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TMI Tax Updates - e-Newsletter
December 3, 2013
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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Charges for printing of the company's product catalogue is in the nature of contract for sale/purchase and not in the nature of 'works contract' - not liable to TDS u/s 194C - AT
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The whole time director may not be an employee but even then the character of the receipt or remuneration come within the definition of salary under s. 17(1)(iv) - AT
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Civil contract works Estimation of income @ 8% - Purchase of land and sale of land is a separate business activity and, therefore, the profits or losses on that business activity has to be considered separately. - AT
Case Laws:
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Income Tax
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2013 (12) TMI 74
Disallowance u/s 14A - Held that:- Following Godrej & Boyce Ltd. Mfg. Co. VS. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - The provisions of Rule 8D are applicable from assessment year 2008-2009 - The disallowance u/s 14A is required to be worked out as per the mandate of Rule 8D - The expenses attributed to the tax free income was not disallowed by the assessee - The disallowance at 0.5% has been made towards expenses other than interest - Decided against assessee. Book profits u/s 115JB - Held that:- The amount disallowable u/s 14A is always part of the expenses specifically debited to the profit and loss account - The amount disallowable u/s 14A is covered under clause (f) of Explanation (1) to section 115JB(2) - Following Esquire P. Ltd, Mumbai [2012 (9) TMI 134 - ITAT MUMBAI] - Decided against assessee. Rebate u/s 88E - Held that:- The learned CIT(A) directed to allow rebate u/s 88E subject to the provisions u/s 87(2) as relevant to assessment year 2008-2009 - Decided against Revenue.
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2013 (12) TMI 73
Rectification of mistake - Held that:- Following Commissioner Of Income-Tax Versus Stellar Investment Limited [1991 (4) TMI 100 - DELHI High Court] - The Tribunal does not have power to review its judgment under Section 254 (2) of the Act, which authorises the Tribunal to only correct its mistakes. If a particular case has been decided incorrectly or some error has crept in, which does not require any debate and such error is apparent on the face of the record, such mistake can be corrected in exercise of power under Section 254 (2) of the Act - Decided in favour of revenue.
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2013 (12) TMI 72
validity of re-assessment u/s 147 - Necessary sanction as required by Section 151 (2) of the Act, was not obtained for initiation of re-assessment - Held that:- There was a approval dated 08/5/2010 by Joint Commissioner, Income Tax which has been mentioned in the assessment order itselfAs per explanation to section 151 added by Finance Act, 2008 with retrospective effect - It is not necessary that the Joint Commissioner himself may issue notice - The explanation which was added was not available when the Tribunal decided the matter - The explanation covers this issue - Decided in favour of Revenue.
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2013 (12) TMI 71
Interest on refund - Held that:- In the regular assessment done by the Assessing Officer, the tax liability for the relevant period was found to be higher and, accordingly, the seized cash under Section 132 of the Act was appropriated against the assessee's tax liability - The order of the Assessing Officer was changed by the Tribunal finally on 20.2.2004 - The interest for the post assessment period i.e. from 4.3.1994 until refund on the excess amount has already been paid by the department to the assessee - Section 132B(4) deals with preassessment period in the matters of search and seizure and section 240 deals with post assessment period as per the order in appeal - Decided in favour of assessee.
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2013 (12) TMI 70
Depreciation on securities held to maturity - Held that:- Following assessee's own case for the A.Y. 2003-04 - Main business of the banking company being to accept deposits to advance loans to appropriate persons, money constitutes its stock in trade - The amount required to kept in India as per section 24 of the Banking Regulation Act, 1949 in the form of cash, gold and unencumbered securities is part of stock in trade of the assessee - When there is no distinction between the three categories of securities viz.,HTM, AFS and HFT. The assessee can provide for depreciation in all the securities on the same footing - Decided against Revenue. Broken period interest - Held that:- Following assessee's own case for the A.Y. 2008-09 and CIT Vs. Nedungadi Bank [2002 (11) TMI 29 - KERALA High Court] - The bank purchased government securities paid towards interest in respect of securities purchased for the broken period from the preceding due date for payment of interest upto the date of purchase - Broken period from the preceding due date for payment of interest upto the date of the sale. The assessee claimed the amount of interest paid for the broken period upto the date of purchase as deduction on the ground that the securities were held stock in trade - The broken period interest is an allowable deduction - Decided against Revenue. Disallowance u/s 14A - Held that:- Rule 8D is applicable from A.Y. 2008-09 - After intrduction of this rule in the Income tax Rules - Disallowance of expenditure relating to earning of exempted income under section 14A of the Act, has to be determined as per the method provided under Rule 8D - The assessee itself during the proceeding before the CIT(A) has worked out the disallowance to be made in terms with Rule 8D(2) which has been accepted by the CIT(A) - Decided against assessee. Provision for bad and doubtful debts - Held that:- Following assessee's own case for assessment years 2007-2008 and 2008-09 and T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] - Any debt written off as irrecoverable should be allowed as deduction - If the provision fro bad debts debited to the P&L is netted against the current assets the provisions is an allowable deduction even if individual accounts of the debtors are not wtitten off - As per circulars issued by the CBDT - The deduction on account of provision for bad and doubtful debts u/s 36(1)(viia) is distinct and independent of s. 36(1)(vii) relating to allowance of bad debts - The issue is restored for fresh decision.
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2013 (12) TMI 69
Share trading activity - Held that:- The assessee has made several transactions of purchase and sales during the relevant year under consideration and the high volume of frequency and regularity of the activity - Following PVS Raju vs. Addl. CIT [2011 (7) TMI 818 - Andhra Pradesh High Court] - The activity carried on by the assessee in purchase and sale of shares would partake the character of business activity and it cannot be said that the assessee had merely made investments in shares - The CBDT circular No.4/2007 specifically states that no single principle can be taken and the total effect of all the principles should be considered to determine whether in a given case the shares are held by the assessee as investment or stock in trade - The share trading done by the assessee is nothing but trading activity done regularly with the sole intention of earning profit and hence, the entire income is to be treated as 'Income from Business' - The voluminous share transactions were in the ordinary line of the assessee's business, purchase of shares by them was not for the purpose of earning dividend but with the dominant intention of resale in order to earn profits. The profits made by assessee was not of mere enhancement of value of shares, but was a profit made in the carrying on of a business scheme of profit making. The repetition and continuity of the transactions gave them a flavour of "Trade" - Decided against assessee.
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2013 (12) TMI 68
Sale of shares - Capital gains or business income - Held that:- Following CIT v. Niraj Amidhar Surti [2010 (10) TMI 15 - GUJARAT HIGH COURT] - The assessee had held the shares in question for a long period for the purpose of long-term capital gain, the intention of the assessee had always been that of making investment in shares and not dealing in shares, which was also apparent from the fact that the shares had not been treated as stock in trade by the assesse - Decided against Revenue.
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2013 (12) TMI 67
Non-deduction of tax at source - Polishing charges paid - Held that:- As per the circular No.433 issued by the CBDT dated 25-09-1985 - The provisions of sec. 194C are wide enough to cover oral contracts also - The intention of the appellant as well as the parties who did the job work is not to purchase/sale of material but that of getting job work of anodizing done - Provisions of sec. 194C have been correctly applied - The assessee does not have facilities for polishing, he gets the polishing work done through outsiders - On receipt of materials after polishing, the assessee used to raise the bill for cost of material by including the charges for polishing - Essential ingredients of a contract are very much available in the polishing works entrusted by the assessee - Decided against assessee. As per the second proviso to sec. 40(a)(ia) of the Act, inserted by the Finance Act, 2012 with effect from 1.4.2013 - The benefit of the same should be applied retrospectively - Following Vector Shipping Services [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] - This part of the issue is restored for fresh adjudication.
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2013 (12) TMI 66
Income from letting out of fit outs - Held that:- The fit out rent was earned from letting various facilities such as interiors, furniture and fixtures, electrical fittings etc. - The fit outs form an integral part of the structure owned by the assessee - Following Addl. CIT v. Hindustan Machine Tools Ltd [1979 (6) TMI 27 - KARNATAKA High Court] - The intention of the parties in entering into the lease transaction - It is not the number of agreements which are entered into between the parties which is decisive in determining the nature of transaction - The object is to enjoy the entire property viz., building furniture and the accessories as a whole which is necessary for carrying on the business, then the income derived there from cannot be separated based on the separate agreement entered into between the parties. What has to be seen is, what was the primary object of the assessee while exploiting the property. If it is found applying such principle that the intention is for letting out the property or any portion thereof, the same may be considered as rental income or income from properties. In case, if it is found that the main intention is to exploit immovable property by way of complex commercial activities, in that event it must be held as business income - The income derived from letting out the out-fits, fixtures, furniture etc., is not chargeable under the head 'income from house property' - Decided in favour of assessee. Maintenance charges - Held that:- Following CIT v. Model Manufacturing Co. P. Ltd [1984 (12) TMI 29 - CALCUTTA High Court] - The services rendered by the assessee in providing electricity, use of lifts, supply of water, maintenance of staircases and watch and ward facilities to the tenants constituted separate activities distinct from the letting out of the property and were not incidental to such letting out. It was further held 'that the service charges realised by the assessee were not part and parcel of income derived from house property assessable under section 22 of the Act and that they were assessable under the head 'income from other sources' - Decided in favour of assessee. Professional charges - Held that:- The CIT (A) on its part has not discussed the facts of the case in detail for deleting the additions made by the Assessing Officer - The issue is restored for fresh adjudication. Interest - Held that:- The Assessing Officer has not given any reason while disallowing the expenditure claimed by the assessee - The CIT (A) has merely narrated that the above said expenses are business expenditure and the same is to be allowed - The facts of the issue was not considered either by the Assessing Officer or by the CIT (A) - The issue is restored for fresh adjudication. Rent to guest house - Held that:- The CIT (A) has allowed the relief to the assessee without passing a speaking order and without appreciating the applicability of the provisions of section u/s 40A(2) - The issue is restored for fresh adjudication.
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2013 (12) TMI 65
Charges for printing of the company's product catalogue Held that:- Following CIT Vs. DCAO, Marfed Khanna Branch [2008 (2) TMI 260 - PUNJAB AND HARYANA HIGH COURT] - Payments to the contractors for the purchase of printed packing material for the purpose of packing of its finished products is a contract of sale and not work contract - Supply of all kinds of printed material would not amount to works - The expenditure incurred by the assessee for the purpose of printing product catalogue and telephone index, in our view, is in the nature of contract for sale/purchase and not in the nature of 'works contract'. Therefore, the impugned expenditure does not attract the provision of section 194C Decided in favour of assessee. Payment to Hotel Held that:- According to the CBDT's circular no. 715 dated 08.08.1995 clarifying the position as regard the payments made to a hotel for hiring rooms u/s 194-I of the Act - for the purposes of section 194-I, payment made to hotels for hotel accommodation whether in the nature of lease or licence agreements are covered only if accommodation had been taken on 'regular basis' - In the case of the assessee - The payment made to hotel for booking room is not taken on regular basis and only as per rate contract Decided in favour of Revenue.
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2013 (12) TMI 64
Interest income Held that:- Following assessees own case for the A.Y. 2005-06 The interest income was liable to be taxed However The tribunal held in this issue that - There were factual mistakes in the order that went to the root of the matter and same were not deliberated upon by the FAA in appellate proceedings - The orders for the earlier years have been set aside by the Tribunal - In the interest of justice, matter should be restored back to the file of the FAA for fresh adjudication The issue was restored for fresh decision. Set off of brought forward business losses Held that:- FAA had directed the AO to verify the assessee's claim and to allow/disallow the set off of losses in terms of relevant provisions of the Act - His order, with regard to treatment to be given to brought forward losses does not suffer from any infirmity The issue was restored for fresh decision. Interest paid - Borrowed fund for acquiring rights Held that:- FAA had accepted the alternate submission of the assessee with regard to deduction of interest expenses - As the main issue is being restored to the file of the FAA - All the issues raised by the AO are restored to the file of the FAA for deciding them afresh depending upon the ultimate decision of the main issue Partly allowed in favour of assessee.
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2013 (12) TMI 63
Concealment of Income - Penalty u/s 271(1)(c) - While filing return of income for the assessment year under consideration, the assessee has not disclosed the correct value of closing stock and it has resulted into escapement of income which was liable to tax to the extent of non-inclusion of re-purchase price of the five flats - Held that:- The assessee filed return for assessment years 2005-06 and 2006-07, the years in which the said five flats were sold and the assessee computed profit on sale of those flats - Penalty under the said provision is civil liability - Willful concealment is not an essential ingredient for attracting civil liability - The assessee has not furnished the accurate, or correct particulars of his income particularly when the assessee debited the expenditure on account of purchase of the flats and when the said flats had not been sold at the end of accounting year relevant to the assessment year, the cost of flats was required to be included as part of the closing stock - The ld. CIT(A) was correct in his view that the assessee cannot claim that the same was omitted due to bonafide mistake considering the fact that the assessee had debited the expenditure and the accounts of the assessee are audited by Chartered Accountants - Simultaneous entry has to be made in the books to give corresponding effect in the closing stock to prepare a true and correct balance sheet. On account of whose mistake, the amounts claimed as deductions in this case were not added, while computing the income of the assessee-company. - The assessee is a company which must be having professional assistance in computation of its income, and its accounts are compulsorily subjected to audit - The account of the assessee of not including the re-purchase value of the flats in question in the closing stock is not only incorrect in law but the explanation offered by the assessee is not escaped by Explanation (1) to section 271(1)(c ) of the Act - Decided against assessee.
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2013 (12) TMI 62
Course execution charges Held that:- The appellant was imparting training in the field of computer and information technology in collaboration with US based company. The appellant was conducting examinations and giving certificates to students in India on behalf of US company. For that purpose, the appellant was collecting testing fees from the students and remitting to the same to the US company. The appellant filed entire details of expenses to the AO. In the facts and circumstances, the AO was not justified in making part disallowances that too on adhoc basis - The assessee filed entire details of the expenditures actually incurred, before the AO and the AO had not doubted the genuineness of the claim of the assessee. In the absence of any contrary material on record, the order of CIT(A) is upheld Decided against Revenue. Franchisee management fee Held that:- The major source of revenue was the sales proceeds received from the franchisees - The appellant was paying management fee to the franchisees from year to year and the said payment has been accepted as appellant's business expenses. The AO did not doubted the genuineness of such payment of management fee to the franchisees The disallowance was made on the basis of comparison made with the receipts and payments of immediately previous assessment year 2001-02 only The CIT(A) held that the AO has made disallowance on the basis of incorrect figures The ld. DR could not bring any material to controvert the facts stated by ld. CIT(A) - The AO has made the disallowance by comparing a wrong figures of the previous year on adhoc basis Decided against Revenue.
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2013 (12) TMI 61
Validity of Reassessment u/s 147 Held that:- There are no reasons on the basis of which prima facie it can be said that income has escaped assessment. The Ld. CIT(A) was also convinced that reopening is based on the facts which were already on record - It cannot be said that the assessee has failed to disclose fully and truly all material facts - The reopening of the assessment is beyond a period 4 years therefore, the pre-condition for the applicability of Sec. 147 is that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment - Following the decision in case of Titanor Components Ltd., Vs ACIT [2011 (6) TMI 138 - Bombay High Court] - There is a well known difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the assessee by withholding the material facts fully and truly - Decided against Revenue.
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2013 (12) TMI 60
Rectification of mistake u/s 154 - Fair market value - Held that:- The non-issue of notice u/s. 154(3) by the A.O. under the circumstances is relevant for procedure. The same is, however, not a jurisidictional notice, and is therefore curable - Following Honda Siel Power Products Ltd. v. CIT [2007 (11) TMI 8 - Supreme Court of India] - The assessing authority has an inherent jurisdiction, subject of course to the time limitation provided by law in its respect, to rectify mistakes inasmuch as no court or authority can by its action or non-action cause prejudice to any party before it - The apex court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) has laid down a four-way test toward an order being erroneous. Succinctly put, these are: incorrect assumption of facts; incorrect application of law; without applying the principles of natural justice; and without application of mind - The issue was restored for fresh decision. Following CIT vs. M. R. M. Plantations Pvt. Ltd. [1998 (6) TMI 35 - MADRAS High Court] - The 'record' would be that available with the A.O. at the time of initiation of the rectification proceedings, and not merely the record available at the time of passing the original order - As per Board Circular No. 689 dated 24.09.1994 the A.O. is permitted to admit subsequent material brought on record and to rectify the assessment consistent with such evidence, except where statutory evidence required to be submitted had not been submitted. The assessment as made in the instant case would tantamount to it being made subject to the result of the reference as made during the course of assessment to the valuation officer, and thereby exceeding the time limitation prescribed by law - A subsequent report at a variance may, in the facts and circumstances of a case, exhibit the assessment as framed to be erroneous and prejudicial either to the Revenue or the assessee, validating action u/s. 263 or, as the case may be, sec. 264, but would not by itself make the order 'mistaken', so as to be liable for rectification u/s. 154 - Decided against Revenue.
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2013 (12) TMI 59
Bad debts written off Hire purchase business transaction - Held that:- Following assessees own case for A.Y. 2004-05 - Claim of assessee of bad debt in respect of its business of hire purchase is in favour of assessee - Decided in favour of assessee. Bad debts written off Bill discounting and inter-corporate deposits - Held that:- Following M/s. Mafatlal Industries and Precision Fasters for bills discounting and Delhi Tribunal in the Poysha Oxgen Pvt. Ltd vs. ACIT [2007 (12) TMI 304 - ITAT DELHI] for inter-corporate deposits The issue was restored for fresh decision. Disallowance u/s. 14A Held that:- Unless there was proof of actual expenditure incurred by the assessee to earn the exempt income, no disallowance can be made u/s. 14A - Ld. CIT(A) has given relief to the assessee on the additional evidence produced by the assessee before him which was not before the AO - Ld. CIT(A) has not obtain the remand report on this additional evidence The issue was restored for fresh adjudication. Diminution in value of investments Non-performing assets Held that:- Following TN Power Finance and Infrastructure Development Corporation Ltd vs. JCIT [2005 (10) TMI 38 - MADRAS High Court] - Merely because the Reserve Bank of India has directed the assessee to provide for non-performing assets, that direction cannot override the mandatory provisions of the Income-tax Act contained in section 36(1)(viia) which stipulate for deduction not exceeding 5 per cent, of the total income only in respect of the provision for bad and doubtful debts which are predominately revenue in nature or trade related and not for provision for non-performing assets which are of predominately capital nature Decided against assessee. Lease income Held that:- Following assessees own case for A Y. 96-97 The issue was restored for fresh decision. Consultation fee Held that:- Report was prepared by M/s E & Y on the directions of Gujarat Gas Company Ltd and the report was also submitted to Gujarat Gas Company Ltd - Study carried by E & Y related to amalgamation and merger for efficient and effective functioning of Gujarat Gas Company Ltd and other group companies - Since the study was commissioned by the Gujarat Gas Company Ltd for efficient and effective functioning of Gujarat Gas Company Ltd only, it cannot be said that this expenditure was incurred fully and exclusively for carrying on business of the assessee Decided against assessee.
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2013 (12) TMI 58
Commission whether remuneration or income from salary Held that:- Following Sajid Mowjee vs. ITO [2005 (8) TMI 94 - CALCUTTA High Court] - The appointment of director is a contract of employment not a contract for employment -The company could be an employer while appointing one of its directors as whole time director on a particular remuneration and prescribing the terms and conditions of his appointment - The whole time director may not be an employee but even then the character of the receipt or remuneration come within the definition of salary under s. 17(1)(iv) being a fee or remuneration in whatever name it is called and not being excluded by the Expln. 2 to s. 15 - The remuneration received by the assessee cannot be treated to be anything other than income under the head salary - The receipt comes under the head salary The issue was restored for fresh decision. Interest on bank loan Expansion of activities Held that:- Following SA Builders Ltd. vs. CIT(A) and another [2006 (12) TMI 82 - SUPREME COURT] - If the directors of the sister-concern utilise the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency - Where it is obvious that a holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would be entitled to deduction of interest on its borrowed loans Decided in favour of assessee. Disbursement of funds wind-up of company The assessee along with his NRI friends floated the company - The company did not perform as planned due to the changed circumstances, the Directors decided to wind-up the company and distributed the funds invested back to the Directors and shareholders while refunding the funds to one of the NRI investor The assessee received funds on behalf of his cousin and reflected the same in his books in the name of the company wounded up - Held that:- The assessee has produced the statement of P & L account of GMS Medimall Pvt. Ltd., his own balance sheet from April, 2007 to March, 2008 - The assessee also submitted the certificate/confirmation from NRI investor - The actual owner of the funds has been identified and certificate has been obtained from the owner The issue was restored for fresh examination. Undisclosed long term capital gains Held that:- The sale documents executed in favour of buyers of flats clearly shows that the vendors viz., Smt. G. Niveditha Reddy and Sri G. Radhacharan Reddy have obtained permission from the Kukatpally Municipality for construction of multi-storeyed building and also started constructing the building complex - It is also clear from the sale documents that the above mentioned vendors have offered to sell out of their 40% share the semi finished flats for consideration which total to ₹ 68,00,000 - The onus is on the assessee to show that the development agreement is a sham transaction - The cost of construction as on the date of agreement is ₹ 1,10,00,000/- as per the Sub Registrar's valuation as mentioned in the Encumbrance Certificate, the same is considered as consideration for determining capital gains in the A.Y. 2006-07 Decided against assessee. Short term capital gains Held that:- The Assessing Officer worked out the Short Term Capital Gain for the Financial Year 2005-06 and 2006- 07 based on the cost of acquisition for the total construction area of 11,972 square feet being ₹ 44 lakhs Whereas the CIT(A) worked out the cost of acquisition on the basis of Sub Registrar value shown in the Encumbrance Certificate - The assessee could not furnish any evidence to establish that the same was lower than that However Tribunal is of the view that the cost of construction should be worked out based on cost of construction of M/s. VNR Constructions i.e. the developer The issue was restored for fresh decision. Sale of terrace rights Held that:- - As per the development agreement, the terrace rights were with the land owners - The assessee and his wife had constructed a flat on the 6th floor and sold the same to M/s. Charans Life Devices Pvt. Ltd. - As the property was constructed on the terrace, the owners were having the title and the rights over the same - The terrace rights have been sold and accounted by VNR Constructions - The consideration paid to VNR Constructions towards the flat has been shown in the books of Charans Life Devices Pvt. Ltd - The terrace rights cannot be retained by any one except the prospective purchasers - The circumstances in the case are ambiguous The issue was restored for fresh decision. Advance to directors Transfer the property to the Company to obtain loan facility from the Banks, Financial Institutions for conducting the business - To facilitate the transfer of the properties to the company, advances were paid by the company to the Directors Even after six years, the transfer of the properties to the company has not been effected - Held that:- Following Pradeep Kumar Malhotra [2011 (8) TMI 16 - CALCUTTA HIGH COURT] - For retaining the benefit of loan availed of from the bank if decision was taken to give advance to the assessee such decision was not to give gratuitous advance to its shareholder but to protect the business interest of the company - The transaction was for the purpose of business which is a non-gratuitous advance which should not be treated as deemed dividend Decided in favour of assessee.
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2013 (12) TMI 57
Tax effect Held that:- The tax effect in the present appeal is below the prescribed monetary limit in filing the appeal before the Tribunal The CBDT vide instruction no.3/2011 dated 9.2.2011 revised/raised the monetary limit for filing the appeal by the department - Following CIT v. Madhukar K. Inamdar (HUF) [2009 (7) TMI 145 - BOMBAY HIGH COURT] - The Circular issued by CBDT will be applicable to the cases pending before the Court either for admission or for final disposal and held that Instruction No. 3 dated 9.2.2011 is applicable for the appeal preferred by the revenue - The revised monetary limit issued by the CBDT vide instruction No.3/2011 dated 9.2.2011 Decided against Revenue.
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2013 (12) TMI 56
Civil contract works Estimation of income @ 8% - Held that:- Assessee has not produced books of account before the AO and in the absence of books of account, it is difficult to verify the reasons for earning lesser profit as contended by Assessee Following order of The Special Bench of the ITAT in the case of M/s Arihant Builders Vs. ACIT [2006 (11) TMI 253 - ITAT INDORE] - Estimation of income at 8% of the turnover is reasonable - The coordinate benches of the Tribunal is accepting the estimation of income ranging from 8% to 12.5% depending upon the facts of the case and nature of contracts undertaken In the absence of proper reasons for earning lesser profit, the AO is justified in estimating income at 8% on the gross receipts made Decided against assessee. Sale of land - Addition of income Held that:- Assessee had contract receipts as well as profit on sale of land, which is also as part of business income - Assessee has not offered this income either under other sources or claimed benefit of capital gains. Therefore, profit on sale of land is part of the business activity of Assessee company - Purchase of land and sale of land is a separate business activity and, therefore, the profits or losses on that business activity has to be considered separately. Even though, the income was estimated on contract receipts by rejecting books of account, on the basis of statements of accounts filed before the revenue authorities if they come to a conclusion that certain other business incomes are also earned, the same are necessarily to be brought to tax separately - Profit on sale of land has no nexus with the profit on contract receipts and accordingly, inclusion of profit on sale of land separately by making addition is justified Decided against assessee. Addition u/s 40(a)(ia) Tax not deducted at source contract labour payment and fees paid to auditors - Held that:- These amounts are not labour contract payments but direct labour payments made by the company - As for as income estimation on contract receipts are concerned, Ii has already been upheld the estimation of income at 8% in this case - Once the books of account are rejected, while computing incomes from section 30 to 43D of the IT Act, there is no necessity for disallowing any further amounts Following CIT Vs. Banwari Lal Banshidhar [1997 (5) TMI 37 - ALLAHABAD High Court] - No disallowance could be made in view of the provisions of section 40A(3) read with rule 6DD(j) of the Income- tax Rules, 1962, as no deduction was allowed to the assessee - When the gross profit rate was applied, that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchases made by the assessee - When a net profit rate is applied, there remains no scope for further disallowance of any expenditure Decided in favour of assessee. Other income Business income or income from other sources Held that:- As Assessee has not proved that these incomes are part of the Contract business income and no details have been placed on record either before the AO or before the CIT(A) or even before the Tribunal - Except relying on legal principles, Assessee has not brought on record any factual details on this addition It is therefore confirmed that the incomes are to be taxed under the head 'other sources' even though books of account are rejected to the extent of estimating business income on contracts Decided against assessee. Share application money Held that:- Following Kale Khan Mohammad Hanif V. CIT [1963 (2) TMI 33 - SUPREME Court] - The amounts of the cash credits could be assessed to tax as income from undisclosed sources in addition to the business income computed by estimate. The taxing authorities were not precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appeared in the books of a business whose income they had previously computed on a percentage basis. It purchased property and the sellers agreed to take the amount as share application money and to this effect entries were passed by way of journal entries - They were not in a position to furnish any confirmations at the time of assessment or appeal before the CIT(A). It was, therefore, submitted that if the matter is remanded to the file of the AO, Assessee would be in a position to file necessary evidence The issue was restored for fresh decision.
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2013 (12) TMI 55
Environmental Relief Fund disallowance u/s 43B Held that:- Following Pruthvi Brokers and Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] has held that even if a claim is not made before the AO, it can be made before the appellate authorities and the jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Honble Supreme Court - Since the assessee in the revised return has made a claim that the amount of Rs.70,31,561/- collected towards environmental relief fund does not fall under the purview of section 43B and since the Assessing Officer has not entertained the claim for not being claimed through a revised return, therefore, respectfully following the decisions cited (Supra) we hold that the assessee can make the claim before the appellate authorities and the appellate authorities can entertain such a claim The issue was restored for fresh decision. Profit on sale/redemption of investments Whether business income of the Public Financial Institution or income from Insurance business - Held that:- Deletion of sub rule (b) from Rule 5 of the First Schedule was with a specific purpose. This schedule not only prescribe the method of computation of income of Insurance Business in Part (A) but also prescribe the method of computation of other Insurance Business in Part (B). Rule 5 is within Part(B) and earlier it has prescribed the method of taxation of profit on sale of investments which was later on scraped - The Revenue Department has no right to tax such an income in the absence of any enabling provision. Naturally, such a deletion cannot be treated a superfluous action but this change had to give a definite judicial meaning. We have to ascribe a logical conclusion to the said deletion of sub rule (b) from Rule 5 and the natural meaning is that after the deletion the income described therein is out of the purview of computation of Insurance Business from the First Schedule therefore consequently cannot be taxed u/s 44 of I.T. Act Decided against Revenue. Applicability of section 14A Sale of investment exempt u/s 44 - Held that:- Following DCIT vs. Oriental General Insurance Co. Ltd. [2004 (9) TMI 323 - ITAT DELHI-C] - Section 44 of the Act is a special provision dealing with the computation of profits and gifts of business of insurance - It being a non obstinate provision, has to prevail over other provisions in the Act - Income from insurance business has to be computed in accordance with the rule contained in the First Schedule - Section 44 creates a specific exception to the applicability of sections 28 to 43B The purpose of section 14A has no applicability to the profits and gains of an insurance business - Section 44 applies notwithstanding anything to the contrary contained within the provisions of the Income-tax Act relating to computation of income chargeable under different heads - In the cases of assessment of Insurance Companies it was not permissible to the A.O to travel beyond sec. 44 of First Schedule of I. T. Act Decided against Revenue.
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2013 (12) TMI 54
Capital gain - sale of property - revision u/s 263 on the ground that AO and allowed the exemption u/s 54 wrongly - Held that:- The AO allowed the claim for deduction u/s 54 on the basis of unregistered purchase dded - The Assessee has not mentioned anything about capital gains or capital loss - There is also no claim for exemption u/s 54. The AO has also not dealt with any of the claim of the Assessee regarding sale of property at Somaji Guda, Hyderabad - Even if some documents were filed before the AO, for which no proof or acknowledgement has been filed with us, the AO has not even made a passing mention about sale of immovable property much less the capital gain/ loss arising therefrom or deduction u/s 54 - revision u/s 263 is valid - Decided against the assessee. CIT worked out the short term capital gains holding that the Assessee is not entitled to deduction u/s 54. He has not appreciated that for determining whether an asset is long term or short term capital asset, the period of `holding' the asset is relevant and not merely the date of registered conveyance - The period of holding of the asset by the Assessee has to be reassessed based on the facts of the case - The Assessee had incurred expenditure Rs. 17,10,000/- which may have to be added to the cost of acquisition of the asset - If this expenditure is taken into account there will not be any capital gains but only loss on sale. This aspect has not been considered by the CIT - The issue was restored for fresh decision. - Decided partly in favor of assessee.
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Customs
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2013 (12) TMI 94
Benefit of exemption notification - Imported raw material is Zircon Concentrate or Zircon ore - Assessee manufacturing the Zicronium Silicates - Principal raw material is Zircon sand - Classified the same under CTH 2615 10 00 - Whether import of goods and declared the same as Zircon sand (Zircon Ore) and claimed the benefit of non-payment of CVD by availing the benefit of Notification No. 4/2006-C.E., is correct or not Held that:- Since the experts in the field like Indian Rare Earths Ltd. Research Centre, Kollam and Indian Bureau of Mines has opined categorically that the goods which were imported i.e. Zircon sand are nothing but the Zircon Ore, and the said expert opinion having been not rebutted by any other opinion from any other expert, and specifications of imported goods seems to match with specification of the ISI standard for Zirconium Ore. Therefore the goods imported by the appellant are eligible for the benefit of Notification No. 4/2006-C.E. as the goods which are imported are nothing but Zirconium Ore. - Following decision of CLASSIC MICROTECH PVT. LTD. Versus COMMISSIONER OF CUS. . AHMEDABAD [2013 (1) TMI 469 - CESTAT, AHMEDABAD] - Decided in favour of assessee.
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2013 (12) TMI 93
Condonation of Delay Held that:- The applicant received the order on 2.8.2010 and filed writ petition in the same month - By judgment dated 25.11.2010, the Honble Division Bench of Madras High Court directed that if the applicant so prefers the appeal, the time spent in the proceeding before the Honble High Court shall be excluded for calculating the period of limitation calculation of three months to be made from the date of the Honble High Courts decision, then also the applicant should have filed the appeal on or before 24.2.2011 - But the applicant had not filed the appeal within the limitation as per direction of the Honble High Court and it has filed on 23.6.2011 - It is beyond the period of three months as provided under Section 129A of the Customs Act, 1962 the application for condonation of delay rejected Decided against Assessee.
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2013 (12) TMI 92
Confiscation of goods u/s 113(g) - Penalty under Section 114(iii) - Imposition of redemption fine - Held that:- redemption fine cannot be imposed if the goods are not available for confiscation unless the goods were allowed to be cleared subject to furnishing undertaking/bond etc. - imposition of redemption fine in the impugned order is not sustainable in law - Following decision of Shiva Kripa Ispat Pvt. Ltd. case [2009 (1) TMI 124 - CESTAT MUMBAI] and Raja Impex (P) Ltd. [2008 (4) TMI 320 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH] - Decided in favour of assessee. There is nothing in the language of the provisions of Section 114 of the Customs Act, 1962, to suggest that mens rea is essential for imposition of penalty. Mere act or omission to act would suffice for imposition of penalty if such act or omission violates statutory provisions. Proceedings under Section 114 of the Customs Act are not criminal proceedings but quasi-judicial proceedings and hence mens rea is not required to impose penalty under the said section - The short time interval between the arrival of the goods in the port area and the sailing of the vessel could have led to the omission/default on the part of the CHA which could be a mitigating factor - Penalty reduced - Decided partly in favour of assessee.
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2013 (12) TMI 91
Demand of differential duty - Undervaluation of goods - Import of superheat resistant latex rubber thread in ribbon form - Bar of limitation - Held that:- goods are imported by the appellants are powder quoted as per the invoice and we have examined the bills of the goods imported on higher price where the goods are of silicon coated. We further examined the price of the goods imported during the period July, 2007 to September, 2007 wherein the price of imported goods similar to the goods in question, the Bill of Entry dated 6-7-2007 is showing that the import has been made at @ US $ 1.21 per kg and other two invoices dated 19-11-2007 showing the price almost Rs. 53/- per kg. The Bill of Entry relied on by the adjudicating authority dated 29-1-2008 cannot be considered as reliable document as import has taken place in October, 2007 to October, 2008. In these circumstances, the appellant has been able to show that the quality of goods are different from the goods and value which were relied on by the adjudicating authority for loading of the value - in these cases the show cause notices admittedly have been issued beyond the period of six months and there is no allegation of suppression, concealment of facts, fraud, etc., therefore, we hold that the show-cause notices issued to the appellants are barred by limitation - Decided in favour of assessee.
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2013 (12) TMI 90
Valuation of goods - Addition of Technical know how fees and royalty - Import of parts and components - Held that:- as per the agreement, the technical know-how and licence related to the post importation activities to be undertaken by the appellant. The payment consisted of two components - one a lumpsum amount payable in instalments and a running royalty - The product referred to in the agreement relates to the cars manufactured in India of specific models. From this, it becomes clear that the running royalty of 2.15% is on the goods manufactured in India and sold by Maruti and has nothing to do with the imported components. Similarly, the royalty of 3% is relatable to the indigenization programme of the appellant since it is on the deleted portion of the CKD components, that is, on the value of the components which have not been imported. Thus, higher the indigenization, higher the payment of royalty. This is for the reason that, had the appellant imported these components rather than manufacturing indigenously, SMC would have been able to earn profits by way of sale of imported components. There is no mention of any specific items of import or of any royalty or licence fee payable for imported goods. In this factual position, there is no legal requirement for adding the know-how fee to the value of any imported items and assessing these imported items to customs duty based on the added value as held in the case of Hyundai Motor (India) Ltd. [2007 (2) TMI 81 - CESTAT,NEW DELHI]. Technical know-how fee charged in respect of post importation activities can not be included in the assessable value of the imported goods as held by the Honble Apex Court in the of Prodelin India (P) Ltd. [2006 (8) TMI 186 - SUPREME COURT OF INDIA]. No efforts has been made by the Department in the instant case to ascertain whether there was a price adjustment between the cost incurred by the appellant on account of royalty/licence fee and the price paid for imported items. The department has merely relied on the consideration clause in the Licence agreement only without establishing the fact that what was termed as royalty/licence fee was in fact not such royalty/licence fee but some other payment made or to be made as a condition pre-requisite to the sale of imported goods. The onus is on the Revenue to prove that the declared price did not reflect true transaction value. In the absence of any reliable evidence in this regard, the contention of the Revenue that royalty/licence fee is includible in the assessable value of the imported goods can not be accepted - Decided in favour of assessee.
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2013 (12) TMI 89
Refund claim - Benefit of Notification No. 102/2007, dated 14-9-2007 - Revenue rejected refund claim as per time limit prescribed under Notification No. 102/2007 - Held that:- at the time of payment of duty, Notification No. 102/2007, dated 14-9-2007 was in force and in the said notification, for filing the refund claim no time-limit was prescribed. The time-limit for filing the refund claim was prescribed by Notification No. 93/2008, dated 1-8-2008 and the said notification has not been implemented retrospectively. Therefore, the Notification No. 93/2008 is not applicable in the case of refund claim filed against the duty paid prior to 1-8-2008. Hence, the rejection of the refund claim on the ground of time bar is not sustainable at all - Decided in favour of assessee.
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Corporate Laws
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2013 (12) TMI 88
Maintainability of Petition Remedy by way of appeal available or not Held that:- The appropriate remedy for the petitioners would be to file an appeal in terms of the provisions of the Competition Act - the High Court in exercise of its extraordinary jurisdiction under Article 226/227 of the Constitution will not be justified in intervening in the matter, when an equally efficacious alternative remedy is available to the petitioners - The remedy of appeal is, in fact, more efficacious than the remedy by way of a writ petition under Articles 226/227 of the Constitution and there is no reason why the petitioners should not avail the said remedy. The right to file an appeal, created by statute is a substantive right which remains unaffected by the subsequent changes in law, unless taken away expressly or by necessary application, though the mechanism for enforcement of such a right being procedural in nature can be changed even retrospectively - the legislature, while repealing an Act, is certainly competent to confer an additional right by providing for an appeal to an appropriate forum - A party to the lis is not in any manner prejudicially affected on such an additional right being granted to him while repealing an enactment. Applicability of Provisions of Competition Act - Compensation under Monopolies and Restrictive Trade Practices Act, 1969 Loss and Damage caused because of monopolistic, restrictive or unfair trade practice Held that:- Relying upon Nathoo Lal Vs. Durga Prasad [1954 (4) TMI 47 - SUPREME COURT] The orders came to be passed by the Competition Appellate Tribunal much after the MRTP Act had been repealed and the Competition Act had been notified - despite the fact that the original application was filed under the provisions of Section 12B of the MRTP Act and in view of the provisions contained in Section 66 of the Competition Act as also Section 6 of the General Clauses Act, the petitions had to be decided in terms of the provisions of the MRTP Act, an appeal against the order passed by the Competition Appellate Tribunal, after coming into force of the Competition Act would be maintainable - The appeal under Section 53T of the Competition Act is provided against any decision or order of the Competition Appellate Tribunal irrespective of whether such decision or order be interlocutory, intermediate or final though the orders in their petitions are final orders Decided against Petitioner.
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Service Tax
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2013 (12) TMI 104
Service Tax demand - Penalty under Section 78 - Notification No. 8/2005-ST dated-01/03/2005 - Business Auxiliary Services - Held that:- It is the asserted case of the petitioner; and the assertation is not controverted by Revenue that the petitioner was a mere provider of anti-corrosion treatment. If the petitioner was providing the anti-corrosion treatment for its own material, there would be no question of a taxable service having been provided, since service to oneself is not a taxable service. The fundamental premise of the proceedings is that the petitioner was providing the anti-corrosion service to another by way of BAS. The goods processed by the petitioner are received from, processed and then handed over to the client another and the later manufactures excisable goods. The benefits of Notification No. 8/2005-ST would therefore, clearly and squarely apply - Prima facie case in favour of the petitioner - Stay granted.
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2013 (12) TMI 103
Demand of service tax - Penalties under Section 76 and 77 - Suo moto adjustment of excess service tax paid - Held that:- appellant can make suo-motto adjustment subject to, inter-alia, the following procedural conditions - It has not been denied by the appellant that conditions were fulfilled by them but has relied upon the case law of Single Member bench in the case of Siemens Limited vs. CCE, Pondicherry (2013 (2) TMI 609 - CESTAT CHENNAI). It is seen from the facts of the case that the value on which service tax was paid was determined as late as June 2007 whereas the duty was paid in 2006. In Para 6 of the order in the case of Siemens Limited, it has been discussed by the Bench on facts, as to how the appellant has provided reasonable explanation in the case. In the present case, there is no reasonable explanation from the appellant as to why appellant was not able to adjust excess service tax paid in the liability for the succeeding month or quarter. The words used in Rule 6 (4B) is not Subsequent Months or Quarters. It is a well settled proposition that when a procedure is prescribed by the legislation for availing an exemption/ concession than that procedure has to be followed strictly in that fashion only - Confirmation of demand and interest has been correctly made by the first appellate authority which needs to be upheld. Appellant has a bonafide belief that it was their own money and they are entitled to adjust the excess amounts paid. Under these circumstances there cannot be any malafide on the part of the appellant. Accordingly, I set aside the penalties imposed upon the appellant under Section 76 and 77 read with Section 80 of the Finance Act, 1994 - Decided partly in favour of assessee.
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2013 (12) TMI 102
Interpretation of Notification - Penalty u/s 80 - Notification 56/98-ST dated 7.10.1998 - Whether the respondents are entitled for the benefit of the Notification 56/98-ST dated 7.10.1998 - Security service to the Banks - Held that:- As per the agreement, the respondents are responsible for safeguarding the building of the bank along with the fixtures, fittings and equipments, cash, other securities etc. Therefore, it cannot be said that the respondents are providing security services in relation to safe deposit lockers or security of safe vaults. In view of this the benefit of notification is not available to the respondents - respondents are registered with the Revenue authorities as service provider and paying appropriate service tax - Therefore, penalty is waived off - Decided partly in favour of assessee.
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2013 (12) TMI 101
Waiver of pre deposit - Drilling and blasting - Whether drilling and blasting would constitute dredging services - Held that:- applicants had not produced any work order to show the scope of work. The only contention of the applicants is that the applicants had taken the process of drilling and blasting. Dredging service includes removal of material. As the drilling and blasting essentially result in removal of material, therefore, we find that, prima facie, the applicants had not made out a case for total waiver of the dues - Conditional stay granted.
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2013 (12) TMI 100
Demand of service tax along with interest - Receipt of charges as donations - Whether the amounts which are collected as donations while booking the hall are to be treated as gross amount received for providing service of mandap keeper - Held that:- hall is booked on the condition that the service recipient will pay the donation. As the donation is compulsory for booking of the hall for social function, in these circumstances, we find no merit in the contention of the appellant-assessee that this amount is not to be counted towards the gross amount towards booking of the hall for social function. In respect of the extended period of limitation, we find that the appellant-assessee never disclosed to the Revenue that they are collecting donations at the time of booking of the hall hence we find no infirmity in the impugned order whereby the demand is confirmed after invoking the extended period of limitation - assessee were following the same practice which was prevalent prior to the introduction of service tax on mandap keeper and it is not the case of the Revenue that the practice was adopted by the appellant-assessee after the introduction of service tax as a mandap keeper, therefore we find that the penalty imposed under the impugned order will meet the ends of justice - Decided partly against assessee.
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2013 (12) TMI 99
Stay application - Credit availed for Service Tax paid on the consultancy services - Appellant does not have any office in India - Eligibility for modvat credit - Held that:- services were not used in relation to business in India, infact would lead to a situation where the appellants could not have paid Service tax inasmuch as the services were obtained in a foreign country for setting up of a unit in the foreign country itself. As such, if the revenues stand that no services were received in India in relation to the business of appellant are accepted, the same would lead to a situation where no service tax was required to be paid by the appellants - prima facie demand is barred by limitation. The appellants, having reflected the quantum of credit availed by them in the returns filed with the department, cannot be held to be guilty of any mala fide intention or mis-statement - Stay granted.
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2013 (12) TMI 98
Input credit - Assessee contends that invoices showing payment of service tax either in the name of head office or in the name of factory should be considered for grant of input credit - Public interest or private interest - Whether matter should go back for examining the issue - Held that:- exemption cannot be granted as public revenue is sacrificed by grant of exemption. Revenue owes a duty to ask about eligibility and manner of claim as well as admissibility thereof and Assessee has burden to proof its claim. Legislature have thoughtfully designed the manner how claim should be made for which they have laid down the procedure under Rule 9 of the Cenvat Credit Rules, 2004. Document which is not known to the law shall not entitle any relief to a claimant. Public interest always weighs heavier than the private interest. While exemptions are granted at public interest, certain safeguard measures prescribed by notification have to be fulfilled. If the appellant has led evidence about the claim in accordance with law and such a claim was to serve the purpose of manufacture or in relation to manufacture or for providing taxable output service the appellant shall only be entitled to the input credit - matters are remanded to the original authority for re-adjudication - Decided in favour of assessee.
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2013 (12) TMI 97
Waiver of pre-deposit of interest - Denial of refund of Service Tax paid on gardening services and insurance services - Held that:- appeal filed against denial of refund of Service Tax paid on gardening services and insurance services is pending before this Tribunal. The interest will be payable only if it is held that Service Tax is payable on these services and the same is yet to be decided - There is a prima facie case for complete waiver of pre-deposit of interest in favour of the applicant. The pre-deposit of interest is waived and its recovery is stayed during pendency of the appeal - Stay granted.
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2013 (12) TMI 96
Availment of CENVAT Credit - Assessee had doubt whether they had utilized the Cenvat credit wrongly in view of provisions under Rule 6(3)(c) of Cenvat Credit Rules, they on their own on 5-5-2005 and 4-8-2005, paid in cash, amount of excess Cenvat credit utilized by them during the period September, 2004 to March, 2005 along with applicable interest - Refund of CENVAT Credit as per Rule 6(3)(c) - Held that:- under Rule 6(3)(b)(f), the rule makes a provision that the assessee may take credit on its own for adjusting excess amount of Cenvat credit utilized. This rule is for a slightly different situation but is within the overall situation dealt by Rule 6 which is about adjustment of Cenvat credit when an assessee takes credit of input or input services and utilizes it for providing both taxable services and non-taxable services - The Revenue has not been able to point any argument by which the appellant was not be entitled to the credit it has taken after payment of equivalent amount in cash. Therefore, the entire matter relates to only procedural violation to the extent that the appellant should not have taken the credit on its own but should have applied for a refund. Such procedural violation cannot result in demand of duty equal to the credit which they have taken. This can at best result in a penalty - Decided partly in favour of assessee.
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2013 (12) TMI 95
Stay application - Disallowance of CENVAT Credit - Credit of the duty paid on CHA services and courier services - Held that:- credit of the duty paid on CHA services and courier services are not admissible as the same relate to the activities at the loading Port and has nothing to do with the manufacture of the goods or their clearance since the clearance of the goods manufactured had taken place at the factory gate itself. The fact that the clearance of the goods was at the factory gate was not in dispute, so also the fact that the claim relates to the duty paid on the services which were utilized at the loading point for the export purposes - No prima facie case having been made out for total waiver of the amount payable under the impugned order - Partial stay granted.
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2013 (12) TMI 77
Valuation of a taxable service Held that:- A dispute relating to valuation cannot be raised before a High Court as Section 35L(b) provides that any order passed by the Appellate Tribunal relating, among other things to determination of any question having relation to the rate of excise duty or to the value of goods for purposes of assessment shall lie before the Supreme Court Section 35G has been repealed by the National Tax Tribunal Act, 2005 has not been notified - M/s. Universal Law Publishing Company Pvt. Ltd. Call upon to issue a clarification and publish correct copies of the bare Act - Decided against Appellant
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2013 (12) TMI 75
Demand - Rate of Tax - Held that:- when the service was provided, the rate of tax applicable at that relevant time was lower and when the amount for the service was received, the rate of tax was higher and the department has demanded the tax at the higher rate - substantive provisions of the Act would indicate the relevant date for payment of service tax is date of entry and not date of billing - Following decision of CCE & C v. Reliance Industries Ltd. [2009 (7) TMI 717 - GUJARAT HIGH COURT], prima facie case is in favor of assessee - stay granted.
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Central Excise
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2013 (12) TMI 87
Who is the Manufacturers - Whether as per the terms and conditions of the agreement Job worker is the manufacturer or the appellants are the manufacturer Held that:- There was no supervision over the manufacture As held in COLLECTOR OF CENTRAL EXCISE, BARODA Versus MM KHAMBHATWALA [1996 (5) TMI 84 - SUPREME COURT OF INDIA] - Incense sticks were put in packets and such packets were sold from the premises of the house-hold ladies and they did not go to the factory premises of the assessee - the sale proceeds went to the respondents but that will not change the character of manufacture - the said goods were manufactured by M/s. Raigad at the premises hired by the appellant - the machineries of job worker were under the supervision of supervisors appointed by the appellant Job worker is the manufacturers. Entitlement for benefit of Notification - If the appellants are the manufacturer then whether they are entitled for the benefit of exemption notification - Whether the goods are sea going vessel or not Held that:- UNION OF INDIA Versus V. M. SALGAONCAR & BROS. (P) LTD. [1998 (3) TMI 134 - SUPREME COURT OF INDIA] - Tugs and barges used by the appellants are sea going vessels - the question whether a transhipping vessel is an ocean-going vessel, can solely rest on the test of its dominant use to which their owners put them at times - Use may vary from season to season, port to port and also managers to managers - So in this area of understanding use of the article stands down-staged, and the Court must look at to know what actually the commodity is - The affidavit of Shri Arun Kapur, Naval Architect which clearly confirms that the tugs and barges in question are ocean going vessels which are not controverted or cross-examined by the Revenue - the tugs and barges are ocean going vessels and the appellants are entitled for the benefit of exemption Decided in favour of assessee.
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2013 (12) TMI 86
Imposition of Penalty u/s 11AC of Central Excise Act as per the decision of the Dharmendra Textiles Industries & Ors vs. UOI [2008 (9) TMI 52 - SUPREME COURT] - Once the wrongly taken credit along with interest was suo-motto paid by the appellant and thereafter intimating the department, it cannot be said that assessee had any intention to take wrong cenvat credit by making misstatement or suppressing facts - the provisions of Section 11AC are not attracted and no penalty under Section 11AC of the Central Excise Act, 1944 is imposable Decided against Revenue. Penalty under rule 15(1) not mentioned in show cause notice Held that:- Commissioner (Appeals) has imposed the penalty under Rule 15(1) of the Cenvat Credit Rules, 2004, which was not even quoted in the show cause notice Thus, Commissioner (Appeals), has gone beyond the scope of show cause notice - penalty under Rule 15(1) of the Cenvat Credit Rules, not invoked in the show cause notice, cannot be imposed upon the assessee Decided in favour of Assessee.
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2013 (12) TMI 85
Non-reversal of cenvat credit Inputs lying as semi-finished goods Waiver of Pre-deposit Held that:- Prima facie, common registrations and maintenance of common PLA/Cenvat accounts had to be maintained till 23-9-2009 till separate registrations to three units were granted - The common credit taken with respect to all the three units at one place by transferring the credits admissible and lying with all the three units apparently appears justifiable - Appellant cannot be expected to maintain separate accounts without getting separate Central Excise registrations from the proper authority Appellants have made out a prima facie case for complete waiver of the dues and penalties Pre-deposits waived till the disposal Stay granted.
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2013 (12) TMI 84
Application for Rectification of Mistake - Eligibility of deemed credit - Entitlement to the benefit of Notification No. 202/88 Held that:- Goods exempted to Nil rate by an exemption Notification, issued under Sec. 5A of the Central Excise Act, 1944, has to be considered as goods on which no duty is paid - Continuation of mention of ship breaking material under the description of inputs of the Table to Notification No. 202/88-C.E. after 20-5-1988 will be for those materials which are lying in the country after 25-7-1991 but were manufactured and cleared before 28-2-1993 i.e. the date of Notification No. 63/91-C.E. - The value of clearances of dutiable goods not entitled to exemption under Notification No. 202/88-C.E. are required to be included in the value of clearances during 1993-94. For determining eligibility of the small scale exemption value of clearances of 1992-93 were required to be taken into consideration - Small scale eligibility and payment of duty in a financial year is dependent upon the value of clearances of the preceding financial year as well as the quantum of clearances in the relevant financial year - the value of dutiable clearances up to 28-2-1994 was required to be taken into consideration for calculating the value of clearances and duty liability during the period 1-3-1994 to 31-3-1994, when the goods of heading 72.30 got fully exempted under exemption Notification No. 44/93-C.E., dated 28-2-1993 There is no mistake apparent from the records while passing order dated 5-5-2011 - 18-5-2011 Decided against Assessee.
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2013 (12) TMI 83
Application for Rectification of Mistake - Entitlement to the benefit of Notification No. 202/88 Held that:- The appellant was not entitled to the benefit of Notification No. 202/88-C.E., clearances made from April, 1993 to February, 1994 will be required to be added to the aggregate value of clearances under Notification No. 1/93 - value of clearances during the financial year (1992-93) was within the exemption limit, still appellants were required to pay duty during the year 1993-94 after exemption limit got exhausted - There is nothing on record that appellants during the period April, 1993 to February, 1994 were having value of clearances less than the prescribed exemption limit - in the ROM application also the facts have not been brought on record by the appellants - there is no mistake apparent from the records and accordingly ROM Applications filed by the appellants are dismissed Decided against Assessee.
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2013 (12) TMI 82
Difference of transaction value at the time of clearance and credit taken Revenue was of the view that as per Rule 3 (5) of Cenvat Credit Rules 2004 when capital goods on which Cenvat credit had been taken were removed from the factory, the manufacturer of the final product shall pay an amount equal to the credit availed Held that:- When capital goods are removed after use, it cannot be considered as a case of removal of goods as such for the purpose of reversing the entire credit taken at the time of receiving the capital goods as prescribed in Rule 3 (5) of CCR 2004 - The use of capital goods is to spread over many years - Following CCE Salem Vs Rogini Mills Ltd.[2010 (10) TMI 424 - MADRAS HIGH COURT] - A decision to the effect that assessees can bring in capital goods, use it for a few days and then remove it without reversal of any Cenvat credit taken is not consistent with the overall scheme of Cenvat credit and can lead to abuse of the scheme Decided against Assessee.
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2013 (12) TMI 81
Compensation for delay to be included in the assessable value u/s 4 of central excise act or not after 01-07-2000 Held that:- The provision in the contract, for variation in the price by application of the clause, was related to liquidated damages and the same is in the nature of a compensation payable for delayed delivery in the supply of goods and not in the nature of penalty - The Tribunal concluded that in terms of the definition of "transaction value", duty is payable only on the price arrived at by taking into account the liquidated damages - Section 4 read with the definition of "transaction value" in Section 4 (3) (d) enables levy of duty on the transaction value paid or payable for the goods - The value payable in a case where liquidated damages is applied would therefore be the consequent value and this would constitute the "transaction value". Following United Telecom Ltd. Vs CCE Bangalore [2006 (9) TMI 321 - CESTAT, BANGALORE] - Post the amendment of Section 4 and the statutory definition of transaction value' in sub-section (3) (d) of the Act - the eventual value payable after factoring in any liquidated damages contractually stipulated for delayed supply would be the transaction value and this value would be the value relevant for levy of duty - wherever the assessee, as per the terms of the contract and on account of delay in delivery of manufactured goods is liable to pay a lesser amount than the generically agreed price as a result of a clause, stipulating variation in the price, on account a the liability to "liquidated damages", irrespective of whether the clause is titled "penalty" or "liquidated damages", the resultant price would be the "transaction value" - such value shall be liable to levy of excise duty, at the applicable rate.
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2013 (12) TMI 80
Duty liability - Simultaneous benefit of Notification No.29/2004 and Notification No.30/2004 Taken benefit of CENVAT cannot be taken on duty paid on inputs -Whether subsequent reversal of proportionate CENVAT Credit at the end of the month in respect of the inputs used in manufacturing of final product cleared under Notification No.30/2004 would amount to a situation as if CENVAT Credit was not availed Held that:- Relying upon Hello Minerals Water (P) Ltd. v. Union of India [2004 (7) TMI 98 - HIGH COURT OF JUDICATURE AT ALLAHABAD] - Reversal of Modvat credit amounts to non-taking of credit on the input - the benefit has to be given of the notification granting exemption/rate of duty on the final products since the reversal of credit on the input was done at the Tribunals stage. There is reversal of CENVAT Credit, the question of discharge of duty liability does not arise, but the appellant is required to pay interest in accordance with the provisions of law on the amount reversed belatedly . In order to quantify the correct amount of interest liability on the appellant, he has not reversed the CENVAT Credit attributable to the inputs, the matter remanded back to the lower authorities for limited purpose of quantifying the amount of interest on the belated reversal of CENVAT Credit by the appellant, wherein they had reversed the CENVAT Credit not at the end of the month when the clearances took place, but subsequently - The penalties imposed are unwarranted and set aside Decided partly in favour of Assessee.
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2013 (12) TMI 79
Process Manufacture or not u/s 2(f) of the Central Excise Act, 1944 - Whether the process of cutting of carpet matting in rolls and stitching the edges and providing a lining to the cut sizes, to facilitate use as floor mats, amounts to manufacture and the emerging product is exigible to excise duty Held that:- Following Brakes India Ltd. Vs Superintendent of Central Excise [1997 (3) TMI 120 - SUPREME COURT OF INDIA] - the cutting of carpet rolls into smaller sizes and subjecting such cut sizes to a process of stitching linings at the edges would not amount to manufacture nor result in emergence of a distinct independent commodity, exigible to duty under provisions of Section 2(f) of the Central Excise Act, 1944 - the end products and the process do not bring into existence any new and distinct product by transformation of the original commodity - therefore, no manufacturing per se or within the meaning of Section 2(f) of the Central Excise Act, 1944, is involved - reference made accordingly and the matter remitted for determination on merits - Decided in favour of Assessee.
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2013 (12) TMI 78
Time-barred appeal pending or not - Non-maintenance of separate account under Rule 57CC of the Central Excise Rules, 1944 - Modvat Credit took on various inputs - Final products Dutiable as well as exempted products - Whether a time barred appeal can be said to be pending and pendency can be negated on the ground that it was filed beyond time Held that:- The findings have been recorded by the Tribunal that the date of receipt of the order i.e. 13th August, 2003 has to be accepted - The appeal was filed by same person - The findings recorded by the Commissioner as well as the Tribunal that the appeals were barred by time are based on consideration of all relevant materials - Relying upon Commissioner of Income Tax, Rajkot vs. Shatrusailya Digvijaysingh Jadeja [2005 (9) TMI 362 - SUPREME COURT OF INDIA] - The proposition is undisputed that even if appeal is filed beyond time, the appeal is to be treated as an appeal pending and merely because the appeal is beyond time, it cannot be treated as no appeal - there is no power with the Commissioner to condone the delay beyond one month after expiry of two months - when appeal is filed before the Appellate Tribunal it had jurisdictional power to set aside an order of Commissioner Central Excise Appeals including an order rejecting the appeal as barred by time. Rule 57CCC does not refer to pendency of appeal or revision rather it uses a word of wider connotation i.e. "a dispute" - The word "dispute" clearly encompass within it a pendency of any litigation or claim of one party against the department - the adjudication order passed by adjudicating authority directing for payment of duty was disputed by filing an appeal - When an order passed by the adjudicating authority is challenged by an aggrieved party he is obviously disputing the order and his action of filing a time barred appeal either before Commissioner Central Excise (Appeals) or before the Tribunal has to be treated as raising a dispute and appeal before the CESTAT pending on the relevant date, it has to be accepted that the dispute was pending on the relevant date. The very basis of contention to knock out the application submitted by the petitioner under Rule 57CCC is unfounded - the application dated 2.7.2010 filed by the petitioner to take benefit under section 69(2) of the Finance Act, 2010 read with Rule 57CCC cannot be said to be non entertainable on the ground that no dispute was pending on the relevant date i.e. on 8.5.2010 - the writ petition is disposed of with a direction to the respondent no. 2 to consider the application dated 2.7.2010 submitted on 5.7.2010 by the petitioner under section 69(2) of the Finance Act 2010 read with Rule 57CCC of the Rules Decided in favour of Petitioner.
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2013 (12) TMI 76
Waiver of the pre-deposit ordered by CESTAT - Pan Masala unit run without registration - Rule 17 (2) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 i.e; the deeming clause of the period for operating the machines will be applicable unless evidence to the contrary proves to the satisfaction of the Central excise Officers that the machines were used in the previous financial year as well Held that:- The contention that deeming provision will be applicable from 1st April of the financial year in which unit was found to be not registered cannot be accepted there was no prima facie fault in the reasoning given by the Tribunal that the deeming provision will be applicable unless evidence to the contrary is provided to the satisfaction of the Central Excise Officer. Te appellant admitted that the agreement was executed on 1.10.2010 and the manufacture started from January, 2011 for which he also deposited admitted excise duty - The deeming provision as held by the Tribunal prima facie applied with effect from 1st April, 2010 in case of unit, which is not registered and not from 1st April, 2011 -this question is still to be considered by the Tribunal The petitioner has been given substantial relief both in depositing the excise duty as well as the penalty and there is no reason to interfere also there was no substantial question of law arise for consideration Decided against Appellant.
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2013 (12) TMI 53
Duty liability under Rule 6(3) of the CENVAT Credit Rules, 2004 Common inputs in the manufacture of dutiable as well as exempted goods - Press-mud emerges as a waste in the process of manufacture of sugar and molasses Waiver of Pre-deposit Held that:-Manufacture as defined under the Act pertains to any process leading to a manufactured product - It is undeniable that press-mud which was generated in the appellants factory during the material period was not a manufactured product- the fundamental test of manufacture fails - press-mud cannot be considered to be an exempted excisable goods - t is also pertinent to note that this commodity does not figure anywhere in the 1st Schedule to the Central Excise Tariff Act - Rule 6(3) is not attracted and the demand is unsustainable Pre-deposits waived till the disposal Stay granted.
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CST, VAT & Sales Tax
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2013 (12) TMI 105
Stay application - Recovery of tax - Held that:- Addl. Commissioner (Appeals), Commercial Tax, Ghaziabad-respondent no.1 to decide the stay application in the pending appeals for the assessment years 2007-08 and 2008-09 within a period of three working days from the date a certified copy of this order is produced before him - Decided in favour of assessee.
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