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TMI Tax Updates - e-Newsletter
November 21, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Right to use any industrial, commercial or scientific equipment Royalty u/s 9 or not - DTAA with Netherlands the amount received by the assessee for hiring out Dredgers to an Indian Company of the same name for use in Indian Ports is not taxable in India - HC
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Merely because the assessee undertakes certain activities which may not directly disseminate information or demonstrate modern techniques or methods of agriculture, animal husbandry or poultry farming it cannot be said that expenditure, which is otherwise eligible for weighted deduction, does not fall within the nature of expenditure described in section 35C(1)(a) - HC
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Entitlement for deduction u/s 10A in Section 10A, nowhere there is a restriction provided that deduction may be applicable only after registration with STPI or only for the amounts earned after such registration. - HC
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Bad and doubtful debts written off disallowed provision for bad and doubtful debts cannot be allowed u/s 36(1)(vii) - AT
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Invocation of section 40A(3) - Octroi was paid to the Ahmedabad Municipal Corporation Cash payment - payment does not come within the provisions of section 40A(3) read with Rule 6DD(b) - HC
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Eligibility for exemption u/s 11 Application of income - Section 11(1)(a) is pari materia to the third proviso to Section 10(23C)(vi) of the Act and the only difference is with regard to the percentage of income and the period for which it can be carried forward - HC
Case Laws:
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Income Tax
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2014 (11) TMI 610
Entitlement for deduction u/s 80IB Assessee not the owner of property Built up area of flats less than 1500 sq. ft. Held that:- Following the decision in The Commissioner of Income Tax Business Ward XV(3), Chennai. Versus M/s. Sanghvi and Doshi Enterprise [2012 (12) TMI 84 - MADRAS HIGH COURT] - for the purpose of considering the deduction, it is not necessary that the assessee, engaged in developing and construction of housing project, should be the owner of the property - when the local authority, being part of Chennai Metropolitan Development Authority and also the approving authority, thus having certified about the completion, there was no justifiable ground to invoke Explanation (2) to sub-section (10) of Section 80IB of the Income Tax Act for the purpose of negativing the claim - the Explanation cannot have a control on the substantive provision thus, the assessee is entitled to deduction in respect of the built up area exceeding 1500 sq. ft. on a proportionate basis thus, the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 609
Allowability of deduction on interest income u/s 80P(2)(a)(i) - Whether the Tribunal was right in law in allowing deduction u/s 80(P)(2)(a)(i) on interest income as being attributable to the business of banking Held that:- In Commissioner of Income-Tax Versus Baroda Peoples Co-operative Bank Ltd. [2005 (7) TMI 33 - GUJARAT High Court] it has been held that as per the Scheme of the Income Tax Act net income relatable to a particular head or item has to go in as a component of the gross total income before any deduction under Chapter VIA is allowed u/s 80P(2)(a)(i) of the Act the two activities, viz., business of banking or providing credit facilities to its members, are distinct and separate activities; the former connotes a larger activity than the activity of providing credit facilities to its members - the Tribunal was right in allowing deductions u/s 80P(2)(a)(i) of the Act on interest income as being attributable to the business of banking decided against revenue.
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2014 (11) TMI 608
Levy of penalty u/s 271(1)(c) - Whether on the facts and in the circumstances of the case and in light of documentary evidence on record and explanation of the assessee the Tribunal was justified in law in confirming the levy of penalty u/s. 271(1)(c) Held that:- The Tribunal erred in coming to the conclusion that penalty u/s 271 of the Act was rightly imposed upon the assessee in New Sorathia Engineering Co. Versus Commissioner of Income-Tax [2006 (1) TMI 71 - GUJARAT High Court] it has been held that the penalty order and the order of CIT(A) show that no clear cut finding has been reached - The Tribunal has failed to appreciate the legal issue - the order of penalty cannot be sustained and the Tribunal could not have sustained the same - The Tribunal having failed to take into consideration and deal with the decision of the jurisdictional High Court it would constitute an error in law which goes to the very basis of the controversy involved - even on the assumption that the initial onus lies on the asseessee, the assessee sufficiently discharged its burden by placing explanation and evidence from time to time - no inquiry was made in case of lenders - the Tribunal committed an error in imposing penalty u/s 271(1)(c) of the Act thus, the order of the Tribunal is upheld Decided in favour of assessee.
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2014 (11) TMI 607
Validity of assessment u/s 114 r.w section 158BD revision order u/s 263 evidences produced for claiming 50% of commission expenses or not Held that:- Assessees are individuals engaged in the business of financing and commission agency with Sree Gokulam Chits and Finance Company Limited - the proceedings initiated u/s 158BD of the Act by issuance of notice to the assessees was beyond the period of two years of completion of assessment u/s 158BC of the Act in the case of Sree Gokulam Chits and Finance Company Limited - Revenue contended that there is no time limit prescribed in the statute for completion of block assessment in respect of persons other than the person on whom search was made and, therefore, the notices issued u/s 158BD of the Act by the AO are valid - where limitation is not prescribed, action must be taken within reasonable period. The reasonable period would depend upon the facts of each case and it would be open to the assessee to contend that it is bad on the ground of delay - block assessment in respect of the Sree Gokulam Chits and Finance Company Limited was proceeded under Section 158BC of the Act - It is only on the basis of the block assessment of the person with respect to whom search was made under Section 132 of the Act, proceedings under Section 158BD of the Act in respect of any other person can be initiated - the provisions of Sections 158BD and 158BC are intertwined - the jurisdiction to issue notice u/s 158BD of the Act to any person, other than the person with respect to whom search was made, and the consequent time limit prescribed under Section 158BE of the Act in respect of third parties, would certainly be included within the two years period given to the AO for completion of block assessment under section 158BE(1) of the Act - When such an inference can be drawn from a bare reading of the provisions which are explicit, it does not lie in the mouth of the Revenue to state that there is no time limit prescribed in the statute for initiation of proceedings under Section 158BD of the Act in Commissioner of Income Tax v. Umesh Chandra Gupta [2014 (2) TMI 521 - DELHI HIGH COURT] also the same has been held as such no substantial question of law arises for consideration Decided against revenue.
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2014 (11) TMI 606
Effect of amendment u/s 55(2) treatment of amount included in total income on goodwill received on retirement capital gains tax or not Held that:- The AO found that the assessee was entitled to receive an amount of ₹ 67,50,000/- from M/s. Jyoti Estate out of which the assessee had already received ₹ 28,00,000/- on 24.6.1989 and the balance was to be paid to him by 24.2.1990 - the assessee also contended that the amount received from the two firms was capital receipts which was exempt from income-tax - The Tribunal rightly considered CIT VS. MOHANBHAI PAMABHAI [1971 (9) TMI 56 - GUJARAT High Court] wherein it has been held that the interest of a partner in a partnership is not interest in any specific item of the partnership property - It is a right to obtain his share of profits from time to time during the subsistence of the partnership and on dissolution of the partnership or on his retirement from the partnership to get the value of his share in the net partnership assets which remain after satisfying the debts and liabilities of the partnership. When a partner retires from a partnership and the amount of his share in the net partnership assets after deduction of liabilities and prior charges is determined on taking accounts on the footing of notional sale of the partnership assets and given to him, what he receives is his share in the partnership and not any consideration for transfer of his interest in the partnership to the continuing partners - His share in the partnership is worked out by taking accounts in the manner prescribed by the relevant provisions of the partnership law and it is this, namely, his share in the partnership which he receives in terms of money - There is in this transaction no element of transfer of interest in the partnership assets by the retiring partner to the continuing partners the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 605
Right to use any industrial, commercial or scientific equipment Royalty u/s 9 or not Whether the Tribunal was right in holding that the amount received by the assessee for hiring out dredgers to an Indian Company of the same name for use in Indian ports is not taxable in India in terms of the Double Taxation Avoidance Agreement with the Netherlands - Held that:- Under a Notification No.GSR 382(E) DATED 27.3.1989, the convention, between the Government of Republic of India and the Kingdom of Netherlands for the Avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, came into force w.e.f. 21.1.1989 - both Governments have agreed and the DTAA agreement with seven chapters and 30 Articles was signed - the 'payments for the use of equipment' originally found in clause (1) of Article 12 as defined in clause (6) was incorporated in the definition of the term Royalties in clause 4 w.e.f.1.4.1991 and subsequently deleted w.e.f.1.4.1998 and thereby completely taken out from clause (1) and (2) of Article 12 - the payment for the use of equipment or any consideration for the use of , for the right to use industrial, commercial or scientific equipment is deleted and it is not taxable in the contracting State in which they arise viz., in the given case India - the appellate authority below has rightly considered Article 12(4) of the DTAA agreement between Netherlands and India and is right in holding that the amount received by the assessee for hiring out Dredgers to an Indian Company of the same name for use in Indian Ports is not taxable in India Decided against revenue.
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2014 (11) TMI 604
Re-computation of deduction u/s 10A Insurance and commission expenses - Whether CIT(A) was correct on facts and circumstances of the case and in law in deleting the reduction in respect of Insurance & Commission expenses and on account of expenses incurred in foreign currency, both from the export turnover, for the purpose of recomputing the deduction u/s 10A Held that:- The assessee had not incurred various expenses in foreign exchange for providing Technical services outside India - when the expenses were not included in export turnover, there was no question of exclusion of the same from the export turnover - the communication expenses were related to domestic usage and there was no nexus with export of services. Explanation 2(iv) to sec. 10A of the Act provides that freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the Technical services outside India not to be included in export turnover in CIT Vs Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] the same has been decided - since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression export turnover cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula - A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover - Freight and insurance do not have an element of turnover the order of the CIT(A) is upheld Decided against revenue.
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2014 (11) TMI 603
Proceedings u/s 153C Held that:- Assessment order u/s 143(3) of the Act was passed on 31.03.2006 by making various disallowances and additions - the AO framed the assessment order u/s 153C/143(3) of the Act despite the fact that no incriminating material was found during the course of search - This aspect is evident by the fact that the AO framed the impugned assessment order u/s 153C/143(3) of the Act by taking the total income arrived at in the original assessment order u/s 143(3)/154 of the Act dated 02.08.2006 which included various disallowance and additions - order u/s 143(3) of the Act has been passed earlier and the issue was further adjudicated before the higher authorities and accordingly the assessment for assessment year under dispute was not pending on the date of initiation of action u/s 153C of the Act - the hand over of the materials which belonged to the assessee was taken much later after passing of assessment order us 143(3) of the Act. Where none of the assessments were pending on the date of search the AO is precluded from re-agitating issues u/s 153C of the Act which have attained finality in original assessment dehorse any incriminating material found during the course of search - the only action left for the AO in that respect as no addition was conceived on incriminating materials is to drop the proceedings - under the provision of Act only the proceedings which is pending shall get abated - any proceedings that has reached its finality shall not be disturbed unless there are materials found, indicating existence of income embedded in incriminating documents - No incriminating material has been proved to have been found in the course of search which belonged to the assessee warranting the re-assessment u/s 153C of the Act for the AY. The person who is searched u/s 153A of the Act can be assessed only on the basis of incriminating material found and the other person who is assessed u/s 153C of the Act in connection with the same search should be assessed de hors any incriminating material - the provision of section 153C(1) was amended to obviate practical difficulties which arose in its interpretation - To put it simply this amendment to proviso to section 153C(1) of the Act debars the AO from making any assessment dehorse any incriminating material found during the search - assessment in the AYs have been completed u/s 143(3) of the Act - the assessment for the concerned assessment year does not abate - assessment u/s 153C of the Act in these cases dehorse any incriminating material is not sustainable thus, the order is set aside decided in favour of assessee.
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2014 (11) TMI 602
Interpretation of application of section 35C entire expenses eligible for weighted deduction or not - Held that:- The Tribunal rightly was of the view that Kaira Dist. Co-Op. Milk Producers Union Ltd. Versus Commissioner Of Income Tax [2001 (7) TMI 71 - GUJARAT High Court] u/s 35C(1)(a) the nexus between the supplier of raw material to the assessee and the providing of services by the assessee has been stipulated - Though the nexus may not be direct yet the requirement is to the effect that the assessee, to qualify for weighted deduction under that section, shall incur expenditure of the specified nature to provide the goods, services or facilities to a person who would in turn be the supplier of raw material - the assessee should incur expenditure for the purpose of obtaining raw material, while at the same time incur such expenditure in a manner so as to undertake development of the recipient and the area in which the recipient is located, i.e. rural area - merely because the assessee undertakes certain activities which may not directly disseminate information or demonstrate modern techniques or methods of agriculture, animal husbandry or poultry farming it cannot be said that expenditure, which is otherwise eligible for weighted deduction, does not fall within the nature of expenditure described in clause (a) of section 35C(1) - The assessee is entitled to deduction of expenditure claimed in entirety except the aforesaid two items which have been dealt with the by the Income-tax Officer decided in favour of assessee.
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2014 (11) TMI 601
License fees/service charges accrued to assessee mercantile system of accounting followed Held that:- The license fee is received by the assessee in a separate division known as "M/s. Skul International India" from January to December that is, on calendar year basis, whereas the books of accounts were maintain on financial year basis, that is, first of April of every year to 31st March of the next year - The assessee used to raise the bills for the license fee in the month of January and the license fee received from January to March was accounted as income of the year and license fee from April to December was taken under the head current liabilities' that is, it does not recognizes the income of the year but as income of subsequent year - the license fee from the period April to December is not recognized as income, because bills are not raised and therefore income is not accrued to the assessee - When the bill are raised from the month of January, the assessee recognizes the income and accordingly account for in the books of accounts - only 3 months income is accounted and for an balance nine months income is taken to next financial year - since assessee is duly accounting the income in the manner consistently in all the years and therefore, there is no reason to deviate from such system of accounting, for recognizing the income which has been followed regularly in all the years the order of the CIT(A) is upheld Decided against revenue. Disallowance u/s 40(a)(ia) TDS not deducted Held that:- As decided in assessees own case doe the earlier assessment year, the assessee entered into an agreement with its holding company towards incurring of such expenses - A conjoint reading of 'sections 195 and 40(a)(ia) 'brings to the fore that the disallowance can be made' only if the amount paid is chargeable to tax in the hands of the recipient - In other words, if the amount is not chargeable to tax in hands of the recipient, there cannot be any scope for 'deduction of tax at source - Once no deduction of tax at source is contemplated, the natural corollary which manifestly follows is that the provisions of section 40(a)(ia) cannot be triggered - Decided in favour of assessee.
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2014 (11) TMI 600
Forfeiture of staff security exempted income or taxable receipt Held that:- The Tribunal rightly of the view that the contention of the revenue for treating forfeited amount as taxable income is fully supported by the decision in Atlas Cycle Industries Limited Versus Commissioner Of Income-Tax, Patiala [1980 (3) TMI 43 - PUNJAB AND HARYANA High Court] - the amount of ₹ 91,216/is intimately connected with the business activities of the assessee company and has rightly been treated by the AO as taxable receipt - considering the business of the assesse-company, it can be said that the amount is intimately connected with the business activities of the assessee company and the amount has rightly been treated as taxable receipt Decided against assessee. Technical know-how fees disallowed Held that:- The expenses on account of technical knowhow fee have resulted in the amalgamation or expansion of the profit earning apparatus of the assessee company and clearly relate to capital field - In Alembic Chemical Works Company Limited Versus Commissioner of Income-Tax, Gujarat [1989 (3) TMI 5 - SUPREME Court] it has held that if the expenses incurred by the assesse are in the capital field and are inextricably connected with the capital structure of the company, it would be capital in nature - the assessee has acquired technical knowhow, technical and scientific information and knowledge for the manufacture of dryers, which is clearly an addition of enduring nature connected with the strengthening of the infrastructure of business - The expenditure is capital in nature Decided in favour of assessee.
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2014 (11) TMI 599
Interpretation of provisions of Kar Vivad Samadhan Scheme, 1998 Held that:- During the pendency of revenue appeal, assessee availed the benefit of KVSS, 1988 meaning thereby he has accepted the addition as made by the AO in the assessment order - As a matter of fact assessee, like in the earlier years, could have gone for K.V.S.S. for the assessment year under appeal also - a statement was also required and on that basis AO made the addition - by making declaration under KVSS, 1998 for the A.Y. 1986-87, the assessee has admitted that promissory note of ₹ 1,68,000/- pertains to him - AO is fully justified in taxing interest income on this promissory note for all the assessment years under Appeal as such no substantial question of law arises for consideration Decided against assessee.
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2014 (11) TMI 598
Condonation of delay delay of 65 days Held that:- Assessee in the affidavit, has explained the reasons for the delay - the Hon. Secretary was looking after all the income tax affairs of the assessee society - On 22.11.13, he was hospitalized and operated on 30.12.13 for heart problems - Copy of the discharge summary of KLES Heart Foundation, Belgaum has also been filed in support of the averments in the affidavit - Thus, reasons for the delay have been explained to be due to ill-health of the Hon. Secretary of the assessee - delay in fling the appeal was occasioned due to a reasonable cause delay condoned. Denial of deduction u/s 80P(2)(a)(i) - Assessee is a co-operative society registered under the Karnataka State Co-operative Societies Act, 1959 - Held that:- In ACIT, Circle 3(1), Bangalore v. M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd. [2011 (4) TMI 1222 - ITAT BANGALORE] - it has been held that section 80P(4) is applicable only to cooperative banks and not to credit cooperative societies - The intention of the legislature of bringing in cooperative banks - Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessees case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act The existing sub-section 80P(2)(a)(i) shall be applicable to a cooperative society carrying on credit facility to its members - This view is clarified by Central Board of Direct Tax vide its clarification No.133/06/2007-TPL dated 9th May, 2007 - The new proviso to section 80P(4) which is brought into statute is applicable only to cooperative banks and not to credit cooperative societies - The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks - Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application and it is entitled to deduction u/s 80P(2)(a)(i) of the Act - the assessee society is entitled to deduction u/s. 80P(2)(a)(i) of the Act Decided in favour of assessee.
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2014 (11) TMI 597
Computation of deduction u/s 80HHC Exclusion of 90% of net job charges Held that:- In assessees own case it has been held that u/s 80HHC 90% of the labour charges have to be deducted and the deductions should be on the net and not the gross - The assessee is entitled to deduction of 90% towards the labour charges on the net income and not on the gross income Decided against revenue. Allowability of provision for warranty as a deduction Held that:- In assessees own case it has been held that provisioning to be an admissible expenses, since a sensible analysis of historical trends enables a robust and reliable estimation of a present obligation which arises out of an obligating event - If such a provision is based on the past experience, containing demonstrable data of the expenses incurred by the assessee for providing warranty, then it would be an ascertained liability - FAA has rightly allowed the claim of the assessee Decided against revenue. Computation of book profits u/s 115JB Computation of Book profit for the purpose of MAT - reduction of book profit by deduction allowable u/s 80HHC (Export Benefit) - Held that:- Following the decision in Ajanta Pharma Ltd. Versus Commissioner of Income Tax-9, Mumbai [2010 (9) TMI 8 - SUPREME COURT] - the total amount of deduction computed u/s 80HHC is to be deducted from the book profit u/s 115JB - ultimate deduction granted to the assessee u/s 80HHC is not the amount which is to be reduced from the book profit, but the amount originally computed for deduction u/s 80HHC has to be reduced, but after the Finance Act, 2000, the rate of deduction has been reduced in phased manner - the AO is directed to reexamine this aspect and compute the deduction admissible to the assessee while preparing the book profit for the purpose of section 115JB Decided partly in favour of assessee.
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2014 (11) TMI 596
Entitlement for deduction u/s 10A Profits attributable to export turnover - Whether the Tribunal was right in holding that the assessee company was entitled to deduction u/s 10A in respect of the profits attributable to the export turnover for the entire previous year relevant to the AY 2000-01 even though registration from the Software Technology Parks of India (STPI), as an STPI unit was obtained only on 04.03.2000 and the AO was not correct in restricting the deduction to the export profits relating to the turnover of the period after the date of registration as certified by the STPI Held that:- The assessee Soffia Software Limited has been notified on 04.03.2000 and the assessee has commenced its software production during the previous year related to the Assessment Year - From the date of notification, the assessee would be entitled to the benefit of Sec.10A if other conditions have been fulfilled - in Section 10A, nowhere there is a restriction provided that deduction may be applicable only after registration with STPI or only for the amounts earned after such registration. If the assessee has to derive the benefits of the special provisions of Sec.10A, the assessee has begun or begins to manufacture or produce articles or things during the previous year relevant to the assessment year in the STPI Unit and it will be entitled to deduction under Sec.10A in respect of profits attributed to export turn over the Tribunal was rightly of the view that the Circular issued under Section 10B cannot be made applicable to the case falling under sec.10A - There is a clear distinction between the establishment of Sec.10A and the special provisions of Sec.10B of the Act which defines 100% Export Oriented Undertakings - There is no scope for drawing inference from the provisions of Sec.10B as the assessee satisfies the requirement of Sec.10A, it will be entitled to such benefit - the AO has restricted the deduction based on an artificial cut off date (i.e.) 4.3.2000 which we hold is not the correct method of computation for benefit flowing under sec.10A the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 595
Determination of assessment year for assessability of income AY 2008-2009 or AY 2006-2007 - Capital gains on transfer of property through joint development Held that:- The possession of the land was handed over pursuant to the joint development agreement, in the AY 2008-09 - assessee is right in offering the capital gains for the AY 2008-09 satisfying all the conditions u/s 53A of the Transfer of Property Act - The Tribunal rightly was of the view that AO had substantively assessed the long term capital gains in the impugned AY - CIT (A) has held that it deserve to be assessed substantively in AY 2008-2009 - the Revenue has not come up in appeal in AY 2008-2009 - revenue cannot plead that capital gains will be applicable for two different AYs the order of the Tribunal is upheld as such no substantial question of law arises for consideration Decided against revenue.
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2014 (11) TMI 594
Bad and doubtful debts written off disallowed Held that:- The assessee has made provisions for bad and doubtful debts against sale of powers at 50% of incremental basis - According to the assessee, this is a policy matter and has been approved by the Board of Directors of the Company - Accordingly it claimed deduction of the same under section 36(1)(vii) of the Act, but on a careful perusal of the provisions of section 36(1)(vii) of the Act, deduction of the amount of any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year, can be allowed subject to the provisions of sub-section (2) of section 36 of the Act - Under this sub-section, only claim of deduction of bad and doubtful debts on its written off or irrecoverable can be allowed and not provision for bad and doubtful debts - The other clause (vii)(a) of section 36(1) of the Act deals with the issue of claim of provision for bad and doubtful debts made by the Scheduled Bank or non- Scheduled Bank or Corporation Bank, etc. - the assessee has claimed deduction for provisions of bad and doubtful debts under section 36(1)(vii) of the Act which only deals with actual claim of deductions - provision for bad and doubtful debts cannot be allowed u/s 36(1)(vii) the order of the CIT(A) is upheld decided against assessee. Interest in consumer security disallowed Invocation of section 43B Held that:- Assessee has made provision for payment of interest on consumer securities, but it was not in fact paid even in succeeding years, as it depends upon certain happenings or the events. If the assessee has debited a particular interest to this account, a corresponding credit entry should have been made in the accounts of the consumer - But the assessee without crediting the corresponding interest to the account of the consumers intend to claim expenditure of provision of interest on consumer securities, even the payment depends upon certain happenings or events - it is not clear that as to in how many cases interest were paid to the consumers - CIT(A) has not adjudicated the issue in detail - Considering the complexity of facts with regard to the issue of provision for interest, the is required to be remitted back to the CIT(A) for proper adjudication Decided in favour of assessee. Electricity expenses disallowed Invocation of section 43B Held that:- Assessee rightly contended that electricity duty received from consumers was immediately transferred to UPPCL, the holding company which adjusted the electricity duty subsidy released by the Govt. to reduce the loss of the company - The debit note was also accordingly issued by UPPCL to KESCO, the assessee - But these facts were not brought to the notice of the AO and the AO has invoked the provisions of section 43B of the Act for the reason that the assessee-company has not paid the amount on the date of filing of the return of income - new facts require proper verification by the Assessing Officer thus, the matter is remitted back to the AO for proper verification Decided in favour of revenue. Non-payment of interest to U.P. Power Corporation Ltd. Held that:- UPPCL is a holding company of the assessee and as per contractual arrangement, the assessee-company was required to pay interest to UPPCL - But since the payment of interest is not statutory liability, provisions of section 43B of the Act cannot be invoked - Therefore, the disallowance made by the AO having invoked the provisions of section 43B of the Act is not correct- the order of the CIT(A) is upheld Decided against revenue. Trade tax liability and employee cost treated as prior paid expenses Held that:- During the course of assessment proceedings, the AO has asked the assessee to furnish explanations, as these expenses appear to be prior period expenses, but the assessee made a general explanation which was not accepted by the AO and made disallowance- Whereas before the ld. CIT(A) assessee has taken altogether a different stand by raising a different plea - The new explanation was neither confronted to the AO nor the CIT(A) examined the correctness of the claim, making necessary enquiry by himself - the new explanation furnished by the assessee was not properly examined by the CIT(A) and it requires a fresh adjudication/examination by the AO thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of revenue. Allowability of relief on surcharge of power purchase due to late payment Held that:- Clause 3 deals with late payment charges, according to which the assessee was required to pay additional charge at the rate equal to 2% per month or part thereof on the amount which is subject to delay - The text and tenure of the clause speaks that late payment surcharge is of compensatory nature on account of delay in payment - Therefore, it can be treated as revenue expenditure - the payment is of compensatory nature and no disallowance is called for the order of the CIT(A) is upheld Decided against revenue.
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2014 (11) TMI 593
Reopening of assessment Contravention of section 151 or not - Whether the approval given by CIT(A) would meet the requirements prescribed u/s 151 - Held that:- In Amarlal Bajaj Versus Assistant Commissioner of Income-tax [2014 (1) TMI 1280 - ITAT MUMBAI] it has been rightly held that Sections 147 and 148 are charter to the Revenue to reopen earlier assessments and also protected by safeguards against unnecessary harassment of the assessee - They are sword for the Revenue and shield for the assessee - Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147 - The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer - the Commissioner has simply put "approved" and signed the report thereby giving sanction to the AO - Nowhere the Commissioner has recorded a satisfaction note not even in brief - it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction - the reopening is bad in law for the reason that the Ld.CIT-V, Delhi has not recorded his satisfaction as contemplated u/s 151 of the Act. Addition u/s 68 Unexplained credits Held that:- The assessee has furnished the following documents in support of transactions entered into by him CIT(A) rightly was of the view that the transaction regarding share application money and loan received by it were genuine transactions and the it were not accommodation entries there was no evidence collected by the AO which could prove otherwise - Accordingly, the AO was not justified in treating the amount of share application money and loan received by the appellant as its undisclosed income - there is no enquiry whatsoever by the AO and as the additions are not based on any material or evidence Decided against revenue.
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2014 (11) TMI 592
Notices issued u/s 143(2) and 142(1) Mere intimation u/s 143(1)(a) could not be equated with an Assessment Order or not - Held that:- The assessee had set off this loss against its business income of this year - For the purpose of purchasing the units, the assessee had taken a loan of ₹ 15 crores from its sister concern M/s. Deepak Fertilizers & Petrochemicals Corporation Ltd.- On this loan, an interest of ₹ 21,83,698/- was paid to the sister concern - The assessee was the owner of the Unit only for One month and seven days and the total amount of dividend received from the UTI amounted to ₹ 1,82,23,200 - following the decision in DEEPAK NITRITE LIMITED Versus COMMISSIONER OF INCOME-TAX [2008 (5) TMI 233 - GUJARAT HIGH COURT] mere intimation u/s 143(1)(a) could not be equated with an Assessment Order - for the reasons stated in his order the claim of loss 'is not acceptable and the same is ignored in the computation of income - Decided against revenue.
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2014 (11) TMI 591
Allowability of claim of depreciation on guest house Held that:- Following the decision in Britannia Industries Limited Versus Commissioner of Income-Tax And Another [2005 (10) TMI 30 - SUPREME Court] - while the expression "premises and buildings" in sections 30 and 32 of the Income Tax Act, 1961 and the expression "residential accommodation in the nature of guest house" in sub-sections (3), (4) and (5) of section 37 can be similarly interpreted, a distinction has been sought to be introduced for the purpose of section 37 by specifying the nature of the building to be a guest house - The intention of the Legislature is clear and unambiguous - the intention was to exclude from deduction the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purpose of a guest house of the nature indicated in subsection (4) of section 37 - If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodation used for the purpose of the business or profession, then the Legislature would not have felt the need to amend the provisions of section 37 so as to make a definite distinction with regard to buildings used as guest houses as defined in section 37(5) and the provisions of sections 31 and 32 would have been sufficient for that purpose - the disallowance made by the AO was right Decided in favour of revenue. Invocation of section 40A(3) - Octroi was paid to the Ahmedabad Municipal Corporation Cash payment - Held that:- The Tribunal rightly observed that the transporting company provided its services in the payment of octroi duty on the goods transported by it for the assessee company and recover the amount from the assessee and that the arrangement so made did not shift the obligation to pay octroi duty from assessee to the transport company - The Tribunal observed that the obligation in fact was on assessee to pay octroi duty to the Municipal Corporation on the goods transported within the municipal limits - so far as payment of octroi is concerned as it is mandatory - The payment is made through an agency appointed by the assessee and therefore the payment does not come within the provisions of section 40A(3) read with Rule 6DD(b) Decided against revenue.
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2014 (11) TMI 590
Validity of warrant of authorization u/s 132 Order u/s 127 Confusion because of name of assessee - Held that:- The original Form No. 45, which is the warrant of authorization under Section 132 of the said Act has been seen - the warrant has been issued in the name of Shri Om Prakash and the address given is J-6/15, DLF City-II, Gurgaon. Mr Madan has also handed over a letter dated 10.11.2014 which has been issued to him by the Assistant Commissioner of Income Tax, Central Circle, Noida in connection with WP(C) 7639/2014 titled Om Fincap Private Limited v. CIT and Others - the search was conducted essentially in respect of the Premia Group and its group companies - The confusion has arisen because one of the directors in Elevate Real Estate Services Private Limited was also one Mr Om Prakash, whose full name was Om Prakash Duggal - Coincidently, the Mr Om Prakash Duggal was earlier also a resident of J-6/15, DLF City-II, and Gurgaon - the warrant of authorization dated 15.05.2013 did not, in fact, relate to Mr. Om Prakash Dhingra - the search operations conducted in the aforesaid locations would be without the authority of law the warrant of authorization stands clarified that it does not relate to Mr. Om Prakash Dhingra but to Mr. Om Prakash Duggal - insofar as Mr. Om Prakash Dhingra and the other petitioners are concerned, the search operations are held as non est and all subsequent events pursuant thereto are also declared as non est - The order passed under Section 127 of the Income Tax Act on 18.09.2013 is also set aside Decided in favour of assessee.
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2014 (11) TMI 589
Determination of value of goodwill matter remitted back after the report from DVO - Held that:- The Tribunal rightly noted that the assessee company transferred its Unit II to its 100% subsidiary viz. E.D.O.P. for a consideration of ₹ 4,65,90,306/- out of which ₹ 1,60,00,000/- was claimed as the value of goodwill - expected super profits method of valuation of goodwill is an accepted method - the Registered Valuers of the assessee adopted the method of expected super profits which was in consonance with the accepted methods of accountancy and principles of law - The AO rejected the detailed report without any cogent reasons and proceeded to value the goodwill by adopting the method which is contrary to the accepted principles of accountancy and the settled principles of law - the AO Accepted the report of the Registered Valuers in the original order without referring this issue of valuation to the Departmental Valuation Officer and even when the case was restored to him by the CIT u/s. 263, he did not refer the case to the Departmental Valuation Officer and adopted his own method and arrived at erroneous conclusions - the value of goodwill determined by the Registered Valuers viz. M/s. S.I. Mogul & Co., ₹ 1,60,00,000/- being based on accepted method of accountancy and settled principles of law the order of the Tribunal is upheld Decided against revenue. Addition on technical know-how deleted Held that:- The know-how was generated in the course of day to-day business operations of the assessee company. It did not separately pay for acquiring this capital asset the Tribunal tightly recorded that the technical know how is obviously a capital asset - The price realised on sale of capital asset would be a capital receipt - The only facts certain expenses for calender years 1968 and 1969 of research section had been allowed as deduction - It is not brought on record by the ITO as to what was the nature of those expenses which had been allowed and what amount has been allowed - there was no cost of this asset and it could not be therefore liable to capital gain tax - the goodwill which was assessed by the valuer in scientific method - There was no substitute opinion by any competent officer the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 588
Eligibility for exemption u/s 11 Assessee trust running with profit motive or not Held that:- The assessee is a Trust registered u/s 12A of the Act with effect from 02.09.2003 - The main object is to impart education - assessee has been generating profit and creating fixed assets - The assessee claims capital expenditure as application of income in terms of Section 11 of the IT Act - The CIT (A) has considered every aspect of the assessment order with reference to the reasons given by the AO for disallowing exemption the Tribunal, which is the final fact finding authority, after hearing the appeal filed by the Department did not incline to interfere with the order of the first appellate authority - CIT(A) has thread bare considered the issues in question with reference to the admitted facts that the assessee is registered u/s 12A of the Act and running the educational institution, imparting education in the fields of technical engineering and computer applications with the parameters laid down by the AICTE and the guidelines given by Ministry of Human Resource Development, Government of India, New Delhi and the fees collected by the assessee from the students for imparting such education having been approved by the AICTE - The assessee is spending the amount received by it by way of collection of tuition fees or collection of hostel fees is being spent for building necessary infrastructure for imparting the education in various fields which is the charitable purpose for which the trust was established - The assessee has also spent the said amount for raising the infrastructure necessary for carrying out the object of imparting education and thereby the assessee was found to be entitled for exemption u/s 11 and the view of the AO that there is contravention of Section 13 is found to be baseless by the CIT(A) after thread bare considering all the relevant facts Decided against revenue. Application of income - Whether the Tribunal is correct in law in holding that capital expenditure incurred by the assessee Trust shall be allowed as application of income Held that:- Educational Institution is eligible for exemption u/s 11, capital expenditure incurred by an Educational Institution is the basic necessity if such expenditure promotes the object of the Trust - iIn CIT Vs. Jyoti Prabha Society [2008 (8) TMI 203 - UTTARAKHAND HIGH COURT] it has been held that the educational society which had utilized rental income for the purposes of imparting education by maintaining the buildings and constructing new building for the same purpose, would be entitled to the exemption claimed u/s 11 - Section 11(1)(a) is pari materia to the third proviso to Section 10(23C)(vi) of the Act and the only difference is with regard to the percentage of income and the period for which it can be carried forward - capital expenditure if incurred by an Educational Institution for attainment of the object of the Society, it would be entitled to exemption u/s 11 Decided against revenue.
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2014 (11) TMI 587
Transfer pricing adjustment Whether segmental information to be considered while computing margin of the assessee in its TP study Held that:- Segmental information provided must be taken and only the AE transactions ought to be considered, unless it was shown by the TPO/DRP that there were specific issues with the same in M/s. Four Soft Ltd. Hyderabad Versus The Dy. Commissioner of Income-tax, Circle 1(3), Hyderabad [2011 (9) TMI 634 - ITAT HYDERABAD] it has been held that the lower authorities were not justified in not excluding profit or loss in respect of domestic transactions for determining the profit declared by the assessee in respect of AE transactions - They were not justified in adopting the profit level achieved by the assessee in respect of all its transactions including domestic transactions as the profit level declared in respect of AE transactions - the assessee had furnished separately its working of the profit declared by it in respect of its AE transactions before the TPO as well as before the DRP - there is no legal requirement that the segment-wise working submitted before the TPO should be audited by the assessee's CA - In absence of any error being pointed out in the working shown by the assessee wherein it has claimed that it has achieved a profit level of 34.17% of the cost in respect of transactions with AE, we have no option but to accept the same - the rate of profit achieved in other comparable cases are to be compared with profit level declared by the assessee in respect of its AE transactions after excluding domestic transactions - the profit level declared by the assessee in respect of its AE transactions is more than the profit level in respect of comparable cases found by the TPO - only AE segment transactions should be considered while computing the PLI - bad debts incurred by the assessee were in respect of transactions with AE the matter is remitted back to the TPO for verification Decided in favour of assessee. Computation of margin Held that:- In Capital IQ Information Systems India Pvt. Ltd. v. DCIT [2014 (3) TMI 626 - ITAT HYDERABAD] it has been held that the foreign exchange fluctuation gains is nothing but an integral part of the sales proceeds of an assessee carrying on export business - foreign exchange fluctuation gains form part of the sale proceeds of exporter-assessee - The foreign exchange fluctuations income cannot be excluded from the computation of the operating margin of the assessee company - foreign exchange loss in case of providing services to AEs is to be considered as operative in nature and hence is to be included in the PLI calculation of the assessee - a portion of the foreign exchange loss is attributable to non-AE transactions and furthermore, a portion of the foreign exchange loss pertains to advances which are non-operative in nature thus, the matter is remitted back to the TPO with a direction that only foreign exchange loss attributable to AE transaction should be considered and also that only that portion of loss which is operative in nature is to be included in the PLI calculation Decided in favour of assessee. Working capital adjustment Held that:- in Demag Cranes & Components (India) (P.) Ltd. Versus Deputy Commissioner of Income-tax, Circle-1(2) [2012 (1) TMI 60 - ITAT Pune] it has been held that Rule 10B(1)(e) on one side and other sub-rules in the context of TNMM and we have analysed the need for elimination of the difference, if any, in the comparable uncontrolled transactions which materially affect the profit margin in the open market - appropriate working capital adjustment is required to the margins of comparable uncontrolled transactions to generate credible comparable data on transactional net margins since the TNMM is applied thus, the TPO is directed with a direction to allow requisite adjustments on account of the impugned "working capital" while determining the margins of comparable. Selection of comparables KALS Information Systems Ltd. - Held that:- Assessee has brought on record sufficient evidence to establish that this company is functionally dis-similar and different from the assessee and hence is not comparable - and the finding rendered in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) for Assessment Year 2007-08 is applicable to this year also. We are inclined to concur with the argument put forth by the assessee that Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products - it cannot be said that provisions or writing back of liability is not part of operating profit or would not be taken into consideration for computing the same - bad debts and provision for bad and doubtful debts are part of the operating expenses and the TPO is directed to re-compute the margins of comparable companies by including bad debts and provision for bad and doubtful debts as operating expenses for the purpose of computing profit and loss of comparable companies. Risk adjustment due to difference in risk profile Held that:- in M/s. Excellence Data Research Pvt. Ltd., Hyderabad Versus Income Tax Officer [2014 (9) TMI 126 - ITAT HYDERABAD] it has been held that allowing deduction of 1% towards risk profile uniformly cannot be adopted as a norm - this aspect requires to be re-examined by the TPO - Therefore, after excluding the above companies, if any adjustment is required to be made, Assessing Officer is directed to consider the risk profile and allow necessary deduction, based on the facts of each comparable case the matter is remitted back to the TPO for consideration of risk profile Decided in favour of assessee.
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Customs
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2014 (11) TMI 614
Denial of refund claim - exemption under Notification No. 51/86 dated 17.2.1986 - Refund amount sanctioned but ordered to be credit to the consumer welfare fund by invoking the principles of unjust enrichment' - Held that:- In view of the detailed categorical finding recorded by the Dy. Commissioner after examining the various documents on record in addition to the CA's Certificate, the refund has been allowed by a speaking order holding that unjust enrichment' is not attracted in the facts and circumstances of the case. Further, I find that the appellate order is non-speaking order and the refund sanctioning order has been set aside only taking notice of the grounds of appeal without recording or indicating a single finding of the Dy. Commissioner to be perverse. Thus, I set aside the impugned appellate order and restore the order of the Dy. Commissioner dated 20.7.2005 granting refund - Decided in favour of assessee.
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2014 (11) TMI 613
Waiver of pre-deposit - Penalties imposed under Section 114(i) and Section 114 AA - allegation that all these appellants were engaged in aiding/abetting diversion of Muriate of Potash which was imported at concessional duty for use as fertilizer or manufacture of composite fertilizer - Held that:- Adjudicating authority in impugned order has recorded detailed findings as to the role played by each of the appellant. It is noticed that the role attributed to Shri Vijay Singh Gohil is in respect of procuring and providing the place for conversion of MOP into different packing and labelling thereof, providing logistic support for transportation of goods to the port. The adjudicating authority has attributed the role of signing the export document to the appellant Shri Chhaganlal Arun though being an employee of CHA has done so without proper authorization. As regards the role played by Shri Anupam Krishi, it is recorded that this appellant had knowingly sold MOP to individuals on invoices which were raised on individual farmers and authorised dealers. It is also recorded that M/s Ashoka Salt Refinery Industries had played a role of supplying and invoices for salt without any sale transactions which was utilised by the people for export of MOP under the guise of Feldspar Powder. role attributed to every appellant before us prima facie seems to be an activity which is performed for contravention of the provisions of Customs Act 1962. - Partial stay granted. As regards the application for the waiver of pre-deposit of the amount penalty imposed on M/s Ashoka Salt Refinery Industries, we find from the records that the said appellant had only issued one invoice of sale of salt to Ashok Agarwal. This solitary act of the appellant could not mean that he has any role to play in the export of MOP as Feldspar Powder. We are of the view that this appellant has made out a case for the waiver of the pre-deposit of the amounts as penalties imposed by the adjudicating authority. This application for waiver of pre-deposit of the amount of penalty involved is allowed and recovery thereof stayed till the disposal of this appeal. - Stay granted.
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2014 (11) TMI 612
Valuation - Suppression of value of goods - Inclusion of separate charge for design, engineering fee - Confiscation of goods - Redemption fine and penalty - Held that:- Appellants never concealed any fact from the Department and as soon as they were asked to furnish documents, they submitted all the documents such as contracts and detailed agreements, etc. when the documents were received, the department objected that design and engineering charges also should suffer duty and this was also paid by them with interest and it is the appellant s submission that appellant s did not even wait for all the clearances to take place even though the design and engineering charges were being paid in installments and not exactly lumpsum and when the duty was paid, the amount had not yet been paid in full to the supplier. advance amount received by the appellant was accepted as part of the consideration without any objection and without any hesitation and differential duty with interest was paid. Therefore, we find that in respect of advance amount received and duty paid, the imposition of penalty cannot be sustained. Accordingly, we set aside the penalty in respect of this alone. When contract produced for supply of basic design and engineering, drawings and supervision of erection, etc., one is as much a part and condition of the contract as the other and addition of these charges to the assessable value is sustainable - no segregation of supervision cost, local material cost, local engineering cost have been made. At the same time, there is also no indication that the design and engineering cost does not include the basic design and engineering, cost of the equipment supplied. Prima facie, we do not find any merit. In respect of design and engineering charges and technical supervision charges, we find that it is always a disputable item and requires interpretation of the agreement, application of valuation rules and unless there is evidence to show that such agreement was deliberately forged and was not part of the contract for supply of equipment or it was not declared at all and there was a considerable effort to hide the fact of payment of such charges, it may not be appropriate to impose penalty. In this case, from the second bill of entry, always the assessment was provisional and therefore on that ground also, it may not be appropriate to impose penalty. Therefore the penalty imposed on this basis is also set aside. When we have limited the whole case to confirmation of demand for duty and interest thereon, and set aside the penalties on all the counts, it would not be appropriate to uphold the confiscation of the goods and imposition of fine in lieu of penalty. Therefore, the redemption fine also has to be set aside and is set aside. When there is no penalty on the main appellant, there cannot be penalty on the employee also. Therefore, the penalty imposed on the employee who is the second appellant before us is also set aside. - Decided in favour of assessee.
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2014 (11) TMI 611
Confiscation of goods u/s 113 (d) - Redemption fine and penalty - Mis declaration of goods - Held that:- In the guise of Basmati rice, attempt was made to export non Basmati rice adopting questionable modus operandi. Actually 13 containers were attempted to be cleared. Containers were stuffed in such way that front row contained Basmati rice and second row contained non-Basmati rice. Findings of the Commissioner relating to confiscation of the goods and imposition of redemption fine of ₹ 32.50 lakhs. In the facts and circumstance is justified when questionable modus operandi remained un-explained. Intentional misdeclaration does not deserve leniency. Therefore redemption fine imposed in adjudication remains un-intouched. Conduct of appellants show that they were consciously involved in the export of non basmati rice following dubious method to defraud the revenue. Therefore imposition of penalty on the exporter does not call for interference for which entire penalty is confirmed - Decided against assessee.
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Service Tax
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2014 (11) TMI 631
Waiver of pre deposit - eligibility of credit taken on various services - classification of service has not been mentioned in the invoice/bill - Held that:- Even though this is not an essential requirement, to decide the nexus and the eligibility, the requirement as to under which service the service received is classifiable and how it is an input service for the appellant will have to be considered and for this purpose it would be necessary to see what was the classification under which tax was paid by service provider. Since for substantial amount, the matter is required to be remanded and a substantial portion has been accepted and not disputed, we consider it appropriate that the requirement of pre-deposit has to be waived and the matter is remanded at this stage itself for fresh adjudication - stay granted - matter remanded back.
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2014 (11) TMI 630
Condonation of delay - Non receipt of SCN - Revenue filed Misc. application for modification of an order where tribunal had condoned the delay of four years and nine months in filing appeal - Held that:- there is no evidence that the order sent by speed post was ever delivered to the appellants or it was received back - It is pertinent to note that when the Central Excise statute prescribes a procedure regarding the manner in which the decisions/orders/summons are to be served, a reference to the General Clauses Act would not be helpful in the wake of the clear cut and unambiguous decisions of the Hon'ble High Courts referred [2012 (6) TMI 304 - BOMBAY HIGH COURT] and [2013 (4) TMI 131 - ALLAHABAD HIGH COURT] as well as in the impugned order with regard to the service by speed post in the context of Section 37C ibid. As an aside, it can also be successfully contended that if speed post was to be treated or intended to be treated by the legislature as equivalent to the registered post the legislature would not have amended Section 37C in the year 2011 to specifically include speed post as one of the prescribed means of service of decision, orders and summons. - Decided against the revenue.
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2014 (11) TMI 629
Waiver of pre deposit - Construction of residential complex service - Works contract service - appellants submitted that the appellants had undertaken married accommodation project for army which involved construction of residential quarters. He submits that the service rendered by them cannot be considered as residential complex service since the army layout does not require approval of any competent authority which is one of the requirements in the definition of residential complex service. - Held that:- Definitions of works contract show clearly that even under works contract service, we have to go to the definition of residential complex to see what exactly was meant by residential complex. The definition of works contract service does not explain what is residential complex. Therefore, whether the service is works contract service or residential complex service, the principles to be considered are one and the same. When a residential complex is built for use of the Govt whether it is by a sub-contractor under a main contractor or otherwise, end use is what is required to be considered. - When the end use of the residential complex is not covered by the definition of residential complex at all, the fact that the contractor is a main contractor or a sub-contractor in our opinion on a prima facie basis is not relevant. Therefore, the decision of the Tribunal in the case of Khurana Engineering Ltd. (2010 (11) TMI 81 - CESTAT, AHMEDABAD) is prima facie applicable. In view of the above, it can be said that the appellants have made out a prima facie case in their favour for complete waiver. Accordingly, the requirement of pre-deposit is waived and stay against recovery is granted for a period of 180 days from the date of this order - Stay granted.
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2014 (11) TMI 628
Construction of industrial or commercial complex service - demand of service tax with penalties - Held that:- There is a small demand of amount of ₹ 1,11,389/- under the head construction of industrial or commercial complex service. appellant could not produce any proof that service had been rendered prior to 2005-06. It was submitted that it was for the Department to show that the service was rendered after 2005-06 and was liable to tax. However, in view of the fact that the amount involved is small, he would not like to contest the same and would prefer to save the time of the Tribunal to hear other appeals. Under these circumstances we accept the offer to make the payment of service tax and interest on this service and allow the request for waiver of penalties by invoking provision of Section 80 of the Finance Act, 1994. In this case, even though amount was received in 2005-06, the service became liable to tax from 2005-06 and being a new service, there is a possibility of confusion in the minds of assessees. demand of service tax with interest and penalty imposed in respect of residential complex service is set aside. The demand for service tax and interest in respect of commercial or industrial complex rendered for HSBC is upheld. The penalties imposed under all relevant statutory provisions of Finance Act, 1994 are set aside - Decided in favour of assessee.
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2014 (11) TMI 627
CENVAT credit - whether amount of services written of due to non receipt is amounting to exempted service - Held that:- Service receivers did not pay the consideration and was written off. Tax was payable only on receipt of consideration during the relevant period and if a customer did not pay the consideration and the same is written off, the service tax would not be payable but the service as such cannot be considered as an exempted service. - Decided in favor of assessee. Demand of service tax on the ground that assessee filed to produce the copy of challans - Held that:- The appellants did not have a copy of the challan, it may not be appropriate to demand the tax again. No doubt the challan copy should have been kept by the appellant for a period of five years and failure to do so would be violation of the provisions of law. But the demand for tax has to be in accordance with law and only when the tax has not been paid, the question of demanding the same would arise. Since ST-3 return was not available to be shown and it was not shown before the original authority also and demand has been confirmed only on the ground that appellant could not produce proof in the form of challan, we consider it appropriate that the matter should be remanded for verifying the payment particulars and confirmation that amount has not been paid. - Matter remanded back - Decided in favour of assessee.
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2014 (11) TMI 626
Reversal of CENVAT Credit - Cargo Handling Service - Held that:- Appellant have no other exempted service except being attributable to export i.e. services rendered for facilitating export which are not taxable by virtue of export. Therefore, I find that no reversal is required under the provisions of Rule 6(3)(ii) read with Rule 6(3A) as the appellant has availed credit suo motu mistakenly. Further, I hold that the appellant is entitled to the benefit as provided under Rule 6(6)(v) of the Cenvat Credit Rules, 2004. In this view of the matter, the impugned order is set aside - Decided in favour of assessee.
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2014 (11) TMI 625
Penalties under Sections, 76, 77 and 78 - Issue of SCN u/s 73 - service tax liability along with interest is charged before the issue of show cause notice - Held that:- From a perusal of Section 73(3) it is abundantly clear that once the assessee discharges the service tax liability along with interest thereon, either on his own account or on pointing out by the department, the proceedings abate and there is no need for issue of show cause notice. The explanation makes it abundantly clear that once the payment are made, no penalty can be imposed under the provisions of Chapter V of the Finance Act, 1994. The Board's circular relied upon by the appellants clarifies this position. In spite of the clear provision in law and clarification given by the Board in this regard, the appellate authority has completely ignored these provisions and chosen to proceed with imposition of penalties which is clearly unsustainable in law. Therefore, I set aside the penalties imposed on the appellants under Sections 76, 77 and 78 of the Finance Act, 1994. adjudicating authority directed to refund, within a period of one month from the date of receipt of this order, the amount of penalty pre-deposited by the appellants subsequent to passing of the impugned order - Decided in favour of assessee.
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2014 (11) TMI 624
Maintenance and repair service rendered to Indian Navy - Levy of tax on gross value received for the services provided by them - Discharge of liability only on a notional percentage - Penalty u/s 76 & 77 - Exemption under Notification No. 31/2010-ST dated 22.06.2010 - Held that:- Once the amount is collected and billed as service tax, it has to be paid to Government and in this case it has been rightly paid. Nevertheless just because an assessee shows some amount as service tax, collects the same and pays it to Government, if the whole activity is not liable to tax, just because he paid the tax would not render him ineligible for such exemption. Therefore we find that the decision taking a view that exemption notification benefit is not available to the appellant in respect of services rendered to Indian Navy cannot be sustained. for the balance portion of the demand, the matter has to be remanded to the original authority - Decided in favour of assessee.
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Central Excise
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2014 (11) TMI 623
Forbearance of second respondent from selling the properties owned by both the first respondent company - Payment of duty due on first Respondents - Held that:- Dues payable to the Central Excise Department do not have any precedence over the right of a secured creditor. The secured creditor viz., the second respondent herein has come into the picture pursuant to various deeds of assignment executed in their favour. Therefore, the only remedy available to the petitioner / Central Excise Department is to approach the third respondent / Official Liquidator and place their claims before the Official Liquidator, so that the claim can be adjudicated and the Official Liquidator in turn can issue notice to the defaulters as well as to the second respondent and adjudicate the matter. In such circumstances, the petitioner cannot prevent the second respondent, the secured creditor, from proceeding further. - petitioner is directed to file claim petitions, before the Official Liquidator, which shall be adjudicated by the Official Liquidator, after issuing notice to the respondents - Decided against Revenue.
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2014 (11) TMI 622
Denial of registration - Whether the respondent is justified in passing the impugned order to clear the dues of the predecessor without affording an opportunity of hearing to the petitioner. - Whether the petitioner could be called upon to pay the dues liable to be paid by his lessees as a condition precedent to issue fresh registration certificate - Held that:- registration stood in the name of three persons, who are the lessees and even according to the department, two of them are absconding and one of them who is the Managing Director, is unable to recover the dues. Therefore, they caught hold of the petitioner, when he applied for fresh registration certificate. Hence, the respondent has passed a non-speaking order without affording an opportunity of hearing to the petitioner, rejecting his claim. When the department having recognised those three as lessees, cannot claim the amount payable by them from the petitioner. If they are not recognised as lessees then the question is different. From the records produced it is seen that the name of three persons, in whose name registration certificate has been granted and they have been described as lessees of the tea factory. Therefore, if an opportunity for personal hearing had been granted to the petitioner, he would have placed all the records including the decisions relied on stating that the liability left behind by lessees cannot be fastened on the petitioner, when he seeks for a fresh registration certificate in the capacity of owner of the factory. Since on the first ground itself this Court is convinced, that the petitioner has not been afforded with a reasonable opportunity, the petition is entitled to be allowed. In the light of the above, the second question need not be gone into since that would require examination of the facts and this should be done by the second respondent after issuing a show cause notice to the petitioner - Decided in favour of assessee.
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2014 (11) TMI 621
Demand of interest - revenue neutrality - Exemption by virtue of the Notification No.67/95-CE dated 16 March 1995 - Levy of Additional Excise Duty - Held that:- If the Assessee carries out bleaching, dyeing, printing and mercerizing of textile fabrics, which would invite levy of excise duty on each stage of manufacture, however, if the Assessee is also entitled to Modvat credit on duty paid at each stage, then something which is required to be paid or remitted at the final stage could be set off or there is a revenue neutrality. That approach is a permissible approach. If the component of interest is on the tax or duty demanded on the product and if that duty or tax is liable to be set off or adjusted against the credit available at the intermediate stage, then the demand itself was neutralised . Once it was so neutralised and in terms of the judgment of the Hon'ble Supreme Court [2008 (9) TMI 57 - SUPREME COURT], then, one cannot segregate or take out the interest component and call upon the Assessee to pay the sum demanded as interest. The approach of the Tribunal, therefore, in holding that there is a revenue neutrality cannot be termed as illegal or erroneous. The view taken is a possible and probable one. It is taken in the given facts and circumstances and peculiar to the Assessee. In such circumstances, the same cannot be termed as perverse or vitiated by any error of law apparent on the face of record enabling us to entertain this further Appeal. - Decided against assessee.
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2014 (11) TMI 620
Imposition of penalty - Rule 26 of Central Excise Rules, 2002 - Clandestine removal of goods - Held that:- Extensive role attributed to the present appellant as a Director to M/s. SAPL to M/s. Deora Wires (DWNMPL) as also an authorised signatory of SHEL, not only he had knowledge at every stage, while removing, keeping, selling, concealing the excisable goods and it would not have been possible without his active role and connivance with other buyers. The Commissioner (Appeals) has rightly levied penalty for his having contravened the statutory provision and the rules and the Tribunal was justified in confirming the same. Although, the discussion with regard to the confirmation of penalty is very brief that itself cannot deter us from upholding such findings of the Tribunal inasmuch as the Tribunal, while concurring with the reasonings of the Commissioner (Appeals) in imposing the penalty need not have elaborated his role and the provision of Rule 26. It also need not have any specific terms holding the person liable for penalty with both the adjudicating authorities below have discussed elaborately the role of appellant and the order of the Tribunal also attributes such clandestine removal and confirmation of demand of duty to the Director of SAPL against the company also the penalty has been confirmed in way of confirmation of demand on duty. - Decided against assessee.
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2014 (11) TMI 619
Waiver of pre-deposit - validty of order of tribunal seeking pre-deposit of duty - principle of natural justice - Held that:- No reason has been recorded by the appellate tribunal while deciding the application for waiver of pre-deposit/grant of stay and, therefore, the same has been in violation of principles of natural justice. In view of the law laid down by the Apex Court in the case of DCM Financial Services Ltd. v. J.N. Sareen & Anr., [2008 (5) TMI 613 - SUPREME COURT OF INDIA] and also to the fact that the decision cited by the learned counsel for the department has been considered by the Madras High Court and the question has been referred to the Larger Bench and the issue is pending before the Larger Bench, we are of the view that the writ petition filed by the petitioner is maintainable. It is true that deposit of money demanded by the respondents is a condition precedent as per Section 35F of the Act. However, the same can be waived or dispensed with only if deposit of the money is going to cause undue hardship to such a person and a prima facie case has been made out - Matter remanded back - Decided in favour of assessee.
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2014 (11) TMI 618
Condonation of delay - Sufficient reason - Held that:- Tribunal fell in error in rejecting the application for condonation of delay on the ground that there was no explanation of the steps initiated by the applicant between 29th October, 2009 and 1st week of April, 2010. The applicant was required to explain the delay from 29th January, 2010 onwards and not from 29th October, 2009 onwards. The unexplained delay, if any, was between October 29, 2009 and 1st week of April 2010. - Tribunal very rightly found that the delay need not be explained date-wise. The reasons advanced by the applicants for delay should evince bona fides and should be sufficient to warrant condonation of delay in filing the appeal. - delay need not be explained mechanically but the reasons advanced for the delay should reflect bona fides, perhaps the learned Tribunal would have taken note of the consequences of usurpation of an office and consequential misplacement of records and files, and found the reasons acceptable, had it not considered the conduct of the appellant within the period of limitation - tribunal directed to consider the application for condonation of delay afresh - Decided in favour of assessee.
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2014 (11) TMI 617
Validity of Tribunal's order - Provisional assessment or not - Whether the Tribunal can suo motu (after hearing has been completed) come to a conclusion that there had been provisional assessment of the impugned goods, even while such an averment did not appear in the show cause notice or in the Order-in-Original or at the time of hearing - Held that:- The issue whether the assessment is provisional or final is a pure question of fact. That was not the issue raised in the show cause notice or in the Order-in-Original of the Commissioner. The Tribunal states that learned Department representative does not aver that the goods were finally assessed. This cannot be correct as the show cause notice issued under Section 28(1) of the Act invoking extended period goes on the premise that assessment is final and the importer does not deny it to plead a case of no suppression or misstatement. We, therefore, find that the Tribunal has misdirected itself to consider the issue on a total new plea, which was not canvassed by the Revenue in the show cause notice. That apart, the Commissioner was not called upon to adjudicate on that issue as to whether the assessment is provisional or otherwise. We find that the Tribunal erred in considering such new plea and coming to the conclusion that there was no case of misstatement or suppression. The order of the Tribunal, in the light of the law laid down in the decisions of the Supreme Court, referred supra, requires to be rectified. - Matter remanded back - Decided in favour of assessee.
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2014 (11) TMI 616
Levy of NCCD while allowing area based exemption - Exemption under Notification No.50/2003 dated 10th June, 2003 - Imposition of National Calamity Contingent Duty (NCCD), Education Cess, Secondary & Higher Education Cess, interest and penalty - Held that:- Exemption granted by a notification must be read limited to the duty of excise as mentioned in the notification, and by simple interpretation it cannot be extended to cover any other kind of excise duty. Moreover, the petitioner is getting and is availing benefit of exemption notification 50/2003. The petitioner is not aggrieved by any condition contained in the notification nor there is any challenge to the notification - writ petition lacks merit - Decided against assessee.
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2014 (11) TMI 615
Condonation of delay - Supreme Court denied to condone the delay due to non satisfactory explanation given by the Revenue Department - Revenue had filed appeal against the decision of high court as reported in [2010 (4) TMI 1026 - CESTAT AHMEDABAD] and [2010 (2) TMI 335 - CESTAT, AHMEDABAD] regarding levy of education cess on 100% EOU over and above of the aggregate of customs duty.
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