Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 3, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Validity of notice for reopening of assessment u/s 147/148 - merely because subsequently another decision of the Co-ordinate Bench of the ITAT is noticed by the AO, that will not vests the jurisdiction in the AO to exercise his powers u/s 147 - AT
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Relief u/s 89(1) for the amount received in excess of the amount eligible for exemption u/s 10(10C) - voluntary retirement scheme (VRS) - assessee are clearly entitled for relief u/s 89(1) in accordance with law in respect of the payments that are included in the total income - AT
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Nature of purchase of software - software purchased by assessee for ultimate export either as embedded software or as part of project undertaken by it cannot be considered as capital expenditure - AT
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Assessability of profit on sale of development rights in land - provisions of section 50C of the Act are not applicable as the same are to be applied only where there is transfer of land or building or both - AT
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Disallowance u/s 54F - construction of new residential house - there is no condition that the building plan of the residential house constructed should be approved by the Municipal Corporation or any other competent authority - exemption allowed - AT
DGFT
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No ‘insecticide’ can be imported from a source other than that specified on the certificate of registration or the permit, as the case may be. - Notification
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Import Policy regime of Radio Navigation Equipment under ITC (HS) 4 digit code 8526 modified - Notification
FEMA
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Security for External Commercial Borrowings - Circular
Service Tax
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Demand of service tax – Onus of classifying the services rendered - department has mentioned the details of services provided - burden shifted on the Assessee to explain the amounts in question in respect of the rendering of services - AT
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Prima facie, the activities of conducting tests for evaluation of a person’s English speaking understanding and writing abilities may not fall under the category of commercial training and coaching service - AT
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Commercial and Industrial Construction Service - The material on record does not reveal that the activities in the Paryatak Bhavan are substantially for non-commercial or non-industrial purposes or are substantially for accommodating official/departmental establishments of the State - prima facie case is against the assessee - AT
Central Excise
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If the appellant deposits before the department unconditionally the entire amount of unpaid duty with interest and 1/4th penalty, the penalty under Section 11 AC of the Central Excise Act shall be reduced to such extent - HC
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CENVAT Credit - Non receipt of material - If, according to the Revenue, they have not received the raw material from the said two registered dealers, there is no answer to the question as to from where manufacturing unit have procured the raw material. - AT
VAT
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By virtue of the specific exclusion of “first taxable sellers“ from the scheme of payment of presumptive tax under “clause (d)“ of section 6(5), the lower authorities including the Tribunal have rightly rejected the claim of the petitioners - HC
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Nature of currency counting machine - exemption from entry tax - If two views are possible and if the appellate authority or the assessing authority has adopted a particular view, it is not open to the Revisional Authority to substitute his reasoning and interfere with the orders - HC
Case Laws:
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Income Tax
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2015 (1) TMI 64
Validity of notice for reopening of assessment u/s 147/148 - Jurisdiction to issue notice - Held that:- The assessee is a 100% EOU. The assessee also sold goods to another EOU to the extent of ₹ 10,12,61,099/- and deduction u/s. 10B of the Act to the extent of ₹ 4,26,30,184/- was claimed - on perusal of the original assessment order passed u/s. 143 it is seen that the Assessing Officer discussed issue of deduction - it cannot be said that the AO has not made an enquiry or applied his mind to the issue which was the subject matter of the reassessment proceedings and issuance of the notice u/s. 148 - assessee had made a disclosure in the notes forming part of the accounts of the nature of payments required to be made to the foreign principal on account of CDC - a reference was made to the fact that as a result of a circular issued by the RBI, the assessee was not permitted to remit a certain proportion equivalent to US $ 1.5 for each container - The statutory auditors had also included a note in the report - during the course of assessment proceedings, the assessee addressed a comprehensive letter dt. 18th Nov., 2009 making a full disclosure of facts – the AO specifically discussed in the course of the assessment order the matters in respect of which he has made a disallowance either fully or in part. Since the AO did not find any justification to reject the claim of the assessee in respect of the issue of CDC, there was no specific discussion in the course of order - the AO has considered the claim of the assessee by applying his mind - there was a decision on this issue in favour of the assessee when the assessment was completed u/s. 143(3) - merely because subsequently another decision of the Co-ordinate Bench of the ITAT is noticed by the AO, that will not vests the jurisdiction in the AO to exercise his powers u/s 147 – the AO was not justified at all to initiate the proceedings u/s. 147 and issued the notice u/s. 148 – thus, the proceedings initiated u/s 147 is set aside – Decided in favour of assessee.
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2015 (1) TMI 63
Rejection of application for recognition u/s 80G(5) – Whether the Trust had failed to spent 85 per cent of the amount towards the objects of the Trust - Held that:- The similar matter has been decided in Commissioner of Income Tax Versus Shree Govindbhai Jethalal Nathavani Charitable Trust [2014 (8) TMI 561 - GUJARAT HIGH COURT] - At the time of granting approval u/s 80G of the Act, what is to be examined is the object of the trust and so far as the aspect of income is concerned, same can be very well examined by the AO at the time of framing assessment - the assessee-Trust was refused recognition only on the ground that it had not spent 85 per cent of the amount towards the objects of the Trust – the Tribunal relied upon CIT VS. SURYA EDUCATIONAL & CHARITABLE TRUST [2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT] wherein it has been held that at the stage of registration u/s 12AA of the Act, the extent and nature of activities are not required to be examined and the same is required to be examined in assessment proceedings - the Tribunal committed no jurisdictional error in issuing direction to grant recognition to the Trust u/s 80G(5) – Decided against revenue.
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2015 (1) TMI 61
Deletion of addition of investment – whether the notional loss said to be suffered by the taxpayer on revaluation of the securities is allowable as deduction or not - Held that:- As decided in assessee’s own case for the earlier assessment year, wherein the decision in Commissioner of Income-tax vs. Nedungadi Bank Ltd. [2002 (11) TMI 29 - KERALA High Court] wherein it has been held that the bank constitute their stock in trade or investment - the loss claimed by the bank in valuation of their securities should be allowed as deduction in computing the taxable profit - the loss suffered by the taxpayer in revaluation of the securities has to be allowed as deduction - the RBI issued guidelines to value to unsecured shares on the basis of YTM, i.e., yield to maturity method adopted for valuation of securities - the assessing authority has not come out with any suggestion/formula for computation of market value of unquoted shares – thus, the order of the CIT(A) is upheld – Decided against revenue. Deletion of addition on appreciation on current category of investment – Held that:- As decided in assessee’s own case for the earlier assessment year, wherein it has been held that the investment in the unquoted shares is to be treated as a part of its stock-in-trade and, accordingly, valued at cost or market value, whichever is less - the AO's objection with regard to the non-availability of the market quotation, the shares being unquoted, as also qua non write off of the relevant investment in books, the same being liable for a valuation, as stock-in-trade, on each valuation date, would not hold - however, the fact that the balance-sheets were uncommunicable or the companies were defunct, which only would enable the valuation at nil as against break-up value, the assessee claiming loss for the entire book value, would need to be established by it – thus, there was no infirmity in the order – Decided against revenue. Addition u/s 36(1)(viia) - Deduction of provision for bad debts - Held that:- Following the decision in Commissioner of Income Tax Versus Lord Krishna Bank Ltd. [2010 (10) TMI 860 - Kerala High Court] - the definition clause does not exclude the literal meaning of rural branch which necessarily excludes urban areas - if the assessee's case accepted by the Tribunal that population in a Ward has to be reckoned for deciding as to whether the location of a Panchayat is in a rural area or not is accepted, then probably even in Municipal areas there may be Wards with less than 10000 population thereby answering the branch located in such Municipal area also as a rural Branch - going by the ordinary meaning of Rural Branch, we feel only Branches of the Bank located in rural areas are covered - decided against assessee. Disallowance of provision of leave encashment – Held that:- As decided in assessee’s own case for the earlier assessment year, wherein it has been held that the opinion of the CIT(A) was set aside so far as disallowance claimed in respect of leave encashment u/s 43B(f) of the Act, as on today - as long as Section 43B(f) is on Statute, the disallowance is justified – Decided against assessee. Disallowance of payment of pension u/s 37 – Held that:- As decided in assessee’s own case for the earlier assessment year, wherein it has been held that the assessee has claimed that the amount received from the Pension Fund is credited in the Profit & Loss Account and the amount of pension given to its retired employees is debited to the Profit & Loss Account - the tax authorities have not examined the present claim of the assessee that there is no duplication in this regard - the claim of the assessee needs re-examination at the end of the AO – Decided in favour of assessee.
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2015 (1) TMI 60
Penalty u/s 271(1)(c) – Held that:- The assessee had not been filing his ROI over the years, despite the fact that he had enjoyed overall taxable income - the factum of the assessee not filing the ROI despite having taxable income was unearthed when the department undertook search operations over the assessee - it was only after the search and after a considerably long gap of 17 months that the assessee finally filed his ROI - all these facts culminate into the positive assumption that the assessee is callous, and not inclined to pay taxes voluntarily - this has been proved by the CIT(A), when he made the observation, “further, even after search, the appellant had not filed the return of income for 17 months and taxes on the same were also not paid till the commencement of the appellate proceedings - it is also clear from the fact that the appellant did not contest the addition in appeal as he had nothing to say on the matter. The decision in CIT vs Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT] , is not applicable on the present facts as the present is a case where the assessee did not file his return of income even though he had taxable income. This is a clear case of concealment of income - the detection of the assessee having taxable income came to light only when the assessee was searched u/s 132 - this cannot be taken into the realm of assessee furnishing the details and disallowed by the revenue authorities - rather, it would fall into the category of concealment, with an intention to conceal the particulars of income and evade tax, which would squarely fall within the precinct of section 271(1)(c) – thus, the levy of penalty u/s 271(1)(c) is sustained – Decided against assessee.
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2015 (1) TMI 59
Weighted deduction u/s 35(2AB) of the Act – In-house R & D unit - Alternate claim of deduction u/s 37 - Disallowance of 5% of business development expenditure on adhoc basis. - Held that:- Following the decision in DCIT, Circle 16(1), Hyderabad Versus M/s. Nagarjuna Agrichem Ltd. [2014 (6) TMI 396 - ITAT HYDERABAD] - the statutory formalities for getting approval u/s 35(2AB) are that application in Form No. 3CK and 3CL are to be submitted and an order of approval has to be obtained in Form No. 3CM from the prescribed authority - the assessee has not furnished Form No. 3CM either before the revenue authorities or before us for claiming weighted deduction u/s 35(2AB) - there is justification for reopening of assessment - assessee is entitled for 100% of the allowance at present and as and when received Form 3CM, weighted deduction may be allowed. Restriction placed in Section 35(2AB) will apply only in the case when amount was allowed u/s 35 itself - These two provisions are mutually exclusive but an assessee can claim a particular deduction either u/s 35 or u/s 37 so long as the amount spent is for the purpose of business – there was no merit in the AO’s contention that the amount once considered u/s 35 cannot be considered u/s 37 – Decided in favour of assessee.
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2015 (1) TMI 58
Assessment framed u/s 158BC r.w 158BD – retraction of statement - Documentary evidences not properly examined – Held that:- it is settled principle of natural justice that if statement of any person is relied against any person, the copy of such statement should be furnished to the person against whom such statement is required to be used - The affected also should be afforded an opportunity to cross examine the person making such statement - Since no enquiry with such other persons they have retracted their earlier statement and having also filed the affidavit in this regard, the assessee was not required to prove anything further - The AO cannot rely upon statement of his witnesses after the same retracted. The AO has not proved that the affidavits filed by these persons are incorrect - Thus, after the retraction of the statements by these persons no evidence remains with the AO to hold that the transactions by the assessee with these three persons is not genuine and the assessee has also paid unaccounted commission - the present assessments are made u/s. 158BC - The undisclosed income can be computed only on the basis of material found as a result of search and such other enquiry relating to such material - During the course of search, no material is found which suggests that the assessee has incurred unaccounted expenditure by way of commission for so called sales transactions - Thus, no part can be included in the computation as undisclosed income for the block period - after going through the orders passed by the Revenue Authorities along with the documentary evidence filed by the parties, the documentary evidence filed by both the parties requires thorough examination at the level of the AO afresh under the law – thus, the matter is remitted back to the AO for fresh adjudication after considering the documentary evidence, as per law – Decided in favour of assessee.
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2015 (1) TMI 57
Relief u/s 89(1) for the amount received in excess of the amount eligible for exemption u/s 10(10C) - voluntary retirement scheme - Whether the assessee is entitled for exemption u/s 10(10C) – Held that:- Following the decision in Sail-dsp Vr Employees Association-'98 Versus Union of India And Others [2001 (4) TMI 57 - CALCUTTA High Court] wherein it was held that the maximum exemption u/s 10(10C) of ₹ 5 lakhs is allowable as all the conditions of Section 10(10C) read with rule 2BA are fulfilled - If the sum is received in excess of ₹ 5 lakhs, the same was held eligible for relief under section 89 (1) - the sums are clearly the part of salary in the form of profits in lieu of salary as defined in Section 17(3) - these are amount of compensation received by, the employee from the employer in connections with the terms of employment and, therefore, the assessee are clearly entitled for relief u/s 89(1) in accordance with law in respect of the payments that are included in the total income – Decided in favour of assessee. Condonation of delay of 2 years and seven months – delay genuine and bonafide or not – Held that:- The assessee cannot be treated as a litigant who was not interested in pursuing the legal remedy against the assessment order - CIT(A) clearly vindicates the assessee's claim that he was acting on legal advice - The assessee was a bank employee and not a legal expert to know the niceties of his legal rights - in the present set of facts and the delay in filing the appeal before CIT(A) should have been condoned.
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2015 (1) TMI 56
Two payments made by assessee disallowed u/s 40(a)(ia) – Non deduction of TDS on clearing and forwarding charges - Held that:- CIT(A) was rightly of the view that the amount of ₹ 18,16,637/- is nothing but reimbursement of expenses incurred by the payee on behalf of the assessee - these amounts did not constitute income of the clearing agent and no TDS was required to made - therefore, the provision of Section 194C will not be applicable in respect of reimbursement of expenses - Circular No.715 dated 08.08.1995 issued by CBDT on “Clarifications on various provisions relating to tax deduction at source regarding changes introduced through Fiannce Act, 1995” will not have application on the present facts as the bills are raised separately for reimbursement of expenses – the same has been decided in INCOME TAX OFFICER. Versus DR. WILLMAR SCHWABE INDIA PVT. LTD. [2005 (3) TMI 398 - ITAT DELHI-D] thus, CIT(A) is justified in deleting the disallowance – Decided against revenue. Commission payments made on sales – Held that:- CIT(A) rightly deleted the disallowance for the reason that the assessee has deposited the tax deducted within time stipulated as per the provision of Section 40(a)(ia) - the tax has been paid well before the due date furnishing of the return u/s 139(1) - proviso 1 to Section 40(a)(ia) is applicable - the proviso though it is applicable w.e.f. 01.04.2010, it has been held the proviso to be retrospective – the order of the CIT(A) in deleting the disallowance of ₹ 9,00,300/- is upheld – Decided against revenue.
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2015 (1) TMI 55
Taxability of sale proceeds - Sale of agricultural land exempted u/s 2(14)(iii) or not – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the AO could not make out any case to treat the lands as non-agricultural lands so as to tax the profits on their sale under the head short term capital gains - since the evidence produced by the assessee clearly shows that the property is an agricultural property – and decision relied upon by assessee cannot be relied upon as the land was situated within municipal limits registered as urban land, bearing municipal door No. and subject to urban land tax sold on yardage basis surrounded on all sides by industrial and commercial buildings on which the assessee itself constructed two buildings after its purchase, part of such land lying vacant cannot be agricultural land for the mere reason that it was subject to agricultural operation, and hence its sale gave rise to capital gains – since gain on sale of agricultural lands are exempt from Capital gains, CIT(A) was not justified in bringing into tax gain on sale of agricultural lands as business income – Decided in favour of assessee. Claim of deduction u/s 80IB(11A) - Information/evidence furnished at the time of finalization of assessment or not – Held that:- In assessee’s own case for the earlier assessment year, it has been held that the assessee has fulfilled all the conditions, therefore, entitled for deduction u/s 80IB(11A) – thus, the order of the CIT(A) is upheld - Decided against revenue. STCG and LTCG disallowed - Information/evidence furnished or not – Held that:- CIT(A) rightly noticed that in the remand report, the AO has accepted the interest income at ₹ 83,721/- as shown by the assessee - Thus, the addition made on estimate basis of at ₹ 1,00,000/- is deleted - Regarding the short term capital gains shown at ₹ 2,06,826/- which was estimated by the A.O. at ₹ 2,50,000/- is again accepted by the AO in the remand report and the sale of land at ₹ 1,47,441/- which was estimated at ₹ 1,50,000/- the AO has accepted the figure in the remand report, therefore, the addition made at ₹ 4,00,000/- on account of short term capital gains and ₹ 1,00,000/- income from other sources is deleted – thus, the order of the CIT(A) is upheld – Decided against revenue. Most of the additions made by A.O. were accepted to be wrong and Ld. CIT(A) deleted the same. In the bargain returned income by assessee was not brought to tax. Therefore, we direct the A.O. to accept the income returned. To that extent, Revenue appeal is partly allowed. Cost of ₹ 1000 levied on ACIT-1, Warangal for coming in appeal on issues which are already accepted by him in the remand report - This amount should be recovered from the salary of the Officer concerned and to be remitted to the Government account.
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2015 (1) TMI 54
Applicability of section 40A(3) – Payment of retrenchment compensation - payment exceeding ₹ 2,00,000/- in cash – allowability of deduction u/s 35DDA - assessee submitted that the expenditure claimed under the head ‘Gratuity, Retrenchment and Notice Pay in assessment year 2003-04 was not allowed by the AO in the assessment. Therefore, they were claimed in the assessment year 2004-05. The AO allowed only 1/5th expenses after reducing the cash payment u/s 40A(3) of the Act. - Held that:- CIT(A) was not justified in confirming the addition u/s 40A(3) of the Act on the basis of cash payment exceeding ₹ 20,000/- In this case Rule 6DD(h) of the Income-tax Rules is applicable wherein the cash payment limit is not exceeding ₹ 50,000/- The Revenue’s grounds are revolving around allowing expenses claimed by the assessee at ₹ 45,13,340/- u/s 35DDA - CIT(A) held that these expenses are not covered u/s 35DDA - as per Section 35DDA, the only expenses are allowed to be proportionate basis i.e. 15th expenditure in connection with voluntary retirement - there was no voluntary retirement in assessee case - the payments were related to Gratuity, Retrenchment and Notice Pay - CIT(A) has rightly decided the case – Decided in favour of assessee. Interest payment on advance paid disallowed – Held that:- AO rightly was of the view that the assessee has shown advance to both the parties i.e. M/s. D.R. Polymers (P) Ltd., New Delhi and M/s. Neel Kanth Corporation, Jaipur and opening balance as on 01-04-2003 was at ₹ 7.50 lacs and ₹ 7.00 lacs respectively and closing balance was at ₹ 5.25 lacs in the case of M/s. Neel Kanth - assessee has not charged any interest on these advances - dealing in the share is not the business of the assessee, hence money borrowed relatable to the advance to M/s. D.R. Polymer (P) Ltd. is not for the purpose of business - Similarly, as interest free advance has been given to M/s. Neelkanth Corporation, it is evident that money borrowed to that extent is not used for the purpose of business – assessee has not brought any evidence to substantiate its claim except the arguments that these payments were made either in the form of share application money or weak financial position of the company - before AO, no reply was filed by the assessee – thus, the matter is remitted back to the AO for fresh adjudication – Decided partly in favour of
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2015 (1) TMI 53
Validity of order of CIT u/s 263 – nature of purchase of software - deduction u/s 10B - STPI unit - software export - Held that:- it could not be understood as to how a software purchase as a raw material in export of software can become capital expenditure - Both CIT and Ld. CIT(A) wrongly considered software purchase on the concept of enduring benefit in the business of assessee - since assessee purchased software as a raw material in its business of exports, it cannot be considered as capital in nature, as this is not asset in its business but as a component in the process of manufacturing/ export software -software purchased by assessee for ultimate export either as embedded software or as part of project undertaken by it cannot be considered as capital expenditure, as assessee is not using the software as an asset of the business but as raw material in its business – thus, the order of the CIT setting aside the order of AO is set aside. The profit of assessee arrived at ₹ 21,20,552 is after claim of purchase of software as an expenditure to an extent of ₹ 37,29,850 - any disallowance would automatically increase the profit from software division - There is no doubt that the profits from software division being STP unit are eligible for deduction u/s 10B - the entire amount gets exempted u/s 10B without any tax effect on the other incomes offered by assessee - since the raw material purchased by assessee is disallowed as capital expenditure, the stand taken by CIT in disturbing the order of AO cannot be appreciated - the order u/s 263 by CIT is set aside – Decided in favour of assessee.
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2015 (1) TMI 52
Validity of direction made to AO for re-computation of deduction u/s 10A – Exclusion of freight expenses from export turnover and total turnover for computation of deduction – Held that:- Following the decision in Income-Tax Officer. Versus Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D] - it has been held that freight and telecommunication charges which are required to be excluded from export turnover as defined under Explanation 2(iii) of section 10B of the Act should also be excluded from total turnover for the purpose of computing relief allowable u/s 10B – thus, the order of the CIT(A) is upheld – Decided against revenue. Treatment of subsidy received by the assessee as income – Held that:- The assessee in the course of assessment proceedings appears to have agreed for the addition in respect of subsidy received by it - assessee never denied that he has not agreed for the addition - the assessee could not establish as to why the subsidy received by it is to be treated as capital receipt and not exigible to tax - The assessee has simply stated that the subsidy is received towards electronics and women workmen subsidy and it is a general subsidy - assessee himself states that it is not received in respect of any particular asset - subsidy received by the assessee cannot be treated as capital receipt – the order of the CIT(A) is upheld on the issue of bringing to tax the subsidy received by the assessee – Decided against assessee. Denial of deduction u/s 10A - Sale proceeds in foreign exchange not brought into India within six months from the end of the financial year – Held that:- Assessee received sale proceeds to the extent of ₹ 48.28 lakhs after a period of six months from the end of the financial year in which the exports took place - the competent authority is Reserve Bank of India - assessee has not produced any evidence to show that the competent authority has granted extension for receiving sale proceeds beyond six months from the end of the previous year - the claim of the assessee u/s 10A of the Act is rightly disallowed by the lower authorities - the order of the CIT(A) is upheld on the issue of bringing to tax the subsidy received by the assessee – Decided against assessee. Interest on debtors and creditors no longer payable written back not considered – Held that:- In CIT Vs. Madras Motors Ltd. [2002 (3) TMI 10 - MADRAS High Court] it was held that interest earned by the assessee on belated payments by its customers was directly relatable to its business - There can be no doubt that this interest would however be directly relatable to the business of the assessee of forgings - If the purchasers of the forgings did not make the payments of the forgings and then agree to pay the interest on the delayed payments, the said interest would have its direct nexus with the business of forgings - contentions of the assessee cannot be accepted that this amount is forming part of business income – the order of the CIT(A) is upheld in excluding the amount while computing relief u/s 10A – Decided against assessee.
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2015 (1) TMI 51
Allowability of deduction u/s 80IB(10) - Applicability of the amended provisions of section 80IB(10) w.e.f 1.4.2005 vide Finance Act, 2004, in respect of the project of the assessee which was approved prior to 1.04.2005 - Fact relating to Development rights of commercial units were transferred to its sister concern M/s Nikunj Developers considered or not – Held that:- Following the decision in The Commissioner of Income Tax-16, Mumbai Versus M/s. Happy Home Enterprises, M/s. Kanakia Spaces Pvt. Ltd. [2014 (9) TMI 707 - BOMBAY HIGH COURT] - there were several conditions that were imposed in the newly substituted section 80-IB(10) that were absent in the section prior to its amendment - the housing projects were approved prior to 31st March, 2005 - the Legislature did not intended to give any retrospectivity to clause (d) of section 80-IB(10) - it is clearly a condition that relates to and/or is linked with the approval and construction of the housing project - clause (d) of subsection (10) of section 80-IB cannot have any application to housing projects that are approved before 31st March, 2005 - The said clause (d) being inextricably linked to the date of approval of the housing project, it will have to be held that the clause operates only prospectively i.e. for housing projects approved after 1st April, 2005 - the project was approved prior to 1.4.2005 on 10.01.2005 by the local authority – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2015 (1) TMI 50
Assessability of profit on sale of development rights in land - Business income or capital gain – Applicability of section 50C - Whether while assessing the income under the head ‘income from short term capital gain’, the provisions of section 50C of the Act are applicable - Held that:- The assessee was a civil contractor and was also earning income as commission agent - assessee had entered into an agreement for the development of the property - the assessee had some rights in the property and the extinguishment of the said rights give rise to the transfer of the asset in the hands of the assessee and such transfer is assessable as income from capital gain in the hands of the assessee - However, the provisions of section 50C of the Act are not applicable as the same are to be applied only where there is transfer of land or building or both - there were only development rights in the said land available to the assessee and such transfer of development rights does not establish the case of the Revenue that it amounts of transfer of land or building or both - The provisions of section 50C of the Act are attracted in specific cases and are not applicable - the income arising in the hands of the assessee on sale of development rights by adopting the sale price at ₹ 1,05,00,000/- and adopting cost price of ₹ 44,00,000/- is to be computed in the hands of the assessee to the proportion of his shareholding – the AO is directed to compute and include the same in the hands of the assessee under the head ‘income from short term capital gain’. CIT(A) failed to include the income from business in the hands of the assessee - the expenses claimed by the assessee i.e. office establishment expenses, provision for compensation to litigation are not to be allowed as expenses - the provision for compensation to litigants have not been allowed by the CIT(A) - assessee rightly admitted that there is an error in the order of CIT(A) while computing the income in the hands of the assessee – the AO is directed to re-compute the income – Decided partly in favour of revenue.
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2015 (1) TMI 49
Disallowance u/s 54F - failure to produce evidence to show that it is not renovation but construction of a new house - Held that:- The assessee has allegedly utilized the Long Term Capital Gain arising from the sale of shares towards the construction of a new residential house after demolition of old building on the plot-in-question. The assessee has claimed exemption u/s.54F on the ground that the assessee has invested Long Term Capital Gains arising from sale of shares towards construction of a new house within the prescribed period as mentioned in the Act. However, the contentions of the assessee has been rejected by the authorities below for the reason that the assessee has not placed on record the approved building plan from the Municipal Corporation. The assessee has admitted the fact that the new residential house has been constructed without the approval of the Municipal Corporation. The provisions of section 54F mandates the construction of a residential house, within the period specified. However, there is no condition that the building plan of the residential house constructed should be approved by the Municipal Corporation or any other competent authority. If any person constructs a house without approval of building plan, he will be raising construction at his own risk and cost. As far as for availing exemption u/s.54F, approval of building plan is not necessary. The approved building plan, certificate of occupation etc. are sought to substantiate the claim of new construction. In the present case, the fact that the assessee has raised new construction is evident from the interim order issued by the Corporation of Salem. - it is evident that the assessee has put up a new construction in place of old residential building, thus, the assessee is entitled to claim exemption u/s.54F. The impugned order is set aside - Decided in favour of assesse.
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2015 (1) TMI 48
Stay of demand - Disallowance u/s 40(a)(i) - disallowance u/s 14A - Held that:- there is a direct decision given by the Tribunal in assessee's own case for the assessment year 2006-07 deleting similar disallowance u/s 40(a)(i). The amendment to sec. 40(a)(i), brought to our notice by the ld. DR, became effective from the assessment year 2005-06 and as such was impliedly not absent for consideration from the tribunal at the time of deciding this issue in favour of the assessee for the assessment year 2006-07 - Respectfully following the judgment of the Hon'ble High Court and the fact that the Tribunal for the assessment year 2006-07 has deleted such disallowance made by the A.O. u/s 40(a)(i), we are of the considered opinion that, at least prima-facie, the assessee has made out a case for stay of demand on this issue. - Stay granted.
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2015 (1) TMI 47
Application for rectification of mistake u/s 254 - Disllowance u/s 40(a)(ia) - non-deduction of TDS on interest paid to Tata Capital Ltd. - Held that:- Section 254(2) provides that the Appellate Tribunal may with a view to rectify any mistake apparent from record amend any order passed by it under sub-section (1) and shall make such amendment. It would clarify that the assessee admitted before the AO that TDS has to be deducted on payment of interest and the assessee admitted applicability of provisions of section 40(a)(ia) of the IT Act in the matter. The assessee in miscellaneous application also stated that the aforesaid decision of Allahabad High Court [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] came to their knowledge subsequently. Therefore, the assessee has failed to point out any mistake apparent from the record of the Tribunal. When on the last date of hearing, the ld. counsel for the assessee was asked to explain above legal position and the case was adjourned, he did not appear on the date of hearing to explain anything on the issue. It, therefore, appears that the assessee and their counsel have nothing to say in the matter and are not interested in prosecuting the aforesaid miscellaneous application. The same is, therefore, liable to be dismissed. - Decided against assesse.
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2015 (1) TMI 46
Reopening of assessment - Computing the book profit u/s. 115JB - interest accrued but not paid by the assessee - Change of opinion - Held that:- it is evident that the reopening cannot be resorted to where the assessment has been framed under section 143(3) of the I.T. Act, after the expiry of 4 years unless the same is due to failure on the part of the assessee to disclose full or truly all material facts necessary for the assessment. - reopening in this case is clearly hit by the proviso to section 147. As already held by us as above, there is no failure on the part of the assessee to disclose fully and truly all material facts. Hence, the reopening in this case after 4 years under section 148 is not valid. Accordingly, the assessment framed in this case are hence, liable to be quashed and they are quashed as such. - reopening in this case is clearly hit by the proviso to section 147. As already held by us as above, there is no failure on the part of the assessee to disclose fully and truly all material facts. Hence, the reopening in this case after 4 years under section 148 is not valid. Accordingly, the assessment framed in this case are hence, liable to be quashed and they are quashed as such. - there is also change of opinion on the part of the AO which is also not permissible and the assessment on this account is also liable to be quashed. - assessment order passed in this case under re-assessment is void and hence, the same is quashed - Decided against Revenue.
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2015 (1) TMI 45
Netting off interest earned on deposit of margin money with the interest payable on term loans - CIT(A) allowed the relief following the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Sasan Power Ltd. vide [2012 (1) TMI 25 - DELHI HIGH COURT] and Shree Ram Honda Power Equipment – [2007 (1) TMI 86 - HIGH COURT, DELHI]. The Revenue has not disputed the applicability of the above decisions to the facts of the assessee’s case. From ground No.2 of the Revenue’s appeal, it is evident that the Revenue is disputing the matter in appeal because the Revenue has filed the SLP against the decision of Hon'ble Jurisdictional High Court in the case of Sasan Power Ltd. (supra) which is pending for adjudication. - Held that:- The decision of Hon'ble Jurisdictional High Court is binding upon all the authorities working within the jurisdiction of the said High Court. Therefore, the decision of Hon'ble Jurisdictional High Court in the case of Sasan Power Ltd. (supra) is binding on the ITAT as well as the CIT(A) in Delhi irrespective of the Revenue’s challenge to the above decision in SLP before the Hon’ble Apex Court. Unless and until the said decision is modified or reversed by the Hon'ble Jurisdictional High Court, the same would be binding on all the authorities within the jurisdiction of Hon'ble Delhi High Court. In view of the above, we find no infirmity in the order of learned CIT (A). - Decided against Revenue.
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Customs
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2015 (1) TMI 71
Power of Tribunal to extend stay beyond 365 days - Held that:- In view of the decision of this Court in case of Commissioner vs. Small Industries Development Bank of India (2014 (7) TMI 738 - GUJARAT HIGH COURT) it can be concluded that the Tribunal did not lack the power to extend stay beyond 365 days from the initial date of granting stay. However, if the stand of the revenue is that such extension was without recording reasons or without passing speaking order as required by the decision of this Court in case of Commissioner vs. Small Industries Development Bank of India (supra) it would be open for the Department to move a rectification application before the Tribunal. - Decided against Revenue.
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2015 (1) TMI 70
Demand of differential duty - Violation of principle of natural justice - Personal hearing not granted - Held that:- The foundation or the basic requirement of rule of law is that no adverse order is passed and visiting the party like the Petitioners with civil consequences, unless their defence is considered and the parties given an opportunity of hearing. In this case, the requirement of oral hearing has admittedly not been complied with. Merely because after the Petitioners responded the matter was pending for 14 months would not justify taking it up suddenly and disposing it of in the above manner. The authority could have fixed a date of hearing and given advance notice of the same to the Petitioners so as to enable the Petitioners to remain present and put forward its case effectively and properly. That has not been admittedly done. We do not see how a notice to recover the money could have been issued unless that was preceded by an order and in terms of the Act. That the proceedings are quasi-judicial and, therefore, a reasoned order was required to be passed is apparent. We do not find any such order and being passed after hearing the Petitioners. - In the event, the Petitioners deposit a sum of ₹ 5 Crores with the Respondents within a period of eight weeks from the date of receipt of a copy of this order, the Petitioners shall be given a personal hearing and thereafter a reasoned order shall be passed and duly communicated to the Petitioners - Decided conditionally in favour of assesse.
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2015 (1) TMI 69
Power of Tribunal to extend stay beyond 365 days - Held that:- In view of the decision of this Court in case of Commissioner vs. Small Industries Development Bank of India (2014 (7) TMI 738 - GUJARAT HIGH COURT) it can be concluded that the Tribunal did not lack the power to extend stay beyond 365 days from the initial date of granting stay. However, if the stand of the revenue is that such extension was without recording reasons or without passing speaking order as required by the decision of this Court in case of Commissioner vs. Small Industries Development Bank of India (supra) it would be open for the Department to move a rectification application before the Tribunal. - Decided against Revenue.
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2015 (1) TMI 68
Refund claim - Import of medical equipments - ad hoc exemption - Held that:- Respondents filed refund claim on the basis of ad hoc exemption Order dated 16-2-2010 which was already in existence at the time of import. However, the same was not brought to the notice of the Customs as the respondents were not aware of that order. From the ad hoc exemption order we find that the same was addressed to the concerned Customs Authorities. The ad hoc exemption order was in existence at the time of import of the goods. We find that the ratio of the decision in the case of Priya Blue Industries Ltd v. CC - [2004 (9) TMI 105 - SUPREME COURT OF INDIA] relied upon by the Revenue is not applicable on the facts of the present case as in the present case goods are assessed to duty irrespective of the ad hoc exemption Order. In view of the above, there is no infirmity in the impugned order - Decided against Revenue.
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2015 (1) TMI 67
Denial of refund claim - Unjust enrichment - excess payment of safeguard duty - Held that:- the argument of ld. A.R. that bar of unjust enrichment is applicable to the facts of the case is sustainable. - the appellant has been able to prove that the amount is recoverable from the customs and he is able to produce the Chartered Accountant certificate certifying that the amount of excess safeguard duty has not been formed the part of selling price of the goods. Therefore, the appellant has proved that the burden of duty is not passed on the buyer and the bar of unjust enrichment is not applicable to the case. - refund allowed - Decided in favour of assessee.
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2015 (1) TMI 66
Stay application - appeal dismissed for non compliance with pre deposit order - Held that:- At the time of consideration of the stay application, no opportunity of hearing was given to the appellant to defend their stay application but they were directed to make a pre-deposit of 50% of penalty for considering their appeal. In these circumstances, I hold that the learned Commissioner (Appeals) has violated the principles of natural justice therefore, the impugned order has no merit. Accordingly, the impugned order is set aside and the matter is remanded back to the Commissioner (Appeals) to first to decide the application for stay after giving a reasonable opportunity of hearing to the appellant to present their case and thereafter to decide the appeal on merits. - Decided in favour of assessee.
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Corporate Laws
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2015 (1) TMI 65
Award of interest – Held that:- Respondent tried to persuade to enhance the post-Award interest granted by the Arbitral Tribunal @ 10.5% to 18% p.a. in the light of provisions in Section 31(7)(b) of the Act – the contention cannot be accepted because the Arbitral Tribunal has already granted post-Award interest @ 10.5% - Only if the Award had not made such a direction, the statutory rate of interest @ 18% p.a. would have been payable from the date of the Award to the date of payment as per statutory provision - the order under appeal ought not to have approved grant of any pre-Award interest. Crane hire charges – Held that:- Clause 12 and other sub-clauses show that a high capacity crane (250 T) is included in the Tools and Plants which will be provided by BHEL to the respondent free of charge as per provisions of contract on availability but only upto “drum lifting of Unit II” as specified in clause 12.2.2 - There is no provision either in the Work Order or in the Agreement/Tender Document to entitle the respondent to claim that it was not obliged to pay the higher charges as fixed, subject to the conditions laid down by BHEL from time to time in respect of user of crane for Unit No. III - To the contrary, the extracts from the Tender Document contain a clear stipulation for recovery of such charges from the contractor’s bill/security deposit in one instalment - the learned Division Bench has not kept in mind the provisions in the Work Order and the Tender Document. BHEL was neither required to issue any notice for exercising its right to recover crane hire charges for Unit III, nor was it required to deduct such charges from the running bills of the respondent - the crane hire charges claimed by the appellant were wrongly disallowed by the order under appeal passed by the Division Bench – thus, the appellant is entitled for crane hire charges and, therefore, that amount needs to be deducted from the amount payable to the respondent under the Award on other heads – the appellant is not liable to pay any pre-Award interest and the interest @ 10.5% p.a. shall be payable by the appellant only from the date of Award till the date of payment on the Award amount now found payable, if any – Decided partly in favour of appellant.
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Service Tax
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2015 (1) TMI 91
Waiver of pre deposit - rent-a-cab operator services - contravention of the provisions of Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994 - Held that:- On a prima facie case taken by the appellant that for the previous year where the proceedings initiated by the Department was set aside by the Tribunal and that being the case for the subsequent period, the said benefit should enure to the appellant insofar as the pre-deposit is concerned. As against the earlier order of the Tribunal for the previous year, an appeal has been filed by the Department, in respect of another issue which is stated to be pending before this Court - In the light of the above, pending the above proceedings, the appellant is entitled to waiver of entire pre-deposit - Decided in favour of assessee.
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2015 (1) TMI 90
Demand of service tax on various services rendered by the appellants to Neyveli Lignite Corporation – Onus of classifying the services rendered - The main contention of all the learned advocates is that the Revenue failed to determine the amount of tax with the nature of activities and the classification of service. - Held that:- Assessees had obtained service tax registration for the services rendered by them to NLC. The demand of tax is for the period prior to registration. Hence, it is the duty of the Assessees to explain the activities in respect of the amounts in question received by them from NLC as they had entered into contract with the NLC for rendering services of various nature. In our opinion, while the Revenue placed the statement of NLC showing payment details received by the Assessees from NLC in respect of the various services rendered by them and this fact was not disputed by the Assessees and therefore, it would be sufficient for discharging the onus by the Revenue. So, it is shifted on the Assessee to explain the amounts in question in respect of the rendering of services. In our considered view, none of the case laws relied by the learned advocates would be applicable to the facts and circumstances of the instant case. - Revenue had already discharged the onus lies on them to establish the services rendered by the Assessee in the premises of NLC. It has also placed consideration received by the Assessee in respect of rendering of services to NLC. These facts were disputed by the Assessees. It is well settled that the facts admitted with the supporting documents need not to be proved. The only grievance of the Assessees are that the Revenue had not given the break-up of the amounts with reference to each service. We are of the view that when the Revenue has given all these facts, then the onus lies with the Assessee to explain the service rendered by them in respect of the amount received from NLC. Assessee should be given opportunity to defend their case before the adjudicating authority - Matter remanded back - Decided partly in favour of assesse.
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2015 (1) TMI 89
Waiver of pre deposit - Admissibility of Cenvat credit - inputs and capital goods and input services used in the erection of transmission towers and shelters spread all over the country - wilful mis-statement/suppression of facts - Held that:- period involved in this case is 2004 to 2008 which is prior to 2010 when the decision of Larger Bench of CESTAT in the case of Vandana Global (2009 (5) TMI 47 - CESTAT, NEW DELHI) was delivered. Thus the observation in the Show Cause Notice that the appellants ‘knew’ that taking the impugned credit of service tax was irregular hardly sustains. Indeed in a scenario where divergent decisions had been delivered by CESTAT, the extended period is held to be non-invokable by Kerala High Court in the case of Binani Zinc Vs. ACCE Cochin - [1994 (10) TMI 74 - HIGH COURT OF KERALA AT ERNAKULAM] and by CESTAT in the case of Laxmi Cement Vs. CCE, Jaipur-I - [2004 (5) TMI 362 - CESTAT, NEW DELHI] Further, in the case of Gopal Zarda Udyog Vs. CCE - 2005-TIOL-123--CEX-LB Supreme Court observed that mere failure or negligence on the part of the manufacturer does not attract the extended period. In the case of CCE Vs. Chemphar Drugs Liniments - [1989 (2) TMI 116 - SUPREME COURT OF INDIA], Supreme Court held that something positive other than mere failure on the assessee part or conscious withholding of information when assessee knew otherwise is required for invoking for extended period. As is evident from the foregoing the Show Cause Notice or the impugned order arguably scarcely brings out any negligence or failure on the part of the appellants. Appellants have been able to make out a good case in their favour on the ground that the demand is barred by limitation. Accordingly, we waive the pre-deposit and stay recovery of the adjudicated liabilities during pendency of the appeal - Stay granted.
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2015 (1) TMI 88
Waiver of pre deposit - commercial coaching or training service - appellant provides various tests for evaluation of a person’s English speaking understanding and writing abilities - Held that:- unlike in a regular coaching, there is no institute, there is no contact whatsoever alleged between the students and the teacher. Prima facie, we are of the view that these activities may not fall under the category of commercial training and coaching and therefore, we deem it appropriate to waive the pre-deposit of dues as per the impugned order and stay recovery thereof till disposal of the appeal. - Following decision of SUN MICROSYSTEMS (I) PVT. LTD. Versus COMMISSIONER (LTU), BANGALORE [2013 (12) TMI 867 - CESTAT BANGALORE]. Management or business consultant services - Held that:- there is no finding as to what exactly is the service received by the appellants for which they have made the payment. It was the appellant s claim that according to US GAAP requirements, when a company has subsidiaries elsewhere, the time spent for activities relating to subsidiaries has to be allocated and subsidiaries are also required to allocate payment for such time spent. He says, to fulfill this requirement, the appellant makes credit entry as per the requirement and simultaneously a debit entry is also made and in reality no payment is actually made. He drew our attention to the relevant ledger entries and we find this to be so even though it looks very strange that there is a credit and debit entry simultaneously at the same time for the same transaction and according to the appellants there is no payment made for the time of the company in US. Nevertheless, in our opinion this may not be very relevant in view of the fact that in the impugned order, we do not find any evidence or any basis for coming to the conclusion that appellants received management or business consultant service from the company in US. - there is absolutely no evidence relied upon to show that a taxable service has been rendered and there was a service provider and a receiver relationship. Therefore, prima facie, we find that the appellant has made out a case for waiver. - Stay granted.
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2015 (1) TMI 87
Application for intervention - Permission for appointment as necessary party - demand of tax in the case would affect their right and business liability - Held that:- present applicant had not approached the Adjudicating authority. Therefore, we do not find any force in the application filed by the applicant. applicant cannot be treated as aggrieved party under Section 86 of the Finance Act, 1994 merely on the ground that the assessee - the Port Department, raised a demand on them relating to demand of tax arising out of the impugned order against which the Port Department filed an appeal - Decided against Appellant.
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2015 (1) TMI 86
Waiver of pre-deposit - Commercial and Industrial Construction Service - Invocation of extended period of limitation - Held that:- Paryatak Bhavan owned and administered by the Andhra Pradesh Tourism Development Corporation does not appear to fall outside the purview of Commercial or Industrial Construction service primarily intended since there is admittedly a commercial activity of a hotel carried on in the premises. The material on record does not reveal that the activities in the Paryatak Bhavan are substantially for non-commercial or non-industrial purposes or are substantially for accommodating official/departmental establishments of the State. With regard to the extended period of limitation invoked for passing the adjudication order, the issue requires to be examined at the hearing of the appeal since much turns upon the surrounding facts and circumstances and as to whether petitioner’s failure to file Returns in the context of the self-assessment regime is founded on the basis of a genuine misconception of the petitioner’s liability or a mere uninformed or delusional assumption. - Partial stay grated.
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2015 (1) TMI 85
Waiver of pre deposit - Construction of commercial complex service - Non examination of material evidence - Held that:- Intention of the parties were to act distinctly on two different contracts and there is no material on record to suggest at this stage that there was wrongful arrangement made by the appellant to cause to prejudice to Revenue. Such intention is not apparent from record. Calling for pre-deposit at this stage shall cause undue hardship to the appellant. - Stay granted.
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2015 (1) TMI 84
CENVAT Credit - Belated revised returns filed - Imposition of interest and penalty - Held that:- There is an irregular availment of credit by the appellant which is admitted fact on record reflecting conduct of the appellant as stated above. But the record nowhere exhibits that Cenvat credit irregularly taken was utilised. Accordingly, it can be only held that credit was availed for which levy of interest is justified and there shall be no interference to the levy of interest by the Tribunal. Interest demand is thus confirmed. Insofar as the penalty under Rule 15(1) of CCR, 2004 is concerned, learned adjudicating authority imposed penalty of ₹ 62,04,375/- without following the doctrine of proportionality. Rule 15 of CCR, 2004 does not necessarily require levy of penalty to the extent of Cenvat credit disputed. Penalty is mandate of law to discourage recurrence of default in future. But dose of penalty depends on the facts and circumstances of the case. Following doctrine of proportionality, it is considered appropriate to impose penalty of ₹ 25,000 to reduce the litigation - Decided partly in favour of assessee.
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2015 (1) TMI 83
Waiver of pre deposit - Business Export Service - whether the nature of service provided by the appellant during the period 1-5-2006 to 30-5-2007 falls under taxing entry in Section 65(105)(zzzq) of the Finance Act, 1994 read with the meaning of the term ‘support service’ under Section 65(104c) of the said Act - Held that:- From the agreement it appears that the assessee is developing and supplying contents used by the telecommunication industry for value added services. The above mentioned activities squarely fall within the definition of “Development and Supply of Content” services and the assessee has rightly classified his service. In view of the fact that the said service is taxable under “Development and Supply of Content” service the explanation given by the Ministry in DOF No. 334/1/2007-TRU, dated 28-2-2007 covers the activities of the assessee and is rightly classifiable as “Business Support Services” for the period from 1-5-2006 till the effective date of the new service, viz. Development and Supply of Content” service. it is apparent that learned authority has examined the nature of the service provided by the appellant to the telecom operators. Revenue is able to bring its prima facie in its favour establishing nexus of the service provided and received which satisfies mandate of the aforesaid provisions of law. Therefore, there is no scope to grant waiver of pre-deposit fully. - Partial stay granted.
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2015 (1) TMI 82
Waiver of pre deposit - Errection, Commissioning or Installation service - Held that:- Prima facie, we satisfied that services provided by the petitioner in relation to its activities under an agreement entered into in respect of the ITR Balasore and the Jaipur Development Authority and the consequent assessment in this behalf are not sustainable since the adjudication order contains no satisfactory reasons for bringing the activities within the fold of the ‘taxable service’ under Section 65(39a) read with Section 65(105)(zzd). Insofar as the service provided by the petitioner in relation to the JDA is concerned, the petitioner has already remitted Service Tax in respect of the service component and claimed that the value of the goods sold by the petitioner to the JDA as part of the composite contract would be exigible to tax. Without any analysis of this contention, the adjudicating authority has brought the whole of the amounts received by the petitioner from JDA to tax. To this extent the order of the adjudicating authority is prima facie unsustainable. Insofar as the assessment in respect of the service provided by the petitioner to the Health and Family Welfare Department, Government of Kerala is concerned, we prima facie find no infirmity on this aspect except that despite the petitioner’s claim, the adjudicating authority failed to grant benefits of Notification No. 1/2006-S.T., dated 1-3-2006, issued by the Government of India whereby only 33% of the gross value should be taken as the taxable value of the service. - Partial stay granted.
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Central Excise
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2015 (1) TMI 79
Condonation of delay - Held that:- Admittedly, the order dated 22.02.2013 passed by the adjudicating authority was communicated to the petitioner shortly thereafter. More than one and half years have, thus, passed since the statutory period of limitation inclusive of the extendable period, had expired for filing appeal. No explanation has been rendered why not appeal was presented within a period of limitation or at least shortly thereafter. Merely stating that the petitioner has a good case on merits and that the authority passed an order, which to the petitioner appears to be irregular, would not permit us to ignore such gross delay when the statute provides for power of condonation to the appellate authority which has been circumscribed by the period beyond which such powers cannot be exercised - Decided against assessee.
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2015 (1) TMI 78
Benefit of the Notification 23/2003 - Benefit to imported resin, Tenax paste and Hardner - As per Notification, goods manufactured wholly from imported raw materials and cleared by an EOU to DTA are exempted from the duty of excise equal to that leviable on such goods manufactured and cleared by other DTA units - what will be the rate of duty that is payable by the first respondent - Held that:- it is apparent that the question as to the applicability of a notification or a circular which has a bearing on the determination of the rate of duty is a question which has a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment. In the circumstances, the present appeal which relates to the applicability of the above referred circular, relates directly to the determination of rate of duty for the purpose of assessment and as such, in the light of the provisions of Section 35G read with Section 35L of the Act, this Court has no jurisdiction to entertain the appeal. - Following decision of Commissioner of Central Excise v. JBF Industries Ltd. [2010 (12) TMI 437 - GUJARAT HIGH COURT] - appeal is not maintainable and accordingly, the same is dismissed giving liberty to the appellant to pursue the matter before the appropriate forum - Decided against Revenue.
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2015 (1) TMI 77
Validity of Tribunal's order - Whether the first respondent is justified in vacating the demand of duty and penalty on the ground of limitation and allowed the appeal - Marketability of sugar syrup - Bar of limitation - Held that:- Tribunal, to come to the above conclusion, was guided by the fact that the Department has knowledge about the product as early as 1994 when all the material facts were placed before the Department. The Tribunal relied upon the letter of the assessee dated 08.9.1995, which clearly shows that the Department was aware that sugar syrup was an intermediate product emerged in the process of manufacture of the final product. - there is substantial merit in the reasoning of the Tribunal and there is no case of suppression of fact for invoking the extended period of limitation under proviso to Section 11A(1) of the Central Excise Act. The issue relating to limitation is distinct and separate and there cannot be a demand if there is a clear finding that there is no case of suppression falling under proviso to Section 11A(1). We, therefore, confirm the order of the Tribunal answering the questions of law in favour of the assessee and against the Revenue. - Decided against Revenue.
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2015 (1) TMI 76
Penalty u/s 11AC - Whether an option of paying 25% of penalty imposed on the appellant under Section 11AC of the Central Excise Act was required to be extended to the appellant and whether the orders of the tribunal declining to extend such option are sustainable in the facts and circumstances of this case - Held that:- Provision of reduced penalty aims at reduction in the litigation and ensures that an assessee who accepts the duty demand and pays the same with interest within stipulated time would be granted such a benefit of reduced penalty. However, this Court has taken the view in the past, considering the departmental circulars issued from time to time, that such option should be offered. - Assessee would have an option to pay up the entire duty with interest within 30 days, upon which he would avail the benefit of duty, interest and reduced 1/4th penalty. The question is answered accordingly. Judgment of the tribunal is reversed to that extent. If the appellant deposits before the department unconditionally the entire amount of unpaid duty with interest and 1/4th penalty, the penalty under Section 11 AC of the Central Excise Act shall be reduced to such extent - Decided partly in favour of assesse.
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2015 (1) TMI 75
Waiver of pre deposit - penalty imposed under Rule 18 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 read with Section 11AC of CEA, 1944 - Whether actual production of Chewing Tobacco be considered or the deemed production as prescribed for levy of duty under Section 3A of CEA, 1944 read with Chewing Tobacco Rules, 2010 and relevant Notification 16/2010-C.E., dated 27-2-2010, be considered - Held that:- without analyzing the relevant rules, prima facie, ongoing through the circular dated 24-1-2014 issued by the Board, we are of the opinion that for determination of capacity of production and the duty liability, the procedure laid down under the said Chewing Tobacco Rules, 2010 would be relevant. In other words it is the deemed production rather than the actual production of the goods be relevant for calculation of duty. Thus, the applicant could able to make out a prima facie case for waiver of dues adjudged against them. Consequently, all dues adjudged is waived and its recovery stayed during the pendency of the appeal - Stay granted.
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2015 (1) TMI 74
Benefit of proviso to section 11AC - Duty paid before issuance of SCN - Held that:- It is not disputed that the appellants had deposited an amount of ₹ 66 lakhs even prior to issuance of show cause notice. The said amount covers the entire duty amount confirmed against the appellant and interest as also penalty of 25% of duty amount. In terms of first proviso to Section 11AC, if the duty determined and interest is paid within 30 days from the date of communication of the order of the Central Excise officers determining such duty, the amount of penalty liable to be paid by such persons under this section shall be 25% of the duty so determined. Inasmuch as the appellant in the present case has deposited the duty prior to confirmation of the same in fact prior to issuance of show cause notice, the said deposits have to be held as satisfying the first proviso to Section 11AC in which case the penalty would get reduced to 25%. Though the appellant have relied upon various decisions of different High Courts in support of his contention, I feel no need to refer to same inasmuch the law itself provides reduction of penalty in the said scenario. Accordingly, penalty on M/s. Intex Technologies is being reduced to 25%. Demand confirmed against them along with interest is however upheld as not contested - No separate penalty to be imposed on the Managing Director of the company - Decided partly in favour of assesse.
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2015 (1) TMI 73
Cenvat credit - Non movement of goods - Statement of truck owner recorded after 3 years - Held that:- statement of Shri Bhoop Singh is in the nature of third party statement and is required to be proved by evidence, I find that the said statement was recorded after a gap of around 3 years. It is not only impractical but also impossible for a person to remember as to what happened three years back. Appellants have brought on record all the documentary evidence including the GRs showing that the goods have been transported from the supplier’s end to their end. Not only that the appellants have also produced on record evidence in the shape of form VAT-D3 prescribed under the proviso to Rule 56(1)(4) and (5) and Haryana Authority Added Tax Act, 2003 showing the despatch of the goods by M/s. International Metal Corpn. Revenue has also not shown any alternative source of acquisition. - no reason to deny the credit based upon the sole statement of owner of the truck recorded after a period of three years, especially when the appellants have produced sufficient evidence on record to show the movement of the goods. In view of the above, the impugned order is set aside - Decided in favour of assesse.
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2015 (1) TMI 72
CENVAT Credit - Revenue’s allegation was that the said two dealers have issued only cenvatable invoices without the corresponding supply of the goods to the manufacturing units - Held that:- all manufacturing units in their statement have accepted to have received the material in question and payments for the same had been made by crossed cheques. There is virtually no evidence of any flow back of money from the dealers to the manufacturers, in which case I agree with the appellate authority that the Revenue’s allegation cannot be upheld. - period involved in the present appeal is after 1-4-2000 to July, 2000. The manufacturing units were also receiving the raw material from the said dealer being prior to 1-4-2000, when Section 3A was in operation and no Cenvat credit was availed by the manufacturing units in respect of the material so received by them from the said dealers. As such, the appellate authority has correctly observed that the allegation of the Revenue after 1-4-2000 that they only received cenvatable invoices without corresponding receipt of the inputs is only assumptive. - Revenue has not shown any alternate source of procurement of raw material. Admittedly the manufacturing units have consumed the raw material and have shown the production of their final product, which was cleared on payment of duty. If, according to the Revenue, they have not received the raw material from the said two registered dealers, there is no answer to the question as to from where manufacturing unit have procured the raw material. - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (1) TMI 81
Constitutional validity of Notification - retrospective change in the meaning of eligible industrial unit" regarding "unit in pipeline" - change in incentive scheme – Notification ultra vires of Article 14 of Constitution of India or not –Held that:- Power to enact rules shall include power to enact them retrospectively from the date on which policy for incentives to industry is announced by the State Government and for this purpose, rules 28A, B, C of the Rules shall have retrospective effect from April 1, 1988, August 1, 1997 and November 15, 1999, respectively - Thus, a rule, notified to achieve objects of the policy granting incentives to industry, can be notified retrospectively, thereby negating the argument raised by counsel for the petitioner that the Act does not empower amendment of rules, with retrospective effect - thus, challenge to the retrospectivity of definition of "units in pipeline", on the ground of want of statutory sanction is rejected. Notification passed by High Level Screening Committee, constituted under rule 28C of the Haryana General Sales Tax Rules, 1975 declining to treat the petitioner as a "unit in pipeline" – Whether the definition of "units in pipeline" takes away any right that may have vested in the petitioner under rule 28, before introduction of sub-clause (o) – Held that:- The definition of "eligible industrial unit", as enacted before the amendment required an industrial unit, including "units in pipeline" to be registered and holding a registration certificate - The amendment enacted by sub-rule (o) merely reiterates this part of the original provision and says nothing more - The petitioner, was not registered with any Department of the Government before April 30, 2000 - the petitioner applied for registration with the Department of Industries pursuant to an application made on May 17, 2000 and was granted a provisional registration certificate on May 24, 2000, i.e., after April 30, 2000, the cut-off date - The petitioner applied for registration as a unit on May 17, 2000 and was registered on May 24, 2000, thereby failing to fulfil the first condition. The petitioner purchased land on April 3, 1996, obtained a certificate for change of land use on August 18, 1997 but did not take any steps to set up an industrial unit from August 18, 1997 to April 30, 2000 - all formalities relating to setting up of the unit, supply of machinery, etc., were set into motion after the cutoff date of April 30, 2000 - The mere fact that the petitioner may have gone into commercial production on March 30, 2002 and made its first sale on March 30, 2002, would not confer any benefit on the petitioner as it does not fall within the definition of "units in pipeline" - The right to claim exemption as "units in pipeline" as on April 30, 2000, required the petitioner to comply with the four conditions set out in the definition of "units in pipeline" - The power to define "units in pipeline" with retrospective effect having been affirmed and as the petitioner as per his own showing not being registered with any Department as on April 30, 2000, the notification cannot be said to operate to the prejudice of the petitioner - The order passed by the Higher Level Screening Committee is in consonance with the facts of the case as the petitioner failed to establish its credential as a "unit in pipeline" as on April 30, 2000 - the petitioner is not entitled to be treated as a "unit in pipeline" – Decided against petitioner.
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2015 (1) TMI 80
Rejection of application for registration u/s 6(5) of the Kerala Value Added Tax Act, 2003 as a "presumptive dealer" with liability to pay tax at lesser rate and the assessment finalised u/s 25(1) of the Kerala Value Added Tax Act – Satisfaction of liability u/s 6(1) or not – Held that:- The Commissioner of Commercial Taxes had issued a Circular No. 5 of 2005 dated April 1, 2005, explaining the scope of provision, wherein it was observed that the rate of presumptive tax was "one per cent" of the taxable turnover of the dealer - The amendment was brought about on August 28, 2005, giving retrospective effect from April 1, 2005 - Section 6(5) as amended with retrospective effect from April 1, 2005, the rate of tax payable by an eligible "presumptive tax dealer" has been brought down to "0.5 per cent" of the turnover of the sales of the taxable goods. There was a total stock of ₹ 13.45 lakhs, which however was sought to be explained by the petitioner stating that it was only in respect of "maize", which was purchased for feeding the petitioner's own poultry and not for sale; adding that it was not a taxable commodity - the commodity is the same and the rate of tax is also the same, as it is 12.5 per cent - The benefit of lesser rate of tax available to a presumptive tax dealer under section 6(5) is carved out by way of exemption in respect of such dealers, who satisfy the different parameters as prescribed under the statute - It is for the law making authorities to prescribe various conditions so as to extend the benefit of exemption, by way of reduced rate of tax and incorporation of such provisions with retrospective effect cannot be misunderstood as enhancement of any rate of tax, by virtue of any amendment - The idea and understanding of the petitioner is thoroughly wrong and misconceived. Constitutional validity of section 6(5) with regard to the retrospective amendment made on August 28, 2005 w.e.f. April 1, 2005 – Held that:- There is absolutely no challenge or discrimination with regard to the rate of tax in respect of broiler chicken, which is 12.5 per cent, whether it is imported from outside the State or procured within the State - However, in respect of certain specified class of dealers, who satisfy the conditions stipulated under section 6(5) and having a place lower in the hierarchy with maximum turnover of less than ₹ 50 lakhs, are given the benefit of option of paying tax as a "presumptive tax dealer" on the total sales turnover at the prescribed rate, subject to satisfaction of the requirements - This, in no way, violates the mandate under article 301 or 304(a) of the Constitution of India - That apart, when the petitioner raises a blanket challenge against section 6(5) referring to the discrimination to the imported commodity and if the said provision is to go on this count, the benefit of option also goes and the petitioner cannot be heard to say that he is entitled to have the benefit of section 6(5) as a presumptive tax dealer - The challenge is quite wrong and unfounded. The liability to satisfy tax is not depending upon the right or chance of the dealer to have it passed on to the purchaser - Tax is payable at the instance of sale and only by virtue of the statutory prescription that the dealers have been permitted to pass on the liability to buyers, which in no case can be a "pre-condition" to have mulcted with the tax liability - the tax paid by the petitioner u/s 6(5) was not in full conformity with the statutory prescription and as such, the option exercised and satisfaction of the requirements could be said as incomplete. By virtue of the specific exclusion of "first taxable sellers" from the scheme of payment of presumptive tax under "clause (d)" of section 6(5), the lower authorities including the Tribunal have rightly rejected the claim of the petitioners - section 6(5)(d) was very much there in existence, right from the beginning when the VAT Act was brought into force with effect from April 1, 2005, independent of any amendment subsequently brought about on August 28, 2005 (with retrospective effect from April 1, 2005) – as the petitioner is not entitled to have the benefit of "presumptive tax" under section 6(5) (even by virtue of the unamended provision itself), the petitioner is not entitled to have any relief in this writ petition – decided against petitioner.
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2015 (1) TMI 62
Nature of currency counting machine - exemption from entry tax - Whether the currency counting machine is a machine or electronic goods – Held that:- The assessee has classified currency counting machine as “machinery” under Entry 1(iii)(a) of Part ‘M’ of Second Schedule to Karnataka Sales Tax Act, 1957 - in order to construe a particular goods as machinery, it is not the requirement of the law that there should be a manufacturing activity conducted with the aid of the said goods - even it is not necessary that such a machine should be operated with an electric energy or any other type of energy - even natural force or human or animal energy could be used to perform the work for which the said machine is invented - The essence of a machine is, it is a mechanical device consisting of a planned and an organized arrangement, to perform a work which otherwise a man would have performed - Such a work is done in a more convenient way and may be faster than what a human being could do - It is a case of substitution of manual work by a machine - Such work may result in a new product or may not result in a new product at all and therefore, the said finding recorded by the appellate authority is unsustainable and is contrary to the well settled legal principles over a period. If two views are possible and if the appellate authority or the assessing authority has adopted a particular view, it is not open to the Revisional Authority to substitute his reasoning and interfere with the orders - when it cannot be said that it is an electronic goods and the test prescribed by the appellate authority for coming to such conclusion is ex facie illegal, it cannot be said that two views are possible - the finding recorded by the assessing authority is erroneous - It is not the case of two views being possible - the Revisional Authority was justified in interfering with the order of the appellate authority and restoring the order of the assessing authority. Whether a revisional authority in exercise of power u/s 15(2) of the Act could interfere with the order of penalty, on the ground that the maximum penalty as prescribed under law is imposed – Held that:- The imposition of penalty is not automatic - this is not a case where the assessee has not filed his returns nor it was a case where returns had been filed but the turnover in respect of a particular goods was not disclosed in the returns - having regard to the dispute between the parties, the assessing authority was justified in not imposing the maximum penalty for non-disclosure of the tax - he was justified in imposing ₹ 10,000/- the Revisional Authority was not justified in interfering with the order on the ground that maximum penalty is not imposed - as the suo motu powers can be exercised by the Revisional Authority only when the order sought to be revised is prejudical to the interest of Revenue - the portion of the order of the Revisional Authority setting aside the penalty and remanding the matter to the assessing authority to re-impose the penalty is set aside – the order of the assessing authority is restored in its entirety - Decided partly in favour of revisionist assessee.
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