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TMI Tax Updates - e-Newsletter
December 12, 2017
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Rate of tax of GST - works contract - case of petitioners is that the contract works for which the agreements were executed prior to 01.07.2017, GST cannot be imposed and 2% VAT alone is applicable - WP disposed of with direction to commissioner - HC
Income Tax
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Disallowance of depreciation - assessee is not entitled for depreciation on the land portion. Hence, bifurcation of the consideration into land and building separately becomes necessary - AT
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Addition on account of interest expense claimed against the interest income - As the interest bearing fund has been advanced by the assessee to the parties to earn interest then in our considered view the interest paid qua to the interest income was very much eligible for deduction u/s 57(iii) of the Act - AT
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Disallowance of incentive payment - test of commercial expediency - there is no cogent basis for making the disallowance on the ground that it is a capital reimbursement and/or not commensurate with the services provided. - AT
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Levy of interest for late deposit of TDS for two months instead of one month - delay of few days - the question of levy of interest for the second month can arise only if the period of time between the date on which tax was deducted and the date on which tax was paid to the Government exceeds one month. - AT
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Estimation of income from the unsold vacant units as income on notional basis - The flats not sold was its stock-in-trade and income arising on its sale is liable to be taxed as business income. - there is no justification in the order of AO for estimating rental income from these vacant flats u/s. 23 which is assessee's stock in trade as at the end of the year. - AT
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There is no dispute that the assessee was liable to tax in UAE by the virtue of incorporation in UAE and therefore, the assessee was covered by definition of “resident of Contracting State” under Article 4(1) of the Indo-UAE Tax Treaty. - AT
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Interest on refundable security deposit from the tenants - interest income earned by the assessee company is chargeable to tax as business income - AT
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Service charges received by the assessee from tenants - Income from house property or business income - service charges received by the company from the tenants is assessable under the head business income - AT
Customs
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Exemptions in respect of gold and silver imported under specified FTP schemes - See Notification as amended
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Effective rate of basic duty of customs under chapters 50 to 63 on textile products - Notification
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Effective rate of basic customs duty on specified varieties of woven fabrics, falling under Chapters 52, 54, 55 and 58 - See Notification as amended
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Goods imported by EOU shall be exempted from IGST and compensation cess leviable thereon upto 31.3.2018 - See Notification as amended
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Import of Gold Strip (Vaddanam) worn on their waist - the ornaments worn on the person cannot be considered as baggage - the goods in question cannot be classified and taxed as Baggage - the impugned goods shall be liable for duty at the tariff rate i.e 15% adv. as was in force at the material time - AT
DGFT
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Application for grant of import licence may only be deposited at the RA's office, after paying the applicable fees - if they do not attach copy of the fee paid, their application will not be processed.
Service Tax
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Commission amount paid to the foreign travel agent - reverse charge mechanism - Since the services were provided and consumed outside India, the appellant will not be liable to Service Tax under reverse charge mechanism in terms of Section 66A of the FA, 1994 - AT
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Health care services or not - There is no legal justification to tax the share of clinical establishment on the ground that they have supported the commerce or business of doctors by providing infrastructure - The service provided by the respondent hospital would merit classification under Health Care Services extended to the patients. - AT
Central Excise
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Manufacture - Printed Chromo Art Paper Rolls - The Chromo Art Paper Rolls remain the same albeit with printing - no new commodity emerges and hence there is no justification to charge Central excise duty on the printed paper Rolls. - AT
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Classification of goods - repacking of product - Parry’s Natural Beta Carotene - Pro 9 Natural Mixed Carotenoids - the goods remain the same and there is not even addition of vitamin during the process of repacking. - There is no justification in reclassifying the product upon repacking - AT
Case Laws:
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GST
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2017 (12) TMI 515
Rate of tax of GST - works contract - case of petitioners is that the contract works for which the agreements were executed prior to 01.07.2017, GST cannot be imposed and 2% VAT alone is applicable - Held that: - since the petitioner's representations are pending, it is to appropriate for the respondents to respond to the same by giving them a reply. The appropriate person, who would be in a position to give reply, is that the Commissioner of Commercial Taxes shall give a reply. Because all other authorities are the department of Highways and National Highways etc., who would not be in a position to specifically address the issue pointed out by the petitioner. There will be a direction to the Commissioner of Commercial Taxes to consider the representations given by the petitioner/Association and pass orders on merits and in accordance with law - petition disposed off.
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2017 (12) TMI 514
Cancellation of the tender in which the petitioner participated - change of tax regime - introduction of GST - Held that: - Since the entire tax regime has undergone change, therefore, the State Government's decision not to act upon the tenders invited with effect from 1.7.2017 to 5.8.2017 cannot be said to be illegal or arbitrary, which may warrant interference of this Court. In pursuance of the offer of the petitioner, letter of acceptance of the contract has not been communicated to the petitioner. Therefore, it is not a case of concluded contract. In the absence of concluded contract, the petitioner cannot claim right to seek grant of contract only on the basis of the offer submitted by the petitioner at one stage. Petition dismissed - decided against petitioner.
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Income Tax
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2017 (12) TMI 535
Addition made on account of share application money u/s 68 - Held that:- Assessee has all necessary evidence right from Foreign Inward Remittance certificate to application filed with Forex department of RBI to justify allotment of equity shares and receipt of share application money from M/s Great Value Company Ltd of Mauritius. Once the initial burden cast upon the assessee to prove the identity, genuineness of transactions and creditworthiness of the parties is established, then it is for the AO to prove otherwise with necessary evidences. In this case, the AO, without bringing any cogent material on record, simply made addition by doubting the transaction only on the basis of higher share premium charged by the assessee to conclude that transaction is not genuine. Therefore, we are of the considered view that there is no reason of whatsoever to make addition towards share application money received from M/s Great Value Company Ltd of Mauritius in the financial year 2006-07 relevant to AY 2007-08, in the impugned assessment year, that too, when the assessee has proved all the three ingredients of section 68. The Ld.AO, except for finding fault with the evidence filed by the assessee and disbelieving the same has not been able to add any evidence or information to come to the conclusion that the assessee has not received share application money from the subscriber. The CIT(A), after considering all the evidences filed by the assessee, has rightly deleted addition made by the AO - Decided against revenue Disallowance of depreciation - assets put to use for less than 180 days as evident as per the note ‘credits for excise duty availed on capital goods purchased - Held that:- On perusal of details filed by the assessee, we find that the assessee has rightly classified assets purchased and put to use for more than 180 days and assets purchased and put to use for less than 180 days. This is further supported by bills. The AO, without appreciating facts, only on the basis of input credits for excise duty claimed in the month of March has come to the conclusion that all assets are purchased and put to use for less than 180 days.. The assessee has filed depreciation chart as per which it has capitalised plant & machinery and other asses of ₹ 13,12,87,037 before 30th September, 2007. There is no evidence to the contrary in the AOs possession that plant & machinery was put to use after 30th September, 2007 except input credit availed in March, 2008 which is not relevant as per section 32 is concerned. The CIT(A), after considering relevant details has rightly deleted addition made by the AO Disallowance of interest u/s 36(1)(iii) and 37(1) - Held that:- In this case, admittedly, the production activity of the assessee has been commenced in the previous year relevant to AY 2007-08. This fact has not been disputed by the revenue. Therefore, we are of the view that there is no reason for the AO to disallow interest paid on term loan by holding that it is in the nature of capital expenditure. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. Disallowance of interest paid on cash credit u/s 43B(e) - Held that:- The provisions of section 43B(e) provides for disallowance of interest on loans or advances if such interest is not paid on or before the due date of furnishing return of income. Further Explantion 3D explains the position of law provided in section 43B(e) so as to clarify the position of interest actually paid or interest converted into loan or advances. In this case, admittedly, the assessee has paid interest on cash credit account which has been debited by the bank on regular intervals. We further notice that such interest has been paid by the assessee on or before due date of furnishing return u/s 139(1) of the Act. Therefore, we are of the considered view that the AO was completely erred in disallowing interest on CC account u/s 43B(e) of the Act. Addition made towards excise duty (PLA) shown as loans and advances - as per AO assessee has not made suitable adjustments towards unutilised Modvat credit for valuation of closing stock - Held that:- No merit in the findings of the AO for the reason that there is nothing on record to indicate that the assessee has not considered unutilised input tax credit for valuation of closing stock. The assessee has furnished a certificate from the auditors to the effect that closing stock has been valued including excise duty. We further notice that amount shown in PLA account is nothing but advance payment of excise duty which has been kept in the loans and advances in the asset side of the balance-sheet. The AO without appreciating the facts made addition to PLA balance on suspicion and surmise without bringing any material on record to show that this represents unutilised Modvat credit which has not been considered for valuation of closing stock. The CIT(A), after considering submissions of the assessee has rightly deleted addition made by the AO. Addition towards excise duty credits in the P&L Account within the meaning of section 145(3) - AO, on the basis of notes to accounts came to the conclusion that excise duty collected is in the nature of receipt accrued to the assessee, but the assessee has failed to recognise it as income - Held that:- We do not find any merit in the findings of the AO for the reason that the assessee has collected excise duty on sales and paid the same to the excise department which is evident from the fact that the assessee has routed its excise duty collected on sales and payment of excise duty through balance-sheet. The assessee, for the purpose of disclosure of accounts in accordance with provisions of section 145(1) shown sales net of excise duty in the P&L Account. The AO misconstrued the facts to make addition towards excise duty collected. Therefore, we are of the considered view that the CIT(A) was right in deleting addition made towards excise duty. TDS u/s 194C - Non deduction of tds on transportation charges paid - addition u/section 40(a)(ia) - Held that:- We find that the CIT(A) has recorded a categorical finding to the effect that the impugned payment is covered by the certificate furnished by the assessee u/s 197 of the Act, for non deduction of tax at source u/s 194C. The AO, without appreciating the facts, simply disallowed transportation charges u/s 40(a)(ia) even though the assessee has furnished valid certificate issued u/s 197 of the Act. We do not find any error in the findings of the CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and reject ground raised by the revenue Addition on reduction in production of pig iron - rejection of books of accounts - Held that:- AO has also overlooked the basic fact that the finished products of the assessee are excisable and no finished goods are removed without payment of excise duty. There is nothing on record to suggest that excise authorities have contemplated any action on so-called suppressed production and there is not an iota of evidence to suggest that the assessee has sold produce of finished goods, outside books of account. In the absence of any incorrectness as to books of account and stock registers, merely on the basis of comparison of production percentage of finished goods addition cannot be made for production loss, despite, the assessee explains the reasons for such production and also filed reconciliation explaining the shortfall. Therefore, we are of the view that the AO was incorrect in making addition towards estimated production loss. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. Disallowance of repairs and maintenance to plant and machinery being capital in nature - expenditure giving enduring benefit to the assessee - Held that:- We are of the considered view that the assessee has not derived any enduring benefit by repairing damaged refractory lines of blast furnace. The assessee only regained its lost production capacity by repairing refractory lines. Therefore, the lower authorities were completely erred in treating the repairs and maintenance to plant and machinery being capital in nature. Hence, we direct the AO to delete addition made towards repairs and maintenance to plant & machinery.
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2017 (12) TMI 534
TDS u/s 194A - non deduction of tds on interest payment - assessee-in-default under section 201(1) - as per assessee TDS is not made as the amount involved is only surrender of interest to these concerns - interest liability calculation under section 201(1A) - Held that:- A.O. has given details at page-4 of the order in which the amount of interest paid and taxed under section 201(1) on interest paid and then interest liability is calculated. No infirmity have been pointed out in the order of the A.O. for calculating the interest liability payable by the assessee under section 201(1A). The assessee also failed to produce any order from the Competent Authority that assessee need not to make any TDS as the payee has paid the advance tax including the impugned transactions in the return of income. It is well settled law that charging of interest is mandatory under section 201(1A) of the I.T. Act. The provision for payment of interest are mandatory and automatic and interest has to be paid from the date on which the tax was chargeable till the date on which tax is actually paid. Even if recipient has paid the tax, for the short fall, the interest shall have to be paid by the assessee. Thus interest in question is chargeable. The assessee has failed to produce any details before the authorities below as well as before the Tribunal to point out any error in the computation of tax liability under section 201(1A) by the A.O. Therefore, in the absence of any evidence on record, in our view, the matter need not be remanded to the A.O. for fresh calculation of interest. - Decided against assessee.
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2017 (12) TMI 533
Addition on account of under invoicing - addition on the basis of email correspondence between the Director Mr. Pradeep Thampi and the customer - Held that:- When the rates charged are competitive with the charges billed to other customers, there cannot be any inference that the books of accounts of the assessee need to be rejected. The rates quoted in the email can by no stretch of imagination be treated as the final bill, the receipt against which has been clandestinely received by the assessee. There is no mention of any incriminating cash, bank balance etc. found which can corroborate this hypothesis of the assessing officer. In the course of survey also it is not the case that Shri Pradeep Thampi had admitted that assessee company has received any clandestine amount. Thus, there is no case that any person had admitted the receipt of differential amount in the course of survey. The email conversation which has been explained to be a quotation, can by no stretch of imagination be treated as conclusive evidence that the assessee company has made under billing and received a sum of ₹ 42,89,213/- which has not been disclosed in the books of accounts. This fact is more accentuated when it is noted that the rates charged are competitive and no case has been made out that it is lower than any rate charged to other customers. Hence in the background of aforesaid discussion, we are of the considered opinion that this addition has been made dehors any cogent material and, hence, the same is not at all sustainable. Accordingly, we reverse the order of the authorities below on this issue and delete the addition in this regard. Disallowance of incentive payment - test of commercial expediency - expenditure wholly and exclusively laid out for the purpose of the business - Held that:- For determining whether the expenditure was wholly and exclusively laid out for the purpose of the business the reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. Hence, torch bearer of the corporate governance mantle donned by the assessing officer is uncalled for and the disallowance is not sustainable on the facts and circumstances of this case. Another reasoning given by the assessing officer is that it is a repayment of capital contribution of ₹ 1 crore, on the basis of the statement of the said director. The ld. Commissioner of Income Tax (Appeals) has correctly held that this cannot be sustained as a capital contribution of Shri Pradip Thampi remains at ₹ 1 crore, at the end of the relevant assessment year. Hence, the view that the payment is reimbursement of capital is wholly unsustainable. Hence, in our considered opinion, there is no justification whatsoever in making the disallowance. Accordingly, in the background of the above discussion and precedent, in our considered opinion, there is no cogent basis for making the disallowance on the ground that it is a capital reimbursement and/or not commensurate with the services provided. Accordingly, we set aside the order's of the authorities below and delete the disallowance. Revenue appeal dismissed.
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2017 (12) TMI 532
Bogus purchases - estimating of profit - Held that:- When the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken by the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) that 12.5% disallowance out of the bogus purchases serves the interest of justice. Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [2013 (1) TMI 88 - BOMBAY HIGH COURT].
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2017 (12) TMI 531
Addition on account of interest expense claimed against the interest income - assessee has earned interest income which was offered to tax under the head “income from other source” - whether the assessee is entitled for claiming the interest expense against the interest income ? - Held that:- It is undisputed fact that the loan was provided to the parties on interest and accordingly interest income was earned. Now the question arises whether the fund used by the assessee in providing loan was interest bearing or not. On perusal of the balance-sheet we find that assessee has been paying interest on the capital contributed by the partners to the firm as well as money borrowed by the firm from the outside. As the interest bearing fund has been advanced by the assessee to the parties to earn interest then in our considered view the interest paid qua to the interest income was very much eligible for deduction u/s 57(iii) of the Act. From the above precedent, we hold that assessee is very much entitled to claim the expense incurred in the form of interest against the impugned interest income. Computation of interest expense qua to the interest income - Held that:- We find that the assessee has adopted the manner for making the disallowance of interest expense as provided under Rule 8D of I.T. Rules, 1962. Though prima facie we disagreed to the basis adopted by the assessee for claiming the interest expense qua the interest income. However, Ld DR before us has not brought any defect in the manner in which interest expense was worked out against the interest income as adopted by assessee. Therefore, we are not inclined to adjudicate the same. In view of the above, we hold that is entitled to claim the interest expense against the interest income. We respectfully following the consistent view of the Tribunal decline to interfere with the order passed by the Ld. CIT(A) on this account and accordingly the ground taken by the Revenue is regretted.
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2017 (12) TMI 530
Disallowance of depreciation - bifurcation of the total consideration towards land and building separately in view of fact that the assessee is not entitled for depreciation on land portion - Held that:- As relying on case ITO Ward-7 (3) , P-7, Kolkata Versus M/s Shree Banke Behari Enterprises Pvt. Ltd [2016 (10) TMI 582 - ITAT KOLKATA] we deem it fit and appropriate to remand this issue to the file of the Ld. AO with direction to the assessee to furnish the evidence in support of bifurcation of consideration towards land and building. We agreed with the fact that the assessee is not entitled for depreciation on the land portion. Hence, bifurcation of the consideration into land and building separately becomes necessary, for which purpose we are remanding this issue to the file of Ld. AO. Accordingly, ground no. 1 raised by the assessee is allowed for statistical purposes. TDS u/s 194C - Disallowance made u/s 40a(ia) - Crossword Book Reward Programme Card printing charges - Held that:- DR fairly agreed for setting aside this issue to the file of the Ld. AO. Accordingly, we remand this issue to the file of the Ld. AO to decide the same in the light of the second proviso to section 40a(ia) of the Act and in the light of decision rendered by the Hon’ble Delhi High Court in the case of Ansal Land Mark Township Pvt. Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] - Ground no. 2 raised by the assessee is allowed for statistical purposes.
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2017 (12) TMI 529
Determination of nature of income derived on sale of land - profit on sale of land to be assessed as business income or under the head capital gain - Held that:- The only reason adopted by the Revenue for treating all these persons as traders was that they have earned profit on sale of their land which is more than 800 times than ordinary profit in this year. In our opinion, it is one of the corroborative factors amongst other. This transaction might be boon because of their geographical location of the land near to power plant. It was not a case that they have anticipated many fold rise of agriculture land price, and therefore, ventured into trade. Apart from the above, the ld.CIT(A) has observed that land was not used for agriculture purpose. This observation was made without any foundation and by merely referring the case of Shri Amitabh Bachhan. It is pertinent to mention that in the land revenue record it was mentioned as agriculture land. The record is per se admissible in evidence. It can be rebutted but by producing evidence and not by general remarks that Shri Amitabh Bacchan was also stated to be farmer. There should be spot inquiry. Presumption of truth is in favour of the record maintained by State revenue official in their official function. Thus, land is to be treated as agriculture land. Therefore, we allow the appeal of the assessee. We direct the AO to treat the profit earned by the assessee on sale of agriculture land as exempt under section 2(14) of the Income Tax Act, 1961. - Decided in favour of assessee.
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2017 (12) TMI 528
Non deduction of tds - addition u/s 40(a)(ia) - Held that:- Now it has been settled that if the recipients have accounted the receipts, which have been disallowed in the hands of the payer on account of non-deduction of tax, and the same has been included in their taxable income, then no disallowance is to be made in the hands of the payer. Considering this aspect, set aside this issue to the file of the Assessing Officer for verification. The assessee shall provide the complete details of recipients and the ld. Assessing Officer shall call for information from the recipients, i.e. ABN Amro, Bajaj Capital and Reliance Capital as to whether they have included this amount in their taxable income or not. If the receipts are accounted in their taxable income, then no disallowance is to be made in the hands of the assessee. This ground of appeal is allowed for statistical purposes. Disallowance of travelling expenses - Held that:- As gone through the record carefully. The assessee has submitted that he took a honeymoon package from PCFL Travel House. According to the assessee, it was only for the namesake “Honeymoon Package”, but he did not go for honeymoon, because his marriage was taken place long back. However, after considering the record, find that the assessee failed to bring any evidence on record demonstrating that the expenditure was incurred wholly and exclusively for the purpose of business. Learned CIT(A) has rightly confirmed the disallowance Low household withdrawal shown by the assessee - Held that:- No error in the order of the ld. CIT(A). A person who can afford a foreign trip for honeymoon, it is highly improbable that his household expenditure should be only ₹ 5,000/- per month in AY 2011-12. Considering the status and nature of business carried out by the assessee, the estimation of the household expenses at the end of the assessee is quite on the lower side. Therefore, this ground of appeal of the assessee is rejected. Addition u/s 37 - expenditures incurred through credit cards - Held that:- When these expenditures are considered in the light of other disallowances made by the Assessing Officer, i.e., estimated household expenditure and foreign travel expenditure etc., then it would reveal that instead of making addition under each item, the ld. Assessing Officer ought to have adopted a uniform policy for making an ad-hoc disallowance. He should not have identified each item, i.e. credit card expenditure, household expenditure, etc., because all these expenditures will be taken care of by ad-hoc disallowance of ₹ 6,00,000/- as this disallowance has been worked out at half percentage of the total turnover. Therefore, once estimated ad-hoc addition on account of low household withdrawal has been made and estimated, ad-hoc disallowances out of business expenditure have been made, then this credit card expenditure ought not to be made. Therefore, part addition confirmed, because the assessee could not submit supporting details showing that the expenditures were exclusively incurred for the purpose of business.
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2017 (12) TMI 527
Deemed dividend u/s 2(22)(e) - Held that:- We are of the view that section 2(22)(e) was not applicable in the case of the assessee company, as it was holding only 1.7% of the voting power in the lending company M/s Mega Resources Ltd. We note that the AO has erred in law as well as on facts in considering the share holding of the subsidiary company for computing the voting power of the assessee, therefore we are of the view that the AO has misconstrued the provisions of section 2(22)(e) of the Act. The requirement of section 2(22)(e) is that the assessee should be holding not less than 10% voting power. The provisions of section 2(22)(e) is applicable only to a person who is the beneficial holder of shares having not less than 10% of the voting power. But, in the assessee`s case under consideration, we find that the assessee is not holding shares in excess of the prescribed limit and consequently, the provisions of section 2(22)(e) are not applicable. Addition u/s 36(i)(va) r.W.S. 2(24)(x) in respect of employee’s contribution to PF/ESI for an amount of ₹ 1,32,86,580/- - Held that:- Based on the provisions of section 43B(a) of the Act, it is abundantly clear that employer`s contribution to provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, is allowable on actual payment basis. We note that the Assessing Officer had made the addition on account of employee’s contribution, which is factually incorrect. However, the material on record suggests that the same is related to the employer’s contribution which was allowable u/s 43B. Therefore, considering the factual position, as explained above, we do not find any infirmity in the order of CIT(A), therefore, we confirm the order of CIT(A). Addition made on account of gratuity liability - Held that:- The coordinate Bench Kolkata in assessee’s own case allowed the claim of the assessee, holding that the liability for gratuity in respect of those employees who had retired during the year is allowable u/s 40A(7)(b), even if no provision for the same had been made in the accounts. Respectfully, following the judgment of Jurisdictional ITAT, Kolkata in assessee own case, we are of the view that the order passed by the ld. CIT(A) does not contain any infirmity. Therefore, we confirm the order passed by the ld. CIT(A). Addition u/s 14A r.w.r. 8D - Held that:- We are of the view that considering the judgment of jurisdictional ITAT ‘A’ Bench, Kolkata in the case of REI Agro Ltd. [2013 (9) TMI 156 - ITAT KOLKATA] wherein it was held that the disallowance under rule 8D (2)(iii) should be restricted to 0.5 % of only those investments which yielded tax free income, during the relevant previous year. Therefore, following the judgment of the Jurisdictional ITAT (supra), we direct the Assessing Officer to compute disallowance under Rule 8D(2)(iii) by restricting to those investments that have yielded tax free dividend income during the year.The CIT(A) has already directed the Assessing Officer to compute the disallowance under rule 8D (2)(iii), by considering only those investments that have yielded tax free dividend income during the year, therefore, we are of the view that order of CIT(A) does not contain any infirmity and hence we confirm the order passed by CIT(A).
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2017 (12) TMI 526
Unexplained cash credit on account of unexplained money u/s 69A - Held that:- We are of the view that certified copies of the sale deeds provided by the Additional District Sub-Registrar, Khanna are acceptable documents and since the said official had obtained photo identities of the parties (buyer and seller of land), hence, there remains no doubt about the existence of the buyers and sellers. We also note that cash deposit in the bank to the extent of ₹ 4,25,000/- is claimed to be the amount received from the cultivation of the land during 2005-2008, prior to its sale. The AO did not bring any cogent evidence to disprove the same. We note that AO had raised a controversy about the receipt of the money from the assessee by his father. The assessee’s father has categorically stated in his affidavit that he has received the amount. In respect of non-filing of return by the assessee’s father for the A.Y 2009-10, we are of the view that this cannot result in any taxation in the assessee’s hand because sale was agricultural land and does not attract capital gain tax. Therefore, based on the factual position, the addition of ₹ 54,20,000/- made by the AO has been rightly deleted by CIT(A). Hence, we do not find any infirmity in the order passed by the ld. CIT(A) and therefore, we confirm the order passed by the ld. CIT(A). Regarding the addition of ₹ 14,00,000/-, we are of the view that assessee during the assessment proceedings had provided to the AO a copy of the sale bill in respect of the household articles of his father. The AO did not bring on record and cogent evidence to prove that sale bills of household articles are bogus. Based on the factual position, we are of the view that order passed by the CIT(A) does not contain any infirmity. Therefore, we confirm the order passed by the ld. CIT(A). - Decided against revenue Addition under the head of unexplained expenditure - Held that:- AO during the assessment proceedings made his own estimate of what the assessee would have spent but we observe that the assessee had been supported by his son and his father was getting tax free pension which was sufficient to meet the family expenses. Therefore, considering the factual position, we are of the view that the order passed by the CIT(A) does not contain any infirmity. Therefore, we confirm the order passed by the CIT(A). Addition under the head concealed income earned from security charges - Held that:- If the security service charges of ₹ 1,62,536/- shown in the profit and loss account were increased by ₹ 71,937/-, the payment made to security personnel shown as expenditure in the profit and loss account would also have to be increased by the like amount. The AO, however, treated the sum of ₹ 71,937/- as concealed income ignoring the explanation that the amount paid to security personnel had to be increased by the like amount and consequential there would be no effect on the income. We note from the remand report that the AO has not controvert the fact that payment of ₹ 71,937/- to security personnel was debited to the security service charges received account resulting in netting off of the receipts to that extent. Therefore, the assessee’s explanation that if the security charges received were to be increased by ₹ 71,937/- to ₹ 2,34,473/-, the payment made to security personnel of ₹ 65,364/- was also required to be correspondingly increased by ₹ 71,937/- with no effect on the taxable income is quite acceptable and therefore, we confirm the order passed by CIT(A).
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2017 (12) TMI 525
Profit on sale of land - adventure in the nature of trade - purchase of agriculture land anticipating the sale at much higher rate- assessed as business income or under the head capital gain - Held that:- The AO has neither recorded statement of any person from CGPL nor recorded when CGPL has started its power plant; how it has expressed its desire to acquire further land for its residential colony. Whether a person of having background like the assessee could have chance to inter-act with CGPL officials and only thereafter purchase land. All these factors are totally missing on record. Department has started inquiry only when huge claim was made by local persons of the area for exemption of capital gain. The only reason adopted by the Revenue for treating all these persons as traders was that they have earned profit on sale of their land which is more than 800 times than ordinary profit in this year. In our opinion, it is one of the corroborative factors amongst other. These transactions were boon because of their geographical location of the land near to CGPL. It was not a case that they have anticipated many fold rise of agriculture land price, and therefore, ventured into trade. Therefore, we allow the appeal of the assessee and rejected appeal of the Revenue. We direct the AO to treat the profit earned by the assessee on sale of agriculture land as exempt under section 2(14) of the Income Tax Act, 1961. - Decided against revenue
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2017 (12) TMI 524
Profit on sale of land - nature of land - gain realized on sale of such land was claimed exempt u/s.2(14) - Business income or capital gain - Held that:- Merely if an assessee is getting a higher volume of sale consideration, then it could not be construed that transaction would take colour of a business transaction. The assessee is basically an agriculturist; purchases land at a distance of more than 20 kms. away from municipality and close to his native village. After sale of this land, he has again purchases agriculture land. He has not entered into any sale/purchase of land in earlier period of time or in subsequent period of time. He has not borrowed money for purchase of land and incurred interest expenditure. There might be reasons for all of a sudden spurt in the price of land in the area. There could be change of policy of Government level; introduction of some project, but that type of change in the policy, whether, was in the notice of the assessee. No such factors have been brought on record by the AO. It is also pertinent to observe that whether the assessee could anticipate such substantial increase in the sale price of the land because of any policy introduced by the Government, no such factors have been brought on record. Facts are to be view keeping in view perspective the assessee, i.e. from where he belongs; whether he has ventured in any trading activities of similar nature; his educational background etc. Even the entire transaction is being looked into with that angle, then it would reveal that he has not traded in the land, rather it was a simplicitor investment for agriculture operation, but on account of getting good price land has been sold, and higher volume of land purchased at different places. Every agriculturist would like to enhance his land holding, if similar type of sale of land can result into a price, which can enable him to buy higher volume of other agriculture land. In view of the above discussion, we allow appeal of the assessee and direct the AO to treat the assessee as an investor in the agriculture land. Entire land sold to be treated as agriculture land and gain on sale of this land is beyond the purview of the capital gain under section 2(14) - Decided against revenue
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2017 (12) TMI 523
TDS u/s 194A - time limit for depositing the tax deducted at source under section 194A - Interest demand under section 201(1A) - interest for delay in depositing the tax at source, for a period of two months - Held that:- In the case before us, the TDS is deposited on 8th of October 2014. There is thus clearly delay in depositing tax at source. Learned counsel does not even dispute that. All that he prays for is that the levy of interest should be reduced to actual period of delay in depositing the tax at source, i.e. from the date on which tax was deducted and till the date on which tax was deposited. It is only if such a period exceeds one month, then the question of levy of interest will arise. However, what has been done in the present case is that the interest has been charged for two calendar months, i.e. September and October. This plea of the assessee indeed meets our approval in the sense that the question of levy of interest for the second month can arise only if the period of time between the date on which tax was deducted and the date on which tax was paid to the Government exceeds one month. We, therefore, direct the Assessing Officer to recompute the levy of interest under section 201(1A) accordingly.
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2017 (12) TMI 522
Addition on account of rent paid - assessee availed the premises belonging to a relative of Chairman of assessee - Held that:- We find that at the time of initial operations, the registered office of the assessee was not ready to conduct the business operations of the assessee as because the requisite infrastructure and facilities were not available at the said office. Therefore, the assessee availed the premises belonging to a relative of Chairman of assessee temporarily on rent basis in support of which the ld. AR brought on record the minutes of the Board meeting in accepting the proposal made by the Chairman. Admittedly, this document was not there before the AO and CIT(A) and it is seen from the order of AO and CIT(A) that for non-submission of any evidence to that effect that disallowance amount was confirmed by the CIT(A). Therefore, in view of the same, we deem it proper to remand the issue to the file of AO for his verification on an examination of the supporting document filed during the course of second appellate proceedings before us. Disallowances made on account of transportation & labour charges and loading & unloading charges of godown and wreck - addition of said amount only on the impression that the assessee has shown the payments aggregating single figure incurred towards the loading and unloading charges and it is very difficult to give details of numerous parties to whom the payments were made below ₹ 50,000/- - Held that:- The said amount was shown in the accounts and was claimed in the assessment proceedings as an aggregating amount to simplify the information. In our opinion, as contended by the ld. AR that there was no opportunity for the assessee to produce the numerous details, payments attracting below ₹ 50,000/-. We find that the total income of the assessee is ₹ 1,21,84,444/- and there was no adverse remark in respect of 80% of total payments or books of accounts, taking into consideration the same disallowance on the basis of estimatation is not permissible. Thus, the additions made on account of loading and unloading charges are liable to be deleted. Thus, the Ground raised by the assessee is allowed
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2017 (12) TMI 521
Service charges received by the assessee from tenants - whether are not an integral part of the rental income and the same are assassable under the head “business income” instead of “income from house property” - Held that:- The assessee in the present case, on the other hand, has charged rent and service charges separately and it is not a case of receipt of rent for furniture and fixture provided in the property simplicitor but the case of receipt of service charges from the activity of rendering various services that was carried on in the continuous and organized manner. As rightly held by the Ld. CIT(A), the decision of Hon’ble Apex Court in the case of Karnani Pvt. Ltd. (1971 (8) TMI 18 - SUPREME Court) and Attukal Shopping Complex (P) Ltd. (2002 (10) TMI 80 - KERALA High Court) thus is clearly applicable to the facts of the present case and we find no infirmity in the impugned order of the Ld. CIT(A) holding that the service charges received by the company from the tenants is assessable under the head business income by relying on the said decision. The same is therefore upheld dismissing ground no 1 of revenue’s appeal. Interest on fixed deposit is to be assessed in the hands of the assessee under the head “business income” instead of “income from other sources” - Held that:- The assessee company had collected the refundable security deposit from the tenants in order to cater to this requirement and the amount of such deposits partly was deposited in bank to earn interest. Such interest earned by the assessee company was a source, in addition to the service charges levied, to meet the expenses involved in rendering of services and amenities to tenants. The interest income earned by the assessee company thus was inextricably linked with the business of the assessee company of providing services and amenities to the tenants and as rightly noted by the Ld. CIT(A) in his impugned order, the activity of rendering services had resulted into profit only because of interest income earned by the assessee company. Having regard to all these facts of the case, we are of the view that the interest income earned by the assessee company is chargeable to tax as business income as rightly held by the Ld. CIT(A). and not as “income from other sources”. Rental income received by the assessee company from its subsidiary company - whether be assessed on actual basis instead of considering the fair rent as provided under section 23 - Held that:- As regards the allegation made by the A.O. that no rent was being charged by the assessee company to its sister concern M/s. KCT to avoid tax, the Ld. CIT(A) has found the same to be baseless and incorrect after having noted that the said sister concern had declared income running into crores and was assessed to tax at maximum marginal rate. Keeping in view all these observations and findings recorded by the Ld. CIT(A), which have remained uncontroverted by the learned DR, we find no infirmity in the impugned order of the Ld. CIT(A) deleting the addition of ₹ 1,61,52,877/- made by the A.O. on account of the deemed rent allegedly receivable by the assessee company from its tenant namely KCT and upholding the same, we dismiss ground of revenue Addition on account of notional interest earned by the assessee on refundable security deposit taken from the tenants - Held that:- Addition made by the A.O. to the total income of the assessee under the head income from house property on account of notional interest on security deposits received from tenants was not sustainable and the Ld. CIT(A) is fully justified in deleting the same. See CIT vs Satya Co. Ltd. [1993 (8) TMI 293 - CALCUTTA HIGH COURT] Computation of disallowance under section 14A of the Act r.w.r. 8D by taking into consideration only the dividend yielding investment - Held that:- This issue is squarely covered in favour of the assessee by the decision of Hon’ble Kolkata High Court in the case of REI Agro Ltd. [2014 (4) TMI 713 - CALCUTTA HIGH COURT] wherein it was held that only the investment which yield dividend during the relevant previous year that has to be considered while adopting the average value of investment for the purpose of computing disallowance to be made under section 14A as per the Rule 8D(2)(ii) & (iii) of the rules.
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2017 (12) TMI 520
Entitlement to treaty protection by an entity based on UAE - whether assessee covered by definition of “resident of Contracting State” under Article 4(1) of the Indo-UAE Tax Treaty - Held that:- In order to invoke Article 29, what is to be established is that if the assessee company was not to be formed in the UAE, the assessee would not have been entitled for such benefits. We have noted that the entire share capital of the assessee company is held by German entities by the name of Martrade Shipping + Transport GMBH and C.R. Consulting & Holding GMBH, but then, in the Indo-German DTAA also similar treaty protection with regard to taxability of shipping profits only in the state of residents are available. Therefore, whether the company was to be formed in UAE or in Germany, it would not have any material difference so far as non-taxability of said income in India is concerned. As corollary to this legal position, merely because the company is set up in UAE and not in the country to which the capital belongs, the assessee does not get any benefits of the Indo-UAE agreement which would have been otherwise available. The requirement necessary for invoking Article 29 is thus not fulfilled in the present case. Following the co-ordinate bench decision in the case of MUR Shipping DMC Co. (2015 (10) TMI 2374 - ITAT RAJKOT ), we reject the grievances of the Assessing Officer on this count also. As regards the wordings of the Tax Residency Certificate, based on which the Assessing Officer has concluded that the company was formed only for the purpose of availing Indo-UAE tax treaty benefits, we may mention that neither the inference of the Assessing Officer is based on any legally sustainable material or even common sense, nor this Tax Residency Certificate is relevant in any way. There is no dispute that the assessee was liable to tax in UAE by the virtue of incorporation in UAE and therefore, the assessee was covered by definition of “resident of Contracting State” under Article 4(1) of the Indo-UAE Tax Treaty.
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2017 (12) TMI 519
Estimation of income from the unsold vacant units as income on notional basis - Held that:- As relying on case of C.R. Developments Pvt. Ltd. [2015 (5) TMI 1161 - ITAT MUMBAI] relying on the case of M/s Chennai Properties Investments Ltd. Vs. CIT (2015 (5) TMI 46 - SUPREME COURT) held that where assessee company engaged in the activity of letting out properties and the rental income received was shown as business income, the action of AO treating the rental income as income from house property in place of income from business shown by the assessee was held to be not justified. On the very same analogy in the instant case, assessee is engaged in business of construction and development, which is main object of the assessee company. The three flats which could not be sold at the end of the year was shown as stock-in-trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by letting out the flats. The flats not sold was its stock-in-trade and income arising on its sale is liable to be taxed as business income. Accordingly, we do not find any justification in the order of AO for estimating rental income from these vacant flats u/s.23 which is assessee's stock in trade as at the end of the year. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23 of the I.T.Act - Decided in favour of assessee.
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2017 (12) TMI 518
Penalty u/s. 271(1)(c) - proof of mens rea or guilty mind - claim of provision u/s 36(1)(viia) - Held that:- In view of the order passed by the ITAT in the assessee’s own case, we are of the view that the penalty is not leviable. Moreover, it is not a case of furnishing the inaccurate particulars of income and concealment of particulars of income because we also noticed that the case of the assessee is in connection with the raising of the claim in view of the provision u/s 36(1)(viia) of the Act which has been declined therefore, no penalty is leviable in view of the law settled in CIT Vs. Reliance Petro Product [2010 (3) TMI 80 - SUPREME COURT] in view of the above discussion it is quite clear that the no penalty is liable therefore, we set aside the finding of the CIT(A) on this issue and delete the penalty. - Decided in favour of assesee.
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2017 (12) TMI 517
Validity of assessment u/s 143(3) - no issue of notice - scope of the provisions of section 153A - curbale defect u/s 292BB - Held that:- There was no notice issued u/s 143(2) prior to the completion of assessment under section 143(3) of the Act by the AO; that the year under consideration was beyond the scope of the provisions of section 153A of the Act, it being the search year and not covered in the six year to the year of search as per the assessment scheme/procedure defined u/s 153A; that the AO has passed regular assessment u/s 143(3) of the Act; although the ld CIT has mentioned the section as 143 r.w.s 153A and that the department had not controverted these facts at the stage of hearing. It is noted that issue of notice u/s 143(2) for completion of regular assessment in the case of the assessee was a statutory requirement as per the provisions of the Act and non-issuance thereof is not a curable defect. Even in case of block assessment u/s 158BC, it has been so held by the Apex court in the case of ‘Hotel Blue Moon’ (2010 (2) TMI 1 - SUPREME COURT OF INDIA). The assessment order is passes without issue of notice u/s 143(3) of the Act and this defect cannot be cured by taking recourse to the provisions of section 292BB of the Act. Thus AO had no valid jurisdiction to pass the assessment order and the very foundation of the assessment proceedings is bad in law. - Decided in favour of assessee.
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2017 (12) TMI 516
Penalty u/s 271(1)(c) - defective notice - failure to specify the specific charge in the notice u/s 274 - Held that:- We have perused the copy of show-cause notice u/s 274 r.w.s. 271(1)(c) of the Act dated 19.01.2011. The said notice does not contain the reference about the specific charge if it was issued for concealment of particulars of income or for furnishing inaccurate particulars. We find force in the submissions of ld. AR for the assessee, that the notice does not contain any reference about the specific charge, if the same was issued for concealment of income or furnishing inaccurate particulars. See CIT vs. Samson Perinchary (2017 (1) TMI 1292 - BOMBAY HIGH COURT) - Decided in favour of assessee.
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2017 (12) TMI 477
Amount received by way of exemption of sales tax payments - trading receipt OR capital receipt hence not liable to tax? - HC [2017 (7) TMI 501 - DELHI HIGH COURT] held that the absence of any condition towards capital utilization meant that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialization of the state, ensuring greater employment. Clearly, the subsidy was revenue in nature - Held that:- Issue notice. In the meantime, the operation of the impugned judgment shall remain stayed.
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Customs
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2017 (12) TMI 513
Smuggling - Gold Strip (Vaddanam) worn on their waist - It was alleged that the Appellants attempted to smuggle the same and thus the impugned goods are liable for confiscation - Baggage Rules - Held that: - the Appellants were wearing the gold strips i.e Vaddanam on their waist and the same was not carried by them in their baggage. However the same was not disclosed to the officers and after enquiry by the officers the same was revealed to the officers - The adjudicating authority in his findings has held that the Gold strip was only covered by the Appellants for safety purposes and has not concealed them ingeniously with an intention to escape detection by the customs authorities and the same may not have been declared to the department may be due to ignorance of law - the Appellant did not intend to smuggle the goods. Applicability of baggage rules - rate of duty - Held that: - the Hon’ble High Court of Kerala in case of VIGNESWARAN SETHURAMAN Vs. UNION OF INDIA [2014 (12) TMI 268 - KERALA HIGH COURT] held that the ornaments worn on the person cannot be considered as baggage - the goods in question cannot be classified and taxed as Baggage - the impugned goods shall be liable for duty at the tariff rate i.e 15% adv. as was in force at the material time. Redemption fine - penalty - Held that: - the intention to evade duty was absent in the present case - the Appellant be charged with reduced amount of redemption fine and penalty u/s 112 (a) - penalty u/s 114AA set aside. Appeal allowed in part.
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2017 (12) TMI 512
100% EOU - Conversion of shipping bills - free-shipping bill into DEPB shipping bill - Held that: - conversion of free shipping bill into DEPB shipping bills, through amendment as provided under Sec. 149 of CA,1962, is inadmissible and has been rightly rejected by the authorities below - reliance placed in the case of Arise Exports, Trident Creation Versus C.C., Ahmedabad [2017 (8) TMI 145 - CESTAT AHMEDABAD] - appeal dismissed - decided against appellant.
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2017 (12) TMI 511
Benefit of N/N. 4/2006 - Classification of imported goods - Polished Marble Slabs - classified under CTH 68 02 2110 or under CTH 680221 90? - Held that: - the notification mentions only 6802 2110 and does not mention 6802 2190 - vide Circular No. DOF. No. 334/03/2012-TRU, dated 16.03.2012 the Board has clarified that "Polished Marble Slabs are classifiable under CTH 6802 2190 and the benefit of Notification No.4/2006-CE, dated 01.03.2006 is available to "Polished Marble Slabs. - The Hon'ble Apex Court in the case of M/s. Suchitra Components Ltd. [2007 (1) TMI 4 - SUPREME COURT OF INDIA] has held that beneficial Circular is to applied retrospectively. Benefit of notification allowed - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (12) TMI 510
Directions for strict enforcement of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 by every company transferring shares to the second respondent (the Investor Education and Protection Fund) and ensure that officials transferring the shares are made responsible for due certification of compliance with the Rules - Held that:- What is clear is that the combined effect of the first and second amendments to the Rules, results in companies becoming aware adequately in advance of their obligations, especially towards notifying the shareholders about the transfer. This appears to be the main grievance of the petitioner. So far as the other aspect highlighted with regard to the non-publication of list of shareholders goes, this Court is of the opinion that without any details or reference to form etc. in this regard, it would be next to impossible to return a finding. These are causes that cannot and ought not to be gone into in public interest proceedings. To summarize, the Court holds that Section 124(6) does not result in a statutory vesting of any property; it merely transfers through transmission of shares in companies which have yielded dividends for seven years that have not been claimed. Such shares are then transferred to the Fund which then holds them as a custodian – in whichever manner one would wish to say it. The Central Government further is mandated to devise appropriate procedures to enable shareholders to reclaim their property in the shares, by an appropriate procedure. For the duration of transfer of the shares, the companies cannot issue bonus shares or add anything prohibited under Section 126. As far as the operationalisation of this provision goes, the Rules, especially the first and second amendments had the effect of giving companies adequate time to notify and comply with the three month public notice period to their shareholders about the event of transfer. The Court also notices that the transfer of such shares or classes of shares is not a one-time measure but an ongoing event given the obligation of each company to identity such shares after the holding of every AGM. It is imperative that the Central Government gives publicity to the transfer of shares, by virtue of the provisions (not of individual companies) to inform the public, and ensures a simple as well as compact form with attendant procedure is notified, for reclaiming them.
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Service Tax
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2017 (12) TMI 509
Business Support Services - collection charges/facilitation fee - sharing of infrastructure with the doctors - Doctors are provided space in the hospitals with required facilities to attend to the patients coming to the hospitals, run by the appellants. These doctors engaged on contract basis are paid professional fee in terms of the contracts. - Held that:- there is no taxable activity identifiable in the present arrangement for tax liability of the appellant hospitals - After introduction of negative list tax regime, Notification No. 25/2011-ST exempted levy of service tax on health care services rendered by clinical establishments - For such services, amount is collected from the patients. The same is shared by the clinical establishment with the doctors. There is no legal justification to tax the share of clinical establishment on the ground that they have supported the commerce or business of doctors by providing infrastructure. We find that such assertion is neither factually nor legally sustainable The service provided by the respondent hospital would merit classification under Health Care Services extended to the patients. Accordingly, the demand proceedings against the respondent hospital was dropped - Appeals are disposed-of.
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2017 (12) TMI 508
Reverse charge mechanism - case of the department is that appellant have received various services from foreign based service providers - Held that: - As regard the correct quantification of the demand, this issue being purely matter of fact, need to be verified from the records - no proper findings on the discrepancies were given - matter remanded to the adjudicating authority for passing a fresh order after verification of the above re-quantification on the basis of records of the appellant - appeal allowed by way of remand.
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2017 (12) TMI 507
Cenvat credit on capital goods - Rule 2(a) of Cenvat Credit Rules, 2004 - Held that: - during the material time, defined inputs to mean all goods, except light diesel, high diesel oil, motor spirit, commonly known as petrol and motor vehicles used for providing any output service. Since the definition of input at the material time was broad enough to consider all goods, excepting the exceptions contained therein, Cenvat credit taken on tyres by the appellant should be considered as input for the purpose of availment of Cenvat credit. With regard to taking of 100% credit in the year of receipt of the capital goods, I find that the appellant had submitted the extracts of relevant portion of the ST 3 returns to show that the credit inadvertently taken, has not been utilised for payment of service tax on the output service provided by it. However, since the ST-3 returns have to be verified by the original authority, I remand the matter to him for ascertaining the fact, whether Cenvat credit taken during the relevant period, were actually available in the books for utilization. If the Cenvat credit had not been utilized for payment of service tax on the output service, the interest liability shall not be demanded from the appellant - Appeal is disposed of.
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2017 (12) TMI 506
Non-payment of service tax - commission amount paid to the foreign travel agent - reverse charge mechanism - Held that: - The fact is not under dispute that whenever the foreign tourists planned to visit India, they approached the overseas agents for necessary guidance for booking of accommodation in India - the appellant is not in the picture as far as receipt of any taxable service from the overseas clients is concerned. Since the services were provided and consumed outside India, the appellant will not be liable to Service Tax under reverse charge mechanism in terms of Section 66A of the FA, 1994 - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (12) TMI 505
Area Based Exemption - N/N. 32/99-CE dated 08.07.1999 amended vide N/N. 5/2002-CE dated 12.02.2002 - denial on the ground that claim that new factory was established at the cited address was found to be false in as much as the invoices under which it was claimed that various items of machineries were purchased, were found to be fake and fabricated - Held that: - The N/N. 32/99-CE dated 08.07.1999 granting the area based exemption was amended vide N/N. 5/2002 dated 12.02.2002. After the said amendment, the site in which the appellant was situated was covered within the definition of industrial area and the appellant became eligible for such benefit. From the SCN as well as the impugned order we do not find that any verification of the machines actually installed and working in the unit has been carried out. Further, the entire case has been build up on the basis of the statements of the suppliers of plant and machineries. In the absence of any documentary corroboration as such the statements cannot be admitted as gospel truth. The evidence on record would not justify the withdrawal of the benefit which was extended only after careful consideration and inspection of the factory at the relevant time - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 504
CENVAT credit - raw materials used in the manufacture of Pig Iron, Sponge Iron and Steel Billets - Held that: - the issue is squarely covered by the decision of the Tribunal in the case of Singhal Enterprises Pvt. Ltd. vs Commissioner of Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 503
Rejection of declaration u/s 89 of FA - Kar Vivadh Samadhan Scheme, 1998 - denial on the ground that the appellant had wilfully mis-declared the facts in order to avail maximum undue benefit at the cost of the exchequer - Held that: - appellant did not fully comply with the conditions mentioned in the Kar Vivadh Samadhan Scheme, 1998 - amount as claimed by the appellant had been paid through Cenvat account, but on scrutiny, the department observed that such amount reversed from the Cenvat account was again re-credited in the books - rejection of application is proper - appeal dismissed - decided against appellant.
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2017 (12) TMI 502
Clandestine removal - Evidence - whether the papers/ records of third parties can be considered as evidence of clandestine clearance against the Appellant unit? - Held that: - it has been alleged that the Appellant Unit were clearing goods under the cover of invoices and once the goods reached the destination the invoices were taken back by the Appellant and were destroyed - there is no evidence to corroborate such allegation. In none of the seized records the reference of such invoices is appearing which can show that initially the goods were cleared under the cover of invoice and were later taken back by the Appellant and destroyed. Cross-examination of witnesses - Held that: - The adjudicating authority refused to accept the cross examination on the ground that the same has been given after two and half year and that the panch witness were not examined. The reasoning given by the adjudicating authority towards non acceptance of cross examination is not legal. The cross examination cannot be brushed aside on the ground of having been conducted after some time. The statements or records of the brokers/ agent has to be corroborated with the evidences unearthed from the Appellant unit. However there is no evidence of clandestine clearance has been found from the Appellant Unit. No incriminating records or documents showing removal of goods without payment of duty has been found from the Appellant Unit. Without corroboration of any evidence the third party records and their statements cannot be made basis for upholding the demand. The statement of director of Unit on the basis of third party records cannot be basis of demand as corroborative evidence has been brought on record. Also, the adjudicating authority himself has set aside the demand of ₹ 11, 15,930/- holding that no corroborative evidence of raw material or production has been brought on record. The said evidence would apply equally to all demands as nothing incriminating has been found from the Appellants premises. No duty demand can be made against the Appellant Unit and the impugned order dt. 31.01.2007 in as much as it confirms demands and imposes penalty against M/s Sundar Ispat Ltd. is not sustainable - charges against all the remaining Appellants i.e director of Unit Shri Vinay Agarwal and other co-appellants who are either broker or alleged recipients is also not sustainable - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 501
Clearance of goods without payment of duty - Held that: - the issue to be addressed is: whether the appellant had availed credit on those capital goods, that became scrap and sold during the relevant period, without payment of duty. Ld. Chartered Accountant for the appellant categorically makes a claim that no duty is required to be paid on the MS Scrap as the same did not arise out of capital goods on which credit was availed by them. It is his contention that the said scrap did arise on dismantling of the old plant and machinery installed in their premises since 1968 but before April 1994 - Appeal allowed by way of remand.
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2017 (12) TMI 500
Cenvat credit - Car/Mobile Insurances - Repair and Maintenance Service of Car - Held that: - the appellant had availed CENVAT credit of Service Tax paid on various input services which were not eligible after 01.4.2011 being mentioned under the exclusion clause of the amended definition of ‘input service’. However, I find that prior to 1.4.2011 under various judgments these services were held to be input service and accordingly credit was admissible - Also, as soon as it was pointed out by the audit team of the department in Feb. 2012, the appellant paid/reversed the entire amount of credit. Nevertheless, since the appellant has availed credit erroneously, keeping in view the overall circumstances of the case, imposition of penalty of ₹ 5,000/- on the Appellant would. meet the ends of justice - Appeal partly allowed.
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2017 (12) TMI 499
CENVAT credit - input services - sales commission - whether the sales commission paid to agents would fall under the scope of sales promotion mentioned under the inclusive part of the definition of ‘input service’ prescribed under Rule 2(l) of CCR, 2004? - Held that: - the present appeal is disposed of with the liberty to both sides to approach the Tribunal soon after the verdict of the Hon’ble High Court in the pending Appeal against the Division Bench judgment of this Tribunal in Essar Steel India Ltd.’s case [2016 (4) TMI 232 - CESTAT AHMEDABAD] filed by the Revenue, where it was held that even for the period prior to 03.02.2016, the service tax paid on sales commission has been held to be admissible to CENVAT credit - appeal disposed off.
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2017 (12) TMI 498
CENVAT credit - repair and maintenance services used in windmills - captive consumption of electricity in their factory - Held that: - there is a tripartite ‘wheeling and banking agreement’ between the respondent company, ‘Suzlon Energy Limited’ and ‘Jaipur Vidyut Vitran Nigam Limited (JVVNL). Under this agreement, the respondent company has agreed to set-up the windmill for generation of power and inject the same in the grid maintained by the JVVNL. In exchange, the appellant is entitled to draw power at their Bhiwadi unit. The appellant is indirectly receiving power in their factory which is one of the factors of production, without which they cannot manufacture their dutiable outputs - reliance placed in the ruling of larger bench of this Tribunal in Parry Electronics and Engg. Pvt Ltd [2016 (1) TMI 546 - CESTAT AHMEDABAD] wherein it has been held that in case of Windwills located away from the factory and electricity generated is surrendered to the grid and the same is withdrawn in the factory from the grid, cenvat credit is available for the services received and used at the windmills located away from the factory. Appeal dismissed - decided against Revenue.
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2017 (12) TMI 497
CENVAT credit - vehicles/truck chassis falling under chapter 87 of CETA 1985 - Held that: - the dumpers/tippers/vehicles in question have been used by way of material handling system for moving the mined ore from the base of the mine to the stockyard at surface which is located within the mine area - the dumpers and tippers in the case of the present respondent are entitled to Cenvat credit being used as part of the material handling system - such mined ore is used by the appellant in their factory for production of dutiable outputs - credit allowed - appeal dismissed - decided against Revenue.
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2017 (12) TMI 496
Penalty u/r 15 of CCR 2004 - Held that: - penalty is normally imposed to correct a delinquent assessee. It is not compensatory in nature, like interest. It is settled law that penalty is imposed only in case of deliberate defiance of law, like suppression of facts with intention to evade payment of duty - In the present case, it is admitted fact that the appellant had filed ER-1 returns with the Department regularly and had disclosed their affairs, including the tax payable/paid - penalty set aside - appeal dismissed - decided against Revenue.
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2017 (12) TMI 495
Penalty u/r 25 of CER - Rule 4(4) of Central Excise Rules, 2002 - clandestine removal - Held that: - when the finished goods of defective biris or sub-standard biris which were stored in adjoining premises outside the factory premises were duly accounted for in the RG1 register, and no evidence of clandestine removal being there, have held that only a case of venial breach of the provisions of Rule 4(4) of CER, 2002 is made out - except this venial breach of Rule 4(4), there is no other breach of the provisions of the Act and the Rules nor any case of clandestine removal is made out against the appellant - penalty not justified - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 494
CENVAT credit on the service tax paid on sales commission - N/N. 2/2016 CE(NT) dated 03.02.2016 - Held that: - Tribunal in Essar Steel India Ltd. Vs. C.C.E. & S.T., Surat I [2016 (4) TMI 232 - CESTAT AHMEDABAD] holding that the same is clarificatory in nature and hence, retrospective in application. In other words, even for the period prior to 03.02.2016, the service tax paid on sales commission has been held to be admissible to CENVAT credit. In similar circumstances, a Division Bench of this Tribunal in the case of Ashapura Volclay Ltd and others Vs. C.C., Jamnagar [2017 (6) TMI 659 - CESTAT - Ahmedabad] disposed of the matters, with the liberty to approach the Tribunal after disposal of the cases pending before the higher forum - Appeal disposed of.
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2017 (12) TMI 493
Refund claim - N/N. 41/2007 dated 06.10.2007 as amended - whether the assessee is entitled to refund of service tax paid on repo charges, haulage charges and terminal handling charges, Customs House Agent Service and Clearing and Forwarding Service used for export of their goods as per the Notification No.41/2007 dated 06.10.2007 as amended? - Held that: - the Hon’ble Gujrat High Court in the Respondents’ own case, for earlier period, COMMISSIONER OF CENTRAL EXCISE Versus AIA ENGINEERING PVT. LTD [2015 (1) TMI 1044 - GUJARAT HIGH COURT], considered the eligibility of benefit of N/N. 17/2009 dated 07.07.2009 as amended, in relation to very same services and held that these services fall under the scope of the said Notification - the service tax paid on the aforesaid services, undisputedly used in the export of goods by the assesse, are eligible to refund under N/N. 41/2007 dated 06.10.2007, as amended - appeal dismissed - decided against Revenue.
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2017 (12) TMI 492
Excess stock - confiscation - whether excess aluminum scrap of 81,250 Kgs found in the factory premises of the appellant on 24.12.2012 is liable for confiscation and consequently under Rule 25(1) of the Central Excise Rules, 2002 and also penalty? - Held that: - A plain reading of Rule 25(1) of the Central Excise Rules, 2002 it is clear that the goods are liable for confiscation in the event the same are not accounted for in their books of accounts. In the present case though it is not mentioned in their Daily Stock Account (DSA) register RG-1 but the same are duly accounted for in their internal production/process register - confiscation and penalty set aside.
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2017 (12) TMI 491
CENVAT credit - capital goods/input - pre-fabricated steel items used as supporting structure for capital goods - Held that: - the issue is addressed by Principal Bench at Delhi in the case of Singhal Enterprises Pvt. Ltd. Vs. Commissioner of Central Excise & Customs, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. To ascertain, the use of the prefabricated steel items as claimed by the appellant as being used in the factory as supporting structure, accessory of capital goods, the matter is remanded to the adjudicating authority for verification of the same - appeal allowed by way of remand.
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2017 (12) TMI 490
Refund - Held that: - it had intimated the Department that due to ban of manufacturing of Gutka, it had permanently seized the manufacturing activities with effect from 18.7.2012. Receipt of such letter of the appellant was duly acknowledged by the Department. Further, I also find that the adjudicating authority has also specifically brought out any evidence to show that on 18.7.2012 the appellant had manufactured Gutka by using /utilising machines installed in the factory. Since, it is an admitted fact on record that from 18.7.2012, there was no manufacturing activity undertaken in the factory of the appellant, the duty liability in respect of 19.7.2012 should not be considered for confirmation - Appeal allowed - decided in favor of the assessee.
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2017 (12) TMI 489
CENVAT credit - input services - sales commission - whether the sales commission paid to agents would fall under the scope of sales promotion mentioned under the inclusive part of the definition of ‘input service’ prescribed under Rule 2(l) of CCR, 2004? - Held that: - the present appeal is disposed of with the liberty to both sides to approach the Tribunal soon after the verdict of the Hon’ble High Court in the pending Appeal against the Division Bench judgment of this Tribunal in Essar Steel India Ltd.’s case [2016 (4) TMI 232 - CESTAT AHMEDABAD] filed by the Revenue, where it was held that even for the period prior to 03.02.2016, the service tax paid on sales commission has been held to be admissible to CENVAT credit - appeal disposed off.
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2017 (12) TMI 488
CENVAT credit - service tax paid on the invoices where service tax registration number initially not mentioned but later procured - Held that: - issue is covered by the decision of this Tribunal in the case of Imagination Technologies India Ltd. [2011 (4) TMI 406 - CESTAT, MUMBAI], where it was held that belated registration cannot be a ground for denial of Cenvat credit of service tax paid on input service - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 487
Clandestine removal - penalty - Held that: - Since, the proprietor himself has admitted the fact, there is no need for any further corroboration is my view and the demand which is confirmed by the first appellate authority is correct, legal and does not require any interference, also interest liability thereunder. The provisions of Section 11 AC indicate that when there is reduction of incidence of demand of duty, in the appellate proceedings, the penalty liability also has to be recalculated as per the provisions of Section 11 AC of CEA, 1944 and the first appellate authority should have extended the benefit of reduced penalty of ₹ 25% of the amount of ₹ 2,85,325/-. Appeal disposed off.
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2017 (12) TMI 486
CENVAT credit - GTA Services - FOR basis - Held that: - reliance placed in the case of M/s Kelvin Plastics Pvt Ltd Versus Commissioner of Central Excise, Rajkot [2017 (9) TMI 141 - CESTAT AHMEDABAD] where it was held that the admissibility of CENVAT Credit on GTA Service (outward freight) rests on the condition of sale - the factual matrix as to whether the goods were delivered on FOR basis or otherwise needs to be ascertained from the documents, the matter is remitted to Adjudicating Authority to do the same - appeal allowed by way of remand.
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2017 (12) TMI 485
Rectification of mistake - The applicant submits that the order is not as per the observation made by the bench in open court at the time of final hearing held on 28.03.2016. Accordingly, the Miscellaneous Application has been filed for recalling of the final order dated 28.03.2016 and also for rectification of the mistake in the said order - Held that: - It is evident from the order that no dictation was given in the open court on 28.03.2016. Since the order was dictated afterwards and the appeal was partly allowed to the extent of reducing the quantum of redemption file from ₹ 20,000/- to ₹ 5000/-, it cannot be said that the bench observed differently at the time of hearing with regard to the benefit of duty demand as well as for imposition of penalty - ROM application dismissed.
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2017 (12) TMI 484
CENVAT credit - capital goods - certain items of Iron & Steel etc - Held that: - the issue herein is squarely covered in favour of the appellant as held by Hon'ble Madras High Court in appellant's own case M/s. India Cements Ltd. Versus The Custom, Excise and Service Tax & The Commissioner of Central Excise [2015 (3) TMI 661 - MADRAS HIGH COURT], where it was held that on items like MS Rod, MS sheet, MS channels, MS plate, etc. used for erection of capital goods and used for fabrication of structural to support various machines like crusher kiln hopper etc. without which such a structural machinery could not be erected and would not function, which fact is not disputed, and credit remains allowed - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 483
Clandestine removal - Penalty - section 11A (5) of the CEA, 1944 - case of appellant is that when an assessee pays duty along with penalty to the extent of 25% of duty, before issuance of SCN, it should not suffer penalty equal to the amount of duty - Held that: - There was no case of availability of details relating to the transactions available on record. That led to the inference of evasion which could not be rebutted - this is a total proved case of material facts leading to clandestine removal of finished goods - demand upheld - appeal dismissed - decided against appellant.
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2017 (12) TMI 482
Classification of goods - Printed Chromo Art Paper Rolls - Held that: - printing is merely incidental to the primary use of the goods i.e., packing of cells - the goods are not liable for classification in chapter 49, but will remain classified in chapter 48 only. Whether the printing undertaken on the paper amounts to a process of manufacture in terms of section 2(f)? - Held that: - It is easily seen that no distinct, identifiable commodity emerges out of the process of printing undertaken by the respondent. The Chromo Art Paper Rolls remain the same albeit with printing - no new commodity emerges and hence there is no justification to charge Central excise duty on the printed paper Rolls. Appeal dismissed - decided against Revenue.
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2017 (12) TMI 481
Classification of goods - repacking of product - Parry’s Natural Beta Carotene - Pro 9 Natural Mixed Carotenoids - classified under CTH 2936.00 of Central Excise Tariff Act, 1985 or under CTH 2108.99 of CETA? - Held that: - The respondent has undertaken repacking of the goods received by them in bulk into the form of capsule - As clearly held by the Commissioner (A), the goods remain the same and there is not even addition of vitamin during the process of repacking. There is no justification in reclassifying the product upon repacking into 2108 - appeal dismissed - decided against Revenue.
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Wealth tax
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2017 (12) TMI 480
Treatment of asset as stock in trade - Held that:- The assessee has purchased urban vacant land located at Banjara Hills and entered in to development agreement with Vulcon Project Developers Pvt. Ltd for development of the land but no development took place till the date of valuation date. The assessee declared the asset in the balance sheet as a fixed asset and no supporting evidence was placed by the assessee with regard to the claim of the assessee as stock in trade. The property was not converted as a business asset in the relevant period. On identical facts in the case of Devineni Avinash for the A.Y.2009-10, the coordinate Bench [2016 (7) TMI 422 - ITAT VISAKHAPATNAM ] held that the asset is an investment but not stock in trade. Litigation on the property before the Hon’ble Civil Court with an injunction order to maintain status quo till further orders - Held that:- The land in question cannot be excluded from the definition of asset from the definition of section 2(ea) of Wealth Tax Act and CWT(A) has rightly directed the AO to hold that the same required to be brought to Wealth Tax purpose. Accordingly, we uphold the order of the CWT(A) and dismiss the appeal of the assessee on this ground.
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2017 (12) TMI 479
Market value of immovable property - adoption of the value determined by the Departmental Valuation cell - Held that:- There is a search in the case of the assessee and subsequently it is found that there are some immovable properties and the assessee has to file a wealth tax return, which he was not filed. The A.O. has issued a notice, accordingly, assessee filed the wealth tax return and declared immovable properties as per the books of accounts. The A.O. has referred the matter to the Departmental Valuation cell to ascertain the market value of the immovable properties, however, the A.O. has not received the report of the Departmental valuation cell, and therefore, he has completed the assessment with a rider that assessment will be revised after report received from the departmental valuation cell. Subsequently, the Ld. Commissioner passed an order u/s 25(2) of the Wealth Tax Act, directing the assessing officer to adopt the value determined by the Departmental Valuation cell and complete the assessment. We find that the above order passed by the Ld. Commissioner is not correct and not justified. It needs modification. In view of the above, "we direct the A.O. to issue one copy of the report of the Departmental Valuation Cell to the assessee and if any objections raised by the assessee, the same may be considered and complete the assessment in accordance with law” - Decided in favour of assessee for statistical purposes.
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2017 (12) TMI 478
Penalty levied - not furnished the return within time of sub-section (1) of section 14 - difference between filing of return within the time stipulated u/s 14(1) of the Act or filing the same with any delay - Held that:- It is only basing on the revised assessment, the assessment was completed. Only reason stated by the AO for initiation of penalty was that no revision could be made incase of belated filing of the original return of wealth. Though it is argued by the Ld. DR that the belated return as well as the revised return both are nonest in the eye of the law. We find it difficult to agree with him inasmuch as it is only on the basis of the revised return of wealth, the assessment took place. We also do not find any support of law to the observations of the AO that the belated return is nonest in the eye of law as such it cannot be revised thereby rendering the revised return of wealth as void ab initio. The observations of the Commissioner of Wealth Tax are perfectly justified and the case of the assessee is squarely falls within the ambit of Section 15 of the Act as such it does not give rise to any penalty proceedings. With this view of the matter, we uphold the findings of the Commissioner of Wealth tax and found it difficult to sustain the penalty levied by the AO. We, therefore, direct the AO to delete the penalty - Decided against revenue
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