Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 4, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Transfer pricing adjustment - issuance of corporate guarantees were in the nature of shareholder activities- as was the uncontroverted claim of the assessee, and, as such, could not be included in the ‘provision for services’ under the definition of ‘international transaction’ u/s 92B - AT
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Taxability of receipts as fees for technical services - Indo Dutch DTAA - as long as the services rendered by the assessee are managerial or consultancy services in nature, which do not involve or transmit the technology, the same cannot be brought to tax as fees for technical services - AT
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Rebate of claim u/s 88E - in case of arbitrage loss assessee had admittedly not paid any income tax. Therefore, if assessee’s plea is accepted then it would lead to double relief to assessee – firstly, by allowing set off u/s 70 against STT income and then allowing rebate from income-tax. This is definitely not the intention of legislature - AT
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TDS u/s 194C or u/s 194J - programmes produced for television, including "commissioned programmes", will fall within the realm of section 194C, Explanation III of the Act - AT
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Grant of recognition u/s 80G rejected - reference of the promotion of study of Jain Agama and Jain Siddhnta by itself would not render the whole of the object of the trust as religious in nature. - AT
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Denial of exemption u/s. 54F - assessee can not denied the deduction u/s. 54F in the year under consideration even if the asset stands sold subsequently - it will be chargeable under the head ‘Capital Gains’ relating to long term capital assets of the previous year in which such new asset is transferred - AT
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Direction of the CIT(A) to assess the development of plots as Short Term Capital Gain on sale of plots - Since assessee is owner of the plots, sale of plots will also be Long Term Capital Gain as assessee is owning the plot for more than three years. - AT
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Unexplained cash credit u/s 68 - assessee should not be punished for his inability to enforce the attendance of the creditors - there is failure on the part of the AO also in not enforcing the attendance of the creditors by issuing summons to them - AT
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The resultant profits and gains, derived from, or derived by, an industrial undertaking, because of the insurance subsidy, have to be treated as deductible in terms of the provision of Section 80IB or 80IC - AT
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The interest income cannot notionally be excluded for the purpose of determining the allowable deduction of remuneration paid to the partners under Section 40b - AT
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Scope of the term "Plant" u/s 43(3) - Exclusion of Building and Furniture from the scope of plant - constitutional validity - expenses have been incurred on wall partition, fall ceiling, flooring and sliding - Claim of the assessee rejected - AT
Customs
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Target Plus Scheme - Discharge of Education Cess @ 2% on the goods imported - revenue submitted that under the Target Plus Scheme, basic customs duty and additional customs duty are exempted but Education Cess is not exempted. - contention of the revenue rejected - AT
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Confiscation of goods - Revenue’s contention that appellant acted deliberately cannot be ruled out for the reason that an exporter who has not remitted higher amount of foreign exchange to this country does not expect higher quantity of goods with higher value. - AT
Service Tax
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Demand of service tax beyond the scope of SCN - Since the demand was confirmed by the impugned order on a class of taxable service which was not alleged in the show cause notice, the demand cannot be sustained - AT
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Demand of service tax - Franchisee service - it clear reflects to a joint venture to run buses in the city. Even the logo is to be decided by both parties. There is no relationship of franchisor and franchisee. - AT
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Site Formation and Clearance, Excavation and Earthmoving and Demolition service - the reason and logic adopted by the Commissioner (Appeals) for setting aside the demand of service tax relating to horizontal drilling (for the passage of cables) where such drilling was not done using drilling machine is totally untenable and not supported by any legal reasoning - AT
Case Laws:
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Income Tax
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2015 (12) TMI 144
Reopening of assessment - unaccounted sale and purchase of a scrip - Held that:- The transactions of purchase and sale which is the basis of the reopening is factually not correct. The transactions of purchase and sale were of 62 scrips during the year. The sale and purchase of a scrip in large number when placed by the assessee on the electronic system of Stock Exchange appear broken in different transaction in view of multiple buyers and sellers of the same. Therefore, a single transaction of purchase or sale which may appear as many transactions when in fact it is not so. Be that as it may, so far as reopening of assessment is concerned, the same can only be done on the satisfaction of the provisions of Section 147 of the Act. In the present facts, the issuing of reopening notice is a clear case of change of opinion on the part of the Assessing Officer as the order under Section 143(3) of the Act in the regular assessment proceedings had been passed on examination of the very issue now being raised in the reopening notice. As observed by the Supreme Court in Commissioner of Income Tax Vs. Kelvinator of India Ltd., (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) a power to reassess is not a power to review. Therefore, an assessment cannot be reopened on a mere change of opinion in the absence of any fresh tangible material. - Decided in favour of assessee.
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2015 (12) TMI 143
Transfer pricing adjustment - adjustment being notional value of excess credit period allowed by the assessee to its US based associated enterprise, i.e. Micro Inks USA, in respect of sale of semi finished goods, ingredients and raw materials - Held that:- The comparison has to be based on real transactions of similar nature, if at all such transactions have taken place. When no such transactions have taken place, as is the case before us, there is obviously no occasion of any comparison. The stand taken by the learned Departmental Representative, therefore, is not only quite detached from commercial reality but also wholly untenable in law. In any case, what can be examined on the touchstone of arm’s length principles is the commercial transaction itself, as a result of which the debit balance has come into existence, and the terms and conditions, including terms of payment, on which the said commercial transaction has been entered into. In this view of the matter, learned Departmental Representative’s reliance on Aztec decision (2007 (7) TMI 50 - ITAT BANGALORE ) is of no assistance to the case of the revenue. The international transaction is exports of goods which been benchmarked on TNMM basis and which is duly accepted by the TPO. In view of these discussions, and respectfully following the decision of the coordinate bench in assessee’s own case for the earlier years, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned ALP adjustment - Decided in favour of assessee. Arm’s length price adjustment on account of corporate guarantees given by the assessee in respect of its associated enterprises - Held that:- The scope of the capital financing transactions, as could be covered under Explanation to Section 92 B read with Section 92B(1), is restricted to such capital financing transactions, including inter alia any guarantee, deferred payment or receivable or any other debt during the course of business, as will have “a bearing on the profits, income, losses or assets or such enterprise”. This pre-condition about impact on profits, income, losses or assets of such enterprises is a pre-condition embedded in Section 92B(1) and the only relaxation from this condition precedent is set out in clause (e) of the Explanation which provides that the bearing on profits, income, losses or assets could be immediate or on a future date. These guarantees do not have any impact on income, profits, losses or assets of the assessee. There can be a hypothetical situation in which a guarantee default takes place and, therefore, the enterprise may have to pay the guarantee amounts but such a situation, even if that be so, is only a hypothetical situation, which are, as discussed above, excluded. In the present case, we have held that the issuance of corporate guarantees were in the nature of shareholder activities- as was the uncontroverted claim of the assessee, and, as such, could not be included in the ‘provision for services’ under the definition of ‘international transaction’ under section 92 B of the Act. We have also held, taking note of the insertion of Explanation to Section 92B of the Act, that the issuance of corporate guarantees is covered by the residuary clause of the definition under section 92 B of the Act but since such issuance of corporate guarantees, on the facts of the present case, did not have “bearing on profits, income, losses or assets”, it did not constitute an international transaction, under section 92B, in respect of which an arm’s length price adjustment can be made. In this view of the matter, and for both these independent reasons, we have to delete the impugned ALP adjustment. - Decided in favour of assessee. Granting deduction u/s. 80IB and 10B - assessee has raised the grievance that the Assessing Officer has erred in not accepting the profits of various units as declared by the appellant company by reducing certain items as adjustments for inter division transfer and adjusting the same to the business income of various units as under while granting deduction u/s. 80IB and 10B - Held that:- The issue is covered in favour of the assessee, by the orders of the co-ordinate bench in assessee’s own cases for the assessment years 2002-2003 and 2005-06, to the extent that the matter is required to be remitted to the file of Assessing Officer for fresh adjudication in the light of the directions set out in those orders. We are, thus, urged to remit the matter to the file of the Assessing Officer for fresh adjudication in the light of Tribunal’s order for the assessment years 2002-03 and 2005-06, even as learned. Departmental Representative dutifully relied upon the stand of the Assessing Officer. - Decided in favour of assessee by way of remand. Addition pertaining to telephone and electricity expenses of Managing Director - Held that:- On this issue also, the learned representatives fairly agree that the issue is covered by the order of co-ordinate bench for the assessment year 2005-06 in the sense that, on the same lines, while disallowance in respect of electricity expenses of ₹ 8,83,622/- is to be confirmed, the disallowance of telephone expenses to the tune of ₹ 1,03,272/- is to be deleted. In this issue also, we see no reasons to deviate from the stand taken by the co-ordinate bench in the earlier year and respectfully following the same, we delete the disallowance of telephone expenses and confirm the disallowance of electricity expenses as above. To the limited extent of deleting the disallowance of telephone expenses of ₹ 1,03,272, the assessee gets the relief. - Decided in favour of assessee in part. Addition out of software expenses - Held that:- This is a case when ERP has been introduced for the first time and the expenditure is not in the support or maintenance of the existing software.We, therefore, approve the stand of the authorities below on this point and decline to interfere in the matter. - Decided against assessee.
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2015 (12) TMI 142
Taxability of receipts as fees for technical services - Indo Dutch DTAA - whether provisions of the Indo US tax treaty cannot be read into the provisions of Indo Dutch tax treaty?- Held that:- Learned CIT(A) was clearly in error in holding that the provisions of the Indo US tax treaty cannot be read into the provisions of Indo Dutch tax treaty. As clearly stated in the MoU to the Indo US tax treaty, which stands incorporated in the Indo Dutch tax treaty as well by the virtue of MFN clause, “under paragraph 4(b), consultancy services which are not of a technical nature” cannot be treated as technical services. Accordingly, fees for non technical consultancy services cannot be treated as covered by the scope of ‘fees for technical services’. There are a large number of decisions by the coordinate benches which reiterate this proposition. What essentially follows, therefore, is that as long as the services rendered by the assessee are managerial or consultancy services in nature, which do not involve or transmit the technology, the same cannot be brought to tax as fees for technical services. An example of this type is a service is set out in example no. 7 to the MoU appended to the Indo US tax treaty, which is adopted in respect of Indo Dutch tax treaty as well- as noted earlier in this order As long as the Assessing Officer can demonstrate, after collecting necessary details from the assessee, that the non taxable consideration component (i.e. consideration for physical deliverables, consideration for services other than technical services and consideration for services which donnot transmit the technical know how etc) is less than fifty percent of the overall consideration paid by the assessee for basic refinery package, he can certainly come to that conclusion. It is, therefore, necessary that all the requisite details, as may be available to the assessee and as may be requisitioned by the Assessing officer, must be taken into account to facilitate this apportionment. We are, however, not inclined to conduct this exercise directly at the stage of second appeal. We, therefore, remit the matter to the file of the Assessing Officer by upholding the plea of the assessee in principle and directing the Assessing Officer to apportion the consideration for basic refinery package on the above lines. - Decided in favour of assessee for statistical purposes.
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2015 (12) TMI 141
Rebate of claim u/s 88E - whether section 88E is a specific provision and, therefore, it has to be given preference over other provisions and the computation had to be made as contemplated under that section? - set off being claimed u/s 70 of the Act in regard to loss incurred by assessee on account of arbitrage and jobbing transactions on which admittedly STT was paid - Held that:- The object of Section 88E clearly is to protect the assessee from double taxation. Firstly, by way of payment of STT and secondly by way of income tax on the income earned from STT transaction. The concept of total income as contemplated under Section 2 sub-section (45) cannot be imputed here. The opening words of section 2 dealing with the definition are that unless the context otherwise requires. Therefore, the total income as contemplated u/s 88E is not same as contemplated u/s 2(45). It has been considered in entirely different context in section 88E. The term “total income” as interpreted by various decisions relied upon by ld. Counsel cannot be made applicable to the facts of the case which is in context to Section 88E. Therefore, we do not find any reason to interfere with the order of Ld. CIT(A) in holding that business loss occurred on arbitrage and job which were STT paid transactions could not be adjusted against the non-STT transaction belonging to clients. It had to be deducted from STT paid transactions only on assessee’s own account. There is one more reason. The rebate u/s. 88E is allowable from the tax paid. However, in case of arbitrage loss assessee had admittedly not paid any income tax. Therefore, if assessee’s plea is accepted then it would lead to double relief to assessee – firstly, by allowing set off u/s 70 against STT income and then allowing rebate from income-tax. This is definitely not the intention of legislature. We accordingly do not find any reason to interfere with the order of Ld. CIT(A) and ground taken by assessee is dismissed.
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2015 (12) TMI 140
Disallowance made u/s. 14A - Held that:- As relying on Derive Trading Pvt. Ltd case [2014 (12) TMI 1152 - ITAT MUMBAI ] we direct the AO to recompute the disallowance u/s. 14A with the rider to the actual expenditure which can be attributable to the receipt or earning of the dividend income excluding the expenditure related to business activity of share trading. - Decided in favour of assessee for statistical purposes. Disallowance of Broken Period interest - Held that:- Broken Period interest is allowable to assessee as relying on case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] - Decided in favour of assessee. Addition on account of amortization of premium on HTM Securities - Held that:- Amortization of premium on HTM Securities is allowable to assessee as relying on case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2015 (12) TMI 139
TDS u/s 194C or u/s 194J - payment of placement charges to cable operator/D.T.H. - Held that:- The issue regarding deduction of tax at source for the payment made to cable operators as placement charges is fully covered in favour of the assessee by the various decisions and also by the Circular no. 720 of 30.08.1995, The Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati [2006 (11) TMI 159 - DELHI High Court] on a similar issue has held that Explanation III, which was introduced simultaneously with section 194J, is very specific in its application to not only broadcasting and telecasting but also include "production of programmes for such broadcasting and telecasting" if, on the same date, two provisions are introduced in the Act, one specific to the activity sought to be taxed and the other in more general terms resort must be had to the specific provisions which manifests the intention of the Legislature. It is not, therefore, possible to accept the contention of the Revenue that programmes produced for television, including "commissioned programmes", will fall outside the realm of section 194C, Explanation III of the Act. - Decided against revenue Uplinking charges were liable for deduction of tax at source u/s 194C or 194J - Held that:- In the light of the proposition laid down by the Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati [2006 (11) TMI 159 - DELHI High Court], the specific provisions of section 194J are applicable in case of uplinking fees being integral part of the broadcasting and telecasting. Following the Judgment of Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati, and other decisions relied upon by the Ld. AR, we do not find any reason to interfere with the order of CIT (A) observing that uplinking was an integral part of broadcasting/telecasting and is covered under the Explanation to section 194C - Decided against revenue Payment for production of programmes for bradcasting and telecasting was liable to tax u/s 194C or 194J - Held that:- The CIT(A) decided the issue in favour of the assessee by following the decision in the case of Prasar Bharati (Broadcasting Corporation of India) (Supra) and CBDT circular dated 30.08.1995 (supra) By holding that the AO was not justified in treating the payments for programmes production as royalty. In any case as also held in the aforesaid judgment provisions of section 194C are more specific as compared to those of section 194J( Since provision of 194C deals with very payment in question- production of programmes and not with general category of payment like fee for technical services or royalty as in section 194J and hence section 194J cannot apply to the payment for production of programmes. Section 194C clearly states that payment for production of programmes constitutes payment for work u/s 194C. Accordingly, applying the said Judgment of the Hoourable Delhi High Court and also relying on CBDT circular, CIT(A) correctly held that provisions of section 194C would prevail over section 194J of the Act in this case.- Decided against revenue
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2015 (12) TMI 138
Penalty under section 271(1)(c) - addition made on account of disallowance of commission payment on contract receipt from Government / PSU, addition relating to expenditure on issuance of convertible debenture and expenditure on project which did not materialize - Held that:- Additions on the basis of which penalty has been imposed under section 271(1)(c) of the Act, the issues can be considered to be debatable, hence, in the particular circumstances of the case, penalty under section 271(1)(c) of the Act cannot be imposed. Accordingly, allowing assessee's ground, we delete the penalty imposed under section 271(1)(c) of the Act. - Decided in favour of assessee.
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2015 (12) TMI 137
Grant of recognition u/s 80G rejected - one of the clauses of the object of the assessee trust as religious in nature - Held that:- None of the expenditure so far incurred by the assessee can be said to be of a religious nature and, therefore, the assessee fulfilled the conditions as provided u/s 80G of the Income-tax Act. The Hon’ble Supreme Court in the case of Dawoodi Bohra Jamt (2014 (3) TMI 652 - SUPREME COURT ) has also confirmed and recognized the duality of the purpose of religious as well as charitable nature. The provision of sec. 80G also recognizes the duality of purpose with a rider that for the purpose it should not be wholly or substantially the whole of which is religious in nature. In the case in hand the reference of the promotion of study of Jain Agama and Jain Siddhnta by itself would not render the whole of the object of the trust as religious in nature. In view of the above facts and circumstances of the case, we find that the assessee’s objects cannot be described as wholly or substantially the whole an religious in nature, accordingly, we set aside the impugned order of Commissioner and direct the Commissioner to grant the recognition u/s 80G of the Act by considering the fact that the assessee has already been granted the registration u/s 12A and picking up a particular reference in one of the clauses of the object would not constitute the entire and whole of the objects of the assessee trust as religious in nature. - Decided in favour of assessee.
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2015 (12) TMI 136
Trading addition - CIT(A) deleted the addition - Held that:- We have verified the facts, which are identical to A.y. 2008-09. The similar trading additions were made by the Assessing Officer by rejecting the books of account, not maintaining quantitative and qualitative details of stock and day to day stock register of raw material consumed. During the year, the assessee’s turnover has gone up whereas the G.P. rate has gone down compared to immediate preceding year but is more compared to A.Y. 2007-08 and 2008-09 except A.Y. 2009-10. The ld AR had explained the reasons for more G.P. rate in the A.y. 2009-10. As the ld CIT(A) has discussed the reasons for decline of GP rate i.e. competition in market, dollar price and recession in international market, which has not been controverted by the ld DR. Therefore, we uphold the order of the ld CIT(A). - Decided against revenue
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2015 (12) TMI 135
Rectification of mistake - deduction on the profit earned out of job work charges u/s 80IB not allowable - Held that:- On going through the facts on record, it is an admitted fact that the claim of assessee u/s 80IB was allowed by the revenue authorities from AY 1998-99, which was the first AY in which assessee made its claim u/s 80IB. The benefit, of deduction available for a specified number of years on satisfaction of the conditions laid down as per the respective provisions of the Act once considered and allowed cannot be withdrawn subsequently and that too by recourse to the proceedings U/s.154 of the I.T. Act, 1961 when there was no change either in facts and/or in law. The Hon’ble Supreme Court in case of ITO Vs. Volkart Brothers [1971 (8) TMI 3 - SUPREME Court ] gave a categorical finding that “A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record.” In view of the settled position of law, we do not find any infirmity in the orders of CIT(A) in the AYs under consideration and accordingly the same are hereby upheld dismissing the grounds raised by revenue in all the appeals under consideration. - Decided in favour of assessee.
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2015 (12) TMI 134
Penalty u/s 271(1)(c) - evasion of tax on sale of property - Held that:- the assessee has offered the surplus out of OTS to Bank in the books of the company/firm, which is more than the sale under dispute, to tax and also offered to tax the interest income. It shows that there is no intention to conceal the income. The ld. AR also insisting that the sale transaction does not attract income tax and He was under influence of his financial advisers that the sale of property for the purpose of bank settlement is exempt from tax. It shows that assessee was under bonafide belief that the transaction did not attract capital gains tax. It gives impression that the assessee has no intention to conceal any income. Therefore, this is not a fit case to impose penalty u/s 271(1)(c). Accordingly, we cancel the penalty levied by AO u/s 271(1)(c) and allow the appeal of assessee. - Decided in favour of assessee.
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2015 (12) TMI 133
Deductions claimed u/s 54B and 54F denied treating capital gain as short-term capital gain (STCG) - CIT(A) confirmed the action of the AO by treating the capital gain arising from the transfer of the property as STCG as well as the entire income was assessed in the hands of the assessee-HUF - Held that:- The documents filed by the assessee, being additional evidence, are very much relevant and crucial for adjudicating the matter of assessment of capital gain in the hands of the assessee. In view of the above facts and circumstances of the case as well as the observations made in the foregoing paragraph we are of the considered opinion that the issue of computation of capital gains as well as the deduction u/s 54B and 54F is required to be reconsidered along with the case of Smt.Kaveramma. Accordingly, the matter is set aside to the record of the AO for de novo consideration of the matter in the light of the fact as discussed above and the additional evidence filed by the assessee - Decided in favour of assessee for statistical purposes.
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2015 (12) TMI 132
Computation of capital gain - CIT(A) taking the date of development agreement as the point of time for accrual of Capital Gains while the assessee has offered the Capital Gains for taxation based on factual accrual of gains in the respective years - Held that:- Plots were ready for allotment and assessee has in fact offered some capital gains in AY. 2005-06 and construction of houses were also started. As rightly held by the Ld. CIT(A), it is evident from the sequence of events that the development agreement was willingly executed and was taken up in right earnst by the developer and work has commenced. Thus, as assessee has handed over the land to the developers and the developer had clearly accepted their willingness to perform and do the development work and had proceeded accordingly, the capital gains arise on the date of development agreement in terms of Section 45 r.w.s. 2(47)(v). In view of the above, we uphold the order of CIT(A) and AO on this issue that the capital gain can be brought to tax in AY. 2004-05 and accordingly the ground is rejected. Denial of exemption u/s. 54F - Held that:- The provisions of Section 54F(3) contemplates that the amount of capital gain arising from the transfer of original asset not charged u/s. 45 on the basis of the cost of such new asset shall be deemed to be income chargeable under the head ‘Capital Gains’ relating to long term capital assets of the previous year in which such new asset is transferred. Consequently, assessee can not denied the deduction u/s. 54F in the year under consideration even if the asset stands sold subsequently. If the asset is sold the consequential action has to be taken in the year of sale. We are of the opinion that the denial of deduction by CIT(A) is not correct and therefore, for computation of deduction u/s. 54F, the matter is restored to the file of AO for working out the capital gains along eligible deduction u/s. 54F to assessee. Decided in favour of assessee for statistical purposes. Direction of the CIT(A) to assess the development of plots as Short Term Capital Gain on sale of plots - Held that:- The order of CIT(A) pre-judges the issue and CIT(A) is not empowered to traverse beyond the year under consideration in appeal. In fact, he has virtually fixed how much is the Long Term Capital Gain and how much is the Short Term Capital Gain with out examination by AO or objections from assessee. In the process, the sale of plots allotted to assessee were termed to be Short Term Capital Gain, ignoring his own finding that assessee is owner of the plots and what he has got in bargain was only benefit of development cost, which was directed to be the value for capital gains working as sale consideration. Since assessee is owner of the plots, sale of plots will also be Long Term Capital Gain as assessee is owning the plot for more than three years. This basic aspect of ownership of the plot was not taken into consideration and accordingly, Ld. CIT(A) erred in directing the AO to tax the amount as Short Term Capital Gain. Since those years are not before the CIT(A) and the directions given are also not according to the facts, we therefore, set aside the computation of capital gains as was done by the CIT(A) on Phase-2- Table 2, Table 3 and Table 4 and also directions in para 28 for AY 2009-10. However, we make it clear that AO is free to take necessary steps to compute necessary capital gains as applicable in those years without being governed by the observations or directions of the CIT(A) in this order. Issues are open for consideration/ adjudication by the AO/ Assessee.
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2015 (12) TMI 131
Adoption of fair market value of capital asset as on 1.4.1981 and also adoption of value u/s.50C(2)for computation of capital gains - Held that:- In this case, the AO adopted the fair market value of the land as on 1.4.1981 at ₹ 30,000/- per ground as against ₹ 3 lakhs adopted by the assessee, on the basis of valuation of Sub- Registrar’s office, which was not put before the assessee for comments. Further, the AO adopted the sale consideration at the guideline value of ₹ 2,82,18,792/- as against the value admitted by the assessee as per sale deed at ₹ 1,20,00,000/-, though the assessee objected the same by producing the valuation report from the Registered Valuer. In our opinion, objection expressed by the assessee is to be considered in proper perspective. Whenever the AO places reliance on the valuation report received by the DVO, the same should be communicated to the assessee for her comments and decided thereupon. The assessee before us pointed out that there are certain discrepancies in the valuation report, which is detrimental to the interest of the assessee and it is appropriate to call for the comments and details from the assessee. Therefore, we are of the opinion that it is appropriate to remit the issue to the file of the AO. Regarding fair market value of the property as on 1.4.1981, the AO shall find comparable cases, which shall be at the vicinity of the property. Accordingly, we remit the entire issue to the file of the AO for fresh consideration after giving adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (12) TMI 130
Jurisdiction of the Joint Commissioner of Income-tax without order u/s.120(4)(b) of the I.T.Act, 1961 - Held that:- The definition of the Assessing Officer under Section 2 7(A) includes the Joint Commissioner of Income Tax. In a case which falls under proviso to Section 127(1) of the then Act, which deals with transfer from one Assessing Officer to another Assessing Officer of the same city, locality or place, no opportunity need to be given to the assessee and consequently there is no need to record reasons for transfer See M/s Karandhai Tamil Sangam Versus The Commissioner of Income Tax-II [2011 (8) TMI 324 - MADRAS HIGH COURT] - Decided against assessee. Addition on account of sale of milk, rental receipts and interest income in the assessment order passed u/s.144 - Held that:- Admittedly, in this case, the assessment was framed for all the impugned assessment years, ex parte, u/s.144 of the Act and the AO made various additions by estimating the income from sale of milk, rental receipts and interest income. The same was confirmed by the CIT(Appeals) without passing a speaking order. He has not given any reason for confirming the same, which is not proper. Therefore, it is appropriate to remit the issue to the file of the AO for fresh consideration. Accordingly, we remit the issues relating to addition on account of sale of milk, rental receipts and interest income to the file of the AO for fresh consideration after giving adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (12) TMI 129
Unexplained cash credit under section 68 - CIT(A) confirmed addition for two parties - Held that:- The inquiry with regard to the creditors have taken place during the course of appellate proceedings before the ld. CIT(A) in the year 2011. Admittedly, these loans were taken in the year 2000, hence, we find merits in the submissions of the ld. AR that the creditors did not co-operate with the assessee and hence they did not appear before the AO, since the assessee had repaid the loans. We further notice that the assessee has filed copies of cheque/pay-in-slips and confirmation letters obtained from these creditors. The confirmation letters contained the address of the creditors and also their respective PAN. Thus, we notice that the creditors having received back the loans from the assessee did not mind to co-operate with the assessee by way of appearing before the AO, since the transactions were 10 years old. We also notice that the AO also did not enforce the attendance of these creditors by issuing summons to them and he did not verify their income tax returns also, even though the assessee has filed necessary details. Under these set of facts, we are of the view that tax authorities could not draw adverse inference in respect of inability of the assessee to produce the creditors.In the peculiar facts and circumstances of the case, we are of the view that the assessee should not be punished for his inability to enforce the attendance of the creditors. We have already noticed that there is failure on the part of the AO also in not enforcing the attendance of the creditors by issuing summons to them - Decided in favour of assessee. For addition of ₹ 21.36 lakhs CIT(A) has simply restored the matter to the file of the AO to examine the claim of the assesee. Hence, we are of the view that the Revenue could not be considered as having aggrieved by the said direction given by the ld.CIT(A). Accordingly, we do not find any merit in the appeal filed by the Revenue. - Decided against revenue
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2015 (12) TMI 128
Validity of the reference made to DVO under Section 58 - which report to be adopted either of DVO or of Registered Valuer? - Held that:- Both the registered valuer as well as the DVO had not referred to any comparable instances and simply adopted the value without any reference of the supporting material. The term ‘fair market value’ has been defined under the provisions of Section 2(22B) of the Act to mean that the fair market value to the value which asset would ordinarily fetch on the sale in the open market on the relevant date. In our opinion, the concept of fair market value envisages of hypothetical seller and hypothetical buyer in hypothetical market. The value assessed by registering authorities for stamp duty purpose cannot be the basis for estimating the fair market value. Therefore, any valuation report based on the value as per the register maintained by the Registering Authorities cannot be taken as the basis for the purpose of valuing fair market value. Hence, we are of the considered opinion that interest of justice would be met, if the matter is restored back to the file of the Assessing Officer for de novo assessment. Accordingly, the matter is restored back to the file of the Assessing Officer for de novo assessment, after affording reasonable opportunity of being heard to the assessee. - Decided in favour of revenue for statistical purposes.
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2015 (12) TMI 127
Addition u/s 68 - accommodation entries - Held that:- when the assessee has duly explained the source of credit in their account on account of loan, interest on loan and cash deposits etc. and has also claimed expenses on account of bank charges, conveyance, salary and allowances and depreciation, we are of the considered view that addition should not have been made without verifying the genuineness and creditworthiness of the parties who have otherwise confirmed the same. So, in view of the matter, it would be proper in the interest of justice to set aside the order passed by the authorities below and the matter is restored back to the file of A.O. for making assessment afresh after affording proper opportunity of being heard to the assessee in accordance with the Act. - Decided in favour of assessee for statistical purposes
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2015 (12) TMI 126
Deduction u/s. 10B - whether unabsorbed depreciation cannot be set off against the profit for the relevant assessment year as the assessee being a 100% Export Oriented Unit (EOU) - Held that:- We have gone through the approval granted by Assistant Development Commissioner, Cochin Export Processing Zone dated 26.09.1997 in regard to M/s. Zenith Textiles, a unit of Zenith Exports Ltd. whereby it is declared as 100% EOU. It means that this concern was declared as 100% EOU w.e.f. 26.09.1997. As per the provisions of section 10B of the Act, which are attracted to EOUs like one of the units run by the assessee company i.e. Zenith Textiles, there is no controversy that under the provisions of section 10B(6) read with section 32 of the Act, if any deduction for any relevant assessment years ending before 01.04.2001 has been given full effect then the same neutralizes the provision of section 32(2) of the Act. However, in the present case, while working out unabsorbed depreciation for AY 1997-98, the AO has considered incorrect facts and figures. The fact is that M/s. Zenith Textiles was approved under Special Scheme of Govt. of India as a 100% EOU only on 26.09.1997 and accordingly, assessee claimed deduction u/s. 10B of the Act in respect this unit for and from AY 1998-99. According to us, there being no claim made for deduction u/s. 10B of the Act in AY 1997-98, the unabsorbed depreciation relatable to Zenith Textiles is not hit by the provision of section 10B(6) of the Act factually. Accordingly, we are of the considered view that the assessee's claim of unabsorbed depreciation relatable to AY 1997-98 is to be allowed and the AO is directed accordingly. The orders of the lower authorities i.e. the AO and that of the CIT(A) are reversed.- Decided in favour of assessee.
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2015 (12) TMI 125
Deduction u/s. 80IC on transport subsidy and interest subsidy - Held that:- As decided in CIT Vs. Meghalaya Steels Ltd. & Pride Coke Pvt. Ltd. [2013 (7) TMI 175 - GAUHATI HIGH COURT] under this Scheme, the insurance premium paid by eligible industrial units (under such scheme), set up in the North Eastern Region, are reimbursed by the nodal insurance company - The insurance subsidy, thus, helps in reducing the running cost of the industrial unit concerned establishing thereby direct and first degree nexus between the industrial activities of the assessee-respondents concerned, on the one hand, and the subsidy, in the form of insurance subsidy, on the other, received by the assessee-respondents. The resultant profits and gains, derived from, or derived by, an industrial undertaking, because of the insurance subsidy, have to be treated as deductible in terms of the provision of Section 80IB or 80IC - Decided in favour of Assessee.
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2015 (12) TMI 124
Disallowance of additional depreciation u/s.32(1)(iia) claimed on new plant and machineries - Held that:- As decided in case of S.S.M. Bros. Pvt. Ld. & Others [1999 (1) TMI 2 - SUPREME Court] where the machinery or plant is installed for the purpose of the business of production of textiles, including those dyed, printed or otherwise processed, made wholly or mainly out of cotton, the assessee is entitled to the deduction of the development rebate the under. What is important is that this development rebate is available if the machinery or plant is installed for the purposes of the business of the production of textiles, including those 'otherwise processed.' If the machinery or plant is required to be utilized in the production of such textiles, at whatever sage, the assessee is entitled to the benefit of the development rebate. It is not disputed fairly that if the assessee had been producing the embroidered cloth starting from scratch, that is, by starting with cotton, this machinery would have been entitled to be considered for the purposes of such development rebate. We are of the view that it makes no difference that in the particular case, the assessee buys the cloth and then processes it, using the machinery, by embroidering it and, in some cases, by dyeing it. The assessee utilizes the machinery in the production of processed textiles. Therefore, the machinery is entitled to the development rebate under s.33(1)(b)(B)(i). The question has, therefore, to be answered in the affirmative and in favour of the assessee.'
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2015 (12) TMI 123
Disallowance u/s 40(b) - remuneration paid to partners - AO held that interest so earned by the assessee can only be taxed as "income from other sources" - CIT(A) held that interest income is to be excluded from computation of permissible remuneration of partners - Held that:- The issue in appeal is now squarely covered by the judgement of Hon'ble jurisdictional High Court in the case of CIT vs. J J Industries (2013 (7) TMI 577 - GUJARAT HIGH COURT) wherein Their Lordships have upheld the Tribunal's stand to the effect that for the purpose of ascertaining ceiling on the basis of book profit, the profit shall be in the profit and loss account. The interest income, therefore, cannot notionally be excluded for the purpose of determining the allowable deduction of remuneration paid to the partners under Section 40b of the Act. As in the present case, in this case also interest was assessed as business income, and yet, for the purpose of computing admissible deduction under section 40(b), a different path was followed - Decided in favour of assessee.
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2015 (12) TMI 122
Scope of the term "Plant" u/s 43(3) - Exclusion of Building and Furniture from the scope of plant - constitutional validity - expenses have been incurred on wall partition, fall ceiling, flooring and sliding - Held that:- The word “plant” has been defined in section 43(3) as under: “(3) “plant” includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purpose of the business or profession [but does not include tea bushes or livestock] [or buildings or furniture and fittings] As it can be seen from the above provision, definition of “plant” is inclusive in nature and not exhaustive. Thus, there is a wide scope for including many items in the definition. It is a matter of fact that legislature has stepped in specifically excluding “building” from the definition of “plant” and such amendment was brought by the Finance Act 2003 w.e.f. 2004. The coverage of term “plant” was subject matter of litigation, particularly on the issue whether building or furniture and fittings constitute “plant” and to clarify the intention of the statute such amendment has been brought. Such amendment brought into the statute by the legislature has not been shown to be violative of constitutional provision. Therefore, according to clear legislative intent the assessee cannot take the benefit of higher depreciation by including building in the value of “plant”. - Decided against assessee.
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2015 (12) TMI 121
Levy of penalty u/s 271(1) (c) - addition on account of sale of paddy at lower price and on account of sale of rice at lower price- Held that:- Ultimately addition has been confirmed on estimate basis and normally penalty is not attracted in such situation. See COMMISSIONER OF INCOME-TAX Versus SANGRUR VANASPATI MILLS LTD. [2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT ] - Decided in favour of assessee. Undisclosed deposit in bank - surrender of income - Held that:- urrender has been made mainly on account of discrepancies found in the books of account, loose papers, found of various products etc. The cash available was only ₹ 6500/-therefore, no cash could possibly have been deposited. The assessee though incorporated the surrender amount in the P&L Account but by showing the sale of opening stock at lower price the income was again reduced to ₹ 48,054/- this clearly shows that the amount surrendered was nullified while filing return. However, later on assessee became wise and deposited the amount of ₹ 14 lacs in the bank and before us it was stated that the assessee purchased miscellaneous assets which were later on sold and the amount was deposited in the bank. There is no evidence to show the existence of any miscellaneous assets therefore explanation given by the assessee is totally false. This is not a case of full disclosure of facts therefore penalty confirmed - Decided against assessee.
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2015 (12) TMI 120
Unexplained cash deposits in the Saving Bank Account with Centurion Bank of Punjab which was later merged with HDFC bank - Held that:- We do not find any force in the submissions of Ld. Counsel for the assessee. Even if it is assumed that certificate is correct and bearer of this property Shri Rajiv Kalra issued two bearer cheques No. 684557 and 684558, then how it is possible that assessee has been able to encash the cheque on 14.7.2007 itself. The sale deed is also executed on 14.9.2007 which must have taken sometime. Thereafter assessee got time to exchange the cheques. Assuming for argument sake that this is possible, still the problem is that on 14.9.2007 the assessee has deposited ₹ 4,05,000/- only. So, if the assessee has cash of ₹ 10 lakhs on 14.9.2007 i.e. ₹ 9 lakhs from encashment of two cheques and ₹ 1 lakh as cash payment, then why only ₹ 4.5 lakhs was deposited and then money has been deposited in various installments as stated above. No explanation was given for this discrepancy. Therefore, in our opinion, the assessee has not a been able to satisfactorily explain the deposits of cash and accordingly we confirm the order of CIT(A). - Decided in favour of assessee.
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Customs
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2015 (12) TMI 174
Exemption from Special Additional Duty under Notification No. 20 /2006-Cus in respect of the impugned goods in terms of entry No. 50 in the table appended to Notification No.20/2006-Cus - Held that:- Once the impugned goods were removed from the said 1st Schedule vide Finance Act, 2011, the benefit of exemption Notification No.20/2006-Cus no longer remained available to the appellant in respect of the impugned goods. The appellant has not disputed fact that the impugned goods were not specified in the said 1st Schedule during the relevant period. While the said subsection allows Central Government to levy SAD not only to countervail sales tax/VAT but also other taxes/charges, we must hasten to add that once the Central Government has taken a view in this regard and imposed SAD on the impugned goods, it is not open to CESTAT to challenge the validity of such levy. - CESTAT in this order has prima facie disregarded the fact that the appellant was not entitled to the benefit of Notification No. 102/2007-Cus and in effect held that the Central government could not collect the impugned SAD in that case. As CESTAT is not competent to challenge the legality of a Notification issued by Central Govt, prima facie, the order is issued without jurisdiction and an order issued without jurisdiction is a nullity. More importantly, the said CESTAT order (in the case of Katyal Metal Agencies [2015 (1) TMI 323 - CESTAT KOLKATA]) is only an interim order dismissing stay petition of Revenue and therefore has no value as a precedent for deciding the issue. - appellant was not eligible for the benefit of notification No. 20/2006-Cus and therefore the impugned demands were correctly upheld by the first appellate authority. Consequently, the appeals are dismissed - Decided against assessee.
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2015 (12) TMI 173
Waiver of pre deposit - Misuse of Target Plus Scheme Licences - Customs Exemption Notification No. 32/2005-Cus. dated 08.04.2005 - Held that:- Adjudicating authority in his order has clearly brought out the issues in detail on the misuse of license and the role played by each individual. The issues raised by the appellants on the role of High Seas Seller, receiving the finished products again, denying the cross objection by the adjudicating authority, to be examined at the time of final hearing. Therefore, we find that all the appellants have prima facie not made a case for waiver of pre-deposit. Upon compliance the pre-deposit of balance dues shall be waived and its recovery stayed during the pendency of the appeals. - Partial stay granted.
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2015 (12) TMI 172
Target Plus Scheme - Discharge of Education Cess @ 2% on the goods imported - revenue submitted that under the Target Plus Scheme, basic customs duty and additional customs duty are exempted but Education Cess is not exempted. - Held that:- first appellate authority was correct to come to such a conclusion. This view of the first appellate authority and the view of this Tribunal is affirmed by the Hon'ble High Court in the case of Pasupati Acrylon Ltd. (2014 (1) TMI 169 - GUJARAT HIGH COURT ). - As regards the reliance placed on Circular No. 5/2005 we find that the learned Counsel is correct in bringing to our notice that the said Circular has been struck down in the case of Gujarat Ambuja Exports Ltd. (2012 (7) TMI 679 - GUJARAT HIGH COURT ). - the first appellate authority has not erred in passing such an order. - Impugned order is upheld as correct, legal and does not suffer from any infirmity - Decided against Revenue.
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2015 (12) TMI 171
Waiver of pre deposit - Denial of the benefit of customs Notification No. 48/1999-cus dated 29.04.99 - diversion of imported ‘Mulbery Raw Silk and Dupion Yarn' under advance Licences - Imposition of penalty - Held that:- Adjudicating authority has clearly brought out in his findings the diversion of imported goods with connivance of other co-noticees. We also find that Shri Mahesh Khemka already deposited ₹ 5,50,000/- and customs encashed the bank guarantee and appropriated for an amount of ₹ 29,61,884/- as clearly indicated at page-11 in para-10(p) of OIO. However, the adjudicating authority has not appropriated the said amount in the adjudication order. - As regards imposition of penalty, prima facie, we find all the four of the applicants have made out a case for waiver of penalty - Stay granted.
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2015 (12) TMI 170
Waiver of pre deposit - Demand of differential duty - Eligibility to avail the benefit of Notification No. 12/2012-Cus dated 17.03.2012 (Sl.No. 123) - Held that:- issue of eligibility of the said Notification to the coal imported by various coal importers is referred to the Larger Bench of this Tribunal in the case of Tamil Nadu Generation and Distribution Corporation Ltd. [2015 (1) TMI 366 - CESTAT CHENNAI], Co-ordinate Bench of this Tribunal presided by the Hon'ble President, at Hyderabad, has granted unconditional waiver to the appellants therein on identical issue holding that since the conflict has been referred to the Larger Bench, waiver has been granted till the disposal of the appeal and stay has been granted by the Larger Bench of this Tribunal - Stay granted.
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2015 (12) TMI 169
Refund claim - appellants had not challenged the assessment order by way of filing an appeal - Held that:- Ratio of the aforesaid judgement of Delhi High Court (which had duly taken note of and distinguished the Supreme Court judgements in the case of Flock (India) Pvt. Ltd. (2000 (8) TMI 88 - SUPREME COURT OF INDIA) and Priya Blue Industries (2004 (9) TMI 105 - SUPREME COURT OF INDIA) on the basis of which the appellants refund claims were rejected by lower authorities) is squarely applicable to the facts and circumstances of these appeals. - matter remanded back - decided in favour of assessee.
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2015 (12) TMI 168
Confiscation of goods - misdeclaration of the quantity and value of goods meant for export - neither such quantities were available in the exporting consignments nor the values declared were correct - Held that:- there was violation of provision of section 113(i) and 113(ii) of Customs Act, 1962 since there was a misdeclaration of the quantity and value of the goods with material departure to the particulars relating to quantity and value of the goods being attempted to be exported under drawback claim not corresponding in material particular with the information furnished in the export documents. Revenue’s contention that appellant acted deliberately cannot be ruled out for the reason that an exporter who has not remitted higher amount of foreign exchange to this country does not expect higher quantity of goods with higher value. Accordingly, confiscation of the goods was justified. Since the goods were under drawback claim, imposition of redemption fine is also warranted under law. But learned Commissioner did not record his finding on redemption fine. Therefore it is desirable to work out the same in the interest of justice. - Matter remnanded back - Decided in favour of Revenue.
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2015 (12) TMI 167
Imposition of penalty under Section 114 - Seizure of currency - Held that:- On perusal of findings of the impugned order, the adjudicating has clearly brought out in detail the attempt of smuggling of Indian currency of ₹ 41,60,000/- by way of concealment. The original statement of both the appellant and the statement of other witnesses are clearly brought out in the said order. Attempt to smuggling of foreign currency has been clearly established. But for the timely detection the currency would have been smuggled out. Only after the seizure and arrest, the appellant were trying to disown the currency whereas subsequent statement has clearly proved otherwise. As per the statement recorded before the Customs it was a valid evidence and also based on the circumstantial evidences it is clearly brought out that attempt of smuggling of Indian currency belonged to Kirankumar and Anwar Aneesur Rahman carried the same as per the instruction of the first appellant. As per the statement recorded before the Customs it was a valid evidence and also based on the circumstantial evidences it is clearly brought out that attempt of smuggling of Indian currency belonged to Kirankumar and Anwar Aneesur Rahman carried the same as per the instruction of the first appellant. - present case relates to attempt to export of Indian currency in violation of Customs Act and FEMA. Therefore, appellants are liable for penalty under Section 114. However, taking into overall facts and circumstances of the case and also considering the acquittal of appellant in prosecution, I reduce the penalty - Decided partly in favour of assessee.
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2015 (12) TMI 166
Modification of stay order - Waiver of pre deposit - Classification of goods - Classification under CTH 27011200 or under CTH 27011920 - Bituminous coal or steam coal - Held that:- as per the investigation conducted by the Customs Department, the gross calorific value was found to be exceeding 5833 Kcl/kg and the volatile matter content exceeded 15% and the goods merited classification as "bituminous coal" as defined in sub heading note 2 to Chapter 27. Further, this Tribunal also took into account the final order of this Tribunal in the case of Coastal Energy Pvt. Ltd., & Others vide order dated 20/06/2014 wherein it was held that the coal imported having volatile matter content exceeding 15% and gross calorific value limit exceeding 5833 cal/kg would merit classification as "bituminous coal". Subsequent orders of the Tribunal either by the Madras Bench or by the Circuit Bench at Hyderabad are only interim orders, whereas the decision relied upon by this Tribunal while passing the stay order is based on a final order passed by the Bangalore Bench on the matter. It is a settled position of law that interim orders passed by the co-ordinate benches do not have any binding value. Further, interim order relied upon is subsequent to the passing of the order by this bench in the appellant's case and therefore, they cannot be said to have any precedential value. - No merit in modification application.
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2015 (12) TMI 165
Modification of stay order - Waiver of pre deposit - Held that:- Tribunal directed the pre-deposit after considering their role played in respect of forging of the documents for export of non-Basmati rice. The applicants submitted that the cross examination of the main person (exporter) was not granted. We find that this issue would be considered at the time of appeal hearing. The applicants also submitted that they have filed salary certificates and bank pass books with their applications. In our view, the case relates to forging of the documents in export of the restricted items and the money would definitely not shown in their bank passbooks or salary certificates. So, the evidence placed by the applicants would not suffice to their financial hardships. - No reason for modification of the stay order.
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Corporate Laws
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2015 (12) TMI 175
Non-compliance of the provisions of Section 160 of the Companies Act, 2013 - appellant did not consider the notice issued by the second respondent under Section 257 of the companies Act, 1956 for considering the appointment of its nominees - Held that:- As per Section 160 of the companies Act, 2013, notice has to be issued 14 days prior to the meeting for the appointment of Director together with the deposit of ₹ 1 Lakh for the purpose of considering the proposal at the meeting. In the instant case, admittedly, the nomination letter dated 26.9.2014 along with the requisite sum of ₹ 1 Lakh deposit were handed over only at the meeting on 27.9.2014. Also, it transpires that on 26.9.2014, the Company Law Board had not dispensed with the mandatory requirement of 14 days notice of the appointment and the deposit of ₹ 1 Lakh per Director Inspite of specific pleading by the second respondent to dispense with the mandatory requirement of issuing 14 days notice, the Company Law Board has not exercised its discretion and such order passed by the Company Law Board without dispensing with the notice, will not hold good. It is also not the reasoning of the Company Law Board that the appellant raised any dispute over its discretion to dispense with the notice. It is manifestly clear that the Company Law Board had adopted a callous attitude and chose not to go into the issue in detail. In any view of the matter, since the learned Company Law Board did not assess the merits of the case and did not answer the relief sought with regard to dispensation of the mandatory notice, making an endeavor to do the same in this appeal, in my considered view, is not appropriate since original Court viz., the Company Law Board here, has virtually made no effort in that regard. Therefore, there is no other go except to remit the matter for fresh consideration by the Company Law Board, Southern Region Bench, Chennai. For the foregoing reasons, the common order impugned in these appeals is set aside and the matter is remitted to the Company Law Board to pass orders on the petitions in accordance with the statutory provisions.
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Service Tax
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2015 (12) TMI 164
Demand of service tax - Business Support service - order beyond the scope of show cause notice - Held that:- Services provided by the appellants do not fall within the category of support services for business or commerce. As a consequence of this finding since the proceedings were initiated only on the allegation that appellants had provided services of support of business or commerce, the proceedings should have been dropped. However, the lower appellate authority proceeded to analyze the nature of the services and concluded that the appellant had provided business auxiliary service and confirmed the demand assessed by the primary authority. - Since the demand was confirmed by the impugned order on a class of taxable service which was not alleged in the show cause notice, the demand cannot be sustained - Decided in favour of assessee.
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2015 (12) TMI 163
Demand of service tax - Consulting Engineer Service - Invocation of extended period of limitation - Held that:- Assessee has a separate Engineering Wing which undertook supervision of the construction activities and charged an amount equal to 10% of the construction cost. - It is seen that the assessee provided designs with estimates and supervised the work of construction to ensure that the construction was in accordance with the design. Thus, it clearly rendered consultancy or technical assistance by way of formulating designs and so clearly fell within the scope of advice, consultancy or technical assistance in the field of civil engineering which is a discipline of engineering - normal period of one year covered the period from 01.04.2006 onwards for which the demand has been confirmed by the adjudicating authority. As stated earlier, the demand prior to 01.05.2006 is not sustainable and consequently the Revenue appeal against dropping of the demand for the extended period (beyond the normal period of one year) which was the period prior to 01.04.2006 becomes unsustainable on that count alone apart from the reasons given by the adjudicating authority that the assessee could not be held guilty of wilful misstatement or suppression of facts. - Matter remanded back - Decided in favour of assessee.
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2015 (12) TMI 162
Demand of service tax - GTA service - Trading and transportation of coal - Held that:- Only for a small portion of demand (Rs. 238511.73) in respect of 7 customers, such confirmation could not be obtained and the Commissioner confirmed that much demand against the respondent which chose not to contest the same as it was a small amount but that cannot be a legal ground to assert that the respondent was liable to pay service tax under GTA service. The onus is on Revenue to establish that the respondent was liable to pay service tax under GTA service. We find that Revenue has not produced any consignment notes showing respondent as recipient of GTA service i.e. it was the consignor or consignee who paid freight for transport of coal. This adds to the credence to the contention of the respondent that the freight expenses shown in the balance sheet of the respondent represented the actual amount paid for hiring trucks. Mere hiring of trucks by a Goods Transport Agency does not constitute GTA service. We find that the invoices have been issued by M/s Coal Feeders which show names of the customers who purchased coal and to whom coal was consigned. Thus, M/s Coal Feeder became the provider of GTA service and as these invoices clearly mentioned ‘freight to be paid by the consignee’, the freight was rightly paid by the consignee along with service tax as has been confirmed in respect of 62 out of total of 69 consignees. - entire demand raised in the show cause notice actually stood paid (except for an amount of ₹ 238512/- which was confirmed vide the impugned order) and the crux of para 5.7 of CBEC instruction dated 17.12.2004 essentially is that in respect of GTA service, double taxation should be avoided. - Decided against Revenue.
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2015 (12) TMI 161
Disallowance of CENVAT Credit - GTA service - whether the service for which M/s Hira Industries were paid fell within the scope of GTA service even though the charges recovered pertained not only to transport of goods but also for loading and unloading - Held that:- Commissioner (Appeals) has taken into account the nature of service to arrive at the classification of service as GTA service. - in the given circumstances Commissioner (Appeals) was justified in holding that the said CBEC clarification was squarely applicable to the facts of the present case also and therefore the impugned service was GTA service and not cargo handling service. - No infirmity in impugned order - Decided against Revenue.
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2015 (12) TMI 160
Demand of differential tax - Security deposit - inclusion of reimbursable expenses - Held that:- Decision in the case of Security Agencies Association (2013 (2) TMI 356 - KERALA HIGH COURT) as relied upon by the learned Authorised Representative for the Revenue is in the context of challenging the vires of Service tax under the category of Security service. There is some force in the submission of the Appellant that the Hon'ble Delhi High Court in the case of Intercontinental (2012 (12) TMI 150 - DELHI HIGH COURT) held that the reimbursable expenses would not be included in the taxable value as per the Valuation Rules. In our considered view, the Adjudicating authority should examine the demand of balance amount of tax alongwith interest and penalty in the light of the decisions placed by the Appellant and the learned Authorised Representative on behalf of the Revenue, in the interest of justice. - Appeal disposed of.
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2015 (12) TMI 159
Demand of service tax - Franchisee service - use of logo / trade mark - joint venture to run buses in the city - Held that:- AMT is nothing but the name of service provided and the noticee has permitted i.e given representational right to use name AMT i.e logo on the city buses to be run by M/s APMSS. Providing of the service of use of name AMT on city buses by M/s APMSS is nothing but a service mark/logo, trade name and slogan which is covered under Franchise Service falling under Section 65(47) of Finance Act, 1994 and chargeable to Service Tax under section 65(105)(zze) of Finance Act, 1994 w.e.f 01.07.2003." We have seen the conditions of the Agreement between the appellant and APMSS as extracted in the adjudication order. We find that it clear reflects to a joint venture to run buses in the city. Even the logo is to be decided by both parties. There is no relationship of franchisor and franchisee. We did not find any representational right having been granted by appellant to APMSS to provide any service identified with the franchisor. - Decided against Revenue.
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2015 (12) TMI 158
Waiver of pre deposit - Disallowance of CENVAT Credit - conversion from a 100% EOU to DTA unit - Held that:- From the facts and circumstances of this case it is observed that services availed by a 100% EOU were eligible for getting refund of service taxes paid under Notification No. 41/2007-S.T., dated 6-1-2007. Similarly under Rule 10 of the Cenvat Credit Rules, 2004 provisions exist for transferring the Cenvat credit to the new unit on sale merger, amalgamation, transfer, etc. Appellant has rightly relied upon the case law of Showa India (P) Limited v. CCE, Faridabad (2011 (7) TMI 909 - CESTAT, DELHI) where credit of services availed before obtaining registration has been held to be admissible. Prima facie, appellant has made out a case for complete waiver of the confirmed dues and penalty, in view of the relied upon case laws. Accordingly, it is ordered that there will be a stay on the recoveries of the dues till the disposal of this appeal. - Stay granted.
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2015 (12) TMI 157
Disallowance of CENVAT Credit - Nexus with manufacture - Held that:- Perusal of the substance and evidence of the case on record indicates that the Service Tax paid in respect of the services, viz., rent at Ludhiana, insurance for sugar stacked at Ludhiana and Commission on sugar sale at Ludhiana after clearance from factory appear to be integral part of the manufacturing and sale activity in the eyes of law. Therefore, Cenvat credit of few services is allowed - Decided partly in favour of assessee.
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2015 (12) TMI 156
Benefits of exemption Notification Nos.15/2004-ST and 18/2005-ST dated 10.9.2004 and 7.6.2005 - Failure to disclose the value of goods supplied free of cost by the service recipient to the assessee for incorporation into works executed by the assessee for the benefit of the recipients - Held that:- Issue is squarely covered by the decision of the Larger Bench of this Tribunal in Bhayana Builders Pvt. Ltd. vs. C.S.T., New Delhi - [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)]. This is only the issue on the basis of which liability of the assessee to tax and interest, penalty was determined by the impugned adjudication order. - Decided in favour of assessee.
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2015 (12) TMI 155
Demand of service tax - Site Formation and Clearance, Excavation and Earthmoving and Demolition - Held that:- “site formation and clearance excavation and earthmoving and demolition” is defined under Section 65(97a) of the Finance Act 1994 - The activity of the respondents is indisputably covered under Sr. No. (iii). It is seen that the said definition in no way and nowhere implies that only such horizontal drilling is covered there-under which is done using drilling machines. Thus we find that the reason and logic adopted by the Commissioner (Appeals) for setting aside the demand of service tax relating to horizontal drilling (for the passage of cables) where such drilling was not done using drilling machine is totally untenable and not supported by any legal reasoning - Decided in favour of Revenue.
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2015 (12) TMI 154
Refund claim - exemption Notification No. 41/2007 dated 06.10.2007 as amended by Notification No. 17/2008 dated 01.04.2008 - Held that:- Impugned order of the learned Commissioner appears unsustainable. Its only by the amendment introduced by Notification No. 17/2008-ST that services provided by a commission agent located outside India and engaged under a contract or agreement or any other document by an exporter in India, to act on behalf of the exporter, to cause sale of goods exported by such exporter was notified as a scheduled service, comprising the taxable service enumerated in Section 65(105)(zzb), entitled to benefits of exemption and w.e.f. 01.04.2008. The learned appellate Commissioner however, appears to have concluded that since commission agent service was included as part of Business Auxiliary Service w.e.f. 01.07.2003 in Section 65(19) of the Finance Act, 1994, exemption was available for the entire period claimed. - refund Stayed.
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2015 (12) TMI 153
Rejection of refund claim - Bar of limitation - Notification No. 17/2011-ST dtd 1.3.2011 - Power of Commissioner to remand back the case - Held that:- Such powers has been granted to the adjudicating authorities/revenue officers needs to be used in broader prospective. In the case in hand, since the issue is of refund of the service tax paid and services received in SEZ area, the said powers which are given to the adjudicating authority should be exercised to achieve stated goals of Govt. of India i.e., to make services to SEZ tax free. - in the peculiar facts of this case to the extent the appeal is filed of rejection of refund claim of ₹ 85,237/- is remanded back to the adjudicating authority to reconsider the issue after following the principle of natural justice and considering the clause 3(e) of the Notification No. 17/2011-ST in its proper perspective. - Decided in favour of assessee.
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2015 (12) TMI 152
Demand of service tax - Manpower Recruitment or Supply Agency services - imposition of penalty - Held that:- Neither any specific allegations have been made in the show cause notice nor any findings recorded in the impugned order that non-payment of service tax by the appellant within the stipulated time-frame, is on account of any wilful suppression or mis-statement of facts, with intent to evade payment of service tax. Further, I find that the original authority in the adjudication order dated 2-5-2011 has refrained himself from imposing penalty under Section 78, by invoking provisions of Section 80 of the Act, which clearly demonstrates that non-payment of service tax by the appellant was not due to wilful suppression coupled with the intention to evade payment of service tax - In the absence of any wilful suppression, etc., on the part of the appellant to defraud the Govt. revenue, I am of the opinion that Section 73(3) of the Act will have application in the present case, for non-initiation of any proceedings for recovery of the penalty amount, in view of the fact that the service tax along with interest has been paid by the appellant, before issue of the show cause notice. - Decided in favour of assessee.
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2015 (12) TMI 151
Waiver of pre deposit - Cenvat credit - input services had not been rendered in the factory premises and used in or in relation to the manufacture of the finished goods - Held that:- Input services received by various RSOs and the Head Office are undisputedly used outside the factory premises of the Applicant Company, but in or in relation to the business activities of the Applicant Company. Prima facie, we find that the applicant had availed the Cenvat credit on the invoices issued by their RSOs/Head Office, which were registered as Input Service Distributors under the relevant Rules. Also, in our opinion, it is not necessary that the back-up invoices should be enclosed along with the invoices issued by the Input Service Distributors so as to make the applicant eligible to avail the Cenvat credit on such invoices of the input service distributors. In the result, the applicant could be able to make out a case for waiver of the dues adjudged. Accordingly, pre-deposit of all dues adjudged is waived and its recovery stayed during the pendency of the appeal. - Stay granted.
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2015 (12) TMI 150
Cenvat Credit - invoices did not give description of the services provided by said M/s. Shree Services & Trading Company Ltd., and the registration number has not been mentioned on the invoice. - Held that:- Revenue is not denying the fact of payment of Service Tax by the service provider and the fact of availment of service by the service recipient, i.e., the appellant. The appellants have also produced the service registration number on record. Further as per the appellant, the details of input service were not being provided by the service provider inasmuch as they were providing all sort of services to the appellant under a contract which fall in the category of Business Auxiliary Services, on which services the service provider was paying the Service Tax. As such, I fully agree with the appellants that the fact of invoices raised by the service provider not giving full details, cannot be made a ground for denial of substantial benefit of credit of Service Tax to the appellants, especially when there is no dispute about the availability of the same. As such, I set aside the impugned order - Decided in favour of assessee.
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2015 (12) TMI 149
Waiver of pre deposit - Non discharge of the service tax liability on the amounts received from M/s. ONGC for the services rendered - inclusion of expenses incurred by the client directly - Held that:- Entire order of the adjudicating authority is misdirected. It is on record that the appellant is providing services to ONGC for security purposes as deployment charges. M/s. ONGC has directly made the payment to the various service providers like telephone companies, rent a cab services, insurance services, health services for the facilities extended to CISF. There is nothing on record to indicate that CISF has billed ONGC for all these charges which were incurred directly by the ONGC. In our view, these charges cannot be considered as an amount that needs to be included in the services provided by CISF to ONGC. Prima facie, we find that the appellant had made out strong case for the waiver of the pre-deposit of the amounts involved - Stay granted.
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2015 (12) TMI 148
Benefits under Board Circular No. 80/2004-S.T., dated 17-9-2004 - pandal and shamiana service - Held that:- Primary Authority rejected the claim for benefits under Board Circular No. 80/2004-S.T., dated 17-9-2004 on the ground that pandal and shamiana service provided to facilitate congregation of the Nirankari Mandal was a spiritual purpose but not for worship of gods or goddesses. According to the primary Authority, Nirankari Mandal preaches spirituality, oneness of god and goddesses which is a holy purpose but not a purely religious ceremony. - conclusion is irresistible and compelling that the primary adjudication order, issued without a show cause notice is unsustainable and non est. The setting aside of such an order by Appellate Commissioner including for the reason that no show cause notice is impeccable and warrants no appellate interference - Decided against Revenue.
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2015 (12) TMI 147
Demand for service tax - Construction service - canal dump supply - Held that:- According to the definition of personal use under the residential complex service, construction of quarters for providing accommodation to the employees is considered as personal use. Therefore, prima facie, the appellants have a case in their favour for waiver. No sale is involved and the assessees performed the job of transporting the goods. Apparently the canal dump is the boulders and the other things arising while digging the canal and it is submitted that it was used for making the gravel road nearly 3 kms. away from the canal. No classification of service has been made and we find that the activity, prima facie, does not come under the category of cargo handling or under the GTA service. Therefore, appellants have made out a prima facie case for waiver. There is no exclusion of private railways from exemption in the definition of works contract service and therefore we consider that the appellant has a prima facie case for waiver in respect of this demand also. Amounts paid by the appellant relates to the year 2009-10 only and not to the earlier year. Therefore we consider that appellant should deposit the amount relatable to the year 2008-09 in respect of which, the appellant does not have a prima facie case for waiver and the amount involved comes to ₹ 11 lakhs according to the learned CA. After calculating interest payable on a rough estimate basis on this amount and even though financial difficulty was pleaded, we could not consider the case because the appellant is clearly liable to pay service tax on this amount and further in the subsequent year they have collected the tax and that was also not paid immediately. - Partial stay granted.
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2015 (12) TMI 146
Demand of service tax - Sponsorship Service - sponsorship of a sports event, which has a commercial element - Held that:- Issue is now settled by the decision of the Tribunal in Hero Honda Motors Ltd. v. CST, Delhi - [2013 (4) TMI 428 - CESTAT NEW DELHI] whereby the demands were made on the same grounds - impugned order is set aside - Decided in favour of assessee.
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2015 (12) TMI 145
Demand of service tax - claim of benefit of abatement where cost of free supplies are not included in the value - works contract - benefits of Notification Nos.15/2004-ST, dated 10.9.2004 and 18/2005-ST dated 7.6.2005 - Held that:- The impugned adjudication order confirms the demand indicated above on the basis that the presumptive value of the free supplies is also a consideration received for the rendition of the services and that this component and non-disclosure of this component disentitles availment of the benefits of Notification Nos.15/2004-ST, dated 10.9.2004 and 18/2005-ST dated 7.6.2005 - issue is covered by the decision of the Larger Bench of this Tribunal in Bhayana Builders (P) Ltd. vs. C.S.T., Delhi - [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)]. No other issue fall for consideration is also admitted. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (12) TMI 181
Refund of the excess ITC - no refund was made within 60 days - claim of interest on delayed refund - Provisional refund - Held that:- After hearing learned counsel for the petitioner, perusing the present petition and without expressing any opinion on the merits of the case, Court dispose of the present petition by directing respondent No.4 to decide the applications dated 28.1.2015 and dated 21.8.2015, in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one month from the date of receipt of certified copy of the order. It is further directed that in case any amount is found payable to the petitioner, the same be released to it within next one month, in accordance with law. - Appeal disposed of.
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2015 (12) TMI 180
Validity of reassessment proceedings - Escapement of sales turnover - Held that:- Court, after surveying the earlier cases that clarified the legal position held that the requirement of the AA having to record ‘reasons to believe’ preceding the issuance of the show cause notice to an Assessee under Section 24 (1) DSTA was mandatory. It is not enough for the AA to merely reproduce the wording of the provision and state in the notice to an Assessee that there is "reason to believe" that the whole or any part of the turnover has escaped assessment. It other words the exercise of reopening of an assessment is not a casual one. The noting has to reveal that as part of the process of reopening the assessment, the AA applied his mind to the relevant materials prior to arriving at the conclusion, even prima facie, that there are 'reasons to believe' that the whole or any part of the turnover has escaped assessment. - mandatory requirement of Section 24 (1) of the DSTA has not been fulfilled in the present case. Schedule 13 of the balance sheet produced by the Assessee clearly discloses the know-how fees in the sum of ₹ 400 lakhs. The extracted passage of the order clearly indicates that the Assessing Officer had perused the balance sheet and thereafter framed the assessment. Consequently, what in fact the AA did was to review his earlier order based on a change of opinion that the said sum of ₹ 400 lakhs ought to have been brought to tax. This course of action was legally impermissible and was beyond the scope of the powers of the AA under Section 24 (1) of the DSTA. If indeed the assessment order of the AA was prejudicial to the interests of the revenue then it was open to the Commissioner to seek to invoke the revisional powers under Section 46 of the DSTA. That course was, however, not opted in the present case. - Decided in favour of assessee.
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2015 (12) TMI 179
Rejection of aplication u/s 84 - Rectification of mistake - Held that:- An opportunity should be given before rejecting the application filed under Section 84 of the Act. As far as the present case is concerned, the same is not provided. When such being the case, there is no justifiable reason for the assessing authority to reject the application filed under Section 84 of the Act - impugned order passed by the respondent dated 09.10.2015 is set aside and the matter is remitted back to the respondent for passing appropriate orders on merits and in accordance with law - Decided in favour of assessee.
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2015 (12) TMI 178
Refund claim - Tripura Incentive Scheme of 2002 read with section 28 of the Tripura Sales Tax Act read with rule 37 of the Tripura Sales Tax Rules, 1976 - Held that:-concession shall only be admissible to industrial units registered as small-scale industrial units by the Director of Industries, Government of Tripura. The petitioner definitely is a small-scale unit. Sub-rule (1) of rule 37 provides that the Government may permit draw back, set off or refund of an amount equal to the tax paid in respect of raw materials used in production. Subrule (3) clearly provides that the State Government may, by notification in the Official Gazette specify the class or classes of goods which are to be treated as raw materials. Therefore, the benefit under sub-rule (1) will only be in respect of those goods which are notified under sub-rule (3). The State Government has only issued notification under sub-rule (3) in respect of "paraffin wax" and not in respect of aluminium wire. No doubt the Additional Secretary of the Department of Industries and Commerce has recommended vide his communication dated 31st December, 2004 that aluminium wire of less than 3 mm should also be included and notification in this regard should be issued but till such notification is issued by the State Government, the benefit cannot be given - Decided against assessee.
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2015 (12) TMI 177
Levy of penalty - Forfeiture of remitted tax under section 47(2)(b) of the Karnataka Value Added Tax Act, 2003 - Levy of penalty - Held that:- Assessee sold naphtha and collected sales tax from the purchaser. Though in the earlier returns the assessee had declared nil sales and nil tax, on receipt of a portion of amount, he filed a revised return within 11 days from the date of filing of original returns and paid the entire tax with interest for 11 days. Therefore, the assessee had never disputed the tax liability. - levy of penalty was not justifiable because the assessee had filed a revised return, paid tax and interest within a span of 11 days. Hence, imposition of penalty is not being automatic unless the intention to evade tax is made out or any mala fide act is made out, the penalty cannot be imposed. Therefore, the order of imposing penalty is unsustainable. Accordingly, it is hereby set aside - Decided partly in favour of Revenue.
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2015 (12) TMI 176
Exemption of tax under rule 28A of the Rules - benefit of consignment sales during the currency period of exemption of tax - Whether the dealer is liable to pay purchase tax on paddy which is included in the levy price to the DFSC - Whether for the purpose of notional sales tax liability, the export sales are includible therein or not - Held that:- Decision in the case of Jay Vee Rice and General Mills v. State of Haryana [2010 (9) TMI 881 - SUPREME COURT OF INDIA] and State of Haryana v. Liberty Enterprises [2009 (3) TMI 545 - SUPREME COURT OF INDIA] followed - Matter remanded back - Decided in favour of assessee.
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