Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 28, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Supply of software on license – What has been transferred is not copyright or the right to use copyright but a limited right to use the copyrighted material and does not give rise to any royalty income - it is not in the nature of royalty - HC
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Share application money - additions u/s 68 - Other than the share application forms, no other agreement between the respondent and third companies had been placed on record - additions confirmed - HC
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Exemption from long term capital gains (LTCG) u/s 54F - Construction or acquisition of property - earlier structure was demolished and new construction was made on the plot - exemption allowed - HC
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Management and advisory fees - Business income or income from other sources - AO has not been able to prove that the appellant did not carry out the stated activity of investment management - HC
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Applicability of section 234A - Late filing of return or non filing of return where tax has been paid earlier - Interest can not be levied u/s 234A - HC
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Transfer of plant and machinery to new industrial unit - Rejection of deduction u/s 80IA - Neither there is suppression of fact or misrepresentation of fact by the Assessee - For attracting penalty u/s 271(1)(c) men's rea is necessary - HC
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Legal representative of deceased – order of appeal was passed only after the death of the deceased assessee in name of deceased assessee which is not correct - HC
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Consultancy charges – The substance of the agreement is for consulting the foreign party for marketing the product of the assessee in South East Asian countries. Therefore, it is only consultancy charges - TDS to be deducted on payment – AT
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Deduction, when there is variance between CPWD and State PWD rate – The assessee is entitled for deduction of 15% on account of rate variation between CPWD and State PWD and 10% towards self supervision. - AT
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Bogus purchases - Additions u/s 69C - the existence of the vendor party which has sold the goods to the assessee company is doubtful and appeared to have been issued the accommodation entries only but this fact stands alone cannot make the purchase bogus - AT
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Addition of Interest accrued but not due – accrual of income - broken periods - The contention that interest accrues for broken periods between two consecutive dates stipulated in the agreement/instrument for payment of interest is without any basis in law - AT
Customs
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Confiscation under Section 115(2) - Mis declaration of goods - Nowhere it can be said that the appellant has to prove beyond doubt that he has not committed an offence - they do not have the knowledge of nature of the goods being transported - AT
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The Thawer equipment for blood warming is distinct and separate from the present imported goods namely blanket contained blowers for warming of the body of the patient - exemption denied. - AT
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Waiver of pre-deposit - Classification of goods - whether the imported goods are goods imported are “Non Alloy Steel“ - two views are possible - stay granted - AT
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Cross-examination - Jurisdiction of Adjudicating authority - the submission that the First Secretary (Commerce) should be cross-examined before the adjudication process is completed cannot be accepted. - AT
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Fraudulent claims of Drawback - Revenue successfully corroborated mala fide of Appellants when material facts and evidence relating to their ill design remained in their special or peculiar knowledge - AT
Service Tax
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Waiver of pre deposit - Cenvat Credit - Job work - denial of credit in respect of goods cleared under exemption notification no. 8/2005 - prima facie case is against the assessee - AT
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Section 73(3) clearly provides that notice can be issued only for recovering such shortfall and not in respect of tax paid by the assessee before issue of SCN - AT
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Service tax liability - Adjustment of excess duty paid - The amount adjusted by the appellant was more than the amount specified in the Rule and no intimation was given - since the appellant was having bonafide belief, penalty waived - AT
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General Insurance Business service - CBEC has earlier clarified that the activity is not taxable, later on, after reconsideration, clarified that the activity is taxable - prima facie the subsequent letter is prospective in nature - stay granted - AT
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Refund of service tax - Merchant Exporter - since name of the respondent has figured in the Shipping Bills; the goods have been exported. There is no dispute in this aspect and service has been used for export of goods and service tax has been suffered by manufacturer - refund can not be denied - AT
Central Excise
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Clandestine Removal of goods - liability of successor - even the legal heirs may have been liable but not the successor - A successor would have been liable only for recovery of the liability once the assessment order was passed and adjudicated - HC
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Interest on delayed payment under Rule 3 (5) of the Cenvat Credit Rules, 2004 – If there is delay in payment of this amount, for whatever reason, interest would be chargeable in terms of the provisions of sub-rule (3) of Rule 8 - AT
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Cenvat Credit - Merely because all the individual equipment, machinery or components are assembled together, it will be preposterous to suggest that the capital goods credit cannot be allowed on this individual machinery/equipment or appliances - AT
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Clandestine removal of Molasses - Unaccounted stock of molasses – Lack of evidences – It cannot be said that there was excess unaccounted stock of molasses in the appellant’s factory, more so when the molsses is under physical control of the State Excise Authorities - AT
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Correct classification of Nestea Tea premix – Under Heading 2108.99 OR Heading 2101.20 of CETA – the demand was beyond the period of limitation is not sustainable - the demand was confirmed as being within the period of limitation - AT
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Cash refund on accumulated cenvat credit under Rule 5 of the CCR, 2004 - If the EP copies of the shipping bills have been misplaced, the photocopies of the original EP copies duly attested by the exporter can also be produced - AT
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Cenvat credit - The Rules 6(2) & 6(3) would not apply when some exempted final products emerge as inevitable and unavoidable waste or by-product, as in such a situation, even if the manufacturer wants, he cannot maintain separate account and inventory - AT
Case Laws:
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Income Tax
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2013 (11) TMI 1413
Selection of comparables – Held that:- The event management division of Saket Projects Limited was taken as comparable - The event management was done by sponsorships in the case of assessee which is evident form various documents placed - Further the segment allocation of expenses also appears to be not reliable - In the case of Saket Projects Ltd. there is functional dissimilarity - When direct comparables are available then segmental results of companies engaged in other business should not be taken as comparable – Decided in favour of assessee. Non-operating income – Held that:- While computing operating margin under TNMM non-operating income is not to be considered – The TPO is directed to exclude miscellaneous income of ICRA Mannagement Consultancy Services – The nature of such miscellaneous income could not be defined with the documents available – The issue was restored for fresh decision. Overstated profit of comparable – Held that:- On perusal of the Audit Report of the comparable company - There was an abnormality in the accounts of comparable Education Consultant (P) Ltd. overstating the profit to the tune of ₹ 2.72 crores – This abnormal profit needs to be adjusted while working out the OP/TC in this account of comparables – The issue was restored for fresh decision. Foreign exchange difference – Held that:- The issue was no more res integra – Following ITAT, Bangalore Bench in the case of SAP Labs India (P) Ltd. vs. ACIT [2010 (8) TMI 676 - ITAT, BANGALORE] - The foreign exchange gain is an integral part of the sale proceeds of an assessee carrying on an export business - This income should not be excluded from the computation of the operating margin of the assessee company – Decided in favour of assessee. Risk profile and working capital adjustment – Held that:- No risk adjustment can be allowed when the same has not been quantified - The assessee has failed to bring any evidence on record to show that there was any difference in risk profile of comparable companies – If difference in the risk results into deflation and inflation of the financial results of comparables adjustment can be made on this fact - The assessee has also failed to establish any working capital difference – Decided against assessee. Arms length Range – Held that:- As per amendment inserted by the Finance Act, 2012 retrospectively - Benefit of +/- 5% under the Proviso to section 92C(2) of the Act shall not be allowed for the purpose of computation of arm’s length price – Decided against assessee. Depreciation on computer peripherals – Held that:- Following Commissioner of Income Tax vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] - Computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system - The computer accessories and peripherals cannot be used without the computer - Depreciation @ 60% on such items shall be allowed – Decided in favour of assessee. Professional consultancy fee – Held that:- The DRP has directed the Assessing Officer to verify the claim of the assessee and allow deduction if the TDS has been deducted - The direction of the DRP is upheld – Decided against assessee.
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2013 (11) TMI 1382
Supply of software on license – Whether royalty or not – Held that:- For a payment to qualify as royalty payment, it is necessary to establish that there is transfer of all or any rights (including the granting of any licence) in respect of copyright - It is to be established that the licensee, by making such payment, obtains all or any of the copyright rights - Distinction has to be made between the acquisition of a "copyright right" and a "copyrighted article". Copyright is distinct from the material object, copyrighted. Copyright is an intangible incorporeal right in the nature of a privilege, quite independent of any material substance. The license granted to the licensee permitting him to download the computer programme and storing it in the computer for his own use is only incidental to the facility extended to the licensee to make use of the copyrighted product for his internal business purpose - The licensee were allowed to make only one copy of the software and associated support information for backup purposes with a condition that such copyright shall include Infrasoft copyright and all copies of the software shall be exclusive properties of Infrasoft - Licensee was allowed to use the software only for its own business as specifically identified and was not permitted to loan/rent/sale/sub-licence or transfer the copy of software to any third party without the consent of Infrasoft - The licensee has been prohibited from copying, decompiling, de-assembling, or reverse engineering the software without the written consent of Infrasoft. The licence agreement between the Assessee company and its customers stipulates that all copyrights and intellectual property rights in the software and copies made by the licensee were owned by Infrasoft and only Infrasoft has the power to grant licence rights for use of the software. The incorporeal right to the software i.e. copyright remains with the owner and the same was not transferred by the Assessee. The right to use a copyright in a programme is totally different from the right to use a programme embedded in a cassette or a CD which may be a software and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the definition of royalty as given in the DTAA – Following Delhi High Court in DIT v. M/s Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT] - The right to make a backup copy purely as a temporary protection against loss, destruction or damage does not amount to acquiring a copyright in the software - What has been transferred is not copyright or the right to use copyright but a limited right to use the copyrighted material and does not give rise to any royalty income - The consideration received on grant of licences for use of software is not royalty within the meaning of Article 12(3) of the Double Taxation Avoidance Agreement between India and the United States of America – Decided against Revenue.
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2013 (11) TMI 1381
Share application money - additions u/s 68 - Held that:- As per the decision in CIT vs. Nova Promoters and Finlease (P) Ltd. [2012 (2) TMI 194 - DELHI HIGH COURT] - Where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders’ register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec.68 and the remedy open to the revenue is to go after the share applicants in accordance with law. The assessing officer had the knowledge on the basis of information received from the Investigation Wing that the assessee was one of the beneficiaries, who had procured share application money from entry providers - Where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed “accommodation entry providers”, whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee - Mere filing of PAN number, acknowledgement of income tax returns of the entry provider, bank account statements etc. was not sufficient to discharge the onus. In this case - Other than the share application forms, no other agreement between the respondent and third companies had been placed on record. The persons behind these companies were not produced by the assessee company – The assessee adopted non- cooperation attitude before the Assessing Officer - Identity, creditworthiness or genuineness of the transaction is not established by merely showing that the transaction was through banking channels or by account payee instrument - Whether or not onus is discharged depends upon facts of each case - It depends on whether the two parties are related or known to each - The manner or mode by which the parties approached each other - Whether the transaction was entered into through written documentation to protect the investment - Whether the investor professes and was an angel investor - Decided in favour of Revenue.
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2013 (11) TMI 1380
Exemption from long term capital gains (LTCG) u/s 54F - Construction or acquisition of property - Held that:- The architect's certificate showed that earlier structure was demolished and new construction was made on the plot - It was a case of new construction after demolition - The word “construct” is distinguishable from maintenance, which means to keep up, to keep from change, to preserve - The construction was carried out within the outer limit of three years - Decided against Revenue.
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2013 (11) TMI 1379
Management and advisory fees - Business income or income from other sources - Held that:- The Assessing Officer has failed to examine the nature of the receipts independently - The appellant’s proprietorship concern M/s Litolier was appointed as ‘Investment Manager’ to invest and manage the funds and assets entrusted to him - The appellant has not maintained separate record for expenses incurred for separate sources of income and has shown all expenses incurred under one consolidated account for his convenience - Some expenditure must have been incurred for earning the management and advisory fees in terms of common expenses of office overheads, salaries, rent etc - The Assessing Officer has implicitly accepted that the expenditure is duly incurred for such business - The appellant also derives income from business of speculation, dealing, in shares, investments, loan finance and related activities in the name of M/s Ashok Mittal & Co. - The Assessing Officer has not been able to prove that the appellant did not carry out the stated activity of investment management - Decided against Revenue.
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2013 (11) TMI 1378
Conditional stay for recovery of tax - Held that:- The department had already recovered almost 23% of tax demand by adjusting the refund due in case of assessee - The appeal of the petitioner for the assessment year 2010-11 is already fixed for hearing before the CIT(Appeals) - The appeal of the petitioner challenging the order withdrawing the registration granted under Section 12A of the Act, has been heard by the Tribunal and the order is awaited - The decision of the Tribunal will have an impact on petitioner's submission that the income is exempted under Section 11 of the Act - It is directed that the CIT(Appeals) will take up the appeal for Assessment Year 2010-11 for expeditious hearing as soon as the Tribunal passes an order on the above - The petition is disposed off.
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2013 (11) TMI 1377
Genuineness of unexplained creadits - Penalty u/s 171(1)(c) - Held that:- The A.O. did not carry out any enquiry after remanding of the issue - The enquiry in the previous assessment is not sufficient to make addition towards unexplained creditors - The enquiry carried out for the accounting period 1.4.1997 to 31.3.1998 in the year 2001 after lapse of three years would not result into accuracy in findings - When purchase and sales were not doubted, treated as genuine, there could be no reason for treating the creditors to be bogus - Even if assessee submits reply that he has surrendered income by piece, it was necessary for the AO to establish from the enquiry that the assessee had concealed the income or furnished inaccurate particulars - AO could not have relied upon earlier enquiry for imposing penalty - Decided against assessee.
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2013 (11) TMI 1376
Applicability of section 234A - Late filing of return where tax has been paid earlier - Held that:- The assessee has already paid the tax amount though return has not been furnished by him - Revenue has not suffered any monetary loss - In this case if the doctrine of purposive construction is not taken recourse to, the same would betray the purport and object of the Act - If the aforementioned construction is not resorted to, a penal provision in section 234A should be read, which was not and could not have been the object of the law for the reasons stated hereinbefore - Decided against the revenue. in case of doubt or dispute, taxation statute must be liberally construed - The assessee will be liable to pay interest in accordance with the law for the late deposit of tax under Section 140A which has been paid by the assessee - No costs.
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2013 (11) TMI 1375
Cash found during search – Penalty u/s 271(1)(c) - Held that:- Following Union of India and Ors vs. Dharmendra Textiles Processors & Ors., [2008 (9) TMI 52 - SUPREME COURT] [2008] 306 ITR 277 – There has to be concealment of the particulars of the income of the assessee and the assessee must have furnished inaccurate particulars of his income - Mere making of a claim, which is not sustainable in law, by itself, would not amount to furnishing of inaccurate particulars regarding the income of the assessee. There was a mistake in the entries regarding the sale of flats to J.B. Exports and the assesee also filed copies of the entry register in respect of two flats and also in respect of other similar flats sold to other parties - Even purchaser (J.B.Exports) produced the documents before the AO - On examining the documents it was found that no "on-money" was paid to the assessee - Following Mak Data P. Ltd., vs. Commissioner of Income Tax-II [2013 (11) TMI 14 - SUPREME COURT] - When a difference is noticed by the Assessing Officer between the reported and assessed income - The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise – In the present case the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation - If the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income - Such onus which shifted on the department has not been discharged – Decided against Revenue.
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2013 (11) TMI 1374
Transfer of plant and machinery to new industrial unit - Rejection of deduction u/s 80IA - Penalty u/s 271(1)(c) is leviable or not - Held that:- The Assessee was under the bonafide impression, that since more than 80% of the cost at new factory was by installing new plant and machinery and only less than 20% of the cost was towards transferring the plant and machinery, it was entitled to benefit under Section 80-IA - Assessee has not concealed any fact from the authorities - Neither there is suppression of fact or misrepresentation of fact by the Assessee - For attracting penalty u/s 271(1)(c) men's rea is necessary - Decided against Revenue.
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2013 (11) TMI 1373
Validity of reassessment u/s 147 - On the basis of DVO's report - Held that:- The reasons recorded by the AO for reopening of assessment only refer to the valuation report and not application of mind or belief formed by the Assessing Officer - Following ACIT versus Dhariya Construction Company [2010 (2) TMI 612 - Supreme Court of India] - Decided against Revenue. Excess exemption u/s 54F - Held that:- The Tribunal when observed this excess allowance issued notice u/s 154 - The assessee had admitted the said mistake and had deposited Rs.21,520/- towards excessive allowance or exemption under Section 54F - Reasons recorded do not state or record that notice under Section 154 of the Act stands withdrawn - Decided against Revenue.
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2013 (11) TMI 1372
Replacement of integral part of machinery - Chamber assesmbly - Capital or revenue expenditure - Held that:- Following Commissioner of Income Tax v. Saravana Spinning Mills (P) Ltd [2007 (8) TMI 16 - SUPREME COURT OF INDIA] - No new asset has come into existence - Replacement of integral part is a current repair and not a capital expenditure - Decided against Revenue.
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2013 (11) TMI 1371
Legal representative of deceased – Held that:- As per section 2(29) - legal representative is a person who in law represents the estate of a deceased person and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued - The order of appeal was passed only after the death of the deceased assessee – The executors were appointed under the “will” of the deceased – The order of CIT(A) was set aside for fresh decision.
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2013 (11) TMI 1370
Head office expenses - Deduction u/s 80HHC - Held that:- The assessee had not maintained separate books for the export and the trading goods - Head office expenses are not attributable in entirety to exports to treat them as direct costs - Export is of trading goods and in such cases where direct and indirect cost are not identifiable as attributable to the export of such goods, the Statute prescribes that the formula be adopted as export turnover as reduced by direct and indirect costs attributable to export of such goods - Head office expenses was not attributable to the exports exclusively but only as relatable to exports - Decided against Revenue.
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2013 (11) TMI 1369
Loan from the company - deemed dividend - Held that:- The borrower is not a shareholder of a Company known as M/s. Goa Golf Club Pvt. Ltd. (which is lender in this case) and as such the question of including the disputed amount as deemed dividend in terms of Section 2(22)(e) of the Income Tax Act, does not arise - Decided against Revenue.
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2013 (11) TMI 1368
Consultancy charges – Tax to be deducted on payment – The assessee engaged M/s Stratum Resources as marketing agent for South East Asian countries - Held that:- The work of the foreign party is to identify the potential customer and file a report regarding the market strategy and developmental studies - Agreement is not for the marketing of product of the assessee in South East Asian countries - The impugned agreement has to be viewed by substance of the transaction and not by the nomenclature - The substance of the agreement is for consulting the foreign party for marketing the product of the assessee in South East Asian countries. Therefore, it is only consultancy charges - The substance of the impugned agreement is only consultancy agreement – Decided against assessee.
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2013 (11) TMI 1367
Deduction u/s 10A to be allowed before or after setting off brought forward losses and unabsorbed deprecition – Held that:- Relying upon the decision of Hon’ble Karnataka High Court in the case of CIT & Anr. Vs Yokogawa India Ltd. and Others [2011 (8) TMI 845 - Karnataka High Court] and the decision of Hon’ble Tribunal in the case of RR Donnelley India Outsorce Pvt. Ltd vs DCIT [2013 (9) TMI 396 - ITAT CHENNAI], it has been held that deduction u/s 10A is allowable to the assessee without setting off of brought forward losses and depreciation. Adjustment of book profit - MAT - Section 115Jb - Book profit should be computed after or before allowing deduction of unabsorbed book loss or unabsorbed book depreciation whichever is less as claimed by the assessee – Held that:- Provision under clause (iii) of Explanation to section 115JA(2) of the Income tax act shows that brought forward losses or un absorbed depreciation has to be reduced as per the books of account - The Assessing Officer has correctly worked out the carry forward business loss or unabsorbed depreciation at Nil, because he has found that depreciation already stood reduced – Rs. 248,007,447/- was allowed as set off to the assessee in computing the book profit of the assessment year 2004-05 was of unabsorbed depreciation only and as the entire unabsorbed depreciation was allowed as deduction in assessment year 2004-05, the carried forward unabsorbed depreciation was NIL in the instant case and consequently, the deduction allowable under clause (iii) of Explanation to section 115JB(2) in the year under consideration comes to NIL – Decided in favor of Revenue.
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2013 (11) TMI 1366
Rejection of books of accounts – A.O. rejected the books of accounts only because of non maintenance of measurement book - prescribed books of accounts as per Rule 6F of Income-tax Rules – Held that:- Books of accounts were rejected as it was found to be very difficult to ascertain the consumption of various raw material as shown in the books of accounts in absence of a measurement book - DVO has not completely relied upon the books of accounts. Had it been the case then the DVO would have accepted the cost of construction declared by the assessee before him at Rs.6,59,57,184/- and would not have determined it at Rs.7,48,58,300/- - In the circumstances, it cannot be said that the rejection of books of accounts was not valid – Decided against the Assessee. Deduction, when there is variance between CPWD and State PWD rate – Held that:- CIT(A) was justified in upholding plinth area basis for determining cost of construction over the CPWD rates and further reduction of 10% on account of personal supervision. - No force in department's submission that the object of determining that rate of 10% for personal supervision was given only because, the assessee in that case himself was an engineer. The assessee is entitled for deduction of 15% on account of rate variation between CPWD and State PWD and 10% towards self supervision. If the aforesaid deductions are allowed, then the cost of construction shown by the assessee at Rs.6,59,57,184/- would be more than the cost of construction determined by the DVO and there will be no case for addition on account of excess cost of expenditure incurred by the assessee– Decided in favor of Assessee.
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2013 (11) TMI 1365
Allowance of Lease rent paid – Sale and Lease back transaction - Revenue contended that the series of transactions were entered into between the group concerns with a view to avoid tax liability of the group as a whole - Held that:- Bank of Madura who purchased windmill 500 KW is not part of the assessee group - Secondly, it is not for the Income-tax authorities to determine as to in what manner the assessee should have conducted his business affairs. It is not in dispute that the transactions were given effect to by the parties - There is considerable force in the contention of the assessee that while on the one hand the assessee's claim of deduction of lease rentals has been disallowed, the income earned by the assessee on sale of power to Andhra Pradesh Government has been assessed without demur – Lease rent allowable as deduction – Decided against the Revenue. Allowance of unabsorbed depreciation of earlier years – Applicability of provision of section 32(2) of the Income Tax Act – Held that:- Assessee's unabsorbed depreciation for the assessment year 2001-02 and 2002-03 and current year's depreciation, as held by the CIT (A) are more than the capital gains and dividend being brought to tax separately by AO. In these circumstances both on facts as well as on law, assessee's contentions are allowable – Decided against the Revenue. Claim of deduction u/s 80HHC, while computing the book profits under section 115JB – Held that:- Following the decision in the case of Ajanta Pharma Ltd vs. CIT [2010 (9) TMI 8 - SUPREME COURT], deduction u/s 80HHC is allowed for computation of book profit – Decided against the Revenue. Taking of turnover of the taxable division only on "standalone" basis for computation of deduction u/s 80HHC - assessee company had several division viz. Textile Division, Lease and Hire Purchase Division; Power Generation Division, Foreign Exchange Division & Financial and Other Services Division. These activities were distinct and separate from each other - Assessee had maintained separate books of account in respect of each division and separate P & L A/s. and separate balance sheet were prepared in respect of each division – Held that:- Assessing Officer had simply adopted the figures appearing in the consolidated account and ignored the separate accounts of Textile Division - In the case of an assessee carrying on more than one business it was only the business of which export was a part was required to be taken into consideration and not other business which had nothing to do with the export business – Decided against the Revenue.
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2013 (11) TMI 1364
Bogus purchases - Additions u/s 69C of the Income Tax Act on account of bogus purchases – Held that:- Commissioner(A) in its order observed that as far as the purchases of raw-material are concerned, they are genuine but it is likely that the bills in respect of those purchases have been purchased from the market - Linkage of these purchases with the sale is not ascertainable because the purchases of raw- material has undergone the various processes before its sale as a finished products. The raw-material and finished goods have different entity and cannot have direct link - But its purchase and sales have been accepted by the Excise and Trade Tax Department. The other evidences such as, the freight receipts for bringing the goods inside the factory by citing the vehicle number etc., their entry in the stock register, purchases against For No. ST- 38 issued by Excise and Trade Department of Haryanas and subsequent assessment by Excise and Trade Department of the purchases and sale of the assessee company are the evidences which cannot be ignored. These evidences have clearly shown the authenticity of the purchases - In the assessment of the main companies of the assessee where huge purchases were made, no adverse view has been taken by the Assessing Officer and by Commissioner of Income-tax (Appeal). In the present case the purchase as compared to the other group companies are negligible. It is also a fact that the existence of the vendor party which has sold the goods to the assessee company is doubtful and appeared to have been issued the accommodation entries only but this fact stands alone cannot make the purchase bogus. Relying upon the judgment in the case of DCIT vs. Global Business India Pvt. Ltd. [2013 (9) TMI 362 - ITAT DELHI] on an identical issue under almost similar facts, it is held no infirmity has been found in the order of Commissioner(A) and purchases are held to be genuine – Decided against the Revenue.
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2013 (11) TMI 1363
Addition of Interest accrued but not due – accrual of income - broken periods - Held that:- Observation has been made by Hon’ble High Court in the case of American Express International Banking Corpn [2002 (9) TMI 96 - BOMBAY High Court] that the right to receive interest on the Government securities vested in the respondent only on the due date mentioned in the securities. Consequently, interest accrued on the securities only on the due dates and cannot be said to have accrued to the respondent on any date other than the date stipulated therein. The contention that interest accrues for broken periods between two consecutive dates stipulated in the agreement/instrument for payment of interest is without any basis in law – Observed that in respect of the securities held by the respondent on 31st March, 2001, the due date for payment of interest thereon had not arrived on 31st March, 2001 and that the assessee sold some of such securities prior to the next due date for payment of interest. It is only the holder of the security on such date to whom interest can be said to have accrued – Following the above observation by the Hon’ble High Court, in any event interest did not accrue to the respondent on 31st March, 2001, as admittedly interest was not payable on that date as per the terms of the said securities – Addition on account of interest deleted – Decided in favor of Assessee. Addition of interest amount received from the foreign Head Office – Held that:- Relying upon the Special Bench judgment in the case of Sumitomo Mitsui Banking Corpn [2012 (4) TMI 80 - ITAT MUMBAI], it has been held that interest, cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law – Decided in favor of Assessee. Addition of Provision of Bad Debt for computing ‘book profit' under section 115JA of the Act – Held that:- In view of the retrospective amendment made by the Finance (No. 2) Act , 2009 w.r.e.f. 1-4-1998, the A.O. was justified in making the addition of the said provision of bad debts while computing the book profit/s 115JA of the Act – Decided against the Assessee. No portion of interest expenditure and operating expenditure would be attributed to the income claimed exempt u/s 10(15) and deleting the proportional disallowance made - Assessee has claimed exempt interest on foreign currency deposits with schedule banks and the same is exempt u/s 10(15)(iv)(fa) of the Act – Held that:- Reliance has been placed upon the assessee’s own case Dresdner Bank AG v. Asstt. CIT [2006 (10) TMI 175 - ITAT BOMBAY-F], wherein it has been held that exemption is allowable u/s 10(15) in respect of gross amount of interest - Any expenditure incurred in relation to earning to the exempt income is to be disallowed u/s 14A – Decided against the Assessee. Interest receivable by the Indian branch from its Head Office/Overseas Branches is the 'income' – Held that:- In the absence of any contrary material placed on record by the Revenue, deleted the disallowance of deduction of interest of Rs. 3,244,213/- - Decided in favor of Assessee.
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Customs
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2013 (11) TMI 1400
Confiscation under Section 115(2) - Mis declaration of goods - Imposition of redemption fine - Onus to prove - Held that:- appellant has to show that the vehicle was used without his knowledge and he did not know the nature of the goods. This submission leads to a conclusion that he did not have the knowledge of the goods being transported which becomes a rebuttable submission only because it is necessary for the department to rebut to show that he had knowledge. In this case, the Commissioner has taken a view that the appellant has to prove beyond doubt that they had no knowledge . This term is used only when a person is being prosecuted and will be subjected to conviction in which case the prosecution is required to prove the guilt beyond reasonable doubt (and not beyond doubt) . Nowhere it can be said that the appellant has to prove beyond doubt that he has not committed an offence - appellant or his agent or driver of the vehicle or person in-charge of conveyance did not have knowledge of nature of the goods being transported - Decided in favour of assessee.
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2013 (11) TMI 1399
Denial of benefit under Notification No. 21/2002-Cus - Classification under Heading 3005 9090 and 8414 5920 of the Customs Tariff Act, 1975 - Assessee claimed the goods are thawer equipment for blood warming and eligible for exemption from duty under Sl. No. 363 A & B - Held that:- Sl. No. 36 of the Table appended to Notification No. 21/2002-Cus. granted concessional rate of duty on the goods namely medical equipments (excluding Foley Balloon Catheters) and other goods specified in List 37. Sl. No. 54 of List 37 of the said Table provides ‘Thawer Equipment for Blood Warming’ - exemption is extended to the Thawer equipment is used for the action of making or becoming warm of the blood - The certificate placed also certified that it is used for convective warming therapy. In our considered view, the Thawer equipment for blood warming is distinct and separate from the present imported goods namely blanket contained blowers for warming of the body of the patient. Therefore, the benefit of the exemption cannot be extended - Decided against assessee.
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2013 (11) TMI 1398
Waiver of pre-deposit - Classification of goods - Commissioner has confirmed the demand for duty on the ground that the goods imported are "Non Alloy Steel" falling under Tariff Heading 72.25 by virtue of Chapter Note 1(f) of Chapter 72 of Customs Tariff - Issue of Advance License - Duty free import of Non-Alloy Steel - Held that:- Any type of steel is an alloy and there is no definition of Non Alloy Steel in the Customs Tariff - The use of the word "Other" and the absence of definition of non alloy steel, at this stage, subject to detailed further hearing, prima facie indicates that Note 1(f) covers all forms of steel - when there are more than one elements to make it alloy steel but if all the elements are in different proportions, it would be non-alloy steel. If this interpretation is accepted than even as per MTC, the steel imported by the Applicants cannot fall under Note 1(f) - Prima facie it does appear that even if interpretation by both sides is considered, when two views are possible, on first principles, and without any reference to the case of Tata Motors, the one in favour of assessee must be preferred in matters of classification where as is the settled law, the burden to prove is on the Department. On limitation, it does appear that manufacturer's certificates were obtained instead of producing the MTCs for clearance. Even on the basis of the chemical composition in the MTC if the goods merit classification under heading 72.08, the non disclosure of MTCs would not amount to wilfull conduct or concealment on the part of the Applicant, particularly when description in the bill of entry is not disputed. Even the few Country of Origin Certificates with heading 72.25 did not raise any query or objection from the assessing officer since the goods were meant for manufacture of export goods - prima facie no illegal illegible benefit or gain to the Applicant, if all goods are exported and hence prima facie no case of intention to evade duty, given the absence of diversion or misutilisation is made out - since all duty free inputs as imported in this case are required for manufacture of goods for export and have infact as claimed and not disputed, actually so used, there is no question of passing of the incidence of duty - appellant has made out a prima facie case for waiver of pre-deposit of duty, interest thereof and penalty. Accordingly, the applications for waiver of pre-deposit of the amounts involved is allowed and recovery thereof until the final disposal of the appeal - Stay granted.
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2013 (11) TMI 1397
Recovery of duty drawback for non-submission of proof of sale proceeds in foreign currency in stipulated period - Condonation of delay for filing an appeal before Commission (Appeals) - service of order - Denial of refund claim - Bar of limitation - Delay in delivery of order - Appellant claims that they have received the order throguh RTI - Held that:- Order-in-Original was posted to be delivered in time and there has been delay in filling the appeal and accordingly he held that the present appeal has been filed beyond the prescribed time for filing the same, thus it is hit by bar of limitation - unless the contrary is proved, service shall be deemed to have been properly effected when a letter properly addressed, pre paid and posted by registered post - Following decision of Miles India Ltd. Vs Assistant Collector [1984 (4) TMI 63 - SUPREME COURT OF INDIA] and Collector or Central Excise Vs. Doaba Cooperative Sugar Mills [1988 (8) TMI 103 - SUPREME COURT OF INDIA], prima facie case is not in favor of assessee. - appellant directed to make full pre-deposit - stay denied.
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2013 (11) TMI 1396
Jurisdiction of Adjudicating authority - Cross-examination of the First Secretary (Commerce) - Whether the adjudicating authority is competent to adjudicate the matter or not - order-in-original was passed in the first round of litigation on 17.5.2010 and the matter travelled up to Supreme Court and finally again the adjudicating authority had to take up adjudication. In the meanwhile the appellants were pursuing the matter under RTI Act to get the information relating to the issue from Singapore High Commission. The application to Singapore High Commission was made nearly two years after the adjudication order was passed i.e., 8.6.2012 which was rejected on 5.7.2012. Thereafter the appellate order under RTI Act was passed on 17.8.2012. However, when the adjudicating authority in the second round of litigation took up the matter, the fact that such applications were made and an appellate order had already been passed under RTI Act was not brought to the notice of the adjudicating authority at all, when the personal hearing took place - In fact nothing could have prevented or should have prevented the appellants from seeking the cross-examination of the First Secretary (Commerce) if they intended to do so in the first round of litigation itself, since appellants knew that there was a report and that had been mentioned in the show-cause notice also. Therefore, the submission that the First Secretary (Commerce) should be cross-examined before the adjudication process is completed cannot be accepted. Even though both sides have not produced any decisions, it is clear that there is no bar for adjudication of a matter by the adjudicating authority even if he had some role to play at the time of investigation or in the issue of show-cause notice. What is required to be seen is that there is no bias while passing the order - He had only responded to the query from India about the prices of betel nuts and had sent a report. Therefore, it cannot be said that he was part of the investigation. Therefore, this ground also we are unable to accept - Decided against assessee.
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2013 (11) TMI 1395
Penalty u/s 117 on courier service provider - Authorization under Regulation 13(a) not produced - Held that:- goods arrived on 22.06.2009 and they filed the bill of entry as per manifest and the goods are also detained on the same date. It is contended that after filing of the bill of entry, they obtained the authorization for clearance of the goods as per normal practice. Be that as it may, it is seen that eight consignees appared and goods were cleared to them. Apart from that, eight consignees also appeared and disowned the goods. In any event, three consignees are non-existent and only one person received the notice but did not turn up. It is noted that the effect of non-filing of authorization would apply in respect of the three consignees only. The Commissioner (Appeals) observed that after thorough discussions that in this factual background none of the clauses of Section 111 would be invoked and, therefore, imposition of penalty under Section 112 is set aside. It is noted that the authorised representative made an elaborate submission on this issue but no appeal was filed by the Revenue - it is fit case that the penalty should be set aside after giving a caution to the appellant and they should avoid such irregularity in future, if any - Decided in favour of assessee.
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2013 (11) TMI 1394
Fraudulent claims of Drawback - Mis declaration of description of goods as gear cutting tools of Cobalt bearing high speed steel and heat resistance rubber tape as against inferior nature and quality thereof exported - Onus of proving mis declaration - Held that:- Appellants 5 to 7 had hand in glove with the master minded appellants 1 and 2 to procure inferior goods from unknown source misguiding the investigation that those were procured from the fictitious concerns named by investigation in its result of investigation summarised herein before and fake invoices fabricated by all of them - Entire investigation result depicted at the our set and adjudication finding brought out truth and close connection of entire racket acting in defiance of law making fraudulent export to claim undue benefit of DEPB claim. When reinvestigation gathered cogent evidence against Kishorpuria group, they came forward to surrender part of the DEPB claim made by them and deposited the same with investigation. Their contumacious conducts came to broad day light. Revenue proved its case in minute detail and established truth by fruitful investigation result to make its story very believable - None of the appellants proved to be innocent and failed to lead cogent evidence to disturb adjudication finding. They did not repel any of the arguments of Revenue with cogent evidence - Appellants resorted to fraud consciously by their ill design as was found by investigation and adjudicating authority. Their conscious knowledge of mis-declaration as to description of the goods as well as value of the export made from India was proved when they had intention to make ill gain from undue claim of DEPB. Motive of all these appellants was oblique to promote illegality. Investigation discovering truth by extensive enquiry brought out neatly the intimate connection of the racket and their conscious involvement to benefit each other - Having echoing evidence on record by investigation, establishing live link and close proximity of the above appellants inference drawn by the Adjudicating Authority cannot be disturbed against them since presumption of innocence was countered by Customs by the presumption of guilt which could not be assailed by the appellants. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof often it is nothing more than a prudent mans estimate as to the probabilities of the case - Escapement of misdelcared goods resulting in fraud against Customs (Revenue), proved from governing facts, attendant circumstances and conduct of the parties using fraudulent documents for export, cannot be brushed aside accepting the plea that Customs failed to check the goods exported nor the same tested at the time of export. If such plea is entertained, the economy will be in jeopardy and fraud against the State shall perpetuate. Secrecy and stealth being covering guards of ill designed act, it is normally hardship for Revenue to unravel every link of the process. Revenue successfully corroborated mala fide of Appellants when material facts and evidence relating to their ill design remained in their special or peculiar knowledge - Decided against assessees.
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Corporate Laws
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2013 (11) TMI 1393
Contravention of Regulations 3(a), (b), (c) and (d) and Regulation 4(1) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 - Trading done on account of Appellant no. 1 in such a way that net quantity at end of day was zero - Before placing orders for Central Bank of India, shares were purchased in account of Noticee no. 1 and sold to match the orders of CBI, thereby, earning undue profits at cost of CBI and its customers - Held that:- 1995 Regulations prohibited front running by any person dealing in the securities market and a departure has been made in the Regulations of 2003 whereby front running has been prohibited only by intermediaries - In the absence of any specific provision in the Act, rules or regulations prohibiting front running by a person other than an intermediary, we are of the view that the appellants cannot be held guilty of the charges levelled against them. There is no denying the fact that when the appellants placed their order, these were screen based and at the prevalent market price. Admittedly Passport was the major counter party for trading in the market and was placing huge orders and hence possibility of order of traders placing orders for smaller quantities matching with orders of Passport cannot be ruled out. Therefore, it cannot be said that they have manipulated the market. The alleged fraud on the part of Appellant may be a fraud against its employer for which the employer has taken necessary action. In the absence of any specific provision in law, it cannot be said that a fraud has been played on the market or market has been manipulated by the appellants when all transactions were screen based at the prevalent market price. Act of front running is always considered injurious be it an intermediary or any other person for that reasons. We would like to give a liberal interpretation to the concept of front running and would hold that any person, who is connected with the capital market, and indulges in front running is guilty of a fraudulent market practice as such liable to be punished as per law by the respondent. Appellant nos. 1 and 2 have not been implicated in the case on basis of being mere husband and wife and on basis of their relation, but on basis that Appellant no. 1 was privy to inside privileged information, not in public domain, since she was wife of Appellant no. 2, who was dealer in securities on behalf of CBI; is borne out of facts and circumstances of the case; since investigation has brought about significant facts of the case where trading on basis of privileged information by Appellant no. 1 has been sufficiently proved beyond reasonable doubt, based on preponderance of probability against Appellants acting in concert with each other for committing fraud on investors and manipulation of securities market and not on basis of premise that matching of trade to 100% on 14 days out of 40 days of investigation period was mere coincidence - Hence, charges against Appellants have been sufficiently proved, on basis of above, and Appellants have violated Regulations 3(a), (b), (c), (d) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations) and that penalty of Rs. 25 lac on Appellants to be paid jointly and severally is justified - Decided against appellants.
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Service Tax
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2013 (11) TMI 1412
Waiver of pre deposit - Cenvat Credit - Job work - demand confirmed on the ground that applicant had availed excess credit in respect of the input services which are used in the processing of the goods, which were cleared on payment of appropriate service and part of the goods are cleared at nil rate of Service Tax by claiming the benefit of exemption Notification No.8/2005-S.T. dt. 1.3.2005 - Held that:- part of the processed goods are cleared at nil rate of Service Tax by availing the benefit of exemption. It is also not disputed by the applicant, that credit has been availed in respect of the common inputs as well as input services, which are used in the processing of exempted as well as the processed goods on which the Service Tax has been paid - applicants are undertaking process which does not amount to manufacture and in view of this the applicants are clearing part of their processed goods on payment of appropriate service tax. In view of this, prima facie the applicant has not made out a case for waiver of service tax. The ratio of the above decision is not applicable to the facts of the present case - Assessee directed to make a pre deposit - Partial stay granted.
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2013 (11) TMI 1410
Inclusion of cost of material used during the provision of services - Repair and maintenance service - Whether an assessee engaged in rendering services of repairs and maintenance to its customers having utilized various articles for providing effective repairs and maintenance would be entitled to avail the benefit of the Notification No. 12/2003-S.T., dated 20-6-2003 in relation to such articles - decision of the Tribunal in the matter of Agrawal Colour Advance Photo System v. CCE (2011 (8) TMI 291 - CESTAT, NEW DELHI (LB)) wherein similar issue had arisen and/has been sought to be referred for decision by a Larger Bench, in the view what is stated above and particularly taking into consideration the divergent views expressed by different Benches of the Tribunal and the Courts on the point in issue and the reference sought to be made in relation to the said issue to the Larger Bench - core of the dispute stands settled by higher authority of the Supreme Court and the Delhi High Court, we do not consider necessary to answer the issues referred for our consideration. The grievance of the appellant is in the circumstances more appropriately decided by the regular Bench which will now consider all relevant decisions presented for its consideration and resolution - Following decision of G. D. Builders And Others Versus UOI And Another [2013 (11) TMI 1004 - DELHI HIGH COURT] - Decided against assessee.
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2013 (11) TMI 1409
Stay application - Waiver of pre deposit - Management, maintenance and repair services - Section 65(64) - Held that:- so far as strengthening/replacement of damaged fencing and maintenance of Border Security fencing is concerned, the adjudicating authority proceeded, on what prima facie appears to be a creative interpretation of the transaction and the relevant provision - where individual residential units are constructed, the transaction falls outside the purview of construction of complex service, defined in Section 65(30a) - service tax assessed under management and maintenance of repair service and construction of residential complex service is prima facie unsustainable for the above reasons and in respect of service tax assessed for works contract; erection, commissioning and installation services and manpower recruitment, since service tax availing the cum duty benefit and abatement entitlement has been remitted. Tax component assessed under works contract service for false ceiling executed by the petitioner in the conference Hall for military station hqrs. We prima facie find no justification for waiver of pre-deposit on this amount - As service tax on cum duty basis and after availing abatement benefit has been remitted in respect of the other three components, we are of the view that the petitioner has made out a case for waiver of pre-deposit in full and stay of further proceedings for realisation of the adjudicated liability, assailed in the substantive appeal related to this application, pending disposal of the appeal - Partial stay granted.
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2013 (11) TMI 1408
Rectification of mistake - Suppression of Service tax - Assessee contends that there was no allegation for suppression of service tax - Benefit u/s 73(3) - Whether interest paid can invoke penalty imposed - Held that:- for availing the benefit of Section 73(3) what is required is payment of disputed service tax amount before issue of show-cause notice. Explanation (1) is to the effect that interest will be payable. There is no provision that interest should be paid before issue of the show-cause notice as it was there in Section 73(1a) of the Act which stood at the relevant time - Section 73(3) clearly provides that notice shall not be issued in respect of amount so paid implying that if any short-fall is noticed, notice can be issued only for recovering such shortfall and not in respect of tax paid by the assessee before issue of SCN - Therefore, order passed by the Tribunal needs correction - So the Show Cause Notice issued and penalty levied are not maintainable in law - Rectification allowed.
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2013 (11) TMI 1407
Service tax liability - Adjustment of excess duty paid - Rule 6(4A) & (4B) of Service Tax Rules, 1994 - Penalty u/s 76 - Held that:- any excess amount of Service Tax required to be paid by the appellant should be adjusted from the excess duty paid in the subsequent period as outlined in Rule 6 (4A). However, the adjustment mentioned above are subject to the conditions specified under Rule 6 (4B) which, inter alia, according to which any amount in excess of specified amount cannot be adjusted by the appellant. The second condition is that such an adjustment should be intimated to the jurisdictional Central Excise officer within a period of 15 days from the date of such adjustment. The amount adjusted by the appellant was more than the amount specified in the Rule and no intimation was given to the jurisdictional Central Excise officer - Under Rule 6(3), there are no conditions like the value limit to be adjusted or regarding giving intimation of the adjustment to the jurisdictional Central Excise officer. Appellant had a bonafide belief that the entire amount of Service Tax payable can be adjusted against excess Service Tax paid, therefore, it is a fit case where the provisions of Section 80 of Finance Act, 1994 can be made applicable. Accordingly, penalties imposed upon the appellant under Section 76 of Finance Act, 1994 are set aside - Decided partly in favour of assessee.
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2013 (11) TMI 1406
Interest u/s 75 - Penalties under Sections 76, 77 and 78 - Manpower recruitment or supply agency - Section 65(105)(zr) read with Section 65(68) - manner of service of notice for summons - Violation of Section 37C - Held that:- unproductive enterprise of Revenue in serving summons on the petitioner at its registered address, Revenue legitimately invoked the process of serving the show cause notice under Section 37C by affixing the same at the registered business premises of the petitioner. Additionally, a copy of the notice was also affixed on the residence of the proprietor of the petitioner firm - Prima facie, there was wholesome and substantial compliance with provisions of Section 37C - Decided against assessee.
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2013 (11) TMI 1405
Differential service tax liability - Manpower Recruitment Agency services - Discharge of service tax liability on the entire amounts received - Held that:- show-cause-notice issued to the appellant specifically talks about inclusion of the difference in income shown between the balancesheet and ST-3 returns filed by the appellant. The annexure to show-cause-notice specifically talks about the such difference - invoices which were produced by the appellant do not inspire any confidence to hold that amount which have been paid as salary and wages are reimbursed by the service recipient, since we are unable to come to any conclusion that documents produced by the appellant indicate that there was reimbursement of expenses from the service recipient - Following decisions of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT] and Malabar Management Services Pvt. Ltd. vs. Commr. Of S.T. & Modern Business Solutions[2007 (10) TMI 135 - CESTAT, CHENNAI] - Partial stay granted.
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2013 (11) TMI 1404
Discharge of service tax liability - Storage and Warehousing Services - Import of Ammonia - Demand of duty, interest and penalty – Bar of limitation - Held that:- Demand is time barred as extended period is not invokable as no such point was taken by the first audit of their premises done by Revenue. It is observed that appellants have filed the required periodical returns with the department showing the credit taken. It may be true that copies of the documents on the basis which credits are taken are not enclosed with the periodical returns filed with the department. But all the Cenvat credit taking documents are required to be seen by the Revenue during audit exercise to ensure that credit has been correctly taken by an assessee. However, if the improper credit taken is detected by the revenue in the very first audit, still there could be a case for application of extended period in view of the provisions contained in the Cenvat Credit Rules, 2004 - prima facie case for complete waiver of the confirmed dues and penalty on time barred - Following decision of Commissioner of Central Excise, Bangalore vs. M/s. MTR Foods Limited [2012 (10) TMI 165 - KARNATAKA HIGH COURT] - Stay granted.
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2013 (11) TMI 1403
Demand of service tax - General Insurance Business service - Waiver of pre deposit of duty, interest and penalty - CBEC has earlier clarified that the activity is not taxable, later on, after reconsideration, clarified that the activity is taxable - Assessee contends that letter was prospective in nature therefore demand for the earlier period is not sustainable - Held that:- applicants were corresponding with the Board of Customs & Central Excise. Earlier the applicants were asking for exemption from service tax which was declined vide letter dated 05.01.2009. The matter was again taken up with the Board and the Board vide letter dated 24.02.2009 conveyed to the applicants that the applicants are not performing taxable service of General Insurance Business and not liable under the taxable service of General Insurance Business service. The Board has reviewed its earlier decision which was conveyed to the applicants vide letter dated 20.09.2011 whereby it has been decided that the applicants are providing taxable service. Show Cause Notices were issued in view of the letter dated 20.09.2011. In view of the earlier letter dated 24.02.2009, whereby it was conveyed that the applicants are not liable for service tax under the category of General Insurance Business, prima facie, the applicants have a strong case for waiver of pre-deposit of dues - Stay granted.
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2013 (11) TMI 1402
Refund of service tax - Merchant Exporter - refund of service tax paid by them in respect of 13000 MTs of sugar exported by them - Held that:- Foreign Trade Policy is not a mandatory requirement for the purpose of third party exports. Foreign Trade Policy requires an exporter to be identified for the purpose of determination of eligibility for export benefits and for this purpose, the third party exporter is required to be mentioned in all the documents. If the Shipping Bills do not contain the name of third party exporter, the third party exporter who is a Merchant Exporter would not be the exporter in the eyes of law. Notification No. 17/2009-S.T. dated 7.7.2009, amended subsequently under which refund has been made. According to this notification, exemption for the taxable service which is extended in the form of refund is available in respect of taxable service received by exporter of the goods and used for export of the goods. There is no definition in the notification or in the Central Excise Act. Since the refund is for the export of goods, it would be appropriate to take the definition of ‘exporter’ in the Customs Act for this purpose. In this case, the respondent has fulfilled all the conditions since name of the respondent has figured in the Shipping Bills; the goods have been exported. There is no dispute in this aspect and service has been used for export of goods and service tax has been suffered by manufacturer - Decided against Revenue.
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2013 (11) TMI 1401
Stay application - Denial of CENVAT Credit - Nexus with the output service of ‘Management Consultancy Services and Works Contract services’ - applicability of Rule 6(5) where input services are related to exempted services - Held that:- It is observed from the opening paragraph of the contract dated 27.7.2007 entered between the appellant and M/s. Yes Bank Limited that Sadbhav Infrastructure Project Limited (SIPL for short) has been given alternate names ‘Sadbhav’ or ‘Company’ - it is possible that Yes Bank Limited has provided services to all the group Companies and payment part has been done by the appellant for the purpose of taking cenvat credit. Further, whether the services for which cenvat credit has been taken has got nexus with the output services provided by the appellant needs deeper consideration. Appellant has, therefore, not made out a prima facie case for complete waiver and is required to be put to certain condition - Partial stay granted.
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Central Excise
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2013 (11) TMI 1411
Denial of cenvat credit - Irregular and illicit credit availed on Rails as capital goods and as inputs - Waiver of Pre-deposit – Held that:- The Applicant had availed the CENVAT Credit on Rails as capital goods and as inputs - the procurement of Rails had been capitalized by the Applicant in their Statement of Accounts and Balance Sheet - the Applicant have not made out a prima facie case for total waiver of pre-deposit of the CENVAT Credit – Assessee directed to deposit Rupees nine lakh as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2013 (11) TMI 1392
Clandestine Removal of goods - liability of successor - Cooling/indoor units of split air conditioner & other parts of air conditioner manufactured and cleared without payment of duty – No registration was obtained – Statutory compliances were not made - Documents seized prior and post incorporation of the company - Appellant contended that the company was incorporated on 29th January, 1998 and had started manufacturing operations from 1st April, 1998 and that they cannot be saddled with the liability of duty or penalty pertaining to the period between 1st July, 1996 to 31st March, 1998 - Whether the appellant company is liable and could be assessed for the period prior to its incorporation i.e. 1st April, 1998 – Held that:- Kuldeep Singh Punn was certainly available and could have been assessed in respect of his clandestine and wrongful activities - In his absence, even the legal heirs may have been liable but not the successor - A successor would have been liable only for recovery of the liability once the assessment order was passed and adjudicated under Rule 230(2). The mandatory and primary condition of sub-section (3) to Section 170 is that the Revenue should not be in a position to recover the dues from the predecessor and then “only” the successor is liable - The appellant company has taken over assets and liabilities of Kuldeep Singh Punn - The liabilities taken over, were mentioned in the books of accounts and not those which were not mentioned or were clandestine activities undertaken by Kuldeep Singh Punn in his personal or individual capacity as a sole proprietor, before the company was incorporated on 29th January, 1998 and started business with effect from 1st April, 1998 - the succession is not stated or claimed to be fraudulent - The statutory provisions or the legislative mandate is the primary and guiding principle, to make the successor vicariously liable to pay the liabilities of the predecessor - to initiate and continue proceedings against a firm, which was dissolved, it was necessary that there should be a statutory provision. Separate legal entity – Vicarious liability - Whether the appellant-company can be held to be vicariously liable for the dues and the liability of an individual and promoter director – Held that:- There has been an extraordinary and serious error in the order passed, which is of a basic or fundamental nature - The appellant was incorporated only on 29th January, 1998 and came into existence on the said date as a separate juristic entity and a legal person - The appellant could not have indulged in clandestine and wrong sales prior to 29th January, 1998 as it was not in existence and was not carrying on manufacturing activities till 31st March, 1998 - Before the said date, Kuldeep Singh Punn in his individual capacity as a sole proprietor and was carrying on the business of manufacture and sales of air conditioners and cooling units from the same premises from where the appellant started operating. Principle of lifting of corporate veil has no application - Principle of vicarious liability has to be created and enacted under statute by the Legislature - Sometimes the doctrine is applicable by the courts to punish and impose penalties or fines by lifting the corporate veil as offences or violations of law committed by natural persons behind the company - But in such cases, the offences or violations are committed by the artificial juristic person and do not relate to period prior to the incorporation – Decided in favour of Appellant.
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2013 (11) TMI 1391
Denial of Cenvat credit on various articles – Held that:- Following Commissioner of Central Excise Vs Rajasthan Spinning and Weaving Mills Ltd.[ 2010 (7) TMI 12 - SUPREME COURT OF INDIA ] – The items were used as supporting structures. It is also observed that these items are used to support the working platform around the equipment and hand rails for safety purposes – Following Vandana Global Ltd. Versus CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) ] - cement and steel items used for laying foundation for building supporting structures cannot be treated either as 'inputs' or 'capital goods' in relation to the final goods - the items were used for supporting structures of the working platform – Penalty is not sustainable – Decided partly in favour of Assessee.
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2013 (11) TMI 1390
Interest on delayed payment under Rule 3 (5) of the Cenvat Credit Rules, 2004 – Held that:- If there is delay in payment of this amount, for whatever reason, interest would be chargeable in terms of the provisions of sub-rule (3) of Rule 8 - if the assessee fails to pay the amount of duty, he shall be liable to pay the outstanding amount along with interest at the specified rate - Interest would be attracted on the outstanding amount for the period starting from the first day after due date till the date of actual payment of the outstanding amount - When the interest on duty payable on the goods cleared in a month including the amount payable under Rule 3(5) of Cenvat Credit Rules, is linked with the period of delay from the due date, the interest would be attracted whenever there is delay – Decided in favour of Revenue.
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2013 (11) TMI 1389
Eligibility for capital goods credit – Machinery gone in the fabrication of plant - Revenue was of the view that the plant is an immovable structure and not excisable and no duty has been paid on the plant, the credit is not admissible – Held that:- In the manufacturing plants, all the machineries cannot be used as such and directly, the various machineries and equipments have to function in conjunction and in unison with each other and for this purpose, they are assembled into a plant - Merely because all the individual equipment, machinery or components are assembled together, it will be preposterous to suggest that the capital goods credit cannot be allowed on this individual machinery/equipment or appliances - The purpose of allowing capital goods credit is to relieve the burden of cascading effect of taxes. If that purpose is to be achieved in a meaningful way, the law has to be interpreted in a reasonable manner so that the object is achieved. Following COMMISSIONER OF CENTRAL EXCISE, LUDHIANA Versus PEPSI FOODS LTD. [2010 (2) TMI 608 - PUNJAB & HARYANA HIGH COURT] - ownership of goods is not a criterion for denial of credit on capital goods and even if it is leased for a particular period, the assessee is eligible to take CENVAT Credit - merely because M/s Inox Air Products Ltd. has leased out the plant to the appellant, that does not disentitle the appellant from availing CENVAT Credit of the excise duty paid on capital goods - RAJARAMBAPU PATIL SSK LTD. Versus COMMISSIONER OF C. EX., PUNE-II [2006 (10) TMI 310 - CESTAT, MUMBAI] - CENVAT Credit of excise duty paid on parts, components and accessories would be admissible under the Capital Goods Credit scheme even if they are assembled into goods which are immovable or exempted. COMMISSIONER OF C. EX., MYSORE Versus ICL SUGARS LTD. [2011 (4) TMI 1065 - KARNATAKA HIGH COURT ] - immovability has no bearing on eligibility for availment of CENVAT Credit on capital goods - So long as the individual machinery, equipment or appliance or parts and components fall within the definition of capital goods under Rule 2(A) of the Cenvat Credit Rules, 2004 and so long as they are used within the factory of production for the manufacture of excisable goods which are chargeable to duty, the benefit of capital goods credit cannot be denied. The appellants are rightly entitled for capital goods credit on various machinery, equipment, appliances and parts and components thereof used in the setting up of oxygen plant within the factory premises - Thus the order denying the capital goods credit is unsustainable in law – Decided in favour of Assessee.
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2013 (11) TMI 1388
Clandestine removal of Molasses - Unaccounted stock of molasses – Lack of evidences – Held that:- The statements of the drivers have not been supplied to the appellant - Since there was no shortage of molasses in the appellant’s factory and on the contrary, there was excess quantity vis-`-vis the balance recorded in the RG-I register and since no samples from the stock of molasses seized from the tankers and from the stock of the molasses stored in the Appellant’s factory had been taken and tested, if cannot be said with certainty as to whether the molasses seized from the tankers was same as that which had been manufactured in the appellant’s factory. The department’s allegation that the molasses seized from the tankers had been clandestinely cleared by the appellant is not supported by any evidence - As regards excess stock of molasses in the appellant’s factory, the Appellant’s plea is that during summer season on account of heat, foam is generated in the tanks because of which the dip reading gets distorted - there is substance in the appellant’s plea – BAJAJ HINDUSTAN LTD. Versus COLLECTOR OF CENTRAL EXCISE, KANPUR [1994 (6) TMI 59 - CEGAT, NEW DELHI] - It cannot be said that there was excess unaccounted stock of molasses in the appellant’s factory, more so when the molsses is under physical control of the State Excise Authorities and no case had been booked in this regard by them against the appellant – order set aside – Decided in favour of Assessee.
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2013 (11) TMI 1387
Correct classification of Nestea Tea premix – Under Heading 2108.99 OR Heading 2101.20 of CETA – Held that:- It cannot be accepted that the appellant suppressed the ingredients with an intent to evade payment of duty - There is no elaboration in the show cause notice indicating as to which particular ingredients, which was relevant for the purpose of classification, does not stand disclosed by the appellant in the said flow chart or manufacturing process - no initiative was taken by the Revenue to propose change in the classification of pre-mix tea and to raise differential duty demand - There is no explanation as to why when Revenue was aware of the facts, the show cause notice was issued only 3.7.2008, covering the period June, 2003 to February, 2008. The appellant filed proper classification list, and they were also regularly filing monthly ER-1 returns showing the manufacturing and clearance of the pre-mix tea, by adopting classification under heading 2108.99 - No objection was ever raised by the Revenue - When the Revenue was raising the show cause notice in respect of pre-mix coffee, they could have or they should have raised show cause notice in respect of pre-mix tea also - It is well settled law that claiming classification under a particular heading does not amount to suppression or mis-statement with intent to evade payment of duty - the demand was beyond the period of limitation is not sustainable - the demand was confirmed as being within the period of limitation which demand is already quantified and deposited by them alongwith interest - in the absence of any malafide on the part of the assessee, it was not fit to impose any penalty – Decided partly in favour of Assessee.
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2013 (11) TMI 1386
Rejection of refund claim – Cash refund on accumulated cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 r.w Notification no.05/2006-CE (NT) – Attested shipping bills required to be submitted – Held that:- The ground of which the refund claim has been rejected is not correct as the condition of notification is that ‘copies of relevant shipping bill of export duly certified by the Customs Officers to the effect that the goods have been exported’ must be produced - what is required to be produced is the copies of the shipping bills containing certification by the Customs Officers regarding export of the goods which is on the EP copy of the shipping bill - If the EP copies of the shipping bills have been mis-placed, the photocopies of the original EP copies duly attested by the exporter can also be produced, as it contains the certification by the Customs officers certifying the export of the goods – relying upon COMMISSIONER OF C. EX., JAIPUR-I Versus UNIMAX GRANITES (P) LTD. [2010 (10) TMI 570 - CESTAT, NEW DELHI] – order set aside – Decided in favour of assessee.
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2013 (11) TMI 1385
Refund claim on decreased price with retrospective effect - Whether the refund is admissible where the price variation clause is contained in the contract, the price was reduced with retrospective effect and the differential amount including taxes returned to the buyer through the credit notes – Held that:- It is evident from the above that there is no apparent contradiction and the various case laws cited by the Revenue and the Ld. Advocate for the appellant relate to different facts and circumstances of the case and therefore each case has to be examined on its own merits based on its own facts. The Commissioner (Appeal) had relied upon the letter dated 11/10/2011 of M/s. VFJ alone and allowed the appeal without discussing whether the documents called for from the appellants by the adjudicating authority were necessary to process their refund claims under the provisions of Section 11B of the Act - the applicant did not produce the documents called for from them to process their refund claims – order of the Commissioner (Appeal) set aside and the matter remitted back to the adjudicatory authority to decide the issue afresh. He should provide a list of those documents necessary to verify the contention of the applicant/appellant that refund was due as according to variation clause in the contract/supply order, price was reduced and consequently the differential amount including duty was returned to M/s. VJF - On production of these documents the adjudicating authority shall verify the claims in terms of Section 11B of the provisions of Central Excise Act and pass a fresh order – Appeal allowed by way of Remand – Decided in favour of Revenue.
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2013 (11) TMI 1384
Invocation of Rule 6(3) of Cenvat credit rules - Separate account and inventory not maintained for dutiable as well as exempted goods – Held that:- Nowhere in the show cause notices, it is mentioned as to which are the common input or input services in respect of which cenvat credit has been availed and which had been used in or in relation to the manufacture of dutiable and exempted final products - Unless the common inputs and or input services, in respect of which cenvat credit had been availed and which had been used in the manufacture of dutiable and exempted final products are clearly mentioned in the show cause notice, the show cause notice cannot invoke Rule 6(3) of Cenvat Credit Rules and demand an amount to 10% equal to the sale value of the exempted final products. The Rules 6(2) & 6(3) would not apply when some exempted final products emerge as inevitable and unavoidable waste or by-product, as in such a situation, even if the manufacturer wants, he cannot maintain separate account and inventory - Rule 6(2) and 6(3) cannot be construed to impose an obligation on a manufacturer which is imposable to observe and then go on penalise him, by the demands under Rule 6(3) and imposition of penalty – Relying upon RALLIS INDIA LTD. Versus UNION OF INDIA [2008 (12) TMI 46 - HIGH COURT BOMBAY] - Rule 57 CC of Central Excise Rules, 1944 (which is pari materia with Rule 6(3) of Cenvat Credit Rules, 2004) is not applicable in respect of by-products – Decided against revenue.
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2013 (11) TMI 1383
Mis-declaration of goods – Suppression in the value of goods - Goods seized from different premises were proved to be supplied by paragon group of companies including Roxy Electrical and Roxy Cable Company - Appellants failed to rule out their role as consignors of misdeclared goods - Goods seized at various places and consignment of past clearances revealed that description of goods differed in quantity, quality, length and nature of goods and composition as well as characteristics thereof and such difference admitted - Value of goods consigned was also suppressed - Various evidence both oral and documentary revealed a planned evasion by appellants - Suppliers of the goods having been found to be involved were also penalized -persons dealing with such goods were penalised for no proof of their innocence. Quantum of redemption fine – Held that:- Authority below did not justify levy of such huge redemption fine without examining any other undue gain other than duty element if nay made by that appellant - Making an overall assessment of the situation, redemption fine in the case of Metal and Metal (Elect.) Pvt. Ltd. is reduced which shall be twice the duty element looking to the magnitude of evasion and questionable modus operandi followed – Decided partly in favour of Assessee.
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