Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 10, 2018
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Accrual of income - Taxability in India of the salary of its employees sent abroad for rendering services to a foreign company - As the assignees are not liable to be taxed in India in respect of their income during the financial year 2011-12, the Applicant is not obliged to withhold taxes on the salary paid to them in India for such period. - AAR
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Taxability in India of the salary of its employee, sent abroad for rendering services to a foreign company - Accrual of income - assessment of income for period of deputation - once the income is taxable in the USA as per DTAA, it is not taxable in India - No withholding tax (TDS) liability - AAR
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Revision u/s 264 in favor of assessee - period of limitation - the petitioner cannot be shut out from placing facts before the Commissioner and Section 264 empowers the Commissioner to cause enquiry and verify the facts. Secondly, if there has been a genuine mistake committed by the assessee, Statute does not bar the assessee from rectifying his mistake - HC
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Disallowance of the expenses of damage - CIT-A restricted addition to 10% - the cost incurred for the damage of goods is directly connected with the business activities of the assessee and accordingly eligible for deduction u/s 37(1) - AT
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Non-deduction of TDS u/s 194H r.w.s. 40(a)(ia) - nature of discount - Some services should be provided by the person or any other services in the course of buying and selling of goods - since there was no relationship between the assessee and its customers as of principal and agents, the amount of discount cannot be termed as commission - No TDS liability - AT
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Business expenditure - the service tax paid by the assessee is otherwise eligible for deduction. Hence the input tax credit relatable to exempted services is also eligible for deduction, since it cannot be availed as credit by the assessee. - AT
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Penalty u/s 271C - assessee had failed to deduct TDS on interest paid on FDRs and to deposit the same - the assessee is found to have had reasonable cause for not deducting the tax at source. The penalty levied is, accordingly, deleted. - AT
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Deduction as Municipal Taxes and other charges u/s 24 against rental income earned - The expenditure as claimed by the assessee was not covered by the statutory provisions and hence not allowable - AT
Corporate Law
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Condonation of delay of 9 days - applicability of Section 5 of the Limitation Act - application to the peremptory language of Section 421(3) of the companies act, 2013 - period of limitation - appeal against the order of NCLT - delay cannot be condoned - SC
IBC
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Approval of resolution plan. - Amendments in the Regulation no. 38 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017
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Resolution plan. - Amendments in the Regulation no. 36 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017
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Invitation of Resolution Plans. - New Regulation 35A added to the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017
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Information memorandum - Amendments in the Regulation no. 35 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017
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Fair value and Liquidation value. - Amendments in the Regulation no. 34 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017
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Appointment of registered valuers. - Amendments in the Regulation no. 26 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017
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Definitions - Amendments in the Regulation no. 2 of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017
Service Tax
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Small Scale exemption upto ₹ 10 lacs for providing Business Auxiliary Services - the said services were rendered to the Financial Institutions and therefore, the question of use of brand of the Financial Institutions by the Service Provider did not arise - AT
Central Excise
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Valuation - paper board - related party transaction - the sole attempt made by the de novo adjudicating authority was only to compare 2% of the transactions during the period which has also been done in a very flawed manner - No demand could be made - AT
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CENVAT credit - Education Cess and Secondary Higher Education Cess paid under Section 94 of the Finance Act 2004 and Section 139 of the Finance Act, 2007, on the aggregate duty of customs levied under Sec.12 the Customs Act, 1962 can never be held to be admissible to credit which continued to be levied before and after 17.3.2012. - AT
Case Laws:
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Income Tax
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2018 (2) TMI 521
Accrual of income - Taxability in India of the salary of its employees sent abroad for rendering services to a foreign company - assessment of income for period of deputation - DTAA - Held that:- The income earned by the assignees/employees from the services rendered in USA / Germany, respectively, would be chargeable to tax in the USA / Germany only, and not in India, for the period of their deputation. As the assignees are not liable to be taxed in India in respect of their income during the financial year 2011-12, the Applicant is not obliged to withhold taxes on the salary paid to them in India for such period. Whether u/s 192, the Applicant can give credit to the assignees for the taxes paid in the USA / Germany? - Held that:- While discharging its obligation u/s 192 the Applicant may take into account the credit for the taxes paid in the USA for Mr. Rajendrababu in view of Article 25 of the India-USA DTAA and for Ms. Prashanth in view of Article 23 of India–Germany DTAA, after making proper verification as required by section 192(2) of the Act.
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2018 (2) TMI 520
Taxability in India of the salary of its employee, sent abroad for rendering services to a foreign company - Accrual of income - assessment of income for period of deputation - DTAA - withhold taxes on such salary paid in India - Held that:- The Income earned by Mr T N Santhosh Kumar from the services rendered in the USA would be chargeable to tax in the USA, and not in India, during the period that he was rendering services in the USA. We are in agreement with the view that the split pay and perquisites received in India by Mr T N Santosh Kumar but accrued outside India, would not be taxable in India, and consequently, the employer, Texas Instruments (India) Pvt. Ltd., ie. the Applicant would not be obliged to withhold tax on the same at the time of payment under section 192 of the Act. Whether u/s 192, the Applicant can give credit to Mr T N Santhosh Kumar for the taxes paid in the USA, as per Article 25 of the India USA DTAA? - Held that:- While discharging its obligation u/s 192 in respect of his income for the FY 2012-13, the Applicant may take into account the credit for the taxes paid in the USA for Mr. T.N. Santhosh Kumar, in view of Article 25 of the India-USA DTAA.
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2018 (2) TMI 519
Addition on account of receipts not recorded in the books of accounts - Held that:- Tribunal came to correct conclusion that the Commissioner, Income Tax (Appeal) has rightly granted part relief to the assessee as both the service and escort charges were shown separately in profit and loss account on net basis. Dis-allowance out of certain expenses on the basis of certain discrepancies found therein - A.O. has disallowed a percentage of such expenses on the ground that most of these expenses have been incurred in cash and the vouchers have been prepared in one handwriting - Held that:- Both of such observation were found incorrect because while such amounts were expended both by cash and cheque, the vouchers were prepared by computers and handwritten vouchers were in many handwritings. Entries on each voucher are narrative which includes transaction detail, type of work & L.R. No. of each transaction. Payment of appellant in released by Idea cellular only after verification of work done as appearing in such vouchers. When books of accounts of appellant wereduly audited & A.O. failed to find any defects in detailed vouchers maintained by appellant, hence adhoc dis-allowance as percentage of such expenses is not at all justified - Revenue appeal dismissed.
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2018 (2) TMI 518
Claiming deduction u/s. 80IB (10) - whether disallowance under Section 40(a)(ia) cannot be regarded as increase in profit of the assessee's business on which deduction u/s 80IC would be allowable? - Held that:- Tribunal had held that the disallowance was not justified. The Revenue complained that the Tribunal was not justified and failed to appreciate that this disallowance under Section 40(a)(ia) cannot be regarded as increase in profit of the assessee's business on which deduction under Section 80IC would be allowable. In the opinion of the Revenue, that amount has already been expended. We do not see how such a question arises in these Appeals. We have already held above that the substantial questions of law in these Appeals revolve around interpretation of Section 80IB( 10) of the Income Tax Act We have already held above that the substantial questions of law in these Appeals revolve around interpretation of Section 80IB( 10). We see no justification, therefore, for the Revenue seeking assistance of an order of admission in a distinct case (M/s. Lipid Technologies (2018 (2) TMI 351 - BOMBAY HIGH COURT). Therefore, Mr. Tejveer Singh's contentions with regard to this order being applicable to the facts of the present case deserve to be rejected. The contentions are therefore rejected.
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2018 (2) TMI 517
Reopening of assessment - eligible reasons to believe - proof of accommodation entries - Held that:- A plain reading of the reasons recorded for reopening the assessment reveals that the basis for formation of belief that the transaction made by the assessee with M/s Shreeji Trading Company is bogus in nature is that Shri Anil Kumar Jain and Shri Pravin Kumar Jain admitted to carrying on the business of giving accommodation entries in the names of various entities and upon verification it was found that one such entity handled by them was M/s Shreeji Trading Company. As noted hereinabove, the information which was received by the Assessing Officer nowhere discloses that M/s Shreeji Trading Company was an entity handled by Shri Anil Kumar Jain and Shri Pravin Kumar Jain. No nexus has been established between Shri Anil Kumar Jain and Shri Pravin Kumar Jain who had made the statements under section 131 of the Act and M/s Shreeji Trading Company. Thus, the reasons are based upon a factually incorrect premise that M/s Shreeji Trading Company was being handled by Shri Anil Kumar Jain and Shri Pravin Kumar Jain. Absence of any material on record to indicate any nexus between M/s Shreeji Trading Company and Shri Anil Kumar Jain and Shri Pravin Kumar Jain, erodes the very substratum for formation of belief that income has escaped assessment. Consequently, once there is no foundation for such belief, the reasons based thereupon have no legs to stand, hence, on the reasons recorded - AO could not have formed the belief that any income chargeable to tax has escaped assessment. Therefore, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act to reopen the assessment by issuing the impugned notice under section 148 of the Act is without authority of law - Decided in favour of assessee
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2018 (2) TMI 516
Expiry of the period for filing an appeal - Interest u/s 220(2) - Held that:- As against the order passed by the Commissioner of Income Tax (Appeals) dated 27.12.2017, the petitioner has an effective alternate remedy of an appeal before the Income Tax Appellate Tribunal. The time limit for preferring an appeal is 60 days from the date on which the order passed by the CIT(Appeals) was received by the petitioner Board. According to the learned counsel for the petitioner, the copy of the order was received on 08.01.2018. Therefore, well before the expiry of the period for filing an appeal, the respondent would not be justified in enforcing the demand dated 08.01.2018. If it is enforced, then the petitioner's right to file the appeal would be defeated and the appeal is likely to be rendered as infructuous. In the light of the above, demand notice dated 08.01.2018, issued by the second respondent, shall be kept in abeyance for a period of 60 days from 08.01.2018 till the expiry of the period for filing an appeal before the Income Tax Appellate Tribunal
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2018 (2) TMI 515
Reduction or waiver of interest u/s 234A, 234B and 234C - rectification of mistake - Held that:- In the present case, the notice u/s 142(1) of the Act was issued by the ITO on 19.8.2002 calling for return of income by 26.8.2002. Thereafter, again the notices were issued on 9.9.2002 and 17.10.2002. Thus, it cannot be said that the return could not be filed due to unavoidable circumstances. In totality, the petitioner’s case is not covered in any of the Paragraphs of the Circular dated 26.6.2006 issued by the CBDT. Moreover, the judgment relied upon by learned Counsel for the petitioner, which was rendered by the Hon. Apex Court in the matter of ‘B.M. Malani v. C.I.T.’ [2008 (10) TMI 2 - SUPREME COURT ], is not applicable in view of the present facts and circumstances of the case. In that case, the appellant had requested the appellate authority to sell shares and securities seized from him and appropriate the sale proceeds towards payments of arrears of taxes. In the present case, there is no mistake apparent from the record, as discussed hereinabove.
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2018 (2) TMI 514
Revision u/s 264 in favor of assessee - CIT rejected the application - condonation of delay - period of limitation - Held that:- The time taken for prosecuting these matters, some of which, was at the instance of the Department and some at the instance of the petitioner, has to be necessarily excluded while computing limitation for exercise of power under Section 264. This is for, more than one reason, firstly, the petitioner cannot be shut out from placing facts before the Commissioner and Section 264 empowers the Commissioner to cause enquiry and verify the facts. Secondly, if there has been a genuine mistake committed by the assessee, Statute does not bar the assessee from rectifying his mistake though there might have been some statement made by the petitioner that the canadian income has been taxed in the said country which was found to be false and the stand taken by him that he has received certain Gifts were also found to be false cannot be a bar to ascertain the correct status of the petitioner as to whether during the relevant period that he was a resident or a non-resident. The petitioner should not be shut out on technicalities and the facts should not be left unexamined. One more aspect which has to be taken into consideration is with regard to the observations made by the Commissioner while passing the order dated 28.03.2014, wherein the Commissioner himself has stated that the issue pertaining to the status of the petitioner as a resident or a non resident cannot be broached under Section 263 and the assessee could have come u/s 264 separately on the issue. Therefore, the Commissioner was satisfied with the issue raised by the petitioner regarding the status was a matter that could be considered u/s 264. Thus, for all the above reasons, the delay in filing the petition should be computed from the date on which the ITAT dismissed the petition (i.e.,) on 25.06.2015 and if that period is reckoned, revision petition had to be filed within a period of two months from the said date. Therefore, it cannot stated to be either hopelessly time barred and delay remains unexplained. Thus, for the above reasons, the delay in filing the revision petition, if any, requires to be condoned.
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2018 (2) TMI 513
Revision u/s 263 - subsequent Treaty will automatically apply to the present India- Netherlands DTAA also - Held that:- This Court is of the view that the impugned order passed by the CIT (IT) under Section 264 of the Act on 30.3.2016 cannot hold the field and the same deserves to be set aside. As far as the issue of there being a requirement of issuing a separate Notification for enforcing the later Treaty with another OECD country, viz., Finland, in the present case is concerned, this Court does not find any justification in the contentions raised on behalf of the Revenue, that such a Notification was required to be issued by the Government of India to enforce such later Treaty between India – Finland in the present case. The Protocol clause quoted above in the India- Netherlands DTAA itself provide for such automatic application of subsequent Treaty, to the India–Netherlands Treaty in hand and therefore, no such separate Notification was envisaged to be issued for enforcing such subsequent Treaty with another OECD country, viz., Finland, to be made applicable to the facts of the present case. The two reasons assigned by CIT (IT) in the impugned order, are no longer sustainable and therefore, the impugned order cannot be sustained in the eye of law. - Decided in favour of assessee
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2018 (2) TMI 512
Disallowance u/s 40(a)(ia) for non-deduction of tax at source based on tax audit report u/s 44AB - Held that:- The scheme of taxation is primarily governed by the principles laid down in the Constitution of India and as per Article 265 of the Constitution of India, no tax shall be levied or collected unless by an authority of law. When a particular item is not to be taxed as per the statute, then taxing the same would amount to violation of constitutional principles and revenue would be unjustly enriched by the same. Hence in the process of verification by the AO, if the stand of the assessee is found to be correct and if it results in income being assessed lower than the returned income, that would be the true and correct income of the assessee and it would be the duty of the revenue to assess the correct tax liability of the assessee. We deem it fit and appropriate, in the interest of justice and fairplay. Addition being amortization of premium paid for purchase of securities - Held that:- We find that this issue is covered in favour of the assessee by the order of this tribunal in assessee’s own case for the Asst Year 2008-09 [2016 (6) TMI 181 - ITAT KOLKATA] wherein held AO disallowed the claim of the assessee on the assumption that full purchase consideration of all the securities was included in the said investment trading account and amortization amount is charged separately in the Profit and Loss Account again and he therefore held that the claim of the Assessee cannot be allowed in computation of total income. This factual assumption of the AO is wrong as found by the CIT(A) which has not been disputed before us. In these circumstances, we are of the view that the order of the CIT(A) does not call for any interference.
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2018 (2) TMI 511
Eligibility of deduction u/s. 80P - assessee claimed interest income under the head ‘profit and gains’ from its business - whether assessee is entitled to claim deduction under section 80P(2)(a)(i) on the amount of interest received u/s. 244A of the Act and interest earned on FDs from bank should be assessed under the ‘profit & gains of business’? - Held that:- In the present case, the AO found that the assessee earned interest from SBI and treated the same as income from other sources. We find that in the aforementioned decision, the Hon’ble High Court of Calcutta directed the AO to work out the interest expenses that might have been incurred by the assessee in earning the impugned amount under the head ‘interest’ from SBI. Thus remand the issue to the file of the AO, to verify the expenses that may have been incurred in earning the impugned amount i.e. ₹ 39,30,537/- and whether such investments were made out of its own surplus fund or out of the amount payable to its members. Accordingly, the grounds raised by the revenue are allowed for statistical purpose.
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2018 (2) TMI 510
Long Term Capital Gain - exemption u/s. 54 entitlement - Held that:- We are of the view that booking of flat with the builder has to be treated as construction of flat by the assessee and hence period of three years would apply for construction of new house from the date of transfer of long term capital asset. Therefore, the Ld. CIT(A) has rightly allowed the exemption u/s. 54 because in the present case also the flat booked with the builder by the assessee has to be considered as a case of construction of flat and the deduction claimed by the assessee u/s. 54 was rightly allowed, which does not need any interference on our part, hence, we uphold the same and reject the grounds raised by the Revenue.
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2018 (2) TMI 509
TDS u/s 194J or 194C - tds liability on payment to DBM Geotechnics Construction Pvt. Ltd. for marine geotechnical investigation for rock excavation in Mithi River - Held that:- AO is directed to verify and evaluate the tender/contracts under which the payments were made by the assessee to DBM Geotechnics Construction Private Limited during the relevant period to the tune of ₹ 7,59,32,109/- and if the payments were found to be made by the assessee to DBM Geotechnics and Construction Private Limited for the construction of the retaining wall alongwith the bank of Mithi River , then the provision of section 194C shall be applicable so far as deductibility of income tax at source is concerned, while if the payments were made by the assessee to DBM Geotechnics and Construction Private Limited towards marine geotechnical investigation for rock excavation, then provisions of Section 194J will be applicable so far as deductibility of income-tax at source is concerned, as was held by the tribunal vide afore-stated common orders dated 30-01-2017 for AY 2008-09 and 2011-12.
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2018 (2) TMI 508
Disallowance of diminution in value of closing stock - method of valuation of closing stock of quoted shares - Held that:- We find that the assessee had placed reliance on the said CA’s certificate and had accordingly valued its closing stock by adopting the breakup value per share as on 31.03.2004, as it was lower than cost of the unquoted shares. We also find from the accounting policy of the assessee company which are part of the audited financial statements and from point 1C enclosed in page 32 of the paper book on the accounting policy followed for ‘stock-in-trade’. We also find that the assessee has been consistently following this method of valuation of closing stock of unquoted shares without any deviation thereon as has been categorically mentioned by the Ld. CIT(A) in his order, which remained uncontroverted by the Revenue before us. No justifiable reason to interfere in the order of the Ld. CIT(A) in this regard and hence, we do not find any infirmity in the order of the CIT(A) with regard to the issue. Accordingly, grounds raised by the Revenue are dismissed. Disallowance of interest paid on loan taken for purchase of shares of Ganpati Sugar Industries Ltd., which was part and parcel of the stock-in-trade - Held that:- The assessee is engaged in the business of dealing in shares. It is not in dispute that the assessee is already holding 11,30,000 shares of M/s Ganpati Sugar Industries Limited and which is part and parcel of its stock-in-trade of the trading business. Hence, it could be safely concluded that the additional investment which was made by the assessee out of borrowed funds were also made only for the purpose of business. AO had observed in the assessment order that the assessee has been allotted by M/s Ganpati Sugar Industries Limited by converting the share application money into share capital in assessment year 2005-06. In any case, once the borrowing has been accepted as being used for business purposes in the year of borrowing, then any interest paid thereon in subsequent years cannot be the subject matter of disallowance as the closing balance of borrowings at the end of earlier year would become the opening balance of borrowings at the beginning of this year. Department cannot take different stand during the year under appeal when they had accepted the borrowing being used for business purposes in the earlier year. This ratio has been laid down in the case of CIT vs. Sridev Enterprices (1991 (1) TMI 52 - KARNATAKA High Court). - Decided against revenue.
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2018 (2) TMI 507
Revision u/s 263 - deduction u/s 80P allowability - change of opinion - allowability under section 40A(9), section 37(1) and diversion by overriding title - revision permissible merely on audit objection - rule of consistency - Held that:- Deduction claimed under chapter VIA is held to be allowable for the year under consideration. This shows clearly that claim of deduction under section 80P has been examined and thereafter, it has been allowed. We are therefore of the view that in absence of any specific query/discussion/examination by the AO and in absence of any specific finding in the assessment order as having examined the claim of the assessee regarding general and education reserve and the provision for gratuity, it cannot be said that there is a change of opinion when such an opinion has not been formed at the first place. Therefore, we are unable to accede to the contention of the ld AR regarding change in opinion. It is a case where we find that there is no due and proper application of mind by the AO. The AO having reproduced the entries of general and education reserve as appearing in the profit/loss appropriation account, should have applied his mind to determine firstly, whether the entries in the profit/loss appropriation account, which are below-the-line entries in the accounting parlance, are allowable at first place in the hands of the assessee and secondly, what is the nature and purpose of these reserve and how the same are allowable and under what provisions of the Act. We donot find anything on record to suggest that the issue has been examined in the past from the perspective of section 40A(9). Hence, the above said contention of the ld AR regarding rule of consistency cannot be accepted. As we refer to the provisions of section 263 which provides that the ld Pr CIT may call for and examine the record of any proceedings under this Act in the instant case, it is not disputed that the revenue audit memo is part of the records. CIT has examined the assessment records as well as revenue audit memo available on record and after examining the same and providing a detailed reasoning in the revision order come to a conclusion that the assessment order passed under section 143(3) is erroneous and prejudicial to the interest of the Revenue. It is therefore not a question of borrowed satisfaction on the part of the ld Pr CIT wherein merely on account of revenue audit memo, she has initiated the proceedings under section 263. Rather she has examined the records and independently applied her mind and has come to a conclusion that the assessment order is erroneous and prejudicial to the interest of the revenue. The decisions relied upon by the ld AR are rendered in the peculiar facts of the case and are distinguishable. Regarding the arguments of the ld AR on merit regarding allowability under section 40A(9), section 37(1) and diversion by overriding title, we believe that the same can be examined by the AO and the assessee shall be free to raise the same before the AO. To this extent, we modify the directions of the ld Pr CIT and the same should be read to the effect that claim of the assessee regarding the claim of the deduction towards the transfer to general reserve, education reserve and the provisions for gratuity should be examined afresh as per law after providing reasonable opportunity to the assessee.
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2018 (2) TMI 506
Assessment u/s 153A - Additions on account of alleged investment in jewellery - Held that:- As considered very facts from that case and variation in the gold jewellery in his case was to the extent of 269.10 grams. Similarly, variation in silver articles was of 13.43 kg. This was excess jewellry found at the time of search than the one disclosed in the wealth-tax returns filed by the assessees viz. Ganapat L. Chowdhary. Similarly, in the case of Smt.Parvati S. Chowdhary variation was of only 41.96 grams of gold jewellery. It suggests that details with regard to possession of jewellery were already disclosed to the department. No incriminating material was found which can justify action under section 153A of the Act. The AO has nothing to expose the assessee on account of jewellery which was already disclosed to the department, and with regard to that no incriminating material was found. This aspect has been considered by us in the order of Shripal Sampatraj Chowdhary extracted (2018 (2) TMI 423 - ITAT AHMEDABAD)(2018 (2) TMI 427 - ITAT AHMEDABAD). Following order of the Co-ordinate Bench, we allow all these appeals, and direct the AO to delete impugned additions. - Decided in favour of assessee.
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2018 (2) TMI 505
Disallowance of deduction claimed u/s. 10B - CIT-A allowing the alternate claim of deduction u/s. 10A - Held that:- CIT(A) in his impugned order has wrongly allowed the alternate claim of deduction u/s. 10A by totally ignoring the intention of the legislature to create different sections i.e. 10A and 10B, for claim of different deductions and further ignoring the fact that the conditions for claim of deduction under these two sections are distinguishable. CIT(A)’s action in allowing the aforesaid claim is without appreciating the totality of facts and merit of the case and without giving proper justification for the fulfillment of the conditions as stipulated u/s. 10A. CIT(A) has obtained the Remand Report from the AO and the AO objected to the same, but Ld. CIT(A) has ignored the objections raised by the AO, which is contrary to the provisions of law and proves that Ld. CIT(A) in a hurry manner has passed the nonspeaking and laconic order. It is true that requirement of stating reasons for judicial orders necessarily does not mean a very detailed or lengthy order, but there should be some reasoning recorded by the lower Authority for granting relief to the assessee. We are unable to find any infirmity in the arguments advanced on behalf of the Department, that no reasons have been recorded for allowing the claim of the assessee, this legal infirmity has, in fact, prejudicially affected the case of the assessee before us. Hence, we are unable to sustain the order of the Ld. CIT(A) and for the afore-recorded reasons, we set aside the impugned order and remit back the issues in dispute to the file of the AO with the direction to decide the issues in dispute afresh - Decided in favour of revenue for statistical purposes.
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2018 (2) TMI 504
Non-deduction of TDS u/s 194H r.w.s. 40(a)(ia) - nature of discount - amount of commission offered by the assessee - Held that:- Some services should be provided by the person or any other services in the course of buying and selling of goods. In the instant case, the assessee has been supplying goods to its dealers on principal to principal basis as evident from the agreement as discussed above. Therefore, we find that there was no relationship between the assessee and its customers as of principal and agents. Therefore, the amount of discount offered by the assessee cannot be termed as commission u/s 194H of the Act. There is no dispute that the discount was offered by the assessee to its dealers in relation to the sales made by it to them. Thus the provisions of section 194H does not apply to the impugned discount offered by the assessee - Decided against revenue Disallowance of the expenses of damage - CIT-A restricted addition to 10% - Held that:- AO cannot just brush aside the details filed by the assessee and draw a conclusion that the expenses are not incurred in connection with the business of the assessee. We note that sufficient details were duly filed by the assessee at the time of assessment proceedings in support of the cost incurred on the damages and no defect of whatever has been pointed out by the AO. The Ld. DR has also not brought anything on record contrary to the finding of Ld. CIT(A). Thus, we hold that the cost incurred for the damage of goods is directly connected with the business activities of the assessee and accordingly eligible for deduction u/s 37(1) of the Act - Decided against revenue Disallowance of provision of doubtful debts while computing the income u/s 115JB - Held that:- In the instant case, we note that the Ld. CIT(A) has admitted the fresh evidences in contravention to the provision of Rule 46A of Income tax Rules. We note that the necessary details of the provision created by the assessee in earlier years were not supplied by the assessee to the AO at the time of assessment proceedings. The issue of provisions for doubtful debts written back by the assessee for ₹ 1,16,27,000/- needs to be examined by the AO. In respect of issue it was agreed by both the parties that the issue must be restored back to the file of AO for fresh examination. Accordingly, we remit back the issue to the file of AO to examine afresh and to decide the issue in accordance with law. AO must give reasonable opportunity to the assessee before passing order on this point.
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2018 (2) TMI 503
Penalty u/s. 271(1)(c) - defective notice - claim of depreciation on the land - Held that:- It is beyond doubt that the assessee has claimed depreciation on the land for which it was not entitled under the provisions of the Act. The mistake committed by the assessee was admitted during assessment proceedings and therefore the income of the assessee was enhanced by the amount of depreciation claimed on the land. It is also a fact that the assessee is also a private limited company and assisted by the tax consultants. Therefore such silly mistake cannot be expected by such organized company. Inadvertent mistakes committed by the assessee do not warrant the imposition of liability under section 271(1)(c) of the Notice issued by the AO u/s 274 does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 does not strike out the inappropriate words. Imposition of penalty cannot be sustained. The plea for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - Decided against revenue
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2018 (2) TMI 502
Eligibility of deduction u/s. 80P - whether the assessee was a 'Primary Agricultural Credit Society' or a 'Co-operative bank' - Held that:- CIT(A) is justified in directing the Assessing Officer to grant deduction u/s. 80P(2). See Edanad-Kannur Service Co-operative Bank Ltd. and others [2018 (1) TMI 848 - ITAT COCHIN] wherein as held Assessing officer was not competent and did not possess the jurisdiction to resolve / decide the issue as to whether the assessee was a 'Primary Agricultural Credit Society' or a 'Co-operative bank', within the meaning assigned to it under the provisions of the Banking Regulation Act and to take a contrary view especially in view of the Explanation provided after the clause (ccvi) of section 5 r.w.s Section 56 of the Banking Regulation Act. - Decided against revenue
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2018 (2) TMI 501
Nature of receipt - Grant received from government - capital or revenue receipt - Held that:- Unspent grant received by the assessee from the Government as on 31/03/2012 cannot be brought to tax as revenue receipt. Addition on account of sundry credits - Held that:- CIT(A) has deleted the addition based on the assurance given by the assessee that reconciliation of the outstanding sundry creditors would be completed and unenforceable credits of sundry creditors would be offered to tax. In the interest of justice and equity, we are of the view that the Assessing Officer should be granted an opportunity to examine the reconciliation statement of sundry creditors filed by the assessee. Therefore, this issue is restored to the files of the Assessing Officer. Addition made on account of interest accrued on treasury savings deposits - accrual of interest - assessee was following the mercantile system of accounting - Held that:- CIT(A) had only directed the Assessing Officer to verify whether interest accrued on treasury savings deposits is offered to tax on the basis of mercantile system of accounting. We do not find any infirmity in the finding of the CIT(A) and confirm the same. It is ordered accordingly.
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2018 (2) TMI 500
Excess stock found at the premises of the assessee during the course of survey - Held that:- A perusal of inventory of stock would indicate that the stock statement was prepared after physical verification. The partners have put their signatures after verifying the correctness of the stock statement. The assessee is simply denying about the availability of excess physical stock at the time of survey. They are harping upon the purchase bills and sales bills and entries made in the stock register. It is pertinent to observe that the surveys and searches are the last resorts with the Revenue to verify the actual position on the spot. The allegation against the assessee(s) is that they were not accounting total purchases in their books. That is why excess physical stock was available on a particular day when the survey was carried out. These allegations cannot be refuted by merely just saying that the alleged calculation made at the time of survey is wrong. The survey team was not having power to get declaration as well as arrest the assessee. The partners should have not put their signatures on the inventory of stock prepared by the survey team. Now, with the help of simple denial, they cannot say that excess stock was not found.- Decided against assessee Addition u/s 40(a)(ia) - Held that:- Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd [2015 (9) TMI 79 - DELHI HIGH COURT] if the recipients have paid the taxes on the receipts on which TDS was not deducted, then, no disallowance be made in the hands of payer with the help of Section 40(a)(ia) of the Act. On due consideration of this contention, we deem it appropriate to set aside this issue to the file of the Assessing Officer. The learned Assessing Officer shall verify as to whether M/s. Nirala Roadways has included ₹ 52,730/- in their taxable receipts and, if it was included, then, no disallowance to be made. We make it more specific that the Assessing Officer shall issue summons to M/s. Nirala Roadways for verifying this fact Penalty u/s 271(1)(c) - excess stock in search - Held that:- As discussed in the quantum appeal, was found at the premises of the assessee during the course of survey. The partners had put signatures on the inventory prepared by the survey team. That admission was never retracted. It failed to give any explanation about the source of excess stock. We have confirmed addition in the quantum appeal. In the penalty appeal, there is no explanation at the end of the assessee as to what prompted in the minds of the partners for not disclosing the excess stock admitted during the course of survey in the return of income. aking into consideration the above facts and circumstances of the case, we do not find any merits in this appeal. It is dismissed.
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2018 (2) TMI 499
Deduction u/s 80P eligibility - entire income of the assessee for the year under consideration is only from interest on deposits made with bank as well as cooperative banks - AO disallowed the claim of the assessee in toto, on the ground that the assessee is not in the business of banking or not providing credit facilities to its members - Held that:- As regards the deduction u/s 80P(2)(d) the issue stands decided for the AY 2013-14 and accordingly, the order of the Ld. CIT(A) to the extent of the claim u/s 80P(2)(d) is upheld. For the AY 2014-15 the assessee claimed deduction u/s 80P(2)(c)(ii) on account of interest income on saving bank account of SBBJ deduction 80P(2)(d) in respect of the interest on FDRs/ deposits with Co-operative Banks and in respect of rent for letting out from godowns of ₹ 8,61,399/-, The AO disallowed the entire claim of the assessee and the Ld. CIT(A) has allowed the same without discussing each of the claims separately. Therefore, the Ld. CIT(A) has not discussed the issue of deduction u/s 80P(2)(c)(ii) and accordingly, this issue is common as the issue involved in the AY 2013-14 and hence, the same is set aside to the record of the Ld. CIT(A) for fresh adjudication. Similarly, the Ld. CIT(A) has not discussed and adjudicated the issue of deduction u/s 80P(2)(e) in respect of income from letting out of godowns. Thus, there is no dispute about the allowability of this deduction in respect of the rental income from letting out of the godowns as per section 80P(2)(e) as there is no condition for availing the deduction under this provision. However, since this issue has not been adjudicated by the authorities below therefore, in the facts and circumstances of the fact, we set aside this issue to the record of the Ld. CIT(A) for proper adjudication, after giving an opportunity of hearing to the assessee.
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2018 (2) TMI 498
Addition u/s 14A - Held that:- No disallowance out of interest expenditure is called for when own funds available with the assessee exceeds value of investment. The learned CIT(A) has further observed that the disallowance as per Rule 8D(2)(ii) works out to ₹ 1,86,773/-, while the assessee itself has disallowed a sum of ₹ 5,90,507/-. It is also pertinent to note that the actual amount of exempt income earned by the assessee was lower than the amount disallowed by the assessee u/s 14A of the Act. Hence, the decision rendered by the Coordinate Bench in the case of Morgan Stanly Co. Pvt. Ltd. (2018 (2) TMI 428 - ITAT MUMBAI) squarely applies to the facts of the present case. In view of the forgoing discussions, we are of the view that the order passed by the learned CIT(A) on this issue does not call for any interference. Disallowance made u/s. 40(a)(ia) - reimbursed amounts towards “advertisement and general expenses” - Held that:- CIT(A) correctly deleted the disallowance made by the AO u/s 40(a)(ia). Hon'ble Kolkata High Court in the case of S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] Addition made for computing profit u/s. 115JB in respect of expenditure relatable to exempt income - Held that:- Revenue by Hon'ble Bombay High Court in the case of Bangalore Finance and Investments Pvt. Ltd. (2015 (2) TMI 1263 - BOMBAY HIGH COURT). AO was not justified in adopting the disallowance made by him u/s. 14A of the Act for the purpose of computing book profit under section 115JB of the Act. Hence, the learned CIT(A) was justified in deleting the addition so made by the Assessing Officer. Rejection of claim for deduction of Service tax liability - Held that:- There appears to be no dispute with regard to the fact that the “input tax credit” relatable to exempt services are not eligible for input tax credit, since the AO himself has observed so in the assessment order. In the instant case, the assessee has provided both taxable and exempt services. Since the “input tax credit” relatable to exempted services are not eligible for input credit, the same has been charged to the Profit and Loss account. We have observed earlier that the service tax paid by the assessee is otherwise eligible for deduction. Hence the input tax credit relatable to exempted services is also eligible for deduction, since it cannot be availed as credit by the assessee. We agree with the submission of Ld A.R that the method of accounting Service tax liability, i.e., exclusive method or inclusive method does not have revenue implications. We notice that the tax authorities have taken adverse view against the assessee without verifying the relevant documents, even though they were furnished before them. Since there is no dispute with regard to the fact that the input tax credit relatable to the exempted services cannot be availed by the assessee, we are of the view that the assessee has rightly claimed the same as deductible expenditure. Accordingly we set aside the orders passed by the Ld CIT(A) on this issue in both the years under consideration and direct the AO to allow them as deduction. - Decided in favour of assessee
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2018 (2) TMI 497
Penalty u/s 271C - assessee had failed to deduct TDS on interest paid on FDRs and to deposit the same - Held that:- The assessee cannot be considered as having done willful neglect for non-compliance of the TDS provisions. This is just a technical mistake and, accordingly, the assessee cannot be held to be an assessee in default and no penalty can be imposed. This is clear from the fact that the moment this descrepancy was highlighted by the AO, the assessee immediately deposited the short deducted amount with the Revenue. From the above, it is evident that the assessee was visited with reasonable cause beyond its control leading to the alleged default. The mistake occurred because of a software updation error, the Revenue is compensated by paying the interest as well as due taxes by the payee. Therefore, there is no loss to the Revenue in the matter. Moreover, the Branch Manager will personally have no interest in non-deduction/ short deduction/ lower deduction of some of the customers of the Branch. Hence, this is an unintentional mistake and, accordingly, no penalty provisions should get attracted. Accordingly, the assessee is found to have had reasonable cause for not deducting the tax at source. The penalty levied is, accordingly, deleted. - Decided in favour of assessee.
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2018 (2) TMI 496
Deduction as Municipal Taxes and other charges u/s 24 against rental income earned - Income from interest and other income - treated as‘Income from Other Sources’ - Appellants submit that the above income is taxable as income from business e do not find any substance in assessee’s appeal. The assessee could not claim any expenditure from Income from House Property outside the ambit of Section 24. The expenditure as claimed by the assessee was not covered by the statutory provisions and hence not allowable. The interest income was earned from Capital Gains Bonds which was rightly assessed as Income from Other Sources. Similarly, the assessee failed to show that misc. incomes aggregating to ₹ 48,407/- were, in any way, related to assessee’s business and therefore, rightly been assessed as Income from other Sources. - Decided against assessee
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Customs
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2018 (2) TMI 495
Jurisdiction - case of petitioner is that the officer, who is manning the office of the third respondent, is equivalent in rank to the Commissioner of Customs and that therefore, he cannot decide the matter - Held that: the petitioner is unable to lay his hands on the Notification of the Central Board of Excise and Customs appointing an officer in the rank of Principal Commissioner as the Revisional Authority under the Customs Act and N/N. 27/17 CE (NT) dated 23.11.2017 pertains only to appeals arising under the Central Excise Act - the writ petition challenging the order passed by the first respondent is held to be not maintainable.
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2018 (2) TMI 494
Refund of excess duty paid - denial on the ground of unjust enrichment - whether the amount paid at the time of provisional assessment can be treated as pre-deposit of duty paid during the pendency of assessment or not? - Held that: - Admittedly the appellant has opted for provisional assessment and the assessment has been finalized later on. So, therefore the amount paid by the appellant during the pendency of adjudication proceedings shall be the equivalent amount paid pending adjudication - after finalization of assessment, whatever excess duty has been paid by the appellant is refundable. The appellant is entitled to avail refund claim to excess duty paid by them before the finalization of the assessments - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 493
100% EOU - benefit of N/N. 52/2003-Cus - case of Revenue is that some of the items imported by the appellants may not qualify as capital goods and the exemption already allowed is not sustainable - Held that: - the goods were duly assessed as capital goods by the competent officer at the port of entry. The same has not been varied by that officer. The goods were in warehouse. In the case of Greenspan Agritech Pvt. Ltd. Vs. CCE, Pune [2013 (5) TMI 823 - CESTAT MUMBAI], again the Tribunal examined the same notification. It has held that when the appellant is a 100% EOU and the goods imported are used for the intended purpose, no demand will arise. The denial of exemption under N/N. 52/2003-Cus is not sustainable - appeal allowed.
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2018 (2) TMI 492
Scope of SCN - case of respondent is that the department has not appealed against the invocation of extended period in the grounds of appeal - Held that: - The department in the grounds of appeal has not raised the invokability of extended period, which shows that they are not aggrieved with the finding of the Commissioner on the ground of non-invokability of extended period - appeal dismissed - decided against Revenue.
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2018 (2) TMI 491
Import of restricted item - old/used digital multifunctional Print and Copying Machines - enhancement of value - Held that: - the imported goods in question are not restricted item - during the relevant period the impugned goods were not restricted and the adjudicating authority has invoked only Section 111 (d) to hold that goods are liable for confiscation. Hence the imposition of redemption fine and penalty are unsustainable and are required to be set aside - the redemption fine and penalty imposed set aside, without disturbing the enhancement of value - appeal allowed in part.
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2018 (2) TMI 490
Restoration of appeal - principles of natural justice - case of appellant is that they had not received the notice fixing the date of hearing as 27.10.2016 and therefore, neither the appellant nor the counsel could appear on the said date of hearing of the appeal - Held that: - The appeal is of the year 2005 and the Tribunal has been intimating all concerned through the cause list published that there will not be any adjournment in appeals upto the year 2007. We therefore find no circumstances insisting to restore the appeal to the files of the Tribunal - restoration of appeal application dismissed.
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2018 (2) TMI 489
Benefit of N/N. 30/2004-CE dated 09.07.2004, in respect of additional duty of customs equal to excise duty - imported silk fabrics classifiable under the Tariff item No.5007 - denial on the ground that it was applicable only to the goods manufactured in India and not to the imported goods since there is a condition that there is no cenvat credit is availed on inputs. Held that: - identical issue decided in the case of CC (Exports), Chennai Vs. Prashray Overseas Pvt. Ltd. [2016 (5) TMI 1106 - MADRAS HIGH COURT], where it was held that In cases where the exemption Notification stipulates two conditions, namely that the inputs should have suffered duty and that no CENVAT credit should have been availed, then the benefit of the Notification will be available only if both conditions are satisfied. Benefit of notification cannot be allowed - appeal dismissed - decided against appellant.
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2018 (2) TMI 488
Restoration of appeal - case of appellant is that the appeal should be restored being an order passed in the absence of their senior counsel on record - Held that: - The appeal has not been dismissed for default or non-prosecution on the side of the learned counsel for appellant. Instead, the Tribunal has gone though the grounds stated in the appeal memorandum and also the records placed along with the same. The appeal has been disposed on merits and not on non-prosecution, therefore, there is no question of restoring the appeal in the file of the Tribunal. The remedy lies by way of an appeal. The application is devoid of merits and does not have any grounds for restoring the appeal.
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Corporate Laws
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2018 (2) TMI 487
Condonation of delay of 9 days - Section 5 of the Limitation Act - application to the peremptory language of Section 421(3) of the companies act, 2013 - period of limitation - appeal against the order of NCLT - Held that:- In the present case, the Section 417(3) does not merely contain the initial period of 45 days, Section 417(3) goes on to state that another period of 45 days, being a grace period given by the legislature which cannot be exceeded, alone would apply, provided sufficient cause is made out within the aforesaid grace period. As has been held by us above, it is the second period, which is a special inbuilt kind of Section 5 of the Limitation Act in the special statute, which lays down that beyond the second period of 45 days, there can be no further condonation of delay. In view of the language of the proviso to Section 421(3) which contains mandatory or peremptory negative language and speaks of a second period not exceeding 45 days, which would have the same effect as the expression but not thereafter used in Section 34(3) proviso of the Arbitration Act, 1996. If we were to accept such argument, it would mean that notwithstanding that the further period of 45 days had elapsed, the Appellate Tribunal may, if the facts so warrant, condone the delay. This would be to render otiose the second time limit of 45 days, which, as has been pointed out by us above, is peremptory in nature. - Decided against the appellant.
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Insolvency & Bankruptcy
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2018 (2) TMI 448
Ways of service of notice to Corporate Debtor - notice sent along with the copy of the Petition at the Registered Office address of the Corporate Debtor and the same has been returned with the endorsement 'left' without instruction - Held that:- Petitioner is directed to serve the Corporate Debtor by way of substituted service by publishing the notice in newspapers one in English and another in vernacular having wide circulation in the area where the Registered Office of the Corporate Debtor is situated and file proof of the same. Put up on 04.01.2018 at 10.30 A.M.
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Service Tax
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2018 (2) TMI 486
Online Information and data processing & retrival - the recipient who create further chain of clients of the company were called “associates” and get commission from M/s.E-Biz Company for the service provide - whether taxable under Business Auxiliary Services or otherwise? - Held that: - an identical issue was considered by this Bench of the Tribunal in the case of Sumit Singh v. CCE & ST, Ghaziabad wherein this Tribunal held that the appellant was paying service tax on the full amount which receives through the receipt and the amount received by the agents are already taxed then no further liability of service tax arose - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 485
CHA service - service tax in respect of turnkey jobs on 15% of the gross amount charged from the clients as per the Circular dated 6.6.1997 issued by CBEC - Held that: - the service tax on CHA services stands already paid by the appellant as per the Scheme, which was valid up to 2006. Hence, the Revenue is not justified in vivisecting the total lump sum received and charging service tax on activity of cargo handling under Port Services - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 484
Liability of interest - short payment of service tax - Section 75 of the Finance Act, 1994 - Held that: - the appellant had filed returns during the relevant period in question, which would mean that there was no suppression of the fact but due to a human error, the short payment of tax was done - in case of appellant itself, in G M (Telecom), BSNL Vs CCE Chandigarh [2003 (6) TMI 6 - CESTAT, NEW DELHI], the Tribunal has held that appellant being Central Government Department, interest liability cannot be pertained. The case is hand, the appellant cannot be burdened with interest liability as the short payment of duty was made good immediately - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 483
Refund claim - amount received in advance - Held that: - The order of this Tribunal in the case of Partibha Consturction, Engineers and Contractors India P Ltd [2010 (12) TMI 331 - CESTAT, MUMBAI] has neither been stayed nor has been set-aside by the higher forum. In that circumstances, authorities below are bound to accept the order of this Tribunal which the adjudicating authority did but, the Ld. Commissioner (A) has violated the judicial principle which is binding on him and had passed the order without going into the merits of the case - refund allowed - decided in favor of appellant.
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2018 (2) TMI 482
Service tax collected by the appellant and not paid to the Government - Held that: - no supporting evidence has been produced. In fact, the case has been listed on many occasions when none appeared for the appellant - considering that the main facts of the case are not in dispute with reference to liability of the appellant to pay service tax of ₹ 75,52,727/- which, in fact, they have collected from the customers, we find no reason to interfere with the findings of the original authority - demand upheld. Liability of service tax - reimbursement charges collected by the appellant - Held that: - it is well settled legal position that reimbursable expenditure on actual basis which are incurred by the service provider on behalf of service recipient is not liable to be included in the taxable value of services - the demand of service tax of ₹ 2,75,561/- confirmed on reimbursement expenditure is not sustainable - demand set aside. Appeal allowed in part.
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2018 (2) TMI 481
Refund claim - scope of SCN - Held that: - the respondent were not issued with any SCN invoking Rule 14 of CCR 2004 proposing recovery of said Cenvat Credit. Therefore, the said Cenvat Credit which is available in the Cenvat account and which otherwise satisfied other requirements of said Rule 5 cannot be refused to be refunded - appeal dismissed - decided against Revenue.
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2018 (2) TMI 480
Ascertaining rate of tax - Taxable event - whether the taxable event for discharge of service tax liability for the month of March 2008 is the date of rendering the services or it is the date of realization of taxable value? Held that: - Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise Vs. Schott Glass India Pvt. Ltd. [2009 (1) TMI 45 - HIGH COURT OF GUJARAT] has held that taxable event is the time of rendering the taxable service and not realization of payment thereof - appeal dismissed - decided against Revenue.
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2018 (2) TMI 479
Rent-a-cab service - the appellant was hiring vehicles to BSNL - Held that: - The Tribunal in the case of Rahul Travels Vs CCE [2016 (11) TMI 1294 - CESTAT MUMBAI] has held that hiring of cars and buses as contract carriage on payment based on their usage as per kilometre basis would not fall under the definition of "Rent-a-Cab service" or under "Tour Operator service" - demand set aside. Levy of service tax - construction services within the period prior to 01.06.2007 - Held that: - The Hon'ble Apex Court in the case of Commissioner, Central Excise & Customs Versus M/s Larsen & Toubro Ltd. and others [2015 (8) TMI 749 - SUPREME COURT] has held that works contract service prior to 01.06.2007 cannot be subject matter to levy of service tax - demand set aside. Appeal allowed - decided in favor of appellant.
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2018 (2) TMI 467
Small Scale exemption upto ₹ 10 lacs for providing BBusiness Auxiliary Services - commission received from the Bank & Financial Institutions for providing services to the Financial Institutions - N/N. 06/2005-ST dated 01/03/2005 - Held that: - the said services are covered by the definition of Business Auxiliary Service and were otherwise eligible for levy of Service Tax under the category of Business Auxiliary Service. Branded services - Use of brand name of financial institutions - benefit of N/N. 06/2005-ST dated 01/03/2005 - Held that: - the said services were rendered to the Financial Institutions and therefore, the question of use of brand of the Financial Institutions by the Service Provider did not arise - services were not covered as Branded services and therefore, the Service Provider were eligible for exemption in terms of N/N. 06/2005-ST dated 01/03/2005. Matter remanded back to the file of Original Adjudicating Authority to allow the said exemption in terms of N/N. 06/2005-ST dated 01/03/2005, to the appellant and re-determine the Service Tax liability - appeal allowed by way of remand.
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Central Excise
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2018 (2) TMI 478
Valuation - paper board - related party transaction - Department took the view that when Wimco Ltd. became a subsidiary of assessee, it no longer cannot be said as retaining its independence; that assessee has become holding company of Wimco Ltd. and they are "related persons" within the meaning of Section 4 (1) (b) of Central Excise Act, 1944 read with Section Central Excise Valuation Rules, 2000 w.e.f. 1.7.2005. Held that: - Discernably, as per Section 4 (1) (a) of the Central Excise Act, the transaction value would be the price adopted for assessment subject to the condition inter alia that assessee and the buyer are not related and the price is sole consideration for the sale. The term related person is defined in Section 4 (3) (b) according to which, the person should be deemed to be related if, inter alia, they are interconnected undertaking within the meaning of Section 2(g) of the M.R.T.P, 1969 - There is no dispute that assessee and Wimco are interconnected undertakings and hence are related for the purpose of Section 4 of the Act. No allegation has been made by the department that there has been any flow back from Wimco to the assessee towards the allegedly lower pricing adopted by the assessee. We do not find any attempt by the adjudicating authority to prove with irresistible evidence that the relationship between assessee and Wimco has in fact influenced the price of the goods sold to Wimco or otherwise. As already discussed above, the sole attempt made by the de novo adjudicating authority was only to compare 2% of the transactions during the period which has also been done in a very flawed manner. The conclusions reached on such threadbare sampling by the Commissioner cannot be sustained. Appeal dismissed - decided against Revenue.
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2018 (2) TMI 477
CENVAT credit - job-work - whether goods received back after job work covered under bill/ invoices/ cash memo issued by the job worker and not under duplicate copy of original challan through which goods were sent for job work is a valid document or not? - Held that: - the appellant have not violated the provisions of the law/rules in respect to job work as required under the provisions of Rule 4(5)(a) of CCR 2004 - Further, it is not disputed by the Revenue that the goods sent on job work have not been received back. The appellant have to kept proper account of the goods sent on job work and receipt of the same after completion of the job work. Appeal allowed - decided in favor of appellant.
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2018 (2) TMI 476
CENVAT credit availed on the Education Cess and Secondary & Higher Education Cess - N/N. 13/2012-Cus and 14/2012-Cus both dated 17.03.2012 - whether the assesse are entitled to cenvat credit of Education Cess and Secondary Higher Education Cess paid on imported goods post March 2012? - Held that: - Education Cess on excisable goods leviable under Section 91 read with Section 93 of the Finance Act, 2004; the Secondary and Higher Education Cess on excisable goods leviable u/s 136 read with Section 138 of Finance Act, 2007, are eligible to credit. Under Clause (vii) additional duty of customs leviable u/s 3 of the Customs Tariff Act equivalent to duty of excise specified under Clause (i),(ii),(iii),(iv),(v),(vi),&(via) is eligible to credit. Education Cess and Secondary Higher Education Cess paid under Section 94 of the Finance Act 2004 and Section 139 of the Finance Act, 2007, on the aggregate duty of customs levied under Sec.12 the Customs Act, 1962 can never be held to be admissible to credit which continued to be levied before and after 17.3.2012. Penalty - Held that: - issue involved in the present appeals relates to pure question of interpretation of law and the demand notices were issued for normal period of limitation, therefore, imposition of penalty on the assesses is unwarranted - penalty set aside. Appeal allowed in part.
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2018 (2) TMI 475
CENVAT credit - whether the M.S. Plate, S. S. Plate, H.R. Plate, Aluminium Coils, G.I. Earthing Strips etc., undisputedly used for the repair and maintenance of various capital goods, in the factory premises of the appellant are eligible to CENVAT credit under the definition of input as prescribed u/r 2(k) of CCR, 2004? Held that: - identical issue decided in the case of KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX. LUCKNOW [2013 (7) TMI 2 - CESTAT NEW DELHI], where it was held that the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for CENVAT credit - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 474
CENVAT credit - service tax paid and distributed by the Head Office as ISD - Held that: - there is no dispute as to the fact that the cenvat credit has been availed based upon the invoices issued by the Head office of the appellant as an ISD - similar issue has been decided by this Bench in the case of Styrolution Abs India Pvt. Ltd. Vs CCE Vadodara [2018 (1) TMI 299 - CESTAT AHMEDABAD], wherein it was held that cenvat credit should be allowed to the manufacturing unit - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 473
CENVAT credit - service tax paid on the courier service which was received by the Appellant for export of the goods - Held that: - the issue is no more res integra and this Tribunal in the case of Haldyn Glass Ltd. and others Vs. C.C.E. & S.T., Vadodara [2017 (8) TMI 1217 - CESTAT - Hyderabad] has held that such cenvat credit is eligible to be availed - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 472
CENVAT credit - input services - catering, maintenance and house keeping services provided to guest house - wharfage charges - water service by tankers - Held that: - The issue in hand is being respect of input services rendered at guest house having been decided by this Tribunal in the case of JSW Steel (SALAV) Ltd. [2016 (8) TMI 450 - CESTAT MUMBAI] and on such services, the cenvat credit is available to the Appellant herein. Wharfage charges for the goods cleared for export - Held that: - the Division Bench of this Tribunal in the case of C.C.E., Indore Vs. Suraj Impex (India) Pvt. Ltd. [2015 (11) TMI 1415 - CESTAT NEW DELHI] has considered that such service tax paid under the port services is eligible to be availed as cenvat credit. Water supply service rendered by the service provider - Held that: - since the cenvat credit of the service tax paid on water supply, such service needs to be considered from the angle for which such service has been used. Without expressing any opinion on this point, the matter is remanded to the adjudicating authority to be considered this issue after following the principle of natural justice. Appeal allowed in part and part matter on remand.
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2018 (2) TMI 471
CENVAT credit - inputs - it was alleged that sister concern/units have already taken the claim for refund - Held that: - matter needs to be examined afresh, both the parties have agreed to remand the matter to the adjudicating authority to verify whether the sister concern/units have already taken the claim for refund or not - appeal allowed by way of remand.
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2018 (2) TMI 470
Demand of duty with penalty - It is claimed that the said moulds were returned to the appellant but the department is of the view that the same was never returned - Held that: - the moulds were supplied by the appellant to its job-worker for testing. Even if the same were not returned, then the same will be of no use to the job-worker as it is only the appellant who will have to supply the articles to Mahindra and Mahindra Ltd., its principle - the moulds were sent only for the purpose of testing and not for sale - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 469
Penalty u/r 209 of the CER 1944 - Held that: - it appears that cross-appeal was also filed by the respondent-assesssee where the impugned order was upheld - In appeal, the jurisdictional High Court of Bombay in the case of HANILA ERA TEXTILES LTD. Versus UNION OF INDIA [2010 (9) TMI 202 - BOMBAY HIGH COURT] upheld the same - appeal dismissed - decided against Revenue.
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2018 (2) TMI 468
Maintainability of appeal - Held that: - the remand proceedings have also been finalized and the matter is again before the Tribunal. In view of the above the Revenue appeal becomes infructous - appeal dismissed - decided against Revenue.
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2018 (2) TMI 466
CENVAT credit - removal of capital goods after use - case of the department is that since the appellant have cleared capital goods as a scrap, they are liable to pay duty in terms of Rule 3(5A) of CCR 2004 - Held that: - the appellant have purchased the capital goods along with plant and machinery from SICOM, (a Government of Maharashtra undertaking) as is where is basis. At the time of purchase, admittedly no cenvat credit was availed by the appellant. This fact has been accepted by Ld. Commissioner (Appeals) in the impugned order - Moreover for the purpose of Rule 3(5A) of the Rule, it is to ascertain that whether the assessee who remove the capital goods, has availed the cenvat credit on such capital goods or otherwise. As per the fact of the present case, since the appellant has not availed the cenvat credit, demand under Rule 3(5) cannot be sustainable. Appeal allowed - decided in favor of appellant.
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2018 (2) TMI 465
CENVAT credit - input services - denial on the ground that documentary evidence were not produced - Held that: - The appellant during adjudication submitted all the documents however the adjudicating authority has disallowed the credit on the issue of admissibility of the input service for which the appellant was not issued any notice therefore the order-in-original was passed in gross violation of principles of natural justice - the matter to the adjudicating authority for passing a fresh order after providing personal hearing to the appellant and giving opportunity for explaining the issue of the admissibility of the input service - appeal allowed by way of remand.
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2018 (2) TMI 464
CENVAT credit - sales commission - Held that: - In similar circumstances, a Division Bench of this Tribunal in the case of Ashapura Volclay Ltd and others Vs. C.C., Jamnagar [2017 (6) TMI 659 - CESTAT - Ahmedabad] following the principle laid down by the Larger Bench, disposed of the matter, with the liberty to approach the Tribunal after disposal of the cases pending before the higher forum. The present appeals are also disposed of with the liberty to both sides to approach the Tribunal - appeal disposed off.
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2018 (2) TMI 463
CENVAT credit - after availing the benefit of Cenvat credit of duty on the inputs, cleared the inputs as such “as such”, after reversing the credit so availed - Revenue is of the view that such removal of inputs has to be treated as a trading activity so as to make the appellant liable to pay an amount equal to 5%/6% of the value of the goods in terms of the provisions of Rule 6(3) of the CCR 2004 - Held that: - the issue stands covered by the Tribunal decision in the case of Commissioner of Central Excise & Service Tax, Ghaziabad Versus Mahaveer Cylinders Ltd. [2016 (11) TMI 1336 - CESTAT ALLAHABAD] laying down that removal of inputs “as such” by a manufacturer cannot be treated to be a trading activity - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 462
CENVAT credit - duty paying invoices - invoices issued by their Head office registered as an input service distributor (ISD) - Held that: - the matter may be remanded to Ld. Commissioner (Appeals) so as to verify all the relevant documents for the entire period and also afford a chance to the appellant to rebut the findings recorded pertaining to the period April 2006 to February 2007 as no such allegation is forthcoming from Show Cause Notice - appeal allowed by way of remand.
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2018 (2) TMI 461
Clandestine removal - demand raised on the basis of these loose slips found - Held that: - the Revenue was not required to ascertain the fact whether the details of buyers mentioned in loose slips have been received the goods or not? The buyer’s name mentioned in the SCN may be fake, therefore, no investigation is required at the end of the Revenue, as the same has not been objected by the appellant - the charge of clandestine removal of the goods stand proved and duty is rightly demanded. Demand of interest - Held that: - as the duty has been paid by the appellant on the same date, when the shortage of finished goods were found, therefore, in the absence of the date of clearance of those goods, the demand of interest is not sustainable. Penalty on Director - Held that: - director has accepted that they have cleared the goods clandestinely - penalty on the Director is rightly imposed - however, the penalty of ₹ 5,00,000/-, in comparison to the duty of ₹ 8,00,000/-, is excessively high, therefore, the penalty on the Director of the company is reduced to ₹ 1,00,000/-. Appeal allowed in part.
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2018 (2) TMI 460
Condonation of delay of 237 days in filing appeal - Section 35B of CEA 1944 - power of Commissioner (Appeals) to condone delay - Held that: - the time limit for filing the appeal before the ld. Commissioner (Appeals) has been prescribed under Section 35B of Central Excise Act, 1944 wherein the assessee is required to file the appeal against the adjudication order within 60 days of its communication and the said period can be further extended by 30 days if the reasons for causing delay is explained satisfactorily - Admittedly, the appeals have been filed by the appellants beyond the period of condonable delay by the ld. Commissioner (Appeals). Ld. Commissioner (Appeals) has no powers to condone the delay - appeal dismissed.
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2018 (2) TMI 459
Entitlement of re-credit - whether the Appellant-Assessee could avail suo motu re-credit of the duty initially paid/reversed in their books of accounts, after a period of time? - Held that: - In similar circumstances, a Division Bench of this Tribunal in the case of Ashapura Volclay Ltd and others Vs. C.C. , Jamnagar [2017 (6) TMI 659 - CESTAT - Ahmedabad] following the principle laid down by the Larger Bench, disposed of the matter, with the liberty to approach the Tribunal after disposal of the cases pending before the higher forum - appeal disposed off.
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2018 (2) TMI 458
CENVAT credit - capital goods/inputs - storage racks - Revenue denied the credit on the ground that the said storage racks are neither capital goods nor inputs for the appellant's final products and as such, benefit cannot be extended to them - Held that: - Tribunal in the case of M/s. Banco Products (India) Ltd. Vs Commissioner [2009 (2) TMI 101 - CESTAT AHMEDABAD], has held that the steel rack used for raw material storage were held to be an integral part of the manufacturing activity and hence cenvatable - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 457
Clandestine removal - penalty - scope of SCN - Held that: - there are no allegations that goods were cleared clandestinely or there has been a case of evasion of duty. The shortage was noticed by the Officers of Central Excise Department on 18/12/2006 as compared to the stock recorded in RG-1 register and the appellant has explained that the entries in RG-1 register were on the basis of formula and it was not on the basis of actual weight. There are no allegations in the said SCN dated 19/06/2007 to establish that there was any clandestine clearance of the finished goods - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 456
Valuation - includibility - Pre-Delivery Inspection charges - Held that: - the issue whether pre-delivery inspection charges is to be included in the assessable value is settled in favor of the appellant in the case of COMMISSIONER OF C. EX., AHMEDABAD-II Versus LUBI SUBMERSIBLES LTD. [2015 (10) TMI 35 - CESTAT AHMEDABAD], where it was held that PDI charges recovered at the instance of the buyer are not includible in the assessable value - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 455
CENVAT credit - inputs/capital goods - PTFE, Corrugate Hose Pipe, Anyhydrous Therminol 55, Fuel Pil, Additives, Well Glass fitting, Steam Joining sheet, Vee Belt, Epoxy Primer, Gland Packing Jointing Sheet etc. - Held that: - the subject goods are in the nature of spare parts/ components/ accessories or are used for maintenance of capital goods which are used in the manufacturing activity by the appellant. Therefore the same are eligible for credit as Capital goods. The Appellant’s reliance upon Larger bench judgment in case of Banco Products (India) Ltd. Vs. CCE, Vadodara [2009 (2) TMI 101 - CESTAT AHMEDABAD] is absolutely applicable to the present case, where it was held that crates used for transportation of finished goods in to bonded store room, are eligible for credit as input. The subject goods fall within the definition of capital goods being spares/components/accessories of capital goods - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 454
SSI exemption - job-work - valuation - Held that: - we do not find any reason why, when the goods have been manufactured on job work basis and returned to the customers and job charges have been collected as indicated in the show cause notice, how the value of these clearances can be foisted on to Hitech for the purposes of determining the value of clearances for SSI exemption - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (2) TMI 453
Principles of natural justice - Penalty u/s 70(2) of the KVAT Act, 2003 - only grievance of the appellant in these appeals is, no sufficient opportunity was provided by the Revisional Authority while restoring the penalty order levied u/s 70(2) of the KVAT Act, 2003, for the tax periods in question - Held that: - without expressing any opinion on the merits or demerits of the case, we deem it appropriate to remand the matter to the Revisional Authority for reconsideration in accordance with law in order to provide one more opportunity to the appellant to defend the case - appeal allowed by way of remand.
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2018 (2) TMI 452
Set off of the amount of TDS deducted in the hands of the main contractor - Form VAT 156 - Rule 44 (3) of the KVAT Rules, 2005 - Held that: - the tax payable by the dealer for any period s hall be given set off to the extent of the tax already remitted under sub Section (5) - In the present case, the contractee-BHEL has deducted the tax at source and remitted the same relating to the main contractor/respondent No.5, not of the appellant-assessee herein. The set off is available only to the main contractor to whom VAT 156 certificate is issued. Sub Section (11) further clarifies that the burden of proving the tax on such works contract has been remitted and of establishing the exact quantum of tax so remitted s hall be on the dealer claiming the reduction of tax under sub Section (10). In the present set of facts, it is the main contractor who can be construed as the dealer to claim the reduction of tax under sub Section (10). This is further clarified by Rule 44 (3) (f) which specifies that any authority or person deducting tax, having obtained Form VAT 156 or Form VAT 158 shall not either directly or through any other person transfer the same to another person. The order of the first appellate authority is contrary to these provisions which is apparently erroneous and prejudicial to the interest of the Revenue. The appellant is not entitled to claim set off on the TDS deducted in respect of main contractor regarding which VAT 156 is issued - appeal dismissed - decided against appellant.
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2018 (2) TMI 451
Rate of tax - iron and steel in the works contract - whether taxable at 4% or 12.5%? - Held that: - The issue involved herein is no longer res integra in view of the dictum enunciated by the Hon’ble Apex Court in the case of Gannon Dunkerley & Co. Versus State of Rajasthan & Larsen & Toubro Ltd. & Union of India [1992 (11) TMI 254 - SUPREME COURT OF INDIA], where it was held that the declared goods in question can only be taxed at the rate of 4% - revision dismissed - decided against Revenue.
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2018 (2) TMI 450
Liability of interest - on increased tax liability due to rectification of assessment proceedings - Section 12-B(2) of the Karnataka Sales Tax Act, 1957 - Revenue is claiming interest under Section 12-B (2) of the Act based on the rectification orders passed under Section 25-A of the Act, rectifying the assessment orders - Held that: - Section 12- B(1) of the Act deals with the payment of tax in advance according to which every dealer is required to file monthly returns to the assessing authority including the taxable turnover during the preceding month and shall pay in advance the full tax amount payable by him within 20 days after the close of the preceding month to which tax relates. There is no short payment of tax in terms of the monthly returns filed. If so, initiating proceedings under Section 12-B (2) of the Act to claim interest on the rectification orders passed subsequent to the assessment orders is unjustifiable - it is clear that when the assessee pays the tax which according to him is due on the basis of the information made in the return filed by him, it is highly unrealistic to expect him to pay the tax on the basis of final assessment done by the assessing authority. The assessee cannot predict the liability accruing on the basis of the rectification proceedings initiated subsequent to assessment proceedings. Revision petition dismissed.
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2018 (2) TMI 449
Penalty u/s 74(4) of KVAT Act - it was alleged that petitioner has not filed audited statement of accounts in Form 240 within 9 months after the end of the relevant year as required u/s 31(4) of the Act - Held that: - the order or endorsement dated 08.11.2016 disclose notice has been issued for the production of the said document with in 7days but it is not mentioned whether an earlier show cause notice was been issued to the petitioner to produce the documents, failing which, to show cause as to as to why penalty should not be imposed upon the petitioner - this endorsement could be treated as a notice to the petitioner to explain why he should not be imposed with penalty and after hearing the parties, the competent authority can pass appropriate orders in this regard, only with regard to penalty. It is incumbent upon the authority, before levying any penalty, the petitioner should be heard in the matter. Petition allowed in part.
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