Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 11, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Highlights / Catch Notes
Income Tax
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Nature of income - Income received from Strand Book Stall for providing warehousing, binding, shrink wrapping, supervision charges and mailing charges - taxable as business income and not as income from house property - AT
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Mere failure to file the relevant vouchers as required by the AO cannot be the basis for disallowance unless it is found that the expenditures were not incurred wholly and exclusively for the purpose of business - AT
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TPA - If all the public sector undertakings are to be treated as ‘associated enterprises’, the inter se transactions between all the public sector undertakings will be subject to arm’s length price determination- something which is seemingly quite incongruous and contrary to the scheme of the transfer pricing legislation. - AT
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TPA - Associate companies - scope of section 92A - An artificial juridical person is a creature of law but the President of India is a creation of the constitution. - The shares are held by the Union of India in the name of Present which is a sovereign, cannot be held as associated company - AT
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Disallowance u/s 40 A(2)(b) - payment to the specified person - excessive and unreasonable expenditure - is clear that double filter oil is more costly than the filter oil and it also fetch more price in the market than the filtered oil - no additions - AT
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Reopening of assessment - it is a settled law that an assessment could not be reopened only on the basis of difference in TDS certificate and receipts shown in the P&L account - AT
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Disallowance of foreign travel expenditure - it was not open to AO to deny any part of deduction for these expenses particularly when there is no material to hold that the visit was for personal purposes of the Director - AT
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Disallowance of alleged unverified purchases/expenditure - Absence of receipt of any reply from the suppliers cannot by itself demonstrate any bogus claim by the assessee unless any of the attendant facts bear out any bogus nature of the claim of expenditure by the assessee. - AT
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TDS u/s 195 - payment made to Non-Resident, viz. Chemical Abstract Services USA, for online access to the database system "SciFinder" - not in the nature of royalty - revenue could not demonstrate as to how there was use of copyright - No TDS / withholding tax liability - AT
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Penalty u/s 271(1)(c) - addition made on protected assessment - addition in this case was made on protected assessment/addition on estimated basis which is against the law - AT
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Benefit of exemption 11 - assessee's trust can promote its charitable objects by giving donation to other charitable organizations and such donations will amount to application of income of the trust. - AT
Customs
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Valuation - High Seas Sale - no evidence was produced regarding the nature of the administrative charges, therefore so called administrative charges, in our view is nothing but Sales profit only of the High Sea seller which at par with High Sea Sale commission. Therefore the same is clearly includible in the assessable value. - AT
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Refund claim - the appellant right from filing of bill of entry have protested the denial of exemption notification - The adjudicating authority must pass a speaking order thereafter process the refund application of the appellant - AT
Service Tax
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CENVAT credit - Whether bills of entry in the name of M/s Godfrey Phillips India Ltd. and not bearing the endorsement of proper office of Customs are valid documents under Rule 9 of the CENVAT Credit Rules, 2004 - once goods and received accounted for, credit cannot be denied - HC
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CENVAT credit - Cargo handling services - Courier services - nexus with output service - such services, have been used for purposes of repair and maintenance services rendered during warranty period - credit allowed - AT
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Refund claim - the appellant in the capacity of recipient of service, can file refund application before the authorities having jurisdiction over the service recipient or before the jurisdictional authorities of the service provider u/s 11B - AT
Central Excise
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100% EOU - The levy of duty u/s 3 of Central Excise Act, 1944 on clearances effected domestically includes all duties leviable under all the statutes relevant to imported goods and, hence, domestic area clearance cannot be excused from leviability. - AT
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Reversal of CENVAT credit on capital goods wrongly taken - when the Cenvat credit are availed on the inputs or capital goods, the credits get merged and as such, lose their identity. In such situation, considering the credit balance of inputs and capital goods separately is not legally sustainable - AT
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Valuation - captive consumption - Since the transaction value of the excisable goods is available and not all the excisable goods are captively consumed, the provisions of Rule 8 as prevailing during the relevant time will not apply to the assessee. - AT
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100% EOU - there is no such stipulation that the input services must be provided or received in the factory of manufacture - the appellant is entitled to refund of cenvat credit in respect of Renting of Immovable Property Services. - AT
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Manufacture - process of tinting - The appellant have entertained a bona fide view that process of tinting may not be liable to excise duty in the light of long standing practice in the industry and CBEC clarification - Demand beyond the normal period of one year set aside - AT
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Interest on differential duty - Supplementary invoices - when the normal time limit prescribed is one year from the relevant date for recovery of the principal amount, it is reasonable to adopt the same period for recovery of interest as well. - AT
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Job work - credit on capital goods - semi-finished goods removed by the job worker from its unit to the principal, without payment of duty, would not come within the scope of expression exempted final product - AT
Case Laws:
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Income Tax
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2017 (1) TMI 573
Penalty levied u/s 271(1)(c) - revised return of income offering additional income on own before any notice was issued by the Department - allegation of the Department that only because in an investigation conducted by the Department, it was found that assessee has not disclosed income from share transaction she was compelled to file return of income offering additional income - Held that:- The explanation of the assessee that having become aware of the fact that income from share transaction have not been offered in these assessment years she voluntarily came forward to file revised return of income offering additional income appears plausible. It is also a fact on record that revised returns of income filed by the assessee are prior to issuance of any notice by the Department. It is also a fact to be taken note of that apart from the additional income offered in the revised return of income Department has not assessed any other income. In other words, the income offered in the revised return of income was accepted by the Department without any variation. It is pertinent to note here that in assessment years 2007-08 and 2008-09, wherein the Department was in possession of information regarding non-disclosure of income by the assessee from share transactions, the income declared by the assessee from such transaction in the revised return of income has ultimately been accepted by the Department in assessment s completed under section 143(3) and assessee’s claim that no proceedings for imposition of penalty under section 271(1)(c) have been initiated remains uncontroverted by the Department. In the aforesaid facts and circumstances, in our opinion, it cannot be said that filing of revised return of income by the assessee offering additional income is not voluntary. Therefore, on consideration of overall facts and circumstances, we are of the view that there being no conscious or deliberate act on the part of the assessee to either conceal particulars of income or furnish inaccurate particulars of income imposition of penalty under section 271(1)(c) is uncalled for. - Decided in favour of assessee
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2017 (1) TMI 572
TDS u/s 194C or 194J - payment on account of placement charges - short deduction of tds - rendering of services by the cable operators/MSO’s - invocation of section 201(1)/201(1A) - Held that:- On verification of various clauses of such agreements which were found to be similarly worded it is seen that the Broadcasters are paying carriage fees not just for the purpose of utilizing the services of cable operators for transmitting its Channels but for placing its channels on price bands. The placement of channels on prime bands is the crux of the entire contract agreements and the payments made are directly in relation to fulfillment of condition of placement of channel in such prime band. It is worth mentioning that as is clear from nature of services rendered by cable operators as mentioned in preceding paragraphs, the payment on account of placement charges may be said to be in nature of commission as defined in Explanation to section 194H of the Income-tax Act, 1961. In view of the nature of services provided it is clear that the Cable Operators / Multi System Operators facilitates delivery of products of the broadcaster to the viewer and thus viewed this is the payment is in the nature of commission or brokerage as defined in Explanation to section 194H of the Income-tax Act,1961. There is uncontroverted finding in the impugned order that the assessee has already deducted TDS under section 194C of the Act on placement fee, therefore, we are in agreement with the stand of the Ld. Commissioner of Income Tax (Appeals) that the assessee may not be treated as assessee in default under section 201(1)/201(1A) of the Act as there is no short deduction of tax by the assessee, consequently, we affirm the stand of the Ld. Commissioner of Income Tax (Appeals). - Decided in favour of assessee
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2017 (1) TMI 571
Capital gain computation - fair market value - reference to DVO - Held that:- There is no dispute on the year of taxability by the assessee as well as the tax department. So far as invocation of Section 50C is concerned, the AO was correct in invoking the same. Since Stamp Duty value was more than fair market value, the AO referred the matter to the DVO. Assessee give limited power of attorney in August 2007 to Runwal Developers to represent the matter in the Court. Since the matter was disputed in the High Court the date on which stay was vacated by the High Court is required to be considered as the date of transfer and therefore, the fair market value as on 06/05/2008 is required to be taken for the purpose of Section 50C. Accordingly, AO is directed to recompute the addition u/s. 50C, taking the value at ₹ 13,26,03,000/-. We direct accordingly. Allowance of legal expenditure incurred by Runwal Development for vacating the property after having out of court settlement, while computing the long term capital gains - Held that:- As per our considered view even if an assessee exercises his option to substitute the market value of the asset instead of the actual cost price, under Section 55(2)(i), deduction of any type of expenditure whether it is connection with the transfer or in connection with improvement to the capital assets, is allowable. Accordingly, we direct the AO to allow the legal expenses incurred and paid by Runwal Developers, while computing capital gains in the hands of assessee. Disallowance made u/s. 14A read with Rule 8D - Held that:- Assessee had invested INR 1,333.10 lakhs in Equity shares from which it had earned exempt income of ₹ 1.66 lacs. The said investments were made out of the Own Fund i.e. Share Capital and Reserves. As of 31 st March 2008, these are stated at INR 13,264.7 lacs and Investment of INR.1333.10 lakhs is only 10.08 % of the Net Worth. As per the decision of Jurisdictional High Courts in case of HDFC Bank Ltd., [2014 (8) TMI 119 - BOMBAY HIGH COURT] and Reliance Utilities & Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] if assessee is having sufficient own funds, no disallowance of interest is warranted. We also found that against the exempt income of ₹ 1.66 lakhs the assessee suo-moto worked out the disallowance as per Rule 8D at INR 49,66,962 as against the disallowance of INR 62,87,173 worked out by the AO. Accordingly, we direct the AO to restrict disallowance u/s 14A of ₹ 49,66,962/-. Disallowance under section 37(1) being excess payment of managerial remuneration - Held that:- During the year under consideration, Assessee was impacted by the down turn in auto industry with reduced margins and increased finance costs. However, assessee company could still achieve increase in terms of volume mainly on account of various cost saving and other measures taken by these top executives of the company and as such assessee company deemed it appropriate to reciprocate them with the similar bonus as paid in the earlier years which was always well within limits prescribed by the Companies Act,1956. We also found that in respect of Mr. Prakash Kulkami, waiver was granted from recovery of excess remuneration amounting to INR 18,40,868/-. As such, entire amount paid to him was allowed by the MCA and nothing was recoverable. However, AO has disallowed the differential amount of ₹ 47,16,866/- i.e. difference between total remuneration paid to Mr. Kulkami of ₹ 65,57,734 less waiver granted by the MCA amounting to ₹ 18,40,868/-. Since entire amount paid to Mr. Kulkami stands allowed by the MCA, no disallowance can be made u/s 37. However, neither AO nor CIT(A) have properly appreciated all these factual aspects. Thus we set aside the order of the lower authorities and restore the matter back to the file of the AO for deciding afresh, keeping in view our above observations.
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2017 (1) TMI 570
Nature of income - Income received from Strand Book Stall for providing warehousing, binding, shrink wrapping, supervision charges and mailing charges - business income or income from house property - Held that:- The assessee has established that it was carrying on its activities of commercially exploiting its business asset, i.e. the said factory premises at Thane, to render the aforementioned services to M/s. Strand Book Stall for a consideration which constitute ‘business income’ . It is not disputed that this position, i.e. such income for rendering of similar services to M/s. Strand Book Stall was accepted as ‘business income’ as declared by the assessee, even in scrutiny assessments under section 143(3) of the Act for A.Y. 1996-97 and 2003-04. While the principle of res-judicata is not applicable to income tax proceedings, we observe that the authorities below have not brought on record any material to prove that the factual matrix of the case on this issue has undergone any change in the year under consideration in the case on hand. The factual matrix of the case on hand in similar to that of the case of CIT vs. NDR Warehousing P. Ltd. (2014 (12) TMI 189 - MADRAS HIGH COURT) and the same would squarely cover the issue in the case on hand. Moreover the Department having accepted the assessee’s position in earlier years, even in scrutiny assessments that the income from M/s. Strand Book Stall even though bearing the nomenclature of rent was exigible as ‘business income’, we find that it is nobody’s case that the factual matrix of the case has undergone any such change that required action that such income was to be taxed under the head ‘income from other sources’ and not ‘business income’ as declared by the assessee. - Decided in favour of assessee.
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2017 (1) TMI 569
TDS u/s 194I - lease premium paid for acquiring land from CIDCO - Held that:- No tax is deductible at source u/s 194-I on lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold rights over land or any other property are not payments in the nature of rent within the meaning of section 194-I of the Act. Therefore as held by CBDT in its recent circular that such payments are not liable for tax deduction at source under section 194-I of the Act , whereby the CBDT accepted the decisions in the case of The Indian Newspaper Society (2015 (12) TMI 984 - DELHI HIGH COURT ) and Foxconn Developer Limited (2016 (4) TMI 314 - MADRAS HIGH COURT ). The assessee has also made one-time up-front payment being lease premium of ₹ 11,43,36,405/- which was paid by the assessee to CIDCO in respect of Plot No. 5, Sector 2A, Koparkhairane, Taluka-Thane. we hold that there is no default on the part of the assessee in not deducting tax at source u/s 194-I of the Act on one-time up-front payment being lease premium of ₹ 11,43,36,405/- which was paid by the assessee to CIDCO in respect of Plot No. 5, Sector 2A, Koparkhairane, Taluka-Thane and we donot find any infirmity in the order of learned CIT(A) in ordering to delete the demand raised by the Revenue against the assessee u/s 201(1) and 201(1A) of the Act, which order of learned CIT(A) we affirm/sustain. - Decided in favour of assessee
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2017 (1) TMI 568
Addition u/s 40A (2)(a) - payments under various heads for goods and services procured from its holding company - Held that:- Adhoc disallowance cannot be made on mere suspicion rather the AO should have brought some cogent material in the form of comparables so as to justify that the impugned payments are excessive or unreasonable. Moreover, both entities being in the same tax bracket, hence the transactions are tax neutral and covered by CBDT circular number 6-P dated 06/07/1968 as stated that no disallowance is called for u/s 40A(2) in respect of payments made to relatives/sister concerns where there is no attempt to evade taxes. we are inclined to delete the impugned disallowance of 20% made u/s 40A(2). See Commissioner of Income-tax Versus VS. Dempo and Co. P. Ltd. [2010 (10) TMI 711 - Bombay High Court ] - Decided in favour of assessee Adhoc 20% disallowance of certain expenditures for want of verification of vouchers on test check basis - Held that:- The factual position is that although complete details were made available by the assessee before lower authorities but additions were made for want of verification of vouchers for 3 months on test check basis. There is nothing adverse on record with respect to expenditure in Tax Audit Report. Gujrat High court in CIT Vs. Vallbh Glass Works Ltd. (2013 (9) TMI 806 - GUJARAT HIGH COURT ) has held that where audited accounts were available with regard to the expenses claimed by the assessee and there were no adverse comments by auditor, no disallowance of such expenses should be made unless there are cogent reasons to question the genuineness of such expenditure. Mere failure to file the relevant vouchers as required by the AO cannot be the basis for disallowance unless it is found that the expenditures were not incurred wholly and exclusively for the purpose of business. Therefore, on the facts and circumstances of the case and judicial pronouncements, we are inclined to delete the impugned adhoc disallowance - Decided in favour of assessee
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2017 (1) TMI 567
Exemption u/s 80P - denial of claim on belayed filing of return by the assessee - Held that:- The belated filing of return of income by the assessee does not disentitle it from the benefit of deduction u/s 80P(2) of the Act. See KARUVANTHIRUTHY SERVICE CO-OPERATIVE BANK LTD Versus THE INCOME TAX OFFICER WARD NO. 2 (3)[2016 (6) TMI 1155 - KERALA HIGH COURT] Further, the assessee, in the instant case, is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon’ble High Court, in the case of Chirakkal Service Co-operative Bank Ltd (2016 (4) TMI 826 - KERALA HIGH COURT), had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, to hold that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act. - Decided in favour of assessee
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2017 (1) TMI 566
Addition as STCG - bogus accommodation bill - speculating profit or loss on commodity trading - Held that:- CIT(A) concluded that the shares were dematized on 28.07.2004 and concluded that the share might have been purchased around July 2004 and directed the AO to treat the profit on sale of share as STCG. The ld. AR of the assessee has placed on record the copy of share certificate along with certificate of M/s Talent Inforways Ltd. about the transfer of share, copies of which are available on page no. 53 to 71 of PB. The certificate of M/s Talent Inforways Ltd. shows that the shares were transferred on 31.05.2003. Therefore, considering the documentary evidence, we restore the case to the file of AO to verify the fact. The AO shall verify the fact regarding the dates of purchase, date of transfer, period of holding in accordance with the CBDT Circular No. 704 dated 28.04.1995 and shall grant relief in accordance with law. - Decided in favour of assessee for statistical purpose.
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2017 (1) TMI 565
Addition as unexplained cash deposit on various dates in Andhra Bank, Sector-55/56, Noida - Held that:- It is an admitted fact that assessee has submitted all documentary evidence in respect of agreement to sale of land, sale deed of property, sale in accordance with agreement and copy of khasra and khatoni in support of agriculture land, details of cash received and copy of relevant bank account which establishes that these are sufficient evidence for source of deposit of ₹ 25,07,770/- in Andhra Bank. Keeping in view of the above, assessee has well explained the deposit of cash with Andhra Bank ₹ 2507700/- out of sale proceed of agriculture land, hence, the addition made and sustained by the Ld. CIT(A) are not justified in the eyes of law. Therefore, the addition in dispute is deleted. - Decided in favour of assessee.
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2017 (1) TMI 564
Disallowance determined under section 14A r.w.Rule 8D while computing book profit under section 115JB - Held that:- We find merit contention on behalf of the assessee and direct the AO to delete the adjustment made on account of estimated disallowance determined under section 14A r.w.Rule 8 D of the I.T.Rules, 1962 while computing book profit under section 115JB of the Act. See Alembic Ltd [2017 (1) TMI 513 - GUJARAT HIGH COURT] Denial of relief claimed under 115JB towards provisions to write off on account of diminution in the value of investment and bad debts written back during the year - Held that:- It is the case of the assessee that after the filing of the return of income the provisions of section 115JB was amended to include a new clause(i) in Explanation-1 after sub-section(2) of sub-section with retrospective effect from AY 2001-02 onwards. In view of the amendment, the assessee requested the AO to reduce the book profit by the amount of write backs of ₹ 4,50,000/- being provision for diminution in the value of investment and ₹ 9,53,624/- being provision for diminution in the value of investment and ₹ 9,53,624/- being provision for doubtful debts. It is the case of the assessee that in view of the retrospective amendment book profit declared is required to be reworked. The assessee has relied upon the decision in the case of Kochi Refineries Ltd. vs. Dy.CIT reported in (2010 (1) TMI 980 - ITAT MUMBAI). We note that the AO appears to have not examined the issue and factual aspects arising therein. Accordingly, the issue requires to be decided afresh at the end of the AO
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2017 (1) TMI 563
Disallowance excess payment made u/s 40 A(2)(b) - payment to the specified person - excessive and unreasonable expenditure - Held that:- We have gone through the submission of both the sides and find that the assessee has made payment excess by 3% to the three above stated related parties because of sourcing of double filter edible oil. We observed that it is clear that double filter oil is more costly than the filter oil and it also fetch more price in the market than the filtered oil. We find that learned CIT appeal has justified his decision keeping in view the nature of business, volume and quality of products involved. In view of above facts and findings, we do not find any reason to interfere in the finding of the learned Commissioner of Income Tax (appeal). Disallowance out of Kharagat expenses - Held that:- We noticed that the assessing officer had disallowed 10% of the Kaharjat expenses incurred in cash of ₹ 2, 72,8,756 - incurred in cash on the ground that most of the expenses were incurred in cash and the vouchers not contained the detail of rate of payment and the destination where the oil was delivered. We find that the assessing officer had not pointed out any specific defects and the disallowance was made on general assumption that expenses were incurred in cash and the vouchers not contained the detail of rate of payment and the destination where the oil was delivered for want of proper maintenance of vouchers. Looking to the volume of expenditure incurred in cash and the facts reported by the Ld. CIT(A), we uphold the decision of the ld. CIT(A) to restrict the disallowance to the extent of being 3% of the Khargat expenses incurred in cash. Shortage in loose ground nut oil and cotton seeds oil - Held that:- We noticed that the assessee’s claim of shortage of oil in percentage term comes to 0.19% to 0.23% which was not unusual. We observed that the shortage in oil had been taken place in the process of transforming the oil from the tankers to storage tanks and therefore into the packing material such as bottles, jars tins and pouches. We find that the assessing officer had disallowed the shortage in oil without any supporting material just on the basis of presumption and guess work. In view of the above stated facts and findings, we considered that the Ld. Commissioner of Income Tax(A) is justified in allowing the claim of the assessee.
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2017 (1) TMI 562
Reopening of assessment - reasons to believe - difference in TDS certificate and receipts shown in the P&L account - Held that:- In light of the ratio laid down by in the case of CIT vs. Orient Craft Ltd. (2013 (1) TMI 177 - DELHI HIGH COURT) find that the above decision would be squarely applicable in the present case because no fresh material is brought by the Revenue on record but the assessment has been reopened on the basis of the Form 26AS and the TDS certificate issued by the employer of the assessee, hence, no tangible material was before the AO apart from the TDS certificate, to form a belief that income has escaped assessment. Also further find that it is a settled law that an assessment could not be reopened only on the basis of difference in TDS certificate and receipts shown in the P&L account. In the background of the aforesaid discussions and respectfully following the precedents, hold that the reopening of assessment is not valid. - Decided in favour of assessee
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2017 (1) TMI 561
Disallowance u/s 14A read with rule 8D - Held that:- As given the fact that the lenders take all their precautions to ensure the end use, which is on record, it is reasonable to assume that these borrowings have been used for the stated purposes. The assessee has given reasonable evidence, as would be normally possible in such a situation, and, in the light of such evidence, there is no reason to resort to the presumption, leave aside reaching the conclusion, that these borrowings for specific purposes have been used in making investments in question. As regards inadequacy of disallowance, even during the course of proceedings before us, learned Departmental Representative could not demonstrate that the disallowance offered by the assessee suo motu is inadequate. In view of these discussions as also bearing in mind entirety of the case, we are of the considered view that authorities below were indeed in error in sustaining the impugned disallowance - Decided in favour of assessee Addition of expenses disallowed u/s 14A while computing book profits u/s. 115JB - Held that:- We uphold the grievance of the assessee and direct the Assessing Officer not to make any disallowance under section 14A while computing book profit under section 115JB. See Sobha Developers case [2015 (2) TMI 940 - ITAT BANGALORE] - Decided in favour of assessee Disallowance of foreign travel expenditure - 75% time on the trip was used for personal purposes of the director - Held that:- The foreign visit was at least partly for business purposes and, therefore, just because this visit resulted in, assuming it is correct, personal benefit to the director, the expenses incurred on the visit cannot be disallowed as personal expenses. This is at best expense of the assessee company which resulted in benefit to the director. In any event, there is no material whatsoever to come to the conclusion that 75% time on this trip was used for personal purposes of the director. The case relied upon by the CIT(A) was a case in which a detailed analysis of the activities of the director was carried out and then this conclusion was drawn. There is no such material on record in this case. Once the CIT(A) came to the conclusion that the trip was for some business purposes, it was not open to him to deny any part of deduction for these expenses- particularly when there is no material to hold that the visit was for personal purposes. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance - Decided in favour of assessee
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2017 (1) TMI 560
Disallowance of alleged unverified purchases/expenditure - AO holding that amount of certain purchases and expenses debited in the books of accounts could not be properly verified and, therefore, he added a sum to the returned income - CIT(A), on the other hand, has restricted the disallowance to 25% - Held that:- At pages 50 to 62 of the paper book is placed the explanation of the assessee with regard to 24 such parties regarding the variation found by the Assessing Officer in cases where purchases recorded by assessee were of different amounts. In this regard, we may refer to one item of Simplex Engineering & FDR Works Pvt. Ltd. in whose case a sum of ₹ 7,83,247/- has been considered as unexplained purchases because the reply received from the suppliers showed that sales effected to the assessee has been shown as ₹ 37,99,042/-, whereas as the amount of purchase as per assessee was ₹ 30,15,795/-. In this context assessee had explained that the bill of the said supplier was of last year but assessee had accounted for the same in the instant year and relevant invoices of the party was also placed on record. The assessee had also furnished confirmed ledger account of the party of the earlier assessment years highlighting the bills which reconciled the difference. We find that there is no rebuttal to any of such explanation furnished and the entire amount has been added as unexplained purchases by the Assessing Officer, while the CIT(A) effected an overall scaling down of the disallowance. Considering the manner in which the replies/reconciliation filed by the assessee have been considered, in our view, the addition of ₹ 3,61,44,082/- is not at all justified. Even addition of ₹ 54,19,143/- on account of variation in the year of recording is also not justified at all. The verification exercise carried out by the Assessing Officer does not result in unearthing of any falsity in the claims made by the assessee and thus, no addition is merited. Absence of receipt of any reply from the suppliers cannot by itself demonstrate any bogus claim by the assessee unless any of the attendant facts bear out any bogus nature of the claim of expenditure by the assessee. Under these circumstances, in our considered opinion, additions not justified - Decided in favour of assessee. Addition with respect to the payment of labour charges and off-loading expenses - Held that:- A perusal of the statement reveals that though the contractor admitted of having arrangement with the assessee for providing labour but he has also tendered that a portion of the amount was refunded back to the assessee company. Because of such statement and for the fact that other contractors could not be produced, the amount of ₹ 1,47,91,709/- has been disallowed. Even disallowance out of offloading expenses have also been made in the cases of five parties, because the amount could not be verified at all. On this two elements of expenditure, in our view, the approach of the Assessing Officer in principle is justified in principle. The contractor examined by the Assessing Officer reveals inherent discrepancy in the claim of expenses by the assessee. Under these circumstances, in our view, certain addition deserves to be made even though specific discrepancy is available only with respect to the one of the parties. Considering the entirety of facts and circumstances, some amount of unverifiability in the claim of the expenses cannot be ruled out and, therefore, on this aspect of the matter we find no reason to interfere with the conclusion of the CIT(A) that 25% of such expenses of labour charges ₹ 1,47,91,709/- and out of off-loading expenses of ₹ 54,87,524/-, deserve to be disallowed - Decided in favour of assessee partly .
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2017 (1) TMI 559
Computation of capital gain - LTCG or STCG - Held that:- The date of allotment should be taken as the date for computing the holding period for computing capital gains. In the case on hand, the date of allotment as per letter of allotment is 29.03.2006 and the date of sale of the said property/flat at Torino Building is 23.10.2009 and therefore it is clear that the holding period is more than 36 months. The assessee paid the first instalment on 29.03.2006, thereby conferring a right to hold a flat, which was identified and the possession of which was given on a later date. In the factual matrix the capital gains earned by the assessee on sale of the said flat has to be treated as LTCG. We hold that the capital gains of ₹ 1,82,01,530/- arising to the assessee on sale of the said flat at Torino Building is to be assessed as LTCG and not as STCG as held by the authorities below. Consequent to our holding that the capital gains of ₹ 1,87,01,530/- arising to the assessee on sale of the said flat at Torino Building is to be treated as LTCG, we hold that the assessee is entitled to be allowed exemption of ₹ 64,92,50/- under section 54 of the Act in respect of investment made by him in the purchase/construction of new flat at Amanda ‘B’, Hiranandani Meadows, Thane as worked out by the AO at para 4.3 of the order of assessment as against the assessee’s claim of ₹ 73,72,315/-. Consequently, grounds 1 to 3 of the assessee’s appeal are partly allowed as indicated above.
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2017 (1) TMI 558
Eligibility to benefit u/s 54 - assessee has not produced evidence to show that the impugned house was in a habitable condition and it was occupied by someone, hence AO held that the asset originally transferred at Uttarahalli cannot be treated as a 'residential house' for the purpose of claiming benefit u/s. 54 but it could be treated as ‘land’ which qualifies for deduction u/s.54F - Held that:- The facts remain that as on 01.4.2010, the assessee had the residential property situated at No.7/232/415, Doddakallasandra village, Uttarahalli Hobli, Bangalore South Taluk which was purchased on 03.6 & 01.7.2006 and a flat at Brigade Gateway which was purchased on 16-10-2009. He sold the residential property situated at No.7/232/415, Doddakallasandra village, Uttarahalli for a consideration of Rs. one crore on 25-05-2010. The AO has held that the building at Uttarahalli cannot be treated as a 'residential house' for the purpose of claiming benefit u/s. 54 but the property could be treated as ‘land’ which qualifies for deduction u/s.54F. The assessee purchased another residential flat at F 1605, 16th floor, "Marigold" Block, The Gardens, Binnyston Garden, Magadi Road, Bangalore, on 16-06-2010 for a consideration of ₹ 57,77,137/-. Thus, as on 16.06.2010, other than the new asset at Magadi Road, the assessee has a flat at Brigade Gateway. So, he is entitled for a deduction u/s 54F on the investment made at Magadi Road property . Although, the assessee claimed such benefit before the AO & also before the CIT (A), as mentioned supra, his claim is not considered. Thus, his alternate plea is found meritorious and accordingly, the AO is directed to grant deduction on the investment made at Magadi Road property u/s 54F. The appeal is allowed to that extent.
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2017 (1) TMI 557
Penalty u/s 271(1)(c) - addition made on protected assessment - Held that:- It is well settled law that the assessment proceedings and penalty proceedings are separate and distinct as held in the case of Anatharam Veerasinghaiah & Co. vs. CIT [1980 (4) TMI 2 - SUPREME Court]. We agree with the contention of the assessee’s counsel that merely because an addition has not been contested, it cannot be presumed that the addition represents concealed income and placed the reliance of the decision of the Hon’ble Supreme Court of India in the case of Sir Shadilal Sugar & General Mills Ltd. [1987 (7) TMI 3 - SUPREME Court] that from the assessee agreeing to additions to his income, it does not follow that the amount agreed to be added was concealed income. Also further find that addition in this case was made on protected assessment/addition on estimated basis which is against the law laid down in the case of M/s Bahilal Manilal Patel vs. CIT (2014 (10) TMI 621 - GUJARAT HIGH COURT). Also further find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee’s conduct cannot be said to be contumacious so as to warrant levy of penalty. - Decided in favour of assessee
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2017 (1) TMI 556
Transfer pricing adjustment - ALP determination - import of natural gas - scope the term 'Person' - associate enterprises - whether Present of India can be termed as associate person / companies - rejection of CUP (comparable uncontrolled price) as the most appropriate method - whether comparable uncontrolled price method vis-à-vis resale price method, for the assessee’s benchmarking imports of LNG from its AEs, was indeed more appropriate to the facts of this case? - Held that:- What the TPO had suggested was the CUP method, but, for the detailed reasons set out earlier in this order, we have held that CUP method cannot be applied to the facts of this case. No method of determining ALP is perfect, but it is from these imperfect methods that we have to find out which is more appropriate a method. There is nothing on record or in the arguments of the learned Departmental Representative which can demonstrate to us as to why the RPM can be discarded and a more appropriate method of determining ALP can be adopted. Associate companies - scope of section 92A - Held that:- the equity shareholding of the asseesse, even though in the name of the President of India, is held by the Union of India. The shares are held by the Union of India which is a sovereign. As for the President of India being treated as an artificial juridical person, as is contended by the learned Departmental Representative, we are unable to see any merits in this plea either. An artificial juridical person is a creature of law but the President of India is a creation of the constitution. If all the public sector undertakings are to be treated as ‘associated enterprises’, the inter se transactions between all the public sector undertakings will be subject to arm’s length price determination- something which is seemingly quite incongruous and contrary to the scheme of the transfer pricing legislation. The assessee and Indian Oil, Bharat Petroleum, ONGC and GAIL, or, for that purpose, any other public sector undertaking, cannot be said to be associated enterprises. In the cases of public sector companies, even as all or majority of shareholdings may be by the Union or State Governments, these companies, for that reason alone, cannot be said to be associated enterprises for the purposes of Section 92A. In view of this finding, the issue regarding related party transactions ceases to hold good in law. Non suitability of comparable - Even under long term contracts, the prices of the LNG are not to remain static, as has been assumed by the learned Departmental Representative. This is also not in dispute that the PLL has purchased the LNG under long term arrangements as also by way of these spot deals. In any case, as is opined in the expert opinion filed by the assessee. ““It is, infact, a misnomer to refer to the short-term LNG trade as a ‘spot market,” and “there is no spot market because no one is making a market, in the sense of providing liquidity and posting quotes in exchange for a buy-sell spread. As a matter of fact, as opined in the expert report, “short-term trade is a collection of bilateral deals that may cover a single cargo to many cargoes, over period ranging from a single month to over a year.” In this view of the matter, we agree that the mere fact that PLL also has long term arrangements for purchases of LNG, it does not cease to be a valid comparable for this reason alone. As regards GAIL as a comparable GAIL is selling natural gas on administered prices, this objection is found to be incorrect inasmuch asin response to the RTI application dated June 24, 2013, it has been clarified that Government that it does not regulate / fix / control the prices of imported LNG. In any event, even if GAIL is to be excluded from comparables, it does not make any difference to the conclusion that the margin earned by the assessee are well within the comparable margin earned by PLL. In view of the above discussions, as also bearing in mind entirety of the case, we hold that the comparables adopted by the assessee are appropriate. We may also add that there is a specific finding in the order of the Dispute Resolution Panel that in the light of this Tribunal’s decision in the case of Liberty Agri Products (2011 (8) TMI 737 - ITAT, CHENNAI), even for the purposes of CUP, the prices prevailing on the day of transaction can only be compared with the comparable uncontrolled prices prevailing on that day only and not on some other dates, and that in none of the cases the TPO has used the prices prevailing on that particular day. This finding remains unchallenged and this principle has not been called into question by the appellant. Therefore, even if CUP method is to be applied, the impugned adjustment will have to be deleted anyway. Viewed thus, the grievances raised in this appeal may be viewed as somewhat academic and of no practical consequence. However, without any offence or prejudice to this line of reasoning, we have dealt with the issue on merits and given our categorical findings on the same. - Decided against the revenue.
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2017 (1) TMI 555
Benefit of section 11(1) (d) denied - voluntary contribution of Thermax Ltd towards corpus of the trust - Held that:- It emerges from the record that the impugned donations were given by Thermax Ltd to the assessee as corpus donation, a fact which is evident from the letter mentioned above. Thermax Ltd the donor has given specific direction for corpus of the assessee trust and in our considered opinion the same cannot be interpreted in a different manner by intendment and presumptions by Authorities below. Similar methodology of Thermax Ld. Donation and their similar utilization has been accepted by the department in past years as depicted in the chart above. The reasons given by ld. CIT(A) to adopt different view is based on the misinterpretation and presumptions, which are unsustainable. Voluntary contribution of Thermax Ltd towards corpus of the trust cannot be included in the income of the assessee in clear terms of section 11(1)(d). Our view is fortified by Visakhapatnam ITAT judgment in the case of Nagarjuna Educational Society (2011 (7) TMI 580 - ITAT, VISAKHAPATNAM ) and by Delhi ITAT, in the case of Dharma Pratishthanam (1984 (8) TMI 117 - ITAT DELHI-A). Thus findings of Ld. CIT(A) on this issue is hereby reversed. Violation the provision of sec. 11 and 12 by giving donation for furtherance of its objects to the other registered charitable trust having similar objects. Nothing has been brought on record to suggest that assessee's to carry out its objects there is any clause in the memorandum prohibiting this. It is settled law that the charitable objects can also be promoted with own efforts and by donating other trust having charitable objects. Our view is supported by Mumbai ITAT in the case of Suman Ramesh Tulsiani (2012 (12) TMI 58 - ITAT MUMBAI) which again relies on various other judgments besides, Hon'ble Bombay High Court in the case of trustees of the Jadi Trust [1981 (4) TMI 75 - BOMBAY High Court ]. Thus no hesitation to hold that assessee's trust can promote its charitable objects by giving donation to other charitable organizations and such donations will amount to application of income of the trust.Thus, the findings of the Ld. CIT(A) on the second issue is also reversed.
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2017 (1) TMI 554
TDS u/s 195 - payment made to Non-Resident, viz. Chemical Abstract Services USA, for online access to the database system "SciFinder" - Held that:- Payment made for access to online publication/database cannot be considered as being in the nature of royalty, liable to withholding tax, either under the Income-tax Act or under the DTAA with USA. Therefore, hold that the payment made to Chemical Abstract Service USA was not liable to TDS under the provisions of Sec. 195 and accordingly, the appellant could not be held liable to pay tax as an assessee in default u/s. 201(1). Payments treated as royalty payments - copyright work - Indo US tax treaty - Held that:- It is only when the use is of the copyright that the taxability can be triggered in the source country. In the present case, the payment is for the use of copyrighted material rather than for the use of copyright. The distinction between the copyright and copyrighted article has been very well pointed out by the decisions of Hon’ble Delhi High Court in the case of DIT Vs Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT ]. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the AO righty noted that ‘royalty’ has been defined as “payment of any kind received as a consideration for the use of, or right to use of, any copyright of literary, artistic or scientific work” and that the expression “literary work”, under section 2(o) of the Copyright Act, includes ‘literary database’ but then he fell in error of reasoning inasmuch as the payment was not for use of copyright of literary database but only for access to the literary database under limited non exclusive and non transferable licence. Even during the course of hearing before us, learned Departmental Representative could not demonstrate as to how there was use of copyright. In our considered view, it was simply a case of copyrighted material and therefore the impugned payments cannot be treated as royalty payments.
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Customs
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2017 (1) TMI 574
Benefit of N/N. 12/2012-CE - classification of imported mobile phone - denial on the ground that the condition of notification not satisfied with - the contention of the appellant is that the said issue has been examined by the Hon’ble Apex Court in the case SRF Ltd. vs. Commissioner of Customs, Chennai [2015 (4) TMI 561 - SUPREME COURT], wherein the Hon’ble Supreme Court has allowed the claim of the appellant. Held that: - it appears that when the order in appeal was passed by the Commissioner (Appeals), the above mentioned judgements/orders were not available. In other words, the orders passed by Hon’ble Supreme Court as well as passed by Tribunal are subsequent to the impugned order. When it is so then we deem it fit to remand the matter to the original adjudicating authority to examine the claim of the assessee in the light of judgements - appeal allowed by way of remand.
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2017 (1) TMI 530
Benefit of N/N. 12/2012-CE - denial on the ground that the assessee has taken the credit - Subsequently, in SRF Limited vs. CC, Chennai [2015 (4) TMI 561 - SUPREME COURT], the Apex Court has interpreted the Condition No. 20 of Notification No. 06/2002-CE dated 01.03.2002 (Sl. No. 122) which was identical to Condition No. 16 of Notification No. 12/2012-CE. It was held by the Hon’ble Apex Court that no question of availing CENVAT credit under the CENVAT Credit Rules, 2002 arises where inputs are procured from a country other than India Held that: - it appears that when the order in appeal was passed by the Commissioner (Appeals), the above mentioned judgments/ orders were not available. In other words, the orders passed by Hon’ble Supreme Court as well as passed by Tribunal are subsequent to the impugned order. When it is so then we deem it fit to remand the matter to the original adjudicating authority to examine the claim of the assessee in the light of judgements (supra), for denovo assessment, but within a period of four months - appeal allowed by way of remand.
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2017 (1) TMI 529
Valuation - rejection of transaction value - Held that: - In the light of the decision of the Supreme Court in Eicher Tractors Ltd. [2000 (11) TMI 139 - SUPREME COURT OF INDIA] case, NIDB is not a valid basis for rejecting the transaction value - appeal dismissed - decided against Revenue.
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2017 (1) TMI 528
Refund of SAD - time limitation - whether the time limit prescribed in the N/N. 93/08 dated 01.08.2008 will have the retrospective application for denying the refund benefit to the imports made during the period from 19.09.2007 to 18.01.2008? - Held that: - The issue arising out of the present dispute is no more res integra, in view of the judgment of Hon'ble Delhi High Court, in the case of Sony India Pvt. Ltd. - Vs. - Commissioner of Customs, New Delhi, [2014 (4) TMI 870 - DELHI HIGH COURT ], where it was held that subsequent sale of goods on incurrence of sales tax/VAT is the condition precedent for claiming refund of the SAD amount and that since achieving such objective is not in the hands of tax payer, time limit cannot be prescribed by issuance of notification under sub-section (1) of Section 25 ibid. The refund claim filed by the appellant is not barred by limitation of time - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 527
Benefit of N/N. 12/2012-CE - denial on the ground that the assessee has taken the credit - Subsequently, in SRF Limited vs. CC, Chennai [2015 (4) TMI 561 - SUPREME COURT], the Apex Court has interpreted the Condition No. 20 of Notification No. 06/2002-CE dated 01.03.2002 (Sl. No. 122) which was identical to Condition No. 16 of Notification No. 12/2012-CE. It was held by the Hon’ble Apex Court that no question of availing CENVAT credit under the CENVAT Credit Rules, 2002 arises where inputs are procured from a country other than India Held that: - it appears that when the order in appeal was passed by the Commissioner (Appeals), the above mentioned judgments/ orders were not available. In other words, the orders passed by Hon’ble Supreme Court as well as passed by Tribunal are subsequent to the impugned order. When it is so then we deem it fit to remand the matter to the original adjudicating authority to examine the claim of the assessee in the light of judgements (supra), for denovo assessment, but within a period of four months - appeal allowed by way of remand.
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2017 (1) TMI 526
Refund of SAD - time limitation - the assessment of Bills of Entry was provisional and the same were finalized on 15.09.2010. Thus, there was no scope or occasion for the appellant to file the refund application before the date of such finalization - Held that: - The issue is no more res integra in view of the judgment of Hon’ble Delhi High Court in the case of Pioneer India Electronics Pvt. Ltd. [2013 (9) TMI 705 - DELHI HIGH COURT], wherein it has been held that limitation period in case of provisional assessment must be computed from the date after the finalization of refund claim and longer of two periods i.e. the period specified under section 27 or the Notification dated 01.08.2008 read with Circular No. 23/2010-Cus. dated 29.07.2010 would be applicable for the purpose of computing the limitation period - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 525
Valuation - High Seas Sale - CIF value + 2% notional High Seas Sale commission when acceptable? - whether the difference between declared value in Bill of Entry and tax invoice value is includible in the assessable value? - Held that: - the tax invoice raised by the High Sea seller to the High Sea buyer clearly disclosed that value charged is over and above the CIF Value + 2%, therefore method of valuation i.e. CIF Value + 2% will not be applicable in the present case. As regard the LC charges, we are of the view that since LC charges are borne during the course of import as L.C. is opened pre import of the goods, all the expenses which are borne pre-clearance of the imported goods shall be includible in the assessable value. As regard the administrative charges, which appellant claimed that it is on account of various services such as assistance in erection and installation of machine, we find that appellant could not produce any evidence in this regard either before the adjudicating authority or before the Commissioner(Appeals) even when the matter was heard by us, no evidence was produced regarding the nature of the administrative charges, therefore so called administrative charges, in our view is nothing but Sales profit only of the High Sea seller which at par with High Sea Sale commission. Therefore the same is clearly includible in the assessable value. Extended period of limitation - Held that: - the value in the High Sea Sale contract was mis-declared and fact was suppressed from the department. In this circumstances extended period of demand was rightly invoked. Appeal dismissed - decided against appellant.
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2017 (1) TMI 524
Refund claim - benefit of exemption N/N. 17/2001 dt. 1.3.2001 - payment of duty under protest - natural justice - Held that: - the appellant right from filing of bill of entry have protested the denial of exemption notification and accordingly paid the duty under protest. However, the assessing authority has not passed any speaking order in connection with assessment of bill of entry - once the appellant has protested the matter the assessing officer is duty bound to pass a speaking order on the merit of the issue therefore before deciding the refund claim the assessing officer was supposed to pass a speaking order on the assessment of bill of entry - Since no speaking order was passed the matter of refund in the present case cannot be concluded. The adjudicating authority must pass a speaking order thereafter process the refund application of the appellant - matter remanded to the original adjudicating authority with a direction to pass a speaking order on the assessment of bill of entry, accordingly the refund matter should be reprocessed. Appeal allowed by way of refund.
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Corporate Laws
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2017 (1) TMI 522
Scheme of Amalgamation - Held that:- Sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956. The Petitioners will comply with the statutory requirements in accordance with law.
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Service Tax
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2017 (1) TMI 553
CENVAT credit - Rule 9(2) of the CENVAT Credit Rules, 2004 - Whether bills of entry in the name of M/s Godfrey Phillips India Ltd. and not bearing the endorsement of proper office of Customs are valid documents under Rule 9 of the CENVAT Credit Rules, 2004 so as to entitle the respondent (a distinct manufacturer) to avail CENVAT Credit? - Held that: - there was no dispute about the duty paid nature of the capital goods and receipt of same by the assessee and used also for its own internal purposes. No violation of Rule 9 ibid has been recorded. Further, Rule 9(2) ibid provides exception that if the said document contains the details of duty or service tax payable, description of the goods or taxable service, name and address of the factory or warehouse or premises of first or second stage dealers or [provider of output service], and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, CENVAT credit may be allowed - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 552
Rectification of mistake - Held that: - there is no error in our order dated 08/08/2016. We find that the paragraph No. 4.2 which was read by the learned Departmental Representative, is in furtherance of the judgment of the Hon’ble High Court of Bombay in the appellant’s own case in Writ Petition No. 1513 of 2004. We find that paragraph 4.2 does not require any rectification - application disposed off.
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2017 (1) TMI 551
GTA service - reverse charge mechanism - amount paid to a sanstha or a society which is called as Bhima Sarva Seva Sangh for harvesting and transporting sugarcane to their factory - Held that: - reliance placed in the case of Nandganj Sihori Sugar Co. Ltd. v. Commissioner of Central Excise, Lucknow [2014 (5) TMI 138 - CESTAT NEW DELHI], where it was held that there will be no service tax liability on the appellant sugarcane mills, as they have not received the service from a Goods Transport Agency - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 550
CENVAT credit - input services to provide output service of repair and maintenance service during warranty period - Held that: - The service received by the appellants from their dealers is Business Auxiliary Service which has to be treated as an input service for the appellant used in or in relation to manufacture of their final products, as free warranty repair and maintenance during warranty period, has enriched the value of the goods - credit allowed. Cargo handling services - Courier services - nexus with output service - Held that: - such services, have been used for purposes of repair and maintenance services, which have not been explicitly charged to Service Tax since the same has been rendered during warranty period. I find that the credit on such services has been permitted as input services under Rule 2(l) of the Cenvat Credit Rules, 2004 - credit allowed. Appeal allowed - decided in favor of appellant.
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2017 (1) TMI 549
Refund claim - reduction in transportation charges - reverse charge mechanism - unjust enrichment - Time limitation - section 11 B of the Central Excise Act, 1944 - denial on the ground that the appellant, being the service recipient, has no locus standi to claim a refund as it has not paid service tax in the Government Account - Held that: - The applicability of Section 11B ibid for claiming refund of Central Excise duty/Service Tax is not restricted only to manufacturer/service provider. The said statutory provision mandate that any person can claim refund, subject to the conditions that the tax/duty was collected from or paid by him; and the incidence of such tax/duty had not been passed on by him to any other person. Jurisdiction to file claim - Held that: - There is no provision exist in Section 11B ibid, limiting the filing of refund claim either in Commissionerate having jurisdiction over service provider or that having jurisdiction over service recipient - the appellant in the capacity of recipient of service, can file refund application before the authorities having jurisdiction over the service recipient or before the jurisdictional authorities of the service provider under Section 11B ibid. The excess paid service tax has been borne by the appellant and its incidence has not been passed on to any other person. Therefore, the legal presumption contained in Section 11B ibid has been rebutted in this case and the appellants refund claim is not hit by the doctrine of unjust enrichment. Appeal allowed - decided in favor of assessee.
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2017 (1) TMI 548
Reverse Charge Mechanism - the amounts paid as fees for raising extra commercial borrowings from overseas investors - Held that: - entire issue needs to be reconsidered by the adjudicating authority for the simple reason that the appellant had not taken the plea of revenue neutrality before the lower authority. Revenue neutrality is a question of law as also it is a question of fact whether the appellant is entitled to take CENVAT credit of service tax on the service tax paid on the services received by them from their overseas services providers, in this case, it is the submission of the learned AR that the appellant has got units which manufacture exempted products - appeal allowed by way of remand.
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Central Excise
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2017 (1) TMI 547
Valuation - job-work - whether royalty expense to be included in the assessable value? - Held that: - money value of free supply of goods by principal is not required to be included in assessable value in the hands of job-worker - the demand against the job-worker fails along with the imposition of penalty; the imposition of penalty on M/s Savita Chemicals Ltd also fails - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 546
100% EOU - short-payment of duty - an export oriented unit was required, under section 3 of Central Excise Act, 1994, to discharge duty on domestic clearances by payment of duty at a rate equivalent to that charged on like goods when imported into India. The adjudicating authority, however, took note of the exemption in N/N. 23/2003-CE dated 31st March 2003, which replaced N/N. 2/95-CE dated 4th January 1995, permitting clearance at half the duty to be so levied and, as the conditions stipulated therein had been complied with, allowed the benefit of that exemption - Held that: - On the issue of levy of special excise duty, we observe that there is no exemption granted in so far as this element of tax is concerned. Undoubtedly, this is a countervailing measure and is refunded to traders who are subject to sales tax upon sale of imported goods. The intent of the notification is to place the domestic procuring entity at par with supplier of imported goods. The levy of duty under section 3 of Central Excise Act, 1944 on clearances effected domestically includes all duties leviable under all the statutes relevant to imported goods and, hence, domestic area clearance cannot be excused from leviability. It may also be noted that the exemption to imported goods is administered though a refund mechanism with sanction accorded by customs authorities of place of import. A parallel provision does not exist for export oriented units whose domestic clearances are not within the jurisdiction of Customs Houses which administer the refund mechanism. The availment of extended period of limitation and imposition of penalty under section 11AC of Central Excise Act, 1944 cannot be faulted - appeal rejected - decided against appellant.
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2017 (1) TMI 545
Reversal of CENVAT credit on capital goods wrongly taken - interest liability - Held that: - when the Cenvat credit are availed on the inputs or capital goods, the credits get merged and as such, lose their identity. In such situation, considering the credit balance of inputs and capital goods separately is not legally sustainable. The disputed amount has been put into use at least in some of the months by the appellant which will necessarily result in short payment of duty attracting the interest liability - Original Authority is directed to recalculate the interest liability taking into account the combined balance available with the appellant during the impugned period month-wise - appeal allowed by way of remand.
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2017 (1) TMI 544
CENVAT credit - angles, joists, beam, channels, bars, etc. - denial of credit on placing reliance in the case of Vandana Global Ltd. v. CCE, Raipur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - Held that: - the Larger Bench decision stands reversed by the Hon’ble High Court in the case of Mundra Ports & Special Economic Zone Ltd. v. CCE & Cus. [2015 (5) TMI 663 - GUJARAT HIGH COURT] - the said Larger Bench decision is in any case not applicable to the facts of their case inasmuch as the various iron and steel items stands used by them in the fabrication of the capital goods. The said Larger Bench decision was related to the explanation [under Rules] 2(l) and 2(k) which was introduced w.e.f. year 2009 but subsequently withdrawn in 2011, when new rules were framed - The period involved in the present appeal is from June, 2012 to July, 2013 and as such the disputed issue is required to be decided in the light of the newly amended provisions of law. Appeal allowed by way of remand.
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2017 (1) TMI 543
Valuation - captive consumption - stock transfer - Determination of applicability of Rule 8 of Central Excise Valuation (Determination on Price of Excisable Goods) Rules, 2000 in respect of internally transferred goods for consumption in assessee's various project work - whether valuation need not be done under Section 4(1) (a) of the Central Excise Act, 1994 but rather under Section 4(1) (b) of the Excise Act read with Rules 8,9 ,10 and 11 of the Central Excise Valuation Rules, 2000? Held that: - the subject matter is covered by Tribunal's decisions in the appellant's own cases SAIL vs. CCE Raipur, [2016 (1) TMI 970 - CESTAT NEW DELHI], where it was held that Since the transaction value of the excisable goods is available and not all the excisable goods are captively consumed, the provisions of Rule 8 as prevailing during the relevant time will not apply to the assessee. Appeal allowed - decided in favor of appellant.
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2017 (1) TMI 542
100% EOU - refund of accumulated unutilized cenvat credit towards exports - Business Support Service - Management, Maintenance and Repair Service - Renting of Immovable Property - Security Agency Services - Held that: - The Legal Services and Accounting Services are specifically mentioned in the definition and they are used by the appellant in relation to their manufacturing/business activity only - reliance placed in the case of Golden Tobacco Ltd. Vs. CCE, Mumbai I [2013 (6) TMI 617 - CESTAT MUMBAI], where it was held that All these services have nexus and are integrally connected with the business of manufacturing and are all eligible input service - Business Support Service, Management, Maintenance and Repair Service fall in the definition of input services and appellant is entitled to refund of the same. Renting of Immovable Property Services - Held that: - reliance placed in the case of Indian Rail and Industries Ltd. [2006 (8) TMI 7 CESTAT- Mumbai] wherein it has been observed that there is no such stipulation that the input services must be provided or received in the factory of manufacture - the appellant is entitled to refund of cenvat credit in respect of Renting of Immovable Property Services. Security Service - Held that: - reliance placed in the case of CCE & ST, Bangalore Vs. Biocon Ltd. [2014 (9) TMI 716 - Karnataka] wherein the Hon’ble High Court observed that if the assessee owns more than one unit and all the units are situated at a place it would constitute a factory - Security Services are also fall in the definition of input service and appellant is entitled to the refund of cenvat credit. Credit allowed - appeal allowed - decided in favor of assessee.
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2017 (1) TMI 541
Manufacture - process of tinting - CBEC Circular dated 3.10.96 - suppression of facts - extended period of limitation - Held that: - The process of tinting of base paint is not a new process in the industry. CBEC has taken the view in 1996 that such process cannot be considered to be process of manufacture. However, this view merits revision amendment of Section 2(f). The appellant have entertained a bona fide view that process of tinting may not be liable to excise duty in the light of long standing practice in the industry and CBEC clarification. It is also to be noted that the demands in the present case have been made for the period immediately after the amendment of Section 2(f). As such, we are of the view that the allegation of suppression made against the appellant cannot be sustained. Consequently, there can be no demand of excise duty beyond the normal period of limitation sanctioned by the Section 11A - the demand beyond the normal period of limitation set aside - the original adjudicating authority directed to re-quantify the demand - penalty set aside - appeal allowed - matter on remand.
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2017 (1) TMI 540
Reversal of CENVAT credit - credit taken on inputs contained in the finished goods and semi finished goods lying in the stock - the decision of Albert David Ltd. [2002 (11) TMI 144 - CEGAT, COURT NO. III, NEW DELHI] is not applicable in the instant case as the provision for payment of equivalent amount of credit was introduced in CCR, 2004 on 1.3.2007, whereas the period involved in this case is 31.7.2005. Held that: - the issue in the present case is squarely covered by the judgement of the Hon’ble Punjab and Haryana High Court in the case of CCE, Panchkula vs. HMT Ltd.[2010 (4) TMI 1036 - PUNJAB AND HARYANA HIGH COURT], where it was held that the assessee has paid the duty on inputs used in the indicated manufacturing of final goods, the assessee has maintained separate accounts/record, duly entered credit of duty-paid on the inputs in manufacture of final goods and validly availed the Cenvat credit. Therefore, the same cannot be reversed on the ground that the final product (i.e. agricultural Tractors) were subsequently exempted from tax. Appeal allowed - decided in favor of appellant.
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2017 (1) TMI 539
CENVAT credit - GTA services - outward transportation of goods from November 2007 to January 2009 - Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944 - interest - penalty - Held that: - as far as the Cenvat credit of service tax prior to 1.4.2008 is concerned, the appellant is squarely covered by the decision of the Hon’ble High Court of Karnataka in the case of ABB Ltd. [2011 (3) TMI 248 - KARNATAKA HIGH COURT], and credit allowed. Further, after the period 1.4.2008 to January 2009, the appellant is entitled to Cenvat credit in view of the Board’s Circular dated 20.10.2014 and the judgment of the Hon’ble High Court of Karnataka in the case of Madras Cements Ltd. [2015 (7) TMI 1001 - KARNATAKA HIGH COURT], provided the adjudicating authority satisfies with regard to the terms and conditions of the sale with the buyer and the passing of ownership and the property in the goods, and for this purpose, the case is remanded. Appeal disposed off - appeal partly allowed and partly matter on remand.
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2017 (1) TMI 538
Refund - N No.108/95-CE - Unjust enrichment - Held that: - In my view, even if different name is there in the certificate and difference of name is only due to name change of the company, the same certificate should have been accepted by the department on the basis of the ROC certificate which certifies the change of name of the company - The discrepancy raised by the Assistant Commissioner is rectified and revised certificate was submitted wherein the appellant name is correctly mentioned. In this fact the appellant was very much entitled for the exemption notification and the duty paid by them is legally refundable. As regard unjust enrichment it is an admitted fact that no documentary evidences were submitted by the appellant before the lower authority. However it appears from the nature of supplies and the certificate issued by the project authority that duty is not payable on the consignment - Needless to say that appellant should be given sufficient opportunity of personal hearing and for submission of the documents as required with regard to the aspect of unjust enrichment. The original adjudicating authority is expected to pass a de novo adjudication order within a period of three months from the date of this order - Appeal allowed by way of remand.
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2017 (1) TMI 537
Interest on differential duty - Supplementary invoices - Time limitation - Held that: - Supreme Court of India in the case of CCE Vs. SKF India Ltd. reported in [2009 (7) TMI 6 - SUPREME COURT ] wherein it has been held that whenever the assessee recovered differential price by raising supplementary invoices and paid differential duty it implies that there was a short payment of duty though completely unintended and without any element of deceit and such payment of differential duty clearly came under sub-section (2B) of Section 11A and attract levy of interest under Section 11AB of the Act - the legal position is not in doubt that interest is liable to be paid from the date of original clearance of goods till the date of payment of differential duty on supplementary invoices. Regarding time limitation - when the normal time limit prescribed is one year from the relevant date for recovery of the principal amount, it is reasonable to adopt the same period for recovery of interest as well. Therefore in the instant case, we are of the view that Department should have initiated the proceedings for recovery of interest within a period of one year from the date of filing of monthly returns. Since the show-cause notice for payment of interest has been issued only on 20.01.2010 for recovery of interest for the period June 2007 to December 2007, it will be beyond the period of one year and therefore will be barred by limitation - Appeal allowed - decided in favor of the assessee.
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2017 (1) TMI 536
Job work - credit on capital goods - whether cenvat credit was correctly availed by the appellants on capital goods used exclusively for manufacturing goods as a job worker for their principal manufacturer? - Interest - Penalty - Held that: - the Hon ble Madras High Court in the case of C.C.E., Chennai vs. Kyungshin Industrial Motherson Ltd. [2015 (11) TMI 899 - MADRAS HIGH COURT ]wherein it was held that wiring harness was removed without payment of duty under job work procedure to the principal manufacturer and that semi-finished goods removed by the job worker from its unit to the principal, without payment of duty, would not come within the scope of expression exempted final product used in Rule 57R(1) equivalent to Rule 6(4) of the CCR, 2004. The Tribunal has rightly held that availment of Madvat Credit on capital goods to be job work is in order - Decided in favor of the assessee.
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2017 (1) TMI 535
Valuation - demand of duty on clearance value - time limitation - Held that: - it is clear that the entire fact of removal of input as such and the duty payable on the same was declared by the appellant. However, the show-cause notice was issued belatedly on 21/01/2003, i.e. after the stipulated time period of one year provided under Section 11A (1). Since there is no suppression of facts on the part of the appellant, the entire show-cause notice is time barred - appeal allowed on grounds of limitation - decided in favor of assessee.
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2017 (1) TMI 534
Recovery of CENVAT credit - capital goods - demand on the ground that the capital goods being exclusively used in the manufacture of exempted final product viz. urea - Held that: - I observe from the categorical submission advance by the Appellant that they are engaged in the manufacture of both dutiable as well as exempted products during the relevant period. No reason found to deny them balance 50% credit availed in April 2008, when the capital goods received in the year 2007, and the Department has not disputed admissibility of credit on said invoices in allowing the first installment of 50% credit in the financial year 2007-08 - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 533
Valuation - inclusion of cost of motor vehicles chassis - Demand of duty, interest and penalty - Held that: - similar issue has come up before the Tribunal in the case of Audi Automobiles vs. C.C.E., Indore [2009 (5) TMI 426 - CESTAT, NEW DELHI], where the condition of interest and demand of duty was sustained and penalty was set aside and was held that the said firms had cleared the goods in relation to the body fabricating and mounting on the chassis which were supplied to the said firms free of cost by the manufacturer of chassis. Being so, the activity for the purpose of valuation would squarely fall under Rule 10A and not under Rule 6. We, therefore, do not find any illegality in the impugned order as far as the demand of duty and interest payable thereon from the appellants - as regards penalty, the appellant was seeking to claim benefit in terms of Rule 6. In the circumstances, we do not find any justification for imposition of penalty in the matter in hand. Appeal dismissed - decided against Appellant.
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2017 (1) TMI 532
CENVAT credit - goods cleared was treated as clandestine removal - Appellant utilized such credit on payment of duty on the clearance of the goods for export through merchant exporters. - Held that: - there is no dispute that demand in the present proceedings was confirmed by the adjudicating authority as nonpayment of duty on the finished goods cleared by the respondent on the ground that though the duty was paid but utilizing the wrongly availed Cenvat credit - With this position that the Cenvat credit availed by the respondent was held to be correct then utilization thereof also stands legal and correct - credit allowed - appeal dismissed - decided against Revenue.
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2017 (1) TMI 531
Condonation of delay - delay of 26 days beyond the period of 60 days and 22 days in other appeal in filing appeal - Held that: - reliance placed in the decision of the case of Affiliated Computer Services (I) Pvt. Ltd. vs. CST, Bangalore [2012 (9) TMI 705 - KARNATAKA HIGH COURT] wherein the Hon’ble Karnataka High Court condoned the delay in filing the appeal. The reason for delay in this case was that the recipient of the order in one department had not been communicated to the legal department of the company. However, the Hon’ble Karnataka High Court allowed the appeal on the ground that appeal is a substantive right and narrow view should not be taken to dismiss the appeal - by taking a liberal approach, I am of the considered view that the delay in filing the appeal before learned Commissioner (A) was not intentional and deliberate and therefore, I condone the delay in filing the appeal - delay condoned - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (1) TMI 523
Levy of entry tax - JCB Excavator - Held that: - the aspect relating to, whether or not the subject vehicle would be chargeable to Entry Tax, has not been taken into account - the impugned order proceeds, on the basis that the JCB Excavator is a motor vehicle, as per provisions of Section 2(i) of the 1990 Act. The Division Bench of this Court in the case of RDS Projects Ltd. Vs Commercial Tax Officer, Chennai [2006 (11) TMI 559 - MADRAS HIGH COURT] has held that the excavators in question having regard to its distinguishing features from the other excavators has to be held as not "motor vehicle" falling under the definition of the term defined under section 2(28) of the Motor Vehicles Act, 1988 and therefore, not liable for entry tax. The impugned order is quashed, with a direction to the Assessing Officer, to recommence the proceedings, if necessary, against the petitioner, only after a physical examination of the subject vehicle. If, upon a physical examination of the subject vehicle, the Assessing Officer comes to the conclusion that the subject vehicle is a JCB Excavator, which moves on chains and is not adapted for use on road, as contended before me, then, the Assessing Officer will proceed, in accordance with the ratio of the judgment rendered in the RDS case, and thereafter pass appropriate orders - appeal allowed by way of remand.
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Indian Laws
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2017 (1) TMI 521
Joint trial - offences in relation to dishonour of two cheques of the same date - Held that:- As per Section 219 Cr.PC, only three offences of the same kind within one year may be charged together. Thus, even if this court directs clubbing of the complaints together, there being seven cheques which got dishonoured, the petitioner will still have to face trials in three complaint cases as against five complaint cases. However, to seek this relief the petitioner ought to have approached the court in the first instance itself and not at a belated stage. The complaints were filed on 3rd January 2014 whereafter the petitioner was summoned and it entered appearance. However, the applications seeking clubbing of the complaints were filed only on 5th February 2016 after the right of the petitioner to cross examine was closed. Even though the contention of the petitioner is that the purpose of joint trial is to expedite the same however as noted above the right of the petitioner to cross-examine the witnesses had already been closed which was recalled and last opportunity granted. Hence at this stage, it is evidence that the application moved for clubbing the five complaints is not in expediency of a speedy trial but to further delay the trial. Finding no illegality in the order impugned warranting interference; this court is not required to exercise its discretionary remedy under Section 482 CPC.
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