Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 2, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Penalty u/s.271(1)(C) - paints were his “personal effects” - the plea of the assessee that receipts from sale of paintings were not offered to tax on a bona fide belief is acceptable. - as there was neither concealment of particulars of income or furnishing of inaccurate particulars of income, no penalty - AT
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Exemption u/s 11 - merely because the payments are made outside India, it cannot be said that the charitable activities were also conducted outside the country - the word ‘applied’ does not mean ‘spent’ and even if the income has been earmarked and allocated for the purpose of carrying out the objects of the institution, it might be deemed to be applied for that purpose - AT
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As long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form 10 are for achieving the objects of the trust, merely because of non-furnishing of the details, as how the said amount is proposed to be spent in future, the assessee cannot be denied the exemption as is admissible u/s 11(2) - AT
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Valuation of closing stock - notwithstanding the fact that the opinion of the Chartered Accountants of India was expressed in the 'guidance note", which had not attend a mandatory status, would not be a ground to discard the books of accounts of the Assessee or the method of accounting followed - No addition on account of unutilized CENVAT Credit was called for - AT
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Taxability of Income from assets held by Trust - The circumstances highlighted by the Assessing Officer to show that the transaction as a colorable device cannot take precedence over earlier judicial scrutiny and a specific tripartite Agreement. - AT
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Non-granting of exemption u/s. 10(23C)(iiiab) - denial of benefits of exemption u/s. 11 also - the exemption has been denied solely for the reason that the institution has received the capitation fees. - There is not even a whisper in the orders of the authorities below which could suggest that the facts of the case are hit by the provisions of Sec. 13 - exemption allowed - AT
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Computation of capital gains - The expression “full consideration” cannot be considered as having a reference to the market value of the asset transferred, but the expression only named the full value of the thing received by the transferor in exchange for the capital asset transferred by him - AT
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Delayed payment of employee’s contribution to ESI fund should be allowed as deduction under section 36(1)(va) of the Act read with section 43B of the Act if the said payments are made on or before the due date for filing the return of Income - AT
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TDS u/s 194I - non deduction of TDS - no TDS is required to be deducted on such a premium paid for acquisition of rights in the land taken by way of lease from MMRDA - AT
Customs
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100% EOU - Clandestine manufacture and clearance of goods - DTA Clearances - The so called job workers in their statements clearly stated that they did not carry out any job work on behalf of M/s Loomcraft and M/s Fabricart. - Prima facie case against the appellant. - AT
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Valuation of goods - valuation Integrated Circuits and transistors imported - Assessable value cannot be determined on the basis of quotation. Quotations are merely indicative price having no relevance as to the Country of Origin, which is admittedly not mentioned on the quotation - AT
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Claim of exemption from CVD - import of ‘Red Fine Standard Grade Murate of Potash (MOP) - Imported MOP had been used in the manufacture of fertilizers. - since the evidence produced by the appellant, has not been rebutted by the revenue, exemption allowed - AT
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Valuation of imported goods - Inclusion of royalty amount for use of the trademark - There is no finding by Commissioner that the buyer had adjusted price of imported goods in the guise of enhanced royalty. Nor that the appellant was compelled to import raw material from Associate companies -- invoice value is not required to be loaded by including the royalty - AT
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Wrong claim of CVD Benefit - assessee had opted for First Check Assessment - importer had admitted their typographic error, showing willingness to pay differential duty - no case of misdeclaration or contumacious conduct on the part of the importer is made out - AT
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Revalidation of DFIA Licenses - The request is not for revalidation of Licenses by Customs, but only a certificate to be issued to DGFT confirming the sequence of events from the date of first refusal of duty free clearances of imported Boric Acid till the date when the Customs started finding Bills of Entry and releasing PD Bonds/Bank Guarantees - Request is very legitimate - AT
Corporate Law
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Obligation cast on the promoter/promoter group to make yearly disclosure - the AO’s of SEBI have not considered the question as to whether the appellants are individual promoters or they constitute ‘promoter group’ under the respective Takeover Regulations. - SAT
Service Tax
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Activity of painting, pasting, displaying and/or maintaining the same on side panel of buses on behalf of the client - Demand of service tax with interest and penalty confirmed - AT
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Refund claim - if the service tax liability is discharged on which education cess is paid on the goods exported, the benefit of refund of such education cess paid should not be denied when the export of goods is not in dispute. - AT
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Valuation - there remains no doubt that the value of photographic paper and consumables cannot be included in the value of photography service to levy service tax. - AT
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Short payment of service tax - even after so many years, the appellant has not been able to provide even a Chartered Accountant certified final figures to show that the figures earlier submitted by it (based on which impugned demand was worked out) were incorrect in any manner - demand confirmed - AT
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Taxability of amount received from goods auctioned - discharge of all the duties as per Section 150 of the Customs Act, 1962 - Not taxable as storage and warehousing service - AT
Central Excise
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Removal of semi-finished goods for certain purposes without obtaining requisite permission under Rule 16B of the Central Excise Rules, 2002 - application was filed and the Commissioner did not act upon the same immediately - Objection of the revenue cannot sustain - AT
VAT
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Purchase of goods for use in works contract from other state - interstate movement of goods against Form-C - Denial of exemption claim - Notification dated 28.04.1993 - Revision petition filed by the revenue dismissed - HC
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Sale of goods in the SEZ - works contract - Appellate authority has failed to appreciate the fact that it is not possible to abide by sub-rule (2A) of rule 42 of the rules having regard to the nature of the contract which is a works contract wherein the goods which are sold to the buyer, are used in the execution of the works contract and it is only after execution that the invoices are raised. - Demand set aside - HC
Case Laws:
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Income Tax
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2015 (12) TMI 48
Taxability of income - provisions of Block assessment could not be invoked as per ITAT? - sum paid by “Sharp Corporation, Japan” to the assessee for transfer of the right to use the trade mark “SHARP” which consisted of both goodwill as well as the right to use associate with 14 items out of 21 items did not attract capital gains tax - Held that:- From the record it is clear that the return of income for the relevant assessment year 1996-97 was filed by the assessee on 2/12/1996, which was nearly a year before the search was conducted. A categorical finding of fact has been recorded by the Tribunal with regard to the disclosure of the receipt of such amount through banking channels by the assessee, which is to the effect that, “When the amount has been received through banking channels and has been shown as part of the cash and bank balances, it is not possible to say that the transaction has not been or would not have been disclosed for the purposes of the Act within the meaning of Section 158-B(b)”. As the appellants has not been able to satisfy us that there was non-disclosure of the aforesaid amount having been received by the assessee in the returns filed by the assessee for the relevant assessment year. - Decided against the Revenue.
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2015 (12) TMI 47
Disallowance of loss on eligible derivate transactions in foreign exchange - Held that:- The assessee company has entered into derivative transactions in foreign currency through recognised stock exchange and has complied with the other conditions as stipulated in Section 43(5) read with proviso(d) and explanation 1 to the said Section 43(5) of the Act for which cogent material is brought on record. The contract for derivatives in foreign currency are commodity as defined u/s 43(5) of the Act, the underlying asset being foreign currency and are hence entitled for exemption from being treated as speculative provided all other conditions as stipulated u/s 43(5) are complied with. A binding obligation accrued against the assessee the minute it entered into contract for derivative in foreign currency. A liability is said to have crystallized when a pending obligation on the balance sheet date is determinable with reasonable certainty. The considerations for accounting the income are entirely on different footing. As per AS-11, when the transaction is not settled in the same accounting period as that in which it occurred, the exchange difference arises over more than one accounting period. The contract for derivative in foreign currency have all the trappings of stockin- trade. In the ultimate analysis, there is no revenue effect and it is only the timing of taxation of loss/profit and in case the derivative contract is squared off/settled in the succeeding year, the difference in loss/profit will be brought to tax in the succeeding assessment year and hence its allowability in the current year is tax neutral. Hence, we order that loss incurred by the assessee company on the contract for transaction in un-expired contracts as on the date of Balance Sheet as at 31st March 2009 in derivatives in foreign currency complies with the provisions of Section 43(5) of the Act read with proviso (d) and explanation 1 of the Section 43(5) of the Act and is exempt to be categorised as speculation loss and further hold that the said loss as at the date of financial statement as at 31st March 2009 arising due to adverse movement in exchange rate between United States Dollars vis-avis in relation to Indian Rupee as on the date of Balance Sheet as at 31st March 2009 is not a notional or contingent loss rather it is a ascertained liability which has crystallized on the date of Balance Sheet as at 31st March 2009 and can be computed with reasonable certainty and accuracy, hence allowable as non-speculation loss. - Decided in favour of assessee. Payment of stamp duty and fee to Ministry of Corporate Affairs, New Delhi towards increase in authorized capital - revenue v/s capital expenditure - Held that:- Hon'ble Supreme Court in the case of Brooke Bond India Ltd. v. CIT (1997 (2) TMI 11 - SUPREME Court) and Punjab State Ind. Corp. Ltd. v. CIT (1996 (12) TMI 6 - SUPREME Court ) has clearly held that these stamp duties/fees to Ministry of Corporate Affairs, GOI paid towards the increase in authorized capital of the company is held to be for expansion of capital base of the company and hence these are capital expenditure and cannot be allowed. Respectfully following the above decisions of the Hon'ble Supreme Court, we uphold the orders of assessing officer as confirmed by the CIT(A) and decide this issue against the assessee company and in favour of the Revenue by holding that payment by assessee company towards stamp duty and fee to Ministry of Corporate Affairs, New Delhi towards increase in authorized capital of the assessee company is capital expenditure and disallowed as revenue expenditure as claimed by the assessee company. - Decided against assessee.
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2015 (12) TMI 46
Addition on account of Gross Profit - CIT(A) confirmed part addition - Held that:- As find that assessee had not maintained complete books of account and vouchers. The Assessing Officer had pointed out various discrepancies in the books of account and calculation of opening and closing stocks. The argument of learned AR the mere absence of stock register cannot lead to rejection of books of accounts is though correct but here is a case where not only stock register was not maintained but there were various discrepancies in the valuation of opening and closing stock and moreover the Assessing Officer has clearly held that Gross Profit declared by assessee in the present year was lower as compared to earlier years. Moreover, the Assessing Officer has also compared Gross Profit ratio of two parties for the same year, who were also engaged in the similar type of activities. Therefore, we do not find merit in the arguments of learned AR regarding further relief. As regards Ground No. 1 taken by assessee that no show cause notice was issued in terms of provisions of Section 144(1), we find that assessment was not completed u/s 144 and therefore, no notice was required to be issued u/s 144. The learned CIT(A) has very reasonably dealt with issue and has allowed appropriate relief to the assessee and therefore, we do not intend to interfere with his findings - Decided against assessee and revenue Disallowance of expenses - as per assessee where the profits are estimated, the revenue authorities cannot further make addition on account of disallowance of expense - Held that:- We find that such a scenario of not making any further additions arises only in those cases where the net profits are estimated whereas here is a case where addition has been made to the Gross Profits, therefore, the Revenue Authorities were justified in making various other additions on account of disallowance of expense - Decided in favour of assessee. Disallowance on account of foreign exchange expenditure - CIT(A) restricting the disallowance of foreign traveling expenses to the extent of 10% - Held that:- In Asst. Year 2005-06 in the case of assessee itself, had reduced the disallowance of foreign traveling expenses in the case of employees of assessee to 10% whereas in the case of expenses incurred by partners, the Tribunal had confirmed the disallowance to the extent of 10% as upheld by learned CIT(A). Respectfully following the above Tribunal Order in the case of assessee itself, we restrict the disallowances out of foreign tour expenses to 10%. - Decided partly in favour of assessee. Disallowance of Keyman Insurance Premium - Held that:- As for the statement made by the employees of the insurance companies, nothing turns on these statements. What constitutes a keyman insurance policy under section 10(10D) is not dependent on what is it treated even by the insurer; as long as the assessee is allowed to take life insurance policy on its keymen, as have been undisputedly taken in this case, the same satisfies the requirement of Section 10(10D). In view of these detailed discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and delete the impugned disallowance - Decided in favour of assessee. Disallowance of salary, labour welfare expenses - Held that:- We find that the disallowance made by Assessing Officer and confirmed by learned CIT(A) is reasonable keeping in view that books of account were rejected and the bills/ vouchers were self made and payments were made in cash on the basis of self made vouchers. The disallowance represents about 10% of the total amount of unverifiable expenses which is reasonable - Decided against assessee.
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2015 (12) TMI 45
Addition under the head long term capital gain - valuation of land - confirming the addition by applying provisions of Section 50C(1) - Held that:- Section 50C is applicable to transfer of capital asset only in respect of land or building or both and is not applicable to right in land. In the present case, the assessee has only transferred the right in land for a valuable consideration, therefore, in the opinion of the Bench, the long term capital gain cannot be calculated by invoking the deeming provisions provided under section 50C. Therefore we hold that section 50 C is not applicable to present case The amended provision of section 50C is not applicable to the transfer which had already taken place prior to the amendment. In the present case the assessee has transferred the capital asset for a consideration of ₹ 74,91,000/- and the document was neither registered nor evaluated for the purpose of stamp duty purposes by the Stamp Valuation Authority at the time of execution of said document . Therefore, there was no evaluation of stamp duty payable on the document. Thus in our view the deeming provision of section 50C do not come in to play thereby replacing the full valuation of consideration of the document with the value calculated by the Stamp Valuation Authority / registering Authority. In the absence of any adoption or assessment by the authority of state government for the purposes of the Stamp duty in respect of subject transfer ( as the document was not registered ), there was no occasion for the AO to either refer the matter to the Registering Authority or to the Stamp Valuation Authority for the purpose of arriving at the valuation of the property. Therefore, in the interest of justice we set aside this issue to the Assessing Officer and directed to apply the provisions of Income Tax including Section 55A to determine the correct capital gain in this transaction and decided the case after considering the above observations of this Bench and also give reasonable opportunity of being heard to the assessee after bringing of required evidences on record. The assessee challenged in the second ground of appeal that the ld CIT(A) is allowed the appeal partly by applying DVO’s valuation in coowners case U/s 50C but Section 50C is not applicable in the case of assessee. Therefore, the order of the ld CIT(A) is reversed to that extent as observed in preceding paras. Accordingly, the revenue’s appeal as well as assessee’s appeal are set aside to the Assessing Officer. - Decided in favour of assessee and revenue for statistical purposes.
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2015 (12) TMI 44
Sale of agricultural land - CIT(A) allowing the claim of the assessee that the land sold was agricultural land and profit on sale of land was not liable for tax - intention of the assessees at the time of acquiring the land or interval action by the assessee between the period from purchase and sale of the land - Held that:- dverting to the facts of the present case, the land in question is classified in the Revenue records as agricultural land and there is no dispute regarding this issue and actual cultivation has been carried on this land by leasing the same to Shri.D. David and income was declared from this land in the return of income filed by the assessee for the earlier years as agricultural income. It is also an admitted fact that the AO has not brought on record any evidence to show that the agricultural land was used for nonagricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes. It is also an admitted fact that neither the impugned property was subject to any developmental activities at the relevant point of time of sale of the land. The mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. The presumption may be rebutted. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations and even there was no intention to sell the land in future at that point of time. It was due to the boom in real estate market came into picture at a later stage, the assessee has sold the land. Merely because of the fact that the land was sold for profit, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade. The period of holding should not suggest that the activity was an adventure in the nature of trade. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. - Decided in favour of assessee.
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2015 (12) TMI 43
Penalty u/s.271(1)(C) - receipts on sale of paintings was not disclosed as “income” in the return of income filed - Held that:- In the penalty proceedings, the Assessee pointed out that the sale of paintings was not done by him as an adventure in the nature of trade. The paintings were kept for years over because of his aesthetic sense. It gave him tremendous pleasure and pride of profession. The paintings were therefore his “personal effects”. This aspect has not been disputed by the AO. In the statement recorded u/s.131 of the Act by the AO in the course of assessment proceedings, in answer to Question No.11 the assessee has stated that the paintings are made as per creation desire of the assessee. Therefore, it would be proper to accept the contention of the assessee that the paints were his “personal effects”. The AO has not disputed the position that the source of funds for investment in units of mutual funds was the sale of paintings which were personal effects and therefore income from sale of paintings were capital receipts not chargeable to tax. Therefore, the plea of the assessee that the on the basis of professional advice, receipts from sale of paintings was treated as capital receipt not chargeable to tax, is found to be acceptable. Therefore the plea of the assessee that receipts from sale of paintings were not offered to tax on a bona fide belief is acceptable. Consequential imposition of penalty in so far as, it relates to the addition of ₹ 60,99,454/-, in our view is unsustainable, as there was neither concealment of particulars of income or furnishing of inaccurate particulars of income. The show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon’ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT ], we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee.
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2015 (12) TMI 42
Disallowance of faculty teaching charges payable to Ohio University - CIT(A) deleted the addition - Held that:- The services have been rendered by the faculty members from Ohio University as the classes were taken in Bangalore. The services have been utilized for the purposes of the Trust’s objectives in India, viz. of imparting higher education in India. Ohio University has also offered the income earned by it from the assessee trust to tax in India. In the light of the above mentioned facts, it is clear that the activities of the assessee trust were conducted in India in accordance with its objects. As regards the payments being made out of India, we concur with the view of the learned CIT (Appeals) that merely because the payments are made outside India, it cannot be said that the charitable activities were also conducted outside the country. We also do not concur with the Assessing Officer’s view that a specific exemption is required from CBDT for making claim of application of income. This requirement has been specified only for those trusts that have as its objects, the promotion of international welfare. In the case of the assessee in the case on hand, the objects of charitable activities for imparting higher education in India, has already been approved by the Department while granting the assessee trust registration. Also unable to concur with the view of the Assessing Officer that mere credit entries in favour of Ohio University in the assessee’s books of account cannot be taken by the assessee as being for charitable purposes as contemplated in Section 11 of the Act. Thus we uphold the decision of the learned CIT (Appeals) in deleting the addition/disallowance made in respect of faculty teaching charges as the word ‘applied’ does not mean ‘spent’ and even if the income has been earmarked and allocated for the purpose of carrying out the objects of the institution, it might be deemed to be applied for that purpose. - Decided in favour of assessee. Set off of brought forward excess application income/loss of earlier years - CIT(A) allowed claim - Held that:- The assessee had incurred certain preliminary expenditure in the year of setting up of the trust. The same is amortised by the assessee trust over a period of 5 years from the year of incurring of expenditure. The fact of amortization was not disputed by the Assessing Officer in the assessment proceedings for Assessment Year 2007-08 where the entire amount was added back claiming 1/5 th of the expenditure. The un-amortised expenditure has been brought forward and set off as application of income in subsequent years, including the to assessment years, 2008-09 and 2009-10 which are under consideration.urther, the CBDT Circular No.5-P (LXX) – 6 of 1968 cited by the assessee makes it clear that income should be understood in its commercial sense; in the case of trusts also and therefore the commercial principle enunciated by the Hon’ble Karnataka High Court in the above referred case of Sisters of St. Anne (1983 (8) TMI 44 - KARNATAKA High Court) applies to trusts as well. In view of the factual and legal matrix of this issue in the case on hand as discussed above, we concur with the decision of the learned CIT (Appeals) in cancelling the disallowance made by the Assessing Officer and in allowing the amortization of expenses - Decided in favour of assessee. Loss on account of foreign exchange fluctuation - CIT(A) allowed claim - Held that:- The basic facts of the matter on this issue are not in dispute. In the year under consideration, the assessee had incurred expenditure towards programme fees payable to Ohio University, USA - We have already held that these payments come under the purview of application of income for charitable purpose in India. Having held so, we have no hesitation in holding that foreign exchange fluctuation expenses related to the programme fee is also a deductible expenditure as held by the Hon’ble Apex Court in the case of Woodward Governor India (P) Ltd. (2009 (4) TMI 4 - SUPREME COURT ). In this view of the matter, we uphold the decision of the learned CIT (Appeals) - Decided in favour of assessee. Disallowance of Accumulation of Income - Held that:- The purposes mentioned by the assessee trust in Form No.10 were ‘for use in purchase of fixed assets’ and for use in other purposes, ‘for fulfillment of the objects of the trust.’ The Assessing Officer disallowed the assessee’s claim for accumulation of income on the grounds that the purposes mentioned in Form NO.10 was not specific. As pointed out by the learned CIT (Appeals), there are divergent decisions by various High Courts in the matter. While the Assessing Officer has relied on the decision of the Hon’ble Kerala High Court, the assessee has relied on the decision of the Hon’ble Delhi High Court. The learned CIT (Appeals) after noting the divergent views taken by different High Courts has decided the issue in favour of the assessee by observing that there is no decision of the jurisdictional High Court in the matter, the decision favourable to the assessee should be followed. As decided in Director of Income Tax, Exemptions And Others Versus Envisions [2015 (6) TMI 38 - KARNATAKA HIGH COURT ] as long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form 10 are for achieving the objects of the trust, merely because of non-furnishing of the details, as how the said amount is proposed to be spent in future, the assessee cannot be denied the exemption as is admissible under sub-section 2 of Section 11 of the I.T.Act, 1961. - Decided in favour of assesse.
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2015 (12) TMI 41
Valuation of closing stock - Scope of section 145A - inclusion of Excise duty and VAT to the value of closing stock, in a case where the Assessee is following exclusion method of accounting of Excise and VAT for valuation of stock - Held that:- Merely because the Central Government has not notified in the Official Gazette "accounting standards" to be followed by any class of assessees or in respect of any class of income, it cannot be stated that the Accounting Standards prescribed by the Institute of Chartered Accountants of India or the Accounting Standards reflected in the "guidance note" cannot be adopted as an accounting method by an Assessee. It further held that notwithstanding the fact that the opinion of the Chartered Accountants of India was expressed in the 'guidance note", which had not attend a mandatory status, would not be a ground to discard the books of accounts of the Assessee or the method of accounting followed. See Snehal Pharma Chem [2015 (2) TMI 151 - ITAT AHMEDABAD ] No addition on account of unutilized CENVAT Credit was called for in the present case. We thus dismiss the appeal of Revenue and allow the C.O of Assessee.
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2015 (12) TMI 40
Taxability of advance received from clients in the year of receipt even though the assignments were completed in the subsequent year - Held that:- We find that the assessee being an individual engaged in the legal profession had to receive certain advances from clients for taking care of certain expenses to be incurred for and on behalf of the client and the same is reflected in the balance sheet as a liability. The said liability takes the character of income on completion of the matters / assignment taken up by the assessee. We hold that the solicitor is the agent of the client. The client makes over the money to the solicitor for some work being done by the solicitor as his agent. The money must be employed to that purpose and must not be treated as money received for any other purpose. This position is not altered by the fact that the solicitor retains a lien upon the balance of the money for his costs. The result of solicitor having a lien on the balance of the money is no more than a person having a charge on somebody else’s money. When a solicitor receives money from his client, he does not do so as a trading receipt but he receives the money of the principal in his capacity as an agent and that also in a fiduciary capacity. The solicitor remains liable to account by this money to his client and hence it does not become the income of the assessee. Thus we have no hesitation in deleting the addition made towards advance received from clients by the Learned AO in various assessment years - Decided in favour of assessee Disallowance u/s 40(a)(ia) in respect of payments to Receiver etc. - Held that:- In respect of remuneration component to the receiver Shri.Samir Roy Choudhury (assessee client’s share is ₹ 38,250/-) and Shri. Tapas Kr. Banerjee (Special Officer), the same are liable for deduction of tax at source in terms of section 194J of the Act. But it is not clear from the records, whether the said sums were debited by the assessee in his income and expenditure account and whether any deduction was claimed by the assessee in that regard . It is also not clear that whether the payments made to these counsels have been reimbursed to the asseseee by his clients. We hold that if there is no profit element in this activity and is mere reimbursement of expenses, then no disallowance u/s 40(a)(ia) could operate. However, there is no clarity on the same from the orders of the lower authorities. Hence we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue in respect of amounts paid to Shri. Samir Roy Choudhury and Shri. Tapas Kr. Banerjee alone , to the file of the Learned AO to ascertain whether deduction has been claimed by the assessee in respect of payments made to them and whether the same has been reimbursed to the assesee by his clients without any profit element - Decided in favour of assessee for statistical purposes. Disallowance of Electricity Expenses, Telephone Expenses, Car Maintenance, Motor Car depreciation, Car expenses representing Road tax, insurance on car and interest on loan for car - Held that:- CITA had disallowed only 5% towards personal element of expenditures involved hereinabove in the earlier years and hence his action of increasing the disallowance to 10% is without any basis. We also find that against the orders passed by the Learned CITA on this issue for the Asst Years 2003-04 & 2004-05, the revenue had not challenged this issue before tribunal. In any case, it is only an estimated disallowance. Accordingly, we direct the Learned AO to restrict the disallowance at 5% towards personal element. - Decided in favour of assessee in part. Disallowance u/s 14A read with Rule 8D - Held that:- AO had to first record his satisfaction that the claim made by the assessee that no expenditure has been incurred for earning exempt income or the expenditure incurred by assessee is not found to be correct. We find that the Learned AO had not considered the claim of the assessee at all and he has straight away embarked upon computing disallowance under Rule 8D. Without recording his satisfaction in terms of Rule 8D(1), he cannot directly proceed to implement Rule 8D(2) and accordingly we hold that the action of the Learned AO in making disallowance u/s 14A of the Act in the facts and circumstances of the case is not in accordance with law. - Decided in favour of assessee. Restriction of addition u/s 94(7) of the Act on sale of shares - Held that:- We find that the assessee had sold certain shares within a period of three months. Before us, the Learned AR pleaded that the loss of ₹ 1,54,690/- on the shares of Federal Bank Ltd took place owing to purchase of cum Bonus Shares and sale of Ex Bonus Shares. It was also pleaded that the Learned AO had not considered the fact whether the assesee had received dividend in respect of the subject mentioned share scripts during the relevant period. It was further pleaded that in several cases, the assessee received dividend not on the shares sold but on the shares continued to be retained by him. It was also further pleaded that disallowance u/s 94(7) , if any, could be restricted only to the extent of dividend received. We hold that the Learned CITA had rightly restricted the disallowance u/s 94(7) of the Act to the extent of dividend received in accordance with the provisions of the Act and by duly appreciating the true intention behind introduction of provisions of section 94(7) of the Act. Hence we find no infirmity in the order of the Learned CITA in this regard.- Decided against revenue.
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2015 (12) TMI 39
Sale of land treated as Long Term Capital by CIT(A) - as per revenue the land was never shown in the block of assets - Held that:- Treatment of the assets in the purchaser's account, does not have any material bearing on taxability of the receipt in the hands of the assessee, since purchaser's treatment of the transaction in its accounts is not determinative of the true nature of the transaction. Further, with regard to contention of the AO that assessee had never shown the land in its fixed assets schedule, we find force in argument of the assessee that as it had not paid any sum by way of premium for acquisition of land, there was no question of reflecting the land as an asset in the balancesheet. Important point to be noted is that the land was held by the assessee on lease, on payment of monthly rent. There was no purchase price paid. Thus we concur with the findings of Ld CIT(A) that the assessee had transferred independent interests in two different assets and therefore the Capital Gains arising on the assignment of leasehold interest in the land being a capital asset was rightly offered for tax as Long Term Capital Gains and the consideration attributable to the transfer of the building was rightly offered for tax as Short Term Capital Gains - Decided against revenue. Addition to the sales consideration of the factory building by holding that compensation of ₹ 1.5 crores paid to M/s. Writer Jesia family trust be taxed in the hands of assessee firm as arising out of sale of factory buildings - CIT(A) deleted the addition - Held that:- The Agreement of sale dated 09.05.2002 was a tripartite Agreement between the three parties and this was the basis of the sale the consideration paid to the Trust and the other conditions related to it. The consideration of ₹ 1.50 crores was payable to the Trust by virtue of this Agreement and, as a result it cannot be said that this was not based on any legal obligation. Thus, we find that Ld CIT(A) has rightly rejected the contentions of the AO on this issue. It cannot be held, only on the basis of presumptions, that the transaction was a colorable device. The circumstances highlighted by the Assessing Officer to show that the transaction as a colorable device cannot take precedence over earlier judicial scrutiny and a specific tripartite Agreement. Besides, the circumstances highlighted by the Assessing Officer cannot be treated as very unusual or improbable. In any case, the Trust has offered the consideration as income, in its return of income. In our opinion, Ld CIT(A) has rightly rejected the stand of the AO on this issue also. It has been rightly argued by Ld Counsel that even if the entire sum of ₹ 4,95,00,000/- is viewed as the sale consideration accruing to the assessee, deduction of ₹ 1.50 crores is available to the assessee as an expenditure incurred wholly and exclusively in connection with the transfer.CIT(A) has rightly held that the Assessing Officer was not justified in taxing the sum of ₹ 1.50 crores in the hands of the assessee and treating it as part of short term capital gain - Decided against revenue. Brought forward unabsorbed depreciation adjustment against any income of the assesee of the current year - Held that:- Ld. CIT(A) considered submissions of the assessee and held that brought forward depreciation stands on the same footing as the current year's depreciation and, therefore, unabsorbed depreciation of past years can be set-off against income chargeable under any head. Section 32(2) makes it clear. This also finds judicial support from the decision given by the Hon'ble Supreme Court in the case of CIT vs. Jaipuria China Clay Mines (P) Ltd. [1965 (11) TMI 32 - SUPREME Court] and Garden Silks vs. CIT [1991 (3) TMI 1 - SUPREME Court ]. Accordingly, Ld CIT(A) accepted submissions of the assessee and allowed this ground of appeal. We find that this issue is covered in favour of the assessee, and therefore Ld CIT(A) has rightly decided the same in favour of the assessee. Nothing wrong therein could be pointed out by Ld DR, nor found by us, and therefore the same is upheld - Decided against revenue.
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2015 (12) TMI 38
Treatment to share trading loss - CIT(A) not treating the same as speculative loss - Held that:- The claim of the assesse for set off of loss from share dealing should be allowed from the profits from F & O in share transactions, the character of the income being the same and also hold that before application of the Explanation to section 73, aggregation of the business profit or loss is to be worked out irrespective of the fact whether it is from share delivery transaction or derivative transactions. - Decided against revenue. Interest on borrowed funds disallowed - interest on borrowed funds as not meant for business purposes when loans and advances were advanced without interest - CIT(A) deleted disallowance - Held that:- We find that the Learned CITA had rightly granted relief to the assessee to the extent of availability of own funds with the assessee. This issue is now settled by the decision of the Bombay High Court in the case of Reliance Utilities and Power Ltd reported in [2009 (1) TMI 4 - HIGH COURT BOMBAY] wherein it was held that “Where an assessee has his own funds as well as borrowed funds, a presumption can be made that the advances for non-business purposes have been made out of own funds and that the borrowed funds have not been used for this purpose.” - Decided against revenue. Disallowance u/s 14A - CIT(A) deleted disallowance - Held that:- CITA had rightly granted relief to the assessee by stating that while applying the second limb of Rule 8D , the interest that is already disallowed u/s 36(1)(iii) of the Act should be ignored for the purpose of separate disallowance u/s 14A of the Act in order to avoid double addition. - Decided against revenue.
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2015 (12) TMI 37
Non-granting of exemption u/s. 10(23C)(iiiab) - denial of benefits of exemption u/s. 11 also - Held that:- An identical issue was considered by the Tribunal, Pune Bench in the case of Deccan Education Society [2015 (7) TMI 649 - ITAT PUNE ] wherein also the Tribunal had the occasion to consider the fact that the institution was accepting capitation fees in the form of donation and the Tribunal allowed exemption u/s. 10(23C)(iiiab) of the Act finding that nothing was brought on record to show that such donation has not been accounted for or utilized by any trustees or their relatives or utilized for purposes other than education. Thus, from the totality of the aforestated facts in the light of the judicial decisions discussed hereinabove, the two conditions vis-ŕ-vis institution should solely exist for the purpose of education and it should not exist for the purpose profit have been successfully fulfilled by the assessee society. If the Government grant receipt is less than 50%, the assessee cannot be denied exemption u/s. 10(23C)(iiiab) of the Act on the ground that the condition of “substantially financed” by the Government stands violated . Thus no hesitation to hold that the institution is “substantially financed by the Government”. Thus, fulfilling the third condition also for the eligibility for claiming exemption u/s. 10(23C)(iiiab) of the Act.It would not be out of place to mention here that even after the survey and search operation, the Government grants are still received by the Institution which establishes the fact that even in the eyes of the Government, the institution is solely existing for imparting education. We, therefore, direct the AO to grant exemption u/s. 10(23C)(iiiab) of the Act. In the case in hand, the exemption has been denied solely for the reason that the institution has received the capitation fees. This issue has been elaborately discussed by the Tribunal while restoring the registration u/s. 12A of the Act as mentioned elsewhere. There is not even a whisper in the orders of the authorities below which could suggest that the facts of the case are hit by the provisions of Sec. 13 of the Act. After considering the facts in totality in the light of the decision of the Tribunal in assessee’s own case while restoring the registration u/s. 12A of the Act in our understanding of the facts qua the relevant provisions of the Act, we are of the opinion that the assessee is entitled for the benefit of Sec. 11 of the Act. We, therefore, direct the AO to grant the benefits of Sec. 11 of the Act. - Decided in favour of assessee
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2015 (12) TMI 36
Reopening of assessment - computation of long term capital loss - Held that:- AO had originally completed the assessment u/s 143(3) of the Act and the details of computation of long term capital loss is part and parcel of the memo of income filed along with the return of income by the assessee. Even though the reopening in this case was done within the period of 4 years, we find that there is absolutely no tangible material available with the Learned AO to come to a conclusion that income has escaped assessment. It only amounts to revisiting of the existing materials already available on record. It only amounts to change of opinion on which ground reopening is not permissible as per law. We hold that the assumption of jurisdiction u/s 147 by the Learned AO, is based only on change of opinion; made without any tangible material that constituted new information, formation of belief for assumption of jurisdiction made without considering the relevant provisions of the Act and hence the reopening of assessment u/s 148 and consequential reassessment order passed u/s 147 is bad in law and accordingly the reassessment proceedings stand quashed. - Decided of assessee.
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2015 (12) TMI 35
Computation of capital gains under S.48 - transfer of equity shares - CIT(A) confirming the order of the Assessing Officer in substituting the full value of the consideration with fair value of consideration - Held that:- The reason for computing the capital gain by the Assessing Officer by estimating the sale consideration is that the shares of Bharati Cements have fetched a higher amount as compared to the shares of Silicon Builders, which is holding the shares of Bharati Cements. As seen from the order of the CIT(A), the Assessing Officer has worked out the net worth of Bharati Cements to arrive at the share value of Bharati Cements to estimate the share value of M/s. Silicon Builders. This, in our opinion, is fallacious. Hon’ble Supreme Court in the case of CIT V/s. George Henderson (1967 (4) TMI 18 - SUPREME Court) has held that the expression “full consideration” in the main part of S.12(B)(2) of the Indian Income-tax Act, 1922 cannot be considered as having a reference to the market value of the asset transferred, but the expression only named the full value of the thing received by the transferor in exchange for the capital asset transferred by him. S.12(B)(2) of the Indian Income Tax Act, 1922 is analogous to S.48 of the Income Tax Act,1961. Thus we direct the Assessing Officer to adopt the full value of consideration as received by the assessee on sale of shares of M/s. Silicon Builders at cost to be the full consideration for computation of capital gains on such sale. - Decided in favour of assessee
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2015 (12) TMI 34
Reopening of assessment - Reopening on audit objection - Held that:- In this case, an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer did not make any addition in the assessment order. Respectfully following Honourable Delhi high court in CIT V Usha International ( 2012 (9) TMI 767 - DELHI HIGH COURT) in such situations, it should be accepted that the issue was examined but the Assessing Officer, did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer, had formed an opinion in the original assessment, whether or not he had recorded his reasons in the assessment order. Therefore we do not have any hesitation to hold that the reopening in this case is initiated solely on the basis of 'Change of Opinion' which cannot be sustained. - Decided in favour of assessee
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2015 (12) TMI 33
Transfer pricing adjustment - selection of comparable externally - Held that:- As the TPO had erred in choosing an external comparable, when there was an internal comparable uncontrolled transaction which the assessee had taken in its TP study. - Decided in favour of assessee Disallowance u/s. 40(a)(i) relating to the payments of bio-study expenses - Held that:- DRP correctly deleted the disallowance following the decision of the Hon ble jurisdictional High Court in the case of De beer India Minerals Pvt. Ltd [2012 (5) TMI 191 - KARNATAKA HIGH COURT] - Decided in favour of assessee Disallowance of employees contribution to PF/ESI u/s. 36(1)(va) - Held that:- The provision of section 43B encompasses in its ambit, employee s contribution too. Therefore, considering the various judicial precedents and going by the intention of the legislature, we respectfully submit that delayed payment of employee s contribution to ESI fund should be allowed as deduction under section 36(1)(va) of the Act read with section 43B of the Act if the said payments are made on or before the due date for filing the return of Income. See COMMISSIONER OF INCOME-TAX Versus ANZ INFORMATION TECHNOLOGY P. LTD. [2009 (9) TMI 69 - KARNATAKA HIGH COURT ] - Decided in favour of assessee
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2015 (12) TMI 32
Penalty under section 271(1)(c) - wrong computation of long term capital gain - Held that:- As far as computation of long term capital gain is concerned, we find that the ld.AO has made this addition by invoking the provision contained in section 50C of the Income Tax Act. The section 50C is a deeming provision which empowers the AO to deem sale consideration equivalent to the amount on which the value has been adopted for the purpose of payment of stamp duty. To our mind, this fiction cannot be extended for visiting the assessee with penalty for concealment of income. It is pertinent to mention here that the stamp duty paid on a sum of ₹ 1,21,72,500/-. This section authorizes the AO to deem this amount as an actual sale consideration for the purpose of computing the long term capital gain. However, on a reference to the DVO, the value has been scaled down to ₹ 46,82,000/-. This drastic change in the value itself indicates that it is an estimated figure. The fiction created for computation of capital gain cannot be extended even for visiting the assessee with penalty under section 271(1)(c) of the Act. As far as the invocation of Explanation 1 and 3 attached to section 271(1)(c) is concerned, we find that the assessee has contended before the AO that she had never taxable income throughout her life. She was not well-conversant with the computation of capital gain and due to bona fide belief that her income is below taxable income, she did not file the return originally. The AO has also not exactly worked out the taxable income of the assessee on the basis of actual sale consideration received by her. Considering the explanation of the assessee, coupled with the fact that for the additions made with the help section 50C, penalty cannot be imposed upon the assessee. Decided in favour of assessee.
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2015 (12) TMI 31
Disallowance of depreciation on computers on the ground that the same were not put to use - Held that:- Total number of computers received were 88 in numbers and these computers were subject to positive report on testing. It is not coming out from the records that when the testing was carried out and whether the testing was carried out for the purpose of business requirements. In the absence of such material evidence, no inference can be drawn with regard to usage of the computers. Under these facts, we deem it proper to restore this issue back to the file of AO for verification and the AO is hereby directed to carry out further verification of the genuineness of certificate and claimed trial run of computers. Decided in favour of assessee for statistical purposes.
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2015 (12) TMI 30
Penalty under section 271(1)(c) - Difference in stock as per bank statement vis-a-vis books of the assessee - Held that:- Revenue proceeds on the basis that difference between these two figures represents concealed income. That view is not entirely free from doubt as it is a ground reality that bank statements at times reflect inflated value of stocks so as to avail higher credit limits. There is nothing more than bank statement figure which is put against the assessee. Whatever be the merits of upholding addition on such facts, in our considered view, an addition of this nature cannot be visited with penalty proceedings. Hon’ble jurisdictional High Court’s judgment, in the case of CIT Vs Sachidanand Pulse Mills [2014 (12) TMI 750 - Gujarat high Court] holds so. Penalty in respect of declining deduction for write off due to joint venture having been aborted, we find that the Tribunal has confirmed the quantum addition. While doing so, the Tribunal, vide order had observed that "the resolution also passed after the financial year by the appellant and no copy of MOU dated 15.11.2003 has been furnished before any of the authorities below". The aspect regarding joint venture having been aborted was rejected on technical grounds. Such a loss, if it is indeed found to be on aborted joint venture, is generally allowable. It is also important to bear in mind that the AO did not even bother to given an opportunity of hearing because, as it appears from his observations extracted earlier in the order, he was of the view that findings in the assessment proceedings were good enough for imposing penalty as well. That is clearly an erroneous approach. In view of these discussions, the penalty in respect of write off was not justified either. The penalty in respect of depreciation already stands deleted and the AO is not in appeal. - Decided in favour of assessee
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2015 (12) TMI 29
Disallowance under section 40(a)(ia) - assessee has not filed any bills and vouchers and hence, not allowable under section 37 - assessee’s objection was only against the disallowance of the expenditure both under section 37(1) as well as under section 40(a)(ia) - disallowance of depreciation - Held that:- We find that in the case before us, the A.O. has not estimated the income @ 8% but has justified the disallowance by stating that the disallowance would result in the assessed income being 8% of the gross profit. Both the A.O. as well as the Ld. CIT(A) have not given any reasoning as to why the claim of depreciation has not been allowed. As rightly pointed out by the Ld. Counsel for the assessee, the provisions of section 40(a)(ia) are not applicable to the payments already made. Therefore, the disallowance under section 40(a)(ia) is not sustainable. However, in the absence of bills/vouchers produced by the assessee, we do not find any reason to interfere with the order of the Ld. CIT(A) that the disallowance under section 37(1) is justified. However, with regard to claim of depreciation, we deem it fit and proper to remit the issue back to the file of A.O. for consideration of the same in the light of judgment of the Hon’ble A.P. High Court in assessee’s own case for A.Y. 1998-99. - Decided partly in favour of assessee for statistical purposes.
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2015 (12) TMI 28
TDS u/s 194I - non deduction of TDS - assessee in default - agreement of lease and the nature of payment of rent - CIT(A) deleted the disallowance - Held that:- The Tribunal has been taking a consistent view after taking into consideration the agreement of lease and the nature of payment and also the scope and ambit of definition of "rent" as given in section 194I, that no TDS is required to be deducted on such a premium paid for acquisition of rights in the land taken by way of lease from MMRDA and, therefore, assessee cannot be treated as assessee in default u/s 201(1) and consequently no interest is chargeable u/s 201(1A). Accordingly we uphold the order of the CIT(A) and dismiss the grounds raised by the revenue. - Decided in favour of assessee.
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2015 (12) TMI 27
Penalty u/s.271(1)(c) - whether barred by limitation - whether the issue of limitation was not dealt by the ld. CIT(A) - recalling the order - Held that:- From the order of the CIT(A), it transpires that the ld.CIT(A) stated that the assessee was unable to substantiate this ground of facts without mentioning the relevant facts of the case. Hence, there is merit into the contention of assessee that order of ld. CIT(A) is nonspeaking on this issue. Further, it was observed by ld. CIT(A) that in support of contention, assessee relied upon the decision of Navjivan Oil mills [2001 (7) TMI 81 - GUJARAT High Court] and Dilip N Shroff vs. JCIT [2007 (5) TMI 198 - SUPREME Court] In the entire order of the ld. CIT(A), he has not discussed the facts of the case, which were relied by counsel for the assessee during course of hearing before him. Ld. CIT(A) has simply stated that the case laws as relied by assessee are distinguishable on facts. It is settled position of law that the appellate authority is required to give its finding on the judgments as relied by counsel merely stating that the decisions relied are distinguishable on facts would not be sufficient. Under these facts, we do not find any merit into the application moved by the Revenue. Moreover, the revenue has not pointed out any mistake apparent from the record. The ground taken for recalling the order is that the order of the Tribunal is perverse and contrary to the facts on record. The grounds as taken in the present application do not fall within the scope and ambit of Section 254 of the Act, as it would tantamount to review of the order. Decided against revenue
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2015 (12) TMI 26
Legal right to the AO for opportunity of being heard at the time of hearing appeal - Held that:- AO has not been given notice of hearing by Ld. CIT(A) as is required by the provision of Sec. 250(1) of the Act. So in view of the above factual position, we restore the matter to the Ld. CIT(A) with a direction to complete the appellant proceedings within a period not exceeding three months from the date of service of the order. It is also not out of place to mention that the notice should be served to AO as required under the law and AO should co-operate in the appellate proceedings so that matter can be disposed off within the prescribed period. - Decided in favour of revenue for statistical purposes.
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2015 (12) TMI 25
Disallowance u/s 14A r.w.r 8D - Held that:- In view of the decision from Hon’ble jurisdictional High Court in Godrej & Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT) we restor the matter back to the file of the Assessing Officer to consider the calculation of the assessee for disallowable expenditure in accordance with law by analyzing/verifying investments vis-ŕ-vis borrowed funds after providing reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purpose
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2015 (12) TMI 24
Eligibility for deduction under section 80IB for Unit-II - CIT(A) allowed claim - Held that:- As could be seen from the impugned order of the learned Commissioner (Appeals), the Tribunal, while deciding assessee's appeal for the assessment year 2003-04, allowed assessee's claim of deduction under section 80IB, by holding that Unit-II, is a separate industrial undertaking. This decision was again followed in assessee's own case for the assessment year 2004-05 Thus the Tribunal holding that Unit-II, is a separate industrial undertaking has allowed assessee's claim of deduction under section 80IB of the Act. The learned Commissioner (Appeals), having allowed assessee's claim of deduction following the aforesaid decision of the Tribunal, there is no reason to interfere with the same which is hereby upheld. - Decided in favour of assessee
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2015 (12) TMI 23
Addition towards sale proceeds and undisclosed investment - Held that:- Assessing Officer in assessment order did not mention any statement given by the parties who have given cash to the assessee neither there is any reference related to lease deed and revenue records and its extracts in the assessment order. Therefore, the crucial evidence and the statement of the parties should have been taken into consideration while passing the assessment order by the Assessing Officer. The Ld. CIT (A) also fails to look into these crucial aspects while dismissing the appeal of the assessee. This needs to be looked into by the Assessing Officer. Therefore, the matter is remanded back to the Assessing Officer. - Decided in favour of assessee for statistical purposes.
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Customs
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2015 (12) TMI 4
Detention of assets - violation of principles of natural justice and fair play. - Allegation of Smuggling of consignment seized including Luxury Car, Luxury Wrist Watches, Assorted jewellery, pieces of fur of wild animals and cash - whether the impugned order extending the time limit under Section 110(2) is legal and proper and whether the officers of DRI had sufficient time and opportunity for investigating into the details of the assets detained vide Panchanama dated 6.12.2013, and further investigation only a few days before the issue of show-cause notice for extension of further time for issue of show-cause notice, vide notice dated 2.6.2014. Held that:- Competent officers of Customs, or in any area adjoining the land frontier or the coast of India, has reason to believe that any goods are liable to confiscation, or any documents or things, which in his opinion will be useful or relevant to any proceedings under this Act, are secreted in any place, he may himself or through other officers search for such documents, goods or things. The provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searches shall, so far as may be, apply to searches under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word Magistrate, wherever it occurs, the words Commissioner of Customs were substituted. - It is evident from perusal of the panchanama dated 6.12.2013 that no condition precedent as required under Section 110 of the Act, is recorded at the time of detaining the goods/assets found to the effect that subject goods are liable for confiscation under the provisions of the Customs Act. Further no satisfaction have been recorded as required under sub-section 3 of the Section 110 to the effect that the documents or things detained will be useful or relevant to any proceeding for detaining seized assets under the Customs Act. Revenue had sufficient time for conducting inquiry and or issue of show-cause notice under Section 124 within a period of six months from the date of detention of the goods. It is evident on the face of record that the investigation officers have done practically very little or nothing in spite of the appellant being available for the purpose of inquiry right from 7.12.2013 till 10.2.2014 being the period of judicial custody. Further, during the said custody, the DRI have never sought permission to interrogate the appellant. Even after the release from the judicial custody, the appellant was attending the office of the DRI every week particularly on Monday and such other days as he may have been advised. Further, the appellant and his family members had approached the Revenue authority for release of the goods by filing a detailed representation as to the nature and their source on 24.2.2014, but no inquiry seems to be made in the matter and the investigating authority chose about two weeks prior to the end of time limit of six months, have ventured to make further inquiry about the detained assets by recording statement and asking for further details like Bank statement and other documents. Detention of the goods/assets in question is bad under the provisions of Section 110 as the goods/assets have only been detained and not seized as required under the scheme of the Act. We further take notice of this fact that so far the two cars in question is concerned, major part of the purchase price have been funded through Banking finance and further the other payments made by the appellant and/or his company are through the Banking channel. - order for provisional release of the cars asking for 100% Bank Guarantee of the invoice value is also bad in law and on the facts. Thus, in the facts and circumstances, we hold that impugned order is bad in law and in facts and accordingly, the same is set aside. We further direct the learned Commissioner and/or the DRI to release the detained goods of the appellant and their family members after obtaining PD Bond and/or Indemnity Bond, that the appellant and other persons will not alienate the assets returned to them and/or any way deal with them without prior permission of the Commissioner of Customs. The goods are to be returned forthwith, within a maximum period of 20 days from receipt of a copy of this order. As the appellant is a noticee in the show-cause notice dated 13.1.2014 in the case of alleged smuggling of Red Sanders, we permit the Revenue to retain the cash seized on 6.12.2013 from the residence/premises of the appellant and his relatives, which shall be liable to appropriation upon adjudication of the said notice dated 13.1.2014. We further direct the Revenue to keep the said amount detained in a separate Bank account/PD account bearing interest pending adjudication. - Decided partly in favour of appellant.
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2015 (12) TMI 3
Waiver of pre deposit - 100% EOU - Clandestine manufacture and clearance of goods - DTA Clearances - Clearance of goods in the name of fictitious units - exemption on capital goods under Notification No. 53/97-Cus - Held that:- on the basis of evidences unearthed by the investigation, it is revealed that the Applicant M/s Vatan Textiles Ltd have manufactured final products i.e. fabric and cleared clandestinely in the domestic market without payment of excise duty. The said Applicant with systematic modus operandi, in the guise of clearance of goods from M/s Loomcraft and M/s Fabricart, manufactured and cleared goods to various customers clandestinely. Claim of the group companies i.e. M/s Loomcraft and M/s Fabricart that the goods alleged to have been manufactured by M/S. VTL were manufactured on job work basis on their behalf, got demolished on the basis of enquiries conducted with the so called job workers, where it was found that there exist no such job worker or they do not have any loom to manufacture of fabric. The so called job workers in their statements clearly stated that they did not carry out any job work on behalf of M/s Loomcraft and M/s Fabricart. Goods manufactured by the Applicant M/S. VTL is neither exported nor cleared on payment of excise duty and without the permission of the development commissioner. The Applicant cleared said manufactured goods clandestinely without payment of duty. Thus the Applicant(VTL) appears to have grossly violated the conditions of the exemption notification No.53/97-Cus. Therefore in our view the demand of custom duty confirmed on the capital goods is prima facie correctly demanded. As regards claim of the Applicant for depreciation in the valuation for calculation of custom duty, we are of the view that once vital conditions of the notification is not complied with, the Applicant is not eligible for the exemption notification. The depreciation provision being part of the said notification shall also not be prima facie available. M/s Loomcraft and M/s Fabricart are directly involved in abeting and aiding the evasion of excise and custom duty committed by VTL. - Applicants have not made out prima facie case for full waiver of the pre-deposit. - Partial stay granted.
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2015 (12) TMI 2
Suspension of CHA license - Denial of duty free benefit - Misdeclaration - absence of the ITC (HS) Code number relating to Cocoa powder in the amendment sheets issued by DGFT against the original DFIA Licences - Held that:- It is quite obvious from the remarks of the Assessing Officer (AC)that the assessment was done in full consciousness of the facts of the case. We fail to see how the extended period can be invoked even under the Customs Act for demanding duty. We also fail to understand how suppression of facts or mala fide intention can be alleged on the part of the importer and, more importantly, the CHA, when all the facts were clearly before the Customs authorities. The case under the Customs Act is not before us. The case before us relates to suspension of CHA License in connection with the same imports. We find the allegations against the CHA are not supported by facts. We do not find mis-representation by the CHA of any facts. The CHA s role is to present all the documents before the assessing authority which they did. And the assessing authority passed the assessment order in complete knowledge of the facts as well as with knowledge of the CESTAT order in the case of M/s. Kushalchand & Co. (2010 (10) TMI 239 - CESTAT, BANGALORE). The endorsements were made by the assessing officer on the face of the Bill of Entry on the basis of CESTAT judgement which has become final. It (CESTAT) judgement was not challenged and therefore became binding on all lower authorities including Customs officers and the Customs Brokers. Judicial discipline requires the department to follow rulings rendered by higher judicial fourms. Therefore no action is warranted against the CHA. - Impugned order is set aside - Decided in favour of appellant.
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2015 (12) TMI 1
Valuation of goods - valuation of 10 varieties of Integrated Circuits and 6 varieties of transistors imported under Bill of Entry dated 8.9.2003 - Held that:- Assessable value cannot be determined on the basis of quotation. Quotations are merely indicative price having no relevance as to the Country of Origin, which is admittedly not mentioned on the quotation. With respect to the IC No. 0800HCN, (Sr. No. 2 of Annexure-B to show-cause notice), the Revenue has relied on the NIDB website, wherein the number of ICs are not reflected at all, whereas under the Bill of Entry, the Country of Origin is other than Japan. In the case of Bill of Entry No. 655048 relied upon by the Revenue, copy of the same have not been supplied to the appellant leading to violation of principles of natural justice and the finding is thus perverse. In another Bill of Entry as relied upon by the Revenue, the quantity is only 300 of M/s Shreeji, whereas the quantity imported by the appellant is 10,000 and there is also difference in Country of Origin. It is something different and/or short with respect to comparison adopted by the Revenue for the purpose of under-valuation. - Revenue has not discharged the burden to establish under-valuation as required under the Customs Valuation Rules, 1988. In this view of the matter, we reject the value adopted by the Revenue - Decided in favour of assessee.
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2015 (11) TMI 1505
Claim of exemption from CVD - import of ‘Red Fine Standard Grade Murate of Potash (MOP) - whether the appellant are eligible to the benefit of Notification No.12/2012-CE dated 17.03.2012 - Held that:- We do not find that the benefit of excise Notification No.12/2012-CE dated 17.03.2012 has been denied to the appellant, recording any observation that the appellant are not eligible to the benefit of both the Notifications simultaneously - it is clear that denial of benefit to the said exemption Notification rests only on the issue of lack of evidence to establish that the condition of Notification No.12/2012-CE dated 17.03.2012 has not been satisfied. Vehemently challenging the same, the ld.Advocate for the appellant submits that the ld.Commissioner(Appeals) observation is de hors of the conditions of the said Notification, hence, untenable in law. However, rebutting the said finding of fact, claimed that the entire quantity of imported MOP was meant and in fact had been used in the manufacture of fertilizers; in support, the appellant have produced a certificate issued by their statutory auditors. Further, it is their contention that the benefit of concessional rate of Basic Customs Duty @ 5% was allowed only on the condition that the imported MOP had been used in the manufacture of fertilizers, therefore, it cannot be said that the imported MOP were not used in the manufacture of fertilizers, but sold in the market. Imported MOP had been used in the manufacture of fertilizers. In any case, it is needless to mention that at any point of time, if the department is able to unearth facts or bring evidences that would lead to an inference that the imported MOP had not been used in the manufacture of fertilizers, on that ground alone the benefit of exemption Notification could be denied alleging suppression or mis-declaration of facts. However, at this stage since the evidence produced by the appellant, has not been rebutted by the revenue by producing contradictory evidences, hence, in our opinion, it is safe to conclude that they have complied with the condition of Notification No.12/2012-CE dated 17.03.2012; accordingly, eligible to the benefit of the said Notification. - Decided in favour of assessee.
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2015 (11) TMI 1504
Valuation of goods - Determination of assessable value - Inclusion of royalty amount for use of the trademark - Held that:- royalty is not related to the imported raw material; the royalty is related to the finished goods. Only because imported goods are contained in the finished goods, it cannot be said that royalty is related to the imported goods. The royalty is only paid for using the Trademark i.e. Sandvik on the products manufactured and sold in India. Therefore, we are of the view that the first condition of Rule 10 (1) (c) is not satisfied because the royalty is not related to the imported goods. - The Agreements with Sandvik Materials Technology and Sandvik Mining and Construction to whom the royalty is paid do not require the import of material from them only. The material may be procured other foreign suppliers or even locally. There is no condition that the Trademark can be used only if the appellant imports the raw materials from Sandvik. The appellants have made a statement that they have imported the goods from other suppliers and sourced locally too. This establishes that even the second condition under Rule 10 (1) (c), that royalty is paid as a condition of the sale of imported goods, is not met. In any case it is not as if the imported raw materials were sold by the appellant under the brand name Sandvik. There is no finding by Commissioner that the buyer had adjusted price of imported goods in the guise of enhanced royalty. Nor that the appellant was compelled to import raw material from Associate companies. Nothing in the Agreements indicate any binding to buy raw material from Associate companies. Rather, the Ld. Counsel submitted a statement showing use of raw material sourced locally as well as from unidentified origin. Therefore in the circumstances, the judgment of the Apex Court in the Ferodo case [2008 (2) TMI 12 - Supreme Court] is applicable in the present case. - invoice value is not required to be loaded by including the royalty - Decided in favour of assessee.
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2015 (11) TMI 1503
Revocation of CHA license - Forfeiture of security deposit - Seizure of goods - Goods not declared - violation of Regulation 12 and Regulations 13 (a), 13(b), 13(d) & 13(e) and 13(o) - import of offending goods - Forging of signature - Held that:- Appellant had allowed Shri Manish Sangani to use the appellant s License because his own License of National Shipping Agency had been suspended. Strangely, although the license of National Shipping Agency was suspended, the employees holding G-Cards of National Shipping Agency continued to operate in the Customs area and did Customs clearance work in respect of documents filed in the name of the appellant CHA. How this was permitted by Customs needs to be answered. - transfer of License did not take place physically. But Regulation 12 states no License shall be sold or otherwise transferred. As the law itself prohibits transfer of a License, the act of a person allowing another person to use his License, would amount to transfer of a License. - Therefore, it is clear that Regulation 12 has been violated in this case. As regards Regulation 13(a), it is clear from the provisions that the CHA has to take an authorization from the importer. An authorization given to a person (other than License holder) who actually used the CHA License does not become a true authorization in the sense and spirit of Regulation 13(a). An authorization addressed to the appellant was produced during the inquiry but this was much later and no authorization was produced at the time of seizure of the goods. We have seen the authorization. It does not even show any contact number or telephone number of M.S. International. Further there is a huge gap between the words yours truly and the signature on the authorization. The appellant has also failed to fulfill the condition of Regulation 13 (e) because he had allowed Shri Manish Sanghani to use his License and did not exercise due diligence to impart correct knowledge to the importer. As regards Regulation 13 (o) which requires the CHA to verify the antecedents of the importer, the appellant have tried to evade the charge by producing copies of PAN, IEC of the importer and a copy of the signature verification of the importer by the Bank. - signature verification bears no date. The account number in the stamp of the Bank appears to be overwritten. No prudent banker would put his signatures without affixing the date of the signature and without understanding the significance of the purpose for which it will be used. The signature verification paper is not on a letterhead. Thus the attempt of the appellant to create evidence is rather weak. We, therefore reject the defence put up in respect of violation of Regulation 13 (o). Regarding regulation 19(5), it is noted that the Director of the appellant Shri Manish Amlani had in his examination in the inquiry on 18.1.2013 and on 22.1.2013 admitted that he had allowed Shri Manish Sanghani to do the business related to Customs clearance work. Shri Manish Sanghani had filed the Bill of Entry online on behalf the appellant. Therefore the violation of Regulation 19(5) is proved. Charges against the appellants stand established. However, we also hold the view that the appellant cannot be disabled permanently for the violation as that would deprive him and his employees of their source of livelihood. The License has remained in operative since 29.5.2012. We find that the three years period uptill now during which he has not been able to use the License is sufficient punishment. - we cancel the order of revocation. The license would become operative immediately. However, the forfeiture of security deposit is upheld. - Decided partly in favour of Appellant.
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2015 (11) TMI 1502
Penalty u/s 114(i) on CHA for abetting the export of the prohibited goods - confiscation under Section 113 - Whether or not the respondents had knowingly attempted to export prohibited goods i.e. rice in the guise of dal Husk are liable for penalty under Section 114(iii) of the Customs Act, 1962 - Held that:- there is no breach of obligations by the respondents Director and employee of CHA. It is not the case that CHA had got the goods loaded in the container. Further, on noticing the mis-declaration at the time of de-stuffing, the respondents have immediately informed the concerned authority in writing. Further, the respondents have co-operated in investigation against the said kingpins who have attempted export of prohibited goods. Accordingly, I uphold the impugned order passed by the learned Commissioner (Appeals). - Decided against Revenue.
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2015 (11) TMI 1501
Wrong claim of CVD Benefit - assessee had opted for First Check Assessment - importer had admitted their typographic error, showing willingness to pay differential duty - Misdeclaration - Held that:- under the facts and circumstances no case of misdeclaration or contumacious conduct on the part of the importer is made out. I further agree with the findings of the Commissioner (Appeals) setting aside redemption fine and penalty. Thus the appeal of the Revenue is dismissed. The respondent-assessee will be entitled to consequential relief, if any, in accordance with law. I further, direct the concerned authority to refund the fine and penalty deposited - Decided in favour of assessee.
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2015 (11) TMI 1500
Levy of penalty for negligence in duty on the officers involved in appraising and assessing the customs duty - Misdeclaration of goods - Smuggling - misuse of the unaccompanied baggage mode for smuggling, by not declaring the high value goods and courier parcels by way of mis-declaration of description and value of the goods - Held that:- Neither there is any charge of aiding or abetting on part of the officers, nor there is any charge of favouring the alleged importers for any monitory gain. At best the case appears to be of negligence in duty for which they have already suffered by way of major penalty under disciplinary proceedings. In this view of the matter, I hold that no penalty is sustainable against the appellant Smt. Geeta V Patil and accordingly, I set aside the penalty of ₹ 50,000/- under Section 112(a) of the Customs Act against her. I further hold that no penalty was imposable against other two respondent officers namely, Shri V.M. Joshi and Shri A.A. Salkar - Appeal disposed of.
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2015 (11) TMI 1499
Denial of duty benefit under Customs Notification No. 94/96 -Cus. dated 16/12/96 - Reimport of goods - whether the appellants are eligible for the nil rate of duty as envisaged in notification number 94/96 -Cus. benefit of which was claimed by them while re-import of a consignment of gold jewellery exported earlier for exhibition abroad - Held that:- Condition of 60 days, as provided in the foreign trade policy, is not a prohibition and we further hold that as the goods have been re-imported within a period of 6 months as provided in the notification, read with the foreign trade policy, the appellant is entitled to the benefit of exemption notification number 94/96 Cus. Thus, the appeal is allowed in favour of the appellant with consequential benefits. We direct the concerned authority, the Commissioner of Customs, C.S.I. Airport, Mumbai to release the goods in question, within seven days of receipt or production of a copy of this order. The impugned order is set aside. - Decided in favour of assessee.
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2015 (11) TMI 1498
Revalidation of Duty Free Import Authorization (DFIA) Licenses - failure of the appellant to produce an import permit from the Central Insecticide Board & Registration Committee (CIB &RC) under the Insecticide Act 1968 - Held that:- Lower authorities have misread the provisions of law. As per Para 2.13.1 of the Handbook of Procedures, only the licensing authorities can permit the revalidation of freely transferable DFIAs. There is no dispute on this. But it should be fairly understood that adequate justification for revalidation has to be made available to DGFT. And this information can only be made available by Customs. The appellant has merely sought a statement to be issued by Customs to the DGFT certifying that the admissibility of import of Boric Acid against the DFIAs licenses remained in litigation. In fact, the Commissioner (Appeals) acknowledges this position regarding the litigation. - request made by the appellant to the Customs Department is very legitimate. The request is not for revalidation of Licenses by Customs, but only a certificate to be issued to DGFT confirming the sequence of events from the date of first refusal of duty free clearances of imported Boric Acid till the date when the Customs started finding Bills of Entry and releasing PD Bonds/Bank Guarantees. This factual certificate will enable the appellant to approach the DGFT who can consider the appellants case on merits for revalidation of such expired licenses. - Decided in favour of assessee.
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Corporate Laws
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2015 (11) TMI 1493
Obligation cast on the promoter/promoter group to make yearly disclosure under Regulation 8(2) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and regulation 30(2) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 - whether the obligation to make yearly disclosure is on the promoter group or the obligation is on every promoter covered under the promoter group? - Held that:- The obligation to make yearly disclosure under regulation 8(2) and regulation 30(2) of the Takeover Regulations framed by SEBI in the year 1997 & 2011 respectively is on the promoter/ promoter group. If the promoters of a listed company are individual promoters then the obligation is on the individual promoters and in case there is a ‘promoter group’ then the promoter group is required to make yearly disclosure. If the promoter group fails to disclose the shares or voting rights held by the promoters in the promoter group as also their PAC’s within the time stipulated under the Takeover Regulations, then, penalty is imposable on the promoter group and the said penalty would be recoverable jointly and severally from the promoters in the promoter group who held shares or voting rights in the Target Company with their PAC’s. In all these appeals the AO’s of SEBI have not considered the question as to whether the appellants are individual promoters or they constitute ‘promoter group’ under the respective Takeover Regulations. Even in Appeal No. 385 of 2014 the AO of SEBI has not verified the correctness of the argument advanced by the appellant to the effect that they form an independent promoter group. In these circumstances, we set aside the orders passed by the AO of SEBI and restore the appeals to the file of SEBI for passing fresh order on merits and in accordance with law.
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Service Tax
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2015 (12) TMI 22
Demand of differential service tax - activity of painting, pasting, displaying and/or maintaining the same on side panel of buses on behalf of the client namely M/s. LIC and M/s. New India Insurance Co. Ltd - Held that:- Appellant has not discharged the differential service tax liability on an amount received from M/s LIC and M/s New India Insurance Co. Ltd. towards painting charges and display charges. Appellant had never disputed the fact that they have received the amount towards painting charges and display charges from their clients. On perusal of the agreement/work order issued to the appellant we find that M/s. LIC has categorically stated that service tax liability arises on both the amounts. When the allegation in the show cause notice is for undervaluation and question of re-classification was never charged, we find that both the lower authorities have misdirected their findings and tried to classify the services under advertisement agency services. We find that these service are not at all disputed by appellant nor there is any allegation in the show cause notice to that extent. - impugned order of confirming the demand of differential service tax liability along with interest and the penalties imposed is confirmed - Decided against assessee.
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2015 (12) TMI 21
Refund claim - whether the appellants herein are eligible for the refund of education cess paid on the service tax in respect of port related services technical testing and analyzing services - Held that:- first appellate authority set aside the order-in-original which granted refund to the appellant by relying on the judgement of the Tribunal in the case of Balasore Alloys Ltd. (2010 (7) TMI 327 - CESTAT, KOLKATA ) which is in favour of the Revenue. We find that the first appellate authority has not considered the subsequent judgements passed by the Tribunal in the case of Cauvery Coffee Traders [2012 (8) TMI 374 - CESTAT, BANGALORE] and Kudremukh Iron Ore Co. Ltd. (2011 (12) TMI 131 - CESTAT, BANGALORE). It is also to be noted that the CBEC Circular No. 134/3/2011 dated 08.04.2011 was issued specifically noting the judgement of the Tribunal in the case of Balasore Alloys Ltd. (supra) and the Boards view is if that education cess paid on the service tax by the service providers is also to be refunded to appellants. We find that the ratio of the judgement of the Tribunal in the case of Cauvery Coffee Traders and Kudremukh Iron Ore Co. Ltd. (supra) is the correct view as if the service tax liability is discharged on which education cess is paid on the goods exported, the benefit of refund of such education cess paid should not be denied when the export of goods is not in dispute. - all appellants are eligible for refund of education cess paid on the service tax by the service providers. - Decided in favour of assessee.
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2015 (12) TMI 20
Waiver of pre deposit - Abatement claim - Commercial or Industrial Construction Service - Held that:- Even CICS is a limb of works contract service and the service tax liability under the compositional scheme under works contract service and with 67% abatement under CICS is approximately the same. We, however, are in agreement with the appellant that even when the value of free supplies was not included in the assessment value, it was entitled to 67% abatement in the light of the judgement in the case of Bhayana Builders (P) Ltd. & Ors. vs. CST, Delhi & Ors [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] - activities of charitable institutions cannot be said to be non-commercial in nature even if the organisation which runs them is the declared to be charitable under Income Tax Act. The appellant cited the judgement in the case of Administrative Staff College of India Vs. CCE, Hyderabad [2008 (8) TMI 194 - CESTAT, BANGALORE ]. Apart from the fact that the said judgement is with regard to commercial training or coaching service, that judgement no longer represents good law in the light of the CESTAT Larger Bench judgement in the case of Great Lakes Institute of Management Ltd. Vs. CST, Chennai[2013 (10) TMI 433 - CESTAT NEW DELHI - LB]. - appellant would be prima facie eligible for 67% abatement, we order the pre-deposit of ₹ 1.8 crores along with proportioned interest within 6 weeks - Partial stay granted.
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2015 (12) TMI 19
Valuation - Non inclusion of value of the photographic service provided by the respondent the value of photographic paper and processing chemicals - Held that:- In the case of State of Karnataka etc Vs. Pro Lab and Others etc. (2015 (2) TMI 388 - SUPREME COURT OF INDIA) the Supreme Court discussed the trajectory of the issue regarding the vivisectability of works contracts - payment of service tax and VAT are mutually exclusive, there remains no doubt that the value of photographic paper and consumables cannot be included in the value of photography service to levy service tax. - Following the same, no merit in Revenues appeal - Decided against Revenue.
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2015 (12) TMI 18
Waiver of pre deposit - Demand of service tax - renting of immovable property service - Held that:- There is no constitutional provision brought to our notice which provides immunity to the appellant from the service tax liability for rendering taxable service. It is also a fact that the levy of service tax on rental income under renting of immovable property service was set aside by the Delhi High Court in 2009 in the case of Home Solution Retail India Ltd (2009 (4) TMI 14 - DELHI HIGH COURT) though that judgement was reversed by Delhi High Court in its subsequent judgement in 2011 as stated earlier. It clearly shows that there were questions as well as ambiguity about the impugned service. The definition of taxable service was also amended with effect from 1.6.2010. - in the chart submitted on 2.6.2014 the figures under the head collection from Govt. units are lower than the figures submitted earlier. We also note that appellant had not been cooperating in providing the figures. The leviability of service tax on similar rental income when the immovable property was rented for business or commerce has been upheld in the case of Greater Noida Industrial Authority Vs. CCE Noida [2014 (9) TMI 306 - CESTAT NEW DELHI]. We are informed by the appellant that the demand for normal period of one year for renting for use in business or commerce works out to ₹ 18 crores (approx.). - Partial stay granted.
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2015 (12) TMI 17
Denial of refund claim - PORT services and CHA services - appellant had not complied with the conditions of notification and they file to furnish evidences of actual payment of service tax - Held that:- finding recorded by the lower authorities of the documents are improper, the document in appeal, on perusal, found to be correct and in accordance with the provisions of Service Tax Rules. We find that the invoices contain service tax registration Number, Name and address of the invoice maker and appellant's name as the services receiver as regards the documents of Port Trust, we find that the said documents clearly indicate service tax registration number of Mumbai Port Trust and service tax amount discharged under the head “Port Services”. In our considered view, there being no dispute as to the facts that services were utilized by the appellant for export of goods, rejection refund of such an amount is incorrect. Secondly, we find both the lower authorities recording that appellant should have produced evidence as to payment of service tax liability by the service provider to the government of India is a non-starter and curious findings. We find on careful reading of notification no. 41/2007-ST dated 06 Oct. 2007, it does not indicate that the refund claim is to be evidenced by producing information of the service provider having discharged the service tax liability. - conditions of notification of discharging the service tax liability by the appellant to the service provider are satisfied and there is no reason for rejecting the appeal.- Decided in favour of assessee.
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2015 (12) TMI 16
Waiver of pre deposit - benefit of abatement - service of laying pipelines - installation or commissioning service - Held that:- No hearing was held in respect of the Show Cause Notice dated 15.10.2012 and therefore prima facie the demand of ₹ 14,81,645/- has been confirmed in violation of principles of natural justice which warrants full waiver and stay in respect thereof. As regards the remaining demand of ₹ 52,72,521/-, we find that the benefit of abatement in the Notification No. 15/2004-ST has been denied on the ground that the value of free supplies has not been included in the assessable value. In this regard we note that in the case of Bhayana Builders (P) Ltd. & Ors. vs. CST, Delhi & Ors. [2014 (7) TMI 1049 - CESTAT NEW DELHI], it has been held that the benefit of abatement is available even when the value of free supplies is not included in the assessable value. Thus, prima facie, the appellants are eligible for the benefit of abatement rate of 67% under Notification No. 15/2004-ST / No.1/2006-ST. - Installation of plumbing, drain laying or other installation for transport of fluid is covered under the definition of "Erection, Commissioning or Installation Service" (ECIS) - Partial stay granted.
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2015 (12) TMI 15
Condonation of delay - Power of Commissioner to condone delay beyond the period of 1 month - Held that:- As per the postal document, the impugned order stands delivered to the appellant on 12.1.2013. Not only the signature of the recipient person stands appended on the said postal receipt but the seal of the company is also put on the same, showing thereby the said order stands received by an authorized person of the company. On the contrary, the appellant has not been able to show as to who was the person who actually put his signature and how the said person was not their employee and not authorized to receive the said speed post. We fully agree with learned A.R. that it is only when the actual receipt is in doubt then the fact of sending the impugned order by Registered A.D., would arise. When there is a proof of delivery of the order, the fact that it was sent by speed post and not by registered A.D, will not have any effect on the situation. As such, we conclude that the order-in-original having been received by the appellant on 12.1.2013, the appeal filed on 9.10.2013 is admittedly beyond the normal period of limitation and also beyond the condonable period of one month which the Commissioner (Appeals) is rested with power - Condonation denied.
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2015 (12) TMI 14
Waiver of pre deposit - Adjudicating authority has not taken into account the excludible value of non-taxable service - Penalty u/s 77 & 78 - Held that:- In the adjudication order at para 28.2, where the Commissioner has already taken into account the total value and also worked out the revised value. The total taxable value worked out to ₹ 2,30,30,794/- and it is revised to ₹ 1,64,06,953/- after excluding the amount of ₹ 66,23,841/- already paid as per the R.O's verification report. We find from the grounds of appeal appellants have paid an amount of ₹ 78,10,816/- for the period 2009-10, 2010-11 and 2011-12 as per ST-3 returns and challans. Taking into consideration the submissions, we find that appellants have not made out a prima facie case for waiver of predeposit of entire demand. Appellant's contention of they being a sub-contractor, tax liability should be fastened on the main contractor will be examined at the time of final hearing of appeal. - Partial stay granted.
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2015 (12) TMI 13
Short payment of service tax - Non filing of ST-3 returns - figures provided by assessee had inherent inconsistencies as the service tax amounts shown as recovered/collected did not correspond with the service tax payable on value of taxable service - Held that:- Primary adjudicating authority relied upon the data provided by the appellants itself to arrive at the amount of service tax short paid. The appellant has not been able to show as to how those calculations are not correct. It has not been able to provide any reconciliation statement to establish that the figures made available by them earlier had factual errors. The appellant had not been submitting ST-3 returns and provided the figures only as a result of persistent follow up by Revenue. Therefore wilful mis-statement/suppression of fact on its part is evident. The fact that even after so many years, the appellant has not been able to provide even a Chartered Accountant certified final figures to show that the figures earlier submitted by it (based on which impugned demand was worked out) were incorrect in any manner. - No infirmity in impugned order - Decided against assessee.
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2015 (12) TMI 12
Taxability of amount received from goods auctioned - discharge of all the duties as per Section 150 of the Customs Act, 1962 - storage and warehousing service - Held that:- Issue is no more res integra as this bench in the case of Maersk India Pvt. Ltd. vs. CCE & C, Raigad reported in [2012 (11) TMI 612 - Cestat, Mumbai] has relied upon the Board's Circular, as well as, the view taken in the case of Mysore Sales International ltd., vs. Asst. CCE & ST, Bangalore reported in [2010 (12) TMI 453 - CESTAT, BANGALORE ] held in favour of appellant/assessee therein. - facts are being very same in the case involved, we are of the view that the impugned order is not sustainable and the impugned order is liable to set aside - Decided in favour of assessee.
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2015 (12) TMI 11
Demand of service tax - Commission received on sale of recharge coupons - Held that:- Service tax liability arises on the recharge coupons on the commission received on the sale of recharge coupons by BSNL on merits we find that the assessee has no case and the impugned order to that extent needs to be set aside and we do so. The impugned order to that extent is set aside. The respondent-assessee is liable to pay the service tax liability along with interest. Issue of discharge of service tax liability on the sale of recharge coupons purchased from the telephone service provider was a highly contested issue and was before the higher judicial forum during the relevant period. We are of the view that the respondent could have entertained a bonafide belief as to that they are not laible to discharge service tax liability. - assessee has discharged the entire service tax liability of ₹ 18,98,953/- was reimbursed by BSNL and the same has been appropriated by adjudicating authority. Since the service tax liability stands discharged by the respondent-assessee, we find that this is a fit case for invoking the provisions of section 80 of the Finance Act 1994 and find first appellate authority was correct to that extent. In our view the impugned order does not require any interference in setting aside of penalties. - Decided partly in favour of assessee.
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Central Excise
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2015 (12) TMI 10
Classification of goods - Classification of henna powder retail packs - Invocation of extended period of limitation - Held that:- By section 67 (d) of Finance Act, 2006 heading 140410 alongwith its sub-heading 14041011 to 14041090 were deleted. Deletion of the sub-heading 14041011 and 14041019 which included the sub-heading 14041011 to 14041090 pertaining to henna leaves and henna powder respectively would imply that heena powder and leaves were no longer covered under heading 1404. However, the Central Excise Tariff published by the Directorate of the publication of Central Board of Excise & Customs continued to mention the word henna just below the sub-heading 140410 pertaining to raw vegetable materials of a kind used primarily in dying or tanning It is only in tariff for 2013-14 published by the publication directorate of the CBEC; that this mistake was corrected. When this fact stands accepted by the adjudicating authority, in our prima facie view the assessee cannot be blamed for entertaining belief that even after 1/1/07 henna powder was specifically covered under heading 1404 and would attract nil rate of duty. Irrespective of the merits of the department s case for classification of the goods, in question, under heading 3304, the longer limitation period of five years under proviso to section 11A(1) is not invokable and bulk of the duty demand would therefore to be time barred. Therefore, we are of the view that an amount of ₹ 20 lakh paid by appellant during investigation is sufficient for the hearing of the case and hence the requirement of the pre-deposit of the balance amount of duty demand, interest thereon and penalty by the appellant company and the requirement of pre-deposit of penaty by Sh. Vikas Gupta, Director of the appellant company is waived for hearing of their appeals and recovery thereof is stayed. - Stay granted.
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2015 (12) TMI 9
Denial of CENVAT Credit - Capital goods - Invocation of extended period of limitation - Held that:- view taken by Commissioner (Appeals) in holding that extended period of limitation is invocable appears to be erroneous. I find that the appellant have duly informed the Revenue authorities at the time of fabrication and/or taking of credit by way of letter as well as by way of Annexure to its returns and as such there is no case of suppression of facts or any contumacious conduct on the part of the appellant-assessee. In this view of the matter, the extended period of limitation seeing not invocable. Thus, there is a prima facie case in favour of the appellant. - stay granted.
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2015 (12) TMI 8
Waiver of pre deposit - exemption under Notification No. 6/2006-C.E., dated 1-3-2006 - Held that:- In the said Notification, exemption is allowed to machinery or equipment to leaf cutting machines used in plantation sector. In the present case, we find that the claim of the applicant is that the machines manufactured by them are used for tea leaf cutting and also used in the plantation sector. In support, they have adduced evidences from the respective users who certified that these machines are used for tea leaf cutting manufactured by appellant i.e. CTC leaf cutting machines. We do not see merit in the observation of the ld. Adjudicating Authority that since the certificate contains similar wordings, therefore, the same cannot be relied upon. Also, we do not see any other evidences adduced by the Department, contrary to the said certificates. In these circumstances, at this stage, we are of the view that the said machine used for leaf cutting and being used in the plantation sector, accordingly eligible to the benefit of the said Notification. In the result, pre-deposit of the dues adjudged is waived and its recovery stayed during the pendency of the appeal - Stay granted.
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2015 (12) TMI 7
Removal of semi-finished goods for certain purposes without obtaining requisite permission under Rule 16B of the Central Excise Rules, 2002 - Held that:- application was filed and the Commissioner did not act upon the same immediately and the appellant cleared the goods during the pendency of decision on the said application. In any case the permission having been granted by the Commissioner in the relevant period, the Revenue’s objection that the said permission was not available at the time when the goods were cleared cannot be sustained. - Decided against Revenue.
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2015 (12) TMI 6
CENVAT Credit - Bogus invoices - Issue of invoices without actual receipt of goods - Held that:- Revenue in their grounds of appeal have reiterated their stands that the Cenvat credit was wrongly passed to the respondent. However, they have not referred to any evidence on record, which was the main reason for the appellant authority to set aside the demand. They have simply reiterated that the respondent had paid back the Cenvat credit during investigation and as such cannot contest the same. I find no merits in the above stand of the Revenue. The payment of Cenvat credit cannot act as estoppel against the assessee to the contest the confirmation before the higher appellant authorities. - no reasons to interfere in the impugned order of Commissioner (Appeals). - Decided against Revenue.
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2015 (12) TMI 5
Demand of interest u/s 11AB - If the duty was short paid or not paid by reason of fraud, collusion, or any wilful misstatement or suppression of facts or contravention of various provisions of the Act - Held that:- These ingredients are not available in the present case, therefore, interest is not payable for the period October 1999 to December 1999. We find that the Revenue has not disputed this fact in the grounds of appeal. - reason to interfere the impugned order passed by the Commissioner (Appeals) - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (11) TMI 1497
Purchase of goods for use in works contract from other state - interstate movement of goods against Form-C - Denial of exemption claim - Notification dated 28.04.1993 - Held that:- Assessee is a contractor and carrying on the constructions works and he purchased the goods in the course of inter-State trade, the CST would be payable in the appropriate State, i.e. U.P. wherefrom the movement of the goods commenced and for this reason, the contractor was not liable to pay any tax under the provisions of the RST Act, 1994 and the State of Rajasthan could not ask the contractor to pay tax under the provisions RST Act on such inter- State purchases of the Contractor. Therefore, it could not be treated as violation of the condition No. 4 of the Notification dated 28.04.1993. - Court finds no force in the present revision petition filed on behalf of the Revenue and the same is liable to be dismissed in terms of the judgment dated 22.08.2013 passed in the case of CTO Vs. M/s Jatan Construction Pvt. Ltd., while upholding the orders of the Deputy Commissioners (Appeals) and of the learned Tax Board. - Decided against Revenue.
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2015 (11) TMI 1496
Sale of goods in the SEZ - works contract - Exemption under section 5A of Gujarat VAT despite of failure to obtain endorsement of custom authority on the bill as required by Rule 42(2A) - levy of interest and penalty - Held that:- Having regard to the nature of the contract between the petitioner and the Adani Power Limited, which is in the nature of a works contract, when construction materials are purchased by the assessee, they are purchased for sale in the course of execution of works contract, which is to take place at a later point of time on the principle of accretion. Therefore, at the time of entry of goods into the SEZ area, there is no sale to the SEZ unit or to the developer, but the sale takes place at a later point of time. In view thereof, the assessee with a view to ensure compliance with the provisions of the SEZ law as well as requirement of endorsement of bills with a view to claim exemption from tax as zero rated sale, obtained the endorsement of the concerned authority on the purchase bills for goods which entered the SEZ area. Such goods were used in the execution of the works contract, which is not even disputed by the appellant. Appellate authority has failed to appreciate the fact that it is not possible to abide by sub-rule (2A) of rule 42 of the rules having regard to the nature of the contract which is a works contract wherein the goods which are sold to the buyer, are used in the execution of the works contract and it is only after execution that the invoices are raised. This court is, therefore, in agreement with the view adopted by the Tribunal that rule 42(2A) of the rules cannot be held to be mandatory in nature and that the endorsement on the purchase bills obtained by the respondent assessee is sufficient compliance with the provisions of sub-rule (2A) of rule 42 of the rules. - it cannot be said that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to any question of law, much less, a substantial question of law as proposed or otherwise - Decided against Revenue.
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2015 (11) TMI 1495
Challenge to assessment order - Bar of limitation - violation of the principles of natural justice - Held that:- there is no explanation for the delay of more than four months caused in issuing the assessment order to the petitioner except stating that due to clerical mistake there has been a delay of four months. Nothing has been stated in detail as to when the order of assessment has been handed over to the dispatch section and who is responsible for such delay. Therefore, we have no hesitation to hold that the order of assessment under Annexure-1 was not made on the date it was purported to have been made. In order to give an impression that the impugned order of assessment was passed within the period of limitation, the order bears the date 18.6.2008 whereas it has been passed much later that. - Decided in favour of assessee.
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2015 (11) TMI 1494
Whether, on the facts and in the circumstances of the case and on a true and correct interpretation of sub-entry (xv) of entry 6 of Schedule B appended to the Bombay Sales Tax Act, 1959, was the Tribunal justified in law in holding that 'welding electrodes' continue to be 'wire rods' or 'wires' even after they were coated with lime, sand and binding glue - Held that:- statement of case and the reasons recorded by the Tribunal. Instead of repeating the same, it would be appropriate for us to quote the relevant paragraphs containing the reasons given by the Tribunal in its order - reasons given by the Tribunal, to our mind, are sound, legal and proper, and we fully agree with the reasoning given by the Tribunal - welding rods are covered under entry 6(xv) of Schedule B of the Bombay Sales Tax Act, 1959, and the same be subjected to tax - Appeal disposed of.
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