Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 13, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Eligilbility for exemption u/s 10(23C)(iiiae) - A hospital which provides for maternity care will fulfill the description of a hospital for the reception and treatment of persons requiring medical attention - Sub clause (iiiae) must receive its plain and ordinary meaning. - HC
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The sale of gold bonds approaching the due date of redemption, the repurchase and thereafter sale of the gold was not in the nature of the regular business of the assessee - HC
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Remission / cessation of liability u/s 41(1) - CIT(A) was justified in deleting this addition because the amount stood remitted in the earlier year and not the current year - AT
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Deduction u/s 80IA - assessee has not fulfilled the basic condition provided u/s. 80IA(7) of the Act as per which the assessee is required to file along with the return of income an audit report in Form No. 10CCB - benefit denied - AT
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Penalty u/s 271(1)(c) - Held that:- Wrongful claim of depreciation - The attempts made by the assessee are indicative of frivolous nature of claim - penalty confirmed - AT
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Section 80IB is available only for profit derived from business of manufacture of goods - AMC charges should be excluded for the purpose of computing relief under Section 80IB - AT
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Addition on account of Suspense Account Treating it as income u/s 28(iv) - Income u/s 28(iv) on account of benefit can be assessed to tax only on receipt basis - the addition made by the A.O. u/s 28(iv) of the Act on account of suspense account balance pertaining to the earlier year is not sustainable - AT
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Payment made towards goodwill for ensuring retention and continued business in the hospital acquired by assessee on going concern basis is comparable with trademark, franchise, copyright etc. - Depreciation allowed - AT
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Confirmation of Change of status u/s 12AA(3) - due process not followed - CIT (A) grossly erred in confirming the change of status of assessee from that of a charitable trust to an (AOP) - AT
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There is no ambiguity on the issue that section 14A is applicable in respect of interest received from HO/overseas branches which is held as exempt on the principle of mutuality. - AT
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An assessment where sought to be reopened with reference to section 115-O, seeking to withdraw a deduction granted u/s 80-M was found not valid - section 115O(5) did not restrict the allowability of a claim u/s.80M - AT
Customs
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Confiscation of goods - subsequent change of mind on the part of revenue authorities, as regards the classification of the goods imported, cannot be held against the appellant as the view of assessee was a possible one, as it has been approved by the authorities, when the bill of entry was assessed finally. - AT
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Recovery of duty draw back excise portion granted earlier to the merchant exporter on the gound that manufacture has got the refund of cenvat credit - no liability could be confirmed for past periods based on Circulars which were in the knowledge of the department and which were not implemented. - AT
Service Tax
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Classification of service - When the appellant was providing comprehensive sanitation assistance to Jaipur Municipal Corporation, it cannot be said to have provided Business Auxiliary Service - AT
Central Excise
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Even though the Excise Authorities are preferred creditors, but they are covered by Section 530 of the Companies Act and stand in queue after the claims of the creditors covered by Section 529A - HC
Case Laws:
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Income Tax
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2014 (1) TMI 556
Eligilbility for exemption u/s 10(23C)(iiiae) - Held that:- In order to fall within sub clause (iiiae), the income must be received by any person on behalf of any hospital or other institution which exists solely for philanthropic purposes and not for the purpose of profit - The sub clause specifically refers to reception and treatment of persons during convalescence; or of persons requiring medical attention or rehabilitation - The expression 'medical attention' cannot be read to be confined to medical treatment of persons who are only suffering from an illness or a mental disability - The expression 'illness' has not been statutorily defined for the purpose of sub clause and must receive its ordinary and natural meaning - A hospital which provides for maternity care will fulfill the description of a hospital for the reception and treatment of persons requiring medical attention - Sub clause (iiiae) must receive its plain and ordinary meaning. Both the views of the CIT (A) and of the Tribunal are not sustainable with reference to the provisions of sub clause (iiiae) of clause (23C) of Section 10 - It is a matter of common experience that a hospital providing for maternity care has to deal with emergencies and on occasion, such hospitals have to provide emergent care which is often necessary to save the lives of the mother and the child - As modern science, technology and knowledge have advanced, there is a considerable reduction of maternal mortality due to availability of expert medical care - These aspects have not been gone into either by the Assessing Officer, CIT(A) or by the Tribunal - The issue was restored for fresh adjudication.
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2014 (1) TMI 555
Whether expenditure made to start a telecom business are business expenditure - Held that:- Assessee borrowed money for setting up the V-SAT application and incurred the entire expenditure - After setting up the new facility or the new project, the assessee continues to manage the said project as a part and parcel of the existing project - In order to increase the said capacity, V-SAT application through satellite was adopted to transfer data at much higher speed - The expenditure was incurred for switching over to the new technology - The said expenditure incurred is revenue expenditure - The expenditure squarely falls u/s 37. Interest paid on loan borrowed for purchase of new machinery - Revenue or capital - Held that:- Following Deputy Commissioner of Income-Tax vs- Core Health Care Limited [2008 (2) TMI 8 - SUPREME COURT OF INDIA] - As per section 36(1)(iii) - There is no distinction between money borrowed to acquire a capital asset or a revenue asset - All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account - An assessee is entitled to claim interest paid on borrowed capital provided that capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed - Actual cost of an asset has no relevancy in relation to section 36(1)(iii) - The proviso inserted in section 36(1)(iii) by the Finance Act, 2003, with effect April 1, 2004, will operate prospectively - The assessee was entitled to deduction under section 36(1)(iii) prior to its amendment by the finance Act, 2003, in relation to money borrowed for purchase of machinery even though the assessee had not used the machinery in the year of borrowing - Decided against Revenue.
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2014 (1) TMI 554
Whether sale of gold bonds and repurchase of new bonds is adventure in the nature of trade - Held that:- At the time of sale of gold in 1980 the Gold Control Act, 1968 was on the statute book which was repealed in the year 1990 by the Gold (Control) Repeal Act, 1990 - The Gold Control Act in order to carry on business of gold and gold ornament required a licence to be obtained under Section 27 of the Act - A restriction was imposed under Section 8 of the Act on the acquisition, possession and disposal of gold without a licence - The gold bonds were purchased and were given as a gift without requiring any conditions of having a licence - The taking of delivering of gold and its sale was under the terms and conditions of the purchase of National Defense Gold Bonds - There was no material to show, nor there was anything on record to demonstrate that the motive of the assessee was to deal in sale and purchase of the gold. The sale of gold bonds approaching the due date of redemption, the repurchase and thereafter sale of the gold was not in the nature of the regular business of the assessee. All the transactions were made taking advantage of the National Defense Gold Bonds 1980, as scheme as per notification dated 19.10.1965, amended on 19.11.1965, and the communiques issued by the Government of India on 22.9.1980 - Decided in favour of assessee.
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2014 (1) TMI 552
Suppressed purchases - Held that:- The Assessing Officer observed difference in the amount of purchases recorded by assessee from Shri K.S. Ahluwalia and sales shown by that party - The Assessing Officer did not confront the assessee with the details received from Sh. K.S. Ahluwalia showing the sales made to the extent of Rs.46.04 lakh - The ld. CIT(Appeals) was not justified in deleting this addition by observing that increase in such purchases would affect the closing stock and thus neutralise the difference - The issue was set aside for fresh adjudication. Addition on account of cessation of liability - Held that:- The sundry creditor's account in the assessee's books for the earlier year as on 31.02.2007 shows that a sum of Rs.16.23 lakhs was debited on 31.03.2007 with the remarks "Sundry creditors written off" - This amount debited to the account of Roy Industries was credited to the 'Other income' with the remarks "Credit balance written back" totalling Rs.72,51,225.80 - This amount of Rs 72.51 lakh included a sum of Rs.16.23 lakh, which fact was observed by ld. CIT(Appeals) for deleting this addition - As per section 41(1) - Charge of income is attracted in the year in which the cessation or remission takes place - In assessee's case the cessation or remission took place in the preceding year when the assessee debited the account of this party with a sum of Rs.16.23 lakhs - No event happened in the current year by means of which the assessee received any remission or cessation of liability on this account - The CIT(Appeals) was justified in deleting this addition because the amount stood remitted in the earlier year and not the current year - Decided against Revenue.
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2014 (1) TMI 551
Eligibility for deduction u/s 10BA - Held that:- Following assessee's own case for A.Y. 2006-07 - "The expression "splitting up" or "reconstruction" as used in clause (b) of sub-section (2) of Section 10BA, are with respect to an undertaking which is formed by the splitting up or the reconstruction of a business already in existence - It does not involve a case like this where all the assets have passed to the new owner, i.e. the company, without breaking the existence of undertaking into different sections of the activities previously conducted and carried independently by different owner as sole proprietor thereof nor there is transfer of assets of the undertaking to another undertaking - The Central Board of Direct Taxes in its circular F. No. 15/5/63-IT(AI) dated 13/12/1963 in the context of Section 84 where for grant of deduction where a similar condition that "the industrial undertaking is not formed by splitting up, or the reconstruction of a business already in existence" was under consideration, agreed that the benefit of section 84 of the I.T. Act, 1961, attaches to the undertaking and not to the owner thereof - The successor will be entitled to the benefit for the unexpired period of five years provided the undertaking is taken over as a going concern - The mere change of ownership does not amount to splitting up or reconstruction - The authorities were not justified in denying the exemption u/s 10BA of the Act Decided against Revenue. Whether DDB and DEPB be treated as part of export business Held that:- Following M/s Suraj Exports India, Churu Vs. Income Tax Officer, ward-2, Churu [2013 (11) TMI 262 - ITAT JODHPUR] - As per the amendment vide the Finance Act, 2001 w.e.f. 01.04.2001 in section 10BA(4) - The profits derived from export of articles or thing means the amount which bears to the profits and gains of the business of the undertaking and not from any other business carried on by the assessee Whereas prior to amendment the profits derived from export of articles was meant the amount which bore to the profits of the business, the same proportion as export turnover in respect of such articles bear to the total turnover of the business carried on by the assessee - By this amendment only the profits of the business of the undertaking only is to be considered for working out the profits and gains as are derived by an undertaking from export out of India of eligible articles or things - The profits and the gains of the business of the undertaking is to be worked out as per the provisions of section 28(i) which does not include the profits of items under sub sections (iiia), (iiib), (iiic), (iiid) and (iiie) etc. - Section 28 itself makes it abundantly clear that the profit on account of Duty Draw Back or on transfer of DEPB will not form part of profit and gains of the business or profession which was carried on by the assessee - 'such profits' as are derived from the export out of India shall be allowed from the total income of the assessee. Sub Section (1) of Section 10BA is subject to the provisions of S.Ss. 2, 3, 5, 6 and 7 but s.s. 4 lays down a method of computation for the purpose of sub section (1). The sale proceeds of DEPB cannot be considered as part of turnover as it is not the sale proceeds of the articles or things manufactured and sold by the assessee, then the profits from sale of DEPB cannot apportioned on treated on profit derived by the undertaking from export out of India - The exemption provisions in 10BA have to be liberally interpreted unless the credit of DEPB and DDB is expressly taken away - The manufacturing activities of the assessee are eligible for deduction provided u/s 10BA of the Act - The assessees before us are eligible for deduction u/s 10BA of the Act Decided against Revenue. Rejection of books of accounts and estimation of G.P. rate Held that:- The assessee explained the reasons for declining in the G.P. rate, which was mainly due to recession and this explanation of the assessee appears to be true because the turnover declined to Rs. 6.88 crores in subsequent year in comparison to Rs. 10.09 crores in the year under consideration - The other reasons given by the assessee was the increase in labour and raw material cost, the Assessing Officer had not commented on the explanation of the assessee - Certain defects were pointed out by the Assessing Officer and books were rejected u/s 145(3) of the Act, the said action of the Assessing Officer has not been challenged by the assessee - The G.P. rate estimated by the Ld. CIT(A) is on higher side, to meet the ends of justice, it would be fair and reasonable to apply G.P. rate of 10% instead of 11% - Partly allowed in favour of assessee. Interest expense to be set off against interest receipts - Held that:- If the interest receipts are treated as "income from other sources", then the corresponding expenses shall also be allowed u/s 57 of the Act - The issue is remanded back to the file of the Assessing Officer to be decided after considering the explanation of the assessee that there was a nexus in the interest bearing funds and the advances from which interest is received. Whether purchases were genuine or not Held that:- On account of the assessee having shown bogus purchases, the books of accounts had been rejected, and the matter was proceeded u/s 145 - The income is to be determined on the basis of best judgment assessment - The gross sales figure for the relevant year is not in controversy in the sense, that whatever bogus sales have been found by the A.O., if they were to be considered literally, they would have reduced the figure of sale, and there is no material or finding, or any indication, to show that the gross sale was shown by the assessee at any deflated figure - For making best judgment assessment the only relevant thing, required to be considered was, application of particular GP rate, which has been applied by the Tribunal and the CIT(A), on relevant consideration, being the GP rate applied in the last year - It cannot be said that any material evidence has not been considered, or any irrelevant consideration has been taken into account by the Tribunal Decided against assessee.
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2014 (1) TMI 550
Deduction u/s 80IA - Held that:- Following assessee's own case for A.Y. 2008-09 [2013 (7) TMI 83 - ITAT HYDERABAD] - There is no approval u/s. 10CCB of the Act for the assessee's project - In the absence of statutory approval from Ministry of Commerce, Government of India, as per the provisions of section 80IA of the Act exemption cannot be granted - Mere moving an application to the Central Government for being notified under clause (iii) of section 80IA(4) to the Secretary, DIP & P, Ministry of Commerce & Industry, New Delhi cannot confer the benefit when the 2002 scheme was not in operation and not applicable -The benefit u/s. 80IA(4)(iii) could be availed by the assessee only after the approval by the DIPP under the scheme - The assessee has not fulfilled the basic condition provided u/s. 80IA(7) of the Act as per which the assessee is required to file along with the return of income an audit report in Form No. 10CCB Decided against assessee.
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2014 (1) TMI 549
Penalty u/s 271(1)(c) - Held that:- Wrongful claim of depreciation by the assessee in this case was not a bonafide mistake rather the assessee had claimed the same as a matter of right and even tried to justify his claim of user of property up to ITAT - When the assessee has failed to prove its claim and the same has been found to be wrongfully made by the concerned authorities, then the assessee now has come with stand of onetime bonafide mistake which cannot be accepted - Following CIT vs. Morgan Finvest (P.) Ltd [2012 (12) TMI 457 - DELHI HIGH COURT] - In a case where there was complete lack of evidence to show that property was used for the purpose assessee's business and attempts made by assessee showed contrary and the same were indicative of a frivolous claim, penalty u/s 271(1)(c) is leviable - The attempts made by the assessee are indicative of frivolous nature of claim - On perusal of IT returns, it is proved that the property was not put to use during the relevant assessment year - The order of CIT(A) is set aside and the action of AO in levying penalty was confirmed - Decided in favour of Revenue.
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2014 (1) TMI 548
Whether addition can be made u/s 153A when no material evidence found during search - Held that:- Following All Cargo Global Logistics Ltd. v/s DCIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)] - Once no material has been found at the time of search and the earlier assessment order has attained finality, then no addition can be made in the assessment order passed under section 153A - If the material has been considered in the course of original assessment proceedings, then without any further incriminating material, addition cannot be made in the assessment order passed under section 153A - Decided in favor of assessee.
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2014 (1) TMI 547
Non-allowance of reduction in respect of income - Held that:- The income has been reduced due to double billing n the months of January-2001, February- 2001 and March-2001 on account of defect in the new billing software - The same was not substantiated by any documentary evidence by showing comparative rates - The assessee vide letter dated 3.7.2004 filed before CIT(A) had given comparative statement of billing done in the month of December 2000, February 2001, March 2001 and April 2001 to demonstrate that billing in the months of January 2001 to March 2001 for similar advertisements had been made at double rate - These details which had been filed first time before the CIT(A) have not been examined - The issue has been restored for fresh examination. Payments to Midday Outdoor - Held that:- The assessee had taken certain out door contracts for which it had no infrastructure of its own and had utilized the facilities of MOL for which the cost incurred by MOL had been reimbursed by the assessee - There were discrepancies in the findings of CIT(A) in different years regarding this issue - AO himself has allowed 50% of expenses which means he has admitted the use of assets but has given no basis for disallowance of 50% - The issue requires fresh examination at the level of AO. Professional charges and travel expenditure Held that:- These expenses had been included by the assessee in the share issue expenses - Later on the assessee claimed these expenses as revenue expenditure incurred for the purpose of business - It is clear that share issue expenses had not been claimed as revenue expenditure in the PL Account - There is no double claim of deduction - CIT(A) has also given a finding that there was no evidence that these expenses were incurred wholly and exclusively for the purpose of business - This aspect has not been examined by the AO - The issue has been restored for fresh examination. Notional Advertisement Credits Held that:- The assessee in connection with IPO had published advertisements in its own newspapers in respect of which the expenditure incurred had been claimed as revenue expenditure - CIT(A) has confirmed the addition on the ground that the auditors had also not made any qualification regarding the notional entry - There is no finding given either by AO or CIT(A) that the assessee had received any income - The assessee had published the advertisement for its own business, therefore, the assessee could not earn income from itself - No income could be assessed on account of notional entry Decided in favour of assessee.
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2014 (1) TMI 546
Disallowance of proportionate amount of franchisee fee Held that:- The nature of the expenditure should be determined objectively - The agreement entered by the assessee with M/s Ma Foi Management Consultants Ltd shows that the assessee has only acquired the license to act as the franchisee of the above said company - It is not a case of acquiring a trade name, which would fall in the category of Capital expenditure - The same is allowable as expenditure u/s 37(1) Decided in favour of assessee. Disallowance of expenses relating to exempted income u/s14A Held that:- Following CIT Vs. Dhanalakshmy Bank Ltd [2010 (10) TMI 806 - Kerala High Court] The proportionate disallowance under section 14A should be limited to only interest liability and not overheads or administrative expenditure, which should be considered for disallowance under Rule 8D - The issue restored for fresh examination. Disallowance of medical expenses Held that:- The assessee has claimed that the medical expenses were incurred on its employees - The assessing officer did not examine the said claim of the assessee - The AO had disallowed this expenditure for want of adequate details/explanations - The issue restored for fresh examination.
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2014 (1) TMI 545
Payment of CST Held that:- CST has been paid by 5 challans before the due date of filing return, which is allowable as per the provisions of section 43B - CIT (A) had granted relief after due verification of payments which have been made before due date Decided against Revenue. Addition on account of lower G.P. rate The gross profit rate for the year immediate preceding year was 9.118% in comparison to the current year gross profit rate at 4.063% - Held that:- The sales were increased due to special order obtained by the assessee from the Department of Post, Government of India - The assessee has to make quotations with low profit margin in the tenders - The assessee has not given the bifurcation of the sales made to the Department of Post, Government of India and to other persons - Assessee's contention cannot be accepted in totality - The assessee itself has admitted that schedule of partners share capital account and computation of income was wrongly prepared - The assessee has to establish that the G.P. on sales to Department of Post and G.P. on sales to others are at variance The issue was restored for fresh decision.
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2014 (1) TMI 544
Disallowance of amortization expenses u/s 35D of the Act Expenditure incurred on FCCB bonds Held that:- If the expenditure has been incurred for the purpose of business of the assessee and if it is not in the nature of capital expenditure or personal expenditure, the same is allowable under Section 37 - Merely because in the accounts the assessee has set off all these expenditure against the share premium or assessee has not debited any amount in its profit and loss will not prevent the assessee to claim expenditure which is otherwise allowable under the Income tax Act - If Section 35D is applicable to the instant case, expenditure on issue of debentures which is otherwise allowable u/s 37, will be allowable in full and the expenditure need not be amortised Relying upon CIT Vs East India Hotel [2001 (8) TMI 102 - CALCUTTA High Court] and CIT Vs Thirani Chemicals Ltd 2005 (12) TMI 86 - DELHI High Court] - expenditure on issue of bonds allowable under Section 37 Decided in favour of Assessee. Disallowance of loss on account of foreign exchange fluctuation Held that:- Profit and loss arising on exchange fluctuation in respect of loan taken will constitute capital or revenue expenditure depending on the purpose for which the loan has been utilized Following ONGC Vs CIT [2010 (3) TMI 81 - SUPREME COURT] - loss on exchange fluctuation in respect of loans acquired for revenue purpose is an allowable deduction matter remitted back to the AO Decided in favour of Assessee. Exclusion of Annual Maintenance Charges u/s 80IB of the Act Held that:- The decision of the AO and the CIT(A) upheld - AMC is a separate stream of income and is not connected to the main activities of manufacture and sale of goods by the assessee - This service is rendered after the sale of goods has been completed - The AMC services can be provided independent of the sales also thus, providing Annual maintenance Services cannot be considered as connected in the first degree with the activity of manufacture and sale of goods - Section 80IB is available only for profit derived from business of manufacture of goods and therefore it is not applicable to income derived from any ancillary activities/ services Thus, AMC charges should be excluded for the purpose of computing relief under Section 80IB Decided against Assessee. Disallowance u/s 14A of the Act Indirect interest expenditure Held that:- The entire borrowals on which interest expenditure has been incurred has been applied for the purpose of the business, then no part of the borrowals can be taken to be indirectly applied for investments - if the entirety of borrowals can be established to have been utilised for the purpose of business and therefore could not have been used for the purpose of investment, then there can be disallowance even in respect of indirect interest expenditure - This point has not been examined by the lower authorities Thus, the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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2014 (1) TMI 543
Addition on account of Suspense Account Treating it as income u/s 28(iv) of the Act Held that:- As per the provisions of section 28(iv) of the Act, the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession is chargeable to Income Tax under the head profits and gains of business or profession Following CIT vs. Bhavnagar Bone and Fertiliser C. Ltd. [1986 (7) TMI 37 - GUJARAT High Court] - there must be a nexus between the business of the assessee and the benefit which the assessee has derived in order to attract the provisions of section 28(iv) of the Act - There is no nexus established in the present case between the business of the assessee and the benefit which the assessee has alleged to have derived from the credit balance in the suspense account. The benefit, if any, as a result of difference in the balance sheet thus was derived by the assessee in A.Y. 1985-86 itself and the resultant addition u/s 28(iv) of the Act could have been made only in that year and certainly not in the year under consideration wherein the suspense account balance carried forward for 20 years was simply reflected in the balance sheet There appears to be the reason why no addition on account of suspense balance was made by the A.O. in the assessment completed in the case of the assessee - the assessee is following cash system of accounting and as held in CIT vs. American Consulting Corporation [1979 (8) TMI 40 - ORISSA High Court] - Income u/s 28(iv) on account of benefit can be assessed to tax only on receipt basis - there is nothing brought on record by the Revenue to show that any such benefit was actually received by the assessee in cash on account of suspense account balance - thus, the addition made by the A.O. u/s 28(iv) of the Act on account of suspense account balance pertaining to the earlier year is not sustainable Decided in favour of Assessee.
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2014 (1) TMI 542
Rejection of Application Registration u/s 12A of the Act Held that:- The assessee-society has changed its object clause by passing resolution in its general body meeting - The CIT has passed his order on the basis of the pre-amended object clause - the object clause has been amended, thus, the application filed by the assessee needs reconsideration in the light of the amendment carried out in the object clause of the assessee-society order set aside and the matter remitted back for fresh adjudication Decided in favour of Assessee.
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2014 (1) TMI 541
Disallowance towards petrol and diesel expenses Relevant vouchers could not be produced - Held that:- The Assessing Officer had asked the assessee to produce one month vouchers in the case of travel business but the assessee failed to produce the before the Assessing Officer - The assessee did not produce the copies of the vouchers for his perusal - the CIT (Appeals) did not call for a remand report from the Assessing Officer before granting partial relief - Thus, one more opportunity be granted to the assessee to substantiate its claim by producing the vouchers and other details before the Assessing Officer - the issue remit back to the file of the Assessing Officer and direct the Assessing Officer to verify the details and decide the issue on merits with respect to disallowance Decided in favour of Assessee. Disallowance towards business promotion and advertising expenses No supporting material present Held that:- The disallowance has been made by the Assessing Officer on estimated basis at 25 per cent. of the expenses and which has been restricted to 10 per cent. for the reason that the assessee has paid fringe benefit tax - the assessee has neither produced any supporting material either before the lower authorities or before the tribunal there was no reason to interfere with the order of the Commissioner of Income-tax (Appeals) Decided against Assessee. Disallowance on account of bad debts u/s 36 (1)(vii) of the Act Held that:- Assessee has written off the amounts in the books of account pertaining to its travel business and the income was taken into consideration while computing the income in the earlier years - the debts were written off in the books of account and therefore it has complied with the requirement of the Act - the assessee has written off the amount in its books of accounts Following T.R.F. Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT] - the addition made by the Assessing Officer to be deleted Decided in favour of assessee. Disallowance of depreciation on goodwill u/s 32(1)(2) of the Act Restricting the disallowance to 10 per cent. as against 20 per cent - Held that:- The assessee had taken an additional ground with respect to claim of depreciation on goodwill before the Commissioner of Income-tax (Appeals) and the it was dismissed by the Commissioner of Income-tax (Appeals) for the reason that the goodwill did not form part of intangible asset specified in section 32(1)(2) of the Act - there is nothing on record to indicate as to what was the amount of goodwill on which the assessee has claimed depreciation Following CIT v. Smifs Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT] - goodwill is an asset within the meaning of section 32 and is therefore eligible for depreciation matter remitted back to the AO for fresh adjudication Decided in favour of Assessee and against the Revenue. Deletion of disallowance towards maintenance of building and machinery Held that:- The nature of the expenses is that they appear to have been incurred towards maintenance of building and machinery - the Assessing Officer while holding them capital in nature has not brought on record that they have resulted into bringing a new asset with the appellant - He has also not brought on record any material to show that it has resulted in enhancement of existing capacity of the appellant Relying upon CIT v. Pioneer Engineering Syndicate [1988 (2) TMI 15 - MADRAS High Court] and CIT v. Jafarbhai Akbarali and Bros. [1992 (1) TMI 17 - BOMBAY High Court] - if an expenditure was incurred for acquiring and bringing into existence an asset for an enduring benefit of the business, it would normally be capital expenditure and if the expenditure was made for running the day-to-day business with a view to produce more income it would be "revenue expenditure" - Nothing has been brought by the Revenue to controvert the findings of the Commissioner of Income-tax (Appeals) there was no reason to interfere in the order Decided against Revenue.
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2014 (1) TMI 540
Depreciation on Goodwill Nature of Goodwill Tangible or intangible u/s 32(1)(ii) of the Act Held that:- The marketing network, a commercial right, acquired is an intangible asset eligible for depreciation on the reason that the assessee acquired the rights to avail the infrastructure of the networking - the meaning of business or commercial rights of similar nature mentioned in section 32 of the Act has to be understood in the context of purpose of such rights obtained as for effectively carrying on the business and commerce Relying upon Skyline Caterers (P.) Ltd. Versus Income-tax Officer, Ward-8(3) 2, Mumbai [2007 (12) TMI 308 - ITAT MUMBAI] diminution in value of the asset is not a relevant factor for allowing the depreciation u/s 32 of the Act - assessee acquired the marketing network of Jyothi Industries by which the assessee got access to the marketing network of Jyothi Industries consisting of representative, infrastructure, customer lists, marketing strategies etc. - assessees acquisition of distribution network is eligible for depreciation u/s 32 of the Act Thus, the assessee is entitled for depreciation on the distribution rights ie marketing network Decided against Revenue and in favour of Assessee. Allowability of Depreciation on Trademark rights and Intangible asset Held that:- Following B. Raveendran Pillai vs. CIT [2010 (9) TMI 434 - Kerala High Court] - Payment made towards goodwill for ensuring retention and continued business in the hospital acquired by assessee on going concern basis is comparable with trademark, franchise, copyright etc referred to in sub-clause (ii) of section 32(1) entitling the assessee for depreciation Decided against Revenue and in favour of Assessee. Allowability of deduction Held that:- Following Balmukund Acharya Vs Deputy Commissioner of Income-tax [2008 (12) TMI 88 - BOMBAY HIGH COURT] - only real income should be taxed and the AO should allow the deduction permissible under the law matter remitted back to the AO for fresh adjudication Decided partly in favour of Revenue.
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2014 (1) TMI 539
Denial of Credit for TDS u/s 40(a)(i) of the Act Held that:- The assessee is not justified in claiming credit for TDS credited during the period 25th April, 2006 to 20th July, 2006 - However, upon proving before the AO that it pertains to A.Y. 2007-08, assessee is entitled to claim deduction in the next year - the assessee is directed to make a claim in the year in which it is allowable Decided against Assessee.
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2014 (1) TMI 538
Confirmation of Change of status u/s 12AA(3) of the Act - Status changed from a Charitable Trust to An AOP Held that:- There were no proceedings of cancellation of registration granted to the assessee, by the competent authority - the authorities below has grossly erred in changing the status of the assessee from that of a charitable trust to an association of person (AOP) without following a due process of law as stipulated under Section 12AA(3) of the Act - the authorities should have brought some incriminating material or evidence to show that the activities of assessee trust were not genuine or were not being carried out in accordance with the objects of the trust or institution - the CIT (A) grossly erred in confirming the change of status of assessee from that of a charitable trust to an (AOP) Thus, the status of the assessee trust would remain a charitable trust till the registration granted to assessee under Section 12A of the Act exists - Decided in favour of Assessee. Facts and the documents produced ignored Trust deed not appreciated Registration u/s 12A of the Act Entitlement for Deduction u/s 80G of the Act - Held that:- Neither the Assessing Officer nor the CIT(A) has either noted or observed any fact that the receipts of the assessee trust were misappropriated, misused or used contrary to the charitable objects of the assessee trust as stipulated in the trust deed - the authorities below have not made any allegation that the assessee trust had carried out any activities contrary to its object and misusing the funds of the assessee trust - The status of the assessee trust cannot be changed from charitable trust to AOP until and unless the registration granted to the assessee is cancelled by following the due procedure as mentioned in Section 12AA(3) of the Act - thus, the Assessing Officer was not justified in completing the assessment of the assessee in the status of AOP instead of charitable trust. As per provisions of the Act this is not a pre-condition for conducting a charitable activity that the persons or institutions towards which the assessee charitable trust is providing donation and conducting charitable activity should be registered under Section 12A of the Act coupled with entitlement to enjoy benefits of Section 80G of the Act - the issue claim of expenses towards a charitable activity deserved to be examined by the Assessing Officer de novo after affording due opportunity of hearing to the assessee the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee. Error in admitting additional evidence under Rule 49A of the Act Held that:- There was no perversity, ambiguity or any other valid reason to interfere with the findings of CIT(A) - the CIT (A) decided the issue of admissibility of additional evidence following a due procedure as laid down in Rule 46(A) of the Rules - Decided against Revenue. Nature of Donation Donation can be termed as corpus donation or not Held that:- The assessee was prevented due to sufficient reason for submitting relevant evidence before the Assessing Officer and the same was submitted before the Ld CIT (A) as additional evidence - the CIT (A) allowed and admitted the additional evidence of the assessee by properly following due procedure as laid down under Rule 46A of the Rules - the CIT (A) after examination of additional evidence held that the donation of Rs.50,00,000/- made by Seagram India Pvt. Ltd was a corpus donation for the appellant trust and the same could not be treated as general receipt - the donor contributed to the assessee trust as corpus donation for specific purposes and objects Decided against Revenue.
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2014 (1) TMI 537
Taxability of interest income received from Head Office Held that:- The interest income received from the HO is not taxable in view of principle of mutuality the aspect of total income under the scheme of Income Tax is understood as the earning of the assessee from all the sources as classified under different heads of income reduced by the expenditure directly and indirectly incurred in relation to the earning of the income and further deducting all the allowable claims and the exemption/deduction while computing the total income - the total income chargeable to tax means the net income computed from the gross receipts after the deduction of the allowable expenditure and other deductions - the income which is chargeable to tax is computed after the deduction of the expenditure which has been incurred for earning such taxable income thus, the expenditure incurred for other than the income chargeable to tax, is not permitted to be reduced from the income for computation of the total income - This aspect of allowing the expenditure incurred in relation to the taxable income is embedded in the provisions of section 14A to ensure that the expenditure incurred in relation to the income which is not chargeable to tax shall not be allowed as deduction against the income which is chargeable to tax - the income, which is chargeable to tax is taken as net income after deduction of the allowable expenditure and similarly the income which is not chargeable to tax is also taken net and the expenditure incurred in relation to such income is reduced from it - Thus, the income, which does not form part of the total income, shall also be the net income after considering the expenditure directly or indirectly incurred in relation to earning the said income. Applicability of section 14A of the Act - Interest received from the HO is not an income - No question of exclusion from the total income Held that:- Following M/s. Societe Generale Versus The Dy. Director of Income-tax (International Taxation) -2(1) Mumbai [2013 (5) TMI 374 - ITAT MUMBAI] - the applicability of section 14A upheld in respect of the interest which was held to be exempt on principle of mutuality - there is no ambiguity on the issue that section 14A is applicable in respect of interest received from HO/overseas branches which is held as exempt on the principle of mutuality. Need of Investigation and examination relying upon National Thermal Power Company Limited Versus Commissioner of Income-Tax [1996 (12) TMI 7 - SUPREME Court] Held that:- The applicability of sec. 14A is purely a question of law arising from the finding that the interest income is not taxable and only quantum of disallowance requires the examination of the facts - the issue is only applicability of section 14A and not the computation of the quantum of disallowance thus, it cannot be said that this issue of applicability of section 14A cannot be admitted as this requires examination of the facts. Expenditure incurred u/s 37(1) of the Act - HO paid on behalf of Indian Branch office Held that:- Following Commissioner of Income-Tax Versus Emirates Commercial Bank Ltd. [2003 (4) TMI 2 - BOMBAY HIGH COURT] - Section 44C is applicable only in the cases of those non-residents, who carry on business in India through their branches - the expense was initially incurred by the head office which was recovered by the head office from the branch in India by raising a debit note - the expense was incurred for the branch office in India thus, section 44C has no application Decided in favour of Assessee. Deduction of expenditure on account of swap cost on un-matured contracts Held that:- Following The Siam Commercial Bank PCL Versus Deputy Director of Income-tax (International Taxation)-2(1) [2011 (11) TMI 75 - ITAT MUMBAI] - both transactions of sale and purchase of dollars are totally independent of each other thus, there is no question of estimating any profit or loss on such transaction in the manner in which the assessee has done so, more specifically without divulging the impact of difference in the rate of dollar as at the end of the year vis-avis that agreed as per the forward contract Decided in favour of Assessee. Disallowance u/s 40(a)(i) of the Act Held that:- Following Assistant Director of Income-tax (International Taxation) 3(1) /2(2), Mumbai Versus Oman International Bank S. AOG [2012 (12) TMI 414 - ITAT MUMBAI] - The assessee paid transaction charges on MOSTRO account with banks outside India Decided in favour of Assessee.
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2014 (1) TMI 536
Deletion of Rs. 30 Lakhs - Method of Accounting Held that:- The assessee is following cash system uniformly for all customers, and in respect of an item/s of income which is regularly charged and for which they are contractually bound - the figures itself suggest of the payments being received in the regular course of business it cannot or ought not to lead to a double tax - matter remitted back to the AO and the onus to prove its case with reference to uncertainty and its resolution would be on the assessee - the offer of income pertaining to a preceding year/s on cash basis, would not justify non accounting of income for the current year, or even for a preceding year, which though not received, yet stands accrued during the current year - This is as there could be no option for following a mixed system of accounting - the income not offered to tax on accrual basis, would not preclude it being brought to tax on receipt inasmuch as the same falls within the scope of income u/s. 5 of the Act. Disallowance of prior paid expenses Held that:- The expenses being admitted as prior period expenditure in the assessees accounts - Where an expenditure is disputed or indeterminate, liability would arise only in the year of resolution of the dispute Decided partly in favour of Revenue.
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2014 (1) TMI 535
Validity of Proceedings Notice u/s 148 - Applicability of Section 115-O to Deduction u/s 80M of the Act Held that:- Relying upon Godrej Agrovet Ltd. v. Dy.CIT [2010 (2) TMI 27 - BOMBAY HIGH COURT] - The reassessment proceedings to the assessment u/s. 143(3), initiated after the expiry of four years from the end of the relevant assessment year - it could only be by virtue of proviso to section 147, where the income had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment for the relevant assessment year - The assessee had disclosed all the primary facts in relation to its deduction u/s 80-M - there is nothing to suggest consideration of the applicability or otherwise of section 115-O (5) of the Act in the assessment order - the assessment fails on jurisdiction in view of the non-satisfaction of the primary condition per first proviso to section 147, notwithstanding Explanation 1 - An assessment for A.Y. 2003-04, where sought to be reopened with reference to section 115-O, seeking to withdraw a deduction granted u/s 80-M was found not valid - section 115-O(5) did not restrict the allowability of a claim u/s.80-M Following Castle Investments & Industries Ltd. v. ITO [2008 (7) TMI 598 - BOMBAY HIGH COURT] - Decided in favour of Assessee.
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Customs
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2014 (1) TMI 534
Prohibition to conduct operations as a CHA - Revocation/suspension of license - Held that:- order passed by CC Kandla is an interim measure taken by the ld.Commissioner by prohibiting the appellant in operating in the area of Customs House in Kandla and Mundra and is passed under Regulation 21 of CHALR 2004 read with Regulation 23 of CBLR 2013. We find that at this juncture, no interference is called for in this order and find that the appeal filed by the appellant is required to be disposed of as not maintainable - Following decision of S.R. Sale & Co. Vs. UoI & Ors [2013 (6) TMI 272 - BOMBAY HIGH COURT] - Decided against appellant.
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2014 (1) TMI 533
Confiscation of goods - Penalty u/s 112 - Benefit of concessional rate of customs duty under Notification No.21/2002-Cus dated 01.03.2002 - Held that:- as per sub-section 28 (1) (b), if any duty is discharged before the service of show case notice under sub-section 28 (1) (a), the then there is provision under sub-section 2 of section 28 (a) that no notice should be served on the person who is liable to pay said duty. We find, that the provision of section 28 (2) would clearly get attracted in this case as there was no suppression of fact, wilful misstatement on the pat of the main appellant Shreeji Shipping a fact undisputed, as the consignment was examined by lower authorities before extending the benefit of notification No. 21/2002-Cus, to the appellant; directing him to pay the custom duty as assessed under chapter heading No. 8905 9090. In our view subsequent change of mind on the part of revenue authorities, as regards the classification of the goods imported, cannot be held against the appellant as the view of assessee was a possible one, as it has been approved by the authorities, when the bill of entry was assessed finally. There was no provisional assessment nor there was any bond executed for release of the goods to the main appellant. The law laid down by the larger bench would apply in the case in hand, and it has to be held that the liability to confiscation under section 111 (m) & Customs Act, 1962, as ordered by the adjudicating authority is incorrect. We are also unable to agree to the proposition of the adjudicating authority for liability to confiscation as there is nothing on record to indicate that the appellant has mis-declared any particulars in the bill of entry filed by them while clearing the consignment. Section 111 (m) of the Customs Act, 1962 can come into play only when there is a mis-declaration of value or any particular in the bills of entry. There is no dispute that the appellant has declared their consignment correctly and was found correct on examination by lower authorities. In view of this the confiscation order by the adjudicating authority under the provision of 111 (m) is unsustainable - Decided in favour of assessee.
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2014 (1) TMI 532
Whether the show cause notice dated 23-4-2008 brought the appellant to specific charges in terms of any of the clause under Section 112 of Customs Act, 1962 - Held that:- For the misuse of name of appellant, it had pleaded that complaint was filed with Deputy Commissioner of Police, South District on 30-6-2008. The enacted provision of Section 112 of the Customs Act, 1962 has provided two situations to penalize. Those are embodied in clause (a) and (b) of the said section. Nothing is whispered in the show cause notice in what manner the appellant was either to fall under Section 112(a) or 112(b). In absence of clear evidence against appellant attracting the charge as per law, the show cause notice itself is misconceived and that failed to provide cause of natural justice to the appellant to lead evidence - Decided in favour of assessee.
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2014 (1) TMI 531
Recovery of duty draw back excise portion granted earlier to the merchant exporter on the gound that manufacture has got the refund of cenvat credit - Assessee partially paid the duty - False declarations - Whether the demand is to be sustained in view of para (iv) of Circular 17/97-Cus. and para (vi) of Circular 64/98-Cus. - Held that:- As may be seen from para 1(iv) of Circular 17/97-Cus. and para 1(vi) of Circular 64/98-Cus. there was no question of taking any declaration from merchant-exporters who buy goods from the open market as in the case of this appellant but the drawback was supposed to be restricted to the customs portion only. However Revenue chose to grant drawback for excise portion also and after lapse of five years to one year, the drawback amounts granted on various shipping bills have been demanded to be paid back. There is also an argument that this appellant is being singled out for such treatment. This argument is relevant not in the sense whether a wrong can be corrected in the hands of one when others go scot free but in the context that there was a bona fide belief because of the circulars from 2001 onwards that they were eligible for the impugned drawback. Court is not inclined to confirm such huge liability for past periods based on Circulars which were in the knowledge of the department and which were not implemented. We would like to rely more on the legal provisions. The only legal provision relied upon is Rule 3 of the Drawback Rules. We agree with the interpretation to this Rule given by the Board in Circular 16/2009-Cus. Interpretation is not applicable from date of issue of Circular 16/2009-Cus. because the Rule has remained the same except for amendment on 13-7-2006, to take care of incidence and rebate of Service Tax - Decided in favour of assessee.
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2014 (1) TMI 530
Valuation of goods - Reliability on quotation of the supplier - Held that:- value cannot be enhanced on the basis of the quotation. There is no evidence on record to show that the respondents had paid over and above the declared value of the imported goods. The trade discounts are acceptable principles in the international trade. It is not the case of Revenue that the trade discount is to suppress the value of the goods - Decided against Revenue.
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Corporate Laws
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2014 (1) TMI 528
Dishonour of Cheque - Lacuna in evidence - Trial Court acquitted accused - High Court convicted accused - Held that:- respondent was not even aware of the date when substantial amount of ₹ 1,50,000/- was advanced by him to the appellant, that he was not sure as to who wrote the cheque, that he was not even aware when exactly and where exactly the transaction took place for which the cheque came to be issued by the appellant. Apart from the said serious lacuna in the evidence of the complainant, he further admitted as PW.1 by stating once in the course of the cross-examination that the cheque was in the handwriting of the accused and the very next moment taking a diametrically opposite stand that it is not in the handwriting of the accused and that it was written by the complainant himself, by further reiterating that the amount in words was written by him. Such a serious lacuna in the evidence of the complainant, which strikes at the root of a complaint under Section 138, having been noted by the learned trial Judge, which factor was failed to be examined by the High Court while reversing the judgment of the trial Court, in our considered opinion would vitiate the ultimate conclusion reached by it. In effect, the conclusion of the learned Judge of the High Court would amount to a perverse one and, therefore, the said judgment of the High Court cannot be sustained - Decided in favour of appellant.
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Service Tax
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2014 (1) TMI 568
Application of Section 80 - Imposition of penalty - Activity of Over Burden Removal, Site Formation and clearance, Excavation and Earth Moving and Demolition Services - Period of service - Held that:- As per the contract which is for Over Burden Removal and there is no activity of mining under the contract. Therefore, we find no infirmity in the impugned order the demand along with interest is confirmed. In respect of penalties imposed, we find that Section 80 of the Finance Act, provides that notwithstanding anything contained in the provisions of Section 76, or Section 77 or Section 78, no penalty shall be imposable on the assessee for any failure referred to in said provisions if the assessee proves that there was reasonable cause for the said failure. Limited company is found by Ex-servicemen, disabled Ex-servicemen and war widows and allowed to work into area specified by the government. During the period in dispute the appellant were also corresponding with the Western Coalfields Limited for payment of service tax. In these circumstances, we find that in view of the provisions Section 80 of the Finance Act, impositions of penalties are not sustainable - Decided in favour of assessee.
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2014 (1) TMI 567
Refund claim - Service of goods transport operator - Commissioner allowed refund claim - Held that:- as per the provisions of the Finance Act, 1994 and the Rules made thereunder, the service provider was to collect and pay the service tax. In view of this, the respondents are liable to pay service tax in respect of the services provided - As per the validation provisions, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any service tax refunded is recoverable within a period of 30 days from the date of the Finance Act, 2000 - in view of the retrospective amendment, the respondents are not entitled for any refund. Even if any case where the refund is allowed, the same is to be recovered hence the impugned order is not sustainable - Following decision of Laghu Udyog Bharti [1999 (7) TMI 1 - SUPREME COURT OF INDIA] - Decided in favour of Revenue.
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2014 (1) TMI 566
Non remittance of service tax - Transportation of passengers by air - Notification No. 15/2010-Service Tax dated 27.02.2010 - Held that:- total non application of mind to a claim of the assessee predicated upon a statutory rule, amounts to abdication of adjudicating responsibilities and derogates from the functional responsibilities of adjudication. The adjudication order is perverse and invites invalidation - matter remitted for de novo consideration by the said authority. On remit as ordered herein, the adjudicating authority shall issue a notice to the appellant for personal hearing and on consideration of its submission shall pass a fresh order clearly dealing with the appellant's claim for exclusion of the component of statutory levies and charges, on the basis of the Service Tax (Determination of Value) Rules, 2006 amended in 2010, w.e.f. 27.02.2010. The adjudicating authority shall now and without fail record reasons while dealing with the assessee's claim on the basis of 2006 Rules - Decided in favour of assessee.
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2014 (1) TMI 565
Waiver of pre deposit - Demand of service tax - airport services - ground handling services - Held that:- services provided by Airport Authority of India or any person authorized by it are only taxable under the category of airport service. Prima facie, we find that the adjudicating authority as well as investigating authority has not brought on record anything to come to a conclusion that the appellant was authorised by any airport authority. At the same time, we find that the appellant has deposited an amount of approximately Rs.24 lakhs during the pendency of the appeal before first appellate authority. We consider the said amount as enough deposit to hear and dispose the appeal - Stay granted.
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2014 (1) TMI 564
Waiver of pre-deposit of service tax - Renting of Immoveable Property Service - Industrial and commercial construction activity - Held that:- Applicants constructed a mall and now registered with the Revenue authorities as provider of service of renting of immoveable property - credit of input service which are used in the construction of mall is available where the assessee is providing renting of immovable property service - prima facie applicant has made out a case for total waiver of dues Following decision of Navaratna S.G. Highway Prop Pvt. Ltd. vs. Commr of S.T., Ahmedabad [2012 (7) TMI 316 - CESTAT, AHMEDABAD] - Stay granted.
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2014 (1) TMI 563
Business Auxiliary Service - Job Work - Whether the activity undertaken by the respondent amounts to manufacture or not - Held that:- respondents are receiving job work of Heat Treatment of automobile parts mainly crankshafts from their principal manufacturers M/s. Hind Engg. Works, and M/s. Fairfield Atlas Ltd. After the heat treatment carried out on crank shafts the same were returned back to the principal manufacturers. Both the principal manufacturers have issued certificates to clarify that the crank shafts on which heat treatment process was done by the respondents was received by them and the same were cleared ultimately on payment of appropriate Central Excise duty. In view of this as the activities undertaken by the respondent do not fall under the category of "Business Auxiliary Service" - Decided against Revenue.
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2014 (1) TMI 562
Waiver of pre-deposit of service tax - Service of tour operator - Held that:- as per the brochures, the tour is Ex-Srinagar. The activity of tour is undertaken in Srinagar and the provisions of the Finance Act are not applicable to Jammu & Kashmir. Therefore, the applicant has a strong case in their favour. Pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.
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2014 (1) TMI 561
Classification of service - Comprehensive sanitation assistance - Whether said service would fall under Business Auxiliary service - Held that:- Municipal Corporation was doing business of providing sanitation work to be supported by auxiliary service. When the appellant was providing comprehensive sanitation assistance to Jaipur Municipal Corporation, it cannot be said to have provided Business Auxiliary Service - Decided in favour of assessee.
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2014 (1) TMI 560
Waiver of pre deposit - Testing and painting of old and used gas cylinders - Benefit of Notification No. 12/2003-S.T., dated 2-6-2003 - Held that:- applicants were undertaking the process of testing and painting of old and used gas cylinders. Prima facie they are providing maintenance and repair service and paint is used as consumable for providing such service. We find no merit in the contention of the applicant that paint is being sold separately. In view of this we find it is not a fit case for total waiver of Service Tax - Conditional stay granted.
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2014 (1) TMI 559
Waiver of of pre-deposit of Service Tax - Classification of service - Catering service or not - Held that:- prima facie, putting together different items of food in one tray does not amount to manufacture. The appellants are not giving any impression that the items like cheese, jam etc. are manufactured by the appellants. Thus, we do not see any ground for demanding excise duty for the activity of putting together different items of food in a tray and serving it with their label. Their name card put in the cutlery package can at best convey a message that catering is done by the Appellants and not that the goods are manufactured by the Appellants - Following decision of M/s. Taj Sats Air Catering Ltd. [2012 (11) TMI 354 - CESTAT, NEW DELHI] - Stay granted.
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2014 (1) TMI 558
Denial of CENVAT Credit - Credit on service tax paid on bank charges - Imposition of equivalent penalty - Held that:- definition covers not only services used directly or indirectly in or in relation to manufacture of final products but also various services used in relation to business of manufacture whether prior to manufacture or after manufacture. Needless to say banking charges are paid in relation to purchase of raw materials and sale of finished goods and therefore such services is definitely relatable to the manufacture. Under these circumstances, the appellant is eligible for the credit - Decided in favour of assessee.
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2014 (1) TMI 557
Availment of CENVAT Credit - Outdoor catering service - Held that:- Service Tax proposal is for denial of Service Tax credit on food and hospitality services rendered by hotel - The credit has been denied on the ground that Service Tax has been charged on the buffet dinner, mineral water also and such Service Tax credit cannot be allowed in Cenvat Credit Rules, 2004 - outdoor caterer service has a nexus or integral connection with the manufacture of final product. The view taken is that for benefit of cenvat credit in respect of input services, such services should be relatable to the manufacturing activity. It cannot be said that providing lunch/dinner to customers is not part of the business promotion and is not part of sale of manufactured goods. Without promoting the sale of the product, the manufacture also cannot take place. Therefore the activity can be definitely said to be relatable to the manufacture of the goods. Under these circumstances on merits I find that the appellant is eligible for the benefit of Cenvat credit - Following decision of Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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Central Excise
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2014 (1) TMI 529
Liquidation of Company - Payment to Central Excise department - Held that:- Even though the Excise Authorities are preferred creditors, but they are covered by Section 530 of the Act and stand in queue after the claims of the creditors covered by Section 529A of the Act are paid. Since all the assets of the company in liquidation have been sold, no useful purpose would be served in receiving this application for further consideration - official liquidator directed to make payment of the admitted claim of the Excise Authorities if there is any money left after discharging the claims of the creditors of the company in liquidation covered by Section 529A of the Act - Decided in favour of appellant.
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2014 (1) TMI 527
Waiver of Penalty under Rule 26 of the Central Excise Rules, 2002 Goods transported though having knowledge that they are liable for confiscation - Held that:- Shri Rakesh Kumar Gupta could not have been held as having knowledge that the consignment, which has been brought to his godown for de-stuffing and segregating to various buyers, could be liable for confiscation, as the appropriate customs duty has been paid and there were duty paying documents - the provisions of Rule 26, which has been invoked against Shri Rakesh Kumar Gupta, prima facie, cannot stand to scrutiny of law - The second appellant Shri Tavinder Singh Dhodi, is a local transporter, who has transported the consignments from the godown of Shri Rakesh Kumar Gupta based upon the documents given by the CHA - the appellants has made out a prima facie case for the waiver of pre-deposit of the amount of penalty Waiver of Pre-deposits allowed till the disposal Stay granted.
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2014 (1) TMI 526
Exemption under Notification No.89/95 Products to be treated as useful by-products and not waste - Waiver of Pre-deposit Held that:- The soap stock is further processed to get products needed in soap industry and then cleared - the argument that such products manufactured and sold can be considered as waste and exemption under Notification 89/95-CE dated 18-05-95 cannot be extended - the applicant is directed to make a deposit of Rupees Eight lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.
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2014 (1) TMI 525
Restoration of appeal Recall of final order Held that:- The applicant/appellant has already deposited the required amount belatedly - After considering the reasons for delay stated by the appellant - the delay condoned and the final order recalled with the restoration of appeal. Waiver of Pre-deposit Held that:- The assessee has complied with the direction for pre-deposit, the two co-appellants are entitled to waiver of pre-deposit till the disposal Stay granted.
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2014 (1) TMI 524
Denial of cenvat credit Credit availed on MS angles, Beams, Plates Sheets Utilized for the purpose of fabrication of structures for support of capital goods Waiver of Pre-deposit Held that:- The items are used for manufacturing supporting structures Following Vandana Global Ltd. Vs. Commissioner of Central Excise Raichur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - the appellant is not eligible for the credit - the appellant directed to deposited the amount attributable to normal period of limitation which is worked out as ₹ 39,12,002 to be submitted as pre-deposit Upon such submission rest of the duty to be stayed till the disposal Partial stay granted.
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2014 (1) TMI 523
Clandestine Removal of Goods Clearance made by improperly declaring the retail sale price Undervaluation of Tiles - Waiver of Pre-deposit Held that:- The Tribunal has been following judgment of Honble High Court of Gujarat that an assessee should deposit 8% of the amount of duty confirmed - The appellant has deposited an amount which is more than 8% of the duty liability - the amount already deposited is enough to hear and dispose the appeals Pre-deposits waived till the disposal Stay granted.
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2014 (1) TMI 522
Clinkers consumed for manufacture of cement - Waiver of pre-deposit Held that:- The cement is supplied by the appellant in international competitive biddings - the provisions of Rule 6 excludes this kind of supply for not maintaining separate records and input credit is available to the appellant-assessee - if the assessee is directed to pay the duty on captively consumed clinkers, he can avail CENVAT Credit for the purpose of manufacturing of cement, which is a dutiable item but for the exemption granted for the supplies for international competitive biddings - the appellant has made out a prima case for the waiver of pre-deposit of the amounts Pre-deposits waived till the disposal Stay granted.
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2014 (1) TMI 521
Excess amount of freight collected Includible in the assessable value or not - Invocation of Rule 6 of the Valuation Rules read with Section 11AC of the Central Excise Act, 1944 Waiver of pre-deposit Held that:- The amounts have been collected towards the freight charge for the transfers delivered to the place of the purchasers - Following BARODA ELECTRIC METERS LTD. Versus COLLECTOR OF CENTRAL EXCISE [1997 (7) TMI 126 - SUPREME COURT OF INDIA] the appellant has made out a case for the waiver of the pre-deposit of the amount Pre-deposits waived till the disposal Stay granted.
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2014 (1) TMI 520
Eligibility to avail canvat credit - Scrap transported from factory - Waiver of Pre-deposit of Penalty under Rule 26 of Central Excise Rules, 2002 Held that:- The invoice clearly indicates that the appellant has discharged the excise duty on the waste and scrap of iron, steel which arises due to the ship breaking - they are not arranging for the transport but is arranged by the dealers to transport scrap from appellants factory - prima facie, the appellant cannot be visited with penalty under Rule 26 of the Central Excise Rules, 2002 - the appellant has made out a strong prima facie for the waiver of the pre-deposit of the amount Pre-deposits waived till the disposal Stay granted.
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2014 (1) TMI 519
Aiding and abetting the sale and purchase of chakdo rickshaws - Waiver of Pre-deposit of Penalty under Rule 26 of Central Excise Rules, 2002 Held that:- There is a finding recorded by the adjudicating authority that the appellants had collected cash on behalf of the manufacturers over and above the invoice value, which would indicate that they were aware that the amount which has been collected, no duty is discharged by manufacturers - the chakdo rickshaws are registered by the appellants with the RTO based upon the documents which has been given to them by manufacturer and each indicates that assessees invoice of the sale of the chakdo rickshaws - the appellants to deposit an amount of Rs.25,000 as pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.
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2014 (1) TMI 518
Invoices raised but inputs not received Waiver of pre-deposit Held that:- The appellant had raised the credit without receiving the input the contentions and the evidence needs to be gone into detail which can be done only at the time of final hearing of appeals - Prima facie, the appellant needs to be put to some condition for hearing and disposing the appeals the main appellant has already deposited an amount of Rs.15 lakhs thus, a further deposit an amount of Rs.10 lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.
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2014 (1) TMI 517
Goods cleared but no machinery to process - Waiver of Pre-deposit Held that:- The appellant were clearing the goods to one of the firm despite having the knowledge that the M/s. Sana Textiles has no machinery to process the goods - there being an admission statement of the appellant as to the commissions and omissions the appellant had not been able to make put a prima facie case in their favour - the appellant is directed to deposit an amount of Rs.5 lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal partial stay granted.
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CST, VAT & Sales Tax
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2014 (1) TMI 569
Penalty under Section 10-A - Use of Form-C and Form-31, without any authority - Held that:- assessee has imported the goods. It is claimed that in Form-A, the assessee has attached the list mentioning the items for the purpose of import and re-sale. But, fact remains that without registration and without proper permission, he has imported the electrical goods and machinery and parts - Tribunal observed that on 08.01.1982, the assessee has submitted merely Form-A, but without any list. Concurrent findings have been recorded by both the appellate authorities. When the concurrent findings have been recorded by the appellate authorities, then no interference is required. The said findings has not been challenged - assessee has not attached the list along with the Form-A. Goods were imported without any registration and authority. When it is so, then the penalty levied is justifiable - Decided against assessee.
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Indian Laws
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2014 (1) TMI 553
Unaccounted properties possessed - Disproportionate sources of income - Held that:- Section 227 and 239 provide for discharge before the recording of evidence on the basis of the police report, the documents sent along with it and examination of the accused after giving an opportunity to the parties to be heard. However, the stage of discharge under Section 245, on the other hand, is reached only after the evidence referred in Section 244 has been taken - The court is required at this stage to see that there is a prima facie case for proceeding against the accused - Following R.S. Nayak v. A.R. Antulay, (1986) 2 SCC 716 [1986 (4) TMI 338 - SUPREME COURT OF INDIA] - There is no scope for doubt that the stage at which the magistrate is required to consider the question of framing of charge under Section 245(1) is a preliminary one and the test of prima facie case has to be applied - If the Trial court is satisfied that a prima facie case is made out, charge has to be framed - Accused N. Suresh Rajan has acquired properties disproportionate to his known sources of income in the names of his father and mother - The property in the name of an income tax assessee itself cannot be a ground to hold that it actually belongs to such an assessee - In case this proposition is accepted, it will lead to disastrous consequences - It will give opportunity to the corrupt public servants to amass property in the name of known persons, pay income tax on their behalf and then be out from the mischief of law - While passing the impugned orders, the court has not sifted the materials for the purpose of finding out whether or not there is sufficient ground for proceeding against the accused but whether that would warrant a conviction - This was not the stage where the court should have appraised the evidence and discharged the accused as if it was passing an order of acquittal - Defect in investigation itself cannot be a ground for discharge - The order impugned suffers from grave error and calls for rectification - The Court shall proceed with the trial from the stage of charge in accordance with law and make endeavour to dispose of the same expeditiously Decided in favour of petitioner.
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