TMI Tax Updates - e-Newsletter
January 21, 2015

Case Laws in this Newsletter:

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

TMI SMS

• TDS u/s 192 - Salary paid to Non-resident MD outside India at US for the services to the US branch would not be taxable in India u/s 9 - Tri

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Articles

1. EDUCATION SERVICES UNDER NEGATIVE LIST

   By: Dr. Sanjiv Agarwal

2. In case of remand matter, the Department is not entitled to hold on to the amount deposited by the Assessee during the course of investigation as pre-deposit – Assessee is entitled for refund

   By: Bimal jain

News

1. FM: Record Number of 11.50 Crore Bank Accounts Opened Under Pradhan Mantri Jan Dhan Yojana (PMJDY) as on 17th January 2015 against the original Target of 7.5 Crore by 26th January, 2015;

2. RBI Reference Rate for US $

3. Key Highlights of Nirmala Sitharaman’s Bilateral Engagements on Sidelines of Partnership Summit 2015

4. Amended Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

Notifications

Central Excise

1. 01/2015 - dated 20-1-2015 - CE (NT)

Amendment of Notification No. 27/2014 - Central Excise (NT) dated 16.09.2014

Companies Law

2. F. No. 1/18/2013-CL- V-Part - dated 19-1-2015 - Co. Law

The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2015

3. F. No. 01/9/2013-CL.V (Part-II) - dated 19-1-2015 - Co. Law

The Companies (Appointment and Qualification of Directors) Amendment Rules, 2015.

Customs

4. 11/2015 - dated 19-1-2015 - Cus (NT)

Amends Notification No. 09/2015-Customs (N.T.), dated the 15th January, 2015

FEMA

5. 331/2014-RB - dated 16-12-2014 - FEMA

Foreign Exchange Management (Export and Import of Currency) (Second Amendment) Regulations, 2014

Circulars / Instructions / Orders

Customs

1. 04/2015 - dated 20-1-2015

Re-export of goods imported under bonafide mistake - Reg.

Highlights / Catch Notes

Income Tax

• Tax Deduction Certificate Denied u/r 28AB, Rendering Rule 28AA Inapplicable for Petitioner's Case.

  Case-Laws - HC : Lower deduction certificate under section 197 r.w.r 28AA rejected - Rule 28AA which would generally apply would not apply in the present case because the petitioner’s case is covered under the specific instances provided under Rule 28AB - HC
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• Joint Ventures' Payments to Members Exempt from TDS u/s 194C Due to Lack of Contractor-Subcontractor Relationship.

  Case-Laws - AT : TDS u/s 194C - joint ventures/consortiums - payments made to their constituent members on account of execution of contract work - There being no relationship of contractor and subcontractor - not liable to TDS - AT
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• Cooperative Bank Must Deduct TDS on Term Deposit Interest for Members Under Income Tax Act Section 194A.

  Case-Laws - AT : TDS u/s 194A - Interest paid on term deposits to its members by the Co-op bank - , when there is a specific provision, general provision cannot be applied in the case of the assessee otherwise the provision of section 194A (viia) will become redundant. - assessee liable to deduct TDS - AT
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• Court Approves 40% Depreciation Rate for Mobile Crane as Heavy Motor Vehicle Under Income Tax Act Section 32.

  Case-Laws - AT : Claim of higher rate of depreciation - Mobile crane was registered as a heavy motor vehicle - depreciation at 40% on crane mounted on motor truck allowed u/s 32 - AT
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• Property Transfer Date Not Triggered Without Possession; Capital Gains Not Taxable for 2001-02 Assessment Year.

  Case-Laws - AT : Capital gain - possession was not given - transfer of property did not take place on the date of execution of development agreement and accordingly the capital gain not taxable in AY 2001-02 - AT
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• Salary to Non-Resident MD for US Branch Not Taxable in India; No TDS Deduction Needed u/s 192.

  Case-Laws - AT : TDS u/s 192 - Salary paid to Non-resident Managing Director - non deduction of TDS - the salary paid outside India at US for the services to the US branch would not be taxable in India u/s 9 - AT
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• CIT vs. AO: No Disallowance u/s 40(a)(i) for Foreign Commission; Two Views Possible, Not Erroneous.

  Case-Laws - AT : Revision u/s 263 - AO chose not to make any disallowance u/s 40(a)(i) on foreign commission received - when two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue - AT
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• No Penalty Imposed: Taxpayer's Bona Fide Belief in Transactions Before Presidential Assent u/s 271(1)(c), 94(7.

  Case-Laws - AT : Penalty u/s 271(1)(c) - disallowance made u/s 94(7) - transactions concluded prior to the date of receipt of assent of Hon’ble President of India - in view of bonafide belief, no penalty - AT
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• Section 40(a)(ia) Disallowance Not Applicable: No Deduction Claimed on Advances, No TDS u/s 194C.

  Case-Laws - AT : Disallowance of expenses u/s 40(a)(ia) - TDS u/s 194C from the advances made - assessee had not claimed any deduction from the income of the year under consideration - no disallowance - AT
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• Section 14A: Only Expenses Tied to Exempt Income Disallowed, Business Expenses Remain Untouched Under Income Tax Act.

  Case-Laws - AT : Disallowance u/s 14A - The expenditure incurred exclusively for business activity cannot be included in such attributable expenses for the purpose of disallowance u/s.14A - AT
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Customs

• Interest on Refund Claims Starts Three Months Post-Application; No Extensions Allowed.

  Case-Laws - AT : Delay in refund claim - Interest on refund claim - date of refund application and payment of interest after three months thereafter, cannot be postponed under any circumstances. - AT
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• Customs Ruling: Solely Using NIDB Data for Goods Valuation is Insufficient; Calls for Comprehensive Valuation Approach.

  Case-Laws - AT : Enhancement of declared value of goods - enhancement of value on the basis of NIDB data cannot be accepted - AT
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Service Tax

• No Penalty Imposed for Late ST-3 Filing and Service Tax Shortfall Due to Reasonable Delay Explanation.

  Case-Laws - AT : Failure of registration of service - Belated filing of ST-3 Returns - The short payment of Service Tax was not detected by the Revenue, therefore, the reasonable cause explained - no penalty - AT
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Central Excise

• Rebate Claims Valid if Filed Within One Year of Export, Even Without Original AREs-1 Copies; Not Time-Barred.

  Case-Laws - CGOVT : Denial of rebate claim - Bar of limitation - once the initial rebate claims filed within 1 year of date of export, although without original/duplicate copies of AREs-1 the same is to be treated as filed on the date when it was initially filed and as such cannot be treated as time barred - CGOVT
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• CJK Creation Not Manufacturing; CENVAT Credit Adjustment Denied for Appellant's Packing Process.

  Case-Laws - HC : Adjustment of CENVAT Credit - process of packing of bought out items and manufactured items undertaken by the appellant to make CJK which was not amount to manufacture - credit was rightly denied - HC
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VAT

• Iron and steel in works contracts taxed at 4%, other goods follow Third Schedule rates.

  Case-Laws - HC : Rate of taxability of iron and steel used for execution of works contract - iron and steel to be taxed at 4% - remaining taxable turnover relating to goods other than iron and steel taxable at the rates prescribed in the Third Schedule over goods - HC
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Case Laws:

• Income Tax

• 2015 (1) TMI 749
  Loss on account of intraday trading in shares - whether speculative in nature? - Held that:- Both the CIT (Appeal) and the ITAT took into consideration the assessee’s explanation that certain intraday transactions – broadly described as “clearing differences”, were held over in the sense that the delivery had to be obtained. The assessee had also apparently argued before the concerned authorities and placed a chart reflecting the transactions to support the submission that even in respect of intraday sales, consideration had passed. A look at the order of the CIT (Appeal) as well as ITAT nowhere reflect this position. Even the discussion of the assessing officer while including a sum of 66,35,210/- would show that the no rationale has been given as to whether in fact consideration flowed for the intraday purchases and sales effected by the assessee so as to take it out of the mischief. Thus the matter should be considered afresh and express findings recorded as to whether in fact intraday purchases and sales made by the assessee were jobbing transactions and whether consideration has passed. - Decided in favour of assessee for statistical purposes. Interest-free loans secured by the assessee - addition under Section 68 - Held that:- All the seven creditors of the assessee had confirmed the transactions. Their creditworthiness was established in the sense that relevant documents in support of their possessing and requisite funds to advance loans to the assessee were examined. It was also noticed that this amount was represented by the assessee to the said creditors. In the circumstances, the appropriate course – if the assessing officer felt that being interest-free, certain amounts were deemed to be included as income-was to do so in accordance with law rather than proceeding under Section 68 as he did. The mandate of the law as explained in CIT V. Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] is that onus is upon the assessee to disclose the true identity of the creditor and the creditworthiness of the said party. In this case since the identity and creditworthiness had been established, genuineness was a matter of inference. This Court is satisfied that both the CIT and ITAT acted in consonance with law. No substantial question of law arises in this count.

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• 2015 (1) TMI 748
  Assessment proceedings under Section 158BC - Satisfaction note non accord with the requirements of Section 158 BD - Held that:- Since the limitation period for completion of block assessment, or in the case of searched persons as well as the third party who is issued notice is two years, it is reasonable to assume that the revenue can be given latitude of six months which can be considered as “immediate” or immediately proximate in point of time. In the present case, the six month period expired on 28.02.2003; the satisfaction note was recorded on 06.03.2003 and the notice was issued more than 3 ½ months after lapse of the date i.e. 18.06.2003. In these circumstances this Court holds that the notices did not accord with the Supreme Court’s declaration of law in MANISH MAHESHWARI case [2007 (2) TMI 148 - SUPREME COURT OF INDIA] and was unduly delayed. They cannot be considered as having been recorded immediately after the completion of assessment proceedings under Section 158BC Income Tax Act. - Decided in favour of assessee.

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• 2015 (1) TMI 747
  Lower deduction certificate under section 197 r.w.r 28AA rejected - petitioner submitted that Rule 28AA would not apply and it is Rule 28AB which would be applicable - Held that:- We agree with the submissions made by petitioner that Rule 28AA which would generally apply would not apply in the present case because the petitioner’s case is covered under the specific instances provided under Rule 28AB. Therefore, the consideration which was given by the Deputy Commissioner of Income-tax under rule 28AA was under a wrong provision. The parameters which have to be examined under Rule 28AA and the parameters under Rule 28AB are entirely different. The result is that the application of the petitioner has been examined under parameters which were not applicable to the petitioner and therefore the rejection based thereupon would be liable to be set aside. Set aside the impugned order of rejection and remit the matter to the concerned DCIT for consideration afresh under Rule 28AB after giving an opportunity of hearing to the petitioner/ representative of the petitioner. Decided in favour of assessee for statistical purposes.

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• 2015 (1) TMI 746
  Contractual trading liability - disallowance under Section 43B - Held that:- The amount is not an ascertained liability. The Court held that such liability is contingent upon an uncertain fact and, therefore, deduction claimed by the assessee was not permissible in view of Section 43B of the Income Tax Act. See Oswal Agro Mills Ltd. vs. Commissioner of Income Tax [2014 (2) TMI 378 - DELHI HIGH COURT ] - Decided against assessee. Disallowance of loss incurred on account of devaluation of Rupee - Held that:- Loss incurred on account of devaluation of Rupee is governed by the ruling in CIT vs. Woodword Governor India Pvt. Ltd. (2009 (4) TMI 4 - SUPREME COURT ) wherein held the loss incurred is clearly admissible and the disallowance made by the Revenue was not justified. Decided in favour of assessee.

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• 2015 (1) TMI 745
  Addition under Section 68 deleted by ITAT - sum of 57,65,419/-, which the assessee-respondent claimed as capital gains along with original acquisition of 4,86,750/- aggregating to 61,25,169/- was erroneously held to be a wrong addition under Section 68 of the Income Tax Act - Held that:- In line with the judgment of CIT V. Lovely Exports (P) Ltd. (2008 (1) TMI 575 - SUPREME COURT OF INDIA) the initial onus to disclose the source of credit is upon the assessee. That judgment clearly states that once this burden is discharged in a reasonable manner, the burden of establishing that the source of the income is unaccounted or that the explanation afforded is unreasonable or not capable of investing or not lies upon assessing officer. In the present case, the assessee had clearly disclosed all relevant particulars i.e. the name and addresses of the share brokers to whom it has transacted, particulars of the company, the rates at which the shares were brought and the relevant quotations from the concerned stock exchanges etc. In these circumstances to expect the assessee to even produce the brokers physically before the assessing officer was unreasonable. After all, the assessing officer could have used his powers if he thought there was any reason to suspect the materials produced before him were dubious or otherwise unacceptable. - Decided in favour of assessee.

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• 2015 (1) TMI 744
  Liability to deduct TDS - assessees in the present case are joint ventures/consortiums - payments made to their constituent members on account of execution of contract work - AO treated assessee as the assessees in default under S.201(1) - Held that:- There being no relationship of contractor and subcontractor between the assessee AOP/joint venture and its constituent members, tax at source was not required to be deducted from the payments made by the assessee AOP to its members, as per the provisions of S.194C(2), and consequently, there was no question of treating the assessees as in default under S.201(1). We therefore, uphold the impugned order of the learned CIT(A) and dismiss these appeals filed by the Revenue. - Decided in favour of assessee.

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• 2015 (1) TMI 743
  TDS u/s 194A - Interest paid on term deposits to its members by the Co-op bank - whether the assessee co-operative bank engaged in the banking business is liable for TDS or not? - Held that:- Wherever, the reference is made to any co-operative society, the Income tax Act, 1961 has clearly distinguished and specified the type of co-operative society based on the type of activity carried out. Such a distinction was required as the legislation intends to extend different benefits to different types of co-operative societies through the Income tax Act. The assessee claimed the benefit of sections 36(1)(viia), 269 SS and 269T on the ground that it is a co-operative bank but for availing exemption from TDS under section 194A, it is claiming itself as an ordinary 'co-operative society' within the meaning of section 194A(3)(v) of the Act. We find that this distinguishes the co-operative society and the cooperative society carrying on business of banking. The Hon'ble Kerala High Court in the case of Moolamatom Electricity Board Employees Co-operative Bank Ltd., [1998 (7) TMI 53 - KERALA High Court] has distinguished this. The decision of Hon'ble Kerala High Court in the case of ITO 27,58,64,367/- deleted on account of accrued interest on loans by CIT(A) - Held that:- Interest accrued on sticky advances which was not brought in profit and loss account but taken to separate suspense account should be added as income only when actually received, which is in the case of the assessee. Thus we uphold the order of ld CIT(A) in deleting the addition of Rs. 27,58,64,357/-. - Decided against revenue.

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• 2015 (1) TMI 742
  Claim of higher rate of depreciation - whether equipment i.e. payloaders, JCBs and 400V loaders can be classified as plant and machinery for the purpose of depreciation and not as motor bus, motor lorry or any transport/goods vehicle? - Held that:- Mobile crane of the assessee which admittedly was registered as a heavy motor vehicle, for the above reasons, clearly fall within the expression 'motor lorries' (which means motor trucks) in heading III E (1A) of the Table in Appendix 1 under rule 5 since it was used by the assessee in its business of running the crane on hire. Therefore, wrong in holding that the assessee was not entitled to depreciation at 40 per cent on crane mounted on motor truck. - Decided in favour of assessee. Depreciation on Commercial Transport Vehicle claimed at @30% - recourse to section 154 by AO restricting the depreciation @15% - Held that:- The issue could not have been taken by the AO u/s 154 of the Act in as much as the issue was debatable and it required investigation both on facts as well as applicability of law. In this view of the matter assessee's Cross Objection is liable to succeed. Accordingly Cross Objection of the assessee stands allowed. - Decided in favour of assessee. Reopening of assessment - depreciation on Tata & JCB loaders @ 40% are excessive whereas @25% is allowable - Order u/s 263 by the C.I.T. by dropping the proceedings after accepting the plea of the assessee - Held that:- Once the issue has already been examined and held in favour of the assessee u/s 263 of the Act the same cannot be the subject matter of reopening by the AO. In this view of the matter we hold that the assumption of jurisdiction by the AO in this case was bad in law and accordingly we set aside the reopening.- Decided in favour of assessee.

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• 2015 (1) TMI 741
  Bogus purchases - CIT(A) deleted the addition of 2,84,01,250/- on account of bogus purchases of 2,98,96,050/- - Held that:- AO has given various reasons for not accepting the explanation of the assessee. The AO has given finding that the assessee failed to produce the original sale invoices, not a single cheque issued by the assessee against these purchases has been credited in the account of any of these parties, none of the cheque was issued as ‘A/c.payee cheque’ and no cheque was issued in favour of any of these parties. The AO has also invoked the provisions of section 40A(3) and proviso to section 69C of the Act. We find that there is no finding or any whisper on these objections of the Assessing Officer in the impugned order. The ld.CIT(A) has simply restricted the disallowance to the extent of benefit of VAT, i.e. 5% of the total purchases. Under these facts and circumstances of the case, unable to confirm the finding of the ld.CIT(A), therefore the order of the ld.CIT(A) is set aside on this issue and restore the same back to his file for decision afresh in accordance with law. Decided in favour of revenue for statistical purposes.

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• 2015 (1) TMI 740
  Capital gain - selection of assessment year as 2001-02 - Held that:- Assessee had received advance amounts much earlier to the execution of development agreement, probably on the strength of the MOU. The property was encumbered with tenancy rights of many persons and the release of tenancy right was completed only in January, 2005. Further, the approval from municipal corporation was also got delayed and the plans were revised subsequent to AY 2000-01. The surrounding circumstances show that the developer did not start the work of development in the year relevant to AY 2001-02. As per the terms of development agreement, the assessee has given only licence to enter into the property, meaning thereby the possession was not given in the year relevant to AY 2001-02. Hence, we hold that the transfer of property did not take place on the date of execution of development agreement and accordingly the tax authorities are not justified in assessing the capital gain in AY 2001-02. Thus we do not find it necessary to address other issues relating to computation of capital gains. - Decided in favour of assessee.

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• 2015 (1) TMI 739
  Depreciation on assets of the Vegetable Oil Division - Held that:- Once an asset forms a part of block of assets and the business having been carried on, the depreciation is allowable on the written down value (WDV) comprising of block of assets sole on as the business is being carried on by the Assessee then the condition of user of a particular asset is not applicable under the concept of allowing depreciation on block of assets as once the asset forms a part of block of assets it loses its individual WDV or identity. Accordingly, we hold that the CIT(A) rightly allowed relief for the Assessee and orders of the ITAT have not been set aside or modified by any high forum. - Decided against revenue. Prior period expense disallowed - CIT(A) deleted the addition - Held that:- It has been accepted that as per regular system of accounting followed by the Assessee the disputed expenses are always claimed in the year in which the same are quantified in view of above we inclined to hold that since the liability in respect of entire expenditure arose during the year under consideration. Therefore, the same cannot be disallowed by holding them to be prior period expenditure. Hence, the CIT(A) rightly granted relief for the Assessee and we decline to interfere with the impugned order in this regard. - Decided against revenue. Processing fees paid to banks and financial institutions - Revenue v/s capital expenditure - Held that:- When the processing fee was paid for obtaining a loan for the purpose of business then it is a revenue expenditure and the same could not be disallowed hence the CIT (A) rightly deleted the addition in this regard. - Decided against revenue. Commission paid for processing loans from banks/financial institutions disallowed - CIT(A) deleted the addition - Held that:- Assessee has submitted details of brokerage as well as amount of loan received and the name of the bank of financial institution from where the loans were obtained. Thus, CIT(A) right hold that the respective progress rendered services to the Assessee for obtaining huge amounts of loans from banks and financial institutions. Therefore, the brokerage expenses incurred in this regard has to be allowed as revenue expenditure and the CIT(A) rightly allow the same by deleting the impugned addition.- Decided against revenue. Exchange rate fluctuation - whether CIT(A) erred in not remanding the addition back to the AO and in giving directions to the AO in violation of Section 251 - Held that:- Income for Assessment Year 2002-03 clearly observe that the Assessee has added back a sum of 64 lakhs in the computation of income for the Assessment Year 2002-03. Further we observe that deduction of 64 lakhs has been claimed on payment basis during the A.Y 2003-04. Thus, the action of the CIT(A) on this issue is justified which is based on proper analysis of facts. Under theses circumstances, the CIT(A) directed the AO to allow the relief subject to some verification of certain facts and the we are unable to see any perversity, ambiguity or any other valid reason to interfere with the same. - Decided against revenue. Disallowance of brought forward losses and depreciation - Held that:- Assessing Officer has not raised or disputed the issue of brought forward loses and unabsorbed depreciation and the Revenue is not allowed to create or re-open the issue which was not an issue of dispute before the authorities below. - Decided against revenue. Routine expenses dis allowance - Held that:- The issue is restored to the file of Assessing Officer for proper examination and verification in the light of earlier and subsequent assessments of the Assessee. Needless to say that the AO shall provide due to opportunity of hearing for the Assessee during the fresh adjudication of the issue. The Assessing Officer is further directed to consider the explanation, evidence and documents of the Assessee in the light of earlier and subsequent assessment orders of the assessee company in this regard. Decided in favour of assessee for the statistical purpose.

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• 2015 (1) TMI 738
  Non deduction of TDS on freight income - CIT(A) deleted the addition relying on TDS certificates given as additional evidence - violation of the provisions of Rule 46A by CIT(A) on admitting additional evidence not giving AO an opportunity of hearing - Held that:- As it is clear from the record which was considered by ld. CIT(A) that the same is not an additional evidence but the break-up of gross receipts and various expenditure were furnished after taking the same from the record already available before the AO. Therefore, we do not find any merit or substance in the objection raised by the revenue, that CIT(A) has violated the provisions of Rule 46A while considering the break-up of receipts and expenses. It is pertinent to note that when the gross receipts of the assessee is much more than the receipts shown as per TDS certificate then there is no question of showing less receipt by the assessee . Accordingly, in the facts and circumstances of the case we do not find any error or illegality in the order of ld. CIT(A) qua this issue. - Decided in favour of assessee. Salary paid to Non-resident Managing Director - non deduction of TDS - disallowance u/s. 40a(iii) - CIT(A) deleted the addition - Held that:- salary in question was paid to Mr. Jayant Bhardwaj, MD of the assessee in US. The assessee produced the passport and visa of the MD to show that he was a non-resident Indian during the year under consideration and, therefore, the salary received by him outside India for the services rendered outside India are not taxable in India. Since the fact that the MD of the assessee is a non resident during the year has not been disputed by the Revenue , therefore, the salary paid outside India at US for the services to the US branch would not be taxable in India as per the provisions of Section 9 of the Income tax Act, thus no corresponding disallowance can be made under section 40(a)(i) of the Income tax Act, 1961. - Decided in favour of assessee.

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• 2015 (1) TMI 737
  Addition/disallowance on account of pay channel expenses - Held that:- The dispute arose when the AO noticed that the assessee had sold its business w.e.f. 1.8.2007 and the AO disallowed proportionate amount i.e. 1/5th of actual expenditure estimate related to August 2007 without bringing out any other adverse fact or material. In the present case, undisputedly during FY 2007-08, the sale of business of the assessee was in process and there cannot be a cut off date of expenditure, if expenditure has been incurred for the purpose of business and the same cannot be recovered from the purchaser of the business, then the claim of the assessee cannot be disallowed on proportionate and estimate basis and the same is allowable u/s 37 of the Act. Hence, we are of the view that the AO was not justified in making part disallowance in this regard and the CIT(A) was not justified in upholding the same. - Decided in favour of assessee. Interest on advance given - CIT(A) deleted the addition - Held that:- AO made addition by taking a hypothetical approach and without any basis which was rightly deleted by the CIT(A) on the basis of conclusion arrived after logical analysis of the details, evidence and submissions of the assessee. The probability or improbability of realisation has to be seen and considered in a realistic manner and no addition can be made in this regard without bringing out the fact that the interest really accrued to the assessee. - Decided against revenue. Channel placement income - CIT(A) deleted the addition - Held that:- Income tax cannot be levied on hypothetical income. As per taxation jurisprudence, income accrues when it becomes due but also be supported by a corresponding liability of the other party (s) to pay the amount, only then for the purpose of taxability it can be said that income is not hypothetical and it has really accrued to the assessee. In the present case, the revenue authorities below miserably failed to substantiate this fact that the assessee actually earned income from channel placement and the same was accrued to the assessee company during financial year under consideration. Accordingly, we are inclined to hold that the AO made addition without any basis which was rightly deleted by the CIT(A).- Decided against revenue. Disallowance of provision for expenses - CIT(A) deleted the addition - Held that:-AO misinterpreted the accounting details of payment of salary made by the assessee company to its staff. The assessee company made provision of 17 lakh which was utilized for making payment to the staff and the amount of payment made by the assessee from 30.06.2008 to 30.09.2008 was 17,03,030/- and the same fact has not been disputed by the DR. Accordingly, the CIT(A) was right in deleting the disallowance and addition made on this issue and we are inclined to hold that there is no ambiguity or perversity in the impugned order and we uphold the same.- Decided against revenue.

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• 2015 (1) TMI 736
  Revision u/s 263 - AO chose not to make any disallowance u/s 40(a)(i) on foreign commission received - Held that:- The amount of commission income for rendering services in procuring export orders outside India is not chargeable to tax in the hands of the non-resident agent and hence no tax is deductible under section 195 on such payment by the payer. Resultantly, no disallowance is called for u/s 40(a)(i) of the Act. At this juncture, it is pertinent to note that we are dealing with an appeal against the order passed u/s 263 of the Act. It is settled legal position that there can be no revision on a debatable issue as held in Malabar Industrial Company Ltd. Vs. CIT (2000 (2) TMI 10 - SUPREME Court) and CIT vs. Max India Ltd. (2007 (11) TMI 12 - Supreme Court of India) wherein held that when two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law. Adverting to the facts of the instant case, it can be seen that the AO, after considering certain decisions relied by the assessee favouring non-deduction of tax at source in the present circumstances, accepted the assessee’s contention. The fact that the decision of the Authority for Advance Ruling, relied by the ld. CIT, favours the Revenue’s case, at the maximum, makes the issue about deduction of tax at source from foreign commission, a debatable one. In view of such a cleavage of opinion, this debatable issue goes outside the purview of section 263. We, therefore, set aside the impugned order. Decided in favour of assessee.

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• 2015 (1) TMI 735
  Addition made u/s 69A - unaccounted jewelery - Held that:- In this case undisputed facts are that when the jewellary was seized by the Sales Tax Department, the company came forward and claimed ownership of the said jewellary as evident from the proceedings before the Sales Tax Authorities and the filing of the writ petition before the Hon’ble J&K High Court, wherein company D-Mines Trading Co. Pvt. Ltd was the petitioner. On the direction of the Hon’ble High Court, the company had furnished the bank guarantee and also paid the penalty amount imposed by the STA, for the release of the jewellary seized. When company had claimed ownership of the jewellary, mere possession of the same by the assessee at the time of its seizure by STA is immaterial as to determine the ownership of jewellary. To determine the ownership of jewellary necessarily the books of account of the company also needs to be examined. It is a fact that the AO had not verified as to whether the company DMines Trading Co. Pvt. Ltd had recorded in its books of account the transaction effected. Taking into account the facts of the matter, we are of the view that the issue is to be examined afresh by the AO, for the limited purpose, to verify as to whether, the jewellary seized is recorded in the books of account of D-Mines Trading Co. Pvt. Ltd. If the seized jewellary is recorded in the books of account of the company, necessarily assessee’s explanation that he is not the owner of the jewellary cannot be said to be false and therefore, addition u/s 69A of the Act is not warranted in his hands. - Decided in favour of assessee for statistical purposes.

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• 2015 (1) TMI 734
  Penalty levied by the AO u/s 271(1)(c) - disallowance made u/s 94(7) - Held that:- In the present case, it is not the case of the revenue that the assessee has failed to furnish all particulars of income. As noticed earlier, the assessee has indicated in its return of income that it was conscious of the provisions of sec. 94(7) of the Act. The assessee had attached a note also in this regard expressing its view about the applicability of the provisions of sec. 94(7) of the Act. In the assessment proceedings, the assessee has contended that the amended provisions should not be applied on the transactions concluded prior to the date of receipt of assent of Hon’ble President of India. Thus, in our view, the assessee was under bona fide belief that the amended provisions will not be applicable for the transactions concluded atleast upto the date of receipt of assent of the Hon’ble President to Finance (No.2) Bill , 2004. In our view, the said belief cannot be altogether rejected, since the said claim of the assessee is a debatable one. Even otherwise, we are of the view that the decision of Hon’ble Supreme Court in the case of Reliance Petro Products (2010 (3) TMI 80 - SUPREME COURT ) supports the case of the assessee, i.e., a claim which is not sustainable in law by itself would not lead to furnishing of inaccurate particulars of income. Thus the penalty levied on the disallowance made u/s 94(7) of the Act is liable to be deleted. - Decided in favour of assessee.

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• 2015 (1) TMI 733
  Disallowance of expenses u/s 40(a)(ia) - TDS u/s 194C from the advances made - labour/transport/professional charges - CIT(A) deleted the addition - Held that:- While deleting the addition of 2,40,000/- paid to Ramesh Ramjibhai Patel and 7,00,000/- paid to Mukesh G. Patel, has held that the said amounts paid were advances to the concerned persons. Under Section 40(a)(ia) of the Act, the disallowance of an amount which is otherwise allowable as deduction to the assessee, while computing the business income of the assessee, can be made for non-deduction of TDS from the payments made to the payee. Since the assessee paid these amounts as advances to the said persons and had not claimed any deduction from the income of the year under consideration, therefore, no addition could have been made of the said amounts to the income of the assessee by disallowing the same u/s 40(a)(ia) of the Act. - Decided in favour of assessee. With regard to other disallowances, the CIT(A) has held that the amount of each bill was less than 20,000/- although the payments were made together which exceeded 20,000/- and, therefore, deleted the disallowances but has brought no material on record to show that whether the payments made were with respect to different contracts or the payments were made with respect to the same contract. If the payments are made with respect to the same contract, then they will be hit by the provisions of Section 40(a)(ia) as well as 194C of the Act and if the payments are made for separate contracts, then they will not be hit by the provisions of Section 194C and Section 40(a)(ia) of the Act. Since both the parties have not produced any material before us to verify the same; therefore, in the interest of justice, we set aside the order of the CIT(A) and restore the matter back to the file of the Assessing Officer to re-adjudicate the issue afresh. - Decided in favour of Revenue for statistical purposes.

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• 2015 (1) TMI 732
  Revision u/s 263 - as per CIT(A) capital gain on sale of land should be taxed as business income - Held that:- As seen from the order of A.O. and statements recorded during the survey, the aspect of gains on sale of lands was thoroughly examined by A.O. Therefore, the prima facie objection that it is change of opinion by the Ld. CIT on the given set of facts has to be accepted as a valid one. A.O. not only accepted the capital gain but also denied cost of improvement in the order which was also confirmed by Ld. CIT(A). Therefore, order of CIT that income has to be treated as business income that too in this year only, ignoring the fact that in earlier two years similar incomes were quantified and accepted cannot be upheld. Therefore, the order of CIT on Dommara Pochampally gain in the hands of Mahindra has to be set aside. - Decided in favour of assessee. Gain on agreement with M/s Victory Avenues Ltd., (VAPL) should be taxed entirely in the year under consideration as against the income offered to the extent of sales made by VAPL as stated by CIT(A) - Held that:- The stand of CIT cannot be supported. First of all, the agreement with VAPL is a GPA agreement without handing over possession. This stand gets support by the stamp duty paid and accepted by Registration authority. The agreement was registered as GPA agreement and not as a sale agreement. Thus on facts the agreement cannot be considered as sale agreement so as to bring entire capital gain tax in the impugned year. Moreover, there was a statement from Manager of VAPL recorded by A.O. during survey which indicate that there were lot of unsold plots and detailed statement was recorded about sale of various plots and how the monies are accounted. This indicates that the said VAPL is only acting as an agent in sale of property and it did not acquire the property. Therefore, stand of CIT that the land/property in question was sale cannot be accepted. Lastly, the CIT himself accepted that gains on sale of Medchal land has to be assessed under the head “Long term capital gains”. The gain is taxable at the rate of 20% only. Whether it is taxed in A.Y. 2007-08 or in later years, the tax rate is at 20% only. Thus, there is no prejudice caused to Revenue. Therefore, the twin conditions for invoking jurisdiction under section 263 have not been satisfied. For these reasons, we are of the opinion that the orders of CIT cannot be justified and so they are accordingly set aside. - Decided in favour of assessee.

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• 2015 (1) TMI 731
  Disallowance u/s 14A - dividend of 80,45,298/- from the domestic companies and 13,85,100/- from tax free US 64 Bonds of UTI - expenditure incurred for earning tax-free income - Held that:- For the assessment year under consideration rule 8D is applicable and the working of disallowance has to be as per formula provided under rule 8D and there is no scope of any estimation of disallowance under section 14A. For the purpose of computing disallowance as per rule 8D the investment in subsidiaries including Excel Crop Care Limited as well as the investment which does not yield tax free income as in the case of Saraswat Co-op. Bank shall be excluded from the average investment.As we have already directed the AO that the investment in the subsidiary and not yielding taxable income shall be excluded from the average investment therefore, the disallowance on account of administrative expenses shall be computed accordingly. It is made clear that disallowance computed under rule 8D shall not be more than the actual expenditure attributable for earning the tax free income and debited in the profit and loss account. The AO to ear mark the expenses which can be attributable for earning taxable as well as tax free income. The expenditure incurred exclusively for business activity cannot be included in such attributable expenses for the purpose of disallowance u/s.14A. - Decided partly in favour of assessee for statistical purposes. Taxability of advance licence/duty free replenishment certificate benefit as well as taxability of pass book benefit receivable - CIT(A) deleted the addition - Held that:- An identical issue has been decided by the Hon’ble Supreme Court in case of the assessee for the assessment year 2001- 02 in CIT Versus M/s Excel Industries Ltd. and Mafatlal Industries P. Ltd. [2013 (10) TMI 324 - SUPREME COURT] that it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. - Decided against revenue.

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• 2015 (1) TMI 730
  Penalty under S.271(1)(c) - addition made to the total income of the assessee on account of long term capital gain - Held that:- Concealment of income envisaged in S.271(1)(c) is to be inferred from the return of income filed by the assessee, and since the penalty proceedings under S.271(1)(c) in the present case were initiated by the Assessing Officer during the course of re-assessment proceedings, it is the return of income filed by the assessee in response to notice under S.148 that has to be seen to infer the concealment. As already noted no return of income was filed by the assessee in response to notice issued by the Assessing Officer under S.148 in the month of January, 2011, withdrawing the excessive claim for exemption under S.54F, in spite of the fact that at that juncture, the assessee was fully aware that the amount of 1.25 crores paid in advance to the contractor was not fully utilised for the construction of the house and the same having been already refunded by the contractor partly in the month of March, 2010, its claim for exemption under S.54F was excessive. Having regard to all these facts of the case, we are of the view that the assessee is clearly guilty of furnishing inaccurate particulars of income, as rightly held by the authorities below, attracting penalty under S.271(1)(c). As regards the alternative claim of the assessee that quantum of penalty worked out by the Assessing Officer is wrong, we direct the Assessing Officer to verify this alternative claim of the assessee and to allow appropriate relief on such verification. - Decided partly in favour of assessee.

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• Customs

• 2015 (1) TMI 752
  Duty demand - Provisionally released goods - Imposition of penalty - Penalty on CHA - Held that:- At the time of original importation and assessment, the appellant had furnished invoices, packing lists, bill of sale and certificate from the Indian Register of Shipping. Further the goods were also examined on first check basis by the customs authorities by boarding the vessel. Therefore, it cannot be said that the Customs officers did not know what the goods under import were, that is, whether it is only a mere supply vessel or it is also capable of anchor handing. Further, the certificate issued by the Indian Register of Shipping clearly described the class of the vessel as tug/supply vessel. - towing capability of the vessel was clearly indicated in the certificate issued by the Indian Register of Shipping. Further in the bill of sale which was submitted along with import documents, it is clearly shown that the vessel is an anchor handling tug/supply vessel. Therefore, it cannot be said that the assessing authority did not know the nature of the vessels under importation. Even in the Lloyds register which is mentioned in the Indian Register of Shipping, the vessel is shown as offshore tug/supply ship. Therefore, if the department wanted to classify the vessel under CTH 8904, they should have done the same when the bills of entry were filed along with other import documents for the purposes of assessment which they failed to do. In the appellant's own case the lower appellate authority had classified the anchor handling tug/supply vessel under CTH 89019000 as a cargo vessel. This order of the lower appellate authority was not challenged by the Revenue and had attained finality. In these circumstances, the appellant could have entertained a bona fide belief that the goods under importation merited classification under CTH 8901. Appellant had furnished the requisite particulars as envisaged under the law at the time of assessment of the goods. The vessels were also boarded and examined by the Customs and therefore, it cannot be contended that the appellant had suppressed any information. Since the show-cause notices have been issued only in 2012 in respect of the imports made in 2008 and 2009, the demands are clearly time barred and therefore, the question of confirming differential duty would not arise at all. As regards the argument that since one of the vessels were seized and confiscated and allowed to be redeemed, there is no time limit for demand of duty, we do not subscribe to this view. As regards the payment of duty under section 125 at the time of redemption, the same would arise when no assessment had been done earlier. In any case, in the present case the goods have been confiscated under section 111(m) of the Customs Act. Since we have already held that there was no mis-declaration on the part of the appellant and confiscation under the said section is not justified, the question of giving any option of redemption or payment of duty at the time of redemption would not arise at all. Consequently, the penalties imposed on the appellant and its official are also not sustainable in law. As regards the penalties imposed on the CHA, we find no justification for such an imposition. The CHA had acted based on its understanding of the law and on the basis of the documents given, had classified the vessels under CTH 8901. We also note that the CHA had specifically asked for assessment on first check basis, that is examination first and assessment later which was also acceded to. In these circumstances, the CHA could not be said to have aided or abetted evasion of duty by the importer. Therefore, imposition of penalties on the CHA and its official is clearly unsustainable in law. - Decided in favour of appellant.

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• 2015 (1) TMI 751
  Delay in refund claim - Interest on refund claim - whether interest is required to be paid to the Respondent for delay in sanctioning of refund claims - Held that:- non production of documents will be only those documents which are prescribed so by the department and were required to be furnished along with the refund application. Any subsequent documents required by the department, which are not prescribed, can also be called for by the Revenue for their satisfaction but taking of such longer time for getting additional information for satisfaction cannot be made the ground for non payment of interest. - date of refund application and payment of interest after three months thereafter, cannot be postponed under any circumstances. If the view expressed by Revenue is accepted than in every refund claim department will ask for certain information and shift the burden on the assessees for not furnishing the required information/ documents in time. The whole purpose of Section 27A of the Customs Act, 1962 will be thus defeated. - Following decision of Ranbaxy Laboratories Limited vs. UOI [2011 (10) TMI 16 - Supreme Court of India] - Decided against Revenue.

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• 2015 (1) TMI 750
  Enhancement of declared value of goods - adjudicating authority enhanced the value on the basis of NIDB data - Held that:- Adjudication order that the adjudicating authority observed that the unit price declared appears to be very low compared to the contemporaneous import value available in NIDB data. The appellant imported PU Coated Fabrics of various thickness and different qualities from China. It is seen from the Table as reproduced in the adjudication order that the declared unit price varies from 0.90 MT to 1.60 MT and the value was enhanced from1.24 per MT to 2.04 per MT. We have also noticed that the appellant imported the same goods from Kolkata Port also. The appellant in the written submission before the Commissioner (Appeals) submitted copies of the various orders passed by the Commissioner (Appeals) under which it was accepted. There is no evidence of higher value of contemporaneous import from same sources. There is no allegation of mis-declaration of the goods. Adjudicating authority enhanced the value as the declared value appears to be very low compared to value available in NIDB data, otherwise, there is no material available. The Tribunal consistently observed that the declared value cannot be enhanced merely on the basis of NIDB data. It is noticed that the value of impugned goods varies widely on the basis of quality, size, quantity etc. and it is contended by the appellant before the lower appellate authority that the declared value of the same goods were accepted by the Department at Kolkata Port. We also find force in the submission of the learned Advocate that in this particular situation, Rule 9 of the Valuation Rules would not be invoked. - Following decision of Eicher Tractors Ltd. v. CC [2000 (11) TMI 139 - SUPREME COURT OF INDIA] - enhancement of value on the basis of NIDB data cannot be accepted. Accordingly, the impugned orders are set aside - Decided in favour of assesse.

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• Service Tax

• 2015 (1) TMI 771
  Chartered Accountants Services - Services rendered to Special Economic zone(SEZ) - Held that:- Major amount of the demand is involved in respect of rendering of services to Special Economic zone. The adjudicating authority observed that the benefit of amended Rule 6(6A) of CCR 2004 would be available w.e.f. 1.3.2011. We find that Rule 6(6A) of CCR 2004 would be effective retrospectively by Finance Act, 2012 for the period from 10.2.2006 to 28.2.2011. Hence in our considered view, the issue is required to be examined by the adjudicating authority. It is noticed that the Tribunal in the case of National Engineering Industries Ltd. (2011 (9) TMI 759 - CESTAT, NEW DELHI) allowed the appeal on the issue of exporting services with certain directions. We also notice that appellant already deposited some amount against the demand. - Matter remanded back - Decided in favour of assessee.

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• 2015 (1) TMI 770
  Waiver of pre deposit - ‘Management or Business Consultancy Service’ and ‘Business Auxiliary Service’ - Held that:- Preamble of the agreement indicates that the other company took fees to assist, manage and operate the hotel. The other company also received consideration as Management Fees as is evident from Para 1.1(5) of the Agreement. Prima facie, it appears that the other company rendered the service as Management Consultant. The applicant failed to make out a strong prima facie case for waiver of pre-deposit of the entire amount of dues. Applicant is directed to make a pre-deposit of 12,00,000 within a period of eight weeks. Upon deposit of the same, the balance adjudged dues shall remain waived and stay recovery thereof till disposal of the appeal. Partial stay granted.

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• 2015 (1) TMI 769
  Waiver of pre-deposit of service tax, interest and penalties - business support services - renting of immovable property services - benefit of the Small Scale Exemption Notification - Held that:- in view of the Explanation to provisions 3(B) of the Notification, prima facie the applicant has a strong case in their favour. Therefore, the pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.

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• 2015 (1) TMI 768
  Waiver of pre-deposit of service tax - Business Auxiliary Service and Technical Testing and Analysis Services - Held that:- in respect of Technical Testing and Analysis Services the applicants rely upon the provisions of Rule 3 of the Taxation of Services (Provided from Outside India) Rules, 2006, particularly the proviso to Rule 3 (ii). Under this Rule the provision of sub-clause (zzh) has been omitted with effect from 1.4.2011 and certain portion of the demand is after that date. In view of above, prima facie the applicant has not made out a case for total waiver of pre-deposit. Taking into the facts and circumstances of the case, the applicants are directed to deposit 9.00 lakhs, in addition to the amount already deposited, within eight weeks. On deposit of the above mentioned amount, the pre-deposit of the remaining dues is waived and recovery thereof stayed for hearing the appeal - Partial stay granted.

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• 2015 (1) TMI 767
  Failure of registration of service - Belated filing of ST-3 Returns - Erection, Commissioning or Installation services - Penalty u/s 77 & 78 - Held that:- Appellant paid the entire Service Tax along with interest and intimated the same in the ST-3 returns belatedly filed with the Revenue. The reason given for late payment of Service Tax was accident of their proprietor and also the financial difficulties faced by the appellant. appellant himself paid the entire Service Tax and interest before issue of show cause notice and also intimated the Department by way of filing the required ST-3 returns, though belatedly. The short payment of Service Tax was not detected by the Revenue, therefore, the reasonable cause explained by the advocate, on account of an accident of the proprietor of the appellant and their financial difficulties are justifiable reasons for the purpose of Section 80 of Finance Act, 1994. Accordingly, it is held that no penalty under Section 78 of the Finance Act, 1994 is imposable upon the appellant by virtue of proviso of Section 80 of Finance Act, 1994 - Decided in favour of assessee.

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• Central Excise

• 2015 (1) TMI 764
  Extended period of limitation - Valuation - inclusion of value of Design and drawing supplied free of cost - Differential demand - Held that:- It is seen that in the case of other contractor, the demand was dropped. It is a case of interpretation of provisions of Valuation Rules with the decision of Hon’ble Supreme Court in the case of Ujjagar Prints (1988 (11) TMI 106 - SUPREME COURT OF INDIA) and other decisions. There is no material available that the appellant suppressed the facts with intent to evade payment of duty. The appellant contended that there is no intention to evade payment of duty insofar as, if the appellant would pay the duty, the other companies would avail the CENVAT credit. Taking into account of overall facts and circumstances of the case, we are of the view that the extended period of limitation cannot be invoked in the present case. - Decided in favour of assessee.

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• 2015 (1) TMI 763
  Exemption towards wind operator electricity generators (WOEG) and their components and parts - whether the LSP and anchor rings, and tower doors can be considered to be covered under 'wind operated electricity generator, its components and parts' which are exempted under Notification no.6/2006 - Held that:- as a matter of judicial discipline the matter may be placed before the Hon'ble President for constitution of a Larger Bench because our view is contrary to the view taken by a Co-ordinate Bench in the matter of the same assessee for a different period. The issue to be considered by Larger Bench is framed as follows: Whether a manufacturer is entitled to claim the benefit and exemption from Central Excise duty on 'wind mill doors' under Notification No. 6/2006 dt. 1.3.2006 which grants exemption to "wind operated electricity generator, its components and parts thereof 'including rotor wind turbine controller". Matter referred to larger bench.

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• 2015 (1) TMI 762
  Denial of rebate claim - Bar of limitation - Delay in submission of orginal and duplicate ARE-1 - Held that:- Time limit to be computed from the date on which refund / rebate claim was originally filed. original refund/rebate claim filed initially within prescribed time limit laid down in section 11B of Central Excise Act, 1944 and the claim resubmitted along with some required documents/prescribed format on direction of department after the said time limit cannot be held time barred as the time limit should be computed from the date on which rebate claim was initially filed. - rebate claims cannot be treated as time barred since it was originally filed before department which is well within the limit period of one year stipulated in section 11B of Central Excise Act, 1944. Government is of considered view that the rebate claims initially filed within one year are to be considered filed in time and are to be sanctioned in accordance with law. AREs-1 pertain to August 2008, September 2008 and March 2009. However he rejected the substantial part of rebate claims as time barred by holding that original/duplicate copies of AREs-1 could be submitted only after stipulated one year and hence, the rebate claims are treated to be filed only after 1 year stipulated time period. As observed in para (8) above, once the initial rebate claims filed within 1 year of date of export, although without original/duplicate copies of AREs-1 the same is to be treated as filed on the date when it was initially filed and as such cannot be treated as time barred. Therefore, the rebate claim in question is required to be sanctioned to the applicant considering the same as filed within one year time limit. As per provisions of Section 11(BB) of the Central excise Act 1944, interest at applicable rate is required to be paid from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty. In these cases, since there has been delayed payment of refund/rebate beyond stipulated three months. Hence, interest of delayed payment of rebate may be allowed as per law, wherein rebate claims have been held admissible - Decided Partly in favour of assessee.

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• 2015 (1) TMI 760
  Wrong availment of CENVAT Credit - mis-statement or suppression of fact - notice issued after 22 months - Held that:- proviso to Section 11A is not applicable because the show cause notice does not indicate that there was deliberate act of suppression of fact, fraud, mis-statement, etc. committed by the assessee. Mere act of omission by the assessee without there being any intention to evade payment of tax cannot be a ground to invoke the proviso to Section 11A of the Act, especially when the evasion came to the notice of the department when the audit was conducted in the month of March, 2010. - mere suppression of facts without there being a deliberate act of fraud, etc. with the intention to evade payment of duty cannot entitle the department to invoke the proviso to Section 11A of the Act. - Decided against Revenue.

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• 2015 (1) TMI 759
  MODVAT Credit - appellant had availed Modvat credit on pig iron, which was found short and the same was not used in the manufacture of final goods - Held that:- From the perusal of the inspection note as well as while carrying out inspection, the statement of the appellant was recorded wherein he has clearly and categorically admitted and shown willingness to pay the duty upon the aforesaid wastage of iron which could not be shown due to the entries made in the register and it was again shown as a fresh raw material - when it is clear that the wastage of iron was shown as new raw material and when the appellant himself has agreed to pay the excise duty thereon, therefore, the decision rendered by the CESTAT upon the aforesaid peculiar facts and circumstances of the case is in consonance both in law and on facts. Hence, the appeal fails - Decided against assessee.

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• 2015 (1) TMI 758
  Availment of MODVAT Credit - removal of capital goods - invocation of Rule 57S(2)(b) of Central Excise Rules, 1944 - appellate authority, as a matter of fact found that there was no removal of the capital goods and further it has recorded a finding that the appellant-unit was doing job work though it had stopped manufacture of products by itself - Held that:- it is well settled that the question of law said to be arising from the orders of the Tribunal mean the questions which have been raised and argued before the Tribunal and not one which may be raised based on the material though not raised and argued before the Tribunal. Instances of what are the questions of law that are said to be arising from the orders of the Tribunal are lucidly elucidated in the judgment of the Supreme Court in the case of Scindia Steam Navigation Co. Ltd. v. Commissioner of Income-tax - [1961 (4) TMI 6 - SUPREME Court]. Applying the parameters as set out in the above judgment of the Supreme Court, we do not find any question of law, much less substantial question of law in the present case. - Decided against Revenue.

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• 2015 (1) TMI 757
  Exercise of Jurisdiction u/s 35 - Held that:- Jurisdiction Section 35G can be exercised only if the ingredients thereof are satisfied. That jurisdiction is not to be exercised to re-appreciate or re-appraise a finding of fact unless it is demonstrated to be perverse or vitiated by an error of law apparent on the face of record. In this case, what has happened is that the adjudicating authority as well as the Tribunal while dealing with the contentions raised and particularly that the private records cannot be relied upon for suppression of production and clandestine removal of goods held that the adjudicating authority had examined the issue at great length. The categorization was done. The Statement of Mr. Vijay Makhija, Managing Director of the Appellant and which was recorded on several dates has been referred to. Thus, while referring to that statement the Tribunal held that there is suppression of production of plastic pipes which have been manufactured by the Appellants. The suppression is found in their statutory accounts. These goods were cleared without payment of Excise duty and issuance of invoice. Therefore, the admission is culled out or derived from suppression and which is apparent from the statement of the Managing Director. Therefore, the Tribunal opines that as error in the private records were detected but, were not accounted in the RG Register. The authorities did not commit any error in examining and relying upon the record maintained by the department. Moreover, the suppression has been concluded from a comparative analysis and which also does not suffer from any serious infirmity. Thus, this is not a case where the order can be said to be perverse or based on no material nor it can be termed as vitiated by an error of law. There are concurrent findings on record. They do not require any interference in Appellate jurisdiction. - Decided against assessee.

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• 2015 (1) TMI 756
  Adjustment of CENVAT Credit - process of packing of bought out items and manufactured items undertaken by the appellant to make CJK which was not amount to manufacture - Held that:- Tribunal while adjudicating the issue against the appellant came to the conclusion that there was no excise duty payable on CJK and as such, the assessee had claimed, wrong Cenvat Credit in respect thereof. The Tribunal further noticed that the present case related to recovery of wrongly utilised Cenvat Credit amounting to 20,50,911/- on the bought out items for payment of duty on CJK and it was not a case of demand of excise duty. No illegality or perversity could be shown by the learned counsel for the appellant in the approach of the Tribunal. Furthermore, under Rule 6 of the Rules, the assessee is not entitled to claim Cenvat Credit on such quantity of input used in the manufacture of exempted goods. However, under sub-rule (2) thereof, the assessee can bifurcate the claim between manufacture of dutiable goods and exempted goods, where the manufacturer is required to maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take Cenvat Credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. - no question of law arises for consideration - Decided against assessee.

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• 2015 (1) TMI 755
  Captive consumption - intermediary product - Naphtha - manufacturing of exempted goods - Benefit of Notification No. 67/95 - It is the contention of the appellants that the reversal satisfies the conditions of Notification 67/95 read with Rule 6 of Cenvat Credit Rules, 2002 - High Court admitted appeal on the following substantial questions of law:- Whether CESTAT was justified in applying the ratio of this Hon’ble High Court judgment in Indorama Synthetics [2007 (7) TMI 315 - HIGH COURT OF JUDICATURE AT BOMBAY] to the facts in the present case? Whether Tribunal was justified in invoking the ratio of this Hon’ble Court’s judgment in Indorama Synthetics which related to admissibility of credit under Cenvat Credit Rules on one hand land on the other hand holding that provisions relating to meaning assigned to “input” under Cenvat Credit Rules being wider cannot be made applicable for interpretation of exemption Notn.? Whether Tribunal has erred in upholding the demand pertaining to allied activities without considering various submissions made including judgments from various judicial for a, CBEC instructions etc.?

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• 2015 (1) TMI 754
  Cenvat Credit - Extended period of limitation - Held that:- In the matter of this nature, it is not expected that the Tribunal takes an extreme view and expresses virtually a final opinion on the merit of the controversy. These are matters where litigants are not expected to be non-suited at interlocutory stage. The remedy of appeal becomes meaningless and the legal provision nugatory by such extreme directions. That would mean that the exercise of discretion in the given case is arbitrary and capricious as well. Bearing in mind this salutary principle in the present case the Tribunal should have passed an order which protects the interest not only of the Revenue but prevents the appellant before us in not being non-suited completely. - the appellant has not raised the issue of financial hardship. - Decided conditionally in favour of assessee.

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• 2015 (1) TMI 753
  EXIM - Import of Second-hand used Dornier Repair Looms with accessories - Held that:- There is no allegation that the aforesaid fact finding is not correct. To give a chance, on 19-2-2014, we adjourned the matter to enable the Revenue to produce the Chartered Engineer’s Certificate as referred to in the original order. The Chartered Engineer’s Certificate was not produced and the material which is now produced by the Revenue has no correlation with the matter. Report No. SGS/VSP/2795, dated 15-3-2012 of SGS India (P) Ltd., has been produced before us, whereas in the order of learned Tribunal, the learned Tribunal relied on the reports dated 8-2-2002 and 12-2-2002 of SGS India Pvt. Ltd. - No illegality or infirmity in the judgment and order of the learned Tribunal - Decided against Revenue.

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• CST, VAT & Sales Tax

• 2015 (1) TMI 766
  Rate of taxability of iron and steel used for execution of works contract - Section 29 of the KVAT Act, 2003 R/w Rule 29(1)(b) of the KVAT Rules 2005 properly considered or not - Whether the Karnataka Appellate Tribunal is justified in law in holding that the iron and steel used by the respondent for the execution of works contract being used in the form should be taxed at 4% and not 12.5% - Held that:- The works contract is for laying pipes and construction of water tanks in different villages, whence materials such as iron and steel, cement, PVC pipes and RCC pipes, were transferred in the same form, regard being had to Running Account bills prepared by the authorities of the Jilla Panchayath, a Department of State Government - the quantities of material and their value transferred in the same form in the execution of the works contract are certified by the authorities of the Jilla Panchayath as recorded in the RA Bills, out of which iron and steel transferred in the same form during the year 2005-06 was 67,38,377/-, with impost at 4% per annum - there is no calculation of the value of other goods transferred in the same form, namely, cement, PVC pipes, RCC pipes carrying tax at different rates, as prescribed in the Third Schedule to the KVAT Act, 2003 - assessee did not furnish the tax invoice, the debit note or credit note in relation to sale of the materials transferred in the execution of the works contract, in accordance with Section 29 or 30 of the KVAT Act, 2003. The authorities based upon the RA Bills submitted by the respondent/assessee arrived at 67,38,377/- as the value of the iron and steel, in respect of which the rate of tax is 4% - the State is not entitled to the illegal duty on 'works contract' for the AY 2005-06, calling forth the application of doctrine of unjust enrichment - the direction issued by the KAT relating to subjecting to tax at the rate of 12.5% on the remaining taxable turnover, relating to goods other than iron and steel cannot be upheld – thus, the portion of the order is set aside which is subjecting to tax at 12.5% on the remaining taxable turnover relating to goods other than iron and steel and direct imposition of tax at the rates prescribed in the Third Schedule over goods, such as cement, PVC pipes and RCC Pipes said to have been transferred in the same form in the execution of the works contract during the year 2005-2006, after making a valuation of the said articles, as against the remaining taxable turnover excluding 67,38,377/-, towards the purchase of iron and steel, at 4% - Decided partly in favour of revisionist revenue.

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• 2015 (1) TMI 765
  Order of Pre-deposit complied or not - Whether the Deputy Commissioner of Commercial Tax needs to be directed to hear the appeal on merits without requiring the petitioner to make any further deposit towards the tax dues – Held that:- By an order dated 5th July, 2011, the assets of the petitioner including goods, factory, land, motor cars, lands of Directors, etc. came to be attached - at the time of attachment, the value of the properties was around 53 crores, out of which the stock was valued at 48 crores - However, now according to the respondent, the value of the stock is estimated at 2.15 crores only - The appellate authority/Deputy Commissioner has directed the petitioner to pre-deposit 7,13,27,525/- for hearing the appeals on merits - instead of deciding the matter on merits by examining as to whether the petitioner had made out a prima facie case or as to whether any of the circumstances envisaged under the proviso to section 73 of the Act are attracted, the Tribunal proceeded to ask the Department to dispose of the stock attached by it with a view to recover the amount towards the pre-deposit – section 73(4) of the GVAT Act, it is apparent that the same prohibits entertainment of any appeal by an appellate authority unless the same is accompanied by satisfactory proof of payment of tax in respect of which the appeal has been preferred - However, the proviso thereto permits the appellate authority if it thinks fit for reasons to be recorded in writing to entertain the appeal without payment of tax with penalty or without penalty, on payment of proof of a smaller sum as it may consider reasonable or on the appellant furnishing in the prescribed manner, security for such amount as the appellate authority may direct - Thus, any of the aforesaid three courses of action are available to the appellate authority, if it so deems fit. The court has examined the order of assessment passed by the AO and is of the view that the petitioner does have a prima facie case in its favour - insofar as the payment of pre-deposit as directed by the appellate authority is concerned, the court is of the view that as per the averments made in the affidavit-inreply filed by the respondent that at the time when the properties were attached vide order dated 5th July, 2011, the same were worth 53 crores, and as such the interest of the department is sufficiently secured – thus, the appeals filed by the petitioner before the appellate authority are required to be heard on merits without payment of any amount by way of pre-deposit, in view of the fact that sufficient security is available with the department by way of attachment of the properties of the petitioner – thus, the order of the Tribunal is set aside and the matter is restored to the DCCT for adjudication – Decided in favour of applicant assessee.

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• Indian Laws

• 2015 (1) TMI 761
  Commission of offense u/s 60 of Excise Act - Transport of illegal liquor without required license - Held that:- The scrutiny of the evidence as well as discussions made by the learned trial court suggests that the learned trial Court has analyzed the evidence and reached to the correct conclusion that evidence recorded makes out a case under Section 60 of the Excise Act against the accused appellant. - ends of justice would successfully meet if the accused appellant is awarded punishment already undergone by him. The appellant has remained in jail for some period as has no previous criminal history. The fine of 5,000/- awarded to the accused-appellant by the trial court is also reduced to half, i.e. from 5,000/- to 2,500/-. The accused appellant shall pay fine within sixty days from the date of receipt of record by the learned trial Court. In the event of default in payment of fine, the defaulting accused shall have to undergo further imprisonment as directed by the judgment and order passed by the court below. Amount of fine, if any, deposited earlier in this regard before the learned trial Court, shall be adjusted by learned trial Court. - Decided partly in favour of appellant.

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