Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 5, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Addition on account of share deduction money - money was retained for the purpose of issuing share of the Society to such growers - not an income - not taxable - AT
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Deemed dividend - section 2(22)(e) - deemed shareholder - None of the conditions for invoking the provisions of section 2(22)(e) of the Act were present in the instant case – addition deleted - AT
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Penalty u/s 271(1)(c) - CIT upheld penalty - the onus of proving and disproving keeps on shifting as the proceedings are advanced. - AT
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Rejection of Books of accounts - Simply because the volume of expenses have increased during the year vis-à-vis earlier year that cannot be a ground for rejecting the books of account - AT
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Tax on salary - Salary received and taxed in U.K. - The income from salary received in India for employment exercised in UK is to be clubbed there and has been done by the assessee - not taxable in India - AT
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Penalty u/s 271(1)(c) - Merely because the assessee claimed set off of the loss carried forward would not mean that there was concealment of income as alleged or such claim would amount to furnishing inaccurate particulars. - HC
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TDS u/s 192 - Non deduction of TDS on uniform allowance and conveyance maintenance reimbursement expenditure (hereinafter referred to as “the CMRE“) - Non deduction of TDS on the scheme named “holiday homes“ floated for the benefit of employees - Decided in favor of assessee - HC
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Opening of assessment u/s 153C - no documents belonging to the assessee were found and, therefore, no assessment under sec. 153C of the Act can be framed in their cases - AT
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Expenditure of ESOP - Expenditure in question was wholly and exclusively for the purpose of the business of the assessee and had to be allowed as deduction as a revenue expenditure - AT
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Even if the income is treated under the head income from other sources even then the total income of the assessee would be computed after setting off losses under other sources including under the head profits from business - AT
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As per section 72(2), unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current years depreciation u/s 32(2) is to be set off. As deduction u/s 10A has to be excluded from the total income of the assessee, the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise - AT
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The fact of non-provision of the reasons recorded for initiation of proceedings u/s 147 before the completion of assessment proceedings and the furnishing of the said reasons recorded at the appellate stage before CIT(Appeals) will render the order of assessment invalid and unsustainable in law - AT
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Renting of cinema hall (buildings) - income derived as rent from property must be computed under that specific head regardless of the fact that property had at one point of time bean utilized by the assessee for business purposes. - AT
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Taxability of grant in aid - funds received by the assessee from State Government and Sugar factories have been spend only for those specific projects and there was no surplus with the assessee - not an income u/s 2(24) - not taxable - AT
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There cannot be two sets of net profits: one for the general public, financial institutions, stakeholders and for distribution amongst partners and the other for income-tax authorities. - AT
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Undisclosed income - Income received from hospital - that the entries found in the crystal college book is with regard to payment made to respective doctors including the assessees herein over and above their monthly salary - AT
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Disallowance u/s 40(a)(ia) for short deduction of tax - in case of short / lesser deduction of tax, the entire expenditure whose genuineness was not doubted by the assessing officer, cannot be disallowed. - AT
Customs
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Valuation of goods i.e. Brass/Zinc hardware imported by the appellant from China - appellant submitted that in Tanya Industries [2013 (11) TMI 246 - CESTAT NEW DELHI], absolute stay was granted - every Court has its own discretion in passing order at the interim stage - stay granted partly - AT
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Duty demand - Mis-declaration of MRP on bulbs imported - - Instead of explaining the position of the fraudulent stickers recovered during the course of investigation the appellant went on leading legal pleading. - prima facie case is against the assessee - AT
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Warehousing - Applicability of Circular No. 128/95-Cus. - Applicability to private sector warehouses or public sector warehouse - In view of the clear distinction between the two sectors, mandate of Section 45 of Customs Act, 1962 and finding of no prejudice caused to Revenue, appellant succeeds on all these grounds - AT
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Classification of goods - Function of the Debranner milling machine is beyond the scope of CTH 843710.00 and therefore it would be rightly classifiable under CTH 8437 80.10 which specifically covers flour mill machineries - AT
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Import of human hair - Notification No.32/97-Cus. - notification clearly defines the term “goods“ to mean that raw materials etc. as are directly related to the export order and supplied free of cost by the foreign buyer - in this case appellant has made the payment - stay granted partly - AT
Corporate Law
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Winding up - Inability to pay debts - The debt being disputed by the respondent for the reasons attributable to the petitioners namely, on account of the terms of the contract dated 29.08.2010 not having been adhered to by them - petition dismissed - HC
Service Tax
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Wrong Utilization of Cenvat credit – On payment of such service tax in cash, the credit utilized by them for payment of such service tax would be credited in their Cenvat credit account and the entire credit availed by them on inward transportation of the raw material would be paid back to them by making a debit entry in their Cenvat credit account - AT
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Transfer of technical know-how – Royalty - Commissioner is right in coming to the conclusion that the services rendered does not merit classification under Consulting Engineer's Service - AT
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C & F Agent versus as a Del Credere Agent – since the respondent-assessee was not a C&F Agent for IPCL as it was a Del Credere Agent the respondent-assessee is not liable to pay service tax - AT
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Penalty u/s 78 - Commercial training or Coaching services - the law was amended retrospectively to validate the levy of service tax on coaching and training services rendered by even non-commercial organizations - Imposition of penalty under Section 78 of the Finance Act, is not warranted - AT
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Valuation - inclusion of cost of material in the value of repair and maintenance services provided during warranty period - VAT was being paid on material - notification no. 12/2003 - stay granted - AT
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Refund claim - If the Board is of the view that Section 66A, is not a charging Section by itself and the charging Section remains 66, in our view, taking a holistic approach towards the issue wherein it is not disputed that the appellant is situated in SEZ area, has paid the service tax and the goods are exported, denial of the refund claim to the appellant only on hyper- technicalities, seems to be incorrect - AT
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Adjustment of service tax paid paid in excess - self adjustment - the adjustment is not in respect of services which are not provided rather it is by way of discounts and rebates. - prima facie case is against the assessee - AT
Central Excise
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The order passed by the CESTAT in terms of Section 35F of the Central Excise Act, 1944 or Section 129-E of the Customs Act, 1962 is appealable in terms of Section 35G of the Excise Act, 1944 or Section 130 of the Customs Act, 1962. - HC
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Reversal of CENVAT Credit – the procedure adopted by the appellant is also in accordance with law since during the relevant time if the inputs are cleared as such, the duty payable was on transaction value - stay granted - AT
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Cenvat credit availed by the appellant on the dated expired goods is in violation of the provisions of Central Excise Rules, 2002 - prima facie case is against the assessee - stay granted partly - AT
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Adjustment of excess duty paid with short payment of duty in case of stock transfer - Prima facie, there is no reason why the excess duty paid should not be adjusted for the period where duty has been short paid - AT
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SSI Exemption – Cenvat Credit of duty on Inputs lying in stock -When the Appellants case is covered by the provisions of Rule 11(2) of CENVAT Credit Rules, and the provisions of this sub-rule are clear and unambiguous, the same have to be given effect to - AT
VAT
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Penalty u/s 15A(1)(a) of the Trade Tax Act - it is no concern of the department as to whether the purchaser had made payment of price of the goods purchased to the revisionist-assessee dealer or not - HC
Case Laws:
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Income Tax
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2013 (11) TMI 229
Addition on account of share deduction money - Assessee has not made payment of Rs. 59,81,538.84 to the Cane Growers as money was retained for the purpose of issuing share of the Society to such growers - Share deduction money account reflected in the balance sheet under the head share capital – Held that:- The amount added by the Assessing Officer is Rs.1/- per quintal of sugarcane out of deduction from the payment made. The amount remains as share deduction money and when it reaches Rs. 1,000/- in each case, it is transferred to share capital account. The share capital is accordingly increased and this practice has been followed by the appellant for the last so many years. It is not the case of the department that the liability is ceased, rather the money -paid is to be converted into share capital and it cannot be said that it has become income of the appellant – Addition deleted – Decided against the Revenue. Addition on account of retention money – Held that:- The retention money is basically the money retained to be set off against the penalty imposed, if the requisite supply is not made by the cane grower. If any penalty is levied on the cane grower, the same is squared up by way of transferring money from retention money account and the balance amount is paid to the members. It cannot be said that this amount, in any way, is income of the appellant – Decided against the Revenue.
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2013 (11) TMI 228
Deemed dividend - section 2(22)(e) - deemed shareholder - Conditions for invoking the provisions of section 2(22)(e) - Transaction can give benefit to the Assessee because the two individuals viz., Mr.Shanbhag and Mr.Sampathkumar hold the entire shares of VPSPL which in turn held 66% of shares of the Assessee – Held that:- A loan or advance given by a company to the shareholders or to a concern would not qualify as dividend. It has been made so by legal fiction created under s. 2(22)(e). This legal provision relates to "dividend" and it is the definition of dividend which is enlarged by this deeming provision. Definition of shareholder is not enlarged by any fiction. The loan or advance given under the conditions specified under s. 2(22)(e) has to be treated as dividend. Fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. Intention behind the provisions of s. 2(22)(e) is to tax dividend in the hands of shareholders. A concern which is given loan or advance by a company cannot be treated as shareholder/member of the latter simply because a shareholder of the lender company holding voting power of 10 per cent or more therein has substantial interest in such concern. If the intention of the legislature was to tax such loan or advance as deemed dividend at the hands of "deeming shareholder", it would have inserted deeming provision in respect of shareholder as well - None of the conditions for invoking the provisions of section 2(22)(e) of the Act were present in the instant case – Deleted the addition – Decided against the Revenue.
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2013 (11) TMI 227
Condonation of delay – Held that:- Inordinate delay in filing the appeal before the Tribunal in the present case is said to have happened due to laxity on the part of one of the staff of office of the Chartered Accountants who is engaged by the assessee. Considering the entire facts and circumstances of the case, in order to advance substantial justice, a liberal presumption is to be made to the above submissions of the assessee that the delay is beyond its control, and reasonable cause for condonation of the delay, more so, when the affidavit filed by the staff of the counsel of the assessee has not been doubted by the Revenue – Decided in favor of Assessee. Additions u/s 68 of the Income Tax Act - Impugned transaction is 'cheque badli' transaction – Held that:- Shri Bholabhai Kakiya, has not responded to the notice under section 133(6) issued by the AO, and the AO has noted that neither any reply nor any evidence was filed by the assessee to prove that the impugned transaction is genuine, and hence remained unverifiable. The additional evidences such as PAN card and the bank statement of Shri Bholabhai with Progress Mercantile Co-op. Bank were not before the AO at the time of finalization of the assessment. Nevertheless, the CIT(A) has not found the same to be satisfactory to explain genuineness, identity and credit worthiness of the cash transaction undertaken by the assessee – Since the assessee has stated that the AO has not given proper opportunity to furnish further evidences in this regard, it is proper to give one more opportunity to the assessee to furnish all the details and evidences in respect of the impugned loan of Rs.33,01,000/- taken from Shri Bholabhai Kakiya – Issue remanded to the file of AO.
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2013 (11) TMI 226
Penalty u/s 271(1)(c) - CIT upheld penalty - Held that:- while imposing the penalty the AO is required to examine the aforesaid explanation of the assessee to ascertain whether it was totally a false or an untrue explanation as prescribed under Explanation-1(A) to section 271(1)(c). Even the ld.DR Mr.Singh has not ruled out the importance of the said Explanation, but he has argued that the AO is not required to prove the falsity of the explanation offered. In our humble understanding, this explanation prescribes that where in respect of any facts material if a person offers an explanation which is found by the AO to be false, then the amount so added results into a levy of penalty. Therefore, the AO is to find out the truthness of an explanation. Side by side, the statute has also added Explanation-1(B) to section 271(1)(c). This part of the Explanation prescribes that where in respect of any facts material a person offers an explanation which he is not able to substantiate or fails to prove that such explanation is bona fide, then the said failure results into levy of penalty. Meaning thereby an assessee has to prove to the satisfaction of the AO his bona fide. A situation where an assessee had offered an explanation duly substantiated by certain evidences to establish his bona fide. Therefore, in this manner, the onus, at first, has been discharged by the assessee as casted upon him by Explanation-1(B) of IT Act. The next step is that the AO has to investigate all those evidences and the onus thereafter shifts upon the AO to disprove the claim of bona fide of the assessee. The proceedings do not stop at that juncture. The AO is expected to communicate his reasoning for rejection of the said explanation of the assessee. Again if the assessee is not satisfied with the rejection of the AO, then the onus shifts upon the assessee to place on record substantial evidence in support of his truthness. Meaning thereby the onus of proving and disproving keeps on shifting as the proceedings are advanced. We are therefore, in this case, referring the issue of levy of penalty back to the stage of the AO to verify whether the assessee's explanation was altogether false being not substantiated by authentic evidences. The assessee is required to corroborate his explanation with the support of legitimate evidences - Question of levy of penalty restored back to the stage of the AO - Decided in favour of assessee.
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2013 (11) TMI 225
Disallowance of Expenditure - Investment in subsidiary company - CIT upheld disallowance - Held that:- Assessing Officer and the CIT(A) erred in not considering the allowance of expenditure, which has a direct nexus with the investments made in subsidiary companies by way of redeemable non-convertible debentures. Out of Rs.508.72 crores received from M/s. Platex Ltd. Mauritius from issue of 14.5% redeemable fully convertible debentures of Rs.1 lakh each, assessee has invested Rs.410.85 crores in subsidiaries as stated earlier. As there is direct nexus to the interest earned, which was brought to tax, assessee's claim of for corresponding proportionate interest and incidental expenditure has to be allowed, not only on facts, but also under the provisions of S.57. Accordingly, we allow grounds No.11 and 12 of the assessee, and direct the Assessing Officer to allow proportionate interest, out of Rs.5,30,31,148, paid to M/s. Platex Ltd. and also any other incidental expenditure that might have been incurred towards legal and corporate expenditure allowable under S.57(1)(iii) of the Act - Decided in favour of assessee. Reopening of assessment - Change in effective date for calculation of interest - Held that:- there is no basis for changing the effective date for calculation of interest from 26th February, 2007, when the funds are not provided to the other company, prior to that date. Since there is no dispute with reference to the date of funds being made available to the subsidiary company, i.e. only from 26.2.2007, we agree with the assessee's contention that the interest accrued only from 26.2.2007, though the debentures were dated 21.2.2007. Unless the funds are made available, no body would pay interest. Therefore, the assessee's calculation of interest is upheld and the addition made by the Assessing Officer in this behalf is deleted. Since it is one of the basic issue on facts, we do not intend to consider the legal issues raised by the parties, on various principles of law. The Assessing Officer is directed to delete the addition so made on this count - Decided in favour of assessee. The issue relating to validity of reopening of assessment has become academic. However, for the sake of record, the original assessment under S.143(3) was completed by the Assessing Officer, after due examination of the interest received on the redeemable debentures. It is already on record, that the assessee has received share premium and it was disclosed in the Balance Sheet. Assessing Officer after noticing that the assessee has not offered any income, which was in fact adjusted in the pre-operative expenses, brought to tax interest as income from other sources. Since he has examined the issues in detail, including the investments made thereon, it cannot be said that the Assessing Officer has not applied his mind while considering the amounts he intend to bring to tax. Therefore, reopening of the assessment on the reason that some of the accrued income was not offered to tax does not arise, as the assessee has validly accounted interest from the time monies were placed at the disposal of the subsidiary company. Therefore, reopening of assessment per se is bad in law. On this reason also, the assessee gets relief - Decided in favour of assessee.
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2013 (11) TMI 224
Adjustment of arm's length price - Rejection of comparables - Held that:- set of 8 comparables was taken by the TPO for the TP study in order to determine the ALP of the international transactions of the assessee company with its AEs relying on the assessment for the immediately preceding year in assessee's own case wherein similar set of eight comparables was confirmed by the DRP - the matter as involved in A.Y. 2006-07 has already been decided by the Tribunal accepting only one out of the eight comparables selected by the TPO/DRP namely IDC (India) Limited. Since the facts involved in the year under consideration are similar to A.Y. 2006-07 inasmuch as the set of eight comparables was taken by the TPO relying on the assessment for A.Y. 2006-07, we respectfully follow the order of the Tribunal passed on similar issue for A.Y. 2006-07 and hold that IDC (India) Limited is the only comparable company which is to be taken for the comparable study in order to determine the ALP of the transactions of the assessee with its AEs. The transfer pricing adjustment accordingly has to be recomputed by adopting the operating profit to cost ratio of 15.8% of IDC (India) Limited as against 12.6% shown by the assessee - Decided in favour of assessee. Adjustment as per the proviso to section 92C(2) - Benefit of ± 5% - Held that:- difference between the prime lending rate and bank rate is sought to be adopted by the assessee as the rate to eliminate the risk difference. As already noted, the claim of risk adjustment of the assessee has been rejected by the Tribunal in A.Y. 2006-07 for want of quantification of such adjustment which, according to the Tribunal, could be possible only when some real and accurate facts of difference in the risk assumed by the assessee and by the comparable are brought on record. The details furnished by the assessee, in our opinion, are hardly sufficient to comply with this requirement. It is also observed that in the case of Wills Processing Services (India) (P.) Ltd. (2013 (6) TMI 532 - ITAT MUMBAI) similar method was sought to be used by the assessee for risk adjustment and the same was rejected by the Tribunal holding that there is no corelation between the bank lending rates and risks involved as claimed by the assessee. It was held by the Tribunal that all the companies conducting business will have the same risk i.e. market risk, customer risk, government policy risk etc. associated with conducting business. It was also held that unless the risk is quantified in certain objective manner and can be represented by way of numbers, it is very difficult to make adjustment on presumptions and surmises - assessee has failed to quantify the risk adjustment by bringing certain real and accurate facts relating to the difference in risk assumed by the assessee vis-à-vis the comparable and in the absence of the same, its claim for risk adjustment cannot be allowed as rightly held by the authorities below. We therefore find no merit in assessee's claim for the benefit of ± 5% adjustment as well as for risk adjustment and reject the same - Decided against assessee.
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2013 (11) TMI 223
Rejection of Books of accounts - Incomplete books of accounts - CIT deleted rejection - Held that:- if the AO was not satisfied with the quantum of expenses, he could have proceeded to disallow them on adhoc basis. Simply because the volume of expenses have increased during the year vis-à-vis earlier year that cannot be a ground for rejecting the books of account. - it is difficult to accept that the books of accounts of the assessee are defective or incomplete from which the correct profit cannot be deduced. The books of accounts are audited, the auditors have not given any adverse comments in the maintenance of books of account or stock registers - Decided against Revenue. Disallowance of future losses - 100% loss claimed even when project was not 100% completed - AS-7 Followed - Held that:- It is a fact that AS-7 has not been notified by the Central Government. This does not mean that the assessee is precluded from following AS-7. A perusal of the provisions of Sec. 145 show that Accounting Standards which have been notified by the Central Government have to be mandatorily followed by the assessee. But this does not mean that the assessee cannot follow the other Accounting standards issued by ICAI. ICAI being the highest accounting body of the country, created by an Act of Parliament, Accounting Standards issued by it cannot be brushed aside lightly. On the contrary, if an assessee is following the Accounting Standards issued by ICAI, it would give more credibility and authenticity to its account The matching principle is of relevance where income and expenditure, both are to be considered together. However, in the instant case, the effect of valuation of WIP would automatically affect the profits of subsequent years accordingly. Therefore, there was no reason for not accepting in principle the assessee’s claim as being allowable - Following decision of Jacobs Engineering India (P.) Ltd. Versus Assistant Commissioner of Income-tax 8(2), Mumbai [2009 (5) TMI 601 - ITAT MUMBAI] - Decided against Revenue.
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2013 (11) TMI 222
Tax on salary - Salary received and taxed in U.K. - Whether salary received by assessee shall be taxable in India - Held that:- there is no dispute about the fact that assessee is a NRI and the salary income received by him in India for employment exercised in U.K. has been offered by him for taxation in U.K in pursuance of Article 16 of DTAA with U.K. - The assessee is a resident of UK and UK is the contracting state for tax purpose. Only if the appellant had exercised his employment in India, this may have been taxed in India as per the DTA agreement. Clearly this is not the case. The income from salary received in India for employment exercised in UK is to be clubbed there and has been done by the assessee - Following decision of British Gas India Private Limited, In re [2006 (11) TMI 139 - AUTHORITY FOR ADVANCE RULINGS] - Decided against Revenue.
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2013 (11) TMI 221
Penalty u/s 271(1)(c) of the Income Tax Act - Claiming set off of the loss carried forward - Held that:- The contention urged on behalf of the revenue was that the assessee ought not to have claimed set off of loss carried forward of the assessment year 1998-99 despite the letter dated 4.4.2003 whereby the assessee was clearly informed that he was not entitled to carry forward the business loss since the return of income for the assessment year 1998-99 was filed belatedly - Assessee requested by his letter dated 5.5.2003 to pass order in respect of the assessment year 1998-99 to enable the assessee to challenge the order, and despite such written request, no assessment order was passed for the year 1998-99. It is in this backdrop, revised return was filed in which the assessee claimed set off of the loss carried forward of the assessment year 1998-99 - Merely because the assessee claimed set off of the loss carried forward would not mean that there was concealment of income as alleged or such claim would amount to furnishing inaccurate particulars. The term "inaccurate particulars" is not defined - Supreme Court in Reliance Petroproducts Pvt., Ltd.[2010 (3) TMI 80 - SUPREME COURT], by no stretch of imagination, making an incorrect claim in law would tantamount to furnishing inaccurate particulars – Decided against the Revenue.
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2013 (11) TMI 220
TDS u/s 192 - inclusion of certain prerequisite and allowances in Salary - Exemption u/s 10(14) - Non deduction of TDS on uniform allowance and conveyance maintenance reimbursement expenditure (hereinafter referred to as "the CMRE") - Non deduction of TDS on the scheme named "holiday homes" floated for the benefit of employees - Assessee in default under section 201(1)/201(1A) - Held that:- eventually for any shortcoming of employees, the employer cannot be found fault with. As this question concerns the respondent to a limited extent as to whether tax was to be deducted at source for being taxable receipts and the issue since is squarely covered by the decision of this court in the assessee's own case, the present tax appeals on this issue deserve no consideration - Following the decision in [1998 (11) TMI 3 - GUJARAT High Court] decided in favor of assessee. Regarding holiday home scheme - Held that:- as far as the assessment years 2006-07 and 2007-08 are concerned, the expenditure incurred by the employer for holidays enjoyed by the employees was not prescribed as fringe benefit for the purpose of section 17(2)(iv) of the Act and the same was not taxed as perquisite in the employees' hands and wherever not actual and fully utilised, the same would constitute taxable salary. However, for the assessment years 2008-09 and 2009-10, the 'holiday home scheme' could not be considered as perquisite under section 17(2)(iv) of the Act in the hands of the employees, was held rightly acceptable. This was essentially on account of the introduction of rule 3(7)(ii) of the Income-tax (Fourteenth Amendment) Rules, 2007, with effect from April 1, 2008, in respect of those employers who were not liable to pay FBT under Chapter XII-H of the Act. Payment in question towards the 'holiday home scheme' if not utilised actually, the same can be held to be taxable salary of the employees. In these appeals, concerned essentially is the taxable receipts and not the payment of tax by the employer. Moreover, till the FBT regime was in existence, the respondent-assessee has already paid the FBT under section 115WB of the Act. Therefore, rightly no default was considered on the part of the respondent-assessee under section 201(1) of the Act – Decided against the Revenue.
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2013 (11) TMI 219
Opening of assessment u/s 153C of the Income tax act – Held that:- Reliance has been placed upon the judgment of the Co-ordinate bench of Tribunal, Bangalore in the case of DCIT vs. United Spirits Ltd., Bangalore [2013 (11) TMI 75 - ITAT BANGALORE] wherein it was held that no material belonging to the assessee was found which authorized the Assessing Officer to initiate the proceedings under sec. 153C of the Act – On reading of s. 153C of the Act, it is crystal clear that 'where the assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs to belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. In the abovementioned case, no books of account nor any incriminate documents pertaining to the appellant were seized when a search was conducted in the residential premises of Sri Miglani and that no books of account or documents or assets seized or requisitioned were handed over to the assessing officer having jurisdiction over the appellant - Thus, the AO, was not within his realm for initiation of proceedings u/s 153A r.w.s. 153C of the Act in the case of the appellant. Query that UPDA is a society where all the assessees are members. According to the principle of mutuality, why the details prepared by the Secretary of the Society be not construed as belonging to all the members of the society. To this query, it was contended by the learned counsel for the assessee that UPDA is an independent taxable entity. It is not a members club and not a mutual benefit society. It is constituted under a separate Memorandum of Association. The Memorandum of Association does not provide that excess of the income shall be paid or transferred directly or indirectly to the members of the society. It also does not provide that on dissolution of the society, assets of the society shall be distributed among the members of the society. Any thing belong to the society can not be said to be belonged to the members. All these amounts have been taxed in the hands of UPDA also. The assessees have their independent status as a company other than the members of a society. On an analysis of above submission, no any merit in the contention of Learned DR that considering the position of Shri Miglani as Secretary of UPDA. The document should be construed as belonged to assessee. Respectfully following the order of the ITAT, Bangalore, allowed the preliminary grounds raised by the assessee that no documents belonging to the assessee were found and, therefore, no assessment under sec. 153C of the Act can be framed in their cases. Consequently, all the assessment orders are quashed.
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2013 (11) TMI 218
Expenditure of ESOP, a revenue expenditure or capital expenditure - Held that:- The law by now is well settled by the decision of the Special Bench of the ITAT Bangalore in the case of Biocon Ltd. in [2013 (8) TMI 629 - ITAT BANGALORE], wherein it was held that expenditure on account of ESOP is a revenue expenditure and had to be allowed as deduction while computing income - Expenditure in question is wholly and exclusively for the purpose of the business of the assessee and the fact that the parent company is also benefited by reason of a motivated work force would be no ground to deny the claim of the assessee for deduction, which otherwise satisfies all the conditions referred to in section 37(1) of the Act - Expenditure in question was wholly and exclusively for the purpose of the business of the assessee and had to be allowed as deduction as a revenue expenditure – Decided in favor of Assessee.
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2013 (11) TMI 217
Classification of head of income, whether the interest income falls under the head ‘Business income’ or ‘Income from other sources’ – Held that:- Income was earned out of surplus funds advanced by the assessee to its sister concern which was not a business activity of the assessee and neither the Ld AR could prove that advances were given for business purposes – However, even if the income is treated under the head income from other sources even then the total income of the assessee would be computed after setting off losses under other sources including under the head profits from business. Addition on account of inadmissible expenses – Held that:- Expenses were incurred against NIL business receipts. The revenue has also not brought anything before us in support of the claim that expenses were not business expenses. The revenue’s only contention is that expenses should have been capitalized as work in progress whereas in our opinion the expenses of rent, electricity, printing, telephone conveyance, security expenses, filing fee etc. Are common expenses which are required to run a business – Decided against the Revenue. Change in method of accounting adopted u/s 145 of the Income Tax Act – Held that:- The Assessing Officer cannot force assessee to change the method of accounting specially in a case where in earlier years the method employed by assessee was accepted by Department – Decided against the Revenue.
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2013 (11) TMI 216
Transfer Pricing Adjustment - Rejection of two comparable companies - Held that:- in the period under consideration, comparable company was outsourcing most of its work whereas the assessee was carrying out the work by themselves - There is no dispute to the fact that the assessee providing business process outsourcing services to its AEs and operating in the ITES sector has no software product intangibles - a company having unique software developed in house which also renders specialized services in its area of specialization gets that sort of competitive edge that gives it an advantage - comparable company has developed unique software from which it would derive substantial benefits /advantages when compared with the assessee which is undertaking pure call centre services - company has a clearly demarcated call centre segment and segmental results are available in the audited financial statements of the company and therefore see no reason why this company should not be considered as a comparable - assessee has failed to demonstrate that there was any specific reason for the comparable company's profits to be abnormal in Assessment Year 2004-05 which could adversely affect its comparability. It is also seen that company has a clearly demarcated call centre segment and segmental results are available in the Annual Reports / audited financial statements of the company and TPO has allocated the unallocated expenses in the ratio of sales, which also cannot be faulted - action of the TPO in rejecting these two companies as comparables in the case on hand for Assessment Year 2004-05 is upheld - Following decision of 24/7 Customer. Com (P.) Ltd. Versus Deputy Commissioner of Income-tax, Circle 11(2), Bangalore [2013 (1) TMI 45 - ITAT BANGALORE] - Decided in favour of Revenue. Deduction u/s 10A/10B - Set off of brought forward business loss - Held that:- After making all such computation the assessee would be entitled to the benefit of set off or carry forward of loss as provided u/s 72 of the Act. That is the benefit which is given to the assessee under the Act irrespective of the nature of business which he is carrying on. The said benefit is available even to undertakings u/s 10B of the Act. The expression "deduction of such profits and gains as derived by an undertaking shall be allowed from the total income of the assessee", has to be understood in the context with which the said provision is inserted in Chapter III of the Act. Sub-section (4) of section 10A clarifies this position. It provides that the profits derived from export of articles or things from computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. Therefore, it is clear that though the assessee may be having more than one undertaking for the purpose of section 10A it is the profit derived from export of articles or things or computer software from the business of the undertaking alone that has to be taken into consideration and such profit is not to be included in the total income of the assessee. It is only after the deduction of the said profits and gains, the income of the assessee has to be computed - As the income of 10-A unit has to be excluded at source itself before arriving at the gross total income, the loss of non 10-A unit cannot be set off against the income of 10-A unit u/s 72. The loss incurred by the assessee under the head profits and gains of business or profession has to be set off against the profits and gains if any, of any business or profession carried on by such assessee. Therefore as the profits and gains under section 10-A is not be included in the income of the assessee at all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise. Similarly, as per section 72(2), unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current years depreciation u/s 32(2) is to be set off. As deduction u/s 10A has to be excluded from the total income of the assessee, the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise - Following decision of CIT v. Yokogawa India Ltd. [2011 (8) TMI 845 - Karnataka High Court] - Decided against Revenue. Deduction u/s 10A - Reduction of telecommunication expenses - Held that:- The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover constitutes the numerator in the formula prescribed by sub-section (4). Export turnover also forms a constituent element of the denominator in as much as the export turnover is a part of the total turnover. The export turnover, in the numerator must have the same meaning as the export turnover which is constituent element of the total turnover in the denominator. The legislature has provided a definition of the expression "export turnover" in Expln.2 to s.10A which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to the delivery of the articles, things or software outside India. Therefore in computing the export turnover the legislature has made a specific exclusion of freight and insurance charges. The submission which has been urged on behalf of the revenue is that while freight and insurance charges are liable to be excluded in computing export turnover, a similar exclusion has not been provided in regard to total turnover. The submission of the revenue, however, misses the point that the expression "total turnover" has not been defined at all by Parliament for the purposes of s.10A - purpose of applying the formula under sub-section (4) of section 10B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula - Following decision of CIT v. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] - Decided against Revenue.
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2013 (11) TMI 215
Validity of notice u/s 148 - Notice issued to agent of the assessee - Notice issued without passing an order u/s.163(2) - Held that:- As per the provisions of section 163(2) of the Act, before treating a person as an agent, an opportunity of being heard has to be given to such person for it to file objections it may have in that regard - no proper opportunity was afforded to the assessee company of being heard in the matter and that the proper procedure for issue of notice u/s.148 of the Act to the Indian Company i.e. TESA for treating it as an agent of the assessee company was not adhered to. It is also relevant to mention here that before treating any person as an agent of a foreign company or person, an order has to be passed in accordance with the provisions of section 163 of the Act and that order requires to be communicated to the parties concerned - it is seen that no there is no order passed by the Assessing Officer u/s.163 of the Act treating TESA as an agent of the assessee company for A.Y. 2002-03. Consequently, the notice u/s.148 of the Act dt.31.3.2005 issued by the Assessing Officer to TESA on behalf of the assessee company is bad in law and all subsequent proceedings culminating in the passing of the order of assessment would not the test of judicial scrutiny. In this view of the matter, the order of assessment passed u/s.143 r.w.s. 147 of the Act on 31.3.2006 for Asst. Year 2002-03, based on the invalid notice issued u/s.148 of the Act on 31.3.2005 is cancelled - Following decision of Commissioner Of Income-Tax, Bombay City III Versus Belapur Sugar And Allied Industries Limited [1981 (9) TMI 19 - BOMBAY High Court] - Decided in favour of assessee. It is undisputed that the notice under section 148 of the Act dt.31.3.2005 for Assessment Year 2002-03 is issued in the name of TESA, as an agent of the assessee company, whereas the order of assessment for the said period was passed in the name of the assessee company instead of being concluded in the hands of the Indian company i.e. TESA as an agent of the assessee company. In our view, this action on the part of the Assessing Officer is not curable. It is a well settled position of law that the notice cannot be regarded as a mere procedural requirement. Rather, it is a condition precedent to the initiation of assessment proceedings - if a notice is issued on one person in a particular company and the order of assessment is passed on another person who has not been served the said notice, then such order is bad in law and ab-initio, null and void. Records of assessment admittedly reveal that the reasons recorded by the Assessing Officer for initiating proceedings under section 147 / 148 of the Act were not communicated / made available to the assessee by the Assessing Officer before the completion of assessment proceedings - it is amply clear that the reasons as recorded by the Assessing Officer for initiating reassessment proceedings for Assessment Year 2002-03 in the case on hand were not provided, communicated or made available to the assessee by the Assessing Officer during the pendency of assessment proceedings, but the same were provided to the assessee at the stage of appellate proceedings by the learned CIT(Appeals). The letter dt.24.6.2005 relied on by the learned Departmental Representative cannot be construed as the communication of reasons recorded to the assessee - The failure of the Assessing Officer in providing the assessee with the reasons recorded for initiation of proceedings under section 148 of the Act, within a reasonable period of time so that the assessee could efficiently represent / file objections to the same is, in our opinion, amply evident beyond any doubt from the facts on record and our observations thereon. The fact of non-provision of the reasons recorded for initiation of proceedings under section 147 / 148 of the Act before the completion of assessment proceedings for the relevant period and the furnishing of the said reasons recorded at the appellate stage by the learned CIT(Appeals) will render the order of assessment dt.31.3.2006 for Assessment Year 2002-03 invalid and unsustainable in law.
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2013 (11) TMI 214
Valuation of closing stock - A.O. enhanced value on account of accessories - Held that:- it cannot be held that the quantity of stock shown to the bankers was actually the correct quantity and what has been shown in the books of account as on 31st March 2002, are incorrect. Once, there is not much of a difference in quantity, the difference in the value of stock disclosed to the bank and as appearing in the books of account will not make a difference as the stock disclosed to the banker is only for the purpose of hypothecation or for credit/overdraft facilities. In cases where stock are disclosed to the bank, one has to see the quantity of stock disclosed and tally it with the quantity shown in the books of account. Value wise difference is not that material as assessee may show higher value. At least there should not be difference in quantity. Even though the proper reconciliation could not be filed before the Assessing Officer, the learned Commissioner (Appeals) and the Assessing Officer were required to examine, once these were furnished at the appellate stage and there is not a whisper by the learned Commissioner (Appeals) why such an additional evidence of reconciliation of statement is not accepted. Once these additional evidences have not been rejected, it has to be presumed that the same has been admitted by the learned Commissioner (Appeals) and is part of the record - Decided against assessee. Disallowance of damaged goods - Held that:- assessee has made a very categorical submission that the aforesaid amounts have been reversed in the assessment years 2003-04 and 2001-02 and have been offered for tax. If that is so, the disallowance of claim for damaged goods cannot be taxed in this year - Therefore, matter is restored back to A.O. - Decided in favour of assessee. Disallowance of purchase expenditure - Held that:- Each and every purchases has been accounted for by the assessee in its books of account which has now been confirmed by the MIL through bills number - assessee’s records have been disbelieved without any reasons, secondly all these documents were available before CIT(A) and AO in remand proceedings and lastly, the same are now verifiable from the face of the record - Decided in favour of assessee. Undisclosed sales - Distribution of part of free samples - Held that:- assessee has given details of container samples given to various statutory authorities which were 950 pieces and samples for pre-production and pre-shipment for 830 pieces, we are of the considered opinion that it would be reasonable to give over all benefit of 1,800 sample pieces from the total free samples of 2,978 pieces. Balance cannot be allowed for the simple reason that the same have not been substantiated by way of any documentary evidence at all - assessee was unable to substantiate as to what was the rate per piece sold in the local market. Had it been so, then the rate per piece as worked out by the assessee could have been applied. Thus, out of the total pieces of 2,978, the Assessing Officer is directed to give benefit of 1,800 pieces and balance pieces should be treated as undisclosed sales after applying the rate of Rs. 505.21 - Decided partly in favour of assessee. Disallowance u/s 43B - Commission paid to directors - Held that:- payment of commission to the directors was made by account payee cheque on 11th October 2002 i.e., much prior to the date of filing the return of income which was on 31st October 2002. Under section 43B, any sum paid to an employee as bonus or commission, the same is to be allowed while computing the income under section 28 of that previous year in which such sum is actually paid. Once the cheque has been paid to the directors, the date of payment will relate back to the date of cheque only as it is not the case of the Department that these cheques have not been encashed - Following decision of Commissioner Of Income-Tax, Bombay South, Bombay Versus Ogale Glass Works Limited [1954 (4) TMI 3 - SUPREME Court] - Decided in favour of assessee. Disallowance of staff training expenses - Held that:- assessee is unable to bring on record as to whether the higher studies undertaken by the director at Harvard Business School, was in any way, for the purpose of business of the assessee and whether there is any direct nexus with the studies undertaken by the director with that of the business of the company. While claiming such an expenditure, the onus is on the assessee to substantiate that such a training of higher education by one of the directors was for the benefit or promotion of the assessee’s business - Decided against assessee. Deduction u/s 80HHC - Held that:- For the purpose of export of garments, export quota is required by the exporters who are registered with Apparel Export Promotion Counsel. If any exporter is unable to export as per the quota, the excess can be sold to other exporters. Such a receipt is neither covered in either of the clauses mentioned in clause (iiia) to (iiie) of section 28 nor it is any kind of receipts mentioned in clause (baa) of Explanation to section 80HHC. Thus, in our opinion, in such a situation when there is no bar in clause (baa) of explanation to sec.80HHC, then it has to be treated as part of the profit of business and cannot be reduced for the purpose of deduction under section 80HHC - Decided in favour of the assessee.
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2013 (11) TMI 213
Renting of cinema hall (buildings) - Income from House property or Income from other sources - Classification of head of Income for availing benefit attached to a particular head of Income - The AO held that there is no rent agreement nor lessor and lessee relation between the assessee and PVR Ltd. The AO also observed and held that the income of the assessee is to be assessed under the head "Other Sources" and accordingly statutory deduction of 30% provided for income from house property was disallowed. The AO finalized the assessment by holding income receipt from PVR Ltd. as income under the head of "Other Sources" in terms of operation and management agreement – Held that:- On careful reading of the agreement between assessee and PVR LTD. and other documents available, there is no hesitation to hold that the intention of the parties while executing and entering in the agreement was not to share the profits of the cinema business as partners, joint venture or franchise but the intention of the parties was to rent out the property on minimum fixed consideration in one part and second part was related to the amount of sales of tickets. This arrangement cannot be said as partner ship, joint venture or franchise in any manner. From the copy of the agreement on the next date of agreement, the PVR Ltd. returned furniture, fittings and other equipments to the assessee with specific foot note to the list that no assets, equipments, furniture, fixture other than building has been retained by M/s Priya Village Roadshow limited. This recitals and documents specifically show that only cinema building was handed over to PVR Ltd. by the assessee for fixed consideration as mentioned in schedule second of the agreement. After taking over vacant possession of cinema building from assessee to the PVR Ltd. converted it into four screens multiplex with all modern fittings, fixtures and furniture therein - Overall risk/control of the management, operation and development of the cinema rests with PVR Ltd. and assessee is not bearing any kind of risk under the agreement - PVR Ltd. independently obtained the cinema license, entertainment tax registration etc. in its name and started its business - From the orders of the authorities below, this fact has not been controverted that the multiplex business is being independently operated by PVR Ltd. at its own and there is no element of joint venture, partner ship or franchise with the assessee. Following the judgment of Hon'ble High Court of Bombay in the case of Parekh Traders vs. CIT (Poona), [1983 (9) TMI 39 - BOMBAY High Court], it is held that income derived as rent from property must be computed under that specific head regardless of the fact that property had at one point of time bean utilized by the assessee for business purposes. Such property cannot be treated as a business asset and rent thereof as income from business - The Hon'ble Bombay High Court has clearly held that plant and machinery are commercial assets and their exploitation even by means of letting out, yields or bring income from business and per contra, income earned from letting out the building is income from property. In the case in hand the PVR Ltd. taken over only cinema buildings on rent and remains furniture, fixtures and other equipments have been returned by the PVR Ltd. to the assessee, accordingly fixed rental earned therefrom deserves to be treated as rental income from house property - Receipts from PVR Ltd. by the assessee to be treated as income from house property and all consequential benefits and deductions be allowed to the assessee in this regard – Decided in favor of Assessee.
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2013 (11) TMI 212
Taxability of grant in aid - local authority u/s 10(20) - whether assessee was an organ of the state as such immune of Article 289 of the Constitution - Whether only surplus remaining after allowing expenses as per the account of the assessee should be brought to tax - Held that:- There is nothing to suggest that the assessee is carrying on any business activities, generating income. Accordingly, the ld. CIT(A) concluded that there was no surplus with the assessee and therefore, there was no question of any taxable income. Admittedly, the grant-in-aid in question is a financial aid or subsidy given by the State Government of UP and Sugar factories for the specific purpose of construction of roads. In section 2(24) of the Act, it is declared that "income includes" various items which are enumerated therein in clauses (i) to (xv). In the said section 2(24), such a grant-in-aid has not been specifically included as an income or a revenue receipt. Therefore, considering the use for the worked "include" in section 2(24), the word "income" shall be construed as comprehending not only those items which said section declared that these shall include but also such items which said section declares that these shall include but also such items as it signified according to its natural import. Since section 2(24) has not declared that such a grant-in-aid shall be included in the income the word "revenue" shall be construed as comprehending what it signified according to its natural import. In relation to a business undertaking, the word "revenue" connotes incomings of the undertaking which are products of the normal working of the undertaking. The giving of financial aid or subsidy to the aforesaid committee, which admittedly is not carrying on any business, is at the discretion of the Government or Sugar factors. Thus, the grant-in-aid in question was not a product of the normal business activities of the assessee committee, assessed by the AO as a local authority. Therefore, such a grant-in-aid could not be termed as a revenue receipt so as to form part of the total income. As already pointed out, the ld CIT(A) concluded that the aforesaid funds received by the assessee from State Government and Sugar factories have been spend only for those specific projects and there was no surplus with the assessee. Since the Revenue have not placed before us any material, controverting these findings of facts recorded by the ld. CIT(A) so as to enable us to take a different view in the matter, there is no basis to interfere with his findings - Matter is restored to A.O.
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2013 (11) TMI 211
Adjournment of hearing - Held that:- The assessee had more than one month after service of notice of hearing to prepare for the hearing and be ready to attend on the date of hearing. It is in the interest of both the parties if the appeal is disposed of at the earliest as all the relevant facts/details including legal position governing the issue are on record. - In view of the aforesaid, the application for adjournment was rejected and the factum of rejection was announced in the open court. Nobody entered appearance on behalf of the assessee. On the facts found by the AO/CIT(A) and the law applicable to those facts, it was felt that the appeal could be disposed of on merits after rejecting the application for adjournment. Undisclosed income - Suppression of profit - CIT restricted addition to 30% of profits only - Held that:- The assessee has invoked real income theory in support of its claim for exclusion of 80% of the impugned sum from net profit as shown in the audited profit & loss account. According to the assessee, the element of real profit in the impugned sum was only 20% and therefore only 20% was offered by it to tax. Let us therefore examine as to whether net profit as shown in the audited profit & loss account is real profit or illusory profit. Real profits are those which are not illusory. In the case before us, the assessee has indeed collected the impugned sum in cash on sale of plots. Such collections are not illusory. They are real and represent the return in money in the hands of the assessee from its own business. When a return is furnished and accounts are put in, in support of that return, the accounts should be taken as the basis for assessment and that an assessee cannot discard his own profit & loss account and balance sheet and more particularly the Audit Report in Form No.3CB signed by a Chartered Accountant in terms of section 44AB of the Income-tax Act. Apparent state of affairs shown in the profit & loss account would have to be treated as real unless the contrary is proved. It is reiterated too often by the courts/tribunals that the onus to prove that the apparent is not real is on the party who claims it to be so. The assessee has not discharged the aforesaid burden Application of rate of net profit is one of the methods to assess the income of an assessee where the books of account maintained by the assessee are found by the AO to be incorrect or incomplete or not in conformity with the accounting standards notified by the Central Government or in the circumstances mentioned in sub-section (3) of section 145. In the case before us, neither the AO has invoked section 145(3) nor has the assessee led any evidence to prove that the items shown in the books of account or profit & loss account and balance sheet drawn on that basis are incorrect. Therefore, the question of application of rate of net profit, be it 20% or 30% of the impugned sum, does not arise on the facts of the case before us. Having admitted in the profit & loss account that the impugned sum represents part of its net profit from the operations of business, the assessee cannot be allowed to plead that the said net profit should not form the basis for assessment of its income and tax thereon. There cannot be two sets of net profits: one for the general public, financial institutions, stakeholders and for distribution amongst partners and the other for income-tax authorities. The assessee has deliberately suppressed and thereby concealed the particulars and/or furnished inaccurate particulars of its true income in the return of income by claiming deduction to the extent of 80% with full knowledge that claim for such deduction was inconsistent with its own audited books of account and statutory provisions of the Income-tax Act and therefore completely untenable on facts and in law. It is an open and shut case of bogus claim for deduction to the extent of 80% of the impugned sum so as to evade payment of legitimate taxes due to the State - Decided in favour of Revenue.
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2013 (11) TMI 210
Undisclosed income - Income received from hospital - Record shown in crystal book which is not regular books of account - Held that:- it is obvious that the entries found in crystal college book are not the regular books of account maintained by the hospital for receipt of the amount. This crystal college book was maintained for collection of amount over and above the regular hospital charges to be paid to the respective doctors directly - that the entries found in the crystal college book is with regard to payment made to respective doctors including the assessees herein over and above their monthly salary. Therefore, the same is to be treated as their income - Decided against Revenue.
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2013 (11) TMI 209
Disallowance u/s 40(a)(ia) for short deduction of tax - Interest u/s 201(1A) - Held that:- if any part of the tax which required to be deducted was found to be not deducted then can be levied in respect of that part of the amount which was not deducted. Whereas the language of section 40(a)(ia) does not say that even for short deduction disallowance has to be made proportionately. Therefore, the legislature has clearly envisaged in section 201(1A) for levy of interest on the amount on which tax was not deducted whereas the legislature has omitted to do so in section 40(a)(ia) of the Act - section 40(a)(ia) does not enable the assessing officer to disallow any proportionate amount for short deduction or lesser deduction - section 40(a)(ia) does not envisage a situation where there was short deduction / lesser deduction as in case of section 201(1A) of the Act. There is an obvious omission to include short deduction / lesser deduction in section 40(a)(ia) of the Act - in case of short / lesser deduction of tax, the entire expenditure whose genuineness was not doubted by the assessing officer, cannot be disallowed. Accordingly, the orders of lower authorities are set side and the entire disallowance is deleted - Decided in favour of assessee. Disallowance of foreign exchange fluctuation loss - Held that:- by acquisition of a company in South Africa, the manufacturing base and distribution network, in other words, the capital base of the company, expands considerably and the profit making apparatus also expanded. Though the company was acquired through a subsidiary company this Tribunal of the considered opinion that it is only an arrangement made by the assessee to acquire Dunlop Tyres International (proprietory) Ltd. In effect, the assessee is holding and controlling the subsidiary company as well as Dunlop Tyres International (proprietory) Ltd - the entire arrangements made by the assessee by establishing two intermidiary subsidy companies would come to light once the corporate veil is lifted. Therefore, the loss suffered was in the process of acquisition of Dunlop Tyres International (proprietory) Ltd in South Africa. In other words, the loss was suffered in the process of acquisition of a capital asset which expands the manufacturing facility as well as the profit making apparatus of the company - loss suffered by the assessee by settling the forward contract in the process of acquisition of Dunlop Tyres International (proprietory) Ltd is a capital loss which cannot be allowed as a revenue loss or as an item of expenditure. This is not an expenditure incurred in the course of earning of profit - Decided against assessee. Disallowance of raw material being destroyed in fire - Held that:- even if the claim of loss was not made in the return of income, the CIT(A) ought to have admitted the claim as an additional ground and examined the issue on merit - CIT(A) is not justified in rejecting the claim of the assessee. However, since the assessing officer has not considered the matter on merit - the matter has to be adjudicated by the assessing officer at the first instance. Accordingly, the orders of lower authorities are set aside and the issue of loss of Rs.18,26,47,613 on account of fire is remitted back to the file of the assessing officer. The assessing officer shall consider the issue on merit and thereafter decide the same in accordance with law after giving reasonable opportunity of hearing to the assessee - Decided in favour of assessee. Deduction u/s 80IA(4)(iv)(a) - Held that:- Though a claim was made with regard to deduction u/s 80IA in respect of DG & DT & GT power generating unit at Limda, admittedly, the power generated in the form of steam by gas turbine boiler was not claimed in the return of income. For the first time, the assessee makes the claim with regard to generation of power in the form of steam from its gas turbine boiler. No doubt, section 80A(5) says that no deduction shall be allowed under Chapter VIA under the heading, “C.-Deductions in respect of certain incomes”, unless the same is claimed in the return of income. As rightly pointed out by the learned senior counsel section 80A(5) was brought in the statute book by Finance Act, 2009, of course, with retrospective effect from 01-04-2003. Therefore, on the date of filing of return of income for the assessment year under consideration, the assessee would not have anticipated the retrospective amendment that would be brought in the statute by finance Act, 2009. The assessee was expected to file the return of income as per the law as it existed on the 01st day of April of the respective assessment year - Therefore, order of CIT(A) is set aside and the issue is restored to the file of the assessing officer with a direction to consider the same on merit in respect of deduction u/s 80IA(4)(iv)(a) with regard to generation of power in the form of steam from its gas turbine boiler - Decided in favour of assessee.
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Customs
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2013 (11) TMI 249
Imposition of penalty under Section 112A - valuation of goods i.e. Brass/Zinc hardware imported by the appellant from China - appellant submitted that in Tanya Industries [2013 (11) TMI 246 - CESTAT NEW DELHI], absolute stay was granted- Held that:- this appellant was not before Tribunal in the case cited by the appellant. Facts and circumstances of each case decide the order thereon. Further, every Court has its own discretion in passing order at the interim stage. Even that Court has power to vary or vacate its order. - Decision in the case of Empire Industries vs. UOI, [1985 (5) TMI 215 - SUPREME COURT OF INDIA] followed - stay granted partly
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2013 (11) TMI 248
Duty demand - Mis-declaration of MRP on bulbs imported - Held that:- Instead of explaining the position of the fraudulent stickers recovered during the course of investigation the appellant went on leading legal pleading. Had there been no utility of MRP stickers of higher value the appellant would not have possessed the same. Preponderance of probability suggests that the appellant was beneficiary of sticker of higher value. Prima facie, it cannot be ruled out that Revenue was prejudiced for the questionable modus operandi followed by the appellant. Therefore, we direct the appellant to deposit Rs. 15 lakhs (Rupees fifteen lakhs only) within 6 weeks from today - stay granted partly.
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2013 (11) TMI 247
Waiver of pre deposit - seizure of Indian currencies from the baggages about to be exported - Held that:- he stated that he was only a carrier of the currency which was said to have been handed over to him by one Mr. Hussain alias Mohammed Hussain Pote. The appellant was to have delivered the currency to another person, one Mr. Raees in Dubai. - The currency stands absolutely confiscated in terms of Section 113 of the Act - prima facie case for the appellant against the penalty. There is no evidence of financial hardships forthcoming. Nevertheless, we are not asking for full pre-deposit. - stay granted partly.
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2013 (11) TMI 246
Valuation of goods - lower authorities have enhanced the value to the extent of 30% based upon the value of the raw materials, reckoned to be LME prices, by ignoring the transaction value - Held that:- There is no evidence produced by the Revenue discarding the transactional value. As such, at this interim stage, we are of the view that appellant is entitled to unconditional stay. - stay granted.
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2013 (11) TMI 245
Warehousing - Applicability of Circular No. 128/95-Cus. - Applicability to private sector warehouses or public sector warehouse - Held that:- On perusal of Section 45 of the Customs Act, 1962, it appears that custody of the imported goods shall be of such person as may be approved by the Commissioner until those are cleared for home consumption or are warehoused or are transhipped in accordance with the provisions of Chapter VIII. Sub-section (2) of Section 45 cases certain responsibilities on the custodian who is approved under Sub-section (1) of Section 45 by the Commissioner. The said section does not specify about penal consequence of law. Once there is no penal consequence prescribed under the law and that has not been invoked in Para 35 of the impugned order, there cannot be mechanical imposition of penalty because there was circular issued by the Board. Section 35 also does not throw light about guidelines to be issued by the Board. But it is mandate of that section that approval of the Commissioner is necessary to the custodian of the goods. Even that section does not empower the Commissioner to prescribe any condition or restriction. Therefore, intention of the Circular cannot be confused with the mandate of Section 45 of the Customs Act, 1962. Hon’ble High Court of Andhra Pradesh accordingly held that the Circular is to be read in the context of private sector participation which probably is the situation calling for approval under Section 45 of the Customs Act, 1962. In view of the clear distinction between the two sectors, mandate of Section 45 of Customs Act, 1962 and finding of no prejudice caused to Revenue, appellant succeeds on all these grounds - Following decision of Sujana Steels Ltd. v. CCE, Hyderabad [2000 (9) TMI 82 - HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYD.] - Decided in favour of assessee.
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2013 (11) TMI 244
Rectification of mistake - Extended period - Held that:- there is a detailed discussion as to why the extended period of limitation is not available to the Revenue for raising the demand. It stands observed tin the said order that Commissioner himself has dropped the penalty on the ground that appellant is a bonafide purchaser of transferable DEPB scripts and as such, no suppression can be attributed to the appellant. Further the Tribunal also relied upon Tribunals decision in appellants own case whereby the demand of duty for the extended period was dropped - issue of availability of extended period is a legal issue required to be decided in the facts and circumstances of each and every cases. Tribunal having come to a finding that such extended period was not available to the Revenue for raising the demand, we are of the view that said findings cannot be held to be a mistake requiring any rectification - Decided in favour of assessee.
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2013 (11) TMI 243
Classification of goods - Import of Debranner Milling Machine - Benefit of Notification No. 21/2002 (Sl. No. 267) - Classification under CTH 843710.00 - Held that:- the CTH 843710.00 is a specific Heading for "machines for cleaning, sorting or grading seed, grain or grading seed, grain or dried leguminous vegetables”. The other machineries are covered under Sub-heading No. 8437.80 - Note (1) to HSN Classification of sub-heading 8437.10 covers machines for cleaning, sorting or grading seed, grain or dried leguminous vegetables etc. by winnowing, blowing, rotating winnowers and seed or grain selectors, special machines for selecting and grading seed for planting. Note (II) of the said Explanatory Notes to HSN for Heading No.8437, indicates machinery used in milling industry. The “Bran cleaners” is specifically mentioned in Part (II)(c)(3). It is noted that milling machine for bran cleaner is outside the purview of sub-heading No.843710.00. Function of the Debranner milling machine is beyond the scope of CTH 843710.00 and therefore it would be rightly classifiable under CTH 8437 80.10 which specifically covers flour mill machineries - Decided against assessee.
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2013 (11) TMI 242
Stay application - Import of human hair - Appellant claimed exemption under Notification No.32/97-Cus. - Department denied exemption on account of violation of Notification No.32/97-Cus. - Held that:- apparently there is violation of the notification No.32/97-Cus. The notification clearly defines the term "goods" to mean that raw materials etc. as are directly related to the export order and supplied free of cost by the foreign buyer. In the present case, it appears that they have remitted the foreign exchange to the foreign buyer. The submission of ld. advocate that said amount could be treated as deposit. We find that Commissioner has given detailed finding on this issue. Hence the submission of learned advocate on this issue will be looked at the time of appeal hearing. Letter dt.9.7.09 as referred to by the appellant was not mentioned in the impugned order. Hence the contention that demand is barred by limitation would be looked into at the time of appeal hearing. It is also noted that applicant executed a bond - Prima facie view not in favour of assessee - Stay granted partly.
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Corporate Laws
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2013 (11) TMI 241
Winding up - Inability to pay debts - recovery of dues - Held that:- that petitioners have made a feeble attempt to recover the said amount of Rs. 2.5 crores paid by them to M/s. Tilak Nagar Industries contending it to be a distinct transaction which has been held herein above as otherwise - if the defence raised by the respondent company being substantial one and not a mere moonshine and all the contentious issues are required to be finally adjudicated on merits by the Civil court, this Court would not be inclined to exercise the discretionary jurisdiction vested in it for winding up of the respondent company. The debt being disputed by the respondent for the reasons attributable to the petitioners namely, on account of the terms of the contract dated 29.08.2010 not having been adhered to by them - defence set up by the respondent company is a bona fide dispute and as such petitioner would not be entitled to seek winding up of the respondent company under section 433(e) and read with section 439 of the Companies Act - Following decision of IBA Health (India) (P.) Ltd. v. Info Drive Systems SDN. BHD [2010 (9) TMI 229 - SUPREME COURT OF INDIA] - Decided against petitioner.
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Service Tax
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2013 (11) TMI 259
Eligibility of Cenvat Credit - Security services of residential colony – scope of input services – Rule 2(l) of CCR - Waiver of Pre-deposit – Held that:- Following COMMISSIONER OF CENTRAL EXCISE & CUSTOMS Versus GUJARAT HEAVY CHEMICALS LTD [2011 (5) TMI 132 - GUJARAT HIGH COURT] - the act of providing residential quarters by the manufacturer to its employees was voluntary - Providing security service in such residential quarters was also an act voluntary in nature - Appellants do not have prima facia case in their favour – the entire service tax amount with interest directed to deposit as pre-deposit – upon such submission there would be waiver of Penalty.
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2013 (11) TMI 258
Availability of Cenvat credit - Telephone Provided to Employees for business purposes - Courier Services - Insurance Services – Held that:- Following CCE vs Ultratech Cement Ltd. [2010 (9) TMI 19 - High Court of Bombay] - cenvat redit was available in respect of such telephone connections which are installed in the premises from where output service is provided – Following CCE vs CCL Products [2009 (3) TMI 136 - CESTAT, BANGALORE] - all the services which are availed by the respondent are in respect of manufacturing activity – Following U.G. Sugar & industries Ltd. [2013 (3) TMI 403 - CESTAT NEW DELHI] - the services are cenvatable services – order set aside – Decided in favour of Assessee.
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2013 (11) TMI 257
Wrong Utilization of Cenvat credit – Service tax on outward transportation – Held that:- Utilization of wrongly availed credit for payment of Service tax, which was required to be paid in cash amounts to as if no service tax was ever paid, in which case the appellant should be imposed penalty - Cenvat credit is not available to the appellant - Inasmuch as the same stand utilized by them for payment of duty on the outward transportation - appellants would pay the Central excise duty in cash along with interest - On payment of such service tax in cash, the credit utilized by them for payment of such service tax would be credited in their Cenvat credit account and the entire credit availed by them on inward transportation of the raw material would be paid back to them by making a debit entry in their Cenvat credit account. Penalty - Availment of credit and its utilization was reflected by the appellant in their ST 3 return - If the appellant was having any malafide intention, they would not have correctly declared all the facts to their jurisdictional authorities, at the time of filing of their returns – this is a case of interpretation of complex provisions of service tax, of which assessee may not be aware of - this is not a case of imposition of penalties – Penalty set aside – Decided partly in favour of Assessee.
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2013 (11) TMI 256
Service Tax – Intellectual Property Services – Transfer of technical know-how – Consulting Engineer's Service - demand of service tax on royalty - Held that:- supply of technical know-how and technical assistance does not come under the purview of Consulting Engineer's Service and such services merit classification under IPR service - Commissioner is right in coming to the conclusion that the services rendered does not merit classification under Consulting Engineer's Service - Decision in the case of ARACO CORPORATION versus COMMISSIONER OF CENTRAL EXCISE, BANGALORE [2004 (10) TMI 16 - CESTAT (BANGALORE)] followed - Decided in favor of assessee.
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2013 (11) TMI 255
C & F Agent versus as a Del Credere Agent – service rendered by the assessee to the IPCL. is more in the nature of an indemnifier as the assessee as to indemnify to the value of the goods sold by the IPCL to its customers and that the assessee shall ensure the proper repayment of the value of the goods sold by the IPCL to its customers - revenue contended that service rendered by the respondent to the IPCL has to be considered as clearing and forwarding Agent as defined under the Finance Act, 1994 – Held that: - . Combined reading of the definition of C&F agent under the Finance Act under Section 65(25) and the meaning of Del Credere Agent and the amendment brought into in the year 2005, whereunder Del Credere Agent is also included would clearly establishes that prior to the amendment, the service rendered by a Del Credere Agent had been excluded from service tax. Therefore we are of the view that since the respondent-assessee was not a C&F Agent for IPCL as it was a Del Credere Agent the respondent-assessee is not liable to pay service tax - following decision of COMMISSIONER OF SERVICE TAX, BANGALORE Versus SREENIDHI POLYMERS (P) LTD. [2010 (3) TMI 333 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2013 (11) TMI 254
Penalty u/s 78 - Commercial training or Coaching services - Held that:- Imposition of penalty under the said Section envisages existence of malafide on the part of the assessee either by way of forgery, collusion, willful mis-statement or suppression of facts with intent to evade tax. No such element is present in the impugned case and this Tribunal also in a number of decisions has held that incase of training and coaching rendered by non-commercial organization service tax liability would not be attracted. In view of this position, the law was amended retrospectively to validate the levy of service tax on coaching and training services rendered by even non-commercial organizations - Imposition of penalty under Section 78 of the Finance Act, is not warranted in the facts and circumstances of the case. - no penalty - refund to be granted for the amount already deposited - Decided in favour of assessee.
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2013 (11) TMI 253
CENVAT credit - Input service in respect of the freight paid for transportation of two wheelers from factory premises of the manufacturer - Held that:- In terms of Rule 2(l) of CCR 2004, input service means any service used by a provider of taxable service for providing an output service. In the present case, the applicant is registered under the category of Authorized Service Station. Rule 3(iv) of CCR 2004 provides that the cenvat credit may be utilized for payment of service tax on any output service. Prima facie, we are unable to accept that the transportation of two wheelers from manufacturer’s factory has relation with the servicing of motor vehicle by the applicant. - stay granted partly.
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2013 (11) TMI 252
Demand for service tax short paid - Construction of Residential Complex Service - Held that:- The core issue has already been examined by the Tribunal in the case of LCS City Makers Vs. Commissioner of Service Tax, Chennai [2012 (6) TMI 363 - CESTAT, CHENNAI]. In view of that, we direct the applicant to predeposit Rs. 20,00,000 within a period of six weeks. - stay granted partly.
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2013 (11) TMI 251
Valuation - inclusion of cost of material in the value of repair and maintenance services provided during warranty period - VAT was being paid on material - notification no. 12/2003 - Whether there is a sale of goods to the service recipient in a case where value of the goods is paid by the service recipient but the possession is handed over to the owner of the vehicle is a legal issue to be decided at the time of hearing of the appeal - Held that:- In the matter of cenvat credit, it is not clear as to what type of burden the applicant is expected to discharge so long as Revenue has not pointed out any instances of the applicant having taken Cenvat credit on materials used. Further, from the invoices placed before us we are of the view that the dispute is about parts used and not consumables and if at all there is any consumable involved the proceedings before the lower authorities have not segregated the quantum attributable to consumables - It is proper to grant waiver of pre-deposit of dues arising from the impugned order in this case also for admission of appeal - stay granted.
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2013 (11) TMI 250
Refund claim - Commission paid to the agents - recovery of refund already granted - Held that:- The first appellate authority, on an appeal filed by the Revenue has come to a conclusion that the said Notification 9/2009-ST grants refund of the amount of service tax utilised in SEZ area, if the same is paid under Section 66 of the Finance Act, 1994, while the appellant herein has paid the service tax under Section 66A of the Finance Act, 1994. We find strong force in the contentions raised by the learned counsel that the provisions of Section 66A were clarified as not a charging Section by itself but created a legal fiction to charge the services which were rendered to the service recipient in India. This clarification is given by the Board by a Circular No. 354/148/2009/TRU dated 16.7.2009. If the Board is of the view that Section 66A, is not a charging Section by itself and the charging Section remains 66, in our view, taking a holistic approach towards the issue wherein it is not disputed that the appellant is situated in SEZ area, has paid the service tax and the goods are exported, denial of the refund claim to the appellant only on hyper- technicalities, seems to be incorrect - Prima facie appellant is eligible for the refund and hence impugned which sets aside the refund filed by the appellant seems to be incorrect. We find that the appellant has made out a prima facie case for the waiver of pre-deposit of the amounts involved. Application for the waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Decided in favour of assessee.
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2013 (11) TMI 238
Adjustment of service tax paid paid in excess - self adjustment under Rule 6(3) of service tax Rules, 1994 - revenue contended that adjustment can be done in respect of the service which is not provided by the service provider and the amount of service tax has been refunded to the person from whom it was received. In the present case the applicants were giving some volume discounts and other rebates and such amounts were adjusted against the payment of service tax for subsequent period, which is not permissible. - Held that:- the adjustment is not in respect of services which are not provided rather it is by way of discounts and rebates. In view of this, prima facie the applicants have not made out a case for total waiver of service tax - stay granted partly.
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Central Excise
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2013 (11) TMI 240
Writ Petition Maintainable OR Not – Alternate Remedy available – Whether the order passed by the CESTAT in terms of Section 35F of the Excise Act, 1944 or Section 129-E of the Customs Act, 1962 is appealable in terms of Section 35G of the Excise Act 1944 or Section 130 of the Customs Act, 1962 - Held that:- The order passed by the CESTAT in terms of Section 35F of the Central Excise Act, 1944 or Section 129-E of the Customs Act, 1962 is appealable in terms of Section 35G of the Excise Act, 1944 or Section 130 of the Customs Act, 1962. There is no contra decision rendered by the Apex Court subsequent to Raj Kumar Shivhare's case [2010 (4) TMI 432 - SUPREME COURT] is placed before us. On the other hand, by following the above decision, a subsequent decision of the Apex Court in Satyawati Tandon case was rendered by holding that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the statute, which decision has been discussed supra. Appellate remedy is available against those orders u/s 35G of the Central Excise Act, 1944 or u/s 130 of the Customs Act, 1962 - all the petitions are liable to be dismissed on the ground of maintainability - all the petitions are dismissed as not maintainable, however by giving liberty to the petitioners to file appeal under Section 35G of the Central Excise Act, 1944 or under Section 130 of the Customs Act, 1962, wherever it applies - writ petitions are dismissed only on the ground of maintainability, the petitioners are entitled to canvass the correctness of the order passed by the Tribunal in their appeal by raising all the grounds as well as the substantial questions of law available to them – liberty is granted to file appeal, the parties are directed to maintain status quo as on date.
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2013 (11) TMI 239
Benefit of Notification No.10/1997 - duty of laboratory furniture - Waiver of Pre-deposit – Held that:- The appellant had cleared laboratory furnitures to various institutes - these institutes are covered under the notification and they have given the certificates - Whether the goods supplied would fall under the category of institution as contemplated under Notification No.10/97-CE is a debatable issue - the appellant has not made out a prima facie case for complete waiver of the entire amounts involved - the appellant directed to deposit an amount of Rs.1,00,000 – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.
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2013 (11) TMI 237
Determination of assessable value – Waiver of pre deposit of duty and Penalty u/s 11AC of CE Act – Held that:- The applicant has determined the assessable value on stock transferred goods under Rule 8 of Central Excise Valuation Rules by adopting 110% of the cost of the product - the applicant has adopted the CAS-4 method - the value was determined by the CERA Audit whereby, the assessable value for the respective years had been revised. The difference in the assessable value was around 57.39 Lakhs and 36.71 Lakhs respectively in comparison to the value arrived at by the applicant, whereas for the years 2006-2007, 2008-2009 and 2009-2010, the applicant has paid duty on the excess value of Rs.3.13 crores, 2.3 crores and 3.03 crores respectively - Prima facie, there was no reason why the excess duty paid during 2006-07, 2008-09 & 2009-10 should not be adjusted for the period where duty has been short paid - the applicant could able to make out a prima facie case for total waiver of dues and all dues waived and its recovery stayed during the pendency of the appeal – Stay granted.
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2013 (11) TMI 236
Reversal of CENVAT Credit – input cleared as such / sale of inputs in auction - reversal on Transaction Value or original credit to be reversed – Waiver of Pre-deposit – Held that:- There is no discussion about this statement at all - there was no admission on the part of the officers of the company that there was no linkage between the inputs written off and sold in auction - department has also not gathered any other evidence to show that the inputs disposed off were different from the one which were written off - the procedure adopted by the appellant is also in accordance with law since during the relevant time if the inputs are cleared as such, the duty payable was on transaction value - the appellant has made out a prima facie case on merits - there will be waiver of pre-deposit and stay against recovery during the pendency of appeal – stay granted.
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2013 (11) TMI 235
CENVAT Credit – inputs where date of use expired before receiving the goods - Waiver of Pre-deposit – Held that:- The appellant has reversed the entire cenvat credit and the interest - But this reversal is done after the issuance of show cause notice -Prima facie the appellant has not made out a strong case for the complete waiver of the amounts of penalties involved as in the first place, the cenvat credit availed by the appellant on the dated expired goods is in violation of the provisions of Central Excise Rules, 2002, in as much as they being in the business for decades, should have known that date expired manufactured insecticides seldom can be re-processed or re-manufactured. All the legal issues raised needs consideration in depth, which can be done only at the time of final disposal of the appeal - the appellant is directed to deposit an amount of Rs.1,00,000 as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.
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2013 (11) TMI 234
Determination of assessable value – adjustment of excess duty paid with short payment of duty in case of stock transfer - Waiver of Pre-deposit – Held that:- The applicant has determined the assessable value on stock transferred goods under Rule 8 of Central Excise Valuation Rules by adopting 110% of the cost of the product - the applicant has adopted the CAS-4 method - For the year 2005-2006 and 2007-2008, the difference in the assessable value was around 57.39 Lakhs and 36.71 Lakhs respectively in comparison to the value arrived at by the applicant, whereas for the years 2006-2007, 2008-2009 and 2009-2010, the applicant has paid duty on the excess value of Rs.3.13 crores, 2.3 crores and 3.03 crores respectively - Prima facie, there is no reason why the excess duty paid during 2006-07, 2008-09 & 2009-10 should not be adjusted for the period where duty has been short paid - the applicant could able to make out a prima facie case for total waiver of dues adjudged and accordingly all dues waived and its recovery stayed during the pendency of the appeal – Stay granted.
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2013 (11) TMI 233
Clandestine Procurement and Removal of Goods – Waiver of Pre-deposit – Held that:- Mere papers were supplied without the goods being supplied. He has also seen that commission transaction were made only to issue papers to enable the appellant to cause loss to Revenue - The bank transaction were examined which suggests self cheque drawals in various unusual manners - Adjudication order brought out nexus of the appellant proving mere paper transaction without dealing with the goods - It is not possible to grant waiver of pre-deposit - appellant company directed to deposit Rs. 80 lakhs as pre-deposit – upon such submission rest of the duty to be waived - Partial stay granted.
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2013 (11) TMI 232
Clandestine Removal of Goods - Shortage of Goods – Waiver of Pre-deposit - Held that:- Shortage occurred for making no entry in the record and clandestine removal of the goods were done - It is not only on one consideration adjudication was made but several considerations as above compelled adjudicating authority to raise the demand - For the reasons aforesaid it is not possible to grant waiver of pre-deposit on baseless defence led - Prima facie, it appears that premeditated design was made to defraud Revenue in the manner - the appellant directed to make deposit of Rs. 4 crores shall serve the interest of Revenue at interim stage till appeal is heard - Partial stay granted.
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2013 (11) TMI 231
Product Manufactured OR not – Applicability of Rule 6(3)(b) of CC Rules – Waiver of Pre-deposit - Held that:- Demand to the extent of Rs. 2.05 lakhs may only be within time, if at all liability arises and, balance shall be time barred - there was substantial reduction of duty demand in appeal - part of the demand is time biased there shall be waiver of pre-deposit in all the stay applications – stay granted.
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2013 (11) TMI 230
SSI Exemption – Cenvat Credit of duty on Inputs lying in stock - Applicability of Rule 11 (2) of CC Rules – Bar of Limitation – Held that:- The appellants case is squarely covered by provision of Sub-rule (2) of Rule 11 of CENVAT Credit Rules, 2004, as this Rule is applicable in respect of a manufacturer who opt for exemption based on value on quantity of clearances in a financial year - the appellant at the beginning of every financial year had opted for SSI Exemption - they were liable to pay an amount equal to the Cenvat credit availed in respect of inputs lying in stock or in process or contained in final products lying in stock which they have not done - When the Appellants case is covered by the provisions of Rule 11(2) of CENVAT Credit Rules, and the provisions of this sub-rule are clear and unambiguous, the same have to be given effect to and there is no scope for giving an interpretation to the provisions of Rule 11(2) which is at variance from the natural grammatical meaning of the wordings of this rule - the appellants may have a good case and as such entire duty demand may not be within limitation period. Waiver of Pre-deposit - The appellant have already paid an amount along with interest - the amount already paid is sufficient for hearing of this appeal - The requirement of pre-deposit of balance amount of Cenvat Credit demand interest and penalty is waived for hearing of the appeal – stay granted.
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CST, VAT & Sales Tax
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2013 (11) TMI 261
Tax liability - Exemption from sales tax - The firm of the petitioner is financed and registered with U.P. Khadi Evam Gramodyog Board - Exemption of tax for Paddy and rice production - Held that:- Under the Government Order dated 31.01.1985, the exemption from trade tax liability has been granted on the sale of the products by the Units of the Khadi Gram Udyog Board. Specifying the products, in clause-38 of Entry-3, the words "hulling, cutting/trimming, processing, packaging and marketing of cereals" have been used and not "processing of paddy". The hulling of the cereal is nothing but hulling of the paddy for manufacture of rice. In Notification No. 709 dated 27.02.1997 the words "processing, packaging and marketing of cereals, pulses, masalas and chhonks" have been used. Thus it was processing of the cereals and not processing of paddy. The word cereal means paddy, rice and all other food grains. Thus the exemption granted to the petitioner on the sale of rice was fully covered in the word 'cereals'. By the subsequent Government Order dated 30.09.2004, "rice and it's by-product manufactured from paddy" has been specifically excluded from clause-38 of Entry-3. An exclusion clause can not be treated as a clarificatory clause, or clarification of existing clause. The exclusion of specific goods clearly proves that the excluded goods were included in this clause prior to that date of exclusion. The notification dated 30.09.2004, which carries exclusion of some goods will apply prospectively and not with retrospective effect. The reassessment under Section 21 (2) on the basis of notification dated 30.09.2004, which was not applicable for the Assessment Years 2002-03 and 2003-04, was illegal - By a notification dated 30.9.2004, Entry no. 38 was amended and by which the manufacturing of rice from paddy was specifically excluded from the words "processing, packaging and marketing of cereals, pulses, masalas and chhonks". The petitioner is, therefore, liable to pay tax (Central) on sale of rice w.e.f. 1.10.2004 - Decided partly in favour of assessee.
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2013 (11) TMI 260
Penalty u/s 15A(1)(a) of the Trade Tax Act - Held that:- It has to be kept in mind that payment of interest on the delayed amount of tax flows from statutory provision i.e. Section 8(1) of the Trade Tax Act while penalty proceedings are taken for delayed payment of tax under Section 15A (1) (a) of the Trade Tax Act. Both interest and penalty are two different concepts. Interest flows from the retention of the money, which was legally payable, while penalty is inflicted for violation of statutory provisions and the time scheduled prescribed - it is no concern of the department as to whether the purchaser had made payment of price of the goods purchased to the revisionist-assessee dealer or not and it is also immaterial as to whether the purchaser is a Government Company or a private buyer - amount of penalty is reduced to 15% subject to the conditions that the assessee deposits the reduced penalty in terms of the order of this Court within one month - Decided partly in favour of assessee.
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