Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 17, 2012
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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Charitable purpose - purchase of a BMW car, borrowing of loans from Sindhi Financiers, non-maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having no relevance to whether or not the Assessee was pursuing education as its main object. - AT
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Penalty - the requirement of filing form 24Q was new one for the assessee and as being the first year of filing such return, there was reasonable cause for delay in filing of returns - penalty cancelled - AT
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Reassessment proceedings - jurisdiction - It appears that the Assessing Officer at Delhi were either trying to avoid or had some reasons not to assume jurisdiction over the matter. - HC
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Auction of immovable property on non payment - right of highest bidder (petitioner) - Departmental authorities are directed to return to the petitioner the amount of 25% of the bid offer deposited by him - HC
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Deduction u/s 80P(2)(a)(i) - the rental income has to be assessed as Income from house property and it is not eligible for deduction u/s 80P(2)(a)(i) - AT
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Charitable purpose u/s 2(15) - It is not proper to characterise the activities of the chamber as activities amounting to a business in the generally understood sense of the word, the most important feature of business being profit motive. - HC
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Interest on housing loan - a deduction under section 24(b) is claimed when concerned assessee declares income from 'house property', whereas, the cost of the same asset is taken into consideration when it is sold and capital gains are computed under section 48. - in favor of assessee - AT
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Penalty u/s 271(l)(c) - assessed income is a loss - explanation 4 to Section 271(1)(c) is clarificatory and not substantive & penalty can be levied even if returned income is a loss - SC
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Sale of building material could not be accepted to be derived from “industrial undertaking” eligible for deduction under section 10(B) of the Act - AT
Customs
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Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Change in Tariff Value of RBD Palmolein, Brass Scrap (All Grades) Poppy Seeds, Gold and Silver Notified - Notification
DGFT
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FTP - Bank Guarantee (B.G.) would require execution by the surety Bank (Guarantor) and LUT by Exporter/Importer.
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Regarding for Guidance of Bank Guarantee (BG)/ Legal Agreement (LUT). - Public Notice
FEMA
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Know Your Customer - Customer Identification Procedure Features to be verified and documents that may be obtained from customers - FEMA Circular
Service Tax
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Business Auxiliary Service - denial of Notification No.13/2003-ST - The appellant is not merely acting as a Commission Agent - benefit of exemption not allowed. - AT
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Refund of Terminal Handling Charges (THC) - export - tax paid on terminal handling charges covered under any of the taxable services is refundable - AT
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Whether an order of penalty could have been passed against the appellant without setting aside the finding of absence of intention – held no, penalty set aside. - HC
Central Excise
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Recovery of dues from the auction purchaser unit in terms of Rule 230(2) of the Central Excise Rules, 1944 - petitioner directed to pay the dues - however penalty not to be recovered - HC
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Authorization for Search – search after surrender of registration - search of another company without separate authorization held as not illegal - HC
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Waiver of pre-deposit – manufacture of footwear - applicants admitted that they are merely sticking a sticker showing MRP on the footwear - applicants had not made out a case for waiver of pre-deposit - AT
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Short levy of the duty - Since notices were not issued in terms of the C.B.E. & C. circular even after 1-3-2002 within the normal period therefore the department had to be allowed to suffer for its revenue loss. - AT
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Denial of cenvat credit – manufacture of batteries - Hydraulic Oil and Hadilin as capital goods – Appellant is eligible for CENVAT Credit - AT
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Penalty - Area based exemption - when there are divergent views of the higher authorities on the issue and assessees act on the basis of said views, therefore cannot be held guilty for mala fide breach – penalty set aside - AT
VAT
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Sales Tax - there is no procedure which enables a dealer to avail of the hybrid procedure namely, for some time the regular assessment and for some time, composition secheme in the same assessment year - HC
Case Laws:
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Income Tax
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2012 (11) TMI 474
Reassessment proceedings - block assessment under section 158BC - unaccounted gold ornaments - Held that:- On plain reading of the reasons recorded, the stock of gold ornaments valued at Rs.29,77,726/- was subject matter of block assessment under section 158BC. AO after considering the material on record in fact made an addition of Rs.29,77,726/- as undisclosed income of the petitioner. Such addition was set aside by the Commissioner (Appeals). The order of Commissioner (Appeals) deleting such addition was upheld by the Tribunal. Thus, when the undisclosed income determined by the AO included Rs.29,77,726/- being the value of gold ornaments which the assessee claimed to be belonging to its customers was subject matter of block assessment, the same cannot be made the subject matter of regular assessment under Chapter XIV of the Act. Under the circumstances, the reopening of assessment in relation to a matter which was subject matter of block assessment is evidently without jurisdiction. When the Commissioner (Appeals) as well as the Tribunal have examined the issue on merits and have held in favour of the petitioner, the AO can have no reason to believe that income chargeable to tax has escaped assessment. For this reason also, the reopening of assessment under section 147 is without jurisdiction - in favour of assessee.
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2012 (11) TMI 473
Gross profit on sale of stock - additional income deleted by CIT(A) - Held that:- The assessee had transferred the stock of old stock of cloth at book value to its sister concern which according to the A.O. should have been transferred at cost plus profit. The assessee’s submission is that the stock was old and non-moveable stock which it had been carrying forward from earlier years has not been disputed by the Revenue by bringing any material to the contrary on record. Further, it is a settled law that Revenue cannot claim to put itself in the armchair of the businessman and assume the role to decide as to how to run the business. A businessman cannot be compelled to maximise its profits. CIT (A) has also given a finding that the case of the Revenue is that it is of a sale to sister concern at a price which is less than its market value. The Revenue has not brought any specific material on record to show a particular sale price. No deeming provision of the nature of section 40A(2)(b) for sales transaction. The Revenue has also not been able to controvert the findings of the CIT (A) or rebut his observations. Thus no reason to interfere in the order of CIT (A) - in favour of assessee.
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2012 (11) TMI 472
Bogus creditors - CIT(A) deleted the addition - Held that:- Balances of sundry creditors appearing in the balance sheet could not have been assessed as income in the hands of the assessee without proving them to be non-genuine. There is no finding of the AO that the assessee has paid these creditors out of unaccounted money or the balance shown in the balance sheet as sundry creditors were fictitious entries. Assessee has submitted before the CIT(A) that these balances consisted of earlier years’ balances also but the AO has not made further inquiries in the matter by issuing summons etc. to the creditor parties to verify the genuineness or otherwise of balances in the trade accounts - addition made was rightly deleted by the CIT(A) - in favour of assessee.
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2012 (11) TMI 471
Personal expenses - Disallowance of Traveling, Telephone and Mobile Expenses - Held that:- The assessee could not produce supporting vouchers for each and every item of expenses claimed under the head “Travelling, Telephone and Mobile Expenses”. The disallowance made on account of personal element involved under this head of the expenses at the rate of 10% at Rs.58,929/- could not be said to be excessive - against assessee. Disallowance of Credit card expenses & penalty for delayed payments - Held that:- As assessee has not made any submissions before the CIT(A), there is no mistake in the order of the CIT(A) in confirming the disallowance - against assessee. Disallowance u/s.40(a)(ia) - Held that:- As decided in Merilyn Shipping & Transports Vs. ACIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] the provision of section 40(a)(ia) are applicable only to the amount of expenditure which is payable on 31st March of every year and it cannot be effected to disallow which had been actually paid during the previous year, without deduction of TDS - thus disallowance is restricted to Rs.4,85,252/- amount payable as on 31-3-2005 and the balance disallowance is deleted - partly in favour of assessee. Addition on estimation of closing stock - CIT(A) deleted the addition - Held that:- The method of accounting of the assessee was same as adopted by the assessee in the earlier period and has been accepted throughout by the department. There is no valid reason for disallowance of 50% of the purchases and the AO has not taken into consideration RA bill for the month of March, as also payment received during the month. In the facts and circumstances of the case, there being no valid reason for making the addition on account of estimation of closing stock - in favour of assessee. Disallowance on account of site expenses - CIT(A) deleted the addition - Held that:- The assessee could not file site-wise break-up of the site expenses, and therefore the disallowance made at Rs.32,448/- by the AO was quite justified - against assessee. Disallowance of office expenses - Held that:- There is no finding of any non-genuineness of the expense claimed under the head “salary & wages”. These expenses incurred under the head “salary & wages” by nature did not allow any personal use of the assessee, and therefore the CIT(A) was justified in restricting the disallowance to the extent of 10% of the traveling expenses and of telephone and mobile expenses claimed by the assessee - partly in favour of assessee.
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2012 (11) TMI 470
Reopening of assessment - claimed exemption u/s 10B for the assessment year 2004-05 which is the 11th year - Held that:- In the present case, it is not the case of the Revenue that the assessee had not furnished the relevant documents or the information at the time of the assessment. The original assessment order was passed on 29.9.2006. Thereafter, the order was revised by the AO on 23.3.2007. Subsequently, after the elapse of four years notice u/s 148 was issued. The reason for reopening does not fall within the ambit of the provisions leading to escapement of assessment as the assessee had started claiming deduction u/s 10B from the assessment year 1995-96 and not from the assessment year 1994-95. Therefore, 10th and the last year for claiming deduction under the provisions of section 10B is assessment year 2004-05 and not assessment year 2003-04 as has been wrongly held by the AO as well as the first appellate authority - in favour of assessee. Disallowance of deduction u/s 10B - Held that:- As decided in CIT Vs. DSL Software Ltd. [2011 (10) TMI 423 - KARNATAKA HIGH COURT] The said denial of the benefit runs counter to the spirit of section 10B and it would negate the object with which the amended provision was brought in. The assessee is entitled to the benefit of extension from 5 years to 10 years tax holiday as provided under the amended provision for 10 consecutive years from the date of commencement of production. The order has been passed by the CIT(A) in a non-judicious and arbitrary manner. The order is not only against the law laid down by the Hon’ble High Court but smacks malafide on the part of the CIT(A). As CIT(A) has committed "intellectual dishonesty" extending it to the limit of perversity. The impugned order has burdened the assessee with the avoidable cost of litigation before the Tribunal and harassment. The appeal of the assessee is allowed with costs of Rs.25,000/- - appeal in favour of assessee.
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2012 (11) TMI 469
Reopening of assessment - undisclosed commission and interest paid to branches period beyond four years - Held that:- The perusal of the computation of total income filed along with return of income that the assessee has disclosed the interest and commission paid to the head offices and branches and also interest earned from head offices and branches. Once these primary facts have been disclosed before the Assessing Officer and has also been accepted by him after verifying them in scrutiny proceedings, it cannot be held that there was any failure on the part of the assessee to disclose fully and truly all material facts on these issues. Even though, the AO has mentioned about the failure on the part of the assessee in the "reasons recorded", however, such a failure cannot be ascribed or inferred from the material placed on record for the simple reason as to what the Assessing Officer is contending in the reasons recorded is the legal inference of taxability of such income. It is not in dispute that the AO on September 15, 2003, had himself carried the file to the CIT(A) and on the very same day, rather the same moment in the presence of the AO, CIT(A) granted approval. As a matter of fact, while granting approval it was obligatory on his part to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment year. It was also obligatory on the part of the Commissioner to consider whether or not power to reopen is being invoked within a period of four years from the end of the assessment year to which they relate. None of these aspects have been considered by him which is sufficient to justify the contention raised by the petitioner that the approval granted suffers from non-application of mind. Thus re-assessment proceedings u/s 147 are treated as void ab initio - in favour of assessee.
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2012 (11) TMI 468
Rectification of order - assessee seeking rectification in the order of the Tribunal confirming valid service of notice u/s. 148 - Held that:- In this case the Tribunal after considering the entire facts and circumstances of the case held that there is valid service of notice u/s. 148. The order of the Tribunal may not be drafted in a manner as the assessee wanted. Because the order is not in favour of the assessee that cannot be said to be an error having mistake apparent on record. The Tribunal cannot be said to be committed an error as the Tribunal not elaborately given the finding that the order of the Tribunal relied upon by the assessee's counsel is not analysed. The Tribunal after taking due care taken a conscious decision that there is a valid service of notice u/s. 148. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under s. 254(1) is the effective order so far as the appeal is concerned. The words used in s. 254(2) are 'shall make such amendment, if the mistake is brought to its notice'. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision - The power to rectify a mistake under s. 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the IT Act. Thus, what it could not do directly could not be allowed to be done indirectly - no infirmity in the order of the Tribunal and the petition filed by the assessee cannot be said to be falls under the purview of section 254 - against assessee.
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2012 (11) TMI 467
Deduction u/s. 80IB(10) - denial of claim for for want of completion certificate - Held that:- There is no dispute that the assessee has been following percentage completion method and also the assessee furnished the evidence in the form of property assessment document, water connection documents, pollution control permission etc. On an examination of the notices issued by the Bangalore Mahanagar Palike (Municipal Corporation) in respect of 141 flat owners in the assessee's housing project, it is seen that in the notices dated 17.1.2007 in response to the flat owners applications dated 1.12.2006 requesting for assessment and allotment of municipal numbers, the Municipal Corporation had issued notices for payment of the required taxes for the initial assessment. The proof of payment of taxes in certain cases has also been produced. Thus it would appear that the applicants, being flat owners, had individually filed application before the Municipal Corporation for allotment of municipal numbers and assessment. The notice, as above, clearly indicates that the municipal numbers were being allotted in respect of newly constructed residential apartments. The assessee is following Percentage Completion Method. This method is recognised by the Income-tax Act for disclosing the profit in the case of a builder. The purpose of granting deduction u/s. 80IB(10) is to promote housing projects. If we accept the proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only "Project Completion Method" it leads to an absurd situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) though all other requirements of the section being fulfilled - If the Revenue is taxing the profit in the year under consideration on the ground that the assessee is adopting "Percentage Completion Method" then the natural corollary should be that the connected deduction ought to be granted simultaneously in this year or the other method of computation is that the Revenue must not tax the profit of the project yearly on the basis of "Percentage Completion Method" but tax the entire profit on completion of the project by applying "Project Completion Method" - direct the AO to allow deduction u/s. 80IB(10) - in favour of assessee.
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2012 (11) TMI 466
Deduction u/s. 80IB(10) - denial of claim as the assessee is not a developer and only carried on the work of contractor and build the residential complex - Held that:- the assessee has been engaged as a builder and not as a contractor. In the present case, the assessee having right to 60% in the constructed area and also a share in the undivided property, cannot be called a mere contractor. Thus the claim of deduction u/s. 80IB(10) is to be granted to the assessee to the extent of its share and there cannot be double deduction - in favour of assessee. Non production of completion certificate - Held that:- Intention would only have been that for the project as a whole, there should be certification from the relevant authority proving the commencement and completion, and not that a completion certificate should be there in every year of the project span. Thus, the Assessing Officer need not insist on the completion certificate in this assessment year, this is the right meaning of the statute - in favour of assessee. Calculation of built up area - AO included the proportionate share of common area in the size of each flat - Held that:- The Finance Act (No. 2) of 2004 inserted the definition of "built up area" to clarify this position, thus finding merit in the contention of the assessee that the proportionate common area should be excluded from the calculation or flat size - in favour of assessee. NIL deduction v/s full deduction v/s proportionate deduction u/s 80IB - Held that:- The assessee is eligible for deduction u/s. 80IB in respect of those flats whose size is within the prescribed limits - in favour of assessee. Work-in-progress related to Maredpally Project credited to the Profit and Loss A/c - Held that:- he Assessing Officer may be directed not to reduce the eligible deduction u/s. 80IB by taking into account the work-in-progress relating to Maredpally site since the quantification of the work-in-progress has not affected the deduction claimed by the assessee u/s. 80IB(10). As the CIT(A) not adjudicated this ground, this issue is remitted back to the file of the CIT(A) for fresh adjudication - in favour of assessee for statistical purposes. Chit dividend, scrap sales and discount on materials are to be considered as income from business eligible for deduction u/s. 80IB(10) as decided in CIT v. Kovur Textiles & Co. [1980 (1) TMI 8 - ANDHRA PRADESH HIGH COURT ]. However, the other income i.e., rent on vacant flat, interest on deposit cannot be considered as income from business and the same has to be considered as income from house property/income from other sources, respectively - partly in favour of assessee.
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2012 (11) TMI 465
Income from the share transactions - Capital gain v/s business income - Held that:- The assessee has made several transactions of purchase of shares during the relevant year under consideration, and if there high volume, frequency and regularity of the activity carried on by the assessee in a systematic manner, it would partake the character of business activities carried on by the assessee in shares, and it cannot be said that the assessee has merely made investments in shares. Matter remanded back to AO to redetermine the income relating to each category of shares as business income or income from capital gains as the case may be, in conformity with Circular No.4 of 2007 dated 15.6.2007.
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2012 (11) TMI 464
Unexplained investment in the factory building - case referred to DVO - Held that:- A.O. did not reject the books of account regularly maintained by the assessee by invoking section 145(3). The assessee raised the ground before the CIT(A) that reference under section 142A to the D.V.O. is without jurisdiction as the A.O. did not reject the books of account. The CIT (A) rejected the assessee's contention with general observation without pointing out serious infirmity in the books of account maintained by the assessee. The CIT (A) on general presumption stated that the cost of construction recorded in the books of account is not supported by bills and vouchers without pointing out any specific instances. The CIT(A) has failed to point out any material in support of his finding that the books of account maintained by the assessee is liable to be rejected under auction 145(3). No convincing reasons why the CIT(A) has estimated cost of construction only on the basis of D.V.O.'s. report when the A.O. made reference to D.V.O. without rejecting books of account regularly maintained by the assessee - order of the CIT(A) is set aside by deleting the addition sustained by the CIT(A) - in favour of assessee.
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2012 (11) TMI 463
Imposition of Penalty u/s 271D,271E – For violation of provisions of sec 269SS, Sec 269T – Shri Suryakant R. Shah (S.R. Shah) was the spouse of a partner of the assessee firm and trustee of B.G. Education Trust which was running a school in the name of Ambe Vidyalaya. The collection centre for the fees of the hostel and the school was at a single place. Sometimes, the fees collected by the hostel were handed over to Shri S.R. Shah as the working hours of the bank might have been over. Since Shri S.R. Shah held the cash on behalf of the hostel for its safe custody, according to the assessee, the same did not imply that the hostel had given any loan to Shri S.R. Shah. Similarly, if some amount was received from Shri S.R. Shah, the same did not mean that hostel had accepted any loan from Shri S.R. Shah in cash. It was the case of the assessee that if some expenditure was incurred by the hostel or the school students and the amount was reimbursed to the hostel by the Managing Trustee of the school, that is, Shri S.R. Shah the same did not become a deposit or loan given or taken by way of cash. Held that:- There was reasonable cause for the assessee to indulge into cash transactions in violation of Section 269SS of the Act. Shri S.R Shah acted as a custodian only, holding the money for a brief period, and that the same were deposited in the hostel's bank account at the earliest opportunity. The provisions of sections 269SS and 269T of the Act would not be applicable. Consequently, the question of contravention of such provisions attracting penalty under sections 271D and 271E of the Act would also not arise. - Decided in favour of appellant.
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2012 (11) TMI 462
Adjustment to ALP - CUP v/s TNMM method - assessee trader of coffee - Held that:- As considered in AY 2006-07 TPO as well as the DRP have not considered the objections raised by the assessee against the comparables selected by the TPO for arriving at the ALP. As seen from the submissions of the assessee, the glaring differences that appears that comparable used by TPO is in the business of processing and trading in spices, whereas the assessee is in the business of trading in Coffee. As the facts of present year are same as above it would be appropriate to consider as to which the most appropriate method for determining the ALP to the TPO for fresh consideration. The fact the assessee adopted CUP method as the most appropriate method will not be conclusive and the endeavour of the assessee and the revenue should be to arrive at the correct ALP. Assessee also submitted that the price at which the Coffee Board sells Coffee seeds should not be taken as bench mark - remand the matter to the TPO for fresh consideration.
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2012 (11) TMI 461
Validity of order passed u/s 263 by CIT(A) - sale of theatrical rights - DR submitted that CIT(A) had not considered the applicability of Rule 9A - Held that:- It is evident from the order of the CIT(A) that the claim of cost of production of film was a subject matter of appeal before the CIT(A) and CIT(A) after consideration of remand report of the AO gave his finding. Therefore, this order of the AO, undisputedly had merged with the order of the CIT(A) as far as the claim of cost of production of film is concerned. AO specifically stated in the remand report to make "working of deduction allowable u/r 9A" of I.T. Rules. Further, also observed from para-10 of the assessment order that the AO called for the details from the assessee by issuing notice u/s 142(1) dated 18-12-2009 to furnish details of cost of production allowable as per Rule 9A of Rs. 27.19 crores. As mentioned hereinabove, the AO after considering the reply filed by the assessee vide letter dated 29-12-2009 as mentioned by the AO considered the claim of the assessee to the extent of Rs. 24,84,37,124/- and disallowed the balance amount of Rs. 2,34,91,380/-. Therefore, it is not factually correct that the AO at the time of making the assessment did not consider the applicability of Rule 9A vis-a-vis claim of the assessee on cost of production of film. CIT in his revisional proceedings cannot travel beyond reasons given by him for revision in show cause notice issued u/s 263. CIT has not exercised his revisional jurisdiction u/s 263 in respect of allowability of claim of production of film in the context of Rule 9A of I.T. Rules validly as the assessment order on this issue had already been merged with the order of CIT(A) dated 12-10-2011 much before issue of show cause notice dated 19-3-2012 to assume jurisdiction u/s 263 therefore, that the order of ld. CIT dated 29-3-2012 is liable to be vacated - in favour of assessee.
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2012 (11) TMI 460
Cancellation of Registration granted u/s 12A - Held that:- The fact that the Assessee was paying commission to persons who solicit students for studying in the Assessee's institution cannot lead to the conclusion that the Assessee is not imparting education. Similarly purchase of a BMW car, borrowing of loans from Sindhi Financiers, non-maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having no relevance to whether or not the Assessee was pursuing education as its main object. There are no facts brought out in the impugned order regarding the genuineness of the activities of the trust or as to whether the object of education was not pursued by the Assessee as its main and predominant activity. In fact, the order of the DIT(E) does not anywhere show that the assessee is not imparting education. The definition of Charitable Purpose as given u/s 2(15) of the Act refers to "relief to poor, medical relief, education and the advancement of any other object of general public utility". - eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assessee, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1)(c) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution - In such circumstances, order u/s 12AA(3) of the Act, cannot be sustained - In the result,appeal of the assessee is allowed.
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2012 (11) TMI 459
Penalty for failure to submit returns or statements in time - reasonable cause - No notice issued for default under section 272A (2) (k) - Held that:- There is mistake in notice as regards mentioning of clause (2) of section 272A of the Act is covered by section 292BB which provides that where an assessee has appeared in any proceeding or co-operated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such case shall be precluded from taking any objection in any proceeding or enquiry under this Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner - confirm the order of the CIT(A) upholding validity of impugned proceedings on the strength of notice issued under section 272A(2)(c) - against assessee. No provision in the Act for issuing separate notice for levy of penalty under section 272A(2) for late or non-filing of form 24Q and 26Q - against assessee. Penalty - reasonable cause - As decided in Royal Metal Printers (P) Ltd. Versus ACIT [2010 (1) TMI 938 - ITAT, MUMBAI] the delay in filing the returns, even if they are characterized as negligence on the part of the assessee, can only be considered as a technical or venial breach of law for which penalty should not be levied automatically. In the present case the requirement of filing form 24Q was new one for the assessee and as being the first year of filing such return, thus there is no dispute about the fact that the tax has been deducted by the assessee, there was reasonable cause for delay in filing of returns - penalty cancelled - in favour of assessee.
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2012 (11) TMI 458
Disallowance of expenses in relation to the exempt income u/s. 14A - held that:- The High Court observed that the assessee had not retained the shares with the intention of earning dividend income which was incidental due to his sale of shares which remained unsold by the assessee. The High Court, therefore, did not uphold the order of the Tribunal disallowing the expenditure in relation to the dividend from shares. Thus there being a direct judgment of a Hon’ble High Court on this issue, the same has to be followed in preference to the decision of the Special Bench of the Tribunal in the case of M/s. Daga Capital Management P. Ltd. (2008 (10) TMI 383 - ITAT MUMBAI).
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2012 (11) TMI 457
Reassessment proceedings - question of jurisdiction raised by assessee - Held that:- The petitioner had changed his registered office w.e.f. 4th November, 1989 from first floor 6376 Naya Bans Delhi to Y-192, Loha Mandi, Naraina, New Delhi, and thereafter w.ef. 3rd October, 2000 from Y-92 Loha Mandi, Naraina, Delhi to Room No.9, Y-3C, Loha Mandi, Naraina, Delhi. The principal place of business is at Agra, where he has a floor mill. In his affidavit filed in the High Court, Shri Ashok Kumar Agrawal has described himself to be working as Director of the petitioner company and has given his address as 6/26, Bhai Gali, Belanganj, Agra. He has not annexed the acknowledgment of return or assessment order of the year 1999-2000, with which we are concerned in the present case. It was in the search and seizure operations carried out in Ganga Ram Agrawal Group of cases, a report was sent by Addl. CIT (Inv), Agra on 10.12.2003 reporting the debts of the assessee in the books of accounts of the Agrawal Groups of persons in respect of assessee from which it was derived and on which reasons were recorded by Addl. Commissioner of Income Tax, Range-4, Agra in the notice under Section 148 that the income of Rs. 1,32,45,426/- of the assessee for the year 1999-2000 has escaped assessment. The limitation will expire on 31.12.2006. The respondent no.1 took extreme caution and care before assuming jurisdiction, which was concurrently vested in her. The petitioner admittedly has a branch office and principal place of business at Agra. The respondent no.1, as A.O., send the matter firstly to DCIT, Circle-5 (1), New Delhi and thereafter DCIT, Circle-3 (1), New Delhi which was very surprising as to why these officers at Delhi did not take over the jurisdiction. They simply returned the papers back to respondent no.1, firstly by advising her to pass order in view of G.K.N. Driveshafts (India) Ltd.'s case (2002 (11) TMI 7 - SUPREME COURT) and thereafter returning the papers on the ground that the assessment order of the year 1999-2000, was not accompanied with the letter. It appears that the Assessing Officer at Delhi were either trying to avoid or had some reasons not to assume jurisdiction over the matter. The respondent no.1, before proceedings with the matter, requested for permission of the Commissioner of Income Tax-II, Agra to proceed with the matter who was directed to frame protective assessment orders, so that there is no loss of revenue. The order dated 1.12.2006 giving such direction to her was sufficient to allow her to assume jurisdiction for making assessment. Thus no error of jurisdiction committed by the respondent no.1 in proceedings with the assessment of the income under Section 147/148 which had escaped from the assessment of the petitioner-assessee in the assessment year 1999-2000 - against assessee.
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2012 (11) TMI 456
Non deduction of TDS - payment made to Mathadi Board - disallowance u/s 40(a)(ia) - Held that:- there is no contractual relationship as a principal and contractor between these assessees and Mathadi Board, but, in fact, in pursuance of the provisions of the Act as well as the scheme, both these assessees are bound to engage the labourers or the workers through the Mathadi Board therefore, the disallowance made by the A.O. invoking the provisions of section 40(a)(ia) was not justified - in favour of assessee. Disallowance for non-deduction of tax u/s 194A - Held that:- There is no dispute about the fact that the assessee has obtained the Form No. 15G has provided under section 197A(1)(ia) but the assessee did not furnish the said Form to the CIT, Kolhapur. Thus it is only the procedural lapse. Once the assessee has obtained the Form No. 15G from the payee assessee, has no legal obligation to deduct the tax on the payment made to payee - in favour of assessee.
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2012 (11) TMI 455
Transfer pricing - arm's length price - intra-group services - selection of Comparable - TPO made the addition on various grounds - Held that:- The assessee's objections in this regard were, as such, rejected without passing a speaking order - remit this matter to the file of the ld. DRP, to be decided afresh in accordance with law on considering the aforesaid data provided by the assessee before the TPO.
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2012 (11) TMI 454
Auction of immovable property on non payment - right of highest bidder (petitioner) - stay granted for further proceedings on appeal filled by assessee - appeal allowed without hearing the petitioner - Held that:- Proclamation of sale and holding a public auction are only the initial steps towards sale of immovable property of a tax defaulter to recover such amount through sale of his properties. The highest bidder, whose offer is accepted, during such public auction, has the responsibility to deposit 25% of the purchase money on spot, failing which, the acceptance of offer stands revoked. However, before the sale can be confirmed in favour of the highest bidder, several steps are to be completed and intervening factors to be taken into account, like within fifteen days from the date of public auction, the purchaser has to pay remaining 75% of the amount. Even then the sale is subject to confirmation and the tax defaulter, at various stages, has right either to intervene, pay off the tax or question the very proclamation i.e under Rule 60 he can apply to set aside the sale of immovable property upon deposit of the amount of tax dues, of course before the confirmation of sale. He also has a right to question any order that the Tax Recovery Officer may have passed under the schedule. Rule 86(1) provides for a statutory appeal against any such order before the Chief Commissioner or the Commissioner. Sub-rule (3) empowers the appellate authority, pending its final decision in appeal, to stay the execution of the certificate. It was in exercise of such statutory right of appeal that the respondent No.3 carried order of the Tax Recovery Officer before the Commissioner and questioned the very proclamation of sale. When such appeal was filed, the auction was not even conducted. The petitioner was nowhere in picture. In such appeal, it is unable to find as how at least at the outset the petitioner could have been made a party. The question of joining the petitioner as a respondent in such an appeal at a later stage also would not arise since by merely being the highest bidder in a public auction, the petitioner did not get any vested right in the property. His time for depositing remaining 75% of the amount had not yet expired nor before such date he had deposited the remaining amount. Even after depositing the remaining 75% of the amount, the sale was subject to confirmation & long before such steps could be completed, the Commissioner on the very day of the public auction, had stayed the entire proceedings. Thus as Respondent No.3 had succeeded in requiring the settlement commission to entertain his application for settlement on which certain demand orders were passed & payments were also made the petitioner has made out any case for interference. Departmental authorities are directed to return to the petitioner the amount of 25% of the bid offer deposited by him on 31.03.2000 with simple interest @ 8% per annum from such date till actual payment.
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2012 (11) TMI 431
Penalty u/s 271(l)(c) - assessed income is a loss - Held that:- As decided in CIT v. Gold Coin Health Food (P.) Ltd. [2008 (8) TMI 5 - SUPREME COURT] explanation 4 to Section 271(1)(c) is clarificatory and not substantive & penalty can be levied even if returned income is a loss - in favour of revenue.
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2012 (11) TMI 430
Interest on housing loan - capital gains v/s House property - Held that:- Deduction u/s 24(b) and computation of capital gains u/s 45 are altogether covered by different heads of income i.e., income from 'house property' and 'capital gains'. Further, a perusal of both the provisions makes it unambiguous that none of them excludes operative of the other. In other words, a deduction under section 24(b) is claimed when concerned assessee declares income from 'house property', whereas, the cost of the same asset is taken into consideration when it is sold and capital gains are computed under section 48. Thus no doubt that the interest in question is indeed an expenditure in acquiring the asset. Since both provisions are altogether different, the assessee in the instant case is certainly entitled to include the interest amount at the time of computing capital gains under section 48. CIT(A) has rightly accepted the assessee's contention - in favour of assessee. Loan transaction - Addition regarding income from the head "other sources" - CIT(A)deleted the addition - Held that:- The CIT(A) has nowhere dealt with the legal aspect of the issue i.e., whether the assessee who, called himself to be a salaried employee could raise a plea his loan transaction could be called as a 'business activity' or not even after the same had led to accrual of interest as held by the assessing authority. This vital aspect, in our opinion has escaped the consideration of the CIT(A). Thus it will be appropriate that the CIT(A) shall redecide this legal aspect - in favour of revenue by way of remand.
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2012 (11) TMI 429
Charitable purpose u/s 2(15) - Income from property held for charitable or religious purposes - whether the provisions of Section 11(4A) were attracted to the assessee’s case - whether by rendering specific services to members and non-members for a fee, a trade, professional or similar association can be said to be carrying on a business activity? Held that:- A survey of the decided cases shows that trade and professional associations have been held entitled to the exemption under Section 11. An association of businessmen who sold goods on hire purchase Add. CIT vs. South India Hire Purchase Association (1978 (2) TMI 59 - MADRAS HIGH COURT), an association of traders dealing in photographic and connected trades Commissioner of Income-tax v. South Indian Photographic and Allied Trades Assn ( 1983 (7) TMI 3 - MADRAS HIGH COURT) and an association consisting of Kirana Merchants Madras Kirana Merchants Association v. CIT, (1976 (8) TMI 29 - MADRAS HIGH COURT) were held by the Madras High Court to be eligible for the exemption under Section 11 notwithstanding that some of the associations charged their members fees for specific services rendered. It is not proper to characterise the activities of the chamber as activities amounting to a business in the generally understood sense of the word, the most important feature of business being profit motive. It has not been suggested by the income tax authorities that the activities carried out by the assessee chamber were propelled by any profit motive. In such circumstances, it is proper to view the activities as driven by a charitable motive in the sense in which a charitable purpose is defined in Section 2(15). In this view of the matter, the provisions of Section 11(4A) are not attracted to the present case and a remand to the AO for finding out whether the activities were incidental to the objectives of the trust and separate books of accounts were maintained for such business was unnecessary - in favour of the assessee.
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2012 (11) TMI 428
Deduction u/s 80P(2)(a)(i) - rental income received by the taxpayer - Held that:- As decided in M/s. The Totgars' Cooperative Sale Society Limited Versus Income Tax Officer, Karnataka [2010 (2) TMI 3 - SUPREME COURT] the source of income is relevant for deciding the applicability of section 80P. Weightage should be given to the words "the whole of the amount of profit and gain of business" attributable to one of the activities specified in section 80P(2)(a). The income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society. Unless and until the letting out of property falls within the definition of banking activity, the rental income received by the taxpayer cannot be construed as operational income. At no stretch of imagination it could be said that rental income is attributable to banking business. In the present case the taxpayer has let out the building. It is nobody's case that the commercial asset was exploited in the course of its banking activity or providing credit facility to its members. Therefore, letting out of the property is other than one specified in section and u/s 80P(2)(a)(i) and 80P(2)(c). Therefore, the rental income received by the taxpayer has to be assessed as "Income from house property" and it is not eligible for deduction u/s 80P(2)(a)(i) of the Act - in favour of revenue.
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2012 (11) TMI 427
Indo-Mauritius DTAA - contracts work - Permanent Establishment (PE) in India - Held that:- Considering the chart tabulated by CIT(A) the duration of first contract is 8 months 11 days and no preparatory work was done by the assessee in this regard as the construction designs were provided by the third party through independent contracts. DR could not controvert the finding given by the CIT(A) in this regard. Thus it becomes apparent that the duration in respect of first contract is only 8 months and 11 days, which is less than 9 months as per Article 5 of the Indo-Mauritius DTAA to constitute permanent establishment. The duration of second contract as per the above table is only 10 days and the third contract is 3 months and 14 days. Patently such duration is less than the prescribed period of 9 months. No material has been placed on record by the DR to show that there is any infirmity in the impugned order in recording the starting or completion dates of duration of such contracts. Since the duration in all these contracts is less than nine months, obviously the mandate of article 5 cannot be activated. In the absence of any PE there cannot be any question of taxability of business profit as per Article 7 - in favour of assessee.
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2012 (11) TMI 426
Exemption u/s 10B - Revision u/s 263 - denial of claim as activity of producing plants through tissue culture does not amount to manufacturing - Held that:- There is no specific definition of word "manufacture or produce" u/s 10B, thus that definition of 'manufacture' contained in the corresponding provisions of section 10AA would also apply qua the assessee's case vis-a-viz its manufacturing activity. The modern day technology of tissue culture is a multifaceted activity with the help of latest biotechnological tools, wherein from one mother plant the manufacturer/producer can get thousands of plant within a short span of time, with limited space and minimum other requirements. The definition of 'manufacture' as per Section 2(r) of the SEZ Act, 2005 is incorporated in Section 10AA of the Income-tax act with effect from 10.02.2006. We conclude, in the light thereof, that the assessee's business activity of tissue culture is 'manufacture or produces' within the meaning of section 10B(2)(i) of the "Act" and Commissioner of Income Tax had wrongly held that since assessee's produce is "plant", which is a lively object, therefore, it is covered by section 2(29)BA). Assessing Officer in finalizing the assessment had rightly granted the assessee deduction under section 10B of the "Act". It was one of the 'possible view' as per law, which could not be revised by CIT under section 263 of the Act. Consequently, once we have held that the assessee's unit is entitled to be treated to be a qualifying unit under the provision of section 10B(2)(1) of the "Act", our conclusion is that the order of the Commissioner of Income Tax revising the assessment does not withstand the test of the law. - Decided in favor of assessee.
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2012 (11) TMI 425
Penalty u/s 271 (1) (c) - addition on LTCG - Held that:- As per the return of income filed by the assessee the assessee declared long term capital loss of Rs.13,83,666/- but the A.O. assessed long term capital gain at Rs.23,05,136/- but the penalty is imposed by the A.O. on the positive capital gain computed and no penalty on long term capital loss declared by the assessee. Since as per the tribunal order in quantum proceedings, it is held by the tribunal that fair market value of the flat as on 01.04.1981 as declared by the assessee has to be adopted by the A.O. and after effect is given to this tribunal order in quantum proceedings, the resultant capital gain will not be in positive figure but it will be a long term capital loss only although the same may be at a lesser amount than declared by the assessee. But still since no penalty is imposed by the A.O. in respect of capital loss declared by the assessee the present penalty cannot survive because penalty has been imposed by the A.O. on the positive capital gain - in favour of assessee.
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2012 (11) TMI 424
Penalty u/s 271(1)(c) - Whether penalty can be levied in case of disallowance of expense towards payment to contractors and procession fee for violation of provisions of section 40(a)(ia) of the Act - Held that:- when the disallowance is made by the A.O. due to non payment of TDS in time, the addition is technical in nature and hence, the same does not amount to concealment of income or furnishing of inaccurate particulars of income - Penalty u/s 271(1)(c) is not justified in these circumstances. In the present case, the facts are similar and even better because in the present case, TDS was deducted and paid also although belatedly. Hence, by respectfully following the tribunal decision, issue in the present case is decided in favour of the assessee and decline to interfere in the order of Ld. CIT(A) - In the result, the appeal of the revenue is dismissed.
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2012 (11) TMI 423
Penalty u/s 271(1)(c ) - CIT(A) deleted the levy - Held that:- Issue regarding disallowance of addition of deferred revenue expenditure was set aside & G.P. addition made by the A.O. of Rs.64,25,615/- was scaled down to only Rs 17,74,615/- & estimation of turn over to Rs. 3.75 crores from Rs.5 crores and the rate of G.P. was also scaled down to 30% as against 32%. As decided in Jumabhai Premchand (HUF) Versus CIT [1998 (6) TMI 538 - GUJARAT HIGH COURT] estimated addition is not sufficient for levy of penalty u/s 271(1)(c) - the addition in the assessment order is alright but in the proceeding for imposition of penalty, that fact alone was not sufficient and the burden was on the department to prove concealment of income which was not discharged by the department - in favour of assessee.
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2012 (11) TMI 422
Disallowance u/s 14A r.w.r. 8D - CIT(A) deleted the addition - Held that:- In view of the factual position that own funds were many times more than the amount of investment and in view of the judgment of CIT Versus Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) wherein held that no disallowance u/s 14A when assessee had interest free funds of its own and also in view of the fact that Rule 8D is not applicable in the present year, no interference is called for in the order of CIT(A) on this issue - in favour of assessee. Reopening of assessment - valuation of closing stock, disallowance u/s 14A & escaping of FBT - Held that:- As in the course of original assessment proceedings, the A.O. has made proper queries regarding valuation of closing stock as well as regarding disallowance to be made u/s 14A and on both the counts, reply were submitted by the assessee before the A.O. in course of original assessment proceedings and thereafter, the assessment was completed by the A.O. u/s 143(3) and therefore, it is abundantly clear that opinion was made by the A.O. in course of original assessment proceedings on the basis of queries and its reply and no new material has been indicated which has come to the notice of the A.O. for reopening. FBT which cannot be the ground for issuing notice u/s 148 because for issuing notice in respect of escaping of FBT, there is a separate section 115 WG in the I.T. Act and therefore, no notice can be issued u/s 148 of the I.T. Act - Hence, in the facts of the present case, the reopening is on the basis of mere change of opinion which is not permissible as per law - against revenue.
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2012 (11) TMI 421
Unexplained expenditure u/s. 69C - addition to income - Held that:- On the basis of the loose sheets impounded the fact that it represents expenditure is not in doubt. From the sheet it was seen that in the remarks column there were notings which indicate that in certain occasions the amounts were returned/repaid. On the basis of query from the Bench, the assessee agreed to verify the figures and after verification recalculated the figures after considering the amounts repaid/returned to the partners and the net figure of expenses worked out to ₹ 31,46,500/- also checked and confirmed by the Revenue - thus the addition made by the AO be restricted to ₹ 31,46,500/- instead of ₹ 1,32,57,366/- made by AO - partly in favour of assessee. Addition u/s.68 - Held that:- The Revenue has not been able to prove that the notings in the loose sheet belong to the assessee & represents the amount received/spent by the assessee. The loose sheet being undated, unsigned, without the name nature of transaction thus cannot be considered for the basis of making addition. In view of these facts, we are of the view that no addition can be made on the basis of loose sheets - There is no evidence found by the Revenue in the form of extra cash, jewellery or investment outside the books - in favour of assessee. Unaccounted loan - Held that:- the assessee has obtained aggregate loan of ₹ 5,70,000/- from six parties. The assessee had submitted the copies of confirmation of account of the lenders, copy of their pass book, copy of acknowledgement of Income tax returns in case of Income tax payers, copy of 7/12 utara, copy of PAN card etc. before the A.O. and has thus discharged the initial onus cast u/s. 68. The Revenue has not placed on record any material to controvert the submissions made by the assessee - the assessee is not required to prove the source from which the lenders have acquired the money deposited with the assessee - in favour of assessee. Non deduction of TDS - Addition u/s. 40(a)(ia) - Held that:- As decided in Merilyn Shipping & Transports Versus ACIT, Range-1, Visakhapatnam the provisions of section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS - issue remitted back for verification - in favour of assessee for statistical purposes. Interest u/s 234A - Held that:- The assessment order reveals that the assessee filed its return of income on 28-12-2006. The due date of filing of return in the case of assessee was 31-10-2006. CBDT vide order issued u/s.119 dated 13-10-2006 extended the date of filing of return for the assessees in the state of Gujarat to 31st December, 2006. Since the assessee had filed the return of income on 28-12-2006 which is within the extended due date of filing of return, we are of the view that assessee is not liable to pay interest u/s. 234A - in favour of assessee.
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2012 (11) TMI 420
Interest u/s 36(1)(iii) - disallowance as interest bearing funds have been utilized for making investments - CIT(A) allowed the claim - Held that:- Persuing the P/L A/C of assessee net profit after tax for the year ending 31-3- 2003 is ₹ 488.04 lakhs and the depreciation in that year is of ₹ 150.14 lakhs and hence total generation of own fund in that year is ₹ 638.18 lakhs, whereas investment in shares in that year is only of ₹ 352 lakhs & similarly in the year ending as on 31-3-2004 profit after tax is ₹ 214.25 lakhs and the depreciation in this year is ₹ 195.16 lakhs and hence total generation of funds is ₹ 309.41 lakhs whereas the investment in shares in this year is of only ₹ 55.25 lakhs - it is not justified to make any disallowance of interest claimed by the assessee u/s. 36(1)(iii) in the absence of any direct nexus between the investment in shares and interest bearing borrowed funds - in favour of assessee. Deduction u/s. 80IA - disallowance as undertaking is not a distinct entity with no separate plant and machinery owned by the enterprise having not approved by the Central Government - Held that:- The facts in the year under appeal are identical to that of A.Y. 2004-05 and A.Y. 2005-06, thus following the order of co-ordinate Bench, restore the matter back to the file of A.O. for examining the allowability of deduction u/s. 80IA. The assessee has to furnish the required information called for by the A.O. that enterprise or undertaking is a distinct entity with a separate plant and machinery owned by the enterprise approved by the Central Government/State Government or local authority & maintaining separate books of accounts - in favour of Revenue for statistical purpose. Consumption of closing stock - addition for excise duty debited to P/L A/C - Held that:- No contrary material has been shown proving that any excise duty has been debited in the profit and loss account relating to the finished gods. It is also not shown by the Revenue that cost of finished goods as worked out by the assessee did not contain the element of excise duty paid by it on the raw material consumed in the making of the finished goods. On the other hand, assesse has submitted that excise duty component of raw material has been duly debited to the profit and loss account addition considered in the costing of closing stock. This ground of Revenue is therefore also rejected - in favour of assessee. Disallowance u/s.40A(2)(a) - CIT(A) allowed the claim - Held that:- A.O. has not proved that excessive payment has been made to an associate concern of the assessee. The genuineness of the transactions is not in dispute. The reliance by A.O. on the order of associate concern of the assessee is not proper as that order has been reversed by the CIT (A) and confirmed by the Tribunal. The assessee had provided calculation of fair value of services before the CIT (A) which was sent to the A.O. during remand proceedings. There is no material to justify the disallowance made by the A.O. Further, Tribunal in the case of associate concern of the assessee decided on 30-9-2009 held that there is no excessive payment for services provided to assessee. Thus once factum of excessive payment for services are not proved, there is no case of any addition even in the case of the assessee - in favour of assessee. Software expenses - Revenue v/s capital - Held that:- As assessee has not been able to demonstrate as to how the expenses are of revenue in nature, thus need to be treated as capital - against assessee.
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2012 (11) TMI 419
Unaccounted deposits in bank - Held that:- The assessee has explained the source of cash deposits from cash withdrawal, opening balance consisting of gifts and business Income. The assessee’s explanation that the gifts received in earlier years were of small amounts and not liable to tax and therefore no return was filed. This explanation, considering the amount appears to be plausible explanation - no addition is called for in the present case - in favour of assessee.
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2012 (11) TMI 418
Unaccounted investment in house property and cash deposits - Held that:- Entire submission of the appellant is not supported by documentary proof. The appellant has shown to have earned income by way of business including income for A.Y. 2001-02 of Rs.41,931/- during the year under consideration, then also it is difficult to accept that appellant was able to make investment in house property to the extent of Rs.1,05,000/- and to deposit an amount of Rs.22,000/- in the bank. From the chart furnished and placed on record it is seen that the total funds available with the assessee was to the extent of Rs.1,16,581/- and the additions made by the A.O. was to the extent of Rs.1,27,000/-, thus the addition seems to be on higher side. Thus to meet the end of justice the disallowance be estimated and restricted to Rs.35,000/- instead of Rs.1,27,000/- made by the A.O. - partly in favour of assessee.
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2012 (11) TMI 417
Taxability of profits on sale of DEPB license for working out deduction u/s.80HHC - Held that:- Co-ordinate Bench had relied on the decision of Bombay High Court while deciding the issue of profit on sale of DEPB. As decided in M/s Topman Exports Versus Commissioner of Income Tax, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA] that profit on transfer of DEPB would be sale value of DEPB less its face value which represents the cost of DEPB and not the entire sum received by assessee on such transfer & ACIT vs. Saurashtra Kutch Stock Exchange Ltd. [2008 (9) TMI 11 - SUPREME COURT] that non consideration of a decision of jurisdictional court or of the Hon’ble Supreme Court can be said to be “mistake apparent from the record ” - in favour of assessee.
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2012 (11) TMI 416
Surplus/shortage of closing stock - suppression of purchases of maida and soji - Held that:- Persuing the copy of the reconciliation statement of the quantitative details as per the statement of accounts and as per the audited accounts of the closing stock of raw-material and the finished goods, as filed by the assessee the assessee has tried to explain the reasons for the difference in the two statements of accounts of the closing stock in the written submissions filed before the CIT(A). However, in such type of case, at the most the value of the difference between the stock as per the statement of accounts and stock as per the audited quantitative details of raw-material and finished goods of closing stock could be added as income in the hands of the assessee. Thus the actual difference is slightly more in besan account as per the two account statements and which comes to 9.826 MTs and the value thereof comes to Rs.2,47,850/- and accordingly, the addition on account of difference in besan account is restricted to Rs.2,50,000/- . In other accounts of maida, soji and atta there is in fact shortfall thus the total addition is sustained at Rs.3,00,000/- out of the addition of Rs.19.33 lakhs and Rs.7.42 lakhs sustained by the CIT(A) - partly in favour of assessee. Penalty u/s 271(1)(c) - Held that:- It was the assessee who has filed both the accounts statements with regard to quantitative details of the raw-material and finished goods in various products and they were filed by the assessee at the time of assessment itself. The assessee has filed a reconciliation statement and has tried to reconcile the two statements of account. The mistake on account of difference in two accounts is clearly bona fide and merely because the some part of the addition made on that ground has been sustained by the Tribunal, is no ground to visit the assessee with the penalty under Section 271(1)(c) - in favour of assessee.
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2012 (11) TMI 415
Disallowance of Commission – Held that:- Commission to the extent it exceeds 40% of the brokerage received by the assessee from the clients is clearly prohibited by law and to that extent, as per, Explanation to section 37(1) will clearly be applicable, thus disallowed - AO shall re-decide this issue after considering Bye-Law 218 of the Stock Exchange Ahmedabad after giving proper and reasonable opportunity to the assessee and to allow the commission only to the extent it is permissible in accordance with Bye-Law 218 of the Ahmedabad Stock Exchange - In the result, appeal of the assessee is allowed for statistical purpose.
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2012 (11) TMI 414
Interest on FDR - disallowance as income derived is not from “industrial undertaking” u/s 10(B) - Held that:- The Excise Department has issued security bond after lien of 5% of FDR & assessee was required to keep a security deposit with the Central Excise Department for smooth export-business, but the interest earned on such security deposit could not be said to be derived from industrial undertaking - against assessee. Disallowance of balance written off - Held that:- Written off of sundry balances could not be attributed to the previous year and relates to the earlier years and could not be said to be related to the business income or income derived from export activities of the assessee - against assessee. Disallowance of building material sale - Held that:- the sale of building material could not be accepted to be derived from “industrial undertaking” eligible for deduction under section 10(B) of the Act - against assessee.
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2012 (11) TMI 413
Addition u/s 68 - opening cash balance - Held that:- Assessee was of 58 years of age and was engaged in the business since past many years and was regularly filed return of income year after year, could not be controverted by the Revenue. The accumulated balance of Rs.1,40,886/- could not be said to be unbelievable or excessive - in favour of assessee.
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2012 (11) TMI 412
Profit earned from undisclosed trading turnover - CIT(A) confirmed the addition - Held that:- CIT(A) has sustained an addition by merely observing that the annexures are recorded in the books of account cannot be accepted since the AO has given such finding after examination of the books of account and seized document which are in the custody of the I.T. department, but this approach of the CIT(A) is not sustainable as the assessee in its written submission filed before the CIT(A) has elaborately cited the figure of the turnover as per the seized material, recorded in its sale register and page number of the sale register along with date, amount and full narration has been detailed therein. Also not considered the submissions that the GP rate as per the I.T. records comes to 14.07% and the NP therein is about 8% only. The CIT(A) has not even rejected the same and has not considered the submissions - as per the pleading of the assessee itself there were some arithmetical inaccuracies in the calculations of the unaccounted turnover of the assessee and petty lapses in the recording of the turnover in the sales register could not be ruled out, thus ends of justice shall be met if the addition on account of profit earned by the assessee not accounted is restricted to Rs.8 lakhs out of the addition of Rs.67.22 lakhs confirmed by the CIT(A) - partly in favour of assessee. On money receipt on sale of timber - Held that:- CIT(A) has dismissed the ground of the appeal of the assessee in a summary manner. The Revenue could not justify with evidence to prove its case regarding receipt of “on money” in respect of sale of premium timber - in favour of assessee. Difference in stock - search - Held that:- As assessee could not establish the nexus between the shortfall in stock found at the time of search and addition made by the AO on account of profit earned from undisclosed trading of timber. Accordingly, the GP element at the rate of 14% on shortfall of timber of Rs.1.14 lakhs which comes to Rs.16,000/- be sustained as addition out of the addition of Rs.1.14 lakhs sustained by the CIT(A) and the balance addition is deleted - partly in favour of assessee. Unexplained expenditure - Held that:- CIT(A) has sustained the addition by observing that the AO appears to have verified the material, and accordingly worked out the amount of expenditure. These observations of the CIT(A) is not sustainable considering the submissions of the assessee and to cover up the possible petty lapses and expenditure which could not have been accounted for by the assessee the ends of justice shall be met if the addition of Rs.7 lakhs is confirmed out of addition of Rs.64.59 lakhs sustained by the CIT(A) and the balance addition is deleted - partly in favour of assessee. Set off of unaccounted profit - Held that:- CIT(A) has observed that further addition equal to 15% of the seized items contained in Annexure BS-43 is made, which works out to Rs.1,81,694/- with the remarks that the same will be set off against the above income on account of unaccounted turnover. We find that separate addition on account of undisclosed turnover was made by the Revenue, and therefore the CIT(A) was wholly justified in allowing the set off of this amount of Rs.1,81,694/- against the income from undisclosed turnover of the assessee - in favour of assessee. Unaccounted initial investment - Held that:- the assessee’s timber business is very old, and therefore there is no justification for addition on account of initial investment in block period, and accordingly the order of the CIT(A) on this issue is confirmed - in favour of assessee. Unaccounted profit on stock found short - GP rate of 15% OR 20% - Held that:- GP rate of the assessee as per the income-tax records comes to 14.07% which could not be controverted on behalf of the Revenue. Thus there is no mistake in the order of the CIT(A) in applying the GP rate of 15% instead of 20% - in favour of assessee. Unexplained cash - Held that:- As at the time of search cash amounting to Rs.1,17,000/- was found at the premises of the assessee, and the AO has recorded that the assessee has admitted it to be unexplained. The assessee later on tried to explain the cash as belonging to the father, mother, brother personal etc. which is to held as an after thought - against assessee. Unexplained cash of Rs.1,17,000/- is covered with the addition sustained above accordingly the assessee is entitled to telescopic benefit, and the issue is decided in favour of the assessee.
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2012 (11) TMI 411
Penalty u/s.271(1)(c) r.w.s. 158BFA(2) - disallowance of educational and traveling expenses of the son - CIT(A) deleted the levy - Held that:- Perusal of the scrutiny assessment u/s 143(3) for the AY 2001-2002 and 2002-2003 revealed that the similar expenses on educational and traveling expenses of the son has been disallowed by the AO holding the same as non-business expenditure but no penalty u/s 271(1)(c) in these two assessment years were initiated. The assessee has filed explanation and there is no material brought on record to suggest that the explanation of the assessee regarding the claim of educational expenses was not bona fide. It is a case of difference of opinion between the assessee and the Revenue regarding allowability of certain claim of expenses claimed by the assessee, as an allowable deduction out of its taxable income. In these facts of the case, the penalty levied was rightly deleted by the CIT(A) by observing that the expenses were claimed by the assessee under a bona fide belief that such expenses were allowable expenses to the assessee - in favour of assessee.
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Customs
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2012 (11) TMI 489
Penalty u/s 114A(i) - Held that:- The appellant herein was not served upon any show cause notice in order to make effective contest and reply to the allegations made in the show cause notice, thus issue needs to be reconsidered by the adjudicating authority after considering the reply in the defences taken by the appellant before coming to any conclusion. The heavy penalty has been imposed on the appellant without adhering to the principles of natural justice. On this ground itself the issue to the extent it is challenged before us needs to be set aside - direction to Commissioner of Customs, Kandla to serve the show cause notice on the appellants & appellant's advocate.
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2012 (11) TMI 488
Notification No.32/97/Cus. dated 1/4/1997 - denial of claim as the activity undertaken is not an activity of jobbing - Held that:- The word jobbing has not been defined under the Customs Notification No.32/97/Cus. dated 1/4/1997 and therefore one would have to apply general meaning of the word jobbing which would mean carrying out predetermined job as directed by the supplier of raw material and returning the resultant product to the supplier. The aforesaid activity is admittedly being carried out by the assessee Revenue's contention that the activity carried out by the respondent is not job work in view of the decision of Prestige Engineering India Limited (1994 (9) TMI 66 - SUPREME COURT OF INDIA) is misplaced as in that case it was dealing with Central Excise Notification Notification No.119/75 dated 30/4/1975. Thus as decided in CCE, Trichy v. Rukmani Pakkwell Traders (2004 (2) TMI 69 - SUPREME COURT OF INDIA it is impermissible to interpret one notification with the aid of another notification. It would therefore, be inappropriate to import definition of the job work given in excise notification No.119/75 dated 30/4/1975 while construing Customs Notification No.32/97/Cus. dated 1/4/1997. All that Notification requires is that there should be value addition of 10% or more in the exported product than the value of the goods imported. Further, the Notification nowhere provides that the benefit of Notification would not be available where any indigenous material is used in the manufacture of export product. As it is not permissible to either add or subtract words to exemption notifications as held in M/s. Hemraj Gordhandas v. H.H. Dave, ACCE & C, Surat and others(1968 (9) TMI 112 - SUPREME COURT OF INDIA) no denial to claim is warranted - in favour of assessee.
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2012 (11) TMI 487
Claim for refund on excess duty paid rejected - unjust enrichment - ordered for credit the amount of refund to the consumer welfare fund on presumption of unjust enrichment - Held that:- As from the Cost Accountant's Certificate reproduced by assessee it can be seen that net realisation was Rs. 1.87 Crores approximately and appellants had suffered a loss of Rs. 4.44 Crores approximately. The Commissioner has rejected this claim on the ground that raw material cost was about 1.13 Crores whereas, the net realisation was Rs. 1.87 Crores and therefore, the realisation of finished goods is higher than the cost of finished goods. However, the cost itself shows that the value of materials consumed was Rs. 4.10 Crores and other costs have to be added. Only when the material imported is sold as such, the method adopted by the Commissioner can be acceptable. In a case like this, where raw material have been used for manufacture, what is required to be seen is the total cost incurred for the finished goods and not the difference between the cost of raw material and the price of finished goods without taking other expenses/raw materials/ inputs into account. Therefore, the method adopted by the learned Commissioner to reject the cost certificate cannot be sustained. The cost certificate clearly shows that the appellant's realisation from POY was less than the cost incurred by them for manufacture and therefore, it cannot be said that they have passed on the duty liability to the customers. As appellants have been able to show that they have not passed on the customs duty liability to the customers and therefore, are eligible for refund appellants have been able to show that they have not passed on the customs duty liability to the customers and therefore, are eligible for refund - in favour of assessee by way of remand.
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2012 (11) TMI 449
Time Expired Refund claim - Held that:- Appellants paid duty at higher rate than what was applicable, and they have woken up after several years and sought for refund in 2009 and did not succeed before the original authority and also before the Commissioner (Appeals). They have attempted to reopen the issue by invoking provisions under Section 149. Section 149 gives discretionary power to Customs authorities for amending the documents in certain circumstances. This provision cannot be used to revive a time expired refund claim - no interference with the order of the Commissioner (Appeals) - appeal is, therefore, rejected.
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2012 (11) TMI 448
Grant of Bail – fraudulent availment of duty drawback by exporting inferior quality garments in the name of bogus firms – ACMM granted interim Bail – Held that:- ACMM in his order granting bail to the petitioner, has recorded the involvement of certain custom officers in the offence, and has stated that there are allegations of illegal detention, against those custom officials, pertaining to the same case - apprehension of the respondent to be kept in illegal custody, is justified - right of the respondent, to surrender himself to the competent Court, squarely falls within the ambit and scope of Section 437 CrPC, and cannot be held to be arbitrary or illegal - The provisions of a Special Act, in this case the Customs Act, cannot override the provisions of the CrPC, unless expressly provided so in the special Act - grant of bail to the respondent shall not hamper the investigation or prejudice the investigation
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2012 (11) TMI 447
Import of certain medical equipments duty free by claiming the exemption under Notification 64/88 - certificate given by DGHS has been withdrawn/cancelled – Held that:- Applicant has treated more than 10% indoor and 40% outdoor patients free of charge but there is no evidence on record to show that the patients who have been treated free of charge are having income below Rs. 500/- per month - goods are still in possession and use of the applicant. Therefore, the applicants have failed to make out a case for 100% waiver of the pre-deposit of the amounts - applicants directed to make a pre-deposit
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2012 (11) TMI 443
Import of goods – non-fulfillment of condition - Confiscation – held that:- Therefore, the relevant date for determination of the rate of duty and Customs valuation in respect of imported capital goods would be the rate prevailing on the date of deemed removal, which is 31-3-2001 in the instant case. Coming to the issue of depreciation, inasmuch as the appellants have put to use the capital goods at least for part of the period, they are eligible for depreciation and, accordingly, the Customs duty is liable to be demanded on the imported capital goods on the depreciated value as provided for in Board's Circular No. 14/2004 dated 13-2-2004 and at the rate prevailing on 31-3-2001. Duty on Depreciated value of raw material - held that:- In the case of indigenously procured capital goods and raw materials lying unutilized, there are no specific provisions for grant of depreciation or relevant date for their demand and, therefore, the excise duty foregone at the time of procurement of these goods are liable to be paid by the appellants and we hold accordingly. Interest - held that:- A combined reading of the provisions make it clear that the place where the goods are deposited should be a warehouse at the time of deposit of the goods. On the date of removal, it is not necessary that the place where the goods have been deposited remains a warehouse. Therefore, reading the provisions of Section 61 with Section 2(44) of the Customs Act, the goods are liable to interest on the delayed payment of duty. Penalty - Held that:- Appellant imported the goods subject to the condition that he would fulfil the export obligation which obligation he failed to fulfill - goods became liable to confiscation under Section 111(o). Since the goods are liable to confiscation under Section 111(o), penalty under Section 112(a) is attracted. In this case, penalty has been imposed under Section 112(a) and there is no illegality or infirmity in imposing penalty apart from demanding differential duty Redemption fine – Held that:- When the goods are liable to confiscation, the adjudicating authority has the power to allow the redemption of the goods on payment of fine in lieu of confiscation under Section 125 of the Customs Act - goods were allowed to be cleared by the appellants at the time of importation under a bond executed by the appellant. The clearance of the goods was thus provisional - when the assessment is finalized subsequently, even if the goods are not available for confiscation, redemption fine in lieu of confiscation can be imposed - imposition of redemption fine in the instant case permissible under the law Matter remanded back to the adjudicating authority for re-computation of the duty demand Interest - appellant is also liable to interest on the said duty demand under the provisions of Section 61(2) and in terms of the bond executed by them Fine and penalty, on account of non-fulfilment of export obligation would automatically follow but their quantum again will depend on amount of duty demand - appeals are allowed by way of remand
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Corporate Laws
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2012 (11) TMI 486
Revival of company - application filled major shareholders - two applications by Deccan and Sylvan praying for sale of assets of the company in liquidation - Held that:- Sylvan and Deccan both prayed for distribution of the sale proceeds that would not be possible at this stage. Deecan's right to claim money out of the sale proceeds is a subject matter of suit. Sylvan would have to protect it in accordance with law & that such stage has not come. Even if appeals arising out of order dated April 20, 2011 allowed the situation would not change. The fact, the Apex Court passed orders including the one dated September 26, 2000 where the Apex Court directed the Official Liquidator to sell the assets at the best possible price keeping interest of all creditors cannot be ignored. The said order was passed at the instance of Allahabad Bank. The next order was passed on October 18, 2010 when the Apex Court adjourned the Special Leave Petition filed by ARC (major shareholder) which was ultimately dismissed by the Apex Court. As of date, the attempt of ARC to revive the company failed at all stages. As after the order dismissal of SLP ARC filed another scheme in June, 2011, that was, awaiting disposal before the learned Company Judge. Initially the Court directed the property to be sold as a going concern. Subsequently, it was directed to be sold "as is where is" basis. Accordingly, assets were sold, thus no scope to interference arises. ARC was represented before His Lordship when Deccan and Sylvan were heard on their applications. Thus the learned Judge should have given a hearing to ARC. In any event, such defect is cured by us by giving a full-fledged hearing to ARC on merits. Gourinandan participated in the sale and became the successful bidder. They are supposed to pay the purchase price. On such payment being made Official Liquidator would transfer the right, title and interest. It would then be open for Gourinandan to set up industry with the concurrence of the State by resolution of dispute, if any, they would be having with the State pertaining to the land in question. Official liquidator would not be in any way responsible for the same. The learned Junior Standing Counsel rightly contended, the land revenue issue would be strictly within the domain of Land Tribunal or any other appropriate forum dealing with such situation. Neither the Company Court nor the Court of Appeal in extension of the company jurisdiction, would be competent to deal with the same. The learned Judge rightly declined to interfere.
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2012 (11) TMI 453
Signature on Company Petition - fraud by Petitioners - Held that:- It is not an appropriately constituted petition as the person signing the petition on behalf of Mr. Rupak Gupta Petitioner No. 1 holding 16320 shares of the Company in three different capacities was not duly constituted Power of Attorney of the Petitioners at the time when he signed the petition. Mrs. Supriya Gupta, Petitioner No.2 not being a member of the company was not eligible to file the petition under section 397 & 398 of the Act. Her signing the petition is therefore of no avail. The Petitioners had suppressed material facts and had also made statements on oath which were false to their knowledge. This was done with an intention to gain advantage which would not have been available if true facts were revealed. Elements of Fraud were thus present. The suppression of material facts in the petition and false statements by Petitioner No.l and 2 in their affidavits amounts to an abuse of the process of this Board. By opening the floodgates of affidavits to cover-up or to show that it was a trivial or bona fide error the damage cannot be undone. The Law-firm representing the Petitioners in this petition and one of its Advocates had acted, in the matter of preparing the petition and filing of affidavits, in an irresponsible manner which is appalling and not expected of a Law-firm. False affidavits were sworn on 08/06/2012 by Mr. G.K. Agrawal and notarised by the Notary Shri Dipankar Das. False identification was done by an Advocate representing the Law-firm in the affidavits. Taking a liberal view and granting liberty to the Petitioners Nos. 1, 2 & 4 to file a properly constituted fresh petition subject to cost of Rs. 50,000/- to be deposited within a week with the High Court Legal Aid Committee, New Delhi. The Law Firm and one Advocate had acted in the matter of filing of affidavits in this petition also impose exemplary cost of Rs. 50,000/- on the Law Firm and direct that the cost be deposited within a week from today with the High Court Legal Aid Committee, New Delhi.
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2012 (11) TMI 452
Winding up – purchase of property - Subsequently the applicant-company had experienced financial difficulties and, as such, winding up petition was filed - scheme of arrangement - One of the terms in the scheme being that the said land allotted by the KIADB be transferred to the applicant-company the applicant is before this Court since the KIADB has not executed the sale deed in that regard – Held that:- Company is deemed to have continued in possession of the property once the scheme was approved by this Court, which would span a period of nearly four decades. Hence, the mere contention that the lease-cum-sale agreement was not executed cannot be accepted at this stage, since the period, which has lapsed is much beyond the period that would have been indicated as lease period in a normal course if the agreement had been executed - KIADB is directed to receive the sum of Rs. 3,07,651 from the applicant-company execute and register the sale deed in favour of the applicant-company in respect of the application schedule property
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Service Tax
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2012 (11) TMI 494
Erection, Commissioning or Installation, Commercial or Industrial Construction, Works Contract, Goods Transport Agency - non inclusion of value of site material used in providing services - Held that:- As decided in C.S.T., BANGALORE Versus TURBOTECH PRECISION ENGINEERING PVT. LTD. [2010 (4) TMI 344 - KARNATAKA HIGH COURT] the question of liability under the works contract service was examined and it was held that it will be effective only from 01.06.2007. Therefore, for the period prior to 1-6-07, the meaning of 'Works Contract' as commonly understood i.e. a contract for work, and labour and in other words, a service contract has to be adopted, and it would not be correct to treat a work contract as something different from a service contract. If such a work contract is an indivisible service contract, whether or not involving use of goods which get consumed or get passed on to service receiver either as such or in changed form, and that service is taxable, the works contract will attract service tax and if the work contract is a composite contract involving sale of goods and one or more services and those service are taxable, the service tax will be chargeable on the value of these services. Thus a contract for erection, installation and commissioning, even if involving transfer of property in goods on which state VAT/Sale Tax is paid, would attract service tax even for the period prior to 1-6-07, Similarly a divisible contract involving consulting Engineer's service (preparation of drawings/designs, preparation of operation manuals, or other technical assistance), procurement of goods, erection, installation and commissioning would attract Service Tax on Engineering Consultancy component and erection installation and commissioning component even prior to 1-6-07. This is so there is nothing in Sec. 65(105) and Section 66 of the Finance Act, 1994 from which it can be inferred that the taxable services defined in various clauses of Section 65(105) have to be standalone services and will not attract tax, if they are provided along with other services or providing of the service involves supply/use of goods on which VAT or Sales Tax is payable. Under-valuation - the appellant had separately collected the amount in the cost of wind energy converter as site material which was in reality required for various services rendered for installation of wind mills there was under valuation of services such as electrical work, civil work, D.P. structure, metering etc. Also what was used to supply 4 items to sub-contractors for use in construction of foundation and the same were mentioned in the purchase order as free issue material thus prima facie it is conveyancing that these items cannot be considered as part of the wind energy converter and therefore inclusion of cost of these materials in the wind energy converter was wrong and showing them as free supply was also wrong. Having availed CENVAT Credit on input/input service, the appellant could not have taken the benefit of abatement. Therefore, prima facie, that charge has also to be upheld. The appellant has not been able to make out a prima facie case for complete waiver & as regards financial difficulty, no balance sheet or annual report was produced. The appellants should be required to deposit an amount of Rs.4.5 crores which is less than 10% of the total demand of Service Tax and less than 5% of the total amount of demanded as Service Tax, interest and penalty imposed.
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2012 (11) TMI 493
CENVAT credit on the GTA services upto 18.04.2006 - Held that:- The issue is no more res integra relying on Hon'ble High Court of Punjab & Haryana in the case of CCE Chandigarah Vs. Nahar Industrial Enterprises Ltd [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services. Even as per Rule 3(4)(e) of the Cenvat Credit Rules, 2004, the Cenvat credit may be utilized for payment of service tax on any output service - in favour of assessee.
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2012 (11) TMI 492
Demand of service tax along with interest and various penalties were confirmed. - Held that:- As appellant has paid the substantial amount out of the amount confirmed against them the pre-deposit of balance amount of service tax, interest and penalty is to be waived - recovery stayed during the pendency of the appeal. As the impugned order is an ex-parte order therefore, in the interest of justice, an opportunity to the appellant to defend their case is to be given - remand the matter back to the adjudicating authority for fresh consideration.
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2012 (11) TMI 491
Waiver of Service Tax Liability, Interest and Penalty - Held that:- Claim for treatment of the service under the Works Contract has never been made before lower authorities and it is too late for making such claim at this stage. As regards the claim that demand included the amount received prior to 10.09.2004,. Consultant could not contradict the submissions made by . A.R. that the deduction has already been allowed for the amount received prior to 10.09.2004. - stay granted partly.
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2012 (11) TMI 484
Service tax on a transaction took place abroad under the reverse charge mechanism - Held that:- Leviability of tax being an issue for decision, the matter has to go before the Division Bench in view of the provisions of Section 35 D(3) of the Central Excise Act, 1944.
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2012 (11) TMI 450
Business Auxiliary Service - denial of Notification No.13/2003-ST - service tax demand with interest thereon and penalties - Held that:- Persuing the Management Agent agreement entered into by the appellant with the principal the appellant is required to display, stock and sell jewellery products to the customers through showrooms managed and operated by the agent on stock transfer basis with the design, maintenance and operation of the showrooms undertaken as per the directions of the principal and the insurance cover for the showroom has to be provided by the agent. There is also condition that the agent shall manage and operate or deal in the showroom only the products supplied by the principal company and shall not deal with any other products in the showroom except with the prior written consent of the principal. Even the bills raised for the sale of the products should be in the principal's name. In consideration for services rendered, the agent is entitled to receive a management fee based on the turn over achieved by him on a slab basis Thus from the tenor of the agreement, it is absolutely clear that the appellant is not a mere commission agent as envisaged in the Notification No.13/2003. The appellant is not merely acting as a Commission Agent but does something much more than that i.e., designing, managing and operating a showroom, receiving goods on stock on transfer basis, undertaking sales promotion activities and collecting the sale proceeds on behalf of the principal. These activities do not come within the purview of Commission agent as defined in the notification No.13/2003 - against assessee.
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2012 (11) TMI 444
Refund of Terminal Handling Charges (THC) and the GTA service – alleged that appellant has filed the claim, classifying the Terminal Handling Charges under Port service defined under Section 65(105)(zn) & Section 65(105)(zzl) whereas the terminal handling charges was specified as exempted service vide Notification No. 17/2009-S.T – Held that:- Notification No. 17/2009-S.T., specifies that payment of service tax on services commonly known as terminal handling charges classifiable under any sub-clause of clause (105) of Section 65 is exempted from service tax - tax paid on terminal handling charges covered under any of the taxable services is refundable - refund of transport of goods under Section 65(105)(zzp) is rejected and to that extent the impugned OIO is upheld.
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2012 (11) TMI 438
Penalty under Section 76 & 78 of the Act - entire amount of service tax and education cess with interest was paid before the issue of show-cause notice – assessee submitted that assessee is an illiterate person and did not know the provisions of law and therefore a liberal view is required to be taken – Held that:- Department came to know about the fact that appellant was providing manpower supply service only during the audit of service receivers and thereafter proceeding were initiated - appellant cannot be said to have a bona fide belief about his liability to tax - Penalty under Section 76 is not a mandatory penalty - penalty under Section 76 is required to be set aside by invoking the provisions of Section 80 of the Act which provides for non-imposition of penalty on a reasonable cause being shown - demand for service tax, interest and imposition of penalty under Section 78 of the Act confirmed - penalty under Section 76 of the Act set aside
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2012 (11) TMI 437
Refund of cenvat credit - excise duty on packing materials - appellants have taken credit of excise duty paid in respect of the rice exports made by them – Held that:- Credit was taken since the appellant felt that instead of claiming the refund they take credit of the duty paid and utilise the same - Rule 5 of Cenvat Credit Rules also provides that when credit cannot be utilised, refund can be claimed - demand for interest and imposition of penalty cannot be sustained Regarding maintenance of guest house and security expenses towards guest house – Held that:- Prior to the issue got settled that such expenses are not admissible, there were decisions taking a view that service tax credit in respect of expenses incurred for worker's colony etc. are admissible - subsequently the issue has been settled against the appellants, the appellants are required to pay the interest on this amount but no penalty can be sustained Regarding seminar fees – Held that:- Seminars were related to their business only and prima facie it appears that it is admissible - demand for interest and imposition of penalty as regards seminar fees also cannot be sustained Regarding Share related expenses – Held that:- It is required to be incurred by any Public Limited Company and it cannot be said that this has nothing to do with business - appellant cannot be found fault with for entertaining bona fide belief about the admissibility and therefore penalty cannot be sustained. Since the appellants are not disputing the denial of service tax, interest would be payable Regarding stock broker service, Entertainment expenses and Membership subscription expenses – Held that:- Demand for interest in respect of these three items are upheld as not disputed - this is a case where provisions of Section 80 can be invoked - waiver of penalty under Section 80 of the Finance Act allowed - no penalty shall be payable - in respect of all services where credit is not admissible, the appellant shall be liable to pay interest
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2012 (11) TMI 433
Whether an order of penalty could have been passed against the appellant without setting aside the finding of absence of intention – Held that:- Intention of evasion was not present in the matter - There is no effort by both these Authorities to consider the correctness of the finding or then its impact, in so far as the imposition of penalty or its quantum is concerned - order passed by the CESTAT [2011 (1) TMI 736 - CESTAT, MUMBAI] quashed and set aside - Appeal is thus partly allowed
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2012 (11) TMI 432
Cenvat credit – input service distributor – Revenue contended that appellant had two factories, the head office should have registered itself as an input service distributor and therefore, availment of credit is wrong – Held that:- only ground on the basis of which the credit has been denied is that the registration number was not available and this has been explained subsequently by the respondent by explaining by the time instructions were issued by the Government, the Head office had already issued the invoice and therefore, procedural requirement could not be fulfilled – credit allowed. Decision in the case of Jindal Photo Limited - [2009 (1) TMI 187 - CESTAT, AHMEDABAD] followed.
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Central Excise
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2012 (11) TMI 485
Refund of penalty - Imposition of Penalty for Evasion of Duty - Held that:- Following the decision of court in case of [Union of India Versus M/s Rajasthan Spinning & Weaving Mills AND Commissioner of Customs [2009 (5) TMI 15 - SUPREME COURT OF INDIA] Once the conditions specified u/s 11AC of the Central Excise Act are satisfied, penalty becomes mandatory and there is no scope of discretionary power. In the present case appellants were importing inputs and availing the CENVAT Credit of CVD amount is paid. The credit of CVD amount paid by the 100% EOU was availed on the strength of the invoices issued by 100% EOU. Whereas there is restriction for taking credit in respect of the inputs received from 100% EOU. This mistake was pointed out by the Revenue and the duty and interest was paid.It cannot be said that there was willful mis-statement or suppression of facts with intent to evade payment of duty as required for imposition of penalty under Section 11AC of the Act - final order of the Tribunal reducing the penalty to Rs. 1 lakh, which has been already paid by the appellants,is not challenged by the appellant. Therefore, appellants are not entitled for refund of the penalty already paid by them.
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2012 (11) TMI 483
Recovery of redemption fine - application for modification of stay order - Held that:- The Tribunal is empowered to waive the deposit of duty demanded and penalty levied. As there is no requirement for deposit of redemption fine for hearing the appeal before the Tribunal, therefore, the question of waiver of redemption fine for hearing the appeal does not arise. No merit in this application and the same is dismissed.
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2012 (11) TMI 482
Waiver of pre-deposit of Duty, Interest and Penalty - held that:- Goods manufactured by the job worker on which appropriate duty has been paid was further used by the job worker in the manufacture of the goods which were returned to the applicant on payment of appropriate duty. Credit cannot be demanded simply on the ground that the goods manufactured by job worker are not received in the factory of the applicant - Pre-deposit of the same is stayed during the pendency of the appeal - stay petition is allowed.
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2012 (11) TMI 481
Penalty u/s 11AC - Assessee reverse the credit on rejected inputs on the basis of sales value instead of credit availed on such inputs under rule 3(5) of CCR AO impose penalty u/s 11AC Held that:- Since the assessee continuously, in every statutory monthly return declared the goods and, therefore, the limitation would run from the relevant time and notice could have been issued only within a period of 12 months, therefore, beyond the period of 12 months, no demand could have been raised. Therefore allegation of suppression of facts with intent to evade payment of duty is not sustainable and the demand beyond the normal period of limitation is time barred. Appeal decides in favour of assessee
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2012 (11) TMI 480
Demand of duty - manufacture of various Machineries and Bulkers – Held that:- Cabins are built up by M/s. Commercial Engineers & Body Builders Co. Ltd. and clearing the same under benefit of Notification No.5/98-CE dt. 2.6.1998 without payment of duty - cabins are fabricating by the job worker and job worker is liable to pay duty in respect of the cabin and job worker being independent manufacturer is availing the benefit of notification - duty by adding Rs.45,000/- to the assessable value of bulkers cannot be confirmed against the present assessee, who is manufacturing bulkers - job worker is wrongly availing the benefit of Notification No.5/98-CE dt. 2.6.98 the job worker is liable to pay duty and not the present assessee
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2012 (11) TMI 479
Demand of duty - Job work - exemption under Notification No. 214/86 - For the job work, MS plates were sent by M/s. Larsen & Toubro to the Appellant - they had not sent back the scrap as per provision of Rule 5(9) of Rule 4 of Cenvat Credit Rules, 2004 – Held that:- After doing the job work, the finished goods were returned to M/s. Larsen & Toubro. Certain amount of waste was generated in the course of job work. Such goods were sold by M/s. L&T to the Appellants itself. On such sale, L&T had paid excise duty - no revenue loss in the matter and it is only a procedural mistake - order is set aside and appeal is allowed.
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2012 (11) TMI 478
Demand of excise duty and penalty – recovery of dues from the auction purchaser unit in terms of Rule 230(2) of the Central Excise Rules, 1944 - petitioner submitted that it had purchased the industrial unit in an auction from UPFC in March, 2002 free from all encumbrances. At the time of purchase of the unit there was no provision in the Central Excise Act relating to recovery of arrears of the erstwhile manufacturer from the buyer of the unit – Held that:- Even if it may be taken that there is no charge on the property on the plant and machinery, of the Excise duty, for which show cause notices were given prior to the sale of the UPFC, the petitioner as a purchaser under the terms of the agreement dated 14-3-2002, of the plant and machinery had agreed to bear all statutory liabilities arising out of plant and machinery of the industrial unit Penalty - Excisable duty becomes due and payable at the time of manufacture of the goods, the penalty in the present case was imposed by adjudicating orders dated 29-8-2002, and 22-7-2003, after the sale deed dated 8-3-2002 of land and building and the agreement of plant and machinery dated 14-3-2002 were executed - penalty as a quasi criminal liability, was leviable on represented through its Board of Directors, and personally on director of the company - penalty, therefore, having been levied and imposed after the purchase of land & building and plant & machinery installed in the unit which earlier belonged to M/s. P.J. Steels Ltd., Muzaffarnagar, is not payable by the petitioner, and is not covered under the stipulation in the sale deed and agreement as statutory liability nor it arose out of plant and machinery of the industrial unit - writ petition is partly allowed to the extent that the petitioner shall not be liable to pay penalties imposed upon M/s. P.J. Steels Ltd. and its Director under the impugned orders.
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2012 (11) TMI 477
Demand of duty, interest and penalty – alleged that appellants received certain quantity of molasses from the Khandsari Sugar Factory and as per the provisions of Rule 4(2) of the Central Excise Rules, the purchaser is liable to pay Central Excise duty in case of molasses received from Khansari Sugar Factories – Held that:- If the duty is paid by Khandsari Unit, no demand can be raised against the recipient of the molasses on the ground that there should be no double taxation on the same goods - order is set aside and the appeal is allowed.
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2012 (11) TMI 476
Determination of capacity of production - Appellants were manufacturing Pan Masala containing tobacco known as Gutka with two Retail Sale Prices namely, Rs. 1.00 per pouch and Rs. 0.50 per Pouch - two different RSPs of the goods manufactured by them was falling in the same slab – Held that:- Provisions of the first proviso to Rule 8 applies only when Pan Masala with two RSPs falling under two different slabs are manufactured - Rule 8 talks about a situation when the assessee-commences to manufacture Pan Masala of a new RSP during the month - Rule 8 is very punitive in nature in a situation where the same machine is used for manufacturing Pan Masala of more than one RSP - pre-deposit waived
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2012 (11) TMI 475
Assessable value of the physician sample packs distributed free of cost – Held that:- Show cause notice was issued on 11th June, 2008 - extended period would not be invoked in cases where the matter is referred to the Larger Bench and also discussed the effect of the Circular issued by the Board, the Tribunal held in the instant case that the demand is barred by limitation - Decided in favor of assessee.
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2012 (11) TMI 446
Authorization for Search – search after surrender of registration - proper authorisation of search dated 9.2.2011, premises of M/s. MGM Metallisers Ltd., were searched - premises of M/s. Frenylon Industries. was also searched - Held that:- If such company had discontinued its manufacturing activities, there was nothing on record to suggest that despite such so-called discontinuance the registration of central excise was cancelled. In fact the petitioner agrees that there was no such cancellation of registration. If during such search, any documents, materials, or other incriminating or innocuous materials were found from such premises, nothing prevented the Excise authorities from taking note of the same. Further contention of the petitioner that premises of M/s. Frenylon Industries. was also searched without authorisation, also cannot be accepted. It is the case of Central Excise authorities that certain raw materials/finished products belonging to M/s. Frenylon Industries was found from the premises of M/s. MGM Metallisers Ltd. These are highly disputed questions of facts. We are unable to uphold merely on the basis of affidavits that the Excise authorities transgressed their authorisation and searched and seized materials or documents from outside of the premises of M/s. MGM Metallisers Ltd. From the affidavits filed by the respondents,there was considerable material to prima facie hold a belief that central excise duty evasion was being carried out by the group of companies led by M/s. MGM Metallisers Ltd. whose Director was Shri Nagindas Kapadia. In his case also, a separate search authorisation was issued - Under the circumstances in absence of any illegality pointed out to the authorisation of search and in absence of any foundation for examining allegations of personal mala fide, all the petitions must fail - Same are accordingly dismissed.
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2012 (11) TMI 445
Cenvat Credit on Capital Goods - Held that:- As the principal manufacturer has claimed depreciation under Section 32 of the Income Tax Act, 1961, in respect of capital goods supplied by him to be used by the job worker in manufacture of Confectionery and further the assessee have not acquired the capital goods on lease or hire purchase or under loan agreement from a finance company Cenvat Credit on Capital goods cannot be taken - against the appellant - Appellant is directed to deposit the duty along with interest and penalty within six weeks from the date of order.
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2012 (11) TMI 442
Principle of natural justice - non-granting of relied upon documents to the main appellant - documents recovered during the raid in the premises of main appellant - Held that:- It is seen that the entire set of relied upon documents was given to the appellant recently i.e. after the matter has been adjudicated and the matter came up for final disposal before Tribunal. Suffice to say that non-granting of relied upon documents to the main appellant and other appellants would have made their plea and the defence before the adjudicating authority as a weak submission. We also find that the Bench cannot overlook the fact that the defences that can be raised by the appellant based upon the relied upon documents even if the same is not taken up as a ground of appeal. Therefore, matter needs to be remanded back to adjudicating authority.
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2012 (11) TMI 441
Plea for waiver of pre-deposit - denial of credit in respect of capital goods, used in the setting up of Oxygen Plant in the factory of the applicant on the ground that the capital goods on which credit has availed has gone into fabrication of the Plant which is not excisable - Revenue contended that no duty has been paid on the Plant and therefore not entitled for credit - Held that:- In view of decision in case of CCE Vs Gujarat Ambuja Cements Ltd (2008 (10) TMI 363 - HIMACHAL PRADESH HIGH COURT) wherein it was held that if impugned good is a capital good, Rule 57Q is applicable enabling party to claim credit of duty paid on capital goods by the manufacturer of specified goods. A manufacture is entitled to claim Modvat Credit on account of the excise paid on the components, spares and accessories of the goods exempt. If duty is paid on the components used in its manufacture, we see no reason why the manufacturer cannot claim Modvat credit for such duty, applicant has made out a strong prima facie case for waiver. Pre-deposit of the dues is waived and Stay petition allowed.
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2012 (11) TMI 440
Condoning the delay of 486 days in filing the appeal - contention of appellant is that one Shri B.B. Bagaria was dealing with excise matter and retired in Jauuary 2010 and had not informed the appellant - Held that:- Adjudication order was duly served upon them in January 2010 and appeal was filed in May 2011. Therefore, there is no merit in the contentions of the appellant - appellant had not taken care to file the appeal within the period of limitation and shifted blame on his employee - The negligence of the employee of applicant cannot be considered as sufficient cause for not filing the appeal within the period of limitation - appeal dismissed.
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2012 (11) TMI 439
Waiver of pre-deposit – manufacture of footwear - applicants were paying duty on the MRP of the footwear - benefit of Notification No. 5/2006-C.E. and cleared the goods on concessional rate of duty - alleged that the applicant has wrongly availed the benefit of Notification No. 5/2006-C.E. as the applicant has failed to fulfil the condition of the Notification – Held that:- Applicants are availing the benefit of Notification No. 5/2006 and as per the condition of the Notification, the retail sale price has to be indelibly marked or embossed on the footwear itself - applicants admitted that they are merely sticking a sticker showing MRP on the footwear - applicants had not made out a case for waiver of pre-deposit
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2012 (11) TMI 436
Short levy of the duty - Alleged that there was wrong assessment of the goods cleared by the appellant - Held that:- Since notices were not issued in terms of the C.B.E. & C. circular even after 1-3-2002 within the normal period therefore the department had to be allowed to suffer for its revenue loss. Since the payment made by the party was on written communication by way of demand which on merit was sustainable and payable and hence the demand so paid is hereby; held as legal, proper, sustainable and maintainable. They do not deserve any refund neither on merit nor on limitation. However, jacking them with further liabilities after limitation period is over, is not justified and cannot be maintained and sustained. Therefore, the proceedings started by issuance of show cause notice dated 10-9-2004 and tried to be fortified or enhanced by corrigendum are held to be inappropriate and illegal. Show cause notice dated 10-9-2004 as well as corrigendum dated 17-6-2005 and 28-7-2005 were without any authority of law and inappropriate and illegal - demands and other proposed cause of actions are barred by limitation - appeal is allowed
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2012 (11) TMI 435
Denial of cenvat credit – manufacture of batteries - Hydraulic Oil and Hadilin as capital goods – Held that:- ‘Hydraulic Oil’ is indispensable for operating any ‘Hydraulic Machine’ used as component for all Machinery falling under eligible Chapter. It is essential for operating a ‘Hydraulic Machine’, which is in turn, an essential component of a Machinery with which it is functioning - goods are indispensable and undisputedly, they are used in the manufactory for the manufacture of final goods - Appellant is eligible for CENVAT Credit
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2012 (11) TMI 434
Penalty - Area based exemption - whether the Education Cess and secondary and higher Education Cess would get covered under the said notification so as to result in automatic refund to the assessee – Held that:- During the relevant period i.e. January, 2008 to April, 2008, declaration of law by the Tribunal was in favour of the assessee. It was only subsequently in 2009 that the earlier order of the Tribunal was overruled by Division Bench and it was held that the assessee located in the area of Jammu and Kashmir would not get the benefit of Notification No. 56/2002 in respect of Education Cess and secondary and Higher Education Cess - when there are divergent views of the higher authorities on the issue and assessees act on the basis of said views, therefore cannot be held guilty for mala fide breach – penalty set aside - in favour of assessee
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CST, VAT & Sales Tax
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2012 (11) TMI 495
Purchase tax under section 9 read with section 24(3) - job-work done by the petitioner on stock transfer of goods to other States by working out the purchases of goods utilised in manufacture including the consumable stores - taxable event – Held that:- Act of purchase of goods which are used in the manufacture of end-products and not the act of despatch or consignment - petitioner becomes liable to pay purchase tax when it purchase the raw material being the last purchaser - petitioner cannot escape the liability to pay purchase tax. It is on the basis of sound taxation policy of the State in respect of the declared goods that if sales tax is paid on the manufactured goods then the purchase tax on the raw material would not be payable but if sales tax is not paid then the liability to pay purchase tax is to continue. The aforesaid policy has been incorporated by the legislation in order to avoid double taxation - Decided against the assessee.
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2012 (11) TMI 451
Andhra Pradesh General Sales Tax Act - option of composition of tax under section 5F of the Act – Held that:- In taxation measures composition schemes are not unknown and when such scheme is availed of by the assessee it is not at all permissible for him to turn around and ask for regular assessment - there is no procedure which enables a dealer to avail of the hybrid procedure namely, for some time the assessment under section 5F of the Act and for some time, composition of tax in the same assessment year - Decided against the assessee.
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Indian Laws
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2012 (11) TMI 490
Termination of probation order - petitioner is a practicing advocate in the Calcutta High Court as well as CESTAT - Held that:- Rule 9(2) of the CESTAT Members (Recruitment and Conditions of Service) Rules, 1987 apart from prescribing the substantive provisions with regard to termination during probation, also prescribes the procedure, whereby such termination is to be carried out. Therefore, when the two provisions, i.e. Rule 8(3) and Rule 9(2) are read harmoniously, there is no conflict between them. The only interpretation that follows upon a conjoint reading of the said two rules is that the services of a probationer member can be terminated at any time during the period of probation and, if the probationer member happens to be a judicial member directly appointed from the bar, then his services can be terminated only after giving him one month’s notice. Thus agreeing with the submission made by the petitioner that if no notice had been given in terms of Rule 9(2) of the said Rules, the termination/discharge order dated 20-11-2009 would be bad - in - law & not agreeing with the submission made by the respondent that Rule 8(3) would apply only during the three year period of probation and that Rule 9(2) would apply only to a situation of an unconfirmed member beyond the period of three years. There is no such indication in the rules. In any event the salutary principle of interpretation must not be forget that when there is any doubt, the benefit must go to the employee. Thus as a result the ‘discharge’ order dated 20-11-2009 are set aside. The writ petition is allowed to the aforesaid extent.
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