequently the Tribunal's conclusion that the supervision fees are taxable under Article 12(2) (FTS) and not under Article 12(5) read with Article 7 was affirmed for the years where material was complete. The rate consequence (tax @20% under the DTAA) was indicated for those years. [Paras 5, 6]

FTS received by the assessee for AYs 1992 93, 1993 94, 1994 95 and 1996 97 are covered by Article 12(2) of the Indo Japan DTAA and taxable accordingly; the Tribunal's view that the receipts are FTS is upheld.

Permanent establishment - supervisory activities / aggregation rule under Article 5(4) - no force of attraction principle - effective connection / 'effectively connected' test - Whether the assessee had a permanent establishment in India for supervisory services (including whether supervision periods across contracts must be aggregated) so as to render the supervision fees attributable to a PE. - HELD THAT: - The Tribunal's earlier factual and legal findings were accepted: the Local Office (LO) performed only preparatory and auxiliary functions and was not a PE for the supply contracts; project offices existed with RBI approval but the supervisory services contracts were severable and independent; supervisors were deputed from Japan; the supervision period under each individual contract was less than the 180 day threshold in Article 5(4); and the contracts did not form a single coherent commercial or geographic whole that would justify aggregation. The Court reiterated that Article 5(4) requires assessment of supervisory activities for each individual site/project unless the exceptional coherent whole facts are shown. On the material available there was no evidence that the contracts were effectively connected with any Indian PE, and therefore the supervision fee could not be taxed as business profits attributable to a PE. [Paras 5]

There was no supervisory PE in India in relation to the supervision contracts and the supervision fees were not effectively connected with any PE; aggregation of separate purchase orders was not justified on the facts.

Remand for assessment on missing contract details - Disposition of the Assessment Year 1995 96 in view of missing contract details. - HELD THAT: - The Tribunal's earlier order had noted absence of details for certain contracts (Nos. 19-25) for AY 1995 96 and had referred those items to the Assessing Officer for decision on the lines indicated. The Court remanded the question of taxability of FTS for AY 1995 96 to the Assessing Officer to decide in accordance with the principles stated in this order, directing the assessee to furnish necessary contract details so the AO may determine whether those particular receipts are taxable as FTS under Article 12(2) or as business profits under Article 12(5)/Article 7. [Paras 5]

AY 1995 96 is remanded to the Assessing Officer for decision on specific contracts (Nos. 19-25) in accordance with the Tribunal's reasoning and subject to production of necessary details by the assessee.

Final Conclusion: The Tribunal's conclusion that the supervision receipts are 'fees for technical services' not effectively connected to any Indian permanent establishment is upheld; accordingly the FTS for Assessment Years 1992 93, 1993 94, 1994 95 and 1996 97 are taxable under Article 12(2) of the Indo Japan DTAA (at the treaty rate indicated), while taxability for Assessment Year 1995 96 (contracts Nos. 19-25) is remanded to the Assessing Officer for determination on the lines indicated.

Addition under section 68 on account of unexplained loans/deposits - penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - ex parte adjudication where assessee fails to appear despite service of notice - restoration to the file for passing a speaking order - failure to avail opportunities of hearing as basis for upholding assessment and penalty

Addition under section 68 on account of unexplained loans/deposits - ex parte adjudication where assessee fails to appear despite service of notice - Validity of the addition of Rs.10,24,020 made under section 68 to the income of the assessee - HELD THAT: - AO found deposits/loans from multiple persons totalling the impugned amount and, on being not satisfied with the documents and explanations furnished by the assessee, made the addition under section 68. The Ld. CIT(A) initially decided the matter ex parte for want of the assessee's appearance; the ITAT earlier restored the matter to the file of the Ld. CIT(A) with a direction to pass a speaking order after giving opportunities. On restoration the Ld. CIT(A) again gave several opportunities, but the assessee neither appeared personally nor through a representative; notices for the present hearing were also served but the assessee failed to appear before the Tribunal. In these circumstances the Tribunal found no basis to interfere with the Ld. CIT(A)'s corroborated findings and upheld the addition. [Paras 6, 7, 8, 9]

Addition of Rs.10,24,020 under section 68 upheld and the assessee's appeal dismissed.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - failure to avail opportunities of hearing as basis for upholding penalty - Sustainability of the penalty imposed under section 271(1)(c) consequent to the addition - HELD THAT: - AO imposed penalty under section 271(1)(c) on the basis of the addition. The Ld. CIT(A) confirmed the penalty by an ex parte order when the assessee failed to avail opportunities for hearing; following the ITAT's earlier restoration for fresh adjudication, the Ld. CIT(A) again provided opportunities but the assessee chose not to appear. The Tribunal, noting service of notice for the present hearing and the assessee's continued non appearance, found no reason to interfere with the Ld. CIT(A)'s confirmation of the penalty. [Paras 10, 11, 12, 13]

Penalty under section 271(1)(c) confirmed and the assessee's appeal in respect of penalty dismissed.

Final Conclusion: Both appeals filed by the assessee for A.Y. 2001-02 - against the addition under section 68 and against the penalty under section 271(1)(c) - are dismissed; the orders of the Ld. CIT(A) are upheld as the assessee failed to avail opportunities of hearing despite service of notices.

Interest on interest - statutory interest under section 244A - compensation for delay in refund - interpretation of Sandvik Asia Ltd. - binding effect of Larger Bench/precedent in Gujarat Fluoro Chemicals

Interest on interest - statutory interest under section 244A - compensation for delay in refund - Entitlement of the assessee to interest on interest (compound interest) for delay in payment of refund related to assessment year 1986-87. - HELD THAT: - The Tribunal examined whether, in respect of assessment year 1986-87, the assessee was entitled to receive interest on the statutory interest awarded under section 244A or any additional compensation by way of interest on interest. Reliance placed by the assessee on Sandvik Asia Ltd. was held to be misplaced and wrongly interpreted. The Larger Bench decision in Gujarat Fluoro Chemicals was held to be determinative: the statute (section 244A) provides for payment of interest on refunds under specified contingencies and does not contemplate payment of interest on that statutory interest. Where interest itself is quantified and forms part of the refunded amount, any further delay in payment of that ascertained amount may attract interest as provided by the Act; but absent such quantification, the remedy is limited to the statutory simple interest under section 244A and not interest on interest. Applying this principle, the Tribunal upheld the CIT(A)'s conclusion that no interest on interest was payable to the assessee. [Paras 7, 8]

Assessee is not entitled to interest on interest; only statutory interest under section 244A is payable.

Final Conclusion: The Tribunal dismisses the appeal for assessment year 1986-87, upholds the CIT(A)'s order and rules that the assessee is entitled only to the statutory simple interest under section 244A and not to interest on interest.

Conversion of capital asset into stock-in-trade - adventure in the nature of trade - taxability under section 45(1) and section 45(2) - accrual of capital gains and year of chargeability - valuation / apportionment of consideration in cash and kind

Conversion of capital asset into stock-in-trade - adventure in the nature of trade - taxability under section 45(2) - Whether the development arrangement resulted in part conversion of the assessee's land into stock-in-trade and that part is taxable as business income while the balance is taxable as capital gain. - HELD THAT: - The Tribunal upheld the conclusion reached by the CIT(A) that the owners, including the assessee, carried out a planned, systematic development of the Vakola property and, by their conduct and the terms of the development agreement, treated the portion of land retained as part of their business of property development. The arrangement with the outside developer was an outsourcing of construction but did not detract from the owners' role in the adventure in the nature of trade. The Tribunal limited the conversion finding to the proportion of land corresponding to the constructed area retained by the assessee (45% under the original agreement, scaled down by later modification) and held that that portion is to be treated as stock-in-trade, attracting s.45(2) for the purpose of capital gains on conversion and thereafter business taxation on sale. The balance portion conveyed to the developer is a realization of capital asset and is taxable under s.45(1). The Tribunal also explained that conversion may be inferred from conduct and agreements even without formal appropriation to business, and that the composite flats received in kind are distinct assets for market dealings. [Paras 4, 7]

A part of the land (the portion corresponding to the constructed area retained) is converted into stock-in-trade and is in the nature of an adventure in the nature of trade (taxable under s.45(2) on conversion and thereafter as business income on sale); the remaining portion transferred to the developer is taxable as capital gain under s.45(1).

Accrual of capital gains and year of chargeability - valuation / apportionment of consideration in cash and kind - remand for computation - The year in which capital gains arise and the method by which the land/construction consideration is to be apportioned for computation, and the need for fresh adjudication on computation. - HELD THAT: - The Tribunal held that the capital gain pursuant to the agreement as modified by the conciliation deed inures in A.Y. 2005-06, the date of the conciliation deed (05.04.2004) being the date for determining conversion/treatment. The Tribunal outlined a method of arriving at the proportion of land transferred and retained (working in percentage terms) and suggested adding the cost of construction (per ready reckoner, subject to adjustments) to the cash consideration to determine the value of the land portion transferred, maintaining internal consistency between land and construction components. Noting deficiencies in the record and absence of detailed break-up from the assessee, and that the CIT(A) had not given detailed findings on recomputation, the Tribunal remitted the matter to the CIT(A) to compute capital gains and business income for the relevant years, after hearing parties and passing a speaking order. The Tribunal stressed that the computation should preserve internal consistency and address parking-space allocation and any necessary discounts to ready-reckoner values. [Paras 5, 6, 8]

Capital gain on the conversion is to be determined with effect from 05.04.2004 and charged in A.Y. 2005-06; the apportionment and computation are remitted to the CIT(A) for fresh quantification and speaking adjudication in accordance with the Tribunal's observations.

Final Conclusion: The Tribunal held that part of the Vakola land was converted into stock-in-trade (an adventure in the nature of trade) and that portion is subject to s.45(2) (with business taxation on subsequent sale), while the remainder is taxable under s.45(1); the Tribunal fixed the date of conversion as 05.04.2004 (capital gain in A.Y.2005-06) and remitted the matter to the CIT(A) for detailed computation and speaking orders on apportionment and valuation. Appeals allowed for statistical purposes.

Penalty under Section 271(1)(b) for failure to comply with notice - Reasonable and sufficient cause for non-appearance - Opportunity of hearing and principles of natural justice - Appellate interference and reversal of confirmation of penalty

Penalty under Section 271(1)(b) for failure to comply with notice - Reasonable and sufficient cause for non-appearance - Opportunity of hearing and principles of natural justice - Whether the penalty under Section 271(1)(b) confirmed by the CIT(A) was sustainable where the authorised representative did not appear on the scheduled hearing dates. - HELD THAT: - The Tribunal examined the facts that the authorised representative did not attend the assessment proceedings on 14-07-2009 because he was at Palghar to meet an advocate in connection with pending civil suits, and that he was indisposed with hypertension and high temperature between 05-08-2009 and 13-08-2009. The First Appellate Authority had declined to accept the documentary confirmations produced by the assessee and held that no independent evidence established presence at Palghar or that pest-control or medical exigencies prevented attendance, and therefore confirmed the penalty. The Tribunal, after perusal of the documents placed before it and consideration of the surrounding facts and circumstances, found that the non-appearances on both occasions were due to unavoidable circumstances constituting reasonable cause. Applying the principle that penalty cannot be sustained where reasonable cause for default is shown, and having regard to the material before it, the Tribunal concluded that confirmation of the penalty was not justified and interfered with the appellate order.

Confirmation of penalty under Section 271(1)(b) set aside and appeal allowed.

Final Conclusion: The Tribunal reversed the CIT(A)'s confirmation of the penalty under Section 271(1)(b), holding that the authorised representative had shown reasonable cause for non-appearance on the hearing dates; the appeal is allowed.

Condonation of delay - disallowance under section 14A of the Income-tax Act - inapplicability of Rule 8D to Assessment Year 2007-08 - use of percentage of exempt income as reasonable estimate for disallowance - remand for quantification in light of binding High Court precedent

Condonation of delay - 44-day delay in filing the appeal was condoned and the appeal admitted for adjudication on merits. - HELD THAT: - The assessee filed an affidavit and medical certificate explaining illness and bed rest, establishing a bona fide cause for the delay. The Tribunal applied the settled principle that courts should adopt a lenient view when the cause is bona fide and not a device to defeat limitation, and preferred substantial justice over technical bar. On this basis the delay of 44 days was condoned and the appeal was taken up on merits. [Paras 2]

Delay of 44 days condoned; appeal admitted for adjudication on merits.

Disallowance under section 14A of the Income-tax Act - inapplicability of Rule 8D to Assessment Year 2007-08 - use of percentage of exempt income as reasonable estimate for disallowance - remand for quantification in light of binding High Court precedent - Disallowance under section 14A confirmed in principle but remitted to the AO for quantification in accordance with Bombay High Court decisions; Rule 8D held not applicable to AY 2007-08. - HELD THAT: - The Tribunal found that Rule 8D did not apply to the assessment year 2007-08 and could not be indirectly invoked. Relying on the Bombay High Court's decisions (including Godrej & Boyce and Godrej Agrovet Ltd.), the Tribunal accepted that a percentage of exempt income can constitute a reasonable estimate of expenditure attributable to exempt income for years prior to AY 2008-09. Consequently, the matter was remitted to the Assessing Officer to quantify the disallowance in consonance with those High Court rulings and to verify and restrict the disallowance accordingly. [Paras 3, 4]

Disallowance under section 14A upheld in principle; Rule 8D inapplicable to AY 2007-08; matter remanded to AO for quantification in line with Bombay High Court precedent.

Consequential nature of penal interest - Contestation of levy of penal interest under sections 234A, 234B, 234C and 234D was held to be consequential and therefore not adjudicated. - HELD THAT: - The Tribunal treated the contention on penal interest as arising consequentially from the primary tax computation and disallowance issue. Since the primary issue was remitted for quantification, the Tribunal observed that the question of liability to penal interest did not require separate adjudication at that stage. [Paras 5]

Claim regarding penal interest not adjudicated as it is consequential in nature.

Final Conclusion: The appeal is partly allowed: delay in filing condoned; disallowance under section 14A sustained in principle but remitted to the AO for quantification in accordance with Bombay High Court precedents (Rule 8D held inapplicable to AY 2007-08); the question of penal interest was left unadjudicated as consequential.

Exemption for non-insecticidal use under the Insecticides Act, 1968 - entitlement to duty-free import under the DFIA scheme - invalidity of Condition No.7 of DGFT Notification No.2 (RE-2006)/2004-2009 dated 07.04.2006 - confiscation, redemption fine and penalty consequences

Exemption for non-insecticidal use under the Insecticides Act, 1968 - invalidity of Condition No.7 of DGFT Notification No.2 (RE-2006)/2004-2009 dated 07.04.2006 - entitlement to duty-free import under the DFIA scheme - Appellant entitled to duty-free import benefit under the DFIA scheme without production of a permit from the Central Insecticide Board and Registration Committee. - HELD THAT: - The Court accepted that the Insecticides Act, 1968 provides an exemption for import of boric acid for non-insecticidal (agricultural/non-insecticidal) purposes and that the appellant had imported the goods for such non-insecticidal use. The Court noted that Condition No.7 of DGFT Notification No.2 (RE-2006)/2004-2009, which required production of an import permit from the Central Insecticide Board and Registration Committee, has been struck down by the Hon'ble Kerala High Court. In view of the statutory exemption and the invalidity of the notification condition, the obligation to obtain a permit from the Ministry of Agriculture did not arise and the appellant satisfied the conditions of Notification No.2/06 dated 07.04.2006. Consequently, the appellant was entitled to the benefits of the DFIA scheme.

Impugned order confiscating the goods and confirming duty, penalty and redemption fine was set aside and the appeal allowed with consequential relief.

Final Conclusion: The appeal was allowed: since Condition No.7 of Notification No.2/2006 has been struck down and the Insecticides Act exempts non-insecticidal imports, the appellant was entitled to duty-free import under the DFIA scheme; the adjudicating order of confiscation, duty confirmation, penalty and redemption fine was set aside with consequential reliefs.

Classification of diamonds as rough versus cut and polished - confiscation for misdeclaration under Section 111(m) of the Customs Act - redemption fine under Section 125 of the Customs Act - penalty under Section 112(a) of the Customs Act - Kimberley Process certification and Board clarification on semi-processed (semi-cut) diamonds

Classification of diamonds as rough versus cut and polished - confiscation for misdeclaration under Section 111(m) of the Customs Act - Kimberley Process certification and Board clarification on semi-processed (semi-cut) diamonds - Whether the imported diamonds were misdeclared as rough (or semi-processed) and liable to confiscation under Section 111(m). - HELD THAT: - The Tribunal found from the expert reports and the Kimberley Process certificate produced by the importer that the imported stones were semi-processed/rough diamonds. The HSN explanatory notes and the Board circular dated 29/12/2009 (clarifying that small polishing or semi-cut diamonds remain within the ambit of rough diamonds for certification purposes) support classification as rough rather than finished cut and polished diamonds. Given these materials, the Tribunal concluded that there was no misdeclaration of the nature of the goods. Applying the principle that a bona fide claim about classification or exemption does not amount to misdeclaration (as in the authorities relied upon by the appellant), confiscation under Section 111(m) was held to be without basis. [Paras 5]

Confiscation under Section 111(m) set aside; goods held to be rough/semi-processed and not misdeclared.

Redemption fine under Section 125 of the Customs Act - penalty under Section 112(a) of the Customs Act - Whether imposition of redemption fine and penalty was sustainable where duty was discharged and no misdeclaration was established. - HELD THAT: - The Tribunal noted that the appellant had paid the assessed duty and cleared the goods, so the goods were not available for confiscation or redemption. In the absence of misdeclaration or any other sustaining finding, imposition of a redemption fine under Section 125 was unsustainable. Similarly, having rejected any finding of misdeclaration and having accepted that the claim on classification/exemption was bona fide, there was no warrant for imposing penalty under Section 112(a). The Tribunal relied on the legal principle that asserting an arguable claim on classification/exemption does not constitute misdeclaration warranting confiscation or penalty. [Paras 5]

Redemption fine and penalty set aside; no penalty or redemption fine sustainable in law.

Final Conclusion: Appeal allowed; impugned adjudication setting aside confiscation, redemption fine and penalty. Order-in-Original dated 17/05/2013 is set aside.

Sub-letting of CHA licence - authorization from exporter for clearance - liability of CHA for acts of intermediary procuring business - good faith reliance on shipping documents

Sub-letting of CHA licence - liability of CHA for acts of intermediary procuring business - Whether the appellant had sub-let or transferred its CHA licence to Shri Christopher Lopez by allowing him to bring business and use the licence for monetary consideration - HELD THAT: - The Tribunal found on the material on record and statements recorded during enquiry that clearances of the export consignments were carried out by the appellant's employee and that shipping bills were signed and filed by the appellant through its own staff. Although Shri Lopez procured business and received payments for bringing consignments, the factual matrix established that procurement of business through an intermediary who was not an employee did not amount to sub-letting or transfer of the CHA licence. The Tribunal relied on the principle that mere procurement of business by an intermediary, without transfer of actual control over clearance functions to that intermediary, does not constitute sub-letting of the licence. Consequently, the charges under the Regulations alleging sub-letting were held unsustainable. [Paras 8]

Charges of sub-letting or transfer of the CHA licence were not sustained and are set aside.

Authorization from exporter for clearance - good faith reliance on shipping documents - Whether the appellant was liable for revocation of licence on the ground of not having proper authorization from exporters and for not verifying genuineness of export consignments - HELD THAT: - The Tribunal examined the record and statements and concluded that the appellant had obtained proper authorization from exporters and that the shipping documents were filed by the appellant's employee who held the CHA pass. Noting precedent that a CHA is not expected to investigate the genuineness of an exporter once an IEC and documents are produced and that a CHA filing shipping documents in good faith on material supplied by clients is not liable to penal action, the Tribunal found the allegation of lack of authorization and requisite culpability to be untenable on the facts. Therefore, the ground of revocation premised on absence of authorization and on failure to verify genuineness was rejected. [Paras 8]

The allegation of absence of proper authorization and related liability for filing shipping documents was not sustained; revocation on this ground was set aside.

Final Conclusion: The order revoking CHA licence No. 11/654 is set aside; the appeal is allowed and the revocation is revoked with immediate effect, with consequential relief if any.

Territorial jurisdiction under Article 226 - cause of action - forum conveniens - quashing of proceedings under the Prevention of Money Laundering Act - distinction between COFEPOSA and PMLA proceedings - bundle of facts as envisaged by Section 20(c) CPC

Territorial jurisdiction under Article 226 - cause of action - forum conveniens - quashing of proceedings under the Prevention of Money Laundering Act - Whether the Delhi High Court has territorial jurisdiction to entertain the petition under Article 226 seeking quashing of provisions of PMLA and the complaint/proceedings pending before the Special Court, Mumbai. - HELD THAT: - The Court examined settled principles governing territorial jurisdiction under Article 226, including that cause of action comprises a bundle of material facts and that even a part of cause of action arising within a High Court's territory may render the petition maintainable, subject to the discretionary doctrine of forum conveniens. Applying those principles, the Court found that the material and substantial elements of the dispute - incorporation of the companies, registration of FIRs, investigation, registration of the ECIR and filing of the PMLA complaint - all occurred in Mumbai, and the Special Court, Mumbai is seised of the trial. The facts relied upon by the petitioner (summons and an arrest effected in Delhi by an officer who had camped at the Delhi office) were held insufficient to create a material cause of action in Delhi; mere logistical acts or presence for convenience do not confer jurisdiction. The Court further held that proceedings under COFEPOSA are distinct from PMLA proceedings and past entertainments by this Court of COFEPOSA matters did not import jurisdiction over separate PMLA proceedings. Exercising its discretion, the Court concluded that Bombay High Court is the more appropriate forum to adjudicate on quashing of the subordinate court's proceedings and that Delhi is not the forum conveniens to determine the present lis. The petition contained no pleaded factual nexus to justify Delhi as forum and omitted the mandatory jurisdictional averment. [Paras 21, 22, 23, 24, 25]

The petition is not maintainable in the Delhi High Court for want of territorial jurisdiction and, invoking forum conveniens, the petition is dismissed with liberty to move the appropriate court having territorial jurisdiction.

Final Conclusion: The Delhi High Court declined to entertain the writ petition challenging provisions of the PMLA and seeking quashing of the complaint pending before the Special Court, Mumbai, holding that the material and substantial cause of action arose in Mumbai and that Bombay High Court is the appropriate forum; the petition is dismissed with liberty to file in the court having territorial jurisdiction.

Summary order. The special leave petition is dismissed.

Classification of composite service as Goods Transport Agency (GTA) service - Cargo Handling Service - principal activity test - ancillary services - reverse charge mechanism - pre-deposit waiver and stay of recovery - Board Circular No.104/07/2008-ST dated 06.08.2008

Classification of composite service as Goods Transport Agency (GTA) service - Cargo Handling Service - principal activity test - ancillary services - reverse charge mechanism - Board Circular No.104/07/2008-ST dated 06.08.2008 - Whether the services rendered by the appellant contractor (loading, unloading, transportation, track cleaning and stacking within UML premises) are taxable as Cargo Handling Services or are to be treated as GTA/transport services with loading/unloading being ancillary, and whether a prima facie case is made out for waiver of pre-deposit. - HELD THAT: - The Tribunal found from the contracts that transportation was the principal activity with loading and unloading being ancillary, the charges being composite on per MT basis and obligations relating to vehicles and documentation placed on the contractor, indicating transportation as dominant. The Board's Circular dated 06.08.2008 was applied to the effect that where transportation by a GTA is accompanied by packing/related acts and amount charged is inclusive, the service is to be treated as GTA service and not Cargo Handling Service. Reliance was placed on earlier decisions which distinguish mere transportation from cargo handling and which hold that shifting/transportation within plant/stockyard where loading/unloading are incidental is not taxable as Cargo Handling Service. As M/s Usha Martin Ltd. had already discharged tax under the reverse charge mechanism on GTA services, and in view of the prima facie classification in favour of GTA/transport, the Tribunal concluded that the appellants had made out a prima facie case for waiver of pre-deposit and stay of recovery during the pendency of appeals. [Paras 5, 6, 7, 11]

Prima facie classification of the impugned activities as GTA/transport services with loading/unloading ancillary; appellants entitled to waiver of pre-deposit of the adjudged dues and stay of recovery during pendency of appeals.

Final Conclusion: The Tribunal prima facie held that transportation was the principal activity and loading/unloading were ancillary (applying the Board Circular and precedent); accordingly the applicants' pre-deposit of the adjudged dues was waived and recovery stayed pending appeal.

Refund of service tax - export under claim for drawback - non-availment of drawback condition - Notification No.41/2007-ST proviso (clause (e)) - eligibility for refund where drawback claimed

Refund of service tax - export under claim for drawback - non-availment of drawback condition - Notification No.41/2007-ST proviso (clause (e)) - Whether the appellant was entitled to refund of service tax for exports made during July 2008 to September 2008 when exports were made under claim for drawback - HELD THAT: - The Appellate Tribunal examined the refund claims rejected by the lower authority on the ground that the appellant had exported goods under a claim for drawback and therefore violated the condition of non-availment of drawback contained in the proviso to Notification No.41/2007-ST (clause (e)). The appellant contended that no drawback claim for service tax had been filed and that any drawback filing was routine. The Tribunal held that the condition barring refund where export is made under claim for drawback was breached. The manner in which the claim was filed (routine or otherwise) did not alter the fact of violation of the notification's condition, and consequently the refund claims could not be allowed. [Paras 2, 5]

Appeals dismissed; refund claims rightly rejected for breach of the non-availment of drawback condition in Notification No.41/2007-ST.

Final Conclusion: The Tribunal dismissed the appeals and upheld the rejection of the refund claims for July 2008 to September 2008 on the ground that the exporter had made exports under claim for drawback, contrary to the condition in Notification No.41/2007-ST (proviso, clause (e)).

Exclusion of value of materials from taxable value - liability of sub-contractor to pay service tax despite main contractor's payment - invocation of extended period of limitation for suppression with intent to evade - imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994 - abatement and CENVAT credit interaction

Exclusion of value of materials from taxable value - abatement and CENVAT credit interaction - Appellant's entitlement to benefit under Notification No.12/2003-ST (exclusion of value of goods/materials sold) and related abatement under Notification No.1/2006-ST - HELD THAT: - The adjudicating authority rejected the claim solely because the appellant did not produce documentary evidence before it. The Tribunal notes, however, that the departmental records (show cause notice para 4) indicate that the appellant had previously submitted contract details, bills and other particulars to the department. In the interest of justice and because the documents were available on record or can be furnished by the appellant, the Tribunal directs the adjudicating authority to examine afresh the appellant's eligibility to Notification No.12/2003-ST and the claim for abatement under Notification No.1/2006-ST in the light of evidence already on record or additional documentary proof submitted by the appellant, and to recompute tax liability accordingly. [Paras 7, 8]

Matter remanded to the adjudicating authority for de novo consideration of entitlement to Notification No.12/2003-ST and abatement under Notification No.1/2006-ST, with recomputation of service tax if applicable.

Liability of sub-contractor to pay service tax despite main contractor's payment - CENVAT credit scheme and single-point taxation principle - Whether a sub-contractor is independently liable to pay service tax on services rendered even where the main contractor has paid service tax - HELD THAT: - Relying on the Larger Bench decision in Vijay Sharma & Co. and subsequent coordinate bench authority, the Tribunal holds that service tax liability arises under the charging provisions and the person who provides the taxable service is liable to pay tax. The Tribunal rejects the appellant's reliance on earlier, service-specific circulars and decisions (which addressed particular services and pre-dated extension of the CENVAT scheme to services) as not laying down any general immunity for sub-contractors. The extension of the CENVAT credit scheme altered the tax-credit regime and made the contention of immunity inapplicable to the present facts (commercial or industrial construction service for the period after April 2004). Consequently, the sub-contractor is liable to discharge service tax on services provided by him. [Paras 7, 8]

Appellant, as sub-contractor, is liable to pay service tax on the services rendered; the contention that payment by the main contractor absolves the sub-contractor is rejected.

Invocation of extended period of limitation for suppression with intent to evade - imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994 - Whether extended limitation period could be invoked and whether penalties under Sections 76, 77 and 78 are imposable - HELD THAT: - The Tribunal finds that the appellant deliberately ceased payment of service tax w.e.f. 1-3-2006 to minimize tax liability after change in notification and also failed to file timely returns and to furnish information, thereby suppressing facts. Applying the reasoning in Neminath Fabrics (by analogy) and relevant tribunal precedents, the Tribunal holds that once the ingredients for invoking the extended period (suppression with intent to evade) are established, the extended limitation is invokable regardless of departmental knowledge at an earlier date. Penalty under Section 76 (default/delay in payment) is attracted without proof of mens rea; penalty under Section 77 (non-compliance of filing returns) is imposable for non-compliance; penalty under Section 78 is imposable where suppression is established, but the quantum of penalty under Section 78 must exclude any service tax paid and appropriated. The matter of quantum and recomputation of penalties is to follow recomputation of tax demand. (The judicial member dissented on penalties under Sections 76 and 78, leading to a reference on points of difference.) [Paras 7, 8]

Extended period of limitation properly invoked for suppression; penalties under Sections 76, 77 and 78 are sustainable in principle and the quantum of penalties is to be re-determined after recomputation of service tax (subject to the noted difference of opinion on Sections 76 and 78).

Final Conclusion: Appeals allowed in part: (i) appellant held liable as sub-contractor to pay service tax on services rendered; (ii) entitlement to Notification No.12/2003-ST and abatement under Notification No.1/2006-ST remanded to the adjudicating authority for fresh consideration on available or newly submitted documentary evidence and recomputation of tax; (iii) extended limitation period held invokable for suppression and penalties under Sections 76, 77 and 78 are sustainable in principle, with recomputation of demand and penalties on remand; points of difference between members on the temporal scope of sub-contractor liability and on penalties under Sections 76 and 78 have been placed before the President for reference to a third member.

Sale of space or time for advertisement service - taxable service - in relation to - pre-deposit requirement - condonation of delay - stay of recovery

Sale of space or time for advertisement service - taxable service - in relation to - Whether the appellant's sale of exclusive rights to third parties falls within the definition of 'sale of space or time for advertisement service' and whether a prima facie case exists to waive pre-deposit. - HELD THAT: - The Tribunal examined the definition of the taxable service under Section 65(105)(zzzm) as any service 'in relation to sale of space or time for advertisement, in any manner'. Relying on the Apex Court's construction of the expression 'in relation to' as covering preceding activities, the Tribunal held that sale by the appellant of exclusive rights to enable third parties to sell advertising space precedes and is connected to the subsequent sale of space/time for advertisement and therefore falls within the phrase 'in relation to'. The Tribunal found that the Delhi Bench decision in Municipal Corporation, Jalandhar did not take into account that meaning of 'in relation to'. Given this prima facie legal position, the appellant had not established a case for complete waiver of pre-deposit. The Tribunal nevertheless noted that, because the appellant is a Municipal Corporation, there was no finding of intent to evade tax and treated the demand as subject to the normal period of limitation; on the material before it the normal-period demand was approximately Rs. 49 lakhs and no financial hardship had been pleaded. [Paras 6]

Demand in relation to sale of exclusive rights is prima facie covered by the definition of service; pre-deposit not waived and the appellant directed to make a pre-deposit equivalent to the normal-period demand of Rs. 49 lakhs.

Condonation of delay - pre-deposit requirement - stay of recovery - Condonation of delay in filing the appeal and interim relief in the form of stay subject to pre-deposit. - HELD THAT: - The Tribunal accepted the appellant's explanation that delay in filing the appeal (about three months) arose from coordination among Municipal Corporation branches and obtaining legal advice, found the reasons satisfactory and condoned the delay. As to interim relief, the Tribunal directed a pre-deposit of Rs. 49 lakhs to be made within eight weeks; upon such compliance the balance of the adjudged dues was waived for pre-deposit purposes and recovery of the remaining amount was stayed pending the appeal. [Paras 3, 7]

Delay condoned; appellant to deposit Rs. 49 lakhs within eight weeks, on which compliance recovery of the balance is stayed during pendency of the appeal.

Final Conclusion: Delay in filing the appeal was condoned. On the merits the Tribunal held prima facie that sale of exclusive rights by the Municipal Corporation is covered by the definition of sale of space or time for advertisement service ('in relation to'), declined complete waiver of pre-deposit and directed a pre-deposit of Rs. 49 lakhs within eight weeks; on compliance recovery of the balance was stayed pending appeal.

Input service credit - rent-a-cab service - manpower supply service - penalty under Section 11AC - extended period of limitation

Input service credit - rent-a-cab service - manpower supply service - Input service credit for transportation of employees was not admissible as part of manpower supply service and therefore denied. - HELD THAT: - The Tribunal examined the agreement with the service provider and found no stipulation that manpower was to be supplied at the doorstep of the appellant nor any mechanism for quantification of transportation charges as part of manpower supply. In the absence of concrete evidence in the agreement tying the transportation to the manpower supply service, the transportation was held to qualify as rent-a-cab service and not as an integral component of manpower supply; consequently input service credit claimed for that transportation was disallowed for the stated period. The finding rests on the contractual terms and absence of allocation/quantification showing transportation formed part of the manpower service. [Paras 6]

Credit denied for transportation of employees as it qualifies as rent-a-cab service and was not shown to be part of manpower supply.

Penalty under Section 11AC - Penalty under Section 11AC was not imposed. - HELD THAT: - The Tribunal found that there was no intention on the part of the appellant to avail inadmissible credit. Given the absence of mala fide or deliberate wrongdoing, the imposition of penalty under Section 11AC was considered unwarranted and therefore not sustained. [Paras 6]

Penalty under Section 11AC not warranted and therefore not imposed.

Extended period of limitation - Extended period of limitation was not invoked. - HELD THAT: - The show-cause notice invoked the extended period of limitation, but the Tribunal held that because there was no malafide intention on the part of the appellant to claim inadmissible credit, the extended period of limitation could not be invoked. Accordingly, only the normal period of limitation was applied for confirming the inadmissible credit along with interest. [Paras 6]

Extended period of limitation not invocable; normal limitation period applied.

Final Conclusion: Input service credit for transportation of employees for the period 09.12.2011 to 29.03.2012 is disallowed as it qualifies as rent a cab service and was not demonstrably part of manpower supply; penalty under Section 11AC is not imposed and the extended period of limitation is not invoked, but the inadmissible credit is confirmed for the normal period with interest.

Power of the Appellate Tribunal to extend stay - interpretation of sub-section (2A) of Section 35C of the Central Excise Act, 1944 - effect of insertion of the third proviso to sub-section (2A) - stay order to stand vacated after prescribed period - good cause exception for extension of stay

Power of the Appellate Tribunal to extend stay - good cause exception for extension of stay - effect of insertion of the third proviso to sub-section (2A) - Whether the Appellate Tribunal retains power to extend a previously granted stay beyond the period specified in the provisos to sub section (2A) of Section 35C where the delay in disposal is not attributable to the assessee and there is good cause. - HELD THAT: - The Tribunal recalled that sub section (2A) (introduced by Finance Act, 2002) and its provisos prescribe time limits for disposal of appeals and provide that a stay shall stand vacated on expiry of the prescribed period. The third proviso (inserted by Finance Act, 2013) limits extension by allowing the Tribunal, if satisfied that the delay is not attributable to a party, to extend the stay for up to 185 days but provides that if the appeal is not disposed within a total of 365 days the stay shall on expiry stand vacated. The Court relied on the ratio in CCE, Ahmedabad v. Kumar Cotton Mills Pvt. Ltd., where the Supreme Court held that sub section (2A) cannot be construed to punish assessees for delays beyond their control and that the Tribunal may extend stay beyond the specified period on good cause and where the delay is not attributable to the assessee. Applying that principle, the Court held that the decision in Kumar Cotton Mills remains applicable despite the 2013 insertion, and the third proviso does not oust the Tribunal's power to grant an extension on satisfaction of the specified conditions. The contention based on ITW Signode was held inapposite as it related to statutory interpretation distinct from the Kumar Cotton Mills ratio which directly addresses extension of stays on good cause.

The Tribunal retained power to extend the stay on being satisfied that delay was not attributable to the assessee and on good cause; the extension application was allowed.

Final Conclusion: The miscellaneous application for extension of the stay granted earlier is allowed because the Tribunal, applying Kumar Cotton Mills, may extend a stay beyond the prescribed period where delay is not attributable to the assessee and good cause is shown, notwithstanding the insertion of the third proviso to sub section (2A).

Benefit of captive consumption notification - exclusion of Rule 6 obligations for supplies against International Competitive Bidding - interpretation of proviso to Notification No. 67/95-CE - prima facie entitlement to stay and waiver of pre-deposit

Benefit of captive consumption notification - exclusion of Rule 6 obligations for supplies against International Competitive Bidding - interpretation of proviso to Notification No. 67/95-CE - Whether inputs (steel pipes) used in manufacture of goods cleared under Notification No. 6/2006-CE (ICB supplies) are entitled to exemption under Notification No. 67/95-CE without discharging the obligations prescribed under Rule 6 of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal examined the proviso to Notification No. 67/95-CE which excludes benefit where inputs are used on exempted final products except goods specified in clauses (i)-(vi) and where the manufacturer has discharged obligations under Rule 6. It noted that clause (vi) of the proviso contemplates application of the notification to goods cleared after discharging Rule 6 obligations. Clause (vii) of Rule 6(6) exempts goods supplied against International Competitive Bidding from the applicability of sub-rules 1-4 of Rule 6. S.No.91 of Notification No. 6/06-CE grants nil duty for goods supplied against ICB. On a prima facie consideration, and following the Tribunal's earlier view in the assessee's own cases, the Tribunal found that where final products were cleared as ICB supplies covered by Notification No. 6/06-CE and clause (vii) of Rule 6(6) applies, the obligation under Rule 6(1)-(4) need not be discharged and the assessee has made out a prima facie case for the applicability of Notification No. 67/95-CE to captive inputs. [Paras 4, 5, 6]

Prima facie view that Notification No. 67/95-CE applies to the inputs used in manufacture of goods cleared under Notification No. 6/2006-CE without requiring discharge of Rule 6(1)-(4) obligations.

Prima facie entitlement to stay and waiver of pre-deposit - stay of recovery and waiver of pre-deposit - Whether the appellants are entitled to interim relief by way of stay of recovery and waiver of pre-deposit of the demand, interest and penalty. - HELD THAT: - The Tribunal relied on its earlier stay orders in the assessee's own cases which had taken a prima facie view favourable to the assessee on the same question. Applying that prima facie view and finding no force in the Revenue's contention, the Tribunal dispensed with the requirement of pre-deposit of duty, interest and penalty and stayed recovery pending disposal of the appeal. The Registry was directed to link the appeal with the earlier appeals in which similar stay orders were passed. [Paras 5, 6, 7, 8]

Pre-deposit of duty, interest and penalty waived and recovery stayed until disposal of the appeal; appeal linked with earlier related appeals.

Final Conclusion: The Tribunal took a prima facie view that inputs used in manufacture of goods cleared under Notification No. 6/2006-CE (ICB supplies) fall within the scope of Notification No. 67/95-CE without discharging Rule 6(1)-(4) obligations and, following earlier stay orders in the assessee's own cases, granted interim stay and waived pre-deposit of duty, interest and penalty pending disposal of the appeal.

Principles of natural justice - right to inspect and obtain seized non-relied upon documents - duty of Revenue to return or supply documents not relied upon - remand for fresh adjudication to enable fair opportunity - administrative responsibility for custody and traceability of seized records

Principles of natural justice - right to inspect and obtain seized non-relied upon documents - duty of Revenue to return or supply documents not relied upon - remand for fresh adjudication to enable fair opportunity - Non-supply of seized non-relied upon documents to the assessee violated the principles of natural justice and required remand for fresh adjudication after supply of those documents. - HELD THAT: - The Tribunal found that documents seized during departmental visits which were not relied upon in the show cause notice ought to have been returned or supplied to the assessee on request, because retention of such records by the Revenue prevents the assessee from preparing an effective defence. Earlier directions by the Commissioner (Appeals) and by the Tribunal for supply/inspection of the non-relied upon documents were not complied with by the adjudicating authority or the Revenue. The failure to supply the documents despite specific remand and subsequent directions, and the Revenue's later contention that the documents are not traceable, were held to be attributable to the Revenue and inconsistent with fair adjudication. In view of these lapses and the centrality of the documents to the assessee's defence, the impugned order based on clandestine removal was set aside and the matter remanded to the original adjudicating authority with directions to make all efforts to supply the non-relied upon documents and to afford a fresh opportunity for hearing and consideration of submissions. [Paras 7, 8, 9, 11, 13]

Impugned order set aside and matter remanded to the original adjudicating authority with directions to procure and supply the non-relied upon seized documents to the assessee and to afford a fresh opportunity for hearing and to pass a speaking order.

Administrative responsibility for custody and traceability of seized records - A copy of the Tribunal's order was to be forwarded to the concerned officer in the Board for information and further action, including issuance of instructions to field adjudication officers if deemed fit. - HELD THAT: - The Tribunal recorded its concern over departmental lapses in custody and traceability of seized records and directed that a copy of the order be sent to the Board so that appropriate administrative action or instructions may be considered to prevent recurrence of such failures by field officers. This was ancillary to the remand but constituted an express administrative direction. [Paras 12]

Order to be sent to the concerned officer in the Board for information and further action, with liberty to issue instructions to field adjudication officers.

Final Conclusion: All appeals allowed by setting aside the impugned order and remanding the matter for de novo adjudication after supply of the seized non-relied upon documents to the assessee; copy of the order to be forwarded to the Board for appropriate administrative action.

Inadmissibility of Cenvat credit and statutory formula for computation - remand for recalculation and opportunity to be heard - penalty under Section 11AC of Central Excise Act, 1944 requires intention to evade duty - absence of intention or suppression negates penalty - interest to follow the duty demand

Inadmissibility of Cenvat credit and statutory formula for computation - remand for recalculation and opportunity to be heard - Adjudicating Authority to recalculate inadmissibility of Cenvat credit applying the statutory formula and to confront the calculation with the appellant, granting a fair opportunity to defend - HELD THAT: - The Tribunal found that the calculation aspect of inadmissibility under the Cenvat Credit Rules was not exposed to the appellant for defence and that the statutory formula must be applied. In the interests of justice and to avoid prejudice, the matter is directed to be remitted to the learned Adjudicating Authority for recomputation of any inadmissible credit in accordance with the statutory formula and for the appellant to be given an opportunity to examine and contest the calculations before a fresh order is passed. This remedial direction is aimed at ensuring that the computation is in conformity with the Rules and that the appellant is not denied natural justice. [Paras 3]

Matter remanded to the Adjudicating Authority to recalculate inadmissibility of Cenvat credit applying the statutory formula and to confront the calculation with the appellant, granting a fair hearing

Penalty under Section 11AC of Central Excise Act, 1944 requires intention to evade duty - absence of intention or suppression negates penalty - Penalty under Section 11AC is not imposable in the present case - HELD THAT: - On perusal of the show cause notice, the allegation was limited to excess credit taken, and Para 9 did not establish the requisite intention to evade duty or suppression necessary for imposing penalty under Section 11AC. The Tribunal held that arithmetical or calculation errors, without proof of intention to evade or suppression, cannot be construed as deliberate evasion invoking Section 11AC. Given the absence of material demonstrating intention or suppression, the imposition of penalty would be unwarranted. [Paras 5, 6]

Penalty under Section 11AC set aside for want of averment/proof of intention to evade duty

Final Conclusion: The appeal is partly allowed: the demand relating to inadmissibility of Cenvat credit is remanded to the Adjudicating Authority for recomputation in accordance with the statutory formula and for the appellant to be afforded a fair opportunity to contest the calculations; the penalty under Section 11AC is quashed; interest shall follow the duty demand.

Interest on delayed or short-paid excise duty - liability for interest from statutory amendment effective date - penalty for short payment under Section 11AC - absence of mens rea / no intention to evade as a defence to penalty

Interest on delayed or short-paid excise duty - liability for interest from statutory amendment effective date - Liability to pay interest on differential duty following the amendment made effective from 11-5-2001. - HELD THAT: - The Tribunal noted that with effect from 11-5-2001 the amended provisions (Section 11AB) made interest applicable in all situations of short levy or short payment of duty, whether determined by the department or paid by the assessee. Applying this statutory change, the appellants became liable to pay interest from 11-5-2001 until the date of payment of the differential duty. The Tribunal therefore upheld the demand of interest commencing from the amendment's effective date until payment. [Paras 9]

Appellants liable to pay interest from 11-5-2001 until payment of the differential duty.

Penalty for short payment under Section 11AC - absence of mens rea / no intention to evade as a defence to penalty - Whether penalty under Section 11AC should be sustained where sugar was cleared pursuant to Government directions and subsequently treated as free sale sugar with reimbursement. - HELD THAT: - The Tribunal found that the manufacturer cleared the sugar pursuant to directions from the Government of India and the Food Corporation of India, and that the Government later directed that the loan quantity be treated as free sale sugar and reimbursed the price difference. Given this statutory and administrative context, the Tribunal accepted the appellant's contention that there was no intention to evade duty. On that basis the imposition of penalty under Section 11AC was not warranted and the penalty was set aside. [Paras 10]

Penalty imposed under Section 11AC is set aside for lack of intention to evade payment of duty.

Final Conclusion: The appeal by the manufacturer is allowed to the extent that the penalty under Section 11AC is set aside; the appellants remain liable to pay interest on the differential duty from 11-5-2001 until the date of payment. The Revenue's appeal against the reduction/set aside of penalty is dismissed.

Rectification of mistake - review of order - mistake going into root of the matter - order pronounced and dictated in open court - concession by departmental representative

Rectification of mistake - mistake going into root of the matter - review of order - Application for rectification of an alleged mistake in the Tribunal's final order - HELD THAT: - The Tribunal examined the Revenue's application seeking rectification of the Final Order No. 1181/2009 on the ground that paragraphs of the order wrongly recorded that the appellant used the brand name only from 17-2-2001. The Tribunal noted that the observations in the order were recorded after hearing submissions in court and that the order was pronounced and dictated in open court in the presence of the departmental representative and counsel. The record also contained a concession by the departmental representative regarding the absence of a finding that the appellant used the brand name from 17-2-2001. The Tribunal found that the mistake alleged would go to the root of the matter and that attempting to correct it by rectification would effectively amount to a review of the order. Because rectification cannot be used to effect a review, the application for rectification was held to be without merit. [Paras 3]

Application for rectification rejected as the alleged mistake goes to the root and rectification would amount to review.

Final Conclusion: The Revenue's application for rectification of the Final Order No. 1181/2009 is dismissed; the Tribunal declined rectification because the alleged error would require review of the order rather than permissible correction.

Cenvat credit admissibility - inputs - burden of proof of utilisation - admissibility of Chartered Engineer's certificate

Cenvat credit admissibility - inputs - burden of proof of utilisation - Whether Cenvat credit availed on angles, channels, MS plates and similar items could be retained in absence of records showing issue and utilisation in manufacture - HELD THAT: - The Tribunal held that the appellant failed to maintain any records evidencing issue of the materials and their utilisation in the factory. It was the assessee's responsibility to demonstrate that the items were used for the purpose for which Cenvat credit was claimed. In the absence of such contemporaneous records and no new supporting facts being produced at final hearing, the Tribunal upheld the view that the appellant has not discharged the burden to establish that the disputed items qualified as inputs for manufacture of components/machinery/equipment. The absence of adequate documentary proof was treated as determinative of the claim. [Paras 4]

Claim for Cenvat credit on the disputed items is not allowable for want of records and proof of utilisation; appeal rejected on this ground.

Admissibility of Chartered Engineer's certificate - burden of proof of utilisation - Whether the Chartered Engineer's certificate produced by the appellant sufficed to prove utilisation of materials as inputs - HELD THAT: - The Tribunal agreed with the Revenue that the Chartered Engineer's certificate was unreliable and could not be accepted as proof. The certificate lacked a date, did not state that the engineer had visited the factory or when any inspection occurred, and itself described the calculations as estimates. The certificate furthermore admitted that in many instances the materials were used for fabrication of structural supports. On these foundations the Tribunal found the certificate inadequate to discharge the appellant's evidentiary burden and rejected it. [Paras 3, 4]

Chartered Engineer's certificate rejected as insufficient evidence to sustain the Cenvat credit claim.

Final Conclusion: The appeal was dismissed: the Tribunal upheld the impugned order denying the Cenvat credit on the disputed items and rejected the Chartered Engineer's certificate as inadequate, on the ground that the assessee failed to prove issue and utilisation of the inputs.

Exemption under Notification No. 10/97-C.E. - accessories and spare parts of scientific and technical instruments - certificate from the head of the institution / end-use certificate - public funded research institution - condition precedent for exemption: production of certificate at time of clearance

Exemption under Notification No. 10/97-C.E. - accessories and spare parts of scientific and technical instruments - certificate from the head of the institution / end-use certificate - Whether the appellant was entitled to exemption under Notification No. 10/97-C.E. on the basis of certificates produced by public funded research institutions certifying end-use of the goods as parts/accessories of scientific and technical instruments. - HELD THAT: - The Notification exempts specified scientific and technical instruments and their accessories and spare parts supplied to specified institutions, subject to the condition precedent that the manufacturer is produced with a certificate from the head of the institution certifying the goods are required for research purposes (or an equivalent certificate where applicable). The Tribunal examined the certificates produced by the appellant, including a certificate from Bhabha Atomic Research Centre, which certify that the impugned goods are used as parts/accessories of scientific and technical apparatus (for example, pipes/tubes used as parts/accessories for specified installations). Having regard to the Notification's requirement and the contents of the certificates, the Tribunal found that the necessary end use certifications were produced and that the goods therefore fall within the class of goods eligible for exemption. The adjudicating authority erred in denying the benefit on the ground that the certificates did not state the goods were spares/accessories, because the certificates on record did in fact certify such end use and satisfy the condition for exemption. [Paras 6, 7, 8]

The impugned order denying benefit of Notification No. 10/97-C.E. is set aside and the appeal is allowed, the appellant being entitled to the exemption on production of the requisite end use certificates.

Final Conclusion: The Tribunal allowed the appeal, holding that the certificates produced by public funded research institutions satisfied the Notification's condition and entitled the appellant to exemption under Notification No. 10/97-C.E., and therefore set aside the adjudicating authority's order denying the benefit.

Levy of Education Cess and Secondary and Higher Education Cess on statutory cess - Characterisation of statutory cess as duty of excise - Application of precedent from Hon'ble Gujarat High Court in Commissioner v. Sahakari Khand Udyog Mandli Ltd. - Compliance with C.B.E. & C. instructions under Section 35R of the Central Excise Act, 1944

Levy of Education Cess and Secondary and Higher Education Cess on statutory cess - Characterisation of statutory cess as duty of excise - Application of precedent from Hon'ble Gujarat High Court in Commissioner v. Sahakari Khand Udyog Mandli Ltd. - Whether Education Cess and Secondary Higher Education Cess are payable on Jute Cess collected under the Jute Manufacture Cess Act, 1983 - HELD THAT: - The Tribunal examined whether the Jute Cess constituted a duty of excise attractable to Education Cess and Secondary Higher Education Cess. It accepted the view in the decision of the Hon'ble Gujarat High Court in Commissioner v. Sahakari Khand Udyog Mandli Ltd., holding that a statutory cess levied under a special enactment (here, the Jute Manufacture Cess Act) is not a duty of excise for the purpose of levying Education Cess. The learned AR conceded that the provisions of the Sugar Cess Act considered by the Gujarat High Court are similar to the Jute Manufacture Cess Act; accordingly, the same principle applies and the appellants have no merit on the substantive claim to levy additional cesses on the Jute Cess. [Paras 3]

Education Cess and Secondary Higher Education Cess are not payable on the Jute Cess collected under the Jute Manufacture Cess Act, 1983; the substantive contention of Revenue fails.

Compliance with C.B.E. & C. instructions under Section 35R of the Central Excise Act, 1944 - Whether the appeals should be rejected for being filed contrary to C.B.E. & C. instructions issued under Section 35R of the Central Excise Act, 1944 - HELD THAT: - The Tribunal noted that the total amounts involved in the appeals were small and that departmental officers had filed the appeals in contravention of instructions issued by the Board under Section 35R of the Central Excise Act, 1944. Filing appeals against those instructions was held to contravene the provisions empowering the Board to issue such directions. On this independent ground the Tribunal found that the appeals ought to be rejected. [Paras 4]

Appeals rejected for contravention of C.B.E. & C. instructions issued under Section 35R, in addition to the substantive lack of merit.

Final Conclusion: All three appeals are rejected; on the merits Education Cess and Secondary Higher Education Cess are not leviable on Jute Cess, and the appeals were also dismissed for being filed contrary to Board instructions under Section 35R of the Central Excise Act, 1944.

Transfer of the right to use goods - levy under Section 3-A of the Tamil Nadu General Sales Tax Act, 1959 - delivery and possession as requisite for taxability - possession and effective control - characterisation of transaction as service

Transfer of the right to use goods - levy under Section 3-A of the Tamil Nadu General Sales Tax Act, 1959 - characterisation of transaction as service - Whether the transactions fell within the ambit of Section 3-A by constituting a transfer of the right to use the equipments, attracting tax. - HELD THAT: - The Tribunal and Appellate Assistant Commissioner found on the materials that the equipments (R.P. Chain and radio paging system) were imported by O.N.G.C. but were deployed and operated by the respondent together with its specialised personnel; no other person had access to the equipments except the respondent's staff and O.N.G.C. had no independent right to use the equipments. Although physical possession and effective control were said to be with O.N.G.C., operation remained with the respondent. On these factual findings the courts below concluded that there was no transfer of the right to use the goods and that the transactions were in substance for services. Applying that factual conclusion to the statutory test, Section 3-A did not get attracted and levy under that provision could not be sustained. [Paras 5]

The finding that there was no transfer of the right to use the equipments and that the transactions were service contracts was upheld; Section 3-A did not apply.

Delivery and possession as requisite for taxability - possession and effective control - levy under Section 3-A of the Tamil Nadu General Sales Tax Act, 1959 - Whether delivery and possession of the goods to the lessee is a sine qua non for invoking Section 3-A and whether mere physical possession with the user, coupled with respondent's continued operation, attracts tax. - HELD THAT: - The question framed before the Court and decided by the Tribunal concerned whether delivery/possession to the lessee is essential to attract Section 3-A. The Tribunal accepted the factual matrix that physical possession was with O.N.G.C. but effective control and operation remained with the respondent; consequently, the Tribunal held that mere physical possession without transfer of the right to use did not bring the transaction within Section 3-A. The High Court, on examination of those findings, treated the factual conclusions as determinative and found no necessity to examine limitation; accordingly it dismissed the appeals against the Tribunal's conclusion on this point. [Paras 5, 6]

Mere physical possession with the user, in the absence of transfer of the right to use (with operation and control retained by the supplier), is insufficient to attract Section 3-A; the Tribunal's conclusion on this point is sustained.

Final Conclusion: On the admitted facts the courts below correctly found no transfer of the right to use the equipments and characterised the transactions as services; Section 3-A of the Tamil Nadu General Sales Tax Act, 1959, therefore did not apply. The tax case revisions are dismissed.