Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 17, 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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Additional depreciation u/s. 32(iia) - the work of embroidery carried on by the assessee would fall within the ambit of definition of "manufacture" as envisaged u/s 2(29BA) - Additional depreciation allowed - HC
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When the assessee has opted to take advantage of investment allowance, rather than deduction of the whole amount of actual cost by way of depreciation, he is now estopped from contending otherwise - HC
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Unexplained cash - Addition u/s 69A - same cannot be added in the hands of the assessee company, because the amount has not been found from the premises of the assessee company but from the residence of the Directors and the family members - AT
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Penalty u/s.271(1)(c) - non receipt of export proceeds - , the approval having not been sought, there is no basis to even expect an approval - assessee’s explanation is both false and not bona fide and is guilty of a dishonest conduct - levy of penalty @ 120% confirmed - AT
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Addition u/s 69 - AO has himself recorded in his order that assessee has disclosed all the bank accounts in his regular books of account and only because of the reason that some of the entries would not tally at the time of hearing resulted into such additions - No addition could be made - AT
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Penalty under section 271(1)(c) - assessee has failed to handle the donations received by them in appropriate manner - assessee offered the very same amount for taxation - CIT(A) is not correct in upholding the penalty - AT
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If the object of the legislature is to tax the gains arising on transfer of a capital asset acquired under a gift or will or inheritance by including the period for which the said asset was held by the previous owner in determining the period for which the said asset was held by the assessee, then that object cannot be defeated by excluding the period for which the said asset was held by the previous owner while determining the indexed cost of acquisition of that asset to the assessee. - AT
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Penalty u/s 271(1)( c) - we are unable to see any malafide or any deliberate act on the part of the assessee and without any hesitation, we hold that the assessee cannot be held guilty of furnishing of inaccurate particulars of its income, specially when the assessee filed a revised return immediately after noticing the mistake - AT
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Income from House property or business income - allow the sister concern to use of premises - The assessee was able to reduce its losses and get better financial results. Thus the intention of the assessee was for the purpose of business and not to earn rental income - claim of depreciation also allowed - AT
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Claim u/s 10(5B) denied - the claim of exemption u/s 10(5B) cannot be entertained because the appellant has to fulfill all the conditions required by section 10(5B) to qualify as a technician and he has surely failed to qualify for the same on two important conditions- having worked as a technician in the past and having been in employment as a technician with the Indian Company - AT
Customs
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Claim of interest of refund of SAD - refund was granted beyond period of three months - Section 27A - Department was not justified in denying interest to Respondent on the delayed refund of SAD - HC
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Demand of Duty – Textile Machinery imported - Liability to pay duty arises from bond executed by assessee with Department obliging to abide by the conditions in Notification - Section 142 inserted by Act No. 23 of 2004 holds that successor of defaulter would also be held liable; M/s Vampex are also liable to pay the dues - AT
Service Tax
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Demand of tax made from the Respondents without issuing SCN as required under Section 73. - Letter issued was more of an advisory nature and demand of money in the name of tax is in violation - Appeal dismissed being devoid of merits against the Revenue. - HC
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Liability of Service Tax on lottery tickets - Petitioners in buying and selling the lottery tickets is not rendering service to the State and, therefore, their activity does not fall within the meaning of 'service' - it would be ultra vires the Finance Act, 1994 and is accordingly struck down - HC
Central Excise
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Denial of rebate claim - Bar of limitation - Export of goods - Petitioner's claim for refund would be governed by rule 18 of the Central Excise Rules, 2002 read with the notification issued thereunder. The said notification does not provide any period of limitation for a claim for rebate. The rejection of the petitioner's claim for rebate, therefore, is not well founded. - HC
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Annual capacity of production - manufacture of 'Pan Masala' - the machine purchased by the assessee is a single track machine, the duty payable by the assessee on the basis of a single track machine, should have been levied. The Commissioner fell in error in treating the said machine as a two track machine - HC
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Fraudulent CENVAT Credit - allegation that inputs imported in certain containers were diverted elsewhere instead of taking these inputs to their factory and only Cenvat Credit was taken on the basis of documents/ Bills of entry without receipt of inputs - Revenue failed to prove its case - AT
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Valuation - Determination of assessable value - It is immaterial that those engineering and design charges were recovered from Triveni Engg. Pvt. Ltd. initially for the said purpose and later on as damages - charges paid for engineering, designing and various equipment are includible - AT
VAT
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Denial of refund claim - Far from being unjustly enriched the appellant in this manner is actually out of the pocket to the extent of the amount paid as a condition precedent to the maintainability of the appeal - refund allowed - HC
Case Laws:
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Income Tax
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2015 (10) TMI 1093
Reopening of assessment - determination of the capital gains in place of the loss - Held that:- The revised return of income filed on 17/11/2000 wherein the appellant had specifically mentioned that the profit and loss account and the balance sheet was enclosed to the original return of income filed on 22/09/1997. The Assessing Officer had on 20/11/2000 called upon the appellant to produce the balance sheet and profit and loss account for the assessment year 1996-97 as the same were not attached to the return of income filed on 17/11/2000. In case the Revenue had in its possession the 1997 Return of Income then it would have had relied upon the annexures filed with the original return of income and no occasion to call for it from the appellant could arise. The absence of record is prima facie evident from the letter dated 20/11/2000 addressed by the Assessing Officer to the appellant merely 7 days after the issuing of the impugned notice. This aspect has not at all been considered by the authorities under the Act, including the Tribunal. The impugned order of the Tribunal while rejecting the appellant's plea of the notice being without jurisdiction has not dealt with the appellant's above contention but merely upheld the order of the CIT(A). In view of the above the impugned order of the Tribunal holding that the notice dated 13/11/2000 was issued under Section 148 of the Act was within jurisdiction has to be set aside. However, the same is being restored to the Tribunal to consider afresh the contentions of the appellant as well as the Revenue with regard to the existence of the original return of income filed on 22/09/1997 in the record of the Assessing Officer at the time when the notice dated 13/11/2000 was issued. It is admitted position that there is no difference in the amount of income returned in the return of income filed on 17/11/2000 and the one filed originally on 22/09/1997. The appellant in fact need not have filed a return of income and as such could have relied only upon its earlier return of income.
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2015 (10) TMI 1092
Applicability of section 50C - profit or gains arising from a transfer of capital asset - Held that:- Explanation 2 to Section 2(47) of the Act was added by Finance Act, 2012 with retrospective effect on 1.4.1962 and, consequently, the said provision would be applicable. The said explanation clearly provides that transfer of an asset includes disposing of or parting with an asset by way of an agreement. In the light of the aforesaid provision, it is apparently clear that the moment an agreement to sell is executed between the parties and part consideration is received, the transfer for the purpose of Section 50C of the Act takes places and computation under Section 48 of the Act will start accordingly, for the purpose of calculating the capital gains under Section 45 of the Act. From the aforesaid, it is apparently clear that the transfer of the property took place in the year 2001 when the provision of Section 50C of the Act was not in existence. Consequently, the Assessing Officer was not justified in making the reassessment and computing the capital gains by invoking the provision of Section 50C of the Act, which was clearly not applicable in the assessees' case. - Decided in favour of assessee.
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2015 (10) TMI 1091
Disallowance of additional depreciation u/s. 32(iia) on embroidery machine - use of the input and the output remains the same even after doing the embroidery work - whether the embroidery work carried out by the assessee on synthetic fabrics would amount to "manufacture" or "production"? - ITAT allowed the claim - Held that:- In the present case, the assessee carries on embroidery work on synthetic fabrics. When the assessee carries on embroidery work on the synthetic fabric, such synthetic fabric is converted into a new article, viz. embroidered synthetic fabric which is commercially known as another article. The nature of the article produced would depend upon the kind of embroidery carried out on the synthetic cloth. The ultimate article produced may be an embroidered saree or an embroidered dress material or some other article. Therefore, there would be a transformation in the basic synthetic fabric on which embroidery has been carried out resulting into a new article which is commercially known as another article. Under the circumstances, the work of embroidery carried on by the assessee would fall within the ambit of definition of "manufacture" as envisaged under section 2(29BA) of the Act. The Tribunal, therefore, did not commit any legal error in holding that the activity carried on by the assessee falls within the ambit of manufacturing activity and thereby the assessee is entitled to avail of the additional depreciation under section 32(1)(iia) of the Act in relation to the machinery installed by it.- Decided in favour of assessee.
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2015 (10) TMI 1090
Depreciation claim waived - assessee had taken the benefit of investment allowance under Section 32A - whether the assessing authority was entitled to compute the income by allowing depreciation even though the assessee has not made any claim for such depreciation? - Held that:- When the claim for depreciation was once waived by the assessee and he chose to avail himself of the benefit of investment allowance under Section 32A of the Income Tax Act, he could not at a subsequent stage revive the claim for depreciation during the assessment year 1984-85. Moreover, there is a statutory bar contained in Section 32A, which provides that no deduction shall be allowed under Section 32A in respect of “any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year. When the assessee has opted to take advantage of investment allowance, rather than deduction of the whole amount of actual cost by way of depreciation, he is now estopped from contending otherwise. - Decided against assessee. Assessment U/s. 41(2) - Held that:- The order under challenge passed by the learned Tribunal holding that in the absence of any benefit having been availed by the asessee on account of depreciation, the question of any assessment under Section 41(2) of the Income Tax Act could not arise is affirmed.
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2015 (10) TMI 1089
Disallowance of claim of assessee of interest u/s.36(1)(iii) - Held that:- Tribunal had observed that though the Assessing Officer had specifically requested the assessee to file necessary evidence in support of the claim that the premises was used for the purpose of business, the assessee could not submit any evidence to prove that the said premises was used for its business purpose. We further find that on a specific query by the Tribunal the learned counsel had stated that he was unable to submit insurance policy against fire of the building and trade licence to show that the premises was used for business purpose. Therefore, as facts were dealt with in detail by the Tribunal and no cogent evidence could be adduced by the assessee in support of its claim, in view of judgment Tirupati Trading Co. (1999 (8) TMI 19 - CALCUTTA High Court), the order of the Tribunal requires no interference. - Decided against assessee.
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2015 (10) TMI 1088
Refund application after the expiry of the period - condonation of delay - Held that:- When Exts.P14 and P15 applications were filed by the assessee, what was required to be examined was whether, to avoid genuine hardship to the assessee, it was necessary to condone the delay in making the application for refund. Ext.P16 order does not show that the Commissioner has examined Exts.P14 and P15 applications in the manner as required under Section 119(2)(b). On the other hand, Commissioner has discussed on the merits of the application and held that the delay has not been properly explained and that when returns are filed in response to notices issued under Section 148, assessee will not be entitled to claim refund of advance tax paid. In our view, such an order does not reflect a proper exercise of power under Section 119(2)(b) and for that reason, Ext.P16 is unsustainable. In this case, according to us, when Ext.P16 order was passed in an improper manner, the learned Single Judge ought to have directed reconsideration of Exts.P14 and P15 instead of condoning the delay by himself. Therefore, while we are inclined to agree with the learned Single Judge on the unsustainability of Exts.P13 and P16 orders, according to us, the proper consequential order to be passed is to direct reconsideration of Exts.P14 and P15 with a direction to pass fresh orders in the matter.
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2015 (10) TMI 1087
Reopening of assessment - Held that:- This court is of the considered view that the petitioner could be directed to file necessary returns and thereafter claim necessary particulars from the assessing authority and on receipt of such reasoning for reassessment, the petitioner shall redress his grievance in accordance with law. Writ petition is disposed of and the petitioner is directed to file necessary returns and thereafter claim necessary particulars from the assessing authority giving adequate reasons within the reasonable time. Upon receipt of such reasoning the petitioner shall file necessary objections and thereafter the assessing authority shall proceed in accordance with law and pass appropriate orders of assessment.
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2015 (10) TMI 1086
Deduction under Section 10B - exclusion of duty draw back in the form of DEPB benefits - The issue in question in this appeal which pertains to the Assessment Year 2009-10- Held that:- As per Section 28, clause (iii-c), any duty of customs or excise repaid or repayable as drawback to a person against exports under Customs and Central Excise Duties Draw Back Rules, 1971 is deemed to be profits and gains of business or profession. The said provision has to be given full effect to and this means and implies that the duty draw back or duty benefits would be deemed to be a part of the business income. Thus, will be treated as profit derived from business of the undertaking. These cannot be excluded. Even otherwise, when we apply Sub-section (4) to Section 10B, the entire amount received by way of duty draw back would not become eligible for deduction/exemption. The amount quantified as per the formula would be eligible and qualify for deduction/exemption. The position is somewhat akin or close to Section 80HHC of the Act, which also prescribes a formula for computation of deduction in respect of exports.
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2015 (10) TMI 1085
Transfer pricing adjustment - selection of comparable - Held that:- Aftek Infosys Ltd. - TPO had included this company on account of it dealing in software activity after pointing out that assessee had not been able to establish how the company was functionally different. Thus, it is evident that the functional differences, as pointed out by ld. counsel for the assessee in synopsis, have not been critically examined with reference to the annual report and, therefore, we restore this matter to the file of AO to find out the factual aspects on this count and, if, the company is found to be only a software product company, then the same cannot be compared with the assessee company, which is primarily a designing and developing software on contract basis for its AE. This issue is allowed for statistical purposes. Infosys Technologies Ltd. - because of the diversified functions performed by Infosys Technologies Ltd., and also on account of ownership of branded/ proprietary products, it cannot be compared with the assessee because difference in functions performed, asset base and risk assumed by both the companies. Satyam Computers Services Ltd.- we are in agreement with ld. counsel for the assessee that due to unreliable financial data of Satyam Computers Services Ltd., which is in public domain now, the company cannot be considered as a comparable to the assessee Xansa India Ltd.- no plea was taken before ld. CIT(A) on the basis of RPT, but now this objection has been taken as annual report is available and, therefore, the matter may be restored back to the file of ld. CIT(A) in order to arrive at proper conclusion. Geodesic Information Systems Ltd. - assessee has pointed out that this company as engaged in development of software products and operated as full fledged risk taking entrepreneur having IPR and trade mark. These aspects were not considered by ld. TPO, thus the issues raised before us needs to be examined by ld. TPO because assessee itself had taken into consideration this comparable. Ecosoft Technologies Ltd. - this company was rejected since data for current year was not available. As now the current year’s data is available, so matter may be restored back to the file of ld. CIT(A). Compudyne Winfosystems Ltd -CIT(A) has not considered the segmental results of the software development unit. The assessee has filed the annual report of this comparable for FY 2002-03 in the paper book, wherein we find that in the entertainment division and analysis specific segmental details regarding software development, revenue earning and segment-wise results have been given. Therefore, the observation of ld. CIT(A) is not correct. We, accordingly, restore this issue to the file of AO for fresh adjudication Orient Information Technology Ltd. -the financial details as mentioned in the TPO’s order are available in the annual report filed by assessee and, therefore, the matter needs to be examined afresh by ld. CIT(A). Accordingly, we set aside this issue to the file of CIT(A) for decision afresh. Adjustment on account of risk environment - CIT(A) held that TPO had committed an error by allowing downward adjustment of 20% in an ad hoc fashion - Held that:- No interference is called for in the order of ld. CIT(A) on this count because assessee failed to propose the necessary adjustment by filing a scientific methodology during TP proceedings or during appellate proceedings. The onus for quantification was on assessee on the risk assumed by comparables vis a vis tested party. Accordingly, this ground is rejected. Exemption u/s 10A - Held that:- t it is not disputed that PR, supply chain, CT head and SMG were incidental services to IT enabled services and, therefore in view of Notification no. 890(E) dated 26-9-2000, these services being part of back office operation and support services are eligible to be considered as part of export turnover. In the result, this ground is allowed. Disallowance of leave encashment - Held that:- In view of clause (f) of section 43B, assessee’s claim will be disallowed as the same had actually not been paid by the assessee. The assessee had merely made a provision for payment of leave encashment. - Decided against assessee. Disallowance of foreign exchange fluctuation loss - Held that:- In case of the revenue items falling under section 37(1), para 9 of AS-11, which deals with recognition of exchange differences, needs to be considered. Under this para, exchange differences arising on foreign currency transactions have to be recognized as income or as expense in the period in which they arise. The important point to be noted is that AS-11 stipulates effect of changes in exchange rate vis-avis monetary items denominated in a foreign currency to be taken into account for giving accounting treatment on the balance sheet date. Therefore, an enterprise has to report the outstanding liability relating to import of raw materials using closing rate of exchange. Any difference, loss or gain arising on conversion of the said liability at the closing rate, should be recognized in the profit and loss account for the reporting period. See CIT Vs. Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] - Decided in favour of assessee.
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2015 (10) TMI 1084
Rejection of books of accounts u/s 145(3) - estimation of profit of the business - Held that:- Books of accounts along with the register, which gives the entire details of day-to-day purchase, production/consumption and sales have been not only maintained but were also filed before the AO as well as CIT(A). Another reason for justifying the application of estimation of GP rate by the Tribunal, was that the assessee has failed to submit detail in respect of sale of milk to the tune of ₹ 12,54,254/-. Here, in this year, there is no such material that assessee has failed to submit any details in support of sale of milk. On the contrary, the assessee had stated before the AO as well as CIT(A) that bulk sale have been made through account payee cheques and secondly, day-to-day sales have been recorded, were also produced before the AO. No specific defect or discrepancy has been highlighted by the AO nor any enquiry has been made. Further, we have also called for the records and books of account of the assessee to see the nature of entry and recording of transactions. Therefore, under such facts and circumstances prevailing in this year, the finding of the Tribunal in the earlier years will not apply in the impugned assessment year. Otherwise also, if the assessee's books of accounts were not found properly maintained in the earlier years then, it cannot be ipso facto presumed that the books of accounts are defective or not properly maintained in this year also. The principles of res judicata will not apply in such matters. Had it been so, then in assessee's own case, for the assessment years 2009-10 & 2010-11, the department has not only accepted the books of account and book result but also its income from sale of milk. If in the subsequent year, the factum of sale of milk have been accepted then with the same logic, the finding of the assessment year 2006-07 and 2007-08 that there is no sale of milk, cannot be held to be applicable in the impugned assessment year, i.e. A.Y. 2008-09. Each year have to be examined independently based on facts and materials on record, because, the matter pertaining to rejection of books of accounts are factual issues, which need to be examined every year. Thus, in view of our above finding, we hold that books of account and the book result, as shown by the assessee should be accepted and consequentially the estimation of the undisclosed income of ₹ 8,30,742/-, as submitted by the CIT(A) is deleted. Unexplained cash - Addition u/s 69A - AO noted that during the course of search action at the residence of the Director Jasvinder Bajaj, a cash of ₹ 8,34,000/- were found - Held that:- Cash was found from the residence of the Director Jasvinder Bajaj, wherein a sum of ₹ 7,34,000/- was found and ₹ 39,500/- was found from another Director, Shri Swaranjit Bajaj. At the time of search, it was claimed that there was cash in hand in the names of various persons including that of the assessee company, which aggregated at ₹ 32,72,780/-. The reply of the assessee as filed before the AO has not been properly rebutted or examined. Further, from the statement of cash balance of various persons, it is seen that, the availability of cash as per their books maintained and claimed by the assessee appears to be correct. In all the personal Balancesheets and cash balance as appearing in the cash-book belonging to the family members of the Directors and Director themselves sufficient cash was available, therefore, under these circumstances same cannot be added in the hands of the assessee company, because the amount has not been found from the premises of the assessee company but from the residence of the Directors and the family members. Accordingly, we hold that no addition on account of unexplained cash can be made in the hands of the assessee company u/s 69A of the Act and hence, addition of ₹ 8,73,500/- is deleted - Decided in favour of assessee.
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2015 (10) TMI 1083
Disallowance of Advertisement expenses - Held that:- Since the co-ordinate bench of Tribunal in the assessee’s own case [2013 (11) TMI 319 - ITAT MUMBAI ] has already taken the view on this issue in favour of the assessee concluding there is no dispute about the date of release of the film in question on 29.4.2005. We further note that the Censor Board of Films issued the certification of the film on 21.4.2005 therefore, the film was released for exhibition on commercial basis at the beginning of the previous year and as per Rule 9A of the Income Tax Rule the entire cost of production is allowable deduction - consistent with the view taken by the co-ordinate bench we hold that the assessee is eligible to claim deduction of advertisement expenses. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the disallowance of advertisement expenses. - Decided in favour of assessee. Disallowance on ad-hoc basis from out of various expenses - disallowance for want of technical documents - Held that:- We notice that the assessing officer has only made some bald observations that some of the items are under self made vouchers/cash payments/cash memos/bills from unregistered dealers without pointing out any specific instances. Hence, we are of the view that the assessing officer did not make any strong case in support of disallowance made by him. We have earlier noticed that the co-ordinate bench in the assessee’s own case as well in the case of Shri Karan Yash Johar (supra) has taken the view that the technical documents are not really required to ascertain the genuineness of the expenses and further held that the maintenance of the same was not feasible for valid reasons. Accordingly, in the case of Shri Karan Yash Johar (2015 (5) TMI 539 - ITAT MUMBAI), the Tribunal has taken the view the disallowances were not called merely for want of technical documents. - Decided in favour of assessee.
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2015 (10) TMI 1082
Computation of sales consideration - determination of capital gain - expenditure incurred towards the transfer of property - settlement of claims of tenants/occupants u/s. 48 - Held that:- This is a well settled law that while determining capital gains both additions as well as deduction from the apparent value have to be given effect. In the present case, the assessee has not placed any document on record to substantiate the expenditure incurred towards the transfer of property in question. So far as ₹ 1.25 Crores allegedly utilized for payment to tenants/occupants of building is concerned, no evidence, whatsoever has been furnished by assessee except self serving affidavits and Deed of Rectification. Moreover, a perusal of Development agreement and Sale Deed would show that the liability to settle the claim of the tenants/occupants of building is of the developer/purchaser and not that of the assessee or the other co-owners. - Decided in favour of revenue. Claim of exemption u/s. 54 denied - Revenue has assailed the findings of Commissioner of Income Tax (Appeals) in allowing exemption u/s. 54 in respect of two residential houses - AR of the assessee has stated that expression ‘a residential house’ does not mean one residential house - Held that:- The Tribunal has been consistently taking a view that ‘a residential house’ does not mean one residential house. The expression ‘a residential house’ used in the section 54 does not restrict the exemption for investment in one residential house. This issue has been decided by the Co-ordinate Bench of Tribunal in the case of Shri Narsing Gopal Patil Vs. Asst. Commissioner of Income (2013 (5) TMI 837 - ITAT PUNE). In this view of the matter, we do not find any justification on the part of the Revenue to deny exemption under Section 54F of the Act merely on the ground that the residential building constructed by the assessee consisted of several independent residential units. Assessee is eligible to claim benefit of section 54 on both the flats in the same building.- Decided against revenue.
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2015 (10) TMI 1081
Penalty u/s.271(1)(c) - non receipt of export proceeds (i.e., in convertible foreign exchange) within six months from the end of the relevant previous year. No instruction from Reserve Bank of India (RBI) had in fact been applied for - Held that:- No ‘post facto approval’ had been allowed to the assessee, which gets established as fact by the tribunal, the final fact finding authority, we are unable to see as to how any such contention could at all be raised in penalty proceedings. This is as the said finding, which is one of fact, and even otherwise not challenged before the hon’ble high court, has attained finality. Repeating the same argument in the penalty proceedings, without brining any further material or fact/s or circumstances on record would therefore be to no effect or purpose. Why, no approval, as afore-noted, stands sought, so that there is no basis or scope for the assessee to even consider itself as being entitled for approval. The assessee, by making a claim of having been allowed extended time, or an approval up to the time the export proceeds have been received, from the competent authority, thus, makes a false claim, i.e., misleads. The assessee’s argument, consequently, fails. As nobody can be presumed to be bestowed with prescience so as to know in advance if the payment, not received by the date of filing the return of income, shall be received in future – and when, or not, the law prescribes a procedure for claiming deduction in its respect in cases of delay in payment. That is, the claim for deduction is made conditional to the allowance of the extended time for receipt. It may be that the assessee delays seeking the extension of time, i.e., by the expiry of the six month period, but surely unless the same has been obtained, there is no basis to make a claim for deduction. In the instant case, the approval having not been sought, there is no basis to even expect an approval – a condition precedent, much less having received it by the date of filing the return, whereby the assessee lodges the claim for deduction. It is the return as furnished, and the facts, as well as law, as obtaining at the relevant time, that is relevant for the purpose of imposition of penalty (See: CIT v. Onkar Saran & Sons [1992 (3) TMI 1 - SUPREME Court ]). We, in view of the foregoing, are in full agreement with the findings of the authorities below that the assessee’s explanation is both false and not bona fide and is guilty of a dishonest conduct, as noted by both the authorities below.The penalty, levied at ₹ 2,50,000/-, i.e., at 120% of tax sought to be evaded, as against a minimum of 100% and a maximum of 300% thereof, is accordingly upheld. We decide accordingly. - Decided against assessee.
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2015 (10) TMI 1080
Addition u/s 69 - untallied entries /credits /deposits /clearings as appearing in four bank statements shown by the assessee in its books and due to lack of satisfactory explanation/details - CIT(A) deleted the addition - Held that:- Section 69 comes into operation only if investments are not recorded in the books of account maintained by the assessee which is not the case looking to the facts of the assessee wherein the bank balances are shown in the audited balance sheet and reconciliation statement for various entries which were not tallied, as observed by AO but duly put on record before the lower authorities and also filed along with Paper Book. The relevant facts available on record clearly indicate that the non-reconciliation of entries/bank funds transfers which were actually forming parts of the books of accounts were the basis of addition made by the AO and further the AO has duly accepted that the bank accounts are forming part of books of accounts. The AO has himself recorded in his order that assessee has disclosed all the bank accounts in his regular books of account and only because of the reason that some of the entries would not tally at the time of hearing resulted into such additions. Therefore, looking to the above facts there remains no scope of any addition under section 69 of the Act and we do not find any error in the order of CIT(A). - Decided against revenue. Disallowance of machinery repair expenses - CIT(A) deleted the addition - Held that:- From the perusal of the balance sheet of the assessee it is clear that an addition of ₹ 11.24 lacs has been made by the assessee under the head boiler account, which was the capital expenses incurred by the assessee and depreciation has been charged accordingly. The expenses under machinery repair and maintenance have been mainly incurred in relation to boilers which are used to get boiled rice and as a part of the plant come into contact with steam generated from the boiler, thereby getting corroded and require frequent replacement. Similarly consumable stores like rubber rings, hardware items which assist in movement of conveyor belts also need to be replaced regularly due to wean and tear. As such the machinery repair and maintenance expenses incurred by the assessee at ₹ 12,98,213/- are revenue in nature and there is no error in the findings of CIT(A). We uphold the same - Decided against revenue.
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2015 (10) TMI 1079
Entitlement to interest on refund - Held that:- There is no substance in the argument of the Revenue that the delay n the refund was caused because of the conduct of the assessees. In fact, the assessee was questioning the proposition of the Revenue to assess the income in the hands of the Main Trusts. That is why the beneficiary trusts have filed their individual returns of income disclosing the benefits received from the main trusts also. But when KVSS was pronounced by the Government of India, it was for the assessees to decide whether to take benefit out of that or not. Therefore, it is only when KVSS was promulgated, the assessee had an occasion to make a move and settle the dispute. So also the proceedings were locked up in different appellate forums. Therefore, there is no merit in the argument of the Revenue that the delay was caused by the conduct of the assessee. Therefore, we also find that the assessing officer has rightly granted interest to the assessees on refunds due to them. Assessee is not entitled to interest on interest - See Hon’ble Supreme Court in the case of CIT vs. Gujarat Flouro Chemicals (2013 (10) TMI 117 - SUPREME COURT) - Decided in favour of assessee in part.
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2015 (10) TMI 1078
Penalty under section 271(1)(c) - undisclosed donation receipts - assessee is an educational and charitable trust enjoying registration under section 12AA - Held that:- In the present case, the assessee has explained before the Assessing Officer that the amounts received by it are voluntary donation and certain details are not available. Therefore, the extent of details not available are worked out by the assessee and offered for taxation. We find that by explaining all the reasons, the assessee has discharged burden cast upon it. Thereafter, it is the duty of the Assessing Officer to disprove that the explanation given by the assessee is neither correct nor bonafide. Therefore, the ld. CIT(A) is not correct in upholding the penalty order passed by the Assessing Officer by following the decision of in the case of Mak Data P. Ltd. v. CIT [2013 (11) TMI 14 - SUPREME COURT] without considering the explanation given by the assessee. We find that the assessee has failed to handle the donations received by them in appropriate manner. Therefore, the assessee offered the very same amount for taxation. Under these facts and circumstances of the case, we are of the opinion that the assessee has neither concealed the income nor furnished inaccurate particulars. In the case of CIT v. Balraj Sahani [1979 (2) TMI 61 - BOMBAY High Court ] held that the findings in quantum proceedings are not binding in penalty proceedings and the Tribunal, or consideration of unreliable state of evidence regarding concealment, was justified in deleting penalty. Therefore, the ld. CIT(A) was not justified in confirming the penalty order passed by the Assessing Officer. - Decided in favour of assessee.
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2015 (10) TMI 1077
Transfer pricing adjustment - upward adjustment of Arm’s Length Price of the Internation Transaction - CIT(A) deleted the two comparables, namely, M/s Datamatics Technologies Ltd. and Infotech Enterprises Ltd. on the ground that these companies had substantial related party transactions - Held that:- The law is fairly well settled to the extent that the companies having in related party transactions more than 15% cannot be considered as comparable. But in the present case, though the CIT(A) adopted the same parity of reasoning while deleting the two comparables chosen by TPO, he had not referred to any evidence on the record in support of the conclusion drawn that these comparables had related party transactions exceeding 15%, nor the Authorized Representative of the respondent assessee company could establish this fact conclusively before us. No relief can be granted based on mere reliance on the legal proposition without supporting evidence on record. Therefore, we are of the considered opinion that the interest of justice would be met, if the matter is restored to the file of the Assessing Officer for the verification of this issue, after affording reasonable opportunity of being heard to the assessee company. If it is found on verification that the ratio of related party transactions is more than 15%, these companies may be excluded as comparables. - Decided partly in favour of revenue for statistical purposes.
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2015 (10) TMI 1076
Reopening of assessment - CIT(A) concluded that the assessment framed under section 147 was bad in law inasmuch as the assessment ought to have been framed under section 153C of the Act read with section 153A - Held that:- As the proceedings under section 153C of the Act was not completed and it was dropped at the threshold with the approval of the Addl. CIT. Therefore, there is no bar for the Department to take cognizance of the said incriminating material for other provisions of the Income-tax Act and the Assessing Officer accordingly examined those incriminating material and has formed a belief that income chargeable to tax has escaped assessment. Since the Assessing Officer has not applied his mind to frame the assessment on the basis of incriminating material under section 153C of the Act, it cannot be called that there is a change of opinion of the Assessing Officer while forming a belief under section 147 of a for reopening of the assessment. Since the reopening was done on the basis of material seized during the course of search and the said material was never used by the Income-tax authority for completing the assessment, there is no change of opinion of the Assessing Officer and therefore reopening is valid under section 147 of the Act. In the light of these facts, we do not find ourselves in agreement with the order of the ld. CIT(A) who has held that reopening of assessment to be illegal and quashed the entire assessment in all the assessment years - set aside the order of the ld. CIT(A) and restore matter to his file with a direction to re-adjudicate the issues raised before him on merit by passing a reasoned order. - Decided in favour of revenue for statistical purposes.
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2015 (10) TMI 1075
Unexplained income - Held that:- It is clearly accepted at the level of AO as well as CIT(A) that the assessee was engaged in the agricultural activities and was holding agricultural land measuring 69913 sq. metres (as per 7/12) which was purchased by him in parts from 21.6.1989 to December, 1994. The appellant has shown that he was cultivating crops like bajra, maka, etc. and his main source of income, therefore, he was not filing return of income and it is apparent that these facts have not been disputed by the AO nor has he disputed crops produced as per 7/12 submitted to him. Further the ld. CIT(A) has made an estimated basis of calculating estimated income, estimated expenses and estimated household expenses on an overall estimate basis. Looking to the facts that the assessee is aged about 43 years at the close of the AY and he has been carrying on agricultural operations since 1989 which certainly gave him regular earning and after meeting household expenses some savings cannot be ignored. However, this is also a fact that the assessee has not been able to furnish proper details of his savings and earnings in previous years which in normal cases are being rarely maintained by the agriculturists as their income is exempt from tax. Therefore, in the light of the facts and circumstances as well as nature of source of income of the assessee and estimates made by CIT(A) it will be justifiable to reduce the addition from ₹ 6,37,000/- to ₹ 1,00,000/- only and the same is confirmed. The assessee gets part relief. - Decided partly in favour of assessee.
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2015 (10) TMI 1074
Date of index cost of acquisition for computation of capital gain - whether should be the year in which the previous owner acquired the property and not the year in which the assessee became the owner of such property? - Held that:- Construing the words 'asset was held by the assessee' in cl. (iii) of Expln.to s. 48 of the Act, one has to see the object with which the said words are used in the statute. If one reads Expln. 1(i)(b) to s. 2(42A) together with ss. 48 and 49 of the Act, it becomes absolutely clear that the object of the statute is not merely to tax the capital gains arising on transfer of a capital asset acquired by an assessee by incurring the cost of acquisition, but also to tax the gains arising on transfer of a capital asset inter alia acquired by an assessee as provided under s. 49 of the Act where the assessee is deemed to have incurred the cost of acquisition. Therefore, if the object of the legislature is to tax the gains arising on transfer of a capital asset acquired under a gift or will or inheritance by including the period for which the said asset was held by the previous owner in determining the period for which the said asset was held by the assessee, then that object cannot be defeated by excluding the period for which the said asset was held by the previous owner while determining the indexed cost of acquisition of that asset to the assessee. Apart from the above, s. 55(1)(b)(2)(ii) of the Act provides that where the capital asset became the property of the assessee by any of the modes specified under s. 49(1) of the Act, not only the cost of improvement incurred by the assessee but also the cost of improvement incurred by the previous owner shall be deducted from the total consideration received by the assessee while computing the capital gains under s. 48 of the Act. The question of deducting the cost of improvement incurred by the previous owner in the case of an assessee covered under s. 49(1) of the Act would arise only if the period for which the asset was held by the previous owner is included in determining the period for which the asset was held by the assessee Therefore, it is reasonable to hold that in the case of an assessee covered under s. 49(1) of the Act, the capital gains liability has to be computed by considering that the assessee held the said asset from the date it was held by the previous owner and the same analogy has also to be applied in determining the indexed cost of acquisition. For determining the capital gain, the cost of acquisition of capital asset is crucial. Thus, keeping in view, the totality of facts, we hold that the long terms capital gains has to be from the date from which the capital asset in question was held by the previous owner and the indexed cost of acquisition also has to be determined on the very same basis, consequently, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of such asset. See Commissioner of Income-tax Versus Manjula J. Shah [2011 (10) TMI 406 - BOMBAY HIGH COURT ] - Decided in favour of assessee.
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2015 (10) TMI 1073
Shares held for 12 months - long term capital gain or short term capital gain - entitlement to exemption u/s. 10(36) - Held that:- We find that by Finance Act, 2003 a new clause (36) has been inserted in section 10 of the Act w.e.f. 01.04.2004 so as to provide that any income arising from the transfer of long term capital asset, being an eligible equity share in a company purchased on or after 01.03.2003 but before 01.03.2004 and held for a period of twelve months or more shall be exempt from tax for and from AY 2004-05. It means that this circular and the clause (36) as inserted in section 10 by Finance Act, 2003 clearly mentioned the holding period of shares as twelve months or more for claiming exemption in respect of long term capital gains in relation to shares. There is no dispute that the assessee has held the shares for twelve months, as noted in the assessment order by revenue, there is no scope for any other interpretation other than that the shares held by the assessee are long term capital asset eligible for exemption under clause (36) of section 10 of the Act. Hence, we confirm the order of CIT(A) and allow the claim of the assessee. - Decided in favour of assessee.
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2015 (10) TMI 1072
Income estimation at 8% - assessment was made u/sec. 144 - Held that:- The Special Bench of the ITAT in the case of M/s Arihant Builders Vs. ACIT [2006 (11) TMI 253 - ITAT INDORE] considered the issue under similar facts and circumstances of the case and after taking clue from the provisions of section 44AD, though not applicable, held that estimation of income at 8% of the turnover is reasonable. In our opinion, in the case under consideration estimation at 8% is very reasonable because the coordinate benches of the Tribunal is accepting the estimation of income ranging from 8% to 12.5% depending upon the facts of the case and nature of contracts undertaken.Therefore, in the absence of proper reasons for earning lesser profit, the order of the AO is upheld and income estimation at 8% on the gross receipts made by AO is accordingly confirmed - Decided against assessee. Addition on waiver of interest by Andhra Bank - addition as income under the head "Other Sources" - Held that:- In the course of present arguments, assessee filed a statement of Andhra Bank ledger account copy stated to have been filed in September, 2013 in the course of arguments. As seen from the record, this particular document is not on the paper book nor specifically filed. Nor the nature of income was forth coming from the orders of authorities. Therefore, at the time of deciding the issue, it was specifically stated vide para 28 that "we find that assessee did not place any material on record about the nature of income nor contended before us that these incomes has nexus with the contract business". Since this particular document stated to have been filed in the course of argument, it is not on record, the contention of the assessee now that this amount was written off by bank and was considered as income under section 41(1) cannot be considered in the course of proceedings under section 254(2). Be that as it may, even otherwise, since this amount was claimed as expenditure in earlier year and was allowed as such, the same can be considered as income of the year, even though the estimation was made on the contract work of during the year. Since this income does not pertain to contract work of this year, we are of the opinion that there is no error in the order of the ITAT confirming the income under the head "Other Sources". Therefore, the contention of the assessee is rejected.- Decided against assessee.
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2015 (10) TMI 1071
Penalty u/s 271(1)( c) - mistake on the part of the company have claimed losses in the assessment year 2008-09 and surrender the wrong claim of carried forward of losses - assessee filed a revised computation withdrawing the claim of brought forward losses before completion of original assessment proceedings - Held that:- Undisputedly, the assessee had not claimed brought forward losses in the previous assessment year viz. AY 2006-07 and 2007-08 and also in the subsequent years viz. 2009-10 and 2010-11. Accounts Head of the assessee company was in bad state of health, who returned from sickness on the last date of filing of return i.e. 30.09.2008 and return was filed on the same date at 11.30 p.m. in a hurry. Due to this unavoidable circumstance, the inadvertent mistake in claiming the brought forward losses occurred which was subsequently rectified by filing the revised computation of income before the completion of assessment. We may see tax audit report u/s 44AB for the year under consideration wherein brought forward losses or unabsorbed depreciation is shown as nil. The DR has not disputed this point that the assessee filed a revised return withdrawing the claim of brought forward losses before completion of original assessment proceedings. In this situation, the assessee could not be held to be guilty of furnishing of inaccurate particulars of income for levying penalty u/s 271(1) (c). Respectfully following the decision of in the case of Price Warehouse Coopers (P) Ltd. (2012 (9) TMI 775 - SUPREME COURT) we also observe that the assessee made claim for brought forward losses in the original return but when the mistake came to the notice of assessee, the assessee came forward to file a revised return and withdrawing the claim of brought forward losses. Form 3CD of tax audit report has also shown that the brought forward losses and unabsorbed depreciation was shown as nil in Annexure 9 and assessee did not make the same claim either in previous years or in subsequent assessment years. In this situation, we are unable to see any malafide or any deliberate act on the part of the assessee and without any hesitation, we hold that the assessee cannot be held guilty of furnishing of inaccurate particulars of its income, specially when the assessee filed a revised return immediately after noticing the mistake. - Decided in favour of assessee.
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2015 (10) TMI 1070
Valuation of land - estimation of appreciation thereon and thereby making addition to the wealth of the assessee - Held that:- As decided in assessee's own case for AY 2005-06, 2007-08 and 2008-09 [2013 (7) TMI 558 - ITAT DELHI ] Assets being business assets, its value was to be determined as per Rule 14 and not as per Rule 20 of Schedule III - It is only if any condition under Rule 8 is satisfied, that the assessing authority could have referred to and determine the value under Rule 20 - Following decision of M/s Sahara India Savings and Investment Corporation Ltd. Vs. ACIT [2010 (9) TMI 824 - ALLAHABAD HIGH COURT] - Decided against Revenue.
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2015 (10) TMI 1069
Addition u/s. 69B on the basis of valuation estimated by DVO - CIT(A) deleted the addition - Held that:- According to assessee, the investments are declared in the books of account, which are not rejected by the AO for making reference to DVO. Neither the AO has brought on record any evidence regarding any investment made by assessee in the properties in excess of the amount mentioned in the sale deeds. The Ld. Sr. DR has not disputed these facts. Admittedly, the correctness of the figures incorporated in the books of account are not disputed by the AO, so there cannot be any reference to DVO within the premise of section 142A of the Act. This view is settled by Hon'ble Supreme Court in the case of Sargam Cinema Vs. CIT (2009 (10) TMI 569 - Supreme Court of India ), wherein it is held that the AO could not have referred the matter to the DVO without rejecting the books of account. Here, in the present case also, the books of account are not rejected by AO. Hence, reference is bad in law. In the present case, the AO has not given any finding and has not brought on record any evidence to justify the undisclosed investment in the acquisition of these properties i.e. two flats. In such circumstances, we are of the view that the AO has not rightly proceeded for invocation of the provisions of section 69B of the Act. Accordingly, the unexplained investment added by the AO is without any basis and against the provisions of law. - Decided in favour of assessee.
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2015 (10) TMI 1068
Disallowance of claim for exemption under section 54EC on investment made in NHAI bonds - Held that:- This issue is squarely covered in favour of the assessee by various decisions of the Tribunal and respectfully following the same and keeping in view the Central Board of Direct Taxes Circular No. 3/2008, dated March 12, 2008, we direct the Assessing Officer to allow the claim of the assessee for exemption under section 54EC of the Act. See Shri Vivek Jairazbhoy Versus Dy. Commissioner of Income Tax (International Taxation) [2014 (9) TMI 419 - ITAT BANGALORE] Aspi Ginwala Versus Assistant Commissioner of Income-tax, Circle-5, Baroda [2012 (4) TMI 195 - ITAT AHMEDABAD] - Decided in favour of assessee.
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2015 (10) TMI 1067
Transfer pricing adjustment - Held that:- In the subsequent assessment years of 2006-07 and 2007-08, the nature of functions of the assessee in the segment of Provision of marketing support services to the associated enterprises has been accepted by the TPO to be that of a service provider and not a distributor. Even with regard to the manner of computing the PLI in the subsequent assessment years the formula adopted by the assessee of Operating Profits/ Total cost has been accepted. For all the above reasons, the present appeal of the Revenue is devoid of any merit. - Decided against revenue.
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2015 (10) TMI 1066
Residence in India - addition treating the assessee in the status of "non-resident" - stay in india - Held that:- Since the present assessee had stayed in India less than 182 days he was not resident of India for the assessment purpose on the claimed receipts form his outside employment. We thus find that the first appellate order on the issue is comprehensive and reasoned one and hence does not warrant any interference therewith. The same is upheld - Decided in favour of assessee.
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2015 (10) TMI 1065
Addition as income from House property or business income - allow the sister concern to use of premises - Held that:- Assessee had to borrow ₹ 75,00,000/- lacs from their associate concern for a short period and in consideration thereof allowed them to use the said building only for a period of one year. This is also been explicitly provide in the Memorandum of Understanding arrived between associates. The assessee firm also made the associate concern to pay for the maintenance and upkeep and outgoings. We also find that without such an arrangement with assessee would have had to borrow funds from outsiders and financial institutions. Hence it was a prudent business decision to allow the sister concern to use of its premises. The assessee was able to reduce its losses and get better financial results. Thus the intention of the assessee was for the purpose of business and not to earn rental income. Income is liable to be assessed as business income and depreciation is allowable to the assessee - Decided in favour of assessee. Disallowance of bank margin given for guarantee confirmed as assessee did not file requisite details - Decided against assessee. Bad debt written off disallowed - Held that:- The reply filed before the AO and details submitted along with letter dated 15/10/2008, clearly establish the claim of the assessee that the bad debt written off by the assessee was in respect of bills issued by the assessee to the said party. In this view of the situation, we are of the opinion that the claim of the assessee of a sum of ₹ 1,90,971/-, which is written off in the year under consideration is allowable and addition to that extent is deleted - Decided in favour of assessee.
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2015 (10) TMI 1064
Suppression of sales - electricity expenses are on higher side - CIT(A) deleted the addition - Held that:- Assessing Officer has committed a mistake in adopting the sale of ice at Noida factory only, whereas the majority of sales have been reported at Shakarpur Head Office, besides there is no evidence what so ever to suggest any sale out of books, more so when the books of account of the assessee are not rejected. In view of the facts and circumstances of the case, we see no infirmity in the order of CIT (A) - Decided against revenue. Addition on the account of interest disallowed u/s 36(1)(iii) - CIT(A) deleted the addition - Held that:- It is not been disputed that the assessee received an amount of ₹ 38,50,000/- as interest free loans from various parties and the interest free advances have been given to a lesser extent of ₹ 32,30,000/-. There is no allegation that the loan bearing funds were directly diverted to sister concern. In these circumstances, we see no infirmity in the order of CIT (A) which is upheld - Hon’ble Delhi High Court judgment in the case of Bharti Televenture [2011 (1) TMI 326 - DELHI HIGH COURT] is applicable to assessee’s case and factually there being no diversion of interest bearing funds - Decided against revenue.
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2015 (10) TMI 1063
Claim u/s 10(5B) denied exemption to technicians - person to have requisite qualification and work experience of having worked as technician in his past jobs and, besides this, he must be engaged as a technician in his present employment with the Indian Company - Held that:- The resume of the appellants shows that in the immediate past his main duties related to technical staff recruitment and training. Coming to the third condition, find that even while working with Coca Cola, India, New Delhi the appellant was mainly responsible for recruitment and training of local staff. Also perused the employment contract given by the appellant and from that it cannot be inferred that he was employed as a technician. In fact, in agreement with the A.O.’s comments that while working in India, the main job of the appellant was of recruitment and training of local staff. In view of this factual position, the claim of exemption u/s 10(5B) cannot be entertained because the appellant has to fulfill all the conditions required by section 10(5B) to qualify as a technician and he has surely failed to qualify for the same on two important conditions- having worked as a technician in the past and having been in employment as a technician with the Indian Company. In view of the above mentioned facts, the ground relating to claim u/s 10(5B) of the I. T. Act, 1961 is correctly rejected. - Decided against assessee. Charging of interest under Section 234B - Held that:- As no argument has been advanced, is also upheld and ground of the assessee in this regard is dismissed.- Decided against assessee.
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2015 (10) TMI 1062
Income arising on the purchase and sale of shares - business income or capital income - Held that:- We observe parity of facts, with the assessee dealing in shares on futures and options basis as well as by way of share trading. The matter has been discussed at length by both authorities below for the current year, as also stands duly considered by the Tribunal in his own case for the preceding year, referring to the decisions of CIT v. Madan Gopal Radhey Lal [1968 (9) TMI 14 - SUPREME Court] as well as the Circular No. 4 of 2007 dated June 15, 2007 by the Central Board of Direct Taxesto held sale proceeds of bonus shares which had been issued in respect of shares which formed part of the assessees' stock-in-trade of the share dealing business are liable to inclusion in the assessees' total incomes for the respective years as profits of the share dealing business. Under the circumstances, we find no reason not to adopt the findings by the Tribunal, as well as inferences by the authorities below in the matter. - Decided against the assessee Disallowance under section 14A read with rule 8D - Held that:- In principle a disallowance under section 14A read with rule 8D would arise, of course having regard to the facts of the case, and towards which the provisions of section 14A(2) and 14A(3), though procedural in nature, would have to be observed, and towards which we may advert to the decision in the case of AFL P. Ltd. v. Asst. CIT [2013 (8) TMI 597 - ITAT MUMBAI]. Thus we only consider if fit and proper to restore the matter back to the file of the Assessing Officer (A.O.) to allow opportunity to the assessee to present its case before him - Decided in favour of assessee for statistical purposes. Non-consideration of claim for depreciation under section 32(1)(ii), i.e., in respect of tenancy rights of a rented business premises - Held that:- Non-raising of a claim by the assessee per its return of income does not constrain an appellate authority from admitting the same where the circumstances justify it, in the sense that there is nothing mala fide in the said raising of the claim before it. No such case having been made out by the Revenue in the instant case, we, accordingly, admitting the assessee's claim, restore the matter back to the file of the Assessing Officer for his adjudication in accordance with law after allowing the assessee a reasonable opportunity of being heard. We may further clarify that we are in doing so not in any manner adverting to the merits of the said claim, but only enabling a decision thereon. We decide accordingly.- Decided in favour of assessee for statistical purposes. Non-grant of rebate under section 88E on account of security transaction tax (STT) paid - Held that:- The language of the section 88E is clear and unambiguous. However, we do not observe any dispute in the matter inasmuch as the Assessing Officer has allowed the assessee's claim in principle, which becomes all the more maintainable in view of the Revenue's stand of the assessee's income being assessable as business income having been confirmed by us (refer para 3 of this order). The assessee's grievance, which though cannot be discounted, is sans any material on record. The same having also been raised before the first appellate authority, which has not disposed of the same, we only consider it fit and proper to restore the matter back to his file to decide the issue of non- grant of the rebate under section 88E, where so, consistent with the law and the facts of the case after hearing both sides. - Decided in favour of assessee for statistical purposes.
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Customs
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2015 (10) TMI 1100
Period for issuance of SCN for confiscation of goods under Section 110 (2) of the Customs Act, 1962 - Power of Commissioner if not exercised within the stipulated period of six months, the seized goods are liable to be released – Contended by Petitioner that goods are liable to be released as the period of extension lapsed. Respondent submits that date of confiscation not to be included to compute the period of six months - Order impugned was passed prior to the period and same would extend for a further period of six months from expiry of initial period of six months. Held That:- Section 110(2) stipulates that Commissioner for sufficient cause is empowered to extend the said period by a further period, not exceeding six months - Date on which goods were seized is to be excluded - Since extension would come into effect for six months on the expiry of the initial period, mentioning of date would not have any consequence. No infirmity found in order impugned - Commissioner can exercise powers under Section 110(2) and can extend initial period of six months by a further period of six months – Found no merit in the Petition – Decided in favour of the Revenue.
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2015 (10) TMI 1099
Claim of interest of refund of SAD - refund was granted beyond period of three months - Section 27A - refund under Notification No. 102/2007 – Revenue contends that refund under Notification No. 102/2007 was not governed by Section 27 thus Section 27 A would also not apply. Held That:- Notification no.102/2007 under Section 25(1) of the Act exempts goods described in First Schedule of the CTA from whole of additional duty of customs leviable under Section 3 (5) of the CTA - Imposition of a period of limitation for the first time through a notification "without statutory amendment" was legally impermissible. Department was not justified in denying interest to Respondent on the delayed refund of SAD by resorting the para 4.3 of the CBEC’s Circular No.6/2008 - No error committed by CESTAT in allowing the appeal of the Respondent and ordering interest on the amount of SAD determined to be refunded, in terms of Section 27A of the Act – Decided in favour of the Respondent.
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2015 (10) TMI 1098
Registration of Focus License – Rejection on the basis that shipping bills do not match with the records – Petitioner contends that no opportunity of hearing granted - Revenue states that the matter has been referred to the higher authority and the license cannot be issued during pending investigation. Held That:- Petitioner was issued summons to produce documents in their support; as such they did not appear nor produced documents – Contentions of the Petitioner are erroneous and issuing mandamus is not fit for the case – Appeal dismissed in favour of Revenue.
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2015 (10) TMI 1097
Appeal against provisional release of goods seized - No SCN contemplated by sub-section (2) of Section 110 of the Customs Act within a period of six months was issued thus writ petitioner became entitled to return of the goods – Appellant contends the extension of time for issuing a SCN been granted by another six months but couldn’t provide any proof of the same. Held That:- Since Revenue is unable to show that they had any reason to believe that goods in question were liable to confiscation, appeal is thus dismissed in favour of the assessee.
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2015 (10) TMI 1096
Appeal for reducing the Penalty – Appeal being time barred to 55 days – Appellant submits that delay for not filing the appeal within time has been satisfactorily explained – Revenue did not file written objection and Court may examine the genuineness of explanation given by the appellant for filing the appeal beyond time. Held That:- Tribunal has taken an appropriate view of the matter to reduce the quantum and impose the penalty under Sections 114 (i), 114 AA of Customs Act, 1962 and finds that quantum of penalty imposed is pure question of fact and does not raise any substantial question of law – Appeal dismissed in favour of the Respondents.
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2015 (10) TMI 1095
Demand of Duty – Textile Machinery imported - Assessee contends that ownership of machinery is with M/s TFL as per Hire-Purchase agreement, they are liable to pay duty – Machine removed under a Court order and not deliberately – M/s Vampex purchased the machine and hence liable to pay duty and assessee is further liable to claim depreciation on duty demanded. Revenue contended that assessee is only liable to pay duty and depreciation granted is on the higher side. Held That:- Liability to pay duty arises from bond executed by assessee with Department obliging to abide by the conditions in Notification - Section 142 inserted by Act No. 23 of 2004 holds that successor of defaulter would also be held liable; M/s Vampex are also liable to pay the dues – Depreciation rate charged by the authority is not to be interfered with – Appeal dismissed partly in favour of the Revenue.
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Corporate Laws
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2015 (10) TMI 1094
Issuance of Writ of Mandamus for registration of Order under Section 23 of Registration Act – Petitioner holds that after finalisation of the demerger scheme, the Respondent was approached for registration of order along with the registration charges - Petitioner further stated that the order was presented in time for registration as contemplated under Section 23 of the Act but Respondents refused to register the same - Respondents contended that the Petitioner failed to adhere to the provisions of Sections 23 and 32 of the Act and approached the Court with distorted facts – Respondent states that the Petitioner did not produce the copy of the order for registration and the same was done after the expiration of more than two years which is beyond the time limit prescribed under Sections 23 and 25 - The representation so made by the Petitioner was only for mutation of ownership. Held That:- Request for mutation was rightly refused by the respondents as the same was made out of the prescribed time limits and was only for mutation of entries - If the period of limitation is to be reckoned from the date of the Judgment passed by the Division Bench, the request made by the petitioner is well within the period of limitation prescribed under Section 23 - Interpretation given by the Respondents to compute the period of limitation is not tenable and the limitation shall commence from the date on which the Petitioner was furnished with the certified copy of the Judgement - Writ petition is allowed and the third Respondent is directed to accept the certified copy of the Order for registration – Decided in favour of the Petitioner.
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Service Tax
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2015 (10) TMI 1114
Liability of Service Tax on lottery tickets - Liability of Petitioners vide Notification No.7/2015-ST on reverse charge basis - Sub-Rule (7C) of Rule 6 does not enable charging of tax - whether Direct transaction in regard to an actionable claim would not fall under Clause (44) of Section 65B? - Transactions entered on Principal to Principal basis – Respondent contends that Parliament is duly empowered to enact law in relation to service tax on said services - Lottery ticket is actionable claim; thus goods, lottery is a game; thus service; thus included in negative list - whether Petitioners' activities fall under definition of "lottery distributor" or "selling agent"; Sub-Rule (7C) Rule 6 applicable. Held That:- There is no change in the circumstances as in the case of Future Gaming [2013 (11) TMI 1002 - SIKKIM HIGH COURT] and Future Gaming 2014[2013 (11) TMI 1003 - SIKKIM HIGH COURT] The Petitioners in buying and selling the lottery tickets is not rendering service to the State and, therefore, their activity does not fall within the meaning of 'service' as provided under Clauses (31A) and (44) of Section 65B and, therefore, outside the purview of Explanation 2 to the said Section; In any case, since by the Explanation the scope of Section 66D which is the main provision which is to be expanded, it would be ultra vires the Finance Act, 1994 and is accordingly struck down; Letters having been issued on an erroneous interpretation of Section 66D of the Finance Act, 1994, as amended by the Finance Act, 2015 requiring the Petitioners to pay tax under the Service Tax Rules, 1994, as amended, in the absence of specific provision in the Finance Act and that Sub-Rule (7C) of Rule 6 of the Service Tax Rules, 1994, only provides an optional composite scheme for payment of tax and, therefore, does not create a charge of service tax and is a Subordinate piece of Legislation, hereby stands quashed. Resultantly, Circular under D.O.F. No.334/5/ 2015-TRU dated 19-05-2015 referred to in the aforesaid letters in the two Writ Petitions also stand quashed; and The Respondents, their agents, servants, officers and representatives are restrained directly or indirectly, and in any manner whatsoever, from demanding any amounts by way of service tax or enforcing the provisions of the Finance Act, 1994 on the activity of the Petitioners in relation to lottery tickets. Decided in favour of the Assessee.
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2015 (10) TMI 1113
Appeal under Section 35G under Central Excise Act, 1944 – Respondents applied for registration under the category of Technocrats Technical Consultancy – Department contended that the services rendered fall under the category of Consulting Engineering – Demand of tax made from the Respondents without issuing SCN as required under Section 73. Held That:- No SCN was issued to the Respondent placing reliance on the letter issued by Superintendent; as such it does not satisfy the requirement of notice - Letter issued was more of an advisory nature and demand of money in the name of tax is in violation - Appeal dismissed being devoid of merits against the Revenue.
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2015 (10) TMI 1112
Rejection appeals as time barred by the tribunal - Delivery of order by speed post - Proof and date of delivery - Service tax demanded on charges paid by Railways to Appellant towards rendering of customer care service - Business Auxiliary Service – Order passed to pay 25% of tax as pre-deposit - Appeal dismissed on the ground of delay; Department did not complied with Section 37C(1)(a) of the Central Excise Act. Held That:- From 10-05-2013, Section 37C(1)(a) mentions speed post as one of the modes of service and same should be supported by proof of delivery and the same cannot be treated as service for reckoning the period of limitation - No proof having been filed to support such delivery, which is the mandatory requirement as per Section 37C(1)(a) – Question of delay does not arise as the appeal is filed within time - appeal restored before the tribunal – Appeal allowed in favour of the Appellant.
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2015 (10) TMI 1111
Buying and selling of BSNL cards - sale activity or not - whether only commission was paid by the BSNL to the franchisees or not and decision given by the Bangalore Tribunal should be followed or not. Held That:- Similar questions have been considered by the CESTAT Principal Bench, New Delhi and the same is answered in favour of the assessee and against the Revenue – Decision made in the case of G.R. Movers vs. Commissioner of Central Excise, Lucknow [2013 (6) TMI 339 - CESTAT NEW DELHI] followed – Decided in favour of the assessee.
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2015 (10) TMI 1110
Deposit to be made towards CENVAT Credit and CAM Services – Appellant submits that he is facing acute financial hardship and availing of CENVAT credit by the Works Contractor has no bearing to the availability of CENVAT credit by Appellant – Revenue bought attention to the fact that the Court directed to deposit 50% of the amount in question within a period of 45 days. Held That:- To safeguard interest of Revenue as well as Appellant, Appellant directed to deposit 50% of the amount within a period of 45 days from the date of order. Tribunal shall not dismiss the appellants’ appeal for non-compliance of direction about pre-deposit and shall decide the appeal on merits – Appeal allowed in part and modified in favour of the Revenue.
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2015 (10) TMI 1109
Waiver of Pre-deposit of Service Tax – Appeal partly dismissed and required assessee to deposit tax with interest – Held That:- Facts of financial hardship of the assessee were not alleged before the Tribunal but the same were explained by him - Assessee sent the documents to Councel but could not reach in time; appeal dismissed – Question of pre-deposit to be reconsidered by the Tribunal – Matter remanded back – Decided in favour of the assessee.
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Central Excise
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2015 (10) TMI 1106
Denial of rebate claim - Bar of limitation - Export of goods - petitioner paid duty on inputs and to export the goods on payment of duty and thereafter claimed a rebate of the duty paid in respect of the exported goods - held that:- In exercise of powers under rule 18, the Central Government issued a notification being Notification No. 19/2004 dated 06.09.2004 granting a rebate of the whole of the duty on excisable goods specified therein "subject to the conditions, limitations and procedures specified hereinafter". This notification does not prescribe any period of limitation in respect of a claim for rebate. Clause 2 of the notification specifies the "Conditions and Limitations". Sub-clauses (a) to (g) specify various conditions and limitations but do not prescribe any limitation as to the period within which a claim for rebate is to be made. Rule 18 of the Central Excise Rules, 2002, expressly provides that where any goods are exported the Central Government may by notification grant a rebate of the duty paid and that rebate shall be subject to such conditions or limitations, if any, and fulfilment of such procedure as may be specified in the notification. Under rule 18, therefore, a party is entitled to the rebate subject to such conditions or limitations as may be specified in the notification. In respect of grant of rebate, it is open to the Central Government to impose conditions or limitations including as to the period within which the rebate ought to be claimed. The rule is wide enough to authorise the Central Government to impose a condition or limitation stipulating the period within which the facility granted, namely, rebate is to be claimed. The language is wide enough in this regard. Petitioner's claim for refund would be governed by rule 18 of the Central Excise Rules, 2002 read with the notification issued thereunder. The said notification does not provide any period of limitation for a claim for rebate. The rejection of the petitioner's claim for rebate, therefore, is not well founded. - impugned order dated 26.05.2014 of the Commissioner of Central Excise (Appeals) is quashed and set aside - Decided in favour of assessee.
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2015 (10) TMI 1105
Determination of annual capacity of production - manufacture of 'Pan Masala' - Held that:- Rule 5 of the PMPM Rules only distinguishes between a single track and multiple track machines and the duty is paid accordingly. Duty is not paid on the basis of number of pouches produced per minute per month. As per the notification dated 1.7.2008, the rate of duty has been fixed per packing machine per month and not on the turnover of the pouches manufactured. The Central Excise and Customs Board has also issued a circular dated 24.1.2014 clarifying that the duty payable under the notification dated 1.7.2008 is determined on deemed production with respect to the number of operating packing machines in the factory and not on the basis of the actual production by a unit. - In the light of the specific finding given by the Tribunal, being the last fact finding authority, to the effect that the machine purchased by the assessee is a single track machine, the duty payable by the assessee on the basis of a single track machine, should have been levied. The Commissioner fell in error in treating the said machine as a two track machine. The order of the Commissioner was rightly set aside by the Tribunal. - no substantial question of law arises for consideration - Decided against Revenue.
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2015 (10) TMI 1104
Disallowance of fraudulent CENVAT Credit - allegation that inputs imported in certain containers were diverted elsewhere instead of taking these inputs to their factory and only Cenvat Credit was taken on the basis of documents/ Bills of entry without receipt of inputs - Penalty u/s 26 - Held that:- Revenue has relied upon certain letters written by M/s J.N. Baxi and M/s NYK Link (I. Ltd.), who are the container providers in which imported scrap was transported from the port of import. As per the date of containers received back by the container provider, as reported by container provider, containers have returned back in certain cases before taking of credit. There is not even a confessional statement from the main appellant that inputs were not received in their factory and Cenvat Credit was taken only on the basis of Bills of entry. Shri Rajeshwar Prasad R Dubey has given contradictory statements and being third party witness his cross-examination was must. On the issue of taking of Cenvat Credit on an allegation that inputs were not received by an asessee Gujarat High Court in the case of Commissioner Vs. Motabhai Iron and Steel Industries [2014 (10) TMI 723 - GUJARAT HIGH COURT] - in this case larger bench held that oral evidence made by the Managing Director of the appellant and the positive documentary evidence recovered from the factory were of clinching nature. However as already mentioned in the present proceedings there is no confessional statement regarding diversion of inputs by the main appellant. The statements of Shri Rajeshwar Prasad R Dubey, proprietor of PSTC, recorded at different times are contradictory, and cannot be relied upon as evidence in the absence of any cross-examination and corroboration - Decided in favour of assessee.
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2015 (10) TMI 1103
Valuation - Determination of assessable value - Invocation of extended period of limitation - whether the charges paid to appellant No.2 by EID Parry India Ltd. or Triveni Engineering Works Ltd. were relating to the engineering, designing and various equipment before manufacturing or these charges are relating to post manufacturing activity - Held that:- Entirely in agreement with the findings of the Commissioner that most of the activities are relating to pre-fabrication, engineering and design stage. It is on the basis of this designing that the appellant is fabricating various equipment, instruments, pipings, insulations etc. The expenditure on such activities would, therefore, form part of the assessable value of the machinery and equipment manufactured by appellant No.1. In fact without these engineering drawings, it was not possible for appellant No.1 to fabricate and manufacture the equipments which they have supplied. Whole plant was fabricated and assembled by appellant No.1 as per the engineering design by appellant No.2. Keeping in view all these facts, we are of the considered view that the amounts paid to appellant No.2 would form part of the assessable value. We also note that these critical facts were not submitted along with the price declarations and, therefore, the extended period of limitation has been correctly invoked. Revenue has added the engineering design charges for the same reasons. It is immaterial that those engineering and design charges were recovered from Triveni Engg. Pvt. Ltd. initially for the said purpose and later on as damages. It was based upon the engineering designs and drawings supplied by appellant No.2 at the initial stage that appellant No.1 fabricated those equipments. For the reasons which are applicable to the supplies made to EID Parry India Ltd., these amounts will also form part of the assessable value. Here again, the extended period of limitation is correctly invoked and the penalty imposed under Section 11AC is correct. - However, penalty under Rule 173Q is reduced. - Decided partly in favour of assessee.
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2015 (10) TMI 1102
Waiver of pre deposit - Clandestine removal of goods - Violation of principle of natural justice - Opportunity of cross examination not given - Difference of opinion - Majority order - Held that:- first appeal is a matter of right under the Constitution of India and the same has been also provided under the provisions of the Central Excise Act. In Revenue legislations, some minimum pre-deposit is prescribed for admission of the first appeal in most of the Taxation Statutes of the Central Government and/or the State Governments. However, under the Central Excise Act, Section 35F provides for depositing the adjudicated amount of disputed duty in respect of the goods, which are not in the control of the Central Excise authorities or any penalty levied under the Act pending the appeal. Further discretion has been provided to the appellate authority including the Tribunal that such deposit of duty demanded or penalty levied, if would cause undue hardship to such person, the appellate authority may dispense with such deposit, subject to such conditions as may be deemed fit to safe guard the interest of revenue. - no incriminating documents have been recovered from the appellants. Some information from pen drive indicating clandestine purchase of inputs and sale of outputs was recovered from one Rutuja Ispat (P) Ltd. (RIPL). The whole case of the Revenue is prima facie based on the statements of Directors and employees of RIPL. On the basis of statements and recovered data, the Directors of appellants were confronted and they have admitted to some extent. By denial of opportunity to cross-examine, there have been gross violation of the principles of natural justice - there are discrepancies in ascertaining the expected production or output based on plant capacity, as idle time and non working days, have not been considered properly. - no further pre-deposit is required and that the impugned order is fit to be set aside and matter be remanded back to the adjudicating authority for re-adjudication afresh after granting opportunity to cross-examine the witnesses whose statements have been relied upon to make out the allegations against the appellants, and to provide reasonable opportunity of hearing - Decided in favour of assessee.
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2015 (10) TMI 1101
Duty demand u/s 11A - Invocation of extended period of limitation - Held that:- Show cause notice was issued to the assessee on 22.04.2003 i.e. beyond the period of one year from the date of clearance of excisable goods invoking proviso to Section 11A of the Act, and the extended period of five years was made applicable. Extended period would apply only in cases where there is suppression of material facts, collusion or any willful mis-statement, etc. made by the assessee. In the instant case, the finding of the Tribunal is categorical that since respondent-company filed all the relevant declarations there was no suppression of the facts. We find that no question as such was raised making an issue that findings recorded by the Tribunal are perverse and based on no material. No material as such was placed before us to take a contra view. It is well-settled that the Tribunal is the last fact finding authority and the High Court is required to accept the findings recorded by the Tribunal except where there is a specific challenge to the findings raising any questions of perversity supported by relevant material. Hence, we see no ground to interfere with the well-reasoned order passed the Tribunal. - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (10) TMI 1108
Levy of tax - Escape of certain items from assessment of tax - Held that:- In the earlier and subsequent Assessment Years, after due discussion on the issues, which is foundation of the impugned authorisation order and the notices; the Assessing Authority, the Additional Commissioner and the Tribunal have themselves accepted the explanation of the petitioners and held that the chemical formula in question cannot be applied as a matter of rule, but, production of zinc oxide would depend upon the quality of raw material. In view of these facts, the very foundation for initiation of proceedings under Section 21 of the Act by the Assessing Authority for the Assessment Years in question becomes non-existent - there was no relevant material before the Assessing Authority giving rise to prima facie inference that some turnover of the petitioners has escaped assessment to tax. Consequently, the impugned authorisation orders as well as notices under Section 21 of the Act issued by the Assessing Authority are without jurisdiction and, therefore, deserve to be quashed. - Decided in favour of assessee.
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2015 (10) TMI 1107
Denial of refund claim - Whether the Tribunal was justified in rejecting the appellant’s claim on the ground of unjust enrichment - Held that:- Tribunal had by the order dated 23.12.2002, upheld the levy of purchase tax upon the appellant as the appellant was the last purchaser of taxable goods to be used for the purpose of manufacturing non taxable goods. In view of this order, the appellant filed the above review application before the Tribunal. As we also mentioned earlier, thereafter the respondents issued the eligibility certificate in favour of M/s. Haryana Organics for 9 years which included the assessment years 1998-99 and 1999-2000 which are relevant in this appeal. - Assuming that the tax had been paid by the appellant and had been recovered from the consumers, the matter would end there. The appellant would not be burdened with any tax itself. However, the appellant was compelled to deposit the entire purchase tax element with the Assessing Authorities as a condition precedent to the maintainability of its appeal. Far from being unjustly enriched the appellant in this manner is actually out of the pocket to the extent of the amount paid as a condition precedent to the maintainability of the appeal. In the event of the same being refunded, there would be no question of unjust enrichment. Conversely assuming that the appellant had not paid the tax, it would be reasonable to presume on the same line of reasoning adopted by the Tribunal that the appellant had not recovered the amount from the consumers. In any event, the Tribunal has not come to any finding against the appellant to the effect that it actually recovered the amount from the consumers. There would be no justification for us to speculate to this effect in the appellant’s appeal. In that event also, the appellant would be out of pocket to the extent of the amount deposited by it as a condition precedent for the maintainability of its appeal. The amount, therefore, must even in that event be refunded. - Decided in favour of assessee.
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