Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 17, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
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Index Numbers of Wholesale Price in India (Base: 2004-05=100), Review for the month of October, 2014
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Change in Tariff Value of Crude Palm Oil, Rbd Palm Oil, Others – Palm Oil, Crude Palmolein, Rbd Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Chairperson, CBDT inaugurates the ‘The Taxpayers' Lounge’ at IITF-2014 at Pragati Maidan; various taxpayer services including E-Filing of returns, viewing of tax credit through 26as, applications for Pan and Services of Tax Return Preparers are showcased to the public
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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DTAA between India and the Swiss Confederation - Though a training activity may be connected to an engineering concern, that by itself, would not constitute training, to be an engineering activity so as to fall within “professional services” under Article 14 of the Treaty - AT
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Non-deduction of tax u/s 194C – The expenditures were incurred towards greeting cards, stationery, visiting cards, calendars, registers, etc - being a sale and purchase trnasaction not liable to TDS - AT
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Proceedings before the Settlement Commission get abated on 31.03.2007 and the proceedings before the AO get revived on 01.08.2007 – thus, the AO was required to pass the assessment order by 31.07.2008, which in fact has been passed on 31.03.2009 and therefore, the assessment by the AO for the block period is barred by limitation - AT
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Cancellation of penalty u/s 271(1)(c) - In the Directors’ Report, a passing reference only was made to indicate that its consultancy business was sold by the assessee company for ₹ 31,75,000 - There was however, no mention made about this transaction in the notes forming part of accounts - penalty confirmed - AT
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Claim of deduction u/s 80IB(11A) – When the assessee-corporation has set up these godowns in as many as in 73 towns and at different places in those towns, it is entitled for relief u/s 80IB(11A) of the Act in respect of each such new undertaking set up by it. - AT
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Consideration received in nature of reimbursement expenses along with mark up @ 10% - “royalty” and “Fee for included services” in equal proportion – matter has not been examined in the context of Indo-US treaty - matter remanded back - AT
Case Laws:
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Income Tax
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2014 (11) TMI 447
Whether the Tribunal is right in rejecting the additional grounds of appeal filed by the assessee with regard to market development expenses - Held that:- The assessee has failed to claim an expenditure expended on account of market development (advertisement) expenses in the return of income - the assessee has bonafide shown all the expenditure in the balance sheet of the company as stated in the Annual printed report, but the claim was not made in the returns - Noticing the omission, which was due to inadvertance, additional ground was raised in the appeal stage by the assessee - Section 250(5) of the Income Tax Act provides for allowing the appellant to raise such an additional ground and it is for the CIT(A) to state that the omission to raise additional ground was not willful or unreasonable –CIT(A) has erroneously thrown the onus on the assessee to explain the omission as not willful or unreasonable - The assessee has given certain reasons with records to show that it was a bona fide claim, but out of inadvertance it was not stated in the return of income - this claim of the assessee is not willful and the additional ground raised by the assessee cannot be termed as unreasonable. The Act does not contain any express provision preventing the assessee from raising additional grounds in appeal and there is also no provision in the Act restricting the Appellate Authority to entertain such additional ground in the appeal - In the absence of statutory bar, the Appellate Authority is vested with the power, which is co-terminus with that of the Original Authority, to allow the assessee to raise additional ground, if the same is bona fide and not willful or unreasonable - the plea of bonafide omission is acceptable - The additional grounds were raised before the first Appellate Authority with reasons – CIT(A) failed to exercise the discretion vested in him in accordance with law and reason – thus, the order of the Tribunal is set aside and the matter is remitted back to the CIT(A) - Decided in favour of assessee.
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2014 (11) TMI 446
Nature of Trust – Charitable or not – Held that:- The Tribunal has rightly relied upon Hardayal Charitable & Educational Trust Versus Commissioner of Income Tax-II, Agra [2013 (3) TMI 377 - ALLAHABAD HIGH COURT] wherein it has been held that the is that at the time of registration u/s 12AA of the Income Tax Act, which is necessary for claiming exemption u/s 11 and 12 of the Act, the CIT is not required to look into the activities, where such activities have not or are in the process of its initiation - Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration u/s 12AA cannot be refused, on the ground that the Trust has not yet commenced the charitable or religious activity - Any enquiry of the nature would amount to putting the cart before the horse - At this stage only the genuineness of the objects has to be tested and not the activities, which have not commenced - The enquiry of the Commissioner of Income Tax at such preliminary stage should be restricted to genuineness of the objects and not the activities unless such activities have commenced - The Trust or society cannot claim exemption, unless it is registered u/s 12AA of the Act and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused – the objects as provided in the object clause of the trust are charitable objects and are supported by other ancillary objects to which a detailed reference is not necessary – the order of the Tribunal is upheld – Decided against revenue.
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2014 (11) TMI 445
Disallowance of sales commission accrued but not due – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee has been crediting sales commission as and when the liability has arisen by the sale of goods, but the right to receive would accrue to the recipient only when the sale amount is collected and remitted to the assessee – in Assistant Commissioner Of Income-Tax Versus Motor Industries Company [2000 (11) TMI 59 - KARNATAKA High Court] - the liability to deduct tax at source would arise only when the recipient would become eligible to receive the money - the assessee’s liability to deduct tax would arise in the next financial year when the payment is made – Decided in favour of assessee. Disallowance of entire claim u/s 35(2AB) - Inhouse R&D facility approved by the Ministry of Science and Technology - Whether the expenses resulted in acquisition of rights in or arising out of scientific research - Held that:- The expenditure incurred by the assessee could not be disallowed as it involved capital expenditure in the form of acquiring any land or building – the expenses is sought to be excluded u/s. 43(4)(ii) of the Act is an expenditure which the assessee incurs in acquiring rights in or arising out of scientific research already done by somebody - It is possible that the assessee without carrying out the scientific research, acquires rights in scientific research, acquires rights arising out of scientific research done by somebody else and claims cost of acquisition of such rights as expenditure on scientific research - The idea behind the exclusion clause in section 43(4)(ii) appears to be that expenditure on scientific research should be on the research actually carried out by the assessee in-house and it should not merely spent money in acquiring rights in or arising out of scientific research carried out by some other person - This aspect has been clearly overlooked by the revenue authorities - this interpretation is also a possible interpretation - A perusal of the audit report shows that major part of expenses are towards salary, equipments, materials consumed, consultancy fees and other routine expenses - claim of deduction u/s 35(2AB) of the Act has to be allowed – Decided in favour of assessee. Disallowance as deduction towards Research and Development Expenses u/s 35(2AA) and u/s 35(i)(ii) – Held that:- The expenses is in the nature of expenditure on Scientific Research in Sec.35(1)(ii) and 35(2AA) - the question whether the expenditure is capital or revenue is not relevant as what is given by the Assessee is a contribution and that cannot be said to be capital expenditure - In any event under Sec.35(1)(ii) & 35(2AA) of the Act, there is no distinction as to whether the expenditure is capital or revenue and any amount given as contribution has to be allowed – the AO is directed to allow the deduction claimed by the assessee – Decided in favour of assessee. Disallowance of amount paid towards lease rentals of vehicles on operating lease allotted to various executives – Held that:- LPIN finances purchase of the vehicle. The vehicle is purchased as and when the Assessee (client) makes a demand for hiring of vehicle - The ownership of the vehicle is registered in the name of the client only for the purpose of passing the risk of ownership in law on the client - Article 2.2(iii) of the lease deed which has been set out in the earlier part of this order clearly spells out the above purpose and reiterates that LPIN is the owner of the vehicle and that the client is only a lessee - The bifurcation of the monthly payment as partly towards recovery of cost and partly towards interest is only for accounting purposes - It can decide the character of the transaction - Article 3.1 provides for early termination of the lease - On the occurrence of either early termination or on expiry of period, the client is required to return the vehicle to the lessor along with the various documents as mentioned - Thus the de facto ownership and control of the vehicle is always with LPIN - The Assessee (Client) has a right to use the vehicle subject to payment of the hire installments and complying with the other terms of the agreement - The Assessee (client) has no other rights - the lease is an operation lease and therefore the Assessee would be entitled to claim the lease rentals as deduction as revenue expenditure – Decided in favour of assessee. Disallowance u/s 14A r.w. Rule 8D – Held that:- Rule 8D(iii) need not be applied blindly. One has to look at the probable expenses that assessee would have incurred in earning the exempt dividend income - The shares which yielded dividend income were purchased in the year 1997- 98 - It cannot be said that any expenses whatsoever would have been incurred by the assessee to earn this dividend income - the revenue authorities ought to have exercised their discretion in not making a disallowance u/s. 14A of the Act – Decided in favour of assessee.
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2014 (11) TMI 444
Violation of section 13(1)(d) r/w Section 111(2) and 11(5) - Benefits on the portion of the income attributable to impermissible securities to be taxed at maximum marginal rates - Whether the trust was obliged to convert its TISCO share holding into specified securities by the due date or thereafter – Held that:- The trust should had converted the TISCO share into investment of permissible securities in this behalf - the provisions of secs. 11, 12, 13 and 16(2) are to be conjointly read and the CBDT circular referred to above being a beneficial circular is to be also applied - A combined reading leads to a harmonious construction, proviso to section 164(2) is very important, Legislature has clearly contemplated that in a case where the whole or part of the relevant income is not exempt under section 11, by virtue of violation of section 13 (1) (d), tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate - Section 164 (2) refers to the relevant income which is derived from property held under trust wholly for charitable or religious purposes - This is subject to application of other provisions of Act like exemptions, deduction etc. - a proviso was inserted by the Finance Act, 1984, with effect from April 1, 1985, under which in cases where the whole or any part of the relevant income is not exempt u/s 11 or section 12, because of the contravention of section 13(1)(d), then tax shall be charged on such income or part at the maximum marginal rate - only non-exempt income portion would fall in the net of tax, as if it was the income of an association of persons. The dividend income being exempt from income by express provisions of sec 10(34), the dividend income is exempt from Income Tax - This being so, in the result there remains no tax liability on the trust - even department has not been taking any particular stand and allowing the benefits of sec 11 and 12 in some of the years, then rethinking and refusing the benefits by reopening the assessments - even the department has its own share of interpretations, leading to repetitive proceedings – Decided in favour of assessee.
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2014 (11) TMI 443
Disallowance on fictitious/bogus purchases – purchases unverifiable or not – Held that:- CIT(A) rightly was of the view that the disallowance on estimate basis and disallowance on percentage basis cannot be upheld - while cancelling the disallowance made by AO on the purchases, the direction was given to tax additionally declared income of assessee in respective assessment years - the statements from senior employees of the group, which were supported by affidavits, that were not controverted by the AO and the statements from Mr. Rajesh Punamia and Mr. Nishit Doshi, which were not supported by the seized material or further enquiries made in the regard, are not fully reliable to treat few purchases as bogus - The method/procedures adopted in quantification of fictitious purchases in the cases of the appellant company as well as the group concerns are not on sound basis, so as to be used for quantification of unaccounted income, in a search related assessments - the addition of fictitious purchases quantified against the purchases made from Shree group and Pooja group, in the case of appellant company, for the year under reference, do not appear sustainable. Since assessee has not disclosed any income and AO could not establish any bogus purchases, estimation of bogus purchases as a percentage cannot be approved - Moreover there is no consistency also on this estimation as pointed out by CIT(A) - There is also no seized material to suggest that this company also resorted to bogus purchases – Decided against revenue. Claim of R & D expenditure disallowed – Expenses incurred for R&D activity or not – Held that:- CIT(A) rightly allowed the ground not only on the reason that there is no withdrawal of the claim u/s 35(1)(iv) by assessee company but also on the reason that similar issue was allowed in assessee's own appeal – wherein it has been held that the assessee is eligible for deduction u/s 35(1)(iv) and AO is accordingly directed to allow the claim – Decided against revenue.
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2014 (11) TMI 442
Fees for technical services under Explanation 2 to Section 9(1)(vii) – DTAA between India and the Swiss Confederation - Services rendered for installation, commissioning of the mailroom equipment and the training - Held that:- The mailroom equipment comprised of various units and was hence a complex equipment - The bid document clearly stipulated that the units/components of the mailroom equipment would have to be installed and commissioned by trained and qualified personnel of the supplier, who shall, then provide training to the assessee’s employees, on the operation and maintenance of mailroom equipment - The price quoted included installation, commissioning and training - The mere fact that both the contracts, i.e. for supply of the mailroom equipment and its installation, commissioning and training were entered into on the same date would not lead to an automatic conclusion that they should be read in isolation with the other. The assessee has entered into two contracts, one for the supply and one for the services - The price for supply is separately indicated in the contract for supply and that for the services in the contract for services - the equipment could be installed by anybody, with the only requirement, that the person who installs the equipment, should be certified by the vendor, as qualified to install the same - This is not the same as saying that qualified personnel of the vendor should install the equipment as is only indicated in the bid document and not in the contract signed by the assessee – the contention of the assessee that the services rendered by FERAG AG, by way of installation, commissioning of the mailroom equipment and the training of the assessee’s employees as inextricably and essentially linked to the sale of the mailroom equipment and hence not taxable separately as “Fees for Technical Services”, cannot be accepted. The services rendered by FERAG AG, towards installation and commissioning of the mailroom equipment and training are “Fees for Technical Services” as defined under the Act, the consideration paid towards these services are only taxable in Switzerland in the hands of FERAG AG, by virtue of the provisions of Article 14 of the DTAA between India and the Swiss Confederation - the Treaty between India and Swiss Confederation in Article 12(4) defines “Fees for Technical Services”, as including the services rendered by FERAG AG, towards installation and commissioning and training, Article 12(5) provides that services covered under Article 14 of the Treaty will not qualify for “Fees for Technical Services”. Article 14 of the Treaty, though, overrides Article 12(4) while defining the term “Professional Services”, includes independent activities of engineers - Such independent engineering activities would not cover training given to the employees of the assessee - Though a training activity may be connected to an engineering concern, that by itself, would not constitute training, to be an engineering activity so as to fall within “professional services” under Article 14 of the Treaty. Thus, the contention of the assessee that Article 14 of the Treaty applies to the services rendered by FERAG AG, and the consideration relating to installation and commissioning of units of the mailroom equipment is taxable in Switzerland, is upheld - the training period would not have been substantial and that too not essentially shop floor training, as to how to operate the mail room equipment, which would have been training on the machine, Article 12 shall apply on class room training – thus, an estimate of 25% of CHF 17,500/-, as attributable to training, would be reasonable – Decided against revenue.
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2014 (11) TMI 441
15% adhoc disallowance out of the staff salaries – Held that:- Margadarsi Financiers has no other office except its office located in Hyderabad - for collection of deposits and repayments from all over the undivided state of AP, it had to depend upon the branches of the assessee company and some of the staff working - Though the assessee has contended that the role of assessee’s staff is only limited to guiding the investors/depositors and forwarding their applications along with cheques & drafts to Margadarsi Financiers, but the entire deposits and repayments of Margadarsi Financiers is mobilized through staff of assessee company working in the branches of all over the state of AP - some of the staff working in different branches of assessee company are engaged in providing services to Margadarsi Financiers - the entire staff cost incurred by assessee cannot be for the purpose of asessee’s business alone as it is proved beyond doubt that part of the staff are also rendering services to Margadarsi Financiers - a part of the expenditure towards salary paid to staff can be apportioned towards services rendered by the staff to Margadarsi Financiers - the entire expenditure claimed towards staff cost cannot be allowed. When there is nothing on record to show that entire staff in all branches are rendering services to Margadarsi Financiers adhoc disallowance of 15% out of total salary cost is not justified - the treatment given in the accounts of Margadarsi Financiers coupled with the statements recorded from Shri PVSR Das and Shri S. Adinarayana Rao makes it clear that the amount paid by Margadarsi Financiers to the accountants and branch managers of assessee are in the nature of reimbursement of actual cost incurred - as the employees cannot be said to be exclusively doing the work of assessee company but also rendering services to Margadarsi Financiers, 15% out of the salary paid to such staff or the amount equivalent to the expenditure reimbursed by Margadarsi Financiers towards cost of branch managers and branch accountants, whichever is higher, can be considered for disallowance towards services rendered by the staff of assessee company to Margadarsi Financiers - The AO must examine the facts and details relating to the staff engaged in providing services to Margadarsi Financiers and the reimbursement made by Margadarsi Financiers in respect of such staff by verifying the books of accounts of both the assessee company and Margadarsi Financiers and thereafter work out the disallowance accordingly for both the AYs i.e. 2006-07 and 2007-08 – Decided partly in favour of assessee. STCL on sale of plant and machinery disallowed – Held that:- Assessee in an auction conducted by EXIM Bank had purchased land and building along with plant and machinery for a total consideration of ₹ 6,79,20,930 - As can be seen from the sale certificates issued by EXIM Bank, while the land and building has been sold for a price of ₹ 6,22,20,930, plant and machinery was sold for a consideration of ₹ 57,00,000 - so far as assessee is concerned it has purchased the plant and machinery for an amount of ₹ 57,00,000 - When the assessee has sold the said plant and machinery for a consideration of ₹ 10,84,170, there is a short term capital loss to assessee - Therefore, assessee is entitled to set off this capital loss against the short term capital gains from shares, hence, the disallowance of assessee’s claim is not justified – Decided in favour of assessee. Invocation of section 40(a)(ia) – TDS not deducted on dividend paid to chit subscribers – Held that:- As decided in assessee’s own case for the earlier assessment year, wherein the judgment delivered in BILAHARI INVESTMENTS P. LTD. Versus COMMISSIONER OF INCOME-TAX [2006 (6) TMI 59 - MADRAS HIGH COURT] – followed, wherein it was held that the dividend distributed by the assessee did not partake the character of interest and consequently, the assessee was not liable to deduct tax at source – thus, the order of the CIT(A) is upheld in deleting the disallowance u/s 40(a)(ia) on account of dividend paid by the assessee to the chit subscribers for non-deduction of tax at source – Decided against revenue. Deletion of disallowance u/a 14A r.w. Rule 8D – Held that:- AO was not correct in working out the disallowance by applying the provisions of Rule 8D, which is applicable from AY 2008-09, but, it cannot be denied that assessee must have incurred some amount of expenditure for earning the exempt income – in assessee’s own case the Tribunal has already held that it would be fair and reasonable to estimate the expenditure incurred by the assessee for earning of exempt dividend income at 5% of the exempt dividend income – thus, the AO is directed to restrict the disallowance u/s 14A to 5% of the dividend earned – Decided partly in favour of Revenue. Invocation of section 40(a)(ia) – Non-deduction of tax u/s 194C – Held that:- The expenditures were incurred towards greeting cards, stationery, visiting cards, calendars, registers, etc. - it cannot be said that assessee has made the payment towards execution of any contract work - these transactions are in the nature of purchase and sale transactions - Though it may be a fact that the calendars, registers may be containing the name and logo of assessee but that by itself will not be a criteria to conclude that the transaction is in the nature of contract work - it is very much evident that the assessee in fact has purchased calendars, registers, etc. from the concerned parties on payment of sales tax/VAT which clearly demonstrate that it is purely a transaction of purchase and sale of commodities and not works contract - CIT(A) rightly held that there is no liability on assessee to deduct tax at source u/s 194C – Decided against revenue.
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2014 (11) TMI 440
TDS u/s 194I or u/s 194J - nature of transmission charges paid for use of transmission lines or other infrastructure - whether in the nature of rent - Held that:- Following the decision in Maharashtra State Electricity Distribution Co. Ltd. Versus Deputy Commissioner of Income Tax TDS Range-2 [2012 (8) TMI 519 - ITAT, MUMBAI] - in a situation in which the payment in made for the use of an asset simpliciter, whether with control and possession in its legal sense or not, the payment could be said to be for the use of an asset - However, in a situation in which the payment is made only for the purpose a specific act, i.e. power transmission in this case, and even an asset is used in the said process, the payment cannot be said to be for the use of an asset - When control of the as set (transmission lines in the present case) always remains with the PGCIL, any payment made to the PGCIL for transmission of power on the transmission lines and infrastructure owned controlled and in physical possession of PGCIL can be said to have been made for "the use of' these transmission lines or other related infrastructure - section 194-I has no application so far as the impugned payments for transmission of electricity is concerned - the payments made to above companies cannot be considered as rent under the provisions of section 194I of the Act, consequently, there is no question of levy of interest u/s 201 and 201(IA) of the Act – the order of the CIT(A) is upheld – Decided against revenue.
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2014 (11) TMI 439
Entrance fees paid to club disallowed – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that an expenditure incurred on account of payment of membership entrance fee paid to the club is an allowable expenditure – Decided against revenue. Disallowance u/s 14A – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that The Tribunal has set aside the issue to the file of the AO for fresh adjudication - In this year, the CIT(A) has already given direction to the AO to work out the disallowance on some reasonable basis – thus, the order of the CIT(A) is upheld – Decided against revenue. Expenses on software charges disallowed – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the Tribunal relied upon CIT v/s Raychen RPG Ltd. [2011 (7) TMI 953 - Bombay High Court] for coming to the conclusion that the expenditure incurred by the assessee on the software was in the nature of the revenue expenditure - if the expenditure incurred on software are to facilitate the assessee's business or enabling the management to conduct the business more efficiently or more profitably then it cannot be said to be in the nature of profit making and has to be treated as revenue expenditure - The expenditure incurred by the assessee on software was in the nature of revenue, hence, allowable as an expenditure – Decided against revenue. Allowability of Set off and brought forward loss of amalgamating company against LTCG – Whether the assessee company which is an amalgamated company should be allowed to set off and carry forward of the losses computed under the head "capital gains" which had arisen to the erstwhile amalgamating companies under the provisions of section 74 - Held that:- The loss under the head "capital gain" is allowable to an assessee alone - There is no mention about the situation and the condition under which such a loss is allowed to be set-off and carried forward in the case of amalgamation, that is, to allow loss or set off loss of one assessee which has merged with another assessee - section 74 cannot be read or interpreted so as to give benefit of set-off and carried forward of losses under the head capital gains in the case of amalgamation and demerger, sans any specific provision therein – Decided against assessee. Payments made to ex-managing directors disallowed – Expenses to be treated as unexplained or not - Held that:- The assessee in the explanation filed before CIT(A) has clearly explained the nature of expenditure and why such a payment has been made along with the approval and minutes of the AGM and the minutes of the board meeting - All the evidences have not been properly considered or appreciated by the CIT(A) – thus, the matter is required to be remitted back to the AO for examination of the details, nature of payment and the evidences – Decided in favour of assessee.
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2014 (11) TMI 438
Sustenance of addition u/s. 40(a)(ia) - Non-deduction of TDS on payments to various persons for delivery and supply - Held that:- The AO disallowed the amount by invoking the provisions of section 40(a)(ia) of the Act and no disallowance had been made u/s. 40A(3) of the Act - CIT(A) himself admitted in the impugned order that there was no formal contract between the assessee and his agents/relatives, but there was an oral contract - However, it is not clear how the CIT(A) came to the conclusion that there was an oral contract when nothing is available on the record to substantiate the same, neither the AO stated that there was oral contract between the assessee and his trustworthy persons - The assessee made the payments on account of hiring of the vehicles for transportation and nothing was payable at the end of the year. In CIT Vs. Vector Shipping Service (P) Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] it has been held that for disallowing expenses from business and profession on the ground that TDS had not been deducted the amount should be payable and not which had been paid by the end of the year - there was no contract between the assessee and the agents/relatives to whom payment for hiring the vehicles had been made and nothing was payable at the end of the year - the disallowance made by the AO and sustained by the CIT(A) was not justified – Decided in favour of assessee. Sustenance of disallowance out of the godown repair expenses – Non-deduction of TDS – Held that:- CIT(A) categorically stated that the provisions of section 40A(3) of the Act were not applicable to the amount, therefore, the AO was not justified in holding that the provisions of section 40A(3) of the Act were applicable because payment was made on Sunday, the banks were closed on account of holiday - since the amount was not payable as on 31/03/2009, the provisions of section 40(a)(ia) of the Act were not application as decided in CIT Vs. Vector Shipping Service (P) Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] thus, the order of the CIT(A) is set aside – Decided in favour of assessee.
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2014 (11) TMI 437
Vlidity of assessment framed u/s 158BC read with sec. 158BD - Period of limitation for block assessment - Earlier proceedings before settlement commission were abated – Held that:- Appreciations before the Settlement Commission shall not be allowed to be proceeded with unless the additional tax on the income disclosed in such application and the interest is not paid on or before 31st day of July, 2007 - taxes and interest have not been paid on or before 31st day of July, 2007 - the abatement of proceedings before settlement commission is covered u/s 245HA(1)(ii) read with explanation (b) being the specified date i.e. 31st day of July, 2007 - the assessee is covered u/s 245HA(1)(ii) and therefore, the proceedings before the Settlement Commission shall abate on the specified date as referred to in explanation (b) i.e. 31st day of July, 2007 - once the proceedings before the settlement commission are abated on 31st July, 2007 then there cannot be any occasion for the settlement commission to pass any order u/s 245D(4) read with section 245(4A)(i) - Also the proceedings which have been abated once, which is the case of assessee i.e. on 31st day of July, 2007 cannot again abate on a later date i.e. on 31.03.2008 which is the case of revenue - The Act is silent on such a situation – thus, the interpretation which favours the assessee, has to be adopted and accordingly the proceedings before the Settlement Commission get abated on 31.03.2007 and the proceedings before the AO get revived on 01.08.2007 – thus, the AO was required to pass the assessment order by 31.07.2008, which in fact has been passed on 31.03.2009 and therefore, the assessment by the AO for the block period is barred by limitation - the assessment so made is bad in law and the order of CIT(A) is reversed – Decided in favour of assessee.
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2014 (11) TMI 436
Deletion of Prior paid expenses – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the appeal was decided wherein the re-opening was upheld and on merits the addition on account of demurrage charges and purchase of unconnected wagons the action of the CIT(A) was upheld - The challenge of the Revenue regarding the deletion of the addition on account of prior period expenses was disposed saying that the re-opening of assessment has not been upheld in respect of prior period expenses - these expenses have been booked based on crystallization of liability on receipt of material (claim/bill) by the Corporation during the year and cannot be related to the previous periods - Based on the crystallization of expense as per material/information/claim raised during the year, accounting entries have been passed - the assessee has been following the same method of accounting consistently keeping in view the nature of activities and the nature of transactions undertaken by it, the liability cannot be taken into consideration till it is crystallized - accordingly in the absence of any argument addressing factual inaccuracy the settled legal position or the issue is respectfully followed and the departmental ground is dismissed – Decided against revenue.
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2014 (11) TMI 435
Cancellation of penalty u/s 271(1)(c) - Bonafide belief to treat the profits arisen from the relevant transaction to be chargeable to tax or not – Relevant particulars furnished or not - Held that:- The penalty imposed by the AO u/s 271(1)(c) in respect of addition made to the total income of the assessee on account of short term capital gains has been cancelled by the CIT(A) on the basis that the claim made by the assessee for exemption of such short term capital gain was a bona fide claim and all the particulars relevant to the clam were duly furnished by the assessee – the claim of exemption has already been rejected by the Tribunal in the quantum proceedings - the relevant clause relied upon by the learned counsel for the assessee cannot be seen in isolation to ascertain the exact nature of asset transferred by the assessee, and it is necessary to read the entire agreement as a whole to ascertain such nature - It was thus a clear case of transfer of commercial right by the assessee and there is nothing in the agreement to suggest or indicate that any right to carry on business was transferred by the assessee – revenue rightly contended that the claim made by the assessee for exemption of short term capital gain arising from the transaction entered into with M/s. Pintell Systems Pvt. Ltd on the basis that the transaction involved transfer of right to carry on business, thus, was patently a wrong claim and there is nothing to show that the Said claim of the assessee was a bona fide claim. In the Directors’ Report, a passing reference only was made to indicate that its consultancy business was sold by the assessee company for ₹ 31,75,000 - There was however, no mention made about this transaction in the notes forming part of accounts, despite the fact that a sum of ₹ 20,12,902 stated to be profit arising from the transaction was credited to the capital account and the same was directly shown under “Reserves and Surplus” in Schedule 2 of the balance Sheet - No details were given showing the exact nature of this amount appearing as capital reserve nor the basis of arriving at the said figure was given either in the Schedule or even in the notes forming part of the accounts for the year under consideration - no exemption for the short term capital gain was separately or specifically claimed by the assessee either in the return of income or even in the computation of total income and even the basis of claiming the said exemption being the relevant asset having no cost of acquisition was not mentioned by the assessee either in the return of income or in any of the documents filed alongwith the return of income –the order of the CIT(A) that all the material particulars relating to its claim for exemption on account of capital gain were fully and truly furnished by the assessee cannot be accepted - the claim made by the assessee for exemption on account of short term capital gain arising from the transaction entered into with M/s. Pintell Systems Pvt. Ltd was patently a wrong claim and the assessee having failed to furnish the correct particulars of its income on account of short term capital gains, it is a fit case to impose penalty under S.271(1)(c) of the Act – thus, the order of the CIT(A) is to be set aside – Decided in favour of revenue.
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2014 (11) TMI 434
Deemed dividend u/s 2(22)(e) – Amount received by assessee as loans to be treated as deemed dividend or not – Held that:- Assessee rightly contended that the payment made by a company, which is covered by the provisions of S.2(22)(e), can be treated as deemed dividend only to the extent to which such company possesses accumulated profits, and this position clearly evident from the provisions of S.2(22)(e) - the claim of the assessee that M/s. Speed Projects and Infrastructure Pvt. Ltd. did not possess any accumulated profits at the time of advancing the amount to the assessee has not been verified either by the AO or by the CIT(A) although such claim was specifically made in the submissions made before the AO and a specific ground to this effect was also raised by the assessee in the appeal filed before the learned CIT(A) – thus, the matter is to be remitted back to the AO for verification of the claim of the assessee as regards non-availability of any accumulated profits in the case of M/s. Speed Projects and Infrastructure Pvt. Ltd. – Decided in favour of assessee. Addition of amount as deemed dividend – Held that:- Out of the total loan amount, a sum of ₹ 17 lakhs was received by the assessee and the addition on account of deemed dividend u/s 2(22)(e) can be made in the case of the assessee only to the extent of ₹ 10 lakhs, being the amount received during the year – thus, the matter is remitted back to the AO for verification of claim of assessee – Decided in favour of assessee. Addition of gross receipts relating to business of interior design works – Held that:- Assessee has not been able to rebut or controvert the findings of fact recorded by the AO as well as the CIT(A) to dispute the genuineness of his claim of having carried on the business of interior designing work - He has also not been able to produce any evidence whatsoever to establish that any such business was actually carried on by him or any of the expenditure claimed in relation to the said business was actually incurred by him – thus, there is no reason to interfere in the order of the AO in treating the claim of the assessee of having carried on the business of interior designing work as bogus or false – Decided against assessee. Reimbursement of conveyance expenses – Held that:- The assessee has submitted that the amount received by the assessee towards reimbursement of conveyance expenses actually incurred is exempt u/s 10(14)(i) - any special allowance or benefit not being in the nature of perquisite, specifically granted to meet expense wholly, necessarily and exclusively incurred for in the performance of the duty of an office or employment of profit, to the extent to which such expenses are actually incurred for that purpose, is exempt from tax - There is no evidence brought on record by the assessee to show that any special allowance was specifically granted to the assessee by the employer to meet conveyance expense wholly, necessarily and exclusively in the performance of his duty - There is also no evidence placed on record before us to show that the amount in question claimed to be received by the assessee on account of conveyance allowance was actually incurred for such purpose - In the absence of details and evidence, the contention of the assessee cannot be accepted that the amount is exempt from tax u/s 10(14)(i) – Decided against assessee.
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2014 (11) TMI 433
Claim of deduction u/s 80IB(11A) – Business of taking godowns on lease and letting them - determination of initial year - AO noted that the other condition u/s 80IB(11A) that the eligible unit must start its functions on or after 01/04/2001 - the period of five years was sought to be counted from the year of incorporation of the assessee, viz. 1958 - Held that:- Following the decision in AP. State Warehousing Corporation, Hyderabad Versus Dy. Commissioner of Income-tax Circle 1(1), Hyderabad [2014 (5) TMI 730 - ITAT HYDERABAD] - There was no merit in the reasons of the lower authorities for making the disallowance - the assessee-corporation owns premises accommodating godowns at different places all over the State - each unit is an undertaking because food-grains are stored and handled and transported thereto and therefrom - there is no restriction in section 80-IB that an existing business unit cannot set up new undertakings to carry on the integrated business of handling, storage and transportation of food grains - The godowns where this business is to be carried on need not be owned by the assessee - When the assessee-corporation has set up these godowns in as many as in 73 towns and at different places in those towns, it is entitled for relief u/s 80IB(11A) of the Act in respect of each such new undertaking set up by it. The assessee had collected rentals for storing food grains and had engaged outsiders to transport the food grains - the assessee had been carrying on similar business would not disentitle the assessee from claiming relief u/s 80IB(11A) - deduction under Chap VIA, in respect of new undertakings set up by the assessee by way of expansion of the existing undertakings – Relying upon as held by the Apex Court in the cases of Textile Machinery Corporation Ltd v CIT [1977 (1) TMI 3 - SUPREME Court] – thus, the assessee is entitled to deduction u/s 80IB(11A), in respect of income derived from the new undertakings, warehouses, set up and operated from 1.4.2001 for storage, handling and transportation of food grains – the order of the CIT(A) is set aside and the matter is remitted back to the AO for verifying the claim of the assessee - Decided in favour of Assessee. Claim of deduction of deferred revenue expenditure – Held that:- Assessee from the earlier assessment years has been following the same method of accounting in respect of expenditure incurred for LDP covers by claiming the actual expenditure incurred - the CIT(A) has dismissed the ground raised by the assessee merely because the assessee has not referred to it in the written submissions filed before her - fact remains the assessee did raise a specific ground on the issue of disallowance of deduction claimed towards purchase of LDP covers – thus, the matter is remitted back to the AO for verification – Decided in favour of assessee. Depreciation on wooden carts – Held that:- CIT(A) rightly followed the decision as delivered in assessee’s own case in AP State Warehousing Corporation Ltd. Versus Deputy Commissioner of Income-tax, Circle 1(1), Hyderabad [2011 (7) TMI 578 - ITAT, HYDERABAD] - The only ground on which the department has sought to challenge the decision of the CIT(A) is, against the order passed by the Tribunal an appeal has been preferred by the Department before the Hon'ble High Court - filing of an appeal before the Hon'ble High Court against the order of the Tribunal by itself would not make the Tribunal's order either ineffective or inoperative unless it is set aside or reversed by the Hon'ble high Court – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (11) TMI 432
Consideration received in nature of reimbursement expenses along with mark up @ 10% - “royalty” and “Fee for included services” in equal proportion – Held that:- The expressions “Royalty” and “Fees for included services” have been given distinct meaning in the Indo US treaty - the tax authorities were not able to come to a conclusion as to whether the consideration received by the assessee company would fall within the meaning of “Royalty” or “Fees for included services”, even though there are plethora of case laws explaining both the terms - the tax authorities have not examined the issue in proper perspective, i.e., the matter has not been examined in the context of Indo-US treaty by considering the meaning of various terms used therein - the meaning to be ascribed to various terms used in the treaty has been the bone of contention in various case laws and we notice that the tax authorities have not considered the applicable case laws – the matter requires fresh examination at the end of the AO – the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee.
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2014 (11) TMI 431
Transfer pricing adjustment - International transaction of purchase of concrete pump units – Held that:- The assessee has submitted the details in respect of materials, components or parts purchased by the assessee from its AE during the financial year 2007-08 and corresponding particulars of transactions is given in ‘Annexure-1’ - the TPO has no occasion to verify this all documentary evidence - the assessee has produced all these documentary evidence and the documentary evidence shows that if the TPO consider that the assessee has to incur the higher costs on account of higher import duty - where there is imported content of raw material and if the price variation is due to imported raw materials, if it is the first year of operation it will have impact for deciding the arms length price but in that situation imported contents of raw materials which has substantially come down in succeeding year has to be considered while deciding the transfer pricing arms length price and matter was restored to the AO - the issue should be set aside to the file of TPO with the direction to eliminate the difference, if any – Decided in favour of assessee. Depreciation on computer peripherals on the UPS @ 60% – Held that:- The UPS system is designed special for computers for both low and high users and it forms part of entire information technology infrastructure of the company - The UPS is entitled for depreciation @ 60% as decided in CIT vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] - assessee company is eligible for depreciation @ 60% on UPS – Decided in favour of assessee.
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2014 (11) TMI 430
Levy of penalty u/s 271(1)(c) – Claim of deduction u/s 80HHC – Held that:- The claim of deduction was based on unaudited accounts, because of which the claim of deduction at Venniar facility was unduly high, in its accounts, is also to be addressed - The issue, which is common with both the parties is, once the unduly high profit and deduction was brought to the notice of the assessee, was rectified immediately and rightful claim was made – the contention of the assessee is accepted that even a multinational accounting firm, having presence across the globe could end up in making silly mistake as decided in Price Waterhouse Coopers (P.) Ltd. Versus Commissioner of Income-tax, Kolkata - I [2012 (9) TMI 775 - SUPREME COURT] - undesired and unwanted human anomaly cannot push the assessee into the field of penal mens rea - Hence the penalty, as levied by the revenue authorities merit to be deleted. The AO committed mistake in not writing the words "80HH”, while ordering initiation of penalty proceedings - This decision is not quid-pro-quo, but is based on the fact that the entire assessment order is based on denial of deduction u/s 80HH - Simply to accept the lapse committed by the AO cannot comprehend that the AO did not initiate penal proceedings – the order of the CIT(A) is to be set aside - Decided in favour of assessee.
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2014 (11) TMI 429
Determination of ALP – Selection of comparables – Held that:- Assessee has rendered marketing, sales support and coordination services to the group companies for their sales in India - The main transactions of assessee are in the nature of marketing and various sales support services, offers and quotes received from groups’ customers in India, providing information to group companies on market opportunities, trends follow up for payments and deliveries, etc. - this transaction of assessee was considered to have not been entered at ALP - Since assessee’s case does not fall within + 5% range, an adjustment was made - Assessee approached to the DRP, who has excluded Basiz Fund Services Pvt. Ltd., Cameo Corporate Services Ltd., Cyber Media Research Ltd., ICRA Management Consulting Services Ltd. And Rockman Advertising & Marketing India Ltd. as comparables for determining ALP - The DRP also directed for exclusion of ICRA Management Consulting Services Ltd. and Rockman Advertising & Marketing (India) Ltd. since these were loss making companies. DRP has excluded these companies from comparables on the plea that these companies are functionally different from that of assessee company - In respect of ICRA Management and Rockman Advertising &Marketing (India) Ltd., the DRP found that since the two companies were loss making companies, hence, these two comparables were also excluded and DRP directed to recompute the appropriate adjustment and find out if the same is + 5% margin - ICRA Management and Rockman Advertising & Marketing (India) Ltd., which were selected as comparables by assessee, was rejected by TPO - Since the DRP has confirmed the action of TPO, there is no reason for the exclusion – there is no merit in the appeal of the Revenue – Decided against revenue.
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Customs
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2014 (11) TMI 450
Imposition of fine / penalty on partner as well as on firm - Year of manufacturing wrongly mentioned - Imported machineries were found to be more than ten years old warranting a licence - appellant has not taken any such licence - violation of Para 2.17 of EXIM Policy 2002-07 and Rule 11 of the Foreign Trade (Regulation) Rules, 1993 - Whether the statutory authority was justified in imposing fine on the firm as well as on the partner - Held that:- Section 112(a) of the Customs Act, 1962 provides that not only the person who is instrumental in doing a particular act by violating the provisions of the Act but also the person who abets it or commits such act, is also liable for payment of penalty. The goods in question were imported in the name of the firm by name M/s. Sri Ram Tex. The appellant in C.M.A. No. 811 of 2012 in his capacity as the partner abetted the firm to commit the offence. Therefore, the statutory authority was fully justified in imposing fine on the firm as well as on the partner. No substantial question of law arises - Decided against assessee.
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2014 (11) TMI 449
Denial of the benefit of Notification No.12/2012-CE dated 17.3.12 - Application for early hearing of appeal - Held that:- Tribunals of all nature throughout the State are under heavy stress due to heavy pendency and, therefore, any direction to the Tribunal for early hearing of any matter would only be detrimental to the effective functioning of the Tribunal and would put more strain on the already overburdened Tribunal. We, therefore, do not think it fit or proper to fix any time limit for the Tribunal to hear the appeal. However, with reference to the case on hand, taking note of the fact that the appellant has a favourable order at the hands of the Commissioner (Appeals) and despite the same, the original authority is insisting on bank guarantee of 25% of the differential duty, which casts a onerous burden on the appellant/assessee, this Court is of the considered view that the said act on the part of the original authority may not be justified unless the order is reversed by the Tribunal in the appeal filed by the Revenue which is pending consideration. Therefore, we only deem it appropriate to request the Tribunal to consider grant of early hearing of the appeals, preferably within a period three months from the date of receipt of a copy of this order - Appeal disposed of.
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2014 (11) TMI 448
Application for quashment of the proceedings - Seizure of gold biscuits - Imposition of personal penalty - Held that:- subsequent to the remand, the original adjudicatory authority passed fresh orders in the de novo adjudicatory proceedings, on 16.2.2012. The copy of the said order was also furnished for perusal. It is evident that as per the said order dated 16.2.2012 personal penalty was imposed on both the petitioners. In the said circumstances, it is evident that the very foundation of the above cases has fallen to ground as the orders passed by the Commissioner of Customs (appeals) viz., Annexure-A3 orders are no more in existence. That apart, in the de novo proceedings fresh orders have been passed, whereby the petitioners were imposed with penalty. In the circumstances, the captioned Criminal Miscellaneous cases are liable to fail and accordingly, they are dismissed.
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Service Tax
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2014 (11) TMI 468
'Management, Maintenance and Repair service - Whether the CESTAT has erred in holding that Service tax is not required to be paid on goods used in the repairing process on which Excise duty and VAT has been paid on the value of the said goods, ignoring the fact that as per the contract the respondents were under an obligation to replace the damaged parts and to maintain the transformers in a proper working condition - Held that:- The assessee provided Management, Maintenance and Repair services for the repair of old and damaged transformers to Dakshinanchal Vidyut Vitaran Nigam Limited. The issue before the Tribunal was whether transformer oil, HV/LV coil and spare parts which are goods incorporated into transformers belonging to the Nigam, should be included for the purpose of quantifying the gross consideration received, as constituting the taxable value. The Tribunal has relied upon its own decisions and come to the conclusion that the law is settled; the principle of law being that where an agreement quantifies the value of materials separately from the value of services rendered, the value of the materials or goods would have to be excluded since that component is not liable to service tax. - Following decision of Commissioner of Customs and Central Excise Vs. J.P. Transformers [2014 (9) TMI 307 - ALLAHABAD HIGH COURT] - Decided against Revenue.
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2014 (11) TMI 467
Club or Association service - Whether in the facts and circumstances of the case, the Tribunal has committed substantial error of law in allowing appeal of the respondent with consequential relief by placing sole reliance on decision rendered by this Hon’ble Court in the case of Sports Club of Gujarat Ltd. v. Union of India reported in [2013 (7) TMI 510 - GUJARAT HIGH COURT] without recording comparative jurisdictional facts of both the cases and giving its finding thereon - Held that:- It is true that the decision of the Tribunal is somewhat brief and it would have been desirable if the Tribunal had given more elaborate facts in order to apply the ratio of the decision of this Court in case of Sports Club of Gujarat ltd. v. Union of India(supra). However, that by itself would not permit or atleast in facts of this case, to overturn the decision of the Tribunal when undisputably the facts are similar. As noted above, even in case of the present assessees, the notice issued was for levy of service tax on the service provided by a club to its members. - Decided against Revenue.
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2014 (11) TMI 466
Condonation of delay - Whether the Tribunal was right in law in having completely ignored the medical certificate filed in support of the delay condonation petition and dismissed the appeal solely on the ground that none appeared for the appellant before it - Held that:- Tribunal had failed to take note of the medical certificate issued for the purpose of condonation of delay. We have taken pains to peruse such a certificate filed at page 26 of the typed set of papers. It says that the appellant was suffering from HT- Angina and is advised not to travel long distance, since 20.7.2012 to 24.4.2013. The mere certificate from a doctor without any corresponding record, to show that the appellant was taking medical treatment during that period, cannot be accepted. Even the affidavit filed in support of the condonation petition says ill health supported by this certificate, which is bereft of details. It is also not clear whether this certificate was issued by the doctor, who treated the appellant and the certificate was issued on the basis of some material. The condonation of delay based on such vague affidavit and supporting vague certificate does not inspire this Court to consider the plea that the Tribunal ought not to have dismissed the appeal. - Decided against assessee.
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2014 (11) TMI 465
Condonation of delay - Whether the first respondent/Tribunal is right in rejecting the condonation of delay application for condoning the delay of 69 days in filing appeal filed by the appellant - Held that:- Branch Manager of the appellant company filed an affidavit confirming the shifting of the branch office and misplacing of the relevant papers. That apart, the conduct of the appellant does not indicate inaction or negligence in pursuing the matter. The explanation offered by the appellant for the marginal delay of 69 days constitutes a sufficient cause for condonation of delay and deserves to be accepted. - Delay condoned.
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2014 (11) TMI 464
Denial of refund claim - Unjust enrichment - payment of service tax is under protest or not - Notification 21/2009-ST - Held that:- It remains beyond doubt that the service tax levy during the period 2006 was operative only in the designated areas i.e. areas designated by notifications issued by Ministry of External Affairs and made applicable for levy of service tax under Service Tax notification No. 1/2002-ST dt. 1.3.2002. The survey sites where the appellants conducted their operations of seismic survey did not fall in the designated areas. It was only in 2009 that notification No. 21/2009-ST extended the service tax levy to the continental shelf and EEZ in which their survey sites did fall. In the interpretation of a statute, when a person is held to be eligible to obtain the benefit of exemption notification, the same should be liberally construed. It is clear from the judgement that it would apply to cases where the effect of a beneficial statute is sought to be extended. In the present case we have a reverse position where the effect of the amended notification if read retrospectively will have the effect of punishment. We therefore do not agree with the order of Commissioner (Appeals), who has not read the judgement in its proper perspective. Appellant only have a representative in India for communication purposes. The service was actually provided outside India because it was not performed in the designated areas i.e. in India. Even otherwise, the import of services became leviable to tax only w.e.f. 18th April 2006 and the period of dispute is prior to this date. In the present case there was no order of assessment. There is no assessment order against which the appellant could file appeal. The appellants were simply asked to pay during investigations. And they deposited the amount under protest. This 'protest' itself is a challenge to the assessment. They have produced a certificate from ONGC that service tax has not been passed to ONGC & a certificate from the company's statutory auditors that the amount of service tax deposited is shown as receivables in the company's books which facts have not been controverted by the Commissioner. - Decided in favour of assessee.
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2014 (11) TMI 463
Maintainability of appeal - Section 86(2A) of the Finance Act, 1994 requires the Committee of Commissioners to review the order passed by the Commissioner (Appeals) and file appeal before the Tribunal - Revenue submits that there was no meeting of the Committee of Commissioners evidencing application of judicial mind at the time of arriving at the decision to prefer an appeal against the impugned order - Held that:- as there was no guidelines or instructions, by the Board regarding the functioning of the Committee of Commissioners till the Board s Circular dated 23.11.2012, the right of appeal of the Revenue created under the statute cannot be defeated on the ground that there was no meeting of the Committee of Commissioners, when, it has satisfied the test of reasonableness and fairness. We have already stated that the right of appeal is not merely a matter of procedure but it is a substantive right, which becomes vested in a party, cannot be taken away except by express enactment or provision. Hence, the preliminary objection raised by the learned Senior Advocate is ruled out - Decided in favor of Revenue.
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2014 (11) TMI 462
Waiver of pre deposit - Cargo Handling Service - Held that:- Applicant in their Profit & Loss Account mentioned the service as Cargo Transport Hire Charges . The learned counsel submitted that assessee are only picking up the cargo from one place and delivering it to other place within the country. However, this argument is not appreciated - Partial stay granted.
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2014 (11) TMI 461
Waiver of pre deposit - Programme Producer Service and ‘Advertising Agency Service - Payment credited at wrong place - Held that:- Applicant claimed that the amount as demanded was paid and it has also been paid at Chennai, but, it was credited in Mumbai Account. Prima facie, we are not satisfied with the submission of the learned counsel insofar as the amount was paid in the Chennai account. It is also seen that the applicant had not filed any ST-3 returns and therefore there is no scope of the Revenue to verify the payment. We are not clear as to how the applicant paid this amount as claimed by them but they have not filed any return at Chennai. Prima facie, we also find that the demand of tax on print media cost is not sustainable. Thus, there is a dispute in quantification of the demand. Partial stay granted.
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Central Excise
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2014 (11) TMI 460
Waiver of pre deposit - Undue hardship - Held that:- Tribunal has to form an opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person. In this case, the learned Tribunal has not made any endeavour to do so and it was swayed by the so-called bad past conduct of the petitioner. We think that there is no scope for adjudging the conduct and misconduct of the litigant when the Legislature has given a protection on certain contingency. In this situation, the Court of law for that matter the Tribunal has nothing but to find whether undue hardship will work. - Matter remanded back - Decided in favour of assessee.
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2014 (11) TMI 459
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 - Held that:- The petitioner purchased land and building and not the business of the owner. The clause in the agreement requires the petitioner to discharge statutory liabilities arising out of land and building. The petitioner, therefore, cannot be called upon to discharge liability of the original owner under the Central Excises and Salt Act, 1944. An argument raised by counsel for the Revenue that in view of Rule 230(1) and (2) of the Central Excise Rules, liability to pay excise duty can be recovered from plant, machinery and building, cannot be accepted in view of the binding opinion recorded by the Hon’ble Supreme Court, in Rana Girders Ltd. [2013 (8) TMI 540 - SUPREME COURT]. Whether the show cause notice should be quashed - Held that:- As a general rule, a party is relegated to seeking adjudication of the show cause notice but as controversy in the present petition is squarely covered in favour of the petitioner, by judgment of the Hon’ble Supreme Court in M/s. Rana Girders Ltd. v. Union of India and others [2013 (8) TMI 540 - SUPREME COURT], relegating the petitioner to seeking adjudication of the show cause notice would be an empty formality - Decided in favour of assessee.
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2014 (11) TMI 458
Waiver of pre deposit - Denial of CENVAT Credit - Bogus invoices - Whether the Appellate Tribunal erred in directing pre-deposit of 50% of demand relying upon statements of suppliers, who did not turn up for cross-examination - Held that:- there is an admission by the director/its authorized representative as well as by employees pointing out that the inputs were not received under the invoices shown to them. If the appellant succeed at the final hearing in its contention that the evidence of the supplier cannot be relied upon in the absence of cross-examination, then entire demand attributable to the supplier’s statement may be set aside. However, in view of statement of Director and suppliers at this prima facie stage, we see no reason to interfere with the orders of the Tribunal. - Decided against assessee.
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2014 (11) TMI 457
Power of Tribunal to extend stay beyond the period of 365 days - extension of stay granted earlier - Held that:- In view of the decision in case of Commissioner vs. Small Industries Development Bank of India (2014 (7) TMI 738 - GUJARAT HIGH COURT) it can be concluded that the Tribunal did not lack the power to extend stay beyond 365 days from the initial date of granting stay. However, if the stand of the revenue is that such extension was without recording reasons or without passing speaking order as required by the decision of this Court in case of Commissioner vs. Small Industries Development Bank of India (2014 (7) TMI 738 - GUJARAT HIGH COURT) it would be open for the Department to move a rectification application before the Tribunal.
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2014 (11) TMI 456
Clandestine removal of the goods - Evasion of duty - Held that:- Dispatch Supervisor as well as one of the Directors of the Company who was responsible for the day to day functioning of the Company had in unequivocal terms admitted the clandestine removal of the goods without payment of excise duty. Matching entires were found in their diaries which did not form part of the final records. Raw material was purchased in cash. Clearances were made without raising bills or invoices. Significantly and admittedly these statements were never retracted. The authorities were, therefore, entitled to rely on such statements. When the adjudicating authority and two appellate authorities found that there was enough evidence of clandestine removal of goods, in our opinion, the appeal does not give rise to any question of law. Question of additional consumption of electricity and procurement of raw material was raised before the lower authorities or that it could have been raised for the first time before the Tribunal. However, such question was not germane at all. When there was overwhelming evidence of unretracted unequivocal confessional statements, mere failure on the part of the Excise authorities to produce additional evidence of extra consumption of electricity or source of procurement of raw material would pale into insignificance. The Tribunal’s remarks were merely in the nature of passing thoughts. Vulnerability of such observations would not vitiate the order itself - Decided against assessee.
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2014 (11) TMI 455
Notification 16/97 CE, dated 1.4.1997 - Propective or retrospective - inclusion or exclusion of the value of the inputs used in the manufacture of final product in computing the aggregate value of clearances - Held that:- Following decision of Commissioner of Central Excise, Chennai v. Customs Excise and Service Tax Appellate Tribunal Chennai and another [2014 (1) TMI 1519 - MADRAS HIGH COURT] the amendment is only prospective, hence, would not govern the case of the assessee. - Decided against Revenue.
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2014 (11) TMI 454
Denial of refund claim - CENVAT Credit - Contravention of CENVAT Credit Rules - Held that:- Findings in the order of the majority, therefore, do not raise any substantial question of law nor does it reflect any nonapplication of mind. The same does not reflect that the impugned order is vitiated by an error of law apparent on the face of record or perversity either. In these circumstances and when the claim has been granted by relying upon the peculiar fact pertaining to the assessee, then, this is not a fit case for interference in writ jurisdiction and the view taken is a possible one. It is taken in the peculiar facts and circumstances. Hence, no wider question or controversy arises for determination - Decided against Revenue.
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2014 (11) TMI 452
Power of tribunal to grant stay beyond the total period of 365 days - extension of stay granted earlier - extension order should be speaking or not - whether the Tribunal has power to extend the stay beyond the period prescribed under the proviso to section 35C(2A) of the Act - Held that:- In view of the decision in case of Commissioner vs. Small Industries Development Bank of India (2014 (7) TMI 738 - GUJARAT HIGH COURT) it can be concluded that the Tribunal did not lack the power to extend stay beyond 365 days from the initial date of granting stay. However, if the stand of the revenue is that such extension was without recording reasons or without passing speaking order as required by the decision of this Court in case of Commissioner vs. Small Industries Development Bank of India (2014 (7) TMI 738 - GUJARAT HIGH COURT) it would be open for the Department to move a rectification application before the Tribunal - As the Tribunal is expected to consider the individual case and pass a speaking order as to whether the delay can be attributed to the respondentassessee or not, in whose favour the stay is granted in the event the assessee contributed to such delay, the extension of stay is not to be made automatic. - Appeal disposed of.
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2014 (11) TMI 451
Condonation of delay - Section 5 and section 14 of Limitation Act - it appears that the respondent presented the appeal before the Tribunal at the first instance, within 60 days. On being informed that the appeal lies to the Commissioner (Appeals), it was presented there on 09.10.2006. By that time, 5 months i.e. 150 days computed from the date of furnishing of the order expired. The Commissioner took the view that the appeal must be presented within 60 days and since there is delay of 92 days, it cannot be entertained. Held that:- The scope of applicability of Section 14 of the Limitation Act to the proceedings under the Act was never in doubt. The record of this case clearly discloses that if the period during which the proceedings were pending before the Tribunal at the first instance the appeal would be within limitation when presented before the Commissioner. The Tribunal made a specific reference to Section 14 of the Limitation Act. We do not find any basis to interfere with the passed by the Tribunal - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (11) TMI 453
Validity of Order passed under Abkari Policy - Order to to close down all Bar Hotels in Kerala, except those which were having 'Five Star and above' classification - Assessee upgraded from three star Hotel to Five Star delux hotel - Held that:- Ext.P17 order dated 27.8.2014 was to be given effect on the expiry of 15 days from the date of said order. But the fact remains that, Ext.P17 order has not come into force so far. The issue was taken up before the Apex Court, when the proceedings have been finalized observing that the High Court of Kerala has to take a final decision, also with reference to the Abkari Policy of the State, simultaneously granting interim stay, till such final decision is taken, thus enabling the concerned FL-3 licence holders to continue to operate the 'Bar'. It is conceded by both the sides that, final verdict is still to be passed by this Court and the licensees having FL-3 licence are still running the concerned establishments. Petitioner though was having 'three star' status earlier, has now been recognized as a 'Five Star Deluxe' Hotel, vide Ext.P18 passed by the competent authority of the Government of India, Ministry of Tourism. This being the position, the submission made by the petitioner vide Ext.P19 before the first respondent is liable to be considered and appropriate orders are to be passed, more so since, the petitioner no longer continues to be an FL-3 licence holder, having conferred 'Five Star Deluxe' status as per Ext.P18. there will be a direction to the 1st respondent to consider Ext.P19 and pass appropriate orders in accordance with law, also in the light of the above observations which shall be done after giving an opportunity of hearing to the petitioner at the earliest, at any rate, within 'one month' from the date of receipt of a copy of this judgment. 'Status quo' as on date will continue till such time - Petition disposed of.
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