Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 20, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Customs
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54/2015 - dated
18-11-2015
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ADD
Seeks to impose definitive anti-dumping duty on “Carbon Black used in rubber Applications”, originating in or exported from China PR and Russia for a period of five years
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112/2015 - dated
19-11-2015
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Cus (NT)
Rate of exchange of conversion of the foreign currency with effect from 20th November, 2015
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111/2015 - dated
18-11-2015
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Cus (NT)
Appoints the places in as Land Customs Stations for the purpose of clearance of baggage of Indian enclave dwellers coming from Bangladesh to India
FEMA
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355/2015-RB - dated
16-11-2015
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FEMA
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Eleventh Amendment) Regulations, 2015
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345/2015-RB - dated
16-11-2015
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FEMA
Foreign Exchange Management (Permissible Capital Account Transactions) (Fourth Amendment) Regulations, 2015
Income Tax
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S.O. 3050(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Shri Jalaram Arogya Sewa Trust, Gujarat
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S.O. 3049(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Krishnamurti Foundation India, Chennai, Tamilnadu
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S.O. 3048(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Sanjivani Health and Relief Committee Ahmedabad, Gujarat
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S.O. 3047(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Manav Mandir Mission Trust, New Delhi
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S.O. 3046(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Digvijay Lions Foundation, Gujarat
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S.O. 3045(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Maria Seva Sangha, Bangalore
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S.O. 3044(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Shri Kalyan Arogya Sadan, Rajasthan
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S.O. 3043(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Saksham, New Delhi
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S.O. 3042(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Ratnanidhi Charitable Trust, Mumbai
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S.O. 3041(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Bhai Kahnaiyaji Birdh Ghar, Yatimghar, Ayurvedic Dawa Khana, Amritsar, Punjab
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S.O. 3040(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – D-CACUS-Education Centre (Development of Communication, Arts & Culture, Science, Economics and Education Centre), Manipur
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S.O. 3039(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Brahmavetta Shree Devaraha Hans Baba Trust, New Delhi
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S.O. 3038(E) - dated
10-11-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Hindu Mission Hospital, Chennai
Highlights / Catch Notes
Income Tax
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Disallowance of ESOP (Employee Stock Option) expenses claimed by the assessee company as revenue expenditure - discount on issue of Employees Stock option is allowable as deduction in computing the income under the head 'Profit and gains of Business or Profession' - AT
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The Interest Tax Act, unlike the Income Tax Act, has focused only on a very narrow taxable event which does not include within its ken interest payable on default in payment of amounts due under a discounted bill of exchange. - SC
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TDS u/s 194I - premium for acquisition of Lease hold rights for 99 years - the same not being paid consequent to the execution of the lease agreement, cannot be said to be payment in lieu of rent as envisaged under section 194I - AT
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It is not open to the Revenue to pick and chose the Assessee's against whom they would filed appeal in this Court. The law should be uniformly applied, its application cannot change, depending upon the person affected - HC
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TDS u/s 194H - sale of SIM cards - when the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent - TDS u/s/ 194H is not applicable - AT
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Addition u/s 68 as unsecured loan received from one of its directors - assessee has not been able to establish the creditworthiness of the director of the company who has purportedly extended loan - Additions confirmed - AT
Customs
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Duty demand u/s 28 - appellant was fully aware that the repair activity undertaken by it did not amount to manufacture and therefore the goods used for repair of CPTs were not eligible for the concessional rate of duty under Notification No. 25/1999-Cus. - demand confirmed - AT
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Valuation - Transaction value cannot be rejected on basis of a quotation which gives domestic retail sale price. If this were to be accepted, it would cause unimaginable distortion in interpreting the Valuation Law - AT
Service Tax
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Construction Services provided to to various educational institutions - before confirming the demand the issue is to be decided that, whether the educational institutions to whom the petitioner provided construction services, are profit oriented or whether they are established solely for educational purpose without any profit, etc. - HC
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CENVAT Credit - If, upon a misconception of the legal position, the assessee had paid the tax that he was not liable to pay and such assessee also happens to be an assessee entitled to certain credits such as CENVAT Credit, the availing of the said benefit cannot be termed as illegal - HC
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Power to conduct service tax audit - Thought, Rule 5A only providing access to the registered premises as also to the documents demanded for scrutiny by the Audit party, the apprehension of the petitioner that audit team is likely to conduct an audit at the registered premises of the petitioner under the Service Tax Rules, is misconceived - HC
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Demand of service tax - Tour Operator Service - appellants provide/supply the contract carriage business (not tourist vehicles) to their customers on their demand only. Therefore the activity of the appellant is not covered by the definition of "Tour Operator' for the period post 10-09-2004 - AT
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Supply of Tangible Goods for use - model of business is appellant owns the permit for operating Fleet Taxis under an agreement with various drivers, the said taxis are given for plying the passenger in the city - No Service tax as STG - AT
Central Excise
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Classification of motor vehicles hinges and handles - classifiable under Chapter Heading 8302.00 or Chapter Heading 8708.00 - To determine the applicability of the item under particular head, the test of commercial identity of the goods would be the relevant test and not the functional test - SC
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CENVAT Credit - Clearance of goods without payment of duty under CT-2 Certificate under cover of invoices to EPG for use in the packing of tubes and tyres - as the goods were cleared for export under bond assessee is not required to reverse the cenvat credit - AT
VAT
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KVAT - sales effected by the petitioner are mainly to the Lakshadweep Administration - the provisions of the Act read with Rule 112C (1) of the KVAT Rules have to be seen as a complete code in respect of the grant of concessional rate of tax to dealers effecting supply of articles to the Lakshadweep - HC
Case Laws:
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Income Tax
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2015 (11) TMI 877
TDS liability u/s 194A - interest to Punjab Agri Export Corporation Limited - Held that:- There is no documentary evidence placed on record by the ld. Counsel for the assessee that the loan has been raised from the Government and interest is payable to the Government and therefore, the submission made before the ld. CIT(A) and before us cannot help the assessee to cover the issue u/s 196(i) of the Act. It has also been conceded before the ld. CIT(A) that Punjab Agro Food Grains Corpn. Ltd., has also not declared the said interest income in their books of account. No infirmity in the order of the ld. CIT(A), who has rightly held the assessee in default u/s 201(1) & 201(1A) of the Act. We find no infirmity in the order of the ld. CIT(A) subject to the rate of interest which the assessee in ground No.3 has agitated should have been 10.30% instead of 11.33%. The AO is directed to verify the rate of interest as per law whether it is 10.30% or 11.33%. Accordingly, the matter is set-aside to the file of the AO only to the extent of determination of rate of TDS applicable ie. @ 10.30% or 11.33%.
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2015 (11) TMI 872
TDS u/s 194I - premium for acquisition of Lease hold rights for 99 years - Held that:- Where the lease premium paid to PCNTDA was a pre-condition for entering into the lease agreement, the same not being paid consequent to the execution of the lease agreement, cannot be said to be payment in lieu of rent as envisaged under section 194 I of the Act. In addition, the assessee had paid stamp duty on the market value of the plot represented by the lease premium and the said finding of the CIT(A) having not been controverted by the learned Departmental Representative for the Revenue, we find no merit in the appeal filed by the Revenue. - Decided in favour of assessee
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2015 (11) TMI 869
Payment of compensation to the said banks - whether is “interest” liable to tax under the Interest Tax Act, 1974? - interest received by various banks after bills of exchange have been discounted and a party defaults and hence has to pay compensation by way of interest as payment is made after the date stipulated in the bill of exchange - Held that:- Section 2(7) itself makes a distinction between loans and advances made in India and discount on bills of exchange drawn or made in India. It is obvious that if discounted bills of exchange were also to be treated as loans and advances made in India there would be no need to extend the definition of “interest” to include discount on bills of exchange. Indeed, this matter is no longer res integra. The expression “payable in any manner in respect of any moneys borrowed” is an expression of considerable width. It will be noticed that the aforesaid language of the definition section contained in the Income Tax Act is broader than that contained in the Interest Tax Act in three respects. Firstly, interest can be payable in any manner whatsoever. Secondly, the expression “in respect of” includes interest arising even indirectly out of a money transaction, unlike the word “on” contained in Section 2(7) which, we have already seen, connotes a direct arising of payment of interest out of a loan or advance. And thirdly, “any moneys borrowed” must be contrasted with “loan or advances”. The former expression would certainly bring within its ken moneys borrowed by means other than by way of loans or advances. We therefore conclude that the Interest Tax Act, unlike the Income Tax Act, has focused only on a very narrow taxable event which does not include within its ken interest payable on default in payment of amounts due under a discounted bill of exchange. In fact, when we come to the second point agitated in some of the appeals by revenue namely as to whether guarantee fees paid to the Deposit Insurance and Credit Guarantee Corporation could be included in the definition of interest in Section 2(7) of the Interest Tax Act, 1974, it will be clear that such definition does not include any service fee or other charges in respect of monies borrowed or debt incurred, again unlike the definition of ‘interest’ under the Income Tax Act. - Decided in favour of assessee.
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2015 (11) TMI 868
Entitlement to exemption under section 10(10C) - amount received by the Respondent - Assessee on his voluntarily retirement - Held that:- We dismiss the appeal only on the ground that the Revenue having accepted the decision of the Tribunal in Javerilal D. Chhajed (2011 (11) TMI 663 - ITAT PUNE), then in an identical matter, it is not open to the Revenue to challenge a subsequent order. The Supreme Court in Union of India v. Kaumudini Narayan Dalal [2000 (12) TMI 101 - SUPREME Court] has held that the Revenue must be consistent and it cannot differentiate between different assessees. This was in the context of a High Court order. The same principle should apply in case of jurisdictional Tribunal order. We are of the view that it is not open to the Revenue to pick and chose the Assessee's against whom they would filed appeal in this Court. The law should be uniformly applied, its application cannot change, depending upon the person affected. - Decided in favour of assessee.
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2015 (11) TMI 867
Disallowance of ESOP (Employee Stock Option) expenses claimed by the assessee company as revenue expenditure - Held that:- In the case of Biocon Limited (2014 (12) TMI 838 - ITAT BANGALORE) has held that discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t the market price of share at the time of grant of options to the employees. The Hon'ble Special Bench has held that the amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time , however, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference to the market price at the time of grant of option and the market price at the time of exercise of option. No contrary decision is brought to our notice by the Revenue. Respectfully following the decision of Hon'ble Special Bench, Bangalore Tribunal in Biocon Limited(supra), we decide this issue in favour of the assessee company and against the Revenue that discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t the market price of share at the time of grant of options to the employees. The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time, however, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference to the market price at the time of grant of option and the market price at the time of exercise of option. Thus, we hold that discount on issue of Employees Stock option is allowable as deduction in computing the income under the head 'Profit and gains of Business or Profession' In the instant case we have noticed that the AO has refused to grant the deduction of the discount on ESOP at the very threshold and the CIT(A) has allowed the said claim based on the decision of Hon'ble Special Bench in the case of Biocon Limited(supra). Resultantly, the verification of correctness of calculation of discount stood ousted and have become now imperative in view of our directions in light of Hon'ble Special Bench, Bangalore Tribunal orders in Biocon Ltd (supra) which are binding on us and also followed by us. We , therefore, remit the matter to the file of AO for finding out the correct amount of deduction accordingly in light of our orders which are based on the binding orders of Hon'ble Special Bench, Banaglore Tribunal in the case of Biocon Limited(supra). - Decided in favour of assessee for statistical purposes.
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2015 (11) TMI 866
Assessability of long term capital gain in respect of four properties sold by the assessee in the hands of HUF - assessee has challenged the jurisdiction of the Assessing Officer on the ground that the provisions of Section 2(47)(v) of the Act is applicable on this transfer, Section 50C is not applicable on this transaction and year of assessability is A.Y. 2003-04 and not for A.Y. 2004-05 - Held that:- On the basis of alleged agreement to sell and deed of registration, it is proved that alleged agreement to sell are different. Even alleged agreement to sell is presumed to be genuine as per the terms and conditions, the alleged agreement to sell is not existed on the date of registry. As both the parties have not performed terms and conditions of the alleged agreement to sell in prescribed time and prescribed manner. Therefore, it is a breach of contract. Even area as well as remaining consideration are not matching in the alleged agreement to sell and deed of registry of various dates. Therefore, sale consideration considered by the ld Assessing Officer for the purposes of computation of capital gain as per Section 50C is rightly assessed. Section 50C inserted by the Finance Act, 2000 w.e.f. 01/4/2003, therefore, same is squarely applicable on the transfer made during the financial year 2003-04 relevant to A.Y. 2004-05. The assessee claimed that these properties were covered U/s 2(47)(v) of the Act does not stand to support the assessee’s case wherein number of discrepancies were noted above, as such alleged agreement to sale cannot be enforced by the court of law as time and manner prescribed in these alleged agreement to sell has much before and not followed by both the parties expired. The ld Assessing Officer has taken the consideration on the basis of deed U/s 50C, therefore, whatever construction was made on these lands were treated by him as belonged to assessee at the time of transfer as no documentary evidences were submitted by the assessee at the time of assessment that these lands has been got transferred on the basis of alleged agreement to sell in different year to different persons and they constructed building thereon. If these facts were correct, the purchaser might have filing income tax return and also paying the municipal tax and might have installed telephone/electricity connection on it but no evidences were produced before the Assessing Officer. Further in the property No. 5 i.e. Hathi Babu Ka Ahata, Kachhi Basti, Jaipur was given by the assessee’s father on rent, which was continued upto registry of this property i.e. up to 31/3/2003. The assessee also challenged the assessability of this property No. 5, Hathi Babu Ka Ahata, Kachhi Basti, jaipur on the ground of assessability year but on verification of the record it was found that remaining stamp duty was paid by the assessee on 02/4/2003. In case of Raj Rani Devi Ramna Vs. CIT (1992 (5) TMI 11 - PATNA High Court) it has been held that the parties had clearly intended that desired execution and registration of sale deed, transfer by way of the sale would become effective only on payment of entire sale consideration and in this background of fact it had to be held that there was no transfer of land covered by the three sale deeds in question during the period under consideration making the assessee liable for capital gain tax U/s 45. As per registered deed, the assessee got ₹ 50,000/- at the time of registry before Sub-Registrar, Jaipur who has signed the registry on 02/4/2003. Therefore, the assessee got consideration as per terms and agreement of the registered deed on 02/4/2003. Accordingly, the assessability of this capital gain on account of transfer of this property is liable to be assessed in A.Y. 2004-05. The ld CIT(A) was wrong in deciding the assessment of four parties under the head HUF as argued by the ld DR, these properties were sold in the capacity of individual and the assessee had claimed status as individual. No where it has been claimed that these properties were belonged to HUF, therefore, the status of assessability of these four immovable properties referred by the ld CIT(A) is to be held assessable in the capacity of individual not HUF. Further only one witness has been signed on alleged agreement to sell dated 09/8/1975 of property at Hathi Babu Ka Bagh, Jaipur and transferer written in the agreement as Avani Kumar Mukherjee, son of Shri Satkori Mukherjee whereas singed by ‘Athak Kumar Mukherjee’. There is no witness on alleged agreement to sell dated 28/8/1975 to property but no address of the property and transferer written in the agreement as Avani Kumar Mukherjee, son of Shri Satkori Mukherjee whereas singed by ‘Athak Kumar Mukherjee’. In both the alleged agreements to sell singed by Athak Kumar Mukherjee. The assessees have not produced any evidence that these transactions have been disclosed by the assessees at the time of alleged agreement to sell in respective years in their respective income tax returns. Accordingly, the assessee’s appeal is dismissed and revenue’s appeal is allowed. - Decided against assessee. Whether property is assessable under Chapter 4(iv) of the Act, which is liable to be assessed U/s 11(1a) of the Act - Held that:- The assessee claimed benefit of Section 11 but it has to be registered Trust and property is to be held wholly for the charitable and religious purpose thereafter benefit of Section 11(1a) can be availed by the assessee as such this issue was not raised before the lower authority and assessee has not produced any evidence regarding the application of capital gain for the religious or charitable purpose by obtaining registration U/s 12A of the Act from the competent authority, therefore, this ground of appeal is dismissed.- Decided against assessee.
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2015 (11) TMI 865
Addition on account of unexplained investment in construction of building - CIT(A) deleted the addition - Held that:- Assessing Officer has noted that the assessee has maintained two sets of audited books of account signed by different Auditors, but in any case balance sheet submitted to the Revenue authorities disclosed investment in the building at ₹ 1,63,70,624/-. Therefore, the figure given in other books of account should not be accepted. Since the assessee itself has declared investment at ₹ 1,63,70,624/- and the DVO has estimated the investment at ₹ 1,71,79,700/-, the difference was of ₹ 8,09,376/- which is only 4.7% of the investment estimated by the DVO. The ld. CIT(A), having relied upon various judicial pronouncements, has rightly deleted the addition, as the benefit of difference upto 10% is to be allowed to the assessee. We accordingly find no infirmity in the order of the ld. CIT(A) on this issue and we confirm the same. Addition on surrendered income - Held that:- Undisputedly Shri Sunil Kumar Jhunjhunwala has made a surrender of ₹ 1 crore on behalf of four office bearers of the assessee-society and respective office bearers have also declared this amount in their individual returns of income. From a careful perusal of the statement of Shri Sunil Kumar Jhunjhunwala of the compilation of the assessee, we find that in the entire statement he has explained the nature of activities of the assessee-society and its officer bearers. In response to question No.8, Shri Sunil Kumar Jhunjhunwala has surrendered an amount of ₹ 1 crore on behalf of himself and three more office bearers with an assurance that tax thereon would be paid upto 30.3.2009. Since the surrender was made in specific terms on behalf of office bearers, the same cannot be treated on behalf of the assessee. Therefore, we are of the view that the Assessing Officer has wrongly interpreted the surrender statement and treated the surrender of ₹ 1 crore in the hands of the assessee; whereas it was made on behalf of the office bearers. Decided in favour of assessee. Undisclosed investment in the purchase of land - Held that:- the benefit of surrender statement in the hands of the individuals cannot be given to the assessee in order to explain the source of investment. In the light of these facts, we are of the view that the ld. CIT(A) has wrongly given the benefit of surrender statement in the hands of individual, to the assessee in order to cover up the unexplained investment. The assessee-society cannot blow hot and cold in the same breath. If the assessee wants to get the benefit of surrender statement against the undisclosed investment in the purchase of land, it has to own up the surrendered amount in its hands, but in the foregoing paras we have accepted the contention of the assessee that the surrender was made in the hands of the office bearers, therefore, no addition of the same can be made in the hands of the assessee. In that situation, no benefit of surrender statement can be given to the assessee in order to cover up the undisclosed investment in the land. We are, therefore, of the view that since the assessee has failed to explain the source of investment in the land of ₹ 40,26,460/-, the Assessing Officer has rightly made the addition of the same. We, therefore, set aside the order of the ld. CIT(A) on this issue and restore that of the Assessing Officer. - Decided in favour of revenue Unexplained funds in the shape of donations received from the students in the name of kit and uniform - Held that:- The assessee has not filed complete details before the Assessing Officer during the course of assessment proceedings to justify the credit entry found in the name of Madhu Agarwal. The ld. CIT(A) though called remand report, but we are of the view that in the remand proceedings, the Assessing Officer has not examined the details available before him by making necessary verification. We are, therefore, of the view that in the interest of justice, the matter should be set aside to the Assessing Officer with a direction to re-adjudicate the issue in the light of evidence filed before the ld. CIT(A). We accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to re-adjudicate the issue afresh after affording an opportunity of being heard to the assessee. The assessee is also directed to place all relevant evidence to justify the credit entries in the name of Madhu Agarwal along with bills and vouchers for expenses incurred in purchase of uniform kits, etc for students. Addition u/s 69C - Held that:- We find that before the Assessing Officer the assessee has not made any effort to reconcile the statement. No doubt, if any amount is given to Shri. Sunil Kumar Jhunjhunwala in the imprest account, there should be details of its expenditure as to how the imprest amount was exhausted and it is for the assessee to furnish complete details in this regard before the Assessing Officer. But he did not do the same. Before the ld. CIT(A), the assessee tried to furnish some details and the ld. CIT(A) has taken cognizance of Annexure B-1 but he has not made any reference to Annexure B-15. Copy of Annexure B-1 is available at page 2 of the compilation of the assessee, in which total amount given to Shri. Sunil Kumar Jhunjhunwala is ₹ 4,92,830/-, but since Annexure B-15 is not available before us, we cannot make any comment with regard to the entries available therein. In the light of these facts, we are of the view that the ld. CIT(A) has not properly examined the issue in the light of both the documents. We are, however, of the view that in the interest of justice, the matter should be restored back to the Assessing Officer to re-examine the claim. Unexplained cash credit under section 68 - Held that:- Undisputedly the assessee has not furnished complete details before the Assessing Officer despite various opportunities afforded to it and the Assessing Officer was forced to conclude that the deposits in the bank are unexplained cash deposits. If the deposits are made out of cash receipts from the students, there could have been proper record available with the assessee. But during the assessment proceedings, he has not furnished details with regard to the deposits in the bank account. Moreover, we also find force in the contention of the Assessing Officer that throughout the year fees from the students cannot be collected. Generally fees from the students are collected quarterly. But in the instant case, there are regular cash deposits in the bank accounts and onus is upon the assessee to explain the source of deposits. Keeping in view the totality of the facts and circumstances of the case, we are of the view that this issue was not properly examined by the ld. CIT(A) in the light of detailed evidence. We, therefore, set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to readjudicate the issue afresh in the light of evidence filed before the ld. CIT(A). Disallowance exemption under section 11 - Held that:- The conclusive finding with with regard to exemption under section 11 of the Act and treatment of surplus depends upon the conclusion on the other issues on which the matter is restored to the Assessing Officer. Therefore, in the absence of complete conclusion on other issues, this issue cannot be adjudicated at this stage. Accordingly, we set aside this issue also to the Assessing Officer to re-adjudicate it in the light of his findings with respect to other issues on which the matter was restored to his file for adjudication
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2015 (11) TMI 864
Treatment to interest income - business income or income from other sources - Held that:- It is clear from the findings recorded by the CIT(A) that the assessee company was engaged in the business of construction as well as lending of money, both constitute its main business activity. Both these objects were clear from the Memorandum and Articles of Association of assessee company. From the record we found that the investment and lending activity was a separate stream of business apart from the business activity in real estate. As per clause 55 of Memorandum and Articles of Association, assessee was authorized to carry business of money lending. Accordingly, we do not find any infirmity in the order of CIT(A) for directing the AO to treat the interest income as business income rather than income from other sources.- Decided in favour of assessee Disallowance u/s 14A - Held that:- Regarding application of Section 14A of the Act, the contention of the learned Department Representative has to be rejected on the face of it inasmuch as the entire income of the assessee is taxable under the Act. Section 14A is applicable only when any part of the income is not to be included in the total income of the assessee and the expenditure relating to that part of income is claimed by the assessee as deduction. In such cases only, the expenditure relating to the exempted income can be disallowed and not otherwise. Since in the present case the entire income is found to be taxable, no disallowance can be made under section 14A of the Act.' Moreover, the AO has not established the nexus between invested funds and the interest bearing funds. Also nterest bearing funds have not been utilized for investment for purchase of shares. - Decided in favour of assessee interest expenditure incurred for the purpose of business - whether same is deductible u/s.36(1)(iiii) or u/s.57 of the Act? - Held that:- As per the findings given hereinabove the CIT(A) has correctly held that interest expenditure was incurred for the purpose of business, therefore, same is deductible u/s.36(1)(iiii) of the Act or u/s.57 of the Act. A clear finding has been recorded by CIT(A) that interest expenditure have direct nexus with the generation of income, therefore, as an alternate, the same is also allowable u/s.57 of the Act. The CIT(A) has dealt in great details AO's observation to the effect that unless interest income is earned, the interest paid cannot be allowed and held that the decision relied on by the AO in case of Tuticorin Alkali Chemicals & Fertilisers Ltd. Vs. CIT, [1997 (7) TMI 4 - SUPREME Court ] are not applicable to the facts of the case, insofar as assessee was already in the business of construction. The CIT(A) has also found that the assessee has already credited interest element of ₹ 10,89,78,431/- to the work-in-progress out of total interest of ₹ 11.63 crores paid on the loans taken, therefore, there is no need to further apportion interest to the work-in-progress. This finding is based on material on record, therefore, do not require our interference. As the assessee had already credited interest of ₹ 10.89 crores to work in progress out of total interest of ₹ 11.63 crores, no further interest is required to be credited to work-in-progress. Accordingly, we confirm the action of CIT(A) in this regard. - Decided in favour of assessee
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2015 (11) TMI 863
Revision u/s 263 - as per CIT(A) action of the AO in summarily accepting the lease rent as ‘business income’ as offered by the Assessee is thus vitiated by non application of mind - Held that:- We concur with the view of the Ld. Commissioner that the terms of the Lease Agreement would show that assessee is no way involved in the manufacturing activity. The assessee is holding the factory premises and industrial unit in the capacity of lessor alone. The terms of the lease agreement does not throw any light on the intention of the assessee to enable it to resume on the manufacturing activity itself at the opportune time. The obligations cast on the Assessee viz. to procure sugarcane from assessee’s area of operation, make minimum payment of sugarcane price at SMP etc. etc. as noted in para 13 of the order are trivial. Nothing turns out on such marginal obligations. We notice that the Assessee has drawn blank over the query about the current situation on resumption of manufacturing activities which tantamount to implicit admission that no re-commencement of business activity has taken place. There appears to be no rationale or intelligible nexus between the plea of the Assessee and the fact situation. In the totality of situation viz. stipulations in lease deed revealing the continuance of business by the lessee by exploiting the business set-up of the lessor in exclusion to the lessor, passive conduct over fairly long period of 10 years or so, stepping in of liquidator in the shoes of the management etc., We find ourselves in agreement with the conclusion of the CIT that the situation has become irreversible in the immediate future and the Assessee has exited the business of manufacturing activity without there being any trappings of temporariness about it. The most pertinent of all observations is the complete lack of enquiry and total lack of application of mind. This in itself renders the order erroneous as well as prejudicial to the interest of revenue without anything further. The Assessee has set off current year income of ₹ 2.68 crores approx against the unabsorbed business losses of the earlier years and rest has been carried forward on the premise that the lease rent continues to be in the nature of the business income since the act of let out is only temporary and therefore continue to retain the colour of ‘business’. Once it is found that the premise of treating the lease rent as ‘business’ is factually tenous and not on a sound footing, the set off of the carried forward loss is rendered incorrect and thus causes loss to the revenue. The impugned set off is thus also pre judicial to the interest of revenue. Likewise, the allowability of expenses claimed without examination and its sustainability in terms of legal provision is also prejudicial to the interest of revenue The income returned under the head ‘business income’ for ₹ 2.68 crores is not reconciliable with the profit & loss account as well as estimated computation under different heads as noted in para 16 supra. The business income of the magnitude of ₹ 2.68 cr. gets converted in loss of 32.35 lacs odd under the narrow and disadvantaged head of ‘income from other sources’ is perplexing and intriguing. Notwithstanding, the present act of accepting the income as business income will continue to grant the assessee, the right to carry forward and set off. This is also prejudicial to the revenues’ interest by itself - Decided against assessee.
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2015 (11) TMI 862
Disallowance of overseas taxes paid - AO disallowed deduction holding that such taxes are covered by the provisions of section 40(a)(ii) - Held that:- Tribunal has decided this issue against the assessee in the case of “Tata Sons Ltd.” (2010 (11) TMI 709 - ITAT, MUMBAI ), and the said decision has not been stated to have been stayed on appeal, respectfully following the same, this issue is decided against the assessee Software expenses under section 40(a)(i) on account of non-deduction of TDS u/s 195 - Held that:- Withholding tax obligation on the payer applies on payments to nonresidents onlys if there is income chargeable to tax in India. It was held that accordingly, there was no obligation of the assessee to deduct tax at source u/s 195 of the Act, from making remittances to non-residents. The ld. CIT(A) correctly held that he agreed with the assessee’s contention that no tax was deductible on the same and accordingly, no disallowance could be made u/s 40(a)(i) of the Act. The locally acquired software expenses have been treated as capital expenditure, placing reliance on various judicial decisions, which hold that the expenses on software are in the nature of capital expenditure and depreciation is to be allowed on the same. As such, expenses on imported software are also in the nature of capital expenditure and deprecation needs to be allowed thereon. The AO, therefore, is directed to allow depreciation on the imported software purchased by the assessee. This alternative plea raised by the assessee is, hence, accepted. Claim u/s 10A of the Act on units on which deduction u/s 80HHE was allowed in the past - Held that:- Since both the sections, i.e., section 80HHE and section 10A entitle the benefit, the assessee would legitimately be entitled to the benefit of that provision of law, which enables a larger benefit being earned by him. This finds support from the decision of the Hon’ble Supreme Court in “Collector Central Excise vs. Indian Petro Chemicals”, (1996 (12) TMI 66 - SUPREME COURT OF INDIA). We, therefore, do not find any justification in the action of the ld. CIT(A) to hold that the assessee being an old unit and having once claimed deduction u/s 80HHE, was not entitled to claim deduction u/s 10A from the profits of its units. The expenditures which are required to be reduced from the export turnover as per the provisions of section 10A of the Act should also be reduced from the total turnover. Addition on account of TP adjustments in relation to transaction with AE, M/s. Tata America International Corporation Inc. ( TAIC) - CIT(A) deleted the addition - Held that:- The AO erred in not himself examining the issue of TP and with the approval of the ld. CIT, made a reference to the TPO u/s 92CA(1) of the Act; that the AO as well as the ld. CIT(A) failed to apply their mind to the TP Report filed by the assessee, or to any other material or information or document furnished. The TPO made an adjustment which was incorporated by the AO in the assessment order. Thereby, the AO as well as the ld. CIT(A) did not discharge necessary respective judicial functions conferred on them under sections 92C and 92CA of the Act. Further, the assessee is also correct in contending that no TP adjustment can be made in a case like the present one, where the assessee enjoys u/s 10A or 80HHE of the Act, or where the tax rate in the country of the Associated Enterprises is higher than the rate of tax in India and where the establishment of tax avoidance or manipulation of prices or establishment of shifting of profits is not possible. - Decided in favour of assessee.
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2015 (11) TMI 861
Entitlement to the deduction of bad debt pertaining to non-rural branches - Held that:- We set aside this ground of appeal to the file of AO for fresh examination and to grant deduction on merits to the assessee in light of decision of Hon’ble Supreme Court in case of Catholic Syrian Bank Ltd. v. CIT [2012 (2) TMI 262 - SUPREME COURT OF INDIA] wherein held that U/s 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year, while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). The proviso to Section 36(1)(vii) will relate to cases covered under Section 36(1)(viia) and has to be read with Section 36(2)(v) of the Act. Thus, the proviso would not permit benefit of double deduction, operating with reference to rural loans. Therefore, we hold that provisions of Sections 36(1)(vii) and 36(1)(viia) are distinct and independent items of deduction and operate in their respective fields Disallowance of the claim of loss on account of fall in value of investments held as stockin- trade - Held that:- This issue now no longer survives in view of two decisions of Hon’ble Karnataka High Court in case of Karnataka Bank Ltd. vs. Assistant Commissioner of Income Tax [2013 (7) TMI 656 - KARNATAKA HIGH COURT] and CIT vs. Bank of Baroda [2003 (3) TMI 80 - BOMBAY High Court] and a decision of CIT vs. HDFC Bank Ltd. reported at [2014 (7) TMI 724 - BOMBAY HIGH COURT] considering decision of United commercial bank V CIT [1999 (9) TMI 4 - SUPREME Court] and Southern technologies Limited V Jt CIT [2010 (1) TMI 5 - SUPREME COURT OF INDIA ] wherein as decided in the assessee has maintained the accounts in terms of the RBI Regulations and he has shown it as investment. But consistently for more than two decades it has been shown as stock-in-trade and depreciation is claimed and allowed. Therefore, notwithstanding that in the balance-sheet , it is shown as investment, for the purpose of Income Tax Act, it is shown as stock-in-trade. Therefore, the value of the stocks being closely connected with the stock market, at the end of the financial year, while valuing the assets, necessarily the bank has to take into consideration the market value of the shares. If the market value is less than the cost price, in law, they are entitled to deductions and it cannot be denied by the authorities under the pretext that it is shown as investment in the balance-sheet. Thus we reverse the order of CIT (A) and delete the disallowance on account of claim of loss of transfer of security from ‘available for sale’ category to ‘held to maturity’ category by the appellant bank in accordance with direction/ circular of Reserve Bank of India. - Decided in favour of assessee. Disallowance sustained by CIT(A) u/s 14A - assessee has earned exempt income which is exempt under the provisions of Section 10 - Held that:- no disallowances cannot be made in case of a bank where assessee’s own funds and other non-interest bearing funds are more than investment in the tax free securities. However, it cannot be said without detailed examination that the assessee, which can be disallowed, has incurred no expenditure other than interest . However, Rule 8 D does not apply for the year under appeal but reasonable amount of disallowance out of other expenditure may be determined based on details of expenses incur red which are related to earning exempt income. We restore these ground back to the file of AO as relying on assessee's own case for preeding AYs to examine the issue afresh with respect to work out disallowance, if any, of other expenditure other than interest expenditure relating to exempt income. - Decided in favour of assessee for statistical purposes. Restriction on disallowance u/s 14A by CIT(A) - Held that:- We confirm the order of CIT (A) in deleting interest port ion of expenditure u/s 14A in view of the excess of owned interest free funds than the investment in tax free income earning securities for the year. See Commissioner of Income Tax-2, Mumbai Versus HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] - Decided in favour of assessee . Disallowance being broken period interest - CIT(A) deleted the addition - Held that:- Assesse bank has incurred broken period interest expenditure of ₹ 98.12 cr at the time of purchase of securities and claimed it as revenue expenditure. As the securities of the assessee bank are stock in trade of the bank natural corollary would be that the amount of interest paid for broken period shall also be revenue expenditure in nature and allowable to the bank. This issue has been considered by various high courts, which have been considered by CIT (A) in his orders while deciding the issue. Further, the revenue has also not contested this issue in earlier years. Hon Bombay high court in case of CIT V HDFC bank Limited in [2014 (8) TMI 119 - BOMBAY HIGH COURT] has held that even after the decision of Hon. supreme court in case of CIT v Vijaya bank (1990 (9) TMI 5 - SUPREME Court) broken period interest is allowable to the assessee. - Decided in favour of assessee . Claim of depreciation of LAN and WAN equipment - CIT(A) allowed claim - Held that:- As relying on CIT V BSES Yamuna Power Limited [2010 (8) TMI 58 - DELHI HIGH COURT] WAN and LAN equipment are used with computers only same are also eligible for depreciation @ 60 % therefore, we confirm the order of CIT (A) in deleting the granting depreciation of disallowance made by the AO on account of excess claim of depreciation of LAN and WAN equipment. - Decided in favour of assessee . Disallowance of excess claim of depreciation on fixture and fitting - CIT(A) allowed claim - Held that:- Assessee banks has shown addition of ₹ 15,73,78,019/- to the opening WDV of ₹ 15622208/- and reduction therefrom of ₹ 100163 resulting in to WDV of ₹ 99748028 and claimed depreciation thereon of ₹ 75136583/ -. Firstly, assessee has shown these items as furniture and fixtures and we do not find that Appendix I as per Income tax rules 1962 prescribed under the head furniture and fixtures any class of items, which is eligible for 100 % depreciation. As per annexure D of the tax audit report , assessee himself has classified it is temporary wooden structure. Definitely, it is apparent that it is not building which CIT (A) has considered. Therefore, from the facts it is not clear that whether it is building or furniture and fittings. Secondly, we agree with the views of the CIT (A) that AO has erred in allowing depreciation at the correct rates has amortized these expenditure over 5 years. Therefore, in absence of these facts, this ground of appeal is restored back to the file of AO for fresh verification. - Decided in favour of revenue for statistical purposes.
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2015 (11) TMI 860
TDS u/s 194H - sale of SIM cards - assessee has not deducted TDS on discount/commission allowed to distributors - Held that:- There is no dispute that initially, the issue was decided against the assessee in Commissioner of Income Tax-XVII Versus Idea Cellular Ltd. [2010 (2) TMI 24 - DELHI HIGH COURT] by holding that service can be rendered and cannot be sold and therefore, the payment to distributors, who are acting as a link in the chain of service provider, cannot be a discount but the same is in the nature of commission. However, subsequently, the Hon'ble jurisdictional High Court in its decision reported in Bharti Airtel Ltd. And Others Versus Deputy Commissioner of Income-tax and Commissioner of Income Tax, Bangalore (2014 (12) TMI 642 - KARNATAKA HIGH COURT) has distinguished the finding of the Hon’ble Delhi High Court wherein held that the condition precedent for attracting Section 194H of the Act is that there should be an income payable by the assessee to the distributor – the income accrued or belonging to the distributor should be in the hands of the assessees - the assessee sells SIM cards to the distributor and allows a discount of ₹ 20/-, that ₹ 20/- does not represent the income at the hands of the distributor because the distributor in turn may sell the SIM cards to a sub-distributor who in turn may sell the SIM cards to the retailer and it is the retailer who sells it to the customer - The profit earned by the distributor, sub-distributor and the retailer would be dependent on the agreement between them and all of them have to share ₹ 20/- which is allowed as discount by the assessee to the distributor - There is no relationship between the assessee and the sub-distributor as well as the retailer. Thus, it is a sale of right to service - The relationship between the assessee and the distributor is that of principal to principal and, therefore, when the assessee sells the SIM cards to the distributor, he is not paying any commission; by such sale no income accrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands - The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS - the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent – thus, the order passed by the authorities holding that Section 194H of the Act is attracted to the facts of the case is unsustainable. - Decided in favour of assessee Also roaming charges cannot be treated as fees for technical services, the ground raised by the revenue stands dismissed. - Decided in favour of assessee
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2015 (11) TMI 859
Revision u/s 263(1) - Held that:- In the instant case the Revenue has accepted the return filed by the assessee as perfectly valid and, therefore, there is no occasion to held that the return was in derogation to sub section (4) of section 184 of the Act. Thus we find that order of the CIT on this issue is not tenable and accordingly we hold that the assessment order cannot be held erroneous in as much as prejudicial to the interest of Revenue on this issue. We set aside the order of the CIT in toto and hold that the assessment order dated 28.01.2013 passed u/s 143(3) of the Act cannot be held erroneous in as such as prejudicial to the interest of the Revenue. Commissioner has directed the Assessing officer to make the addition on account of understatement of closing stock, disallow interest u/s / 36(1)(iii) in respect of mixing plant and depreciation in respect of mixing pant and disallow of deduction on account of interest, salary etc. paid to the partners. In our considered view, remanding the matter to the Assessing officer is of no consequence, particularly when the CIT himself has reframed the assessment. In the facts and circumstances of the present case the CIT has not left any scope for the Assessing officer to redo the assessment or pass a fresh assessment order. It is also observed that Ld. CIT has directed the Assessing officer to give an opportunity of being heard to the assessee before passing the fresh assessment order. In our view, giving opportunity of being heard to the assessee by the Assessing officer is also meaningless, particularly when the Ld. CIT himself has reframed the assessment order. The directions given by the Ld. CIT in para 7 of the impugned order are also contrary to the settled position of law. When the Ld. CIT directs the Assessing officer to pass a fresh assessment order, the only proper course for the Commissioner was not to express any final opinion as regards to the controversial points. - Decided in favour of assessee.
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2015 (11) TMI 858
Disallowance out of fees and legal expenses - CIT(A) deleted the addition - Held that:- We find that the genuineness of the payment is not in dispute. The Assessing Officer after observing about the loss incurred by the assessee company has brought no material on record after making investigation to show that the assessee has not received the services for which payments were made by the assessee. Rather, on the other hand, the allowance of deduction at the rate of 50% shows that the Assessing Officer also agreed that services of the staff of the payee company were utilized by the assessee company for its business purpose. No material was brought on record to show that the consideration for services received by the assessee was so excessive as to warrant any disallowance out of the same. It is also observed that the amount of consideration paid was as per Memorandum of Understanding entered into by the assessee with the payee company. In view of the above facts and circumstances, we do not find any good reason to interfere with the order of the Ld.CIT(A) - Decided against revenue. Disallowance of employees contribution to Provident Fund u/s.36(1)(via) - CIT(A) deleted the addition - Held that:- This issue has been decided against the assessee in A.Y. 2007-08 by co-ordinate Bench following the judgment of Hon'ble Gujarat High Court in case of CIT vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] to held that with respect to the sum received by the assessee firm from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees' account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va) - Decided against assessee. Disallowance u/s.14A read with Rule 8D - Held that:- firstly the AO is required to find out the nexus between the expenditure incurred and exempt income. If the expenditure is not related to the exempt income, in our considered view the AO is not empowered to make disallowance u/s.14A of the Act by applying Rule 8D of the Income Tax Rules. Thus, first requirement of law is that the expenditure should be related to the exempt income. In case, where the assessee makes a claim that 'x' amount is related to the exempt income or otherwise no expenditure is related to the exempt income, in that event, the AO has to satisfy himself about the correctness of the claim having regard to the accounts of the assessee before proceeding to apply Rule 8 D of the Income Tax Rules, 1962 for computing disallowance. Hence, another requirement of law is that the AO has to satisfy himself about the correctness of the claim of the assessee having regard to the accounts of the assessee. The provision of section 14A mandates the AO to examine the accounts of the assessee before proceeding to apply Rule 8D of the IT Rules. In the present case, the AO has made disallowance on account of interest expenditure and administrative expenses. Since on both the counts, the AO has failed to record his finding, we are of the considered view that disallowance as made by the AO cannot be sustained.- Decided against revenue.
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2015 (11) TMI 857
Eligibility for making claim under Section 11 - payment of advance to the trustee, which is in excess of the market value of the land, would make the assessee ineligible for making claim under Section 11 - according to the Ld. D.R., there was a clear violation of provisions of Section 13(1)(c) - CIT(A) allowed the claim - Held that:- Held that:- The assessee has received ₹ 4,06,92,078/- being the interest from the Managing Trustee, in addition to the principal amount after cancellation of agreement. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that after cancellation of agreement, the assessee-Trust was returned and compensated by way of interest. Therefore, the transaction between the assessee-Trust and the Managing Trustee cannot be construed as without any adequate security or without any adequate interest. Therefore, this Tribunal is of the considered opinion that the money was in fact advanced in pursuance of the agreement for sale. After cancellation of agreement, the money was returned in its entirety. Since there was delay in repayment of money received as advance for sale of the land, the Managing Trustee has also paid interest to the extent of ₹ 4,06,92,078/-. Therefore, at any stretch of imagination, it cannot be said that the money was diverted for interest of the Managing Trustee. Therefore, this Tribunal is of the considered opinion that there is no violation of Section 13 of the Act. Coming to the receipt of donation from Sri Balaji Charitable and Educational Trust, what was received by the assessee is capital asset by way of three institutions and its infrastructures. It is nobody’s case that the assessee’s funds were diverted to any other Trust. When the assessee received three institutions for carrying out its charitable activity, it cannot be said that there was a violation of any other provisions of Income-tax Act. In fact, the Assessing Officer himself disallowed the claim of the assessee on the ground that the money was advanced to the Managing Trustee. Since this Tribunal found that there was no violation of Section 13(1)(c) of the Act in respect of the agreement entered between the assessee-Trust and the Managing Trustee for purchase of property and it is not in dispute that the Managing Trustee returned entire amount with interest of ₹ 4,06,92,078/-, the assessee is entitled for exemption under Section 11 of the Act. Therefore, this Tribunal do not find any infirmity in the order of the CIT(Appeals) and accordingly, confirmed. - Decided in favour of assessee. Entitlement to depreciation - Held that:- Admittedly, the assessee-Trust is registered as charitable institution and it is claiming exemption under Section 11 of the Act. The claim of the assessee under Section 11 of the Act is allowed by the CIT(Appeals) which was confirmed by this Tribunal in the earlier part of this order. It is not the case of the assessee that it is not doing any business. Therefore, this Tribunal is of the considered opinion that the assessee is not entitled for any depreciation under Section 32 of the Act. See Tamil Nadu Cricket Association v. DDIT(Exemptions) [2015 (8) TMI 761 - ITAT CHENNAI ] wherein held as when the written down value of the asset becomes NIL since the entire cost was allowed as application of income under Section 11 of the Act, this Tribunal is of the considered opinion that there cannot be any further claim for deduction under Section 32 of the Act. - Decided against assessee.
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2015 (11) TMI 856
Unexplained purchase u/s 69C - CIT(A) deleted the addition - Held that:- The complete books of accounts were also produced before the AO and the same were examined and the AO has not pointed out any defect in the books of accounts produced by the assessee. Thus, the same stood accepted by the AO. The books of account maintained in the normal course of business are evidence under the 'Evidence Act' and 'Income Tax Act. During the course of assessment proceeding, the assessee has furnished full details of all expenses, sales, purchases and remaining closing stock, day wise details of sales, purchases, item-wise detail of purchases and sales giving inventory and rates which purchases and sales were affected. But no defect was found by the Assessing officer either in the books of account or in the detail furnished by the assessee. After going through the reasons mentioned by the Ld. CIT(A) while deleting the addition in dispute, we are of the considered view that no interference is called for in CIT(A)'s order - Decided against revenue Disallowance of 50% of expenditure - CIT(A) deleted the addition - Held that:- Regarding allowance of depreciation the AO was rightly directed to allow the same as per Income Tax Act Rules. Therefore, this ground was therefore allowed in favour of the assessee company.- Decided against revenue Validity of assessment u/s. 153C - Held that:- As incriminating material belonging to the assessee were found during search period, the assessment made is without jurisdiction and proceedings initiated u/s. 153C is null and void. - Decided against revenue
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2015 (11) TMI 855
Addition on account of agricultural income - as per AO It is a clear case of diverting the business income in the guise of agricultural income which is exempt from tax and part of the income has been suppressed by reducing the sale proceed - CIT(A) deleted the addition - Held that:- So far as the agricultural income is concerned it is an admitted fact that as against ₹ 3,63,000/- declared by the assessee during A.Y. 2008-09 the same has been shown at an astronomically high figure of ₹ 17 lakhs during the impugned assessment year. The land holding of 8.5 acres has not undergone any change. Since there is no addition to the agricultural land during the year, therefore, we find merit in the submission of the Ld. Departmental Representative that when there is no change in the cropping pattern or no increase in the holding of the agricultural land, the amount of agricultural income declared at ₹ 17 lakhs cannot be accepted. No doubt the assessee has filed a certificate from the Tahsildar for the impugned assessment year showing the agricultural income at ₹ 17 lakhs. However, the same cannot be sacrosanct. From the order of the AO we find the assessee has also obtained a certificate from the Tahsildar for A.Y. 2008-09 at ₹ 15 lakhs as agricultural income whereas he had declared the agricultural income in his return of income at ₹ 3,63,000/-. Further, the assessee has obtained the certificate from a Talati who is not the Talati for the land situated at Dugaon Therefore, when in his own admission the assessee declared agricultural income at ₹ 3,63,000/- in A.Y. 2008-09 as against the agricultural income certificate of ₹ 15 lakhs obtained from the Talsildar, therefore, in absence of any increase in land holding and pattern of cropping the agricultural income at ₹ 17 lakhs by no stretch of imagination can be accepted. Therefore, the CIT(A) in our opinion was not justified in accepting the submissions made by the assessee regarding the extent of agricultural income declared by the assessee. We accordingly set aside the order of the CIT(A). However, considering the totality of the facts of the case, determination of net agricultural income of ₹ 4 lakhs under the facts and circumstances of the case in our opinion will meet the ends of justice. We hold and direct accordingly. The balance amount of ₹ 13 lakhs will have to be treated as income from other sources. Sale of milk from dairy business - Held that:- Considering the rate of milk at ₹ 27.50 per litre and other surrounding circumstances net income of ₹ 6,000/- per cattle per year in our opinion in the given facts and circumstances of the case will be reasonable. Since the assessee had 98 live stock at the beginning of the year and had purchased 4 buffaloes on 30-06-2008, 9 buffaloes on 27-10-2008, 10 buffaloes on 30-11-2008, 4 buffaloes on 15-03-2009 and 10 buffaloes on 17-03-2009 net income of ₹ 6,52,000/- in our opinion will be reasonable under the facts and circumstances of the case. Since the assessee has declared income from dairy business at ₹ 3,85,919/-, therefore, the difference of ₹ 2,66,081/- is the suppressed income from dairy business. Accordingly, as against the addition of ₹ 32,47,843/- made by the AO, the addition of ₹ 15,16,081/- is sustained, i.e. ₹ 13 lakhs + ₹ 2,66,081/-). The order of the CIT(A) is accordingly modified and the addition is sustained at ₹ 15,16,081/-. Ground raised by the Revenue is accordingly partly allowed. Disallowance on account of violation of provisions of section 40A(3) - CIT(A) delted the disallowance - Held that:- Admittedly, there is no finding given by the AO that the assessee has made payment in cash exceeding ₹ 20,0000/- at any time. Further, we also find merit in the submission of the Ld. Counsel for the asssessee that when income is estimated the provisions of section 40A(3) cannot be applicable. Since in the instant case there is no evidence brought on record by the AO that the assessee had made payment in cash at any time exceeding ₹ 20,000/- per day and since the income has been estimated, therefore, in our opinion the AO was not justified in invoking the provisions of section 40A(3) - Decided against revenue Addition on account of rent - whether the said expenditure being considered as Revenue in Nature? - CIT(A) deleted addition - Held that:- No infirmity in the order of the CIT(A) on this issue. It is an undisputed fact that assessee is engaged in the business of sale of milk. Although he started the restaurant from this premises in the 3rd quarter of the year, however, the assessee has stated before Ld.CIT(A) that he was also doing milk business from the said premises. In any case the amount being very negligible under the facts and circumstances of the case and the payment of rent is not in dispute, therefore, we find no infirmity in the order of the CIT(A) deleting the addition. - Decided against revenue Addition on account of Fuel expenditure - CIT(A) deleted addition - Held that:- From the order of the AO we find the AO merely states that assessee has not voluntarily disallowed any expenses for personal element in the same. Considering the huge volume of business the fuel expenses at ₹ 65,664/- is very reasonable. Therefore, in our opinion, no disallowance is called for. We accordingly uphold the order of the CIT(A) on this issue and the ground raised by the Revenue is dismissed. - Decided against revenue
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2015 (11) TMI 854
Addition as unsecured loan received from one of its directors - Held that:- Before us the assessee has filed loan account of the director in the books of the assessee-company. However, the question raised by the Commissioner of Income-tax (Appeals) regarding the source of funding the assessee-company remained unanswered. The Commissioner of Income-tax (Appeals) had raised a very valid doubt, that is, if the director has returned his income of ₹ 1,50,820 in the assessment year 2008-09, how he can extend loan of ₹ 40,00,702 to the assessee-company. The learned authorised representative has not been able to place on record for any cogent evidence in the form of bank statement, statement of asset and liability of the assessee, etc., to dispel the shadow of doubts. It is a well accepted principle that to accept a credit as genuine all the three conditions, i.e., identity of person who has accepted the loan, genuineness of transaction and creditworthiness of the person extending loan has to be satisfied. If any of the aforesaid conditions are absent the loan transaction comes under cloud. In the present case the assessee has not been able to establish the creditworthiness of the director of the company who has purportedly extended loan. We concur with the findings of the Commissioner of Income-tax (Appeals) on this issue. - Decided against assessee. Ad hoc disallowance under the head "Other expenses" - Held that:- In the absence of details of expenditure, the Assessing Officer made ad hoc disallowance of ₹ 5,00,000. In the first appeal the Commissioner of Income-tax (Appeals) examined each and every expenditure and thereafter, reduced the disallowance to ₹ 2,00,000. We do not find any infirmity with the findings of the Commissioner of Income-tax (Appeals).- Decided against assessee.
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2015 (11) TMI 853
Adjustment of corporate guarantee provided to associated enterprise - Held that:- As for the assessment year 2007-08 [2015 (8) TMI 40 - ITAT CHENNAI ], a similar adjustment was made wherein this Tribunal after placing its reliance on the decision of Bharti Airtel Ltd. v. Addl. CIT [2014 (3) TMI 495 - ITAT DELHI] found that providing corporate guarantee to its associated enterprise does not involve any cost to the assessee, therefore, it is outside the ambit of international transaction to which the arm's length price adjustment has to be made. Thus the addition made by the lower authorities to the extent of ₹ 5,49,000 is deleted. - Decided in favour of assessee. Disallowance of trade mark licence fee - Held that:- This Tribunal found that nothing uncommon in the assessee's making payment to use the trade mark "Redington" to M/s. Redington Distribution Pte. Ltd., Singapore. By placing its reliance on the order of this Tribunal in the assessee's own case for the assessment year 2009-10 and the judgment of the apex court in S. A. Builders Ltd. v. CIT (Appeals) [2006 (12) TMI 82 - SUPREME COURT ] this Tribunal found that the expenditure claimed by the assessee is an allowable expenditure. Since the facts are identical, this Tribunal is of the considered opinion that the claim of the assessee has to be allowed as business expenditure. - Decided in favour of assessee. Disallowance under section 14A - assessee now claims before this Tribunal that the investment was made out of its own funds accrued internally - Held that:- n the immediately preceding year the investment was ₹ 23,808.73 lakhs. No material is available on record with regard to internal accrual of funds in the regular course of its business activity. As rightly submitted by learned counsel, if the assessee has its own funds for making investment then there is no question of any disallowance of notional interest on the borrowed funds. Since the assessee specifically claims that no borrowed funds were diverted for investment in other companies, this Tribunal is of the considered opinion that funds available with the assessee on the date of making investment has to be examined. Accordingly, the orders of the lower authorities are set aside and the issue of disallowance made by the Assessing Officer under section 14A of the Act to the extent of ₹ 2,55,33,000 is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh and find out the available interest-free funds with the assessee and thereafter decide the issue in accordance with law after giving a reasonable opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (11) TMI 852
Computation of income under section 44D - Reimbursement of expenses not treated as part of 'fees for technical services' by CIT(A)- Held that:- Commissioner of Income-tax (Appeals) while deciding the issue in favour of the assessee has relied on the decision of the hon'ble Cuttack Bench in the assessee's own case for the assessment year 2002-03 wherein considering this clause of the agreement with NHAI and the definition of 'fees for technical services', under the Income-tax Act, as well as, the definition of 'fees for technical services', under the Double Taxation Avoidance Agreement, the receipts in the nature of reimbursement of expenses, cannot be treated as, fees for technical services - Decided in favour of assessee.
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2015 (11) TMI 851
Exclusion of expenses from the export turnover and total turnover - Held that:- As rightly argued by the learned representative for the assessee, both export turnover and total turnover shall be of the same factor. What was excluded from the export turnover cannot form part of total turnover. Therefore, this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly directed the Assessing Officer to exclude the expenses from the total turnover also. This Tribunal does not find any infirmity in the order of the lower authority. Deduction under section 10B - Held that:- xplanation 2(iv) to section 10B clearly says that approval by the Board appointed by the Government of India under section 14 of the Industries (Development and Regulation) Act, 1951 is an essential condition. In this case, though the assessee claims that the approval initially granted by the Development Commissioner, Special Economic Zone was ratified by the Board, it is not clear from the material available on record whether ratification was accorded by the Board constituted by the Government of India under section 14 of the Industries (Development and Regulation) Act, 1951. In the absence of any material to show that whether the approval was accorded by the Board constituted under the Industries (Development abd Regulation) Act, 1951, this Tribunal is of the considered opinion that the matter needs to be re-examined. Moreover, section 10A also gives exemption to 100 per cent. export oriented unit. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer in the light of the provisions of section 10A of the Act, in case the assessee is not eligible under section 10B of the Act. Exclusion of foreign travel expenses, 50 per cent. of telephone charges and communication expenses, freight outward and commission expenses from the export turnover. - Held that:- in view of the decision of the Special Bench in ITO v. Sak Soft Ltd. [2009 (3) TMI 243 - ITAT MADRAS-D ] the expenses which were excluded from the export turnover are also to be excluded from the total turnover. Since the Commissioner of Income-tax (Appeals) excluded the communication charges, foreign travel expenses, commission charges, etc., from export turnover, this Tribunal is of the considered opinion that the same are also to be excluded from the total turnover. In other words, the items which were excluded from the export turnover have also to be excluded from the total turnover. Therefore, this Tribunal do not find any infirmity in the order of the lower authority.
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2015 (11) TMI 850
Addition of diversion of interest bearing funds for non-business purpose - CIT(A) deleted the addition - Held that:- CIT(A) followed the judgment of the hon'ble Bombay High Court rendered in the case of CIT v. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] and the judgment of CIT v. Radico Khaitan Ltd. [2004 (9) TMI 37 - ALLAHABAD High Court] and deleted both these disallowances. The learned Departmental representative for the Revenue could not controvert these findings of the Commissioner of Income-tax (Appeals). - Decided against revenue Addition on depreciation and additional depreciation on effluent plant - CIT(A) deleted the addition - Held that:- CIT(Appeals) has given a categorical finding that cost of construction of tank, etc., forms an integral part of effluent treatment plant and therefore, depreciation on the same is allowable at the rate applicable for plant and machinery as against the rate of building allowed by the Assessing Officer. Regarding chrome recovery plant also, he has given a categorical finding in para 3.7 of his order that in rule 5 of the Income-tax Rules, 1962, 100 per cent. depreciation is allowable and since the plant is used for less than 180 days in the present year, it is allowable at 50 per cent. The learned Departmental representative for the Revenue could not controvert these findings of the Commissioner of Income-tax (Appeals). Hence we decline to interfere with the order of the Commissioner of Income-tax (Appeals) on these issues also because even if a claim was not made in the return of income, it can be made before the learned Commissioner of Income-tax (Appeals) if it is a legal claim - Decided against revenue Excess claim of additional depreciation on reconditioned imported machinery and vibrator staking machine - CIT(A) deleted the addition - Held that:- Commissioner of Income-tax (Appeals) has relied upon a judgment of CIT v. Hindustan Milk Food Manufacturers Ltd. as reported in [1972 (10) TMI 33 - PUNJAB AND HARYANA High Court] and Cochin Company v. CIT as reported in [1967 (3) TMI 19 - SUPREME Court] where it was held that the machines which were reconditioned with substantially new parts are to be treated as new machines. CIT(Appeals) has reproduced a chart containing analysis of percentage of the cost of new parts to total cost indicating such percentage at 62.50 per cent. and 66.67 per cent. in two cases, 75.89 per cent. and 77.32 per cent. in two cases and more than 87 per cent. in remaining three cases. Hence under these facts, the decision of the learned Commissioner of Income-tax (Appeals) is in line with these judgments followed by him. No contrary judgment is cited by the learned Departmental representative for the Revenue. - Decided against revenue Additional depreciation on drum and paddle - CIT(A) deleted the addition - Held that:- CIT (Appeals) has relied upon a judgment of CIT v. Surama Tubes P. Ltd. [1991 (1) TMI 9 - CALCUTTA High Court] and on a judgment of Janta Sugar Industries v. CIT as reported in [2005 (2) TMI 12 - HIGH COURT, ALLAHABAD ] where it was held that for claiming depreciation and investment allowance, material date is the date of installation and not the date of acquisition. The disallowance was made by the Assessing Officer on this basis that the drums of ₹ 8,98,835 and paddles of ₹ 2,94,438 were purchased at the end of the financial year 2004-05 but installed in the financial year 2005-06. Since as per these judgments, the material date is the date of installation and not the date of acquisition we find no infirmity in the order of the Commissioner of Income-tax (Appeals). - Decided against revenue
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2015 (11) TMI 849
Claim of depreciation on the assets, cost of which was allowed as a part of utilisation - assessee is a trust registered under section 12A - Held that:- Issue of the assessee's claim for depreciation on addition to assets acquired in the relevant period is to be allowed even if the entire cost of the same assets have been claimed by the assessee and allowed as application of its income for charitable purposes, since this issue has been held in favour of the assessee in a number of decisions of the co-ordinate Bench of this Tribunal in the case of Asst. CIT v. Shri Adichunchana giri Shikshana Trust [2013 (11) TMI 123 - ITAT BANGALORE] following the decision of the hon'ble Bombay High Court in the case of CIT v. Institute of Banking [2003 (7) TMI 52 - BOMBAY High Court]. - Decided in favour of assessee.
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2015 (11) TMI 848
Penalty under section 271(1)(c) - higher rate of depreciation on toll road claimed by assessee - Held that:- The assessee has filed the details of depreciation and also the fact that it has treated the toll road as "plant" and has claimed a higher rate of depreciation at 25 per cent. The assessee has filed an explanation in this regard which could not be said to be not bona fide. This is a case of difference of opinion between the assessee and the Department with regard to the correct rate of depreciation allowable to the assessee on its toll road and that whether the toll road is a "plant" or is a "building". It is not a case that the Revenue has gathered some material not disclosed by the assessee. It is a case of furnishing of correct particulars of income, but the difference was in the figure of allowance of deduction on account of depreciation due to the difference in the interpretation of the relevant provision of law. The issue that whether the toll road is a "plant" or a "building" is clearly debatable in nature. Thus no penalty under section 271(1)(c) of the Act could be imposed on a debatable issue. - Decided in favour of assessee.
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Customs
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2015 (11) TMI 878
Valuation - Inclusion of royalty - Extra duty deposit - Held that:- As per the Board’s guidelines for extra duty deposit is presently kept at 1%. Only when the importer fails to submit complete reply to the questionnaire, the department can order extra duty deposit of 5%. Whereas, in the present case, we find that the appellants were importing the goods from their related overseas suppliers from 2008 and the department consistently accepted the transaction value for the year 2008 and again in 2011 and again in 2014 vide various AC/DC (SVB) OIO’s dated 04.06.08, 23.03.2011 and 04.06.2014. In view of the above, we do not find any valid justification in the Order of the Commissioner (Appeals) for ordering 5% of extra duty deposit. Therefore, prima facie appellants made out grounds for stay of the impugned order relating to 5% of extra duty deposit. Accordingly, we direct the department to collect 1% extra duty deposit as per the Boards Circular till the disposal of the appeal. - Decided partly in favour of assessee.
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2015 (11) TMI 821
Benefit of KVSS - tax arrears - Levy of additional duty of customs - whether the case of the appellant is covered by KVSS and more particularly by Section 87(m)(ii)(b) of the KVSS or it is excluded by the provisions of Section 95(ii)(b) of the said Scheme - Held that:- in those cases where show cause notice had been issued or where the notice of demand for payment of indirect tax had been issued, it was permissible for the declarant to claim the benefit of the Scheme. In the absence of such show cause notice or demand for payment, the benefit of the scheme was not available as per clear stipulation in Section 95(ii)(b). - on the basis of interim arrangements not only for payment of differential duty as on that date was made, the appellant also cleared subsequently imported goods in future as well on the said basis. The Customs Authority, acting on the order, not only asserted the additional duty @ 15% on aggregate value of CIF price but even this additional duty on basic and auxiliary custom duty and landing charges was assessed. It is a different matter that for the sake of convenience and in order to comply with the interim directions of the High Court, insofar as the additional duty on basic and auxiliary custom duty and landing charges is concerned, the same was not actually recovered but was secured by means of bank guarantee. In any case, there were clear endorsements in respect of demand of this additional duty made on the Bills of Entries by the Assessing Officer. This, according to us, would clearly constitute a “demand” which was issued. - case of the appellant was covered by Section 87(m)(ii)(b) and did not get excluded by virtue of Section 95(ii)(b) and, therefore, the appellant was entitled to the benefit of the KVSS. - Decided in favour of assessee.
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2015 (11) TMI 820
Denial of benefit of DFIA notification - Provisional clearance of goods - Invocation of bank guarantee - Held that:- License being freely transferable, no actual user condition can be imposed on the transferee who has purchased the License from the open market. The importer therefore is not required to establish the actual user condition in terms of DGFT Policy Circular 50/2008 and CBEC Circular No. 46/2007. We note that in similar cases of same goods, i.e. Saffron, the Orders of Commissioner Appeals allowing such import at Mumbai and Nava Sheva were accepted by the Department and the imports under relevant B/Es such B/E No 5551749 field at ACC Mumbai bear the remarks “Assessed as per Commissioner (Appeal) order accepted by Committee of Commissioner of Customs vide F.No. S/3-Misc-18/2010 DFI ACC”. No appeal having been filed in view of acceptance of this Order, the acceptance by the Committee of Commissioners is binding on officers and any contrary decision amounts to defiance of the decision taken by Committee of Commissioners. - department cannot now impose strict conditions for provisional release when there are Orders of the Tribunal and the Commissioner (Appeals) in favour of the appellant. Therefore the Order imposing 100% Bank Guarantee is not sustainable. - adjudicating authority does not have the authority to impose such conditions for provisional release. This exercise of the power is very arbitrary and suffers from lack of reasonableness in view of the judicial pronouncements in appellant's favour. - Decided in favour of assessee.
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2015 (11) TMI 819
Refund claim - benefit of the customs notification No. 21/2003 dated 01.03.2003 - Commissioner held that refund can be granted if its proven under certification of ACCE that the impugned goods were used fully for intended purposes as per the Registration Certificate - Held that:- Bill of Entry No. 550344 was filed on 28.06.2003, and the imported consignment was cleared on 30.06.2003. Registration under Rule 3 was done on 14.07.2003 and the application under Rule 4 was filed on 18.07.2003. All these requirements are merely procedural and the intent of these statute is to ensure that the use of the goods imported by the manufacturer are for the intended purpose as declared in the application. - importer is entitled for the benefit of the notification and refund can be granted if it is proven under certification of ACCE that the impugned goods were used fully for intended purpose as per the Registration certificate. - Decided in favour of assessee.
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2015 (11) TMI 818
Denial of refund claim in terms of Notification No.102/2007-Cus. dated 14.9.2007 - Levy of additional duty of customs - Unjust enrichment - Held that:- As it is seen from the reproduced part of the Circular, a certificate by the Chartered Engineer certifying that the burden of CVD has not been passed on to the buyer and a self-declaration by the buyer is sufficient to establish that the duty burden has not been passed on and the condition of unjust enrichment will not apply. Though the original adjudicating authority has accepted the fact of said certificate on record, but he has not followed the same on the sole ground that details as to how such conclusions were arrived at by the Chartered Engineer, do not stand given in the said certificate. - no such details are required to be given in the Chartered Engineer certificate. Secondly, the Chartered Engineer’s certificate is admittedly based upon the examination of the accounts maintained by an assessee and is presumed to have been given after verification of the same. In terms of the Board’s Circular also such certificate if given by the Chartered Accountant would suffice - Impugned order is set aside - Decided in favour of assessee.
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2015 (11) TMI 817
Valuation - Enhancement in value - Imposition of penalty - Held that:- enhancement of value has been done merely on the basis of the statements of the indenters who too spoke about value of the said goods in Malaysia. Enhancement of value merely on the basis of such statements of the indenters in the absence of any inculpatory statement of the assessee appellant and without the support of value of any contemporaneous imports of identical / similar goods is totally unsustainable particularly when the impugned goods came from UAE and not from Malaysia. When the allegation of undervaluation is not sustainable the question of RF and penalty simply does not arise. - Impugned order is set aside - Decided in favour of assessee.
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2015 (11) TMI 816
Classification of goods - Classification under Chapter Heading 8432 or 8483 - Held that:- Parts imported by the assessee are meant for assembling of agricultural equipment. However even though the parts are solely and principally to be used for assembling of agricultural equipment but certain parts which have placed in their respective tariff entry would merit classification in the respective head - if any of the part are either having independent entry in Chapter 84 or 85 and if the goods are of chapter 73 are of general use covered under chapter heading 7307, 7312, 7315, 7317 or 7318 these parts will not be classified as part of equipment where it is going to be assembled however the same will be classified in their respective tariff heads. We find that the assessee have made their submission mainly on the ground that all the parts imported by them are designed as parts of agricultural machinery and use in the said agricultural machinery i.e. Rotavator, Tiller and therefore they claim that all the parts merit classification as parts of agricultural machinery. However, the appellant have not challenged the reclassification under different Chapter heading held by Adjudicating authority. - there is no dispute that parts imported by the assessee are exclusively meant for manufacture of agricultural machinery therefore the assesees bonafide belief that goods imported by them are classifiable as parts of agricultural machinery. We therefore do not find any infirmity in the Commissioner(Appeals) setting aside penalty and fine, we therefore upheld the same - Decided partly in favour of assessee.
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2015 (11) TMI 815
Waiver of pre deposit - Seizure of goods - Demand of differential duty - Import of heavy slack wax, residue wax and slack wax - misdeclaration of value on the imported goods and DRI investigated the case - Held that:- On perusal of Bill of Entry No. 437564 dated 29.5.2008 we find that the bill of entry was filed for home consumption and the description clearly shows that the bill of entry for clearance of home consumption provisional. Further, we find from letter dated 20.5.2015, produced by learned AR, issued by Commissioner of Customs, Tuticorin, wherein he has confirmed all the 21 bills of entries were provisionally assessed on executed of bond as samples have been sent for testing in order to ascertain the classification and value. The Commissioner also confirmed that the bills of entries are not finalized till date and Bill of Entry No. 4378411 dated 17.8.2011 is not assessed provisionally and was assessed finally. Prima facie, we find that all the 21 bills of entries related to past clearance were assessed provisionally whereas the present order is silent on the finalization of the bills of entries provisionally assessed. Therefore, prima facie, there is merit on the appellant s plea insofar as the 22 bills of entries are concerned as the demand was confirmed under section 28 and value was enhanced without finalizing the provisional assessment of said bills of entries. - adjudicating authority has already appropriated an amount of ₹ 19,47,067/- deposited by the appellant on the basis of the orders of the Hon’ble High Court of Madras. In view of the appropriation made in the impugned order, we find that the amount already paid and appropriated would be sufficient for the purpose of waiver of balance amount of dues. - Stay granted.
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2015 (11) TMI 814
Imposition of penalty - DTA clearances - Fraudulent availment of DEPB Credit - Held that:- There was a demand of duty of ₹ 201.50 crores and ₹ 1.05 crores confirmed against the said company alongwith interest and penalty of equal amount of duty. The appeal of the said Company was dismissed for non-compliance of the Stay Order. So, there is no need to go into the merits of the case on export of the goods as the appeals of the said Company was dismissed. The Adjudicating Authority observed that the entire operation of evasion of duty and obtaining of DEPB license was carried out at the instance and direction of Shri Liladhar of the said company as evident from the statement of Shri Dyaram S Rajde (Proprietor of Ashok Bulk Carriers), Shri Sanjay Ahuja (Export Executive of the said Company) and Shri Deepak S Joshi, (Customs Clerk of the said Company) as well as facts, which were specifically brought on record. - Company obtained DEPB license fraudulently and facilitated the various importers to import the goods duty free and imposition of penalty under Section 112 is justified. It is noted that the said Company exported the goods in irregular manner and penalty under 114 is warranted. It is further noted that the said company cleared the goods from DTA of SEZ in violation of the Central Excise Rules and imposition of penalty under Rule 26 is justified. - However, penalty on 1 appellant is set aside - Decided partly in favour of Appellant.
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2015 (11) TMI 813
Import of goods at concessional rate of duty under Notification No. 25/99-Cus for use in manufacture of goods - Duty demand u/s 28 - Penalty u/s 114A - Demand of differential duty - Held that:- It is seen that the appellant was receiving defective CPTs under Rule 16 of the Central Excise Rules - appellant was fully aware that the repair activity undertaken by it did not amount to manufacture and therefore the goods used for repair of CPTs were not eligible for the concessional rate of duty under Notification No. 25/1999-Cus. as that exemption was available only for such goods which were used for the manufacture of finished goods. Therefore, demand of differential duty on such goods which were imported at concessional rate of duty under Notification No. 25/99-Cus. and were used for repair of CPTs is clearly sustainable. - appellant was fully aware that the repair of CPTs did not amount to manufacture, it was also aware that the goods imported at concessional rate of duty were to be used only for manufacture of excisable goods and still it used those goods for repair. Not only that when information was sought, it indulged in prevarication. - processes undertaken clearly supported the conclusion that they amounted to manufacture while in its own case, CESTAT had given a finding that repair of CPTs did not amount to manufacture. - No infirmity in the impugned order - Decided against assessee.
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2015 (11) TMI 812
Valuation - Doubting the declared transaction value, the department obtained a quotation - Demand of differential duty - Confiscation of goods - Imposition of redemption fine - Held that:- It is indeed surprising that the whole case has been made on the basis of one quotation. The value has been determined by proceeding sequentially through the Valuation Rules. No contemporaneous data was available. Therefore, as the value could not be determined under Rules 4,5,7 & 8, resort was made to Rule 9 residual method. And as a residual method, by way of best judgment the quotation has been made the basis. - There is a fundamental flaw in the manner of obtaining quotation in that the market enquiry was not conducted in the presence of the appellant or their authorized representative. This amounts to violation of natural justice. The department could have at least verified from two or three more sources for credible evidence. From the procedure adopted, it seems the Department was not serious in conducting investigations through a proper market enquiry. For authentic enquiries the department should have at least sought the purchase invoices and the sale invoices of M/s. Max Flex & Imaging System Pvt. Ltd. to lend credibility to their evidence. Valuation Law under Section 14 read with the Valuation Rules provide a proper method to determine the assessable value if there is a doubt regarding the accuracy of the declared value. A mere suspicion is not enough to reject the transaction value. In the present case the department relies on a quotation without checking whether Star Flex is a Brand or not. The test of satisfying criteria under Rule 4(2) of the Valuation Rules must be passed first before seeking to enhance the value. It has not even been explained how contemporaneous data was not available. Fixing of floor prices indicates that the goods are frequently imported . A question arises why floor prices should be fixed if there are no other imports. Transaction value cannot be rejected on basis of a quotation which gives domestic retail sale price. If this were to be accepted, it would cause unimaginable distortion in interpreting the Valuation Law. - percentage of excess miniscule. Moreover the duty is on specific rate basis i.e. on weight basis. And the weight was declared correctly. We see no mischief or any attempt to evade duty. Therefore we hold that confiscation is not warranted. - re-determined values are unsustainable in law. Consequently confiscation, the demands of duty and penalties are set aside. - Decided in favour of assessee.
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Service Tax
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2015 (11) TMI 876
Levy of penalty - Tour Operator Services - utilization of the CENVAT Credit on the inputs services which were used for providing non-taxable output services. - when legal provisions are categorical and there is no doubt regarding interpretation of those provisions, whether lenient view could be taken for not imposing penalty - Held that:- there is no doubt that once output services are provided free of service tax and separate records are maintained, it is imperative that no credit could be utilized for providing non-taxable services. It is also stipulated that if violation of legal provisions is manifested by not restricting the credit utilization to 20 per cent of the credit, then imposition of penalty is attracted. - Adjudicating Authority has rightly imposed the penalty of ₹ 100 per day till the payment of service tax under section 76 of the Finance Act restricting the total amount of penalty equivalent to the amount of service tax involved. - Decided in favour of Revenue.
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2015 (11) TMI 847
Valuation of service - whether the rent paid for hiring the space on buses for displaying the advertisements is to be excluded from the gross amount charged by the advertising agency from the service recipient for determining the taxable value in the light of Board's Circular dated 31st October, 1996 - Held that:- as the payment of service tax on the aforesaid service rendered by the assessee to various State/Central Government Departments is concerned, that is decided in favour of the Revenue holding that the respondents are required to pay service tax on the same. However, at the same time, CESTAT has also returned the finding that the assessee shall be entitled to the benefit of Board's Circular dated 31st October, 1996 and because of this reason, the matter was remanded back to the Adjudicating Authority for recalculation of the duty payable. The CESTAT has also given liberty to the Adjudicating Authority to decide the question of imposition of personal penalty upon the assessee. Since the matter is remitted back to the Authority on the aforesaid issue, we do not find any reason to interfere with such an order passed by the CESTAT [2005 (7) TMI 6 - CESTAT, MUMBAI] - Decieded against Revenue.
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2015 (11) TMI 846
CENVAT Credit - whether the assessee can utilise the cenvat credit facilities in respect of outdoor catering services, provided in the factory for its employees, as input service - Held that:- Court dealt with the issue in a batch of appeals in [2015 (3) TMI 736 - MADRAS HIGH COURT] held in favour of the assessee by following the decision of the Bombay High Court in the case of CCE V. Ultratech Cement Ltd. reported in - [2010 (10) TMI 13 - BOMBAY HIGH COURT], wherein all the contentions raised by the respective parties have been considered in extenso including the definition of 'input service' as defined in the case of Maruti Suzuki Ltd. V. CCE reported in [2009 (8) TMI 14 - SUPREME COURT ]. The Bombay High Court came to the conclusion that the decision of the Larger Bench of the CESTAT in the case of CCE V. GTC Industries Ltd. [2008 (9) TMI 56 - CESTAT MUMBAI] is a correct law, however, with a rider that where the cost of the food is borne by the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. - Therefore, the issue that the Cenvat Credit can be properly availed by the assessee in respect of outdoor catering services is clearly settled now - Decided in favour of assessee.
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2015 (11) TMI 845
Demand of service tax - Works contract service - Construction Services provided to to various educational institutions - exemption as per Circular No.80/10/2004 ST, dated 17.9.2004 - Held that:- Admittedly, as on the date of passing the impugned proceedings, there was no evidence available before the first respondent to hold that whether the educational institutions to whom the petitioner provided construction services, are profit oriented or whether they are established solely for educational purpose without any profit, etc., While that being so, in the absence of any evidence, there is no justification on the part of the first respondent to hold contrary that too on mere non-production of such evidence by the petitioner. In fact, till the impugned proceedings were passed by the first respondent, it was not known or expected by the petitioner that the first respondent would come to such a contrary conclusion. If at all the first respondent was of such view, he could have very well directed the petitioner by providing an opportunity to produce the relevant documentary evidence regarding the educational institutions to whom, the petitioner provided construction service and thereafter, he could have decided the issue. Petitioner were under bona fide impression that the service tax on the constructions provided to the educational institutions is exempted as per Circular No.80, dated 17.9.2004 and that they only constructed classrooms, hostels, etc., which are primarily used for imparting education and not used either for commerce or industry and without deciding the issue that whether the construction provided by the petitioner to the educational institutions are used or to be used for commerce or industry in order to extend the benefit of exemption under the above said Circular, the first respondent has erroneously dealt with the issue holding that the educational institution to which the petitioner provided constructions, itself is an industry and running for profit - impugned proceedings, dated 28.11.2014 of the first respondent are hereby set aside and the matter is remitted back to the first respondent to deal with the issue in terms of the exemption Circular No.80, dated 17.9.2004 - Decided in favour of assessee.
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2015 (11) TMI 844
Penalty u/s 78 - Business Support Services - non payment of service tax - Whether the imposition of penalty was justifiable when a categorical finding has been given that the appellant does not provide any service as provided under section 65 (104c) of the Act and consequently no penalty could be imposable under Section 78 of the Act - Held that:- The necessary ingredients for levy of penalty is where any service tax has not been paid by reason of fraud, collusion, wilful mis-statement, suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder with the intent to evade payment of service tax. - categorical finding has been given by the Tribunal that the activity carried on by the appellant is a manufacturing activity which cannot be classified as a "business support service" nor can the activity of the appellant could be subjected to service tax under Section 65(104c) read with Section 65(105)(zzzq) of the Act. When no service tax is payable or leviable upon the appellant, the question of penalty or imposition of penalty could not arise. - Decided in favour of assessee.
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2015 (11) TMI 843
Challenge to the notices seeking information - Commercial Training or Coaching Services - Revenue contends that omission of Computer Training Institutes in the subsequent notification clearly indicated the legislative intention of not providing an exemption to such Institutes, and therefore, the petitioners would also not be entitled to claim the benefit of the said exemption. - Held that:- even if the stand of the respondents, which is based on the decision of the Supreme Court in Commissioner of Central Excise v. Sunwin Technosolution P. Ltd. - [2010 (9) TMI 71 - SUPREME COURT OF INDIA] is accepted, the petitioners still have a case that the Institutes run by the petitioners fall within the exclusion in the definition of 'commercial training or coaching centre' which excludes an institute or establishment which issues a certificate that is recognised by law from the purview of tax under the head of 'commercial training or coaching centre'. This is an aspect that will have to be considered by the adjudicating authorities when determining the applicability of the levy of service tax to the services rendered by the petitioners. I note that, in some of these writ petitions, the Commissioners of Central Excise of the Thiruvananthapuram, Ernakulam and Calicut Divisions have been made parties. - no coercive steps will be taken till such time as the adjudication is complete. - Matter remanded back - Appeal disposed of.
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2015 (11) TMI 842
Condonation of delay - Non deposit of service tax collected - Delay in depositing due to medical ailment of assessee - whether the case projected by the petitioner with reference to the merit order, is liable to be entertained by this Court when the statutory period for filing the appeal is already over - Held that:- considering the persuasive submissions made by the learned counsel for the petitioner, this Court finds that an opportunity could be given to the petitioner to wipe of the liability in a phased manner, particularly in view of the physical ailments projected from the part of the petitioner with reference to Ext.P7 Medical Certificate and such other reasons. Considering the extent of liability to be cleared, after the amounts appropriated by way of Ext.P5, the outstanding liability shall be cleared by way of 'six' equal monthly instalments, the first of which shall be effected on or before the 15th of December, 2014, followed by similar installments, to be effected on or before the 15th of the succeeding months. Subject to this, the recovery proceedings shall be kept in abeyance, for the time being. - Decided conditionally in favour of assessee.
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2015 (11) TMI 841
Denial of refund claim - Bar of limitation - Applicability of Section 11B - Held that:- Court finds that the question of applicability of Section 11B of the CE Act read with Section 83 of the Finance Act, 1994 to the refund application of the Appellant would arise only if the CESTAT came to the conclusion that the services rendered by the Appellant were in fact liable to service tax. If, on the other hand, the CESTAT finds that the services rendered by the Appellant were not amenable to service tax at all, the question of processing the refund application of the Appellant with reference to Section 11B of the Act would not arise. - CESTAT ought to have first satisfied itself that the services rendered by the Appellant was, on facts, amenable to service tax and different from the other three appeals which were heard together with the Appellant's appeal and allowed by the same impugned order. If and only if the CESTAT finds that the services rendered by the Appellant were in fact amenable to service tax would it then take up the question whether in terms of Section 11B of the Central Excise Act, 1944 and the claim of the refund was barred by limitation. - Matter remanded back - Decided in favour of assessee.
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2015 (11) TMI 840
Availment of CENVAT Credit - GTA service - credit of service tax paid which was not liable to be paid - Held that:- first respondent/assessee was not liable to pay service tax on the transportation of goods both inward and outward upto 31.12.2004. The liability was imposed only with effect from 1.1.2005. But, unfortunately, the first respondent/assessee paid service tax, even at a time when there was no liability on them. Since they made payment of tax under the impression that they were due to pay, they claimed CENVAT Credit to that extent. It is not the case of the Department that the first respondent claimed CENVAT Credit in respect of an amount that they had not paid or in excess of the amount that they have paid. The only grievance of the Department is that if the assessee had paid tax which they were due to pay or if they had paid duty in excess of what they are liable to pay, the only course open to them is to claim refund and not to make use of CENVAT Credit. But, we do not think so. If, upon a misconception of the legal position, the assessee had paid the tax that he was not liable to pay and such assessee also happens to be an assessee entitled to certain credits such as CENVAT Credit, the availing of the said benefit cannot be termed as illegal. Therefore, we find no infirmity in the order of the Tribunal. - Decided against Revenue.
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2015 (11) TMI 839
Waiver of pre deposit - Appeal dismissed for non compliance with pre deposit order - Held that:- As per the order of this court dated 2.1.2014, the appellant ought to have made a deposit of 25% of the service tax within eight weeks. The order copy was delivered on 7.1.2014. The time limit expired on 7.3.2014. But, the appellant made a deposit on 18.3.2014 due to some wrong calculation. The appellant is a Milk Consumer Co-operative Society. Therefore, interest of justice demands that time limit for compliance should be extended and the deposit already made should be treated as proper compliance. In view of the above, the appeal is allowed. The order of the Tribunal is set aside. - Decided in favour of assessee.
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2015 (11) TMI 838
Power to conduct service tax audit - Petitioner apprehends that there is likelihood of a statutory audit being conducted in the course of excise of jurisdiction of access to a registered premises under Rule 5A of the Service Tax Rules, 1994 - Held that:- petitioner is required to comply with Rule 5A of the Rules in as much as providing access to its registered premises so as to assist the audit party in discharge of duties assigned as per departmental instructions. Even according to learned counsel Rule 5A of the Rules does not permit conducting an Audit but only providing access to the registered premises as also to the documents demanded for scrutiny by the Audit party. Therefore, the apprehension of the petitioner that audit team is likely to conduct an audit at the registered premises of the petitioner under the Service Tax Rules, is misconceived - Decided against appellant.
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2015 (11) TMI 837
Validity of impugned order - Tribunal remanded back the matter - Vagueness of show cause - non-specification of classification/category of services in the show cause notice - nature of receipt - Held that:- issue involved in the appeals is arising out of the common order passed by the Tribunal. The said common order of the Tribunal has been challenged before this Court in a batch of appeals. This Court vide order [2015 (6) TMI 474 - MADRAS HIGH COURT], allowed the appeals by way of remand - Matter remanded back - Decided in favour of assessee.
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2015 (11) TMI 836
Condonation of delay - Held that:- order of the Tribunal, on facts, is justified, inasmuch as, the statement of one S.Baskaran, a Manager of the Applicant Company, clearly shows that the Export Manager, on whose back, the complaint of delay is laid, has left the service long before the impugned order came to be received by the Company in question. Therefore, it was a farfetched plea on behalf of the appellant to clutch at the name of an Ex-employee to seek condonation of delay. - Condonation denied.
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2015 (11) TMI 835
Demand of service tax - Tour Operator Service - Held that:- appellants have only planned for providing vehicles of a specific capacity with a particular schedule. We also note that at the time of expansion of the definition of Tour Operator on 10/09/2004, CBEC Circular No. 80/10/2004-ST dated 17/09/2004 clarified that while the existing levy on tour operators engaged in operating tours in tourist vehicles remain as such, in case of a package tour (which are planned, scheduled, organized or arranged by tour operators), the scope of the levy is being extended by removing the limitations regarding transportation by tourist vehicle only which means it will include air-rail-cab travel also. - appellants provide/supply the contract carriage business (not tourist vehicles) to their customers on their demand only. Therefore the activity of the appellant is not covered by the definition of "Tour Operator' for the period post 10-09-2004. - Decided in favor of assessee. Employees of only those companies/factories etc. who had entered into a contract with M/s. Ideal had the authority to board the buses at pre-determined pick-up points at fixed timings agreed upon and M/s. Ideal had no authority to pick-up or drop any other passenger en-route. Thus, I find from the above that M/s. Ideal were not engaged in the business of planning, scheduling, organizing or arranging package tour of their own as provided under the new definition of 'tour operator' service but were adhering to the conditions laid down in the agreements entered into with various customers. Thus it cannot be said that they were covered under the first part of the amended definition of 'tour operator' also". - activity does not get covered under the 'Tour Operator' Service post 10-09-2004. - Decided in favor of assessee. Activity of organizing picnic tours etc - Held that:- this activity will fall under the ambit of planning, scheduling etc in terms of the first part of the definition irrespective of the fact that the vehicle is not a tourist vehicle. This is because the two parts of the definition are independent and for the activity to be taxable, either part may be satisfied. - find there is reasonable cause to waive the penalties in this case in terms of Section 80 - Decided partly in favour of assessee.
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2015 (11) TMI 834
Demand of service tax - Supply of Tangible Goods for use - model of business is appellant owns the permit for operating Fleet Taxis under an agreement with various drivers, the said taxis are given for plying the passenger in the city - Held that:- Tangible goods in form of radio taxi are given to the driver and there is no transfer of the possession of the vehicle but physical transfer has taken place, but the effective control of such taxi still is in the hands of the appellant. This view of ours is based upon the fact that majority of the time, the taxi is booked by a call from customer to appellant's Call Centre. On the basis of the direction of the appellant, the driver of taxi in the vicinity of the passenger ferries him to his desired destination. It is also to be noted that the driver of radio taxi is not a permit holder and he does not have independent authorization for plying the vehicles and is allowed to take passengers on instructions and directions from the appellant only. Passenger or a customer contacts appellant for booking the radio taxi for the journey and if there is any deficiency of services, the appellant is hauled before the courts and not the driver as also for any misdemeanor of the driver. The entire findings of the adjudicating authority has been misdirected to hold that the driver keeps bulk of the amount of the journey and deposits only small portion of the amount as agreed between the appellant and the driver, which indicates the radio taxi is given for use and covered under STGU. The confusion has arisen due to the reason that the driver depositing the money is considered service recipient for use of such road taxi or supply of tangible goods. In the entire exercise the adjudicating authority has lost the sight of the fact that the supply of tangible goods in the case in hand is not for the use of the driver, but it is for the use of the appellant herein as recorded by us herein before; the entire action of booking of the radio taxi till the collection of the fare from the customer/passenger is on behalf of the appellant. It is also noted from the records that appellant is providing training to the driver and drivers are compensated adequately for the driving undertaken on behalf of the appellant; which will lead to a conclusion that appellant is providing services to the individual passengers and not the driver. We have gone through the entire agreement and find that the said agreement is an agreement which indicates that though the driver is in possession of the vehicle, he has to function under the authority and directions of the appellant, who would book the passengers and pass on the booking to drivers. The said agreement does not any where indicate that the driver are having the possession of the vehicles for their use, which is the most important aspect to be covered under category of services under supply of tangible goods. - Impugned order is set aside - Decided in favour of assessee.
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Central Excise
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2015 (11) TMI 875
Restoration of appeal - Appeal barred by limitation - Held that:- Appellant had filed similar application for Restoration of Appeal on 11.8.2003 against the order dated 29.5.2009; which was dismissed. Secondly, I find that the appeal was dismissed by this Bench on a finding that the First Appellate Authority has no power to condone the delay beyond the period within which the assessee has to file appeal before him as provisions of Section 35 of Central Excise Act, 1944. In my view, whether liquidation or otherwise, the ratio of the judgement Apex Court in the case of M/s Singh Enterprises [2007 (12) TMI 11 - SUPREME COURT OF INDIA], will apply in this case. The First Appellate Authority in his impugned order clearly recorded that in the presence of the security guard of the company, the impugned order was pasted on the gate of the factory, and the appeal was filed almost after 6 months. - Decided against assessee.
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2015 (11) TMI 874
Restoration of appeals - Held that:- matter was adjourned as ‘by way of last chance’ on 19.08.2013 and subsequently at least 4 times. We also find from record that this matter was dismissed for non-prosecution in 2007 and subsequently restored on an application made by the appellant. Despite giving so many opportunities to the appellant, they chose to remain absent in the matter. We find that the appellant is not serious in prosecuting the appeals. - Decided against assessee.
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2015 (11) TMI 873
Waiver of pre deposit - Benefit of Customs Notification NO.21/2002-Cus dated 1.3.2002 read with Central Excise Notification No.23/03-CE dated 31.3.2003 - Held that:- It is admitted fact that duty free raw material was imported by appellant in terms of Customs Notification above. Had the raw material not been imported, the appellant would have been at par with domestic players. Peculiarly appellant availed customs duty exemption at the cost of exchequer. Scrap was inbuilt in the duty free material imported. Ignorance of Customs duty forgone on the scrap aspect would place domestic players in disadvantageous position and shall run counter to the principle laid down in Hyderabad Asbestos Cement Products - [1999 (12) TMI 63 - SUPREME COURT OF INDIA]. Therefore, as a course of equality before law, we direct the appellant to make deposit ₹ 40 lakhs within four weeks from today and make compliance on 26.02.2014 - Decided against assessee.
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2015 (11) TMI 833
Classification of motor vehicles hinges and handles - whether the goods are classifiable under Chapter Heading 8302.00 or Chapter Heading 8708.00 - Held that:- the goods in question are meant for specific purpose viz. in the motor vehicles that too for specific model of the motor vehicles as its parts. - To determine the applicability of the item under particular head, the test of commercial identity of the goods would be the relevant test and not the functional test. It was also held that the expression “parts of general use” would not apply to parts or accessories which are not suitable for use solely or primarily with articles of Chapter Heading 87.08 which pertains to parts and accessories of motor vehicles of Chapter Headings 87.01 to 87.05. The Court was also categorical that in such a case the test that is to be applied is: 'whether the goods are suitable for use solely or primarily with articles of Chapter Headings 87.01 to 87.05'. It is strange even when the judgment was specifically brought to the notice of the Tribunal and is taken note of, but the same was not dealt with by the Tribunal in the impugned judgment at all. - Decision in the case of G.S.Auto International Limited vs. CC Excise, Chandigarh [2003 (1) TMI 700 - SUPREME COURT] followed - Decided in favour of assessee.
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2015 (11) TMI 832
Denial of refund claim - SCN not issued - Held that:- Since the deposit of ₹ 15 lakhs was proposed to be appropriated in the show cause notice dated 5/4/2006 issued by DGCEI to M/s. Quality Processors therefore unless until show cause notice is finally decided, refund claim is not mature. I also observe that appellant themselves have proposed for adjustment of this ₹ 15 lakhs against short payment of duty by M/s. Quality Processors. In such a situation, I agree with the lower authorities that the refund cannot be granted at this stage. Information regarding the status of the proceedings of show cause notice dated 5/4/2006 is not available on record before me. In view of the above position, I remand the matter to the original adjudicating authority with a direction that refund claim of ₹ 15 lakhs filed by the appellant should be processed in accordance with law after conclusion of proceedings covered under the show cause notice dated 5/4/2006. - Decided in favour of assessee.
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2015 (11) TMI 831
Denial of refund claim - Unjust enrichment - duty of excise was paid under compound levy scheme Held that:- As regard the applicability of unjust enrichment following the ratio of the Larger Bench decision in the case of Shivagrico Implements Ltd.(2006 (4) TMI 5 - CESTAT, NEW DELHI) , I am of the considered view that unjust enrichment is applicable even in case of refund of duty paid under compound levy scheme. From Section 11B also it can be seen that Section 11B covers refund of any duty of excise therefore duty paid under compound levy scheme is also governed by the Section 11B of Central Excise Act, 1944. As regard Ld. Counsels submission that the order was passed exparte, I find force in his argument and found that either hearing notice was not received by the appellant or it was delivered after the date of hearing. In view of this position, it is fit case for remand. I therefore remand the matter to the original adjudicating authority who shall disposed of the matter within a period of three months from the date of receipt of this order. Appellant has to produce necessary documents/evidence to prove that incidence of refund amount has not been passed on to any other person. - Matter remanded back - Decided in favour of assessee.
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2015 (11) TMI 830
CENVAT Credit - Capital goods - Held that:- Adjudicating authority in his order dropped the proceedings in respect of recovery of demand of reversal of cenvat credit. However, he demanded the interest. On perusal of the DC letter dt. 20.7.2001 addressed to the appellant, where the appellant applied for debonding on 30.3.2001, final debonding order was issued and appellant was allowed to operate as DTA unit with effect from 1.4.2001. Subsequently, the Development Commissioner clarified that appellants have been permitted to operate as DTA unit on 31.3.2001 instead of 1.4.2001 as they have completed Central Excise formalities on 30.3.2001 itself. In view of the Development Commissioner's letter allowing for debonding of EOU, the DTA unit of the appellants have reversed the credit on 30.3.2001 itself and the Development Commissioner in the above letter has also approved debonding w.e.f. 31.3.2001. Therefore, the question of demand of interest and imposition of penalty does not arise and also find that there was no removal of capital goods till the same unit becomes the DTA unit. There was no physical removal or clearance of capital goods or excisable goods. I find that the adjudicating authority instead of taking the date as 31.3.2001 has taken the date of debonding as 14.8.2001 which is not correct. Hence I hold that appellants are not liable for any interest or penalty. Accordingly, the impugned is set aside - Decided in favour of assessee.
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2015 (11) TMI 829
Denial of CENVAT Credit - credit on various steel items, namely, MS channels, angles, Joits, HR sheets, Mill plates, MS plates, etc. - items are neither inputs nor capital goods - Held that:- Items are used for fabrication of storage tank, sugar grader and for structural support of the boiler. For that, the appellant is entitled to take cenvat credit as inputs of capital goods. Further, the appellant has given up claim of cenvat credit of ₹ 6,921/-, which is disallowed. In these terms, I hold that the appellant is entitled to take cenvat credit in dispute except cenvat credit of ₹ 6,921/- for which the appellant is directed to reverse the same alongwith interest. - penalty is not imposable on the appellant - Appeal disposed of.
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2015 (11) TMI 828
Business auxiliary services - CENVAT Credit - Job works - Held that:- It is not disputed by the Revenue at the end of job worker that they are not required to pay service tax. It is also not in dispute that the job worker has not paid the service tax. In these circumstances, whatever service tax has been paid by the appellant to the job worker, appellant is entitled to take Cenvat Credit. Consequently, the appellant was not required to reverse the same. On objection by the audit party, the appellant has reversed the Cenvat credit, they are entitled to take refund on the same. - appellant is entitled to claim refund of service tax reversed by them paid on job work charges. - impugned order is set aside - Decided in favour of assessee.
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2015 (11) TMI 827
Delayed refund - payment of interest on delayed refund - department appropriated the amount towards arrears of duty due involved - Held that:- Rebate was initially sanctioned and the same was appropriated towards dues arising out of Commissioner's Order. I find that the said appeal was filed against the Commissioner (Appeals) order and stay was obtained vide Tribunal's Misc. Order [2012 (6) TMI 794 - CESTAT CHENNAI] and it was subsequently extended by another order. During the period when stay was not extended by the Tribunal as there was no Division Bench sitting, the authority has adjusted the amount sanctioned towards recovery by holding that there was no stay which has resulted in appellant filing of writ petition before the Hon'ble High Court of Madras - Madurai Bench of the Hon'ble High Court of Madras set aside the said recovery in their order dated 29.10.2012 and directed the department to release the amount and in compliance with the High Court direction, the said amount was released by the authority in O-in-O dated 10.12.2012. I find that since the original amount was sanctioned on 18.11.11, 22.11.11, 23.11.11, 24.11.11, 25.11.11, which was initially appropriated but subsequently released on 10.12.2012, the appellants are eligible for the refund of interest on the delayed payment. - Decided in favour of assessee.
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2015 (11) TMI 826
Denial of CENVAT Credit - Clearance of goods from place of removal or factory - Held that:- In the case of clearance of goods for export by manufacturer exporter, shipping bill is filed by the manufacturer exporter and goods are handed over to the shipping line. After Let Export Order is issued, it is the responsibility of the shipping line to ship the goods to the foreign buyer with the exporter having no control over the goods. In such a situation, transfer of property can be said to have taken place at the port where the shipping bill is filed by the manufacturer exporter and place of removal would be this Port/ICD/CFS. Needless to say, eligibility to CENVAT Credit shall be determined accordingly. - There is no dispute that appellants are manufacturer-exporter and goods have been exported by them and that is why invoices for the various services are in their name. On the basis of such invoices they have availed Cenvat Credit. - Decided in favour of assessee.
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2015 (11) TMI 825
Duty demand - exemption Notification No 2 /2001 dtd 27.1.2001 - Captive consumption - Held that:- Tribunal already decided against the 3 show cause notices against the appeal filed by the respondent and remanded the matter. He also submits that the adjudicating authority already dropped the demand in respect of the other 3 show cause notices as per the remand order of the Tribunal. At this stage, the learned Authorised Representative for the Revenue submits 3 months period was not included in the earlier proceedings, which may be verified. Following the decision of the Tribunal in the case of Saurashtra Cement Ltd , we hold that the demand at the rate of 8% of the value of Cement cannot be sustained and remand the matter to the Commissioner for verification of the correctness of the reversal of credit amount. - Appeal disposed of.
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2015 (11) TMI 824
CENVAT Credit - Clearance of goods without payment of duty under CT-2 Certificate under cover of invoices to EPG for use in the packing of tubes and tyres - Held that:- There is no dispute on the packing material which is eligible for cenvat credit. The only dispute is that respondent has cleared packing material under CT2 certificate to their own EPG for export purposes which is declared as Export Processing Godown having a Customs Bonded Warehouse and the packing material used in the finished goods which are ultimately exported from the bonded warehouse at EPG and also there is no dispute on the export of finished goods which contained packing material from the EPG and the appellant followed procedure under Central Excise Rules and duly followed CT-2 procedure as per notification 43/2007 dt. 26.6.2007. The respondents are eligible for cenvat credit on the packing material. I find that as per sub-rule (5) (vi) of Rule 6 of CCR, the provisions of rule 6 is not applicable as the goods were cleared for export under bond in terms of provisions of CER. Accordingly the respondents are not required to reverse the cenvat credit while clearing under CT-2 certificate to their EPG unit and there is merit in the contention of respondent that LAA has relied his own OIA No.20/07 in the impugned order. I do not find any infirmity in the impugned order which is upheld. - Decided against Revenue.
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2015 (11) TMI 823
Duty demand - Remission of duty - Held that:- consequential demand of duty, against the remission application was set aside by the Commissioner (Appeals). The Tribunal by Final Order dtd 27.6.2008 rejected the appeal filed by the Revenue. We find that the demand of duty on the goods destroyed by fire on 22.11.2003 was set aside by the Commissioner (Appeals) and upheld by the Tribunal. Therefore, the rejection of application for remission of duty has no consequence as the demand of duty thereon, has already been set aside. - impugned order cannot be sustained. Accordingly, the impugned order is set aside. - Decided in favour of assessee.
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2015 (11) TMI 822
Denial of CENVAT Credit - Capital goods - CENVAT Credit used in the capital goods of the balance 50% in April-May 2005 would be denied on the ground that the Respondent opted for exemption during 09.07.2004 to 31.05.2005. They opted to avail exemption on clearance of the goods without payment of duty. - Held that:- Commissioner (Appeals) passed the order following the decision of the Tribunal in the Respondent’s own case [2007 (11) TMI 609 - CESTAT AHMEDABAD]. Hence, I do not find any reason to interfere the order of Commissioner (Appeals) - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (11) TMI 879
Review petition - exemption from tax under Schedule “B” notified by the State of Himachal Pradesh under section 9 of H.P. VAT Act., 2005 - Held that:- what appears to be more than settled law is that an error contemplated under the rule must be such, which is apparent on the face of the record and not an error which has to be fished out and searched. It must essentially be an error of inadvertence and definitely something more than a mere error and must be one which must be manifest on the face of the record. If the error is so apparent that without further investigation or inquiry only one conclusion can be drawn in favour of the applicant, in such circumstances, the review will lie. However, under the guise of review, the parties are not entitled to re-hearing of the same issue but the issue can be decided just by a perusal of the record and if it is manifest can be set right by reviewing the order. It must be remembered that in exercise of the powers of review this court cannot sit in appeal over its own order. Re-hearing of the matter is impermissible in law, since the power of review is an exception to the general rule that once the judgement is signed or pronounced, it should not be altered. It has to be remembered that power of review can be exercised for correction of a mistake but not to substitute a view. The review cannot be treated like an appeal in disguise. Whether the sales of the petitioner are inter-State or intra-State, are findings of fact, which have already been determined by this court and cannot be interfered with, because power of review cannot be exercised on the ground that decision is incorrect or erroneous on merit as the same lies within the ambit of a higher court having appellate power which alone is in a position to correct the error committed by the subordinate courts by virtue of power of appeal conferred on the said court by some statute - Based upon the documents on record, it had been found by the Assessing Officer that company had created false documents by generating invoices in the names of the farmers from the State of Haryana. While in fact, the goods were transported to the State of Himachal Pradesh and the name of consigner was declared the department of agriculture. Whereas it was proved on record that company was not supplying the agriculture implements i.e. manually operated and animal driven agriculture, rather installing a complete irrigation system which required material like pipes, joints, sockets, sprinklers etc. and these were not exempted from tax (VAT) - petitioner has failed to make out a case within the four corners of Section 114 read with Order 47 Rule1 and section 151 CPC Accordingly, we find no merit in this review petition - Decided against assessee.
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2015 (11) TMI 871
Review petition - Held that:- State of Andhra Pradesh is now bifurcated into the State of Telengana and State of Andhra Pradesh from 02.06.2014. Assessment orders were passed by the assessing authority of the State of Andhra Pradesh. Now the demand is created by authorities by the State of Telengana. If the petitioner, for any reason, fails in Writ Petition No.31525 of 2013 that is pending before the High Court, they would not be in a position to file an appeal against the assessment order(s) either in the State of Andhra Pradesh or in the State of Telengana. - we set aside the impugned judgment and order passed by the High Court - We reserve liberty to the concerned state assessing authority to complete the assessments for the aforesaid period after disposal of Writ Petition 31525 of 2013. - Decided in favour of appellant.
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2015 (11) TMI 870
Denial of concessional rate of tax - KVAT - sales effected by the petitioner are mainly to the Lakshadweep Administration - Held that:- the provisions of the Act read with Rule 112C (1) of the KVAT Rules have to be seen as a complete code in respect of the grant of concessional rate of tax to dealers effecting supply of articles to the Lakshadweep Administration. Conditions stipulated in Rule 12C (1) have to be interpreted in such a way that they would further the object, that is envisaged in the 1st proviso to Section 6(1). When so read, it would follow that in cases where the dealer in question supplies goods to the Lakshadweep Administration in the archipelago, by effecting transportation of the goods from the mainland to the archipelago, then for claiming a concessional rate of tax in respect of the supply so effected, the dealer would have to satisfy the twin requirements of furnishing a declaration in Form No-42, duly signed and sealed by the Administrator of Lakshadweep Administration, and also produce a copy of the shipping bill or other similar document attested by the Port authority, evidencing the fact of transportation of the goods to the archipelago. It would also follow, on a reasonable construction of the statutory provision, that in a situation where the dealer effecting supplies to the Lakshadweep Administration, is not required in terms of the contract between the parties to effect supplies of the goods in the archipelago, but rather has to effect supplies to the Lakshadweep Administration only in the mainland, then the requirement of production of a copy of the shipping bill duly attested by the Port authorities cannot be fulfilled by the supplying dealer, since he is not in any way involved with the transportation of the goods to the archipelago. Petitioners had produced the necessary declaration in Form No.42 duly signed and sealed by the buyer concerned and in that respect, there was substantial compliance with the requirement of Rule 12C for the purposes of claiming the concessional rate of tax envisaged under the 1st proviso to Section 6(1) of the KVAT Act. I am, therefore, of the view that the impugned orders of assessment in all these writ petitions pertaining to assessment year 2012-13 and Ext.P7 in WP(C) No.1331 of 2013 pertaining to assessment year 2008-09, cannot be legally sustained and I therefore, quash the said orders with a direction to the respective assessing authority to redo the assessment in relation to the petitioners for the said assessment years after granting them the benefit of concessional rate of tax envisaged under the 1st proviso to Section 6(1) of the KVAT Act, by accepting the Form No-42 declaration produced by them in compliance with the provision of Rule 12C of the KVAT Rules. - Decided in favour of assessee.
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