Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 29, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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In case of temporary suspension of business, there is nothing to show that the business has been abandoned permanently and expenditure incurred to keep the business alive in the hope of reviving the same is business expenditure allowable under sec. 37(1) - AT
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Deduction u/s.35(1)(ii) has to be allowed whether the enditure incurred towards scientific research is in connection with the Assessee's business or not. - nowhere it is expressly provided that approval of IIT, Madras for the purpose of Sec.35(1)(ii) of the Act will no longer hold good - AT
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Addition made of the closing balance of the sundry creditors - when the purchases from the parties were accepted and the sales made out of those purchases were not doubted, the payments outstanding in the name of those parties were accepted in the subsequent year than there was no reason to doubt the genuineness of the outstanding balance - AT
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Disallowance out of job work expenses - Though the assessee had provided complete details of the persons doing the job work, including their names and addresses, the A.O did not deem it fit to make any enquiry whatsoever from them. The A.O made a selfanalysis of the matter, but even this analysis was not put to the assessee. - No addition - AT
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Any payment made under lease agreement for use of vehicles partake the character of rent on which tax has to be deducted under the provisions of section 194-I. - disallowance u/s. 40(a)(ia) has to be made for non-deduction of tax at source (TDS) - AT
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Sales promotion expenses - assessee has failed to furnish any bills or any details or break-up of the expenditure - As per 37(1), onus is upon the assessee to establish that the said expenditure has been incurred for carrying on its business. - AT
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Penalty u/s. 271(1)(c) - expenditure toward payment made to employees under Voluntary Separation Scheme - when the assets are in the process of being sold out, the employees are made to go and the business is being in the process of closure down. In these circumstances, the appellant’s contention that their case is not covered by the scheme contemplated by section 35DDA has to be accepted - AT
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Penalty u/s. 271D - where the loans are recorded by merely passing adjustment entries or journal entries are outside the scope of section 269SS - No penalty - AT
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Revised return filed beyond the permissible date - Set off of brought forward business loss and unabsorbed depreciation of amalgamating company - revised return reflecting the consolidated results of the amalgamated entity was filed beyond the permissible time limit u/s 139(5) - This is due to the fact of delayed passing of the order of the High Court approving the scheme of merger - benefit of carry forward of loss allowed - AT
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Disallowance of interest u/s 24(b) while computing 'Income from House Property" - payment of interest by the firm to the partners is an allowable expenditure if the said amount is used for acquisition or improvement of the house property in question as per provisions of sec.24(b) - AT
Customs
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Classification of Liquid Crystal Devices (LCDs) - LCDs are specifically mentioned in CTH 9013 as it has LCDs by name while description of CTH 85.29 is general in nature - Section Note is of no avail as Note (1) (m) of Section XVI clearly states that Section XVI does not cover articles of Chapter 90 - AT
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Misdeclaration of goods - goods imported were different from the goods ordered - Re export of goods allowed - there is no reasonable ground for imposition of fine and penalty as a condition for re-export of the goods and therefore we set aside the impugned order - AT
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Import of plastic granules under exemption scheme (Target Plus Scheme) to be used for manufacturing of final products - Goods sent to Job Work – There is no transfer of imported plastic granules as appellant is sending plastic granules to job worker and buyer is purchasing plastic films - demand set aside - AT
Corporate Law
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Relaxation of additional fees and extension of last date of filing of AOC-4, AOC-4 XBRL and MGT-7 E-Forms under the Companies Act, 2013 - Circular
Service Tax
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Denial of CENVAT Credit - the services which are rendered at the residential colony for the employees cannot be availed as CENVAT Credit. - AT
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CENVAT Credit - whether service tax paid by the appellant on external commercial borrowings (ECB), on which service tax was paid under “Banking and Other financial services” by the appellant under reverse charge, is admissible under the Cenvat Credit Rules or not - Held Yes - AT
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Denial of refund claim of cenvat credit - export of services - after sale support service - Business Auxiliary Service - business of processing of chips, the activity which includes circuit designing, testing, validation of such chips, integration of software on chips - refund allowed - AT
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Penalty u/s 76 and 78 of Finance Act, 1994 – There was suppression of material facts with intention to evade payment of service tax as it was already collected from service recipients but was not paid to department - waiver of penalty denied - AT
Central Excise
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Penalty u/s 11AC - valuation - Assessee paid the duty suo motu without any enquiries or any objection from the department. This conduct of the respondent clearly indicates that there was no intention leave alone wilful intention to evade payment of duty - No penalty - AT
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Classification of goods - Base frames - the base frame would be classifiable under 8485 and not 8413, irrespective of the fact that such base frames are designed for specific model of the pumps - AT
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Valuation - cost of loading/handling charges and insurance at the rate of 8% (under the Employees State Insurance Scheme) incurred on the sale of such scrap not to be included - demand set aside - AT
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Valuation - Captive consumption - it is only the apprehension that the date of invoices for independent buyers is different from the date of invoice for captive consumption. Even if these dates are different the prices of casting will not vary on day to day basis but would be fairly stable - AT
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Denial of Carry forward of CENVAT Credit - Conversion of DTA to EOU - Rule 11(3) will apply only in the situation where final products are exempted. - The final products manufactured by appellant in EOU and cleared for export are not dutiable, but the very same final products when cleared into DTA becomes dutiable hence the provisions of Section 5A doe not apply - AT
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Justification of appeals filed by the Revenue - tribunal observed that why these appeals have been filed before this Tribunal when there is no proposal by the Committee of Commissioners to file these appeals before this Tribunal against the respondents nor any relief has been sought in the appeals against the respondents during the course of arguments - AT
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CENVAT Credit - when the duty on HR sheets is not paid on the basis of thickness but on the basis of weight, the use of HR sheets of less than 4 mm thickness has no bearing on availing the credit. - AT
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Valuation of goods - whether the installation, erection and commissioning charges for equipment installed at customer's premises and values thereof can be added/included for determining the assessable value - Held No - SC
Case Laws:
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Income Tax
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2015 (10) TMI 2256
Disallowance u/s 14A - Held that:- We have been informed that the AO has not passed fresh order so far in pursuance to the order of the Tribunal. in AY 2006-07. In our considered opinion, before this issue can be decided in the impugned year i.e. A.Y. 2007-08, it is imperative that it is first decided by Assessing Officer in A.Y. 2006-07. In case, we decide this issue first, it may pre-empt the order of Assessing Officer for A.Y. 2006-07, and it may also close the gates for the Assessing Officer to make proper examination of facts and circumstances in A.Y. 2006-07. Therefore, to avoid this situation, we deem it proper to send this issue of disallowance u/s 14A, in totality, to the file of Assessing Officer. He shall re-decide this issue, after giving adequate opportunity of hearing to the assessee and after considering the facts and circumstances of the case and the law available at the time of deciding this issue. Therefore, ground no.1 of Assessee's appeal and all the grounds of Revenue's appeal are sent back to the file of Assessing Officer. Disallowance u/s 35(2AB)- expenditure for the 'in-house' research facility - Held that:- Names of the employees have been given along with their rates per hour. It is further noted that ld. Assessing Officer has shown no doubts about the genuineness of these expenses. It was held by Ld. CIT(A) that since claim of assessee with respect to deduction u/s.35(2AB) has been denied, therefore, these expenses are capital in nature. It was further observed by ld. CIT(A) that Assessing Officer, as well as assessee, have treated these expenses as capital in nature. In our view, the observations of Ld. CIT(A) are misplaced and without any basis. We have gone through details of these expenses. These expenses are apparently revenue in nature. Ld DR also could not point out as to which expenses are capital in nature. Thus, in our view, these expenses are of revenue nature. Software expenses u/s 37(1)- Held that:- The mere fact that a deduction was not claimed before the Income-tax Officer, was not of much importance, since if the liability arises then a claim can be made in a bonafide manner at any stage before the higher authority, who is competent to grant relief. Thus, in view of aforesaid discussion, coupled with facts and circumstances of this case and clear position of law, as discussed above, in our opinion there was no reason to deny the claim assessee u/s 37 of the Act. Therefore, the AO is directed to allow these expenses u/s 37 of the Act. Accordingly, ground no.2 of the assessee's appeal is partly allowed. Disallowance of software expenses incurred by treating the same as capital expenditure - Held that:- It is noted that full co-operation has been extended by the assessee at all times i.e. during course of assessment proceeding, and also during appellate proceeding before the ld. CIT(A). If the CIT(A) wanted to have one separate petition under Rule 46A, the same could have been very well pointed out to the assessee. Without affording opportunity to the assessee, the valid claim of the assessee should not have been denied to it, merely for some technical reasons. Under these circumstances, we find it appropriate to send this issue back to the file of ld. CIT(A) who shall give opportunity to the assessee to file all the evidences as may be considered appropriate, along with petition under Rule 46A etc. The assessee shall also extend full co-operation to the ld. CIT(A) by providing further details and documentary evidences, as may be required. Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 2255
Business was not in operation - expenses for employee cost, administrative expenses and finance charges of a beverage unit - deduction u/s 37(1) - CIT(A) deleted the addition - Held that:- It is not in dispute that in the instant case, the business of beverage unit was temporarily suspended since assessment year 2002-03 and the assessee was making efforts to settle the dispute with Pepsi Ltd. for whom the assessee was doing bottling work and had to incur expenditure in question for maintaining the unit in operational condition. It is also not in dispute that the expenditure in question is genuine business expenditure of the assessee. The Hon'ble Delhi High Court in the case of CIT Vs. Anita Jain (2009 (1) TMI 774 - DELHI HIGH COURT ) and the Hon'ble Madras High Court in the case of L. Ve. Vairavan Chettiar Vs. CIT (1965 (4) TMI 6 - MADRAS High Court ) have held that in case of temporary suspension of business, there is nothing to show that the business has been abandoned permanently and expenditure incurred to keep the business alive in the hope of reviving the same is business expenditure allowable under sec. 37(1) of the Act. Further, Departmental Representative has merely relied on the order of the Assessing Officer, but could not point out any specific mistake in the order of the Commissioner of Income Tax (Appeals). - Decided against revenue. Non deduction of TDS u/s 194H - commission paid to newspaper vendors - CIT(A) deleted the addition - Held that:- There is no error in the order of the Commissioner of Income Tax (Appeals) in deleting the disallowance on account of commission paid to the newspaper vendors and towards payments of commission to advertising agents under sec. 40(a)(ia). See Bharti Airtel Ltd. Vs. DCIT [2014 (12) TMI 642 - KARNATAKA HIGH COURT] - Decided against revenue.
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2015 (10) TMI 2254
Eligibility for deduction u/s.35(2AA) - expenditure incurred on scientific research - Held that:- It is not the case of the AO that deduction cannot be allowed to the Assessee as the scientific research for which the Assessee incurred expenditure in question related to its business and therefore the deduction claimed cannot be allowed. It is not open for the revenue to set up a totally new case in its grounds of appeal which was never the case of the AO/CIT(A). Under clause (ii) to Sec.35(1) of the Act, any sum paid to approved scientific research association which has as its object the undertaking of scientific research or to an approved university, college or other institution to be used for scientific research is deductible. Unlike cl. (i) to Sec.35(1) of the Act, this clause does not lay down that the "scientific research", for which the amount is paid should be related to the assessee's business. Therefore deduction u/s.35(1)(ii) of the Act has to be allowed whether the expenditure incurred towards scientific research is in connection with the Assessee's business or not. Whether the notification approving IIT, Madras as an approved institution for the purpose of Sec.35(1)(ii) of the Act is no longer valid? - Held that:- Erstwhile Sec.35 of the Act got revived and remained in suspended animation for a short period. Since the erstwhile Sec.35 of the Act has always been part of the Act, the notification dated 10.12.1973 notifying IIT, Madras as an approved institution for the purpose of Sec.35(1)(ii) of the Act was valid at all point of time. Therefore the objection of the learned DR in this regard is not accepted. We also find force in the argument of the learned counsel for the Assessee that nowhere it is expressly provided that approval of IIT, Madras for the purpose of Sec.35(1)(ii) of the Act will no longer hold good. Sec.24 of the General Clause Act, 1897 refers to repeal of an Act and re-enactment with or without modification. Provisions of Sec.24 of the General Clauses Act, 1897 are applicable even when there is a statutory amendment without there being a repeal of an enactment and re-enactment in place of repealed law and the reliance placed by the learned counsel for the Assessee on the decision of the Hon'ble Supreme Court in the case of Parle Biscuits (P) Ltd. Vs. State of Bihar (2004 (12) TMI 363 - SUPREME COURT OF INDIA ) for the above proposition, in our view, is acceptable and the said stand clearly supports the plea of the Assessee. - Decided against revenue.
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2015 (10) TMI 2253
Validity of reopening of assessment - escapement of income has taken place as wrongly invoking provisions of section 32(1)(ii) instead of allowing calculation to be done with Rule 9B - Held that:- Coming to the merits of the case, without prejudice to the reopening, we find that the assessee offered income from the film "Dil Ne Jisa Apna Kaha" in the return of income filed and the Assessing Officer has reassessed the income with reference to that transactions by invoking section 32(1)(ii) of the Act. The assessment of income in the hands of film distributors has to be as per Special Provisions contained in Rule 9B of the Income Tax Rules, 1962. The dynamics of business income in the distribution of film are different and they are not categorized as 'intangible assets' within the meaning of section 32(1)(ii). The law has made separate provision for ascertaining the income from film distributor by providing for the same in Rule 9B. In this case, as stated M/s Sohail Khan Distribution has given rights of distribution to the assessee. In such situation, film was released on commercial basis and exhibited for more than 90 days before the end of previous year, the entire cost of acquisition of the film shall be allowed as a deduction while computing the profits and gains of such previous year. In this case M/s Sohail Khan sold the rights to the assessee in certain areas and undisputedly film has been released on commercial basis atleast for 90 days before the end of the previous, so the entire amount of acquisition shall be deducted in computing the profits and gains of such previous year. CIT(A) was not justified in making the disallowance of ₹ 1,35,75,000/- because calculation of loss in the release of film by a distributor for the purpose of distribution to be done, as per Rule 9-B of the Rule. The provisions of section 9B of the I.T. Rules are applicable to the assessee as the film was released on 10-9-2004 which is 90 days prior to 31st March, 2005 and the total cost incurred including cost of print and publicity is ₹ 2,39,30,039/-. After deducting the revenue realized, the net loss from the film of ₹ 84,021,740/- (Rs. 1,55,27,299/- (-) ₹ 2,39,30,039/-) was rightly debited in the P&L Account. - Decided in favour of assessee.
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2015 (10) TMI 2252
Short deduction of tax at source - assessee in default - whether as per the terms of agreement with the FTCs Doctors, the tax was liable to be deducted as per section 194J of the Act or as per section 192? - Held that:- FTCs Doctors cannot be construed as employees of the assessee hospital but are independent Consultants, who undertake risk and reward of their medical profession. Mere presence of a clause prohibiting rendering of service to competing hospital would not alter the nature of professional services rendered by the FTCs Doctors. Therefore we hold that the payments made to the FTCs Doctors are in the nature of professional fees liable for deduction of tax at source in terms of section 194J of the Act and that there does not exist any employer-employee relationship so as to invoke the provisions of section 192 of the Act. Consequently, on this aspect assessee has to succeed. Factually speaking, in the present case on the basis of the reading of the terms of agreement with FTCs Doctors and in the light of the judgment of the Hon'ble Bombay High Court in the case of Grant Medical Foundation (2015 (2) TMI 457 - BOMBAY HIGH COURT), it has to be held that no employer-employee relationship subsist between assessee hospital and the FTCs Doctors. Thus lower authorities have erred in treating the assessee as an assessee in default within the meaning of section 201(1) of the Act qua the payment of professional fee to FTCs Doctors. - Decided in favour of assessee. Payment made by the assessee towards annual maintenance of the machineries - TDS u/s 194C OR 194J - Held that:- Annual Maintenance Contracts (AMC) of medicale quipments machines etc. is not in the nature of professional or technical services as construed under the provisions of Section 194J of the Act - Tax has been rightly deducted by assessee on the annual maintenance charges u/s 194C of the Act. Consequently, it is held that the assessee cannot be deemed to be an "assessee in default" within the meaning of section 201(1) of the Act. Consequently, no interest under section 201(1A) of the I.T. Act is leviable.- Decided in favour of assessee. Tax deductible at source on payments made for pest control expenses - TDS u/s 194C OR 194J - Held that:- CIT(A) has correctly held that the payment of Pest control charges do not involve rendering of any technical services by the recipient and accordingly the assessee was right in deducting tax at source u/s.194C of the Act. The order of the CIT(A) on this aspect is also affirmed.- Decided in favour of assessee.
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2015 (10) TMI 2251
Voluntary contributions received from Members - whether be treated as transfer fees ignoring the principle of mutuality as held by CIT(A) - Held that:- The assessee society has received contribution from incoming members who have purchased the flats in the society after they have become the members of the society and the said fund is credited to the common amenity fund which is stated by the society to be used for the purpose of heavy repairs and maintenance of the society as well for use of common passage. The said amount, as stated by the assessee-society, will be used for carrying out repairs and maintenance in the society which will benefit all the members including the incoming members. The authorities below are not able to show or bring on record any cogent material/ evidence that these amounts are being received as 'transfer fee' in violation of notification of Government of Maharashtra. The concept of cooperative society is for benefit and development of housing society whereby the members contribute the funds which are used by the society for the maintenance and development of society which ultimately benefit the society and its members. It is for the Revenue to being on record concrete and cogent evidence on record to prove that these amounts have been received under any compulsion or coercion or involuntary so as to violate the notification of Government of Maharashtra. The Revenue has not brought on record any document or any cogent material to prove that these are involuntary payments, which have been extorted by way of force, coercion or compulsion. The same is the ratio of decision of the Hon'ble Bombay High Court in the case of Sind Cooperative housing society (2009 (7) TMI 15 - BOMBAY HIGH COURT), whereby, the Hon'ble High Court held that there is no evidence brought on record by the Revenue that these are compulsive contributions. Therefore, in the facts and circumstances of the case, in the absence of any cogent adverse material brought on record by the Revenue to prove that these contributions are received under coercion and involuntary in nature so as to be in violation of the notification of Government of Maharashtra, the impugned addition made on the basis of surmises, conjectures and assumptions is not sustainable. Hence, delete the addition made by the Assessing Officer and as confirmed by the CIT(A). - Decided in favour of assessee.
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2015 (10) TMI 2250
Addition made of the closing balance of the sundry creditors - Held that:- The assessee during the course of assessment proceedings furnished the confirmation of outstanding balance obtained from the said parties but those parties could not be produced for the reason that a prolonged litigation was going on and the parties were absconding. However, the assessee furnished the details of their bank account wherein the payment made by the assessee in the subsequent year was credited. The assessee also furnished copy of its bank Account No. 27971 with Bank of Rajasthan to substantiate that the payments were made to the parties in question, through account payee cheques. In the present case, it is an admitted fact that the purchases made from the parties in whose names, balances were outstanding have been accepted but the AO only doubted the genuineness the outstanding balance at the year end in the name of those parties for the reason that those were not produced before him. The assessee vide letter dated 30.07.2012 written to the AO during the course of remand proceedings informed that the confirmation of the said nine parties are filed before the Hon'ble CIT(A)and bank statement of the assessee for the year under consideration, perusal of which clearly reveals that all the payments were made to the parties through regular banking channel . In the present case, when the purchases from the parties were accepted and the sales made out of those purchases were not doubted, the payments outstanding in the name of those parties were accepted in the subsequent year than there was no reason to doubt the genuineness of the outstanding balance. Moreover, in the present case, the books of account were duly audited by the independent Auditor, those books were accepted by the AO and all the trading results except the outstanding balance in the name of 9 parties to the extent of ₹ 3,57,17,506/- were accepted. In our opinion, the AO at the same time cannot blow hot and cold from the same wind pipe. In the instant case, the AO accepted the trading results and the explanation for fall in the G.P rate furnished by the assessee, so there was no reason for doubting the outstanding balance in the name of sundry creditors when the purchases made from them were duly accepted as genuine. In our opinion, the ld. CIT(A) was not justified in confirming the addition made by the AO. There was no cessation of the liability and even the payment made to the creditors in the subsequent year was not doubted, so there was no occasion to make the addition by considering the creditors as bogus for the year under consideration particularly when the purchases from the same creditors were considered by the AO as genuine and even the payments made to them for the amount outstanding at the end of the year under consideration was not doubted in the subsequent year. We, therefore, are of the confirmed view that the addition made by the AO and sustained by the ld. CIT(A) was not justified - Decided in favour of assessee.
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2015 (10) TMI 2249
Unaccounted cash deposits - peak cash deposits in the said Savings Bank A/c - CIT(A) deleted the addition relying upon the additional evidence - Held that:- There was total non-compliance of the assessee before the Assessing Officer. The assessee failed to appear on any of the dates of hearing, except on one date to seek adjournment of the hearing. The Assessing Officer had issued show cause notice to the assessee, which was not replied to by the assessee during the course of assessment proceedings. The Assessing Officer had AIR information of cash deposit of ₹ 17,04,000/- in savings account of assessee with Axis Bank. In the absence of any explanation received from the assessee, the said sum was added as income of the assessee for the year under consideration. The CIT(A) in the appellate proceedings notes that though the Assessing Officer had issued show cause notice, but had not raised any query about the said deposit of cash of ₹ 17,04,000/-. The CIT(A) thus, proceeded to decide the issue after examining the relevant facts. The facts as brought out by the assessee before the CIT(A) were that he was running a pathology lab and was also looking after the land of his family. The case of the assessee before the CIT(A) that Axis bank was used for deposits and withdrawals of amount in respect of agricultural activity of the family. A summary of receipts and payments in the said bank account have been filed before the CIT(A), which have been accepted in toto. We find that the CIT(A) has failed to comply with the provisions of Rule 46A of the Rules i.e. before admitting any additional evidence, the conditions prescribed in the said Rule have to be looked into and in case, the assessee satisfy the same then, such additional evidence can be admitted. Rule 46A of the Rules further provides that on such admission of the evidence, the same should be confronted to the Assessing Officer for verification. The CIT(A) on its own can make certain enquiries, but then the enquiries should be complete and the explanation of the assessee should not be accepted on its face. On perusal of the order of CIT(A) reflects that no proper enquiry has been made by the CIT(A) and in the absence of the same and in view of violation of Rule 46A of the Rules, the matter needs to be adjudicated after following the procedure as envisaged in the Statute. However, since no information was filed before the Assessing Officer and in the absence of the assessee appearing before the Assessing Officer, no proceedings had taken place. We deem it fit to restore the matter back to the file of Assessing Officer to adjudicate the assessment in the hands of assessee de novo, after providing reasonable opportunity of hearing to the assessee. - Decided in favour of revenue for statistical purposes.
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2015 (10) TMI 2248
Transfer pricing adjustment - Arm’s Length Price (ALP) of the international transaction representing software development services provided to the AEs is determined by applying Transactional Net Margin Method (TNMM) - selection of comparable - Held that:- FCS SOFTWARE - annual report states that the said company is engaged in software consultancy, technical support services, e-learning and other related allied services and it is recorded in the annual report that it is not possible to give the quantitative details of sales reveals that the assessee is engaged in E-Learning and Digital Consulting which constitutes 30% of its functions; application support is 11%, infrastructure management service is 15% and IT consulting is 44%; and thus contended that the said company is engaged in different activities and so is not a comparable with the functional profile of the assessee. The ld. DR could not point out from the annual report of the said company the segmental breakup which is essential to work out the PLI, because admittedly this company operates in different segments. In such circumstances, we deem it fit to remand the matter back to the file of the TPO to examine whether the segmental data relating to software development are available to compute the PLI at segmental level of this company. In case, it is not able to discern the segmental data as aforesaid of this company then this company should be excluded from the list of comparables. GOLDSTONE TECHNOLOGIES - after perusal of the annual report that the company in the present assessment year is engaged in the software development, so is functionally similar, therefore, we uphold the decision of TPO/DRP to include this company as a comparable. LANCO GLOBAL SYSTEMS - We find that the TPO in assessee’s own case for assessment year 2009-10 has not included this company as a comparable. We are of the opinion that the TPO may de novo decide whether to include this company as a comparable for the instant year under consideration. Accordingly, we remand the matter back to the file of the TPO for de novo consideration. Disallowance of risk adjustment - Held that:- initial onus for claiming any adjustment in the computation of ALP is always on the assessee. It is only when such initial onus is discharged that the turn of the TPO comes for ascertaining whether the claim so made by the assessee is correct or not. Adverting to the facts of the instant case, we find that there is no material worth the name justifying the claim of risk adjustment by comparatively showing particular risks undertaken or not undertaken by the assessee vis-a-vis the comparables. A generalized submission about the assessee assuming low/no risk vis-a-vis its comparables, cannot be countenanced. The assessee has to expressly exhibit that the specific risks undertaken by the comparables were absent in its case and vice versa. In the absence of any such working available either before the authorities below or us, we are disinclined to direct the granting of any risk adjustment. - Decided against assessee.
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2015 (10) TMI 2247
Penalty u/s 271(1)(c) - Held that:- It is well settled proposition that the additions made in the assessment order would not automatically give rise to penalty. In the penalty proceedings, the assessing officer is required to examine the issues afresh and for that purpose the discussions made in the assessment order can be taken as guidance. In the instant cases, the assessing officer has imposed penalty without establishing that there was concealment of income. Accordingly, we are of the view that the basic condition for imposing penalty was not satisfied and hence the impugned penalty levied for the years under consideration is liable to be set aside. We also notice that, in the penalty notice issued by the AO, one of the limbs has not been struck off. However, in the assessment order, the assessing officer has clearly stated that the penalty proceedings are initiated for concealment of income. Hence, the legal issue urged by the assessee becomes debatable. The ld A.R also contended that there is no variation between the returned income and assessed income and hence the penalty was not leviable. Since we have deleted the penalty on merits, we do not find it necessary to adjudicate these legal issues. We set aside the orders passed by Ld CIT(A) and direct the assessing officer to delete the penalty levied u/s 271(1)(c) of the Act for the years under consideration. - Decided in favour of assessee.
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2015 (10) TMI 2246
Revision u/s 263 - assessee company is not eligible for deduction u/s 35D - Held that:- CIT(A) has proceeded on wrong assumption of facts. The CIT has held that the preliminary expenditure claimed by the assessee were incurred during the financial year 2008-09 whereas the business has commenced from 10.07.2007 relevant to assessment year 2008-09, therefore, the claim of the expense as 'prior period expense' and allowable u/s 35D carries no weightage. This entire finding of the CIT is based on the wrong assumption of fact that the assessee's business has commenced from 10.07.2007. The correct fact is that the assessee company was incorporated on 10.07.2007. The business has been commenced only during the year under consideration. Our view is also fortified by the fact that in the Balance sheet under the head "current assets, loans and advances" project work-in-progress as on 31.03.2008 was only ₹ 13,373/- and as on 31.03.2009 which is the impugned financial year, WIP is shown at ₹ 1,47,77,27,412/- which means that the entire purchase of land was done during the year which also means that the business has been commenced during the year under consideration and the expenditures claim as prior period expenditure are allowable u/s 35D of the Act. - Decided in favour of assessee. Taxability of interest income - Held that:- Assessing Officer has taken a view which may be different from the view of the Ld. Commissioner and assuming that the view taken by the Assessing Officer is a loss to the revenue but the Hon'ble Supreme Court in Malabar Industrial Co. (2000 (2) TMI 10 - SUPREME Court) has held that "every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue", for example, when an ITO adopted one of the courses presumably in law and it has resulted in loss of revenue or where two views are possible and the ITO has taken one view with which the Ld. Commissioner does not agree, it cannot be treated as an order which is erroneous or prejudicial to the interest of the revenue unless the view taken by the ITO is unsustainable in law. Thus the assessment order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impugned order passed by Ld. Commissioner u/s 263 and restore that of the Assessing Officer passed u/s 143(3) of the Act. - Decided in favour of assessee.
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2015 (10) TMI 2245
Addition in respect of capital gains - non-applicability of section 50C - Held that:- A deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of the section. Turning to section 50C, it is seen that the deeming fiction of substituting adopted or assessed or assessable value by the stamp valuation authority as full value of consideration is applicable only in respect of "land or building or both". If the capital asset under transfer cannot be described as 'land or building or both', then section 50C will cease to apply. From the facts of this case narrated above, it is seen that the assessee was allotted lease right in the Plot for a period of sixty years, which right was further assigned to 'P' in the year in question. It is axiomatic that the lease right in a shop plot neither is 'land or building or both' as such, nor can be included within the scope of 'land or building or both'. Considering the fact that dealing with special provision for full value of consideration in certain cases under section 50C, which is a deeming provision, the fiction created in this section cannot be extended to any asset other than those specifically provided therein. As section 50C applies only to a capital asset, being land or building or both, it cannot be made applicable to lease rights in a land. As the assessee transferred lease right for sixty years in the Plot and not land itself, the provisions of section 50C cannot be invoked. Addition made in respect of mortgage expenses incurred for obtaining credit facilities for business purposes - Held that:- It is observed that the appellant has taken loans. The appellant fairly submits that some of the loans have been taken to invest in properties relating to business. The Ld.AR submits that the loan from the Urban Co- Operative Bank, Sonipat has been taken for availing funds from the bank for business. However the ld.AO has not established any nexus between the loans taken with the business activity carried on by the appellant.We are therefore inclined to send this issue back to the file of ld.AO for establishing nexus if any and then to consider the claim of the appellant. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 2244
Disallowance of consumable stores expenses and disallowance out of raw material expenses - CIT(A) deleted addition - Held that:- The assessee had produced a chart of prices of consumable stores for the year under consideration and of the preceding year, which was not considered by the A.O. The A.O just compared the percentage of the costs of consumable stores in the year under consideration and for the preceding year, making an addition of ₹ 1,59,912/-. The sales made by the assessee were accepted. All these facts were duly taking into consideration by the learned CIT(A) and it was rightly observed by him that it was not necessary that the expenses regarding consumable stores should also come down proportionately with the decrease in sales, since the assessee could not pre-suppose or envisage that its sales were going to the fall. The learned CIT(A) has also taken into account that the genuineness of the expenses was not challenged by the A.O. Therefore, finding no error therewith, uphold the action of the learned CIT(A) in deleting the addition on account of disallowance out of consumable stores expenses and that on account of disallowance out of raw material expenses. - Decided in favour of assessee. Disallowance out of free sample expenses and on account of value of goods returned by customers to the assessee - CIT(A) deleted addition - Held that:- These additions were made by the A.O. on an estimated basis. In this regard, it is seen that the A.O had himself accepted giving of free samples to be a part of the assessee’s business. So much so, the A.O had himself allowed 50% of the expenses concerning free sample given. In fact, the disallowance for the other 50% was not based on any clear justification or reasoning. Thus, this disallowance was clearly without application of mind by the A.O. Likewise, the A.O took 25% of the sale value of the good returned, to make the addition of ₹ 29,000/-. This was also without any basis and without any application of mind. Therefore, the learned CIT(A) was correct in deleting these additions. - Decided in favour of assessee. Disallowance out of job work expenses - CIT(A) deleted addition - Held that:- The rates of the job work of the assessee were not compared with those of other similarly placed assessees which ought to have been done. Again, it is nowhere disputed that the payments made were all through account payee cheques and were verifiable from not only the assessee’s books of account, but also from its bank accounts and those of the persons the doing the job work. Though the assessee had provided complete details of the persons doing the job work, including their names and addresses, the A.O did not deem it fit to make any enquiry whatsoever from them. The A.O made a selfanalysis of the matter, but even this analysis was not put to the assessee. The learned CIT(A), however, duly took into consideration these facts and circumstances while dealing the addition and the action of the learned CIT(A) is, accordingly, uphold.- Decided in favour of assessee. Disallowance out of wages expenses - CIT(A) deleted addition - Held that:- The A.O worked out the difference in money terms at ₹ 2,65,220/-, being 2.72% of ₹ 97,50,761/- and made addition of ₹ 92,827/-. The learned CIT deleted this addition. Here also, the addition was made by the A.O without any basis, without doubting either the factum of incurrence, or the genuineness of the expenditure claimed. Therefore, the learned CIT(A) is perfectly justified in deleting this addition also. - Decided in favour of assessee. Disallowance of purchase expenses - CIT(A) deleted addition - Held that:- CIT(A) observed that the amount had been written off by the assessee in its books of account even before the effective start of the assessment proceedings for the year under consideration. Apropos the additional evidence filed in the shape of the copies of bills, the learned CIT(A) observed that these bills had been raised in the name of the assessee company by M/s Flint Group India Pvt. Ltd. It was on considering these factors that the learned CIT(A) deleted the addition made. Do not find anything wrong with this action of the learned CIT(A) also and the deletion is upheld. - Decided in favour of assessee. Difference in account with different parties - CIT(A) deleted addition - Held that:-Difference was on account of opening balances in the accounts of the party. This difference stood duly reconciled by the A.O. This was precisely the reason why no comment was offered in the remand report. Besides, part of the explanation had also been accepted by the A.O., concerning the difference in the accounts. However, no further enquiry had been made. Still, the amounts were added without considering that since the difference was on account of opening balances, no addition could be made in the year under consideration. All these factors were duly taken into consideration by the learned CIT(A) while ordering the addition to be deleted. Finding no error here also, the action of the learned CIT(A) is confirmed. - Decided in favour of assessee. Disallowance out of payment made to internal auditor - CIT(A) deleted addition - Held that:- No comments were offered by the A.O. The learned CIT(A) found the genuineness of the expenses to have not been doubted by the A.O. The payment was also not found to have been made to any related person. The factum of TDS having been made and deposited also went in favour of the assessee. The certification/ confirmation by Sh. Daljit Singh also remained unchallenged. It was all these points which led the learned CIT(A) to delete the addition made. This deletion is also upheld.- Decided in favour of assessee.
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2015 (10) TMI 2243
Validity of reassessment proceedings - Addition u/s.69A - Held that:- There is no satisfaction of the AO that income has escaped assessment. Further, for the said ₹ 1 crore notice u/s.148 has been issued for A.Yrs. 2004-05 to 2006-07. Therefore, the AO is not sure for which assessment year the money has been deployed. Further, he is not saying that this is an income. Therefore, assumption of jurisdiction u/s.148 of the I.T. Act is not warranted. See CIT Vs. SFIL Stock Broking Ltd. [2010 (4) TMI 102 - DELHI HIGH COURT] In the instant case the AO reopened the assessment by issuing notice u/s.148 on the ground that the documents seized during the search action by the income-tax department of Shri Sohanraj Mehta, C&F Agent of RMD Group indicate receipt of an amount of ₹ 1 crore by the assessee out of the unaccounted sale proceeds. Rejecting the various explanations given by the assessee the AO made addition u/s.69A in the hands of the assessee. However, the Ld.CIT(A) while upholding the addition of ₹ 1 crore u/s.69A of the I.T. Act in principle, directed the AO to assess the same in A.Y. 2005-06 since the seized documents show that the amount has been paid to the assessee on 09-07-2004. We find an identical issue had come up before the Tribunal in the case of Shri Vinit Ranawat Vs. ACIT vide [2015 (6) TMI 608 - ITAT PUNE] wherein additions were made on the basis of seized documents found from the residence of Shri Sohanraj Mehta, C&F Agent of RMD Gutkha Group during the course of search and after considering the various submissions made by both the sides, the Tribunal deleted the addition concluding that the presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party - Decided in favour of assessee. Revision u/s 263 - Held that:- We find in the instant case the AO did not make any addition in the hands of the assessee in the impugned assessment year holding that he has already made the addition of ₹ 1 crore in A.Y. 2004-05. This was done by the AO despite the fact brought before him that the seized documents relates to A.Y. 2005-06 and not A.Y. 2004-05. Therefore, the AO in a clear application of mind and in a conscious manner made the addition in A.Y. 2004-05 and not in A.Y. 2005-06. Therefore, it cannot be said that there is no application of mind. Since the amount has already been taxed in A.Y. 2004-05, therefore, no prejudice can be said to have caused to the revenue. In any case we have already held in the preceding paragraphs while deciding the appeal for A.Y. 2004-05 that no addition is called for in the hands of the assessee on the basis of seized documents found during the course of search of Shri Sohanraj Mehta, C&F Agent of RMD Gutkha group either in A.Y. 2004-05 or A.Y. 2005-06. Therefore, the order of the CIT invoking jurisdiction u/s.263 cannot be sustained even on merit. - Decided in favour of assessee.
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2015 (10) TMI 2242
Transfer pricing adjustment - selection of comparable - Held that:- Three companies, namely Aztec Software Ltd., Geometric Software Ltd. and Megasoft Ltd. and KALS Infosystems Ltd. and Accel Telemetrics Ltd. shall be excluded from the set of comparables for the software development services segment of the assessee. Tata Elxsi Ltd. and Lucid Software Ltd. excluded from the list of comparables for the software development services of the assessee. Infosys Technologies Ltd. be excluded from the set of comparables in the software development services segment of the assessee. Deduction under Section 10A - Held that:- Taking into consideration the decision rendered by the Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT ), we are of the view that it would be just and appropriate to direct the Assessing Officer that communication charges and expenses incurred in foreign currency are to be excluded from both export turnover as well as total turnover while computing the deduction under Section 10A of the Act, as has been prayed by the assessee in its alternate plea Interest under Section 234B is consequential and mandatory and the Assessing Officer has no discretion in the matter.
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2015 (10) TMI 2241
Non deduction of TDS on the payments made for hiring the cars u/s 194 (C) - disallowance u/s. 40(a)(ia) - Held that:- In the present case, only condition (a) is satisfied, i.e. the assessee is a contractor. So far as the conditions mentioned in (b), (c) and (d) are concerned, none of the conditions apply in the present case. Thus, the provisions of section 194C are not attracted and thus, the assessee is clearly outside its preview. Whether the payments made by the assessee are in the nature of rent under the provisions of section 194-I? - Held that:- From conjoint reading of provisions of section 194-I and the provisions of section 43(3), we can safely conclude that any payment made under lease agreement for use of vehicles partake the character of rent on which tax has to be deducted under the provisions of section 194-I. In the present case the assessee has furnished lease agreement for hiring cars. The assessee was liable to deduct tax at source on the payments made to the owners/lessor for hiring of cars. It is an admitted fact that the assessee has not deducted any TDS on the payments so made. As the assessee is liable for not deducting TDS under the provisions of section 194-I on the payments made after 13-07-2006. Since, the assessee has defaulted in not complying the provisions of section 194-I, the disallowance u/s. 40(a)(ia) has to be made for non-deduction of tax at source on the payments made in the assessment years 2008-09 and 2009-10. Similarly, the assessee is also liable for the demand raised u/s. 201(1) and 201(1A) for not complying with the TDS provisions. - Decided against assessee.
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2015 (10) TMI 2240
Disallowance of interest on borrowed funds u/s 36(1)(iii) - CIT(A) restricted the addition - Held that:- Admittedly, the investments were made by the assessee in the shares of its sister concerns in the earlier years, in which years no disallowance of interest was made. Further, the claim of the assessee before us is that the said investment was made with its sister concerns because it has business dealings with sister concerns and hence, the advances were for commercial exigency. In the totality of the above said facts and circumstances and in the absence of any finding by the Assessing Officer that the interest bearing funds available with the assessee have been utilized for making the aforesaid interest free investments, we find no merit in the disallowance made under section 36(1)(iii) of the Act. In this regard, we place reliance on the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Reliance Utilities and Power Limited (2009 (1) TMI 4 - HIGH COURT BOMBAY). Accordingly, we set-aside the order of CIT(A) in restricting the disallowance to ₹ 5,89,573/- and direct the Assessing Officer to delete the same - Decided in favour of assessee. Additional depreciation on expenditure on moulds disallowed - Held that:- The additional depreciation on assets is allowable under section 32(1)(iia) of the Act. However, no additional depreciation is allowable as per the proviso to section 32(1)(iia) of the Act, where plant & machinery installed after 31.03.2005, was earlier used either within India or outside India by any other person. Further, additional depreciation is not allowable on any office appliances. The assessee had paid labour charges for the conversion of its old mould into new mould and there was no purchase of new plant & machinery. In the above said facts and circumstances, we find no merit in the claim of the assessee and upholding the order of CIT(A) in disallowing additional depreciation on expenditure of ₹ 68,035/- incurred on account of labour charges in respect of conversion of old mould into new mould - Decided against assessee. Disallowance of sales promotion expenses - Held that:- The claim of the assessee was that the payments were made through ICICI bank credit card. Except filing the statement of payments at pages 72 and 73 of the Paper Book, the assessee has failed to furnish any bills or any details or break-up of the expenditure incurred by the assessee under the head ‘sales promotion expenses’. It is the requirement of law that for allowing any expenditure under section 37(1) of the Act, onus is upon the assessee to establish that the said expenditure has been incurred for carrying on its business. Where the assessee has failed to furnish even basic details of the break-up of expenditure or the nature of expenditure, we find no merit in the claim of the assessee and consequently, the same is rejected. The CIT(A) has already allowed 1/3rd of business expenditure. - Decided against assessee.
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2015 (10) TMI 2239
Penalty u/s. 271(1)(c) - Company has claimed deduction of expenditure toward payment made to employees under Voluntary Separation Scheme - Held that:- Section 35DDA pre-supposes that there is a continuance and existence of business for next relevant years on going concern concept basis, which is not the fact in the assessee’s case. Here, the Govt. of India has decided to close the business and the scheme is not voluntary in nature. It was compulsory and was to be opted by all the employees and if it is not available by certain employees, then in that circumstance, those employees will be compulsorily retrenched. Hence, from the spirit of the scheme, it is seen that it is not voluntary in nature and accordingly, in the circumstances, when the assets are in the process of being sold out, the employees are made to go and the business is being in the process of closure down. In these circumstances, the appellant’s contention that their case is not covered by the scheme contemplated by section 35DDA has to be accepted. - Decided in favour of assessee. Penalty imposed u/s. 271(1)(c) - once the impugned addition on the basis of which the penalty was imposed by the Assessing Officer, stands deleted by us, there remains no justification to hold that the assessee had furnished inaccurate particulars of its income. Therefore, the very basis for imposition of penalty stands collapsed. We, therefore, find no reason to interfere with the order of the ld. CIT(A) in deleting the impugned penalty imposed u/s. 271(1)(c) - Decided in favour of assessee.
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2015 (10) TMI 2238
Penalty u/s. 271D - Held that:- only those loans and deposits are covered by section 269SS where funds/money are transferred. We, therefore, are of the opinion that where the loans are recorded by merely passing adjustment entries or journal entries are outside the scope of section 269SS of the Act. Therefore, in our considered opinion, the ld. CIT(A) was not justified in confirming the penalty against the assessee on this count. - Decided in favour of assessee.
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2015 (10) TMI 2237
Disallowance of General Expenses - CIT(A) restricted disallowance to 10% - Held that:- The revenue has accepted the restriction of disallowance at 10% and no further appeal was preferred for both the years i.e. AY 2002-03 and 2003-04 against the order of CIT(A) of the assessment order. In view of the above, we are of the view that the AO has not given any reasoning for making specific disallowance of expenses and even genuineness of expenditure is not in doubt. Accordingly, we confirm the order of CIT(A) restricting the disallowance at 10%. Disallowance of club expenses - CIT(A) deleted the addition - Held that:- The club expenses are to be allowed because it is not admission fee of club but these expenses are in the nature of business and not personal in nature. Accordingly, we confirm the order of CIT(A) and this issue of revenue’s appeals are dismissed. Disallowance of interest on fixed deposit - CIT(A) deleted the addition - Held that:- AO has not made addition of notional interest but this interest has accrued to the assessee on fixed deposit of ₹ 30 lakhs made with SBI. The assessee neither credited any interest income to the P&L Account nor disclosed in the return of income. This fact when confronted to Ld. Counsel for the assessee, he fairly conceded that this addition can be confirmed. Accordingly, we are of the view that the addition on account of interest income accrued on fixed deposit of ₹ 30 lacs is to be sustained. Accordingly, we confirm the addition and reverse the order of CIT(A) on this count. - Decided against revenue. Addition on interest from loan - CIT(A) deleted the addition - Held that:- No notional interest can be added unless and until there is positive proof that the assessee has actually charged interest or credited interest. We find that this is purely a notional interest and assessee specifically contended that this is interest free loan. The assessee since FY 2002-03 no interest has been charged and revenue has not made any addition qua this earlier years also. In view of the above facts, we confirm the order of CIT(A) in deleting the addition and this issue of revenue’s appeal is dismissed. - Decided against revenue. Addition made under the head loss on account of share trading - CIT(A) deleted the addition - Held that:- Purchase and sale bills of shares wherein complete details are enclosed in the paper book. In view of the above details available in the assessment record and the fact that the assessee has entered into transactions by virtue of which incurred loss in share trading business is proved. Moreover, the AO has not carried out any verification despite the fact that he was having complete information before him. The addition made by AO is totally on the basis of conjecture and surmises. The assessee has filed complete details which was considered by CIT(A). In view of the above, we are of the view that the CIT(A) has rightly allowed the claim of loss and we confirm the same - Decided against revenue. Addition made under the head speculation loss - CIT(A) deleted the addition - Held that:- both the representatives of revenue and assessee conceded that the issue is identical and the facts are common to the ground of appeal for AY 2005-06. Since we confirmed the action of CIT(A) and dismissed the ground of appeal of revenue for AY 2005-06, and since the issue is identical and facts are common to the ground of appeal of revenue for AY 2006-07, following the same, we also dismiss this ground of appeal of revenue.- Decided against revenue. Addition under the head legal expenses - CIT(A) deleted the addition - Held that:- We find that these legal expenses comprised of audit fee paid to M/s. G. L. Jhunjhunwala & Co., Chartered Accountants and arbitration fee paid to one Shri Chittatosh Mukherjee. These expenses like audit fee and arbitration fee are allowable as business expenditure. The revenue in earlier years had not made any disallowance on this aspect and accepted the claim of legal expenses. Even for the sake of consistency also, these expenses should have been allowed - Decided against revenue. Disallowance u/s. 14A of the Act read with Rule 8D - Held that:- We find that the dividend income earned by the assessee is to the extent of ₹ 17,40,745/-. The AO is unable to prove any nexus with the disallowance of expenditure and that of the earning of exempt income. However, the relevant assessment year involved is 2005-06 and Rule 8D of the I. T. Rules will not apply to this assessment year as held by Hon’ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. Vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT ), the provision being prospective and not retrospective. In term of the above, we are of the view that the Tribunal is taking a consistent view and restricted the disallowance at 1% of the exempt income. Hence, we also direct the AO to make disallowance to the extent of 1% of the dividend income. The AO is directed accordingly. Both the ground of appeal of revenue and that of the assessee are partly allowed as indicated above. Addition under the head repair charges - CIT(A) deleted the addition - Held that:- We find that the assessee before the AO has filed complete details in respect to repair expenses and this is verified by the CIT(A) as observed by him in his order. Even otherwise, the assessee now before us contended that in AY 2006-07 the repair expenses were allowed by the AO in full while framing assessment u/s. 143(3) of the Act dated 24.12.2008. We find no infirmity in the order of CIT(A) and hence, this issue of revenue’s appeal is dismissed. - Decided against revenue. Addition in the head of Corporation Tax - CIT(A) deleted the addition - Held that:- All the letters regarding payment of corporation tax was filed before AO vide letter dated 19.02.2007. The same letter was filed before Tribunal also wherein complete details of Corporation Tax paid is enclosed at annexure-7. The relevant details are given at page 35 of assessee’s paper book, which clearly proves that the assessee has paid the Corporation tax and it is the responsibility of the owner only to pay the Corporation tax and not the tenant. Accordingly, we confirm the order of CIT(A) - Decided against revenue. Disallowance of motor car expenses - CIT(A) deleted the addition - Held that:- The assessee in its paper book has filed complete details of motor car expenses as annexure-8 of the same and also depreciation chart on which depreciation is claimed to have been made. The assessee has disclosed receipt of motor car hire charges on which depreciation is claimed. In view of these facts, we confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed. - Decided against revenue. Disallowance of telephone expenses - CIT(A) restricted disallowance to 10% - Held that:- We find that the AO made the disallowance on account of personal use of telephones. The assessee contended that the expenses are genuine and incurred for business purposes. The CIT(A) restricted the disallowance to 10% instead of 25% as made by AO by observing that personal use of telephone cannot be ruled out and the disallowance as made by AO is on higher side. We find no infirmity in the order of CIT(A) in restricting the disallowance to 10% as the disallowance made by AO is on higher side and hence, the same is hereby upheld. - Decided against assessee. Addition of bad debts written off - CIT(A) deleted the addition - Held that:- As the issue is settled by Hon’ble Supreme Court in the case of TRF Ltd. (2010 (2) TMI 211 - SUPREME COURT -) and going through the facts and circumstances of the present case as narrated above, we are of the view that there is no reason for us to interfere in the order of CIT(A). We dismiss this ground of appeal of revenue. - Decided against revenue.
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2015 (10) TMI 2236
Revised return filed beyond the permissible date - Set off of brought forward business loss and unabsorbed depreciation of amalgamating company - Held that:- We find that the revised return reflecting the consolidated results of the amalgamated entity was filed beyond the permissible time limit u/s 139(5) of the Act. This is due to the fact of delayed passing of the order of the High Court approving the scheme of merger with effective date as 1.4.2000. This delay is definitely not attributable to the assessee and it is not within the control of the assessee. We also find the revised return has been filed herein before the completion of assessment proceedings. The decision of Goetze India reported in [2006 (3) TMI 75 - SUPREME Court] is not applicable to appellate authorities. In view of the aforesaid facts and circumstances, we direct the Learned AO to kindly frame the assessment by considering the loss returned by Aqua Chemicals & Systems (Mfg) Ltd i.e by considering the consolidated results reflected in the revised return. Compensation received by the assessee for restraint of trade - capital receipt or revenue receipt - Held that:- We find that the assessee had received the compensation from its US parent company amounting to USD 326374 has been received for entering into restrictive covenants of not entering into competitive business. We also find that the provisions of section 28(va) of the Act had been introduced in the statute book by Finance Act 2002 with effect from 1.4.2003 (relevant to Asst Year 2003-04) only and not earlier. Accordingly, the non-compete fees would become taxable only from Asst Year 2003- 04 and not earlier. The year under appeal before us is Asst Year 2001-02 , during which year, the provisions of section 28(va) of the Act were not in the statute.We also hold that the payments received for impairment of income earning apparatus, sterlisation of source of income or transfer of a capital asset would generally fall in the category of capital receipts. Further the correspondences dated 20.4.1999; 4.1.2000 ; 10.4.2000 & 20.11.2000 as reproduced supra, clearly goes to prove that the compensation received for undertaking restrictive covenants of not competing with the business of the assessee and fall in the nature of capital receipt. - Decided in favour of assessee. Treatment of exchange fluctuation loss arising out of restatement of Exchange Commercial Borrowings (ECB) from holding company of the assessee utilized for general corporate objectives - Held that:- It is observed from the finding given in the assessment order that the ECB Loan of USD 50,00,000 was utilized for general corporate objectives and not for acquisition of any fixed assets by the assessee, though contradictory finding is taken by the Learned AO in his order. Hence we hold that the borrowings were utilized on revenue account. Based on this, it could logically be concluded that any exchange fluctuation arising out of restatement of the said loan at the end of the year, be it gain or loss, would also fall on revenue account and hence automatically comes under the ambit of taxation if it is a gain and allowable as an expenditure if it is a loss. This issue is squarely covered by the decision of the Supreme Court in the case of CIT vs Woodward Governor India P Ltd reported in (2009 (4) TMI 4 - SUPREME COURT) to hold that the "loss" suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure under Section 37(1) of the 1961 Act - Decided in favour of assessee.
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2015 (10) TMI 2235
Deduction u/s. 80IB(10) - housing project “Kumar Primavera” - AO denied the benefit on the ground that the assessee has not completed the project within the time frame as stipulated under the provisions of section 80IB(10)- Held that:- It is not disputed by the Revenue that buildings A1 and A2 in Phase-I were complete and occupation certificate was granted by the PMC in respect of said buildings on 05-09-2008. In so far as buildings A3 to A8 in Phase-II are concerned, the completion certificate in respect of all the flats comprising in said buildings were granted by PMC up to March, 2011, whereas, the last date for obtaining completion certificate was 31-03-2012. Thus, the assessee had obtained completion certificates well within the time frame mentioned in the provisions of section 80IB(10) of the Act in respect of all the buildings in Phase-I and Phase-II. See Rahul Construction Vs. ITO [2012 (6) TMI 319 - ITAT PUNE] The assessee is eligible to claim deduction u/s. 80IB(10) on all the residential buildings comprising in Phase-I (A1 and A2) and Phase-II (A3 to A8). The date of completion of Phase-II shall be reckoned from the date of commencement certificate issued by PMC in respect of buildings A3 to A8. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals), accordingly, the same is upheld and the appeals of the Department are dismissed. - Decided in favour of assessee.
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2015 (10) TMI 2234
Deduction under Section 10A - assessee challenge the action of Assessing Officer and the DRP in excluding expenses incurred in foreign currency towards telecommunication and travel expenses towards delivery of software from export turnover while computing the deduction under Section 10A - Held that:- Taking into consideration the decision rendered in the case of Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT) and of the co-ordinate bench of this Tribunal in the assessee's own case (2015 (8) TMI 712 - ITAT BANGALORE) are of the view that it would be just and appropriate to direct the Assessing Officer that telecommunication charges and travel expenses incurred in foreign currency are to be excluded from both export turnover as well as total turnover while computing the deduction under Section 10A of the Act, as has been prayed by the assessee. It is ordered accordingly.- Decided in favour of assessee.
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2015 (10) TMI 2233
Disallowance of interest u/s 24(b) while computing 'Income from House Property" - assessee contented that the interest has been paid on loan/capital received from the partners which was utilized in acquisition/ construction of property or repayment. of loan utilized for acquisition/ construction of property, hence, should have been allowed - Held that:- It is a case where partners have contributed the said amount of ₹ 3,82,33,742/- over and above their fixed capital contribution and therefore the payment of interest by the firm to the partners is an allowable expenditure if the said amount is used for acquisition or improvement of the house property in question as per provisions of sec.24(b) of the IT Act. See M/s.Sane & Doshe Enterprises [2015 (4) TMI 707 - ITAT MUMBAI] upheld by HC [2015 (4) TMI 882 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2015 (10) TMI 2232
Reopening of the assessment - exemption allowed u/s 10(23C)(iiiab) disallowed - CIT(A) allowed the claim - Held that:- The facts and circumstances are identical for the assessment year under consideration and the CIT(A) has decided the issue of validity of reopening by following the order of this Tribunal in the assessee’s own case. Accordingly, we do not find any error or illegality in the impugned order of the CIT(A) qua this issue. The same is upheld. claim of exemption u/s 10(23C)(iiiab) - The Tribunal in the assessee’s own case for assessment year 2007-08 [2012 (9) TMI 947 - ITAT MUMBAI] has considered the grant of more than 50% as substantial finance by Government. There is no dispute that the assessee received Government grant of more than 50% of the expenditure during the year. Therefore, this issue is covered in favour of the assessee by the order of this Tribunal in the assessee’s own case. Accordingly, we do not find any reason to interfere with the findings of the CIT(A) qua this issue. - Decided in favour of assessee.
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Customs
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2015 (10) TMI 2263
Refund Claim pursuant to 2(c) of Notification No.102/2007-Cus. – Jurisdiction - Impugned orders were passed without giving an opportunity of hearing - No deficiency memo issued by 2nd Respondent informing that he had no jurisdiction to entertain refund claim - Files not transferred to Assistant Commissioner of Customs (Refunds) – Respondent contended that as per the notification jurisdictional Assistant Commissioner alone shall sanction and refund claim – Held That:- Delay in filing application is not on higher side and impugned orders be thereby quashed – 2nd Respondent directed to send application to Assistant Commissioner of Customs (Airport and Air Cargo) and petitioner shall also submit application himself along with copy of order within two weeks failing which respondent can pass appropriate orders – Decided conditionally in favour of assessee.
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2015 (10) TMI 2262
Import of plastic granules under exemption scheme (Target Plus Scheme) to be used for manufacturing of final products - Goods sent to Job Work – Appellant contends that there is no prohibition to send goods to job worker for manufacture of final goods - Goods sent to job worker under provisions of Notification No.214/86 and were cleared on payment of Central Excise duty – Revenue contends that notification prohibits goods to be transferred or sold thus notification has been violated – Contravention of provisions of FTP as goods imported should be for own use. Held That:- Goods were sent to job worker under terms of Notification No.214/86-CE and a list of job workers were also submitted to the Central Excise authorities - There is no transfer of imported plastic granules as appellant is sending plastic granules to job worker and buyer is purchasing plastic films - Appellants are eligible for availing CENVAT Credit and interest and penalties are liable to be set aside - Confiscation of goods and redemption fine are also set aside – Decided in favour of assessee.
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2015 (10) TMI 2261
Classification of Ilmenite upgraded - Classification claimed initially under Chapter Heading 26140010; reclassification claimed under 26140020 – Department contented for classifying under Chapter 26140010. Held That:- Department's contention for classifying under Chapter 26140010 is not based on valid reasons and relying another firm's website details is not authentic evidence - Definition of beneficiation given in Mineral Conservation and Development Rules, 1988 is more authentic than the website literature - Product Ilmenite is rightly classifiable under CH 26140020 of CTH and not under 26140010 of CTH – Decision made in case of Tata Steel & Others Vs UOI [2015 (10) TMI 2386 - SUPREME COURT] – Decided in favour of the Appellant.
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2015 (10) TMI 2260
Refund of Additional Customs Duty levied under Section 3(5) of Customs Tariff Act, 1975 in terms of Notification No. 102/2007-Cus – Revenue contends that Condition No. (b) of the Notification was not fulfilled as the importer had not specifically indicated in invoice that in respect of goods covered therein no credit of additional duty of customs is admissible – Held That:- Commissioner (Appeals) has adequately discussed the issue - Stamp on invoice to the effect that ‘No Credit of Special Additional Duty Available’ satisfies the requirement of Condition ‘b’ of Notification – Found no merits in appeal – Decided against the Revenue.
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2015 (10) TMI 2259
Confiscation of goods - Imposition of redemption fine - Misdeclaration of goods - goods imported were different from the goods ordered - Held that:- The supplier in this case is a well established multi-national on M/s Basell International Trading FZE. It is also seen that the documents relating to the import goods were released by the bank after receiving the balance amount from the appellant. It is also an admitted fact that when the appellant took up the matter with the supplier immediately on coming to know that goods imported were different from the goods ordered, the supplier immediately confessed to the mistake having been made and returned the money through bank and also agreed to bear the expenses with regard to re-export of thee goods. - even in a case where anti-dumping duty is imposed after the orders for supply of goods are placed but before their import the importer can legitimately request for re-export on the ground that the import has become economically unviable due to anti dumping duty. Further it has been mentioned in the primary adjudication order that LDPE was more expensive than PP and therefore, it appeals to reason that the appellant would not collude for getting the supply of cheaper goods while paying for more expensive goods. - It is obvious from this observation of the primary adjudicating authority that no foul play was suspected, let alone established, by him. Indeed, the facts and circumstances of the case clearly point towards the absence of any mala fide on the part of the appellants - Re export of goods allowed - there is no reasonable ground for imposition of fine and penalty as a condition for re-export of the goods and therefore we set aside the impugned order - Decided in favour of assessee.
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2015 (10) TMI 2258
Classification of Liquid Crystal Devices (LCDs) - Appellants sought classification of LCD under Heading 90138010 and states that LCDs are outside the scope of Section XVI of Customs Tariff Schedule which covers Chapter 84 and 85 only - Revenue classified them under CTH 852990.90 on grounds that these are parts suitable for use solely or principally with LCD TV of CTH 8528 and Note 2 of Section XVI gets attracted. Held That:- LCDs are specifically mentioned in CTH 9013 as it has LCDs by name while description of CTH 85.29 is general in nature - Section Note is of no avail as Note (1) (m) of Section XVI clearly states that Section XVI does not cover articles of Chapter 90 - Decision given in case of M/s Secure Meters Ltd. Vs. CC, New Delhi [2015 (5) TMI 241 - SUPREME COURT] followed wherein "parts suitable for use solely or principally with LCD TV" were stated not to cover LCDs for LCD TVs as specifically as description of CTH 9013 covers LCDs by name and devotes a sub heading (90138010) exclusively for it – Decided in favour of assessee.
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Corporate Laws
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2015 (10) TMI 2257
Valuation of Shares – Petition filed under Section 397 and 398 of Companies Act, 1956 - Appellant challenges the order on grounds that CLB had no jurisdiction to entertain the application and order of disposal of petition had merged with appellate order which had since been complied – Revenue contends that CLB has wide powers under provisions of Sections 397 and 398 read with Section 402 – As per Regulations 29 and 44 of CLB Regulations, 1991, CLB has power to pass such orders to give effect to its orders for meeting ends of justice and preventing abuse of process of Bench – Valuer abused order by not valuing the shares at specified date and as such CLB was well within its rights to pass the impugned order. Held That:- Powers under Section 402 are wide and extensive but once CLB disposes of petition finally, it ceases to exercise any jurisdiction - Regulation 29(6) does not suggest that after the board divests itself of jurisdiction over the matter, it still retains its jurisdiction to issue further orders - CLB had not retained any seisin over the matter to enable parties to approach it upon valuation to be carried out by statutory auditor and as such it is not permissible for Jain group to approach CLB, if it is aggrieved by valuation of statutory auditor – Valuer has determined the value of shares in accordance with the directions of the CLB as at the date of 31 March 1999 and after considering all relevant material - Valuation does not give rise to any ground to approach the CLB in challenge of the same - It is not open to CLB to interfere with original order of CLB which has since been confirmed with modification by this Court – Decided against the Appellant.
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Service Tax
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2015 (10) TMI 2294
Liability of Service Tax – Demand confirmed on account of denial of 67% abatement under notification No. 1/2006-ST and under Commercial or Industrial Construction Service category – Appellant contended that credit was duly reversed before passing of order thus entitled to benefit under Notification No.1/2006-ST – Further contended that demand under CICS is not sustainable as services provided to joint venture was in effect service to self and liability of service tax is not sustainable by notification No. 16/2005ST for construction of port as work was for completion of remaining jetty - No wilful mis-statement or suppression of facts. Revenue contended that exemption under Notification is subject to condition of non-availment of CENVAT credit and can be granted only if CENVAT credit is reversed before clearance of goods – Joint Venture had a separate service tax registration thus service rendered cannot be said to be service to self – Jetty was a personal property which could not be used by any other party and hence does not qualify to be called port and appellant is guilty of suppression of facts as it did not pay service tax and also did not file any ST-3 return. Held That:- Benefit of Notification No.1/2006-ST granted on final product since reversal of credit on input was done at Tribunals stage – Demand under CICS is untenable as Notification No.25/2007-ST nowhere implies that CICS for construction of public port only is eligible for exemption and private port is not - Appellant received payment for service rendered to joint venture thus contention that services rendered were effect to self is untenable - Allegation of wilful mis-statement or suppression of facts does not remain of much relevance but it is agreed that appellant did not pay service tax and did not file ST-3 returns – Impugned order set aside – Decided in favour of Assessee.
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2015 (10) TMI 2293
Penalty under Section 76 and 77 of Finance Act, 1994 - Amount of service tax collected from the clients but not deposited - At the instance of Audit party, service tax deposited before issuance of SCN - Appellant states that it had no mala-fide intention to evade tax – Further pleads to set aside penalty as appellant is facing financial difficulties – Held That:- After the audit, fact came into light that appellant received service tax amounts from service receiver but same was not being deposited with Revenue – Found no infirmity in imposition of penalty – Decided in favour of Revenue.
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2015 (10) TMI 2292
Penalty under Section 76 and 78 of Finance Act, 1994 – Simultaneous imposition of penalties under Sections 76 & 78 cannot be made applicable to SCN issued after 16/05/2008 when amended provisions of Sec 78 were in force – No intention to evade tax and by invoking Section 80, penalties should be set aside due to financial hardships – Revenue contends that simultaneous penalties are imposable for period prior to 16/05/2008 when Sec 78 was amended – Tax was not paid till detected by department thus acts of appellant were clearly mala-fide. Held That:- Simultaneous penalty under Sec 76 is not imposable upon the appellant when SCN was issued after 16/05/2008 when amended provisions of Sec 78 were existing – Decision made in case of CST Bangalore Vs The Peoples Choice [2014 (4) TMI 291 - KARNATAKA HIGH COURT] followed – Decided in favour of appellant. No intimation was filed by appellant to make clear his intentions and have no reasonable cause to waive penalty under Section 78 – There was suppression of material facts with intention to evade payment of service tax as it was already collected from service recipients but was not paid to department - Extending 25% reduced penalty option on reworked out amount under Sec-78 is required to be decided by original authority – Matter remanded back.
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2015 (10) TMI 2291
Works Contract – Levy of tax prior to 1.06.2007 - Commercial or Industrial Construction Service – Appellant contended that work executed is taxable only with effect from 01.06.2007 not prior to it and CICS does not include indivisible works contract – Held That:- The contract involved is clearly a works contract as payments are to be made by ONGC during rendition of contract. Issue whether works contract is taxable under the category of CICS prior to 01.06.2007 is no longer res integra as decision made in case of CCE, Kerala Vs. M/s. Larsen & Toubro Ltd. & Anr [2015 (8) TMI 749 - SUPREME COURT] followed – Decided in favour of appellant.
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2015 (10) TMI 2290
Non-examination of evidence Facts by evidence not tested Approach of Appellate Authority is contrary to principle of jurisprudence as it did not determine the issue involved nor examined the assesse Unreasoned and non-speaking order passed Held That:- Matter remanded back affording reasonable opportunity of hearing to Respondent.
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2015 (10) TMI 2289
Waiver of Penalty under Section 78 – Construction Service - Civil Work of Foundation for Drilling Rig Platform – Taxable value included material and labour cost which is 75% of amount thus demand of tax cannot be sustained – Held that:- Considering the period involved in the case and fact that tax has already been paid with interest, penalty is waived – Demand of tax and interest upheld – Decided partially in favour of assessee.
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2015 (10) TMI 2288
Denial of cenvat credit - GTA Services - Held that:- Tribunal's order relates to the period March 2005 to May 2007. Ld. A.R. contended that they have filed a C.M.A before Hon'ble High Court, Madras against the above final order of Tribunal in C.M.A.No.3274/2013. Both sides submit that the Tribunal order is not stayed as no stay is granted and the C.M.A. is still pending before Hon'ble High Court, Madras. Further I find that place of removal has been amended w.e.f. 1.3.2008 and the present case relates to the period prior to the amendment. Therefore, by following Tribunal's Division Bench decision in the appellant's own case, the appellants are eligible for credit of service tax paid on GTA outward transportation. - impugned order is set aside. - Decided in favour of assessee.
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2015 (10) TMI 2287
Denial of refund claim of cenvat credit - export of services - after sale support service - Business Auxiliary Service - business of processing of chips, the activity which includes circuit designing, testing, validation of such chips, integration of software on chips and support services for its parent company - Held that:- The activity would come within the definition of Business Auxiliary Service under Section 65 (19) of the Finance Act.1994. Learned Counsel for the respondent also relied upon the decision of Tribunal in CC, Hyderabad vs Knoah Solutions Pvt.Ltd.-[2010 (6) TMI 452 - CESTAT, BANGALORE]. The contention of the Revenue that the activity of processing of chips is a manufacturing process and that it would fall within the definition of 'manufacture' as under section 2(f) of Central Excise Act, 1944 does not find merit at all. - Refund allowed - Decided against Revenue.
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2015 (10) TMI 2286
Denial of CENVAT Credit - Banking and Financial services - whether service tax paid by the appellant on external commercial borrowings (ECB), on which service tax was paid under “Banking and Other financial services” by the appellant under reverse charge, is admissible under the Cenvat Credit Rules or not - Held that:- It is observed from para 5 of the Show Cause Notice Dated 15.10.2010 that that Shri Prakash Mehta, Senior Manager (Accountants) and authorized person of the appellant has, interalia, mentioned that ECBs are obtained by the appellant for the purpose of capital expenditure to increase their existing facility and to create new production capacity of the company in India and abroad. The ‘ECB’ services availed by the appellant are therefore, clearly in relation to the business activities and for promoting the inks manufacture by the appellant. It is the case of appellant that during the relevant period the activities relating to business was covered with the definition of inputs services under Rule 2 (l) of Cenvat Credit Rules, 2004. No contrary arguments are available in the orders passed by the lower authorities that such activities relating to business were not existing in the definition of Rule 2 (l) of the Cenvat Credit Rules, 2004. Hence, it is held that the services availed by the appellant were “Banking and other financial services” on which service tax was paid under reverse charge. The factual matrix of this case is thus stand covered by the case law of this Bench in the case of Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam-I vs. GMR Industries Ltd. (2015 (10) TMI 2231 - CESTAT BANGALORE). The Cenvat Credit taken by the appellant with respect to the ECB, for which tax was paid under “Banking and other financial services”, is therefore covered with in the definition of Rule 2(l) of the Cenvat Credit Rules, 2004 prevalent during the relevant period. - Decided in favour of assessee.
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2015 (10) TMI 2285
CENVAT Credit - GTA Service - Held that:- It is not in dispute that the respondent has not complied with the condition of CBEC Circular No. 97/8/2007-ST dated 23.8.07 i.e. cost of transportation has been borne by the respondent. Insurance cost of transportation was also borne by the respondent and respondent was the owner of the goods till goods reached the premises of buyer. As these facts are not in dispute, therefore, I hold that respondent has complied with the condition of CBEC Circular No. 97/8/2007-ST dated 23.8.07 - Respondent has correctly availed cenvat credit on outward transportation service. Reliance placed by the Revenue in the case of Lafarge India Pvt. Ltd. vs. CCE Raipur (2012 (8) TMI 627 - CESTAT, NEW DELHI) has no relevance to the facts of this case as in that case the Tribunal has not examined the CBEC Circular No. 97/8/2007-ST dated 23.8.07 - Decided against Revenue.
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2015 (10) TMI 2284
Denial of CENVAT Credit - Various services - Imposition of interest and penalty - Held that:- It is undisputed that the services on which CENVAT Credit were availed are used in the residential colony by the appellant. This issue is no more res integra as the Hon'ble High Court of Bombay in the case of CCE v. Manikgarh Cement - [2010 (10) TMI 10 - BOMBAY HIGH COURT ] has allowed the appeal of the Revenue and held that the services which are rendered at the residential colony for the employees cannot be availed as CENVAT Credit. In view of the law being settled, the demand of CENVAT Credit as ineligible and the interest thereof is correct and needs to be upheld. - Bench on an identical issue, set aside the penalties relying upon the judgements of the Hon'ble High Court of Andhra Pradesh in the case of CCE Hyderabad- III vs. ITC Ltd. reported in [2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT ]. I do not find any reason to deviate from such a view already taken by the bench in respect of the very same appellant. Accordingly, the penalties imposed on the appellant are set aside. - Decided partly in favour of assessee.
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Central Excise
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2015 (10) TMI 2283
Short payment of excise duty - Interest u/s 11AB - Held that:- After the issuance of show cause notice, Order-in-Original was passed. However, the High Court set aside the Order-in-Original relying upon the judgment in the case of 'CCE, Mangalore v. Sri Krishna Pipes Industries Limited [2004 (1) TMI 82 - HIGH COURT OF KARNATAKA AT BANGALORE]. - As a result, the impugned judgment of the High Court is set aside and the interest which is levied upon the respondent-assessee is maintained - Decided in favour of Revenue.
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2015 (10) TMI 2282
Valuation of goods - manufacture, clearance and quantification of the product Kalogen Brill 3K - Undervaluation of goods - Held that:- As regards the product Kalsol/Solvent KG, the assessee had classified the same under T.I.68 and had claimed full exemption from payment of Central Excise duty quoting Notification No. 179/77 dated 18.06.1977 as amended by Notification No. 74/83 dated 01.03.1983 contending that the said product was being manufactured without the aid of power. The classification list and price list appeared to have been duly approved of by the Assistant Collector, Central Excise, Pune IV, Division Pune. - Tribunal has discussed in detail all the intricacies and has arrived at the finding that the order of the Commissioner is based on certain assumptions and presumptions which are not found from the records. - Findings are pure findings of facts after due consideration of the entire material on record. We do not find any reason to disturb the same - Decided against Revenue.
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2015 (10) TMI 2281
Valuation of goods - whether the installation, erection and commissioning charges for equipment installed at customer's premises and values thereof can be added/included for determining the assessable value - Held that:- On the facts of this case, while coming to the aforesaid conclusion, the CESTAT has relied upon the judgments of this court in 'PSI Data System Ltd. v. Collector' [1996 (12) TMI 47 - SUPREME COURT OF INDIA], 'Mittal Engineering Works Pvt. Ltd. v. Collector' [1996 (11) TMI 66 - SUPREME COURT OF INDIA], holding that inclusion of installation, erection and commissioning charges for equipment installed at customer's premises cannot be added/ included to determine the assessable value. - This is obvious conclusion on reading of Section 4 of the Central Excise Act as per which the transaction value is to be arrived at at the time of clearance of the goods at the factory gate. All the expenses which are incurred post clearance (that too, after the supply of equipment) in respect of installation, etc., could not have been taken into consideration in the facts of the present case as noted by the CESTAT. - No merit in appeal - Decided against Revenue.
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2015 (10) TMI 2280
Duty demand - Manufacture - repacking of lubricating oil into smaller pack - Held that:- mere repacking of the lubricating oil into smaller pack does not amount to manufacture under the old provision and the position changed only after insertion of note w.e.f. 1.3.2000 - Finding of Tribunal in impugned order [2005 (5) TMI 174 - CESTAT, MUMBAI] is correct. - Decided against Revenue.
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2015 (10) TMI 2279
Restoration of appeal - Appeal barred by limitation - Held that:- Joint Commissioner's order which was challenged is dated 1st April, 2007. That was challenged before the Commissioner (Appeals) Central Excise and Customs, Vapi. Before the Commissioner, the argument was that the appeal is not barred by limitation as the petitioner had no knowledge of the order of the Joint Commissioner. It was in winding up inasmuch as the BIFR had recommended in the month of November, 2006 / January 2007, that the petitioner be wound up. This recommendation / reference of the BIFR was treated as a suo moto petition for winding up by this Court and that is how the proceedings commenced and this Court eventually passed the order of winding up. It is during this time that it is stated that all the operations and activities at the factory came to a standstill. There was closure notice and the factory was closed. It is, therefore, impossible for the petitioner to have been aware of an order stated to be pasted on its factory gate. Once all operations were closed and the factory was not operating, then, the appeal filed before the Commissioner (Appeals) could not be said to be barred by limitation. Once the earlier dismissal of the appeal on merits was exparte, then, the Tribunal could have, by some conditions being imposed, recalled the order and gave a chance to the appellant-petitioner to argue the appeal on its merits. We find that the above perfunctory manner of disposal of the appeal on two occasions and in the absence of the petitioner and its advocates does not sub-serve the larger interest of justice. It is, therefore, in the peculiar facts and circumstances of this case that we set aside the orders dated 29th May, 2009 and 11th April, 2014 and direct that the appeal of the petitioner be restored to the file of the Tribunal - Decided in favour of assessee.
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2015 (10) TMI 2277
Waiver of pre deposit - Undue hardship - Held that:- decision making process of the Tribunal with regard to waiver of pre-deposit suffers from procedural irregularity and is unsustainable in its present form. The orders dated 17-12-2013 and 21-4-2014 are set aside. Central Excise Appeal [2015 (10) TMI 1024 - CESTAT NEW DELHI] is restored to file on merits. The Tribunal shall hear the appellant on its application for waiver of pre-deposit afresh, preferably within a maximum period of four weeks from the date of receipt and or production of a copy of this order before the Tribunal by either party. - Stay granted.
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2015 (10) TMI 2276
CENVAT Credit - Whether the credit availed on H.R.Sheets of thickness less than 4 mm is admissible or not - Held that:- when the duty on HR sheets is not paid on the basis of thickness but on the basis of weight, the use of HR sheets of less than 4 mm thickness has no bearing on availing the credit. Revenue does not raise any discrepancy with regard to the weight of input used and weight of final product manufactured. Again, Revenue does not have any case that the HR sheets of less than 4 mm thickness procured by the appellant was diverted in any manner. The department has come to a conclusion without any basis that HR sheets of less than 4 mm thickness is not used by the appellant in manufacture of final products. It is immaterial whether the final product could be manufactured without actually using a particular input or not. What is actually material is whether the assessee has used the inputs in or in relation to manufacture of final products. I find that the assessee has been able to establish that they have used HR sheets less than 4 mm in the manufacture of final products by way of statement given by the managing director of the appellant and certificate issued by the chartered engineer. In view thereof, I hold that denial of credit on HR sheets less than 4 mm thickness is unjustified. Whether the appellant is liable to pay duty on scrap generated at the job workers end. - Held that:- when the waste and scrap is generated at the job workers premises and inputs are supplied by the appellants then the duty liability is not to be fastened on the principal manufacturer. Similar view has been taken in Mukand Ltd. Vs .CCE, Belapur-[2015 (2) TMI 703 - CESTAT MUMBAI]. Following the ratio laid in the above judgements, I am of the view that the appellant is not liable to pay duty towards waste and scrap generated at the job worker s premises. - Decided in favour of assessee.
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2015 (10) TMI 2275
Availment of wrongful CENVAT Credit - Imposition of equivalent penalty - Held that:- Department has come to know about wrongful availment of credit on 2.1.2008. On pointing out the defect, the appellant reversed the credit. If the appellant was liable to pay interest the department ought to have informed the same to the appellant soon after receiving the letter informing the reversal of credit. - Department has no case that the invoices are bogus. No investigation at the end of supplier of machine was done. There may be many reasons for absence of the machines in the factory. If there was fraud it is for the department to establish the same. In a catena of judgements, the Supreme Court has clarified that when the fact is within the knowledge of the department, the extended period of limitation is not invokable. Again it is pointed out by the learned Counsel for the appellant, that the credit when reversed before utilization of the same would amount to not taking credit. Taking into consideration these facts and circumstances of the case, I do not find that department has been able to establish fraud, or suppression with intention to evade payment of duty so as to invoke extended period. I am of the view that the demand is barred by limitation. - Decided in favour of assessee.
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2015 (10) TMI 2274
Justification of appeals filed by the Revenue - Non imposition of penalty - Held that:- On perusal of the impugned order, penalty on all the respondents have already been imposed by the adjudicating authority and by filing these appeals against these respondents by the Revenue, no specific relief has been sought. I have also perused the order of the Committee of Commissioners advising to file appeal before this Tribunal and on perusal of the said Review order, I find that Committee of Commissioners has not proposed to file appeals against these respondents. Despite that, appeals have been filed against the respondents. I have also perused the appeal memorandum. There is no prayer in the appeal memos. Appeals filed by the Revenue seek no relief against these respondents. I do not understand why these appeals have been filed before this Tribunal when there is no proposal by the Committee of Commissioners to file these appeals before this Tribunal against the respondents nor any relief has been sought in the appeals against the respondents during the course of arguments. - Decided against Revenue.
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2015 (10) TMI 2273
Denial of CENVAT Credit - Welding electrodes - Held that:- issue is no longer res-integra and the Tribunal in Bajaj Hindustan Ltd. case (2013 (11) TMI 981 - CESTAT NEW DELHI) has discussed the judgements of various High Courts on the issue - The judgement laid in Sree Rayalaseema H-Strength Hypo Ltd. (2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT) relied by Revenue is distinguished in the said judgement. Applying the ratio laid in the above judgement in Bajaj Hindustan Ltd. case, I hold that denial of credit on welding electrodes and gas is unjustified. - Decided in favour of assessee.
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2015 (10) TMI 2272
Denial of Carry forward of CENVAT Credit - Conversion of DTA to EOU - Held that:- It can be seen from the Rule 11(3) that it will apply only in the situation where final products are exempted. Undisputed fact is that the final products manufactured by appellant in EOU and cleared for export are not dutiable, but the very same final products when cleared into DTA becomes dutiable hence the provisions of Section 5A of the Central Excise Act, 1944 which are sought to be applied by the adjudicating authority and the learned D.R., will not apply as the said provision of Section 5A are in respect of the goods which are fully exempted from payment of duty. Holistic reading of the provisions of Rule 11(3) would indicate that it will apply only in the case when final products are totally exempted. This view has been held by this Tribunal in final order [2015 (10) TMI 844 - CESTAT MUMBAI] in the appellant s own case. - impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.
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2015 (10) TMI 2271
Valuation - Captive consumption - Invocation of extended period of limitation - Held that:- prices may vary from component to component but by very nature of casting the price will not vary so much. In any case, the grounds of appeal it is presumed without any supporting evidence that the casting which were sold to independent buyers were different from the castings captively consumed. Similarly, it is only the apprehension that the date of invoices for independent buyers is different from the date of invoice for captive consumption. Even if these dates are different the prices of casting will not vary on day to day basis but would be fairly stable. Revenue has not produced any evidence that the dates of the invoice produced before the Commissioner were so much different from the date of captive consumed goods that the prices are necessarily different. In the absence of these details, we do not find any merits in the contention of the appeal filed by the revenue and we agree with the finding of the Commissioner extracted above. Even on limitation, we find respondent has a very strong case. - Decided against Revenue.
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2015 (10) TMI 2270
Valuation - Non inclusion of cost of loading/handling charges and insurance at the rate of 8% (under the Employees State Insurance Scheme) incurred on the sale of such scrap - Held that:- Issue is settled by the Larger Bench of this Tribunal in the case of Supreme Petrochem Ltd. (2009 (6) TMI 51 - CESTAT, MUMBAI). We have also gone through the show-cause notice as also a copy of the audit objection/ audit memo. From these documents we are unable to understand the basis of taking an amount of ₹ 1300/MT over and above the invoice price. While the expenditure incurred on loading of the goods may be included in the assessable value but anything beyond that would not be includable for pre 01.07.2000. In the present case, we find that the barring 2-3 vouchers wherever a paltry sum of few hundreds rupees for certain labours, there is no evidence whatsoever for an expenditure of ₹ 1300/MT. We are unable to appreciate how a contribution @ 8% which is under Employees State Insurance Scheme will be includable in the assessable value. Similarly, in respect of their own transfer it is not clear how a figure of ₹ 2000/MT has been arrived at. - demand has been issued without proper price analysis or investigation - Impugned order is set aside - Decided in favour of assessee.
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2015 (10) TMI 2269
Waiver of pre deposit - revenue contended that applicant was not a manufacturer of the goods supplied to the power corporations but got it manufactured from various job workers. - Imposition of penalty - Held that:- Issues involved in the present case are more or less comparable to the facts and circumstances involved in M/s. S.A. Enterprise case (2015 (10) TMI 1349 - CESTAT KOLKATA). In these circumstances, considering that the applicant had deposited ₹ 5.00 laks during adjudication, the offer to deposit further ₹ 20.00 Lakhs seems to be reasonable at this stage. Consequently, the appellant (1) M/s. Ceebuild Co. Pvt. Ltd. is directed to deposit ₹ 20.00 Lakhs within a period of eight weeks and report compliance on 26/10/2015. On deposit of the said amount, balance dues adjudged against M/s. Ceebuild Co. Pvt. Ltd. and all dues adjudged against Sanjiv Kabra are waived and its recovery stayed during the pendency of the appeals - partial Stay granted.
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2015 (10) TMI 2268
Classification of goods - Classification under 8485.90 or under 8413.90 - Base frames - Held that:- 8485 covers certain parts which are used in a wide variety of machine but are not included by specific names under Chapter 84 in other headings (e.g. ball bearing). Moreover, the said explanatory notes specifically include ‘base plates’ under 8485. Base plates by very nature would also include base frame and thus would be covered by 8485.90. Base plates and base frames are designed keeping in view the machine or mechanical appliances to be mounted on it. As discussed earlier the base frame is not an integral part of the pump, it is only an accessories to the pump. Even the appellant sells the pump without base frame, as also with base frame. Whenever he is selling along with base frame, its price is separately charged. Keeping in view the above facts in our considered view, the base frame would be classifiable under 8485 and not 8413, irrespective of the fact that such base frames are designed for specific model of the pumps. - Decided against assessee.
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2015 (10) TMI 2267
Duty demand - Classification of good - Classification under Heading 2710.90 or under Heading 2710.13 - Captive consumption - Held that:- Both the Revenue as also the assessee in their grounds of appeal have urged that the Commissioner (Appeals) should have decided himself instead of remanding the matter. Revenue s contention is that the main terms of remand is to get the goods retested, but the goods are not being manufactured any more and, therefore, neither the sample can be drawn nor the goods can be retested. On the other hand, the assessee feels that based upon the available information, the matter is in their favour. Keeping in view the fact that the samples of the goods are not available and it is not possible to retest the goods but the only solution left is to decide the case based upon whatever evidences are available on record. Since the Commissioner (Appeals) has not examined all the evidences particularly the test reports of the assessee themselves, statements made by various personnel of the assessee and other related evidences, we consider it appropriate that we set aside the order of the Commissioner (Appeals) and remand the matter to the Commissioner (Appeals) to re-adjudicate the matter based upon the evidences already available and which form part of the show cause notice. - Matter remanded back - Decided in favour of assessee.
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2015 (10) TMI 2266
Penalty u/s 11AC - valuation - inclusion of cost of moulds - Interest u/s 11AB - Held that:- Period involved in the present case is from 1996 to 2000 and under the old Central Excise Valuation Rules there was no specific mention of adding the proportionate cost of moulds. It is true that this Tribunal vide the order in the case of Flex Industries Ltd. (1997 (1) TMI 173 - CEGAT, NEW DELHI) has held that the said cost would be includible. However, that by itself does not imply that any manufacturer who was not including the said proportionate cost was doing so with the wilful intention to evade payment of duty and each case has to be considered in the facts and circumstances of that case. In the present case, we note that some time in 2001 the respondent realized their mistake and they did take remedial measures and they themselves approached Godrej Appliances Ltd. and got details such as certificate from the Chartered Accountant etc. and thereafter computed the differential duty. The respondent B. Tej Enterprises paid the duty suo motu without any enquiries or any objection from the department. This conduct of the respondent clearly indicates that there was no intention leave alone wilful intention to evade payment of duty. Under the circumstances, in our considered view, this is not a case of imposition of penalty under Section 11AC or imposition of interest under the old Section 11AB (which again requires fraud, collusion, wilful misstatement, suppression of facts etc. with intention to evade duty). We do not find any case for imposition of penalty under Rule 209A also either on second respondent or third respondent. - The issue involved in the present case is relating to penalty under Section 11AC which depends on the facts and circumstances of the case and we do not consider it necessary to discuss each of the case laws quoted by both the sides. Similar is the position about interest under old Section 11AB - Decided against Revenue.
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2015 (10) TMI 2265
Reversal of CENVAT Credit - Clearance of empty glass bottles on commercial invoices - Held that:- Observation of the original authority that the bottles were unused is without any supporting evidence and we also observe that in the findings itself the original authority has mentioned the explanation of the appellant that the glass bottles were old, unusable or broken or brand name was scratched etc. Thus the finding of the original authority is without any basis. We also find that the Commissioner (Appeals) in his findings has only stated that the bottles were not unusable. Whatever the reason may be, there are no evidences that the bottles sold were unused bottles and in our view, the criteria prescribed under Rule 57F(1) is satisfied i.e. the inputs have been used in the manufacture of final products. Since the bottles have been used in the manufacture of final products, we do not find any reason to demand the cenvat credit availed on such glass bottles. In the result, the demand is not sustainable. - Decided in favour of assessee.
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2015 (10) TMI 2264
Denial of exemption claim - manufacture of capital goods (generating sets) at site for manufacturing of finished goods - whether the appellant is entitled to benefit of notification No. 67/95 ibid or not - Held that:- Revenue has not disputed that impugned goods i.e. ASRS is falling under CTH 84.26 which is specified in the definition of capital goods. - As the issue is no longer res integra in the light of decision of the Hon'ble Apex Court in the case of Triveni Engineering & Indus. Ltd.(2000 (9) TMI 1049 - SUPREME COURT), therefore, we hold that appellant is entitled for the benefit of Notification No. 67/95 CE dated 16.3.1995. Therefore, the appellants are not required to pay duty on the impugned goods. Consequently, impugned order is set aside. - Decided in favour of assessee.
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Indian Laws
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2015 (10) TMI 2278
Cancellation of FL-3 License - Abkari Policy - Held that:- In the facts and circumstances, essentially going by the ratio laid down by this Court in [2015 (10) TMI 2146 - KERALA HIGH COURT], I declare that the petitioner, for all practical purposes, is deemed to have had a 'No-objection Certificate' from the third respondent. Once this legal fiction is treated as a fact, all the consequences that flow in its wake shall enure to the benefit of the applicant. It is, therefore, essential for the first respondent to consider the petitioner's application as soon as it is represented for the purpose of granting an FL-3 licence. It is, thus, declared that the petitioner has the 'No-Objection Certificate', as the third respondent has failed to consider the petitioner's application within thirty days. - first respondent shall consider the petitioner's application as expeditiously as possible, at any rate, within one month from the date of its re-presentation and pass appropriate orders thereon as regards granting FL-3 licence, subject, of course, to the petitioner's fulfilling all other statutory formalities. - Petition disposed of.
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