Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 21, 2014
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Cargo handling charges to be taxed u/s 194J @ 5% or u/s 194 @ 2% - assessee was not in default for deduction of tax as per provisions of section 194C at the rate of 2 per cent and that lower authorities were not justified for treating the services rendered to the assessee as falling under section 194J - AT
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Claim of deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members. - AT
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Entitlement for claim of exemption u/s 11 - Merely because the receipts are more from the Poultry activity, it cannot be a ground to conclude that the dominant purpose of the activity is not education in poultry management - AT
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Penalty u/s 271AAA - much importance should not be attached to the statement about the manner in which such income has been derived - mere non-statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable. - AT
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Chairman of the CBDT asked that the necessary instructions may be issued to the Income Tax officers/Commissioners in this regard and in future due care be taken, not to disrespect or disobey the orders of the higher judicial authorities and also not to file frivolous appeals - AT
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Salary and interest paid to partners - it was not the first year of the partnership firm and there was no change in the partnership - AO had not established how and in what manner, the assessee failed to comply with the provisions of section 184 - deduction allowed - AT
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The addition was made on the basis of statement recorded during the course of survey which was subsequently retracted and since no corroborative evidence was found, no additions - AT
Customs
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Duties, functions and obligations of custodian appointed under section 45 of the Customs Act, 1962, - cost recovery charges for custom staff posted at the new Perishable Cargo - Once the permissions have been sought and from the various authorities under the Customs Act, then, it is not proper to urge that the conditions imposed by such authorities will not be binding. - HC
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Denial of refund claim - Overvaluation of goods - officers of customs are also required to follow the law and the refusal to collect correct rate of duty compelling the assessee to pay higher duty itself was wrong - AT
Service Tax
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Whether the sub-contractor of a main contractor is liable to discharge the service tax liability on the services provided by him on the same transaction - Held no - opinion of the third member as rendered in the case of Sunil Hi-tech Engineers Ltd. [2014 (10) TMI 524 - CESTAT MUMBAI (LB)] distinguished - AT
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Applicability of old circulars - Even in respect of services which were taxable before 2002, the earlier circulars became redundant in view of the change in law. - AT
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Whether the sub-contractor of a main contractor is liable to discharge the service tax liability on the services provided by him - Held Yes - AT
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Providing smart card based driving licence and paper based learning licence on behalf of Government of Maharashtra - Business Auxiliary Service / Business Support Service - Prima facie this activity is not taxable - AT
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Pandal or Shamiana Contractor servic - activity such as provision of furniture, barricades, matting and white side wall - prima facie activity is taxable - AT
Central Excise
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Cenvat Credit - GTA service - place of removal - the place where sale has taken place or when the property in goods passes from the seller to the buyer is the relevant consideration to determine the place of removal - Circular
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Cenvat Credit on Service Tax paid on GTA Service availed for the transportation of the goods from the factory of the appellant to the Depot of Parle Biscuits, has been correctly denied. - HC
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Denial of CENVAT credit - Credit stand denied on the ground that the said registered dealer was not found available at the premises disclosed in his registration and his registration was cancelled with retrospective effect - AT
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By cutting into required sizes, no new product has been emerged. Therefore, cutting and slitting of paper does not amount to 'manufacture' - AT
VAT
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Penalty u/s 54(1)(14) of UP VAT - import of goods into the State by road against a declaration form - contravention of the provisions of Section 50 - The guilty mind is necessary to be established to impose penalty under Section 54(1)(14) of the Act - HC
Case Laws:
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Income Tax
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2014 (10) TMI 505
Transfer pricing adjustment Inclusion and exclusion of comparables Functionally different - Held that:- CIT(A) rightly was of the view that M/s. Spectrum Infotek Pvt. Ltd. was found to be engaged in the business of manufacturing as well as research & development, but no segmental details were available - the company was found to be mainly in the domestic business, whereas the assessee was 100% EOU - there was no functional comparability found between assessee company and M/s. Seven Gentech Pvt Ltd., and it cannot be treated as comparable with that of the assessee company - CIT(Appeals) was fully justified in taking 8 comparables selected by the Tribunal in the case of Tevapharm (P.) Ltd. Versus Additional Commissioner of Income-tax - 10(3), Mumbai [2011 (12) TMI 284 - ITAT MUMBAI] - as the difference between the Transfer price and the value determine doesnot exceed 5% of Transfer price thus no need to dispute the price - as the final comparables for the purpose of TP analysis in the assessee's case and in directing the AO to restrict the addition made on account of TP adjustment by applying the average OP/OC of the said comparables at 19.08% - the order of the CIT(A) is upheld partly the addition made by the AO/TPO on account of TP adjustment Decided partly in favour of assessee. Deduction on profit derived from 100% EOU by allocating the expenditure on director's remuneration u/s 10B Held that:- The assessee company had only one working director during the year under consideration to whom the remuneration of ₹ 1.93 crores was paid - the export turnover of the EOU during the year under consideration was ₹ 25.63 crores and the profit shown by the assessee of the EOU was ₹ 5.12 crores - it is difficult to accept the contention raised on behalf of the assessee that the only working director was not at all involved in the affairs of the EOU, especially when there is no evidence brought on record to support and substantiate this contention - the involvement of the only working director in the affairs of the EOU in the facts and circumstances of the case was inevitable, especially when both its domestic unit and EOU were managed by the assessee company - the working furnished by the assessee giving segmental details, was for specific purpose and it was prepared by the assessee and appreciated by the TPO in the context of TP analysis - the segmental details were furnished by the assessee for the enterprise as a whole and there was no bifurcation made on the basis of export and domestic turnover - the director's remuneration was liable to be allocated to the EOU for the purpose of computing profit of the said EOU eligible for deduction u/s. 10B and since the allocation thereof was made by the AO on a reasonable basis i.e., turnover, we find no infirmity in the order of the CIT(A), upholding the action of the AO Decided against assessee. Treatment of expenses Expenses incurred on repairs to building Capital or revenue in nature Held that:- As decided in assessees own case for the earlier assessment year, it has been rightly held that civil works to be treated as capital expenditure - The exact nature of expenditure during the year under consideration, however, is not clear either from the order of the AO or from the order of the CIT(A) - Even the details furnished by the assessee in the paper book are not sufficient to ascertain the exact nature of expenditure incurred by the assessee on civil works so as to decide whether the same are capital in nature or revenue thus, the matter is to be remitted back to the AO for fresh consideration Decided in favour of assessee.
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2014 (10) TMI 504
Selection of comparables - Vishal Information Technology Ltd. functionally different unit - Held that:- Assessee as well as TPO has not gone into verticals/horizontals of the ITES sector while selecting comparables - the employee cost of this company is abnormally low compared to the assessee, which presupposes that it has outsourced major portion of its work to third parties - Following the decision in M/s. HSBC Electronic Data Processing India Ltd. Versus Dy. Commissioner of Income-tax Circle 2(2), Hyderabad [2013 (9) TMI 485 - ITAT HYDERABAD] this company is rejected as comparable, due to the reason that it has outsourced a considerable portion of its business and it is functionally different - the AO is directed to exclude this company from the list of comparables. Goldstone Infratech Ltd. Held that:- Following the decision in M/s. HSBC Electronic Data Processing India Ltd. Versus Dy. Commissioner of Income-tax Circle 2(2), Hyderabad [2013 (9) TMI 485 - ITAT HYDERABAD] business model of the above company is different from that of the assessee - the foreign exchange revenue is less than 1% of the total turnover - it fails the filter provided by the AO on the basis of the foreign exchange earnings - the Revenue from BPO is failing over a period of three years - the AO is directed to exclude this company from the list of comparables. Asit C Mehta Financial Services Ltd. - Employee cost filter Held that:- Following the decision in M/s. HSBC Electronic Data Processing India Ltd. Versus Dy. Commissioner of Income-tax Circle 2(2), Hyderabad [2013 (9) TMI 485 - ITAT HYDERABAD] - this company cannot be selected as a comparable not only on the reason of failing employee cost filter, but also due to amalgamation during the year, which has changed the business model of the company thus, the AO is directed to exclude this company from the list of comparables. Datamatics Financial Services Ltd. Held that:- The assessee has objected to the inclusion of the aforesaid company for the reason that it fails RPT filter applied by the TPO himself as the RPT exceeds 25% of the sales - Following the decision in M/s. HSBC Electronic Data Processing India Ltd. Versus Dy. Commissioner of Income-tax Circle 2(2), Hyderabad [2013 (9) TMI 485 - ITAT HYDERABAD] - once the dealings are not considered as 'transactions', these will also cease to be international transactions, going out of the purview of section 92 itself - a pure reimbursement of expenses by one AE to another AE is very much a 'transaction' as per section 92F(v) and consequently is equally an international transaction as per section 92B requiring consideration as per section 92 of the Act it is liable to be excluded as it involves related party transactions at much higher level, as against the filter adopted by the TPO himself, being companies with less than 25% related party transactions the company fails in this filter adopted by the TPO - the TPO is directed to exclude this company from the list of comparables adopted. Maple E Solutions Ltd. Held that:- Following the decision in Income-tax Officer, Ward 3(4), New Delhi Versus CRM Services India (P.) Ltd. [2011 (6) TMI 398 - ITAT DELHI] the company cannot be treated as comparable as financials of the company are not reliable - the company selected by the TPO is not having the same business of voice based BPO as in the case of the assessee the AO is directed to exclude the company from the list of comparable. Rejection of comparables - Genesys International Corp. Ltd. (Seg) Goldstone Technologies Ltd. - Held that:- Taxpayers have objected to the aforesaid company being treated as comparable to companies in ITES sector - so far as Goldstone Technologies Ltd. is concerned, the company being engaged in providing consultation services with various middle ware products is not functionally similar to the companies in the ITES sector - this company cannot be considered as comparable to the assessee. Visualsoft Technologies Ltd. and Quantum eservices Pvt. Ltd. Held that:- So far as the Visual Soft Technologies Pvt Ltd. and Quantum e-solutions Services Pvt. Ltd., are concerned, it is seen that while the loss of Visual Soft Technologies Ltd. for the year under consideration is (-)57.63% that of Quantum e-solutions Services is (-) 14.11%. when the assessee is objecting to super normal profit making companies by applying same standard loss making companies also cannot be treated as comparable. Consideration of management fees disallowed in computation of operating margin Held that:- Though the TPO has disallowed the payment of management fees by determining the ALP at Nil, but, at the same time, he has considered the same while computing operating margin of the assessee - when the TPO is disallowing the payment of management fees, it cannot be considered for the purpose of computation of operating margin, otherwise, it will amount to double addition - the matter is to be remitted back to the AO/TPO to look into this aspect and decide the issue after affording reasonable opportunity of being heard to the assessee. Computation of working capital adjustment Held that:- Though the assessee has raised similar arguments before the DRP but the DRP has rejected the same by stating that the assessee has not maintained segmental accounts, allocation of cost to respective segments cannot be ascertained - DRP held that since the TPO has worked out the working capital adjustment on the business of a transparent method adopted in case of all taxpayers it cannot be questioned - if the assessee has maintained separate records and can substantiate allocation of expenditure to the international transactions with AE and non-AE there is no reason why working capital adjustment should not be made accordingly the matter is to be remitted back to the AO/TPO for fresh adjudication. Denial of exemption claimed u/s 10A Profit relating to offshore research services centre (ORSC) unit Held that:- There is force in the contention of the assessee - ORSC unit is recognized as a STPI unit - the DRP has held that when ORSC unit is converted from domestic tariff area to STPI unit, it is eligible for deduction u/s 10A of the Act for the remaining period out of 10 consecutive assessment years starting from the year in which it was approved as STPI unit - the AO is directed to allow deduction u/s 10A of the Act for the AY also.
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2014 (10) TMI 503
Computation of deduction 80HHF - Reduction of 90% of other income from profits of business - Duty Drawback, Sundry Balances written back, Miscellaneous Income and Compensation Held that:- CIT(A) has admitted that all the receipts cited by the assessee have an element of turnover and can be assessed under the business head but they do not ipso facto qualify the deduction - Following the decision in ACIT vs. Star India Pvt. Ltd. [2008 (4) TMI 535 - ITAT MUMBAI] - the provisions of section 80HHF are similar to the provisions contained in section 80HHC subject to the difference that under section 80HHC, 90% of the sum referred to in clause(iiia) to (iiie) at section 28 has also to be excluded from the profits of the business while such amount is not required to be deducted in computing profits of business under section 80HHF - The relevant observations have already been reproduced above - Provisions of clause (iiia) to (iiie) of section 28 inter-alia include duty draw back - in absence of any express provision in section 80HHF duty draw back cannot be excluded with reference to sub-clause(A) of clause (f) of explanation to section 80HHF - all receipts of the assessee are regarding telecast of films and programmes and thus, all these receipts relate to business activity of the assessee of telecasting films and programmes - They cannot be termed to be receipts distinct from the activity of the assessee of telecasting the films and programmee - amount of Duty Drawback and receipts in the nature of operating income and amount being part of miscellaneous income relating to receipt of the assessee from Indian Film Export Association, refund of Central Excise Duty and credit note of Priya Shine do not fall within the ambit of sub-clause(A) of clause(f) of explanation to section 80HHF - These amounts are held not to be excludible from the computation of deduction under section 80HHF Decided partly in favour of assessee. Interest earned on bank deposits Income from other sources Held that:- It has been the contention of the assessee that FDRs were kept as margin money for securing export payment - The fact that assessee had incurred interest expenditure on borrowed capital is also not disputed thus, the order of the CIT(A) is upheld that the interest earned by the assessee on FDR could not be separately assessed as income from other sources Decided against revenue. Payment made within grace period Held that:- Following the decision in CIT vs. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] - omission of second proviso to section 43B and the amendment of first proviso by Finance Act, 2003, bringing about uniformity in payment of tax, duty, cess and fee on one hand and contribution of employees welfare fund on the other are curative in nature and thus effective retrospectively i.e. w.e.f. 1/4/1988 i.e. the date of insertion of first proviso thus, if payments are made before due date of filing the return then disallowance cannot be made - assessee has made payments within the grace period which is much prior to due date of filing the return the order of the CIT(A) is upheld Decided against revenue.
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2014 (10) TMI 502
Entitlement for deduction u/s 80P(2)(a)(i) - Co-operative society providing credit facilities to its members - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 Held that:- Banking means accepting deposit of money from the public which is repayable on demand or otherwise and withdrawal of these deposits by cheque, draft, order or otherwise and these deposits are accepted for the purpose of lending or investment - These deposits must be accepted from the public, not only from the members - These deposits must be repayable on demand or otherwise and could be withdrawn by the depositor by cheque, draft or otherwise - the Assessee has categorically accepted before the authorities that the Assessee was accepting deposits of money not only from the members but also from non-members - it cannot be said that the Assessee society was not carrying on banking business as it was accepting deposits from the persons who were not members - it is not necessary that the co-operative society should have a banking licence as per the definition under the Income Tax Act - What we have to see whether the nature of the business carrying on by the assessee is a banking business or not - The Income Tax is not concerned whether the banking business carried on by the assessee is legal or illegal - The income has to be assessed u/s 14 of the Income Tax Act under the same head even if the nature of the business is illegal. There is no dispute that the paid up share capital and reserves in the case of the Assessee is more than ₹ 1 lac - the Assessee satisfies the second condition - so far as the third condition is concerned, Sec. 20 of The Karnataka Souharda Sahakari Act, 1997 permits admission of any other co-operative society as a member - the provisions of Sec. 80P(2)(a)(i) are applicable to a co-operative society which is engaged in carrying on banking business facilities to its members if it is not a co-operative bank - section 80P(2)(a)(i) nowhere talks of co-operative credit society and therefore the distinction made under the Banking Regulation Act cannot be imported u/s 80P(2)(a)(i) - the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) thus, the order of the CIT(A) is set aside and the AO is directed to allow deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members Decided in favour of assessee.
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2014 (10) TMI 501
Deduction u/s 80P Assessee is a co-operative society registered under the Karnataka Souharda Sahakari Act, 1997 - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 - Held that:- Sec. 80P(2)(a)(i) provides two types of activities in which the co-operative society must be engaged to be eligible for deduction under sub-clause (i) - These two activities are not alternates ones because the section allows deduction to the co-operative society on the whole of profits and gains of business attributable to any one or more of such activities - where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilities to its members will only be eligible for deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members. Nature of assessee - Whether the Assessee is a co-operative bank or not Held that:- The Assessee has accepted that the Assessee was accepting deposits of money not only from the members but also from the general public who are non-members - The deposits so accepted are used by the Assessee co-operative society for lending or investment - the Assessee society was not carrying on banking business as it was accepting deposits from the persons who were not members - the paid up share capital and reserves in the case of the Assessee is more than ₹ 1 lac - Therefore, the Assessee satisfies the second condition - Sec. 20 of The Karnataka Souharda Sahakari Act, 1997 permits admission of any other co-operative society as a member - The word used in Sec.21A is 'may'. Section 21A further states that the co-operative society can be admitted as nominal or associate member for any specific purpose for any specific period as may be mentioned in the bye-laws - in case the rules and bye-laws of the other co-operative society provides otherwise, the co-operative society may not be admitted as a member of the co-operative society. The provisions of Sec. 80P(2)(a)(i) are applicable to a co-operative society which is engaged in carrying on banking business facilities to its members if it is not a co-operative bank relying upon DCIT vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. [2012 (8) TMI 185 - ITAT PANAJI] - the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) thus, the order of the CIT(A) in not allowing deduction u/s 80P(2)(a)(i) to the assessee is set aside and AO is directed to allow deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members Decided in favour of assessee.
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2014 (10) TMI 500
Addition on account of low GP Application of GP @ 9.7% as against 12% - Held that:- The AO has not rejected the books of account but assessee in course of survey had surrendered the amount of ₹ 4,50,000/- to cover up the discrepancy in stock and other items found at the time of survey - Therefore, the books of account were not reliable - The estimation made by ld. CIT(A) is quite reasonable considering the entirety of facts and circumstances particularly because in the case of M/s Niranjan Das & Sons, Saharanpur, the concern was dealing in retail trading of gents suiting and shirting, whereas the assessee dealt in wholesale as well as the retail trading of ladies suits - there was no basis to draw comparison with this firm. Similarly, M/s Bhagat Ram Godha Ram was dealing in retail as well as wholesale trading of branded gents suiting and shirting, whereas assessee dealt in wholesale as well as retail trading of ladies suits - the trading results of this firm were also not the guiding factor the order of the CIT(A) is upheld Decided against revenue. Various expenses disallowed Proper vouchers not furnished Held that:- CIT(A) rightly was of the view that the AO had made addition of ₹ 1,00,000/- being disallowance of expenses debited under the head salary on the ground that no salary/attendance register was maintained - Further, salary paid to family members was on the higher side in comparison to other employees - assessee has furnished copy of account salary in the ledger of the appellant - AO has not brought any adverse material evidence on record to suggest that the salary paid to family members was excessive - On the other hand, the assessee has not maintained vouchers in respect of payment of salary - no separate salary register/attendance register/muster roll have been maintained by the assessee - assessee has not furnished nature of duties performed by the employees with reference to educational qualification - Keeping in view the fact that salary paid to staff has been allowed by the AO in the preceding years, therefore, it would be reasonable and justified if the addition is restricted to ₹ 50,000 - the disallowances made by the CIT(A) was on the reasonable expenditure after considering in detail the reasoning and explanation given by the assessee Decided against revenue. Difference in closing balance in respect of some creditors Held that:- CIT(A) rightly was of the view that the assessee accounted for the discount at the time of making payments and also raised a debit note to the concerned party - Some of the parties account for the cash discounts on the date of issuing bills itself without mentioning the same on the purchase bills - the payment of bills outstanding at the end of the year were made by the appellant in the next year, the discount/rate difference was accounted for by the assessee assessee has furnished copies of account of the two parties as on 31.03.2010 wherein the amount of ₹ 5,450/- has been debited on 01.05.2009 in the account of Varundev Overseas P. Ltd. Surat against rate difference - Similarly in the case of Bemi Tex, Surat the amount of ₹ 5,435/-had been debited on 01.05.2009 against rate difference - then assessee has reconciled the difference in closing balance totaling to ₹ 10,875/- thus, the order of the CIT(A) is upheld Decided against revenue. Low house hold expenses withdrawal for personal expenses Held that:- CIT(A) was rightly was of the view that the assessees family consisted of self, son and daughter-in-law and total contribution made by the family members was at ₹ 3,43,000 - the quantum of contribution made by each family members is the outlook of the assessee and it is not a case of the AO to decide the same - though the assessee has not significantly contributed towards withdrawals for household expenses but at the same time the AO cannot lose sight of the fact that the other family members have also contributed to expenses which aggregate to ₹ 3,43,500/- which are held as adequate to meet the requirements of the appellants family assessee had not significantly contributed towards withdrawals of household expenses as family members had substantially contributed towards the family requirements have not been controverted by Department - the order of the CIT(A) is upheld decided against revenue.
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2014 (10) TMI 499
Cargo handling charges to be taxed u/s 194J @ 5% or u/s 194 @ 2% - Held that:- Following the decision in Glaxo Smithkline Consumer Healthcare Ltd. Versus Income-tax Officer, Ward 49(3), New Delhi [2006 (10) TMI 259 - ITAT DELHI] the services are also clearly not in the nature of technical, consultancy or managerial services, therefore, tax in respect of these services are not to be deductible u/s 194J of the Act - CBDT in its Circular No. 720, dated 30-8-1995 had also provided that various provisions of Chapter XVII relating to deduction of tax at sources are mutually exclusive and that Chapter XVII deals with a particular kind of payment to the exclusion of all other sections in this Chapter - any payment of any sum shall be liable for deduction of tax only under one section, therefore, payment is also liable for tax deduction only under one section, as warranted by the nature of services. Combined reading of provisions of sections 194C and 194J vis-a-vis CBDT Circular No. 720 makes it abundantly clear that in the instant case payment made by the assessee to the C&F Agents, was for the services which was pre-dominantly for "carrying out work", inter alia, relating to storage dispatch, transportation, loading and unloading of goods, etc. - Thus, the assessee has rightly deducted tax at source under section 194C of the Act - assessee was not in default for deduction of tax as per provisions of section 194C at the rate of 2 per cent and that lower authorities were not justified for treating the services rendered to the assessee as falling under section 194J of the Act and thereby liable for deduction of tax at 5% - the decision taken by the CIT (A) in deleting the demand of tax u/s 201(1) of the Act in respect of Cargo Handling Charges is fair and reasonable and it does not call for any interference Decided against revenue.
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2014 (10) TMI 498
Claim of deduction u/s 80P(2)(a)(i) - Assessee is a co-operative society under Karnataka Societies Act, 1959 - Whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 - Held that:- Sec. 80P(2)(a)(i) provides two types of activities in which the co-operative society must be engaged to be eligible for deduction under sub-clause (i) - These two activities are not alternates ones because the section allows deduction to the co-operative society on the whole of profits and gains of business attributable to any one or more of such activities - where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilities to its members will only be eligible for deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members. Nature of assessee - Whether the Assessee is a co-operative bank or not Held that:- It is not necessary that the co-operative society should have a banking licence as per the definition under the Income Tax Act - The Income Tax in our opinion is not concerned whether the banking business carried on by the assessee is legal or illegal - The income has to be assessed u/s 14 of the Income Tax Act under the same head even if the nature of the business is illegal - there is no dispute that the paid up share capital and reserves in the case of the Assessee is more than ₹ 1 lac the bye-laws of society does permit the admission of other co-operative society as member - Thus the third condition for becoming primary co-operative bank is not complied with - Since the assessee society did not comply all the three conditions, therefore, the assessee society cannot be regarded to be a primary co-operative bank as all the three conditions as discussed by us in the preceding paragraphs are not complied with and in consequence it is not a co-operative bank and the assessee is not hit by the provision of section 80P(4). The provisions of Sec. 80P(2)(a)(i) are applicable to a co-operative society which is engaged in carrying on banking business facilities to its members if it is not a co-operative bank relying upon DCIT vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. [2012 (8) TMI 185 - ITAT PANAJI] - the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i). The Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) thus, the order of the CIT(A) is upheld and the AO is directed to allow deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members Decided against revenue.
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2014 (10) TMI 497
Unaccounted sales - Refusal of estimate profit - Held that:- CIT(A) rightly was of the view that there was no mention of sales made to Shreeji in the statement recorded during the survey - CIT(A) after examining the photo copy of the stock register has given a finding that the sales stated to have been made to Shreeji Sales has been entered after all the sales have been recorded up to 31.03.2007 and the totals were drawn and further the sales as per bills was stated to be 16735 Kg whereas the entry in the register was of 16732 kg. - the sales shown to M/s. Shreeji Sales are not genuine and the entry has been inserted as an afterthought only to explain the shortage of stock - Further there is no material on record to support the contention of the Assessee that the material sent to Shreeji Traders was not taken into account for want of confirmation from the purchaser - the addition made by the AO was justified - the entire amount of sales cannot be considered as income but only the profit element of the sale can be added as income - in the absence of details about the gross profit rate or the net profit ratio of the Assessee, the addition is restricted to lump sum amount of ₹ 1.50 lac Decided partly in favour of assessee. Unsecured loans taken from various parties - Addition u/s 68 Held that:- With respect to the addition with respect to deposit from Shri Pancholi it is stated that he has given loan of ₹ 17 lacs through two cheques to the Assessee - Shri Jadavbhai Kalsaria, Director of the Assessee, in the statement recorded through survey had admitted that assessee had shown bogus loans which were offered for taxation - AO was fully justified in making the addition of ₹ 17 lacs with respect to amount received from Shri Pancholi - In the case of Jayesh Kumar Thakkar, Assessee had filed copy of confirmation and PAN card but did not file the copy of bank statement. There is nothing on record to demonstrate that on receipt of the copy of confirmation and PAN card, A.O had made any further inquiries and then found the amount to be bogus. By merely non filing the bank statement and in the absence of any other material on record it cannot be said that initial burden was not discharged by Assessee - no addition can be made and thus direct the deletion with respect to amount received from Shri Jayesh Thakkar. In the case of Doshi Kantilal Jayantilal, (HUF) N.B. Mehta, Doshi Balwantrai Jayantilal, the Assessees are assessed to tax and have filed the copy of its return of income and thus the Assessee had discharged the initial onus cast upon - There is nothing on record to demonstrate that on the basis of details filed, A.O had made further inquiries and found the amount to be bogus - merely that the depositors did not comply with the summons issued by A.O, we are of the view that no addition can be made from these parties and therefore direct its deletion. In the case of Doshi Dhirajlal, Kalajben Doshi, Ramesh kumar Girjashanker, Shri Ram Foods and Lilavati Shah, Assessee had filed their PAN nos, the deposits were returned subsequently and interest was also paid - These parties are also assessed to tax - There is nothing on record to demonstrate that on the basis of PAN number, enquiries were made by A.O and thereafter the deposits were found to be bogus - no addition can be made with respect to the amounts received from these parties and thus direct its deletion Decided partly in favour of assessee.
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2014 (10) TMI 496
Addition of various unexplained creditor Held that:- CIT(A) rightly perused the record and information u/s. 133(6) and also gone through the statement of account of assessee in the books of M/s. Jai Traders as obtained by the AO on 25.11.2010 as well as assessees books of account showing the account of Jai Traders, and it was found that difference is explained which arise because of the contra entry on account of return of cheques The order of the CIT(A) is upheld Decided against revenue. Cash payment u/s 40A(3) disallowed Violation of principles of natural justice - Held that:- The AO made addition for cash payments noted by this party in their accounts - The bill No. 3014 was not brought on record - No copy of accounts of M/s. Mohit Traders received directly by the AO has been made available to the assessee - The assessee denied to enter into any transaction with this party and also sought opportunity from the AO to cross examine this party for making the entry of cash payments in the books of account, but the AO did not supply copy of statement of M/s. Mohit Traders to the assessee and gave no opportunity to cross examine this party - Therefore, principles of natural justice have been clearly violated in the matter - Since no incriminating material is confronted to the assessee and no cross examination of the party is allowed to the assessee, therefore, such entries in the books of account of M/s. Mohit traders cannot be read as evidence against the assessee relying upon Kishan Chand Chelaram vs. CIT, [1980 (9) TMI 3 - SUPREME Court] Decided against revenue. Addition of bogus creditors Held that:- The purchases are properly entered in the accounts which are supported by vouchers and payments have been made through banking channel - The address of M/s. Marvel Tea Estate India Ltd. is of Jabalpur (MP), but the AO is stated to have issued the summon at Jaipur (Raj.) - The AO accepted the books of account and no discrepancies have been pointed out in the purchase and the book results and the purchases have also been accepted by the department of VAT - The purchases are supported by vouchers and bank statement - CIT(A) specifically noted that no query has been raised regarding these creditors by the AO for holding the same to be in-genuine - such finding itself is sufficient to reject this ground of appeal of the Revenue the order of the CIT(A) is upheld Decided against revenue. Deletion of freight payment expenses Held that:- CIT(A) on examination of record rightly found that for the balance amount of freight, the details are provided which is given in purchase account and was filed before the AO at assessment stage - the addition is unjustified - The accounts submitted by the assessee give party-wise payment of freight expenses the order of the CIT(A) is upheld Decided against revenue.
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2014 (10) TMI 495
Entitlement for claim of exemption u/s 11 - Whether the CIT(A) was justified in holding that the assessee is entitled for exemption u/s.11 without appreciating the fact that the poultry business of the assessee is the primary objective and hence not incidental to education Held that:- As decided in assessees own case for the earlier assessment year, it has been held that the assessee is a Charitable Trust registered u/s.12A of the Act vide No.3866 dated 21-01-1985 - The trust is also registered with the Charity Commissioner, Pune vide No.F/2811/Pune dt. 12-02-1985 - The trust is also registered with the Registrar of Co-op Societies vide registration No.MAH/1707/84/Pune dt.10-10-1984 - The trust is engaged in imparting training in poultry management as well as business of poultry farming hence it is conducting a number of courses relating to Poultry farming, hatcheries etc. and carrying out the activities of research in poultry science and allied activities and to promote educational research development. The assessee trust has been granted registration u/s.12A(a) of the I.T. Act as per the order of the CIT, Pune vide his order dated 21-01-1985 and the same is continuing and has not been cancelled or withdrawn - Merely because the receipts are more from the Poultry activity, it cannot be a ground to conclude that the dominant purpose of the activity is not education in poultry management - CIT(A) was rightly of the view that the assessee has created facilities of high standard by utilising surplus generated over the years along with donations etc., and that no money has been diverted for purposes other than the objective of the trust or that provisions contained in section 13 of the I.T. Act have not been violated could not be controverted by the revenue thus, the assessee is entitled for exemption u/s 11 Decided against revenue.
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2014 (10) TMI 494
Penalty u/s 271AAA - Undisclosed income in pursuance of search - particulars of transactions furnished or not Held that:- U/s 132 (4) of the Act unless the authorized officer puts a specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated subsequently, that amounts to the compliance with Explanation 5 (2) of the Act - in case there is nothing to the contrary in the statement recorded under section 132 (4) of the Act, in the absence of any specific statement about the manner in which such income has been derived, it can be inferred that such undisclosed income was derived from the business which he was carrying on or from other sources - The object of the provision is achieved by making the statement admitting the non-disclosure of money, bullion, jewellery, etc. - much importance should not be attached to the statement about the manner in which such income has been derived - mere non-statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable. Penalty u/s 271AAA is not leviable if an assessee, in his statement recorded during the search u/s 132 of the Act, admits the undisclosed income, specifies and substantiates the manner in which it has been derived and pays the taxes due thereon, together with interest - the assessee has paid due tax on the admitted undisclosed income - there is no specific format/procedure prescribed in the Act for specifying and substantiating an undisclosed income - The statement of the assessee, specifying the manner in which the undisclosed income was derived and substantiated, did not face any rebuttal or rejection at the hands of the AO - the assessee had entered into various transactions of sale/purchase of land during the concerned period - The income arising out of the transactions was declared - This included the undisclosed amount - the assessee has substantiated the manner in which the undisclosed income was derived and that being so, the condition laid down by Section 271AAA (2) (ii) has been duly met - CIT (A) erred in deciding this issue against the assessee Decided in favour of assessee.
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2014 (10) TMI 493
Arms length price adjustment International transaction with IT and ITES - Low end back office support services - Held that:- Assessee is a 100% Export Oriented Unit (EOU) engaged in providing low end back office support services - As both the units of the assessee are situated at Software Technology Park, deduction u/s.10A was claimed in the return of income - During the year under consideration, assessee had also entered into transaction in connection with IT & ITES activity undertaken by it with its associated enterprises - the assessee has benchmarked the low end back office support services rendered by it to its AE on an aggregated basis - The affair of the assessee company demonstrates that assessee company is a low end back office support services provider - The assessee has applied transactional net margin method (TNMM) as the most appropriate method to test the international transactions and operating profit to total cost as profit level indicator (PLI) - the PLI of the assessee is 18.18%, which is higher than all comparable companies - the international transaction of the assessee was at arms length price - The remaining set of 17 comparable companies were having an arithmetic mean of 32.33% - After considering overall PLI of assessee at 17.38% an upward adjustment of ₹ 16,83,86,191/- was made by TPO to the transfer price. The company is a knowledge process outsourcing (KPO) engaged in providing data analysis and data process solutions, online operation support, customer relationship management support, data de-duplication services etc. - Since functionally, it is different from assessee company, DRP was not justified in not excluding the same from the list of comparables - the AO has called for information with respect to this company u/s.133(6), wherein it was found that company is engaged in providing services under IT segment and it is functionally comparable to the assessee. The assessee has placed segment-wise revenue in case of engineering division at ₹ 218,000,505/, and in case of Information Technology Services division, at ₹ 385,147,981 - If we will take correct segmental revenue of information technology service as per audited accounts at ₹ 385,147,981/- in place of ₹ 208,000,505/-, PLI will be much more than 35.30% - There appears to be some contradiction/ error which requires examination on the part of the lower authorities - the AO/TPO is directed to verify and compare the revenue of IT segment of Acropetal Technologies Ltd. with that of assessee company in place of revenue of its engineering design and services the matter is remitted back to the AO for fresh adjudication Decided in favour of assessee. Disallowance u/s 40(a)(v) - Tax borne by employer which was claimed as exempt by the employee u/s.10(10CC) of the Act Held that:- Following the decision in The Commissioner of Income Tax Versus M/s. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] - the AO is directed to allow deduction u/s10A on the enhanced business profit of the assessee i.e. profit to be increased by the amount of disallowance made u/s 40(a)(v) since the assessee has no income other than the income eligible for deduction u/s.10A of the Act - the AO is directed to allow the claim of deduction u/s.10A on the profit of business as increased by the disallowance made on account of foreign exchange loss - the purpose of excluding some items of expenditure mentioned in the definition of export turnover is to ensure that deduction is given only for the consideration for the export of the software and not for amounts received merely as reimbursement of the expenses - It depends on the manner in which bills are raised by the assessee - The assessee has made a specific claim before the CIT that it has excluded those receipts which it received merely as reimbursement of expenses and there is no need to exclude those items further as has been done by the CIT the matter is to be remitted back to the AO Decided in favour of assessee.
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2014 (10) TMI 492
Non-deduction of TDS on interest payment u/s 40(a)(ia) Held that:- The underlying objective of section 40(a)(ia) was to disallow deduction in respect of expenditure in a situation in which the income embedded in related payments remains untaxed due to non-deduction of tax at source by the assessee relying upon Commissioner of Income Tax XIII Versus Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non-deduction of tax at source from payments for expenditure- particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the law - declining deduction in respect of expenditure relating to the payments of this nature cannot be treated as an intended consequence of Section 40(a)(ia). The view cannot be subscribe that it could have been an intended consequence to punish the assessees for non-deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax - That will be going much beyond the obvious intention of the section - the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004 thus, the matter is required to be remitted back to the AO for fresh adjudication Decided in favour of assessee. Cash payment for purchase of land u/s 40A(3) disallowed Held that:- Following the decision in Mr. Jamir Mondal Versus Assistant Commissioner of Income-tax [2014 (6) TMI 245 - ITAT KOLKATA] - Rule 6DD of the Rules clearly lays down the conditions or exceptions under which the rigor of the provisions of section 40A(3) of the Act may be relaxed and there is no discretion on either of the parties to extend the condition or relax the condition at will - Even the existence, demand or necessity or business expediency does not fall under the provisions of Rule 6DD of the Rules - it cannot be said that the assessee has immunity from the provisions of section 40A(3) of the act - the lower authorities have rightly invoked the provisions of section 40A(3) of the Act and made the disallowance Decided against assessee.
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2014 (10) TMI 491
Levy of penalty u/s 271(1)(c) - Income from commission received from various shoe traders and interest on loans Held that:- Following the decision in Vijay Kumar Gupta vs. ITO [2014 (3) TMI 175 - ITAT AGRA] - it is clear case of concealment of income because the assessee has concealed the bank account maintained with ICICI Bank Ltd. from the Revenue department - It is the net profit rate which has to be adopted in such cases - As regards the legal proposition that sales cannot be regarded as profit of the assessee and net profit rate has to be applied, there is no quarrel with the same, but the same proposition would not apply to the facts and circumstances of the case - The assessee admittedly accepted the order of the AO in maintaining the addition because no appeal was preferred before any authority against the said addition - The assessee, therefore, admitted that he has earned unaccounted income from undisclosed business - Therefore, in the penalty proceedings, finding of fact recorded by the AO which have reached finality cannot be disturbed. The AO issued several statutory notices calling for the explanation of the assessee, but no reply was filed - the AO was already having information with him through AIR information and the details called for u/s. 133(6) of the IT Act that the assessee has maintained two unaccounted bank accounts with ING Vaishya Bank Ltd. The assessee did not explain source of entries in the same bank accounts and statutory notices remained un-complied and it is only on 17.09.2009 just prior to completion of assessment, the assessees counsel replied that earlier no compliance could be made on account of slackness of the counsel to whom notice was handed over and the details of bank account could not be obtained - The assessee in the same reply surrendered as additional income on account of peak credit in these bank accounts - The assessee also filed revised income computation chart and requested the AO that the return filed originally may be treated as revised accordingly - The course of action adopted by the assessee is not permissible under law - There is no provision under law to file revised income computation chart without actual filing of revised return of income within the period of limitation in accordance with law - the AO has correctly levied penalty against the assessee - Since no explanation, whatsoever, was filed at the assessment stage as well as at the penalty stage, therefore, levy of penalty u/s. 271(1)(c) is wholly justified The concept of "reasonable cause" or exception as contended by the assessee has no applicability to the penalty proceedings u/s. 271(1)(c) of the IT Act - Decided against assessee.
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2014 (10) TMI 490
Provisional commission not ascertained AO treated as contingent liability Held that:- The assessee has been paying commission on a certain percentage to the agents on the exports sales made - the assessee has been paying commission @ 2% to 3% - For most of the invoices the commission has been paid before 31st March 2007 - Only for the past of the sum aggregating ₹ 9,22,777, the commission on the sale made remained payable for which the assessee has made a provision, which too has been quantified on the basis of fixed rate and part practice - otherwise also, it is a genuine business expenditure which is allowable as deduction and the same has been quantified on the basis of certain percentage even though it has been discharged in a near future date - There is a reasonable certainty in the quantification of the commission payable and such a provision is to be allowed in this year only - in the subsequent year such a payment has been accepted by the AO thus, the order of the CIT(A) is upheld Decided against revenue. Suppression of burning loss Held that:- The assessee's contention that it has shown the sale of scrap generated during the course of process has not been rebutted and such a sale has been allocated on prorata basis on production - The finding of the CIT(A) that if the scrap sale of 240.740 MTs is reduced from the shortage shown then the assessee's irrecoverable loss is only 2.02% which is much below the 3.74% worked out by the AO has not been disputed - such an addition cannot be sustained without finding any defect either in the production record or in the books of account or in the scrap sales shown and adjusted by the assessee, then there is no justification of making any addition simply on adhoc manner as done by the AO by holding that 0.74% of the loss claimed by the assessee is excessive the order of the CIT(A) is upheld Decided against revenue.
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2014 (10) TMI 489
Reassessment u/s 147 - Deduction u/s 80IB(10) - Area of the commercial tenements occupied in respect of "Veena Sur" project is 1488 sq.ft. Held that:- Once an issue is adjudicated and settled by the higher judicial authority, it is not open to the lower income tax authorities to reopen, make assessment or reassessment on the basis of same facts and circumstances and in the absence any incriminating or new material, information or evidence or of a contrary decision of superior judicial authority in order of hierarchy - If the Revenue officials choose to do so, then it is to be treated as not only the misuse but also abuse of their authority and in such an event defenses like protecting the interest of Revenue, keeping the issue alive etc. will not be sufficient to absolve them of the likely penal consequences against them - the AO observed that since the assessment in the case had been annulled on the legality of notice u/s 143(2) of the Act and the case had not been heard on merits at any of the stage including appellate proceedings, there was a reason to believe that the income assessed in this case had escaped and therefore he reopened the assessment u/s 147 of the Act. If an act of making additions u/s 153A on the ground of maintaining consistency in the stand of the Revenue and for keeping the issue alive, is allowed or not condemned, it may lead continuous harassment of assessee and never ending litigation on the same issue, such as, if the said additions are deleted by the higher judicial authorities even up to the level of Apex Court, the AO still would reopen the assessment and make additions on the same issue and on the basis of same facts u/s 147 of the Act - If the appeals also meet the same fate of setting aside of additions, then the Commissioner would step into to make the same additions on the same issue again, by way of invoking the provisions of section 263 of the Act and so on - there will not be any end to litigation on the same issue in the case and also to the harassment, loss and agony of the assessee. In their zeal to protect the interest of the department, the officers should not cross the "Laxman Rekha which we here mean the line of limit of their legal jurisdiction; doing so may not only prove to be detrimental to the interest of the Revenue but also to them personally - there is no infirmity in the order of the CIT(A) in deleting the additions made by the AO u/s 153A - the registry is directed to send a copy of the order to the Chairman of the CBDT so that the necessary instructions may be issued to the Income Tax officers/Commissioners in this regard and in future due care be taken, not to disrespect or disobey the orders of the higher judicial authorities and also not to file frivolous appeals Decided against revenue.
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2014 (10) TMI 487
Reduction of net profits from 12% to 5.5% - Failure to produce books of accounts, bills and vouchers - Held that:- The assessee did not produce the bills and vouchers for verification before the AO - there was no other option except to estimate the income, however the estimate by applying the net profit rate of 12% by the AO was without any basis and even the past history of the case was not considered - CIT(A) considered the past history of the assessee and applied the net profit rate of 5.5% - the net profit rate applied by the CIT(A) by considering the net profit rate declared by the assessee and accepted by the various authorities for the last five assessment years i.e. A.Y. 2004-05 to 2008-09 was fair and reasonable the order of the CIT(A) is upheld Decided against revenue. Salary and interest paid to partners disallowed Held that:- There was no change in the partnership deed - The provisions contained in section 184 of the Act requires that a certified copy of the partnership deed is to be furnished along with return if there is change in the partnership deed or it was the first return of income of the partnership firm - it was not the first year of the partnership firm and there was no change in the partnership - The AO also had not established how and in what manner, the assessee failed to comply with the provisions of section 184 of the Act thus, the AO was not justified in making the disallowance and the CIT(A) rightly deleted the same the order of the CIT(A) is upheld Decided against revenue.
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2014 (10) TMI 486
Addition on the basis of Statements recorded during the survey u/s 133A - statement was retracted later - Addition to be made on substantive basis or not Held that:- No incriminating documents were found by the survey team relying upon CBDT vide Circular F. No.286/2/2003 dated 10-03-2003 and CIT Vs. Dhingra Metal Works [2010 (10) TMI 29 - DELHI HIGH COURT] - the addition was made on the basis of statement recorded during the course of survey which was subsequently retracted and since no corroborative evidence was found either during the course of survey or during the course of assessment proceedings, addition cannot be made thus, the order of the CIT(A) is upheld Decided against revenue. Claim of deduction u/s 80IB(10) Calculation of minimum 1 acre of area - Whether CIT(A) erred in holding that the road acquisition area is to be considerate as part of area of the plot for calculation of minimum 1 acre of area for claiming deduction u/s 80IB(10) - Held that:- As decided in assessees own case for the earlier assessment year, it has been held that CIT(A) rightly allowed the deduction the order of the CIT(A) is upheld - Decided against revenue.
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Customs
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2014 (10) TMI 509
De-Registration of license of CHA - Forfeiture of security - Held that:- where the Commissioner disagrees with the enquiry report, he should record the reasons for disagreement and forward the same to the Customs House Agent for his comments before passing a final order - Ext.P6 shall be treated as show cause notice against the petitioner on disagreement entered by the respondent and the petitioner shall furnish his objection to the findings of disagreement, within a period of four weeks. The proceedings shall be finalised within a further period of three weeks. Status quo ante of Ext.P6 shall be maintained. - Writ disposed of.
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2014 (10) TMI 508
Duties, functions and obligations of custodian appointed under section 45 of the Customs Act, 1962, - cost recovery charges for custom staff posted at the new Perishable Cargo - Regulation 5(2) of Handling of Cargo in Customs Areas Regulations, 2009 - Regulation ultra vires to section 157 and 158 of the Customs Act, 1962 - Held that:- A bare perusal of section 45(1) would reveal that all imported goods unloaded in a customs area shall remain in the custody of such persons as may be approved by the Commissioner of Customs until they are cleared for home consumption or warehoused or for transshipment in accordance with the provisions of Chapter VII. It is this sub section of section 45 which is part and parcel of the Notification dated 3rd May, 2006. Then, by sub section(2) of section 45, the duties and obligations of the persons having custody of any imported goods in a Customs Area have been set out. Then, by sub section (3) the liability to pay duty on the goods which are pilfered shall be of the person having custody of the iported goods. In other words, if the imported goods are pilfered after unloading thereof in a customs area while in the custody of the person within the meaning of sub section (1) of Section 45, then, it is his responsibility and he will be liable to make good the loss caused by such pilferage. By clause (5) the conditions to be fulfilled by an applicant for custody and handling of imported or export goods in a customs area are set out. That clarifies that any person who intends to be approved as a Customs Cargo Service Provider for custody of importer goods or export goods and for handling of such goods in a customs area labeled as an applicant, has to fulfill the conditions specified in clause 5(1)(i) and 5(2) which states that that this applicant shall undertake to bear the cost of the customs officers posted, at such customs area, on cost recovery basis, by the Commissioner and shall make payment at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India, Ministry of Finance. There the Perishable Cargo Terminal permission refers to the Handling of Cargo in Customs Area Regulations, 2009. As per para 4 (XXIII) thereof, the Petitioners have to bear the charges of the Customs staff posted at the Perishable Cargo Terminal by the Commissioner of Customs, Air Cargo Complex, Mumbai on cost recovery basis. The Petitioners would not have been permitted to outsource the function of handling of Cargo within this terminal premises unless the Regulation 6(2) of these Regulations had permitted them to do so. Further, they could not have been appointed as custodian and within the meaning of the said term and as contemplated section 45 of the Customs Act, 1962, unless, they subjected themselves to these provisions. That they did so voluntarily does not mean that they can pick and choose favourable or beneficial terms and conditions and leave our or omit the so called onerous one's. Therefore, shall remain in custody of such person are the relevant words and to understand the concept. The permission to set up a Perishable Cargo Terminal for exports was sought by the Petitioners. That the facility was constructed by the Cargo Service Centre India (P)Ltd. on a Build, Operate and Transfer basis is clear from Exhibit '7' to the affidavit in reply. That entity is also designated as Customs Cargo Service Provider is further clear. The function of Cargo is outsourced but the Petitioners appointment as custodian under the Customs Act is not disturbed and remains untouched. Therefore, conditional approval contained in Exhibit '7' binds the Petitioners or else the approval would fall. Once the permissions have been sought and from the various authorities under the Customs Act, then, it is not proper to urge that the conditions imposed by such authorities will not be binding. Cost recovery charges are not being recovered from the importer/exporter. It is because the Petitioners under a specific document sought the approval firstly, to set up a Perishable Cargo Terminal and for exports. That was granted and in that terminal, services of the Customs staff had to be provided so as to enable the goods exported being cleared therefrom. For the purposes of clearance of imported and exported goods, and making of entries in relation thereto, by the proper Officer before a importation and equally for home consumption and payment of import duty, enabling recovery thereof in accordance with law that the customs staff alone would be in a position to take the requisite steps. They alone are competent to administer and implement the Act. That their services are utilized is clear and therefore the reimbursement of the charges incurred on them is undertaken to be made by the Petitioners. Such a payment and of cost recovery charges does not come within the ambit of the controversy dealt with by the Hon'ble Supreme Court. It is in these circumstances that this is a payment and more particularly by way of reimbursement of the costs in relation to such staff. That staff is deployed by the department of Customs and particularly the Commissioner. These are officers posted on additional sanctioned posts than the regular strength. The details have been provided in the affidavit in reply. In that regard, we find that Mr. Jetly has rightly relied upon paras 32 to 37 of the affidavit in reply, wherein it has been pointed out as to how additional cost has to be incurred for providing the services of the staff and posting them at the disposal of the station. It is in these circumstances that though it is denied that this is in the nature of a tax or a fee but the recovery is supported assuming to be a fee by corelating it with these services provided. There is, therefore, quid pro quo. There is no element of tax therein - Decided against the appellant.
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2014 (10) TMI 507
Violation of provisions of Sections 40 & 51 - Penalty u/s 114 - On recording the findings that the goods have been loaded and the ship which sailed before the issuing of the LEO and hence, the goods were liable to confiscation under the provisions of Section 13(g) and accordingly liable to penalty under Section 114(iii) of the Act. The goods were held liable to confiscation. - Held that:- Shipping bills were presented under the EDP system almost two days prior and further the goods were stuffed under the supervision of Excise/Customs authorities in the factory. In the present case as per the endorsement, the goods were loaded on the ship under the supervision of the Customs authorities at port. In view of the fact that exporter did not have any control over loading of container on the vessel, I find it is a fit case that no penalty should be levied for the alleged violation - Decided in favour of assessee.
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2014 (10) TMI 506
Denial of refund claim - Overvaluation of goods - Voluntary payment of duty - Held that:- Once the payment is made under protest, it means assessment also has been challenged. In such cases, either an assessment order confirming the original assessment has to be issued or the refund claim has to be considered. In any case, the appellant has the option to file an appeal against the assessment also in case the refund was rejected. In this case, the respondent did not have any grievance since the refund was sanctioned by the original authority as agreed upon between the two parties as emerging from the letter written by the party. No doubt there is no estoppel in law. At the same time, the officers of customs are also required to follow the law and the refusal to collect correct rate of duty compelling the assessee to pay higher duty itself was wrong. The correct procedure would have been to resort to provisional assessment in which case, the appellant would not have paid higher duty at all. The facts and circumstances show that the refund sanctioned by the original authority was in accordance with law and there was no need to interfere with the same by filing an appeal. Fortunately, the Commissioner (Appeals) has agreed with the lower authority in this case - No merit in the appeal filed by the Revenue - Decided against Revenue.
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FEMA
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2014 (10) TMI 527
Revocation of appellant's Passport - penalty on the appellant under Section 13 of FEMA for having contravened the provisions of Section 37 of FEMA read with Section 131(1) and 272A(1) of the Income-tax Act, 1961. - Held that:- officers under the Income-tax Act have the same powers as are vested in a court under the Code of Civil Procedure, 1908 to try a suit in respect of inter alia discovery and inspection, enforcing the attendance of any person, including any officer of a bank / company and examining him on oath and compelling the production of books of accounts and other documents. Because the appellant had not appeared before the Assistant Director, Directorate of Enforcement pursuant to the said summonses, the said Assistant Director had filed a complaint under Section 16(3) of FEMA on 16.09.2010. That complaint has led to a show cause notice being issued by the Directorate of Enforcement on 20.09.2010 and adjudication in respect thereof is pending. So, this much is clear that the written complaint under Section 16(3) of FEMA with regard to the appellant's non-compliance with the summonses is pending before the Adjudicating Authority under FEMA. A show cause notice was also issued by the Adjudicating Authority on 20.09.2010 wherein the appellant was required to appear in person or through legal practitioner / chartered accountant duly authorised by the appellant. This was in consonance with the stipulation contained in Section 16(4) of FEMA which clearly enables the person against whom the complaint has been made to appear either in person or take the assistance of a legal practitioner or a chartered accountant of his choice for presenting his case before the Adjudicating Authority. On the basis of the material available on record, the complaint under Section 16(3) of FEMA which was registered on 16.09.2010 has been followed by a show cause notice dated 20.09.2010 which essentially requires the appellant to show cause as to why an inquiry should not be held. The matter has not progressed beyond that stage. In fact, nothing has been brought to our notice to indicate that the Adjudicating Authority has formed any opinion that an inquiry should be held and that an inquiry has in fact been held. In any event, it is an admitted position that no adjudication order imposing a penalty pursuant to the complaint dated 16.09.2010 has been passed by the Adjudicating Authority under FEMA as yet. Revocation of the appellant's passport was based on the letter dated 04.10.2010 received by the Regional Passport Officer from the Directorate of Enforcement to the effect that a complaint dated 16.09.2010 under Section 13 of FEMA had been filed against the appellant and that a show cause notice had been issued against the appellant by the Directorate of Enforcement on 20.09.2010 for non-compliance of summonses issued by them. We may recall that complaint dated 16.09.2010 which had been filed under Section16(3) of FEMA. At the time the revocation order was passed, the appellant was already abroad in the U.K. The direct consequence of the revocation order was that the appellant could not travel to any country outside of the U.K. He could not attend any conferences or meetings in any other country where he could have expressed his views on cricket or on the organization and administration of cricket. To that extent it can be said that the 'direct and inevitable' consequence of the revocation order was to impinge upon his freedom of speech and expression. Now, this could be legitimate if the revocation order could be said to be in the interests of the general public, of course, limited to the interests of 'public order, decency or morality'. The alleged infraction on the part of the appellant could hardly be stated to fall foul of 'public order, decency or morality'. Therefore, in our view, the revocation order was invalid. The "public interest" allegedly involved, as evident from the appellate order dated 31.10.2011, was that cricket was the most popular sport in India and a huge public sentiment was attached to it and, therefore, it was in 'public interest' that the case against the appellant was properly investigated for which the "interrogation" of the appellant was considered necessary. This kind of 'public interest' does not fall in the categories of "public order, decency or morality" and, therefore, cannot be used as a shield against invalidity which would naturally follow on account of a restriction on the freedom of speech and expression. Therefore, the observations of the authorities below with regard to the allegations of FEMA violations against the appellant ought to be disregarded in the context of the revocation order. But, the matter does not end here because, in our view, these allegations had an impact on the decision making process of the Regional Passport Officer as well as the Chief Passport Officer inasmuch as they have both referred to the allegations to indicate that it was in 'public interest' that the passport of the appellant be revoked. In other words, the authorities under the Passports Act, while revoking the passport of the appellant, examined and were influenced by materials which were not relevant or germane and were not specified in the show cause notice dated 15.10.2010. The only 'subject-matter' of the show cause notice was the 'non-compliance of summons' issued by the Directorate of Enforcement, Mumbai. Since there is a specific procedure and there are specific statutory provisions for any default in non-compliance with summonses under FEMA itself read with relevant provisions of the Income-tax Act and the CPC, the revocation of the appellant's passport for that so-called default (which is yet to be adjudicated upon), on the ground that it was in the interests of the general public, was not lawful - Court set aside the impugned judgment dated 16.01.2013 and, consequently, the orders dated 31.10.2011 and 03.03.2011 passed by the respondent Nos.2 and 3. As a result, the revocation of the appellant's passport is set aside and the passport stands restored. - Decided in favour of appellant.
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Service Tax
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2014 (10) TMI 525
Commercial or Industrial Construction Service - main contractor has paid Service Tax on the transaction - Whether the sub-contractor of a main contractor is liable to discharge the service tax liability on the services provided by him on the same transaction - Held that:- Notification No. 1/2006-ST is in confrontation with the charging section, Section 66 of the Finance Act, 1994 and accordingly I hold the same is not applicable in the facts and circumstances of the case so far as the condition relating to not taking of CENVAT Credit is concerned of the service tax paid by the sub-contractor. Further, I notice that the finding of fact recorded by the adjudicating authority having not been challenged by any of the parties, and in view of the categorical finding of fact recorded, I hold that the respondent assessee is entitled to refund - Apex Court in the case of L&T Ltd. [2008 (8) TMI 21 - SUPREME COURT], I hold that opinion of the third member as rendered in the case of Sunil Hi-tech Engineers Ltd. [2014 (10) TMI 524 - CESTAT MUMBAI (LB)] by this Tribunal is not binding and held per incuriam as the same is directly in the teeth of the ruling of the Apex Court and is passed without taking notice of the aforementioned ruling of the Hon'ble Supreme Court - Decided against Revenue.
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2014 (10) TMI 524
Whether the sub-contractor of a main contractor is liable to discharge the service tax liability on the services provided by him - Applicability of old circulars - Denial of the benefit of exemption under Notification No. 12/2003-ST - Abatement of 67% under notification No.1/2006-ST - Penalties under sections 76, 77 and 78 - Held that:- Service tax law has been extended to a large number of services from 2002 onwards and scheme of Cenvat Credit was extended to services, no such circular has been issued in respect of any of the services which became taxable in 2002 or afterwards. Even in respect of services which were taxable before 2002, the earlier circulars became redundant in view of the change in law. Appellant had no doubt about the provisions of law and the fact that his activity was chargeable to service tax. This is evident from the fact that the appellant was paying service tax before 1.3.2006. From 1.3.2006 the reason for stopping to make payment is only that the main contractor was specifically made ineligible to take credit of input services vide notification no. 1/2006. In my opinion if law specifically prohibits doing something, the same cannot be circumvented by stopping to pay duty and claiming benefit of circulars which were not issued even in respect of that service and was also prior to the law at the relevant time i.e. introduction of Cenvat credit scheme to services. Appellant had no doubt about the taxability of service and was in fact paying service tax till 28.2.2006 and stopped paying service tax w.e.f. 1.3.2006 due to changes in legal position relating to the main contractor, it is clearly a case of taking law into hands. The notification No. 1/2006 clearly prohibits taking the credit of service tax paid on input services for availing the abatement. By not paying the duty appellant is trying to subvert purpose of restriction imposed in the new notification. Clearly this is a willful act with clear intention to evade payment of duty. The appellant is liable to pay service tax on the taxable services rendered by him in the capacity of a sub-contractor. The appellant's eligibility to the benefits of Notification No. 12/2003-ST and 1/2006-ST shall be examined by the adjudicating authority in the light of the evidences already available on record or on the basis of documentary evidence which the appellant shall submit forthwith to the adjudicating authority. The service tax demands shall be re-computed thereafter in accordance with law. Extended period of time is invokable in the present case as the appellant has suppressed facts and consequently, the appellant is also liable to penalties under sections 76, 77 & 78 of the Finance Act, 1994 - Decided against assessee.
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2014 (10) TMI 523
Waiver of pre-deposit of service tax - Various services provided by applicant - import of courier services - Held that:- For Courier received in India, the remuneration towards service rendered received in India and they are paying the service tax on whole of the amount. Therefore, whatever amount they paid to the foreign entity, the applicant is not required to pay service tax. When foreign entity is receiving courier to be delivered in India and the same has been given to the applicant to deliver in India. In that case, we are of the view that the service although performed in India but rendered to foreign entity therefore - Prima facie we are of the view that on this activity, the applicant is not required to pay the service tax. Applicant is receiving courier in India whereas the remuneration towards the service provided were received outside India. For this activity, the applicant is required to pay the service tax as service recipient is located in India and the service has been provided in India by the applicant. Therefore, prima facie we are of the view that the applicant has failed to make out a case for 100% waiver of pre-deposit - Partial stay granted.
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2014 (10) TMI 522
Waiver of pre-deposit - Business Auxiliary Service - applicant agreed to promote, endorse NKID products through artist - Held that:- product in question are not 'goods' as per section 2(7) of the Sale of Goods Act, 1930. Therefore, the levy of service tax under the category of Business Auxiliary Service is not sustainable. In these circumstances, the applicant has made out a case for complete waiver of pre-deposit - Stay granted.
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2014 (10) TMI 521
Waiver of pre deposit - providing smart card based driving licence and paper based learning licence on behalf of Government of Maharashtra - Business Auxiliary Service/Business Support Service - Held that:- As issuance of the driving licence by the applicant on behalf of the Government of Maharashtra prima facie is not an activity of business, therefore, the same does not qualify under Business Auxiliary Service/Business Support Service. In these circumstances, the applicants have made out a case for complete waiver of pre-deposit - Stay granted.
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2014 (10) TMI 520
Mandap Keeper service - benefit of abatement of 40% in terms of notification no.12/2001-ST dated 20.12.2001 - Held that:- As such the finding of the appellate authority that abatement was available only till 31.3.2004 is factually incorrect. Further, we find that though the appellant have raised the above ground of availment of notification before the Asstt. Commissioner, he has bothered not to examine the same and to find out whether the conditions of the said notification are fulfilled or not. However, in any case, we find that the said notification do not carry any conditions, as is clear from the latest notification no.8/2004-ST dated 9.7.2004 even the earlier notifications. Matter remanded back - Decided in favour of assessee.
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2014 (10) TMI 519
Availment of CENVAT Credit - common services - payment of an amount @ 10% / 5% on the electricity sold by the appellant from their electricity generated in Tamil Nadu as per Rule 6 of the Cenvat Credit Rules, 2004 - Held that:- During the course of the hearing and on perusal of the case records, it is observed by us that no where it is coming out as to which common services were availed by the appellant which were used both in the premises of the appellant as well as the electricity generating unit in Tamil Nadu. In the absence of any such co-relation, prima facie, Revenue has not been able to discharge burden that certain common services have been availed by the appellant and their electricity generating unit situated in Tamil Nadu. In view of the above observations and the case laws relied upon by the appellant, prima-facie, a case for complete waiver of the confirmed dues and penalties have been made out by the appellant - Stay granted.
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2014 (10) TMI 518
Waiver of pre deposit - Pandal or Shamiana Contractor servic - activity such as provision of furniture, barricades, matting and white side wall - Held that:- On a prima facie analysis, in view of Section 65(77a), Pandal or Shamiana is defined to mean a place specially prepared or arranged for organising an official, social or business functions; and under Section 65(77b) Pandal or Shamiana contractor means a person engaged in providing any service, either directly or indirectly, in connection with the preparation, arrangement, erection or decoration of a Pandal or Shamiana and includes the supply of furniture, fixtures, lights and light fittings, floor coverings and other articles for use therein. Section 65(105)(zzw) enumerates any service provided or to be provided to any person by a Pandal or Shamiana Contractor in relation to a Pandal or Shamiana, in any manner and including the services, if any, provided or to be provided as a caterer, to be the taxable service. On an interactive analysis of the above provisions, the supply of furniture by the petitioner for Rajasthan Diwas and like functions clearly falls within the ambit of the taxable service. We therefore prima facie find no case in favour of the petitioner. Whether penalty should be levied is a matter to be considered at the final hearing of the appeal - Partial stay granted.
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2014 (10) TMI 517
Demand of interest on the amount of service tax paid wrongly which was found as not payable - Held that:- When the demand for main amount itself is not sustainable, demand for interest cannot be sustained for the reason that appellant had paid amount which was not legally due. Appellant should get relief at least in respect of the interest amount not yet paid. Therefore, I set aside the impugned order of the Commissioner (Appeals) in so far as it upholds demand of interest of ₹ 1,21,011 - Decided in favour of assessee.
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2014 (10) TMI 516
CENVAT Credit - input services - Credit on Rent a cab service - Credit on GTA service - Held that:- service was availed for providing cabs to the customers who are required to come and inspect the goods as regards the quality and specification before they are removed. Since this is an activity which is required to be completed before removal of goods, the appellant is eligible for the credit. As regards the freight inwards, the credit has been disallowed on the ground that the appellant have been making varied claims before the lower authority and the appellate authority. Before the lower authority, appellant stated that they received the service from M/s. Muneish Enterprises whereas before the Commissioner (A) they mentioned the name as M/s. Dinesh Enterprises. However, there is no clear finding as to whether the credit was in respect of freight inward or outwards. It is the submission of the appellant that the claim relates to only freight inwards and not for freight outwards. Learned counsel submits that total amount involved is less than ₹ 4,000/-. Having regard to the facts and circumstances, I am inclined to allow the benefit accepting the submission made by the learned counsel that the entire amount relates to transportation of raw materials, etc., into the factory and does not relate to removal of goods from the factory gate. - Decided in favour of assessee.
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Central Excise
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2014 (10) TMI 526
Waiver of pre-deposit Stay application - Classification of micronutrients - Whether the mixture of micronutrients can be considered as other fertilizers or not Held that:- Following the decision in CCE, Bangalore Versus M/s. Karnataka Agro Chemicals [2008 (5) TMI 14 - SUPREME COURT] assessee contended that the product(s) is a mixture of various inorganic substances whose essential constituent is nitrogen which makes it a fertilizer - the scientific study indicates that PGRs are organic compounds, other than nutrients - As compared to nutrients which play a major role in the plant growth as a whole, PGRs play a restrictive role - essentially the product is PGR - PGR do not contain N, P or K - according to the Chemical Examiner's report submitted by the assessee and it forms part of the records and not disputed by the Revenue, micronutrient fertilizers manufactured by the appellants contain N, P or K - the assessee have made out a prima facie case on merits the pre-deposits waived during the pendency of appeal Stay granted.
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2014 (10) TMI 515
CENVAT Credit - Freight GTA - Whether Tribunal was justified in denying the cenvat credit of service tax paid and freight paid by M/s. Parle on inward and outward transportation (from the Appellants' factory to depots of M/s. Parle) on the ground that depots of M/s Parle cannot be the 'place of removal' and that freight charges were not borne by the Appellants but M/s. Parle - Held that:- Clear finding, which has been recorded both by the Commissioner (Appeals) and by the Tribunal, is that the sale had not taken place on an "FOR Destination" basis. Hence, the place of removal in the present case is the factory gate of the appellant and not the Depot of Parle Biscuits. As a matter of fact, as held by the Commissioner (Appeals), the liability on account of freight is borne by Parle Biscuits. No amount was borne by the appellant towards freight under the agreement with Parle Biscuits. Hence, in this view of the matter, the Tribunal was justified in coming to the conclusion that the Cenvat Credit on Service Tax paid on GTA Service availed for the transportation of the goods from the factory of the appellant to the Depot of Parle Biscuits, has been correctly denied. The view which has been taken by the Tribunal is in accordance with law - No substantial question of law arises - Decided against Assessee.
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2014 (10) TMI 514
Waiver of pre deposit - Whether the Hon'ble CESTAT erred in granting waiver of pre-deposit of assessed demand in favour of the respondents during pendency of the appeal thereby extending the period of stay beyond 365 days ignoring the recent amendment to section 35-C of the Central Excise Act, 1944, made through enactment of Finance Bill, 2013 - Held that:- Tribunal has noted that a waiver of pre-deposit and unconditional stay on the realisation of the adjudicated liability was granted by the Tribunal since a prima facie case was found in favour of the assessee. The Tribunal has also observed that the appeal has not been disposed of only on account of the pendency of several older appeals and not on account of any delay on the part of the assessee. ends of justice would be met if the Tribunal is requested to dispose of the appeal expeditiously and preferably within a period of six months from today. The waiver of pre-deposit will continue to remain valid for a period of six months from date of this order - Decided partly in favour of Revenue.
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2014 (10) TMI 513
Waiver of pre deposit - Whether the Hon'ble CESTAT erred in granting waiver of pre-deposit of assessed demand in favour of the respondents during pendency of the appeal thereby extending the period of stay beyond 365 days ignoring the recent amendment to section 35-C of the Central Excise Act, 1944, made through enactment of Finance Bill, 2013 - Held that:- Tribunal has noted that a waiver of pre-deposit and unconditional stay on the realisation of the adjudicated liability was granted by the Tribunal since a prima facie case was found in favour of the assessee. The Tribunal has also observed that the appeal has not been disposed of only on account of the pendency of several older appeals and not on account of any delay on the part of the assessee. ends of justice would be met if the Tribunal is requested to dispose of the appeal expeditiously and preferably within a period of six months from today. The waiver of pre-deposit will continue to remain valid for a period of six months from date of this order - Decided partly in favour of Revenue.
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2014 (10) TMI 512
Denial of CENVAT credit - Credit stand denied on the ground that the said registered dealer was not found available at the premises disclosed in his registration and his registration was cancelled with retrospective effect - Held that:- Appellant availed credit on the basis of invoices issued by the registered dealer who were carrying all the requisite particulars along with his registration number. The said invoices so received by the appellant duly stand entered by them in their RG 23A Part I register and shown to have been used in the manufacture of final product cleared on payment of duty. Apart from the general statement of the dealer of the manufacturer, there is no evidence on record to show that inputs were not actually received by the appellant or they have procured the inputs from any other sources. In the absence of inputs, the appellant could not have manufactured their final product. Accordingly, in the absence of any allegation of procurement of inputs from any other sources, the inputs received by the appellant have to be held as having been received under the cover of cenvatable invoices issued by the registered dealer. As per the provisions of Rule 7 of Cenvat Credit Rules, a manufacturer is under a legal obligation to verify the identity of the person supplying the inputs and is not expected to go beyond it and find out as to whether the supplier was procuring the goods in accordance with the law or not. - Following decision of Talson Mill Store v. CCE & ST, Ludhiana [2014 (2) TMI 443 - CESTAT NEW DELHI] - Decided in favour of assessee.
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2014 (10) TMI 511
Manufacturing activity - Printing and writing paper - Held that:- the lower appellate authority observed that by cutting paper into desired sizes does not amount to manufacture as the product remains only paper and even if duty is demanded, the appellant would be entitled to Credit on inputs - Printing and writing paper itself is classifiable under CETH 4802 90/99. By cutting into required sizes, no new product has been emerged. Therefore, cutting and slitting of paper does not amount to manufacture - Decided against Revenue.
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2014 (10) TMI 510
Availment of Cenvat credit - Non receipt of inputs in factory - Held that:- No verification has been made with the transporters by Revenue and there is no admission or supporting evidence from transporters to prove that they have not transported the goods; three vehicles shown to have been utilized are incapable to transport the goods but no verification has been made with records maintained for receipt of the goods and nature of the goods; and the records maintained as regards receipt of goods especially with regard to two consignments said to have been received by the appellant within 44 minutes when the distance between the supplier and the appellant is more than 60 Kms also have been verified. In respect of 17 invoices where the appellant admitted the liability, description of the goods in the invoices did not tally with the records maintained by them; in respect of others there is no evidence whatsoever. Therefore, prima facie, we can say that the appellant has made out a case for waiver of balance dues. Accordingly, requirement of pre-deposit of the balance dues is waived and stay against recovery is stayed during pendency of the appeals - Stay granted.
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CST, VAT & Sales Tax
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2014 (10) TMI 529
Penalty u/s 54(1)(14) of UP VAT - import of goods into the State by road against a declaration form - contravention of the provisions of Section 50 - Held that:- Non-filling up of column no. 6 i.e. not mentioning of bill / cash memo / chalan / invoice number may lead to an inference that in case of non-checking of goods the declaration form may be re-used for importing goods of same quantity, weight and value to evade payment of tax but it cannot be the sole ground to impose penalty under Section 54(1)(14) of the Act. Satisfaction has to be recorded after giving opportunity to the dealer / person and after considering all the relevant materials / evidences on record that there was an intention to evade payment of tax. The guilty mind is necessary to be established to impose penalty under Section 54(1)(14) of the Act. If the last fact finding authority i.e. the tribunal has recorded a finding of fact that there was no intention to evade payment of tax, same cannot be interfered with in revision under Section 58 of the Act provided the finding is perverse or it is based on consideration of irrelevant material or non consideration of relevant material.
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Indian Laws
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2014 (10) TMI 528
Dishonour of cheque - Compounding of offence - scope of Lok Adalats - The appellant comes in picture only because the parties had approached the Mega Lok Adalat organised by the appellant. The reason for filing the present appeal is the apprehension of the appellant that if the settlement arrived at in the Lok Adalats are not accepted by the Courts, one of the essential function and duty of Legal Services Authority cast upon by the Legal Services Authorities Act, 1987 (hereinafter referred to as the '1987 Act') would be greatly prejudiced and, therefore, it is necessary to straighten the law on the subject matter. - Held that:- No doubt, the manifest objective is to have speedy resolution of the disputes through these Lok Adalats, with added advantage of cutting the cost of litigation and avoiding further appeals. The advent of the 1987 Act gave a statutory status to Lok Adalats, pursuant to the constitutional mandate in Article 39-A of the Constitution of India, contains various provisions of settlement of disputes through Lok Adalat. It is an Act to constitute legal services authorities to provide free and competent legal services to the weaker sections of the society to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities, and to organize Lok Adalats to secure that the operation of the legal system promotes justice on a basis of equal opportunity. In fact, the concept of Lok Adalat is an innovative Indian contribution to the world jurisprudence. It is a new form of the justice dispensation system and has largely succeeded in providing a supplementary forum to the victims for settlement of their disputes. This system is based on Gandhian principles. Court could have passed the order itself, instead of relegating the matter to the Lok Adalat. We have ourselves highlighted the importance and significance of the Institution of Lok Adalat. We would be failing in our duty if we do not mention that, of late, there is some criticism as well which, inter alia, relates to the manner in which cases are posted before the Lok Adalats. We have to devise the methods to ensure that faith in the system is maintained as in the holistic terms access to justice is achieved through this system. We, therefore, deprecate this tendency of referring even those matters to the Lok Adalat which have already been settled. This tendency of sending settled matters to the Lok Adalats just to inflate the figures of decision/settlement therein for statistical purposes is not a healthy practice. Even when a case is decided in Lok Adalat, the requirement of following the guidelines contained in Damodar S. Prabhu (2010 (5) TMI 380 - SUPREME COURT OF INDIA) should normally not be dispensed with. However, if there is a special/specific reason to deviate therefrom, the Court is not remediless as Damodar S. Prabhu (2010 (5) TMI 380 - SUPREME COURT OF INDIA) itself has given discretion to the concerned Court to reduce the costs with regard to specific facts and circumstances of the case, while recording reasons in writing about such variance. Therefore, in those matters where the case has to be decided/settled in the Lok Adalat, if the Court finds that it is a result of positive attitude of the parties, in such appropriate cases, the Court can always reduce the costs by imposing minimal costs or even waive the same. For that, it would be for the parties, particularly the accused person, to make out a plausible case for the waiver/reduction of costs and to convince the concerned Court about the same. This course of action, according to us, would strike a balance between the two competing but equally important interests, namely, achieving the objectives delineated in Damodar S. Prabhu (2010 (5) TMI 380 - SUPREME COURT OF INDIA) on the one hand and the public interest which is sought to be achieved by encouraging settlements/resolution of case through Lok Adalats - Decided against the appellants.
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