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TMI Tax Updates - e-Newsletter
December 16, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Depreciation on Goodwill – additional payment to retiring partner - No goodwill stands acquired by the assessee firm upon the impugned payment/s, the question of the extent of the depreciation does not arise for consideration - AT
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Addition of outstanding sundry creditors - when the amount was not repaid and finally offered by the assessee for the AY 2010-11, the assessee has failed to explain the cash credit to the extent of ₹ 5,00,000 - AT
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Interest paid on funds borrowed for purchase of shares deductible u/s 36(1)(iii) or not – the expenditure relatable to such an investment is allowable business expenditure u/s 36(1)(iii) - HC
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Residential Status of assessee - when his stay in India during the relevant period was only 68 days which is much less than the period of 182 days as per statutory provisions of the Act, then the assessee cannot be treated as resident of India - AT
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Penalty u/s 271(1)(c) – Assessee was well in the knowledge of the fact that for the transactions entered into, delivery of commodities has not taken place - It is a clear case of “speculation transaction” - penalty confirmed - AT
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TDS - Supply of printed tobacco packing material was a sale and could not be considered as a ‘works contract’ and tax was not required to be deducted u/s 194C - AT
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Where the return of income filed u/s 153A of the Act is accepted by the Assessing Officer, there will be no concealment of income and, consequently, penalty u/s 271 (1)(c) cannot be imposed - AT
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Amount written off by the assessee cannot be considered as expenditure incurred wholly and exclusively for the purpose of earning of income, which is included in the computation of income under the head "Income from other sources" - AT
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Classification of income – from the information available on record it is clear that the assessee is only a passive receiver of rent – the rental income is rightly classified as income from house property - AT
Customs
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Exemption from anti-dumping duty - warehoused goods - import of Phosphoric Acid - Since the wordings of the Notification are clear and unambiguous, exemption denied - AT
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Revocation of CHA License - Fraudulent exports under claim of export incentives - forfeiture of security deposit - Failure to obtain an authorization from his client - Commissioner has rightly revoked the CHA licence and forfeiture of their security deposit - AT
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Attachment of residential properties of director of company - Petitioners are the Directors of two Companies - asking housing societies that properties should not be sold, transferred or leased out in any manner without written No Objection Certificate from the Directorate of Revenue Intelligence - communication is not legal - HC
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Application for extension of time to bring the vessel SEAMEC-III to India - Vessel taken out of India for repairs - Extension of the time for bringing the subject vessel SEAMAC-III back to India granted. - HC
Service Tax
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Mandap Keeper Services - Auditorium rented out for conducting drama performance and other cultural entertainments - services being provided by Statutory/Government bodies - activity is taxable - AT
Central Excise
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Waiver of pre deposit - assessment of physician samples - appellants were distributing the medicaments as free samples to physicians. In this case the free samples are not required to be affixed with MRP and are not affixed with MRP - AT
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Demand of differential duty - Valuation of footrest cleared as part of scooter - If the assessee has cleared any footrest in excess to the scooter, the same will be in nature of spares - AT
Case Laws:
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Income Tax
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2014 (12) TMI 551
Tribunal refused to remand proceedings back to the AO – Substantial question of law arises or not - Held that:- If the Tribunal had the authority and had directed the AO to allow the claim for deduction of expenses simply because bifurcation or deployment of funds by the Bank concerned in India or at Branches in India or abroad had not been provided throughout, then, the remand cannot be directed to rectify the defects or to get over the lacunas in the proceedings initiated by the AO - Precisely that has been done in the present case and the Tribunal's refusal to remand the proceedings does not raise a substantial question of law. Netting off interest received u/s 244A - Interest on refund of taxes paid received by assessee – Held that:- The Assessee sought to set off the interest paid against the interest received and offered the net interest received to tax - in the case of the Assessee simply because the exercise carried out by it does not result in loss of revenue and there could not be any prohibition for the same, allowed it - assessee claimed that this was business expenditure and this should have been allowed - the Tribunal in permitting this exercise not violated any of the provisions of the Income Tax Act, 1961 - the Tribunal has followed the similar exercise in the case of very Assessee on the prior occasion as well – thus, as such no substantial question of law. Securities treated as stock in trade instead of investment – Same principle also followed for earlier assessment years - Held that:- The order passed during the prior assessment year has not been reversed or interfered with by this Court – the similar issue has been decided in Commissioner of Income Tax v/s Bank of Baroda [2003 (3) TMI 80 - BOMBAY High Court] – also in the present issue, no substantial question of law arises for consideration – Decided against revenue.
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2014 (12) TMI 526
Admissibility of appeal of revenue – Low tax effect – Validity of Boards’s instruction – Held that:- The circular issued by the CBDT has statutory force as per the provisions of Section 268A(1) of the Act of 1961 - orders, instructions or directions issued time to time by CBDT fixing monetary limits for the purpose of regulating filing of appeal or application for reference by any Income Tax Authorities under the provisions of Chapter-XX are binding – the same has also been decided in Kandhari and Kandhari (P) Ltd. Versus ITAT and Ors. [2012 (10) TMI 389 - Rajasthan High Court] – after considering the tax effect involved, the appeal should not have been filed by the department – the order of the Tribunal is upheld as no substantial question of law arises for consideration – Decided against revenue.
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2014 (12) TMI 525
Allowability of deduction on rent, repairs and depreciation and other expenses on guest house u/s 37(4) – Held that:- Following the decision in Britannia Industries Ltd. v. Commissioner of Income-Tax and Another, [2005 (10) TMI 30 - SUPREME Court] wherein it has been held that while the expression "premises and buildings" in sections 30 and 32 and the expression "residential accommodation including any accommodation in the nature of guest house" in sub-sections (3), (4) and (5) of section 37 can be similarly interpreted, a distinction has been sought to be introduced for the purpose of section 37 by specifying the nature of the building to be a guest house - the intention was to excluded from deduction the expenses towards rents, repairs and also maintenance of premises / accommodation used for the purpose of a guest house of the nature indicated in subsection (4) of section 37 – Decided in favour of revenue. Expenses incurred on issue of debentures – revenue expenses or not – Held that:- Following the decision in INCOME TAX OFFICER Versus VXL INDIA LIMITED [2009 (7) TMI 1205 - GUJARAT HIGH COURT] - when the debentures are converted into equity shares, the assessing company has already got enduring benefit and the expenditure incurred by the conversion of equity shares has to be treated as capital expenditure -portion of the convertible debenture was converted into equity shares and assessee company had got enduring benefits – the Assessing Authority disallowed expenditure only to the extent pertaining to the convertible portion of the expenditure which formed part of the capital – the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 524
Estimation of profits – Directions made by Tribunal to AO for consideration – Held that:- In the first round of appeal, CIT(A) considering that assessee could have purchased material for making turnover outside the books of accounts, has considered the average purchases in the earlier years to arrive at 60% of the cost of sales, being purchase cost - there are clear indications/directions of what AO was supposed to do and also gave certain opinions - without considering these, AO travelled beyond the directions of ITAT and beyond the scope of consequential assessment proceedings in determining the income at 100% of the so-called undisclosed turnover - the entire addition as confirmed by CIT(A) cannot be upheld - to that extent, assessee automatically gets relief without going into any other aspects. Undisclosed turnover and ratios – Held that:- Assessee contended that turnover was recorded by parties for the purpose of supervision and those two parties from whom statements are recorded are not partners of the firm - these aspects were already considered in first round of appeal and admittedly, the spiral bound diaries are held by ITAT to be ‘material available at the time of search and the same relates to assessees’. What profit can be estimated on the basis of material available on record, including the material found during the course of search operations – Held that:- The seized material do pertain to assesses - The detailed discussion of CIT(A) to that extent is upheld - turnover can be estimated at 1: 1.28, this turnover pertains to both the firms and not to one firm alone, as the combined turnover in the books of accounts pertains to both the firms, stated for the purpose of controlling the transactions - Therefore AO is directed to rework out the total turnover taking the ratio at 1: 1.28. and apportion between two firms on the basis of declared turnover in each year. Adjudication of year(s) in which this estimation can be resorted to – Held that:- Assessee has estimated in all years in the Block period, without restricting to the years in which such dairies are available – relying upon Rajnik and Co. vs. ACIT [2001 (4) TMI 53 - ANDHRA PRADESH High Court] - there is admission by the partner that they were resorting to same method in earlier years as well Even then, the GP adopted in other years was less - However in this case, assessee has not admitted that the turnovers recorded are undisclosed – In fact the statement was that they recorded in small note books for the purpose of controlling and belongs to both firms and are of accounted transactions - incriminating material was available only in AYs 2003-04, 2004-05 and part of AY 2005-06 in the Block period – Thus, estimation can only be done in those years only - Even though AO verified some DDs pertaining to AY 2002-03 for rejecting books of account, the invoices / data impounded are in relation to invoices recorded in Books of account - There is finding by AO that invoices are accounted but payments by DDs are not matching - that alone cannot be taken for estimation of undisclosed turn over in AY 2002-03 - AO is directed to calculate the additional sales turn over in both assessee’s case in those three assessment years i.e., AY 2003-04, 2004-05 and Part of AY 2005-06 only - it is not correct to tax 100% of the undisclosed turnover as income as assessee certainly incurs expenditure including cost of purchases - 10% net profit on the additional turnover would be justified – Decided partly in favour of assessee.
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2014 (12) TMI 523
Depreciation on Goodwill – additional payment to retiring partner - Assessee is in business of supply of equipments for shooting and editing telefilms, etc. with computerized digital graphics on hire - Held that:- In CIT vs. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] it has been held that ‘goodwill’ is a depreciable asset under Explanation 3(b) to section 32(1) - no deprecation having been allowed for AY 2002-03, the WDV of the relevant block of assets shall continue to be at ₹ 26.54 lacs, resulting in an enhancement in the assessee’s claim vis-à-vis as made per its return, i.e., by deducting depreciation claimed for the preceding year - the sole ground on which depreciation was disallowed by the Revenue, which found the tribunal’s ‘acceptance’, is of goodwill being not a qualifying asset under Explanation 3(b) to section 32(1)(ii) - The retiring partners could start their own venture, greatly impeding the firm’s, whose name carries a brand value in the trade, built over time, prospects/business - It is to restrain them from so doing that the payment, by purchasing their share in the intangible assets of the firm, had been made - all that the payment signifies is that the firm has been able to retain its’ operational capability consequent to the retirement/s - There is no purchase or acquisition of any asset, tangible or intangible - Rather, to the extent goodwill of the firm is attached to the partners, representing its human and thus most vital, resource, a part of the goodwill of the firm stands definitely eroded. Quantification of depreciation – Held that:- No ‘goodwill’ or any other tangible or intangible asset, thus, stands acquired by the firm consequent to the payment to the retiring partners in pursuance of the retiring deed/s - the second retiring partner, having along with the other continuing partners, acquired share (20%) in the goodwill of the firm of the first retiring partner, the payment to him subsequently includes his share in the share, so that there is in fact to that extent a double payment, i.e., vis-à-vis the total share in the firms’ assets of the two partners - the transaction in right perspective, i.e., as one between the partners inter se, would resolve such issues, which arise only on misconstruing the transactions as one of purchase/acquisition of goodwill by the assessee-firm – Decided against assessee. No goodwill stands acquired by the assessee firm upon the impugned payment/s, the question of the extent of the depreciation does not arise for consideration - the nature of the additional payment to the second retiring partner not arising out of his retirement deed, would have to be examined/determined - the assessee’s claim as not tenable - without doubt, no depreciation has been allowed on goodwill, and it is only the depreciation as actually allowed that would be eligible for being deducted in computing the WDV of the relevant block of assets – reference made to Madeva Upendra Sinai vs. Union of India [1974 (11) TMI 7 - SUPREME Court] - the assessee, it having not acquired ‘goodwill’, or any other depreciable asset for that matter, thus, i.e., upon payment of the impugned sums to the retiring partners, gets reversed to any extent, so that the assessee’s claim becomes valid (to that extent), the same shall have to be allowed - assessee’s claim for additional depreciation, on the basis of having not been allowed deprecation for A.Y. 2002-03, is rejected – Decided against assessee.
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2014 (12) TMI 522
Imposition of penalty u/s 271D - Cash received from one of the Directors of the company – Addition u/s 68 made by AO for violation of section 269SS - Held that:- Most of the High Courts are of the view that where loans and advances are accepted by the Director of company and which is not found to be in-genuine and assessee's return of income having been under scrutiny assessment u/s 143(3) and no addition having been made on account of such loan and there is no finding that transactions were malafide aimed at disclosing concealed money, imposition of penalty u/s 271D merely on technical mistake cannot be sustained - the money was accepted by the company from Director and it was explained that money was accepted through current account and was necessitated for ensuring meeting of funds requirement of company which arose suddenly - The transactions of receipt of cash was duly confirmed by the Director and the it was in the nature of current account - The Director used to pay the money in the current account and withdraw money from the current account as and when the need arises - It was also explained that such transactions were attributable to various exigencies and vicissitudes of the business - there are decisions of High Court wherein it was held that where assessee is unable to prove the exigency, the penalty is imposable. In Commissioner of Income-Tax, West Bengal Versus Vegetable Products Limited [1973 (1) TMI 1 - SUPREME Court] it was held that if in a case of taxing provision two reasonable constructions are possible, construction which favours the assessee must be adopted - cash book of the assessee company was produced before him wherein he found acceptance of cash from the Director - even after verifying the cash book there is no any adverse observation by the AO to the effect that on the date of accepting cash the company was not in any urgent need of funds - without any adverse observation and also the AO's action of acceptance of genuineness of loan u/s 68 and in not making any addition in the hands of the assessee company, puts the case at par with the OMEC ENGINEERS Versus COMMISSIONER OF INCOME-TAX [2007 (9) TMI 27 - HIGH COURT , JHARKHAND] wherein it was held that there being no finding of AO, CIT(A) or Tribunal that the transactions in violation of S.269SS were not genuine, assessee's return having been accepted u/s 143(3) after scrutiny, there being also no finding that transactions were mala fide aimed at disclosing concealed money, imposition of penalty u/s 271D merely for technical mistake could not be sustained – Decided in favour of assessee.
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2014 (12) TMI 521
Restriction of deduction on LTCG u/s 54EC - Quantum of deduction u/s 54EC to be restricted to ₹ 50 lac or not – Held that:- Similar matter has been decided in CIT Vs. C. Jaichander & Another [2014 (11) TMI 54 - MADRAS HIGH COURT] wherein it was held that section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months - There is no cap on the investment to be made in bonds - The first proviso to Section 54EC(1) of the Act specifies the quantum of investment and it states that the investment so made on or after 1.4.2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees - as per the existing provisions of section 54EC the ceiling on the investment to be made in specified bonds is for a particular Financial Year - as per the un amended provisions of section 54EC, the assessee is entitled for deduction of ₹ 1 crore, when the assessee has satisfied both the conditions of the investment in specified bonds of ₹ 50 lac in each Financial Year and the said investment is within the period of six months – Decided in favour of assessee. Addition of outstanding sundry creditors – Held that:- Assessee contended that ₹ 5,00,000/- was received as an advance for sale of shop at Pune - since the sale transaction did not materialize, therefore, the amount was offered to tax for A.Y. 2010-11 - except the submissions, no evidence has been produced by the assessee that the amount was received as an advance for sale of shop – also, when the amount was not repaid and finally offered by the assessee for the AY 2010-11, the assessee has failed to explain the cash credit to the extent of ₹ 5,00,000 – thus, the order of the CIT(A) is upheld – Decided against assessee.
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2014 (12) TMI 520
Interest paid on funds borrowed for purchase of shares deductible u/s 36(1)(iii) or not – Legal and professional charges incurred for rehabilitation - Shares purchased of a BIFR Company – Held that:- CIT(A) was of the view that the decision in Madhav Prasad Jatia v. CIT [1979 (4) TMI 2 - SUPREME Court] it was rightly held that at the time of allowing interest u/s 36 of the IT Act, 1961, three conditions are required to be seen for allowing deduction in respect of the borrowed funds for the purpose of business, i.e. Capital should be borrowed by the assessee, it must be borrowed for the purpose of business and interest must have been paid – assessee company has fulfilled all the three conditions – assessee has incurred interest expenditure in respect of unsecured loan taken from a body corporate and have been utilised for the purpose of acquisition of shares of India Polyfibres Ltd on which no dividend has been received - the expenditure relatable to such an investment is allowable business expenditure u/s 36(1)(iii) - However, the Tribunal, while considering the appeal has not given cogent reasons and has summarily allowed the appeal - since no details reasons are given by the Tribunal, thus, the matter is remitted back to the Tribunal for fresh consideration – Decided in favour of assessee.
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2014 (12) TMI 519
Residential Status of assessee - Salary and Subsistence Allowance received in Bhutan – Form No.16A not appreciated as TDS was deducted – Misinterpretation of section 6(1)(c) - Whether the assessee is a Non Resident Indian against Resident by wrongly applying the provision of section 6(1)(c) or not – Held that:- The AO has made the addition by holding that the assessee does not fall in the category of NRI as per the provisions of section 6(1)(c) of the Act - the assessee had left India on 8.06.2004 for taking up employment in Bhutan with Louis Berger Group Inc (LGB) and remained there continuously for almost ten months till the end of the previous year 2004-05 - the assessee stayed in India only for a period of 68 days during the previous year - the AO misinterpreted the provisions of section 6(1)(c) and Explanation (a) attached thereto – CIT(A) rightly held that the assessee has to be treated as non-resident as per Explanation (a) attached to section 6(1)(c) of the Act - in the case of the individual, a citizen of India who left India during the previous year for the purpose of employment outside India and in a peculiar circumstance, when his stay in India during the relevant period was only 68 days which is much less than the period of 182 days as per statutory provisions of the Act, then the assessee cannot be treated as resident of India and his status would be of non-resident Indian for the purpose of levying of tax as per provisions of the Act. The AO wrongly denied relief for the assessee and made additions on the basis of misinterpretation of facts – CIT(A) granted relief for the assessee by considering agreement of employment dated 31.5.2004, other relevant documents and by properly interpreting the provisions of the Act in the right direction as per letter and spirit of Explanation (a) attached to section 6(1)(c) of the Act – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 518
Rejection of application for registration u/s 12AA – Whether the assessees are eligible for registration u/s 12A of the I.T. Act in view of insertion of proviso to section 2 (15) w.e.f. 1.4.2009 - Held that:- As per situs of the AO is situated within the territorial jurisdiction of Hon’ble Allahabad High Court, hence decision of the jurisdictional High Court is binding upon it - the activities of the assessee as charitable in nature - for the applicability of proviso to section 2 (15) the activities of the trust should be carried out on commercial lines with intention to make profit - Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2 (15) - The aims and objects of the assessee-trust are charitable in nature - Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to section 2(15) and deny exemption available u/s 11 - The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2 (15). The CIT was not justified in rejecting the application of the assesee for registration u/s 12AA of the Act in the case of Khurja Development Authority even after the matter was set aside by the Tribunal with its finding in favour of the assessee – thus, the CIT is directed to grant the registration w.e.f. the requested date as per the provisions of the law in the case of Khurja Development Authority - So far as the appellant Bulandshahr – Khurja Development Authority is concerned, while setting aside the order, the CIT is directed to restore the registration w.e.f. 1.4.2008 – Decided in favour of assessee.
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2014 (12) TMI 517
Levy of penalty u/s 271(1)(c) – Excess depreciation on WDV of bus claimed by mistake – No malafide intention - Held that:- Following the decision in Sarv Prakash Kapoor Versus Deputy Commissioner of Income-tax-4(1), Agra [2012 (10) TMI 801 - ITAT, AGRA] - assessee contended that the books have been prepared by the Accountant, who did not understand that depreciation should not be claimed on the asset which was sold during the accounting year - Due to this mistake, excess depreciation was claimed and there was no mala fide intention to claim excess depreciation or to conceal the income or particulars of income - such mistakes are rectifiable during the course of assessment proceedings - Rectifications of such mistakes are not concealment of particulars of income or furnishing of inaccurate particulars of income - The assessee explained that there is a bona fide mistake in calculation - The AO though has invoked explanation-1 to section 271(1)(c) but he did not find that the explanation furnished by the assessee was a false explanation - the assessee has substantiated his explanation by submitting complete facts - the explanation of the assessee was bonafide and under that facts and circumstances, section of 271(1)(c) is not applicable – thus, the AO was not justified in levying penalty u/s 271(1)(c) – relying upon CIT vs. Reliance Petro Product Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - merely because the assessee claimed deduction of interest expenditure which has not been accepted by the Revenue, penalty u/s 271(1)(c) is not attracted - penalty is discretionary in nature, should not be imposed in each and every case – Decided in favour of assesse.
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2014 (12) TMI 516
Penalty u/s 271(1)(c) – Relevant facts not disclosed by assessee - Loss on commodity trading under F&O as STCG or speculation loss – AO was of the view that the loss is to be treated as speculation loss penalty u/s 271(1)(c) levied - Held that:- The assessee claimed that he has disclosed all the relevant facts in the return of income - assessee entered into contracts of purchasing and selling commodities and the contracts were settled without actual delivery of commodities - Prima facie the loss incurred was a ‘speculative loss’ incurred on speculation transaction of commodities - The speculation loss can be allowed only against the speculation profits and it cannot be allowed to set off against any other income of the assessee - The speculation transactions are clearly defined in section 43(5) of the Income-tax Act, 1961 wherein a speculative transaction means a transaction in which a contract for the purchase or sale of the commodity, including stocks and shares, is periodically and ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. The assessee has tried to take the benefit of provisions of section 43(5)(d) which provides for the purpose of section 43(5) that an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 carried out in a recognized stock exchange - once it is established that the claim is wholly untenable in law and unsustainable, then the assessee would be liable to the imposition of penalty for making a claim of this nature - The assessee’s claim that all the relevant facts were disclosed in the return of the income is not correct - He has not disclosed that the loss was on the transactions where no delivery of commodities has taken place - assessee has not disclosed in the return that loss was of speculative loss, not short term capital loss - The explanation submitted by the assessee is not a bonafide explanation and it is also unsustainable in law - The law clearly defines the ‘speculative transactions’. Assessee was well in the knowledge of the fact that for the transactions entered into, delivery of commodities has not taken place - It is a clear case of “speculation transaction” - assessee had not disclosed all relevant facts in the return of income - assessee is liable to penalty u/s 271(1)(c) and the order of the CIT(A) is upheld – Decided against assessee.
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2014 (12) TMI 515
Admission of additional ground - Non-compliance of DRP directions – Transfer pricing adjustment made in excess of global profits – Held that:- The assessee had raised an objection before the DRP, and the DRP had given a direction to the Assessing Officer that the TP adjustments should not exceed the global profits of the assessee company - the AO has not given effect to this finding of the DRP while passing the assessment order and therefore, this ground is very much admissible and has to be considered on merits. Therefore, we admit the additional ground of appeal. Sub-section (10) of S.144C provides that every direction issued by the DRP shall be binding on the AO – the AO ought to have given effect to the directions of the DRP - the issue needs to be remitted to the file of the AO to re-compute the Transfer Pricing Adjustment, duly complying with the directions of the DRP that the TP adjustments shall not exceed the global profits earned by the assessee company – the matter is to be remitted back to the AO after giving reasonable opportunity of hearing to the assessee – Decided in favour of assessee. ESOPs to the employees – Held that:- M/s. Biocon Limited and others Versus The Dy. Commissioner of Income-tax (LTU) and others [2013 (8) TMI 629 - ITAT BANGALORE] - the discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees - The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time - an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option - No accounting principle can be determinative in the matter of computation of total income under the Act - discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head 'Profits and gains of business or profession' – thus, the matter is to be remitted back to the AO – Decided in favour of assessee.
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2014 (12) TMI 514
Disallowance of amount spent on packing materials u/s 40(a)(ia) – Applicability of TDS under section 194C – Works contract or contract to sale - Held that:- CIT(A) rightly held that the manufacturers were manufacturing the printed material at their premises and they were not captive units of the appellant - Merely because the printing was done as per the requirement/specifications of the assessee, it cannot be said that any work was carried out on behalf of the assessee - there is nothing on record to show that ancillary materials were supplied by the assessee to the manufacturer firms - supply of printed tobacco packing material was a sale and could not be considered as a ‘works contract’ and tax was not required to be deducted u/s 194C - the basic requirement of applicability of section 194C is that the transaction should come under ‘work contract’ and not as a contract to sale – assessee’s case is covered as contract to sale, the provisions of section 194C are not applicable at all - Therefore, there was no requirement of deduction of tax at source and for that matter the provisions of Section 40 a (ia) of the Act are not applicable at all - the manufacturer on his owner has purchased material and manufactured the products as per specification of the assessee, which it sold, to the assessee - the CIT(A) has rightly held the addition made by the AO as untenable – Decided against revenue. Expenses relating to advertisement and publicity – Applicability of section 194C – Payments made exceeded the statutory limit for deduction of tax – Held that:- CIT(A) rightly was of the view that no material was supplied to the seller and the entire material was purchased on his own by the seller - the transaction constitutes a sale within the rules giving rise to such a warranty - The supply has been made by M/s Micron India of printed packing labels as per requirement/specifications of the assessee - there is no material to show that ancillary materials like labels, ink, papers, screen-printing, screens etc. were supplied by appellant to the aforesaid company - assessee has also paid VAT on the sales and has furnished copies of bills in support of its contention - supply of printed labels was a sale and could not be considered as a ‘works contract’ and thus tax was not required to be deducted u/s 194C - it was not a work contract but contract for sale - Thus the CIT(A) has rightly concluded that supply of printed labels was a sale and could not considered as a work contract and thus tax was not required to be deducted u/s 194C of the Act – Decided against revenue. Addition of ₹ 50,00 upheld out of claimed expenses – Held that:- The AO has made addition of ₹ 50,000/- by making disallowance out of the claimed expenses on the basis that the assessee could not prejudice some of the vouchers and also from the perusal of other vouchers, it was found that these are petty and cash payments for which proper verification is not possible - CIT(A) was not justified him sustaining the addition made on ad-hoc basic without proper justification – thus, the order of the CIT(A) is to be set aside and the AO is directed to delete the addition – Decided in favour of assessee.
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2014 (12) TMI 513
Levy of penalty u/s 271(1)(c) – Return filed on the basis of seized papers and documents and not on the basis of cash found – Held that:- The search was carried out on 22.11.2006, as in the said two cases. Certain documents were found and were seized - In the return of income filed u/s 153A of the Act, additional income from trading and commission was disclosed. Concealment penalty was levied on this additional income - as decided in assessee’s own case for the earlier assessment year, the decision in SHRI PREM ARORA Versus DEPUTY COMMISSIONER OF INCOME TAX [2012 (6) TMI 480 - ITAT DELHI] followed, wherein it has been held that for the purpose of imposition of penalty u/s 271(1)(c) of the Act, as a result of search assessments made u/s 153A, the original return of income filed u/s 139 of the Act cannot be considered and that where the return of income filed u/s 153A of the Act is accepted by the Assessing Officer, there will be no concealment of income and, consequently, penalty u/s 271 (1)(c) cannot be imposed - Explanation 5 to section 271(1) of the Act cannot be invoked merely on presumption that the assessee might have been in possession of cash throughout the period covered by search assessments – thus, the order for levying penalty is set aside – Decided in favour of assessee.
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2014 (12) TMI 512
Revision u/s 263 - Additions made by AO – Addition made without proper justification - Enquiries, examinations and verifications were made by the AO or not - Held that:- There is no basis for the AO to treat the amount credited in the bank account of Sh. Ashok Kumar as the benami transaction - as per the seized documents it is clearly established that the sum credited in the bank account of Sh. Ashok Kumar pertains to assessee’s firm, but the AO has not at all deal with the nature of the seized material and what was the content thereof - CIT(A) has given a finding that, how Sh. Ashok Kumar has been treated as the benami of the assessee is neither coming out from the order of the AO nor from the assessment records examined by CIT(A) - there is no infirmity in the order of the CIT(A) in this regard. The submissions do not serve any purpose as neither in the order of the CIT u/s. 263 nor in the assessment order any material is there to show that the sum credited in the bank account of Sh. Ashok Kumar was the benami transaction of the assessee firm - CIT(A) has every right to adjudicate upon the order of the AO appealed before him judiciously – thus, the order of the CIT(A) is upheld - the addition was based on surmises and conjectures and was not at all supported by the evidences or the material on record - AO’s order does not cogently prove that addition of ₹ 6,40,896/- is warranted for amount of unexplained stock. Also, AO has made the addition by estimating the net profit @ 10% on the basis of figures of sales culled out by him at ₹ 1,00,71,689 - CIT(A) has examined the addition and estimation of sales by the AO after duly elaborating upon the issues - CIT(A) has given a finding that the estimate of sales as computed by the AO is not supported by cogent basis - CIT(A) has finally computed the total sales figures of the assessee at the figures of ₹ 35,79,069 - CIT(A) rightly has applied 5% rate of profit – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 511
Interest and lease charges written off disallowed – income assessed as income from other sources - Held that:- In order to determine the head of income under which the income generated out of a particular activity is assessable, one has to look into the intention of an assessee at the time when he started that activity - If the intention is to carry on that activity as a sustained business activity, then the income arising there from is assessable under the head "Income from Business" - the assessee has been declaring the interest income and lease rental income under the head "Other sources" only in the earlier years - the assessee has not advanced funds or leased out machineries to any other concerns or parties - there was no intention with the assessee to carry on business of either giving loans on interest or in leasing out its machinery - the assessee has changed its stand only during the year under consideration and further it did not bring any material on record to show that the assessee intended to carry on the activity of advancing money or leasing out plant as a sustained business activity. The assessee has declared both the interest income and lease rental income under the head "Other sources" would show that the intention of the assessee was only to carry those activities as an investment activity only - the treatment given by the subsidiary company cannot decide about the taxability in the hands of the assessee - The assessee also has taken a stand that the business proximity of the assessee with its subsidiary and the vested interest in the welfare of the subsidiary are the factors that will go to decide the nature of interest and lease rental income - the intention of the assessee at the inception of the activity would decide the nature of the activity and not the close business connection or the welfare of the recipient. The contention of the assessee is accepted that the interest income and lease rental income should have been assessed under the head "Income from business" – the AO was justified in assessing both the income under the head "Income from other sources", as declared by the assessee - the view of the AO is accepted that the amount written off by the assessee cannot be considered as expenditure incurred wholly and exclusively for the purpose of earning of income, which is included in the computation of income under the head "Income from other sources" – the order of the CIT(A) is set aside – Decided in favour of revenue.
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2014 (12) TMI 510
Classification of income – Rental income or income from house property – Held that:- CIT(A) rightly was of the view that no evidence or reasons were provided - the assessee is in the business of trading in various items and not in the business of purchasing properties and letting them out - in order for rental income to be considered as income from business, the assessee has to demonstrate that certain well planned activities were being carried out in that property for the purposes of profits so as to have that income qualify as business income - from the information available on record it is clear that the assessee is only a passive receiver of rent – the rental income is rightly classified as income from house property – Decided against assessee. Expenses disallowed u/s 37 – Held that:- CIT(A) rightly was of the view that no evidence was produced to show the genuineness of the expenditure - no business whatsoever was conducted by the assessee company during the year - not a single voucher or any other evidence was produced to substantiate the veracity of the expenses claimed – the order of the CIT(A) is upheld – Decided against assessee. Unexplained cash credits u/s 68 disallowed – Held that:- Though the CIT(A) called for Remand Report in respect of the credits, the AO failed to submit the same – thus, the matter is required to be remitted back to the AO for reconsideration and the assessee shall be provided sufficient opportunity to produce the required material before him – Decided in favour of assessee.
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2014 (12) TMI 509
Penalty u/s 13(1)(c) of Interest Tax Act – Approval from Committee of Disputes - Held that:- The assessee during the assessment proceedings submitted that chargeability of interest on account of call money with the bank and chargeability of interest on the discounting scheme were not liable to interest tax under the provisions of Interest Tax Act The assessee company has filed the details of interest claimed in the return of chargeable interest and it was supported by the accounting policy of the assessee company - The interest has been claimed on the bona-fide belief that it is allowable in computing its chargeable interest - no penalty can be imposed for disallowance of a claim made on the bona fide belief as decided in Hindustan Steel Limited Vs State of Orissa [1969 (8) TMI 31 - SUPREME Court] - CIT(A) rightly concluded that the penalty imposed by the A.O. u/s 13(1)(c) of the Interest Tax Act is to be set aside – Decided against revenue.
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2014 (12) TMI 508
Bonus paid to the fourth partner disallowed – Held that:- It is neither disputed nor established by the authorities below that all the four partners were actively engaged in the conduct of the business of the firm and thus, are the working partners - although the firm was constituted in A.Y. 2004-05 and the assessee firm has been making this claim right since AY 2004-05 but all along the revenue has been accepting such a claim even in the assessment made under scrutiny hence there was no justification to make a departure from the settled position in the past without bringing any material change in the facts and the circumstances of the case in this year - the issue is revenue is neutral in as much as even assuming a certain part of the claimed remuneration is disallowed in the hands of the firm, it cannot be treated to be an income from business in the hands of the partners and a necessary safeguard has already been provided under the proviso below the Sec.28(v) against the double taxation of the same income - even if the disallowance so made is upheld, deduction to that extent has to be allowed in the hands of the partners/s - revenue shall not be put to any loss if the remuneration as claimed, is allowed in the hands of the assessee firm – there was no justification in the disallowance made u/s 40(b) is set aside – Decided in favour of assessee.
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2014 (12) TMI 507
Miscellaneous application – Permissibility of review - Held that:- The guidelines of RBI binding on the bank and it is stated that the mistake apparent on record may be rectified and order may be amended - Section 254(2) provides that the Tribunal may with a view to rectify any mistake apparent from record amend any order passed by it under subsection (1) and shall make such amendment - the Tribunal has no power to review their own orders passed on merits – relying upon CIT vs. Anamika Builders Pvt. Ltd. [2001 (5) TMI 39 - CALCUTTA High Court] - the Tribunal should not change its view already taken in the matter - the mistake must be so obvious that it can be easily corrected to wit any arithmetical mistake, wrong quotation of section etc. and not on debatable issues - the Tribunal has no power to review their own orders already passed on merits - There could not be any reconsideration of facts while exercising jurisdiction u/s. 254(2) of the IT Act - Since the appeal of the assessee has been decided on merits, considering the material and evidences on record in the light of submissions of the parties, therefore, review of the judgment is not permissible – Decided against assessee.
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Customs
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2014 (12) TMI 532
Exemption from anti-dumping duty - warehoused goods - import of Phosphoric Acid - Notification 24/2013 dated 18.04.2013 - whether exemption from safeguard duty and anti dumping duty will be available or not in the case of material imported against duty-free import authorisation made transferable by the licensing authority when the goods were sought to be cleared on 09/05/2013 from the warehouse - Difference of opinion - Majority order - Held that:- Appellant filed ex-bond Bill of Entry on 09/05/2013 for clearance of the goods from the warehouse. The clearance was sought to be effected under the DFIA which was transferred to the appellant on 09/04/2013. As per Section 15(1)(c) of the Customs Act, 1962, the date for determination of rate of duty and tariff value of imported goods in the case of goods cleared from a warehouse under Section 68 is the date on which the bill of entry for home consumption in respect of such goods is presented under that Section. Therefore, in the present case, the rate of duty that would apply is the rate prevalent on 09/05/2013 when the Bill of Entry for home consumption was filed. On that date when the bill of entry was filed, Notification 98/2009 clearly stated that the exemption from safeguard duty and anti dumping duty shall not be available in case materials are imported against an authorisation made transferable by the regional authority. The said Notification does not stipulate on what date the authorisation should have been made transferable. In the absence of any specific mentioning of the date as to when the transferability should have been made, there is no merit in the contention of the appellant that the Notification stipulates 18/04/2013 as the date on which the authorisation should have been transferable. Since the wordings of the Notification are clear and unambiguous, no extra support or aid is required for interpreting the Notification. In this view of the matter, I am of the view that the appellant is not eligible for the benefit of exemption from safeguard duty and anti dumping duty in respect of ex-bond bill of entry filed on 09/05/2013 - Decided against assessee.
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2014 (12) TMI 531
Revocation of CHA License - Fraudulent exports under claim of export incentives - forfeiture of security deposit - Failure to obtain an authorization from his client for the job of clearance of import and export cargo and to ensure proper conduct of his employee in the transaction of business as Agent - Violation of Regulation 20 of CHALR, 2004 - Held that:- CHA is required to obtain an authorization from his client for the job of clearance of import and export cargo and that he is also required to ensure proper conduct of his employee in the transaction of business as Agent. As against this, the CHA failed to observe the above condition and therefore, is liable for the action under Regulation 20 of CHALR, 2004 - Export documents were not signed by the exporter. The invoice list and the packing list on the basis of which shipping bills were filed, were not received by the CHA from the exporter but from a third person, namely, Shri Arup Kumar Mukherjee. As no authorization could be produced by the Appellant CHA from the exporter, we hold that the charges of violation of Regulation 13 (a) are proved. Employee has been doing the job of clearance on instructions from the exporter during the course of his employment and therefore, keeping in mind the ratio laid down in case of Worldwide Cargo (2006 (11) TMI 281 - BOMBAY HIGH COURT), we are of the view that the principles of vicarious liability of the master will certainly apply. Accordingly, the charges of violation of Regulation 19 (8) are also proved. Act provides for two types of action i.e. (i) for imposition of aiding and abetting the importer/exporter in smuggling of the goods, (ii) and the other action is contemplated under CHALR. As such merely on the ground that the ld. Commissioner set aside the penalty, is not a ground alone for quashing the order or revocation when the CHA has been found to indulge in gross misconduct and contravening the various provisions of Regulation under CHALR, 2004. Commissioner has rightly revoked the CHA licence and forfeiture of their security deposit. The said decision having been arrived at by the ld.Commissioner after taking into consideration all relevant materials and the said Regulation and after following the due process of law, it could not be said that the said decision of the revocation of licence was unreasonable or the punishment dehors the doctrine of proportionality. The Appellant has failed to point out any perversity or unreasonableness of the part of the Adjudicating Authority, and therefore, we do not find any merit in the present appeal - Decided against applicant.
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2014 (12) TMI 530
Denial of refund claim - Whether the respondent/importer is automatically entitled to refund claim solely on the ground that provision for unjust enrichment was incorporated under Section 18 of the Customs Act, 1962 with effect from 14-7-2006 and in the instant case, the provisional assessment having been finalised prior to the date of insertion of the said provision - Held that:- In the case of provisional assessments made and thereafterwards, it results in a refund, even in the absence of a provision of refund, if an assessee has to claim as refund, under equity, he must prove that there is no unjust enrichment and that the liability had not been passed on to the customer. That being the case, refund is not automatic one merely on the score of provisional assessment being followed by final assessment and unless and until the assessee substantiates the claim backed by the proof that the liability has not been passed on to the customer, such a refund claim may be termed as unjust and the claim cannot be granted as a mere consequence for refund arising on final assessment. When the assessee admits that provisional assessment was followed by a finalisation of assessment being finalised, under Section 27 of the Customs Act - any refund question arising thereon must be subject to proof of not passing on the burden of duty to others. Thus, in the absence of equity i.e., unless the assessee establishes that he has not passed on the burden of duty to another, he would not be entitled to refund as pointed out by the decision in the case of Mafatlal Industries Ltd., (1996 (12) TMI 50 - SUPREME COURT OF INDIA). Even in equity, the assessee is bound to substantiate its claim by showing bona fide that the payment of duty and claim not backed by unjust enrichment and the duty has not passed on to the customer, but it was borne out by the assessee only. - Matter remanded back - Decided in favour of Revenue.
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2014 (12) TMI 529
Attachment of residential properties of director of company - Petitioners are the Directors of two Companies - Revenue writes to the Secretary of Cooperative Housing Society in which the Petitioners have residential flats and to the Secretary of Soni Chambers wherein the Petitioners as Directors of two Companies are having their office, informing that for protecting interest of the Revenue, three immovable properties mentioned in the said communications should not be sold, transferred or leased out in any manner without written No Objection Certificate from the Directorate of Revenue Intelligence. Held that:- A bare perusal of Section 28BA would indicate that if any proceeding is pending under Section 28 or Section 28AAA or Section 28B, the proper officer must record the opinion that for the purpose of protecting the interest of revenue it is necessary so to do, with previous approval of the Commissioner of Customs that he makes an order in writing for provisionally attaching any property belonging to the person on whom a notice is served under sub-section (1) of Section 28 or sub-section (3) of Section 28AAA or sub-section (2) of Section 28B, as the case may be, in accordance with the rules made in this behalf under Section 142. The provisional attachment shall cease to have effect after the expiry of six months period from the order under sub-section (1). The expectation is that within this period the proceedings be concluded and the liability or duty amount is crystallized. Even if Section 110 of the Customs Act, 1962 has to be resorted, there is something which is required to be recorded. In the present case, merely addressing such communications and insisting on No Objection Certificate of the Department before the immovable properties are transferred, does not come within the ambit and scope of this provision - Decided in favour of assessee.
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2014 (12) TMI 528
Application for extension of time to bring the vessel SEAMEC-III to India - Vessel taken out of India for repairs - Held that:- Normally no exception could be taken to the impugned order dated 28 October, 2013. However, in view of the peculiar facts viz. as opportunity to gainfully employ the vessel SEAMAC-III in Dubai was found post its repairs and otherwise the vessel would have been idle till the end of November when it would be gainfully employed in India extension of time was sought. The application for extension of time was also made to the Tribunal before 30 September, 2013. Taking all the above facts into account we are interfering with the order of the Tribunal and extending the time limit to bring the vessel SEAMEC-III to India. Learned Counsel under the instructions of Mr. S.L. Mohanty, Chief Legal Officer of the petitioner undertakes that the petitioner will bring the vessel back to India by 30 December, 2013 and shall also pay all the applicable duties and taxes for re-entry/re-import of the subject vessel and shall comply with all other legal requirements. Extension of the time for bringing the subject vessel SEAMAC-III back to India granted.
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2014 (12) TMI 527
Misdeclaration of goods - import of RBD Palmolein Oil (edible grade) - consignment did not conform to the standards - Confiscation of goods - Redemption fine & penalty - Wrong description of goods - Held that:- reply given by the suppliers on 11-3-1999, as regards the mistake committed by the filling point staff is only an afterthought as the same having been given long after the test conducted by the Port Authorities. If the supplier had found the same even before the point of dispatch, nothing prevented them from informing the Importer about the mistakes committed. No justification to interfere with the order passed by the Customs, Excise and Service Tax Appellate Tribunal - Decided against assessee.
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Service Tax
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2014 (12) TMI 550
Condonation of delay - delay was caused due to the elections to various Co-operative Societies, which were in full swing in Tamil Nadu at the time of receipt of the Order-in-Appeal - Held that:- Authorised Representative for the Revenue placed the documents from the website that the election in respect of these applicants was held during the period from 09.05.2013 to 10.06.2013. It is seen that the papers were signed by the Sub-Registrar/Managing Director. Therefore, the reasons for delay in filing the appeal for election has no substance. The Hon’ble Supreme Court in the case of Office of the Chief Post Master General [2012 (4) TMI 341 - SUPREME COURT OF INDIA] dismissed the appeal and held that in the absence of exigencies, government cannot plead that there was no gross negligence or deliberate inaction or lack of bona fide, an liberal concession has to be adopted to advance substantial justice. In view of that, we do not find any merit in the COD applications. Accordingly, all the COD applications are rejected - Condonation denied.
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2014 (12) TMI 549
Penalty u/s 76 & 77 - service tax on GTA - Held that:- GTA service on which service tax demand was raised is related to export of goods, hence the bona fide belief of the Appellant is established. The Appellant admittedly paid the entire service tax before issuance of show cause notice. They are in any case entitled to Cenvat credit in respect of service tax on GTA being related to export of goods in the light of Hon'ble Gujarat High Court judgment in Inductotherm India P. Ltd. case cited [2014 (3) TMI 921 - GUJARAT HIGH COURT]. Service of GTA is in respect of export, hence the Appellant is entitled for Cenvat credit in respect of service tax paid on GTA for export goods. Therefore the service tax demanded by the revenue was admissible Cenvat credit and it is clear case of revenue neutrality. No reason for imposition of penalty on the Appellant under Section 76, hence the same is waived - However, penalty u/s 77 is upheld - Decided partly in favour of assessee.
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2014 (12) TMI 548
Waiver of pre deposit - Business Support Service - applicant submits that it is a Concession Agreement, which should be treated as a ‘LEASE AGREEMENT’, if at all. - development of Karaikal Port - Held that:- Concession Agreement covers various services and some of the services are taxable services. The Adjudicating authority observed that the applicant had outsourced the activities which are necessarily provided by them. It appears that some portion of the consideration is related to Concession Fees/Royalty Fees. It is seen from the impugned order that the applicant received the amount under the head of Royalty Fees or Concession Fees or Lease Charges represents the consideration received by the Govt. of Puducherry from M/s. Karaikal Pvt. Ltd. for provision of Port Services. Both sides failed to produce the details of the amount received by the applicant in respect of the services clearly, which would be examined at the time of appeal hearing in detail. We have also considered the submissions of the learned Counsel that the demand is party barred by limitation. On a query from the Bench, the learned Counsel submits that the demand of tax for the normal period would be approximately ₹ 82,00,000/-. We noted that there is no dispute that the taxes are levied on the Lease Charges from 01.07.2010. It is not clear the services rendered by the applicant in respect of Royalty Fees/Concession Fees - partial stay granted.
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2014 (12) TMI 547
Business Auxiliary Service - Grinding of wheat into wheat products such as maida, atta, suji and bran for various parties - whether the process amounts to manufacture under Sec 2(f) of the Central Excise Act 1944 or not - Held that:- Board has already accepted this issue that the process would amount to manufacture and no service tax is leviable - Decided in favour of assessee.
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2014 (12) TMI 546
Waiver of predeposit - Site Formation Services - Manpower and Recruitment Agency & Security Services - filling of soil to facilitate erection of towers. - Extended period of limitation - Held that:- Applicant were issued three show cause notices in which ‘Manpower Supply and Security Services’ are common, whereas, in the third show cause notice, the Department had also alleged non-payment of service tax on ’Site Formation’, which claimed to have been noticed by the Department during the course of investigation in the year, 2011. There is some force in the argument of the ld. Advocate for the Applicant that the third show cause notice would be barred by limitation in view of the judgment of the Hon’ble Supreme Court in Nizam Sugar’s case [2006 (4) TMI 127 - SUPREME COURT OF INDIA]. However, regarding the demand relating to ‘Site Formation Services’, we are not convinced that the demand on such services, raised in the third show cause notice for the first time, after necessary investigation by the department, would also be barred by limitation. Prima facie, we are of the view that the services rendered by the Applicant to M/s. Reliance Telecommunication Ltd. are ‘Site Formation Services’. In these circumstances, the Applicant though could able to make out a prima facie case in their favour for total waiver of the dues against the demand relating to ‘Manpower Supply and Security Services’, whereas, in relation to the demand on account of ‘Site Formation Service’, they could not able to make out a case for total waiver. - Partial stay granted.
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2014 (12) TMI 545
Imposition of penalty u/s 76, 77 & 78 - Simultaneous penalty u/s 76 & 78 - Held that:- As regards the imposition of penalty under Section 76 of the Finance Act, 1994, it is evident from the records that the liability to pay service tax arose in January, 2009 when the bills for the services rendered by the group companies were received by the appellant in December, 2008. Section 78 of the Finance Act, 1944 was amended on 11-5-2008 so as to provide that if penalty is payable under this section, provisions of Section 76 shall not apply. Since in the present case, the liability to pay service tax arose in January, 2009, the question of invoking provisions of Section 76, especially when penalty was considered under Section 78 would not arise at all. Accordingly, the penalty imposed on the appellant under Section 76 is not sustainable in law. Appellant discharged the service tax liability along with interest thereon as soon as the short payment was pointed out to them and they also intimated to the same to the department vide letter dated 22-6-2011 under the provisions of Section 73(3) of the Finance Act, 1994, much before the show cause notice. It is also a fact that these transactions were reflected in the balance sheets of the appellant for the relevant years. These evidences available on records indicate that the appellant had no intention to suppress any information or withhold any information from the department with an intention to evade payment of service tax. In any case the appellant was eligible for Cenvat credit of service tax paid and there was no need for him to evade any payment of tax. In these facts and circumstances, the decision of the Tribunal in the case of Essar Ltd., cited [2008 (11) TMI 105 - CESTAT, AHMEDABAD] squarely applies. Accordingly, we are of the view that the penalty is not imposable on the appellant under the provisions of Sections 77 & 78 of the Finance Act, 1994, in view of Section 73(3) of the Finance Act, 1994 read with Section 80. - Appellant has not disputed service tax and interest liability and therefore, the appropriation of the same by the adjudicating authority is upheld. - Decided in favour of assessee.
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2014 (12) TMI 544
Mandap Keeper Services - Auditorium rented out for conducting drama performance and other cultural entertainments - Assessee contends that such activity cannot come under purview of Mandap Keeper Service - Whether they are liable to service tax under the category of “Mandap Keeper Services” during the period from 1998-99 to 2004-05 - Held that:- Tribunal in the case of Secretary, Town Hall Committee [2007 (6) TMI 504 - CESTAT BANGALORE] has held that cultural functions are also social functions and renting out the hall for cultural functions would attract Service Tax liability. The said decision of the Tribunal was also upheld by the Hon’ble High Court of Karnataka reported in [2011 (4) TMI 191 - KARNATAKA HIGH COURT]. This Tribunal also followed the ratio of the said decision in the case of Manager, Ravindra Kalakshetra (2007 (10) TMI 208 - CESTAT, BANGALORE) and also in the case of Surat Municipal Corporation v. Commissioner of Central Excise, Surat reported in [2006 (2) TMI 45 - CESTAT, NEW DELHI]. Thus, we are of the considered view that the activity undertaken by the appellant in the present case would get squarely covered under the category of “Mandap Keeper Services” and the appellants are liable to pay Service Tax on the said activity accordingly. In the case of Statutory/Government bodies, there can be no mala fide intention to evade payment of Service Tax and it can be considered only as an omission on the part of the appellants and, therefore, there is no need to impose any penalty and invoke any extended period of time - demand of Service Tax can be upheld only for the normal period of limitation and not for the extended period. The adjudicating authority is directed to re-compute the duty demand for the normal period of limitation and intimate the same to the appellants for payment. The appellant would also be liable to pay interest on the recomputed demand in terms of Section 75 of the Finance Act, 1994. - there cannot be any mala fide intention on the part of the appellant being a Government body and, therefore, we set aside the penalties imposed on the appellants under Section 80 of the Finance Act, 1994 - Decided partly in favour of assessee.
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2014 (12) TMI 543
Penalty u/s 77 & 78 - Short payment of tax - Held that:- Entire service tax payable was recovered by the appellant from the service recipients. Appellant was a registered unit and was well aware of their liability to pay service tax to the Revenue. Even if there was any financial difficulty, appellant was required to file the periodical returns indicating therein the correct service tax liability. Had the appellant filed such returns showing correct duty liability, which he had already recovered, may be appellant’s bona fides could have been accepted. In the present case, appellant recovered the entire service tax from their customers and also did not file periodical prescribed returns with the Revenue. Non filing of returns and non-payment of service tax, in spite of collecting the same from the customers, clearly convey mala fide on the part of the appellant making them liable to penalty under Section 78 of the Finance Act, 1994. - Decided against assessee.
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2014 (12) TMI 542
Denial of CENVAT Credit - credit of service tax paid in respect of digital photographs - Invocation of extended period of limitation - Held that:- As the entire case of the Revenue was that photographs used for brochure meant for sale promotion cannot held to be eligible input service, the presentation of the brochure before Commissioner (Appeals) cannot held to be a additional evidence so as to hit by the provision of Rule 5 of Central Excise (Appeals) Rules, 2001. There is no dispute by the lower authorities that the credit was availed and duly reflected in the returns. If there is no column in the returns to show the nature of the input services, the assessee cannot be blamed for not providing the details of the input services. It is well settled that non-disclosure of the fact which is not required to be disclosed in the law, cannot attribute any suppression to the assessee. As such, the reasoning of the Commissioner (Appeals) that appellants have not disclosed the digital photograph service as a service on which credit was availed thus leading to suppression, cannot be upheld. Accordingly, I set aside the demand on the point of limitation - Decided in favour of assessee.
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2014 (12) TMI 541
Penalty u/s 76 - Whether penalty should be imposed upon the appellant when the entire amount of disputed Service Tax and interest for the delayed payment has already been paid - Held that:- It is the case of the appellant that a clear remark was made in the ST-3 return of the relevant period that appellant has stopped paying. Service Tax in view of Delhi High Court’s order. This fact is not disputed as per Para-2 of the OIA dated 17-11-2011-21-11-2011 passed by the first appellate authority. There is also no evidence on record that Service Tax was separately recovered by the customers from their clients and kept with him. In view of Delhi High Court’s order, appellant has a reasonable cause for paying the Service Tax. The same was paid, along with interest, as per the provisions of Section 80(2) inserted w.e.f. 28-5-2011. In view of the above observations and the settled position as per the relied upon case laws, it is held that no penalty was attracted upon the appellant in this case and appeal filed by the appellant is required to be allowed. - Decided in favour of assessee.
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Central Excise
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2014 (12) TMI 540
Waiver of pre deposit - assessment of physician samples - Valuation on basis of transaction value or MRP basis - Held that:- It is a fact that according to the submissions of the appellant, the physician samples are sold as per the purchase orders issued by different firms / persons. The physician samples are not distributed by the appellants themselves to the doctors or anybody else free of cost. Therefore as rightly submitted by the appellants, the decision in the case of Cadila Pharmaceuticals [2008 (9) TMI 98 - CESTAT AHEMDABAD] would not be applicable since in that case the appellants were distributing the medicaments as free samples to physicians. In this case the free samples are not required to be affixed with MRP and are not affixed with MRP and have been sold on the basis of purchase orders to different firm and persons. - appellants have made out a prima facie case - Stay granted.
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2014 (12) TMI 539
CENVAT credit - tax paid on input/input services used in the manufacture of goods supplied to SEZ developers - Held that:- CENVAT credit would be available in respect input/input services used in or in relation to manufacture of goods supplied to SEZ developers even prior to 31/12/2008 when the Rules were specifically amended to provide for the same. Therefore, we find that the impugned order is not sustainable in law - Following decision of Union of India vs. Steel Authority of India Ltd. [2013 (5) TMI 460 - CHATTISGARH HIGH COURT] - Decided in favour of assessee.
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2014 (12) TMI 538
Invocation of extended period of limitation - Collection of transport charges claimed as deduction - Suppression of facts - Commissioner held demand time barred - Held that:- When the case came up on 27/02/2014, we had directed the Revenue to submit copies of the price declaration filed by the appellant during the relevant period and the same have been submitted before us. On a perusal of these price declarations, it is seen that the respondent had enclosed the work-order and also the purchase orders for the supply of pipes in respect of work-contract undertaken by them. If these documents were available with the Revenue and deduction towards freight was claimed on the basis of these documents, it cannot be said that the respondent suppressed any fact. The learned counsel for the respondent has also relied on a decision of this Tribunal in respondent's own case reported in [2003 (7) TMI 615 - CESTAT, NEW DELHI] wherein it was held that, if the place of removal is indicated in the RT-12 returns and excise invoices, then non-mention of place of removal in declaration filed under Rule 173C would not amount to suppression. Therefore, extended period of time could not be invoked in such circumstances. In the present case, we find that the respondent filed the declarations under Rule 173C along with all the relevant documents. In these circumstances, there is no scope for invoking extended period of time, and therefore, the lower appellate authority has correctly held the demand as time-barred. - Decided against Revenue.
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2014 (12) TMI 537
Waiver of pre deposit - Job workers have been clearing the scrap also but the duty was being paid by the appellant - Liability of principal manufacturer - Revenue submitted that liability to pay duty is on the manufacturer and it cannot be shifted by any trade notice or permission issued to a manufacturer - assessee submitted that there are several decisions taking a view that in cases like this there is no duty liability on the principal-manufacturer at all - Held that:- appellant has made out a prima facie case on merits. Accordingly, the requirement of pre-deposit is waived and stay against recovery of the dues during the pendency of the appeal is granted. - Following dcision of Mahindra Hinoday Industries Ltd.: [2011 (9) TMI 139 - CESTAT, MUMBAI] - Stay granted.
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2014 (12) TMI 536
Waiver of pre deposit - CENVAT Credit - Whether the appellants are eligible for CENVAT credit of duty paid on inputs such as MS Channels, Beams, Joists, Coils, H.R. Plates, G.C. Sheets, and H.R. Sheets etc. - Held that:- items can be considered to have been used for fabrication of machinery within the factory has some merit and the issue is debatable and arguable. Further there is a decision of Hon'ble High Court of Madras [2011 (8) TMI 399 - MADRAS HIGH COURT] which is relied upon is also required to be considered in detail. It has to be noted that chartered engineer certificate is fairly detailed one and appellant has also produced photographs of plant and machinery produced for setting up of the factory. There are several items which can be straightway considered as parts/components and there are also some items of machines which are clearly covered by the definition. Under these circumstances, we consider that the submissions made by the learned counsel that a portion of the credit is not admissible and in fact he identified those machineries where exactly such credit would not be admissible and he showed us the nature of use and ultimate use in such cases. - Partial stay granted.
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2014 (12) TMI 535
Demand of differential duty - Valuation of footrest cleared as part of scooter - Held that:- When the Tribunal directed the Assistant Commissioner to verify the number of scooters cleared and the number of footrests cleared and to add the value of footrests to the value of the scooters, the implication is that the number of footrests whose value has to be taken into account will be those required to be fitted in the scooter. If one footrest is required to be fitted in the one scooter, then the number of the scooter will be equal to the number of footrest. If the assessee has cleared any footrest in excess to the scooter, the same will be in nature of spares. In view of the above, we do not find any infirmity in the conclusion drawn by the lower appellate authority - Decided in favour of assessee.
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2014 (12) TMI 534
CENVAT Credit - dealer's invoices - allegation that the cenvatable invoices issued by the registered dealer M/s. M.K. Steels, Kolkata, were not valid invoices in as much as they have not procured the goods from the manufacturer - Held that:- Revenue has not shown any alternate source of procurement of input and also considering the Rule 7(4) of the CENVAT Credit Rules, 2002, held that the manufacturers were entitled to the CENVAT credit. - Following decision of SK Foils Ltd. Vs. CCE, Rohtak vide [2014 (3) TMI 412 - CESTAT NEW DELHI], wherein the entire legal position as also various precedent decisions of the Tribunal were considered.- no justification for denial of credit to the appellants. - Decided in favour of assessee.
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2014 (12) TMI 533
Clearances of fabrics to DTA in excess of the permission granted by the Development Commissioner - Held that:- if the assessee exceeded the limit prescribed by the Development Commissioner, a show-cause notice should have been issued within the normal period since the clearances have taken place with the knowledge of the Department shown in the returns and an assessee is required to maintain records. We also agree with the finding of the Commissioner that it is also the responsibility of the Revenue to ensure that the clearances made under proper documents and in accordance with law and do not exceed the limit prescribed by the Development Commissioner. In such a situation, extended period could not have been invoked and there could not have been intention to evade payment of duty or suppression of facts. In any case, when the deemed export value is included, the appellant has not cleared any excess quantity. - Decided against Revenue.
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