Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 28, 2014
Case Laws in this Newsletter:
Income Tax
Customs
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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Notice of demand u/s 156 Interest charged u/s 215/217 and 139(8) - if the assessment order does not specify charging of interest under a specific section then it could not be charged or levied u/s 156 of the Act - HC
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Levy of penalty u/s 271(1)(c) - tribunal has materially erred in treating the assessment order as substantive assessment order without properly appreciating the order passed by the AO and it is to be held that the assessment order as such was a protective assessment order. - HC
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Circular issued by the CBDT, whereby deduction of income tax has been ordered on the award amount and interest accrued on the deposits made under the orders of the Court in Motor Accident Claims cases, quashed - HC
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Non-deduction of tax for payment of ship charter hire charges - Royalty u/s 9(1)(vi) -Since the DTAA between Government of India and Government of UAE, is more beneficial to the assessee, the provisions of section 9(1)(vi) Explanation 5 is not applicable - AT
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Loss on write off as receivable - What all therefore the assessee has to demonstrate is an honesty of its intent in effecting the write off - nothing more and nothing less - AT
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The beneficiaries have not set up the Trust - Therefore it cannot be said that the beneficiaries have come together with the object of carrying on investment in mezzanine funds which is the object of the trust - They cannot be regarded as an AOP - AT
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Nature of receipts Revenue or capital receipts Even if the grant received by the assessee bank has been used for meeting SLR requirements of RBI, which is relatable to its banking activity, yet the purpose of the payment made by the Government was to safeguard the interest of farmers and small depositors in the district Nande - held as capital in nature - AT
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Sales commission disallowed contractual obligation with family members of Director - commission was allowable as deduction where the revenue had failed to controvert the broker's statement that he had brought the parties of contract together - AT
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Revision u/s 263 - The direction of the CIT is specific - Now it is for the assessee to show as to which year the issues raised by the ld. CIT would relate to - It is only in the knowledge of the assessee as to what the assessee has done in his books - AT
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Deemed dividend u/s 2(22)(e) If the intention of the legislature was to tax such loan or advance as deemed dividend at the hands of deeming shareholder, then the legislature would have inserted deeming provision in respect of shareholder as well, that has not happened - AT
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Computation of capital gain u/s 50C(1) adoption of SRO value by completely ignoring the valuation made by the DVO is totally wrong and in violation of statutory mandate of section 50C - AT
Customs
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Appellants purchased Valued Based Advance Licence (VABAL) from the market in respect of the goods exported. - the purchaser of VABAL is not liable to prove export obligation for the benefit of Notification No. 203/92-Cus. - AT
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Classification of goods - Classification under Entry No. 5513.41.00 or under CTH 6304.19.30 - Import of bed sheets - goods to fall under 5513.41.00 - AT
Service Tax
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As regards renting of immovable property, extended period could not have been invoked since the levy has been regularized by retrospective amendment. Therefore, prima facie, the appellant has made out a case for waiver of pre-deposit - AT
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Denial of refund claim - Bar of limitation - As it is not an amount of service tax, therefore, provisions of Section 11B of the Central Excise Act are not applicable to the facts of this case. Therefore, the time limit prescribed under 11B is not applicable. - AT
Central Excise
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CENVAT Credit - Whether Cenvat Credit attributable to the quantity of Inputs (Molasses) used in, or in relation to manufacture of exempted final product required to be reversed - Being exempt the final product, respondent could not possibly have claimed CENVAT credit in respect of the same. - HC
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Classification of the product Cheeselings - appellant classified the same as ready to eat packaged foods not falling under the category of Namkeen - partial stay granted. - AT
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Denial of refund claim - Unjust enrichment - When the provisions of Central Excise are not applicable in that case bar of unjust enrichment is also not applicable - AT
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Waiver of pre deposit - manufacture of Lubricating Oils of different grades - Valuation of goods - As such, the assessee ought to have taken the cost of production prevailing during the relevant period of removal of the said goods to their sister units. - AT
VAT
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Stock transfer - CST - An in-genuine Form F may not entitle the dealer to avail the benefit under Section 6A of the Act in respect of a particular transaction, for which, in-genuine Form F has been filed - HC
Case Laws:
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Income Tax
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2014 (10) TMI 627
Assessment order passed u/s 143(3) quashed Failure to serve notice u/s 143 - AO was of the view that notice u/s. 143(2) of the Act was issued to the assessee on 23/09/2010 fixing the date of hearing for 07/10/2010 and thereafter also, other notices were issued u/s. 143(2) of the Act - Held that:- At the time of hearing, nobody was present on behalf of the assessee neither any adjournment was sought following the decision in ITO, Ward-1(2), Udaipur Vs. Shri Bhuvanesh Maheshwari, Prop. M/s. B. Maheshwari & Co., Udaipur [2014 (10) TMI 296 - ITAT JODHPUR] also in ACIT & another Vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] it has been held that after the return is filed, clause (b) of section 158BC provides that the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and "the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section145 shall, so far as may be, apply. This clause enables the AO after the return is filed, to complete the assessment u/s 143(2) by following the procedure like issue of notice u/s 143(2)/142 - This does not provide accepting the return as provided under section 143(3) only - If an assessment is to be completed u/s 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of the block return - the omission on the part of assessing authority to issue notice u/s 143(2) of the Act cannot be procedural irregularity and is not curable - requirement of notice u/s 143(2) of the Act cannot be dispensed with - since the AO failed to serve the notice u/s 143(2) of the Act to the assessee within the stipulated time limit - CIT(A) rightly quashed the assessment framed by the AO on the basis of invalid notice u/s 143(2) of the Act Decided against revenue.
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2014 (10) TMI 626
Allowability of deduction u/s 80IA Ship breaking activity amounts to manufacture or not Held that:- Following the decision in Vijay Ship Breaking Corpn. & Ors. Versus Commnr. of Income Tax, Ahmedabad [2008 (10) TMI 6 - SUPREME COURT] - ship breaking activity gave rise to the production of a distinct and different article and therefore the deduction u/s 80HH and 80-I is required to be given thus, the order of the Tribunal is upheld Decided against revenue.
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2014 (10) TMI 625
Cryptic order passed by Tribunal - Allowability of deduction u/s 80IB(10) on proportionate basis - housing project had contiguous residential units which were merged into a single residential unit measured in excess of 1000 sq.ft. Held that:- The Tribunal has rendered a cryptic finding - It is not an elaborately reasoned order as could have been expected from the last fact finding authority - If the argument was that in each of the project/building the flats having less than 1000 sq.ft. area have been sold by separate agreements, may be to the members of the same family and consequent to the purchase by such members, they have merged the flats/unit and that is beyond the control of the Assessee, the Tribunal has not held that these facts are admitted or that there is no dispute about the same - the Tribunal referred to the construction projects, the flats in dispute and certain findings so also the admission by the Assessee in survey proceedings - If the disputed flats were identified by the parties, their position and situation at site should have been elaborately referred including the statements which have been recorded during the course of survey proceedings - The documents, namely, agreements in relation to these flats should have been referred in extenso by the Tribunal - That having not been done, any expression of opinion on the legal question would be academic thus, the order of the Tribunal is to be set aside and the matter is remitted back to the Tribunal for fresh decision Decided in favour of revenue.
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2014 (10) TMI 624
Order passed u/s 163 - PILCOM to be treated as the Agent of two Non-residents or not Held that:- Assessee rightly contended that the appellant was treated as an agent for the purpose of recovery of tax - The Tribunal came to a finding that the money received by the non-resident was not taxable in India - There was, as such, no question of holding the appellant as an agent - The agency was for the purpose of recovery of tax from out of the money paid during the AY - It is not connected with any other transaction - when the money received by the non-resident was not taxable in India, it should have automatically followed that the assessee is also not an agent which the Tribunal did not hold and thus committed an error of law also in earlier aseessement year of the same assessee wherein the assessment had been quashed, but the finding that the assessee was an agent of non-resident was maintained thus, the order of the Tribunal is to be set aside Decided in favour of assessee.
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2014 (10) TMI 623
Maintainability of appeal Alternate remedy availed by assessee - Validity of notice for reopening of assessment u/s 148 Held that:- The assessee has already invoked an efficacious alternative of filing an appeal to CIT(A) raising all the issues including the issue of jurisdiction to reopen the assessment for AY 2007-08 - the conduct of the AO in delaying the proceeding and thereafter pleading helplessness by stating that unless he passes the reassessment order before 31 March 2014 the same would become time barred is a little strange - This conduct on the part of the AO is not appreciated - The entire procedure of giving of reasons and dealing with objections before reassessment proceedings can commence as decided in GKN Driveshafts (I) Ltd. v/s. I.T.O. [2002 (11) TMI 7 - SUPREME Court] was only to ensure that the reassessment proceedings are not taken by the AO without satisfaction of the preconditions of Sections 147 and 148 of the Act as a safeguard against harassment the hurry in passing Assessment order could lead to injustice not only to the assessee but also to the Revenue as it is likely the proper consideration would not be given to the issues involved - However, as the asessee has already invoked an efficacious alternative remedy by filing an appeal before CIT (A), there no reason to entertain the petition - All contentions left open to be urged before CIT(A) Decided against assessee.
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2014 (10) TMI 622
Notice of demand u/s 156 Interest charged u/s 215/217 and 139(8) - Whether the Tribunal was justified in holding that interest u/s 215/217 and 139(8) of the Act could not be charged unless specifically mentioned in the assessment order particularly when charging of interest was mandatory Held that:- There has to be a specific order passed by the AO charging interest and only thereafter, a notice of demand levying interest could be issued as decided in Commissioner of Income Tax Vs. Anjum M.H. Ghaswala & others [2001 (10) TMI 4 - SUPREME Court] - levy of interest is mandatory but at the same time the Assessing Officer is specifically required to mention the specific section for charging interest, failing which no interest could be levied. A notice of demand is somewhat like a decree in a civil suit, which must follow the order - When a judgment in a civil suit does not specify any amount to be recovered, the decree could not contain such amount - Similarly, when the assessment order does not indicate that interest would be leviable, the notice of demand u/s 156 of the Act levying interest would be wholly illegal since interest is payable in consequence of an assessment order as is clear from Section 156 of the Act itself - the notice of demand cannot go beyond the assessment order and the assessee cannot be served with any such notice demanding interest - Further, the assessee must know that he has been charged interest under a particular section of the Act, which must be specify in the assessment order and only thereafter a notice of demand u/s 156 of the Act could be issued - if the assessment order does not specify charging of interest under a specific section then it could not be charged or levied u/s 156 of the Act as such no substantial question of law arises for consideration Decided against revenue.
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2014 (10) TMI 621
Levy of penalty u/s 271(1)(c) - Unexplained investment in promissory notes treated as income u/s 69 Whether the assessment order was protective assessment order or substantive assessment order - Held that:- Assessee contended that the assessment order passed by the AO was a protective assessment order and the AO as such could not have passed an order to initiate the penalty proceedings u/s 271(1)(c) of the Act - while passing the order to initiate the penalty proceedings u/s 271(1)(c) of the Act the AO specifically observed that the penalty u/s 271(1)(c) of the Act be initiated in respect of income of ₹ 5 lakhs, which has been assessed as protective measure the protective assessment shall be treated as substantive assessment if and when income by way of unexplained investment in promissory note worth ₹ 37,65,000/- is finally excluded from the income of Shri Jitendra R., Patel and vice versa makes it very much clear that the assessment order passed by the AO was a protective assessment order and it cannot be termed and/or treated as substantive assessment order as observed by the tribunal thus, the tribunal has materially erred in treating the assessment order as substantive assessment order without properly appreciating the order passed by the AO and it is to be held that the assessment order as such was a protective assessment order. Where there is dispute as to whether income concealed would be assessed in the hands of the assessee, unless the determination is made by the AO, no charge of concealment can be made against the person in whose hands income is added on protective basis and the assessee is liable only if it is his income, which has been concealed - the only person upon whom the substantive assessment is made would be liable for penalty, provided the conditions precedent for the imposition of the penalty are satisfied. Unless and until the substantive assessment is made and final assessment order is passed in case of the assessee adding the income in the hands of the assessee, even the initiation of the penalty proceedings are not permissible - There cannot be any initiation of the penalty proceedings with respect to the protective assessment order relying upon Bankim J. Shah Versus Commissioner Of Income-Tax [1991 (7) TMI 59 - GUJARAT High Court] - there cannot be any protective initiation of the penalty proceedings - as such the basis or foundation for initiation of the penalty proceedings is the requisite satisfaction as provided in Section 271(1) of the Act and as such satisfaction could not be reached when the Income Tax Officer himself believes that the income for which the assessee is charged for concealment or furnishing of inaccurate particulars does not belong to him and he is assessed only as a protective measure - the tribunal has materially erred in treating the order passed by the AO as substantive assessment order Decided in favour of assessee.
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2014 (10) TMI 620
Tax deduction on interest accrued on term deposits on orders passed in Motor Accident Claims cases Validity of Circular dated 14.10.2011 Held that:- The circular, dated 14.10.2011, issued by the Income-tax Authorities, is not in tune with the mandate of Sections 2(42) and 2(31), read with Section 6 of the Income Tax Act, 1961 the circular also is not in accordance with the mandate of Section 194A of the Act As decided in Ghaziabad Development Authority vs. Dr. N.K. Gupta [2002 (9) TMI 292 - National Consumer Disputes Redressal Commission] - damages paid for the death of a person cannot be equated with the income and tax cannot be deducted also in Delhi Development Authority v. ITO [1995 (1) TMI 126 - ITAT DELHI] - the amounts credited in the accounts of the allottees were not in the nature of interest within the meaning of section 2(28A) and directed that what is recovered by the DDA be refunded in the present facts and circumstances, the Circular, dated 14.10.2011, issued by the Income Tax Authorities, whereby deduction of income tax has been ordered on the award amount and interest accrued on the deposits made under the orders of the Court in Motor Accident Claims cases, is quashed and in case any deduction has been made, they are directed to refund the same, with interest at the rate of 12% from the date of deduction till payment Decided in favour of assessee.
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2014 (10) TMI 619
Addition u/s 69B Income from resort - Investment in land and building Reference made to DVO for determination of value of investment Held that:- The addition was made on the basis of the report of the DVO wherein the DVO had valued the property on the basis of the rates adopted for the purpose of stamp duty by treating the property to be for commercial usage whereas the land had not been converted from agricultural land into commercial land by the Government under change of land use - the Deputy Commissioner-cum-Collector vide order dated 24.2.2011, it has accepted the value of the property as depicted by the assessee in the sale deed to be full value of consideration - the Tribunal had rightly not relied upon the report of the DVO the order of the Tribunal is upheld Decided against revenue.
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2014 (10) TMI 618
Non-deduction of tax for payment of ship charter hire charges - Royalty u/s 9(1)(vi) - Whether the payment made by the assessee is a royalty and whether it is taxable in India - Held that:- The assessee entered into an agreement with Lots International Ltd, a company incorporated in Dubai, UAE for time charter of a vessel by name, M.V. Thekkadi - if the provisions in the DTAA are more beneficial to the assessee, then the provisions in the DTAA would prevail over the Indian Income-tax Act - Article 8 of the DTAA between government of India and Government of UAE would be applicable to the facts of the case, since it is more beneficial to the assessee - Article 8 of the DTAA, more particularly, sub clause 2 clearly says that the profit from operation of the ship in international traffic will also include the charter or rental of ships incidental to such transportation - the profit arising to the non -resident company on charter of the vessel has to be taxed only in the UAE in view of the DTAA between Government of India and Government of UAE, more particularly, Article 8(1) of the DTAA. The material filed by the assessee clearly shows that the vessel M.V. Thekkadi was operated between Tuticorin Port to Mali Port in Maldives. Therefore, it operates in international traffic/waters the distinction made by the CIT(A) between the charter hire and time charter is unwarranted - Since the material filed by the assessee discloses that the vessels were operated between India and Maldives in the international traffic, merely because there was a clause that the vessel would be delivered at Tuticorin Cochin Range after the expiry of the charter period in the agreement, that cannot justify for application of Explanation 5(c) to section 9(1)(vi) of the Act. The CIT(A) placed reliance on the Explanation 5 to section 9 of Indian Income-tax Act - Since the DTAA between Government of India and Government of UAE, is more beneficial to the assessee, the provisions of section 9(1)(vi) Explanation 5 is not applicable the order of the lower authorities is to be set aside Decided in favour of assessee.
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2014 (10) TMI 617
Invocation of provisions of section 263 by CIT Held that:- The power of suo motu revision u/s 263(1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist relying upon Malabar Industrial Co Ltd Vs CIT [2000 (2) TMI 10 - SUPREME Court] - during the course of assessment proceedings AO had raised query with respect to the exchange fluctuation loss and in response to which the Assessee has submitted its reply - the reply of Assessee was found to be acceptable by the AO because no addition on account of exchange rate fluctuation was made by the AO in the assessment order - for A.Y. 2006-07 and A.Y. 2008-09, AO had had made full inquiries by raising the queries and the same were also replied by the assessee and on receipt of the replies accepted the claim of the assessee in CIT vs. Max India Ltd. [2007 (11) TMI 12 - Supreme Court of India] - where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of Revenue, unless the view taken by the ITO is unsustainable in law - during the course of assessment proceedings, the AO examines numerous issues and generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made - provisions of s. 263 cannot be resorted to relying upon Commissioner Of Income-Tax Versus Gabriel India Limited [1993 (4) TMI 55 - BOMBAY High Court] - when a regular assessment is made u/s 143(3) a presumption can be raised that the order has been passed upon on application of mind - Revenue has not brought any material on record to demonstrate that the view taken by the AO was an impermissible view and was contrary to law or was upon erroneous application of legal principles necessitating the exercising of Revisionary powers u/s 263 thus, the order of the CIT(A) is to be set aside Decided in favour of assessee.
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2014 (10) TMI 616
Disallowance u/s 14A r.w Rule 8D Claim of exemption u/s 10(34) and 10(35) Held that:- There is no scope for either inclusion or exclusion of any expenses - which method the assessee adopts, while applying rule 8D, estimation per which is based on the volume of investment yielding (or liable to yield) income not forming part of total income held during the year, i.e., is investment based (though of course would have to be capped at the total amount of expenditure incurred), rather than expense based - the law does not circumscribe the estimation of the expenditure incurred by the assessee in relation to - implying a proximate nexus therewith, income not forming part of the total income, to any particular or one method or formulae - When it is said that rule 8D is mandatory (i.e., AY 2008-09 onwards), all that is meant is where the said expenditure cannot be reasonably ascertained with reference to the assessee's accounts, toward which the AO is to issue his satisfaction or, as the case may be, dissatisfaction, he has no discretion in case of the latter in formulating a method of his own, nor indeed has the assessee, and is bound to adopt the prescription of rule 8D. The assessee has in restricting the disallowance to ₹ 4 lacs, i.e., the interest on borrowed capital availed to fund its investments made during the year, confused between the interest cost directly relatable to such investment, which is a subject matter of rule 8D(2)(i), and that indirectly relatable to such investment, estimation of which is governed by rule 8D(2)(ii) relying upon The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - there was no basis to the Revenue's claim as made before it, so that the Revenue's appeal was dismissed. The assessee has also earned interest income the income is on long term investments and on loans forming part of current assets - The entire interest income is offered as, and admittedly, business income - the fact of earning of interest income would in our view be by itself of little consequence - There is no claim, which would, where so, though need to be established, of the interest being on borrowings which stood relent on interest - no nexus had been established between borrowed funds and investments by the assessee in dividend yielding shares/income yielding mutual funds - the assessee had utilized its own funds for the purpose of making the investments - the assessee has utilized its own funds in making the investments would not be dispositive of the question as to whether the assessee had incurred expenditure in relation to the earning of such income - Even if the assessee has utilized its own funds for making investments which have resulted in income which does not form part of the total income under the Act, the expenditure which is incurred in the earning of that income would have to be disallowed. Adjustment of amount disallowed u/s 14A Computation of book profits u/s 115JB Hedl that:- The disallowance u/s.14A is not qua notional, but actual expenditure - The only adjustment is that the expenditure shall have to be valued at the amount as per the assessee's books, so that where there is a difference, as in the case of depreciation, or the loss on the sale of assets, etc., it is the latter, i.e., the book value, which shall prevail - The expenditure disallowed u/s.14A is only that incurred and claimed by the assessee in respect of dividend income, exempt u/s 10 - the amount disallowed u/s.14A provides a ready basis for determining the amount of such expenditure is another matter. Loss on write off as receivable Allowable u/s 36(1)(vii) or section 37(1) Held that:- What the assessee in effect claims is the loss, on perceiving the amount as no longer receivable in view of the ceasure of some business/es, on reorganization, so that the same would henceforth be carried on by another group concern/s - The claim is u/s.28 and not either u/s. 36(1)(vii) or section 37(1) - What all therefore the assessee has to demonstrate is an honesty of its intent in effecting the write off - nothing more and nothing less it could not be viewed as to how the write off does not represent a honest assessment by the management of the amount being no longer receivable, so that the write off would qualify for deduction on the ground of prudence - It may well be that circumstances may arise in future making available the credit of input available to the assessee; there being no time bar for the claim of the same - If and when claimed, the same would stand to be brought to tax as income for the relevant year - the assessee is bound to maintain accounts so as to reflect the true and fair view of its affairs, and any future adjustment, if any, would therefore find due reflection therein thus, the contention of the assessee is upheld. Computation of book profits u/s 115JB Held that:- The write off to be in pursuance to an accounting policy which is in conformity with the fundamental accounting principles as advocated by the Accounting Standards issued by the ICAI (so that it is in accordance with the provisions of Part II of Schedule VI to the Companies Act, 1956) as well as by CBDT there was no merit in confirming the adjustment in computing the book profit u/s 115JB Decided partly in favour of assessee.
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2014 (10) TMI 615
Order for adjustment towards advance tax liability - Whether the CIT(A) was right in law in holding and directing that the amount seized from the assessee be adjusted towards the advance tax liability without appreciating that the provision of section 132B of the IT Act do not provide for the same Held that:- Following the decision in CIT vs. Shelly Products and Ors. [2003 (5) TMI 4 - SUPREME Court] - the clarificatory and declaratory provisions which were inserted to clarify the law so as to remove doubts are of retrospective effect even if, the same provisions are stated to be applicable from a particular assessment year or date - in a Memorandum of Explanation the provisions of Finance Act, 2013 it has been stated that the amendment for insertion of Explanation-1 and Explantion-2 to the provisions of section 132B of the Act are propose to amend the section was as to clarify the existing liability does not include advance tax payable in accordance with the provisions of part 'C' of Chapter XVII of the Act - Therefore, the Explanation 2 to section 132B of the Act is a clarificatory provision which was inserted to clarify the intention of the legislature that the "existing liability" does not include advance tax payable in accordance with the provisions of Part 'C' of Chapter XVII of the Act revenue rightly contended that the Explanation 2 attached to section 132B of the Act, is a clarificatory provision which is of retrospective effect, even if, the same was stated to be applicable from a particular date - Explanation 2 to section 132B of the Act is retrospectively effective from the date of insertion of provision of section 132B of the Act w.e.f. 1.6.2002. The assets or cash seized u/s 132 of the Act is adjustable against the amount of any "existing liability" under the Act which does not include "advance tax" payable in accordance with the provisions of Part 'C' of Chapter XVII of the Act as per section 208 of the Act, the amount of cash seized could not be adjusted as advance tax for the A.Y. 2008-09 the assessee has shown advance tax paid besides self-assessment tax paid and cash seized - the assessee himself has not treated the amount of cash seized as an advance tax. The assessment was framed u/s 153A/143(3) of the Act on 24.12.2010 on total income, therefore, the application of assets u/s 132B of the Act r/w Explanation 2 would be possible only on conclusion of assessment proceedings i.e. 24.12.2010 - the AO was wrongly granted adjustment of seized cash from 23.2.2011 and the CIT(A) was also grossly erred in holding that the assessee was entitled to adjustment of seized cash from 01.07.2008 - the AO is directed that the adjustment of cash seized be given for the assessee from the date of completion of assessment proceedings u/s 153A /143(3) of the Act i.e. from 24.12.2010 as per provisions of Explanation 2 to section 132B of the Act. Non-credit of seized cash before levy of interest u/s 234A Held that:- The CIT(A) has not specifically granted any relief for the assessee on the issue of levy of interest u/s 234A and 234B of the Act, but the CIT(A) has directed the AO to adjudicate the issues while giving appeal effect to the main grounds and the AO is also directed by the CIT(A) to take consideration of the decisions of Commissioner of Income-tax Versus Ashok Kumar [2010 (9) TMI 771 - Punjab and Haryana High Court] - the adjustment of seized cash is to be given for the assessee from the date of completion of assessment which was 24.12.2010, therefore, levy of interest u/s 234A of the Act being consequential is also restored to the file of the AO with a direction that the issue of levy of interest u/s 234A of the Act shall be decided in view of our findings on the main issue and in accordance with calculation of adjustment of seized cash u/s 132B r/w Explanation 2 of the Act Decided in favour of revenue. Admission of additional grounds Held that:- The letters dated 30.06.2008 and 18.08.2008 were submitted before the AO and the AO gave detail deliberations and findings thereon - However, during first appellate proceedings the CIT(A) considered the letters and relief was granted for the assessee relying on the same letters but this contention of the Revenue is not acceptable that the CIT(A) admitted additional evidence without confronting the same to the AO in contravention of Rule 46A of the Rules - Hence, additional grounds based on this legal contentions are not admissible Decided against revenue.
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2014 (10) TMI 614
Applicability of the provisions of Sec.60, 61 and 63 - Obligation to pay tax by the trust Tax obligation has been fully discharged by beneficiaries of the assessee trust or not Held that:- Assessee contended that the AO has not disputed in his remand report the fact that the Assessee trust is revocable but only says that beneficiaries are assessed at different places in India and it is very difficult to monitor all these beneficiaries as to whether they have filed their returns and even if filed, whether correct share of income received/receivable from the Assessee are admitted - To avoid such eventuality it would be correct to Assessee the trustee/representative Assessee - once the trust is accepted to be revocable then there is no question of assessing the transferee and it is only the transferor who can be assessed - It Sec.61 mandates that income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income tax as income of the transferor and therefore the assessment in the hands of the transferee/representative assessee is not proper. U/s 164 as so replaced, a `representative assessee' who receives income for the benefit of more than one person whose shares in such income are indeterminate or unknown, will be chargeable to income-tax on such income at the flat rate of 65% or the rate which would be applicable if such income were the total income of an AOP, whichever course would be more beneficial to the Revenue the object of the amendments to the provision was only that the distribution of the income should not be entirely at the discretion of the trustees and that the trust deed should regulate the shares. The power of revocation under Clause 13 of the Deed of Trust is a general power of revocation and the same would be sufficient for construing the transfer in the present case as a revocable transfer - it is not necessary that the power of revocation should be at the instance of the contributors/beneficiaries/ transferor and it can be at the instance of any person either settlor, trustee, transferee or the beneficiaries - Provisions of Sec.61 of the Act do not contemplate a power of revocation only at the instance of the transferor relying upon Additional Commissioner of Income-Tax, Gujarat Versus Surat Art Silk Cloth Manufacturers Association (And Other References) [1979 (11) TMI 1 - SUPREME Court] - the existence of a power to revoke the transfer that has to be seen and not the manner in which/ or at whose instance such revocation is brought about. Following the decision in Jyotendrasinhji Versus SI Tripathi And Others [1993 (4) TMI 1 - SUPREME Court] - Sec. 63(1) of the Act does not say that the deed of transfer must confer or vest an unconditional or an exclusive power of revocation in the transferor - the fact that concurrence of the trustee had to be obtained by the transferor/settler for revocation will not make the trust an irrevocable transfer - the deed contains a provision giving the transferor a right to re-assume power directly or indirectly over the whole or any part of income or assets within the meaning of s. 63(a)(ii) of the Act thus, Sec.61 read with Sec.63 of the Act which mandates that income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income tax as income of the transferor will apply to the facts and circumstances of the present case and therefore the assessment in the hands of the transferee/representative assessee was not proper. Applicability of provisions of Sec.164(1) - Charge of tax where share of beneficiaries unknown Held that:- There are two aspects to be noticed, the first aspect is the identification of the beneficiaries while the second aspect is with regard to ascertainment of the share of the beneficiaries - Clause 1.1.13 of the Trust Deed clearly lays down that beneficiaries means the Persons, each of whom have made or agreed to make contributions to the Trust in accordance with the Contribution Agreement the clause is sufficient to identify the beneficiaries - share income of the beneficiaries cannot be determined or known from the trust deed if the trust deed sets out expressly the manner in which the beneficiaries are to be ascertained and also the share to which each of them would be entitled without ambiguity, then it cannot be said that the Trust deed does not name the beneficiaries or that their shares are indeterminate - The persons as well as the shares must be capable of being definitely pin-pointed and ascertained on the date of the trust deed itself without leaving these to be decided upon at a future date by a person other than the author either at his discretion or in a manner not envisaged in the trust deed - Even if the Trust deed authorises addition of further contributors to the trust at different points of time, in addition to initial contributors, than the same would not make the beneficiaries unknown or their share indeterminate - Even if the scheme of computation of income of beneficiaries is complicated, it is not possible to say that the share income of the beneficiaries cannot be determined or known from the trust deed thus, the provisions of Sec.164(1) of the Act would not be attracted in the present case - identity by reference to the terms of the trust deed is sufficient and it is not necessary that the beneficiaries should be specifically named in the deed of trust Decided against revenue. Assessee trust to be assessed as AOP or not Held that:- The beneficiaries contributed their money to the Assessee and a separate agreement was entered into between the Assessee and each beneficiary - There is no inter se arrangement between one contributory/ beneficiary and the other contributory/beneficiary as each of them enter into separate contribution arrangement with the Assessee - it cannot be said that two or more beneficiaries joined in a common purpose or common action and therefore the tests for considering the Assessee as AOP was satisfied - The beneficiaries have not set up the Trust - Therefore it cannot be said that the beneficiaries have come together with the object of carrying on investment in mezzanine funds which is the object of the trust - The beneficiaries are mere recipients of the income earned by the trust - They cannot be regarded as an AOP Decided against revenue. Income of a person has to be assessed in the correct and appropriate status Held that:- Sec.161(1) by implication permits assessment of either the beneficiary or the Trustee - When the Trustee is assessed as representative assessee in respect of income received on behalf of the beneficiary, the section provides that tax shall be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him the order of the CIT(A) is upheld Decided against revenue.
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2014 (10) TMI 613
Nature of receipts Revenue or capital receipts Character of the grant received by the assessee from the Government of Maharashtra of ₹ 110 crores - Held that:- Even if the grant received by the assessee bank has been used for meeting SLR requirements of RBI, which is relatable to its banking activity, yet the purpose of the payment made by the Government was to safeguard the interest of farmers and small depositors in the district Nande - The strategy of providing financial assistance by way of the grant was a mechanism devised by the Government of Maharashtra with the purpose of safeguarding the interest of farmers and depositors from the Nanded district, and the same clearly emerges from the Government decision dated 10.08.2009 - Following the decision in Commissioner of Income Tax, Madras Versus Ponni Sugars & Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] thus, the grants received are not in the course of any trade but is of capital nature, which is not chargeable to tax Decided in favour of assessee. Denial of claim of deduction u/s 36(1)(viia) Restriction of claim of provision for bad debts - Held that:- Creation of provision for bad and doubtful debts equal to the amount mentioned in section 36(1)(viia) is a must for claiming such deduction - As the assessee has not made a Provision for bad and doubtful debts in the books of account equal to the amount of deduction sought to be claimed under Section 36(1)(viia) of the Act, Following the decision in Shri Mahalaxmi Co-op Bank Ltd. Versus ITO, Ward 1 (1), Kolhapur [2014 (1) TMI 1366 - ITAT PUNE] - the claim of the assessee for deduction u/s 36(1)(viia) of the Act is liable to be restricted to the actual amount of Provision for bad and doubtful debts made in the books of account - the income-tax authorities have rightly allowed the deduction u/s 36(1)(viia) of the Act Decided against assessee. Addition of interest income on sticky advances/Non- Performing Asset advances Held that:- The assessee is a cooperative bank and it is not in dispute that it is also governed by the Reserve Bank of India - the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to the assessee as it is applicable to the companies registered under the Companies Act as decided in M/s Southern Technologies Ltd. Versus Joint Commnr. of Income Tax, Coimbatore [2010 (1) TMI 5 - SUPREME COURT OF INDIA] - the provision of 45Q of Reserve Bank of India Act has an overriding effect vis-ΰ-vis income recognition principle under the Companies Act - Hence Sec.45 Q of the RBI Act shall have overriding effect over the income recognition principle followed by cooperative banks also - the AO has to follow the Reserve Bank of India directions 1998. The assessee did not admit the interest relatable to NPA advances in its total income in Commissioner of Income tax Versus Vasisth Chay Vyapar Ltd. & others [2010 (11) TMI 88 - Delhi High Court] it has been held that the interest on NPA assets cannot be said to have accrued to the assessee there is no reasons to interfere with the ultimate conclusion of the CIT(A) in deleting the addition relating to interest income in respect of NPAs Decided against revenue.
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2014 (10) TMI 612
Sales commission disallowed contractual obligation with family members of Director - Held that:- The payment of commission was made after due deduction of tax at source - The assessee was engaged in the business of chemical exports for last many years - During the year under consideration, the assessee secured the contract for setting up galvanized plants in UAE and Iraq from M/s. Azady Trading FZCO and Pioneer Machinery & Equipment Industry LLC which the assessee got executed by availing services of M/s. Gunatit Builders - The assessee claimed to have incurred commission expenses in respect of this business and setting up of galvanized plants at UAE and Iraq - the confirmation of M/s. Gunatit Builders filed by the assessee shows that Mr. Bipinchandra N. Attawala was instrumental in entering of contract between the assessee company and M/s. Gunatit Builders - the assessee company claimed that the business proposal of setting up of galvanized plants in UAE and Iraq was brought to it by Mr. Bipinchandra N. Attawala, Ms. Jasmine B. Lala & Ms. Sejal Dhaval Lala and they assisted the assessee company in entering into contract with M/s. Gunatit Builders also for executing the contract and setting up galvanized plants. Merely because in the legal contract which was directly entered into between the Assessee Company and Azady Trading FZCO and Pioneer Machinery & Equipment Industry LLC, the names of these three persons did not appear, does not evidence that the business proposal was not brought to the assessee company by these three companies - it was not necessary for the three persons to physically visit Iraq before bringing a business proposal in Iraq to the knowledge of the knowledge of the company - In absence of any positive material brought on record by the AO after examining the three recipients of the commission to show that in fact no services were rendered by these three persons, the adverse inference drawn by the AO on the basis of his subjective opinion only cannot be sustained - the genuineness of payment is not in doubt as the payment was made through banking channel after deducting tax at source and the recipients of commission have also shown the same as their income relying upon Swastik Textile Co. Pvt. Limited v/s CIT [1984 (1) TMI 29 - GUJARAT High Court] - commission was allowable as deduction where the revenue had failed to controvert the broker's statement that he had brought the parties of contract together - the disallowance of commission payment cannot be sustained Decided in favour of assessee. Addition of foreign sales commission Held that:- The assessee paid commission to Mrs. Jigna K. Babla and Mrs. Pramodini K. Babla on account of sale to M/s. Carus Chemicals of ₹ 7.23 crore the evidences the fact that recipients of the commission were instrumental in getting the sales order from M/s. Carus Chemical Corporation of USA - the assessee company earned gross profit of ₹ 1.71 crores on the sales made to M/s. Carus Chemical Corporation, USA of ₹ 7.23 crores and that the profit after commission was 15.85% and the commission was 7.7% of sales relying upon Swastik Textile Co. Pvt. Limited v/s CIT [1984 (1) TMI 29 - GUJARAT High Court] - commission was allowable as deduction where the revenue had failed to controvert the broker's statement that he had brought the parties of contract together - the commission payment was incurred for commercial expediency of the assessee - there were other contracts also for which commission to Mrs. Jigna K. Bala and Mrs. Pramodini K. Bala is paid and the same has been allowed by the AO - the AO was not justified in disallowing the commission payment and the CIT(A) was not justified in confirming the same thus, the order of the CIT(A) is set aside Decided in favour of assessee.
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2014 (10) TMI 611
Revision u/s 263 - Erroneous and prejudicial order to the interest of the revenue - period of limitation - Held that:- The assessee has filed a letter dated 'nil' informing the AO of the commission income having been omitted to have been offered to tax - In the said letter the assessee has also enclosed profit and loss account - It is on the basis of this letter that notice u/s 148 was issued - in the letter and response to the notice u/s 148 the assessee itself has back tracked on its letter earlier filed having the escaped income - in the course of 142(1) proceedings the assesee voluntarily has produced details of the share application and the share premium received by the assessee - the assessee was meticulously by design drawn the attention of the AO to the share application money and the share premium - if there is any error which is prejudicial to the interest of the Revenue on the issue of share application moneys and share premiums then it would be in the reopened assessment which has been rightly revised by the CIT u/s 263 - If this re- assessment order is taken into consideration then the order passed u/s 263 is well within the limitation - a perusal of the order passed u/s 263 clearly shows that it is this reassessment order which the CIT has held to be erroneous and prejudicial to the interest of the Revenue, in so far as, no investigation whatsoever have been done by the AO, much less any investigation worth its name - This is also clearly evidence from the order sheet notings in the assessment folder - the order passed u/s 263 is not barred by limitation Decided against assessee. Validity of order u/s 147 Whether there was lack of proper enquiry as to the issue of share capital premium when the reopening was done for the specific purpose of escapement of commission income Held that:- The AO cannot in a reopened assessment do roving enquiry, but what is to be understood is that it is not the reassessment which are in appeal, but, it is revisionary proceedings - If at all, the assessee wanted to challenge the so called roving enquiry which has been done by design, it was to be done within the prescribed time provided in respect of reopened assessment It is not something that can be done in an appeal against the revisionary order passed u/s 263 - The assessee himself having brought to the attention the issues to the AO and the AO have not done any investigation and as rightly submitted by the assessee, being lack of proper enquiries as to the issue of share capital and premium, the action of the ld. CIT in invoking the provisions of 263 is on a right footing and does not call for any interference Decided against assessee. Addition of share capital u/s 68 Held that:- The assessee has made investments in other companies also - The assessee came into existence on 20th November, 2007 with an initial share capital of about ₹ 1 or 2 lakh - The assessee decide to increase its share capital vide an ordinary meeting of the members of the company held on 31.03.2008 and increased the authorised share capital of the company from ₹ 2 lakhs to ₹ 35 lakhs - The issue of section 68 would clearly apply, as the proviso which has been added w.e.f. 01.04.2013 specifically provides for verification of the source of the source especially in respect of share application money, share capital, share premium or any such amount, by whatever name called - The AO have not conducted the enquiry to its logical end and having been carried away by the design of the assessee, CIT was right in invoking the provision of section 263 - proviso to section 68 has been introduced after the decision in COMMR. OF INCOME TAX Versus M/s LOVELY EXPORTS(PVT) LTD [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - as the proviso is now applicable the AO would be right in verifying the source of the source - invocation of the proviso of section 68 has not been done by the CIT and that the CIT has done in his order u/s 263 is to treat the reassessment order passed by the AO to be erroneous and prejudicial to the interest of the Revenue, in so far as, the issue of share capital has not been looked into or investigated by the AO - Thus it is in the proceedings in consequence to the 263 order that the proviso to section 68 would be more applicable Decided against assessee. Power to give directions - Whether the CIT in exercise of power u/s 263 can give direction in respect of subsequent assessment for which revisionary power u/s 263 has not been exercised Held that:- CIT after verifying the records as available have issued the show cause notice and after considering the reply of the assessee had done further investigation and as the information was not fully coming from the assessee had directed the AO to verify whether these three issues relate to the same assessment year - In the order passed u/s 263 the CIT has not in any case extended his jurisdiction u/s 263 to any other assessment year - There is no direction in the order of the CIT directing the AO to consider anything for any other AY - The direction of the CIT is specific - Now it is for the assessee to show as to which year the issues raised by the ld. CIT would relate to - It is only in the knowledge of the assessee as to what the assessee has done in his books - What has happened in the assessee's books cannot be within the knowledge of the ld. CIT - as it is noticed that the CIT has invoked revisionary powers for the relevant AY and has not given any direction in respect of any subsequent AY, the order of the CIT is upheld Decided against assessee. Erroneous and prejudicial to the interest of the revenue or not - Whether order passed by the AO can be said to be erroneous and prejudicial to the interest of the revenue when the AO has passed the order after inquiry or investigation on the issue of share capital Held that:- The fact that the AO has not taken the issue of the share capital to its logical conclusion is evident - the whole reopening itself was by design of the assessee is also evident - Now to take shelter under such design and claim that investigation and inquiry has been done by the AO when the facts clearly stand against such claim is also evident - In any case in regard to the issues of the show cause notice u/s 263 in such cases the issue has been decided in Zigma Commodities Private Ltd; & Another Versus Income Tax Officer And Others [2014 (5) TMI 672 - CALCUTTA HIGH COURT] - CIT has verified and has found that the investigation was not done Thus, clearly recognizing the design of the assessee in respect of re-assessments Decided against assessee.
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2014 (10) TMI 610
Validity of reopening of assessment u/s 147 Change of opinion - Held that:- The assessee along with the return of income, has made a claim for deduction under section 80IC with regard to its Century Pulp Paper unit - Such a claim of deduction under section 80IC, were duly supported by the audit report under section 10CCA - during the course of the original assessment proceedings, the AO has raised queries with regard to the claim of deduction u/s 80IC, not once but twice - the assessee has duly responded to such query and filed replies before the AO - the AO has reduced the claim of deduction u/s 80IC, by allowing the claim in respect of profits attributable to paper and the deduction relating to profits attributable to sale of pulp was denied change of opinion preclude the reopening of the assessment, whether within or outside the four years' limit from the end of the relevant assessment year - the reasons recorded by the AO is purely based on change of opinion de hors any tangible material coming into record following the decision in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the notice dated 15th December 2011, u/s 148, and consequent assessment order dated 22nd December 2011, passed u/s 147/143(3), is held as void as the reasons recorded are based on change of opinion and do not clothe the AO with jurisdiction to re open the assessment thus, the order of the CIT(A) is set aside Decided in favour of assessee.
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2014 (10) TMI 609
Deemed dividend u/s 2(22)(e) Loan received from M/s. Morgan Credits (P) Ltd. - Business of investment in shares/securities of listed companies - Held that:- The assessee-company is not a shareholder holding the required percentage of shares in any of the two companies Following the decision in COMMISSIONER OF INCOME TAX Versus ANKITECH PVT LTD. & OTHERS [2011 (5) TMI 325 - DELHI HIGH COURT] - such a loan or advance given to the shareholders or to a concern, would not qualify as dividend. It has been made so by legal fiction created under s. 2(22) (e) of the Act - Thus, by a deeming provision, it is the definition of dividend which is enlarged. Legal fiction does not extend to "shareholder" - under no circumstance, it could be treated as shareholder/member receiving dividend - If the intention of the legislature was to tax such loan or advance as deemed dividend at the hands of "deeming shareholder", then the legislature would have inserted deeming provision in respect of shareholder as well, that has not happened - the loan of ₹ 27.75 crores received is not to be treated as deemed dividend u/s 2(22)(e) of the IT Act Decided in favour of asssessee.
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2014 (10) TMI 608
Computation of capital gain u/s 50C(1) Adoption of FMV determined by the Stamp Valuation Authority for the purpose of stamp duty - Capital gains on sale of agriculture - land Held that:- Land sold is a capital asset as defined u/s 2(14) of the Act - Though, the assessee has disclosed the total consideration received on sale of property by all the coowners at ₹ 4,50,00,000/- but the Registering Authority has valued the property for stamp duty purpose at ₹ 14,76,00,000 - understatement in sale value in terms of section 50C(1) is prima-facie established - the AO in terms with section 50C(2) did refer the valuation of the property to the DVO - DVO submitted a report to the AO on 25/10/2012 by determining the value of the property at ₹ 7,93,80,483 by estimating the fair market value of the property as on the date of registration at ₹ 43.41 lakh per acre - the AO ignoring the statutory mandate as contained u/s 50C(2) and (3) completed the assessment on the very same day he referred the valuation to the DVO by adopting the value of property at ₹ 14.76 crores as determined by the SRO for stamp duty purpose - AOs action cannot be approved - When the assessee has objected to the SRO value and the valuation of the property has been referred to the DVO, the AO is duty bound to take into account the valuation made by the DVO and thereafter compute the capital gain in terms with section 50C(3). Assessee has complied to the provisions of section 50C(2) and AO has referred the valuation to DVO - adoption of SRO value by completely ignoring the valuation made by the DVO is totally wrong and in violation of statutory mandate of section 50C - value determined by SRO cannot be considered as the fair market value of the property for computation of capital gain. Determination of value by DVO Held that:- section 50C is a deeming provision, assessee is required to establish that sale consideration shown by him is the actual fair market value as on the date of execution of agreement of sale cum GPA on 30/10/2008 - Neither the assessee nor the department has brought any substantive evidence on record to justify the value adopted by them thus, the matter is required to be remitted back to the AO for fresh adjudication Decided in favour of assesse.
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Customs
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2014 (10) TMI 632
Penalty u/s 112 - Misdeclaration of goods - Held that:- Trade opinion may not be an expert opinion, but opinion based on long experience in the trade considering significant difference in the items of Indian origin and foreign origin may be of persuasive value and may not be thrown out only on the ground that trade opinion is not an expert opinion. If there are significant differences in shape, size, test etc. of betel nuts of Indian origin than the betel nuts of foreign origin the person in trade may form an opinion that it is of foreign origin which in the facts of the case may be accepted. It is evident from trade opinion that the recovered betel nuts on the basis of their shape, size and appearance appeared to be of foreign origin. on receipt of the show cause notice, both the appellants approached the Settlement Commission whereby the appellants admitted their liability on the ground that the appellants are the actual importers and also accepted and admitted the allegations and charges made in the show cause notice. In view of the admission made by both the appellants before a statutory authority i.e. the Settlement Commission regarding misdeclaration of the goods imported in the name of M/s. R.R. Exports, we find no merit in the contention of the appellants - Decided against assessee.
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2014 (10) TMI 631
Benefit of Notification No. 203/92-Cus - appellants purchased Valued Based Advance Licence (VABAL) from the market in respect of the goods exported. - allegation that appellants failed to show that input stage credit has not been availed by the manufacturer of the exported good - Held that:- Issue is settled by the decision of the Hon'ble Supreme Court in the case of Commissioner of Customs (Imports), Bombay vs Hico Enterprises - [2008 (4) TMI 117 - SUPREME COURT]. The Hon'ble Supreme Court held that the purchaser of VABAL is not liable to prove export obligation for the benefit of Notification No. 203/92-Cus. In view of the above decision of the Hon'ble Supreme Court, the impugned order is set aside - Decided in favour of assessee.
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2014 (10) TMI 630
Valuation of goods - Basis of valuation is purchase order value - Held that:- There is no cogent evidence on record establishing the allegation of unjust enrichment, since no value was paid by appellant against short supplied item for which passing of duty burden for unpaid amount is inconceivable. Allegation of Revenue not being based on evidence - Decided in favour of assessee.
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2014 (10) TMI 629
Classification of goods - Classification under Entry No. 5513.41.00 or under CTH 6304.19.30 - Import of bed sheets - Held that:- In the absence of the appellant, tariff entries were examined reading as above. When the entries speak for themselves about the nature of the goods there cannot be a disagreement to the classification invoked by Revenue. It appears that learned Commissioner has taken a very right decision examining the goods to fall under 5513.41.00 for which, there is no scope to intervene - Decided against assessee.
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Service Tax
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2014 (10) TMI 648
Waiver of pre deposit - Modification of order - Held that:- Order relies upon the decision of the Honble High court of Andhra Pradesh in the case of Sai Samhita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT]. Learned counsel fairly agrees that even though this decision has been mentioned in Appeal Memorandum and during the arguments it was not brought to the notice of the Tribunal nor it was pressed. It cannot be said that there is any apparent error in the order passed by the Tribunal. When there is no apparent error, if the order is modified, it would amount to review of the order of the Tribunal by the Tribunal itself for which the Tribunal has no power. Accordingly, no case has been made out for modification of the stay order passed by the Tribunal and accordingly, the application is rejected.
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2014 (10) TMI 647
Mandap Keeper Service - Renting of immovable property - Extended period of limitation - Held that:- Appellant is doing restaurant business, it cannot be said that they had valid ground not to pay tax. Prima facie, we find that extended period also is invokable. - entire amount ordered to be deposited - stay denied. As regards renting of immovable property, extended period could not have been invoked since the levy has been regularized by retrospective amendment. Therefore, prima facie, the appellant has made out a case for waiver of pre-deposit of service tax demanded on renting of immovable property service - Stay granted.
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2014 (10) TMI 646
Valuation of the taxable service - inclusion of value of free supply - construction of commercial or industrial complex - section 67 - whether the value of free issue material supplied by the service recipient has to be included while computing the gross amount charged for the purpose of exemption Notification No. 15/04-ST and 1/06-ST - Held that:- Just because the materials were sold by the service provider to the buyer and he in turn provided it as free supply for construction work, the nature of transaction between the service receiver and the service provider that of supply of goods free of cost in our opinion does not change. As regards other decisions relied upon by the learned A.R., we find that all of them were decisions which were rendered before the case of Bhayana Builders (Pvt) Ltd [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] and therefore the Larger Bench decision would prevail. We also take note of the fact that appellants have deposited an amount of ₹ 96,57,536/- in our opinion, this amount is sufficient towards pre-deposit for hearing the appeal. - stay granted.
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2014 (10) TMI 645
Waiver of pre deposit - Cargo handling service - Held that:- Applicant in their Profit & Loss Account mentioned the service as Cargo Transport Hire Charges - classification dispute of the service would be examined at the time of appeal hearing at length. Prima facie, we find it would be treated as Cargo Handling Service as evident from the various documents - After considering the overall facts and circumstances of the case and the financial hardship pleaded, we direct the applicant to predeposit ₹ 1,50,00,000 within a period of eight weeks - Partial stay granted.
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2014 (10) TMI 644
Waiver of pre deposit - Reversal of CENVAT Credit - CVD taken on import of goods - Held that:- Prior to 1-4-2011, in the absence of any specific procedure or specific provisions of law, the appellants cannot be found fault with for entertaining the belief that they are eligible for the credit. However the appellant has reversed the Cenvat credit attributable to the normal period amounting to ₹ 6,43,007 - table shows the total value of manufactured goods, total value of exempted goods and total value of traded goods and proportion worked out, in our opinion, on a prima facie basis, is correct. The entire tax has been paid for the normal period. Whether the extended period is invocable or not is required to be considered in greater detail in the light of facts and circumstances, case laws, etc. In view of the above, we are of the view that at this stage, the amount deposited by the appellant is sufficient for the purpose of hearing the appeal - requirement of pre-deposit of balance dues is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.
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2014 (10) TMI 643
Waiver of penalty u/s 80 - Penalty u/s 76 & 77 - electrical illumination services - Held that:- It is a fact that the appellant has provided temporary electrical illumination service to Govt. of Gujarat for celebrations of Independence Day, Republic Day and other State Govt. functions for which he could have entertained a bona fide belief that Service Tax liability may not arise on the services rendered by him. In my view, such belief is a justifiable reason to set aside the penalties under Sections 76 and 77 by invoking provision of Section 80 of Finance Act, 1994. In my view, the appellant has made out the case for invoking provisions of Section 80 of Finance Act, 1994, doing so I set aside the penalties imposed under Sections 76 and 77 of Finance Act, 1994 - Decided in favour of assessee.
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2014 (10) TMI 642
Denial of refund claim - Bar of limitation - Held that:- It is admitted fact that the appellant was not required to pay any service tax for acquisition of residential unit as held by the Honble High Court in K.V.R. Constructions (2009 (8) TMI 150 - KARNATAKA HIGH COURT). As it is not an amount of service tax, therefore, provisions of Section 11B of the Central Excise Act are not applicable to the facts of this case. Therefore, the time limit prescribed under 11B is not applicable. Hence impugned order deserves no merit and same is set aside - Decided in favour of assessee.
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2014 (10) TMI 641
Waiver of pre deposit - Construction of Residential Complexes - Works Contract Composition Scheme - Held that:- Prima facie, applicant is eligible for the benefit of Works Contract Composition Scheme. Considering the fact that the tax liability has been discharged by the appellant as per the scheme, we waive pre-deposit of balance dues arising out of the impugned order. Further there shall be stay on collection of such dues till the disposal of the appeal - Stay granted.
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Central Excise
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2014 (10) TMI 639
CENVAT Credit - Whether Cenvat Credit attributable to the quantity of Inputs (Molasses) used in, or in relation to manufacture of exempted final product (Rectified Spirit, attracting nil rate of duty and which was reported as wastage / storage loss) should not be reversed as per provisions of para (a)(i) of Sub-Rule 3 of Rule 6 of CENVAT Credit Rules, 2004 - Held that:- Rectified spirit, as we have already noted, is not dutiable being assessable at NIL rate, which, by the CENVAT Credit Rules, is exempted. Being exempt the final product, respondent could not possibly have claimed CENVAT credit in respect of the same. When admittedly duty paid molasses have been used for the manufacture of rectified spirit for which a formula has been deployed by the authorities; we can proceed on the basis that a particular quantity of duty paid molasses is used for the manufacture of the final product, which, because it is not dutiable, respondent becomes disentitled to claim CENVAT credit on the same. In such circumstances, the direction, which is impugned by the respondent, namely, to reverse the credit and imposition of the penalty and the interest for the failure to do so, cannot be complained of. Merely because it is not cleared for the reason that it cannot be cleared does not mean that the manufacture did not take place. The credit standing to the account of duty paid molasses used for the purpose of producing the non-dutiable final product necessarily must be proportionately reduced. The danger of the party using it for other purposes as highlighted by the Commissioner cannot be overlooked by us - Decided in favour of Revenue.
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2014 (10) TMI 637
CENVAT Credit - Capital goods or Inputs - items falling under Chapter 73 - Held that:- Rule 57 of the Central Excise Rules deals with credit of duty paid on the excisable goods used as inputs. Rule 57Q relates to credit of duty paid on capital goods used by the manufacturer of specified goods. The Tribunal had relied on assessee's own case reported in Madras Aluminium Co. Ltd. (2000 (12) TMI 607 - CEGAT, CHENNAI). The said order deals only with 57A of the Central Excise Rules, where many of the inputs were considered for credit. Therefore, the Tribunal is correct in holding that the inputs are used directly or indirectly for the manufacture of final product as per Rule 57A of the Central Excise Rules during the relevant period. assessee is entitled for credit for the above said items - Decided against Revenue.
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2014 (10) TMI 636
Imposition of penalty - compounded levy scheme - Failure to remit duty within prescribed time limit - Tribunal set aside penalty - Held that:- Any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed therefor. It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. The period of five years has been held to be reasonable period for initiating penalty proceedings. Tribunal had rightly upheld the order of Commissioner (Appeals) deleting the penalty on the ground that the proceedings for the same were initiated after 5 years from the relevant date. Accordingly, no substantial question of law arises. - Following decision of Raghuvar (India) Ltd.'s case [2000 (5) TMI 40 - SUPREME COURT OF INDIA] - Accordingly, no substantial question of law arises. - Decided against Revenue.
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2014 (10) TMI 635
Classification of the product Cheeselings - appellant classified the same as ready to eat packaged foods not falling under the category of Namkeen - Penalty under Rule 25 of the CER, 2002 - CENVAT Credit - Held that:- appellant is not allowed to take the CENVAT credit, they are required to discharge duty @2% ad valorem and the duty liability would be approx ₹ 25.46 lakhs. If the appellant is allowed to take the CENVAT credit, the duty liability would be 6% ad valorem and the appellant would be eligible take CENVAT credit of ₹ 56 lakhs then the duty liability would be approx. ₹ 23.46 lakhs - partial stay granted.
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2014 (10) TMI 634
Denial of refund claim - Unjust enrichment - Held that:- Appellant is a job worker who is engaged in the activity of processing of unprocessed fabrics. For processing, the appellant is manufacturing printing paste on which he is not paying duty on their job charges. Only on persuasion of the department, the appellant paid duty on the activity of manufacturing of printing paste which used in their job work activity, under protest. Later-on it was held that the activity of manufacturing of printing paste does not amounts to manufacture therefore, duty is not payable at all. In the circumstance, when the goods are duty-free therefore, the provisions of Central Excise Act, 1944 are not applicable as held by the Hon'ble High Court of Bombay in the case of Biochem Pharmaceuticals (2006 (1) TMI 272 - CESTAT, MUMBAI). When the provisions of Central Excise are not applicable in that case bar of unjust enrichment is also not applicable. Therefore, relying on the decision of Biochem Pharmaceuticals (supra), I hold that in this case bar of unjust enrichment is not applicable - Decided in favour of assessee.
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2014 (10) TMI 633
Waiver of pre deposit - manufacture of Lubricating Oils of different grades - Valuation of goods - Held that:- According to Section 4(1)(a) of the Central Excise Act, 1944, "value shall, in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value." It is thus evident from the above that the value is to be determined with reference to the value prevailing for delivery at the time and place of removal. In any other case, the value be determined in such manners, as may be prescribed. Central Excise Valuation (Determination of Price of Excisable Goods), Rules, 2000 has been framed for this purpose. Value as per Valuation Rules is defined to mean, the value referred to Section 4 of the Act. Accordingly, we are of the opinion that even for the purpose of Rule 8 of the Valuation Rules, cost of manufactured goods is to be taken for calculating the value as the said cost at the time and place of removal of the goods. As such, the assessee ought to have taken the cost of production prevailing during the relevant period of removal of the said goods to their sister units. According to Rule 7 of the Central Excise Rules, 2002, where the assessee is unable to determine the value of excisable goods, they may request the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excises, as the case may be, in writing/giving reasons for payment of duty on provisional basis. However, in the case, the assessee has not done so, in spite of their inability to determine the correct value. Rule 7 also provides that in case of excess payment, the assessee is entitled to a refund, consequent to an order of final assessment. No financial hardship is pleaded - Partial stay granted.
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CST, VAT & Sales Tax
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2014 (10) TMI 640
Stock transfer - CST - Whether under the facts and circumstances of the case the Form F issued by the M/s Rajdhani Traders, Delhi and M/s Radhika Enterprises, Delhi are valid declaration form under Section 6A of the Central Sales Tax Act, 1956 - Held that:- As per Scheme of Section 6A of the CST Act read with Rule 2(cc) and 12(5) of the Rules, one of the most crucial requirement to avail benefit of a Form-F is that such Form-F should be obtained by the transferee from the Prescribed Authority. This follows that it should be a validly obtained and not an invalid, illegal, forged or fabricated form. The postilion may be different, depending upon the facts and circumstances; in a case of simple transaction of purchase and sale when a selling dealer bonafidely and with due diligence received a form from his purchasing dealer for concessional rate of tax or exemption against a sale. But Section 6A is entirely a different provisions. It is by legal fiction that movement of goods from one State to another State may be deemed to have occasioned as a result of sale, if the conditions specified in sub-section (1) of Section 6A are not satisfied . If a dealer claims a transaction to be covered by Section 6 A of the CST Act, then he has to satisfy the conditions mentioned in the said provision and has also to submit a declaration in Form F, which should be genuine one. An in-genuine Form F may not entitle the dealer to avail the benefit under Section 6 A of the Act in respect of a particular transaction, for which, in-genuine Form F has been filed. - A case involving claim under Section 6 A of the CST Act stands on different footing than the case of interstate sale against Form- C, in which case, it may be possible that selling dealer has bona fidely effected interstate sale and bona fidely received Form-C to avail concessional rate of tax - Decided against assessee.
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Indian Laws
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2014 (10) TMI 628
Theft of signed cheques - Conspiracy with bank to withdraw money from Respondent's account - Quashing of proceedings under Sections 34, 379, 411, 417, 418, 420, 457, 458 and 477 IPC - Held that:- object of exercise of power under this section is to prevent abuse of process of Court and to secure ends of justice. There are no hard and fast rules that can be laid down for the exercise of the extraordinary jurisdiction, but exercising the same is an exception, but not a rule of law. It is no doubt true that there can be no straight jacket formula nor defined parameters to enable a Court to invoke or exercise its inherent powers. It will always depend upon the facts and circumstances of each case. The Courts have to be very circumspect while exercising jurisdiction under Section 482 Cr.P.C. Courts have to see whether the continuation of the complaint amounts to abuse of process of law and whether continuation of the criminal proceeding results in miscarriage of justice or when the Court comes to a conclusion that quashing these proceedings would otherwise serve the ends of justice, then the Court can exercise the power under Section 482 Cr.P.C. While exercising the power under the provision, the Courts have to only look at the uncontroverted allegation in the complaint whether prima facie discloses an offence or not, but it should not convert itself to that of a trial Court and dwell into the disputed questions of fact. Courts have to be very careful while exercising the power under Section 482 Cr.P.C. At the same time we should not allow a litigant to file vexatious complaints to otherwise settle their scores by setting the criminal law into motion, which is a pure abuse of process of law and it has to be interdicted at the threshold. A clear reading of the complaint does not make out any offence against the appellant/Branch Manager, much less the offences alleged under Sections 34, 379, 411, 417, 418, 420, 467, 458 and 477 I.P.C. We are of the view that even assuming that the Branch Manager has violated the instructions in the complaint in letter and spirit. It all amounts to negligence in discharging official work at the maximum it can be said that it is dereliction of duty - continuation of the criminal proceedings against the appellant for commission of the alleged offence under Sections 34, 379, 411, 417, 418, 420, 467, 458 and 477 I.P.C. is a pure abuse of process of law and the complaint case deserves to be quashed in the interest of justice - Decided in favour of Appellants.
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