TMI Tax Updates - e-Newsletter
January 17, 2014

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. SERVICE TAX LIABILITY – CONSTRUCTION OF SPORTS COMPLEX

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Indian Institute of Corporate Affairs Signs MoUs To Raise Awareness on Corporate Regulation and Governance and for Promoting the Corporate Affairs Agenda

2. Merchanting Trade Transactions - Revised Guidelines

3. Edible Oil, Oilseeds, Rice Exempted from Stock Holding Limit Under the Essential Commodities Act

4. Exchange rate of foreign currency Relating to imported and export goods notified

5. RBI Reference Rate for US $ and Euro

6. More than 1300 Investor Awareness Programmes Organized as on 31.12.2013 During the Current FY

Notifications

Customs

1. 05/2014 - dated 16-1-2014 - ADD

Seeks to levy definitive anti-dumping duty on imports of ‘Nonyl Phenol’, originating in, or exported from, Chinese Taipei for a further period of five years

2. 04/2014 - dated 16-1-2014 - ADD

Seeks to extend the validity of notification No.95/2011-Customs dated the 3rd October, 2011 for a period of one year i.e. upto and inclusive of 25th December, 2014

3. 03/2014 - dated 16-1-2014 - ADD

Seeks to extend the validity of notification No.137/2008-Customs dated the 26th December, 2008 for a period of one year i.e. upto and inclusive of 25th December, 2014.

4. 03/2014 - dated 16-1-2014 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 17th January, 2014

Circulars / Instructions / Orders

Income Tax

1. INSTRUCTION NO. 01/2014 - dated 15-1-2014

Certificate of Lower deduction or non-deduction of tax at source under section 197 of the Income-tax Act, 1961 - matter regarding.

FEMA

2. 95 - dated 17-1-2014

Merchanting Trade Transactions

Highlights / Catch Notes

Income Tax

• Court Rules Taxpayer Entitled to Hearing Despite Nonpayment of Tax on Returned Income u/s 249(4)(a.

  Case-Laws - HC : Applicability of section 249(4)(a) - seized amount is more then the demand payable - The Assessee could not have been denied a hearing merely on the ground of nonpayment of tax due on the returned income - HC
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• Court Rules Disallowance u/s 40A(2)(b) Unjustified; Relationships Alone Insufficient for Payment Rejection Without Evidence.

  Case-Laws - HC : Disallowance u/s 40A(2)(b) - AO was not justified in adopting disallowance to the extent of 10% payment under Section 40A(2)(b) of the Act solely on the ground that the company to whom the payment was made, was run by the wife of the Director of the assessee company - HC
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• Section 12AA: Trust Registration Can't Be Denied for Not Starting Activities Yet; Activity Start Not Required.

  Case-Laws - AT : Application for registration u/s 12AA - The registration could not have been refused on the ground that the trust has not yet commenced the charitable or religious activities - AT
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• Provision for Bad Debts Denied as Expenditure: Classified as Contingent Liability under Income Tax Act.

  Case-Laws - AT : Allowance of bad debts - Provision made was pre-matured - It was only contingent liability or notional loss which could not be allowed as an expenditure under provisions of I.T Act - AT
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• Banks can amortize HTM investment premiums as revenue expenditure per RBI and CBDT guidelines.

  Case-Laws - AT : In case of banks, the premium paid in excess of face value of investments classified under HTM category which has been amortised over the period till maturity is allowable as revenue expenditure since the claim is as per RBI Guidelines and CBDT also has directed to allow such premium - AT
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• Rental Income from Residential and Commercial Properties Treated Equally Under Income Tax Act Section 22.

  Case-Laws - AT : The Income Tax Act does not create any distinction between rental income from house property and rental income from commercial building - Section 22 shows that the term used in section is 'building', it is not qualified by the word 'residential' - AT
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• Applicants Challenge Tribunal's Findings; Review Request Denied u/s 254(2) of Income Tax Act.

  Case-Laws - AT : Recall of order u/s 254 - the applicants are merely disputing the findings of the Tribunal and seeking a review of the order of the Tribunal, which is not possible under S.254(2) of the Act - AT
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• Tax Assessment Reopening Invalidated Due to Unsupported and Erroneous Reasons Contradicting Available Evidence.

  Case-Laws - AT : Validity of reopening of assessment – the foundation of the reopening itself being erroneous insofar as the reasons recorded are erroneous and are not supported by any evidence but are contrary to the evidence as are available on record - AT
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• Taxpayer Avoids Penalty u/s 271AAA by Paying Tax and Interest on Undisclosed Income Post-Search.

  Case-Laws - AT : Deletion of Penalty u/s 271AAA - the assessee had paid tax along with interest on undisclosed income admitted during the course of search - penalty deleted - AT
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• Penalty u/s 271(1)(c) Not Automatic for Lack of Due Care in Asset Loss and Software Expense Claims.

  Case-Laws - AT : Penalty u/s 271(1)(c) – Disallowance on account of loss on assets written off and on software expenses – Absence of due care does not mean that the assessee is guilty of either furnishing of inaccurate particulars or attempting to conceal its income - AT
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Customs

• Court Denies Stay for Non-Edible Oil Import Case; No Leniency for Fraudulent Activity Involving Edible Oil Adulteration.

  Case-Laws - HC : Rejection of stay application - it is common knowledge that non-edible vegetable oil imported for manufacture of soap are illicitly diverted on large scale for adulteration of edible oils. Such fraudsters do not deserve the dispensation - HC
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• Refund Entitlement for Special Additional Duty on SEZ to DTA Transfers Upheld Under Notification 102/2007-Cus. Stay Granted.

  Case-Laws - AT : Refund of SAD - the benefit of Notification No. 102/2007-Cus., dated 14-9-2007, cannot be denied to the appellant for refund of duty paid on the goods if they move from SEZ to DTA. - stay granted - AT
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Corporate Law

• Cheque Dishonor Case Quashed: Legal Notice Issued Late, Complaint Not Maintainable u/s 482.

  Case-Laws - SC : Quashing of order u/s 482 - Dishonour of Cheque - cheque was presented second time on 10.11.2008 and was returned unpaid, legal notice for demand was issued only on 17.12.2008 which was not within 30 days of the receipt of the information by him from the Bank - complaint is not maintainable - SC
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Service Tax

• High Court Decision Takes Precedence Over CBEC Circular in Jurisdictional Conflicts; Binding on Department.

  Case-Laws - HC : If there is any conflict between the jurisdictional High Court and the CBEC circular, the decision of the jurisdictional High Court is binding to the department rather than CBEC circular. - HC
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• The appellant is not entitled to avail CENVAT Credit on sales commission services they obtained.

  Case-Laws - HC : Availment of CENVAT Credit - appellant would not be entitled to Cenvat Credit on Sales Commission Services obtained by them - HC
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• Appellant Denied CENVAT Credit for Erection Services; Service Tax on Freight and Insurance Excluded from Credit Claims.

  Case-Laws - AT : Availment of inadmissible CENVAT credit - Erection, commissioning and installation service - ppellant separately collected the service tax paid on freight and insurance, from PGCIL and therefore they were not entitled to claim CENVAT credit of such tax - AT
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• Service Tax Implications on Construction for Hindustan Aeronautics Ltd. & Nuclear Fuel Complex Under Govt. of India Examined.

  Case-Laws - AT : Industrial or Commercial Construction - construction activities of buildings for Hindustan Aeronautics Ltd. and also for the Nuclear Fuel Complex (NFC) belonging to the Department of Atomic Energy, Govt. of India - prima facie case is not in favor of assessee - AT
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• Court Considers Barbie Dolls and Hot Wheel Kits Assembly as Manufacturing, Grants Stay on Service Tax Implications.

  Case-Laws - AT : Job work - Assembly of parts - When the goods were cleared from the appellant’s factory premises, they were complete product in the form of Barbie Dolls and Hot Wheel Kits - prima facie it is a manufacturing activity - stay granted - AT
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Central Excise

• Interest on Loans Excluded from Valuation of Castings Transferred to Another Unit u/r 8 with CAS-4 Plus 15%.

  Case-Laws - AT : Clearance of castings made to other unit - interest on loan is not required to be included for the purpose of valuation under Rule 8 read with CAS-4 plust 15% - AT
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Case Laws:

• Income Tax

• 2014 (1) TMI 764
  Reference to DVO u/s 55A - Held that:- Section 55A(a) of the Act provides that a reference could be made to the Departmental Valuation Officer only when the value adopted by the assessee was less then the fair market value - The value adopted by the respondent assessee of the property at Rs.35.99 lakhs was much more than the fair market value of Rs.6.68 lakhs even as determined by the Departmental Valuation Officer - The invocation of Section 55A(a) of the Act is not justified. The reference to the Departmental Valuation Officer by the Assessing Officer is unsustainable because the case of assessee is clearly covered u/s 55A(a) - This is for the reason that Section 55A(b)of the Act very clearly states that it would apply in any other case i.e. a case not covered by Section 55A(a) of the Act - The CBDT Circular dated 25 November 1972 can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the revenue as found in Circular issued by the CBDT is not binding upon the assessee and it is open to an assessee to contend to the contrary - Decided against Revenue.

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• 2014 (1) TMI 763
  Disallowance under section 40A(2) - Held that:- Disallowance was made by invoking the provisions of 40A(2)(b) of the Income Tax Act on 'estimate basis' for which no reason was given - No reason was given for reduction in the salary by the authorities concerned - Following New Plaza Restaurant vs. ITO [2008 (7) TMI 260 - HIMACHAL PRADESH HIGH COURT] - Estimation is a question of fact - Decided against assessee.

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• 2014 (1) TMI 762
  Applicability of section 249(4)(a) - Held that:- As per section 249(4) - Where an Assessee has filed a return of income, then the tax which is admittedly payable by the Assessee should be paid prior to the hearing of any appeal filed by the Assessee - The rationale seems very logical for the reason that no Assessee can be heard in an appeal where the tax which is admittedly payable by the Assessee is outstanding. It is to enforce payment of tax on admitted income - Where an Assessee files the return of income then at least the tax which is payable in terms of the return income should be paid by the Assessee - But where the Assessee either has paid the tax on the returned income or sought adjustment of the amount admittedly lying with the revenue towards the tax payable on the returned income, the Assessee cannot be denied a hearing. The amount of Rs.4,60,000/- belonging to the Assessee which was seized by the Revenue authorities was admittedly available with the appellant was far in excess of the amount of tax payable in terms of the returned income and was even in excess of the demand created under Section 143(1)(a) - The Assessee could not have been denied a hearing merely on the ground of nonpayment of tax due on the returned income - Decided against Revenue.

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• 2014 (1) TMI 761
  Rejection of grant of registration u/s 12AA - Held that:- The Commissioner did not raise any issue about the objects of the trust which the Tribunal found are clearly charitable in nature - The only ground which weighed with the Commissioner in declining to grant registration has been found to be contrary to law - Following Hardayal Charitable and Educational Trust vs. Commissioner of Income-Tax1 [2013 (3) TMI 377 - ALLAHABAD HIGH COURT] - The registration under section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity - At this stage, only the genuineness of the objects has to be tested and not the activities, which have not commenced - The enquiry of the Commissioner of Income-tax at such preliminary stage should be restricted to the genuineness of the objects - Decided against Revenue.

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• 2014 (1) TMI 760
  Disallowance u/s 40A(2)(b) - unreasonable and excessive expenditure - Held that:- The genuineness of the expenditure has not been doubted by the A.O. - The only reason for the impugned addition was that the payments was excessive in nature - No such comparable instance was quoted by the AO to prove that the payment was excessive as compared to market rate - There was no motive to divert the income because the assessee is entitled for the claim of 100% deduction on the income u/s 80IA(4) - The totality of the circumstances demonstrates that there was no justification on the part of the AO to make such an adhoc addition - The Assessing Officer was not justified in adopting disallowance to the extent of 10% payment under Section 40A(2)(b) of the Act solely on the ground that M/s. Pollucon Engineers to whom the payment was made, was run by the wife of the Director of the assessee company - Decided against Revenue.

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• 2014 (1) TMI 759
  Application for registration u/s 12AA - Held that:- Following Babu Ram Education Society vs. CIT [2014 (1) TMI 673 - ITAT AGRA] - most of the objections raised by the ld. CIT in the impugned order are not relevant for the purpose of grant of registration u/s. 12AA of the IT Act and approval of exemption u/s. 80G(5) of the IT Act - For grant of registration u/s. 12AA, The Commissioner of Income Tax is not required to look into the activities where such activities have not or in the process of its initiation - The objects of the Institution shall have to be seen - The issue of receipt of donations is not relevant - The registration could not have been refused on the ground that the trust has not yet commenced the charitable or religious activities - The genuineness of the objects have to be tested and not the activities which have not commenced - The reasons given by the ld. CIT in the impugned order for rejection of applications are thus not relevant at this stage which may be a separate issue and arise whenever the return of income would be filed by the assessee and would be examined at assessment stage - The issue has been restored for fresh adjudication.

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• 2014 (1) TMI 758
  Sale and purchase of shares - Income from business or income from capital gains - Held that:- the gains earned from trading in shares and units of the mutual funds as income from "capital gain and not "income from profits and gains of business or profession" - Decided against Revenue.

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• 2014 (1) TMI 757
  Allowance of bad debts - Held that:- As per compliance report submitted by assessee to Reserve Bank of India, provision was made for pending entry for more than two years - This provision was made on 31-03-2008 pending reconciliation of inter branch and inter bank accounts - As per advise of Reserve Bank of India, the assessee did not take into account the said entry as income either in current year or in preceding year - Revenue authorities observed that provision is an expenditure relating to a particular account period but not falling due on date of filing financial statement - The expenditure relates to particular financial year, a provision was made against revenue generated in said accounting period failing which financial statement could not be shown free and fair view - The provision for expenditure could be allowed as deduction only if liability accrued as on date of making provision and it is not a contingent liability. Provision so made was pre-matured - It was only contingent liability or notional loss which could not be allowed as an expenditure under provisions of I.T Act - The amount in question was not actually returned as bad or business loss during the year and it was only notional provision or loss for diminution of value, if any which could not be allowed as deduction either u/s. 37 of I.T Act or u/s. 28 of I.T Act which has been rightly disallowed by Assessing Officer - Decided against assessee. Amortization of premium paid on purchase of Government Securities - Held that:- As per RBI guidelines dated 16th October, 2000, the investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS) - Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortised over the period remaining to maturity - In the case of HFT and AFS securities forming stock in trade of the bank, the depreciation/ appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. Following The Catholic Syrian Bank Ltd. Versus The Addl. Commissioner of Income-tax, Range-1, Thrissur. [2013 (1) TMI 129 - ITAT COCHIN] - In case of banks, the premium paid in excess of face value of investments classified under HTM category which has been amortised over the period till maturity is allowable as revenue expenditure since the claim is as per RBI Guidelines and CBDT also has directed to allow such premium - Decided in favour of assessee.

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• 2014 (1) TMI 756
  Disallowance u/s 14A - Held that:- It was not examined by the AO whether the interest expenditure was directly relatable to the exempted income or it was not directly attributable to any particular activity - The issue has been restored for fresh adjudication. Disallowance of administrative expenditure - Held that:- The disallowance of expenditure cannot exceed the total expenditure incurred and claimed by the assessee because section 14A provides that expenditure incurred in relation to income not includible in the total income shall not be allowed - Following Jindal Equipment leasing & Consultancy Services Ltd. Versus ACIT, New Delhi [2013 (5) TMI 17 - ITAT DELHI] - When the expenditure has not been incurred by the assessee then there is no scope for any disallowance under section 14A as there is no expenditure incurred by the assessee which is relatable to the income which does not form part of the total income - Decided in favour of assessee.

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• 2014 (1) TMI 755
  Disallowance u/s 14A - Held that:- Following Maxopp Investment Ltd. vs CIT [2011 (11) TMI 267 - Delhi High Court] - Rule 8D is applicable w.e.f. A.Y. 2008-09 - The issue has been restored to AO for fresh adjudication. Undeclared commission income - held that:- From the Form No.16 the salary income was Rs.1,12,60,600 which included commission income of Rs.88,60,600. The TDS was Rs.37,50,990 - The gross salary income offered for taxation was Rs.1,13,20,571 - The commission is properly reflected in the return - The issue has been restored to the AO with a direction to verify the reconciliation statement and other documents - Decided in favour of assessee. Whether CIT(A) have the power to set aside the issue to the AO and entertain fresh evidence - - Held that:- The CIT(A) has the power to admit fresh evidence by specific order under Rule 46A of the Income Tax Rules, 1962 - The power so exercised has been on the plea advanced on behalf of the assessee that no queries in the course of the assessment proceedings qua the issue were raised by the AO - As such the action of the CIT(A) in admitting fresh evidence cannot be faulted with – The rules further require that opportunity to rebut the fresh evidences by evidence, document etc by way of a remand report should have been provided to the AO which admittedly has not been done by the CIT(A) who has instead restored the issue to the AO which he was not empowered to do so as section 251(1)(a) does not empower the CIT(A) to restore the issue to the AO as he can only confirm, reduce, enhance or annul the assessment - In the circumstances holding that the fresh evidence admitted was necessary and crucial for determining the issue as the AO has not proceeded on a sound footing by straightaway making the addition on the ground that Form No-16 was not available which he could have easily called for in the course of the assessment proceedings – Grounds of the Revenue are allowed whereas the ground of assessee has been restored for fresh adjudication.

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• 2014 (1) TMI 754
  Amortization of premium paid on Government Securities – Held that:- As per RBI guidelines dated 16th October, 2000, the investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortised over the period remaining to maturity. In the case of HFT and AFS securities forming stock in trade of the bank, the depreciation/ appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. The Reserve Bank of India norms in respect of Schedule Urban Co-operative Banks had, on 02/09/2004 allowed the shifting of SLR securities to not more than 25% of NDTL provided that the depreciation on such shifting should be fully provided - In view of the difficulties being faced by the urban co-operative banks in meeting the provisioning requirement, the Reserve Bank of India, vide No.UBD(PCB).Cir.41/16.20.200/2004-05 dated 28/03/2005 allowed the amortization of cost over a maximum period of five years commencing from the year 2005 - The claim made by the appellant is in accordance with the extant Reserve Bank of India guidelines providing for provisioning requirement between the book value and the face value. As per the Circular No. 599 (F.No.201/29/87/ITA.II), dated 24th April, 1991 issued by CBDT - Securities held by banks must be regarded as their stock-in-trade and the claim of loss, if debited in the books of account, should be given the same treatment as is normally given to the stock-in-trade. It was also clarified that the interest paid for broken-period on the purchase of securities must be regarded as revenue payment and allowed accordingly. Following ACIT vs. The Bank of Rajasthan Ltd [2010 (12) TMI 894 - ITAT, Mumbai] - In case of banks, the premium paid in excess of face value of investments classified under HTM category which has been amortised over the period till maturity is allowable as revenue expenditure since the claim is as per RBI Guidelines and CBDT also has directed to allow such premium - Decided against Revenue.

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• 2014 (1) TMI 753
  Estimation of gross profit – Books of Accounts required verification – AO was of the view that the assessee having filed the tax audit report obtained by it in accordance with the provisions of Section 44AB – Held that:- Trading in goods cannot be compared for generation of income on account of services when it is an accepted principle that retail trade returns are to be taxed at 5% in case of books are not required to be maintained by the assessee when the contractors are to be taxed at 8% as per the provisions of Section 44AD - there was no merit in the assessment order when the Assessing Officer tried to recompute the purported income embedded in the shortage which fact remains that the assessee did not get paid for it by reducing the transport receipts, when the Assessing Officer has himself has calculated at 12% of gross receipts from transportation - the taxation as brought on record an estimation of 12% to be reduced to 8% would meet the comparison as sought to be brought on record insofar as the coal trading business has also been brought on record by the Assessing Officer for the purpose of comparison - no estimation can be made on purported short receipts on account of transport business which relates to shortages of goods delivered and not because the shortage should be benchmarked fixed for comparison – Decided partly in favour of Assessee.

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• 2014 (1) TMI 752
  Deduction u/s 54F of the Act – Scope of section 22 of the Act – Held that:- The authorities below have erred in coming to the conclusion that the assessee owns two residential properties as the income received from the commercial property is assessed under the head "Income from House Property" - The view taken by the Commissioner of Income Tax (Appeals) is not correct that, the assessee has claimed deduction under section 24 of the Act, the assessee cannot claim property at Raahat Plaza to be commercial property - The Income Tax Act does not create any distinction between rental income from house property and rental income from commercial building - Rental income from residential and/or commercial building has to be assessed under section 22 of the Act under the head "Income from House Property" subject to certain exceptions. Section 22 shows that the term used in section is 'building', it is not qualified by the word 'residential' – Relying upon Shambhu Investment P. Ltd. Vs. CIT [2003 (1) TMI 99 - SUPREME Court] - the property situated at Raahat Plaza, Arcot Road, Chennai is a commercial property - the deduction claimed by the assessee under section 54F of the Act on account of investment in new residential house at Kodaikanal is allowed – Decided in favour of Assessee.

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• 2014 (1) TMI 751
  Recall of order u/s 254 of the Act - Rectification of mistake apparent from record - Held that:- The use of term 'net of all deductions' and specific direction not to allow separate deduction towards remuneration and interest payments to partners, is nothing but the manner of estimation of income of the assessee approved by the Tribunal for determining the incomes of the assessee for the years under consideration by the Assessing Officer - such a direction need not specifically arise only on account of any specific ground raised by the Revenue with regard to allowability of deductions towards remuneration and interest payments to partners - the Tribunal has taken a conscious view in the matter of adopting a method estimation of income, while giving such a direction – thus, it cannot be termed as a mistake apparent from record, nor the Tribunal could review or modify such directions, in the guise of rectifying its order, within the scope of the provisions of S.254(2) of the Income-tax Act, 1961 – the decision of CIT V/s. Ved Prakash [1993 (4) TMI 17 - ANDHRA PRADESH High Court] followed - thus, there could not be any mistake apparent from record in the order of the Tribunal – Decided against Assessee.

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• 2014 (1) TMI 750
  Recall of order u/s 254 of the Act - Rectification of mistake apparent from record - Held that:- The assessees are merely criticizing and disputing the findings of the Tribunal in relation to the nature of land - The grievance of the assessees is also on account of non-mentioning of certain citations relied upon and also certain contentions advanced by the learned Authorised Representative for the assessees before the Tribunal - A careful reading of the order of the Tribunal, clearly reveals that all the contentions of the parties before it have been duly considered and findings have been given based on the material apparent from record – there was no material omission or mistake on the part of the Tribunal in recording the contentions of learned Authorised Representative for the assessees before it – Relying upon Smt. Poonam Kumari. Versus Income-Tax Officer. [1996 (3) TMI 156 - ITAT ALLAHABAD] - the applicants are merely disputing the findings of the Tribunal and seeking a review of the order of the Tribunal, which is not possible under S.254(2) of the Act – Decided against Assessee.

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• 2014 (1) TMI 749
  Validity of reopening of assessment – Notice issued u/s 148 of the Act – Held that:- The AO has recorded his reasons on the basis of the enquiries conducted in the case of the assessee in pursuance to Tax Evasion Petition - the AO has recognized that the assessee is disclosing income from salary - When the AO recognized that the assessee is offering income from salary obviously it would have been known to him that the assessee is drawing his salary from some organizations - the foundation of the reopening itself being erroneous insofar as the reasons recorded are erroneous and are not supported by any evidence but are contrary to the evidence as are available on record - the reasons as recorded are bad in law and the same are liable to be quashed as also the consequential assessment as a consequence to the notice issued u/s 148 of the Act - The reasons recorded for the purpose of reopening the assessments in the case of the assessee are without legal backing and is not supported by any evidence or material on record – Decided in favour of Assessee.

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• 2014 (1) TMI 748
  Deletion of Penalty u/s 271AAA of the Act – Undisclosed income – Held that:- Disclosure of Rs. 75 lacs was made and the same was also offered for tax and tax was also paid - Assessee had submitted that the unaccounted income was earned from undisclosed income - CIT(A) by well-reasoned order while deleting the penalty has noted that the bifurcation of disclosure of undisclosed income was admitted by the Assessee and also filed - the authorised officer did not ask any specific question on substantiating the manner in which income was derived - the income was earned by the Assessee and was satisfied about substantiating the manner in which the undisclosed income was earned - the assessee had paid tax along with interest on undisclosed income admitted during the course of search – Relying upon CIT vs. Mahendra C. Shah [2008 (2) TMI 32 - GUJARAT HIGH COURT] and CIT vs Radha Kishan Goel [2005 (4) TMI 47 - ALLAHABAD High Court] - deleted the penalty - Revenue has not brought any material on record to controvert the findings of CIT(A) – the order of the CIT(A) upheld – Decided against Revenue.

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• 2014 (1) TMI 747
  Penalty u/s 271(1)(c) of the Act – Disallowance on account of loss on assets written off and on software expenses – Held that:- The assessee had disclosed the material facts before the AO and CIT(A) - When the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant thereto, the disallowance of such claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing inaccurate particulars - What is to be seen is whether the said claim made by the assessee was bona fide and whether all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for concealment penalty under section 271(1)(c) of the Ac - Decision of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT [2012 (9) TMI 775 - SUPREME COURT] followed - a bonafide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income, can only be described as a human error which one is prone to make - Absence of due care does not mean that the assessee is guilty of either furnishing of inaccurate particulars or attempting to conceal its income – Thus, penalty u/s 271(1)(c) could not be levied – Decided in favour of Assessee.

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• 2014 (1) TMI 746
  Addition on account of notional interest on security deposit – Held that:- Following Advacado Properties & Trading (I) Pvt. Ltd. [2011 (2) TMI 1299 - ITAT MUMBAI] - the addition on account of notional interest on security deposit for computing the annual value of the property – Decided in favour of Assessee. Disallowance on account of claim of depreciation – Held that:- Following Allied Electronics and Magnetics Ltd. V. DCIT [2007 (2) TMI 213 - DELHI HIGH COURT] - depreciation cannot be granted for the plant and machinery which has not been actually used in the business of the assessee – One of the conditions for allowing deduction u/s 32, is that the machinery must have been used for the purposes of the business during the previous year in which the machinery is sold, discarded, demolished or destroyed – Decided against Assessee. Disallowance of interest expenditure – Held that:- Following M/s Marchon Textiles Industries P. Ltd [2014 (1) TMI 384 - ITAT MUMBAI] - the claim of the assessee allowed by noting that non- utilisation of interest bearing funds for giving interest free advances cannot be the basis for such disallowance – Decided against Revenue.

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• 2014 (1) TMI 745
  Scope of the term charitable institution u/s 2(15) of the Act – Assessee treated as charitable institution – Held that:- the claim of the assessee of being a public charitable trust is covered in favour of the assessee - The AO in the assessment order 1990-01 and 1992- 93 in the assessment framed in scrutiny assessment has admitted that the assessee is a public charitable trust - there is no merit in the grounds of appeal of the revenue - the action of the CIT(A) in treating the assessee as a charitable institution covered u/s 2(15) of the Ac upheld – Decided against Revenue.

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• 2014 (1) TMI 744
  Deletion of disallowance of excess depreciation on tippers, road rollers and JCB u/s 32 of the Act - Held that:- Depreciation on tippers, road rollers and JCB will be allowable @ 40% as against 25% allowed by the AO treating these machineries as plant and machinery and not under the category of motor vehicles – there was no infirmity in the order passed by ld. CIT (A) allowing the higher rate of depreciation in respect of tippers, road rollers and JCBs in both the years though for different reasons - Relying upon CIT vs. A.M. Construction [1998 (8) TMI 58 - ANDHRA PRADESH High Court]. Deletion of disallowance u/s 40(a)(ia) of the Act - Non-deduction of TDS on transport expenses – Held that:- The payments for purchase of material and supply at the site of construction has not resulted in carrying out of any work by a contractor or a sub-contractor for the purposes of section 194C of the Act - the tax was not to be deducted at source u/s 194C of the Act - the assessee had not made payment to a contractor or a subcontractor - Relying upon Birla Cement Works v CBDT [2001 (2) TMI 8 - SUPREME Court] - The payment has been made for the purchase of building material which included the cost of transportation upto the site of the assessee – Thus, the payment made for purchase of material including the transportation cost would not fall under the category of payment to contractor or sub-contractor - the payment made by the assessee will not be hit by the provisions of Section 40 (a)(ia) of the Act. Deletion on account of remission or cessation of liabilities u/s 41 (1) of the Act – Held that:- The assessee has not written back the liabilities nor have the parties forgone their claims – Thus, no benefit has been derived by the assessee - the assessee has made payment to the parties in the year under consideration by way of cash, the payments made to outstanding creditors cannot be treated as income u/s 41(1) of the Act – the assessee had not derived any benefit as the assessee had paid off the liability in the year under consideration - There was no remission or cessation of liability - The AO had not collected any material on record to show that the parties to whom the payments were shown to have been made by the assessee had written off the amounts in the year under consideration - there was no cessation or remission of liability, the amount was not liable to be added u/s 41(1) of the Act – decided against Revenue.

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• 2014 (1) TMI 743
  Disallowance u/s 36(1)(iii) of the Act – Relatable Interest – Interest free advances made to sister concern – Held that:- The total interest free funds available with the assessee was about 12.88 crores, the total interest free funds advanced to the sister concern and others were only 4.16 crores – Prima facie, interest free funds available were much more than the interest free advances given by the assessee - there is no basis for the Assessing Officer to presume that interest bearing funds were advanced to the sister concern as interest free loans – Relying upon CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] the presumption should be that the interest free funds were used to give the interest free loans to the sister concern – order of the CIT(A) set aside – Decided in favour of Assessee and against Revenue. Disallowance made for reversal enteries – Explanation of the Appellant not appreciated – Held that:- The submissions of the assessee require examination by the Assessing Officer in the light of what transpired in the assessment for assessment year 2004-05 in respect of the reversal entry shown in that year - As far as this assessment year is concerned these expenses were connected with the business of the assessee and had to be allowed as deduction - The estimate of expenses to be incurred for the project Ashirward had to be allowed as deduction because the income from the said project was declared by the assessee in the previous year – also, the assessee had an obligation to pay 15 lacs to the land owners and also provide alternate accommodation to the tenants of the property which was to be developed by the assessee - These expenses were legitimate business expenses which are to be allowed as deduction - these expenses were ultimately not to be incurred by the Assessee – Thus, if the above expenses are allowed as deduction the reversal entry, if it is not properly explained will be income of AY 04-05 – order of the CIT(A) set aside and the matter remitted back to the AO to examine on the relevant reversal entries in AY 04-05. Disallowance made out of site expenses – Expenses made on ad-hoc basis – Proper justification not made by AO – Held that:- The complete details of expenses with supporting documents like bills vouchers were submitted before the Assessing Officer and no deficiency has been pointed out by the Assessing Officer except general remarks - the disallowance of 5% of the site expenses and sundry expenses would be fair and reasonable – Decided partly in favour of Assessee. Deletion made u/s 40A(2)(b) of the Act – Excessive payments made – Held that:- The Group concerns have entered into MOU for creation of common pool company to function on 'no profit no loss' basis in providing administrative and managerial requirement of the constituent members - Amount to be reimbursed in the proportion to the construction cost incurred by each of the constituent member - In scrutiny assessment made in the case of M/s. Jayagopal Consultancy Services Private Limited u/s. 143(3) it was accepted by the AO in that M/s. Jaygopal Consultancy Services Private Limited was functioning on 'no loss no profit basis' and no commercial activity was carried out by it except for incurring expenses on behalf of the group companies as a 'pool company' - Relying upon Glaxo Smithkline Asea (P) Ltd., ACIT, Delhi ITAT 'C' Bench [2005 (8) TMI 301 - ITAT DELHI-C] Thus, it cannot be said that the payment was not for purpose of business or was excessive or unreasonable – order of the CIT(A) upheld - Decided against Revenue. Deletion made u/s 40A(2)(b) of the Act – Purchase of marble from sister concern – Held that:- The cost of marble and laying depends upon the quality of marble and this was demonstrated on by the Assessee by showing that for different project in the assessee company, the rate per sq. ft. varied from 280/- per sq. ft. to 315/- per sq. ft. The rate also varied for outside parties and the range was between 150 per sq. ft. to 700/- per sq. ft. No material brought on record by AO proving that rate charged by Topaim was on higher side –Thus, the order of the CIT(A) for disallowance made u/s 40A(2)(b) upheld - The cost of purchase of marbles from Topaim was part of opening and closing WIP - No addition could be made on presumption without the AO proving that the same was not forming part of WIP - the assessee already sold back the said unused marbles in A.Y 2006- 07 - the marbles formed part of closing WIP in the books of the assessee company – Thus, the order of the CIT(A) upheld – Decided against Revenue. Deletion made u/s 40A(2)(b) f the Act – Excessive Interest paid – Held that:- Loans borrowed from outsiders were in majority of case at the rate of interest including brokerage ranging 18% to 27% - Thus, average rate of interest worked out to more than 18% - Ahuja Properties borrowed funds from outsiders and has paid interest ranging from 15% to 21% - it has incurred expenses for maintaining the loans and after reducing the payment of interest to outsiders, has shown some profit earning on financing business and offered the same for tax and paid tax – The decision in CIT vs Amrit Soap C. [2008 (11) TMI 71 - PUNJAB AND HARYANA HIGH COURT] followed - The Assessee is a loss making company and hence, there is no avoidance of tax - In such circumstances no disallowance can be made by invoking the provisions of Sec.40A(2)(b) of the Act – Decided against Revenue. Deletion made on account of Fitness equipment and door cameras – Construction cost to be bear by Assessee – Held that:- The expenditure was incurred by the Assessee in the course of its business - The AO has not doubted the genuineness of expenses - Fitness equipment and door camera part and parcel of construction work - These expense are wholly and exclusively for the purpose of business – Thus, they were rightly directed to be allowed as deduction by the CIT(A) – Order of the CIT(A) upheld – Decided against Revenue.

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• 2014 (1) TMI 742
  Addition made u/s 40(a)(ia) of the Act – Payment made to sub-contractors – TDS not deducted – Held that:- The Assessee was not required to deduct TDS as he was a sub- contractor and the payment made by him was to a sub sub-contractor - whether the assessee is a sub-contractor or main contractor has not been examined either by Assessing Officer or CIT(A) as there is no finding to this effect in their orders –Thus, the issue needs to be examined – the matter remitted back to the CIT(A) for verification – Decided in favour of Assessee. Addition restricted u/s 40(a)(ia) of the Act – Held that:- The Assessing Officer had disallowed the payment made to sub-contractors on which the assessee had not deducted TDS - The total disallowance worked out under 40(a) (ia) was Rs. 33,76,994 - CIT(A) after considering the submissions of the Assessee noted that the amended provisions of section 194C with effect from 01.10.2004 applied to the transactions entered into on or after that date and hence the aggregate limit of contractual amount of Rs. 50,000/- for application of TDS provisions has to be calculated for the period 1.10.2004 onwards – the relief granted to the assessee of Rs. 19,27,931 being the payment made in excess of Rs. 50,000 reckoned from 01.10.2004 – Revenue could not controvert the findings of CIT(A) – There was no reason to interfere with the order of CIT(A) – Decided against Revenue. Addition on account of disallowances of various expenses - Held that:- CIT(A) while deleting the addition has noted that the Assessee had submitted the details of expenses before Assessing Officer - He also noted that financial and other similar expenses to be properly - the disallowance restricted to Rs. 65,166 - Revenue could not controvert the findings of CIT(A) or bring any material in its support – there was no necessity A.Y. 2005-06 to interfere with the order of CIT(A) – Decided against Revenue.

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• Customs

• 2014 (1) TMI 741
  Rejection of stay application - Whether in fact or of law to hold that the Tribunal has committed an error of jurisdiction while rejecting the application for stay - Held that:- Appellant have not been able to establish a prima facie in their favour and, therefore, conditions have to be imposed for safeguarding the interests of the Revenue. In fact, the appellant appear to have committed a huge fraud the ramifications of which go beyond mere tax evasion as it is common knowledge that non-edible vegetable oil imported for manufacture of soap are illicitly diverted on large scale for adulteration of edible oils. Such fraudsters do not deserve the dispensation under the provisions of first proviso to Section 129E of the Customs Act, 1962. Regarding stay granting by the Tribunal in another case - Held that:- an erroneous order passed by a Tribunal cannot operate as a precedent as each case has to be decided on its own peculiar facts. This apart, a finding has been recorded by the Tribunal that the certificate issued to the appellant clearly states that it is issued on the basis of record without any physical verification - Appeal dismissed - Decided against the appellant.

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• 2014 (1) TMI 740
  Discharge of the offences - Recovery of 3.022 kgs of Heroin - Contravention of the provisions of the Act - Held that:- it is found on merit that there is no contravention of the provisions of the Act in the adjudication proceeding, the trial of the person concerned shall be in abuse of the process of the court - there was a recovery of 3.022 kgs of Heroin at Attari Rail, Amritsar by the Inspector, Customs. The petitioner was arrested in F.I.R No. 6 dated 02.02.2010 under Section 21/23/28/29 of NDPS Act upon conscious possession and recovery of 01 kg of heroine. As per his disclosure statement made before the police (A-6), he submitted that 03 packets of heroine sized by the Customs Official on 11.12.2009 from LCS, Attari Rail, Amritsar belonged to him., On the basis of this statement, the petitioner was taken into custody. Thereafter, his statement under Section 67 of the Act and 108 of the Customs Act was recorded(A-7). While making this statement, the petitioner denied 03 kg of heroine which was recovered by the Customs Staff from Attari Rail, Amritsar on 11.12.2009, was to be delivered to him. Since the recovery of 01 kg of heroine had been effected, he is facing trial in F.I.R No. 6 dated 02.02.2010 with regard to the fact that in his disclosure statement, he had admitted the recovery of 03 kg of heroine in December, 2009, belonged to him. This statement was not made as per Section 67 of the NDPS Act. The statement was made before the Interrogating Officer Bawa Singh Sub Inspector. Subsequently, when he appeared before the Court on 01.05.2010,he denied the contents of the statement made by him (A-6). The question for consideration is that whether the statement made on 04.02.2010 (A-6) which was not as per Section 67 of the Act, can be used against him and thereafter, charges under Section 21/23/28/29 of the Act can be framed against him. Petitioner had made a disclosure statement (A-6) before Bawa Singh Sub Inspector. This statement cannot be used against him, as made under Section 67 of the Act so as to charge him with the offence of recovery of 03 packets of heroin recovered/seized by the custom official on 11.12.2010. The statement made (A-6) by the petitioner is not admissible in evidence, as per Section 26 of the Evidence Act. Moreover, penalty proceedings had been initiated against the petitioner and he has been acquitted by the department in these proceedings - continuation of the trial against the petitioner would be an abuse of the process of Court - Following decision of Radheyshyam Kejriwal vs. State of West Bengal and another [2011 (2) TMI 154 - Supreme Court of India] - Decided in favour of Appellant.

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• 2014 (1) TMI 739
  Waiver of pre deposit - Refund under the provisions of Notification No. 102/2007-Cus., dated 14-9-2007 - Held that:- benefit of Notification No. 102/2007-Cus, dated. 14-9-07 is denied by the first appellate authority on the ground that the goods are not exported from SEZ. We find that the office of Development Commissioner of SEZ has given, specific instructions that all the exemptions, partially or totally, provided and under the Customs Act, 1975 are applicable to levy of duty. If that be so, the benefit of Notification No. 102/2007-Cus., dated 14-9-2007, cannot be denied to the appellant for refund of duty paid on the goods if they move from SEZ to DTA. It is also to be noted that for all such purposes, SEZ is considered as a ‘place’ out of India and any goods move into SEZ are considered as export and the goods which move out of SEZ are considered as import - Prima facie case in favour of assessee - Stay granted.

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• 2014 (1) TMI 738
  Valuation of imported polyester knitted fabric - rejection of value - Lack of evidence to prove commercial value - Held that:- Customs has power to reject the transaction value and enhance the assessable value in terms of Customs Valuation Rules. However, such rejection of transaction value and enhancement of assessable value has to be on the basis of some evidences on record. Contemporaneous imports have to be considered in reference to quality, quantity and country of origin with the imports under consideration. It has been held in a number of decisions that NIDB data cannot be made the basis for enhancement of value. Commissioner (Appeals) has relied upon various decisions of the Tribunal for holding any enhancement in assessment value, the transaction value has to be first rejected based on legal permissible ground as indicated in the Valuation Rules - Revenue has not advanced any such evidences to support their case. Inasmuch as, no evidence of rejection of transaction value stands produced by the authority - Decided against Revenue.

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• 2014 (1) TMI 737
  Stay application - Confiscation of goods - Nature goods called hazardous - Imposition of redemption fine - Held that:- impugned goods have been imported in September 2010 and they were yet to be cleared - Therefore, matter is listed for hearing - Stay granted.

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• Corporate Laws

• 2014 (1) TMI 736
  Quashing of order u/s 482 - Dishonour of Cheque - Held that:- complainant had not filed the complaint on the dishonor of the cheque in the first instance, but presented the said cheque again for encashment. This right of the complainant in presenting the same very cheque for the second time is available to him under the aforesaid provision - there cannot be any quarrel and the act of the complainant in presenting the cheque again cannot be questioned by the appellant. However, we find that when the cheque was presented second time on 10.11.2008 and was returned unpaid, legal notice for demand was issued only on 17.12.2008 which was not within 30 days of the receipt of the information by him from the Bank regarding the return of the cheque as unpaid. Non issuance of notice within the limitation prescribed has rendered the complaint as not maintainable. It is thus clear that period of limitation is not to be counted from the date when the cheque in question was presented in the first instance on 25.10.2008 or the legal notice was issued on 27.10.2008, inasmuch as the cheque was presented again on 10.11.2008. For the purposes of limitation, in so far as legal notice is concerned, it is to be served within 30 days of the receipt of information by the drawyee from the bank regarding the return of the cheque as unpaid. Therefore, after the cheque is returned unpaid, notice has to be issued within 30 days of the receipt of information in this behalf. That is the period of limitation provided for issuance of legal notice calling upon the drawer of the cheque to make the payment. After the sending of this notice 15 days time is to be given to the noticee, from the date of receipt of the said notice to make the payment, if that is already not done. If noticee fails to make the payment, the offence can be said to have been committed and in that event cause of action for filing the complaint would accrue to the complainant and he is given one month time from the date of cause of action to file the complaint - he received the information about the dishonor of the cheque on 10.11.2008 itself. However, he did not send the legal notice within 30 days therefrom. We, thus, find that the complaint filed by him was not maintainable as it was filed without satisfying all the three conditions laid down in Section 138 of the N. I. Act - Decided in favour of appellant.

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• 2014 (1) TMI 735
  Arbitration agreement - Transfer of shares - CLB held to transfer of Respondent's rights to Appellant - High Court held that no transfer of right to be taken place - Can the Arbitration clause under clause 15 of the letter of Agreement dated 12th January, 2002 be invoked by the appellants and whether Clause 7.5 of the subsequent Agreement dated 8th March, 2002 invoking the exclusive jurisdiction of the courts of Calcutta nullify the scope of arbitration as mentioned in the previous agreement dated 12th January, 2002 - Held that:- It is nowhere mentioned in the letter dated 8th March, 2002 that transfer of shares to CPIL instead of CPMC extinguishes the old agreement dated 12th January, 2002 to nullity. In fact, in the letter dated 8th March, 2002, CPMC has been constantly mentioned as a guarantor. It is only to this extent the nature of agreement has changed. CPIL is an affiliate of CPMC. This is to say, that by means of the letter dated 8th March,2002 CPMC becomes a guarantor whereas CPIL becomes the borrower. Therefore, the same does not change the rights and responsibilities of the parties under the agreement dated 12th January, 2002 - agreement dated 12th January, 2002 remains the principal agreement while agreement dated 8th March 2002 remains a supplementary agreement which was meant for restructuring of HPL on urgency - clauses of the subsequent Agreements dated 8th March, 2002 and 30th July, 2004 go to show that there has been no alteration in the nature of rights and responsibilities of the parties involved in the contract. Consequently, there has been no novation of the contract - The phrase ‘this agreement’ means the Agreement dated 8th March, 2002 which is essentially a supplementary Agreement and does not, by any mean, make the Principal Agreement dated 12th January, 2002 subject to the jurisdiction of the Court. Agreements dated 8th March 2002 and 30th July, 2004, read with section 5 of the A&C Act, we are inclined to observe that the Arbitration clause in the Principal Agreement continued to be valid in view of clause no. 6 of the Agreement dated 30th July, 2004 and also by virtue of its mention in different parts of both the supplementary agreements dated 8th March, 2002 and 30th July, 2004. Therefore, the arbitration clause mentioned in Clause 15 of the Arbitration agreement dated January 12, 2002 is valid and the appellant is entitled to invoke the arbitration clause for settling their disputes. Principal Agreement dated 12th January, 2002 continues to be in force with its arbitration clause in place. We have also mentioned, while answering point no. 1, that section 5 of the A&C act will be applicable to Part II of the Act as well. The Agreement dated 12th January, 2002 remains valid and the arbitration clause, with all fours, will be applicable to the parties concerned to get their disputes arbitrated and resolved in the Arbitration as per the Rules of ICC - The respondent no.1 has filed a suit seeking two remedies against the appellants: firstly, that the Arbitration Agreement contained in Clause 15 of the Agreement dated January 12, 2002 is void and/or unenforceable and/or has become inoperative and/or incapable of being performed, and secondly, the respondent no.1 sought permanent injunction restraining the appellant herein from initiating and/ or continuing with the impugned Arbitration proceedings bearing case no. 18582/ARP pursuant to the Impugned Arbitration Agreement contained in clause 15 of the Agreement dated January 12, 2002 and the Request for Arbitration dated March 21, 2012 and the communication dated April 02, 2012 issued by defendant no. 8 in the Arbitration proceedings connected therewith and incidental thereto. Since, we have already held that the arbitration clause is valid, suit filed by the respondent no.1 for declaration and permanent injunction is unsustainable in law and the suit is liable to be dismissed - Decided partly in favour of appellant.

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• Service Tax

• 2014 (1) TMI 776
  Availment of CENVAT Credit - Sales Commission Services - Whether the appellant would be entitled to Cenvat Credit on Sales Commission Services obtained by them - Held that:- appellant has heavily relied upon the CBEC circular dated 29.4.2011 and according to the appellant, as per the CBEC circular dated 29.4.2011, the appellant shall be entitled to Cenvat Credit on Sales Commission Services obtained by them. As contended / submitted on behalf of the appellant, CBEC circular dated 29.4.2011 is binding to the department and therefore, while passing OIO the adjudicating authority ought not have taken a contrary view / decision then the CBEC circular - decision of the jurisdictional High Court is binding to the department rather than the circular issued by the CBEC. If there is any conflict between the jurisdictional High Court and the CBEC circular, the decision of the jurisdictional High Court is binding to the department rather than CBEC circular. Under the circumstances, the contention on behalf of the appellant that the department has erred in taking contrary decision then the CBEC circular, cannot be accepted - Merely because, there might be a contrary decision of another High Court, is no ground to refer the matter to the Larger Bench against the decision of this Court - appellant would not be entitled to Cenvat Credit on Sales Commission Services obtained by them - Following decision of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD – II Versus M/s CADILA HEALTHCARE LTD. [2013 (1) TMI 304 - GUJARAT HIGH COURT] - Decided against assessee.

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• 2014 (1) TMI 775
  Stay application - Waiver of pre deposit - Commercial or Industrial Construction Services - Held that:- even if the condition of pre-deposit is maintained, its rigour deserves to be brought down and softened to the extent of avoiding undue hardship to the petitioner - respondents are not in a position to dispute the fact that in relation to the principal, i.e., M/s NLC, the imposition of service tax in relation to the activity of road construction was not approved by the Commissioner (Appeals), Central Excise, Jaipur - Appellate Authority in relation to the case of M/s NLC and then, looking to the fact that the petitioner has an arguable case on merits, it appears just and proper that the petitioner be allowed an opportunity of merit-hearing of the appeal without being forced to deposit an amount equal to the principal demand of service tax. Of course, where the matter would require proper adjudication after hearing the parties and otherwise, pre-deposit remains a statutory requirement, subject to the modification as deemed fit and proper in the case of undue hardship, we are of the view that it would serve the cause of justice if the petitioner is directed to deposit of Rupees Ten lacs instead of Rupees Thirty Five lacs - Conditional stay granted.

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• 2014 (1) TMI 774
  Waiver of pre-deposit - Demand of service tax - Manpower Supply service - Held that:- appellant has been awarded contract by the Dairy for a specific job which is evident from the contract which is attached to the appeal memorandum. If that be the case, we find that the final orders of the coordinate bench in the case of Ritesh Enterprise [2009 (10) TMI 182 - CESTAT, BANGALORE], Divya Enterprise [2009 (12) TMI 155 - CESTAT, BANGALORE] and K. Damodar Reddy (2009 (9) TMI 386 - CESTAT, BANGALORE), decided the issue in favour of the appellant therein. We find that the appellant has made out a prima facie case on merits and hence we allow the application for the waiver of pre-deposit of amounts involved and recovery thereof stayed till the disposal of appeal - Stay granted.

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• 2014 (1) TMI 773
  Waiver of pre-deposit - Stay of recovery - Availment of inadmissible CENVAT credit - Erection, commissioning and installation service - Nexus between input and output service - Held that:- goods manufactured by the appellant were sold at factory gate and that, under the Erection Contract, their customer brought the goods to the sites of installation of transmission lines. Again, it is not in dispute that inland transportation and transit insurance were also part of the Erection Contract. If that be so, the appellant should have included freight and the cost of insurance in the taxable value of erection, commissioning and installation service for the purpose of payment of service tax on this output service, but they did not do so. On the other hand, the appellant separately collected the service tax paid on freight and insurance, from PGCIL and therefore they were not entitled to claim CENVAT credit of such tax - Conditional Stay granted.

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• 2014 (1) TMI 772
  Demand of service tax - Industrial or Commercial Construction - construction activities of buildings for Hindustan Aeronautics Ltd. and also for the Nuclear Fuel Complex (NFC) belonging to the Department of Atomic Energy, Govt. of India - Held that:- Tax liability on services rendered to Hindustan Aeronautics Ltd. is only about Rs.33,000/-. The issue is arguable in the case of Nuclear Fuel Complex in the light of the Board’s Circular which has been relied upon. The case relied upon by the appellant, that is the case of Nagarjuna Construction Co. Ltd. was in the matter of construction of supply of drinking water and maintenance of sewerage system which cannot be compared with manufacture of nuclear fuel for sale for determining whether it is an industrial activity. So we are not convinced that this is a case where total waiver of predeposit is to be granted - Conditional stay granted.

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• 2014 (1) TMI 771
  Waiver of pre-deposit of Service Tax - Job work - Business Auxiliary Service - Assembly of parts - Held that:- appellant herein had received from M/s Mattel Toys (India) Pvt. Ltd., the parts of the Barbie Dolls as well as the Hot Wheel Kits, which they assembled in the factory premises. When the goods were cleared from the appellant’s factory premises, they were complete product in the form of Barbie Dolls and Hot Wheel Kits. In our view, the said activity undertaken by the appellant, prima facie, would fall under the definition of manufacture under Section 2(f) of Central Excise Act, 1944. In view of the foregoing, the appellant has made out a prima facie case for waiver of the pre-deposit of the amounts involved - application for waiver of pre-deposit of balance amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Stay granted.

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• 2014 (1) TMI 770
  Disallowance of Cenvat credit - Expenses incurred in use of mobile phone and also landlines - Held that:- There were no observations about inadmissibility of Cenvat credit in the impugned order. Nowhere it has been brought out in the show cause notice or in the orders of the authorities below that appellant bank was not provider of output service. RBI guidelines displayed at the branch premises disclose the phone numbers to which the customers can make a call. That includes landline phone proving that the phones were used to provide output service - Decided ion favour of assessee.

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• 2014 (1) TMI 769
  Liability to service tax - Retrospective or Prospective - Held that:- activity of the appellant falling under explanation of Section 65(19) of Finance Act, 1994 does not create a liability retrospectively - Following decision of assessee's own case in [2009 (5) TMI 110 - CESTAT, NEW DELHI] - UOI v. Martin Lottery Agencies Ltd. [2009 (5) TMI 1 - SUPREME COURT OF INDIA] - Decided in favour of assessee.

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• 2014 (1) TMI 768
  Waiver of pre deposit - Packing and delivery of salt in smaller packs - Held that:- Applicants are engaged in the activity of packing of salt in smaller packs and making delivery at the instructions of their masters. The Revenue sought to classify this activity of the applicant under the category of ‘Clearing and Forwarding Agents Service’ - However, Prima facie, the activity undertaken by the applicants are not covered under the category of ‘Clearing and Forwarding Agents Service’. Therefore, this is a fit case for grant of 100% waiver of pre-deposit at this stage - Stay granted.

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• 2014 (1) TMI 767
  Account maintenance charges - Stock broker service - Imposition of penalty - Held that:- activity of a stock broker and that of a Depository Participant are two distinct activities and they are separately registered for the said purposes. Prima facie, a Depository Participant need not be a stock broker and similarly a stock broker need not be a Depository Participant. Under these circumstances, the charges collected by the appellant towards ‘account maintenance charges’ as a Depository Participant may not be includible in the taxable value of stock broking services. Therefore, we waive pre-deposit of dues as per the impugned order and stay recovery thereof till disposal of the appeal - Stay granted.

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• 2014 (1) TMI 766
  Waiver of pre deposit - Commercial or Industrial Construction Services - Works contract - Held that:- Waiver of pre-deposit and stay of recovery can be granted in this case, considering the plea of limitation raised by the appellant. The show-cause notice was issued on 21-4-2009 demanding service tax for the period from January 2005 to March 2008. The appellant seems to have brought on record sufficient materials in support of their plea that they did not have intention to evade payment of service tax during the said period. It is their case that they were executing ‘works contract’ during the said period and hence not liable to pay service tax under the head ‘Commercial or Industrial Construction Services’. It has been contextually pointed out by the learned Counsel that the appellant has been paying tax under ‘works contract service’ after this service became taxable - Prima facie case in favour of assessee - Stay granted.

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• Central Excise

• 2014 (1) TMI 734
  Denial of cenvat credit – Iron and steel items used as supporting structures of the boiler in the sugar manufacturing industry – Waiver of Pre-deposit – Held that:- Relying upon Commissioner Of Central Excise, Jaipur Versus M/s Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA] - the appellant is seen to have an arguable case in the substantive appeal – Thus, the assessee directed to deposit 50% of the duty 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 733
  Exempted as well as dutiable goods manufactured - Glass panels and other articles of glass – Separate accounts not maintained – Waiver of Pre-deposit - Assessee contended that they were not availing the credit for those inputs which were used in the manufacture of exempted final products – Held that:- The appellants were either reversing the credit or not utilizing the credit in respect of inputs used in the manufacture of exempted final product - At the most, it can be a question of quantification of such non- utilization of credit – Pre-deposits waived till the disposal - Unconditional stay granted.

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• 2014 (1) TMI 732
  Rectification of Appeal - Clearance of castings made to other unit - Revenue was of the view that non inclusive of interest cost is not the only allegation and that bulk of duty demands on account of non-inclusive of 15% profit margin in the cost – Held that:- The assessable value in respect of clearances was to be taken on 115% of the cost of production and the cost of production for the purpose was to be determined interest of CAS-4 standard of ICWAI, in term of CAS-4, interest on loan was not includable in the cost - The department itself has accepted that appellants have discharged duty liability on cost of production plus 15% and thus plea in the ROM that the profit margin had not been included is not correct – Decided against Revenue.

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• 2014 (1) TMI 731
  Denial of cenvat credit - Welding electrodes used in repair of machineries – Waiver of Pre-deposit – Held that:- Both Assessee and Revenue relied upon various decisions - In view of conflicting decisions, and also in view of doubt expressed by one Bench of the Supreme Court itself, it would be proper to grant waiver of pre-deposit of dues till the disposal – Stay granted.

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• 2014 (1) TMI 730
  Onus to prove the availment of credit on inputs – Waiver of Pre-deposit – Held that:- Certain quantity of inputs on which credit has been availed and cleared by reversing credit and the dies are manufactured in the factory and used in the manufacture of final product - Prima facie that applicant had a strong case - The amount already deposited is sufficient for the purpose of hearing of the appeal - Pre-deposit of remaining amount waived till the disposal – Stay granted.

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• 2014 (1) TMI 729
  Availment of Cenvat credit – Credit availed on capital goods installed outside factory area premises – Waiver of Pre-deposit – Held that:- There are cases where credit was denied on the capital goods used outside the factory –Thus, the applicant is directed to deposit a sum of Rupees twenty 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 728
  Availment of Cenvat credit - MS plates, sheets, beams, angles, joists, coils, channels, aluminium plates/sheets used in structural construction of factory buildings – Waiver of Pre-deposit – Held that:- The Commissioner observed that the machinery is capable of functioning without a supporting structure or the operating platform - Both the sides have not come out with the correct details of use of the materials as to whether in the construction and how much quantity was used in the structural purpose of the machinery - there is factual dispute on the use of the capital goods - the applicant failed to make out a prima facie case for waiver of amount – the applicant directed to deposit Rupees fifty 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 727
  Process amounts to manufacture or not under Rule 16 (2) of Central Excise Rules, 2002 – Motor vehicles cleared after repair and reconditioning with putting chassis on payment of duty – Waiver of Pre-deposit – Held that:- There is factual dispute on the process undertaken by the applicant as to whether it would amount to manufacture or not under Rule 16 (2) of the Central Excise Rules, 2002 – the decisions relied upon by both the sides would be looked into at the time of appeal hearing in detail - the learned advocate produced a chart which shows that there is some chassis were exported and cleared under Central Excise Notification 108/95 and also they availed cenvat credit for some portion - It appears that the amount may be excluded from demand of duty - the applicant to directed deposit a sum of Rupees Two crores 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 726
  Classification of Aloe Vera powder and Aloe Vera juice – Waiver of pre-deposit – Held that:- The classification dispute to be highly debatable - a substantial claim for CENVAT credit raised by the assessee was not considered by the Commissioner - the appellant directed to pre-deposit an amount of Rupees twenty lakhs as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.

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• 2014 (1) TMI 725
  Dientitlement for utilization of credit - Waiver of Pre-deposit – Held that:- The appellant had, by committing default in payment of duty for a certain period, disentitled themselves to utilization of CENVAT credit - Under Rule 8(3A) of the Central Excise Rules 2002, they were liable to pay duty on each consignment during the period of default, from PLA without utilizing CENVAT credit. - There was no prima facie case for the appellant inasmuch as the entire demand on the appellant stems from operation of the Rules – Assessee directed to deposit Rupees Twenty 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

• 2014 (1) TMI 778
  Jurisdiction under Section 59(4) - Whether the Commissioner of Commercial Taxes (Karnataka), Bangalore, invoking the jurisdiction under Section 59(4) of the Karnataka Value Added Tax Act, 2003, could invalidate the clarification issued in the petitioner’s case, by the authority for Clarification and Advance Rulings, under Section 60, without having invoked the Revisional jurisdiction under Section 64(2) or the remedy of an appeal under Section 66 of the said Act - Held that:- If M/s Commercial and Technical (CATS), Bangalore, a dealer, has obtained clarification under subsection (4) of Section 59, that cannot bind the petitioner since what is binding upon the petitioner is Annexure-C clarification of the ‘Authority’ - The Commissioner appears to have misdirected himself without noticing the provisions of Section 60 of KVAT Act more appropriately sub-section 7 providing for remedial measures over the clarification Annexure - C hence the conclusion arrived at in the order Annexure-A is illegal and one without jurisdiction - It is elsewhere said that when a certain thing is permitted to be done, it must be done in that way or not at all and other methods of performance are necessarily forbidden - Decided in favour of assessee.

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• 2014 (1) TMI 777
  Exemption under section 4-A of UPTT Act, 1948 - Disallowance of premium on land - Disallowance of UPSIDC as interest - Disallowance of establishment of Fly Ash Extraction System at N.T.P.C. - Held that:- it is evident that without the Railway, the Factory cannot function and earned in profit as the Transportation cost by road will increase the price of the product tremendously. The assessee has already entered into an agreement with the Railway Department and the work was in progress. The assessee has taken the land for 90 years lease from UPSIDC. So, no ownership is lying with the assessee but the fact remains that the premium was paid for the entire land. The Railway Siding / line is in the interest of the business of the assessee. Similarly three Silos were used for storing the raw materials and at later stage, the same can be used for finished goods. So, it is also in the interest of the assessee's factories - there is a difference between the development and approval of the land drawing. The charges paid for approval of the land drawing cannot be equated towards the land development charges. Assessee is pertaining to the dis-allowance of 26,25,100/- paid to UPSIDC as interest on the deferred payment of installment of the premium. The Tribunal has rightly allowed the same as it is a certain liability - grievance of the assessee towards the dis-allowance of 2,86,91,129/-, which was claimed for establishment of Fly Ash Extraction System at N.T.P.C. Unchahar-Rae Bareli. The Fly Ash is the basic component of the cement. The assessee has claimed this amount towards FCI. The Ash received free of cost in the wet form. By this system, the assessee made the Ash dry and transported to the factory but the fact remains that the site/land was provided by the NTPC free of cost. Towards it, an agreement between the NTPC and the assessee was examined by the Tribunal. For running the Plant, the electricity was available on the payment from the NTPC. Thus, the Fly Ash was available to the assessee without any cost. To run the Plant, electricity was available on payment basis - Decided against assessee.

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• Indian Laws

• 2014 (1) TMI 765
  Requirement of NOC from Delhi Entertainment and Betting Tax department for the purpose of organizing events or fashion shows - Jurisdiction of Government - Power to insist to obtain No Objection Certificate - Petitioner forced to obtain "NOC" from the respondent authorities to organise events or fashion shows from time to time - Held that:- even in cases where exemption is applied for and is granted, deposit of security can be asked - Act requires and mandates self compliance by the organisers/proprietors. Draftsmen were conscious and aware that after the event, it may be difficult to collect tax dues. Proprietors who hold entertainment shows may leave Delhi or may not be traceable. Respondent authorities would lose tax revenue in case precondition of security deposit is not imposed. Thus, the Act stipulates furnishing of prior information to the Commissioner in the manner prescribed in terms of Section 8(1) and there is a requirement to furnish security before the show is held on self appraisal or as per the directions given by the Commissioner. Commissioner can pass an order prohibiting holding of such entertainment and can take reasonable steps to ensure that order of prohibition is complied with, after giving reasonable opportunity to the proprietor. An order of prohibition can be passed by the Commissioner, if any of the three conditions stipulated in the said sub-section is satisfied. One of the conditions stipulated is when proprietor has failed to deposit the security due. The show can be also prohibited if the proprietor has given any false information which is likely to result in evasion of tax or the proprietor has committed breach of any of the provisions of the Act or the Rules made thereunder - proprietor of every entertainment is required to make payment of tax in accordance with the provisions of Section 11 (b), (c) or (d) of the Act by way of pay order/bank draft into the requisite government account within such period as stipulated. There is no express requirement or stipulation in the Act or the Rules that every proprietor must obtain "NOC" from the respondent authorities. What is postulated and mandated by the Act is that every proprietor must, before the event is held, furnish the requisite information stipulated under Form 5 or 6 within the prescribed time. The applicant/proprietor at the time of submitting of Form 5 or 6 shall furnish security which may be prescribed, but in case no security is furnished or the security furnished is inadequate, the Commissioner can pass an order under Rules 30 and 31 read with Section 13(1) of the Act. If there is non-compliance of the said order, a further order prohibiting the event can be passed under Section 8(3) of the Act. There is no provision in Sections 8(1), 8 (3), 13 (1) or Rule 30 or 31 that "NOC" should be obtained for holding an event. What the relevant sections and rules postulate is that the Commissioner can pass an order directing the applicant to furnish security or enhanced security in terms of the Rules - Adjudication or assessment is required to be made under Section 15 of the Act, after organiser/applicant has filed return under Rule 14. At the initial stage, the application made and information furnished is required to be considered and thereupon security as furnished can be accepted or on basis of prima facie or tentative view/opinion, the proprietor can be asked to furnish security, or enhance the security furnished so that in case of a decision or adjudication under Section 15, the tax imposed can be collected and the respondents do not suffer due to non-payment of tax. Concept of single window clearance is not what is postulated and in fact envisaged in the policy. As per the policy, the Delhi Police licensing division requires an organiser to obtain "NOC" from the different authorities/offices. The policy and the rationale behind it has been explained. It deals with the cases where licenses from Delhi Police have to be renewed each year and hence it is recorded that it would be unduly harsh on the organiser to insist upon obtaining clearance from each agency - Delhi Police can insist that the applicant should furnish details of the application made in Form 5 and 6 under Section 8(1) or (2) before they issue clearance or ask the applicant to state whether he has received any order under Section 13(1) read with Rules 30 and 31 of the Rules. Delhi Police before issuing clearance can make inquiry from the Entertainment Tax Office to ascertain whether there has been compliance of the provisions of the Act - Decided against Appellant.

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