Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 21, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Whether income earned on mixing of rubber compound is eligible for deduction u/s. 80IB, being intermediate product - Held Yes - AT
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Registration u/s 12AA - DIT(E) directed to go through the draft trust deed and inform the assessee as to whether the proposed amendment carried out by the assessee with regard to irrevocability of the trust is to his satisfaction or not - AT
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Where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed - AT
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Validity of order u/s 263 - Mere non-discussion of the said issue by the AO in the assessment order, cannot lead to a conclusion that the AO has not applied his mind on that issue - AT
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TP Adjustments - If the interest has been considered to be operational expenses in the case of the assessee, then the same should also be considered as operational expenses in the cases of comparables - AT
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Deduction u/s 80IB - Whether refund of excise duty be treated as income from manufacturing activity - Held Yes, There is a distinction between the Excise Duty Refund and Duty Draw Back/DEPB - AT
FEMA
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Activities of smuggling and illegal export of foreign exchange - Section 6(1) of the SAFEMA will have to be strictly followed and the authority's satisfaction must be recorded in writing, failing which, the notice is liable to be quashed. - HC
Service Tax
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The appellant could hardly claim to have been misled by a Board Circular issued in respect of a wholly distinct service and drawing generic jural principles from such circulars. Had the appellant gone through the provisions of the Finance Act, 1994, there would be no occasion for a doubt as to its liability to service tax - AT
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Business Auxiliary Service - Whether the activity of appellant can be called as ‘production of goods’ and further ‘on behalf of the client’ - they separate the iron metal from the molten slag - demand set aside - AT
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There was no intention to levy any Service Tax on export of services - benefit of exemption would be available even after the withdrawal of Notification No. 6/99-S.T. and its subsequent reinstatement vide Notification No. 21/2003-S.T - AT
Case Laws:
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Income Tax
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2014 (1) TMI 1055
Maintainability of Appeal to the Tribunal u/s 254 of the Act – Penalty levied u/s 271FA of the Act – Held that:- The decision in SRO, Meppayur-Kozhikode vs DIT (Intelligence)[2014 (1) TMI 102 - ITAT COCHIN]followed - Nowhere in section 253 mentions the order passed by Director of Income Tax (Intelligence) or any other officer of the Income Tax department levying penalty u/s 271FA is appealable before the Tribunal - The Tribunal being a quasi-judicial authority established under the provisions of the Income Tax Act cannot travel beyond the provisions of the Act - Therefore, unless and until an appeal is specifically provided section 253 of the Act against the order levying penalty u/s 271FA, the Tribunal is of the considered opinion that the present appeal is not maintainable before this Tribunal. Consent of a litigant party will not confer any jurisdiction of a judicial or quasi-judicial authority unless and until it is otherwise conferred by the legislature - Therefore, the consent/direction of the Director of Income Tax (Intelligence) will not confer any jurisdiction on the Tribunal unless sit is provided for in the income tax Act by the Parliament. The legislature treated sections 271 and 271A as separate and independent sections - section the reference of section 271 in section 253(1)(a) or 253(1)( c) may not be included section 271FA - the omission to include section 271FA in section 253 may be unintended – thus, it is open to the department to bring to the notice of the concerned authority about the omission to provide appeal before the Tribunal for making consequential amendment to section 253 of the Act in case the department found that the omission is unintended – thus, appeals are not maintainable before the Tribunal against the order of the Director of Income Tax (Intelligence) levying penalty u/s 271FA of the Act –though, the assessee is at the liberty to challenge the impugned order of the Director of Income Tax (Intelligence) before the appropriate forum in a manner known to law – Decided against Assessee.
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2014 (1) TMI 1054
Opportunity of being heard – Order passed on presumptions – Procedure to be followed by the CIT(A) in appellate proceedings - Held that:- It has consistently been held that the Rules of natural justice are not embodied rules and the said phrase is not and cannot be capable of a precise definition - The underlying principle of natural justice evolved under the common law is to check arbitrary exercise of power by the State or its functionaries - Accordingly, the principle by its very nature implies the duty to act fairly i.e. fair play in action must be evident at every stage. Fair play demands that nobody shall be condemned unheard – Relying upon Apex Court in the case of A.K.Kraipak – vs- Union of India [1969 (4) TMI 103 - SUPREME COURT] - the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice - The rules are means to an end and not an end in themselves and though it is not possible to make an exhaustive catalogue of such rules however it can be readily said that there are two basic maxims of natural justice namely “audi alteram partem” and “nemo judex in re sua” - the sole issue agitated is pertaining to granting of opportunity of being heard which admittedly has not been made available to the assessee – the prayer of the assessee is accepted - the issue is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1041
Waiver of penalty and interest u/s 273A - Whether the petitioner had made satisfactory arrangements for the payment of tax - Held that:- The petitioner had been unable to show that a satisfactory arrangement had been made for payment of tax and interest for all the years except for one year i.e. 1981 - The learned CIT was of the view that penalty amounts and total dues under Section 220 had to be paid or arranged - The language of the provision i.e. Section 273A(3) of the Act does not talk of one year but of one instance - In this case clearly the view of the Commissioner proceeded on the assumption that the relief could be given one time for one year - the inclusion of any amount over and above the tax and interest payable, such as penalties determined under various provisions as well as the assumption that such amount is collectively payable is without the authority of law. The assessee has been able to demonstrate that payment of tax and interest had been made in respect of the years 1981-82 to 1984-85. The impugned order is set aside in totality in respect of these assessment years
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2014 (1) TMI 1040
Interest on refund u/s 244A - Held that:- CIT(A) has directed the Assessing Officer to grant the interest under Section 244A of the Act on the refund issue till the date of issue of the refund order to the assessee in accordance with law and the provisions of the Act which is confirmed by the Tribunal - When the CIT(A) itself has observed that the interest under Section 244A of the Act should be considered in accordance with law and the said order has been confirmed by the Tribunal, apprehension on the part of the appellant is not well founded – Decided against Revenue.
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2014 (1) TMI 1039
Unexplained cash credit - Held that:- The assessee furnished the explanation with regard to cash found from his residence amounting to Rs. 11,72,830 - The sum of Rs. 10,00,000/- was out of the sale of trees in Village Bawal - Regarding the remaining sum of Rs. 1,72,830/-, it has been stated that it was the accumulation of savings of children and the assessee's wife from the cash gift received from parents, relatives on various functions, occasions and festivals - The Ao rejected the claim of the assessee - As he hasnot brought any documentary evidence whatsoever to substantiate his claim regarding sale of trees - With regard to savings of wife and children, again, the assessee's explanation was rejected on the ground that assessee could not substantiate his claim - There was no mention in the assessment order that the Assessing Officer ever asked the assessee and allowed him any opportunity to produce the evidence in this regard - The issue has been restored for fresh adjudication.
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2014 (1) TMI 1038
Excess duty drawback availed but not received - undisclosed income - Held that:- The assessee submitted that the entire duty drawback had been received by other parties and the assessee did not have any concern with them - During the year, the only sources of income of the assessee were interest and dividend - On verification of the evidence filed, that the goods exported had actually been shipped for export to Russia and Dubai, which fact stood confirmed by the buyers, that the goods had been actually delivered to the shipping agency, which fact stood certified by the customs department, that the receipt of the export proceeds was duly evidenced by invoices, through banking channels and that there was nothing to show that the amounts had been given back to the respective parties - The CIT (A) had opined that Vision Inc. had received the duty drawback in F.Y. 2002-03 and had duly disclosed it as part of its income - The addition had been made by the Assessing Officer by merely and solely relying on the show cause notice issued by the DRI in 2004, without rebutting any of the evidences filed by the assessee - The CIT(A) was justified in deleting the addition on the basis of consideration of all the evidences filed by the assessee - Decided against Revenue.
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2014 (1) TMI 1037
Whether income earned on mixing of rubber compound is eligible for deduction u/s. 80IB, being intermediate product - Exemption in relation of Job work charges - Held that:- Section 80IB is worded in the same way as section 32A - Decision in Midas Polymer Compounds P. Ltd. Versus Assistant Commissioner of Income-tax [2010 (12) TMI 414 - Kerala High Court] followed - The word "production" or "produce" when used in juxtaposition with the word manufacture" takes in bringing into existence new goods by a process which may or may not amount to manufacture, it also taken in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods - Even production of intermediary products is sufficient to entitle the assessee for deduction available to new industrial unit - Compound rubber produced by the assessee on job work for the tyre manufacturing companies is an intermediary from which tyre is manufactured - There is nothing in the section to indicate that article or thing produced or manufactured should be final product in itself. So much so, the activity of the assessee in their new industrial unit, which is mixing rubber with chemicals, process oil etc., making compound rubber, is covered by section 80IB of the Act - Decided against the revenue.
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2014 (1) TMI 1036
Deduction u/s 54F - Held that:- As per the revenue authorities, the assessee has only carried out renovation/ extension of the existing building - The tax authorities have taken the view that the deposit made in Capital gain account scheme for carrying out renovation/ extension of the existing building is not eligible for deduction u/s 54F, since the said section provides for deduction only for either purchase or construction of a new residential house - The submission of the assessee is that he has put up second floor also, besides carrying out finishing works in the existing building - In support of the said submissions, the assessee has filed copies of building permission granted by the competent authority and also copies of approved floor plans, as additional evidences - The materials furnished before us is in total contradiction to the view entertained by the tax authorities. The submissions made by the assessee are in contradiction to the facts as understood by the tax authorities - The assessee has furnished fresh materials before us in the form of additional evidences to support his contentions - These additional evidences are required to be examined by the AO - In view of the contradiction between the parties with regard to the facts relating to the issue, it also requires to be examined afresh - The issue has been restored for fresh adjudication.
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2014 (1) TMI 1035
Disallowance u/s 14A - Held that:- On observing the application of the funds of the assessee, it would be evident that the company is mainly utilizing its funds for the purpose of investment in the equity shares - When the company is existing mainly for the purpose of investing in shares, it cannot be said that the expenditure was incurred wholly and exclusively for earning of interest income only in which the investment is of less than 5% of the assessee's funds - The only reasonable and logical conclusion can be to allocate the expenditure between the exempt income and non-exempt income – The Ao has computed disallowance by applying Rule 8D which is applicable w.e.f. A.Y. 2008-09 - Since the actual expenditure incurred by the assessee was only Rs. 4,27,376/- out of which a sum of Rs. 7,000/- was separately disallowed by the Assessing Officer - The disallowance should be restricted to Rs. 4,20,376 - The assessee has not pointed out any mistake in the working of disallowance under Rule 8D by the Assessing Officer - The disallowance under Rule 8D as worked out as per the formula given in the Rules was more than the actual expenditure, the Assessing Officer has rightly restricted the disallowance to the expenditure actually incurred by the assessee - Decided against assessee.
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2014 (1) TMI 1034
Registration u/s 12AA - Held that:- commencement of activities by the Trust is not a prerequisite to grant registration and approval under sections 12A and 80G of the Act - When the assessee has produced all facts relating to the activities of trust and also its financial statements and there is no adverse finding by the DIT(E) with regard to the genuineness or nature of activity of the Trust, it is to be presumed that the DIT(E) accepts the trust to be genuine - The DIT(E)'s observation that the corpus fund of Rs.10 lakhs has not been deposited in the bank account is also without any basis as facts on record clearly prove that the said corpus fund was deposited in a FD account with the bank - Decided in favour of assessee.
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2014 (1) TMI 1033
Registration u/s 12AA - Held that:- The registration was refused to the appellant, because clause 10 of the trust deed allowed the author to take decision with regard to its continuity which made the trust revocable - A perusal of the draft trust deed does reveal that there is amendment to the trust deed - The unsigned draft trust deed was submitted before the DIT(E) only for the purpose of knowing whether the amendment carried out was to his satisfaction or not - There is certainly a genuine apprehension in the mind of the assessee as to whether the amendment carried out would be to the satisfaction of the DIT(E) - Without doing so it was inappropriate on the part of the DIT(E) to have refused to grant registration alleging non-furnishing of amended trust deed - The issuer has been restored for fresh adjudication with a direction to DIT(E) to go through the draft trust deed and inform the assessee as to whether the proposed amendment carried out by the assessee with regard to irrevocability of the trust is to his satisfaction or not.
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2014 (1) TMI 1032
Rejection of Registration u/s 12AA - Held that:- the assessee is having mixed objectives of both charitable and religious nature - There is no restriction in the statutory provision which says that a trust having both religious and charitable objects would not be eligible for registration under section 12AA of the Act - Section 11 of the Act provides for exemption to both charitable and religious trusts. Only restriction being put by the statute is exemption under section 11 is subject to fulfilment of conditions laid down in sections 11, 12 and 13 of the Act. At the time of registration under section 12AA of the Act, the only requirement is the DIT(E) has to satisfy himself about the genuineness of the activities of the trust and whether it comes within the purview of the 'charitable purpose' as defined under section 2(15) of the Act - Even though the assessee has placed all facts on record in course of proceeding before the DIT(E) with regard to its activities by submitting explanatory note and account copies, the DIT(E) has not made any comments either with regard to the genuineness or the nature of activities of the trust - In such circumstances, it has to be presumed that DIT(E) has no doubt either with regard to the genuineness or nature of the activities of the trust - The denial of registration under section 12AA on the reasons mentioned by the DIT(E) are neither well founded nor justified in the given circumstances of the case - Decided in favour of assessee.
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2014 (1) TMI 1031
Selection of comparables - Held that:- Exensys Software Solutions Ltd. - Where there are extraordinary events, then those events have to be taken note of and where no adjustment can be made on account of this extraordinary event, then such company cannot be considered as a comparable - Following Intoto Software India Pvt. Ltd. [2013 (10) TMI 599 - ITAT HYDERABAD] - there is an extraordinary event which has resulted in the high operating margin of the company - The issue has been remitted back for fresh adjudication. Sankhya Infotech Ltd. and Four Soft Ltd - Following Hellosoft India Pvt. Ltd. [2013 (10) TMI 747 - ITAT HYDERABAD] - Both the companies were having onsite income/expenses of more than 75% - The issue has been remitted back for fresh adjudication. Thirdware Solutions Ltd. - Held that:- Following Intoto Software India Pvt. Ltd. [2013 (10) TMI 599 - ITAT HYDERABAD] - there are software products that the company invoiced during the FY and the financial results are in respect of services only but still it held that though there is no sale of software products during the year but the said company might have incurred expenditure towards development of software products - The company should not be taken as comparable. Infosys Technologies Ltd. - This being a big company in all respects including the range of turnover is not a comparable to small companies which are captive service providers having considerably low turnover - Merely because the assessee had selected it as a comparable it cannot operate as an estoppel in raising objections with regard to comparability of the aforesaid company - The company should not be taken as comparable. Tata Elxsi Ltd - It cannot be treated as comparable with any other company since it is a specialized embedded software development provider - Because of the specialization and also because of diverse nature of its business, it is very difficult to scale-up the operations of Tata Elxsi Limited - Decision in Intoto Software India Pvt. Ltd. [2013 (10) TMI 599 - ITAT HYDERABAD] followed - The issue has been remitted back for fresh adjudication. Bodhtree Consulting Ltd. - Its related party transaction as a percentage to the total revenue is 34% which is more than the accept/reject matrix of more than 25% fixed by the TPO - The issue has been remitted back for fresh adjudication. Vishal Information Technologies Ltd. - The aforesaid company unlike the assessee has outsourced considerable portion of its business to third party vendor in A.Y. 2008-09 - It cannot be considered as a comparable - The TPO was directed to verify whether similar situation exists in the impugned assessment year also - If the employee cost of the aforesaid comparable is also in similar low range, then it has to be assumed that the said company has outsourced its business activities to third party vendor - The issue has been restored for fresh adjudication. Maple E Solutions Ltd. - It provides design service on line and outline media ranging from interface to logo design. The service include website evaluation, intranet/extranet, email list management content management, security etc. Hence, the companies is functionally dissimilar to the assessee - The said company cannot also be treated as comparable as the directors of the said company were found to be involved in fraud, hence financial results of the company cannot be trusted as reliable - The company should not be taken as comparable. Nucleus Netsoft and GIS India Ltd - Held that:- the employee cost as a percentage of the operating revenue is much lower compared to the assessee - Decidion in HSBC Electronic Data Processing India Pvt. Ltd [2013 (9) TMI 485 - ITAT HYDERABAD] followed - The company outsourced its work - The company cannot be selected as a comparable on account of its low employee cost. WIPRO BPO Solutions Ltd - WIPRO is a big company owning intangible and having substantial brand value. It had generated considerable goodwill, reputation and brand value in the market. It is also a fact that it earns substantial revenue from products which are sold at a premium unlike the assessee which is only a contract service provider to its AE - Only after examining the impact of all the factors like, owning of intangibles, brand value, goodwill, reputation on profitablity, the aforesaid company can at all be treated as a comparable to the assessee - The issue has been restored for fresh adjudication.
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2014 (1) TMI 1030
Profits on sale of investments - Held that:- The taxability of income of insurance companies under the head "income from business and profession" as governed by provisions of section 44 read with first schedule to the Income tax Act, does not extend to taxability of profits on sale of investments for the assessment years under consideration - Decided in favour of assessee. Interest on tax free bonds and dividend income - Held that:- Decision in General Insurance Corporation of India, Mumbai Versus The Deputy Commissioner of Income Tax, 1(3) Mumbai & Anr. [2011 (12) TMI 70 - BOMBAY HIGH COURT] followed - As per clarification brought by CBDT - The exemption u/s 10 is available to any other assessee under any clauses of Section 10 is also available to a person carrying on non-life insurance business subject to the fulfillment of the conditions, if any, under a particular clause of Section 10 under which exemption is sought - Decided in favour of assessee. Non-applicability of provision of Section 115AB - Held that:- The accounts of appellant are prepared in accordance with the Insurance Act and not in accordance with Schedule VI of the Companies Act - As per the proviso to sub- section 1 to section 211 - The provisions of section 211 shall not be applicable for an insurance or banking company - The proviso to sub-section 2 of this section relating to the profit and loss account also specifies that schedules VI part II shall not be applicable to any insurance or banking company - The basic premise of applicability of section 115JB does not stand and consequently this section does not apply to appellant company - Decided in favour of assessee.
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2014 (1) TMI 1029
Taxability of sales tax benefit/subsidy received - Capital or revenue in nature - Held that:- the assessee has sold its benefits/entitlements to the third parties - What the assessee has received is consideration in respect of sale of the entitlement/benefits - This is nothing but consideration for the transfer of the entitlement and clearly taxable as revenue receipt in the nature of benefit convertible into money arising from business - On perusal of the agreement to transfer sales tax incentive - Sale consideration on transfer of entitlement is nothing but is a benefit directly arising from business and, is therefore, a revenue receipt - Decided against the assessee.
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2014 (1) TMI 1028
Lease rent of boiler – Held that:- This boiler was sold by the assessee to the above corporation in the earlier year and was taken on lease by the assessee - Following assessee's own case for the assessment years 1992-93 and 1993-94 - Decided in favour of assessee. Entertainment expenses – Held that:- The AO disallowed 70% of the expenses claimed by the assessee on tea, snacks etc. for visitors and the expenses incurred for providing food to employees while on leave at holiday home - Following assessee's own case for the assessment years 1992-93 and 1993-94 – Decided against assessee. Taxability of technical know-how fees – Held that:- The impugned amount has been taxed in the year 1998-99 and the same cannot be taxed again in the year 1990-91 – The issue has been restored to the file of the AO with a view to verify that the impugned technical know how fees has been taxed in the year 1998-99 and if the contention is found correct, then the same cannot be taxed again. Deduction u/s 80HHC – Held that:- Following IPCA Laboratory Ltd. vs. DCIT [2004 (3) TMI 9 - SUPREME Court] - As per sub-section (1) of section 80HHC(3) a deduction can be permitted only if there is a positive profit in the exports of both self- manufactured goods as well as trading goods - If there is a loss in either, that loss has to be taken into account for the purpose of computing profits - Section 80AB has been given an overriding effect over all other sections contained in Chapter VIA, including Section 80HHC - If the income has to be computed in accordance with the provisions of the Act, not only profits but also losses have to be taken into account - The term 'profit' means a positive profit - The meaning of the word 'profit' will depend on the context in which it is used - For purposes of computation u/s 80HHC(3), both profits as well as losses have to be taken into account - The word 'profit' in Section 80HHC(3) will mean profit after taking into consideration losses, if any - The term 'profit' in Section 80HHC both in sub-section (1) and sub-section (3) means a positive profit worked out after taking into account the losses, if any - The word 'profit' has the same meaning in Sections 80HHC(1) and (3) – Decided against assessee. Taxability of exchange profit on repatriation of GDR funds – Held that:- The Ld.CIT(A) was correct in holding that the gain which have arisen on account of conversion of foreign currency into Indian Rupees on repatriation of foreign currency held abroad is on account of capital account and as such the said amount is not taxable as revenue receipt - The gains cannot be brought to tax u/s 45 of the Act as the transaction does not come within the purview of the expression 'transfer' as defined u/s 2(47) of the Act - As regards the direction of CIT(A) to reduce cost of capital asset to the extent of gain arose to assessee company on repatriation of foreign currency and accordingly recalculate the depreciation allowance on the relevant blocks of assets as per law, it is pertinent to mention that section 43 A of the Act is not applicable in the case of the assessee - The GDR issue does not relate to any increase or decrease in the liability of the assessee as expressed in Indian Rupees linked with payment – Decided in favour of assessee. Expenditure incurred on issue of the first Global Depository Receipts – Held that:- Following Brooke Bond India Ltd Vs CIT [1997 (2) TMI 11 - SUPREME Court] - Though the increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in the profit making, the expenses incurred in that connection still retains the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company - The expenditure incurred by the assessee is capital expenditure – Decided against assessee. Repayment of foreign currency loan and investing in PSU bonds – Held that:- The said expenditure is related to the expenses incurred by the assessee in connection with modernization of the DMT division of the assessee company - Due to the reason that the plant has been shut down over a period of time to complete the major revamping involved in the expansion, the fact that there is no increase in the production cannot be a decisive test to negatively conclude that there has no modernization of the DMT Division – The issue has been restored for fresh adjudication so as to examine whether the amounts of Rs.48.05 crores and Rs.16.76 crores incurred by the assessee in connection with re-payment of foreign currency loan and investing in PSU bonds is for the purpose of modernization of the DMT division of the assessee company as claimed. Expenditure incurred on issue of Non Convertible Debenture (NCD)/ Secured Premium Notes (SPN) – Held that:- Following Mahindra & Mahindra Ltd. vs. JCIT [2009 (10) TMI 639 - ITAT MUMBAI] - The expenses in relation to the issue of debentures are allowable u/s 37(1) of the Act as revenue expenditure – Decided in favour of assessee.
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2014 (1) TMI 1027
Penalty u/s 271(1)(c) - Held that:- As per section 271(1)(B) - When any amount is added or disallowed then only a direction would suffice for the levy of penalty u/s. 271(1)(c) of the Act - But in the instant case, in respect of the additional income neither any amount is added nor disallowed by the AO , whatever has been returned by the assessee is assessed to tax except an addition of Rs. 90,000/- which was subsequently deleted by the Ld. CIT(A) - Decided in favour of assessee. Penalty u/s 271(1)(c) for A.Y. 2000-01 to 2005-06 - Held that:- Following Prem Arora Vs DCIT [2012 (6) TMI 480 - ITAT DELHI] - The concealment of income has to be seen with reference to additional income brought to tax over and above income returned by the assessee in response to notice issued u/s. 153A - For the purpose of imposition of penalty u/s. 271(1)(c) resulting as a result of search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered - in case of search initiated after 1.6.2003 a return of income is always filed on issue of notice u/s. 153A - The penalty u/s. 271(1)(c) is imposable when there is variation in assessed and return income. If there is no variation, there will be no concealment. When there is no concealment, question of levy of penalty u/s. 271(1)(c) will not arise. This is settled position of law - Where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed - Decided in favour of assessee.
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2014 (1) TMI 1026
Unexplained investment in jewellery - Held that:- The assessee has been regularly showing the acquisition/purchase of jewellery in his balance sheet filed along with his income tax returns since the assessment year 1995-96 - The ld. CIT(A) has also assailed the action of AO in rejecting the books of accounts of the assessee which the assessee had been maintaining in the regular course of business – The CIT(A) has accepted the books of accounts of the assessee for the assessment year 2001-02 - The jewellery is shown in the balance sheet by the assessee for the financial year ending on 31.03.2001 - The rates of the gold jewellery at the most can be adopted as that were on 31.03.01 and there was no justification for the AO to adopt the rates as on 31.03.06 – Decided in favour of assessee. Unexplained investment - Held that:- The jewellery/gold claimed to be belonging to different persons was found in separate packets under their name - The assessee had also given a reasonable explanation that the said persons had deposited the gold with the assessee for the facilitation of grant of interest free loan for the said persons through M/s. Burhani Quarzen Hasanah Trust - After examining the said persons except Mr. Burhanuddin Bhai, who was said to be residing in Kuwait, the claim in respect of two persons was admitted by the AO - The ld. CIT(A) rejected the contention of the AO in the case of Mrs. Zainab Gandhi observing that merely because the family income of Mrs. Zainab Gandhi was nominal, that itself could not be a ground to reject the contention of the assessee which was further corroborated with the statement of Mrs. Gandhi - Even if, one or two of them could not give the exact proof of purchase of jewellery in the shape of bills etc. that itself alone cannot be a basis to hold that said jewellery did not belong to the said persons, especially, in the presence of other correlating evidence supporting the claim of the assessee. In the case of Mr. Shabir Bhai Ahmedabadwala, the reasoning given by the ld. CIT(A) is not well founded - It is a common practice in India that people generally invest their money in purchase of gold because of the market trend of rise in prices of the gold - The purchase of gold is also a customary practice in India - The gold biscuits were allegedly deposited by the said Mr. Shabir Bhai Ahmedabadwala for getting interest free loan which could have been used for his business or/other requirements, but at the same time, he would have been getting the benefit of appreciation in the price of gold biscuits which ultimately belonged to him - It was not the case of sale of jewellery but it was a case of deposit of gold as a security – The addition with respect to this jewellery was also deleted. In the case relating to jewelry of Mr. Burhanuddin Bhai is concerned, the evidentiary position is same as in the case of other persons except that he was not produced for examination before the AO - His absence had been well explained by the assessee that he was not in India at that time but was residing in Kuwait - However, his duly sworn statement/affidavit was filed before the AO vide which he claimed that the said jewellery belonged to him - The addition made in case of Mr. Burhanuddin Bhai cannot be sustained and is hereby ordered to be deleted - Decided in favour of assessee. Unexplained cash credit - Held that:- The loose papers found during search were written in Gujarati in the handwriting of the wife of the assessee - She was neither examined at the time of search procedure nor during the assessment proceedings - The assessee, through the evidence placed in the paper book, has also tried to establish that Mr. Rashid and Mr. Yusuf were his employees and the payment of salary was made to them through banking channels - The Revenue has also contested the identity of Mr. Mohammed as being not the name of assessee - A perusal of the assessment order as well as order of the ld. CIT(A) reveals that the contentions of the assessee have not been properly looked into by the lower authorities – The issue has been restored for fresh adjudication.
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2014 (1) TMI 1025
Validity of order u/s 263 - Held that:- On perusal of the assessment order in which there is no discussion regarding the issue relating to sale and purchase of shares - From the letters issued by the AO, it is clear that a detailed examination has been done by the AO regarding transactions of sale & purchase of shares entered into by the assessee - The correspondences entered into between the assessee and the AO, clearly reveals that the AO required the assessee to file various details, which were filed by the assessee - Regarding share purchased by the assessee from Prraneta Industries, the assessee has filed the proof of purchases in the shape of ledger account in the name of DPS Shares Securities Pvt. Ltd. In respect of transactions of the assessee regarding shares of Hiren Orgochem Ltd., it is pointed out to learned CIT by the assessee that 3500 shares were wrongly credited to demat account of the assessee and the said entry was reversed back - To support such contentions, assessee has submitted a copy of demat account - On this issue, learned CIT has not doubted the contention of the assessee and he has observed that adequate enquiry has not been made about the genuineness of the company as 7000 shares were purchased - These documents were produced by the assessee before the AO during the course of assessment proceedings, hence, it cannot be said that either the AO did not enquire about the issue of capital gain arising out of sale & purchase of shares or assessee did not furnish required information - The transactions are duly supported by the bills issued by the broker and are through stock exchange for which appropriate evidences were submitted. Section 263 has been invoked only for the reason that the AO did not apply his mind on these transactions - This finding of the learned CIT is against the correspondence and evidences which are placed on record by the assessee during the course of original assessment proceedings and copy of these documents are also filed before the Tribunal - Learned CIT also could not specify any discrepancy either in the rates of shares purchased and sold by the assessee or any incorrectness in the claim of the assessee regarding capital gain shown by the assessee as all the facts were again placed before him - In absence of any material to suggest that these transactions were not valid/genuine transactions, it will mere be a case of a change of opinion by the learned CIT - Mere non-discussion of the said issue by the AO in the assessment order, cannot lead to a conclusion that the AO has not applied his mind on that issue - Decided in favour of assessee.
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2014 (1) TMI 1024
Eligibilty for deduction under Section 10B - Held that:- The benefit, if available to the assessee under the provisions of law, cannot be denied, simply on the basis of that assessee has taken contradictory stand before the AO and CIT(A) - The documents submitted by the assessee suggest that what was submitted by the assessee before the CIT(A), was the correct position - The facts can be verified from the documents filed by the assessee - The issue has been restored for fresh adjudication. Upward adjustment to the arms-length price - Held that:- The assessee has renedered bank guarantee to its associated enterprise - The evaluation was done by the TPO on the basis of comparables and figures given by the assessee - The average rate of 2.08% was taken and the assessee could not point out any defect - Decided against assessee. Disallowance u/s 14A - Held that:- Following M/s. Godrej and Boyce Manufacturing Co.Ltd. vs DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - The said rule 8D was not applicable in respect of assessment year 2007-08 - The CIT(A) calculated the disallowance on reasonable basus which was not disputed by the DR - Decided against Revenue.
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2014 (1) TMI 1023
Applicability of Transfer Pricing adjustments at entity level - Held that:- Following Thyssen Krupp Industries India Pvt. Ltd. Vs. ACIT [2012 (12) TMI 71 - ITAT Mumbai] - Determination of arms length price should be restricted only to international transaction of the assessee with its AE - Decided in favour of assessee. Whether interest to be considered as operational expenses - Held that:- If the interest has been considered to be operational expenses in the case of the assessee, then the same should also be considered as operational expenses in the cases of comparables - The issue has been restored for fresh adjudication at AO level. Benefit of safe harbor of 5% - Held that:- If after computing the arms length price as per directions given above, the difference between margin taken for arms length price and margin shown by the assessee is less than 5%, then appropriate relief should be granted to the assessee.
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2014 (1) TMI 1022
Deduction u/s 80IB - Whether refund of excise duty be treated as income from manufacturing activity - Held that:- Following CIT vs. Dharampal Premchand [2008 (11) TMI 49 - HIGH COURT DELHI] - The excise duty refund in the case of the appellant is directly linked with the manufacturing activity and is production linked incentive, which arises out of manufacturing activity of Appellant's Industrial Undertaking at Jammu - Such excise duty refund is therefore, a first degree source of receipt linked with the manufacturing activity of the undertaking - It is derived from the business of the industrial undertaking and falls within the parameters laid down in Section 80IB of the IT Act - There is a distinction between the treatment to be given to Excise Duty Refund and Duty Draw Back/DEPB, the AO is directed to treat excise duty refund as profit derived from the business of the Industrial Undertaking, while computing the eligible deduction u/s. 80-IB of the Income Tax Act - The CIT(A) was justified in his order - Decided in favour of assessee.
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Customs
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2014 (1) TMI 1020
Issue of writ of habeas corpus - Denial of release of detenue - Recovery of gold smuggling - Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA) - whether the detention order dated 11.06.2013 had been passed on several grounds or is a composite order where two or more facts have been taken into consideration - whether the Bail Order dated 26.05.2009 passed by the Delhi High Court in the previous criminal case and the replies to the three show cause notices filed by the Detenue, in view of the Detaining Authority having considered the three show cause notices, were vital and important material, non-consideration of which would vitiate the order of detention - Held that:- previous order granting freedom to the Detenue by any Court was a relevant material to affect the subjective satisfaction of the Detaining Authority one way or the other - Bail Order dated 26.05.2009 passed by the Delhi High Court in the earlier case under the Customs Act was vital and relevant material to be considered by the Detaining Authority before passing the detention order. The Bail Order having not been considered, the detention order is vitiated and is liable to be set aside. While passing the detention order, the Detaining Authority considered the previous conduct of the Detenue and assessed the propensity of Detenue’s conduct. As has been observed earlier, in some cases a single act may be sufficient to pass an order of detention - replies to the show cause notices were not considered by the Detaining Authority. In fact, the same were not even placed before it - A perusal of the detention order falsifies the stand of the Respondents that the three show cause notices were not taken into consideration by the Detaining Authority while passing the order of detention. The Detaining Authority goes on to mention that the adjudication order in question had not attained finality as an appeal had been preferred by the Commissioner of Customs before CESTAT, New Delhi. The replies to the three show cause notices have been placed on record by the Detenue. There were serious allegations of illegal import of high end gold jewellery and misuse of SEZ facility against the Detenue and others. Show cause notice is a charter of allegation and by replies to the notices, the Detenue claimed innocence and therefore, the replies to the show cause notices were vital, important and relevant material to be considered by the Detaining Authority. By considering only the show cause notices against the Detenue without considering these replies, there was a serious prejudice caused to the Detenue as we do not know how the Detaining Authority would have reacted on considering the replies. Show cause notices and particularly the Detenue’s replies thereof were the most relevant and essential material to be placed before the Detaining Authority before issuance of the detention order - there is no escape from the conclusion that all the relevant and vital material/documents were not placed before the Detaining Authority. The detention order is consequently vitiated; the same is accordingly set aside - Decided in favour of Petitioner.
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2014 (1) TMI 1019
Non clearance of goods - Penalty u/s 117 - Demand barred by limitation - Whether a demand for interest in the present case was required to be issued within a period of 06 months under Section 28 of the Customs Act, 1962 or there is no time limit for making such demand of interest - Held that:- demands raised under Rule 57-I of the Central Excises and Salt Act, 1944 when no period of limitation was prescribed under the said rule has held that taking into consideration the scheme of the Central Excise Law and the limitation periods prescribed for various purposes under different sections and rules reasonable period limitation would be six months or five years depending upon whether there has been any suppression of facts etc. with the fraudulent intention or not - under Section 28 of Customs Act, 1962 period of limitation prescribed for recovery of duty is six months or five years as above and also the period for claim of refund is also six months. The position being similar we hold that the same logic should apply in respect of the recovery to be made under the Customs Act where no period of limitation has been prescribed. It is only reasonable that the period of limitation that applies to a claim for the principal amount should also apply to the claim in the appeals - demand for interest was required to be issued within a period of 06 months under Section 28 of the Customs Act, 1962 in the present proceedings and is thus clearly time barred - Decided in favour of assessee.
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2014 (1) TMI 1018
Confiscation of goods - Imposition of redemption fine - Goods cleared without affixing MRP - Held that:- MRP of the imported goods had been declared in the Bill of Entry and on this basis, Additional Customs duty has been paid, the MRP had not been declared on the individual packages. According to para 5 of the General Notes of Foreign Trade Policy, when packaged commodities in respect of which the provisions of Standards of Weights and Measures Act, 1976 and the Rules made thereunder are applicable, the MRP at which the goods are to be sold in packaged form to the ultimate consumer is required to be declared on each package. Since in this case, there is no evidence that prior to clearance of goods, MRP has been declared on the package and in fact, no MRP stickers had been found on the packages, the provisions of ITC policy have been contravened rendering the goods liable for confiscation. Looking to the quantum of redemption fine and penalty the same are found to be reasonable - Decided against assessee.
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2014 (1) TMI 1017
Classification of goods - Clearance of ‘Non Alloy Steel Round Bars’ of various grades & sizes - Confiscation of goods - Held that:- Bill of Entry has been filed as per the packing list and the goods on examination have been found to be prime quality except 10% of the goods - Appellants have declared the goods as per the packing list and the confiscation of the goods is not sustainable in law. Accordingly, the confiscation of the goods is set aside. So far as the enhancement of value of the goods is concerned, we find the same is without any basis. Further the department’s case is that the goods are not prime quality but defective/secondary. The value of defective/secondary cannot be more than the value of prime quality. Hence the enhancement of value is not justified. We also find that it is not in dispute that 10% of the goods in the consignment were not prime quality, and will not be eligible for the benefit of Notification 21/2002 (Sl. No. 190C), therefore duty is required to be determined - case remanded back to the lower adjudicating authority for limited purpose of determining the duty in respect of 10% of the goods in the consignment after granting the appellants a reasonable opportunity of hearing - Decided in favour of assessee.
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2014 (1) TMI 1016
Waiver of pre-deposit of duty - Duty demand - Mis declaration of goods - Valuation of goods - Held that:- At the time of clearance of the goods the transaction value has been rejected and the assessable value was taken on the basis of contemporaneous import made by other parties at the relevant time as per NIDB Data and the same has been accepted by the applicant accordingly. We further find that if two prices are available for the contemporaneous imports then lower contemporaneous import price is to be taken. As in this case, at the time of import, the assessable value was determined on the basis of the contemporaneous import available at that time therefore, the lowest value of the contemporaneous import is to be the assessable value - applicant has made out a case for 100% waiver of pre-deposit - Stay granted.
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Corporate Laws
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2014 (1) TMI 1015
Amalgamation of company - Dispensing with meeting of equity shareholders and unsecured creditors - Held that:- Court had directed the petitioner companies to file an affidavit indicating as to whether the lease can be transferred to Company No.2 which is 100% owned by foreign companies and whether Company No.2 is under any obligation to obtain any clearance from the Reserve Bank of India under Foreign Exchange Management Act - It may be noted that the transfer of lease, if any, is by one company to another company which have been incorporated under the Companies Act and are having their registered offices in India and, as such, transfer of lease between them would not be in favour of a foreign company or foreigners, though foreigners may be director in one of the companies. The Official Liquidator or the Regional Director are unable to show any condition in the lease deed which would stand violated in case the scheme of amalgamation is sanctioned. They have not specifically pointed out any guideline of the Reserve Bank of India or the provisions of the Foreign Exchange Management Act which may be infringed in case the scheme of amalgamation is sanctioned - There is nothing on record to indicate that the scheme of amalgamation is in any manner detrimental to the interest of its share holders or to its unsecured creditors or against the public public policy of India. The scheme does not appears to be in violation of any provisions of the Foreign Exchange Management Act or the guidelines of the Reserve Bank of India in this regard and in case any formalities in this regard are required to be completed the Director of the transferee company i.e. Company No.2 has undertaken to comply the same as and when required - Petition allowed.
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2014 (1) TMI 1014
Demand of appointment of arbitrator - Demand issued after initiation of proceedings - Whether the petitioner made a demand for appointment of an arbitrator and if so, by which communication/ notice - Held that:- A careful perusal of the clause would show that once disputes or differences have arisen between the parties then, the matter is required to be referred for arbitration by the Chairman and Managing Director of the respondent or any other person appointed by him. The petitioner, undoubtedly, in the notice dated 04.02.2013, raised disputes to which no response was admittedly issued by the respondent - if arbitration had been demanded vide notice dated 04.02.2013, ordinarily there would be no need for issuance of second notice dated 07.05.2013, though such a conduct by itself cannot lead to any definitive conclusion either, especially in the circumstances that there was a gap of at least three (3) months between the two notices - Therefore, the appointment by the respondent, of a sole arbitrator vide communication dated 07.06.2013, would be of no relevance as, the petitioner had moved this court much after the expiry of the thirty (30) days from the date of receipt of the first notice dated 04.02.2013 by the respondent. What made the respondent’s case worse was the fact that the appointment of an arbitrator was sought to be made post the date of institution of the present petition. The petitioner is thus entitled to relief not only under Section 11(4) and 11(5) but also under Section 11(6) of the Act - Decided in favour of Petitioner.
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FEMA
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2014 (1) TMI 1021
Forfeiture of property - Whether in taking over the property of the contesting respondents, the procedure established by law has been followed by the writ petitioner - proceedings were initiated under SAFEMA, 1976 - activities of smuggling and illegal export of foreign exchange through carriers - Held that:- the show cause notice issued by the writ petitioner suffers from manifest irregularity, non-application of mind and in total perversion of SAFEMA. Though this Court has held that in a given case, there is no impediment for the competent authority to file a writ petition, the said discretion must be properly exercised by the authority. It is only in cases where Tribunal's order is perverse, the question of entertaining a writ petition will arise. It is not a fit case where any interference is called for in the impugned order of the third respondent Tribunal. Section 6(1) of the SAFEMA will have to be strictly followed and the authority's satisfaction must be recorded in writing, failing which, the notice is liable to be quashed. - Writ petition dismissed.
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Service Tax
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2014 (1) TMI 1052
Commercial or industrial construction services - Non remittance of service tax - ST-3 Returns not filed - Appellant took plea under Board Circular 7.10.98 - Held that:- Clarifications by the Board are intended to guide field formations, but occasionally tend to achieve the opposite. Provisions of the Finance Act, 1994 clearly enjoin that service tax is remittable (unless otherwise provided in the Statute) by every taxable service provider at every stage of provision of a taxable service. The recipient of a taxable service may be entitled to avail input credit of the service tax remitted, within the ambit of provisions of the Cenvat Credit Rules. The fact that taxable service is provided at various stages or by several agencies sequentially does not alter the trajectory of the legislative provisions. Circulars dealt with customs house agent service and architect service. It is axiomatic that while the Board may be authorized to issue any instruction/guidance to field formations, there is no legislative authority for the Board to be issuing comprehensive commentary on the entire gamut of the Finance Act, 1994 The appellant could hardly claim to have been misled by a Board Circular issued in respect of a wholly distinct service and drawing generic jural principles from such circulars. Had the appellant gone through the provisions of the Finance Act, 1994, there would be no occasion for a doubt as to its liability to service tax - Decided against assessee.
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2014 (1) TMI 1051
Cargo Handling Services - Commissioner dropped demand - Held that:- service of shifting, transportation of raw materials, waste materials, and finished products from one place to another, inside the plant itself, does not fall under the taxing category of Cargo Handling Services. The activities undertaken by the appellant are admittedly within the plant itself - Following decision of Modi Construction Co. vs. CCE, Ranchi [2008 (6) TMI 22 - CESTAT, KOLKATA] - Decided in favour of assessee.
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2014 (1) TMI 1050
Waiver of pre deposit - Construction services - Jurisdiction of Commissioner - Denial of the benefit of Notification No. 12/2003-ST and 1/2006-ST, which permits abatement to the extent of 67% - Held that:- as per the service tax Order No. 1194 dated 29.06.1994 issued by the Board, the jurisdiction of various officers to decide the service tax dispute stands detailed. In terms of the said order, Commissioner of Central Excise will have the jurisdiction as defined in sub-rule (ii) of Rule 2 of Central Excise Rule, 1994 in terms of the Notification No. 14/2002-CE (NT) dated 8.3.2002, as amended, Commissioner of Central Excise, Noida will have jurisdiction to decide the cases in the Districts specified therein and admittedly the State of Maharashtra or Delhi is not one of the specified territories - as the Commissioner has not examined the angle of jurisdiction from the above point of view, we deem it fit to set aside the impugned order and remand the matter to Commissioner for fresh look into the angle of jurisdiction. It is suggested that if the Commissioner is of the view that the matter falls outside his jurisdiction, he is at liberty to approach the Board for the appropriate action required for appointing a single adjudicating authority for multiple registrations - Following decision of Vihar Ahar Pvt. Ltd. vs. CST, Ahmedabad [2012 (11) TMI 370 - CESTAT AHMEDABAD] and Ores India Pvt. Ltd. vs. CCE, Cus. & ST, Bhubaneshwar-II [2007 (7) TMI 138 - CESTAT, KOLKATA] - Decided in favour of assessee.
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2014 (1) TMI 1049
Business Auxiliary Service - Whether the activity of appellant can be called as ‘production of goods’ and further ‘on behalf of the client’ - Period of Demand - Bar of limitation - Penalties under Sections 76 and 78 - Demand of service tax - Held that:- detailed activity undertaken by the appellant is that in which they separate the iron metal from the molten slag - As regards the expression ‘production of goods’, we note that the same was amended in June 2005 and was substituted by the expression – incineration/ shredding of bio-medical where can, by no stretch of imagination, be called as ‘processing of goods’, even if in certain cases the shredded materials may be used as filters etc. Further, the activity also does not qualify to be called as provision of service on behalf of the client. This is because the taxable activity envisaged under this category of ‘business auxiliary service’ is that while the ‘client’ is obliged to provide some service to a 3rd person but instead of the client providing such service, the service provider provides the such service to the 3rd person, on behalf of the client i.e. acting as an agent of the client. Admittedly, in the instant case, there is no 3rd person. Thus, the activity as undertaken does not fall under business auxiliary service or any other existing taxable services - ‘production of goods on behalf of the client’ covers situations where the service provider undertakes job work for the client. In view of the amendment, production or processing (not amounting to manufacture) done either for the client or on behalf of the client would be liable to service tax - Therefore, appellant’s activity prior to June 2005 cannot be held to be exigible to service tax under the category of BAS. Accordingly, we set aside the impugned order and allow the appeal with consequential relief to the appellant - Decided in favour of assessee.
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2014 (1) TMI 1048
Nature of payment towards technical knowhow and inspection charges and royalty charges paid to Hitachi Japan - Consulting engineer or ‘Scientific & Technical Consultancy service’ or ‘Franchise service’ - Penalty u/s 78 - Interest u/s 75 - Whether the payment towards Technical Knowhow and inspection charged and Royalty by the appellants to M/s. Hitachi Japan for the period September’ 04 for the service received by them falls in the category of Consulting Engineering Service - Held that:- The technical knowhow provided by the foreign company as per the Licensed agreements was transfer of intellectual property rights and no consultancy or advice was involved and hence the same was not liable to service tax under consulting engineer service. Further the Government has specifically covered this service for levy of service tax with effect from 10/09/2004 under Section 65 (55b) of the Finance Act, 1944 as ‘Intellectual Property Service’ the definition of ‘Intellectual Property Service’ given under clause (55b) of section 65 is very specific and cover within its ambit, the sale of intellectual property right or transfer or just giving right to the other person for the use or enjoyment of any intellectual property right. Therefore the technical knowhow provided by the Licensor could not be termed as advice or consultancy. Similar view that technical knowhow fee and royalty paid to holding company towards right to use trademark merely a transaction in property and not a consultancy advice - Therefore, the technical knowhow provided by the Licensor cannot be equated with any service covered under consulting engineering service for Sep 2004 and hence the service tax demanded and confirmed on royalty under consulting engineering service is set aside - Decided against Revenue.
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2014 (1) TMI 1047
Denial of CENVAT Credit - Installation of mobile/telephone at the residence of the Managing Director - Held that:- any service availed by a manufacturer of excisable goods in the course of their business activity is entitled for input service credit. Undisputedly, the mobiles/telephone installed at the residence of the Managing Director or senior employees is having a nexus with the business of manufacturing of the appellant company. Therefore, following the decision in Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT], I hold that the appellants are entitled for input service credit on the mobiles/telephone installed at the residence of the senior officers of the appellant company - Decided in favour of assessee.
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2014 (1) TMI 1046
Classification of service - Manpower Supply Service or Site Formation and Clearance, Excavation and Earth Moving and Demolition Service - Held that:- lower authorities have not considered the work-order issued to the appellant, the bills raised by the appellant, the bye-laws of the appellant and the exemption available under Notification No. 17/2005-S.T., dated 7-6-2005 - matter remanded back to the original adjudicating authority for consideration of the matter afresh, taking into account the documentary evidences such as work-order, bills raised by the appellant, bye-laws of the cooperative society, etc. and other documentary evidence, if any, to be submitted by the appellant - Decided in favour of assessee.
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2014 (1) TMI 1045
Steamer Agents Service - Consideration received in convertible foreign exchange - Liability as per Notification No. 21/2003, dated 20-11-2003 and Circular No. 56/5/2003-S.T., dated 25-4-2003 - Held that:- Appellant has rendered the service to a recipient situated abroad and the consideration for the services rendered has been received in convertible foreign exchange. Notification No. 6/99-S.T., dated 9-4-1999 as also Notification No. 21/2003-S.T., dated 20-11-2003 which are identically worded provided exemption from Service Tax in respect of services provided to any person in respect of which payment is received in India in convertible foreign exchange. The above Circular No. 56/5/2003-S.T., dated 25-4-2003 also clarifies that Service Tax is not payable in respect of export of services even after withdrawal of the Notification No. 6/1999, dated 9-4-1999 - From clarification issued by the Board it is evident that there was no intention to levy any Service Tax on export of services - Clarification issued by the CBEC is retrospective in effect and the benefit of exemption would be available even after the withdrawal of Notification No. 6/99-S.T. and its subsequent reinstatement vide Notification No. 21/2003-S.T - Decided in favour of assessee.
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2014 (1) TMI 1044
Waiver of pre deposit - Collection of port dues - Period of service - Business Auxiliary service - Other port service - Held that:- after 1-7-2010, the services rendered in non-major ports which are otherwise considered as “other ports” have also been brought into Service Tax net. According to the definition of “port service”, any service rendered in port irrespective of classification of the service has to be treated as ‘port service’. In such a situation, after 1-7-2010, the services rendered by the appellant for port maintenance in the form of maintenance dredging, improvement to aids to navigation, hydrographic surveys, etc. would clearly fall under the head “other port service”. Once this is accepted, when the port dues are collected, value of this service rendered within the port would form part of port dues. It is further evident from; the agreement that whatever the amount, the appellant received would be from the port dues only and no additional amount was paid by the Government of Andhra Pradesh. In these circumstances, it becomes clear that the amount of 15% of actual expenditure paid to the appellant is port dues collected from port users. It is settled law that the same service cannot be taxed twice under the same head - Prima facie case in favour of assessee - Stay granted.
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2014 (1) TMI 1043
Intellectual property service - Scientific or technical consultancy services - Held that:- Service tax under scientific or technical consultancy services is attracted in a situation when the property is temporarily transferred to another person for a consideration - From the definition of ‘scientific or technical consultancy services’ that there should be an advice given by person or an institution to another person. In the present case temporary transfer of some intellectual property or permitting its use. In the present case there does not seem to be any temporary transfer of intellectual property. The appellant has, therefore, made out a prima facie case that the services alleged to have been provided by them are probably not attracted. The appellant has, therefore made out of a strong case for complete waiver of the service tax liability fastened upon them - Stay granted.
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Central Excise
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2014 (1) TMI 1013
Maintainability of Common appeal - Whether one common appeal can be filed by the appellant and whether it is in consonance with the CESTAT Procedure Rules or not – Held that:- The adjudicating authority has disposed of two show cause notices of the same entity that is, United Phosphorus Limited having two units within his jurisdiction - one appeal will suffice as the provisions of Rule 6A permit for filing one appeal by the aggrieved person. Duty not discharged on goods cleared - Proper valuation of the final products not maintained - Waiver of Pre-deposit – Held that:- For demand of Rs. 6.12 Crores, the appellant has already deposited the entire amount along with interest and is contesting the issue on merits as well as on limitation – the amount submitted is enough deposit to hear and dispose the appeal – For the demand of Rs. 84.97 Lakhs, unconditional waiver allowed in the similar circumstances – Thus, the appellant has made out a prima facie case for the waiver of pre-deposit of the amount – Pre-deposits waived till the disposal – Stay granted.
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2014 (1) TMI 1012
Wrong availment of credit – Documents issued by head office not registered as Input Service Distributor – Waiver of Pre-deposit – Held that:- Following LAKSHMI AUTOMATIC LOOM WORKS LTD. Versus COMMR. OF C. EX., TRICHY [2008 (10) TMI 57 - CESTAT CHENNAI] - the Cenvat credit reversal on the inputs cleared as such to EOU, on merits, the matter is against the appellants and such credit is not admissible - the period involved is June 2003 to September 2011, while the show cause notice was issued on 07.7.2008 and subsequent show cause notices are for the reversal of Cenvat credit within the limitation - the question of limitation is a mixed question of fact and law which can be considered only at the time of final disposal of appeal - the appellant has already deposited an amount of Rs. 62.77Lakhs - the appellant directed to deposit an amount of Rupees five lakhs as pre-deposit – upon such submission rest of the duty to stayed till the disposal – Partial stay granted.
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2014 (1) TMI 1011
Waiver of Pre-deposit – Held that:- The payment of Rs. 11,10,984/- made by the assessee and appropriated by the adjudicating authority has been found to be in discharge of admitted liability and therefore the appellant has got to pre-deposit interest thereon - the outstanding amount payable towards duty and interest is Rs. 8,07,173/-, which is offered as pre-deposit and accepted – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2014 (1) TMI 1010
Abetment of availment of Cenvat credit without receiving the inputs – Waiver of Pre-deposit of penalty under Rule 26 of Central Excise Rules, 2002 – Held that:- The documents on which the credit was availed is on the bills of entries and were purchased on high sea sale basis - the appellants cannot be charged under Rule 26, if it is the case of the Revenue that the main assessee has received only the documents on which the credit was availed, then the provisions of Rule 26 (1) will not apply, and the provisions of Rule 26 (2) will also not apply as the appellants have not issued any document on which someone has availed the Cenvat credit - the appellant has made out a case for the waiver of pre-deposit of amounts – Pre-deposits waived till the disposal – stay granted.
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2014 (1) TMI 1009
Ineligible cenvat credit – Demand on TMT Bars and Cement made – Waiver of pre-deposit – Held that:- The photocopy of the Cenvat credit register and the letter issued by the appellant to the Superintendent of Central Excise, the entire amount of Cenvat credit involved in all these three stay petitions stands reversed – Additional Commissioner (AR) is allowed and is directed to get the matters verified from the lower authorities as to the reversal of the amounts in the Cenvat register - the amounts reversed by the appellant as enough deposit to hear and dispose the applications for waiver of the pre-deposit – Decided in favour of Assessee.
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2014 (1) TMI 1008
Confirmation of the Compounded Levy Scheme - Waiver of Pre-deposit – Held that:- The differential duty has been worked out by the adjudicating authority based upon the capacity of production, as per the Annual Production Capacity Rules - the details as regards the eligibility of deemed credit to the appellant in the absence of any document or any claim made cannot be considered at this stage - the appellant directed to deposit Rupees fifteen 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 1007
Benefit of Notification No. 1/2011 and 2/2011 – Concessional rate of duty - Waiver of pre-deposit – Commission agent services - Held that:- The services were obtained only in respect of Ammonia which is their intermediate product sold to outside parties - The balance ammonia was consumed by them captively – Thus, the commission agent service tax credit stand availed in respect of ammonia sold to outside parties and not in respect of urea cleared in terms of Notification No. 1/2011. Notification No. 1/2011 debars taking of credit of inputs and input services in respect of goods covered under the notification - The appellants have produced on record the invoices showing charging of Service Tax by the commission agents for sale of ammonia and the credit availed by them only in respect of commission paid to the commission agents for sale of ammonia - the appellants has paid the service tax and commission to the commission agents for sale of urea but no service tax credit stand availed by them in respect of such service tax - Prima facie the appellants have made a case in their favour – Pre-deposits waived till the disposal – stay granted.
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2014 (1) TMI 1006
Excisability of the commodities - Waiver of Pre-deposit – Held that:- Prima facie, the view that the arguments will have to be considered at final hearing - on the premise that the aforesaid items are excisable and the appellant ought to have paid duty of excise during the period of dispute – Following Mahindra & Mahindra Ltd. Vs. Commissioner of Central Excise Aurangabad etc. [2005 (11) TMI 103 - CESTAT, NEW DELHI ] - the appellant had good reason to maintain a bonafide belief during a major part of the period of dispute that the activity did not amount to manufacture - the entire value on which duty is sought to be recovered was included by the party in the taxable value of various services and service tax paid thereon after admissible abatement - the appellants directed to pre-deposit Rupees fifteen lakhs and fifty six thousands 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 1053
Rejection of books of accounts - Discrepancy in stock and accounts - Best judgement assessment - Held that:- purchases were shown to have been made by firms at Ghaziabad and Noida but the said firms were found closed when subsequent queries were made and the notices were issued to them. The transaction of payment through bank account is also not in the ordinary course of business inasmuch as the firms claiming their addresses at Noida and Ghaziabad, opened their accounts at Aligarh, collected cheque money and withdrawn the same in quick succession of two to three days and that too in cash. Thirdly the alleged transport companies whereby huge quantity of oil and tin containers were claimed to have been transported from Ghaziabad and Noida to Aligarh, were found non-existing and bogus - In totality, when various circumstances are considered by Revenue, I do not find that the approach can be said to be illegal or erroneous so as to make a best judgment assessment in the circumstances like present one illegal or unauthorized - Decided against assessee.
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Indian Laws
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2014 (1) TMI 1042
Jurisdiction of High Court - Revisional jurisdiction of High Court - Abatement to suicide - High Court quashed charges against Section 306 IPC and 448 IPC - Held that:- revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the exercise of revisional jurisdiction itself should not lead to injustice ex facie. Where the Court is dealing with the question as to whether the charge has been framed properly and in accordance with law in a given case, it may be reluctant to interfere in exercise of its revisional jurisdiction unless the case substantially falls within the categories. The jurisdiction of the Court under Section 397 can be exercised so as to examine the correctness, legality or proprietary of an order passed by the trial court or the inferior court, as the case may be. Though the section does not specifically use the expression ‘prevent abuse of process of any court or otherwise to secure the ends of justice’, the jurisdiction under Section 397 is a very limited one. The legality, proprietary or correctness of an order passed by a court is the very foundation of exercise of jurisdiction under Section 397 but ultimately it also requires justice to be done. The jurisdiction could be exercised where there is palpable error, non-compliance with the provisions of law, the decision is completely erroneous or where the judicial discretion is exercised arbitrarily. What weighed with the High Court was that firstly it was an abuse of the process of court and, secondly, it was a case of civil nature and that the facts, as stated, would not constitute an offence under Section 306 read with Section 107 IPC. Interestingly and as is evident from the findings recorded by the High Court reproduced supra that ‘this aspect of the matter will get unravelled only after a full-fledged trial’, once the High Court itself was of the opinion that clear facts and correctness of the allegations made can be examined only upon full trial, where was the need for the Court to quash the charge under Section 306 at that stage. Framing of charge is a kind of tentative view that the trial court forms in terms of Section 228 which is subject to final culmination of the proceedings. High Court has also noticed that perusal of the suicide note brings to fore the fact that the petitioner-accused is not only named but his illegal occupation of the house of the deceased is stated to be one of the primary reasons for Komal Kapoor in committing the suicide. The statement of the son of the deceased is also on the same line. Then the High Court proceeds further to notice that even if it is assumed at this stage that the suicide note and statement were correct, the action of the petitioner-accused in forcibly occupying the portion of the house of the deceased and the deceased taking the extreme step would not bring his act within the definition of abetment, as there is no material or evidence placed by the prosecution on record. This finding could hardly be recorded without travelling into the merits of the case and appreciating the evidence. The Court could pronounce whether the offence falls within the ambit and scope of Section 306 IPC or not. These documents clearly show that the accused persons had brought in existence the circumstances which, as claimed by the prosecution, led to the extreme step of suicide being taken by the deceased. It cannot be equated to inflictment of cruelty as discussed by the High Court in its judgment. A wilful misrepresentation or wilful concealment of material fact and such person voluntarily causing or procuring or attempting to cause or procure a thing to be done is said to instigate the doing of that thing. According to the record, the accused had made a wrong statement that he had paid a sum of ₹ 24,00,000/- for purchase of the property C-224, Tagore Garden, Delhi and the property belonged to him. Whether it was a misrepresentation of the accused and was an attempt to harass the deceased and her family which ultimately led to her suicide is a question to be examined by the Court. The allegations as made in the afore-stated documents clearly reflects that blank documents were got signed, but the purpose, the consideration and complete facts relating to the transaction were not disclosed to the deceased or the family. Instigation has to be gathered from the circumstances of the case. All cases may not be of direct evidence in regard to instigation having a direct nexus to the suicide. There could be cases where the circumstances created by the accused are such that a person feels totally frustrated and finds it difficult to continue existence. Husband of the deceased was a paralysed person. They were in financial crises. They had sold their property. They had great faith in the accused and were heavily relying on him as their property transactions were transacted through the accused itself. Grabbing of the property, as alleged in the suicide note and the statement made by the son of the deceased as well as getting blank papers signed and not giving monies due to them are the circumstances stated to have led to the suicide of the deceased. The Court is not expected to form even a firm opinion at this stage but a tentative view that would evoke the presumption referred to under Section 228 of the Code. Finding returned by the High Court suffers from an error of law. It has delved into the field of appreciation and evaluation of the evidence which is beyond the jurisdiction, either revisional or inherent, of the High Court under Sections 397 and 482 of the Code - Charge against the accused under Section 306 read with Section 107 and Section 448 IPC are found to be in order - Decided in favour of Appellant.
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