Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 18, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Revenue or capital expenditure - the expenses incurred towards pledge agreement with the bank was for borrowing working capital availed from bank and by incurring he expenditure no capital asset has come into existence. - HC
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Deduction u/s 32AB - there is nothing on the basis of which it could be deduced that deduction is to be allowed only out of the profit of a unit or undertaking where machinery is installed and not out of the profits of the assessee. - HC
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Reopening of assessment - disclosure of the purchase of the property was not made in his return of income - In the absence of any legal obligation on the assessee to disclose about the purchase of property in his return of income, it cannot be said that the assessee had concealed any income - HC
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Benefit of exemption u/s 11 denied - profit motive - Association of leather merchants - AO has not disputed the conditions necessary for allowing exemption u/s.11 of the Act, except the applicability of proviso to Sec.2(15) - the said proviso is not applicable to the case of the Assessee - exemption allowed - AT
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Deduction of interest u/s 24 - Since the assessee had not let out the house property, AO denied the claim of deduction u/s 24 - the question of using of personal purposes shall not arise in the case of the assessee herein, since it is a legal person - claim of interest allowed - AT
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Non-granting of exemption u/s.11 - publishing of newspaper is a commercial line which cannot be considered as charitable activity, so as to grant exemption u/s.11 of the Act. - AT
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Penalty u/s 271(1)(c) - cessation of liability u/s 41(1) in respect of two trade creditors and in respect of one trade debtor - penalty in this case can not be imposed by merely referring to the alleged surrender and without considering the explanation. - AT
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When the authorities are not granting registration under the Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act, 1987, registration u/s 43(1) cannot be made a condition precedent for getting registration u/s 12AA of the Act. Assessee cannot be expected to perform an impossible act. - AT
Customs
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Evasion of education cess - In a case of assessment over a bill of entry, it is the duty of the Assessing Officer to properly assess the duty and onus cannot be shifted to the appellant for not calculating the correct rate of duty - No penalty - AT
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Levy of penalty - 100% EOU erroneously availed the Benefit of Notification No.52/2003-Cus. dt. 31/03/2003 - assessee were allowed to clear the goods under the claim of notification - it is not a case of any mala fide requiring confiscation of goods or imposing any penalties - AT
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100% EOU - Mis-Declaration of excess quantity of export goods to meet export obligation - the export goods are liable for confiscation - redemption fine of ₹ 12 lakh imposed on the appellant confirmed - AT
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Enhancement in value of goods - Revenue has not also explained why Rule 5 and 6 which relate to similar or identical goods should not have been considered when the appellant have given the price of contemporaneous goods - Even if the contemporaneous goods do not indicate the brand, it was duty of Revenue to examine documents relating to contemporaneous imports but it failed to do so - AT
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Provisional release of seized goods - Board’s Circular dated 4-9-2013 - Merely because an SLP is proposed to be filed against the said orders of the High Court of Delhi does not in any way eclipse its binding force. Thus, the impugned order suffers from no appealable infirmity - provisional release not stayed. - AT
Indian Laws
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Levy of property tax - warehouse - property tax on the value of storage and water tanks of the IOC situated in the industrial development area of Cuddapah (A.P.) - The Legislature has provided a particular definition to 'house' and levied property tax thereupon. It is this fictional definition of 'house' which is to be kept in mind for the purpose of levy of tax. - SC
Service Tax
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Only after 2010, the statute treated all services rendered within the port as port service. Therefore since the activity undertaken and the amount collected is for transportation within the port from warehouse to wharf and vice-versa, appellant could have entertained a bona fide belief that what is being rendered is a GTA service - AT
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Denial of refund claim - service tax paid on GTA service twice by them due to clerical error - appellant has been able to prove that they have paid service tax twice - Refund allowed - AT
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Refund - services wholly consumed within SEZ - even though there is no necessity to discharge service tax liability, it was held that this does not mean that in a case where service tax has been paid, assessee is not eligible for refund - AT
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Renting of immovable property - the definition excludes buildings used for the purpose of accommodation, including hotels. It has not been disputed by the lower authorities that the portion of the premises rented out to M/s. Savi Associates has been used for running a hotel - rent to be excluded - AT
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Levy of service tax - security service by Police Forces of the State - prima facie, the consideration amounts to income of the State of Rajasthan which is excluded from the purview of the taxation jurisdiction of the Union vide Article 289 of the Constitution. - stay granted - AT
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Inclusion of reimbursement of expenses in the value - allocation of cost of expenses - recovering the expenses on the basis of a calculation prima facie cannot be held as incurred in the capacity of pure agent - AT
Central Excise
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Valuation of goods - Whether the pre-delivery inspection charges and after sales service charges are to be included in the assessable value - PDI charges and free ASS charges would not be included in the assessable value under Section 4 of the Act for the purposes of paying excise duty - SC
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Refund of Terminal Excise Duty (TED), which was erroneously paid to the excise department. - DGFT directed to consider the application of the writ petitioner for refund in terms of the provisions of the FTP, 2009-2014 and pass an appropriate order in accordance with law - HC
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Imposition of penalty - when the main appeal has been dismissed, there is no question of interfering with the impugned order passed by the Tribunal on the question of penalty on the Managing Director - HC
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Valuation - inclusion of delivery (transportation) charges of HSD and motor spirit - When the delivery charges are separately mentioned in the invoices just because the same have been charged at an equalized rate, their deduction cannot be disallowed. - AT
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Waiver of pre deposit - clandestine removal - preparing parallel Central Excise invoices - Evasion of duty - it is not necessary that the goods should be confiscated in order to impose penalty under Rule 26 - AT
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Footwears with MRP - claim of exemption - the condition of indelible marked or embossed with the MRP does not stand fulfilled - MRP was admittedly less than the said prescribed MRP - when the MRP wad admittedly written on the outer package of the fotwears, the creation of huge demand on the said technical lapse prima facie cannot be appreciated - AT
Case Laws:
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Income Tax
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2015 (12) TMI 912
Apex Court dismissed the appeal of the assessee wherein HC has decided the issue against the assessee i.e Whether the secondment of employees by BSTL and DEML, the overseas entities, falls within Article 12 of the India-Canada and Article 13 of the India-UK DTAAs – High Court in this case [2014 (5) TMI 154 - DELHI HIGH COURT] had uphold the order of AAR and observed that, The nomenclature or lesser-than-expected amount charged for such services cannot change the nature of the services - once it is established that there was a provision of services, the payment made may indeed be payment for services - which may be deducted in accordance with law - or reimbursement for costs incurred – thus, the ruling of AAR is upheld – Decided against Assessee.
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2015 (12) TMI 911
Expenses of stamp duty for pledge agreement and processing fees charged by the bank - revenue or capital expenditure - ITAT deleted the addition - Held that:- While deleting the addition it was noted that the expenses incurred towards pledge agreement with the bank was for borrowing working capital availed from bank and by incurring he expenditure no capital asset has come into existence. Before us no material has been placed on record by the Revenue to controvert the findings of CIT (A) and ITAT treating the expenses as revenue. - Decided against revenue Expenses on account of repairs, renovation, building road, Labour charges and maintenance expenses - revenue or capital expenditure - ITAT deleted the addition - Held that:- CIT (Appeals) and Tribunal concurrently came to the conclusion that looking to the nature of the expenditure, the same could not have been treated as capital expenditure. The Assessing Officer had also made an ad-hoc addition on the ground that corresponding labour charges and other expenses were not reflected. The Tribunal in particular confirmed the view of the CIT(A) that mere quantum of expenditure would not be sufficient to treat as capital expenditure, inter-alia, on such grounds - Decided against revenue Machinery reconditioning charges of existing plant and machinery - expenses treated as capital expenditure - ITAT deleted the addition - Held that:- assessee contended that machinery had become old and without changing the core machinery, replacement of parts was carried out by way of reconditioning and the expenditure involved was for such purpose. Assessing Officer without rejecting the contention of the assessee that the core machinery remained unchanged, disallowed the expenditure and treated as capital expenditure. Here also, the Tribunal observed that merely because the cost of repair was close to written down value of the machinery, would not justify in treating as one of capital expenditure - Decided against revenue
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2015 (12) TMI 910
Failure to deposit TDS deducted from the salary received by the expatriate employee outside India - penalty u/s 271C - Held that:- In the present case, in light of the factual findings of the ITAT that there was nothing brought on record by the Department to show that the Respondent had been intimated by the expatriate employees about the remuneration received by them from ALF, it is held that the Respondent could not be held to be an Assessee in default and no penalty under Section 271C of the Act for the FYs in question could have been levied on it. Accordingly, the question framed by the Court is answered in favour of the Assessee and against the Revenue.
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2015 (12) TMI 909
Brought forward unabsorbed loss/ depreciation of the assessee's 10B unit - set off against the current year's profit of the same 10B unit allowed or not ? - Held that:- The issue as raised stands concluded by the decision of this Court in Black & Veatch Consulting(P) Ltd.(2012 (4) TMI 450 - BOMBAY HIGH COURT ) and "Ganesh Polychem Ltd. Vs. ITO" [2012 (8) TMI 953 - ITAT MUMBAI ] against the Revenue. Tribunal was right in holding that the brought forward unabsorbed depreciation and losses of the unit, the income of which is not eligible for deduction u/s.10B of the Act cannot be set off against the current profit of the eligible unit for computing the deduction u/s.10B of the Act - Decided in favour of assesee
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2015 (12) TMI 908
Expenditure incurred for sales promotion and publicity and setting up of various stores - revenue v/s capital expenditure - CIT(A) deleted the addition confirmed by ITAT - Held that:- This Court in case of Core Healthcare Ltd.(2008 (10) TMI 74 - GUJARAT HIGH COURT ) held that advertisement expenses to create brand image is revenue in nature The treatment accorded to a certain expenditure in the books of account of the assessee would not be conclusive of its true nature and on valid grounds, it would be open for the assessee before the Income Tax authority to claim a different treatment. This was perviously stated in case of Kedarnath Jute Manufacturing Co. Ltd.(1971 (8) TMI 10 - SUPREME Court) which was reiterated in case of Taparia Tools Ltd. (2015 (3) TMI 853 - SUPREME COURT ) as well. - Decided against revenue
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2015 (12) TMI 907
Quantum of deduction under section 80I - CIT(A) reduced the amount of deduction available to the assessee under Section 32AB - Tribunal reversed the decision taken by the CIT(A) holding that deduction under Section 80I of the Act was to be allowed after reducing the deduction allowable to the appellant under Section 32AB - Held that:- Learned counsel for the assessee was unable to demonstrate that the approach of the Tribunal was erroneous or perverse in any manner in allowing deduction under Section 80I of the Act after reducing the deduction allowable to the assessee under Section 32AB of the Act. We endorse the view of the Tribunal and consequently question noticed above is answered against the assessee. Accrual of income - assessee claimed 5% to 10% of the amount as performance security and submitted that the income to that extent had not accrued to it - Held that:- In Sony India (P) Limited's case, (2006 (4) TMI 457 - DELHI HIGH COURT), it was held that the liability arising out of a warranty was an allowable deduction even when the amount payable by the assessee was quantified and discharged in future. Learned counsel for the revenue was not able to rebut the aforesaid contention. Accordingly, this question is answered in favour of the assessee and it is held that the authorities below were not justified in rejecting the claim of the appellant assessee that 5% to 10% of the sale price in each year of supplies does not accrue as income for the year on the basis of terms and conditions attributed to warranty/guarantee/after sale service or on account of non completion of the contractual obligation and the assessee has to offer performance security under the contract. It shall, however, form part of the income to the extent the liability ceases to exist in the year in which the obligation of the assessee stands discharged. The said question is thus answered in favour of the assessee and against the revenue. Deduction u/s 32AB - whether the deduction to be allowed under section 32AB is to be restricted to each profit making unit of the assessee or by taking the utilization of the plant and machinery purchased by the assessee as a whole? - Held that:- Tribunal following the decision of Phoneix Overseas Limited vs. CIT reported in [1995 (10) TMI 75 - ITAT DELHI-D ] directed the Assessing Officer to recompute the claim of the assessee under Section 32AB of the Act in respect of each unit taking the utilization of the plant and machinery purchased by the assessee as a whole and not relate it with each profit making unit of the assessee only. We find the approach of the Tribunal to be in consonance with the provisions of Section 32AB of the Act as there is nothing on the basis of which it could be deduced that deduction is to be allowed only out of the profit of a unit or undertaking where machinery is installed and not out of the profits of the assessee. Nothing was urged by learned counsel for the revenue to raise any challenge to the aforesaid finding of the Tribunal. In the absence of any issue raised by the revenue, no ground for interference by this Court is made out. - Decided in favour of assessee.
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2015 (12) TMI 906
Reopening of assessment - disclosure of the purchase of the property was not made in his return of income - contention of assessee is that the reopening of the assessment for the year in question was made merely for the purpose of further investigation - Held that:- In the present case, there is no allegation of the assessee not having made full and final disclosure in his return of income for the relevant assessment year. Much emphasis has been laid on the fact that disclosure of the purchase of the property was not made in his return of income for the relevant assessment year. On being asked, Sri E.I.Sanmathi, learned counsel for the respondent-Revenue, could not place before the Court any provision of law which required the assessee, in the assessment year 2004-05, to disclose about the fact of having made the actual investment in his return of income. In the absence of any legal obligation on the assessee to disclose about the purchase of property in his return of income, it cannot be said that the assessee had concealed any income, even though when there is no dispute about the fact that he had disclosed his agricultural as well as non-agricultural income during the assessment year in question, and there is no finding as to income from which other source had been concealed by the assessee. Learned counsel for the respondent-Revenue has also submitted, that since there was investigation required with regard to the investment made by the assessee for purchase of property for the assessment year in question, and time for issuance of notice under Section 143(2) of the Act had expired, issuance of notice under Section 148 of the Act was necessitated. In our view, the same cannot be a ground for initiating proceedings under Section 148 of the Act. It was for the Assessing Officer to take proper steps earlier by issuing notice under Section 143(2), and if the law does not now permit issuance of any such notice, then invoking some other provision, which would not be applicable, is not the correct mode. - Decided in favour of assessee.
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2015 (12) TMI 905
Disallowance u.s 14A - CIT(A) deleted the disallowance as confirmed by ITAT - Held that:- While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case, it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., [2013 (5) TMI 580 - ITAT MUMBAI] we uphold the order of CIT (A) and ITAT - Decided against revenue
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2015 (12) TMI 904
Income earned from customers outside India - whether is liable to tax in India under DTAA with USA? - assessee’s claim that the software provided to the representatives did not constitute PE - Held that:- There is no agency PE of the assessee in India. As in the absence of any PE in India the profits if any attributable to the Indian operations cannot be assessed as business profits under Article 7 of the Treaty. - Decided in favour of assessee.
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2015 (12) TMI 903
Transfer pricing adjustment - whether the filter of export sales to total sales of 25% applied by ld. TPO and accepted by ld. DRP is justified or not? - Held that:- Rule 10B(2)(d) is relevant only for CUP method cannot be accepted. All these factors have bearing on the net margin to be determined in all methods including TNM method. We are in agreement with the submission of ld. Sr. DR, reproduced earlier, that those geographical markets in which parties entering into transactions operate is an important factor which influence the price of the transaction and that has to be factored into for identification of uncontrolled transactions. Various case laws relied upon by ld. DR also fortify the view taken by us. For the sake of brevity, we are not referring to those decisions which have been elaborately considered in the submi1ssions of ld. DR, reproduced earlier. We, accordingly, reject this contention of ld. counsel for the assessee. All the comparables had been excluded as they did not pass through export filter applied by ld. TPO. As we have already upheld the export filter applied by ld. TPO in earlier part of our order, we reject the assessee’s contention. There is no denying of the fact that Infosys BPO operates on a large scale and caters to wide variety of customers operating in different industries. Ld. counsel has filed before us extracts from the annual reports and white paper issued by Infosys in regard to ‘Process Progression Model ( “PPM”), a holistic model to transform business processes’.In view of above discussion, we direct ld. TPO to exclude Infosys BPO. eClerx Services Limited to be excluded from the list of comparables as this company is functionally different, which is evident from the business profile of eClerix, reproduced earlier from Annual Report. TPO had denied the risk adjustment claimed by assessee on the ground that assessee failed to show that the comparables had actually undertaken suck risk and failed to demonstrate how the same material affected from margins. He pointed out that unless it was shown that how the risk adjustment to fetch the result of each comparable and how the same would improve the comparability and unless adequate reasons are given for such adjustment, no adjustment can be allowed to the tax payer. Before ld. DRP also the assessee failed to furnish any data for quantification of risk. Unless the difference can be ascertained accurately and their import on the margin can be assessed with reasonable accuracy, the adjustment cannot be allowed. Under such circumstances, the matter also cannot be restored back to the file of ld. TPO. Denial of working capital adjustment - Held that:- The matter needs to be restored back to the ld. TPO to verify the assessee’s contention regarding all the invoices outstanding being for less than six months and, if, the same is found to be correct, then no addition is called for in view of the ITAT decision in the case of M/s Logix Micro Systems Ltd. (2010 (10) TMI 902 - ITAT BANGALORE). One of the plea of ld. counsel for the assessee was that the entire funds are received from parent company. However, this plea has been taken for the first time and was not taken before lower revenue authorities. Therefore, this aspect also needs to be considered by ld. TPO while deciding this issue de novo.
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2015 (12) TMI 902
Income from undisclosed sources by way of pay orders from Union Bank of Switzerland (UBS) – AG for US $ 4 million - Held that:- We find nothing on record to suggest any link between the assessee and the said company, which appears to be an Indian company and is only to be regarded as a distinct legal entity. And income due to or receivable by it could be regarded as the assessee's income only on the strength of evidence which leads to the inference of it being the assessee's money, being transferred to it, or the like. There is, in fact, no mention or even a whisper in this regard, or of any association or link between the two. Clearly, no case for including the amount received or receivable by the said company (US $ 2 million) in. The concept of income under the Act is vast, so that anything corresponding with the notion of income or gain qualifies to be 'income'. The exception would be where the amount is received on capital account, where, again, that received/receivable on transfer of a capital asset would stand to be assessed, to the extent of the gain embedded therein, as capital gains. There is nothing to suggest that the amount is on capital account, or in lieu of a capital asset. Why, any unexplained deposit or money, etc., is, by virtue of the provisions of the Act, and for the same reason, also deemed as income. That is, the onus to establish the nature (as well as the source) of the money, i.e., as being not in the nature of income, is on the assessee, and which he has clearly not.There is, under the circumstances, no case for or no basis to consider the impugned sum as not received (during the relevant year) and, two, of it being not in the nature of income. The assessment of the amount, sought to be paid to the assessee initially vide Pay Order (No. 004 06298 027 43 2895), as income, is, accordingly upheld. We decide accordingly, and the assessee gets part relief. Addition on account of life style other expenditure - Held that:- Though the assessee subsequently, vide his statement u/s.131 dated 01.5.2007, does state that the said estimate by him was only for the current year f.y. 2006-07, and that the household expenditure earlier was much lower at ₹ 20,000/- p.m., there is nothing to indicate that his lifestyle of few years earlier was any different, or any less ostentatious. Why, the letter under reference by UBS AG is itself of April, 1999, suggesting links abroad even at that time. Rather, he shifted to Mumbai and Pune from Hyderabad, whereat he filed his returns up to A.Y. 1999-2000, so that his reference to an earlier living could, then, only be to that at Hyderabad. The said estimate, to be valid in law, has to be an informed one, taking into account the different variables or attributes on which it depends, viz. the number of family members, their living style, including expenditure on food, clothing, domestic helps, etc.; the expenditure on their education, medical bills; the number of residences being maintained; social or health clubs joined, etc. No such exercise has been attempted by the Revenue. Under the circumstances, it is only considered proper to determine the addition on account of lifestyle, including by way of maintenance, expenditure on the basis of the assessee's own estimate, and which we do at ₹ 7.50 lacs. The assessee shall be allowed credit for any sum reflected in his books of account toward the same. We decide accordingly, and the assessee gets part relief. Income from undisclosed sources by way of unexplained capital - Held that:- The assessee's claim of having produced computerized books of account before the A.O., so that the latter's stating of him as not maintaining any books of account is incorrect, is neither here nor there. The 'opening capital' has nothing to do with the books of account for the current year. Rather, the books of account could only be of a business, while the bulk of the 'opening capital' is claimed to be in the form of assets carried over from generations, as part of the family heirloom. The books of account for the earlier years have admittedly been not produced. How and why have the same, having been acquired without incurring any cost, been valued? The income as returned for the nine years preceding the current year is meager, being not sufficient for the family even to meet two ends. Then, again, is the question of valuation. The claim of the opening capital, to the extent it relates to cash-in-hand of ₹ 5 lacs, is thus, again, without any explanation, none being even otherwise furnished. The addition is, accordingly, confirmed. - Decided against assessee
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2015 (12) TMI 901
Benefit of exemption u/s 11 denied - charitable purpose u/s 2(15) - profit motive - Association of leather merchants - AO was of the view that the assessee was allowing outsiders also to participate by keeping their stall in the trade fair organized by the assessee. The AO was therefore of the view that the assessee was having dealings or relations with the outside body and generating income. - Held that:- Keeping in mind the factual aspects and the objects of the Assessee and principle laid down in the decision of India Promotion Organization (2015 (1) TMI 928 - DELHI HIGH COURT ), in our view, will clearly show that the Assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. This is substantiated by the actual income received on operations of the Assessee and the expenditure incurred set out in the earlier paragraphs of this order. The proviso to Sec.2(15) of the Act is therefore not applicable to the case of the Assessee. We therefore hold that the Assessee is entitled to the benefits of Sec.11 of the Act. The AO has not disputed the conditions necessary for allowing exemption u/s.11 of the Act, except the applicability of proviso to Sec.2(15) of the Act. In view of our conclusions that the said proviso is not applicable to the case of the Assessee, we uphold the order of CIT(A) and hold that the Assessee's income is not includible in the total income. - Decided in favour of assessee
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2015 (12) TMI 900
Addition made on account of suppression of sales - CIT(A) deleted the addition - Held that:- CIT(A) has given a finding that it has not been shown by the AO that the assessee has wrongly recorded the sale price in the books. He further observed that this observation leads to suspicion and can be the starting point for investigation but this cannot be the basis for rejecting the books. The A.O. should have carried out inquiries with the buyers to confirm his suspicion before concluding that the books were defective. As no specific defect has been shown in the books, they could not be rejected. We find merit into this contention of the ld.CIT(A) that the AO has not made any enquiry from the buyers to verify the actual sale price. In the absence of the same, in our considered view, the AO was not justified in rejecting the books of account and making the addition. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld - Decided against revenue
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2015 (12) TMI 899
Disallowance of loss on revaluation of stock of equity shares - Held that:- The assessee has relied upon the entries passed in the books of account and also the fact that the shares were purchased out of borrowed funds in order to support its contentions that it intended to purchase the shares as stock in trade. However, as held by Ld CIT(A), these two factors alone cannot be taken as determinative factors and accordingly the intention of the assessee should be gathered from the conduct of the party and surrounding circumstances. We also notice that the assessee had originally disallowed part of interest expenditure relating to the purchase of shares of M/s Deepak Fertilizers & Petrochemicals Ltd treating the same as investment, but retracted from the same only during the course of assessment proceedings. Hence, in our view, the conduct of the assessee and the factors surrounding the issue shows that the assessee had intended to purchase the shares of the above said company only to hold them as investments. Hence we are of the view that the tax authorities are justified in rejecting the claim of the assessee that it was held as stock in trade. Consequently, the tax authorities are justified in rejecting the claim of revaluation loss arising on account of fall in the price of shares. Disallowance made u/s 14A - Held that:- we notice that the assessee itself has admitted that the shares of Deepak Fertilizers & Petrochemicals Ltd were purchased out of loan of ₹ 20.75 crores taken from M/s Nova Synthetics Ltd and the assessee itself has computed the interest of ₹ 40.94 lakhs as pertaining to the investment made in the shares of Deepak Fertilizers. Hence the interest expenditure of ₹ 40.94 lakhs cannot be taken as expenditure relating to the business carried on by the assessee, but it is related to the investment made in the shares. Hence, the interest expenditure is otherwise not allowable under the normal provisions of the Act. Accordingly, we confirm the disallowance of ₹ 40.94 lakhs made by the AO. Disallowance of interest expenditure u/s 24 - Since the assessee had not let out the house property, the AO held that the assessee cannot claim the same u/s 24 of the Act also - Held that:- The Ld D.R submitted that the assessee has changed the character of the property from business asset to house property. But the question here is whether the assessee is entitled to claim deduction of interest expenditure u/s 24 of the Act. The Ld CIT(A) has observed that the question of using of personal purposes shall not arise in the case of the assessee herein, since it is a legal person. Hence the restrictions placed in the Act in respect of property held for personal purposes shall not apply to the case on hand. The Ld D.R could not demonstrate as to how the decision rendered by Ld CIT(A) is contrary to the provisions of the Act. Hence, we do not find any reason to interfere with the view taken by Ld CIT(A) on this issue.
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2015 (12) TMI 898
Non-granting of exemption u/s.11 - DR submitted that activity of publishing of newspaper carried on by the assessee is a commercial one - Held that:- Giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under cl. (b) in relation to the service rendered by the assessee, the terms "any trade, commerce or business" refers to the trade, commerce or business pursued by the recipient to whom the service is rendered (as there may be a situation involving in publishing of newspaper. Thus, as observed earlier, publishing of newspaper is a commercial line which cannot be considered as charitable activity, so as to grant exemption u/s.11 of the Act. Accordingly, we are in agreement with the lower authorities and we deny the exemption u/s.11 of the Act. Disallowance of depreciation - Held that:- We have to make it clear that the claim of depreciation to be granted on written down value of the assets. In other words, if the assessee has already claimed capital expenditure on acquisition of assets as application of income in earlier years and the value of the assets on which depreciation claimed has been fully allowed as expenditure or application in the earlier years that cannot be any claim of depreciation once again. The present claim of depreciation cannot be a double deduction over and above the fully value of the assets, if it was granted as application of income in earlier years. With these observations, this ground is allowed for statistical purposes. Taxability of interest income, it is to be taxed under the head "income from other sources" and it is not an exempted income and there is no reason to exempt the same from taxation as the assessee is not entitled exemption u/s.11 of the Act, in view of the judgment of the Supreme Court in the case of Bangalore Club v. CIT (2013 (1) TMI 343 - SUPREME COURT ).
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2015 (12) TMI 897
Unaccounted cash transactions shown in seized material - CIT(A) conformed the addition - Held that:- The reply furnished by the assessee is not satisfactory inasmuch as it lacks evidence and tries to disown the facts of the impugned document. This categorical finding of CIT(A) could not be controverted by Learned A. R. of the assessee before us and therefore, we do not find any reason to interfere in the order of CIT(A) on this issue. When the assessee could not bring evidence to establish that the cash transactions shown in seized material is duly recorded in books of the assessee, it has to be accepted that unaccounted cash was channelized in books by showing bank draft receipts. Hence, there is no infirmity in the order of CIT (A) on this issue. - Decided against assessee. Disallowance made on ad hoc basis to the extent of 1% of total expenses - CIT(A) deleted the addition - Held that:- On the basis of general observations, without pointing out even a single specific defect in the vouchers or books of accounts, ad hoc disallowance made by Assessing Officer is not justifiable and the same was rightly deleted by CIT(A). Hence, on this issue, we decline to interfere in the order of learned CIT(A) - Decided in favour of assessee. Deduction claimed by the assessee u/s 80IA(4) disallowed - deduction u/s 80IA(4) is not allowable in case of a contractor and the assessee is a contractor and therefore, this deduction claimed by the assessee is not allowable to the assessee - Held that:- In the present case, categorical finding has been given by CIT (A) that the assessee was engaged in development of road and is not a mere contractor as he had deployed his own capital, used his own management and expertise in maintenance and had to bear the risk and defect correction. These findings of CIT (A) could not be controverted by learned DR of the revenue and therefore, this tribunal order rendered in the case of Koya & Co. (2012 (5) TMI 158 - ITAT HYDERABAD ) is squarely applicable because the facts are similar. In the order of CIT (A), he has followed this tribunal order and various other judicial pronouncements as noted by him in his order, as reproduced above. Considering this factual and legal position, we find no infirmity that the order of CIT (A) on this aspect that in the facts of the present case, it cannot be said that the assessee company was mere a contractor and not a developer. Non allowability of claim of the assessee u/s 80IA(4) because this claim is made by the assessee for the first time in the return filed by the assessee u/s 153A - Held that:- In both these years i.e. assessment year 2009-10 and 2010-11, the original return of income was filed by the assessee without claiming deduction u/s 80IA but within the time available u/s 139(1) because in assessment year 2009-10, the original return of income was filed by the assessee on 25/09/2009 whereas time available for filing the return was 31/10/2009 and in assessment year 2010-11, time available for revising the return was up to 31/03/2012 and the return u/s 133A was filed on 31/03/2012 i.e. within the time available for filing the revised return of income and till the date of search, due date of filing the return has not expired. Considering these facts that in these two years i.e. A.Y. 2007 – 08 & 08 – 09, where the time available for filing the revised return has expired before the date of search, CIT(A) has held that the claim made for deduction u/s 80IA(4) in the return filed by the assessee u/s 153A is not acceptable but in the later two years i.e. assessment year 2009-10 and 2010-11, since the time was available for filing the revised return/return of income u/s 139 (5)/ 139 (1) and the assessee could not file the revised return of income within the available time because of search, the return furnished in response to notice issued by the Assessing Officer u/s 153A should be considered as a return filed u/s 139(1) of the Act and therefore, on this issue also, we find no infirmity in the order of CIT(A) and therefore, this issue is decided in favour of the assessee in two assessment years i.e. assessment year 2009-10 and 2010-11 whereas in the earlier two years in which this issue has been raised by the assessee in its C.O. in assessment year 2007-08 and 2008-09, this issue is being decided against the assessee. Addition on the basis of valuation report of D.V.O - Held that:- In the present case reference was made without rejection of books of accounts and therefore, the same is not valid. On merit also, he has given a finding that the Assessing Officer has not considered this aspect that this property was directly purchased by the assessee and then renovated and photograph of the building before renovation and after renovation was submitted before the Assessing Officer and the said investment was duly disclosed by the assessee in its income tax returns but the DVO report does not say that there is an extra investment over and above the declared amount. His report is only an estimate of the fair market value and not an estimate of investment. He has given a finding that the DVO’s valuation report is based on fair market value and this fair market value is relevant for Wealth Tax purposes but under section 69, the term used is unexplained investment in the property. He has given example that if investment is made of ₹ 1,00,000 in April, 2003 and the fair market value of the same building in December, 2003 becomes then no addition can be made of ₹ 45,000/- being difference between investment in April, 2003 and fair market value in December, 2003. Learned D. R. of the Revenue could not point out any defect in this finding of CIT (A) on merit also and considering the totality of facts, we find no infirmity in the order of CIT (A) on this issue also. - Decided in favour of the assessee. Disallowance u/s 14A - Held that:- Allowability of expenses u/s 57(iii) that actual earning of dividend income is not necessary for the purpose of allowing interest expenditure incurred for borrowing for making investment in shares. We have held that on the same analogy, for the purpose of making disallowance u/s 14A also, actual earning of dividend income is not necessary and if it is seen that the expenditure was incurred for earning dividend income, disallowance has to be made u/s 14A of the Act. Accordingly, on this issue, we reverse the order of CIT (A) and restore that of the Assessing Officer. This issue is decided against the assessee. Addition on account of vehicle running expenses - Held that:- section 69C is not mentioned by the Assessing Officer, this comes out from the language of Para 7 of the assessment order that the assessee could not explain as to how this payment found recorded in the seized paper was recorded in the books of accounts. If the assessee fails to establish by bringing evidence that the entry of expenses found in seized material was recorded in books of accounts or that the same was paid out of known sources of fund, addition has to be made u/s 69C and deduction for corresponding expenditure is not allowable. Since the assessee could not establish by bringing evidence on record before us or before lower authorities that the expenditure noted in the seized material was in fact recorded in the books of accounts or was paid out of known sources of fund, the addition made by the Assessing Officer is to be considered as addition u/s 69C and since before CIT(A) or before us also, the assessee could not establish that the entry was made in the books of accounts or that the same was paid out of known sources of fund, deletion of addition by CIT(A) is not proper. Therefore, we reverse the order of CIT (A) on this issue and restore that of the Assessing Officer - Decided against assessee. Addition on account of cash payment exceeding - Held that:- Assessing Officer invoked the provisions of section 40A(3) of the I.T. Act and the total amount of ₹ 69,83,015/- alleged as paid in cash exceeding ₹ 20,000/- was disallowed. When the assessee carried the matter in appeal before the CIT(A), he deleted the disallowance. It is noted by CIT(A) on page No. 31 of his order that part of expenses are related to assessment year 2008-09 and in that year, when the A. O. asked the assessee to explain, it was submitted by the assessee before the Assessing Officer that cash payments were not made to one single person on one single day and there was no bar under the provisions of IT Act for multiple payments being made to different persons which were less than ₹ 20,000/- for each person. The CIT(A) has noted down some instances also that amount of ₹ 85,894/- has been stated to have been made in cash consisting of payments of ₹ 19,894 + ₹ 20,000 + ₹ 18,000 + ₹ 15,000 + ₹ 15,000. Regarding one more payment of ₹ 1.05 lac, it was noted by CIT(A) that this is not a single payment to one party but is being paid to various parties and in support, copies of accounts are enclosed. Similarly payment of ₹ 1,10,000/- and ₹ 10,01,420/- was made but it was stated the same is duly recorded in the books of accounts being paid to various persons as per books of accounts produced. Considering these facts that the cash payment in excess of ₹ 20,000/- was not made to a single person on single date, we decline to interfere in the order of learned CIT(A) on this issue. - Decided in favour of the assessee.
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2015 (12) TMI 896
Assessment u/s.153A - Held that:- In absence of any incriminating material, no addition can be made in the assessment u/s.153A Disallowance of additional depreciation - Held that:- Generation of electricity is a manufacturing activity and the assessee is eligible for additional depreciation u/s.32(1)(iia). Depreciation on electrical fittings used for mindmill - Held that:- CIT(A) correctly following the decision of the Tribunal in the cases of Poonawala Finvest Agro Pvt. Ltd. Vs. ACIT [2008 (6) TMI 586 - ITAT PUNE] held that on power evacuation, infrastructure, transformer, erection and commissioning of the structures, line work, electrical items will qualify for depreciation @80% whereas MEDA charges, site development expenses, cost of construction of controlled beam, civil work, internal road, development application charges, professional fees and bank charges will not qualify for higher rate of depreciation. She accordingly directed the AO to verify these expenses and allow depreciation on above items accordingly. Non making a claim u/s.80IA(4) in the original return of income filed u/s.139(1) - Held that:- CIT(A) was not justified in rejecting the claim made u/s.80IA(4) of the I.T Act merely because the assessee had not made the claim in the original return. Methodology of computation of deduction u/s.80IA(4) - Held that:- Each phase of windmill has to be considered as separate undertaking eligible for deduction u/s.80IA and therefore deduction u/s.80IA(4) should have been computed independently for each phase and not on consolidated basis. Applicability of provisions of section 80IA(5) - selection of initial assessment year - whether initial assessment year u/s.80IA(5) means year of installation of windmill or year in which the claim of deduction u/s.80IA is first made? - Held that:- The provisions of section 80IA(5) are applicable only from the initial assessment year, i.e. the assessment year in which deduction u/s.80IA was first claimed by the assessee after exercising his option as per the provisions of section 80IA(2) of the Act. - Decided in favour of assessee.
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2015 (12) TMI 895
Computation of cost of construction - Held that:- CIT(A) has determined the cost of construction of the flats at ₹ 700/- per sq.ft. as against ₹ 511/- estimated by the Assessing Officer, without giving any valid reason for the relief allowed to the assessee. The CIT(A) has allowed the relief on the ground that selling price of the flats for succeeding year has been taken at ₹ 735/- per sq.ft. We are unable to appreciate that how the selling price in the succeeding year could determine the cost of construction of the property for the preceding year. In these facts of the case, we hold that the assessee could not adduce any evidence in support of its estimate of cost of construction and no valid reason could be assigned by the CIT(A) while giving substantial relief to the assessee and there was some basis for arriving at the cost of construction at ₹ 511/- per sq.ft. by the Assessing Officer on the basis of the assessee’s own valuer report - Decided in favour of revenue Estimating the net profit rate of 15% of gross contract receipts - Held that:- he addition was made by estimating the net profit rate of 15% of gross contract receipts minus 8% of contract receipts by the Assessing Officer. We find that there was no basis for estimating the profit by applying the net profit rate of 15% and, accordingly, we hold that there is no mistake in the order of learned CIT(A) in holding that the Assessing Officer has adopted 15% rate without any concrete reason. Accordingly, the order of learned CIT(A) on this issue is confirmed - Decided against revenue
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2015 (12) TMI 894
Disallowance u/s 14A r.w.r 8D - Held that:- The assessee is a stock trader and not holding any investment in shares and securities then so far as interest expenditure is concerned, the same cannot be attributable or allocable for earning the dividend income which is only an incidental income and not intended income of the activity of the assessee being trading in shares and securities. We find that in a series of decisions, this Tribunal has decided this issue by holding that no disallowance u/s 14A can be made on account of the expenditure incurred for trading in shares & securities merely because the assessee earned the incidental dividend income. The interest expenditure is exclusively incurred for trading activity and, therefore, cannot be said to be an expenditure incurred for composite activity yielding taxable and non taxable income and accordingly, the same cannot be attributed /allocated in respect of dividend income in the hands of the assessee. As regards the other expenses, we find that the Assessing Officer has not pointed out any expenditure debited to the P&L Account which has any proximate nexus with the dividend income. The entire expenditure debited to the P&L account has a direct nexus with the trading activity of the assessee, therefore, the disallowance made by the assessee on its own is proper and just and no further disallowance on account of administrative expenses is justified. In view of the above discussion, we delete the addition made by Assessing Officer u/s 14A. - Decided in favour of assessee.
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2015 (12) TMI 893
Deduction under section 54EC denied - assessee submitted that the period of six months should have been counted from the end of the month and if the same is counted from the end of the month, then investment made by the assessee was within a period of six months and assessee is entitled to get the impugned exemption - CIT(A) has accepted such contention of the assessee and granted the relief to the assessee - Held that:- In the decision of Special Bench in the case of Alkaben B. Patel vs. ITO [2014 (3) TMI 842 - ITAT AHMEDABAD ] “6 months” have been interpreted and it is held that the same would mean 6 calendar months and not 180 days. Thus we find no infirmity in the relief granted by Ld. CIT(A). - Decided against revenue
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2015 (12) TMI 892
Disallowance of commission - the same was not accrued in the assessment year under consideration - Held that:- As per clause 4 of the agreement, the commission payable to KSB Singapore(Asia Pacific) at the rate not exceeding 12.5% on FOB value of the order in the currency in India in which the order is placed. These charges will fall due for payment on receipt of payment from the clients. Being so, it is clear that the payment of commission accrued only on realization of sale value. The assessee’s claim is that it is booking expenditure on the basis of sale value and not on the basis of sale realization and this system has been accepted by the department in earlier years as well as in the subsequent year. In our opinion, we are not concerned with the any other year which are not before us. In our opinion, if the department has accepted in earlier year, it was a mistake and there is no merit in continuing the same mistake in the assessment year under consideration. The payment of commission accrued only on realization of sale value and it is to be allowed when the realization of sale value which is in compliance with the agreement cited supra and disallowance is based on the above agreement brought on record by the authorities and hence, we do not find any infirmity in the orders of the authorities below, which is confirmed.- Decided against assessee.
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2015 (12) TMI 891
Penalty u/s 271(1)(c) - cessation of liability u/s 41(1) in respect of two trade creditors and in respect of one trade debtor - Held that:- It clearly emerges that the amounts in question were carried over trade credits from earlier year, corresponding purchases were included in trading a/c thus legally speaking if trade credits are added as cessation of liability, the relevant entries exist in books and if they are held as bogus then they belong to earlier years. These pleas can be taken by assesse in penalty proceedings and in that case penalty can be imposed not on the sole basis of alleged surrender but after consideration of merits of the explanation. AO has held that the surrender is not acceptable and chose to add it u/s 41(1) of the Act. Thus technically even the surrender is not accepted. The details about trading liabilities and transactions were reflected in the accounting statements which were part of the return of income. Hon’ble Supreme Court in Reliance Petro Products case (2010 (3) TMI 80 - SUPREME COURT ) has held that if the relevant information is filed with the return of income in that case any variation in the claims of the assesse will not entail penalty. This judgment also supports the case of the assesse, in view thereof also the penalty in this case can not be imposed by merely referring to the alleged surrender and without considering the explanation. Thus, in consideration of entirety of facts, circumstances and case laws as relied on by assesse, we delete the penalty. - Decided in favour of assessee.
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2015 (12) TMI 890
Disallowance u/s. 43B - Held that:- AO has erroneously or inadvertently overlooked the accounting treatment given by the appellant, (i.e. remittance of interest entries of earlier years), which has increase the book profit of the appellant in notional manner, and ignored the reversal entire made in this regard to nullify such effect. Accordingly the claim of the appellant in this regard is found justified and the AO is directed to reduce the book profit of the appellant to the extent of ₹ 39467254/-. Consequently this ground of appeal is upheld.'' Since the ld. CIT(A) has given detailed account of the nature of the entries, its effect on book profits and as to how the action of the AO was not justified, therefore, no interference is called for in ld. CIT(A)'s order. PF and ESI contribution of the employees - Held that:- As the assessee had actually paid the PF & ESI contributions before due date of filing of the return which has not been disputed by the ld. DR at the time of hearing. - Decided in favour of the assessee. Disallowance on vehicle and telephone expenses - Held that:- We have found that the assessee has paid FBT tax thereon. Besides, this issue stands decided in favour of the assessee by the Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co.vs CIT [2001 (7) TMI 70 - GUJARAT High Court] holding as the Tribunal was wrong while disallowing 1/6th of the total car expenditure and depreciation claimed by the assessee on account of the personal use of the cars which were used by the directors. We, therefore, answer the question in the negative, i.e., in favour of the assessee and against the Revenue.
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2015 (12) TMI 889
Tds u/s 195 - disallowance under section 40(a)(i)in respect of the amount paid to non-resident M/s. Fund Quest for the purpose of investment management - non deuction of TDS - whether the payments made by the assessee to Fund Quest is in the nature of royalty? - Held that:- A perusal of the term of 'Royalty' as defined in the Act shows that it does not include any information provided in the course of advisory services. We do not agree with the findings of the CIT(Appeals) on the issue. Since, payments made to M/s. Fund Quest are not in the nature of 'Royalty' and the services were rendered abroad, no part of income had accrued or arisen in India. The assessee is not liable to deduct tax at source on the payments so made. The findings of the CIT(Appeals) on this issue are set aside - Decided in favour of assessee. Disallowance of expenditure incurred on improvement/renovation of leasehold building - CIT(A) deleted the addition - Held that:- The expenditure incurred by the assessee for demolition, painting, flooring, partition, modular and electrical works on the leasehold premises is revenue expenditure. Thus, we uphold the orders of the Commissioner of Income Tax (Appeals) on this issue and reject the grounds of appeal raised by the Revenue. See Sundaram BNP Paribas Asset Management Co. Ltd. v. ACIT [2011 (1) TMI 1242 - ITAT CHENNAI ] - Decided in favour of assessee.
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2015 (12) TMI 888
Grant of registration u/s 12AA - grievance of the assessee since the assessee has applied for registration on 18.12.2009, the CIT should have granted registration w.e.f. 1.4.2009 as per sub-clause (ii) of proviso to section 12A(1)(a) and secondly the condition imposed by the CIT for grant of registration u/s 12AA of the Act by requiring the assessee to get itself registered u/s 43(1) of the Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act, 1987 - Held that:- As per clause (ii) of the first proviso to section 12A (1)(a) of the Act in a case where the application for registration is not filed before the commissioner before the expiry of a period of 1 year from the date of creation of the trust or the establishment of the institution, then the registration shall be granted from the first day of financial year in which the application is made. However, as per the second proviso the clause shall not apply in relation to any application made on or after the first day of June, 2007. Similarly, sub-section 2 of section 12A of the Act which was inserted into the statute from 1.6.2007 mandates that in a case where application for registration is made after the first day of June, 2007, the provisions of section 11 & 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made. Therefore, in view of the clear statutory provision as contained u/s 12A(2) of the Act which is applicable to applications for registration made after 1.6.2007 we do not find any infirmity in the order of the CIT in granting registration for the assessment year 2010-11. Therefore, assessee’s contention in this respect cannot be accepted. Requirement of registration u/s 43(1) of the Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act, 1987 is concerned, we are not able to agree with the view of the CIT in this regard. Law is now fairly well settled that for registration u/s 12A of the Act the society is not required to be registered u/s 43(1) of the Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act, 1987. Further, it is a fact on record that the assessee had applied for registration u/s 43(1) of the Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act, 1987 before the Assistant Commissioner, Endowments Department. However, assessee’s application for registration was not acted upon and the assessee was informed that as there is a ban on new registrations, assessee’s application cannot be accepted. That being the case, when the authorities are not granting registration under the Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act, 1987, registration u/s 43(1) cannot be made a condition precedent for getting registration u/s 12AA of the Act. Assessee cannot be expected to perform an impossible act. Non-registration u/s 43(1) of the Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act, 1987 will not be a bar for the assessee in getting exemption u/s 11 of the Act when there is no such restriction put u/s 11, 12 & 13 of the Act. In view of the aforesaid we direct the CIT to grant registration u/s 12AA of the Act to the assessee without insisting upon registration u/s 43(1) of Andhra Pradesh Charitable & Hindu Religious Institutions and Endowments Act, 1987.
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2015 (12) TMI 887
Registration u/s 12A denied - Held that:- Undisputedly, the assessee was created by registered trust deed dated 5.10.2012 and it applied for registration on 25.4.2013. Therefore, it is not unusual that it could not commence any activities within such a short period. Further, admittedly when it has not received any funds nor commenced its activities, there is no need to maintain books of accounts. In the aforesaid circumstances, it cannot be held that as the assessee has not maintained books of accounts or commenced its activities, the activities are not genuine, hence, registration cannot be granted u/s 12A of the Act. So far as objects of the assessee as mentioned in the trust deed are concerned, a perusal of the same would clearly show that they come within the meaning of ‘charitable purpose' as defined u/s 2(15) of the Act. It is well settled principle of law that at the time of grant of registration, the CIT is only required to look into the object of the trust and genuineness of its activities. So far as the object of the trust is concerned, there is no adverse comment by the CIT that they are not charitable in nature. That being the case, only because it has not commenced its activities within such a short period of time, there is no justification in rejecting the application for grant of registration u/s 12A of the Act. Commencement of activity cannot be the sole criteria for not granting registration u/s 12A of the Act. We direct the CIT to grant registration to the assessee u/s 12A of the Act. - Decided in favour of assessee
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2015 (12) TMI 886
Registration u/s 12AA and approval u/s 80G denied - Held that:- It was not proper on the part of the CIT to reject the application solely on the ground that the assessee has not commenced charitable activities as per its objects. When he has not expressed any doubt with regard to the charitable object of the assessee and when there is no other material before him to conclude that assessee’s activities are not genuine, there is no reason to refuse registration u/s 12AA of the Act. The grant of registration u/s 12AA of the Act does not automatically entitle the assessee for exemption u/s 11 of the Act. The Assessing officer is empowered under the Act to look into both the genuineness of the activities and application of fund and in case of any violation of the provisions contained under section 11 to 13 of the Act, the assessee would not be entitled for exemption u/s 11 and would be subjected to tax. That being the case, in our view, refusal of grant of registration u/s 12AA of the Act is not justified solely on the ground that the assessee has not commenced its activities. We are supported in our view by the decisions relied upon by the assessee. In that view of the matter, we set aside the order of the CIT and direct him to grant registration u/s 12AA of the Act to the assessee. - Decided in favour of assessee.
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Customs
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2015 (12) TMI 861
Evasion of education cess - Malafide intention - Imposition of penalty - Held that:- Appellant paid the tax on G.I. wires by filing an appropriate bill of entry and paid the duty as assessed by the Assessing Officer. However, later it was found that the amount of education cess was not paid by the appellant and a show cause notice was issued. The appellant properly paid the duty demanded alongwith interest. In a case of assessment over a bill of entry, it is the duty of the Assessing Officer to properly assess the duty and onus cannot be shifted to the appellant for not calculating the correct rate of duty. Appellant promptly paid the entire amount of duty demanded alongwith interest. Under the present factual matrix, it is not a fit case for imposition of penalty under Section 14 (a) of the Customs Act, 1962 - Decided in favour of assessee.
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2015 (12) TMI 860
Levy of penalty - 100% EOU erroneously availed the Benefit of Notification No.52/2003-Cus. dt. 31/03/2003 - Held that:- There is no contravention by the respondents inasmuch as claiming of an exemption notification at the time of import of the goods cannot be held to be with any mala fides. If the notification was not available to the respondents, the Customs officer was within his right to deny the same at the time of import itself. However the respondents were allowed to clear the goods under the claim of notification. As such, we find force in the reasoning of the Commissioner that it is not a case of any mala fide requiring confiscation of goods or imposing any penalties. - Decided against Revenue.
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2015 (12) TMI 859
Absolute confiscation of empty cartridge material - Confiscation of excess material - Held that:- Commissioner (Appeals) remanded the matter to the Adjudicating Authority for re-adjudication of considering the provisions Section 119 of the Customs Act. In our considered view, the confiscation under Section 119 of the Act would be ascertained after examining the facts in details. As the matter was remanded to the Adjudicating Authority, the imposition of fine and penalty as contended by the Learned Counsel should also consider in the interest of justice. - we direct the Adjudicating Authority, in denovo adjudication to consider the case of both the sides, Revenue and appellants on facts and law of the case and shall pass the order, in accordance with law - Appeal disposed of.
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2015 (12) TMI 858
100% EOU - Mis-Declaration of excess quantity of export goods to meet export obligation - Confiscation of goods - Gutkha under the brand name of 'kolhapuri'. - Imposition of redemption fine - Held that:- It is a fact on record that on physical verification, there was shortage of quantity of export goods to the tune of around 30%. If the goods were not checked at the time of export, the appellant could have shown the quantity of export goods as shown in the shipping bill as correct and had availed rebate claim thereon. It is only after detection of the shortage of quantity, the appellant sought to forego the rebate claim. Therefore, the excuse of the appellant that they have to meet export obligation and their labour was in hurry and has packed less quantity of export goods in the containers is not sustainable. In these circumstances, the charge of mis-declaration of quantity of good by the appellants stands proved. Therefore, the lower authorities have rightly held that the export goods are liable for confiscation. In the impugned order, the redemption fine of ₹ 12 lakh has been imposed on the appellant whereas the quantity in number found short is 15,26,400 pouches, which I find is appropriate. Therefore, redemption fine of ₹ 12 lakh imposed on the appellant is confirmed - Appeal disposed of.
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2015 (12) TMI 857
Duty demand - Enhancement in value of goods - Violation of principle of natural justice - benefit of the Notification No. 149/95 - Held that:- Except for the non declaration of brand in the Bills of Entry the other misdeclaration alleged by the Revenue is lower value declared in the Bills of Entry. To arrive at the correct value, a market inquiry was done. In spite of clear directions by the Commissioner(Appeals) in the first stage, we find that principles of natural justice still remained violated. In the impugned order, the Commissioner(Appeals) has clearly recorded that the Department is duty bound to convey to the respondent the name of the market, name of the address of the person from whom market inquiry was made, name of the product including brand name for which inquiry were made and retail sale price of the product item-wise of brand-wise. Further the method of arriving at the assessable value from the retail sale price needs to be supported with evidence. The department merely considered margin of profit of 50% and 25% at the retail and wholesale stage respectively without giving any supportive evidence as to how this percentage was arrived at. Another flaw in arriving at the assessable value is that although spectacles are said to be of various brands, when it came to the market inquiry the same retail price was considered in respect all spectacles. This itself makes the market enquiry questionable and unreliable. Revenue has not also explained why Rule 5 and 6 which relate to similar or identical goods should not have been considered when the appellant have given the price of contemporaneous goods as observed by the Commissioner(Appeals) and especially when such goods are available in the market as revealed in the market enquiry. Even if the contemporaneous goods do not indicate the brand, it was duty of Revenue to examine documents relating to contemporaneous imports but it failed to do so. - impugned order is not sustainable from both points of view i.e failure to observe principles of natural justice as well as no following appropriate procedure for arriving at assessable value. However, we do agree with order of the Commissioner(Appeals) in denying benefit of the Notification No. 149/95 as the importer admitted that they are not an Actual User. - Decided against Revenue.
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2015 (12) TMI 856
Provisional release of seized goods - Assessee being aggrieved by the allegedly harsh conditions of provisional release filed appeal before Commissioner (Appeals) on the ground that such orders are appealable as held by High Court of Delhi - Held that:- In the light of the order of the High Court of Delhi [2015 (2) TMI 27 - DELHI HIGH COURT], which has not been stayed or set aside, Board’s Circular dated 4-9-2013 is of no consequence. Merely because an SLP is proposed to be filed against the said orders of the High Court of Delhi does not in any way eclipse its binding force. Thus, the impugned order suffers from no appealable infirmity - provisional release not stayed.
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2015 (12) TMI 855
Valuation - Enhancement in value - Import of unbranded goods - Held that:- If the value has to be loaded based on the contemporaneous value of the imports of identical/similar goods, one of the relevant facts for consideration is the quantum of imports involved in the transactions and also the nature of goods, in respect of the material particulars. It is a normal trade practice that if the quantity of goods purchased and sold is high/discounts are offered and the price of the transactions will be lower. Similarly, it is also a well-known fact that branded goods fetch a higher price than unbranded goods. In the present case, we observe that the quantum of imports was substantial and the goods were also unbranded. There is no evidence placed by the Revenue while undertaking the assessments for enhancing the value. There is no comparison done at all with respect of the quantum of imports involved in the transactions and whether the goods are branded or not. In the absence of such a comparison, loading cannot be done arbitrarily as the Customs Value Rules do not provide for arbitrary loading of values. In the present case, we notice that the loading done is arbitrary and without any basis. Therefore, such enhancement of value cannot be sustained in law. Accordingly, we set aside the impugned order - Decided in favour of assessee.
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2015 (12) TMI 854
Waiver of pre deposit - forging of documents for the export of Non-Basmati Rice, Basmati Rice and also Murate of Potash (MOP) - Held that:- Adjudicating Authority had imposed penalty on all those appellants for the role played by them in respect of forging of documents for the export of Non-Basmati Rice, Basmati Rice and also Murate of Potash (MOP). On evaluating the evidence cursorily, we prima facie view all the four appellants has some role to play in forging the documents. All the legal arguments made by the Ld Counsel can be considered at the time of final disposal of appeal. At this juncture, we hold that none of the appellants made out the case for complete waiver of the pre-deposit of the amounts involved. Accordingly, we are of the view that they should be directed to pre-deposit some amounts for hearing and disposing the appeals on merits - Partial stay granted.
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2015 (12) TMI 853
Confiscation of vehicle - non-production of homologation certificate with respect to the car under import is a tedious process and involves dismantling of the car - Held that:- There was a requirement of production of homologation certificate in respect of cars imported from abroad and the appellant also undertook to produce the same within a period of six months from the date of import of the car which the appellant failed to comply with and therefore, the adjudicating authority came to the conclusion that the said car is liable to confiscation under Section 111(d) of the Customs Act. The said finding cannot be faulted at all. However, since the car is used by the company in India and there is no commercial consideration attached or involved in the matter, the imposition of fine and penalty has to be minimal. - Appeal disposed of.
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2015 (12) TMI 852
Release of bank guarantee - Unconditional stay already granted - Held that:- The fact of submission made by the advocate as regards the bank guarantee, already stands considered by us while passing the Misc. order and it stands observed that unconditional stay was granted on its merits and not on the basis of bank guarantee. There was no direction to the appellant, while passing the stay order on 12-10-2010 for keeping the bank guarantee alive. As such, raising the same issue again, does not advance the Revenues’ case. - Further the fact of executing the bank guarantee during the course of investigation with an undertaking to keep the same alive till the final disposal by the Apex Court also does not support the Revenues’ case, inasmuch as it is the stay order of the Tribunal which would prevail and not an undertaking given by the assessee. - Appeal disposed of.
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Corporate Laws
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2015 (12) TMI 847
Demerger - date with effect from which demerger is sought to be effected - Held that:- The Format of Notice of Demerger, given in the Rules supra also requires the date with effect from which demerger is sought to be effected to be specified, meaning that the demerger need not be necessarily from the date of the notice and can be from a date prior to or after the date of notice of demerger. A perusal of the complete Rules, which the counsel for the petitioner himself perhaps did not peruse, clarifies the position beyond doubt and negates the contentions urged before this Court. The same, I may highlight, expressly provides that no concurrence / acceptance from the partners is required and can be effected at the option of 75% or more partners of one of the erstwhile firms. Here, all the partners of one of the two merging firms, opted to demerge. Upon such demerger, the other merging firm viz. Arun Khanna & Associates stood revived. Thus in this regard notice that though Section 25 of the Chartered Accountants Act, 1949 prohibits “company” from practising as a Chartered Accountant but does not contain any such bar against a partnership firm. Rather, the First and the Second Schedule to the Act while stipulating what is professional misconduct describe expressly what conduct as partner of a firm amounts to misconduct. It appears, that in the said spirit, the Rules of Merger and Demerger aforesaid were framed.
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Service Tax
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2015 (12) TMI 885
Demand of service tax - steamer agent service, cargo handling service and business auxiliary service - Waiver of penalty - Held that:- Apparently, the appellants paid the amount when audit objection was raised to settle the issue rather than pursuing the matter and litigating further in this case. The department has proceeded only for the purpose of imposing penalty. The amount was paid even before show-cause notice was issued along with interest. If the appellant were to contest the issue on classification at that stage itself the benefit of limiting the demand to normal period also could have arisen and further, whether demand itself was justified or not could have been examined. In such a situation, the appellant is definitely entitled to benefit of provisions of Section 80 of Finance Act, 1994 for the purpose of penalty under Section 78 of Finance Act, 1994. In this case, during the period prior to 2010, the services rendered in port were to be classified according to the category and the nature of service. Only after 2010, the statute treated all services rendered within the port as port service. Therefore since the activity undertaken and the amount collected is for transportation within the port from warehouse to wharf and vice-versa, appellant could have entertained a bona fide belief that what is being rendered is a GTA service. - Decided in favour of assessee.
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2015 (12) TMI 884
Denial of refund claim - service tax paid on GTA service twice by them due to clerical error - Held that:- Appellant has produced CA certificate before the adjudicating authority in support of their claim for satisfaction of the adjudicating authority. Instead of examining of these documents, he rejected the refund claim on the ground that the appellant has not produced any supporting documents. In the absence of any particular document, which is required for his satisfaction, the refund claim cannot be rejected by the adjudicating authority as well as appellate authority. In these circumstances, I find that as the appellant has been able to prove that they have paid service tax twice during the month of March, 2013. Therefore, the appellant is entitled to refund of the excess service tax paid by them. Therefore, I set aside the impugned order and allow the refund claim of the appellant alongwith interest to be paid to the appellant within thirty days of receipt this order - Decided in favour of assessee.
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2015 (12) TMI 883
Demand of Service Tax - reimbursement of the expenses - Traveling expenses, Lodging and Boarding expenses incurred by the appellant’s employees while undertaking official tour - Held that:- Reimbursable amounts on which service tax liability has been confirmed is a consideration for the services rendered. On perusal of the order, we find that there is no dispute as to the fact that the amounts on which service tax liability is confirmed are reimbursable expenses incurred for traveling, lodging and boarding and hotel charges. Both the lower authorities have invoked the provisions of Rule 5(1) of the Service Tax (Determination of Value) Rule, 2006. We find that the very same provision has been struck down by the Hon’ble High Court of Delhi in the case of Inercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT]. Since, the provisions of Rule 5(1) of the Service Tax (Determination of Value) Rule, 2006 has been struck down, we find no merits in the arguments raised by the Ld. AR, accordingly we set aside the impugned order - Decided in favour of assessee.
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2015 (12) TMI 882
Denial of refund claim - SEZ - Notification No. 9/2009-ST dated 03.03.2009 - services did not have nexus with the authorized operations - Held that:- While rendering the decision in favour of the appellant in that case, the Tribunal had relied upon the decision in the case of Tata Consultancy Services Ltd. Vs. CCE (LTU), Mumbai [2012 (8) TMI 500 - CESTAT, MUMBAI]. - In the case of Tata Consultancy Services the Tribunal had taken the view that once the Approval Committee which has the Commissioner of Customs also as a Member issues certificate that services received by the assessee are in relation to their authorized operations, subsequently a contradictory decision cannot be taken by the officers of Customs. As regards services wholly consumed within SEZ, even though there is no necessity to discharge service tax liability, it was held that this does not mean that in a case where service tax has been paid, assessee is not eligible for refund. - Decided in favour of assessee.
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2015 (12) TMI 881
Denial of refund claim - Business Auxiliary Service imported from abroad - bar of unjust enrichment - Held that:- There was no question of passing on the burden of payment of service tax to another person by the appellant inasmuch as the payment made by them was under the reverse charge mechanism under Rule 2 of the Service Tax Rules 1994. The fact remains that the service tax in question was paid in cash and the amount is lying with the department. - question of unjust enrichment in this case does not arise. A similar view was taken by this Tribunal in the case of CCE, Pune-I Vs. Volkswagen (India) Pvt. Ltd. [2013 (11) TMI 1534 - CESTAT MUMBAI] and it was held that when duty is paid second time by mistake, the question of unjust enrichment does not arise since no customer will pay duty twice for the same set of goods. - Decided in favour of assessee.
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2015 (12) TMI 880
Demand of service tax - Renting of immovable property - Claim of the appellant that a portion of the premises was rented out for running the hotel to M/s. Savi Associates has not been considered on the ground that the definition of renting of immovable property service covers the renting of premises for commercial purposes without considering the part of the definition which provides for exclusions for certain categories. On going through the definition - Held that:- I find that the definition excludes buildings used for the purpose of accommodation, including hotels. It has not been disputed by the lower authorities that the portion of the premises rented out to M/s. Savi Associates has been used for running a hotel. Therefore the rent collected from M/s. Savi Associates has to be excluded for the purpose of collection of service tax. - If the amount already paid covers the amount of service tax payable with interest, it can be said that appellants have fulfilled their obligation under the law in its entirety. This observation is made taking into account the provisions of Sections 80(1) and 80(2) of Finance Act, 1994. Since I consider that appellants had reasonable cause for non-payment of tax during the relevant time, therefore penalty is not imposable. Even otherwise provisions of Section 80(2) would also apply to the appellant. - Matter remanded back - Decided in favour of assessee.
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2015 (12) TMI 879
Demand on interest on reversal of CENVAT Credit - credit was availed but not utilized - Held that:- Appellant has placed the Cenvat Credit Register during the relevant period before me and it was clear that when credit was taken from February 2008 up to July 2009, balance has not come down below the figure of ₹ 33,15,661, the disputed amount. In July 2009, this amount has been reversed. Further, in reply to the show-cause notice, the appellants have clearly stated that they have taken credit but never utilized during the entire period and it was available in the Books of Account and there is no contra finding. - Since the issue is covered by decision of the Hon'ble High Court of Madras [2014 (11) TMI 89 - MADRAS HIGH COURT], respectfully following the same, it is held that the appellant is not liable to pay interest and penalty - Decided in favour of assessee.
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2015 (12) TMI 878
Denial of refund claim - Unjust enrichment - Held that:- Evidence produced by the appellant for payment of service tax and a copy of the General Ledger is sufficient to show that the amount has been paid by the appellant. Since service tax was not collected separately during the relevant period from the appellant, the amount received by the service provider is treated as cum-tax amount. The question is not whether the Rule 4A of the Service Tax Rules is observed or not. The solution is penalty on the service provider and not rejection of refund claim to the client. Moreover, the appellant has claimed that invoice was issued by the service provider only when the construction was over and he produced a copy of the invoice now. Hence this deficiency is made good. In these circumstances, it cannot be said the appellant has not borne the liability of service tax - Decided in favour of assessee.
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2015 (12) TMI 877
Waiver of pre deposit - levy of service tax - security service by Police Forces of the State - Held that:- prima facie, the consideration amounts to income of the State of Rajasthan which is excluded from the purview of the taxation jurisdiction of the Union vide Article 289 of the Constitution. We also notice that C.B.E. & C. Circular Nos. 87/7/2006-S.T., No. 96/7/2007-S.T. and No. 98/1/2008-S.T., dated 18-12-2006, 23-8-2007 and 4-1-2008 also clarify that such consideration received for providing security service by Police Forces of the State which is remitted to the Government account, is not liable to tax - Stay granted.
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2015 (12) TMI 876
Waiver of pre deposit - construction of power house building - Held that:- Definition of works contract clearly indicates that contract which is in respect of execution of building dam, are excluded from work contract. We find that the contract which has been awarded to M/s Vishwaj Enery Pvt. Ltd. is for complete hydro project which could include construction of dam, Power House, etc. Prima facie applicant's service of construction of the power house falls within the contract work. We hold that the applicant has made out a case for waiver of pre-deposit of amounts involved and allow the application for waiver of pre-deposit of the amounts involved and recovery thereof is stayed till the disposal of the appeal - Stay granted.
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2015 (12) TMI 875
Waiver of pre deposit - inclusion of reimbursement of expenses in the value - allocation of cost of expenses - renting of immovable property - Held that:- Appellant is acting as pure agent. As regards BESCOM, charges actually paid to the BESCOM can be said to be in the nature of pure agent since BESCOM charges are required to be paid by the individual flat/space owners. At this stage, therefore, in the absence of any evidence to show that there were no separate lease agreements for each tenant, at this stage, the claim of the appellant that they acted as pure agent on a prima facie basis has to be accepted. However, as regards the difference of ₹ 95,89,015/-, according to the appellants, this is collected towards generator power by the appellants themselves. This is a facility provided by the leaser to the tenants and there are two ways of collecting the amount. One way would be treating average expenses as part of the rent. The other was would be recovering the expenses on the basis of a calculation. Other than submitting that it can be shown by them that the actual expenses incurred on power generator, depreciation, etc., is less than what has been recovered, no evidence has been produced. This expenditure cannot be considered as expenditure incurred on behalf of the tenant and paid to someone else and therefore, appellant has acted as a pure agent cannot also be a view. In such a situation, it can be said that appellant has not made out a prima facie case in respect of the amount collected on this account of ₹ 95,89,015. Therefore, appellant has to be put to some terms to pay tax on this amount. - Partial stay granted.
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Central Excise
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2015 (12) TMI 874
Valuation of goods - Whether the pre-delivery inspection charges and after sales service charges are to be included in the assessable value - Held that:- The assessee/manufacturer had agreed to share half of the advertisement expenses since advertisement benefited both the manufacturer as well as the dealer. The assessee/appellant had claimed deductions of the aforesaid expenditure which was held by the Adjudicating Authority as inadmissible. The decision was upheld in appeal before the Commissioner as well as the Tribunal. However, this Court reversed the view of the lower authorities holding that the assessee would be entitled to claim deduction from price realised from dealers on the aforesaid account after taking note of the relevant clauses of the Agreement between the parties from which it was found that the agreements were genuine entered into on arms length basis and were between principle to principle under which payments were in fact made. - where the manufacturer has sold his goods to his dealer and wholesale dealer thereafter does ASS to the customer and incurs expenditure therefore, it cannot be added back to the sale price charged by the manufacturer from the dealer for computing the assessable value. This is more so, where the ASS is done by the dealer many weeks after the goods have been sold to him by the manufacturer. Such a post-sale activity undertaken by the dealer is not relevant for the purpose of excise since the goods have already been marketed to the dealer. PDI charges and free ASS charges would not be included in the assessable value under Section 4 of the Act for the purposes of paying excise duty. The view taken by the Tribunal in favour of assessees in this behalf is correct in law and all the appeals of the Department, are dismissed. On the other hand, Larger Bench view in Maruti Suzuki [2010 (8) TMI 49 - CESTAT, NEW DELHI] does not lay down the law correctly and is, therefore, overruled - Decided in favour of Assessee.
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2015 (12) TMI 873
Refund of Terminal Excise Duty (TED), which was erroneously paid to the excise department. - goods were exempted absolutely vide Section 5A - Held that:- Central Govt. in exercise of the powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (FTDR Act) issued Export and Import Policy 2004-2009. The Chapter 8 of the said policy provides for ‘deemed exports’ specified therein. - A similar question came up for consideration before Hon’ble Division Bench of this Court [2015 (8) TMI 292 - DELHI HIGH COURT] ‘Union of India & Ors. vs. Alstom India Ltd.’. In the said case, writ petition [2015 (7) TMI 393 - DELHI HIGH COURT] was filed by M/s. Alstom India Ltd. claiming refund of TED which was rejected by the Director General of Foreign Trade, Ministry of Commerce and Industry. The said petition was disposed of by learned Single Judge on 11.02.2015. Thereafter, an appeal being LPA No.192/2015 was preferred. The Hon’ble Division Bench after considering the relevant provisions of the Act and the policy directed DGFT to consider the application of the writ petitioner for refund in terms of the provisions of the FTP, 2009-2014 and pass an appropriate order in accordance with law. - Petition disposed of.
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2015 (12) TMI 872
Confiscation of seized gold - ownership of gold / ornaments - violation of provisions of Gold (Control) Act, 1968 - Penalty u/s 74 - Held that:- gold seized were bangles having design on the outer side of the pieces and inner surface of those bangles were smooth. In the light of the finding given by the Additional Collector, CEGAT proceeded to decide the issue involved relying upon a decision in the case of M/s Choksi Purshottam Vishrambhai Vs. Union of India and others, reported in [1984 (1) TMI 318 - BOMBAY HIGH COURT] - On examination of the bangles produced it appears that there is design in each of the bangles on their outer side and the inner side of each of the bangles was smooth. Moreover, this being a question of fact and a finding has already reached by the fact finding authority, the same cannot be interfered with unless the same is illegal, based on no evidence and perverse. Unless the owner of the gold, namely, the opposite party is given an opportunity to show cause with regard to the allegations made and is provided with the materials to that effect, she would not be in a position to give reply to the same. Thus, for compliance of the principles of natural justice, it was incumbent on the Additional Collector to give an opportunity to the opposite party to reply on the question of purity of the gold seized. As such, the opposite party had no occasion to give any reply on the report, if any, of the Government mint with regard to purity of the gold seized. At this stage, Mr.Mishra contended that the gold seized were of highly purity and ordinarily ornaments are not prepared from the gold of high purity. This is again a question of fact. Evidently, neither any question with regard to the same was raised nor evidence to that effect was adduced by the Department at the time of adjudication before the Additional Collector. Hence, the same is not available to be raised by the petitioner at the stage of reference to this Court. Evidently, neither any question with regard to the same was raised nor evidence to that effect was adduced by the Department at the time of adjudication before the Additional Collector. Hence, the same is not available to be raised by the petitioner at the stage of reference to this Court. Thus, the contention raised by Mr.Mishra to the effect that for non-acceptance of the report from Government mint with regard to purity of the gold seized the impugned order is vitiated, cannot be held to be correct. Thus, the CEGAT was correct in not accepting the report of the Government mint with regard to purity of the gold seized. - Decided against Revenue.
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2015 (12) TMI 871
What is the effect of non-production by the Department in its appeal before the CESTAT of the original records such as RG-1 register and RT-1 returns which have been referred to by the Commissioner (Appeals) in the order under appeal in favour of the Assessee - Held that:- Commissioner (Appeals) had, while allowing the appeal filed by the Assessee, referred to the RG-1 register as well as RT-1 returns and rendered a finding that the utilization of the pouches shown in the loose papers tallied with the production figures shown in the RG-1 register as well as RT-12 return. The specific finding was that “each and every entry written for the receipt of pouches in the loose papers is duly correlated with purchase invoice issued by raw material supplier.” However, during the pendency of the appeal before the CESTAT, the original records were unable to be produced by the Department. In the circumstances, by its order dated 5th October 2015 this Court directed the Revenue to produce before it the original records and also file an affidavit in that regard. - CESTAT was required to examine the effect of non-production by the Department of the original records such as RG-1 registers and the RT-1 returns particularly considering that the findings rendered by the Commissioner (Appeals) in favour of the Assessee was on the basis of the said original records. - Decided in favour of assessee.
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2015 (12) TMI 870
Imposition of penalty - Whether in the facts and circumstances of the case, the Tribunal is justified in negating the penalty imposed on Shri Arvind Kapoor, Managing Director of the Unit, in view of the specific malafide role attributed to him - Held that:- Tribunal took note of the fact that the revenue is against the impugned order of the Commissioner whereby, he had dropped penalty proceedings against the respondent, Managing Director of one M/s Rishiroop Rubber (I) Ltd. against whom demand duty of ₹ 14,734/- stood confirmed. The Tribunal has further noted that M/s Rishiroop Rubber (I) Ltd. had also challenged the said order and the Tribunal by its order dated 07.01.2004, allowed the appellant’s plea and set aside the impugned order. Having regard to the fact that the main appeal stood allowed, the Tribunal held that the revenue’s plea for imposition of penalty on the Managing Director cannot be accepted - Tribunal in the case of M/s Rishiroop Rubber (I) Ltd., the revenue had preferred an appeal before this court being [2015 (11) TMI 318 - GUJARAT HIGH COURT]. By an order of even date, the said appeal has been dismissed. Under the circumstances, when the main appeal has been dismissed, there is no question of interfering with the impugned order passed by the Tribunal on the question of penalty on the Managing Director. - Decided against Revenue.
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2015 (12) TMI 869
Maintainability of appeal - Jurisdiction of court - Held that:- respondent assessee is situated at Silvassa. Therefore, in view of the provisions of section 36(b) of the Central Excise Act, 1944 it is the Bombay High Court, which would have jurisdiction to entertain the appeal against the impugned order and not this High Court. - Decided against Revenue.
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2015 (12) TMI 868
Waiver of pre deposit - Demand of 10% pre deposit of penalty - Held that:- Factory premises of M/s. Amba Re-rolling Mill Pvt Ltd has already been closed down since 2009. The balance sheet of the Company reveals that there is a loss of ₹ 4,20,789/- during the assessment year 2011- 12. CESTAT, Kolkata has also pointed out this fact at per paragraph 15 of the order dated 3rd of July, 2012 which is under challenge. Nonetheless, the Tribunal has pointed out that current asset of this company is approximately ₹ 3.00 Crores as on 31st March, 2011, and, therefore, 10% penalty has been ordered to be deposited by this appellant. - As the penalty imposed personally upon this appellant of 10% is absolutely reasonable amount to be deposited by this appellant, counsel for the appellant is ready to deposit ₹ 10.00 lakhs within four weeks on the condition that the appeal preferred by this appellant before the CESTAT, Kolkata is revived and the same will be decided on its own merits. - Decided in favour of assessee.
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2015 (12) TMI 867
Valuation - inclusion in the assessable value of the HSD and motor spirit of the delivery (transportation) charges being charged from the dealers on equalised basis - Held that:- there is no justification for not permitting deduction of the equalized freight for determining the assessable value, in view of the judgment of the Tribunal in the case of Banmore Cable and Conductors vs. CCE, Indore (2014 (3) TMI 917 - CESTAT NEW DELHI). Moreover on going through some of the sales invoices placed on record, it is seen that the delivery charges are separately mentioned and the same have been charged at the equalized rate of ₹ 44 per K.L. in respect of delivery to places within the radius of 39 K.Ms. from the storage deport and at the rate of ₹ 1.2 per K.L. per K.M to other places. When the delivery charges are separately mentioned in the invoices just because the same have been charged at an equalized rate, their deduction cannot be disallowed. The impugned order, therefore, is not correct and as such the appellant have prima-facie case in their favour. The requirement of pre-deposit of the duty demand, interest and penalty is, therefore, waived for hearing of the appeal and recovery thereof is stayed during pendency of the appeal - Stay granted.
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2015 (12) TMI 866
Restoration of appeal - Exparte order - Appeal dismissed for non prosecution - Held that:- According to the reasons given in the affidavit filed by the appellant, since in October 2011, their employee dealing with the excise matter had left the job without handing over all the papers lying with him, they were not aware of the dismissal of their appeal and they became aware about this only when the recovery proceedings were initiated in January, 2014 and at that stage only, after depositing the entire duty on 10.01.2014 they filed restoration application. There is no dispute that they subsequently have also paid the entire interest on duty as well as penalty and as such the requirement of section 35 F have been fully complied with. - Appeal restored.
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2015 (12) TMI 865
Waiver of pre deposit - clandestine removal - preparing parallel Central Excise invoices - Evasion of duty - Confiscation of goods - Penalty under rule 26 - On investigation by the DGCEI Officers it is revealed that manufacture company has not accounted for production of paints and clear the same without payment of duty of ₹ 88,79,846/- during the period of March, 2007 to April, 2010 either by issuing parallel invoices/ non issue of invoices collection of sale proceeding in cash etc - Held that:- In the case of duty evasion by the company wherein present appellants are directors, this Tribunal has passed the order No. S/311/14/EB/C-II dated 27/5/2014 and directed company to make pre-deposit of 50% of the total duty evaded. In the said order all the issues such as merit of the case and principle of natural justice have been carefully considered and passed a very detailed and reasoned order and this Tribunal found a prima facie case of evasion of duty. As regard the role of the present appellants in the case, it is observed that Shri. Manoj Pyarelal Mittal, Managing Director of the Company deliberately with a planned modus-operandi by preparing parallel Central Excise invoices have evaded excise duty. As regard the role of Shri. Yogesh Kumar Mittal, he has knowingly helped the company and Shri. Manoj Pyarelal Mittal by returning the parallel invoices so that to destroy the same. From the above facts it is clear that both the appellants were collided and master minded the entire offence of evasion of excise duty. As regard submission of the Ld. Counsel that penalty under Rule 26 cannot be imposed since goods not confiscated, we are of the view that it is not necessary that the goods should be confiscated in order to impose penalty under Rule 26 Penalty under Rule 26(i) is imposable on the person who has knowledge that the goods is liable for confiscation. In the present case, while clearance of excisable goods clandestinely without payment of excise duty, both the appellants were having full knowledge that goods are liable for duty and clearance of the same without payment of duty make goods liable for confiscation. Therefore act of the appellants are more than sufficient to invoke Rule 26 of Central Excise Rules, 2002. Since this Tribunal has already taken prima facie view as regard evasion of excise duty against the company in the it’s stay order dated 27/5/201, the argument of Ld. Counsel on merit, principle of natural justice of no help - Partial stay granted.
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2015 (12) TMI 864
Registration - Single registration for unit 1 and unit 2 - claim of benefit of captive consumption at tribunal stage - valuation - appellant has not declared the correct value despite valuation has been settled - Held that:- Appellant have never made claim of exemption Notification No 67/95-CE before the lower authorities. However, before the Commissioner (Appeals) in their prayer they prayed for setting aside the order-in-original. As regard the claim of the appellant of the exemption Notification 67/95-CE at the Tribunal stage, I agree with Ld. Counsel that the Notification being question of law can be raised at the stage of Tribunal also. As regard the contention of the appellant that the status of single registration should be maintained with effect from filing of their application, I am of the view that since the matter of very same application which was traveled up to the High Court and it was held that single registration should be granted, effect should be given from the date of application made by the appellant for single registration i.e. 30/7/2001. It is undisputed that since the claim of the Notification No. 67/1995 was not made by the appellant before lower authorities explicitly in Appeal made before the Commissioner(Appeals). It is just and proper that matter should be remanded to the original authority to examine eligibility of Notiifcation No. 67/95-CE and the clearance made by the appellant to their another unit No.1 - Matter remanded back - Appeal disposed off.
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2015 (12) TMI 863
Denial of refund claim - Unjust enrichment - Held that:- On perusal of books of accounts of 2007-08 and CA certificate, it is clear that amount of refund is accounted for under head of loans and advances in the asset sides of the balance sheet. In my view if this treatment is given to the refund amount in the books of account, it is sufficient ground for establishing that the incidence of such duty has not been passed on. However this treatment of the amount reflecting in the year when the duty was paid but it should continue till the sanction of the refund claim. It is apparent from the order that despite undertaking by the advocate during the hearing the appellant has failed to produce the balance sheet for the year 2008-09 to the adjudicating authority. Therefore treatment of this amount in the books of account could not be known or ascertained by the adjudicating authority in absence of said documents. In view of the above facts, I am of the view that the matter needs to be remanded to the adjudicating authority - Decided in favour of assessee.
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2015 (12) TMI 862
Valuation - footwears with MRP - exemption vide notification no.5/2006-CE and the subsequent notification no.12/2012-CE - footwears were not embossed with the MRP and as such, the condition of notification requiring the footwears to be indelible marked or embossed with the MRP does not stand fulfilled - Held that:- Commissioner himself came to a clear finding that MRP of the footwears was admittedly below ₹ 500/-. In such a scenario, it has to be held that the substantive condition of the notification in question sands fulfilled - The notification grants benefit to the footwears, which are below the MRP of ₹ 250/- or ₹ 500/- and the condition of embossing the same can be held to be in the nature of being sure that the footwears does not exceed the said laid-down limit of MRP. When the Revenue itself is of the view that the MRP was admittedly less than the said prescribed MRP, even if the goods were not marked with the said MRP and especially, when the MRP wad admittedly written on the outer package of the fotwears, the creation of huge demand on the said technical lapse cannot be appreciated. - Stay granted.
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CST, VAT & Sales Tax
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2015 (12) TMI 851
Validity of constitution of Authority to give advance ruling - KVAT - Benefit of Entry 19 of the First Schedule of the Karnataka Value Added Tax Act - Appellant is the manufacturer of a product ‘Yakult’ which, according to the appellant, is akin to ‘lassi’ which is a milk product - Held that:- Rules framed under an Act, cannot override the provisions of the Act. The main Section 60(1) of the KVAT Act clearly mandates that the constitution of the Authority would be of at least three Additional Commissioners. It does not give any scope for interpretation that the Authority consisting of less than three members, would still be a properly constituted Authority. - Even if it is presumed that sub-rule (26-A) of Rule 165 was to be taken as a valid Rule, then too it is only in certain contingencies that the Authority, consisting of two members, could be treated as a valid Authority. However, in the present case, respondent has not placed on record any of such condition being there, because of which only two members had constituted the Authority to decide the matter. In such view also, we are of the opinion that the order dated 21.4.2012 has been passed by an Authority which was not properly constituted under the provisions of the KVAT Act. - Decided in favour of assessee.
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2015 (12) TMI 850
Reversal of ITC - petitioner has purchased goods from the seller by paying tax - Held that:- At the time of purchasing the goods, admittedly, the petitioner has paid the tax to the seller, which is not under dispute. The reason assigned in the impugned order is that the petitioner firm is denied Input Tax Credit just because the dealer/seller has failed to report the same before the respondent. The reason adduced by the respondent is unacceptable for the reason that when admittedly the petitioner firm has paid the tax, he cannot be made liable for the failure on the part of the seller to report the same to the respondent - Decision in the case of Sri Vinayaga Agencies [2013 (4) TMI 215 - MADRAS HIGH COURT] followed - Decided in favour of assessee.
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2015 (12) TMI 849
Levy of entry tax under the provisions of U.P. Tax on Entry of Goods Into Local Areas Act, 2007 - Attachment of bank account - Held that:- we dispose of the writ petition directing the Deputy Commissioner Assessment to decide the petitioner's representation within four weeks from the date of presentation of a certified copy of the order and provide the calculation on the basis of which the figure towards interest has been indicated in the impugned notice dated 4th July, 2015. This calculation will be made after giving an opportunity of hearing to the petitioner. - Till the disposal of the petitioner's application, no attachment of the petitioner's bank account or recovery, as per the impugned notice dated 4th July, 2015, will take place. - Stay granted.
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2015 (12) TMI 848
Denial of input tax credit - Revision of assessment - escapement of assessable taxable turnover - Held that:- Petitioner filed an appeal challenging the assessment order before the authority concerned, but, beyond the limitation period of 60 days. The mandatory pre-deposit amount was also paid. Stating that the appeal is barred by limitation, the same was returned and hence, without any other remedy, the petitioner challenges the impugned order of assessment before this Court - The authority, without affording sufficient opportunity to the petitioner, passed the impugned order, despite specific request made by the petitioner on those lines. Originally, the assessment was completed on 31.10.2012, accepting the returns filed by the petitioner under Section 22(2) of the TNVAT Act. The said assessment was sought to be re-opened by the authority under Section 27 of the TNVAT Act, for escapement of assessment on the basis of the report filed by the Enforcement Wing authorities, which resulted in disallowance of sales return as well as reversal of ITC, which according to the learned counsel for the petitioner is not justifiable and the petitioner is entitled for the same. Apparently, without providing a reasonable opportunity to the petitioner of being heard the impugned order came to be passed. On this score itself, the impugned order is liable to be set aside. - Decided in favour of assessee.
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Indian Laws
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2015 (12) TMI 846
Validity of Section 27(c) (iii) and 27(c) (iv) of the Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 - The principal challenge was mounted on the ground that market fee is not liable to be charged on their agricultural produce for the reason that, firstly, there is no sale and purchase of the goods in the market area and, secondly, it cannot be charged under Section 27(c)(iii) for the reason that there is no sale, storage, processing or transaction of this agricultural produce. - HC upheld the validity - Held that:- an examination of Section 27(c)(iii) would show that it is against the scheme of the Act, as it seeks to levy market fee and development cess even on those units which merely bring agricultural produce from outside the State into the market area for carrying out manufacturing, in that there is no sale or purchase of the product within the market area per se. Entry 52 of List I governs the process of manufacture and production. Therefore, in the instant case, the State Legislature did not have the competence to enact the impugned provisions which sought to levy market fee and development cess even on those agricultural produce which were not being brought into the market for the purpose of sale, but for the purpose of manufacture or further processing. Since the State Legislature was not competent to enact the impugned provision of Section 27(c)(iii) of the Act, the same is liable to be struck down as the same was enacted by the State Legislature without having the legislative competence to do so. In view of the findings and reasons recorded in Point No.1 supra, the impugned common judgment and order upholding the validity of the amendment to Section 27(c)(iii) of the Act is set aside. Section 27(c)(iii) of the Act is struck down. The consequential action of issuing notice of demand and any other orders passed against the appellants are hereby quashed. However, Section 27(c)(iv) is hereby upheld. This Court makes it very clear that the purchaser must prove that the agricultural produce is brought from other State which is an interstate sale, and is in accordance with the provisions of the Sale of Goods Act, 1930.
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2015 (12) TMI 845
Levy of property tax - warehouse - property tax on the value of storage and water tanks of the IOC situated in the industrial development area of Cuddapah (A.P.) - Held that:- It cannot be disputed that structures in question are building. The term 'building' as defined in Black's Law Dictionary, 10th Edition mentioned it to be a structure with walls and a roof, esp. a permanent structure. Even Mr. Guru Krishnakumar, learned senior counsel for the IOC accepted that the storage tanks and water tanks would qualify as buildings. 'Storage' is described in the Black's Law Dictionary as 'the act of putting something away for future use; esp., the keeping or placing of articles in a place of safekeeping, such as a warehouse or depository. Black's Law Dictionary also gives the description of warehouse as 'a building used to store goods and other items'. When we read the definition of 'house' in the context of meaning that is to be assigned to 'warehouse', it is clear that a place where goods are stored would be 'warehouse' which is specifically mentioned in the definition of house contained in Section 2(19) of the Act. It would, thus, follow that it may not be necessary that such a place is capable of frequent visits by the human beings or fit for human occupations. The High Court has rightly pointed out that as per the said definition, the requirement that a house should be fit for human occupations is only for huts which is defined under Section 20 of the Act. The Legislature has provided a particular definition to 'house' and levied property tax thereupon. It is this fictional definition of 'house' which is to be kept in mind for the purpose of levy of tax. No merit in this appeal as well as writ petition which are accordingly dismissed
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