Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 8, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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For the period prior to assessment year 2014-15, the High Court held that the distance between the municipal limit and the agricultural land is to be measured having regard to the shortest road distance - CBDT accepted the decision of HC - Circular
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Applicability of Section 115JB in respect of foreign company which does not have any Permanent Establishment (PE) in India - An appropriate amendment to the Income Tax Act in this regard will be carried out - Appeals disposed of. - SC
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TDS liability on forfeiture of advance security against rent - When assessee made the payment of refundable security, as per circular, he was not supposed to deduct the tax at source. The security was paid in order to cover such type of unforeseen circumstances. - No TDS liability - Allowed as revenue expenditure - HC
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Nature of Sum receive from TELCO - exploitation of the commercial assets of the Assessee which are integral to the running of the business - It would be erroneous to treat the entire income received from TELCO as income from house property as has been sought to be done by the AO. - HC
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Entitlement to deduction under Section 24(b) and 80C - once it is held that the assessee had not borrowed any capital for the purchase of the property, the assessee was not entitled to any deduction under Section 80C(1) read with 80C(2)(xviii) - HC
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Depreciation on the closed units for last 8 years - although the production is suspended but the other activities of the units are being carried out - claim of depreciation allowed - AT
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Treatment to loss - set-off of loss - As per guidelines issued by the RBI, every NBFC is required to maintain liquid assets including investment in shares, stocks, government securities etc. and thus the assessee has made these investments in the ordinary course of its business. Therefore, loss in the said investment relates to the business - AT
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Assessment order passed u/s 144C(2) - The assessee did not file the objections before the DRP within the prescribed time and therefore, the objections are not maintainable until the delay is condoned by the DRP - the final assessment order passed by the AO after rejection of the assessee’s objections by the DRP ‘in limini’ is thus not sustainable - AT
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Interest paid to partners disallowed - The assessee has not furnished any evidence with reference to advancement of capital - claim of interest u/s 40(b) cannot be allowed - AT
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Levy of penalty u/s 221(1) - Assessee did not pay self-assessment tax but filed return of income on due date - Penalty under section 221(1) is not automatic and mandatory. - Since it has bonafide reasons, penalty waived - AT
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The payment was admittedly made for copyright / literary work; hence it has to be considered as royalty. Hence, the assessee is liable for deducting tax u/s 194J - Failure to do so, the provisions of section 40(a)(ia) would come into operation - AT
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Disallowance u/s 40b(v)(2) - remuneration to partners was determined as per the book profit shown in profit and loss account including interest from bank FDRs and income from other sources - claim of deduction allowed - AT
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Taxability of interest income in case of Joint Bank Account - for all purposes that was operated by son and not by the assessee. - No income would be taxable in the hands of assessee - AT
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Rule 9A does not apply to abandoned feature films and that the expenditure incurred on such abandoned feature films is not to be treated as a capital expenditure. The cost of production of an abandoned feature film, is to be treated as revenue expenditure and allowed - Circular
Customs
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Denial of benefit of Notification - Adjudicating Authority denied the benefits of the exemption Notification on the ground that the benefit of the exemption notification should be allowed to Water treatment plant and not parts of water supply or distribution units - order confirmed - AT
Corporate Law
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Approval of Winding Up Petition for non-satisfaction of the award – There is no warrant to deprive a creditor with a decree of foreign Court and the same can also file a winding up petition – it is clear that Respondent is unable to clear its debts and has neglected to satisfy the demand without any sustainable reasons thus petition is admitted - HC
Service Tax
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Management Consultant Service -Service rendered, as described by the Appellant, is so sketchy that by the said description it is impossible to classify the said service and Revenue made no effort to state any reason how the same gets covered under Management Consultant Service - demand set aside - AT
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Disallowance of Cenvat credit - Input services - Only because the appellant are engaged in the business of dealership of cars also it would be highly incorrect to hold that the entertainment shows/promotional shows conducted by the appellants was for promotion of sale of cars alone and not for promotion of servicing of Maruti cars at their Authorised service station - AT
Central Excise
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Valuation - Undervaluation of goods - It has come on record that the merchant manufacturers were disclosing lesser value. It has also come on record that this fact was not known to the assessee. - Tribunal has, therefore, rightly absolved the assessee of any liability - SC
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Extended period of limitation - in a previous case involving the same issue, demand was dropped - Therefore, all relevant facts were within the knowledge/ notice of the Department - demand is time barred - SC
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Classification of printed thermal paper rolls - description of the work done by the assessee makes it clear that it is the printing which it is undertaking and, therefore, it is rightly classified under Chapter Heading 49.01. - SC
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Valuation - Principal of natural justice - demand based of statement of dealers - It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. - SC
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100% EOU - Benefit of Notification No. 8/97-CE dated 01.03.1997 - Concessional rate of duty - Catalyst which retains its character, remains outside the end product, remains uninfluenced and unaltered cannot be treated as raw material - SC
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Reversal of CENVAT Credit - goods destroyed in the fire - goods were admittedly work-in-progress, in which case, no reversal of credit is justified. - AT
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Return of goods - Rule 16 of the Central Excise Rules - the finding that repair of transformers amounts to manufacture is totally wrong finding in respect of clearance of repaired transformers no duty can be demanded, only Cenvat credit on cenvated parts used in repairs is required to be reversed. - AT
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Availment of CENVAT Credit - Non maintenance of separate account - When it is impossible to comply with the provisions of sub-rule (2) of Rule 6, it would not be applicable. Sub-rule (3) of Rule 6 becomes applicable only when the manufacturer does not comply the provisions of sub-rule (2) and the provisions of sub-rule (3) would not be applicable in the cases where the sub-rule (2) is inapplicable. - stay granted - AT
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Refund of unutilized CENVAT Credit - even though the appellant is not an exporter but the goods were cleared under the notification No. 43/2001, which is intended for manufacture of garments and for export out of India, they are eligible for refund under Rule 5 of CCR - AT
Case Laws:
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Income Tax
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2015 (10) TMI 461
Transfer Pricing Issues - whether CIT(A) erred in holding that foreign exchange loss / gain to be operating in nature without ascertaining the nexus between the forex gain/loss with the business activity of the assessee and without appreciating that this gain/loss is not derived from the operating activity of the assessee? - Held that:- It has not been disputed that the foreign exchange gain has arisen as a consequence of the realization of the consideration for rendering ITES services and therefore there is no reason for its exclusion from the operating revenues for the purpose of calculating the operating margin of the assessee. Following the decision of Triology E Business Software India Pvt. Ltd. (2013 (1) TMI 672 - ITAT BANGALORE ) we hold that operating revenue should be computed by including the foreign exchange gain/loss. - Decided against revenue. Computation of deduction u/s.10A - Held that:- We find that this ground is covered in favour of the assessee by the decision of the Hon'ble Karnataka High Court in the case of CIT V Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT ], wherein the Hon'ble Court has held that telecommunication expenses reduced from export turnover should also be reduced from export turnover while computing deduction under Section 10A of the Act. Respectfully following the aforesaid decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. (supra) the deduction under Section 10A of the Act by excluding the telecommunication expenses from both export turnover as well as from total turnover.- Decided against revenue.
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2015 (10) TMI 460
Cost of the abandoned film written off - revenue v/s capital expenditure - Tribunal held as revenue expenditure - Held that:- Tribunal by the impugned order has followed the decision of this Court in CIT Vs. Rajesh Khanna, (2011 (9) TMI 979 - BOMBAY HIGH COURT) and CIT Vs. Dream Merchant Enterprises, (2011 (9) TMI 980 - BOMBAY HIGH COURT). In the circumstances, we find that no substantial questions of law arise for our consideration. - Decided against revenue.
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2015 (10) TMI 410
Interest income and entitlement of benefit u/s. 10A - Held that:- It is clear from the finding of CIT(A) that the AO was directed to consider the netting of expenses in view of the decisions of Hon'ble Supreme Court in the case of ACG Associated Capsules vs. CIT (2012 (2) TMI 101 - SUPREME COURT OF INDIA) Adjustments to be made for calculating deduction us/ 10A - Held that:- We find that the FAA had given specific direction about un realised the export sale proceeds. In our opinion,his order does not suffer from any legal infirmity. If the AO has not made verification till date,he should verify as to whether the sale proceeds were realised by the assessee within the stipulated time or not. - Decided in favour of assessee for statistical purposes. Non reducing freight on export from total turnover for calculating deduction u/s.10A - Held that:- The profits of the business of the undertaking are multiplied by the export turnover in respect of the articles, things or, as the case may be, computer software and divided by the total turnover of the business carried on by the undertaking. The expression “total turnover” has not been defined at all by Parliament for the purposes of section 10A . However, the expression “export turnover” has been defined. The definition of “export turnover” excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression “export turnover” cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance do not have an element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary. - Decided in favour of assessee. Addition being the expenses incurred for increase in the share capital - Held that:- The issue is to be decided against the assessee in the light of the decision delivered by the Hon'ble Supreme Court in the case of Broke Bond India (1997 (2) TMI 11 - SUPREME Court ). Decided against the assessee
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2015 (10) TMI 409
Addition u/s.68 - unexplained partners capital - Held that:- We are of the view that the proceedings qua the addition of ₹ 1.985 crores is difficult to resolve conclusively unless the outcome of the Settlement Commission proceeding are ascertained.A perusal of the Hon’ble Bombay High Court’s interim-order dated 12.3.2015 on the petitions of the partners reveals that these petitions were to be placed for final hearing board in the week commencing from 6.4.2015, meaning thereby, the writ petitions are on the board of Hon’ble High Court and likely to be disposed of on an early date. Therefore, we deem it appropriate to set aside this issue to the file of the CIT(A) for re-adjudication. The ld. First Appellate Authority will take up the proceedings preferably after ascertaining of outcome of the settlement petitions. In case the outcome is not brought to the notice of ld. First Appellate Authority, within reasonable period, then the ld. First Appellate Authority will be at liberty to proceed in accordance with law. As far as other two issues are concerned, both the parties have conceded that these issues may also be restored to the file of the ld. First Appellate Authority for fresh adjudication, because, the addition u/s.68 has a link with Settlement Commission proceedings. The books were seized by the DRI, therefore, relevant material was not produced. The ld. AO disallowed ₹ 1,00,000/- on account of non-filing of supporting evidence. But from the orders, exact failure of the assessee not discernible. Major item of expenses is for power which can easily be verified from the electricity department. Thus, both these issues also required re-appreciation at the level of ld. First Appellate Authority. Taking into consideration the impugned orders and the stand of the ld.representative, we set aside this issue also to the file of the ld.CIT(A). The ld.CIT(A) shall have a re-look on the total addition of ₹ 84 lakhs made under section 68 of the Income Tax Act. - Decided in favour of assessee for statistical purpose.
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2015 (10) TMI 408
Disallowance under the provisions of Section 40A(2) (b) - payment made to Mr. M. H. Pandey on account of legal and Professional charges - Held that:- As Mr. M. H. Pandey himself is the director of the assessee company, thus Section 40A(2)(b) of the Act is correctly applied by the Assessing Officer as well as the CIT(A). In this case the assessee company has not given any details in respect of nature of service in the Bills as well as in the TDS certificates shown before the authorities - Decided against assessee. Disallowance of rent paid by the appellant - Held that:- The assessee company has shown the lease agreement but assessee could not establish that on what basis the rent for the residential premises was calculated and determined to Mr. Ranjana Desai. The premises which were taken by the assessee company was not of commercial nature and this fact was noted by the AO and after taking into consideration all these facts has correctly disallowed this deduction. Besides that Mrs. Ranjana Pandey is wife of Mr. M. H. Pandey, the director of the assessee company thus the Assessing Officer has correctly applied Section 40A(2)(b) which is confirmed by the CIT(A).- Decided against assessee. Disallowance of Photo Films and Software expenses - revenue v/s capital expenditure - Held that:- The evidence submitted before the AO was insufficient in respect of administrative expenses. The AR has pointed out certain documents which has to be looked upon. Therefore in this respect the matter is remanded back to the Assessing Officer. Matter remanded back to the Assessing Officer.- Decided in favour of assessee for statistical purposes. Income from other sources instead of business income - AR submitted that a lump sum amount was prepaid earlier and thus the said expenses has to be treated as expenses in this year - Held that:- In the present case it appears that neither the AO nor the Ld. CIT(A) examined this fact that the expenses were paid in earlier year but pertained to this year. The assessee also did not furnish the relevant material to establish that it was the reimbursement of the expenses. We therefore in the absence of the clear facts on record, deem it appropriate to remand this issue back to the file of the AO to be adjudicated afresh, in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Matter remanded back to the Assessing Officer.- Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 407
Addition in respect of Administrative & managerial expenses related to non-agricultural activities - CIT(A) deleted the addition - Held that:- As decided in assessee's own case for A.Y. 2007-08 on the similar issues CIT(A) has stated that separate books of accounts were maintained, but the basis of his above finding has not been stated in the order. From the order of the CIT(A), it cannot be ascertained as on verification of which material the CIT(A) has arrived at the above findings. Further, both the parties before us, has brought no material to show either one consolidated books of accounts were maintained or separate books of accounts were maintained for eligible/non-eligible activities. Thus, the CIT(A) has observed that the assessee had derived income from agricultural items sold to members was ₹ 56,88,446 (eligible for deduction u/s 80P and not disputed by AO. There was a loss of ₹ 40,93,683/- on the sale of agricultural & non-agri. items to the Members & Non-members so deduction u/s. 80P does not apply, but the basis of above finding of the CIT(A) is not clear from his order. In the above circumstances, in our considered view, it shall be in the interest of justice to restore the issue back to the file of the Assessing Officer for proper verification and thereafter adjudicating the issue afresh by passing a speaking order. We, therefore, set aside the orders of the lower authorities on this issue and direct the Assessing Officer to re-adjudicate the issue as per law after proper verification and after allowing proper opportunity of hearing to the assessee. - Decided in favour of Revenue for statistical purposes.
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2015 (10) TMI 406
Applicability of Section 115JB in respect of foreign company which does not have any Permanent Establishment (PE) in India - Held that:- A circular dated 02.09.2015 issued by the Central Board of Direct Taxes, Ministry of Finance, Government of India states that Minimum Alternate Tax (MAT) provisions will not be available to FIIs and FPIs not having the business/Permanent Establishment in India for the period prior to 01.04.2015. - An appropriate amendment to the Income Tax Act in this regard will be carried out - Appeals disposed of.
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2015 (10) TMI 405
Compensation received on voluntary retirement under the Early Retirement Option - deduction under Section 10(10C) for terminal benefits along with relief under Section 89(1) of the Income Tax Act for the ERO components and gratuity - HC denied exemption - Held that:- Learned counsel for the appellant has produced copies of various orders passed by this Court in certain appeals arising in identical circumstances and holding that in such cases deduction under Section 10(10C) of the Act would be available to the assessee. The learned counsel appearing for the respondent could not dispute the aforesaid position granting relief to similarly situated persons. We, accordingly, set aside the order of the High Court and allow the present appeal holding that the appellant shall be entitled to exemption under Section 10(10C) of the Income Tax Act and, as a result, he will also be entitled to the refund of the aforesaid amount. - Decided in favour of assessee.
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2015 (10) TMI 404
Annual subscription for education fund disallowed - Held that:- The assessee had been following mercantile system of accounting and therefore, the expenses claimed on account of annual subscription for education fund relating to the assessment years 1994-95, 1995-96 and 1996-97 were not permissible in the current assessment year 1999-2000. It was not disputed by the learned counsel for the parties that similar issue had been decided against the assessee in The Commissioner of Income Tax Vs. The Shahbad Coop. Sugar Mills Limited [2010 (12) TMI 952 - Punjab and Haryana High Court] - Decided against the assessee. Contribution towards rehabilitation fund - whether a business expenditure allowable under section 37(1)? - Held that:- Tribunal had allowed the claim of the assessee by noticing in its order dated 30.5.2008, Annexure A.3 that the amount of ₹ 10,05,000/- paid by the assessee was towards rehabilitation fund which was created for the benefit of all the mills including the assessee in case of need. The payment made to the said fund was in the nature of insurance and directly related to the business of the assessee. In such circumstances, the contribution of amount equivalent to 5% of the net profits towards rehabilitation fund was held to be expended wholly and exclusively for business purposes and admissible under Section 37 of the Act. Learned counsel for the revenue could not demonstrate any error or perversity in the approach of the Tribunal warranting interference by this Court. Accordingly, question No.(ii) is answered in favour of the assessee and against the revenue. Disallowance on account of contribution made specifically for the construction of office building of the Apex body i.e. Haryana State Federation of Sugar Mills - Held that:- The impugned expenditure of ₹ 5 lakhs incurred by the assessee towards the construction of head office of Haryana State Federation of Cooperative Sugar Mills Limited, Chandigarh is allowable as a revenue expenditure and the tax authorities below erred in disallowing the same and hence their orders in this regard are set aside. Accordingly, assessee's appeal is allowed Addition of business expenditure paid to the farmers - whether resulting in double deduction on the same head - Held that:- The assessee had received penalty imposed on the farmers who had failed to supply the contracted quantity of the sugarcane to the assessee. Further, the assessee had claimed deduction in calculating the taxable Income on account of amount paid to farmers out of penalty imposed in earlier years. When the assessee had reduced the amount of penalty paid back to the farmers as it had been added back in the earlier years, then in that situation, the amount of penalty imposed on the farmers during the previous year from 1.4.1998 to 31.3.1999 relevant to assessment year 1999-2000 was taxable in this year i.e. assessment year 1999-2000 as it was revenue receipt in the hands of the assessee. The Tribunal was, thus, in error in reversing the orders of the Assessing Officer as well as the CIT(A). The issue before the Madras High Court in Salem Cooperative Sugar Mills Limited's case (1996 (9) TMI 40 - MADRAS High Court) was that where the Central Government had by way of a Molasses Control Order directed that certain amount had to be kept in a fund and it did not belong to the assessee. The assessee could not utilize the amount in the fund for any other purpose. On that basis, it was held that there was no income which had accrued while the amount was deposited in the said fund. Such is not the position in the present case. Accordingly, Question is thus answered in favour of the revenue and against the assessee.
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2015 (10) TMI 403
Business promotion expenses - ITAT restricted disallowance - Held that:- Assessee had stated that the expenses were incurred through debit card and credit card towards fuel, hotel bills and some instances for which supporting bills could not be produced. The ITAT observed that there could be an inflation of expenditure and the possibility of use of certain facilities for personal purposes could not be ruled out. Therefore, the disallowance was restricted to 20%. The view taken by the ITAT is a plausible one. In the facts and circumstances, the Court is not inclined to frame a question of law on this issue. Incentive in selling and distribution expenses - ITAT examined the scheme floated by the Assessee for granting special incentives for achieving certain targets - Held that:- It was noticed that the AO did not issue notices to the parties whose details were furnished. The ITAT was satisfied that in the absence of any exercise undertaken by the AO to verify the payments to such parties, there was no justification for the disallowance. The Court finds nothing legally erroneous in the approach of the ITAT in the matter. If the details were furnished by the Assessee were not verified by the AO for their genuineness by making enquiries, there was no basis for disallowing the expenses. The Court, accordingly, declines to frame a question of law on this issue. Technical knowhow fee - ITAT examined the technical collaboration agreement entered into by the Assessee with the SSA - Held that:- It was noted that what was being paid was a running royalty on fixed percentage of turnover for the use of the name and technical information. The same payment was allowed as revenue expenditure in the earlier AYs. The AO had failed to demonstrate what capital asset had been acquired by the Assessee in the process. The Court concurs with the view expressed by the ITAT that in the context of the Technical Collaboration Agreement, the claim by the Assessee of royalty paid as revenue expenditure could not have been disallowed. The Court accordingly declines to frame question on this issue.
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2015 (10) TMI 402
Reckoning the period for long term capital gains - calculated from the date of purchase of convertible debentures or actual date of allotment of shares on conversion from debentures - Held that:- A plain reading of Section 47(x) would indicate that the conversion of convertible debentures into shares would not constitute transfer for the purposes of computation of income under the head 'capital gains'. Similarly, Section 49(2A) of the Act clarifies that for computing the capital gains on sale of shares received on conversion of convertible debentures, the cost of acquisition of shares shall be the cost of convertible debentures and thus it shall be deemed to be the cost of such shares received on conversion. In such a situation, as a necessary corollary, it would be but logical to reckon the date of acquisition of the convertible debentures as the date of acquisition of such shares received on conversion of convertible debentures. Now examining the factual matrix herein, the assessee was allotted 27160 convertible debentures of TELCO Limited on 20.12.2001 which were converted into equal number of shares on 31.3.2002. The assessee sold the said shares between 23.12.2002 to 10.3.2003 in different lots. This shall result in long term capital gains as the shares shall be deemed to have been held for a period exceeding 12 months by the assessee. The equity shares held earlier and the preference shares acquired in exchange thereof were not the same. It was held that in such circumstances, irredeemable preference shares issued to the assessee being different from the equity shares issued in lieu thereof shall be deemed to have been held by the assessee from the date of their issue and not from the date of issue of the equity shares. Thus, the pronouncements cited by the revenue do not come to its rescue as those cases related to conversion of financial asset into another form of asset where there was no right accruing on the date of acquisition, whereas in the case of convertible debentures, a right is appended to the debenture for the debenture holder to receive shares on conversion after the stipulated period. Thus, in such circumstances, cases relied upon by the revenue shall be on different footing vis-a-vis case of secured convertible debentures. - Decided against the revenue and in favour of the assessee
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2015 (10) TMI 401
Addition on account of advance against order - nexus between sending of money as against sale was not established and no service was rendered by the foreign buyer/receiver of the money and that too without deduction of tax at source as required under section 40(a) - ITAT deleted addition - Held that:- The loss has been caused to the appellant due to the fraud which he fell victim to in the course of his business. The Hon'ble P&H High Court in the case of CIT vs. Pukhrajwati Bubber [2006 (11) TMI 179 - PUNJAB AND HARYANA High Court ] on which the appellant has also relied, while allowing the loss caused due to embezzlement observed as though there is no provision for allowing deduction of a trading loss on account of embezzlement, section 37 of the Act provides for any expenditure for the purpose of business and there has to be nexus between the business operation and the loss. If the loss was directly connected with the business operation and incidental to carrying on of the business, the same has to be allowed as a deduction. Therefore, keeping in view the facts of the case and also the ratio of Hon'ble Punjab and Haryana High Court decision in the case of CIT vs. Pukhraj Wati Bubber (supra) the loss so incurred is held to be an allowable business loss. The addition made by the Assessing Officer is therefore deleted - Decided in favour of assessee. TDS liability on forfeiture of advance security against rent - Addition on account of payment of rent made in contravention to provisions of section 40(a)(ia) - ITAT deleted addition - Held that:- There is no dispute that the amount paid by the assessee was a refundable security. The only dispute raised by the Assessing Officer is that the assessee failed to deduct the TDS. Learned first Appellate authority confirmed the disallowance on the ground that it is capital expenditure. We are of the view that refund was adjusted towards rent in peculiar facts and circumstances When assessee made the payment of refundable security, as per circular, he was not supposed to deduct the tax at source. The security was paid in order to cover such type of unforeseen circumstances. The landlord has forfeited it and adjusted it towards the rent. Thus, it was a revenue expenditure in the hands of the assessee and it did not deserve to be disallowed. We allow this ground of appeal and delete the disallowance - Decided in favour of assessee.
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2015 (10) TMI 400
Nature of Sum receive from TELCO - whether taxable under the head 'income from business' and not under the head 'income from house property'? - Assessee was engaged in the business of procuring Mercedes trucks from TELCO on behalf of its customers - Held that:- In the present case, it is plain from the agreement entered into between the Assessee and TELCO that it is the business of the Assessee as a whole that has been exploited by TELCO and not merely the business premises of the Assessee. In other words, the payment received by the Assessee from TELCO pursuant to the agreement in question is incapable of being segregated into income derived from the exploitation of the premises by TELCO and the income derived from exploitation of the commercial assets of the Assessee which are integral to the running of the business. Since the AO had not made effort to segregate such income, which in any event does not seem to be capable of being segregated, it is plain to the Court that what was being received by the Assessee from TELCO in terms of the agreement was a payment for commercial exploitation by TELCO and of the business assets of the Assessee not confined to 'house property'. It would, therefore, be erroneous to treat the entire income received from TELCO as income from house property as has been sought to be done by the AO. There is no factual basis for coming to any other conclusion than the one arrived at by the CIT (A) which has been affirmed by the ITAT. CIT (A) and the ITAT were justified in treating the income received by the Assessee, pursuant to the agreement entered between it and TELCO, as 'business income' and not as 'income from house property'. - Decided in favour of assessee.
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2015 (10) TMI 399
Review application - Withdrawal of the certificate given under section 12-A - - Held that:- We are inclined to hold, and accordingly hold, that the review applications are maintainable to correct the errors apparent on the face of record. Although, many a grounds have been taken by the review applicant, but we have not been persuaded by learned counsel for the review-applicant to take a view that there is an error apparent on the face of record to justify the review applications. All the aforesaid review applications are, therefore, dismissed.
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2015 (10) TMI 398
Entitlement to deduction under Section 24(b) and 80C - Held that:- A plain reading of the provision shows that an assessee is entitled to deduction on the amount of any interest payable on the capital borrowed for the purposes of acquiring, constructing, repairing, renewing or reconstructing the said property. The property is required to be acquired, constructed, repaired, renewed or reconstructed with the borrowed capital. It is concurrently recorded by the authorities that the property was purchased by the assessee in November, 2005 whereas the loan was taken from ICICI Bank on 31.12.2005. Thus, the loan was taken subsequent to the purchase of the property and cannot be said that the same was utilized for acquiring the property. In such circumstances, the Assessing Officer, the CIT(A) and the Tribunal were justified in declining the benefit of Section 24(b) of the Act. Equally, once it is held that the assessee had not borrowed any capital for the purchase of the property, the assessee was not entitled to any deduction under Section 80C(1) read with 80C(2)(xviii) of the Act. The authorities on appreciation of evidence had rightly declined the claim of the assessee for the deduction under Section 24(b) and 80C of the Act. - Decided against assessee. Addition on account of 89 liquor bottles - Held that:- The Tribunal had recorded that since the assessee was staying in a joint family consisting of his son and daughter-in-law and all the bottles cannot be said to have been purchased in one year and the existence of so many bottles can only point out to the fact that these must have been gathered over a period of time and, therefore, an addition of ₹ 1 lac would meet the ends of justice. We do not find any error in the approach adopted by the Tribunal and, therefore, no interference is called for by this Court. No legal principle is involved in such adjudication.
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2015 (10) TMI 397
MAT - Book profit - whether the Assessing Officer while assessing a Company for income-tax under Section 115J of the Income Tax Act could question the correctness of the profit and loss account prepared by the assessee-company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Schedule VI to the Companies Act? - Held that:- Tribunal should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reference is placed. However, in the instant case, as we have observed above, once net profit shown in the profit and loss account of the Company has been prepared in accordance with the provisions of part II and III of Schedule VI to the Companies Act, it was not open to the Assessing Officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company. Therefore, the question of remitting the matter to the Tribunal does not arise. In our view the controversy involved in the present appeal is squarely covered by the decision of the Supreme Court in the case of Apollo Tyres (2002 (5) TMI 5 - SUPREME Court) that there cannot be two incomes, one for the purpose of the Companies Act and another for the purpose of income-tax. We are of the opinion that the provision of Section 115J does not empower the Assessing Officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company.
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2015 (10) TMI 396
Rejection of the Appellant’s TP documentation, comparable companies and analysis thereof - not considering and appreciating the business model of the Appellant and its AEs and classified it as a “technical service provider” - assessee i.e. AVLTC is a subsidiary of AVL India Private Limited who holds 70% of its shares and the remaining 30% shares are held by AVL Holding GmbH, Austria - Held that:- DR who had initially taken the stand that non-discussion would amount to non-acceptance from a reading of the submissions was unable to point out whether the issue was considered at all. In the circumstances it was her submission that if the business model needs to be addressed first then the finding of the CIT(A) giving part relief to the assessee should also be set aside as the remaining issues in both the assessee’s appeal and the department’s appeal be treated on the same platform. Thus the grounds in the departmental appeal also should be restored back. The Ld. AR stated that qua the remaining grounds on behalf of the assessee the submissions are in the synopsis. However he agreed that in the circumstances the issue may be restored so as to address the first issue first. In the facts of the present case where the Ld. AR has taken the argument that the intensity of functions with the non-AEs are higher than the intensity of functions with the AE’s the nuanced difference if any on the business model of the assessee has to be seen. This difference in the intensity of functions is stated to be impacting the characterization of the business model itself which difference is stated to be not considered either by the DRP or the TPO a position which is borne out from the record. We find that in the case of BMW India Pvt. Ltd. vs ACIT (2014 (11) TMI 266 - ITAT DELHI) while examining the plea of the tax payer that it was a routine distributor it was found on analyzing the Agreements and considering the conduct as borne out from the record that based on its intensity of functions performed that the tax payer was not a routine normal distributor. Analyzing the Agreements and the functions undertaken the tax payer’s claim that it was a normal distributor was not accepted and the tax payer on an analysis of its Agreement with its AE was found to have performed a greater intensity of functions as opposed to a routine distributor who may not be called upon to perform the intensity of functions undertaken by the BMW. Thus the relevance of the intensity of functions performed as a relevant criteria for characterizing the tax payer as per judicial precedent is well-accepted. Consideration of the difference in the intensity of functions with non-AEs as comparable to lesser intensity of function with AE’s also as per judicial precedent on facts is warranted. The objections to the business model as considered by the TPO we find were raised before the DRP and these remain unaddressed the said position is accepted by the parties. In these peculiar facts and circumstances, we find that the submissions of the Ld. Sr. DR inasmuch that the relief granted to the assessee relatable to the exclusion of a comparable challenged by the Revenue before this forum also needs to be set aside. The said approach would in all fairness be appropriate as once the entire edifice of the business model for non-appreciation of relevant facts is demolished the occasion to consider the appropriateness of selection of the comparables with the demolished edifice does not arise. Accordingly for the detailed reason given hereinabove and considering the arguments of the parties on the grounds agitated before us, we set aside the impugned order. The issues are restored back to the file of the AO/TPO with the above directions. TPO/AO is directed to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of assessee and revenue by way of remand.
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2015 (10) TMI 395
Revision u/s 263 - As per the CIT, AO had failed to examine the claim for deduction u/s.80P(2)(a)(i) - Held that:- In so far as construing the meaning of the words carrying on the business of banking by providing credit facilities to its members, is concerned, judgment of jurisdictional High Court in the case of Grain Merchants Cooperative Society [2003 (10) TMI 21 - KARNATAKA High Court] will apply on all four squares. If that be so, assessee has a good case that its property income could only be construed as profits and gains attributable to the business of banking. If that be so such amounts would also be eligible for claim of deduction u/s.80P(2)(a)(i) of the Act. The CIT had directed the AO to make the disallowances without giving him any room for taking the submissions and pleading of the assessee into consideration which in our opinion was not proper. At the same time it is also true that AO had made no enquiries on these vital issues at the time of assessment. Hence we are of the opinion that Ld. CIT (A) was justified in considering the assessment order as erroneous and prejudicial to the interests of Revenue. However in the circumstances of the case, direction of the CIT to assess the incomes mentioned at para four above is not correct. Therefore, while upholding the order of CIT u/s.263 of the Act, we modify it and direct the AO to do the assessment afresh in accordance with law, untrammelled by the observation of the CIT on merits regard. - Decided partly in favour of assessee for statistical purpose.
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2015 (10) TMI 394
Quarry Development Expenses - revenue v/s capital expenditure - Held that:- In the instant case, details of expenditure clearly shows that the expenses have not resulted in creation of any assets nor have they resulted in any enduring benefit to the appellant. The AO has not brought any facts on record to show as to which expenses debited under the head of 'quarry development' were capital in nature. These expenses are in the nature of salaries, wages, fuel, power, rent, and other expenses for removal of overburden etc. which cannot be said to be in the nature of capital expenditure. The Hon'ble Calcutta High Court in the case CIT Vs. Katras Jharia Coal Co. Ltd (1978 (9) TMI 37 - CALCUTTA High Court ) held that expenses for removal of overburden were not for acquiring any right of properties and will also not result in any enduring benefit and therefore are revenue in nature. Since there is no material change in facts and circumstances in the appeal under consideration. No reason for deviating from the findings given by the respective CIT(Appeals) for the Asstt. Years 2007-08, 2008-09 and 2009-10 respectively as stated above. Therefore, addition made by the AO is deleted and the ground of appeal of appellant company is allowed on this issue Depreciation on the closed units for last 8 years - Held that:- If some of the units of the assessee are closed, other units are certainly working and the depreciation is to be allowed on the entire block of assets of the plant & machinery and not only individual plant and machinery of each unit of the assessee - In the present case although the production has not been carried out in the years under consideration but the assets are kept as a stand by for the whole year. Moreover, although the production is suspended but the other activities of the units are being carried out. In such circumstances, find that the AO was not justified in disallowing the depreciation on the assets of these units. The additions made by him are, therefore, directed to be deleted - Decided in favour of assessee.
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2015 (10) TMI 393
Disallowance of expenses incurred in earning tax-free income invoking provisions of section 14A - Held that:- For the purpose of deciding the disallowance under section 14A r.w. Rule 8D(2)(ii), those details will be very material. We are of the view that if the stand taken by the assessee on the disallowance of interest expenses under Rule 8D(2)(ii) of the Rules is factually correct, then no disallowance of interest expenses can be made. We, however, find that the required details have not been filed by the assessee before us. In such circumstances, we are of the view that it would be just and fair to set aside the order of the CIT(Appeals) on this issue and remand the question of disallowance of interest expenses under Rule 8D(2)(ii) to the Assessing Officer for fresh consideration with a direction to the assessee to furnish the required details to substantiate its claim as made before the CIT(Appeals). As far as disallowance under Rule 8D(2)(iii) is concerned, the assessee has not shown as to what is the expenditure to be disallowed. The assessee’s only plea before the CIT(A) was that weighted average based on time (no. of days) in which investments were made should be considered. As rightly contended by the ld. DR, the above stand of the assessee cannot be sustained in view of the clear mandate of Rule 8D(2)(iii) of the Rules, which refers to only the average value of investments as appearing in the Balance Sheet of the assessee as on the first and last day of the previous year. One cannot travel beyond the language of Rule 8D(2)(iii) of the Rules. In the absence of any other plea by the assessee in this regard, the disallowance has to be sustained. However, we find that the Hon’ble Delhi High Court in Joint Investments Pvt. Ltd. (2015 (3) TMI 155 - DELHI HIGH COURT ) has held that disallowance u/s. 14A of the Act cannot be in excess of the tax exempt income. Following the aforesaid decision, we direct the AO to restrict the disallowance to income that is exempt in the set aside proceedings under Rule 8D(2)(iii) of the Rules, after complying with the directions with regard to disallowance of interest expenses under Rule 8D(2)(ii) of the Rules. - Decided partly in favour of assessee for statistical purposes.
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2015 (10) TMI 392
Income from sale of shares - income from business OR short term capital gains - Held that:- From the record we found that assessee has disclosed shares as investment in the balance sheet, there is no claim of any expenses while computing capital gains which demonstrates the intention of the assessee to treat the shares and securities as investment and not as stock-in-trade. No borrowed interest bearing funds was invested in shares except for making investment in one security on long term basis. The said fact was also explained to the AO and the AO has not disputed the same while accepting assessee's claim of long term capital gains. CBDT in its Instruction No 1827 dated 31.08.1989 has laid down certain criteria to determine whether an activity of purchase & sale of shares/securities is in the nature of trading activity or investment activity. One of the criteria laid down is the treatment given by the assessee in its books of account as a trading asset or investment; treatment given in the books is indicative of assessee's intention whether to hold the shares with a view to earn dividend & long term appreciation or with a view to carrying on as business. Even various Courts and Tribunals have approved that treatment given by the assessee in its books of account as a vital factor to decide whether the assessee is a trader or an investor. We also found that the assessee has regularly treated shares as investment in the earlier year and has offered gain on sale of shares under the head "capital gain". In the case of Gopal Purohit (2010 (1) TMI 7 - BOMBAY HIGH COURT), the Hon'ble High Court also accepted tribunal's observations that the principle of res judicata is not attracted since each year is separate in itself. However, there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. No merit in the action of the AO for not accepting assessee's claim for short term capital gains while accepting the long term capital gains on the similar investment made in earlier years. - Decided in favour of assessee.
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2015 (10) TMI 391
Treatment to loss on account of repossessed vehicles as revenue loss - Held that:- The claim of the assessee for the said receipts should be treated as revenue receipts is proper as re-possessed vehicles/ assets are treated as stock-in-trade throughout the earlier years and the same was accepted by the Department in the earlier years. Thus Ld. CIT(A) has taken a correct view and directed the AO to treat the said loss as revenue loss. In light of this, the A.O. is directed to treat the said loss as a revenue loss in respect of the re-possessed vehicles that have been resold. - Decided against revenue. Treatment to loss - set-off of loss - whether CIT(A) erred in not appreciating that the shares, sale whereof had given rise to a loss, had been held as stock in trade of the appellant and hence the loss on that account had to be treated as a business loss? - Held that:- It can be seen that the contentions of the DR in respect of Section 73 of the Act cannot be sustained as the same stand was not taken by the Assessing Officer while passing the Assessment Order and the said plea was not raised before the CIT(A) as well. The Hon’ble Supreme Court in case of Cocanada Radheswami Bank Ltd. (1965 (4) TMI 11 - SUPREME Court) clearly held that the income from the securities which formed part of the assessee’s trading assets was part of its income derived from the business and, therefore, the loss incurred in the business in the earlier year could be set off against that income in the succeeding year. As per guidelines issued by the RBI, every NBFC is required to maintain liquid assets including investment in shares, stocks, government securities etc. and thus the assessee has made these investments in the ordinary course of its business. Therefore, loss in the said investment relates to the business. - Decided in favour of assessee.
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2015 (10) TMI 390
Validity of assessment order passed u/s 144C(2) - whether barred by limitation - determination of the Arms’ Length Price of the international transaction - Held that:- Section 144C of the I.T. Act deals with the circumstances under which the AO can make a reference to the DRP and the procedure to be followed by the AO in making a reference to the Dispute Resolution Panel and also the procedure to be followed by the DRP while dealing with the objections raised before it by the assessee and the passing of the final assessment order by the AO. In the case before us, the assessee did not file the objections before the DRP within the prescribed time and therefore, the objections are not maintainable until the delay is condoned by the DRP. We find that the DRP has refused to condone the delay in raising of the objections before it by the assessee and therefore it amounts to non admission of the grounds and adjudication by the DRP. Therefore, there are also no directions issued by the DRP for the guidance of the AO to enable him to complete the assessment. Therefore, the final assessment order passed by the AO after rejection of the assessee’s objections by the DRP ‘in limini’ is thus not sustainable. The final assessment order passed by the AO dated 7.1.2015 allegedly u/s 143(3) r.w.s. 92CA(3) r.w.s. 144C(5) is therefore to be quashed. See Bank of America NA Versus Assistant Director of Income-tax (IT) Cir. 3(2), Mumbai [2012 (12) TMI 375 - ITAT MUMBAI ] - Decided in favour of assessee.
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2015 (10) TMI 389
Estimation of sale suppression on sale of liquor - Inflation of discount - Held that:- This Tribunal is of the considered opinion that the assessee might have given some discount. In the absence of any material like reference in tariff card or menu card, it cannot be ruled out that the assessee inflated the discount said to be given to corporate guests, walk in customers and happy hours discount, etc. In fact, Shri Raju, who is in-charge of Rohini International Bar, admitted before the authorities that the sale suppression was done from 5 to 6 years earlier. He has further admitted that bill books are destroyed and separate set of sale bills are prepared underlying the sale price. In view of this categorical statement, this Tribunal is of the considered opinion that the suppression of sale on liquor is confirmed and now what remains is the estimation of quantum of suppression of sale. The Assessing Officer totally rejecting the claim of the assessee regarding discount, estimated the suppression at 56.33%. The CIT(Appeals), however, estimated the same at 30%. This Tribunal is of the considered opinion that by taking into consideration the nature of trade and material found during the course of survey operation and the statement recorded from the person in-charge of Bar, estimation of sale suppression at 26% would meet ends of justice. In other words, the sale suppression of liquor should be estimated at 26% instead of 56.33% estimated by the Assessing Officer. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to estimate the sale suppression on sale of liquor at Rohini International Bar at 26% instead of 56.33%. Suppression of lodge receipt at 208.84% - HUF status - CIT(A) restricting the addition to 50% of the estimation made by the AO - main contention of the assessee now before this Tribunal is that even though the lodge is situated in a prime locality of the city, 100% occupancy cannot be expected at every point of time - Held that:- This Tribunal is of the considered opinion that as rightly submitted by the Ld.counsel, 100% occupancy cannot be expected at every point of time. At the very same time, we can expect a reasonable rate of occupancy since the lodge is located at prime locality in the heart of the city. The fact that the assessee has suppressed the sale is established on the basis of the material found during the course of survey operation. In fact, the actual receipt was ₹ 7,27,979/-. However, the assessee has disclosed in the sheet, which was impounded, at ₹ 2,35,714/-. The CIT(Appeals), after taking into consideration the nature of business, has restricted the suppression of receipt from lodge at 50% of what was estimated by the Assessing Officer. In fact, the suppression was made during the entire period of business. Therefore, this Tribunal do not find any infirmity in the order of the CIT(Appeals) and accordingly the same is confirmed. Estimation of suppression of sale from Rohini Lodge Permit Room - Held that:- AO on the basis of the material found, estimated the suppression of sale at 47%. However, the CIT(Appeals) restricted the same to 30%. While considering an identical issue in the earlier part of this order, this Tribunal, after considering the price discount that would be given to the customers in happy hours, corporate guests and walk in customers, estimated the profit at 26%. For the very same reason, this Tribunal is of the considered opinion that estimation of profit at 26% would meet ends of justice. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to estimate 26% on suppression of liquor sales instead of 47%. Addition of ₹ 1 lakh as income from restaurant - Held that:- The assessee appears to have claimed before the Assessing Officer that the restaurant was closed three years back. But, the revenue authorities found the details of sale for the period April, 2007 to January, 2008 and the same disclose the sales at ₹ 9,40,300/-. Therefore, the claim of the assessee that the restaurant was closed three years back is totally contrary to what was found during the course of survey operation. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the addition of ₹ 1 lakh made by the Assessing Officer. Both the appeals of the Revenue and crossobjections of the assessee are partly allowed.
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2015 (10) TMI 388
Disallowance of TTS commission expenses - late deposit of TDS - assessee is a dealer in tractors and this commission has been paid to sub-dealers - CIT(A) deleted the disallowance - Held that:- The assessee has been making the payment of commission to sub-dealers year to year and it is practice of the trade. Further, the payment has actually been made and TDS is also done. In such circumstances it is not correct to allege that the expenditure is not incurred wholly and exclusively for the purpose of business especially when the payees are not relatives of assessee. Further, when the credits/payments in the ledger accounts is made in the month of March, 2009 the assessee has rightly made TDS in March and deposited it before the due date u/s 139(1) to claim the deduction for the assessment year under consideration. No disallowance can be made u/s 40(a)(ia) in such circumstances. We accordingly uphold the order of CIT(A) on this account. We also observe that even if TDS was liable to be made before March, 2009 and the assessee had deducted it during the year and deposited before the due date of filing return u/s 139 (1), no disallowance could have been made in view of our decision in the case of Rajasthan Art Emporium (2014 (11) TMI 43 - ITAT JODHPUR ) wherein it was held that the amendment made by the Finance Act, 2010 in section 40(a)(ia) is clarificatory in nature. - Decided against revenue. Disallowance of sales promotion expenses - AO found that it is incentive paid to 4 employees of the assessee - CIT(A) deleted the disallowance - Held that:- No reason to disagree with the ld. CIT(A) in the facts and circumstances of the case where the disallowance of actually paid incentive is made merely by pointing out that the payee is accountant. Similar payments to other persons have been considered allowable by the A.O. Further, there cannot be denial of a situation that one employee is performing various roles in an organisation. We are, therefore, in full agreement with the findings given by the CIT(A) and uphold the same - Decided against revenue. Disallowance of work shop maintenance expenses - CIT(A) deleted the disallowance - Held that:- We are in full agreement with ld. CIT(A) that AO did not point out any good reason to treat the expenditure in question as a capital expenditure. He has not brought anything on record to show that some new asset has come into existence by incurring this expenditure. Accordingly, we are of the considered view that the disallowance made in this case is not justified and has rightly been deleted by the CIT(A). Therefore, we dismiss this ground of appeal.- Decided against revenue. Disallowance of PF and ESI - CIT(A) deleted the disallowance - Held that:- The issue is squarely covered in favour of assessee by the judgement of Mumbai High Court in the case of CIT vs. Hindustan Organics Chemical Ltd. (2014 (7) TMI 477 - BOMBAY HIGH COURT) wherein even the employees contribution to PF and ESI has been found allowable if paid prior to the due date of filing return u/s 139 (1). The High Court has referred the decision of Supreme Court in the case of CIT vs. Alom Extrusion Ltd. (2009 (11) TMI 27 - SUPREME COURT ). We accordingly reject this ground of appeal also.- Decided against revenue.
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2015 (10) TMI 387
Claim of deduction u/s.80IB in respect of LPG Bottling Plant - AO denied the deduction on the ground that the activity of filling of gas into cylinder does not constitute manufacturing and the LPG bottling plants are part of refining activities - CIT(A) allowed the claim - Held that:- In view of the aforesaid decision of the Hon'ble Jurisdictional High Court in Hindustan Petroleum Corporation Ltd. (2013 (5) TMI 124 - BOMBAY HIGH COURT), which is applicable mutatis mutandis in assessee’s case also, we affirm the order of the learned Commissioner (Appeals) to held bottling of gas cylinders is found eligible for deduction u/s. 80IA. - Decided in favour of assessee. Claim u/s 80G for the payment towards contribution to Rajiv Gandhi Institute of Petroleum Technology - Commissioner (Appeals) held that the donation to such institution can be allowed only when such institution or contribution is specifically approved by the Government for deduction under any specific section - Held that:- Commissioner (Appeals) has merely asked the Assessing Officer to examine the claim of deduction under section 80G, after verifying the necessary documents / certificate for the claim. We do not find any violation of provision of section 250(4), while giving such direction as he has not set aside the matter for fresh adjudication but only for verification which he empowered to do so while disposing off the appeal. - Decided against revenue.
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2015 (10) TMI 386
Disallowance u/s 40(a)(ia) - non deduction of tds on amount paid to LDS Engineers as covered u/s 194C - CIT(A) identified the nature of transaction by considering it as ‘the payment for hiring of machines i.e. dumpers as partaking the character of work’ & proceeded by holding that the deduction of tax at source was required to be made u/s 194C by taking it as ‘work contract’ Held that:- We are at loss to appreciate as to how machinery given on a monthly rental can be construed as ‘work contract’, being a consideration for carriage of goods by any mode of transport, as has been canvassed by the ld. CIT(A). AR has relied on an order passed by the Delhi bench of the tribunal in ACIT Vs Sanjay Kumar (2011 (7) TMI 662 - ITAT, Delhi) in which it has been held that the payment made by the assessee for taking cranes on lease on time basis, did not constitute payment with regard to ‘works contract’ as defined in sec. 194C and hence the assessee was not required to deduct tax at source under this action. No contrary precedent has been brought to our notice by the ld. DR. Thus we hold that the authorities below were not justified in making and sustaining disallowance u/s 40(a)(ia) of the Act in the given circumstances. - Decided in favour of assessee. Depreciation on Earth moving machine - @ 30% allowed by CIT(a) as against 15% allowed by the A.O - Held that:- There is no dispute on the fact that the assessee company used the machines on hire business, on which depreciation @ 30% was claimed. These facts as recorded in the impugned order have not been controverted by the ld. DR. It is patent that when a particular vehicle is used by its owner on hire basis, then the normal rate of depreciation needs to be discarded and substituted with the higher rate of depreciation. We, therefore, uphold the impugned order on this score. - Decided in favour of assessee.
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2015 (10) TMI 385
Transfer pricing adjustment - re-allocation of cost between its packaging unit and ITES unit - Rectification petition on non-consideration of the revised segmental results - Held that:- The directions of the DRP with regard to the claim of assessee for re-allocation of cost between its packaging unit and ITES unit, in our opinion, unambiguous. The DRP has directed the AO to verify actual segmented cost base and compute the ALP. Pursuant to such directions dated 29-11-2013, assessee had on 20-12-2013, filed a letter dated 19-12-2013, before the TPO wherein it had given the heads of expenditure which were subject to re-allocation. The change in the net result between the original segmental working and the revised segmental working of margin is clear. In our opinion, the AO should not have taken refuge under an order passed on an earlier rectification petition by the assessee in which it had pointed out the non-consideration of the revised segmental results filed by it. Even that order dated 30-08-2013, in our opinion, was very cryptic. The directions of the DRP has not been properly considered by the lower authorities If the assessee's claim for revised segmental results are found to be acceptable, there is every possibility that pricing of its international transactions would come within +/- 5% of the PLI worked out by the TPO himself. Then the issue regarding exclusion and/or inclusion of comparables may not arise at all. We therefore, set aside the orders of the authorities below and remit the issue back to the file of the AO/TPO for consideration afresh in accordance with law. Right of the assessee to challenge all other aspects of the assessment and conditions are kept open. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 384
Disallowance u/s 40(a)(ia) - liability to make TDS before making payment to the non-resident holding company - Fees for Technical Services - Held that:- AO has only considered the applicability of the definition of the term ‘Fees for Technical Services’ u/s 9(1)(vii) of the Income-tax Act and has not considered the applicability of the definition of ‘Fees for Technical Services’ under the DTAA between India and Singapore and has not examined as to which of the provisions is beneficial to the assessee. It has been held by various courts that where there is a DTAA between India and the country in which the other transacting company is located and there is a variance between the provisions of the DTAA and the Indian Income-tax Act, then the provisions which are beneficial to the assessee are to be applied. As regards the appeal before the CIT(A), we find that the CIT(A) has only gone on the premise that mention of the word ‘design’ in the invoice proved that the holding company has provided designs to the assessee and therefore, it satisfies the phrase of ‘make available’ in the definition of ‘Fees for Technical Services’ in the treaty between India and Singapore. Before us, the assessee has filed documents to claim that no services relating to ‘design’ were rendered by the holding company to the assessee. In our opinion, all these documents need verification by the AO. Further, the additional grounds raised by the assessee are also legal grounds which need adjudication on the basis of facts on record. Before us, no facts are available to come to a conclusion as to whether the payment is reimbursement of expenses or payment for services rendered by the holding company. As regards the applicability of TDS provisions only on payment basis also, we find that no facts are available on record. In view of the same, we are of the opinion that the issue needs re-consideration by the AO in the light of the details available in the records of the AO as well as those filed before us and the judicial precedents on the issue. The issue is, therefore, set aside to the file of the AO with a direction to examine the applicability of the definition of ‘Fees for Technical Services’ under the DTAA between India and Singapore and apply the same in accordance with law. The AO shall also consider the additional grounds of appeal raised by the assessee as well as the additional evidence filed by the assessee before us and decide the issue in accordance with law. Needless to mention that the assessee shall be given a fair opportunity of hearing. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 383
Penalty u/s 271(1)(c) - as per AO assessee had deliberately and wrongly claimed depreciation - Held that:- On facts the addition by way of disallowing the depreciation claimed on facts is concerned, the same has rightly been made in the quantum proceedings which fact has been accepted by the assessee by filing a revised return and not agitating the issue further. Considering the explanation offered by the assessee in the penalty proceedings, it is seen that repeatedly it is claimed that the return was finalized on the basis of figures appearing in the Sale Deed. This fact has not been disputed by the department and is found to be supported from the assessment order itself. In the aforementioned peculiar facts and circumstances, considering the fact that even after the said addition the assessee was allowed business loss to be carried forward to the extent of ₹ 2.96 crore odd, we have no hesitation in following the judicial precedent relied upon to hold that the explanation offered is bonafide and deserves to be allowed. It is seen that at best the claim of the assessee can be called a wrong claim and by no stretch of imagination on the facts as they stand can it be called a false claim. We have taken into consideration the order of the coordinate bench relied upon in the case of Vasudev Pahwa vs. ACIT (2012 (10) TMI 1009 - ITAT DELHI) and the principle laid down in the case of CIT vs. Reliance Petro Products Limited (2010 (3) TMI 80 - SUPREME COURT) which was subsequently followed in the case of Price Water House Coopers Pvt. Ltd. vs. CIT (2012 (9) TMI 775 - SUPREME COURT ). Thus the penalty order deserves to be quashed - Decided in favour of assessee.
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2015 (10) TMI 382
Unexplained investment - Computation of cost of construction - Variations in the measurements - difference between the constructed area as per the Valuation Cell and the actual area - CIT(A) deleted the addition - Held that:- There is no need to differ from the findings of the Ld. CIT(A). As far as Revenue appeals are concerned, with reference to deletion of additions made by the A.O. on the so-called unexplained investment, we are unable to understand how the building constructed as a part of development cum GPA agreement become unexplained investment, just because assessee has not maintained books of accounts. A.O. is very well aware that assessee has received advances and in fact he has accepted the estimation of 8% income on the advances received. Having accepted that assessee has received advance towards apartments, apart from partner's capital, the amounts received towards that should have been given credit. Even though reference to valuation was made, as pointed out by the Ld. CIT(A), the valuation report itself has certain basic errors in taking the areas and the valuation adopted is also on higher side. Thus CIT(A) has correctly arrived at the valuation of the building more or less to the extent of valuation as declared by the assessee over a period of three years. Therefore, the addition made by the A.O. as unexplained investment cannot be sustained. To that extent, the orders of Ld. CIT(A) in A.Y. 2009-2010 and 2010-2011 are to be sustained. - Decided against revenue. Allowing salary on the estimated income to the partners of the firm - Held that:- This is as per the provisions of partnership deed provisions under section 40(b) are correctly invoked and accepted by the Ld. CIT(A). In fact, A.O. himself was accepted deduction of salary in A.Y. 2009-2010 and that there is no issue in that year, but why he did not allow the same in A.Y. 2010-2011 is not understandable. Assessee has claimed one salary in A.Y. 2009- 2010 for one partner. Whereas, by virtue of the revised agreement, it claimed salaries for two persons in the later year. Since the partnership deed permits the remuneration to the partners, this has to be allowed as per the provisions of the Act. Therefore, Revenue contention on this issue cannot be accepted. In view of this, grounds raised by the Revenue in A.Y. 2009-2010 and 2010- 2011 are rejected.- Decided against revenue. Interest paid to partners disallowed - Held that:- The assessee has not furnished any evidence with reference to advancement of capital. Even though the statements enclosed to the computation of income do indicate capital of various partners, on similar capital in A.Y. 2009-2010 there was no claim of interest. As seen from the computation in A.Y. 2009- 2010 assessee has only claimed remuneration and interest was not claimed. Therefore, on what basis the interest was claimed in later year and how the interest was calculated was also not forthcoming from the record. In view of this, we agree with the findings of the Ld. CIT(A) that interest cannot be allowed on the facts of the case. - Decided in favour of revenue.
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2015 (10) TMI 381
Levy of penalty under section 221(1) - Assessee did not pay self-assessment tax but filed return of income on due date - CIT(A) deleted part penalty - Held that:- There is no dispute with reference to the fact that assessee’s company was stopped by Pollution Control Board and assessee had to construct a new plant at Nandigama. Further, in spite of financial crunch assessee has declared large amount of profits and the taxes due were also admitted. Due to severe cash crunch, assessee could not discharge tax liability immediately. However, the same was discharged as stated by the assessee before the Ld. CIT(A). Penalty under section 221(1) is not automatic and mandatory. The proviso to section 221(1) states that where assessee proves to the satisfaction of the A.O. default for good and sufficient reasons, no penalty shall be levied under this section. In fact, this aspect was examined by the Ld. CIT(A) and came to the conclusion that there are good and sufficient reasons for the assessee not to discharge the self-assessment tax at the particular point of time due to financial crunch. However, he restricted the penalty to 10% instead of deleting the whole of the amount. The assessee had made out a good case in its support and the facts do indicate that there are good and sufficient reasons for assessee’s delay in payment of taxes. Relying on the various case law which are extracted by the Ld. CIT(A) in para-7 of the order, it can be concluded that penalty under section 221(1) is not a mode of recovery of taxes and this punitive action can be taken in case of willful default. Assessee is not a willful defaulter and it has sufficient reasons to not to discharge the tax liability at the time of filing return, but within period of 7 months discharged entire admitted tax. In fact the cheques issued in the month of March, 2011 were encashed by the A.O. in the months of March and June,2011. In these circumstances, we are of the opinion that assessee cannot be considered as willful defaulter. Since it has bonafide reasons, we are of the opinion that penalty under section 221(1) is not attracted on the facts of the case. Therefore, we delete the penalty partly confirmed by the Ld. CIT(A). - Decided in favour of assessee.
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2015 (10) TMI 380
Additions made on account of brick production expenses, clay excavation and carriage expenses and expenditure on water courses - CIT(A) deleted the addition - whether assessee failed to produce the relevant support evidence to substantiate its claim of expenses which were entirely made in cash? - Held that:- Assessing Officer was not justified in making the disallowances of expenses. CIT(A) had rejected the books of account maintained by the assessee and proceeded to determine the income by applying a particular profit rate, which we would advert to at a later stage. The contentiedon of the ld. D.R. that the ld. CIT(A) had not rejected the books of account and hence the provisions of see. 145 cannot be applied does not merit acceptance for the clear reason that the observations of the Ld. CIT(A) as discussed above are crying hoarse that the books of account maintained by the assessee were not appropriate and provisions of sec. 145 are applicable. His further decision in deleting the specific disallowances of expenses and applying a particular G.P. rate clearly proves that in his opinion the books were not properly maintained and he rejected such books of account for making a trading addition. Admittedly the Revenue has not filed any second appeal against the finding given by the ld. CIT(A). This shows that the impugned order has been accepted by the department and the assessment order to that extent stood merged with that of the ld. CIT(A)'s order. In the absence of any appeal filed by the Revenue we cannot put the assessee in a worst position in which it would have been if no appeal had been filed by it. CIT(A) has tabulated the figure of sales, gross profit and gross profit rate of this A.Y. as well as the immediately preceding two A. Ys. at page 31 of the impugned order. On a perusal of this table, it transpires that the assessee had declared G.P. rate of 7.55% in this year as against 6.47% of the preceding year. The Jodhpur Bench of the Tribunal has held in several cases that where the books of account are rejected, then recourse should be taken to the profit rate of the immediately preceding year unless facts justify departure therefrom. On a close examination of the G.P. rate declared by the assessee in this as well as the preceding year, it becomes patent that such rate of 7.55% in this year is better than of 6.47% in the immediately preceding years. In such a situation, there cannot be only question of applying a still higher GP rate for sustaining any trading addition, we therefore, order for the deletion of addition - Decided against revenue.
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2015 (10) TMI 379
Disallowance u/s 40(a)(ia) for non deduction of tax u/s 194J - Copyright or the literary work of the authors for the purpose of printing and publication for the use of the students - Held that:- Admittedly, the recipient of the amount being the literary work, the payment made by the assessee shall be in respect of any copyright or the literary work transferred to the assessee. Explanation 2(v) clearly says that transfer of all or any rights in respect of copyright, literary, etc. shall be treated as royalty. Since admittedly, the payment was made for copyright or the literary work of the authors for the purpose of printing and publication for the use of the students, this Tribunal is of the considered opinion that the payment has to be treated as royalty. The co-ordinate bench of this Tribunal in the case of Majestic Prakashan (2012 (8) TMI 558 - ITAT, MUMBAI) found that the literary work was not used for radio broadcasting and hence the payment made by the assessee cannot be treated as royalty within the meaning of Explanation 2(v) to section 9(1)(vi) of the Act. Accordingly, the Mumbai Bench of this Tribunal found that the assessee was not expected to deduct tax u/s 194J of the Act; hence, there is no question of any disallowance u/s 40(a)(ia) of the Act. We find that in Explanation 2(v) to section 9(1)(vi) of the Act after the words “copyright” and “literary” the legislature uses punctuation mark coma (,). It is well settled principles of law that while interpreting taxation statutes the punctuation marks cannot be ignored. The use of coma after the words “copyright”, “literary”, “artistic” or “scientific work” clearly shows that the legislature intended to treat the words “copyright”, “literary” independent of “artistic or scientific work. In respect of artistic or scientific work, the legislature intended to include films or video tape for use in connection with television or radio broadcasting. Since the legislature uses coma (,) in between “copyright” “literary” both the words have to be treated independently and separately; hence, it may not have any connection with television or radio broadcasting. This distinction or use of coma in between the words “copyright” “literary” was not considered by the Mumbai Bench of this Tribunal in Majestic Prakashan (supra), therefore, it may not be applicable to the facts of this case. In the case before us, the payment was admittedly made for copyright / literary work; hence it has to be considered as royalty. Hence, the assessee is liable for deducting tax u/s 194J of the Act. Failure to do so, the provisions of section 40(a)(ia) would come into operation. - Decided against assessee.
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2015 (10) TMI 378
Disallowance u/s 40b(v)(2) - remuneration to partners was determined as per the book profit shown in profit and loss account including interest from bank FDRs and income from other sources - Held that:- It is fact that interest on FDRs comes under the head "income from other sources" and never has been part of book profit as the income computed in Chapter IV-D except that the assessee is in money lending business, interest income has not been made part of item of income taken U/s. 28 of the Act. Following decision of this Bench in case of S.P. Equipments (2009 (9) TMI 637 - ITAT JAIPUR-A ), we direct the Assessing Officer to compute the book profit including interest income on FDRs etc. as claimed. The impugned disallowance made U/s 40(b) of the Act is directed to be deleted. Hence this ground is decided in favour of the assessee.
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2015 (10) TMI 377
Taxability of interest income in case of Joint Bank Account - Unexplained cash deposited in the bank account - addition made on protective basis - Held that:- A tax auditor has examined the books of account of Rahul H. Shah. As per the balance sheet drawn as on 31st March, 2008 a Corporation Bank SB Account No.15986 was duly disclosed. The deposits were in the regular course of business on several dates and some of the entries were contra entries in the bank account. Learned AR has pleaded on the basis of those evidences that although the said bank account stood in the name of the assessee as well as in the name of her son but for all purposes that was operated by son and not by the assessee. Sri Rahul H. Shah has also made a declaration before the AO that the transactions in the Corporation Bank Account were duly recorded in his books of account. In a situation when a tax payer, i.e., a son is duly disclosing the said transaction in the regular course in his books of account and those entries were duly disclosed in the income tax return then those very entries are not required to be again assessed, if Revenue is not satisfied, in the hands of that person who is one of the account holder. Although, the name of the assessee appeared as first name in the said bank account but for all practical purposes the son was operating that account as is evident from several evidences which were in the notice of the Revenue Department. Therefore on merits, we are of the view that the entries being explained in the case of the son and the Revenue Department has not taken any action in the case of the son, therefore, there was no justification to add those very entries in the hands of her mother, i.e., the appellant before us. Once, we have taken a decision on merits and directed to delete the addition, therefore, the legal issue raised as per the additional ground need not to be addressed by us. Rather, this additional ground has become infructuous. - Decided in favour of assessee.
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Customs
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2015 (10) TMI 418
Failure to fulfil export obligation – Imposition of Duty, Penalty and redemption fines –Appellant being 100% EOU failed to fulfil export obligation – In 2007 Development Commissioner allowed appellant to exit from 100% EOU scheme however, proceedings were initiated by Revenue proposing to demand duty foregone on imported/indigenously procured raw materials and capital goods culminating in impugned order imposing duty, penalty and redemption fine – Held that:- Notification No.13/81-Customs provided for payment of duty on raw materials and consumables imported by EOU in case of failure to either fulfil export obligation or to achieve NFEP – For period 1997-2002 appellants have not fulfilled obligation – For subsequent period, he was allowed to exit scheme – In view of observation, matter requires more detailed consideration – Matter to be reconsidered by Commissioner – Decided against Assesse.
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2015 (10) TMI 417
Smuggling of gold - Bonafide belief - whether Shri Om Prakash Verma has attempted to smuggle the gold to Nepal or not - Held that:- Case of the revenue is that they were having an intimation that some person will smuggle the gold through this check post in Nepal and they have called the pancha for the same. But in the cross examination of one of the pancha Shri Madan Tiwari.it is clear that when he was called at Khunwa office Shri Om Prakash Verma was very much present over there. It means that when the panchas were called Shri Om Prakash Verma was there and as per the panchnama the panchas were present before Shri Om Prakash Verma was apprehended. Therefore, the panchanama was doubtful. - gold is of foreign origin and primary burden of proof lies on the respondent and Shri Anand Kumar Proprietor of M/s. Abhishek Jeweler has produced the invoice in support of the procurement of the gold. Therefore, primary burden of proof has been discharged by the respondent. Now, it is for the revenue to prove that the gold in question was intended to export to Nepal by unfair means which revenue has failed to prove. - Moreover, when panchnama itself is doubtful, therefore, statements have no relevance. - If the statement is retracted after a gap of time the retraction is not admissible. In this case panchnama and statement are doubtful with the cogent evidence. Moreover, the statement has not been corroborated by any tangible evidence to testify the statement of Shri Om Prakash Verma - Decided against Revenue.
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2015 (10) TMI 416
Offence under NDPS Act - evidentiary value of the statements recorded under Section 67 of the NDPS Act - Held that:- True it is that independent persons are to join the investigation, especially the search and seizure proceedings. Nonetheless in the present case, absence of any independent person testifying to the search and seizure proceeding has not made the case doubtful a bit. - The minor contradictions with respect to time and place of search and seizure, in the testimony of witnesses, do not assume any significance. The testimony of even a single witness if found consistent and cogent could be the basis of conviction. The conviction of the appellants has not been recorded only on the statements tendered by the appellants under Section 67 of the NDPS Act. - The statement of DW-1, the Nodal Officer does not help the defence version. There is no reference of any telephone number through which the secret information was received in the police station. Thus the statement of the nodal officer with regard to two numbers not being active on or at the relevant time does not impact the prosecution version. Since no complaint was made either by DW-2 or his sister about the appellant Netrapal having been lifted and whisked away from the liquor vend at Sahibabad, the version of DW-2 also becomes unacceptable. Similar is the case with the statement made by appellant Vir Chand Rai before the Trial Court under Section 315 of the Code of Criminal Procedure. It does not appear to be probable that such a huge quantity of narcotics substance would be planted/foisted on the appellants for being dragged and tried in the present case. - judgment of the Trial Court brooks of no interference. - The appeal, thus fails and is dismissed. - Decided against the appellants.
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2015 (10) TMI 415
Request for provisional release of goods - whether the goods imported by the appellant i.e. Rubber Processing Oil, (RPO), are hazardous or non-hazardous - Held that:- The report of CRCL was challenged in Writ Petition and their Lordships had directed the petitioner and U.O.I. to give the report of laboratories in Maharashtra who are capable would analyze the RPO. On such directions, list was given by Ministry of Environment and Forests and sample was tested in Ashwamedh Engineers & Consultants, Nashik. Reliance is placed on this report by the Ld. Counsel, to strongly submit that the goods imported by them i.e. RPO are not hazardous, while CRCL Director, goes on record that testing method adopted was erroneous. In order to get correct analytical report of the RPO, we deem it necessary that the samples be re-drawn and forwarded to any of the approved laboratory in Maharashtra as were informed to Hon’ble High Court.
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2015 (10) TMI 414
Valuation - Demand of 1% Extra Duty Deposit - Held that:- LAA has considered the submissions of Revenue at pages 6 and 7 of the order and held that LA has not examined the facts for determining the value under Rule 7 of CVR. Since the matter is already remanded by LAA without the issue being not decided on merits, we find that there is no merit in the appellant's plea for remand of the matter by this Tribunal to Commissioner (Appeals). - Decided against assessee.
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2015 (10) TMI 413
Denial of benefit of Notification - whether Pipes are eligible for import under Project Import Regulation, 1986 by Notification No 42/1996-CUS dtd 31.7.1996 - Held that:- Adjudicating Authority denied the benefits of the exemption Notification on the ground that the benefit of the exemption notification should be allowed to Water treatment plant and not parts of water supply or distribution units. The Commissioner (Appeals) rejected the appeal filed by the appellant following the decision of the Tribunal in the case of Pratibha Industrials Ltd vs CCE [2004 (9) TMI 278 - CESTAT, MUMBAI]. The Honble Supreme Court in the case of Pratibha Industries Ltd vs C, Raigad [2015 (8) TMI 623 - SUPREME COURT] rejected the appeal filed by the appellant and upheld the Tribunal Order. - No merit in the appeals filed by the appellants - Decided against assessee.
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Corporate Laws
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2015 (10) TMI 411
Approval of Winding Up Petition for non-satisfaction of the award – Petitioner holds that the Respondent failed to satisfy the award and the objections so raised by them are untenable and the claim needs a fresh arbitration proceeding to be filed – Petitioner contends that Respondents were unable to clear the liability and after finalisation of the award Petitioner has the right to secure its payment by all means available under law and the Respondent cannot assail the award after its finalisation – Respondent, on the contrary, contends that it has a claim against the Petitioner thus denied its demand – Respondent also contended that the provisions of Section 433(3) and 434(1) can be invoked only if the debtor is unable to pay its debt and not if the refusal is on account of denial of liability – Respondent further holds that to enforce the award, petitioner could only file the execution petition and not the winding up petition thus petition for winding up is not maintainable. Held That:- Winding up petition is a perfectly proper remedy as it is the mode of execution given by Court to a creditor against a company unable to pay its debts – Any creditor has a right to approach the Court pointing out that its admitted debt is not paid on which the Court then considers company needs to wind up or not - There is no warrant to deprive a creditor with a decree of foreign Court and the same can also file a winding up petition – it is clear that Respondent is unable to clear its debts and has neglected to satisfy the demand without any sustainable reasons thus petition is admitted with further directions given – Decided in favour of the Petitioner.
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Service Tax
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2015 (10) TMI 459
Refund of Service Tax under reverse charge method for the period prior to 18.4.2006 - Petitioner pleads to pass an appropriate writ for quashing erstwhile explanation to clause (105) of Section 65 of the Finance Act, 1994 as well as the Rule (2)(1)(d)(iv) of the Service Tax Rules, 1994 – Held That:- the issue with regard to the applicability of Rule (2)(1)(d)(iv) of the Service Tax Rules, 1994 is no longer open for debate. It is now well settled that the said Rule would be in operation only after 18.04.2006 when Section 66A was introduced in the Finance Act, 1994. This writ petition is disposed of with the direction that the petitioner is entitled to refund of the service tax paid by it under the said explanation and Rule inasmuch as the same pertains to a period prior to 18.04.2006 from which date Section 66A became effective. The consequential relief is that the petitioner shall be refunded the amount of service tax so paid. - Decided in favor of assessee.
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2015 (10) TMI 458
Business Support Service - freight charges (luggage booking charges) recovered by the appellant for transportation of goods on its buses. – Held That:- it quite clear that transport of goods on the buses would not come under the category of BSS merely because the goods transported belonged to businessmen, indeed the inclusive part of the above definition leaves no scope for doubt in this regard. - Demand set aside. Tour operator service - appellant contended that it operated its buses as stage carriages does not alter the category of its buses from contract carriages to stage carriages. - Held that:- it would appear that the impugned service rendered by the appellant using a contract carriage would fall under the category of tour operator service. – the case is remanded to the adjudicating authority for de novo adjudication on the limited aspect of eligibility of the appellant for the benefit of exemption under Notification No.20/2009-ST, dated 07.07.2009 as made applicable with effect from 01.04.2000, invokability of the extended period and imposability of mandatory penalty under Section 78 ibid. - Decided against the assessee.
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2015 (10) TMI 457
Renting of Immovable property - demand of service tax without giving credit of tax paid earlier - Held that:- appellant had discharged the service tax liability as and when the rental income were received and the details of the challans for the payments made are available. - the demand of service tax on the entire amount without giving any credit for the payments already made is incorrect in law. It is also seen that the appellants have short paid the service tax on these heads in a few years namely October 2007 to March 2008, 2008-09 and 2010-11, and they have excess paid service tax in 2009-10, 2011-12 and April, 2012 to June 2012. The appellant has sought to adjust excess payment with the short payments. This is not permissible. - The excess payments have to be claimed by way of refund and short payments have to be made good by the appellant to the department as principles of unjust enrichment might be involved in any refund claim - Decided partly in favor of assessee. Business Auxiliary Service - The main dispute relates to incentive received from Maruti Suzuki Ltd. The appellant's claim is that this income is nothing but trade discount received by them which is in the nature of quantity discount and has been passed on to the appellant by Maruti Suzuki Ltd. by way of credit notes. - Held that:- the appellant should be given a fair opportunity of producing these documents to satisfy the Adjudicating Authority with respect to their contention that these are nothing but trade discounts. - Matter remanded back for this aspect.
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2015 (10) TMI 456
Management Consultant Service - Activities of business promotion and support, customer care, product launching, customer education program and energy consultancy - Appellant contends the scope of work to be considered as "Business Promotion and Support Services, Customer Care, Product Launching, Customer Education Program and Energy Consultancy" – Appellant further holds jurisdiction to raise demand is with Central Excise or Service Tax Commissionerate, New Delhi and not with Allahabad Central Excise Commissionerate – Further contends there was no suppression or wilful mis-statement – Held That:- Contention of the Appellant in regards to jurisdiction is valid - Service rendered, as described by the Appellant, is so sketchy that by the said description it is impossible to classify the said service and Revenue made no effort to state any reason how the same gets covered under Management Consultant Service - Impugned demand cannot be sustained and appeal is allowed – Decided in favour of the Appellant.
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2015 (10) TMI 455
Demand of service tax - Levy of tax amount received as discount and volume discounts - Held that:- In the appellants own case, this bench vide final order [2014 (11) TMI 545 - CESTAT MUMBAI], allowed the appeals relying upon a decision in identical set of facts. On perusal of the said order, we find that the issue involved was identical and in respect of the very same respondent assessee. As the issue is decided by the bench in the respondent assessees own case, we do not find any reason to deviate from such a view already taken. - Appeal of the revenue and hold that the impugned order is correct, legal and does not suffer from any infirmity - Decided against Revenue.
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2015 (10) TMI 454
Imposition of penalty - Misclassification of service - Held that:- activities undertaken by the appellant can be classified into any of the services and appellant might have entertained a bonafide belief that the services rendered by them can be classified under the head transportation of goods and eligible for the exemption of abatement. We also note that the appellant had made good the differential tax liability with interest on being pointed out by the revenue authorities. In our considered view the ratio of the judgement of the Tribunal in the case of Tidewater shipping (2008 (3) TMI 47 - CESTAT, BANGALORE), and as affirmed by the Honourable High Court of Karnataka [2011 (8) TMI 1072 - KARNATAKA HIGH COURT] will apply in full force - Impugned order is set aside - Decided in favour of assessee.
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2015 (10) TMI 453
Disallowance of Cenvat credit - Input services - Trading activity - promotion of the Authorised service station - Held that:- Appellants are dealers of Maruti Suzuki India Ltd and that they are also having Authorised service station for the same. The sale of cars depends upon the after sales service and customer support offered by the dealer. Therefore the activity of service and maintenance of vehicles is of no less importance. At no stretch of imagination it can be said that any promotional activity by conduct of entertainment shows or otherwise would increase the selling business of the appellant alone and that it does not benefit the Authorised service station. The view taken by the authorities below, that the activity of servicing of vehicles is only an auxiliary activity which is attached with the sale of cars is highly untenable. Only because the appellant are engaged in the business of dealership of cars also it would be highly incorrect to hold that the entertainment shows/promotional shows conducted by the appellants was for promotion of sale of cars alone and not for promotion of servicing of Maruti cars at their Authorised service station. At any rate, the decor and entertainment show/event management services qualifies as input service under the wide definition applicable at the relevant period. - Decided in favour of assessee.
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2015 (10) TMI 452
Demand of service tax - Receipt of commission for supervising the harvesting and transportation of sugarcane from farmers field to the sugar factory - Held that:- issue is now squarely settled by this tribunal in the case of DNYANESHWAR TRUST (2014 (1) TMI 90 - CESTAT MUMBAI). - Impugned order is set aside - Decided in favour of assessee.
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Central Excise
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2015 (10) TMI 447
Clubbing of clearances - whether the excisable goods manufactured by the holding company and the subsidiary company have to be clubbed together has not been satisfactorily answered either by the learned Commissioner or by the CESTAT in the impugned judgment - Held that:- Sole basis on which the CESTAT has decided the issue of clubbing is bad in law. Equally, on the issue of suppression of material facts leading to the extended period of limitation being applicable to the first of the six Show Cause Notices, the CESTAT is equally cursory, relying upon one letter dated 20.07.1998 sent by the subsidiary company in which nothing is stated from which it can be said that there is suppression or otherwise of facts except the fact that M/s. Margo Bio Controls (P) Ltd. happens to be a 100 per cent subsidiary of the holding company viz., M/s. P.J. Margo (P) Ltd. - case should be remanded to the CESTAT to decide afresh as to whether any case for clubbing of excisable goods manufactured by the holding company and the subsidiary company is or is not made out on facts. Equally, the issue as to whether or not there has been suppression of material facts by both the aforesaid companies is also sent back for a re-determination on facts. - Decided in favour of Revenue.
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2015 (10) TMI 446
Valuation - Undervaluation of goods - Invocation of extended period of limitation - Held that:- It has come on record that the merchant manufacturers were disclosing lesser value. It has also come on record that this fact was not known to the assessee. Therefore, the assessee could not be made responsible for the aforesaid - Customs, Excise and Service Tax Appellate Tribunal has, therefore, rightly absolved the assessee of any liability - no question of law arises for consideration - Decided against Revenue.
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2015 (10) TMI 445
Whether the goods cleared by the respondent in DTA in terms of paragraph 9.10 (b) of the EXIM Policy 2002-2007 with the permission of the Development Commissioner and against the payment in foreign exchange could be treated as “export” and, therefore, not liable to duty under the provisions of Section 3 of the Central Excise Act, 1944, by virtue of Notification No. 8/1997 - Held that:- question is answered in favour of the assessee by another judgment of this Court in 'Commissioner of Central Excise, Surat-I v. Favourite Industries' [2012 (4) TMI 65 - SUPREME COURT OF INDIA] - Decided against Revenue.
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2015 (10) TMI 444
Extended period of limitation - Classification of goods - Classification of PVC films/ sheets - Classification under Chapter Heading 4901 or Chapter Heading 3926.90 - Held that:- impugned show cause notice was time barred and it was not a case where the Revenue could invoke the provisions of proviso to Section 11A of the Central Excise Act and take benefit of the extended period of limitation. From the facts noted above, it becomes clear that the Department had issued Show Cause Notice way back on 18.02.1994 asking the appellant to reclassify the goods under Chapter Heading 3920. Therefore, all relevant facts were within the knowledge/ notice of the Department. Not only this, after the appellant had filed the reply to the said Show Cause Notice and was heard in the matter, the proposed move in the said Show Cause Notice was even dropped - by no stretch of imagination, the appellant can be treated as a person who had misled the authorities or made any mis-statement / mis-declaration. The appeal is allowed on this ground itself without going into the issue of classification setting aside the impugned order. As a result, the impugned orders passed by the authorities below are set aside. - Decided in favour of assessee.
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2015 (10) TMI 443
Classification of goods - Classification of printed thermal paper rolls - Classification under Chapter Heading 49.01 or under Head 4811.90 - Held that:- As per the assessee, it is essentially printing work which is done by the assessee relating to the product in question and, therefore, the product comes under Chapter Heading 49.01 which pertains to printing - insofar as the assessee is concerned, it is undertaking the work of printing alone and is supplying to those who place orders in this behalf. The end use of the said product at the hands of the purchaser is not the concern of the assessee and cannot be the consideration for classifying the goods in question. It is the respondent which is to be assessed under the Central Excise Act and it has to pay the excise duty on the manufacturing process undertaken by it - description of the work done by the assessee makes it clear that it is the printing which it is undertaking and, therefore, it is rightly classified under Chapter Heading 49.01. Merely because the thermal paper rolls are the raw material used which is imported or which is cut to different sizes, would not be relevant factor in determination of the classification. - Decided against Revenue.
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2015 (10) TMI 442
Valuation - Principal of natural justice - demand based of statement of dealers - cross-examine the dealers whose statements were relied upon by the Adjudicating Authority - Held that:- not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price-list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. If the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show-Cause Notice. - Order set aside - Decided in favor of assessee.
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2015 (10) TMI 441
100% EOU - Benefit of Notification No. 8/97-CE dated 01.03.1997 - Concessional rate of duty - As per the Revenue, Vanadium Pentoxide which is the material used for the manufacture of the products in question is the raw material and since the aforesaid components of raw material are imported, the assessee would not be entitled to the benefit of the aforesaid notifications. Held that:- Vanadium Pentoxide, while influencing and accelerating the chemical reactions, itself remains uninfluenced and unaltered and retains its independent character. It is also not in dispute that it remains outside the product and does not form part of the product. This has been accepted even by the Commissioner and finding to this effect is given by stating that it is not directly consumed in the process of manufacturing and normal life of the catalyst is 36 months, after which this catalyst has to be replaced by a new one. - Catalyst which retains its character, remains outside the end product, remains uninfluenced and unaltered cannot be treated as raw material. - No violation with the approach of the Tribunal in granting the benefit of the Notifications to the assessee herein - Decided against Revenue.
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2015 (10) TMI 440
Valuation of goods - Section 4A - Supreme Court dismissed the appeal for non prosecution. The Appeal was filed against the decision of Tribunal [2005 (2) TMI 243 - CESTAT, NEW DELHI], wherein Tribunal held that Respondents are not declaring different prices on different packages but they are mentioning three different prices on the same packages. Therefore, as per provisions of the Section 4(A) of the Central Excise Act, the maximum of such retail sale price is to be taken for the purpose of assessment of Central Excise duty.
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2015 (10) TMI 439
Denial of exemption claim - Notification No. 115/75 - Supreme Court held that the issue is directly covered by the judgment in ‘Bombay Oil Industries Limited v. Commissioner of Central Excise’ [1997 (91) E.L.T. 538 (S.C.)]. The appeal is filed against the decision of Tribunal [2004 (10) TMI 471 - CESTAT, BANGALORE]; wherein tribunal held that Tribunal took the decision that all goods are not covered by Notification No. 115/75. However, in view of the interpretation of the same Notification by S.C., we are not inclined to accept the above decision of the CEGAT. We would like to reiterate that any product irrespective of its classification manufactured by a factory coming under coir industry will get the benefit of exemption Notification 115/75, unless it is specifically excluded.
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2015 (10) TMI 438
Duty demand - Captive consumption - Classification - Clubbing of clearances - Clandestine removal of goods - Supreme Court dismissed the appeal filed by the assessee holding that the appeal is squarely covered by the judgment rendered in C.A. No. 1296/2005. The appeal is filed against the decision of Tribunal [2004 (9) TMI 412 - CESTAT, MUMBAI]; wherein Tribunal held that impugned goods are composite goods made up of layers of nylon and leather, nylon and rubber, and nylon and textiles. - Impugned goods require to be classified applying GIR 3(c) since the same cannot be classified applying GIR 3(a) and (b). GIR 3(c) requires classification under the equally competing heading that occurs last in numerical order - Demands confirmed by the adjudicating Commissioner under these headings are sustainable.
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2015 (10) TMI 437
Job work - Exemption - Demand - Valuation (Central Excise) - Limitation - Suppression of facts - Confiscation and penalty - Held that:- appellant had given an undertaking that it would be using the transformer oil for manufacturing of its own final products and the said undertaking has been breached by the appellant inasmuch as the transformer oil was used for repairs of old and used transformers. On these facts, all the authorities below have taken consistent stand against the appellant and on the facts of this case, we do not deem it proper to interfere with the stand taken. - Decided against assessee.
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2015 (10) TMI 436
Clandestine removal of goods - Clubbing of clearances - Classification - Supreme Court dismissed the appeal filed by the assessee holding that matter is squarely covered by the judgment rendered in [2015 (8) TMI 533 - SUPREME COURT]. The appeal is filed against the decision of Tribunal[2004 (9) TMI 412 - CESTAT, MUMBAI]; wherein Tribunal held that not only the goods are different, but also the department has, right from the show cause notice stage, urged classification under Headings 40.10, 42.01 and 59.08 for the respective goods in preference to Heading 39.26.
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2015 (10) TMI 435
Clandestine removal of goods - Clubbing of clearances - Classification - Supreme Court dismissed the appeal filed by the assessee holding that matter is squarely covered by the judgment rendered in [2015 (8) TMI 533 - SUPREME COURT]. The appeal is filed against the decision of Tribunal[2004 (9) TMI 412 - CESTAT, MUMBAI]; wherein Tribunal held that not only the goods are different, but also the department has, right from the show cause notice stage, urged classification under Headings 40.10, 42.01 and 59.08 for the respective goods in preference to Heading 39.26.
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2015 (10) TMI 434
Classification of goods - Classification under under Chapters 3926.10 and 3925.91 or under 8418.00 - Classification of 'INSULATED POLYURETHANE FOAM PANELS' and "INSULATED POLYURETHANE FOAM DOORS" - Supreme Court dismissed the appeal filed by the Revenue against the decision of Tribunal [2004 (8) TMI 135 - CESTAT, MUMBAI] finding no error in the impugned order. Tribunal in the impugned held that even if the entities herein are considered as parts of a Cabinet or an unassembled/CKD Cabinet, such Cabinets with the Refrigerating units received and installed not being excisable goods, the classification under 84.18 of the Central Excise Tariff Act, 1985 cannot be upheld, on the goods leaving the manufacturing process on the same Truck on different or same invoice.
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2015 (10) TMI 433
Challenge to levy of interest - finalization of provisionsal assessment - differential duty - period from June 1996 to February 2000 - Notification No.68/63-CE dated 4th May, 1963 - Liability for interest - Supreme Court dismissed the appeal filed by the assessee against the decision of High Court [2014 (10) TMI 445 - BOMBAY HIGH COURT] wherein High Court held that Liability to pay interest being reiterated in the acceptance of the proposal for instalments and the Petitioners having acted upon the same, the Petitioners are bound to pay interest at the rate of 18% per annum from the date of the order of the Supreme Court [2012 (8) TMI 791 - SUPREME COURT] till the date of realisation as demanded pursuant to Notification No.5/2011 Central Excise (NT) dated 1st March, 2011 read with CBEC circular No.208/42/96-CX dated 2nd May, 1996. However, the petitioner is granted time to comply with the demand notice.
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2015 (10) TMI 432
Classification of goods - Classification under sub-heading 9031.00 of the CETA or under sub-heading 8708.00 - Supreme Court dismissed the appeal filed by the Assessee finding no merit in the appeal. The appeal was filed filed against the decision of Tribunal [2004 (8) TMI 174 - CESTAT, CHENNAI]; wherein tribunal held that goods should be held to be classifiable as parts of motor vehicles falling under sub-heading 8708.00.
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2015 (10) TMI 431
Denial of SSI Exemption - Brand name/logo of buyers - Supreme Court dismissed the appeal of the assessee holding the appeal is covered against the appellant in the case of Kohinoor Elastics Pvt. Ltd. v. Commissioner of Central Excise, Indore, [2005 (8) TMI 115 - SUPREME COURT OF INDIA]. The appeal was filed against the decision of Tribunal [2004 (8) TMI 497 - CESTAT, MUMBAI]; wherein tribunal held that issue is no longer res integra, having settled by the Supreme Courts decisions in the case of Rukmani Pakkwell Traders [2004 (2) TMI 69 - SUPREME COURT OF INDIA] & CCE v. Mahaan Dairies [2004 (2) TMI 73 - SUPREME COURT OF INDIA] The Apex Court has in Rukmani Pakkwell Traders case [2004 (2) TMI 69 - SUPREME COURT OF INDIA].
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2015 (10) TMI 430
Concessional Levy of Tax - Manufacturing activity - Whether any manufacturing activity of Horlicks is undertaken in Tamil Nadu - Held that:- not only a specific finding of fact is arrived at to the effect that M/s. Southern Drugs and Pharmaceuticals, with which the respondent entered into Memorandum of Understanding, is a separate manufacturing unit established of its own with its own finances, land, etc., even the dealings between the respondent and M/s. SDP were on arms’ length basis. On these findings, we are of the opinion that the order of the Tribunal does not call for any interference. - Decided against Revenue.
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2015 (10) TMI 429
Power of tribunal to grant stay beyond the total period of 365 days - extension of stay granted earlier - extension order should be speaking or not - Supreme Court after condoning the delay dismissed the appeal filed by Revenue against the decision of High court [2014 (7) TMI 738 - GUJARAT HIGH COURT]; wherein High Court held that in case and having satisfied that delay in not disposing of the appeal within 365 days (total) from the date of grant of initial stay is not attributable to the appellant / assessee in whose favour stay has been granted and that the Appellate Tribunal is satisfied that such appellant / assessee has fully cooperated in early disposal of the appeal and/or has not indulged into any delay tactics and/or has not taken any undue advantage, the learned Appellate Tribunal may, by passing a speaking order as observed hereinabove, extend stay even beyond the total period of 365 days from the date of grant of initial stay.
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2015 (10) TMI 428
Classification of metal rolling mills and its various parts - whether the items, are to be classified as “part of the rolling mills” under Heading No. 8455.90 or the same are to be classified under Heading No. 84.28 - Supreme Court after condoning the delay and hearing the parties were of the considered opinion that the appeal is devoid of merit and hence dismissed the appeal - The appeal was filed against the decision of Tribunal [2014 (12) TMI 112 - CESTAT NEW DELHI]; wherein tribunal held that items mentioned would be correctly classifiable under sub-heading No. 8455.90 as parts of rolling mills and not under heading No. 8428.00/8428.90 as held by the Commissioner (Appeals).
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2015 (10) TMI 427
100% EOU - DTA Clearances - whether the appellant is eligible to clear into DTA 50% of their FOB value of exports of deemed exports or not - Supreme Court after hearing the parties and condoning the delay did not find any reason to interfere with the order of Tribunal [2014 (6) TMI 128 - CESTAT AHMEDABAD]; wherein tribunal held that assessee is eligible to clear goods to Domestic Tariff Area by taking 50% of the deemed exports value as their eligibility.
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2015 (10) TMI 426
Classification of goods - classification of Calcutta Meetha Pan - Classification under CETH 2108 or under CETH 2106.099 - Supreme Court after condoning the delay and hearing the parties dismissed the appeal filed by the Revenue against the decision of Tribunal [2014 (9) TMI 769 - CESTAT MUMBAI]; wherein Tribunal held that product consists of dry dates shredded, cardamom, dry pan powder, spices, sauf, perfume, etc., and the dry dates account for 70% of the weight of the product. The other ingredients like cardamom, spices, sauf and menthol account for about 20% and the green powder consisting of dry pan leaf about 2% of the weight. Thus, the product is a mixture; hence classifiable under CETH 20.01 prior to March, 2005 and under CETH 20.08 on or after March, 2005.
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2015 (10) TMI 425
Refund claim - Unjust enrichment - price inclusive of duty of excise - maintaining uniformity of price - duty paid under protest - Supreme Court after condoning the delay dismissed the appeal filed by the Revenue filed against the decision of High court [2014 (6) TMI 308 - GUJARAT HIGH COURT]; wherein High Court held that admittedly, till January 2001, the assessee was paying excise duty at a lower rate. For the months of January and February 2001, the assessee was forced to clear the goods under heading 2404.90 at a higher rate. This was done under protest. The assessee also established that the sale price of the goods, despite this change in the duty rate that the assessee charged from the consumers, remained the same. This aspect has been gone into by the Tribunal at a considerable length. In the impugned judgment, the Tribunal compared the different invoices for the period between January-February 2001 and immediately before that. The Tribunal found that despite assessee paying considerably higher rate of excise duty and correspondingly higher duties of special excise and additional excise duties, the price inclusive of taxes remained the same. Hence no infirmity in order of Tribunal.
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2015 (10) TMI 424
Compounded levy scheme - manufacture of pan masala / pan masala containing tobacco commonly known as gutkha - Whether or not Notification No. 42/2008-C.E. superseded the Notification No. 38/2007-C.E. by implication or both the Not ifications were simultaneously operating during the period - Supreme Court after hearing the parties and condoning the delay found no merit in the appeal of assessee and hence dismissed the appeal. The appeal was filed against the decision of Tribunal [2013 (9) TMI 539 - CESTAT NEW DELHI]; wherein Tribunal held that assessee-appellant-respondent were liable to pay differential of excise duty based upon different rates in excise duty on account of enhancement of rate of excise duty; however, it waived the penalty imposed.
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2015 (10) TMI 423
Reversal of CENVAT Credit - goods destroyed in the fire - Whether the provisions of Rule 3(5B) of CCR, 2004 are applicable to the facts of this case or not - Held that:- It was actually the inputs which were destroyed, the appellants stand is that it was the work-in-progress, which was destroyed in the fire. We note that the appellant, right from their first letter onwards, in all their communications addressed to the Revenue, have repeatedly submitted that the fire broke out in the bulk drug unit of the appellant, which unit is located in the manufacturing section. Inasmuch as the bulk drug manufacturing section of the plant is away from the stores, where the inputs were stored, the said fact itself establishes that the inputs had been issued for manufacturing and were work in progress. It is seen that the Commissioner has referred to the appellants claim made before the insurance company, wherein description of the goods stand given by them and has concluded that inasmuch as the goods described by the name of the inputs, on which credit was availed, it has to be held as if the inputs were destroyed. - goods were admittedly work-in-progress, in which case, no reversal of credit is justified. There is clearly no evidence on record to substantiate Revenue's allegations and findings that the destroyed goods were actually inputs, which were not issued for further manufacturing - Respondents are not required to reverse the Cenyat credit. As such, I do not find any infirmity in the impugned order - Decided against Revenue.
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2015 (10) TMI 422
Denial of abatement claim - production capacity based duty - whether appellant is entitled for abatement as provided under Section 3A of the Central Excise Act, 1944 - Held that:- Appellant indeed, have been intimating to the department from time to time vide various correspondence regarding the closure and restarting of the production in their factory. Ld. Commissioner’s finding for rejecting the claim of abatement is boiled down on only one aspect that is during intimating closure of the production and restoring of the production the appellant has not intimated hours. In our view if hours of particular date was not declared by the appellant but if date is intimated it can be taken as from 0000 hours of that particular date. Therefore in our considered view merely because hour of date of closure of production and restoration of production in the communication is not mentioned the same can not be the reason for denying the abatement. - as intimations given by the appellant from time to time to the department, correspondence of the electricity department and the facts narrated in Hon’ble Bombay High Court at Goa bench there is no dispute that production of the appellant factory remained closed during the period declared by them to the department and this fact also not disputed by the Ld. Commissioner. - appellant is legally entitled for abatement and accordingly the demand is not sustainable. We therefore set aside the impugned order - Decided in favour of assessee.
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2015 (10) TMI 421
CENVAT Credit - return of goods - Rule 16 of the Central Excise Rules - transformers have not been returned under the original or duplicate copy of the invoice had been returned only under challans - Held that:- When the show cause notice itself mentions, the goods in respect of which duty has been demanded, as non-excisable goods, I fail to understand as to on what basis the duty had been demanded, when the difference between ER-1 return figure and balance sheet figure is on account of the sale of non-excisable goods. On going through the impugned order, I find that the appellant have declared total the figure of 59,57,159/- in the ER-1 returns for 2001-2002 in respect of the Cenvat credit availed inputs used in the manufactured of transformers, in respect of which at the time of clearance of the transformers, they have paid the amount equal to the Cenvat credit availed. Whenever they used non-Cenvat credit availed inputs for repair, there is no reversal of Cenvat credit, but still these parts having been sold are reflected in the balance sheet. I find that no finding has been given by the Commissioner (Appeals) on this plea and he has simply confirmed the demand stating that the repair activity being excisable, the duty should have been paid on this amount also, while this is not the allegation in the show cause notice. Moreover in any case, the finding that repair of transformers amounts to manufacture is totally wrong finding in respect of clearance of repaired transformers no duty can be demanded, only Cenvat credit on cenvated parts used in repairs is required to be reversed. In view of this, I hold that the duty demand of ₹ 3,92,578/- is not sustainable. - Cenvat Credit cannot be denied - Decided in favour of assessee.
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2015 (10) TMI 420
Availment of CENVAT Credit - Non maintenance of separate account - Exemption under Notification No.4/06-CE dt.1.3.06 - Held that:- In terms of sub-rule (2) of Rule 6, Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or exempted services, then, the manufacturer or provider of output service shall maintain separate accounts and inventory for the receipt and consumption of inputs and input service used in or in relation to the manufacture of exempted goods/ exempted services and those used in or in relation to the manufacture of dutiable final products or providing exempted output service and take credit only on that quantity of inputs/input services which is intended for use in the manufacture of dutiable final product or providing output service on which no service tax is payable. - in course of manufacture of MS Ingots, slag dust arises as an inevitable by-product and in the present case, even if manufacturer, in accordance with the provisions of Rule 6 (2) wants to maintain separate account or inventory of inputs/input services used in the manufacture of dutiable products MS ingots and take credit only in respect of inputs and input services used in the manufacture of MS ingots, this is impossible as slag emergesd as an inevitable and unavoidable by-product. Separate account and inventory as per the provisions of Rule (2) can be maintained only when a manufacturer using common inputs/input services conciously manufactures final products one dutiable and other exempt the two separate processes. When it is impossible to comply with the provisions of sub-rule (2) of Rule 6, it would not be applicable. Sub-rule (3) of Rule 6 becomes applicable only when the manufacturer does not comply the provisions of sub-rule (2) and the provisions of sub-rule (3) would not be applicable in the cases where the sub-rule (2) is inapplicable. - same view has been taken by Hon'ble High Court of Gujarat in the case of CCE, Ahmadabad-III vs. Nirma., (2012 (10) TMI 138 - GUJARAT HIGH COURT) by Bombay High Court in the case of Rallis India Ltd.(2008 (12) TMI 46 - HIGH COURT of BOMBAY)the Apex court in the case of Hindustan Zinc Ltd.(2014 (5) TMI 253 - SUPREME COURT) The appellant thus have a strong prima facie case in their favour. The requirement of pre-deposit of the amount demanded under Rule 6(3) (i), interest thereon and penalty is, therefore waived, for hearing of the appeal and recovery thereof is stayed. - Stay granted.
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2015 (10) TMI 419
Denial of Refund claim - Refund of unutilized CENVAT Credit - whether the appellants are eligible for refund claim of the unutilized credit under Rule5 of CCR - Held that:- Appellants cleared the goods to various garment manufacturers/exporters based on the certificate issued by the jurisdictional Asst. Commissioner of the garment manufacturer under Notification No. 43/2001. - even though the appellant is not an exporter but the goods were cleared under the notification No. 43/2001, which is intended for manufacture of garments and for export out of India, they are eligible for refund under Rule 5 of CCR. By relying this Tribunal's Final Order [2013 (11) TMI 1028 - CESTAT CHENNAI], I hold that the appellants are eligible for refund of unutilized cenvat credit under Rule 5 of CCR. Accordingly, the impugned order is set aside - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (10) TMI 451
Attachment of account of the petitioner to recovery the dues of the third party - Territorial jurisdiction of high court - Held that:- Even if this Court were to have territorial jurisdiction, and qua which I entertain serious doubts, the appropriate High Court to entertain the challenge if at all maintainable, by the petitioner Company is the High Court of Madras within whose territorial jurisdiction the respondent no.1 with whose action the petitioner Company is aggrieved, is situated - Attachment appears to have been effected as far back as prior to 26th July, 2013. It appears that the respondent no.2 Bank, perhaps at the behest of the petitioner Company, had sought certain clarifications from the respondent no.1 and which were rendered by the respondent no.1 vide letter dated 26th July, 2013 which is impugned in this writ petition. Petitioner Company in the petition has chosen not to disclose the same and has emphasised on M/s Maharaja Appliances Limited whose dues are sought to be recovered from the petitioner Company being an entirely different legal entity. However the petitioner in the petition, in Ground (xii) has given an inkling of the relationship by pleading that at the time when the French Company took over the shareholding of M/s Maharaja Whiteline Industries Private Limited, it had obtained an undertaking dated 15th November, 2011 from M/s Maharaja Appliances Limited that M/s Maharaja Whiteline Industries Private Limited will not be liable for any dues of M/s Maharaja Appliances Limited. In my view, the occasion for the petitioner Company taking such undertaking would have arisen, only on account of the possibility existing therefor. I have rather enquired from the counsel for the petitioner Company of the exact relationship. - Petition disposed of.
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2015 (10) TMI 450
Challenge to impugned revised assessment orders - Violation of principle of natural justice - Held that:- Despite the Circular issued by the Principal Secretary/Commissioner of Commercial Taxes dated 03.02.2014, wherein, in paragraph 3 (b), it is specifically stated that no order should be made without affording an opportunity to the dealer, the respondent, has passed the impugned orders by observing that no opportunity of personal hearing be provided. This sort of practice adopted by the respondent cannot be countenanced. Since the issue relates to mis-matching of taxable turnover on the basis of documentary evidences, it is the bounden duty of the respondent to give due opportunity to the petitioner. But, despite specific request made by the petitioner to afford an opportunity of personal hearing, the same was rejected by the respondent. Hence, this Court is of the view that on the ground of violation of principles of natural justice, the impugned orders deserve to be set aside. - Decided in favour of assessee.
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2015 (10) TMI 449
Exemption of tax under section 4A - Satisfaction of requirement of diversification the assessee pertaining to land with regard to its ownership and tenancy for seven years - Held that:- requirement relating to land, building, etc., are contemplated in Explanation (1) in the context of a new unit but in respect of units which are already existing but have undergone expansion, diversification or modernization, the matter is governed by Explanation (5) of Section 4A - revisionist-assessee was claiming certain benefits as a result of expansion and diversification of an existing industrial undertaking, hence the requirement of Explanation (1) could not have been read under Explanation (5), particularly in absence of anything available in the statute book permitting to do so. - it was required to satisfy the requirements contemplated in Explanation (5) and the requirement under Explanation (1) have wrongly been taken into account by the Tribunal in the impugned order, as the same is not applicable. It cannot be said that a person, manufacturing a particular compound in tablet form, if starts manufacturing the same compound in injection form, there is no change and it is one and the same thing. Moreover a different form of a particular item per se cannot be said that it amounts to manufacturing the same item. On the face of also, it amounts to manufacturing an item with expansion of industrial establishment for the reason that machines, plants and other items will have to be added so as to go for manufacturing different form of item. - when a person demands a particular pesticides in a particular form, the supplier does not make him available the item in whatever form he had. In common parlance also, therefore, the dust pesticides and liquid pesticides are treated differently. At least in this regard no otherwise finding has been recorded by the Tribunal and in fact it has gone only on the aspect that since the two things are different in forms only, therefore, they are same. This approach on the part of the Tribunal is totally erroneous and in any case the inference drawn by the Tribunal also cannot be upheld. - Decided in favour of assessee.
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2015 (10) TMI 448
Validity of assessment order - Bar of limitation - Whether the assessment order which was passed on August 22, 2003 under section 11 of the 1948 Act was within limitation - Held that:- Substituted section 11 of the 1948 Act created a substantive right in favour of an assessee to get his assessment finalised within the time prescribed. The provisions of the amending Act would be applicable to the proceedings pertaining to the assessment year 1997-98 as the last date prescribed for the last return was after the promulgation of the Ordinance. The facts of the instant case being similar to Emkay Industries' case [2004 (5) TMI 545 - PUNJAB AND HARYANA HIGH COURT], the assessment was required to be finalised within three years. In the present case, the assessment order was required to be passed by April 30, 2001, whereas the same has been passed on August 22, 2003. Thus, there can be no escape from the finding that the assessment order dated August 22, 2003 is barred by limitation - no substantial question of law arises in this appeal - No merit in appeal - Decided against the revenue.
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Indian Laws
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2015 (10) TMI 412
Payment of Interest under Section 34 of Arbitration & Conciliation Act – Respondents deposited the principal amount before the High Court and requested the same to be made as Fixed Deposit which was ultimately dismissed - Contended by the Appellant that once the amount is deposited in Court, there is no liberty to pay interest in terms of the award - Held That:- Appellants shall be entitled to interest as per award from the date of award till the principal amount was deposited in the High Court - Respondent shall be entitled to the interest in terms of the award on the balance of the award amount which the appellants failed to deposit in Court – Judgement of the Court modified – Decided in favour of the Respondent.
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