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TMI Tax Updates - e-Newsletter
December 3, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Reopening of assessment u/s 147 - “unascertained liability” had been claimed and allowed as expenditure - the assumption drawn by the AO in the “reasons to believe” is farfetched, vague and a mere pretence - HC
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Transfer of capital asset u/s 2(47) or u/s 45(3) - it cannot be stated that assessee has no right on the property when it admits and enters into agreement and even permits the Bank for an equitable mortgage of the property - AT
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No additional material is found pertaining to the assessee which it is held to be belonging to the assessee, the AO does not assume jurisdiction for framing assessment u/s. 153C read with section 153A - AT
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Deduction u/s 80IB(10) – assessee surrendered the income, whose only source, was the business of the assessee - deduction allowed - AT
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Validity of assessment of penalty proceedings - on the date of filing the return for the year under consideration the assessee was having benefit of orders passed by TPO - assessee’s action was in good faith - penalty set aside - AT
Case Laws:
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Income Tax
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2014 (12) TMI 71
Assessability of transaction in respect of sale of lands – Co-owner of the land – Assessee or M/s Viraj Estates Pvt. Ltd. liable to be taxed – Whether the income arising as a result of the Development Agreement dated 30.12.2003 executed by assessee and two others with Shri Rajesh Patharkar is liable to be assessed in the hands of the assessee or not - Held that:- The CIT(A) correctly came to conclude that the sale of land was assessable in the hands of the M/s Viraj Estates Pvt. Ltd. and not in the hands of the assessee - CIT(A) rightly accepted the plea of the assessee that the transaction does not belong to the assessee inasmuch as the land has been purchased and sold for and on behalf of VEPL, having regard to the facts and circumstances of the case - the sale-deeds showed that payments for acquisition of land were made by VEPL through their bank accounts - payments have been recorded in the books of account of M/s VEPL - in the Balance-Sheet of VEPL, the transaction has been reflected as advances against purchase of land - purchase of land by the assessee and two other co-owners is for and on behalf of the VEPL – the land was purchased and sold by the assessee and two other co-owners for and on behalf of VEPL - Therefore, the income was not liable to be assessed in the hands of the assessee – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 67
Estimation of profits @ 10% of GP – Held that:- When the assessee has not produced its books of accounts or bills and vouchers in support of claim of expenditure, the AO could not have pointed out any defect or discrepancy in the books of accounts or inadmissibility of any particular expenditure in the absence of books of accounts, bills, vouchers or even break-up of the expenditure – the contention of the assessee cannot be accepted that it has produced all the relevant material before the AO - regular assessment in case of the assessee has not been made prior to the search – the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for assessing the income - unless the assessee produces its books of accounts and other evidences in support of the claim made in the return of income, the AO would be handicapped in computing the income, hence would be forced to estimate the profit - This fact has not been properly appreciated by the first appellate authority - thus, the matter is to be remitted back to the AO for fresh consideration – Decided in favour of assessee. Addition of rental income and interest income as income from other sources – Held that:- When the assessee itself is treating the lease rental income and interest income as income from ‘other sources’ in the subsequent AY i.e., AY 2009-10, then it becomes very much clear that it is not temporary exploitation of business asset - Rather it demonstrates that the assessee himself no longer treats the asset leased out as business asset but in the nature of exploitation of property by an owner – the contention of the revenue is accepted that the amount being lease rental and interest have to be treated as income from ‘other sources’ – the order of the CIT(A) is set aside and the matter is remitted back to the AO – Decided in favour of revenue. Allowability of exemption u/s 54F – Held that:- In case of capital gains arising from transfer of any long term capital asset not being a residential house, if the assessee, within the period of one year before or two years after the date on which the transfer took place had purchased a residential house or within the period of three years, has constructed a residential house, then there will be exemption of capital gains - the assessee will not be entitled to avail exemption u/s 54F(1) if he owns more than one residential house other than the new asset on the date of transfer of original asset or purchases any other residential house other than the new asset within period of one year after the date of the transfer of original asset or constructs any residential house other than the new asset within the period of three years after the date of transfer of the original asset - the assessee has invested the capital gains in construction of an additional floor as claimed by the assessee over an already existing house property. Whether the additional floor stated to have been constructed can be considered to be a distinct and separate house independent of existing house property – Held that:- More than one flat purchased by an assessee on the same building on the same floor or different floor have to be considered as one unit - it cannot be treated as a new asset as per the provisions of section 54F of the Act – thus, the order of the CIT(A) is set aside – Decided in favour of revenue. Addition made by CIT(A) deleted – Whether there is an excess of jewellery to the extent of ₹ 1,27,60,063/- as determined by the Assessing Officer - Held that:- So far as value of jewellery stated to have been declared in the wealth-tax return of Sri Krishna Kumar HUF amounting to ₹ 60,36,175/- does not appear in the assessment order wherein the AO has considered the jewellery declared in the case of the assessee and other family members - the CIT(A) before accepting the contention of the assessee should have given an opportunity to the AO to put forth his opinion on the issue – thus, the matter is remitted back to the AO for verification. Examination of fresh information under Rule 46A – Held that:- The AO has clearly mentioned that in absence of the details regarding disbursement of loan as well as sanction letter from HDFC or any statement from the bank to substantiate the disbursement of the loan he did not accept the claim of ₹ 24 lakh - Nothing has been produced before us to show that the details of disbursement of loan from HDFC were submitted before the AO to substantiate its claim of availing loan for construction of the property - the CIT (A) also has not allowed the AO to have his view on the evidences/information submitted by the assessee during appellate proceedings - thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of revenue.
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2014 (12) TMI 66
Sale/transfer of agricultural land capital asset or not u/s 2(14)(iii) – Held that:- When the assessee in the conveyance deed himself has recited about the land having been converted u/s 90A of the Act, the nature of the land never remained agricultural any more - even the order passed under the Land Revenue Act has also been indicated in the sale deed - the assessee himself has stated that the seller became an absolute owner of the residential land having converted from agricultural to residential use of the land - no documentary evidence was led by the assessee herein to substantiate his claim of doing any agricultural operations therein as the AO in the assessment order has clearly and repeatedly asked the assessee to substantiate the claim about the exact agricultural operations having been carried on by the assessee, but no satisfactory material was placed by the assessee - the other lands, though not converted from agricultural to non-agricultural use, were in the same/near vicinity of the lands which were converted from agricultural to non-agricultural and thus the nature of the said lands too could not be different – relying upon Sarifabibi Mohammed Ibrahim & others Vs. CIT [1993 (9) TMI 10 - SUPREME Court] it has been rightly held that the lands, sold/transferred by the assesse to the private limited companies, were non-agricultural and outside the scope and meaning of Sec. 2(14)(iii) of the IT Act requires no consideration. – thus, no substantial question of law arises for consideration – decided against revenue. Rejection of books of accounts u/s 145(3) – Higher GP applied and trading accounts rejected – Held that:- Provisions of Sec. 145(3) are applicable and what should be a reasonable profit on account of the trading transactions, is a finding of fact - The assessee has introduced and recorded bogus purchases and verification of opening stock/closing stock were not open for verification in the books of accounts, thus the motive was to reduce its profits and thus the assessee/appellant has not been able to dispel this finding of fact recorded by all the three authorities who in consonance, have come to the conclusion - on non-genuine purchases, books of accounts can be rejected and provisions of Sec. 145(3) are applicable – as such no substantial question of law arises for consideration – Decided against assessee.
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2014 (12) TMI 65
Amount paid on rediscounting of bills part of interest or not – Interest tax Act - Activity of advancing and receiving money from various parties - Whether the Tribunal was justified in holding that amount paid by the assessee to the IDBI, RBI on rediscounting of bills are not part of interest income and as such not chargeable to interest tax – Held that:- The bank has paid amount to the RBI/IDBI under the Industrial Development Bank of India Bill Rediscounting Scheme and there is a direct nexus/corelation with the payment made to the RBI/IDBI and what was received from the borrower - the claim of the bank is justifiable - There is an overriding title of the RBI/IDBI and a direct co-relation/nexus of such bills re-discounted and the re-discount rates of RBI/IDBI collected by the bank which in our view, cannot be chargeable interest, in as much as even before the amount reached the hands of the assessee, it was impressed with the character of re-discount charges payable to the IDBI or RBI, as the case may be – the same has also been decided in CIT Vs. Canara Bank [2007 (7) TMI 11 - SUPREME COURT OF INDIA] – decided against revenue. Subsidy received from the RBI on export credit loans - Whether the Tribunal was justified in law in holding that the amount of subsidy received by the assessee from RBI under the Export Credit (Interest Subsidy), 1968 is not liable to interest tax – Held that:- Assessee rightly contended that as per the scheme of the RBI, the assesse bank used to advance money to various exporters to carry out export business - Such advances generally are termed as packing credit and as per the scheme of the RBI, banks are required to charge interest on such advances at the specific rates provided under the scheme -The RBI would grant subsidy to the bank for the shortfall in interest received from the customer - such subsidy is not received from the customers and is not relatable to what was lended & advanced by the bank, hence it cannot be treated as Interest as provided u/s 2(7) of the Act - Subsidy received from RBI is in the form of support to the bank and cannot be equated to interest - only interest on loans and advances made in India is covered - Since loan and advance has not been made to RBI, thus would not come under the purview of Interest, at all – Decided against Revenue. Overdue Interest on inland/foreign demand bills - Whether the Tribunal was right in law in holding that overdue interest charged by the bank was chargeable amount under the Interest Tax Act – Held that:- The scope and definition of the term “interest” cannot be interpreted to bring within its fold any income that is booked by an assessee under the head interest - The character of an overdue bill is not synonymous with the loans and advances and, therefore, it will not fall within the ambit and scope of interest u/s 2 (7) of the Interest Tax Act - on the due date/cutoff date whatever amount has been recovered by the assessee bank, will certainly fall in the nature of interest, but once the due date/cutoff date is over, any amount received after that date by the bank, would be in the nature of compensation/penalty/liquidated damages and will not be “interest” - the way in which entries are made by an assessee in its books of account or the nomenclature given to a transaction by the parties is not determinative of the due character/nature of that transaction - the amount received as “overdue interest” in inland/foreign demand bills is not liable to be taxed as interest under the Interest Tax Act – Decided against revenue. Guarantee Fees Paid to Deposit Insurance and Credit Guarantee Corporation - Whether the Tribunal was justified in holding that the guarantee fee/commission shown by the assessee itself under the head of interest is not liable to tax under the Interest Tax Act – Held that:- The Interest Tax Act, does not include the term “any service fee or other charges in respect of money charge or debt incurred” under its ambit and putting to test the principle of harmonious interpretation, it is evident that the parliament in its wisdom has chosen not to add the terminology under the Interest Tax Act, and what has not been mentioned neither be added nor is required to be read in between the lines – in Sutlej Cotton Mills Limited Versus Commissioner of Income-Tax, West Bengal [1978 (9) TMI 1 - SUPREME Court] it has been held that mere crediting the amount under a head is not determinative of the real nature and real intent and purpose of the transaction is required to be seen - the amount recovered by the assessee from the constituents (borrower) cannot be taxed as interest in the hands of the assessee - such charges recovered by the bank cannot be equated to the term interest under the Act - Though the receipt of Guarantee Fees received from constituents (borrowers) is not linked to what is paid to DICGC as insurance cover on behalf of depositors, the issue is not relevant – Decided against revenue.
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2014 (12) TMI 64
Expenses treated as pre-operative expenses and disallowed - Business of assessee set up or not – Held that:- CIT(A) rightly deleted the Disallowance after observing that the business of the assessee had been set up and the expenditure incurred was business expenditure - the assessee had explained and asserted that the business of the assessee had in fact commenced because they had started oil exploration operations - it is not a case where the business had merely been set up, but a case where the actual operations had commenced - oil exploration itself was one of the business activities undertaken by the assessee - oil production would be the second stage of business activity, but this would not undo the commercial and business activities relating to oil exploration – relying upon CIT versus Sponge Iron India Ltd. [1992 (10) TMI 67 - ANDHRA PRADESH High Court] - for commencement of business all activities which go on to make business need not be started simultaneously. As soon as an activity which is an essential activity in the course of carrying on the business is started, the business must be said to have commenced - revenue would be generated once the oil production commenced had capitalised the expenditure on oil exploration cost and the same was reflected as “capital work in progress” in the balance sheet – the assessee had themselves added back the Registrar of Companies’ filing fee and had applied/claimed the expense u/s 35D - The depreciation had also been added back by the assessee - This factual position was ignored in the assessment order, without any explanation - other expenditure was not directly relatable and having nexus with the oil exploration costs – AO had also disallowed ₹ 2,90,854/- u/s 35D of the Act being expenses relating to increase in the authorised capital - once it was held that the business had been set up or rather the business had commenced, the addition made by the AO disallowing the claim u/s 35D of the Act has to be rejected – Decided against revenue.
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2014 (12) TMI 63
Reopening of assessment u/s 147 r.w section 148 - reasons to believe – Held that:- The Tribunal was rightly of the view that the “reasons to believe” correctly records that a provision made in accounts for an accrued and known liability is an admissible deduction - the amounts shown under the head “provision” per se is not to be disallowed as unascertained expenditure - The “reasons to believe” do not state why and how the AO came to the conclusion that the provision for expenses was an unascertained liability - assessee was following the mercantile system of accounting and any liability which had been incurred was to be allowed as a deduction, even when payment was not made in the said year - the “reasons to believe” must show live link and nexus with the formation of prima facie opinion that income which should be taxed has escaped assessment - In the absence of any cogent and relevant material or information to show that the amount shown under the head provision included unascertained liability, re-assessment proceedings could not have been initiated - There is a difference between “reasons to believe” and “reasons to suspect”. It was the responsibility of the Revenue to bring on record documents and material to show and establish that the “provisions” related to unascertained liability and the AO while forming his opinion and recording “reasons to believe” was in knowledge or aware of information or material to show that what was shown under the head “provision” was not a certain and accrued liability - in the absence of any material or information, “reasons to believe” it has to be held were not relevant and meet the test of satisfaction required to sustain the reopening - use of the heading or word “provision” in the balance sheet it is apparent became the material or information to reopen - the word/expression “provision” by itself and alone without other information/material, would not reflect and indicate unascertained liability - the assumption drawn by the AO in the “reasons to believe” is farfetched, vague and a mere pretence - “unascertained liability” had been claimed and allowed as expenditure – Decided against revenue.
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2014 (12) TMI 62
Admission of additional evidence u/s 46A – Direction made to AO to re-compute the additional tax – Opportunity of being heard provided or not - The AO acting on assessee’s letter dated 10.08.1995 rectified the order u/s 143(1)(a) by reducing the disallowance u/s 43B to the extent of ₹ 61,04,000 - Held that:- The Tribunal was rightly of the view that the AO made addition u/s 143(1) (a) in respect of accrued interest on term loans from financial institutions, which were debited to profit and loss account, but were not paid to said financial institutions - there is no question of entertaining any new evidence as same was already on the record of AO - assessee had duly intimated the AO about the wrong statement in original return of income before the intimation u/s 143(1)(a) was passed and had also furnished the revised computation of income with a request to treat the original return, revised to that extent - the assessee had intimated the AO about the wrong statement given by him at the time of filing of the return of income, but the same was not considered by the AO – the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 61
Addition for purchasing gas deleted - Whether the Tribunal has substantially erred in law in deleting the addition made in respect of liability for purchasing gas from ONGC – Held that:-Following the decision in COMMISSIONER OF INCOME TAX Versus MAHENDRA MILLS LIMITED [2009 (7) TMI 87 - GUJARAT HIGH COURT] - the assessee has been following mercantile method of accounting - the Gas was supplied for the respective years - uncertainty and difficulty or the pendency of litigation relating to estimation or the pendency of litigation relating to estimation of the purchase price or fixing of purchase price would not convert the accrued liability into a contingent liability and since there remained no uncertainty or difficulty in estimation of the amount of such liability which had accrued in the respective assessment years of supply of Gas, the deduction would be allowable for the respective years - since liability of assessee was contractual which came to be crystallized by virtue of decision of Supreme Court by fixing price of gas supplied by ONGC, in such a situation the conclusion of the Tribunal that deduction in respect of purchase price was to be allowed in respective years when supply of gas was received on basis of price which had been finally determined by Supreme Court is justified – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 60
Refusal to admission of additional ground – Held that:- In National Thermal Power Company Limited Versus Commissioner of Income-Tax [1996 (12) TMI 7 - SUPREME Court] it has been held that u/s 254 of the Income Tax Act, 1961, the Tribunal after giving an opportunity of being heard to both parties, pass such orders as it thinks fit – also in Jute Corporation of India Ltd. V/s. CIT [1990 (9) TMI 6 - SUPREME Court] it has been held that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions - In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter - There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the Assessee in seeking modification of the order of assessment passed by the Income Tax Officer – there is no reason as to why the Tribunal could have disallowed the assessee from raising this ground – the approach of the Tribunal is contrary to the express language of the statute the Tribunal's order cannot be sustained in law – thus, the order of the Tribunal is set aside and the matter is remitted back to the Tribunal – Decided in favour of assessee.
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2014 (12) TMI 59
Computation of deduction u/s 80-I - Service charges to be included in profits of industrial undertaking or not - Held that:- Assessee is entitled to claim deduction u/s 80-I of the Act - assessee had shared a common office with M/s. Interarch - The Tribunal has rightly and correctly recorded that the AO was bound to determine the profits of the industrial undertaking and while computing the profit, the receipts of the industrial undertaking and the expenditure incurred for carrying out the business of the industrial undertaking have to be taken into consideration - only the expenditure relating to the industrial undertaking would be deducted - The expenditure incurred by the assessee would not be included in the expenditure incurred for the business of M/s. Interarch and was reimbursed to the assessee – the order of the tribunal is upheld – Decided against revenue.
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2014 (12) TMI 58
Applicability of Chapter X - Issue of equity shares to AE – Conversion of preference shares into equity shares held by AE – Held that:- Following the decision in Vodafone India Services Pvt. Ltd. Versus Union of India, Addl. Commissioner of Income Tax, Dy. Commmissioner of Income Tax [2014 (10) TMI 278 - BOMBAY HIGH COURT] - there is a short fall in the amounts received on issue of equity shares and conversion of Preference shares into equity shares when benchmarked against the Arm’s Length Price (ALP) to be received on issue and conversion - This short fall is characterized as income arising from International Transactions and is being subjected to tax for Assessment Year 2010-11 – The issue of shares at a premium does not exhaust the universe of applicability of Chapter X of the Act - There are transactions which would otherwise qualify to be covered by the definition of International Transaction - the order of the Tribunal is upheld – Decided against assessee.
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2014 (12) TMI 57
Validity of order passed u/s 153C/143(3) – Bar of limitation - Held that:- The AO must be prima facie satisfied that the documents etc. belong to the other person than the person searched - such satisfaction has been stated to have been recorded and there is nothing to doubt that the action of the AO in this respect as is being made out by the appellant - while search has taken place in the group case in October 2008 but the documents are deemed to be handed over to the AO of the appellant on 05th July 2010, the date on which the notice u/s 153C has been issued - the issue of handing over, and taking over the seized material is obviated, The plea taken regarding the date of search and subsequent date of handing over of seized material is also obviated as both the sides are manned by the same AO - DSL Properties (P.) Ltd. Versus Deputy Commissioner of Income-tax, Central Circle - 8 [2013 (9) TMI 123 - ITAT DELHI] it has been held that even if the AO of the persons searched and the AO of the such other person other than searched is the same, then the AO has to first record the satisfaction in the file of the person searched, thereafter, such note along with the seized document/books of accounts is to be placed in the file of such other person and in absence of such exercise, initiation of proceedings u/s 153C of the Act itself are invalid. U/s 153C of the Act for transferring the material or evidence collected during course of search to the AO of assessee other than the person searched, what is required is that the money, bullion, jewellery or other valuable article or thing or books of accounts or documents seized in the course of search of an assessee belonged to or related to a person other than the person searched - unlike section 158BD of the Act for transferring a file u/s 153C of the Act, there is no need to examine whether the material, documents, books of accounts or other evidence seized during the course of search of an assessee represents or disclosed undisclosed income of another assessee. Since satisfaction was recorded on 5.7.2010 and notice u/s 153C was issued on 6.7.2010, the only conclusion that can be drawn is that the AO of such other person other than searched has taken over the possession of the seized document on 5.7.2010 - the AO has issued notice u/s 153C of the Act dated 5.7.2010 for AY 2003-04 and 2004-05 on 6.7.2010 which is clearly barred by limitation - Therefore, the issue of notice u/s 153C of the Act by the revenue cannot be sustained because it is legally not valid as the conditions laid down for valid assumption of jurisdiction u/s 153C of the Act have not been fulfilled and the same is barred by limitation for AY 2003-04 and 2004-05 – thus, the notice issued u/s 153C of the Act is set aside and the assessment completed in pursuance to such notice are also quashed for AY 2003-04 and 2004-05 as the same are barred by limitation and also not initiated properly without having valid assumption of jurisdiction as required u/s 153C of the Act – Decided in favour of assessee. Unexplained purchases u/s 69C – Held that:- The assessee produced complete books of accounts before the AO and the same were examined during the course of assessment proceedings and no defect, infirmity or ambiguity was found or pointed out by the AO - the revenue has not disputed the point that no adverse remark has been made in the sales tax assessment order with regard to the purchases mentioned by the assessee - when opening stock of the assessee in the beginning of the year and the sales also stood accepted, then there is no cause for not accepting the amount of purchases - the AO made addition on wrong premises which was rightly corrected by the CIT(A) deleting the additions – Decided against revenue. Entire sales represented as income from undisclosed sources or not – Held that:- When a major part of the sales were made against the opening stock and the purchases made during the year, then the sales is nothing but the conversion of stock into liquidity and that too when the profit earned from this purchase and sales activities has been already offered to tax, then it cannot be inferred that the sale proceeds represent income from undisclosed sales of the assessee – CIT(A) rightly deleted the additions – Decided against revenue. 100% of expenditure and depreciation disallowed – Held that:- The CIT(A) has granted relief for the assessee by relying on the books of accounts which were duly audited and there was no negative comment in the audit report – revenue has not disputed the fact that the audited books of accounts were examined by the AO and no defect or deficiency was found by the AO - lump sum disallowance of expenses is not sustainable and the CIT(A) rightly deleted the addition and directing the AO to allow the depreciation for the assessee as per provisions of the Act and Income Tax Rules 1962 – Decided against revenue. Statements of various persons without confronted to the assessee have evidentiary value or not – Held that:- CIT(A) rightly held that Sh. Darshan Singh and Sh. D. Bhattacharya, whose statement is being relied upon do not appear to have any connection with the appellant co. which has been established by the AO – the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 56
Transfer of capital asset u/s 2(47) or u/s 45(3) – Addition under STCG – Held that:- The order of the CIT(A) on the issue of taxing capital gains are to be upheld - the property under consideration need not be immovable property - assessee is having certain rights and the bundle of rights are transferred - Even though assessee relied on provisions of section 2(47)(vi) of the I.T. Act, the provision is very clear that any transaction which has the effect of transferring or enabling the enjoyment of any immovable property is covered by the definition of ‘transfer’ even though assessee has argued that there is no immovable property, what the provision entitles is that of a transaction which has the effect of transferring or enabling the enjoyment of any immovable property - The argument that assessee has no transferable right and the agreement with KIADB does not give rise to any transferable rights is not correct in the sense that assessee is enjoying the property by virtue of allotment letter granted by the Industrial Area Development Board on 10.01.2001 and assessee by way of consortium agreement passed on the bundle of rights to the consortium - assessee has permitted mortgage of the said property by way of equitable mortgage in favour of ING Vysya Bank Ltd., to an extent of ₹ 36 crores for advance made to Dynasty Developers P. Ltd. - it cannot be stated that assessee has no right on the property when it admits and enters into agreement and even permits the Bank for an equitable mortgage of the property - all the contentions raised by assessee that it does not hold any capital asset, there are no transferable rights under the Transfer of Property Act and not transferred without registered document cannot be accepted. The extended definition as contained in section 2(47) even when a sale exchange or relinquishment or extinguishment of any right under a transaction, assessee is to be in possession of any immovable property or retained the same in part, performance of contract under section 53A of the Transfer of Property Act, it amounts to transfer - since assessee has given all rights in immovable property of which, consortium has taken approvals and constructed buildings, the contention that there is no capital asset no transfer cannot be accepted. Whether the capital gains arising in the transaction is that of short capital gain or long term capital gain – Held that:- The gain has to be considered as long term capital gain - assessee was allotted the property on 10.01.2001 - Even though the lease deed was registered on 02.09.2003, assessee has held it for more than three years by the time he has entered into an agreement on 10.12.2004 – Following the decision in Commissioner of Income-tax Versus A. Suresh Rao [2014 (1) TMI 1585 - KARNATAKA HIGH COURT] and Circular No. 471 and 474 of CBDT - there is no dishonest or improper motive on the part of the assessee in claiming exemption - when capital gain is accrued in him instead of paying tax to the Government, he has invested the money in the aforesaid manner, which gives him the benefit of exemption from payment of capital gains - the capital asset has to be considered as long term asset and capital gains thereon has to be assessed only under the head “Long Term Capital Gains” and A.O. is directed to modify the computation accordingly – Decided partly in favour of assessee.
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2014 (12) TMI 55
Expenses towards exempted dividend disallowed u/s 14A r.w. Rule 8D – Held that:- The assessee has earned dividend income of ₹ 70,14,015/- from mutual funds held by it and claimed the income as exempt u/s.10(34) of the I.T. Act - the AO applying the provisions u/s.14A r.w. Rule 8D disallowed an amount which has been upheld by the CIT(A) - no borrowed fund has been utilised towards investment in mutual funds, the income of which has been claimed as exempt – relying upon M/s. Ferrocare Machines Pvt. Ltd. Vs. JCIT [2014 (12) TMI 27 - ITAT PUNE] - it is imperative that the AO can invoke Rule 8D only when he records satisfaction in regard to the correctness of the claim of the assessee, having regard to the accounts of the assessee - The condition precedent for the AO entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the AO must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure - it is all the more necessary that AO has to examine the accounts of assessee first and then if he is not satisfied with the correctness of the claim, only he can invoke Rule 8D - No such examination was made or satisfaction was recorded by AO - the AO has not considered the claim of the assessee at all and he has straightway embarked upon computing disallowance under Rule 8D - Disallowance u/s 14A required finding of incurring of expenditure and where it was found that for earning exempted income no expenditure had been incurred, disallowance u/s 14A could not stand. Since assessee has not directly spent any expenditure for earning the exempt income and also since AO has not recorded any satisfaction with reference to the accounts of assessee or claim that no expenditure was incurred and also keeping in mind the fact that assessee has offered most of the income under the Tonnage Tax Scheme and balance of the expenditure was for earning taxable non-tonnage tax income, invocation of Rule 8D for disallowing the expenditure u/s 14A on estimation/ presumptive basis does not arise – thus, the order of the CIT(A) is set aside and the AO is directed to delete the disallowance – Decided in favour of assessee. Professional fees disallowed u/s 40(a)(ia) – TDS not deposited within time – Held that:- The assessee has paid the TDS on 07-04-2008, a fact brought on record by the AO – in Commissioner of Income Tax XIII Versus Naresh Kumar, M/s Talbros (P) Ltd. [2013 (9) TMI 275 - DELHI HIGH COURT] - section 40(a)(ia) to extent of 2010 amendment was procedural as same did not impose a new tax but wanted to ensure collection of TDS and amendments made had streamlined and corrected anomalies noticed in said procedure by allowing deduction in year when expenditure was incurred provided TDS was paid before due date for filing of return - section 40(a)(ia) should be interpreted liberally and equitable keeping in mind object and purpose behind same, so that assessee should not suffer unintended and deleterious consequences - amendment made in section 40(a)(ia) by Finance Act, 2010 giving relaxation applies retrospectively to earlier years – the order of the CIT(A) is upheld - Decided in favour of assessee. Contract payments disallowed u/s 40(a)(ia) – TDS not deposited within time on bills approved and booked – Held that:- The assessee has deposited the TDS on 07-04-2008, a fact brought on record by the AO - Since the assessee had deposited the TDS in the month of April 2008, therefore, no disallowance u/s.40(a)(ia) is called for – thus, the order of the CIT(A) is set aside – decided in favour of assessee.
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2014 (12) TMI 54
Assumption of jurisdiction by the AO before issuing notice u/s 153C - Validity of order passed u/s 153C/143(3) – Search and seizure u/s 132 – Held that:- There was nothing wrong in the satisfaction note and the forwarding of the entire matter by the Income Tax Officer, Ward-Ill (2), Ahmedabad to the AO of the petitioner at Bareilly - all the requirements of Section 153(c) were complied with by the Income Tax Officer, Ward-Ill (2), Ahmedabad - a search u/s 132A was carried out and bullion was seized - assessee established that the seized silver belongs to M/s Sarvesh Jewellers, Bareilly - the ownership and consignment of the petitioner was also confirmed by the AO of the petitioner at Bareilly - The Income Tax Officer, Ward-Ill (2), Ahmedabad did not commit any error in law, in recording the satisfaction note requesting the petitioner’s Assessing officer to proceed under Section 153(c) - the officer u/s 153C, where he find that seized articles belong to some other person, has to forward a satisfaction note to the AO on such person - The satisfaction in such case is in respect of the material and disclosures of the person with which the articles or assets are found and not in respect of the person who whom they belong. In DSL Properties Pvt. Ltd. Vs. DCIT [2013 (9) TMI 123 - ITAT DELHI] it has been held that if the AO is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched - Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person - the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred – there was no mention of any valuable articles or things or any books of account or documents have been referred even in the assessment order for framing assessment u/s 153C - the returns were originally filed and processed and no additional material is found pertaining to the assessee which it is held to be belonging to the assessee, the AO does not assume jurisdiction for framing assessment u/s. 153C read with section 153A - The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and the issuance of notice itself is null and void and is set aside – Decided in favour of assessee.
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2014 (12) TMI 53
Validity of reassessment proceedings u/s 148 – Any new tangible material came to the notice of the AO or not - Held that:- Existence of new tangible material with the AO is a condition precedent to formulate a belief that certain income chargeable to tax has escaped assessment within the meaning of section 147 of the Act - it is to be appreciated that absence of fresh tangible material would not enable the AO to entertain a belief that certain income chargeable to tax has escaped assessment within the meaning of section 147 of the Act - If the AO forms a belief that certain income chargeable to tax has escaped assessment on the basis of the material already available at the time of original assessment proceedings, it would not be a valid reopening of assessment u/s 147/148 of the Act - the AO was made aware of the intention and purpose for which the assessee was making investment in shares and securities - the existence of the transactions of long term and short term capital gain and dividend earnings was noted by the AO - the reasons recorded thereof to invoke section 147 of the Act do not show any fresh material which came to the notice of the AO so as to enable him to formulate a belief that income chargeable to tax has escaped assessment on the ground that income from short term capital gain was to be assessed as ‘business income’. On the issue of treating the short term capital gain as business income, the initiation of proceedings by the AO u/s 147 of the Act is based on material already available at the time of original assessment proceedings and no new tangible material come to his notice – following the decision in COMMISSIONER OF INCOME TAX. CENTRAL –I Versus SHRI AMITABH BACHCHAN [2012 (7) TMI 374 - BOMBAY HIGH COURT], such an initiation of re-assessment proceedings u/s 147 of the Act is invalid. The assessee is a company engaged in the business of manufacturing of engineering goods and fabrication as well as generation of electricity by windmill - As far as the application of section 32(1)(iia) of the Act relating to additional depreciation is concerned, what is required to be satisfied is acquisition and installation of a new machinery or plant after the 31st day of March, 2005 by an assessee who is already engaged in the business of manufacture or production of any article or thing - as per the AO, income has escaped assessment on account of allowance of additional depreciation on windmill because windmill is not “related to business of manufacture or production of any article or thing” - it does not state that setting up of a new machinery or plant should have any operational connectivity to the article or thing that was already being manufactured by the assessee - the normal depreciation on windmill in terms of section 32(1) of the Act was also allowed in the original assessment, and that has not been disturbed by the AO at the time of initiating the reassessment proceedings – there was no justification for the AO to baldly formulate a belief which is not even in consonance with the phraseology of the relevant provision or any other judicial pronouncement to say that additional depreciation u/s 32(1)(iia) of the Act on windmill is not allowable – thus, the initiation of proceedings by the AO by issuance of notice u/s 147/148 of the Act suffer from legal infirmities and is to be set aside – Decided in favour of assessee.
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2014 (12) TMI 52
Addition of unaccounted jewellery – excess value of jewellery treated as unexplained investment - Held that:- Following the decision in ACIT, CC-4, Hyderabad Versus Sri Krishna Kumar And Other [2014 (12) TMI 67 - ITAT HYDERABAD] it has been held that the AO on the basis of the jewellery declared in the wealth-tax return filed by the assessee - before the CIT (A) it was contended by the assessee that the AO has not taken into consideration the jewellery declared by Sri Krishna Kumar HUF in the wealth-tax return declared in the wealth tax return which was included in the valuation made by the valuer - it is seen from the assessment order that so far as value of jewellery stated to have been declared in the wealth-tax return of Sri Krishna Kumar HUF does not appear in the assessment order wherein the AO has considered the jewellery declared in the case of the assessee and other family members - It is not known whether this fact was brought to the notice of the AO by the assessee - CIT (A) before accepting the contention of the assessee should have given an opportunity to the AO to put forth his opinion on the issue - This is because of the fact, as it appears from the assessment order, the assessee has not submitted the basis for valuation of gold jewellery, stones, diamonds etc. – thus, the matter is to be remitted back to the AO for fresh adjudication in accordance with law after affording a reasonable opportunity of being heard to the assessee – Decided in favour of assessee.
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2014 (12) TMI 51
Validity of reopening u/s 147 r.w. section 148 – Non-application of mind by AO - lack of tangible material/reasonable cause and justification - Held that:- In SARTHAK SECURITIES CO. PVT. LTD. Versus INCOME TAX OFFICER-WARD 7(3) [2010 (10) TMI 92 - DELHI HIGH COURT] it has been rightly held that the only information received by the AO was that M/s Aayushi Stock Brokers (P) Limited is found to be providing accommodation entries in the form of bogus share transactions, bogus share capital etc. - the detail given is only with regard to name of the bank, ledger account number and amount - even the nature of transactions is not given, much less to establish that the above transactions are in the nature of accommodation entries - the assessee has only sold the shares through M/s Aayushi Stock Brokers (P) Limited and the sale proceed has duly been considered while computing the income of the assessee for the assessment year - the notice issued u/s 148 was not valid and is to be set aside – Decided in favour of assessee.
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2014 (12) TMI 50
Selection of comparables – Exensys Software Solutions – Extraordinary event - Held that:- Following the decision in Invensys Development Centre (India) Pvt. Ltd. Versus The Addl. CIT, Hyderabad [2014 (3) TMI 171 - ITAT HYDERABAD] - There is merger of Holool Ltd. as a result of which the company’s income for the year under consideration was ₹ 737.79 lakhs - there is a clear mention that the company’s income is possible with the amalgamqation of Holool India Ltd. - Assessee company has got benefit by advanced latest technical expertise on various technology domains of the transferor company - claim was with reference to the AS-14 and also due to amalgamation of two companies - Not only in the correspondence with the TPO that Assessee expressed its inability to furnish separate accounts for two amalgamated companies but also further it has clearly mentioned to the TPO that there is a gap in the expenditure expected to incur and actual expenditure incurred which made the company record high operating margin on cost - there is an extra-ordinary event which resulted in high operating margin of that company – thus, the AO is directed to exclude the company from the list of comparables. Thirdware Solutions Ltd. – software development business - Held that:- Following the decision in Intoto Software India (P.) Ltd. Versus Assistant Commissioner of Income-tax, Circle -2(1), Hyderabad [2013 (10) TMI 599 - ITAT HYDERABAD] - there are software products that the company invoiced during the FY and the financial results are in respect of services only but still it held that though there is no sale of software products during the year but the company might have incurred expenditure towards development of software products - the AO/TPO is directed to exclude the company from the list of comparables. Bodhtree Consulting Ltd. –Related party transaction - Held that:- Related party transaction as a percentage to the total revenue is 34.68% which is more than the accept/reject matrix of more than 25% fixed by the TPO - in final filters adopted by the TPO he himself has excluded companies having RPT of more than 25% - the matter is remitted back to the AO/TPO to examine this aspect and exclude it from the list of comparables. Tata Elxsi Ltd. – Held that:- The company itself acknowledges that it is a specialized embedded software development service provider, hence, cannot be compared with any other software development company - The company also informed, because of specialization and diverse nature of its business, it is very difficult to scale up its operations - this company not to be a comparable to a pure software development service provider like the present assessee – the AO/TPO is directed to exclude it from list of comparables – Decided partly in favour of assessee.
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2014 (12) TMI 49
Allowability of deduction u/s 80IB(10) – Undisclosed income on extra work done for addition amenities/internal alterations – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that, since the surrender of additional income was made in other cases and the issues of joining the flats to make them bigger flats exceeding 1000 sq. ft. were the subject matter of other assessees and other years of the assessee, the details were called for – thus, the assessee is eligible for the claim of deduction u/s 80IB(10). Whether there was a retraction of the statement given by the managing partner to not to include the amount of ₹ 95,00,000/- in the amount qualifying for deduction u/s 80IB(10) – Held that:- The CIT(A) has concluded that the AO has not brought any new facts for the year under consideration - The facts that emerged at the time of survey u/s 133A. Whether the source of ₹ 95,00,000/- is the business of the assessee or something else – Held that:- It is a settled line of adjudication that any claim for deduction under Income Tax Act are dependent upon the conditions laid down under the provisions of the Act and there are requisite formalities which are required to be done as per the law - once these conditions are fulfilled, the assessee is entitled for statutory deduction or claim to which he is entitled to - Mere consent or acquiescence by the assessee cannot take away the otherwise a legitimate claim to which he is entitled to - an admission or acquiescence cannot be a foundation for assessment where the income is returned under erroneous impression or misconception of law - even though the assessee had surrendered its claim before the AO – relying upon CIT vs Sheth Developers (P) Ltd. [2012 (8) TMI 159 - BOMBAY HIGH COURT] - the assessee surrendered the income, whose only source, was the business of the assessee - the claim of the assessee to include ₹ 95,00,000/- in the computation of deduction u/s 80IB(10) is in accordance with law and must be allowed. Whether the statement given oath u/s 133A is binding and cannot be retracted – Held that:- Statement given u/s 133A is not on oath - the statement made by the managing partner to not to include the amount of ₹ 95,00,000/- in the claim of deduction would have no relevance, first on the fact that the statement was made u/s 133A - even if the statement was recorded on oath, the assessee has prerogative to change his/its stand, after taking into consideration the facts that emerge from the papers seized or impounded - the disclosure is off shoot of survey carried out on 11/10/2005 on the same group – Decided against revenue.
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2014 (12) TMI 48
Penalty u/s 271(1)(c) deleted - Whether the assessee has filed inaccurate particulars of income - Held that:- The assessee is engaged in the share transactions - except change of the head, there is no addition of single penny - CIT(A) was of the opinion that mere change of head cannot be said to filing of the inaccurate particulars of income – in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - it must be shown that the conditions u/s 271(1)(c) must exist before the penalty is imposed - everything would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income - there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false - Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act - a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars – the AO was not justified at all for levying the penalty merely because he is having different opinion on the plea of the assessee in respect of the head under which the income is to be assessed - merely because the legal claim made by the assessee is rejected by the AO that will not attract the penalty - CIT(A) has rightly deleted the penalty and no interference is called for – the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 47
Validity of assessment of penalty proceedings - Additional ground adjudicated or not - whether during the subsistence of the assessment order, it is open to the assessee to challenge the validity of assessment in the penalty proceedings – Held that:- The penalty is assailed by the assessee on the ground that assessment order passed in the case of assessee was time barred and, therefore, was void-ab-initio and for that reason penalty cannot be levied - assessee has not challenged the assessment order by way of filing any appeal against that order – relying upon S.S.Ratanchand Bholenath vs. CIT [1994 (4) TMI 65 - MADHYA PRADESH High Court ] - parties cannot seek to re-open an assessment order which has become final in the penalty proceedings – thus, assessment order having not been challenged in an appeal or in other proceedings, it cannot be said to be a void order in a collateral proceedings – Decided against assessee. Effect of Explanation 7 to section 271(1) – Held that:- The explanation raises presumption that in a case where addition has been made as per TP provisions then the same will be deemed to represent the income in respect of which particulars have been concealed or inaccurate particulars have been furnished, unless the assessee proves to the satisfaction of the AO that the price charged or paid in such transaction was computed in accordance with the provisions contained in section 92C of the Act and in the manner prescribed under that section, in good faith and with due diligence - Thus, the exception to the deemed concealment is the satisfaction of AO regarding international transaction that the same is computed in accordance with the TP provisions in good faith with due diligence - it cannot be said that the computation made by the assessee was not in good faith and not with due diligence - on the date of filing the return for the year under consideration the assessee was having benefit of orders passed by TPO in respect of AYs 2002-03, 2003-04 and 2004-05 - Thus, it cannot be said that the assessee’s action was not in good faith or it was not with due diligence - even applying the provisions of Explanation-7 to section 271(1)(c) of the Act, it cannot be said that levy of concealment penalty warranted – thus, the order of the CIT(A) for deleting the penalty is upheld – Decided against revenue.
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Customs
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2014 (12) TMI 70
Denial of refund claim - Unjust enrichment - Held that:- respondent has shown the sum of ₹ 340.59 lakhs to be recoverable from the department in their balance sheet and they have obtained certificate of the Chartered Accountant to the effect also. There is no provision in law to show specifically the amount in dispute before me to be shown separately as recoverable in the balance sheet. Therefore, I hold that the appeal filed by the revenue is on frivolous ground - Decided against Revenue.
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2014 (12) TMI 69
Demand of differential duty - the appellants had not taken into consideration amount on account of dismantling, packing and stuffing - Imposition of penalty - Held that:- In view of the permission by the Asstt. Development Commissioner, the value of the goods is within the permitted limit. Hence, we find that there is no case for imposition of penalties. The penalties imposed under the impugned order are set aside and the appeals are allowed - Decided against assessee.
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2014 (12) TMI 68
Denial of refund claim - Unjust enrichment - Held that:- admittedly, the appellant has not paid any duty at the time of importation of the goods. They have made a security deposit under project import scheme. It is not disputed that the said amount is not refundable to the appellant. Only dispute in these circumstances is whether bar of unjust enrichment is applicable or not. The appellant has produced a certificate from the Chartered Accountant and shown as receivables in the balance sheet, therefore, the bar of unjust enrichment is not applicable for security deposit. Further, I find that in the case of IDMC Ltd. vs. CC [2013 (2) TMI 257 - CESTAT MUMBAI], this Tribunal has held that in the case of cash securities deposit, the bar of unjust enrichment is not applicable - Decided in favour of assessee.
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Service Tax
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2014 (12) TMI 87
Club and Association Service - Business Exhibition Service - Penalty u/s 77 & 78 - Following decision of Federation of Indian Chambers of Commerce and Industry vs. CST [2014 (5) TMI 183 - CESTAT NEW DELHI], Sports Club of Gujarat Ltd. vs. Union of India [2013 (7) TMI 510 - GUJARAT HIGH COURT] and Ranchi Club Ltd. vs. CCE & ST, Ranchi Zone [2012 (6) TMI 636 - Jharkhand High Court] - service tax demand in respect of Club and Association Service alongwith penalty of equivalent amount under Section 78 is not sustainable and is set aside. Levy of penalty in respect of Business Exhibition Service - Held that:- Since the appellant had paid the service tax of ₹ 2,12,011/- in respect of Business Exhibition Service even before the adjudication alongwith interest and since no option had been given in the adjudication order in terms of proviso to Section 78 of the Finance Act, 1994 to pay lower penalty by paying the same within a period of 30 days from the date of communication of order, in accordance with the judgment of Hon’ble Delhi High Court in the case of K.P. Pouches (P) Ltd. vs. Union of India (supra), the benefit of lower penalty in terms of proviso to Section 78 cannot be denied and accordingly the penalty under Section 78 is reduced to 25% of the service tax demand upheld - Penalty u/s 77 is reduced to ₹ 1000 - Decided partly in favour of assessee.
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2014 (12) TMI 86
Goods Transport Agency Service - Bar of limitation - Whether or not demand issued on 18.5.2005 for the period December 1997 to May 1998 in the case of GTA Services is within the period of limitation when read with Section 73 of Finance Act, 1994, Section 68 (1) and section 71A of the Finance Act, 1994 - Held that:- As per Hon'ble High Court of Gujarat decision in the case of CCE & Cus, Vadodara-1 vs. Eimco Elecon Limited (2010 (7) TMI 477 - GUJARAT HIGH COURT) on the same issue, the show cause notice dated 11.11.2004 for the period 16.7.1997 to 02.6.1998 was considered to be time barred. It is observed that Hon'ble High Court of Gujarat has passed the observation while holding that no short levy can be demanded from the Respondent in that case even after the retrospective amendment was brought into operation by the Revenue as per amendments carried out in Section 68(1) and Section 73 and addition of Section 71A of the Finance Act, 1994. - Decided in favour of assessee.
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2014 (12) TMI 85
Denial of refund claim - SEZ unit - Refund filed under Notification No. 41/2012-ST dated 29.06.2012 and notification no.52/2011-ST dated 31.12.2011 instead of Notification No.40/2012-ST dated 20.06.2012 - Held that:- Appellant have filed the refund claim under Notification no.41/2012-ST dated 29.06.2012/52/2012-ST dated 31.12.2011, the applicable notification is Notification no.40/2012-ST dated 20.06.2012, which is applicable in respect of the SEZ units and which provides for refund of the service tax paid on the services received by a SEZ unit or SEZ developer for use in or in relation to the authorized operations. Just because the appellant have mentioned the wrong exemption notification in their refund claim, the same cannot be rejected and as such, their refund claim must be considered in terms of the Notification no.40/2012-ST. The notification no.40/2012-ST is subject to certain conditions and according to the department, these conditions have not been fulfilled and that a letter dated 23.04.2013 mentioning the deficiencies had been issued to the appellant, but there was no response from the appellant. The appellant’s plea is that this letter was never received by them - Therefore, matter remanded back - Decided in favour of assessee.
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2014 (12) TMI 84
Waiver of pre deposit - Banking and Financial Service and Business Auxiliary Service - Dishonour of cheque - Penalty u/s 76 & 78 - Interest u/s 75 - Tribunal asked for pre deposit of 1 crore - Financial hardship - Held that:- As regards the financial hardship pleaded by the assessee, the affidavit filed before the Tribunal, really points out that the assessee had a huge loss of nearly ₹ 200 crores. In the circumstances, placing reliance on the balance sheet entries, the assessee sought for total dispensation of the pre-deposit. As far as this aspect is concerned, the Tribunal has exercised its discretion on this and considered the financial hardship. We do not find any justifiable ground to substitute our view on this. However, on the reference to Rule 5 before the Delhi High Court is concerned, which the Tribunal will consider in the dispute raised by the assessee, as against the order directing the assessee to deposit a sum of ₹ 1 crore, interest of justice would be met by directing the assessee to deposit a sum of ₹ 50 lakhs within a period of six weeks from today. We make it clear that the reference to the Delhi High Court [2012 (12) TMI 150 - DELHI HIGH COURT] would not stand in the way of the Tribunal considering the case of the assessee on merits. - Decided partly in favour of assessee.
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2014 (12) TMI 83
Waiver of pre-deposit - disallowance of Cenvat credit - various input services for construction of the airport and the passenger terminal building - Held that:- Contention of the petitioner that the demand made by the 2nd respondent by the Order-in-Original, dated 29-1-2010 is barred under Section 11A of the Act is the question which requires consideration in the main appeal pending before the Appellate Tribunal and therefore no finding as such can be recorded at this stage. So far as the waiver of pre-deposit as provided under the first proviso to Section 35F of the Act is concerned, it is the discretion that has to be exercised by the Appellate Tribunal subject to such conditions as it may deem fit to impose, so as to safeguard the interests of the revenue. Satisfaction of the Appellate Tribunal that the deposit of duty demanded would cause undue hardship to the appellant is the condition precedent for exercising the discretion so conferred under the first proviso to Section 35F of the Act. Demand stands reduced to ₹ 24,40,75,164/- after appropriating and adjusting the amounts reversed by the petitioner, we consider it appropriate to modify the condition imposed in the impugned order, dated 8-7-2013 and direct the petitioner to deposit 50% of demand - Partial stay granted.
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2014 (12) TMI 82
Waiver of pre deposit - Outdoor catering service - Held that:- Adjudicating authority whose order is in appeal before the Tribunal has not considered the appellant’s evidence in support of its claim that they are entitled to the benefit of Notification No. 12/2003-S.T., dated 20 June, 2003. The adjudicating authority was prima facie incorrect in law in holding that where outdoor catering service is provided no question of exemption in respect of food sold is available. Notification No. 12/2003-S.T., dated 20 June, 2003 does not exclude outdoor catering services from its purview. The Tribunal also in the impugned order does not consider the above aspect, after recording the same. Moreover the decision of the Tribunal in the matter of Rajeev Kumar Gupta (2009 (3) TMI 122 - CESTAT, NEW DELHI) prima facie seems to apply. Therefore, in the facts and circumstances of the case we are of the view that interest of justice would be served if the appellant is directed to make a pre-deposit the amount of ₹ 25 lakhs as against ₹ 50 lakhs ordered by the tribunal - stay order modified.
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2014 (12) TMI 81
Challenge to the inquiry notice / summon notice - Legality of order of the order passed by the ld. single judge bench dismissing the writ petition [2013 (8) TMI 749 - CALCUTTA HIGH COURT] - appellant subjected to exhaustive scrutiny with regard to its tax liability by the respondent as well as by CERA associated with the office of the Comptroller and Auditor General - Held that:- In the instant case, the subject matter of challenge are impugned summons issued by the authority from Kochi in the State of Kerala. Impugned summons have been received in Kolkata by the appellant company. Such fact is an incidental one and does not constitute an integral part of cause of action so as to vest jurisdiction in this Court. It has been pleaded that the appellant-company had been subjected to alleged similar enquiries at the behest of respondent No. 3 and other authorities in Kolkata, we are of the considered view that in the factual matrix of the instant case as impugned summons had been issued by respondent No. 1 authority from Kochi and the appellant-company is required to respond to the same at Kochi also, the principle of forum conveniens, as aforesaid, would dissuade the Court from exercising its discretionary writ jurisdiction - Decided against assesee.
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Central Excise
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2014 (12) TMI 80
Waiver of pre-deposit of duty - CENVAT Credit - capital goods - MS Angles, Channels, Joists, Chassis, Plates, HR Steet, Round, Beams, TMT Bars etc - penalty imposed under Rule 15(2) read with Section 11AC - Held that:- In the show cause notice, it has been alleged that since these items are classified under Chapter No.72 of CETA, 1985, hence, they are not eligible to avail the CENVAT Credit on the same as these item do not fall under the scope of the definition of capital goods. However, taking into consideration the reply filed by the Applicant, in the impugned Order, the ld. Commissioner observed that these items were not used in or in relation to the fabrication of the capital goods, but used as structures. We find from the impugned Order that the ld. Commissioner s finding is not supported by any verification on the claim of the Appellant advanced in their reply to the Notice regarding its use in the fabrication of capital goods. Both sides agree that in similar cases of other units of the Appellant, necessary verifications were carried out by the field formation, and consequently, on the basis of such verification, findings were recorded. However, we find that in the present case, the Department had not verified the claim of the Appellant - Matter remanded back - Decided in favour of assessee.
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2014 (12) TMI 79
SSI Exemption - Clubbing of turnover of other two units for the Central Excise taxation purpose - allegation that controlling person of all three units is only one person - dubious nature of financial statements - Held that:- Prime requirement of clubbing of clearance of two units is not having complete independent machinery and infrastructure to manufacture the goods. If both the units are complete by itself, capable of manufacturing the goods without any help from the other unit, and are independently, registered with the sales tax, industries registration, Income-Tax Registration and having separate Electricity Connection, telephone connection etc., it has to be held that they are independent units. In the present case, it is not even the Revenue’s case that all three units are working from the same premises or have any common facility. Infact we really find it strange that clearances of the unit which came into existence in 1981 are being clubbed with the clearance of two units which is admittedly came into existence in 1973 onwards. We really fail to understand and if we accept the Revenue's case, there would be no explanation as to what the unit which was working from 1973 onwards, was actually doing. M/s. Tirupati Alloy and Steel Pvt. Ltd. was independent private limited company engaged in the manufacture of final product from 1973 onwards and its clearance cannot be clubbed with subsequently incorporated limited company after of a period of 8 to 9 years. We are also informed that Mrs Neha Beri Mhase was a child when the said unit were formed and became Director of the same subsequently on the death of her father. In such a scenario, the finding of the adjudicating authority that Mrs. Neha Beri Mhase was controlling the affairs of the manufacturing units, in which case their clearance has to be clubbed cannot be appreciated and upheld. We find no merits in the Revenue’s stand - Following decision of CCE, Kanpur vs. Sharad Industries [2013 (9) TMI 213 - CESTAT NEW DELHI] - Decided in favour of assessee.
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2014 (12) TMI 78
Denial of rebate claim - Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 - imported goods have been exported ‘as such’ without undertaking any manufacturing process - Held that:- Goods in question “Styrene Monomer” exported vide ARE-1 No. 26/21-11-2007 was not manufactured by the respondent party but the same had been procured from M/s Karnataka Chemicals Industries, Bangalore, a registered dealer who imported the said goods. These goods are not inputs/raw material for the goods manufactured in the factory of respondent. So it is neither a case of export of excisable goods manufactured by respondent nor a case of clearance of inputs as such for export on reversal of equal Cenvat credit under Rule 3(5) of Cenvat Credit Rules, 2004. Since the excisable goods are not exported on payment of duty the rebate claim was rightly held inadmissible by the original authority. Goods exported are not inputs used in the manufacturing of exported goods. In this case the imported goods have been re-exported - Commissioner (Appeals) has erred in allowing rebate in this case - Decided in favour of Revenue.
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2014 (12) TMI 77
Denial of rebate claim - Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 issued under Rule 18 of the Central Excise Rules, 2002 read with Section 11B - failure to submit duplicate copy of ARE-1 from the authorized officer of the SEZ evidencing the re-warehousing/receipt of goods in the SEZ - Held that:- As per procedure, the original and duplicate copy of ARE-1 duly completed in all respects is presented to the Customs along with goods at the port of export. The Customs Officer after being satisfied about the fact that export of said goods is in accordance with law, he certifies in Part-‘C’ of both the duplicate and original copy of ARE-1 that goods are exported said shipping bill No. After the said customs certification, customs will hand over original copy to the exporter and send the duplicate copy either by post or handover to exporter in a sealed cover for submission before rebate sanctioning authority. In this case the duplicate copy has not reached the rebate sanctioning authority. But the original copies of ARE-1 is submitted. The same customs certification confirming the export of goods is available on original ARE-1. The non-submission of duplicate copy of ARE-1 being a procedural lapse cannot be a ground for denying the substantial benefit of rebate claim. However, the original authority could have made correspondence with the SEZ Customs authority to either ascertain genuineness of ARE-1 certified copy or get confirmation about receipt of said goods in SEZ. The substantial benefit of rebate claim cannot be denied for minor procedural infractions. - Matter remanded back - Decided in favour of assessee.
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2014 (12) TMI 76
Denial of refund claim - merchant overtime charges (MOT Charges) for service provided by Central Excise Officers in the form of examination and sealing of containers in exporters factory premises - Held that:- Issue does not fall in the category of cases mentioned in proviso to Section 35B(1) of the Central Excise Act, 1944 and hence revision application is filed beyond jurisdiction and not maintainable under Section 35EE of the Central Excise Act, 1944. The applicant is required to file appeal before Hon’ble CESTAT - Decided against assessee.
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2014 (12) TMI 75
Extension of stay order - power of tribunal - extension beyond the period of 180 days or 365 days in all - Held that:- in future the stay and waiver granted in the first instance will be followed for 180 days and second extension and thereafter extensions will be granted for a limited period in accordance with law as and when applications are filed after ensuring that delay in decision on the appeal is not caused by the appellant. - appellants should ensure that they file application for extension of stay within the period prescribed under the law without fail. - Once an application has been filed within the period of stay already granted, the Department should not enforce the recovery till the application for extension is decided. - if an appellant has not filed application for extension of stay even after the period of stay is over, if recovery action has not been initiated by the Revenue, the fact that application was filed beyond the period of earlier stay order, should not lead to enforcement of demand. Following decision of SURESH JAISWAL Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2014 (9) TMI 698 - CESTAT NEW DELHI] - Decided in favour of assessee.
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2014 (12) TMI 74
Recovery of refund claim allowed erroneously - Hon’ble Apex Court [2003 (2) TMI 210 - SUPREME COURT OF INDIA] allowed the Revenue’s appeals and restored the order of the Asst. Collector dated 8-6-1982 approving the classification of shells and slides under TI 17(4) - Held that:- Plainly the assessee is obliged to make restitution. The Revenue honoured the Tribunal’s order and made the refund. Upon reversal by this Court of the Tribunal’s order, the assessee was bound in law to restitute the amounts of such refund to the Revenue - If refund was granted in pursuance of the order of the Tribunal and the said order of the Tribunal was subsequently reversed by an order of the Supreme Court, that itself would require the assessee to make restitution of the sum that the Revenue had refunded to it pursuant to the Tribunal’s order. The refund was sanctioned to the appellant pursuant to the Tribunal’s order. The said order of the Tribunal was reversed by the Hon’ble Apex Court order [2003 (2) TMI 210 - SUPREME COURT OF INDIA]. On such reversal, the appellant was required to suo motu restitute the sum to the Revenue which they did not do. Therefore, show cause notice was issued (within a period of six months from the date of the Apex Court’s order) for recovery of the refund wrongly granted and the demand was confirmed along with interest. There is absolutely nothing wrong or illegal in confirmation of such demand as such an order only seeks to enforce the Apex Court’s decision. Therefore, the impugned order is sustainable in law and accordingly we uphold the same - Decided against the assessee.
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2014 (12) TMI 73
Clandestine removal of goods - Mis declaration of goods - Undervaluation - Sale made to related person - Evasion of payment of duty - Wrong classification of goods - prime quality zinc ingots cleared as zinc metal residue - Held that:- Goods, in question, on which the duty demand has been raised, and which were cleared by M/s. IZL to M/s. IMTL, were zinc ingots of at least 97.5% purity. The statements of Shri Ashok Singh of M/s. IZL, Shri Pawan Kumar of M/s. Agrawal Tubes or Shri Manoj Agrawal of M/s. Nilkanth Tubes do not throw any light on this aspect. All it has been stated by Shri Ashok Singh in his statement is that M/s. IZL were selling only zinc ingots to M/s. IMTL while Shri Pawan Kumar of M/s. Agrawal Tubes in his statement has stated that they had purchased zinc ingots from M/s. IMTL. The statement of Shri Manoj Agrawal does not indicate that he had purchased prime quality zinc ingots from M/s. IMTL. No sample of the goods sold by M/s. IZL to M/s. IMTL was available or has been tested. When the criteria for classification of the goods under sub-heading 7901.10 is that the metal must contain at least 97.5% zinc and when in this regard there is absolutely no evidence, the duty demand based on classification of the goods under heading 7901.10 would not be sustainable. There is no dispute that entire sales of M/s. IZL were not to or through M/s. IMTL and there were substantial sales to independent buyers. In view of this, Rule 6(c) of Central Excise Valuation Rules, 1975 could not be invoked and, as such, the entire basis of duty demand by treating the price at which the M/s. IMTL sold the goods to independent buyers is incorrect. With regard to invoking Rule 6(c) of Central Excise Valuation Rules, 1975 when the sales are to or through a related person, the percentage of sales of an assessee to or through related person is not relevant. For invoking this rule, what is relevant is as to whether entire sales are to or through related person and only in that case, this rule would be invokable and if there is some percentage of sales, however small the same may be, to independent buyers, it is the sale price to independent buyers which would be the assessable value in respect of sales to or through related person. In this case, there is no allegation that the sale prices of M/s. IZL to independent buyers was higher than sale price to M/s. IMTL - Therefore neither the duty demand against M/s. IZL is sustainable nor penalty on M/s. IZL and their Director nor the confiscation of the land, building plant and machinery of M/s. IZL under Rule 173Q(2) is sustainable. - Decided in favour of assessee.
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2014 (12) TMI 72
Waiver of pre deposit - CENVAT Credit - the Investigating officers were of the view that the Kathua unit was clearing fully finished Sputtering Targets which were being exported as such and only to wrongly avail Cenvat credit, some processing was being shown at Nathupur, Sonepat unit while in fact, there was no manufacturing activity in that unit and hence the Cenvat credit being availed by Nathupur unit in terms of Rule 12 of the Cenvat Credit Rules, 2004 was contrary to the provisions of law. - Held that:- Sputtering Targets were being cleared for export from Nathupur unit under ARE-1s and permission for in factory examination and sealing had been given by the Jurisdictional Central Excise Authorities. The ARE-1s bear the certificate signed by the Jurisdictional Central Excise Superintendent and the Jurisdictional Inspector certifying the examination of the export consignments and payment of duty in respect of the same. When the Jurisdictional Central Excise officers were visiting the Nathupur unit for examination of the export consignments and their sealing, it is inconceivable that they would not be aware of the activity in the factory which they were visiting. There is no allegation against the departmental officers, who had given permission for in factory examination of the export consignments and the officers who had regularly visited the Nathupur unit for examination and sealing of the export consignments, that they were in connivance with the appellant. In view of this, at this prima facie stage, it is difficult to accept the Department’s allegation that there was no manufacturing activity at Nathupur unit and it was a dummy unit and it is Kathua unit which was manufacturing and clearing fully finished Sputtering Targets. Classification of Sputtering Targets - Held that:- Sputtering targets consist of a flat piece of copper bonded with a layer of gold or silver or any other metal whose film is to be deposited on a substrate. In Physical Vapour Deposition Machine, the Sputtering Targets is bombarded by very high energy atoms of an inert gas like Argon as a result of which the atoms of gold/silver/other metal in the Sputtering Target get ejected, and are deposited on a substrate like silicon wafer, forming a thin film. Thus except for use with Physical Vapour Deposition Machine, there is no other use of the Sputtering Targets. In view of this, the Sputtering Targets have to be treated as component of the “Physical Vapour Deposition Machine” of heading 8543 and prima facie would be classifiable under sub-heading 85439000. Departmental officers were aware of the activity at manufacturing unit of the appellant company at Nathupur and hence Nathupur unit cannot be accused of wilful of suppression of any information with intent to evade the payment of duty by wrongly availing the Cenvat credit and for this reason, neither longer limitation period under Section 11A(1) would be invokable nor the penalty under Section 11 AC would be imposable. The entire Cenvat credit demand would be time-barred. - appellant have prima facie case in their favour. The requirement of pre-deposit of Cenvat credit demand, interest thereon and penalty is, therefore, waived for hearing of the appeal and recovery thereof is stayed - Stay granted.
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