Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 8, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Income from other sources or Business income - Search u/s 132(4) - cash was found from the residential and business premises of the assessee - held as business income - AT
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Katchi Rokar has to be taken as one complete document and cannot be bifurcated for making additions on account of income shown, without reducing from the said amount, the expenditure duly recorded and mentioned in Katchi Rokar records - HC
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Whether the payment of 'discount' and 'rebate' was subject to deduction of TDS – There was 'agency agreement' - Certain incentives as given by the assessee did not constitute a ‘commission’; hence, out of the purview of the provisions of Section 194H - AT
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Notice of penalty u/s wrong provision of Act – The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind - Penalty should be clear as to the limb for which it is levied and the position being unclear here the penalty is not sustainable - AT
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Additions on account of bogus purchases - accommodation bills - AO only restricted to 20% of purchases claimed, it is surprising that the revenue now contends that the entire amount is disallowable. When Assessing Officer did not make disallowance of entire amount, ITAT can not improve upon the order of Assessing Officer - AT
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Whether investment in unquoted shares be excluded while applying the disallowance provisions of section 14A - Held no - AT
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Whether the assessee is entitled to adjust the loss on short term capital assets (STCA) arising on one set of transactions, i.e., 'on market transactions', with the short term capital gain (STCG) arising to it on another set of transactions, i.e., 'off market transactions u/s 70 - Held yes - AT
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Disallowance of advance billing - accrual of income on progressive billing - The amount due to the customers as shown by the assessee thus was nothing but receipt of advance before accrual of income - AT
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Disallowance of interest paid on loans taken from family members u/s.40A(2) - Interest paid at the rate of 18% per annum on unsecured loans during the relevant period cannot be said to be excessive or unreasonable - AT
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Fringe Benefit Tax (FBT) - FMV - ESOP - the average market price adopted as the 'prevailing price' on the date of conversion of GDRs into equity shares as the 'cost of acquisition' is reasonable and justifiable - AT
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Transfer Pricing Adjustment - Reference to Transfer Pricing Officer - the aggregate of international transactions was below Rs.15 Crores - AO was not mandatorily required to make a reference to the TPO under section 92CA of the Act. - AT
Customs
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Import of Crude Palm Oil - high content of Acid about 10% - the entry in the Notification should not be construed by taking aid of the provisions of Food Adulteration Rules and that the alteration of acid value from “4 or more” to “between 4 & 10” would directly violate the language of the Notification. - AT
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Valuation - the case is one, prima facie, of non-accountal of imported goods and the proper provision of law to be invoked by the Revenue was Section 72 of the Customs Act. The show-cause notices did not invoke this provision of law which was apparently squarely applicable to the facts of this case - AT
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Notification 21/2002 - Whether co-polymers of vinyl chloride/vinyl acetate would fall under the broad category of polymers of vinyl chloride under heading 3904 and eligible for exemption - Held yes - AT
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Import of brand new vehicle or not - The car was not used in the U.K. The finding that the vehicle was a new motor vehicle is not perverse or contrary to the evidence - AT
Wealth-tax
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Factory land - asset u/s 2(ea) of the Wealth tax act – There may be situations in which a part of factory land may be sold as ‘land’ but as long as it is a part of the factory, it cannot have any other character in the hands of the assessee than factory as such. - AT
Service Tax
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Consulting Engineers Service – Failed to apply for Registration and pay duty - invocation of the extended period of limitation and the order of assessment confirming demand of service tax, interest and penalty are impeccable - AT
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Interior Decorator Service - On the issue of classification and taxability, both the members are in agreement - decided against the assessee. - But on the issue of raising demand invoking extended period of limitation and levy of penalty, there is no consent, referred to larger bench - AT
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Power of adjudicatory authority u/s 80 to waive penalty - The benefit of the Section 80 of the Act cannot be extended to the appellant in as much as they were aware of their responsibility to file the return and deposit the tax in time - AT
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Banking and Financial services Section 65(12) r.w.s 105)(zm) - Fixed amount charged as lease of equipment - the appellants are not a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern in relation to banking and other financial services - AT
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Finishing services such as glazing, plastering, painting, floor and wall tilling, wall covering and wall papering, wood and metal joinery and carpentry etc - benefit of abatement notification 1/2006 not available - AT
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Cleaning services for educational institutions – Prima facie the appellant has made out a case for waiver of pre-deposit - AT
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Works Contract - availing cenvat credit on Inputs while opting for composition scheme - payment made by the applicant is sufficient for waiver of pre-deposit of balance amount of duty along with interest and penalty - AT
Central Excise
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SSI Exemption – Clubbing of Clearances of two units - Neither of the factories had complete equipment for manufacture the final products - demand set aside on the ground of period of limitation - AT
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It is a common knowledge that if the goods cleared for export, Central Excise duty does not arise - demands raised on Sand Stone Tiles and Khatu Marble Tiles set-aside - AT
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Rebate claim – Non-submission of original and duplicate copy of ARE-1 under Rule 18 of the Central Excise Rules, 2002 r.w Notification No. 19/2004 - rebate denied - CGOVT
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Rebate claim – Combipack - export of mosquito repellant machine & liquid - the combo pack gets specific characteristic as insecticide under 3808 10 - The goods falling under 3808 10 also finds entry as insecticide under Third Schedule - rebate claim allowed - CGOVT
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Rebate claim – The availment and utilization of accumulated Cenvat credit of one unit against payment of duty liability of another unit cannot said to be proper payment of duty - CGOVT
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Rebate claim – The procedural requirement of getting goods cleared under DEEC Scheme, examined and sealed by Superintendent, Central Excise is for availing DEEC benefit - substantial benefit of rebate cannot be denied for minor procedural lapses - CGOVT
VAT
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Non maintenance of stock register - Exemption under second sales - Keeping of a stock register by the manufacturer is of importance to verify the assessee's account for a quantitative tally of different goods attracting different rates - HC
Case Laws:
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Income Tax
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2013 (11) TMI 375
Valuation u/s 50C - sale of plots - Investment in purchase and sale of plots by a builder who is indulged in selling buildings is ancillary and incidental to his business activity - assessee has treated the land as stock in trade - Held that:- Stock in trade has been excluded from the definition of capital asset. According to the Webster's New International Dictionary, the 'stock-in-trade' is "a. The goods kept for sale by a shopkeeper. b. The fittings and appliances of a workman." In other words, the stock-in-trade includes all such chattels as are required for the purposes of being sold or let to hire on a person's trade. According to Stroud's judicial dictionary, 4th Edition, Volume 5 page 2623 "stock-in-trade comprises all such chattels as are required for the purposes of being sold, or let to hire on a person's trade. In Additional Commissioner of Income-tax Vs. Puttu Coal Pvt. Ltd., (1982 (1) TMI 24 - BOMBAY High Court), the assessee was money lender, who purchased a ship in satisfaction of his major portion of outstanding loan. The ship was considered as stock in trade of the assessee's money lending business - The appeal is dismissed by holding that on the facts of the present case, the Tribunal has rightly held that the provisions of section 50C are not applicable with respect of sale of land as sale of land was not capital asset - Decided against Revenue. Income from other sources or Business income - Search u/s 132(4) - Held that:- cash was found from the residential and business premises of the assessee. The assessee in his statement recorded u/s.132(4) has accepted the same as unaccounted business income and offered the same for taxation along with unexplained investment in Icon Tower. The declaration made u/s.132(4) for investment in Icon Tower was accepted without assigning any specific reason but the same was not accepted selectively for the cash found. Further, the declaration for taxability was accepted but the source of the cash found was not accepted. It has been held in a number of judicial decisions that statement recorded during the course of search u/s.132(4) has to be considered and accepted as a whole if the Assessing Officer wants to use it as an evidence. The Assessing Officer cannot be allowed to blow hot and cold simultaneously. The revenue could not be permitted to use that part of the statement which was beneficial to it and reject the other part of the statement which was detrimental to it. When the assessee is undisputedly engaged in the business of real estate, land dealings, running of restaurants and bakeries etc. in individual capacity as well as through partnership firm for the last so many years, therefore, the cash found from residence as well as business premises would belong to such activities. Considering the totality of the facts of the case and in view of the detailed reasoning given by the Ld. CIT(A) while allowing the claim of the assessee that the money found during the search and declared by the assessee as additional income has to be assessed under the head "business and profession" and not under the head "income from other sources" - Decided against Revenue.
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2013 (11) TMI 374
Assessment u/s 153A – Disallowance of labour and site expenses @ 7 percent – Most of the vouchers are self-made, payments have been made in cash and the identity of the payees were not provided completely to make any verification - Held that:- The labour is engaged in far flung areas where it is impossible to maintain documents – It is difficult to verify the identity of labour after gap of years – The disallowance was restricted to 5% - Partly allowed in favour of the assessee. Disallowance out of travelling expenses – The assessee has claimed abnormally high travelling expenses as compared to last year – The assessee did not furnish necessary evidences in support of the travel expenses - Held that:- the CIT(A) have not specifically mentioned as to what particulars have not been furnished by the assessee and whether the particulars which were not given about persons who travelled, or places to which they had travelled or the necessary supporting vouchers for the same – In case of travelling expenses – Not every expense can be supported with third party confirmation – The disallowance was reduced to 50% - Partly allowed in favour of the assessee. Determination of income u/s 143(3) – The search was conducted on 28.7.2008, while the assessment order was passed on 28.12.2007 - Held that:- The assessment order passed u/s 143(3) is still valid – Decided against assessee. Disallowance of miscellaneous expenditure – The assessee has not furnished necessary details of the expenses incurred – Held that:- The AO as well as CIT(A) has not mentioned what evidence were required to support claim - There cannot be any ad-hoc disallowance of expenses in one year without a specific finding about claim of expenditure, when similar expenses have been accepted in other years in assessments framed almost simultaneously and under similar circumstances – Decided in favour of assessee.
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2013 (11) TMI 373
Disallowance u/s 40(a)(ia) of the Income Tax Act – TDS u/s 194C - Assessee contended that they only hired the vehicles; but the drivers, fuel etc. were paid by the assessee and thus Section 194C(2) was not applicable – Held that:- Neither the assessing officer nor Commissioner (Appeals) had orally examined or asked for written replies/computation from the car owners/taxi owners to verify and ascertain whether they had provided drivers and paid for fuel. The assessing officer had proceeded and accepted that drivers/fuel was directly provided/paid for by the respondent - contended by the assessee and voluminous documents produced to establish that the respondent-assessee had paid for fuel and salary of the drivers – Decided against the Revenue.
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2013 (11) TMI 372
Reliance on Katchi Rokar as books of accounts – Held that:- Katchi Rokar has to be taken as one complete document and cannot be bifurcated for making additions on account of income shown, without reducing from the said amount, the expenditure duly recorded and mentioned in Katchi Rokar records - Katchi Rokar as true and correct documentation - Net income as shown and recorded should be treated as true and correct income earned – Decided against the Revenue.
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2013 (11) TMI 371
Whether the payment of “discount” and “rebate” was subject to deduction of TDS – There was “agency agreement” and the “agreement for the appointment of consignment stockist” - In addition to the commission the company at it’s discretion allow an annual quantity discount as per slabs - Although a credit period of 30 days is permissible for payment but an incentive of ‘cash-discount’ shall be allowed if the dealers make the payment within 7 days – Held that:- On the basis of the terms and conditions of those agreements and also the nature of business activity of the assessee, assessee was not required to deduct the TDS on the impugned discounts and rebates - Facts of the case have revealed that on accomplishment of the targets the ‘consignment stockiest’ is permissible to retain the settled discount. It is not the case that the assessee is passing the discounts/rebates to the ‘consignment stockiest’. Such stockiest is required to sell certain minimum guaranteed quantities of the assesee’s product per month and therefore permitted to retain it’s discount on passing over of the proceeds. The discounts and rebates depend upon the quantity of purchase as also the early payment. Therefore, the rebates are in the nature of deduction from the sale price. Payments required to be made within a specific time as per the schedule fixed. Therefore, there was a rebate in respect of early payment - Certain incentives as given by the assessee did not constitute a ‘commission’; hence, out of the purview of the provisions of Section 194H of IT Act - In the light of the judgments cited above i.e. Hindustan Coca Cola Beverages [2007 (8) TMI 12 - SUPREME COURT OF INDIA], the assessee was not simultaneously required to deduct the tax at source – Decided in favor of Assessee. Applicability of section 194J or section 194C of the Income tax act – Held that:- The scope of work of Nandesari Environment Control Ltd. and M/s Gujarat Enviro Protection & Infrastructure ltd. was for collection, transportation and disposal of Hazardous Solid Waste from GFL, Dahej site to Gujarat Enviro Protection & Infrastructure ltd., Surat as per GPCB norms. Again the work of Nandesari Environment Control Ltd. was for operation and maintenance charges and was also based on the quantity lifted. The work of these two companies were of collection, transportation and disposable of waste and these two companies were not giving any technical or managerial or consultancy services as envisaged in Section 194J of the I.T. Act - Collection, transportation and disposal of waste by those two companies can be said to be covered under the provisions of Section 194C of IT Act – Decided in favor of Assessee.
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2013 (11) TMI 370
Whether proceedings initiated u/s 263 of the Act is time barred as it is beyond the period of two years from the end of the financial year in which the original assessment order u/s 143(3) of the Act was passed – Whether the limitation u/s 263 begin to run from the original assessment order u/s 143(3) or from the re-assessment order u/s 147 of the Act – Held that:- Reliance has been placed on the judgment in the case of CIT vs. Alagcndran Finance Ltd. [2007 (7) TMI 304 - SUPREME Court] - ratio laid down by the Hon’ble Supreme Court, the limitation prescribed u/s 263(2) of the Act would begin to run from the original assessment order and not from the re-assessment order - The Hon’ble Court further held that the scope of reassessment cannot be extended to the extent of the issues which were never subject matter of re-assessment; hence the doctrine of merger would not apply – Ratio laid down by Bombay High Court in the case of CIT vs. ICICI Bank Ltd. [2012 (2) TMI 308 - BOMBAY HIGH COURT], issues on which the CIT invoked jurisdiction u/s 263 were never subject matter of reassessment proceedings, the notice issued u/s 263 of the Act on 26-11-2008 from the end of the financial year 2004-05 is barred by limitation and consequently the order passed u/s 263 of the Act is also invalid - Order passed u/s 263 by the CIT being void ab initio – Decided in favor of Assessee.
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2013 (11) TMI 369
Notice of penalty under wrong provision of Act – Penalty to be levied u/s 274 of the act for ‘furnishing of inaccurate particulars’ and the notice was issued for penalty u/s 271(1)(c) for concealment of Income – In this case, operation u/s 132 of the Act and the additional income was offered by the assessee and disclosed in the return in response to section 153A of the Act for all the assessment years under consideration - Held that:- Once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts arid materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. Concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in [1978 (9) TMI 18 - GUJARAT High Court] and the Delhi High Court in the case o VIRGO MARKETING reported in [2008 (1) TMI 15 - HIGH COURT, DELHI], has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind - Penalty should be clear as to the limb for which it is levied and the position being unclear here the penalty is not sustainable - Ground raised by the assessee should be allowed on technical grounds – Decided in favor of Assessee.
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2013 (11) TMI 368
Addition made in the income of assessee u/s 68/69 of the Income tax Act – Search u/s 132 was conducted and Hundies/Promissory Notes were seized from the residence of Shri Jayant Vithaldas - Substantive addition on the aggregate sum of the hundies was made on Mr. Jayant Vithaldas, as these were found from his premises and possession. However, the protective addition was made on the assessee – Held that:- None of the hundies found from the premises and possession of the Mr. Jayant Vithaldas bears the name of the assessee. The revenue authorities have simply proceeded on the presumption that the lender name could be inscribed at any time and that since Mr. Jayant Vithaldas was closely connected to the directors of the assessee, eventually concluded that it is the assessee, who is the lender. This conclusion is merely based on conjecture - The close relation of Mr. Jayant Vithaldas with the assessee company, on which the entire edifice has been built does not bear any foundation. The revenue authorities have failed to establish the connection of the assessee and Mr. Jayant Vithaldas or even Mr. Dilip Sardesai. Ld. CIT(A) erred in confirming the addition made by the AO to the income of the Appellant on account of unaccounted hundies /bills of exchange on protective basis on the basis of certain materials seized from the residence of Shri Jayant Vithaldas, Pune, who was an ex-executive of the Appellant company and he further grossly erred in changing the protective addition into substantive addition without allowing any opportunity of hearing to the Appellant before increasing the tax liability by changing the protective addition into substantive addition – Decided in favor of Assessee.
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2013 (11) TMI 367
Additions on account of bogus purchases - accommodation bills - AO disallowed only 20% - before ITAT revenue claimed addition of entire amount – Held that:- AO gave a finding that even though the purchases from M/s Triton Infotech Ltd. are by way of accommodation bills, it can not be ruled out that assessee did purchase from grey market. AO only disallowed 20% of the so called purchases which was restricted to the possible savings and tax at 4% - In this case and fact that AO only restricted to 20% of purchases claimed, it is surprising that the revenue now contends that the entire amount is disallowable. When Assessing Officer did not make disallowance of entire amount, ITAT can not improve upon the order of Assessing Officer – Decided in favor of Assessee. Disallowance u/s 14A of the Income Tax Act - Held that:- Appellant has Rs. 77.23 crores interest free funds available with him and advanced loan of Rs. 54.68 crores as interest free. The AO has not denied these facts but only on the presumption that possibility of use of interest bearing funds fro non business purposes could not be ruled out and made an ad hoc disallowance of 50% of interest expenses – Relying upon the judgment of the Hon’ble Supreme Court in the case of Munjal Sales Corporation Vs. CIT [2008 (2) TMI 19 - Supreme Court] held that the disallowance made by the AO on ad hoc basis is not sustainable – Decided in favor of Assessee.
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2013 (11) TMI 366
Addition on account of not providing the basis of income - Income at Rs.90 lakhs as per the declaration made u/s 132(4) of the Act – Held that:- Assessee had not spelt out the basis of arriving at the income at Rs.90 lakhs which goes without saying that the assessee had presumably arrived at that figure only on estimation - Assessee had admitted before the first appellate authority that there was change of hands of black money also in the sale proceeds of the said commercial complex. CIT (A), had arrived at the gross sale proceeds at Rs.4,91,59,484/- as against the assessee's working of Rs.3.44 crores which was not supported by proper books of accounts. Taking into account the assessee's offer of net profit at Rs.90 lakhs which works out to 18.3% on a turnover of Rs.4.91 crores considered to be too low and that of the AO's working of Rs.2,24,66,173/- which comes to a net profit at 45.7% appeared to be on the higher side, the CIT (A) took a plausible view of 25% of the total turnover of Rs.4.91 crores. The CIT (A) has worked out the net profits on the basis of seized materials in course of search - Working of the CIT (A) has not been contradicted by the learned AR with any documentary evidence – Decided against the Assessee.
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2013 (11) TMI 365
Presumption u/s. 292C of the Act to apply to only the person, who is searched – Presumption as to assets, books of account, etc. - Search u/s 132 was conducted on third party – Addition made on the basis of search – Held that:- Document in question was seized from the possession of one Mr. Sohanraj Mehta. The seized document makes a reference to the name of the assessee and a figure of Rs.22.75 lakhs appears against his name - There is no basis set out in the order of the AO for coming to the conclusion that the seized document evidences receipt of money by the assessee from Sohanraj Mehta. The presumption u/s. 292C of the Act is only with reference to the person searched and it cannot be extended to the assessee. There is no corroborative evidence or statement of Sohanraj Mehta relied upon by the AO, to the effect that a sum of Rs.22.75 lakhs was paid to the assessee. The assessee has categorically denied having received any payment from Sohanraj Mehta - Even in the proceedings before the AO, when the assessee was examined, he had taken the same stand. The details called for in the scrutiny assessment did not call for any specific details on the seized document or receipt of cash based on the seized document – Decided against the Revenue.
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2013 (11) TMI 364
Disallowance u/s 14A of the Income tax act – Invocation of section 14A where chapter VI-A applies – Held that:- Profit as per P & L A/c was Rs.7,80,29,871/- against which the assessee has claimed deduction u/s 80IB and u/s. 80P(2)(d) of IT Act. The total assessable income was computed at Rs.4,00,68,881/- - Provisions of Section 14A cannot be applied to the provisions of Chapter-VIA, i.e., in respect of deductions u/s. 80A to Section 80U of the IT Act - Deduction under the said Chapter is to be made out of the computation of the total income. Those deductions are not like exempted income - Section 14A are to be attracted in relation to income which does not form part of the total income, i.e., an income exempt under the Act – Reliance has been placed on the decision of ITAT Chennai Bench pronounced in the case of Tamil Nadu Silk Producers Federation Ltd. [2006 (4) TMI 229 - ITAT MADRAS-B] - Provisions of Section 14A have wrongly been invoked in this case – Decided against the Revenue. Rectification u/s 154, when the disallowance made u/s 14A – Held that:- Applicability of the provisions of Section 14A was a disputed issue hence not rectifiable u/s 154 of the IT Act.
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2013 (11) TMI 363
Disallowance u/s 14A - whether investment in unquoted shares be excluded while applying the disallowance provisions of section 14A read with rule 8D of the Rules since capital gains sale of unquoted shares are not exempted u/s 10(38) – Adhoc disallowance of 5% – Held that:- Investment in unquoted shares did not result into short term capital gain during the year. If any dividend income was earned thereon the same was exempt as the value of investment in unquoted shares stood included at the last day of the financial year in the balance sheet – AO recorded his satisfaction about the incorrectness of the claim of the assessee whereby assessee had disallowed 5% of the dividend income under section 14A of the Act - No valid basis adopted by the assessee, the AO was right in rejecting the method adopted by the assessee for disallowance computed under section 14A of the Act. Since there is no defect in the calculation of the AO which is as per section 14A r.w. Rule 8D, the case is decided against the Assessee.
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2013 (11) TMI 362
Penalty for furnishing of inaccurate particulars/documents – Held that:- Assessee company is an old assessee which is assisted by Chartered Accountant and hence it cannot be accepted that the excess claim of depreciation has been made through oversight. In view of that matter, there are sufficient reasons to believe that the wrong/excess claim of depreciation is not out of bonafide/inadvertent mistake of the assesseee – Decided in favor of Revenue. Levy of penalty for disallowance u/s 14A of the Income Tax Act – Held that:- Following similar directions of the ITAT in the earlier years to restrict the disallowance attributable towards earning of this dividend income u/s 14A at 2% of the earning of dividend received against which the assessee has not preferred any appeal to the High Court thereby the same becomes conclusive. This results in the presumption that the assessee would have known the eligible disallowance on this issue. When the fact is being so, it is a fit case for levy of penalty – Decided in favor of Revenue. Levy of penalty on disallowance of compensation for agreement for exclusive utilisation in non-compete fees - During the previous year the assessee had paid a sum of Rs.1,05,00,000/- towards compensation for agreement for Exclusive utilisation, non- competitive business practice and keep out covenant. This expenditure in the book of accounts was treated as deferred revenue in nature, the entire sum had been claimed as an allowable expenditure in the year in which the same was incurred, though a different treatment had been adopted in the books of accounts – Held that:- Fact of the non-compete fees has been disclosed by the assessee in the computation of income filed along with the return of income. Since the entire facts have been disclosed by the assessee by way of note in the computation of income and there are several decisions in favour and against the appellant on this issue, agreed with the findings of the Ld.CIT(A) that the issue of non-compete fee is highly debatable and no penalty u/s 271 (1)(c) can be levied on the debatable issues and the same is upheld – Decided against the Revenue.
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2013 (11) TMI 361
Set off of loss of Short Term Capital Gain as claimed by the assessee ignoring the provisions of section 70(1) of the Income tax act - Whether the assessee is entitled to adjust the loss on short term capital assets (STCA) arising on one set of transactions, i.e., 'on market transactions', with the short term capital gain (STCG) arising to it on another set of transactions, i.e., 'off market transactions – Held that:- 'Loss' is only negative 'income', and is, in any case, assessable under the same head of income; any taxable income under the Act being required to be classified and assessed to tax under a particular head of income - Sub-section (1) of sec. 70, referred to by the Revenue in its ground of appeal, refers to a source of income (under a head), and is in any case not applicable to income assessable as 'capital gains'. Reference thereto is therefore be to no moment; rather, would if at all signify that income on transfer of STCAs is regarded as one category or source of income u/s. 70(2). Reliance has been placed on the in the case of First State Investments (Hong Kong) Ltd. v. Asstt. DIT (International Taxation) [2009 (7) TMI 908 - ITAT MUMBAI], wherein it was held that the computation of income is a process anterior to the application of the tax rate, so that the differential in the tax rates is rendered as of no relevance - No infirmity in clarifying that the option to set off the loss arising under the same class of income, i.e., on STCA, notwithstanding the words 'similar computation' in section 70(2), would lie with the assessee - The words 'similar computation' would only mean the computation as made u/ss. 48 to 55 of the Act, and nothing more – Decided against the Revenue.
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2013 (11) TMI 360
Valuation of property - Adoption of Fair Value - Reasonable adjustment to Fair Value - whether sale in question is panic sale - Held that:- The underneath of flyover was left with congestion. The commercial activities were adversely affected so much so that people had either to close the business or to sell their property. The construction of flyover of bridge near the appellant's property was a negative factor and had adversely affected the fair market value of the property as on the date of transfer. The ld. CIT (A), however, did not make necessary modification though the same was within the scope of his powers as are contained in sub section (2) of section 50C of the Act. We, therefore, find substance in the claim of the assessee and having regard to the report of Shri V. Padmanabhan, Approved Valuer, who is technical person, allow 20% deduction on the rate of Rs. 2905/- per sq. ft. adopted by the DVO and direct the Assessing Authority to correct the fair market value of the property under consideration accordingly. - decided partly in favor of assessee. Regarding panic sale - held that:- assessee has not laid any material on record to substantiate that there was such compulsion for making repayment of loan by him by way of sale of his immovable property nor has he proved utilization of his funds towards making repayment of loan, if any earlier raised by him. - Decided against the assessee.
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2013 (11) TMI 359
Disallowance u/s 37 - Fines and penalties - Hed that:- Revenue has not specified any specific violation of any provision of law, so that it is difficult to understand the basis of its case. Clearly, the various defaults or deficiencies, which stand to be regulated by NSE in terms of its bye-laws, cannot be regarded as an infraction of law, so as to attract disallowance - Following decision of Haji Aziz and Abdul Shakoor Bros. vs. CIT [1960 (11) TMI 15 - SUPREME Court] - Decided against Revenue. Disallowance u/s 43B - Payment to PF and ESI funds - disallowance u/s.2(24)(x) r.w.s. 36(1)(va) of the Act on account of employee’s contribution - Held that:- Payment/s made within the grace period as allowed by virtue of any circular, order, etc. would be eligible for deduction u/s. 36(1)(va). The language of the provision accords primacy to not only the relevant Act, but also to any circular, order, notification, etc. issued thereunder. Two, a ‘due date’, for all practical purposes, as also by definition, is the date by which the relevant action (payment in the instant case) could be performed so as to be considered as eligible, and without inviting any penal consequences. As such, the benefit of the ‘grace period’ could not be disallowed, and which would rather bring the two enactments in harmony - Following decision of CIT v. Godaveri (Mannar) Sahakari Sakhar Kharkhana Ltd. [2007 (10) TMI 145 - BOMBAY HIGH COURT] - Decided partly in favour of Revenue. TDS u/s 194J - various payments to the Stock Exchange - Held that:- the Stock Exchange is billed for the total charges on these counts (i.e., including lease line and VSAT charges) by the Department of Telecommunication (DOT), which in turn allocates the same to its different constituents (which would be on some definite/utilization basis), without including any charge of its own. The payment to the Stock Exchange is thus, only in the nature of reimbursement. Even as, therefore, it may result in a TDS liability in the hands of the Stock Exchange (inasmuch as what it pays to the DOT is only the latter’s income), in-so-far as the individual brokers are concerned, who make the payments to the Stock Exchange, no tax is deductible inasmuch as the same is only a reimbursement of the charges as levied by DOT. - Decided in favor of assessee.
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2013 (11) TMI 358
Disallowance of warranty provision - CIT allowed warranty provision to extent of 0.2% - Held that:- reversal of provision in the subsequent year cannot justify the provision maid in the year under consideration, the correctness of which is to be decided mainly on the basis of past data relating to expenditure actually incurred on warranty - once the deduction on account of provision is not allowed to the extent it is found to be excess, the reversal of provision in the subsequent year to that extent cannot give rise to any income and if the assessee has offered such income in the subsequent years, it can seek appropriate relief from the A.O. who shall allow the same in accordance with law - provision made by the assessee for warranty was rightly allowed by the ld. CIT(A) only to the extent of 0.2% of the value completed in the year under consideration being fair and reasonable - Decided against Revenue. Disallowance of provision for warranty while computing the income of the assessee u/s 115JB - CIT(A) sustained to the extent of 0.20% of the value of work completed - Held that:- said provision to that extent alone can be said to be the ascertained liability of the assessee and the balance provision, which is found to be excessive on the basis of past data clearly represents unascertained liability which is liable to be added back while computing the book profit of the assessee u/s 115JB of the Act. Disallowance of advance billing - accrual of income on progressive billing - Held that:- difference in the amount of progress billing and revenue recognized by the assessee in relation to three contracts shows as “amount due to customers” was explained by the assessee before the A.O. as well as before the ld. CIT(A) by filing a detailed written submission. It appears that neither of them however has been able to appreciate the same in the correct prospective. As explained by the assessee, progress billing was done not only for the amount of work done but also for mobilization and other advances receivable by it as per the terms of the relevant contract. The revenue from the said contracts was recognized by the assessee by following the percentage of completion method and the said method as well as the basis adopted by the assessee to ascertain the percentage of work done was accepted by the department in the earlier years. The mobilization and other advances received by the assessee by raising progress billings did not represent income of the assessee at the time of raising the progress bills and the same therefore had no effect whatsoever on the income of the assessee, which was recognized by following consistently a well recognized method of percentage of completion. As rightly submitted on behalf of the assessee before the authorities below as well as before us, the entire revenue from the contracts executed by the assessee was finally recognized on the completion of the relevant contracts as per the method consistently followed by the assessee and the mobilization and other advances received by the assessee as per progress billings were liable to get adjusted on such completion - The amount due to the customers as shown by the assessee thus was nothing but receipt of advance before accrual of income - Following decision of CIT v. Punjab Tractors Co-Operative Multi-Purpose Society Ltd. [1997 (8) TMI 37 - PUNJAB AND HARYANA High Court] - Decided against Revenue. Disallowance u/s 14A - held that: - investment in shares and mutual funds was made by the assessee out of its own funds and there being no utilization of borrowed funds to make the said investment, the disallowance u/s 14A of the Act out of interest is not called for - Following decision of CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - Decided against Revenue.
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2013 (11) TMI 357
Disallowance of interest paid on loans taken from family members u/s.40A(2) of the I.T. Act, 1961 - The assessee has taken the loans amounting to Rs.57.92 lakhs from his wife, sons and from his own HUF and is paying interest at the rate of 18% on the same. The loans were taken in the earlier years and no similar disallowance was made by the department – Held that:- The decisive factor for the applicability of section 40A(2) of the Act is whether the payment made by the assessee is excessive or unreasonable considering the prevailing market conditions during the relevant period - Interest paid at the rate of 18% per annum on unsecured loans during the relevant period cannot be said to be excessive or unreasonable - Revenue could not cite any instance wherein the assessee on unsecured loan account, other than his relatives account, has paid interest at less than 18% per annum – Decided against the Revenue.
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2013 (11) TMI 356
Fringe Benefit Tax (FBT) - FMV u/s 115WC read with Rule 40C - ESOP - Determination of 'cost of acquisition' of shares on the date of redemption - conversion of Global Depository Receipts (GDRs). - Held that:- the average market price adopted as the "prevailing price" on the date of conversion of GDRs into equity shares as the 'cost of acquisition' is reasonable and justifiable in the absence of any other circular/Rule vis-à-vis Scheme under which GDRs are issued and redeemed into ordinary shares of the company - Decided against Assessee.
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2013 (11) TMI 355
Transfer Pricing Adjustment - Reference to Transfer Pricing Officer - Power of AO - Held that:- for Assessment Year 2006-07, the aggregate of international transactions was below Rs.15 Crores; - In this view of the matter, the Assessing Officer was not mandatorily required to make a reference to the TPO under section 92CA of the Act. - there is no infirmity in the action of the Assessing Officer in determining the ALP of the international transactions and making the Transfer Pricing adjustment of Rs.5,77,02,222; as it is in conformity with the jurisdiction conferred on him by the provisions of section 92C of the Act. - Decided against the assessee. Payment of cross charges of ex-pat costs and contractor charges - claimed as reimbursement to the parent company - Whether or not the expenses incurred by the parent company, Nike Inc., USA can be attributed solely and totally to the business of distribution undertaken by the assessee - Held that:- (i) the nature of these expenses are such that they cannot be attributed to have been solely and exclusively for the distribution business of the assessee; - - (ii) the claim of the assessee that it had derived tangible benefit from the expenditure has not been substantiated with evidence. - (iii) there is no evidence or likelihood of any independent entity dealing in similar circumstances bearing such expenditure. - T.P. Adjustments made by the lower authorities sustained. - Decided against the assessee.
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Customs
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2013 (11) TMI 394
Penalty u/s 114(i) and 114AA - confiscation of an export consignment which was declared in the relevant shipping bill as Bentonite powder but eventually found to be Muriate of Potash - Held that:- in the case pertaining to 125 MTs of the offending goods, the original authority dropped the proposal for penalty under Section 114AA of the Act, which was not reviewed by the Department. It further appears that the facts of the case of 125 MTs and those of the case of 100 MTs of identical goods are similar. Therefore, prima facie, no direction for predeposit of any amount towards penalty under Section 114AA of the Act is warranted - stay granted partly.
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2013 (11) TMI 393
Import of Crude Palm Oil - high content of Acid about 10% - applicability of exemption notification 21/2002 cus dated 1.3.2003 - Held that:- The Notification prescribed the acid value of “4 or more” to attract “nil” rate of duty. The Board prescribed maximum acid value of 10 vide Circular No. 40/2001-Cus., dated 13-7-2001. In the case of Cargill India Pvt. Ltd. [2013 (6) TMI 40 - GUJARAT HIGH COURT], the Hon’ble High Court disapproved the Board’s view by observing that the entry in the Notification should not be construed by taking aid of the provisions of Food Adulteration Rules and that the alteration of acid value from “4 or more” to “between 4 & 10” would directly violate the language of the Notification. In the result, the importer in that case received the benefit of the Notification. Like the consignment of CPO imported by Cargill India Pvt. Ltd., the goods imported by the appellant also had acid value above 10. In both the cases, apparently, the goods satisfied the description of Sl. No. 30(II)(A) - stay granted.
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2013 (11) TMI 392
Import of LPG by filing into-bond bill of entry - Valuation of cleared of LPG cleared on ex-bond bill of entry - Smaller quantities were cleared - Waiver of pre depsoit - Held that:- It appears to us that it is not in dispute that, during the material period, duty had to be paid on the LPG ad valorem. If that be so, the assessable value of the goods was liable to be determined and, in the event of short-payment, differential duty was liable to be demanded under Section 28 of the Act. In the instant case, however, there is no reference to transaction value or assessable value in any of the show-cause notices, both of which proceeded to recover duty on the quantity of the liquid cargo imported but not reflected in the ex-bond bills of entry. In other words, the case is one, prima facie, of non-accountal of imported goods and the proper provision of law to be invoked by the Revenue was Section 72 of the Customs Act. The show-cause notices did not invoke this provision of law which was apparently squarely applicable to the facts of this case. In this view of the matter, we are of the view that waiver of pre-deposit and stay of recovery should be allowed in this case even though the assessee also appears to have overlooked the applicable provision of law. Therefore, proceeding on first principles, we grant waiver and stay as prayed for - Decided in favour of assessee.
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2013 (11) TMI 391
Demand of duty - Illegal import - Held that:- Impugned order was passed in terms of the remand order dated 17.11.2008 of the Tribunal - While remanding the matter the Tribunal categorically directed that any issues settled herein shall not be reopened. We find that the Commissioner, without following the direction of the remand order by the Tribunal, has fixed the duty liability on Shri K.N. Parekh, which is prima facie not acceptable. The applicants have already deposited Rs.12.65 lakhs and penalty partly as per the direction of the earlier stay order. In our view, the deposits made by the applicants are sufficient for waiver of predeposit of balance amount of duty and penalty. Accordingly, predeposit of balance amount of duty and penalties is waived and recovery thereof stayed during the pendency of the appeals. All the stay applications are allowed.
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2013 (11) TMI 390
Restoration of appeals - Committee of Disputes – Request for permission to file appellate proceedings was declined by the Committee of Disputes – Held that:- Following the decision in case of Gas Authority of India Ltd that If the contention of the Revenue is accepted, then in all case in which the Committee of Disputes had declined permission to prefer appeal/legal proceedings, during the period from 1994 onwards, can now be reopened. The matters which have been considered and decided by the Committee of Disputes and permission specifically denied cannot be reopened in the manner suggested and submitted. Final Order of this bench dismissing the appeal filed by the PSU shall stand inasmuch as permission to pursue this case was declined by the ‘Committee on Disputes’ and the Committee’s decision has attained finality. The ROA application is therefore rejected.
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2013 (11) TMI 389
Benefit of Notification 21/2002 - Whether co-polymers of vinyl chloride/vinyl acetate would fall under the broad category of polymers of vinyl chloride under heading 3904 and eligible for benefit of Notification No. 21/2002 in Sr. No. 480 - Held that:- Heading 3904 covers, not only PVC not mixed with any other substance but also PVC mixed with other substances. It also contains compounds of PVC and copolymers of PVC such as, vinyl chloride-acetate copolymers, vinylidene chloride polymers, fluro polymers. Thus, all forms of PVC merit classification under Heading 3904. It is also provided in Sub-heading note 1(b) that chemically modified polymers should be classified under sub-heading appropriate to the unmodified polymers. As per Note 6, primary forms has been defined to include liquids and pastes, including dispersions and solutions and blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bulk forms. As per HSN Explanatory note, primary forms may contain other materials such as plasticizers, stabilizers, fillers and colouring matter, chiefly intended to give the finished products special physical properties or other desirable characteristics. From the Encyclopedia of Chemical Technology, copy of which has been submitted by the appellant, it is seen that PVC is chlorinated so that it can be used in high temperature applications such as hot-water piping. Therefore, chlorinated PVC remains under Heading 3904 as primary forms of PVC. Even if it is assumed that by chlorination, PVC has been chemically modified, as per sub-heading Note1b(2), they remain classified under the same heading as appropriate to the unmodified polymers - No reason to classify the products chlorinated PVC in any other heading other than heading 3904. Vide Notification No. 21/2002 in Sr. No.480, the concessional rate of duty of 5% has been prescribed for PVC falling under heading 3904. The said entry covers all forms of PVC. Sr. No. 559 provides the concessional rate of duty of 7.5% on all goods falling under 3901 to 3915 except 3908. When two rates are specified in a notification for a product, the assessee is entitled to the benefit of that exemption, which gives him greater relief regardless to the fact that the notification as general in terms or other notifications is more specific to the goods. Chlorinated PVC merits classification under CTH 3904 and is eligible for the concessional rate of duty of 5% BCD in Sr. No. 480 of Notification NO. 21/2002 - Decided in favour of assessee.
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2013 (11) TMI 388
Penalty under Section 112(b) and Section 114(i) - Export of Muriate of Potash under the guise of Industrial salt - Held that:- Role played by the appellant needs to be gone in detail, which can be done only at the time of final disposal of appeal. At this juncture, we find that the appellant has been indicted for preparing the documents for export and various related documents, mis-declaring Muriate of Potash as industrial salt. Waiver of pre deposit - Held that:- Appellant has not made out a case for complete waiver of the pre-deposit of the penalty imposed under Section 114(i) of Customs Act, 1962 - Stay granted partly.
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2013 (11) TMI 387
Import of brand new vehicle or not - Exemption under notification no. 21/2002 CUS dated 1 March 2002 - Held that:- Whether a vehicle is or is not new is a pure finding of fact. The facts which have been found by the Settlement Commission indicate that the car was in fact a new car which was transshipped from the manufacturer in Italy to the Ferrari dealer in the U.K. who sold the car to a dealer in the U.K. The Respondent purchased the car from the dealer in the U.K. The Settlement Commission has noted that the registration of the car in the U.K. was only to comply with the requirement of the licensing authorities in the U.K. who require registration even for the purposes of exportation. The car was not used in the U.K. The finding that the vehicle was a new motor vehicle is not perverse or contrary to the evidence - Following decision of COMMISSIONER OF CUSTOMS (IMPORT) Versus NOSHIRE MOODY [2012 (5) TMI 386 - BOMBAY HIGH COURT] - Decided in favor of assessee.
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Corporate Laws
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2013 (11) TMI 386
Winding up - unable to pay dues with running accrual of interest - Held that:- On a careful consideration of the contentions put forward by the petitioner and the documents produced on record in this case, it is clear that the contentions of the petitioner with regard to the claim made herein would sustain the principles of law on the subject and therefore, a winding up order can be passed. It is therefore, clear that the petitioner has made out sufficient grounds to order winding up of the respondent Company under Section 433(e) of the Companies Act, 1956 - Court is of the view that the respondent Company is required to be wound up as it has failed to discharge its liabilities and the respondent Company has lost its financial substratum and the Company has incurred liabilities to such an extent that they cannot be fulfilled. Under these circumstances, this Court is of the view that this is a fit case for passing the winding up order and accordingly, the respondent Company is ordered to be wound up under the provisions of the Companies Act, 1956. The Official Liquidator attached to this Court is appointed as the Liquidator of the Company. The official Liquidator attached to this Court as a provisional liquidator was directed by this Court by an order passed in the matter on 02.08.2011 to take custody and possession of the assets and properties of the Company and while taking possession, the Official Liquidator was also directed to take inventory and draw a Panchnama of the assets of the Company and take further necessary action in accordance in law so that properties of the Company can be safeguarded - official Liquidator attached to this Court shall now take necessary action under Section 454 of the Companies Act, 1956 directing the Ex-Directors of the Company to file statement of affairs of the respondent Company as on the date of the winding up - Petition allowed.
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Service Tax
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2013 (11) TMI 404
Consulting Engineers Service – Failed to apply for Registration and pay duty - Extended Period of Limitation - Revenue was of the view that the appellant had provided the taxable service as consulting engineers and received consideration from the service recipients but failed to discharge the service tax liability – Held that:- The debit notes on service indicate that the appellant had collected charges for providing technical services towards supervision, of production indicating that technical consultancy services were provided in respect of production. Relying upon TATA CONSULTANCY SERVICES versus UNION OF INDIA [2001 (4) TMI 1 - HIGH COURT BANGLORE] - In the case of a service provided by consultant engineers, the taxable service is a service provided directly or indirectly in the nature of advice, consultancy or technical assistance in any manner and relating to any disciplines of engineering - whether the service is provided by an individual, a partnership firm or a company is inconsequential and the definition of the expression "consulting engineer" would include a company - The petitioner had rendered taxable service as 'consulting engineer' but failed either to obtain registration, file returns or remit its tax liability – thus, invocation of the extended period of limitation and the order of assessment confirming demand of service tax, interest and penalty are impeccable – Decided against Assessee.
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2013 (11) TMI 403
Interior Decorator Service - Held that:- Following Spandrel Versus Commissioner of Central Excise, Hyderabad [2010 (5) TMI 299 - CESTAT, BANGALORE] - Services rendered by assessee were brought for first time in definition of 'Commercial or Industrial Construction Service' w.e.f. 16.06.2005 – Thus, the activities of assessee during relevant period would not be covered under definition of 'Interior decorator's service' - The activities which had been undertaken in the clarification have been specifically included - This would indicate that prior to 16.6.2005, these were not included in the category of 'interior decorator service' - if the category of services is brought into service tax net from a specific date, such services would not be covered under any other category of services. Any structure or edifice enclosing a space within its walls would come within the scope of building and therefore even a particular floor or unit of a building which encloses a space within its walls and covered with roof would come within the scope of term "building" - if any activity is undertaken in relation to a particular floor or unit of the building, it would certainly amount to activity being undertaken in relation to a building as envisaged in clauses (c) and (d) of Section 65 (25b) of the Finance Act, 1994 - In the definition of taxable service, under section 65 (105) (zzq), the expression used is "in relation to" has been construed to be of widest amplitude – Relying upon Doypack Systems Ltd. Vs. UOI [1988 (2) TMI 61 - SUPREME COURT OF INDIA ]. Difference of opinion - On the issue of classification and taxability, both the members are in agreement - decided against the assessee. - But on the issue of raising demand invoking extended period of limitation and levy of penalty, there is no consent between the two members - matter referred to larger bench on the issue of period of limitation and penalty.
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2013 (11) TMI 402
Service Tax liability on Management, maintenance and repair in respect of Road – Held that:- The Finance Act, 2012 vide Section 97 specifically exempted Service Tax liability with retrospective amendment - Any management, maintenance and repair undertaken during the period 16.06.2005 to 26.07.2009 are exempted from liability to pay Service Tax - the demand raised on the appellant on this issue set aside as the period involved is April, 2005 to February, 2009. Industrial Construction service – Held that:- Most of the construction done by the appellant is in respect of the buildings/hospitals/hostels and educational institutions for the Govt. of Gujarat - The retrospective amendment exempts Service Tax liability on the appellant, the demand of Service Tax liability on the appellant on this ground except, for Service Tax liability if any, that may arise in respect of construction undertaken by the appellant for Gram Hat Vasna, Ahmedabad and Vrajbhumi International School, Anand - there is no evidence to prove that these two constructions are also non-commercial constructions for Government of Gujarat – thus the matter remitted back to reconsider the issue in respect only these two constructions. Business Auxiliary Service – Tax on collection of toll – Held that:- Following Intertoll India Consultants (P.) Ltd. Versus Commissioner of Central Excise, Noida [2011 (5) TMI 257 - CESTAT, NEW DELHI] - Notification No. 13/2004 specifically exempts the service tax liability on such services of collection of duties and taxes levied by Government - the Service Tax liability under the Business Auxiliary Service for toll collection is liable to be set aside – Decided in favour of Assessee.
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2013 (11) TMI 401
Power of adjudicatory authority u/s 80 to waive penalty - Whether financial hardship is a reasonable cause for exercising the powers by the adjudicating authority under Section 80 of the Act – Held that:- The benefit of the Section 80 of the Act cannot be extended to the appellant in as much as they were aware of their responsibility to file the return and deposit the tax in time - Relying upon Inma International Security Academy P. Ltd. versus CCE, Chennai [2005 (11) TMI 1 - CESTAT - Chennai] - the revisionary order passed by the Commissioner to file appeal against the order cannot be faulted with - the appellant could not show that he could not pay the tax on account of bona fide mistakes or under the impression that tax was not payable due to interpretation – thus they could not show that there existed reasonable cause. Commissioner (Appeals) has not quantified the penalty to be paid - He has also not considered Appellant's claims as to whether the appellant was eligible to the benefit of the provisions of Section 73(3) of the Act on the ground that they paid a substantial amount of service tax alongwith interest before issue of show cause notice - order of the lower authorities set aside and the case remitted back to the adjudicating authority to decide the case afresh of the Appellant.
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2013 (11) TMI 400
Banking and Financial services Section 65(12) r.w. Section 65(105)(zm) of the Finance Act, 1994 - Fixed amount charged as lease of equipment - Revenue was of the view that the appellants are providing banking and other financial services which are taxable – Held that:-As per the agreement, the property, always remains the property of the appellants and the same was only loaned for use to their customers - The customers are not entitled to sell or offer for sale, mortgage and pledge the tanks - The Board circular relied upon by the appellants, clarified in respect of the activity covered under banking and financial services - the appellants are not a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern in relation to banking and other financial services – Relying upon CCE, Vadodara-I vs. G.E. India, Industries (P) Ltd. [2008 (7) TMI 29 - CESTAT, AHMEDABAD] - after looking into the terms and conditions of the agreement demand is set aside – Decided in favour of Assessee.
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2013 (11) TMI 399
Commercial and industrial construction services - finishing services such as glazing, plastering, painting, floor and wall tilling, wall covering and wall papering, wood and metal joinery and carpentry etc. – Held that:- The services are held as finishing services and accordingly fall outside the purview of the said notification No. 1/2006 - Decided against the assessee. Assessee contended that they have paid VAT on the materials supplied in rendering the service and the value of the material should be excluded from the total value of the services in view of Notification No. 12/2003 - Held that:- This plea has not been made before the adjudicating authority and accordingly not considered – the principal contractor has categorically stated that they have discharged the service tax against five projects allotted to the present appellant - these facts need verification – The Appellant are directed to deposit amount as pre-deposit – the case remanded back to the adjudicating authority for consideration of their alternate plea of eligibility of Notification No.12/2003 and also the claim that Service Tax paid by their principal contractor – Decided in favour of Assessee.
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2013 (11) TMI 398
Waiver of Pre-deposit - Appellants provide various services – Held that:- In the show cause notice certain figures have been taken from the profit and loss account of the appellants and demands have been made without any segregation of service-wise amounts of services provided for demanding duty – Relying upon United Telecoms Ltd. vs. Commissioner, Service Tax, Hyderabad [2010 (10) TMI 730 - CESTAT, BANGALORE ] - In the absence of proposal in the show cause notice as to the liability of the assessee under the precise provision the demand cannot be held to be sustainable - appellants have made out a prima-facie case regarding non-chargeability of Service Tax Cargo Handling Services within the factory premises of M/s.TCL - Revenue has not brought out any evidence to the effect that man-power by numbers have been provided by the appellants to M/s. TCL to work under the supervision and control of M/s.TCL - The other contentions regarding manufacture of salt by appellants also need deeper considerations which can be done only at the time of final hearing – stay granted.
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2013 (11) TMI 397
Cleaning services for educational institutions – Waiver of Pre-deposit - Whether it is excluded from the scope of cleaning service u/s 65(24b) r.w. Section 65(105)(zzzd) of the Finance Act, 1994 or not – Held that:- The bills indicate that the charges have been made for cleaning work of the premises or the gardening works in the premises - As per Section 65(24b), cleaning services undertaken in respect of non-commercial buildings and premises are not liable to Service tax – similarly services rendered to agriculture, horticulture, animal husbandry or dairying is also excluded from the purview of Service Tax - Prima facie the appellant has made out a case for waiver of pre-deposit - unconditional waiver from pre-deposit of the dues granted – stay granted.
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2013 (11) TMI 396
Works Contract - availing cenvat credit on Inputs while opting for composition scheme - Waiver of Pre-deposit – Revenue was of the view that the contractor opted to pay service tax under Works Contract Service by availing the benefit of Notification No.32/07-ST and iron and steel products were used in the construction and civil construction - Held that:- Prima facie the applicant is liable to pay duty on the construction and civil construction - the contention of learned counsel on the applicability of Notification No.32/07-ST would be looked into at the time of appeal hearing - payment made by the applicant is sufficient for waiver of pre-deposit of balance amount of duty along with interest and penalty – Pre-deposit of balance amount of duty along with interest and penalty waived till the disposal – stay granted.
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2013 (11) TMI 395
Repeated adjournment of the matter reserved by the Tribunal on 26-5-2011 pending for pronouncement - Held that:- While expressing our unhappiness on this state of affairs prevailing in the Tribunal, we request the Tribunal to expedite the hearing of the appeal since it was already heard once and judgment reserved.
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Central Excise
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2013 (11) TMI 407
CENVAT Credit - Interpretation of definition of 'input service' - Whether the appellant, a manufacturer of lead and zinc and ingots, would be eligible for cenvat credit of service tax paid on the services of the man power supply for maintenance of lawn and green belt around the factory - Held that:- expression would cover not only the services which are directly essential for manufacturing operation but would also cover the services which are indirectly essential for manufacturing operation like the services required for compliance with the statutory provisions. Permission given by the Rajasthan State Pollution Control Board to the appellant for operating zinc smelter plant, was subject to the condition of the appellant maintaining 33% of the area as green cover by tree plantation and on their failure to satisfy this condition, the permission granted was liable to be withdrawn. In view this, the service received by the appellant has to be treated as service necessary for compliance with the statutory provisions subject to which the manufacturing activity had been permitted. - Cenvat Credit allowed - decided in favor of assessee.
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2013 (11) TMI 385
SSI Exemption – Clubbing of Clearances of two units - Revenue was of the view that the two appellants were not having independent manufacturing facilities to manufacture the said final products and they had just split the total turnover in the names of the two units and hence they were not eligible independently for exemption under notification 1/93 – Held that:- Neither of the factories had complete equipment for manufacture the final products - It is not a case of one equipment being shared by two units - It is more of case where one set of equipment is grouped into two premises and exemption claimed in the name of the two units - It is also clear that both the units were in effect operated by the same person. - Decided against the assessee. Extended Period of limitation – Held that:- Relying upon Quality Steel Industries Vs. CCE [1984 (7) TMI 270 - CEGAT, NEW DELHI] - Extended period of time cannot be invoked for demanding duty by clubbing the clearances of the two units when relevant facts are known to the department - the demand invoking extended period cannot be sustained – Decided in favour of Petitioner.
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2013 (11) TMI 384
Classification of polished Granite Slabs - Whether it would fall under Chapter 25 or under Chapter 68 – Held that:- Classification of Marble Slabs, even if polished would fall under Chapter 25 - the adjudicating authority’s endeavour to reclassify the products i.e. polished Marble Slabs and polished Granite Slabs under Chapter 68 is incorrect - all the benefits arising out of such classification needs to be extended to the assessee. Duty demand on the polished Sand Stone Tiles and on Khatu Marbles – Held that:- The evidences produced before us categorically points that the said Sand Stone Tiles are cleared for export - The export invoices, bill of lading and various other documents specifically point out that the goods were cleared for export after being inspected by the Range authorities - It is a common knowledge that if the goods cleared for export, Central Excise duty does not arise - demands raised on Sand Stone Tiles and Khatu Marble Tiles set-aside – Decided in favour of Assessee.
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2013 (11) TMI 383
Cenvat credit as per Rule 3 (7)(a) of CE Rules - 100% EOU - Notification No. 23/2003 – Reversal of Cenvat credit - Extended Period of Limitation – Waiver of Pre-deposit - Revenue contended that the appellants are required to reverse the entire credit - Held that:- In terms of Rule 3(7)(a) the appellants are not eligible for availing credit to entire duty paid by the supplier of the goods - The appellants are disputing the demand only on the ground of limitation - Commissioner (Appeals) has examined the issue of time limitation and has held that that extended period is invokable - Prima facie, the appellants do not have a strong case on merit - the appellants directed to deposit the entire duty along with interest upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2013 (11) TMI 382
Cenvat Credit - Classification of Goods – Capital Goods OR Not – Waiver of Pre-deposit - Held that:- The goods involved in the present case are angle, sheet, section, flat and bar - These goods are classifiable under Chapter 72 and 73 of Tariff and therefore find no place in the category of capital goods as per definition in Cenvat Credit Rules, 2004 - the appellants do not have a strong case for complete waiver of pre-deposit –thus the appellant directed to deposit 50% of the duty 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 381
Benefit of Cenvat Credit – Process Manufacture OR Not – Waiver of Pre-deposit - Revenue was of the view that the processes of sliting/pickling undertaken does not amount to manufacture – Held that:- The slited and pickled sheets received by the appellant were duty paid - Rule 3 of cenvat credit rules 2004, allow an assessee to take credit of duty paid on the inputs received by him - The only requirement of law is that the inputs received by an assessee should be duty paid – Relying upon MDS Switchgear Ltd. v. Commissioner of Central Excise & Customs, Aurangabad [2001 (4) TMI 130 - CEGAT, MUMBAI] - manufacturer is entitled to avail the benefit of duty paid by the supplier, manufacturer - the appellant are entitled to avail the benefit of duty paid by them and has very good prima facie case - the condition of pre-deposit of duty and penalty dispensed till the disposal – Stay granted.
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2013 (11) TMI 380
Rebate claim – Non-submission of original and duplicate copy of ARE-1 under Rule 18 of the Central Excise Rules, 2002 r.w Notification No. 19/2004 - The applicant exported Aluminum Bottles and filed a rebate claim under Rule 18 of Central Excise Rules, 2002 – Held that:- In the absence of original/duplicate copy of ARE-1 duly endorsed by customs, the export of same duty paid goods which were cleared on ARE-1 form from factory of manufacture, cannot be established which is fundamental requirement for sanctioning the rebate claim under Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004. This has never been the policy of the Government to allow unintended benefit - distinction between required forms and other declarations of compulsory nature and/or simple technical nature is to be judiciously done - When non-compliance of said requirement leads to any specific/odd consequences then it would be difficult to hold that requirement as non-mandatory - As such there is no force in the plea of the applicant that this lapse should be considered on a procedural lapse of technical nature which is condonable in term of case laws cited by applicant. In J. Yashoda v. Shobha Rani [2007 (4) TMI 11 - SUPREME COURT OF INDIA ] it was held that the photocopies cannot be received as secondary evidence in terms of Section 63 of the Act and they ought not to have been received since the documents in question were admittedly photocopies, there was no possibility of the documents being compared with the originals - non-submission of statutory documents i.e. ARE-1 original and duplicate copy duly endorsed by customs and not following the basic procedure of export goods, cannot be treated as just a minor/technical procedural lapse for the purpose of granting rebate of duty - rebate claim is not admissible if the original and duplicate copy of ARE-1 is not submitted along with rebate claim – there was no infirmity in the order – Decided against assessee.
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2013 (11) TMI 379
Rebate claim – Classification of goods - Combipack - Assessee exported mosquito repellant machine & liquid - Claim was rejected on the ground that the mosquito repellant machine had not undergone any manufacturing activity – Revenue was of the view that the Commissioner (Appeals) has erred in allowing the rebate on that portion of duty paid on export of ‘mosquito repellent machine in terms of Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004 - Held that:- Government finds that the Sr. No. 86, apart from covering other specific articles, also covers generic articles falling under category of all electro-thermic appliances of a kind used for domestic purpose. Relying upon Karamchand Appliances Pvt. Ltd. v. Commissioner of Central Excise, Chandigarh [2013 (4) TMI 79 - CESTAT, NEW DELHI ] - The mosquito repellant machines were treated as electro thermic apparatus by the tribunal - The harmonious reading of tribunal’s judgment with entry of Sr. No. 86, of Appendix-V of Third Schedule, it can be seen that mosquito repellant machine being electro thermic apparatus, will fall under category of product listed under Sr. No. 86 of Appendix-V of Third Schedule –Thus there was force in the contention of the respondent that their goods fall under Sr. No. 86 of Third Schedule - Tribunal held that the goods i.e. combipack are more appropriately classifiable under Chapter Heading 3808.10 which relates to insecticides, etc., and not under Chapter Heading 8516 relating to electric heating apparatus - the combo pack gets specific characteristic as insecticide under 3808 10 - The goods falling under 3808 10 also finds entry as insecticide under Third Schedule – no infirmity in the order – Decided against Revenue.
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2013 (11) TMI 378
Rebate claim – Assessee filed rebate claims by preparing Central Excise invoices and debiting excise duty in their Cenvat credit accounts for export of goods manufactured at their other units - Claims rejected u/s 11B read with Rules 4 and 18 of Central Excise Rules, 2002 and Notification No. 19/2004 - Duty paid from accumulated Cenvat credit for the goods manufactured and exported by other unit cannot treated as duty paid in terms of Central Excise Law – Held that:- The availment and utilization of accumulated Cenvat credit of one unit against payment of duty liability of another unit cannot said to be proper payment of duty - the applicants had option to clear goods without payment of duty under Rule 19 of Central Excise Rules, 2002 instead of Rule 18 of the said Rules - No duty was paid on the exported goods in the factory of their manufacture - The duty said to be paid by applicant at their Neelambur Unit by issuing Central Excise invoice for goods manufactured and exported from other units cannot be treated as duty paid on the exported goods. The fundamental condition for determining admissibility of rebate claim is that duty paid goods are exported out of India - the duty paid nature of goods is not established - Thus rebate claim are not admissible under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004 - the rebate claims are rightly rejected by the lower authorities - Applicant’s Neelambur Unit has not manufactured the goods - thus the payment of duty by debiting their cenvat credit account has become an excess payment which has to be treated as voluntary deposit with Government - There is no authority to retain excess paid amount - excess paid amount may be allowed to be recredited in their Cenvat credit account – Order partially modified – Decided partly in favour of Assessee.
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2013 (11) TMI 377
Rebate claim – Assessee manufactured Nylon copolymer synthetic yarn – Assessee claimed rebate on the goods exported under DEEC scheme following self-sealing procedure - Goods not examined and sealed by the Superintendent of Central Excise as the self-sealing is not permitted - Contravention of Notification 19/2004 issued under Rule 18 of Central Excise Rules, 2002 – Held that:- The procedural requirement of getting goods cleared under DEEC Scheme, examined and sealed by Superintendent, Central Excise is for availing DEEC benefit - substantial benefit of rebate cannot be denied for minor procedural lapses - Since the export of duty paid goods is not in dispute, the rebate claim cannot be denied – Thus the rebate claim is admissible to the applicant under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004 – order set aside – Decided in favour of Assessee.
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2013 (11) TMI 376
Rebate claims – Final product i.e Nylon Fishnet twine exported and exempted under Notification No. 30/2004 – Non-compliance of Procedure prescribed under Rule 18 of Central Exise Rules, 2002 r.w. Notification No. 21/2004 – Assessee claimed the rebate of excise duty paid on excisable goods used in the manufacture of goods exported – Held that:- Benefit of rebate should not be denied on technical grounds – Relying upon UOI v. Suksha International & Nutan Gems & Anr. [1989 (1) TMI 316 - SUPREME COURT ] - Original authority has observed/admitted the payment of duty on raw materials and export of goods manufactured - There are only procedural violation of not following the procedure laid down in Notification No. 21/2004 - Government notes that goods were cleared under ARE-2 form - assessee contended that input-output ratio is as per Standard Input-Output Norm of EXIM Policy - CBEC Manual of Supplementary Instructions, Chapter 8 has clarified that for sake of convenience and transparency, input-output norms under Export-Import policy may be accepted unless there are specific reasons for variation. substantial benefit of rebate should not be denied for procedural infractions - thus input rebate claim is admissible in respect of duty paid on materials used in the manufacture of goods exported, subject to the condition that input-output ratio does not exceed the SION Norms and there are no other reason for variation - The original authority is directed to sanction the said input rebate claim subject to compliance of conditions – Decided in favour of Applicant.
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CST, VAT & Sales Tax
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2013 (11) TMI 405
Non maintenance of stock register - Exemption under second sales - Held that:- the assessee had not maintained any accounts either relating to first sales or second sales, but however, claimed second sales exemption. Even though learned counsel for the assessee made grievance as regards Rs.61,01,040/-, the Assessing Officer admitting only 27% as for second sales exemption, the only course available under the stated circumstances was to take note of the purchase of raw skins from inter-State and local purchase of tanned skins, sale of tanned skins locally and of export. Thus, on an analysis of the facts available, the Joint Commissioner sustained the method of accounting adopted by the Assessing Officer. - There is no violation in the order of the Joint Commissioner in approving the proportion guiding the best of judgment assessment. Keeping of a stock register by the manufacturer is of importance to verify the assessee's account for a quantitative tally of different goods attracting different rates; if such a stock book is not maintained, there being no other material to identify the different goods, it leads to the conclusion that the account books are not reliable or that particulars are not properly verifiable. Thus, we do not find that there is any arbitrariness in fixing second sales exemption based on the formula - Decided against assessee.
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Wealth tax
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2013 (11) TMI 406
Factory land to be covered under the definition of asset u/s 2(ea) of the Wealth tax act – Held that:- Scope of section 2(ea), does not include ‘urban land’ but once the land so held is part of the industrial undertaking or factory it ceases to have the independent character as urban land; it is a part and parcel of the industrial undertaking, factory or business premises as the case may be. The mere fact that a part of land, which is held as factory, is sold by the assesese as a piece of land would not change the character of asset in the hands of the assessee - There may be situations in which a part of factory land may be sold as ‘land’ but as long as it is a part of the factory, it cannot have any other character in the hands of the assessee than factory as such. A vacant piece of land, even if it can be sold as ‘land’ as such, continues to be a business asset as long as vacant land an integral part of factory etc. - Decided against the revenue.
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