Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 27, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Cash expenditure in excess of ₹ 20,000 - the contention that the suppliers at different locations insisting on cash payments thereon has to be accepted and cannot be doubted / faulted with - no disallowance u/s 40A(3) of the Act is warranted - AT
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TDS u/s 194C - Disallowance made u/s 40(a)(ia) - payments to the site in charge / supervisors - the payments were made to the labourers through the medium of site in charge - No TDS liability - AT
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Consultancy fee incurred in relation to plant and machinery - revenue v/s capital expenditure - AO directed to consider the 70% of the payment on consultancy fee as capital expenditure for inclusion under the block of asset of plant and machinery and allow the depreciation accordingly - AT
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Method of accounting - Construction Contracts - AO's action of rejecting books of accounts in terms of Section 145(3) of the IT Act and assessing income u/s 44BBB(1) on presumptive basis is not justified - AT
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Sale of land - Nature of land at the time of transfer - Sufficient evidence has been adduced by the respondent, to prove that the subject lands have been put to agricultural operations before sale. Classification of the lands, in the revenue records, as agricultural lands, is not varied and that is a determinative factor - HC
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Ingenuine cash credits - Taking into consideration the loans which are accepted merely on some amount of the ladies for which return was filed on the same date through one advocate is not a ground for making additions u/s 68 - HC
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Deductions u/s. 80IB - allocation of Managerial Commission and salary and wages in the ratio of turnover - In the absence of any direct nexus brought on record by the revenue authorities for the impugned allocation of expenses is not correct - AT
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Additions u/s 69B - stock statement submitted to the banks cannot be considered as true and correct - no additions could be made - AT
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Validity of assessment - notice of hearing was served upon minor daughter - the notice should be served at least on any adult member of the family and if the notice is served upon a minor child it would be presumed that it has not been served on the assessee at all. - AT
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Rejection of books of accounts - estimated net profit of 8% on gross contract receipts net of all deductions - A.O. was rightly made additions towards interest income under the head income from other sources - AT
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Subsidy receipt on account of industrial promotion assistance - West Bengal Incentive Scheme, 2000 - receipt is capital in nature. Hence, the said receipt is not includible in the taxable income of the appellant company - AT
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The income earned by the assessee from running and operation of Mall and a provision of host of other services and utilities is to be construed as commercial explanation of its properties and is exigible to tax as ‘business income’ - AT
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Nature of expenditure incurred on subscription and purchase of office and general purpose books - the books in question update it about latest research developments in the field - Held as Revenue in nature - AT
Customs
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Imported crude oil - Whether the appellant is required to pay the National Calamity Contingent duty (NCCD) and cess thereon even though they have utilised advance licence for the import? - Held Yes - AT
Service Tax
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Telecom service - the rate of tax was enhanced with due announcements by the Government and the appellant as one of the regular and large tax payers under the category of telephone services, is expected to discharge correct tax liability after the enhancement - AT
Central Excise
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At the time opting area based exemption of N/N. 50/2003-CE, the appellants are not required to reverse the credit in their cenvat credit account lying unutilized. - assessee is entitled for refund claim of the amount paid by the assessee on account of reversal of credit in cash. - AT
VAT
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Processing of refund claim under DVAT - Revenue's contention that the mandate of Sections 11(2) of the DVAT Act and Rule 12 of the CST Rules, overriding all other concerns and suspending as it were, the obligation to frame the assessments and process refunds within the timeframe prescribed u/s 38(3) is misplaced and rejected as unacceptable - HC
Case Laws:
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Income Tax
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2017 (1) TMI 1216
TDS u/s 194C - Disallowance made u/s 40(a)(ia) - payments to the site in charge / supervisors - Held that:- Assertion of the assessee that the assessee remitted payments to the site in charge / supervisors who in turn made payments to the labourers or contractors and payments to individual labourers were below the limit prescribed for tax deduction u/s 194C of the act remains unrebutted. We find that the authorities had wrongly considered the remittances made to the site in charge as the payment to the labour contractors whereas the records of the assessee indicate that the payments were made to the labourers through the medium of site in charge. Hence we are not inclined to accept the arguments of the ld DR. We also find that the ld CITA had made bald statement that the signatures in the sheets were not matching. It is not known from which document he was able to reach such conclusion for comparison of the signatures. Accordingly we hold that there is no violation of provisions of section 194C of the Act warranting disallowance u/s 40(a)(ia) of the Act. The ld AO is directed to delete this disallowance u/s 40(a)(ia) of the Act - Decided in favour of assessee Disallowance made u/s 40A(3) - Held that:- It is not in dispute that the supply of materials had happened through out the year at different sites but at each site, the job allotted to the assessee was supposed to be executed within a short duration of 3 to 4 weeks. These facts have not been controverted by the revenue before us. Accordingly the payments were made to the parties in cash by the assessee through his employees who were site in charge / supervisors at various sites and it is not in dispute that the bulk payments were transferred to the employees by the assessee and those employees inturn make payment for purchase of materials as and when needed by making cash payments. It is not in dispute that the individual purchase bill for which payment was made was much below ₹ 20,000/- for which expenditure was incurred. All the purchase bills were also produced by the ld AR in his paper book filed. It is not in dispute that the employees of the assessee who were site in charge / supervisors situated at different site locations had approached these suppliers who do not know each other and hence the suppliers insisting on cash payments thereon has to be accepted and cannot be doubted / faulted with. Considering the totality of the facts and circumstances and going by the intention of introduction of section 40A(3) of the Act together with its amendments we hold that no disallowance u/s 40A(3) of the Act is warranted in the facts and circumstances of the case. - Decided in favour of assessee
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2017 (1) TMI 1215
Transfer pricing adjustment - ALP determination - grant of working capital adjustment - Held that:- Respectfully following the finding in the case of Mercer Consulting (India) Private Limited (2014 (7) TMI 715 - ITAT DELHI), we set aside the finding of the DRP on the issue in dispute and remit the matter to the file of the TPO/AO for examining the assessee’s claim for grant of working capital adjustment on merits and, thereafter, allow the same, if it is available. The assessee shall be afforded adequate opportunity of hearing. Selection of comparables for software development segment - characterization of the software development segment - Held that:- On the issue characterization of the software development segment we find that rendering software development services as a captive service provider and development and sale of software product are altogether different activities and cannot be treated as interchangeable. In the process of development of software product, the entity carry out research and development activity, which results into generation of intellectual property rights, which is absent in case of a captive service provider. Accordingly, the segment in consideration is characterized at software development services. The services rendered by the assessee are in respect of the support services for sale of software by the AE and the post sales support services are also in respect of the sale of software by the AE. The bug fixing is also part of the post sales support services, which may be treated partly as a function of technical nature but same cannot be compared with consultancy provided in the field of engineering or infrastructure field. Thus, the segmental function of the assessee is characterized as sale and post sales support services. We find that the assessee has compared the ‘turnkey contract and service’ segment of the company with the sales and post sales support segment of the assessee company. However, we do not agree with the contention of the assessee that the company segment of turnkey contract & service was functionally similar to the segment of the assessee under comparison. The segment of the company compared is turnkey contract and services. No information is available in respect of the turnkey contract executed by the company and, therefore, the result of turnkey contract and service segment are not comparable with the sales and post sale support services in respect of software products. In view of our direction to exclude the comparables chosen the TPO and one comparable chosen by the assessee as well as exclusion of the remaining two comparables by the TPO not challenged by the assessee before us, has left with no comparable in the sales and post sale support segment for determination of arm’s length price. In view of the above facts and circumstances, we restore the matter to the TPO for carrying out a fresh search and selection of comparables having functions similarity to the segment of sales and post sales support and compute the adjustment accordingly as per law. Needless to mention that the assessee shall be provided sufficient opportunity of hearing.
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2017 (1) TMI 1214
MAT computation - Contribution under 'U.P. Sheera Niyantran Adhiniyam’ - whether is required to be added for the purposes of computing 'Book Profit’ under section 115JB ? - Held that:- Disallowance on account of Molasses Reserve Fund-the contribution to the Molasses reserve fund can be viewed as a provision in nature and it is not an actual liability and the provision created for additional storage facility is obviously in the nature of provision for contingent liability, therefore, the impugned amount being contingent in nature deserves to be added back while computing income u/s 115JB of the Act. See Rai Bahadur Narain Singh Sugar Mills Ltd. Versus Addl. CIT [2015 (3) TMI 926 - ITAT DELHI] Addition to capital subsidy to the book profits while computing income under the section 115JB - Held that:- As already been accepted by the Hon’ble High Court in assessee’s own case for AY 1990-91 that the subsidy received by the assessee is in the nature of capital subsidy, hence, the same cannot be treated as revenue and thus, the income approach of accounting for capital subsidy received as government grant is not applicable in this case as per AS-12 where in para 5.2 it has been made clear that the capital approach is to be followed in respect of government grants and it is inappropriate to recognize government grants in profit and loss statements because they are not earned to represent an incentive provided by the government. Accordingly, conclusion of the CIT(A) on this issue is not found to be sustainable and we demolish the same by directing the AO that the amount of capital subsidy to the book profits while computing the income u/s 115JB of the Act is not an appropriation of profits and there is no such debit to the profit and loss account for the alleged appropriation and, therefore, the same cannot be added while computing the income u/s 115JB of the Act. Accordingly, ground of the assessee are allowed. Consultancy fee incurred in relation to plant and machinery - revenue v/s capital expenditure - Held that:- 70% of the payment was towards purchase of a new plant and machinery, which forms part of block of plant and machinery for the purpose of depreciation. It is evident from the above that payment for consultancy was not only for examining the old turbine, but it was consultancy for purchase of a substitute turbine, which forms part of block of the plant and machinery. In such facts and circumstances, we are of the opinion, that at least 70% of the payment of consultancy fee paid by the assessee is expenditure in the nature of capital expenditure and the balance expenditure falls in the nature of revenue expenditure. However, we agreed with the contention of the learned counsel that if this expenditure is held as capital in nature, then depreciation should be allowed to the assessee. We, therefore, direct the Assessing Officer to consider the 70% of the payment on consultancy fee as capital expenditure for inclusion under the block of asset of plant and machinery and allow the depreciation accordingly. This ground of the appeal is partly allowed.
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2017 (1) TMI 1213
Rejection of claim of deduction under section 10B - need for approval of the Board appointed by the Central Government to claim exemption - Held that:- The assessee is entitled to exemption under section 10B of the Act subject to fulfillment of other conditions. See Smt. K. Sudha Rani [2013 (6) TMI 783 - ANDHRA PRADESH HIGH COURT] Even otherwise, when there are two views possible the one which is in favour of the assessee deserves to be taken into consideration. It is also not out of place to mention that in the case of Smt. K. Sudha Rani the Revenue has accepted the view taken by the Hyderabad Benches for the A.Ys. 2005-06 and 2006-07. The Ld. D.R. could not place anything on record as to why the view taken by the Hyderabad Benches was accepted by the Revenue. In fact, the Hon’ble A.P. High Court had taken note of the same and the assessee-company had continuously projected before the Assessing Officer as well as the CIT(A) that in the case of Smt. K. Sudha Rani exemption was granted under section 10B of the Act even though there was no separate approval by the Board. Under these circumstances, the Ld. D.R. ought to have obtained proper details as to why the Revenue has accepted the decision of the ITAT as otherwise the only inference possible is that the Revenue has accepted the legal position and therefore did not prefer to go in further appeal. Thus, even on the principles of consistency the Revenue ought not to have preferred a further appeal even in this case. At any rate, consistent with the view taken in the case of other assessees we accept the view of the assessee and hold that the assessee is entitled to claim exemption under section 10B of the Act.
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2017 (1) TMI 1212
Levy of penalty u/s 271(1)(c) - payment of compensation to investors - claim of compensation paid by the assessee to the investors as revenue expenses u/s 37(1) not allowed by the AO - Held that:- We have observed that the assessee is engaged in the business of Asset Management and Portfolio Management and advisory services . Compensation were paid as per acts’ of omission by earlier consultant M/s. Karvy Consultants Limited appointed by the Mutual Fund. These payments are settlement of claims as per SEBI regulations. The AO in quantum assessment disallowed these payments made by the assessee to investors which was later confirmed by learned CIT(A), while the tribunal for assessment year 2007-08, allowed the appeal of the assessee and the quantum additions has been deleted by the tribunal. Thus, in our considered view, since the quantum additions itself have been deleted by the tribunal in assessee’s own case the penalty levied by the A.O. u/s 271(1)(c) and as sustained by learned CIT(A) cannot now be sustained and hence is hereby ordered to be deleted. - Decided in favour of assessee
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2017 (1) TMI 1211
Expenditure of interest payment made towards interest on loans borrowed to finance the cost of its expansion scheme - revenue expenditure OR capital expenditure - Held that:- As decided in Secure Meters Ltd.case [2008 (11) TMI 66 - HIGH COURT RAJASTHAN] admittedly the debentures when issued is a loan, and therefore, whether it is convertible, or non-convertible, does not militate against the nature of the debenture, being loan, and therefore, the expenditure incurred would be admissible as revenue expenditure. - Decided in favour of the assessee
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2017 (1) TMI 1210
Applicability of 44BBB(2) - rejection of books of accounts - Held that:- We uphold the findings of ld. CIT(A) that the assessee fulfilled all conditions prescribed u/s 44BBB(2) of the IT Act and also has followed one of the recognized methods prescribed for determination of stage of completion of contract as prescribed in para 29 of the Accounting Standard-7 "Construction Contracts" as recognized by the ICAI and the Central Government. Assessee has followed correct method of accounting in terms of Section 44BBB(2) read with Section 145(1) & (2) of the IT Act. Consequently we hold that the ld. AO's action of rejecting books of accounts in terms of Section 145(3) of the IT Act and assessing income u/s 44BBB(1) of the IT Act on presumptive basis is not justified, the order of ld. CIT(A) is upheld. Our view is fortified by Delhi ITAT judgment in the case of Royal Jordanian airlines (2008 (8) TMI 392 - ITAT DELHI-A ) which after dwelling over all relevant aspects of charging and mechanical provisions, statutory mandate, and jurisprudence of regular assessment vis-a-vis presumptive assessment and catena of judicial precedents as detailed in this order. - Decided against revenue.
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2017 (1) TMI 1209
Sale of land - Nature of land at the time of transfer - whether till the lands were sold in the financial year 2010-11, they were used for agricultural purpose and not capital assets? - Held that:- From the material on record, it could be deduced that the respondent has discharged his burden and proved that the lands were agricultural lands, at the time of transfer. Sufficient evidence has been adduced by the respondent, to prove that the subject lands have been put to agricultural operations before sale. Classification of the lands, in the revenue records, as agricultural lands, is not varied and that is a determinative factor. A substantial question of law does not arise on the findings of fact, unless it is substantiated that there is perversity. In Bhagat Construction Co. (P) Ltd., v. CIT reported in (2000 (12) TMI 54 - DELHI High Court ), the Delhi High Court held that a question of fact, becomes a question of law, if the finding is either without any evidence or material or, if the finding is contrary to the evidence, or is perverse or there is no direct nexus between the conclusion of fact and the primary fact upon which that conclusion is based. But it is not possible to turn a mere question of fact into a question of law by asking whether as a matter of law the authority came to the correct conclusion on a matter of fact. In M.Janardhana Rao v. Joint CIT reported in (2005 (1) TMI 14 - SUPREME Court ), the Hon'ble Supreme Court held that in exercise of the powers under Section 260A, findings of fact of the Tribunal cannot be disturbed. Going through the material on record, we are of the considered view that the concurrent findings of fact, rendered by the CIT (Appeals) and the Income Tax Appellate Tribunal, do not call for any interference, as no substantial question of law, is involved.
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2017 (1) TMI 1208
Eligibility of assessee for benefit of DTAA between India and UAE - income was wrongly assessed as Royalty u/s 9(1)(vi) - Held that:- assessee-company was eligible for the benefits of DTAA between India and UAE and that in view of the provisions of Sec. 90(2) of the Act, it was open for the assessee-company to chose between the taxation as per the India-UAE DTAA or as per the Act, whichever was more beneficial to it. - Decided in favour of assessee. Application of Sec. 44BB of the Act in order to compute assessee’s tax liability - Held that:- Insofar as the earnings from M/s. Aracadia Shipping Ltd. is concerned, in our view, the fact-situation clearly brings out that the tug boats have been used in connection with prospecting for or extraction or production of mineral oils. The finding of CIT(A) in this regard is supported by not only the certificate issued by M/s. Aracadia Shipping Ltd., but also by the terms of arrangement of hiring with the said concern. Copies of such arrangements have been placed in the Paper Book at pages 1 to 4. In the absence of any cogent material brought out by the Revenue, we hereby affirm the said finding of CIT(A) and accordingly, Revenue fails on this aspect. In respect to the earnings from M/s. Leigthton Contractors India Pvt. Ltd. for hiring of barge JU-251 following the phraseology of Sec. 44BB of the Act, in our considered opinion, even the earnings from hiring of barge JU-251 to M/s. Leigthton Contractors India Pvt. Ltd. are eligible for assessment u/s 44BB of the Act. In coming to such a conclusion, we are also conscious of the stand of Assessing Officer as manifested in the assessment order for Assessment Year 2008-09, wherein hiring receipts from M/s. Leigthton Contractors India Pvt. Ltd. on account of hire of barge JU-251 in terms of same contract have been accepted to be assessable u/s 44BB of the Act. Therefore, considering the facts and circumstances of the case, we allow the additional Ground raised by assessee that the amount of ₹ 11,77,55,535/- received from M/s. Leigthton Contractors India Pvt. Ltd. is also liable to be taxed in terms of Sec. 44BB of the Act. Thus, assessee succeeds on its additional Ground of appeal. Interest charged u/s 234B - Held that:- Notably, in terms of the judgment of Hon'ble Bombay High Court in the case of DIT(IT) vs. NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT ), wherein held that where the duty is cast on the payer of income to deduct tax at source, the failure of the payer to do so would not result in imposition of interest u/s 234B of the Act in the case of the assessee recipient. Thus, following the judgment above the decision of CIT(A) on this aspect is affirmed and accordingly, Revenue fails on this aspect.
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2017 (1) TMI 1207
Ingenuine cash credits - as per order of the CIT(A) it is clear that while considering the case of the assessee, it has accepted that the partners have taken loan for 25 persons who have filed return and the same was shown in the return - ITAT deleted addition - Held that:- Taking into consideration the loans which are accepted merely on some amount of the ladies for which return was filed on the same date through one advocate is not a ground for reversing the finding but reasoning adopted by the CIT(A) is genuine and no reasons are adopted by the Tribunal while reversing the finding of the CIT(A). In that view of the matter, the Tribunal has seriously committed an error in reversing the finding of the CIT(A) and the appeal deserves to be allowed. - Decided in favour of assessee
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2017 (1) TMI 1206
Income from share transactions - capital gains or business income - period of holding - Held that:- It is evident that the assessee has carried out 31 transactions in 20 scrips out of which eighteen transactions involve holding period of more than a month further inclusive of eleven instances wherein the said holding period is more than 100 days. He has further not claimed any interest expenditure deduction qua the above stated borrowings. Ld. Departmental Representative fails to rebut this factual position. We thus find no reason to interfere in the CIT(A)’s conclusion hereinabove so far as he has treated the assessee to be an investor in case of share transactions involving holding period of more than a month. - Decided against revenue Treating profits from share transactions even having nil holding period as short term capital gains - Held that:- Learned counsel fails to prove that the same are in any case delivery based transaction having purchase and sale instances on the same day. We thus do not deem it appropriate to adopt judicial consistency in the impugned assessment year in view of these peculiar facts. We however find force in assessee’s submissions challenging the CIT(A)’s directions to the Assessing Officer for treating his share profits having holding period upto 30 days as business income in absence of any such statutory provision contained in the Act. We accordingly reverse the CIT(A)’s blanket directions to the Assessing Officer. The Assessing Officer shall now treat assessee’s profits derived from twelve transactions having nil holding period or a day’s holding period only as business income. The assessee’s cross objection is partly accepted.
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2017 (1) TMI 1205
Condonation of delay - Held that:- Though the assessees/appellants submitted that it is the duty of the office of the Commissioner of Income Tax (Appeals) to have sent the notices for hearing of the rectification petitions, filed by the appellants/assessees and thus the assessees were waiting, for a considerable period, and thus attributed the cause for delay, this court is not inclined to accept the same, for the reason that as observed earlier that rectification petitions have been filed before an incompetent appellate authority. Even taking for granted that they were filed in the office of the Deputy Commissioner of Income Tax, we are of the considered view that it is for the appellants/assessees to have processed the same. Blaming an authority is always easy. Conduct of the appellants substantiates lethargy and lack of bonafides. On the facts and circumstances of the case, we are also of the considered view, that the appellants, have not pursued the remedy, promptly, with diligence and due care, when they filed such applications. Inaction, is apparent on the face of record. In the light of the above, it cannot be contended that the appellants were wrongly pursuing a remedy, with diligence, care and caution and hence the delay in filing the appeals before the Tribunal should be condoned. - Decided against the assessee.
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2017 (1) TMI 1204
Transfer of case - whether order U/s.127 of the Income Tax has been passed without providing an opportunity of being heard and without assigning any reason? - Held that:- The petitioners when came to know about the transfer of their cases from Rourkela to Sambalpur, they made representations before the authority that copy of the order be provided since decision has been taken without providing an opportunity of being heard. The authorities have taken into consideration this aspect of the matter and passed a well reasoned order showing the reason that due to the policy decision of re-structuring of the Income Tax Department in the area concerned, the decision has been taken to transfer the cases from Rourkela to Sambalpur and by this the petitioners – assessees are not going to be prejudiced in any way. We gathered from the record that the underlying object of the decision is equitable distribution of work and as such the order passed by the authorities is for administrative convenience. We further find that the authorities have taken into consideration the grievance of the assessees that if they will feel any inconvenience, they may make request before the authority to hear their matter at Camp Court, Rourkela in this way also the interest of the petitioners – assessees have been protected. So far as the ground that the authorities while passing order on 22nd August, 2016 have reviewed its own order, which they cannot do and as such, the said order is per se illegal, but we find no force in this argument for the reason that this cannot be said to be review of the order, since there is no change in the orders, i.e. in the orders dtd.29.1.2015 and 22.8.2016, rather the grievance of the petitioners has been looked into and reasons of transfer of the cases has been communicated to them by reitering the reasons. Taking into consideration these aspects of the matter, we find no reason to interfere with the decisions taken by the authority. Hence, the writ petitions deserve to be dismissed
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2017 (1) TMI 1203
Deductions u/s. 80IB - allocation of Managerial Commission and salary and wages in the ratio of turnover to the Silvassa Unit-I and II - Held that:- The assessee has maintained separate books of accounts for Silvassa unit-I & II as evident from the two Audit Reports exhibited at pages 7 to 19 and 20 to 33 of the paper book. A perusal of the orders of the authorities below shows that the allocation of expenses have been made more out of compulsion then out of necessity. In our considered opinion and the understanding of the facts, the A.O. has not pointed out any flaw or defect in the allocations statement exhibited elsewhere. We find force in the contention of the ld. counsel that the Managerial Commission cannot be allotted to the Silvassa unit. We also agree that only expenses relating to the concerned undertaking should be deducted from the profits thereon. In the absence of any direct nexus brought on record by the revenue authorities for the impugned allocation of expenses, we do not find any merit in the said allocation. We, accordingly, direct the A.O. to delete the allocations re-drawn by him. This grievance is accordingly allowed. Double allocation of Managerial Commission - Held that:- We find force in the contention of the ld. Counsel. We find that the assessee has already included the managerial commission and remuneration while allocating common expenses to the Silvassa unit. The A.O. has once again included these expenses while computing the reallocation. We, accordingly, direct the A.O. to verify the computation once again and decide the issue afresh in the light of our findings given for ground no. 1. Ground no. 2 is treated as allowed for statistical purpose.
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2017 (1) TMI 1202
Foreign Exchange Loss - AO rejected the explanation put forth by the assessee and applying the rate as on 31.03.2009 which was ₹ 50.64 per US $ disallowed the excess foreign exchange loss of ₹ 85,99,177/- claimed (i.e. ₹ 55,36,77,255/- less ₹ 54,50,78,068/-) - Held that:- Method of accounting, as admitted by the assessee is market price or cost whichever is lower. In this case, Assessing Officer has adopted rate of exchange of ₹ 50.64 being prevailing exchange rate as on 31.3.2009, hence his working in para 4 of the assessment order is tenable in the eye of law. Apparently, appellant has adopted wrong working formula and therefore has claimed excess foreign exchange loss of ₹ 85,99,187/-. Thus, the finding and calculation of foreign exchange loss by the Assessing Officer is sustained. If there is any factual mistake, as claimed by the appellant and for that rectification application u/s.154 has been filed on 10.01.2012, it is the duty of the Assessing Officer to reverify the facts and if the claim of the appellant is found correct, the quantum of disallowance has to be modified, accordingly. - Decided against assessee Disallowance under section 14A read with Rule 8D - Held that:- Perusal of the order of assessment shows that the AO, except for stating that assessee’s explanation is not acceptable for the reason proper values have not been taken, has not spelt out what examination of accounts of the assessee have been made by him and in respect of which portion/items of values in the assessee’s accounts he is not satisfied with. Nothing to this effect, as required under section 14A(2) & (3) of the Act, has been brought out by the AO in the order of assessment and in our considered view, the disallowance has been computed mechanically and without any application of mind of the legal position in this regard. In this factual and legal matrix of the case, we set aside the orders of the AO making the disallowance under section 14A read with Rule 8D at ₹ 53,81,133/- and restore this matter to the file of the AO for fresh consideration and adjudication in the manner prescribed under section 14A of the Act read with Rule 8 by way of a speaking order after affording the assessee adequate opportunity of being heard and to file details/submissions required. - Decided in favour of assessee for statistical purposes.
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2017 (1) TMI 1201
Reopening of assessment - petitioner had declared business loss and income under other sources and while computing the business income, the assessee has claimed loss on sale of asset which is a capital gain and the petitioner is not entitled to this amount and hence, it has to be disallowed while computing the business income - Held that:- The income earned by the petitioner was exempt from tax. As already pointed out the petitioner while filing the return of income on 28.10.2005, declared business loss and income from other sources and while computing business income, the assessee had claimed the loss on sale of assets, as a capital loss. This according to the first respondent, the assessee is not entitled to do and he is of the opinion that it ought to have disallowed the same while computing the business income and such amount claimed as loss on sale of asset is chargeable to tax under escapement assessment. If such is the reason, this Court cannot interfere with the impugned notice on the ground that there is no loss of revenue and that the petitioner did not carry forward the loss related to the assessment year 2005-06 or set off against the income of the petitioner in the subsequent years. These issues are factual issues, which the assessee has to raise before the first respondent. More particularly, this Court will not go into the aspect as to what is the effect of not carrying forward the loss to the next year or not setting it off against the income in the subsequent years and whether the petitioner would be entitled to file revised returns for the subject year etc. These being factual, it is best left to the assessing authority to decide. This Court is not inclined to interdict the proceedings initiated by the first respondent by issuing a Writ and the prayer sought for by the petitioner to quash the notice under Section 148 of the Act, is held to be not maintainable and as the petitioner had been communicated with the reasons for reopening by communication dated 03.10.2007, liberty is granted to the petitioner to submit their objections within a period of three weeks from the date of receipt of a copy of this order, after which, the first respondent shall take a decision thereon on merits and in accordance with law after affording an opportunity of personal hearing to the petitioner, uninfluenced by any observations made in this order.
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2017 (1) TMI 1200
Revision u/s 263 - allowing the claim of the assessee for deduction u/s 80IA(4)(i) of the Act was erroneous and prejudicial to the interest of the revenue - Held that:- Assessee has furnished the copies of contracts the receipts from which were claimed as profits derived from the business of carrying out infrastructure development eligible for deduction u/s.80IA(4)(i) of the Act. We have already seen that the AO while completing the assessment u/s.143(3) of the Act by order dated 25.3.2014 has taken note of Form No.10CCB giving complete details of the profits derived from the business that is eligible for deduction u/s.80IA(4)(i) of the Act. He had raised specific queries with regard to allocation of proportionate head office expenses while arriving at the profits of the eligible business. Keeping in mind the past history of the Assessee’s case it cannot be said that the AO failed to deal the specific facts of the case as per law and has not scrutinized/verified the details in respect of the issues raised in the show cause notice u/s.263 of the Act. The liability that was assumed by the assessee under terms of the contract would be obligations involving the development of an infrastructure facility. The assessee has also in its employment technically and administratively qualified team of persons. If the above conditions are satisfied then it would not be correct to say that assessee is merely a contractor and not a developer. Without giving adverse finding on the above tests, the CIT could not conclude that the order of the AO was erroneous and prejudicial to the interest of the revenue. Further the CIT in the impugned order has also observed that the roads construed by the Assessee were not coming under expressway or highway category as mentioned in the Explanation to Sec.80IA(4)(i) of the Act, which defines Infrastructure facility for the purpose of claiming deduction under the aforesaid section. We are of the view that the definition covers any road including toll road. It need not be coming under expressway or highway category. - Decided n favour of assessee
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2017 (1) TMI 1199
Additions towards difference in stock u/s 69B - Additions towards difference in closing stock based on the stock statement submitted to the bank - Held that:- A.O. made additions solely on the basis of stock statement, ignoring the deposition given by the bank manager in the cross examination proceedings. The bank manager clearly explained that he was satisfied with the utilization of the funds based on the scrap available at the factories purchased from the official liquidator by the sister concern and that he considered the said stock for the purpose of sanctioning the loan. The bank manager in the cross examination proceedings clearly retracted from his earlier statement that before the A.O., he had explained the general procedure followed for sanctioning open cash credit loan and further follow up action for verification of stock hypothecated to the bank without referring to the case of the assessee. In the cross examination proceedings, he has categorically admitted that the loan sanctioned to the assessee is a mortgage loan based on the security given by the partners and obtaining stock statement is only a procedural formality. Therefore, we are of the view that the A.O. was completely erred in relying upon the stock statement without pointing out any defects in the books of accounts. Though the A.O. has relied upon plethora of judgements to come to the conclusion that additions can be made towards difference in stock based on the books of accounts and stock statement submitted to the bank, the case laws relied upon by the A.O. are not applicable to the facts of the case. Thus we are of the view that the A.O. was erred in making additions towards difference in closing stock based on the stock statement submitted to the bank. The CIT(A) after considering the relevant details has rightly deleted additions made by the A.O. - Decided against revenue Addition towards gross profit on sales disclosed in the stock statement submitted to the bank - Held that:- we find force in the arguments of the assessee for the reason that the assessee has maintained regular books of accounts which were audited u/s 44AB of the Act. The auditor has not made any comments in respect of books of accounts and also valuation of closing stock. Therefore, we are of the view that there is no reason for the A.O. to reject books of accounts and estimate gross profit without referring to any discrepancies in the books of accounts in respect of sales as well as purchases. In so far as additions towards gross profit on the basis of stock statement, in the preceding paragraph, we hold that stock statement submitted to the banks cannot be considered as true and correct. Therefore, we are of the view that the A.O. was erred in estimating gross profit on the basis of sales disclosed in the stock statement. - Decided against revenue
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2017 (1) TMI 1198
Subsidy receipt on account of industrial promotion assistance - capital or revenue receipt - nature of income - Held that:- Assessee company got the subsidy from the West Bengal Government in the form of Industrial Promotion Assistance under the West Bengal Incentive Scheme-2000. The said scheme clearly says that it is for the company to establish its unit in the backward area to promote the employment and other facilities in the backward areas and the said incentive was towards capital receipt in nature. The said scheme is not for the assessee company to reimburse the day to day operational expenses, therefore, it cannot be in the nature of revenue. Considering the factual position we are of the view that the Ld. CIT(A) has passed a reasoned order and it does not require any modification stating that the receipt receivable by the appellant company on account of industrial promotion assistance under West Bengal Incentive Scheme, 2000 is capital in nature. Hence, the said receipt is not includible in the taxable income of the appellant company. There is no application of provisions of section 41(1) as held by the AO as there was no cessation of liability on account of payment of sales tax. - Decided against revenue
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2017 (1) TMI 1197
Income earned from running and operation of a Mall and service charges - income from profits and gains of business or as income from house property - Held that:- We find that the issue of whether or not the income earned by the assessee from leasing out of its property and for offering a host of other complex services is to be construed as commercial exploitation of its properties as stated in its objects and therefore to be held to be exigible to tax as ‘business income’ as declared by the assessee or as ‘income from house property’ as held by Revenue, has been considered and adjudicated by a Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2009-10. Also see Chennai Properties & Investments Ltd. vs. CIT (2015 (5) TMI 46 - SUPREME COURT) Recovery of common area maintenance and utility expenses - whether constitutes business income from which Municipal taxes paid and the same is allowable as a deduction from business income - Held that:- In view of our holding that the income earned by the assessee from running and operation of Mall and a provision of host of other services and utilities is to be construed as commercial explanation of its properties and is exigible to tax as ‘business income’ as declared by the assessee, we hold that the assessee is entitled to be allowed deduction of Municipal taxes from its business income. Depreciation claimed on the Mall building - Held that:- Following the order of the Coordinate Bench for A.Y. 2009-10 and having held that the assessee’s income earned from running and operation of Mall and service charges etc. is to be taxed under the head profits and gains of business, we hold that in this regard the assessee is entitled for claim of depreciation on Mall building and also brokerage expenses incurred for grant of licence to various users. Disallowance made u/s 14A r.w.r. 8D - Held that:- Following the decision of the Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2009-10 which followed the decisions of the Hon'ble Bombay High Court in Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ) and HDFC Bank Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT), we direct the AO to delete the impugned disallowance made under section 14A r.w. Rule 8D on account of interest expenditure.
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2017 (1) TMI 1196
Disallowance of claim of depreciation - Held that:- AO’s observations are very much self contradictory if we go by different portions therein. He is of the view in former portion that the assessee has also sold its equipments to customers. He however opines in middle portion that the assessee’s ownership over the equipments in question is not in dispute. We thus feel it appropriate that the Assessing Officer shall carry out a detailed exercise in tune with ld. co-ordinate bench’s directions as in assessment year 2006-07 as well. He shall prepare a detailed list of assessee’s equipments. If he finds it not to have transferred ownership thereof to its customers/patients, the impugned depreciation relief would be held allowable Addition made to Royal College Pathologist, London towards reimbursement of travelling expenses - whether there was no corroborative evidence to prove that the same was indeed incur wholly and exclusively for the purpose of the business? - Held that:- There is hardly any dispute that the assessee company manufactures and trades in diagnostics reagent strips and kits along with sale and service of diagnostics instrument. It has incurred the impugned expenditure in the nature of payment made to sponsor air fare of London Delhi London business class of two speakers based in England. The Assessing Officer is fair enough in not rebutting the fact that the said speakers attended an educational meeting at the Apollo Hospital, New Delhi in February 2007. His only case is that the assessee has not proved any business expediency in the said expenditure. The CIT(A) on the other hand agrees with assessee’s contention that it had paid the impugned expenditure for publicity purposes. We thus view assessee’s expenses as very much connected having direct nexus with its manufacture and sale of diagnostics product wherein it is supposed to garner wider publicity in order to create a niche for itself in the field of diagnostics instruments market. We thus find no reason to interfere in CIT(A)’s order under challenge Addition on account of receivables written off and claimed as business loss - Held that:- There is no quarrel between the parties so far as basic facts pertaining to the instant issue are concern that the assessee has claimed the loss in question on account of short recovery of receivables wherein majority of the sale sums stands recovered leaving behind only a portion of the amount which stands claimed as business loss because of short fall in recovery. The assessee has already declared the sums recovered as its business income. It is thus clear that the amount not recovered in question does have very much a direct and live nexus with assessee’s business so as to be treated as an allowable business loss claim. We accept assessee’s argument accordingly to delete the impugned business loss disallowance Disallowance of expenditure incurred on subscription and purchase of office and general purpose books - Held that:- The assessee first of all refers to the nature of its reading material for being subject matter of the impugned issue. The same appears to be “ McEvoy & Farmer” literature regarding research work stated to be throwing light on assessee’s business and latest developments in the field. Learned CIT(A) only refers to depreciation schedule including books also to conclude that the above subscribed books amount to capital expenditure. He has nowhere discussed assessee’s peculiar line of business manufacturing and selling diagnostics products wherein the books in question update it about latest research developments in the field. We thus find force in assessee’s contention seeking to treat the impugned expenditure as revenue in nature. The Assessing Officer is directed to delete the disallowance in question.
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2017 (1) TMI 1195
Validity of assessment u/s 143(3) - notice of hearing was served upon minor daughter - Held that:- There is merit in the submissions of the ld. AR of the assessee, as the proposition canvassed by the ld. AR for the assessee are supported by facts narrated by him. As per Section 15 of the Code of Civil Procedure, the notice should be served at least on any adult member of the family and if the notice is served upon a minor child it would be presumed that it has not been served on the assessee at all. The assessee has also explained before us the definition of the “child” and “adult” and the same we have noted in the above para. The assessee also filed the affidavit before the CIT(A) stating that he was neither aware about the notice u/s.143(2) nor any statutory notice u/s.143(2) has been served on him. Therefore, considering the factual position we are of the view that the order passed by ld. CIT(A) is a reasoned order and does not require any interference. Therefore, we confirm the order passed by ld. CIT(A). - Decided against revenue
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2017 (1) TMI 1194
Rejection of books of accounts - estimated net profit of 8% on gross contract receipts net of all deductions - Held that:- Admittedly, the A.O. had rejected books of accounts for the reason that the assessee has failed to produce supporting bills and vouchers in respect of expenditures. It is also an admitted fact that the assessee himself has admitted about 8% net profit in the earlier period net of all deductions including depreciation. Therefore, considering the overall facts and circumstances of the case, we are of the view that the rate of net profit adopted by the A.O. appears to be fair and reasonable. Hence, we uphold estimation of net profit of 8% on total receipts net of all deductions including depreciation. In so far as separate deductions towards depreciation is concerned since, the A.O. has adopted reasonable rate of 8% on gross contract receipts, further deductions towards depreciation will result into determination of total income below the income returned by the assessee in his return of income. Therefore, we are of the view that the A.O. was right in estimating net profit of 8% on gross receipts net of all deductions including depreciation, and hence, the assessee is not eligible for separate deduction for depreciation. In so far as separate additions towards interest on fixed deposits under the head income from other sources, we find merits in the findings of the A.O. for the reason that there is no nexus between interest receipts and works contracts executed by the assessee. Just because fixed deposits are kept as security for obtaining works contracts, it does not alter the character of income. Interest on fixed deposits are assessable under the head income from other sources. Therefore, we are of the view that the A.O. was rightly made additions towards interest income under the head income from other sources. The CIT(A) after considering the relevant facts has rightly upheld the order of the A.O. We do not see any error or infirmity in the order of the CIT(A), hence, we inclined to uphold the CIT(A) order and reject ground raised by the assessee.
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2017 (1) TMI 1193
Penalty order u/s. 271(1)(c) - non mention of reasons - defective notice - Held that:- Assessee has clearly explained before us that the assessee has admitted the undisclosed income suo moto during the course of search. In the case under consideration, the AO had made the addition based on the estimate and not based on the seized documents. When the addition is based on the estimate the penalty cannot be levied. In addition to this, the ld. AR for the assessee relied on the judgment of the jurisdictional ITAT in the case of Shri Suresh Karmakar Vs. DCIT [2017 (1) TMI 1163 - ITAT KOLKATA] where he has pointed out that the AO did not tick the relevant para of the notice of the penalty u/s. 274 of the Act, therefore, the assessee did not know for which reason he is being penalized. Hence, following the decision of M/s MANJUNATHA COTTON AND GINNING FACTORY & OTHS. [2013 (7) TMI 620 - KARNATAKA HIGH COURT] we are of the view that the penalty imposed by the AO and confirmed by the ld. CIT(A) needs to be deleted. Accordingly, we delete the penalty u/s. 271(1)(c) - Decided in favour of assessee
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2017 (1) TMI 1192
Reopening of assessment - addition made in respect of on-money received - Held that:- From the reasons recorded to reopen the assessment for A.Y 2006-2007, it appears that the same is sought to be reopened by the Assessing Officer on the basis of observations made by Assessing Officer, while framing the assessment for A.Y 2007-2008 with respect to the flats sold during the year under consideration, wherein it was found that the assessee had received on-money with respect to the flats sold and in the A.Y 2007-2008 and therefore, the Assessing Officer while issuing the Notice for reopening has presumed and assumed that with respect to the flats sold in AY 2006-2007, the assessee must have received on-money. From the record available, it appears that there is no further tangible material available with the Assessing Officer to form a belief that the assessee had received on-money with respect to the flats sold in A.Y 2006-2007 and/or had received any on-money in the AY 2006-2007. With respect to addition made in respect of on-money received in A.Y 2007-2008, the same has been subsequently set-aside by the learned CIT [A], against which an appeal was preferred which has been dismissed on the ground of low tax effect. Considering the aforesaid facts and circumstances of the case and solely on the observations made by another Assessing Officer with respect to the subsequent assessment years ie., 2007-2008, the reopening was not permissible, more particularly in absence of any other tangible material available with the Assessing Officer that in the year 2006-2007, the assessee had received any on-money. Under the circumstances, it was not open for the Assessing Officer to re-open the assessment for A.Y 2006-2007, that too beyond the period of four years and more particularly when the original assessment was done under Section 143 (3) of the I.T Act. - Decided in favour of assessee
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2017 (1) TMI 1191
Addition u/s 69 made on account of investment in purchase of land - Held that:- It has come on record that said Mr.Hemendra Ahsh purchased the land situated at Adalaj from power of attorney holder of the original land owners – Mr.Gandaji Thakore and others and thereafter said Mr.Hemendra Shah sold the said land to the assessee. There is no iota of evidence on record to suggest that the assessee paid ₹ 2.10 Crores to said Mr.Hemendra Shah. Solely on the basis of statements of the original land owners – Mr.Gandaji Thakore and others that they received sale consideration from Mr.Champavat, in whose favour sale deed was executed by them in the year 2008, as rightly held by the learned CIT(A) and the learned tribunal, A.O. was not justified in making addition on account of investment in purchase of land at Adalaj of ₹ 74,50,000/-. We are in complete agreement with the view taken by the learned tribunal in deleting addition made by the A.O. on account of investment in purchase of land at Adalaj of ₹ 74,50,000/-. No substantial question of law arise as proposed.
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2017 (1) TMI 1164
Offences to direct the registration of F.I.R. and investigation therein - Held that:- The materials in question are not good enough to constitute offences to direct the registration of F.I.R. and investigation therein. The complaint should not be improbable and must show sufficient ground and commission of offence on the basis of which registration of a case can be ordered. The materials in question are not only irrelevant but are also legally inadmissible under Section 34 of the Evidence Act, more so with respect to third parties and considering the explanation which have been made by the Birla Group and Sahara Group, we are of the opinion that it would not be legally justified, safe, just and proper to direct investigation, keeping in view principles laid down in the cases of Bhajan Lal and V.C. Shukla (1990 (11) TMI 386 - SUPREME COURT ). In view of the materials which have been placed on record and the peculiar facts and circumstances projected in the case, we find that no case is made out to direct the investigation as prayed for.
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Customs
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2017 (1) TMI 1172
Rectification of mistake - non-compliance of conditions of pre-deposit which was necessary for maintainability - Held that: - on 13.7.2015, no compliance was made and thereafter the appeal was also dismissed for non-compliance. Thereafter the present application for rectification of mistake has been filed along with the affidavit. Primarily stating that there was no intentional default on the part of the appellant but we also find that there was no mistake apparent in the order dated 13.7.2015 and if we recall the order dated 13.7.2015, it would tantamount to review of our own order which is not permitted as per the various decisions cited by the learned AR for the department - application for rectification of mistake dismissed - decided against applicant.
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2017 (1) TMI 1171
Advance Licence Scheme - DFIA scheme - Levy of duty on goods actually imported – Appellant imported crude oil which was said to have escaped payment of full customs duty - whether quantity shown in the Bill of Lading of the quantity actually received in the shore tanks should be the basis for payment of customs duty? - Held that: - the matter is fully settled by the Hon’ble Apex court in the case Mangalore Refinery & Petrochemicals Ltd vs CCE, Mangalore [2015 (9) TMI 245 - SUPREME COURT], wherein it has been unequivocally held that the quantity of crude oil actually received in to a shore tank in a port in India should alone be the basis for payment of custom duty - demand set aside - appeal allowed. Whether the appellant is required to pay the National Calamity Contingent duty (NCCD) and cess thereon even though they have utilised advance licence for the import? - Held that: - the Hon High Court of Gauhati in the case of CCE, Dibrugadh Vs Prag Bosimi synthetics ltd., [2013 (11) TMI 487 - GAUHATI HIGH COURT] has answered this issue in the affirmative against the appellant and held that the general exemption has absolutely no reference to NCC duty which is levied as a surcharge under the provisions of the Finance Act, 2001 - the impugned order, rejecting the refund claim of ₹ 4,23,30,927.46/- does not call for any interference - appeal dismissed. Appeal disposed off - decided partly in favor of appellant.
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2017 (1) TMI 1170
EPCG scheme - violation of EPCG license - failure to produce the EODC and installation certificate within 30 days of expiry of the Export obligation period of the license which was expired on 11.05.2011 - Held that: - right from the beginning the appellant had taken a categorical stand that they had exported most of the goods but they are not in a position to substantiate the same on account of loss of file pertaining to the license in question - the appellant have already admitted their duty liability and interest and in the absence of any malafide intention of the assessee and by extending the benefit of doubt to them I set aside the penalty imposed upon them - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (1) TMI 1167
Winding up petition - existence of any agreement - Held that:- Normally, in a petition seeking winding up on the ground of inability to pay debts, the dispute is with regard to the very liability for the payment of such debt. The question which normally arises is whether such dispute, to the very existence of the debt or the liability to pay the debt, is bona fide and one of substance. In this case, as we have noted earlier, there is no dispute whatsoever with regard to the debt of ₹ 90.90 crores which is due and payable by the company to the petitioning creditor. However, even if we were to proceed on the basis that the institution of a suit for damages against the petitioning creditor, in a given case, constitutes valid defence, it is necessary for the company to further establish that such defence is bona fide, one of substance, likely to succeed in point of law and finally backed by prima facie proof of the facts upon which such defence depends. In the present case, we agree with the learned Company Judge that none of these matters have been established by the company and therefore, there is really no warrant to interfere with the impugned order. There is no material on record to establish even the prima facie existence of any agreement between the company and the petitioning creditor in the matter of sale of the pledged Gitanjali sharers. The minutes of the meeting dated 14 March 2013 do not even remotely spell out any such agreement. Mr. Andhyarujina, was not at all clear as to whether it is the case of the company that there exists any such agreement between the parties. In this case, even if we were to proceed on the basis that there was some obligation upon the petitioning creditor to sell the pledged Gitanjali shares and to adjust the proceeds against the dues payable by the company, such obligation, at the highest, would arise only after the trades matured or debt was actually crystalised some time in June 2013. Admittedly, the trades matured or the debt was crystalised in the present case only in June 2013. By this date, there was already a freeze order made by EOW under section 102 of Cr.P.C. disabling the petitioning creditor from dealing with the pledged Gitanjali shares. There was no legal obligation whatsoever upon the petitioning creditor to sell the pledged shares in order to maintain the margins. Again, even if maximum latitude is extended to the company, we find no unreasonability in the petitioning creditor suspending sales from 25 March 2013, no sooner, they were served with EOW's letter dated 23 March 2013, requiring them not to deal with the Gitanjali shares since EOW was examining complaints made by certain clients of the company in relation to these very shares.There is no dispute that the petitioning creditor did sell almost 2,97,000 Gitanjali shares between 19 March 2013 and 22 March 2013. We completely agree with the reasoning of the learned Single Judge that the petitioning creditor acted quite reasonably in the matter, as otherwise, the possibility of the petitioning creditor or it's directors/officers being proceeded with criminally, could not have been ruled out. There are absolutely no malafides in the action of the petitioning creditor, particularly, when the record indicates that the petitioning creditor immediately took up the matter with the EOW, urging the EOW to withdraw such directions.
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FEMA
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2017 (1) TMI 1166
Penalty for contraventions of the provisions of Sections 8(1), 9(1)(a) and 14 of FERA - legal status of the appellant independently - Held that:- As seen from the records that the appellant claimed not a citizen before the Division Bench of this Court in the Habeas Corpus Petition. In the election petition filed by him, he claimed as an Indian citizen. But before the Foreign Exchange Regulation authorities, he claimed as if he is a non-resident Indian. Thus, the appellant has taken different stands, which are not permissible under law. In such view of the matter, this Court deems it fit only to hold that the order passed by the appellate authority that the appellant was a resident within India in this respect does not require any interference. Accordingly the first question of law is answered against the appellant. Whether the appellate authority, having found that on evidence, the charges held to be not proved, can exercise the suo motu powers under Section 52 and re-frame the charges sitting in appeal and whether new evidence can be accepted by the appellate authority? - Held that:- In the present case, the appellate authority has rightly considered only the evidence that was considered by the adjudicating authority and no new material was placed or considered. It is also not the case of the appellant that the appellate authority has based its findings on some evidence, alien to the adjudication proceedings, without granting any opportunity. In the case on hand, the appellate authority had to proceed with the examination of the evidence in accordance with Section 52, as the findings and conclusions arrived at by the adjudicating authority did not logically follow. The appellate authority has also held that the primary burden of the findings rendered by the adjudicating authority would appear to be to deal with the points taken in defence and not to examine the evidence so as to find out as to how the charges can be substantiated on that evidence, and that the adjudicating officer assumed the allegations in the show-cause notice as self-evident of the charges. Hence, on that score, it became necessitated for the appellate authority to deal with the evidence for corroborating the same with the points taken in defence. It is also evident from Page-96 of the order of the appellate authority that the learned counsel for the appellant also rightly admitted that the Board has the authority to consider the matter afresh based on the evidence already collected. Therefore, the appellant cannot now question the authority, which even otherwise, is well protected under Section 52(3) and (4). Whether the order of the adjudicating authority is vitiated on account of bias, violations of principles of natural justice and fair play as he was a part of the investigating team and a witness in the criminal case initiated by the Department? - Held that:- There is nothing on record to show that the adjudicating officer was prejudiced on the subject matter, which reflected in the adjudication process or in the decision. Upon perusal of the records, we find that the appellant was given a fair opportunity. As found by the appellate authority, the guilt of the appellant was culled out only from the documentary evidence, and the entire statements of the other witnesses were discarded. Thus the plea of bias put forth by the learned senior counsel appearing for the appellant, will not hold any water. Though the principles enunciated in the other judgments relied on by the learned senior counsel for the appellant, in respect of bias, are not in dispute, the same will not apply to the case on hand. Further, the plea of bias looses its significance in the present case, since the appellate authority had independently examined the issues based on evidence on record, afresh. Thus, the third question of law is answered against the appellant. Whether Section 3(1) of the Companies Act, which confers a separate legal entity to the company, absolutely dissolves the liability of the Director of a company under every circumstances? - Held that:- The protection given to a company is not an absolute bar to proceed against the directors and it is to be decided on the facts of the each case put to test. In this regard, the appellate authority, after analysing the matter in detail, and also considering the evidence placed on record, came to the conclusion that the name of the company Dipper Investments Limited was used for obtaining the bank drafts, opening an account in Barclays Bank, and for crediting the amount of drafts in that account and transferring the funds so credited to the accounts of Meer Care & Desai, Westback Ltd., and Bank of Ireland. There is also a clear finding that none of these acts could be attributed to the company and that there is no evidence that these were done in the course of company's business.Even though the show-cause notice does not spell out as to how the charges can be made out on the basis of the evidence as narrated, that has been done in the inquiry during the adjudication proceedings. In view of the clear finding given by the appellate authority that the various acts done in the name of the company could not be attributed to the company and that there is no evidence that these were done in the course of company's business, it is clear that the appellant is legally liable for those acts. Accordingly, the fourth and final question of law is answered against the appellant. Appeal decided in favour of revenue
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Service Tax
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2017 (1) TMI 1190
Telecom service - rate of tax - The appellant did not discharge service tax with enhanced rate and as such, proceedings were initiated against them for recovery of short paid tax amount - Held that: - the appellants could not categorically establish the dates of receipt of various taxable considerations during the impugned period to support their claim that some of these considerations were pertaining to the period when lesser rate of tax was applicable. The impugned order also notes that the appellant did not produce the records for post-paid SIM, details of bill collection and sale of pre-paid SIM before the authorities. We note that the rate of tax was enhanced with due announcements by the Government and the appellant as one of the regular and large tax payers under the category of telephone services, is expected to discharge correct tax liability after the enhancement - The service tax as per the statutory rate should have been discharged by the appellant - appeal dismissed - decided against assessee.
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2017 (1) TMI 1189
Maintenance or repair services of computer software - levy of tax or not, in doubt - invocation of extended period of limitation - Held that: - tax liability on this service was not free from doubt and was subject matter of large number of litigations. Invoking fraud, suppression and intention to evade payment of duty is not legally sustainable in such situation. It was held that there was a bonafide doubt regarding tax liability and as such, the demand for extended period is not sustainable. The chronological development relevant to the tax liability on maintenance or computer software have been elaborately recorded in the impugned order. It cannot be disputed that the Board itself earlier clarified that the maintenance or repair of computer software is not taxable. It cannot be alleged that the tax liability was willfully evaded by the respondent - appeal dismissed - decided against Revenue.
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2017 (1) TMI 1188
Renting of Immovable Property Service - imposition of penalty - malafide intention - Held that: - the enquiry letter was issued before deposit of the tax. I find on this particular issue, the Tribunal already held that no penalty would be imposed. Hence there is no reason to interfere with the impugned order - Reliance placed in the case of M/s Amiresh Baruah Vs. CCE & ST, Dibrugarh [2014 (1) TMI 515 - CESTAT KOLKATA], where on similar issue, penalty was set aside, as malafide intention was not there. In absence of any malafide intention proven, penalty set aside - appeal rejected - decided against Revenue.
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2017 (1) TMI 1187
Security Agency Service - default in tax payment - the appellant had defaulted the tax liability inspite of having collected the service tax amount from their clients, whether the leniency can be accorded? - Held that: - the appellant had collected from their client not only the charges for the services but also service tax liability thereon. Even so, they have not remitted the said liability to the exchequer - the appellant certainly has not come out with clean hands to this forum and hence the appeal for extension of CUM duty benefit is not merited and hence not acceded to - demand of tax and interest upheld. With reference to penalty under Section 78, the same is modified to 25% of the service tax demanded provided, the appellant says up the entire duty liability with interest along with reduced penalty within a month of this order - As penalty under Section 78 is confirmed, there shall be no further penalty under Section 76 of finance Act, 1994. Appeal disposed off - decided partly in favor of assessee.
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2017 (1) TMI 1186
Business auxiliary services - Reverse Charge Mechanism - whether the appellants are liable to pay service tax on the commission paid by them for the services received by them from abroad? - Held that: - the issue has been discussed and has attained finality in the case of Indian National Shipowners’ Association [2009 (3) TMI 29 - BOMBAY HIGH COURT], where it was held that the assessee is not liable to pay service tax under the reverse charge mechanism provided under Section 66A of the Finance Act prior to 18/04/2006 - the demands in respect of the period prior to 18/04/2006 is set aside. Extended period of limitation - Held that: - The issue being interpretational and as divergent views were prevailing during that period, we hold that the extended period is not invokable - major part of demand barred by limitation, and set aside - the amounts of ₹ 35,402/- and ₹ 25,311/- are upheld along with interest. The demand pertaining to the period 01/04/2007 to 12/11/2007, would lie within the normal period of limitation involving a demand of ₹ 3,50,817/- - demand confirmed for this part. Appeal disposed off - decided partly in favor of appellant.
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Central Excise
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2017 (1) TMI 1185
Reversal of the cenvat credit at the time of opting for availing the exemption N/N. 50/2003-CE dated 10.6.2003 - credit of inputs contained in inputs, work in process and finished goods - Whether the assessee was required to reverse the credit on inputs contained the input, work in process and finished goods lying in stock on the date of opting for exemption under N/N. 50/03-CE or not? - Held that: - similar issue decided in the case of Gokaldas Intimate Wear [2011 (4) TMI 1123 - KARNATAKA HIGH COURT], where it was held that till 1-3-2007, the assessee was entitled to benefit, of the cenvat credit in respect of inputs contained in the work in progress and semi finished products - at the time opting area based exemption of N/N. 50/2003-CE dated 10.6.2003, the appellants are not required to reverse the credit in their cenvat credit account lying unutilized. Cash refund - denial on the ground that amount to be refunded by way of re-credit to their Cenvat Credit Account - The assessee is in appeal on the ground that as they are not able to utilize the Cenvat Credit Account, therefore, the refund is to be given in cash whereas the Revenue is in appeal on the ground that the Commissioner (Appeals) erred in holding that the assessee is entitled for refund claim - Whether the assessee is entitled for cash refund or to be credited in Cenvat Credit Account? - Held that: - identical issue came up before the Hon’ble Uttarakhand High Court in the case of APCO Pharma Ltd. [2011 (10) TMI 38 - UTTARAKHAND HIGH COURT], where it was held that in a situation where the assessee is not in a position to utilize the Cenvat Credit Account, the refund claim is to be given in cash. Therefore, we hold that the assessee is entitled for refund claim of the amount paid by the assessee on account of reversal of credit in cash. Appeal dismissed - decided against Revenue.
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2017 (1) TMI 1184
Reversal of CENVAT credit - whether the respondent was required to reverse the credit on inputs in stock which were lying in their factory at the time of opting the area based exemption under N/N. 50/2003-CE dated 10.6.2003 or not? Held that: - The issue has already been resolved by this Tribunal in the case of Himachal Futuristic Communications Ltd. [2016 (11) TMI 628 - CESTAT CHANDIGARH], where it was held that when the input-credit legally taken and utilised on the dutiable final products, need not be reversed on the final product becoming exempt subsequently unless specific provision exist therefor - At the time opting area based exemption of Notification No.50/2003-CE dated 10.6.2003, the appellants are not required to reverse the credit in their cenvat credit account lying unutilized. Appeal dismissed - decided against Revenue.
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2017 (1) TMI 1183
Benefit of N/N. 3/2004-CE dated 08.01.2004 and N/N. 108/95-CE dated 28.08.95 - denial on the ground that the certificate issued by the competent authority are not in favor of the respondent - Held that: - In the N/N. 3/2004-CE nowhere it is mentioned that the competent authority is required to issue certificate in favor of the supplier of the goods. In fact, the Notification clearly specified that the certificate is to the effect that such goods are cleared by supplier for intended use - the certificate is not challenged - the respondent is entitled for benefit of N/N. 3/2004 ibid. With regard to the N/N. 108/95-CE dated 28.08.1995, nowhere it is mentioned that certificate is required to be issued by the competent authority in favor of the supplier of the goods - the respondent is entitled for benefit of exemption N/N. 108/95-CE ibid. The respondent is correctly cleared the goods by availing exemption N/N. 3/2004 and 108/95 ibid - appeal dismissed - decided against Revenue.
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2017 (1) TMI 1182
Reversal of credit - Rule 6(3) of CCR, 2004 - Levy of duty on by-product or a waste - emergence of slag as a by-product - Held that: - reliance placed in the case of Hariyana Steel and Power vs. CCE [2015 (11) TMI 771 - CESTAT BANGALORE], where it was held that the slag emerged as byproduct / waste during manufacture of sponge iron does not amount to manufacture of exempted goods and therefore, there is no need for reversal of credit as required in terms of Rule 6(3) of CCR, 2004 - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1181
SSI exemption - unbranded storage tanks - denial on the ground that the assessee availed credit on plastic granules, which were common inputs for both type of tanks - Held that: - it is admitted in the SCN that at the time of issue of credit availed inputs to the manufacture of intermediate powder, the appellants are showing the credit attributable to such granules, which are intended for the manufacture of unbranded tanks and are accordingly reversing the same. Such reversal will satisfy the condition of non-avialment of cenvat credit - The ratio of the Hon’ble Supreme Court's decision in the case of Chandrapur Magnet Wires (P) Ltd. [1995 (12) TMI 72 - SUPREME COURT OF INDIA] is rightly applicable to such situation - the same procedure had been followed by the appellant. As credit availed has been reversed whenever the input granules are used in the manufacture of unbranded tanks, the exemption will be available - appeal allowed - decided in favor of assessee.
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2017 (1) TMI 1180
CENVAT credit - MS items - denial on two grounds, firstly, that the MS items do not fall within the definition of capital goods and secondly, for the reason that the capital goods when fixed to the earth by support structures fabricated by MS items become immovable property - Held that: - The credit seems to be disallowed stating the reason that the appellant has not produced issue slips, work orders etc. for fabrication of capital goods. When the appellant has disclosed the detail in each of the ER1 returns, the Department was under obligation to scrutinise and call for information within the normal period. The Department has not been able to identify or substantiate with any evidence that the appellant has used the MS items for fabrication of foundations / civil works / sheds. The reason for disallowing credit is that the support structures when embedded to the earth will become immovable property and therefore not eligible for credit. In a recent decision in the case of Ultra Tech Ltd. Vs. CCE Indore [2016 (9) TMI 1097 - CESTAT NEW DELHI], the Tribunal has made a detailed discussion that capital goods when fixed to the earth using support structures cannot be considered to be immovable property and that credit cannot be disallowed - there is no evidence to show that the appellant has used the MS items for fabrication of civil structures or laying of foundations. The MS items having been used for fabrication of capital goods which fall within the definition of capital goods viz. Pollution control equipment, energy tank, chimney etc. and also parts of capital goods. Credit allowed - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1179
Clinker and Grey Portland Cement - quantum of penalty - SSI exemption - benefit of payment of penalty under Section 11 AC reduced to 25% - Held that: - Section 11AC(c) provides that the duty determined u/s 11 A and the interest payable thereon paid within 30 days from the date of communication of the order of the Central Excise Officers, the amount of penalty liable to be paid shall be 25% of the duty so determined. The benefit of 25% penalty will be available to the appellant provided that this penalty amount is also paid - From the records of appeal, it is found that out of total amount confirmed in the Impugned order to the extent of ₹ 7,77,816/- and the amount of ₹ 7,76,100/- has already been paid along with interest and 25% penalty. The minor difference is on account of calculation mistake, which is accepted. The benefit of reduction in penalty to 25% extended - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1178
Evasion of duty - the appellants have not submitted the relevant costing information and not paid the applicable duty with an intention to evade payment of duty - demand of duty, interest and penalty - Time limitation - Held that: - the requisite information has been sought by department on 01.12.2002 and appellant replied on 10.12.2002. However the Show Cause Notice was issued only on 29.12.2005. Appellant sought for assessment on provisional basis at the beginning itself, which was not however extended by department. It is also not disputed that the appellant was filing statutory returns all through the period. In these circumstances the issue of the Show Cause Notice beyond the normal period of limitation is found without any good reason. This being the case the SCN will have to be treated as hit by limitation - demand being time barred, is set aside - appeal allowed - decided in favor of assessee.
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2017 (1) TMI 1177
CENVAT credit - single leaf door - glazed view panel - Held that: - These items are used for packing unit and in my view are specialized civil construction items. In view thereof, I uphold the view taken by the Commissioner (Appeals) disallowing the credit availed on single leaf door and glazed view panel. Demand of interest on irregular credit availed - Held that: - The appellant has no case that the irregular credit was reversed. Therefore the prayer of appellant to set aside the interest demand on irregularly availed credit on single leaf door and glazed view panel is not tenable. Appeal disposed off - decided against assessee.
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2017 (1) TMI 1176
CENVAT credit - input services - membership fees paid to Young Entrepreneurs Organization - Convention Services - Risk Advisory Services - C & F services - Held that: - It is indeed definite that seminars, training programmes are essential for improving the competency, skill and calibre of the directors which would improve the business of the appellant company also - service tax paid on membership fees of Young Entrepreneurs Organization is eligible for credit. Convention service - Risk advisory services - Held that: - these services are directly connected with the sales promotion as well as procurement of inputs - credit allowed. C & F agents - Held that: - it is seen in the Order-in-Original that the appellant has not furnished the relevant documents for consideration of this issue before the original authority - matter remanded to to the adjudicating authority to consider whether the appellant is eligible for credit of full amount of service tax or to the reduced portion. Appeal partly allowed - part matter on remand.
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2017 (1) TMI 1175
Imposition of penalty u/s 11AC - shortage of stock - accounting mistake - duty voluntarily paid by assessee immediately on being pointed out - whether levy of penalty justified? - Held that: - the appellant admitted the shortage during the stock taking. It was explained that the shortage may be some mistake in the accounting of the stock of the finished goods. The finding of the lower authorities that the goods were clandestinely removed is without any basis. I do not find any material that the appellant admitted the charge of clandestine removal at any point of time. In any event, the appellant is not disputing the demand of duty which they have already paid on the spot - the imposition of penalties u/s 11AC is not warranted - demand of duty with interest upheld - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1174
MODVAT Credit - endorsed duty paying documents - whether the procedure of endorsement can be the basis for denial of credit and whether credit is admissible to the Appellant after 01.09.1996 on the basis of endorsed invoices? - It is the case of the Revenue that endorsed invoices are not a valid document for taking credit as per the documents prescribed under Rule 57G(3) of the Central Excise Rules, 1944. Held that: - the issue is no more res integra in view of the decision of the larger Bench of the Tribunal in Balmer Lawrie v. CCE [2000 (1) TMI 74 - CEGAT, NEW DELHI] where it was held that after 01.04.1994, endorsed invoices were not valid documents for the purpose of MODVAT Credit - denial of CENVAT Credit upheld - penalty set aside - appeal disposed off - decided partly in favor of assessee.
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2017 (1) TMI 1173
100% EOU - seized goods were provisionally released and were present in the premises of EOU - the adjudicating authority has wrongly mentioned in the order that the goods were not produced at the time of adjudication - Held that: - There is a factual dispute raised by the Revenue in their grounds of appeal to the extent that the goods were available in the factory of the respondent at the time of adjudication, amongst others. In my considered view, the factual aspect as raised by the Reveneue is required to be verified by the adjudicating authority in the interest of justice - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (1) TMI 1169
Reversal of Input Tax Credit on issuance of credit note - the decision in the case of Challenger Computers. Ltd. And Others Versus Commissioner of Trade & Taxes, Delhi And Others [2015 (8) TMI 1005 - DELHI HIGH COURT] contested upon - Held that: - no explanation has been given for the delay - application for COD dismissed - petition dismissed - decided against petitioner.
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2017 (1) TMI 1168
Refund claim - Section 38(7)(d) - Section 38(3) - processing of VAT refund claims - furnishing of particulars and details relating to refund - Held that: - even though the amendment to Section 38(7) was made in June 2012, within three weeks, a statutory notification followed by circulars was issued advising all dealers to furnish requisite details online and to not file the original copies of the declarations. The language of Section 38(7)(d) nowhere specifies that actual physical or hard copy of the original certificate is required. Moreover, the necessary form, i.e. Form-9 elicits exhaustive details in respect of CST and concessional duties with regard to receipt and pendency of declarations in Form E1, E2, F, H etc. Each of these relate to specific quarters for all the previous four years and are to be furnished by the dealers. Such being the case, the Revenue's contention that the mandate of Sections 11(2) of the DVAT Act and Rule 12 of the CST Rules, overriding all other concerns and suspending as it were, the obligation to frame the assessments and process refunds within the timeframe prescribed under Section 38(3) is misplaced and rejected as unacceptable. There is nothing in the language of these provisions compelling the dealers to provide original certificates in the physical format. Interest for delay in filing documents as required - Held that: - for the period beyond what is stipulated u/s 38(3), the Revenue would be under an obligation to pay interest till the point of time the refund claim is adjudicated and allowed. If, for any reason, during the processing of the refund claim (but after the two month period), the assessee is called upon to furnish particulars relating to any inter-state transactions for the purposes of verification of any of the central forms, that time would stand excluded. A direction is issued to the respondents to process all the pending refund claims of the petitioners in respect of the documents by calling specific details within reasonable time - The respondents/DVAT shall ensure that the dealers shall also be entitled to applicable interest in accordance with law up to the date of payment - appeal allowed - decided in favor of appellant.
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Indian Laws
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2017 (1) TMI 1165
Auction sales - recovery proceedings - grant interim injunction - Held that:- It is not open either a party to the lis or to any third party to determine at their own that an order passed by a Court is valid or void. A party to the lis or the third party who considers an order passed by a court as voidable or non est, must approach the court of competent jurisdiction to have the said order setaside on such grounds, as may be available in law. This Court held that the order of the Company Court of Madras High Court was to be complied with and sale held in violation of the said order was to be set aside. The entitlement of EIH to receive ₹ 15.21 Crores, which was the condition of the agreement dated 4th February, 2002 was to be reflected in any future transaction by virtue of the injunction order dated 18th March, 2005 dealing with the property, has rightly been taken note by the Division Bench of the High Court and we do not find any error in the directions issued by Division Bench of the High Court, directing 1st and 2nd Respondent, i.e., erstwhile owner and 8th Respondent Robust Hotels to deposit the sum of ₹ 15.12 Crores. We, however, are of the view that it was not necessary for the High Court to presume that the conditions of deposit, as ordered by the court shall not be complied with. Orders of the court are issued to be complied with and a court does not lack power to ensure the compliance by appropriate proceedings. Thus, further directions of the High Court that 'if the condition of deposit as ordered by this court has not complied with by either of the parties', interim injunction, restraining the 8th Respondent' was uncalled for. The interim order passed by the High Court, directing for deposit of ₹ 15.12 Crores has done substantial justice between parties, which need no interference by this Court in exercise of its jurisdiction under Article 136. It goes without saying that the trial judge has to expeditiously proceed to decide the suit. The deposit was to be made under the order of the High Court till 31st August, 2011. This Court passed an interim order on 29th August, 2011 due to which no deposit was made, we thus extend the time for deposit of the amount till 31st January, 2017. The appeals filed by Robust are disposed of as above. The Division Bench as well as learned Single Judge has already noted that hotel has already commenced its operation and contracts have been made with third parties for the operation of the hotel and bookings are also being taken from the customers. We have already noticed the directions issued by Division Bench, directing the defendant Nos. 1, 2 and 8 to the suit to deposit an amount of ₹ 15.21 Crores which order had done substantial justice between parties. Taking into consideration the overall circumstances, specially when issues raised in C.S. No. 164 of 2011 are yet to be adjudicated, the orders passed by both learned Single Judge and Division Bench, refusing to grant interim injunction in view of the facts as noted above cannot be faulted.
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