Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 11, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
Articles
News
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, others – Palm Oil, Crude Palmolein, RBD Palmolein, others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Direct and Indirect Tax collections together expected to meet the target of Revenue collections for the Current Financial Year 2015-16 without any shortfall; Latest tax collections figures up to 31st January,2016 indicate healthy growth of 33.7% in Indirect Tax and 10.9% in Direct Tax collections
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RBI Reference Rate for US $
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NOTICE INVITING COMMENTS ON THE REVISED SCHEDULE III TO THE COMPANIES ACT, 2013 FOR A COMPANY WHOSE FINANCIAL STATEMENTS ARE DRAWN UP IN COMPLIANCE OF COMPANIES (INDIAN ACCOUNTING STANDARDS) RULES 2015 AND AS AMENDED FROM TIME TO TIME
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NOTICE INVITING COMMENTS ON THE DRAFT COMPANIES (AUDITOR’S REPORT) ORDER, 2016
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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The term “non-resident” means a person who is not a resident as per section 2(30) of the Income Tax Act and for the purposes of sections 92, 93 and 168, includes a person who is not ordinarily a resident within the meaning of 6(6) - HC
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Service tax paid by the assessee could not form part of amount for the purpose of deemed profits u/s 44BB unlike the other amounts received towards reimbursement - AT
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Default for noncollection of tax at source as per the provisions of Section 206C(6A) - sale of the timber - all the parties to whom the sales were made have furnished their respective returns - assessee cannot be treated in default - AT
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Disallowance out of salary wages and bonus - no justification in making the adhoc disallowance - This huge amount of sales, job work income and net profit cannot be achieved without a proper and adequate labour force and concern's nature of business is that of manufacturing job work of hide and skins and leather. - AT
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Addition of cess on green leaf - part of income is agriculture income - Expenditure on cess should be allowed as a deduction before computing the composite income under Rule 8 and the apportionment is to be made after the income is so computed. - SC
Customs
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Mis-declaration of goods and value thereof - period of limitation - relevant date - principles of res judicata - the relevant date for the purpose of limitation would be the clearance of the B/E in question. - HC
Indian Laws
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NOTICE INVITING COMMENTS ON THE REVISED SCHEDULE III TO THE COMPANIES ACT, 2013 FOR A COMPANY WHOSE FINANCIAL STATEMENTS ARE DRAWN UP IN COMPLIANCE OF COMPANIES (INDIAN ACCOUNTING STANDARDS) RULES 2015 AND AS AMENDED FROM TIME TO TIME
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NOTICE INVITING COMMENTS ON THE DRAFT COMPANIES (AUDITOR’S REPORT) ORDER, 2016
Service Tax
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Cenvat Credit - scope of capital goods for providing output services being General insurance services - Appellant is eligible to avail the CENVAT credit of excise duty paid on Furniture and Fittings - AT
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Refund of unutilized cenvat credit - export of services - distinguish between the refund claims as those prior to registration and those post-registration - refund cannot be denied - AT
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Valuation - repair and maintenance activities - Commissioner is in error in Levying tax on the material component involved in repair and maintenance of the cylinders carried out by the appellant. - AT
Central Excise
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Refund by taking credit of the amount in their cenvat account and thereby taking a suo motto refund of pre-deposit - As the amount is payable/refundable to the respondents w.e.f.22.6.2007, do not find any ground to demand interest on the very same amount alleging that the respondents took credit irregularly - AT
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Demand of of interest and penalty - If by efflux of time and in absence of availability of extended period of limitation, such show cause notice itself had become time-barred, any payment made voluntarily by the manufacturer cannot be viewed as one made under sub-section (2B) of Section 11A of the Act. - demand set aside - AT
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Manufacture - whether the items i.e. impure dowtherm diphyl; old and damaged PTA scrap, wash water - 50% concentration of lactum, old and used sludge oil; old and used all types of oil, spin finish oil and old assorted bearings cleared from the factory premises of the assessee are liable to duty? - Held No - AT
VAT
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Doctrine of promissory estoppel - Continuity of exemption after migration from sales tax regime to VAT regime - tax holiday of ten years - KST to KVAT - exemption from CST - once an assessee is found entitled to grant of exemption, the procedure for the same is to be construed liberally in favour of, and for the benefit of the assessee - HC
Case Laws:
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Income Tax
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2016 (2) TMI 308
Allowability of expenditure under section 40(a)(i) - scope of the term 'non resident' - whether the status of a person making the expenditure has to be a non-resident before the provision to section 172 of the Act can be invoked ? - Held that:- To our mind, the Division Bench judgment in Commissioner of Income-tax vs. Orient (Goa) Pvt. Ltd. [2009 (10) TMI 575 - Bombay High Court] seen in this light does not, with greatest respect, take into account the scheme and setting as understood above. There need not be apprehension because there is no escape from the levy and recovery of tax. The tax has to be levied and collected. The ship cannot leave the port or if allowed to leave any port in India, it must either pay or make arrangement to pay the tax. Hence, the apprehension of avoidance or evasion both are taken care of by the legislature. That is how advisedly the legislature cast the obligation to deduct tax at source on the person responsible to make payment to a non-resident in shipping business. The term “non-resident” means a person who is not a resident as per section 2(30) of the Income Tax Act and for the purposes of sections 92, 93 and 168, includes a person who is not ordinarily a resident within the meaning of clause (6)of section 6. The term “person” includes an individual, a HUF, a company, firm and every artificial juridical person not falling within any of the preceding sub-clauses of clause (31) of section 2. By section 2(23A), a foreign company is defined to mean a company which is not a domestic company. Hence, any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act not being income chargeable under the head “Salaries”, would have to deduct the tax thereon at the rates in force.
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2016 (2) TMI 307
Reopening of assessment - valuation of stock questioned - Held that:- As during the original scrutiny assessment, the issue of valuation of stock had been examined at length. We may recall that the assessee is engaged in the business of jewelery. During a survey operation conducted on 3.2.2010, unaccounted cash was found and difference in stock in the books and physical verification were revealed. During the assessment proceedings, there was considerable debate about the valuation of the stock in the nature of jewelery. The assessee contended that much of the stock may be old and that therefore, current price cannot be applied. The Assessing Officer estimated the valuation of such on stock on average purchase price. It can thus be seen that the question of valuation of stock was one of the prime aspects, the Assessing Officer examined during the original assessment. That being the situation, any attempt on part of the Assessing Officer now to reopen the assessment on the question of correct methodology for valuation of such stock would only be in the nature of change of opinion and not permissible as reiterated by the Supreme Court in case of Commissioner of Income Tax v. Kelvinator of India Ltd. reported in (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) - Decided in favour of assessee
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2016 (2) TMI 306
Determination of the tax to be paid in terms of the Kar Vivad Samadhan Scheme 1998 (KVSS) - Held that:- As regards the instructions issued, there are two aspects - one regarding the calculation of the disputed income with reference to the unpaid tax. The other is in relation to the application of the marginal rate. At the outset it requires to be noticed that the Finance Act, 1998 does not talk of any marginal rate to be applied. Also, it appears to the Court that the marginal rate was premised on an Assessee having to pay tax at different slab rates depending on the level of income. However, where the tax is on capital gains, there is only a single rate of tax i.e. 33.6%. In such event, the adoption of a ‘marginal rate’ is not apposite for determining the disputed income. In other words, the impugned instructions of the Ministry of Finance regarding applicability of a marginal rate to the unpaid tax for determining the disputed income cannot apply where the taxable income arises only from capital gains and to which a uniform rate of 33.6% applies. For the reasons already explained, the Court is of the view that the instructions issued are not consistent with the provisions of the Finance Act 1998 which does not talk of a marginal rate, particularly when it comes to computing the disputed income arising out of the capital gains. All that the Finance Act does is to stipulate what should be the rate of tax where the tax is in arrears as in the present case. As far as the Petitioner No. 1 firm is concerned that rate is 35% of the disputed income. Consequently, as far as the present case is concerned, the correct way to determine the disputed income would be to determine in the first instance the unpaid tax which undisputedly is ₹ 81,58,392. The next step is to determine the disputed income in relation to the unpaid tax by applying the rate of 33.6%. Thirdly, the tax payable will be calculated at 35% of the disputed income so computed. In that view of the matter, the writ petition is disposed of by directing the Respondents to re-compute the disputed income and thereafter calculate the tax payable by the Petitioners in terms of the KVSS in the above manner.
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2016 (2) TMI 305
Computation of deduction u/s 10A - whether loss of another unit of the assessee company cannot be set off against the profit of the unit eligible for deduction u/s 10A as held by ITAT - Held that:- No fault can be found with the impugned order of the Tribunal, inasmuch as it follows the order of this Court in Black and Veatch Consulting Pvt. Ltd. (2012 (4) TMI 450 - BOMBAY HIGH COURT ) wherein held Section 10A is a provision which is in the nature of a deduction and not an exemption - the deduction under Section 10A has to be given effect to at the stage of computing the profits and gains of business - Section 80B(5) defines for the purposes of Chapter VI-A “gross total income” to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter – Decided against revenue.
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2016 (2) TMI 304
Accepted method of accounting - assessment on Best Judgment basis - Held that:- As project completion method is one of the accepted method of accounting and the same was regularly followed by the respondent-assessee in computing it's taxable income. It is for the assessee to choose the method of accounting and employ it regularly. It is not the case of the revenue that the project completion method of accounting is not regularly employed by the assessee. As held by the two authorities, the Assessing Officer has without any reason discarded the project completion method and adopted the percentage completion method of accounting. It is pertinent to note that the Assessing Officer has not rejected the books of account of the respondent-assessee so as to complete the assessment on Best Judgment basis under Section 144 of the Act. Therefore, there is no reason to interfere with the concurrent finding of fact arrived at by the CIT(A) and the Tribunal that no defect has been pointed out by the Assessing Officer to discard the project completion method adopted by the respondent-assessee.
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2016 (2) TMI 303
Addition on account of inventory written off - Held that:- As far as the present case is concerned, the CIT (A) having noted categorically that the complete details of inventory were furnished by the Assessee together with evidence of persons before whom the items were disposed of, and with the inventory clearly not being available for any verification, no purpose will be served by remanding the matter to the AO for that exercise. - Decided against revenue
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2016 (2) TMI 302
Penalty imposed u/s 221 (1) - self assessment tax under Section 140A remained payable - denial of natural justice - Held that:- Considering the assessee's submission that the 1st respondent is erred in sustaining the levy of penalty under Section 221(1) without considering sufficient cause shown for the belated payment of self assessment tax under Section 140A for the assessment year in question and without assigning proper reasons and that the 1st respondent has failed to appreciate the unreasonable approach of the 3rd respondent in passing the exparte penalty order even though it was brought to his notice and thus there is gross violation of principles of natural justice the impugned order dated 13.10.2015 is set aside and the matter is remitted back to the 1st respondent for passing orders afresh - Decided in favour of assessee by way of remand
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2016 (2) TMI 301
Service tax collected in relation to projects where the income was being offered to tax on gross basis u/s 44D r.w.s. 115A - CIT(A) held that the service tax was not the part of the gross receipts to be taxed u/s 44D r.w.s 115A - Held that:- Service tax being a statutory liability, would not involve any element of profit and accordingly, the same could not be included in the total receipts for determining the presumptive income. In the light of view taken by the Mumbai Bench in case of Islamic Republic of Iran Shipping Lines Vs. DCIT [2011 (4) TMI 637 - ITAT MUMBAI] especially when the ld. DR did not place any material before us, controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take a different view in the matter nor brought to our notice any contrary decision, we are of the opinion that service tax paid by the assessee could not form part of amount for the purpose of deemed profits u/s 44BB unlike the other amounts received towards reimbursement - Decided against revenue
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2016 (2) TMI 300
Deduction under section 10A - Interest on Fixed Deposits - Held that:- As the interest earned from fixed deposits kept apart for the purposes of business is to be treated under the head ‘Income from Business’ and not under the head ‘Income from other sources’ and is to be treated as profits of the business while calculating the deduction under section 10A of the Act. Exchange difference on EEFC - Held that:- Following the decision of the Coordinate Bench in assessee’s own case for A.Y. 2009-10 we hold that the amount is not interest earned but gain on fluctuation of foreign exchange, which are to be taxed under the head ‘Income from Business’. We direct the AO to tax the exchange gain under the head ‘Income from Business’ and accordingly allow the assessee deduction under section 10A of the Act. Deduction u/s. 10A from Book Profit u/s. 115JB - Held that:- Exclusion of exemption/deduction allowable under section 10A of the Act from the Book Profits taxable under section 115JB directed
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2016 (2) TMI 299
Levy of fee under section 234E in the order u/s 200A - Held that:- The adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234 E is unsustainable in law. We, therefore, uphold the grievance of the assessee and delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee
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2016 (2) TMI 298
Deduction u/s.80P(2)(a)(i) - Held that:- Issue in dispute is purely covered in favour of the assessee partly by the decision of Hon’ble Karnataka High Court in the case of Guttigedarara Credit Co-operative Society Ltd. vs. ITO [2015 (7) TMI 874 - KARNATAKA HIGH COURT] wherein it has been specifically held that interest income earned by the Credit Co-operative Society from deposits made with scheduled bank would also qualify for grant of deduction u/s.80P(2)(a)(i) of the Income Tax Act. Therefore, we allow the appeal of the assessee and direct the Assessing Officer to grant deduction u/s.80P(2)(a)(i) of the Income Tax Act and the interest income.
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2016 (2) TMI 297
Disallowance of claim of discount to customers on sale of two wheelers - Held that:- The genuineness is not established by the evidence that assessee sought to rely upon. We are of the opinion that on the basis of the sample evidences furnished by assessee, in the absence of any policy of discount or acknowledgement by the customers in the invoices, the Modus Operandi adopted by assessee seems peculiar. Therefore, in the interest of justice, we are of the opinion that the claim of discount is required to be examined fully and if necessary by detailed enquiries by the Department on the basis of the evidence available on record. If assessee is not in a position to substantiate the claim, AO is free to examine whether the same Modus Operandi is followed in earlier years or in later years and can examine the current customers whether any discount is genuinely offered by assessee on each and every motorcycle being sold. Only after proper enquiries and satisfying, whether assessee's claim of discount is genuine or not, the claim can be allowed. Decided in favour of assessee for statistical purposes.
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2016 (2) TMI 296
Default for noncollection of tax at source as per the provisions of Section 206C(6A) - sale of the timber - Held that:- The assessee should not be treated as assessee in default in terms of the amended provisions of the law. From the order of the ld. CIT(A) we find that all the parties to whom the sales were made have furnished their respective returns of income. We also find that the ld. DR has not brought anything contrary to the argument of the ld.AR. Accordingly we also relied on the order of ITAT Ahmedabad "A" Bench in the case of K.P.G.Enterprise (2014 (8) TMI 716 - ITAT AHMEDABAD ), we reverse the order of the authorities below and allow this ground in favour of assessee.
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2016 (2) TMI 295
Reopening of assessment - basis of the valuation report received from the office of the DVO - Held that:- As decided in ACIT Vs Dhariya Construction Company [2010 (2) TMI 612 - Supreme Court of India ] the opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment - Decided in favour of assessee
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2016 (2) TMI 294
Entitlement to deduction under section 80IC - CIT (Appeals) deleted the disallowance - that:- No infirmity in the finding given by the learned CIT (Appeals) as the kit for which registration fee is received by the assessee contains the products of the assessee in which the assessee deals together with the literature explaining the use of the product. By no stretch of imagination, this kit can be said to be not related to the business of the assessee. Since deduction under section 80IC of the Act is allowed on any income on sale of products of the company. The product sold through a kit cannot be said to be not of the business. Therefore, we confirm the action of the learned CIT (Appeals) in deleting the disallowance of deduction under section 80IC of the Act on registration charges to the extent of cost of products contained by the kit. Sale of scrap be held to be eligible for deduction under section 80IC
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2016 (2) TMI 293
Adjustment of total turnover while allowing deduction u/s. 10B - Held that:- In light of the decisions in CIT v. Tata Elxsi Ltd., [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] and CIT v. Samsung Electronics Co. Ltd. (2011 (11) TMI 429 - KARNATAKA HIGH COURT) it is very clear that, the deduction claimed u/s 10B should not be restricted by not reducing the freight and forwarding and insurance from total turnover. Hence we direct the AO to follow the decision of the Karnataka High Court in Tata Elxsi Ltd.[supra] and reduce the freight & forwarding and insurance expenses from total turnover. Set-off of losses other than EOU against profits of EOU - Held that:- Following the decision of the Hon’ble jurisdictional High Court in the case of CIT v. Yokogawa India Ltd., [2011 (8) TMI 845 - Karnataka High Court ], the addition made by the AO in this regard and upheld by the DRP is deleted as setting off business loss and unabsorbed depreciation of other undertakings against profits of the EOU undertakings for the purpose of determining the deduction u/s. 10B of the I.T. Act is erroneous. Transfer Pricing adjustment in respect of interest on loan given to subsidiary company - Held that:- Respectfully following the decision of this Tribunal in assessee’s own case for the AY 2008-09, interest charged on loan given to Australian subsidiary is deleted. Relief u/s. 91 - Credit for Dividend Distribution Tax - rectification - Held that:- We direct the Assessing Officer to consider this issue and pass appropriate orders on the rectification application filed by the assessee before him
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2016 (2) TMI 292
Penalty u/s 271(1)(c) - disallowance made on account of expenditure towards payments made to Globextech India (P) Ltd. by the assessee on the basis that due to search and seizure operation conducted at the premises of S.K. Gupta Group of Companies - Held that:- Under the circumstances, it cannot be held beyond doubt that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the additions in question to attract the penal provisions under sec. 271(1)(c) of the Act as the fulfillment of the above condition is sine quo non. Of course, in a penal provisions, advantage of benefit of doubt will go in favour of assessee. We thus while setting aside orders of the authorities below direct the Assessing Officer to delete the penalties in question in the assessment year 2003-04 and ₹ 15,38,030 in assessment year 2004-05 levied under sec. 271(1)(c) of the Act. - Decided in favour of assessee
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2016 (2) TMI 291
Disallowance u/s 40A(3) - Held that:- The assessee had made payments to small time venders who supplied hides and skins on vehicles such as cycles, rickshawalas and rehris. The payments were being made to them against kacha bills because the purchases were made from unorganized sectors and the butchers do not have printed bills. It is also clear from the statements of Shri Ram Kumar and Shri Harish Kumar that they confirmed having purchased kucha skins from other butchers and after processing them with salt and mixture they sold these goods to the assessee. In view of the decision of the Hon'ble Calcutta High Court referred to above, we hold that the payments made by the assessee is fully covered within the meaning of Rule 6DD(e)(ii) of the Rules and hence cash payments made to processors of hides and skins are producers within the meaning of aforesaid Rule, and hence no disallowance u/s 40A(3) of the Act is called for. Accordingly, we delete the addition. - Decided in favour of assessee G.P. addition - Held that:- Assessing officer has not invoked the provisions of section 145 of the Act. The books of account of the assessee are audited and the auditors have not given any adverse remarks. The Assessing officer has computed the suppressed sales without pointing out any discrepancy in the books of account regularly maintained by the assessee. It is observed that CIT(A) has allowed a substantial relief to the assessee but we are of the opinion that there is no justification in sustaining the addition of ₹ 13,80,680/-, particularly when it is not the case of the Assessing officer that the assessee has not declared the true profits and the books of account are not reliable as he has not rejected the book results. Thus, considering the entire facts of the present case and also settled legal position, we do not find any reason to sustain the addition of ₹ 13,80,680/- and accordingly we delete the same and allow this ground of appeal. - Decided in favour of assessee Addition to suppressed sales to the sister concern - Held that:- Considering the entire facts and circumstances of the present case, we observe that on the basis of certain bills, the Assessing officer came to the conclusion that the assessee was selling the goods to its sister concern at a lower price as compared with the sales made to other parties. It is also noticed that during the remand proceedings the assessee submitted two bills having bill Nos. 716 dated 25.10.2008 in which material was sold to the sister concern @ 4.50 per Sq DM and another having bill No. 719 dated 15.10.2008 vide which material was sold to M/s Indiggo @ 3.15 per Sq. DM. According to the assessee the rate of goods sold to sister concern is higher than the goods sold to the other parties. Thus, considering the entire facts and circumstances of the case, we are of the view that there is no justification in sustaining the impugned addition. The Assessing officer cannot dictate terms to the assessee as to how such profit is to be earned. There are no basis for making the impugned addition. - Decided in favour of assessee Disallowance out of salary wages and bonus - Held that:- The assessee himself has admitted that disallowance to the extent of ₹ 17,419/- can be made. The Assessing officer has not pointed out any discrepancy and, therefore, there was no justification in making the adhoc disallowance out of salary wages and bonus as made by the Assessing officer. It is apparent from the records that the assessee has recorded sale of ₹ 1223.72 lakhs and job work income of ₹ 178.32 lakhs and net profit of ₹ 43.23 lakhs. This huge amount of sales, job work income and net profit cannot be achieved without a proper and adequate labour force and concern's nature of business is that of manufacturing job work of hide and skins and leather. In this way, all the employees work day to day basis. . Considering the nature of assessee's business and relevant facts, we are of the opinion that order of CIT(A) requires no interference at our level.- Decided in favour of assessee
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2016 (1) TMI 1088
Deduction u/s 80HHC without reducing the deduction allowed u/s 80IB - Held that:- Sec. 80IA(9) is very clear that where any amount of profits and gains of an undertaking is claimed and allowed, deduction to the extent of such profits and gains shall not be allowed under any other provisions of Chapter VI of the Act. It further says that the deduction shall not exceed the profits and gains of such eligible business as the case may. While interpreting sec. 80IA(9) of the Act, the Bombay High Court in CIT vs Nima Specific Family Trust [2000 (12) TMI 87 - BOMBAY High Court] found that deduction allowed u/s 80HHC need not be reduced while computing deduction u/s 80IA of the Act. Inclusion of receipt from scrap sales in the total turnover - Held that:- The sale proceeds from scrap may either be shown separately in the Profit & Loss Account or may be deducted from the amount spent by the manufacturing unit on the raw material from which goods are manufactured. The raw material which is not capable of being used for manufacturing the goods will have to be either sold as scrap or might have to be recycled. When such scrap is sold, the sale proceeds cannot be included in the total turnover. Therefore, the proceeds of the sale of such scrap would not be included in the sales in the Profit & Loss Account of the assessee. In the case before us, the assessee is admittedly a manufacturing company, therefore, the sale proceeds of the scrap cannot form part of the total turnover. Therefore, we are unable to uphold the order of the lower authority. In view of the judgment of the Apex Court in Punjab Stainless Steel Industries (2014 (5) TMI 238 - SUPREME COURT ) and for the reasons stated therein, we set aside the orders of the lower authorities and the Assessing Officer is directed to exclude the sale proceeds of scrap from the total turnover. Exclusion of freight and insurance from the total turnover - Held that:- Total turnover and export turnover shall be of the same factor. In other words, the denominator and numerator shall be of the same factor while computing the deduction u/s 80HHC. Therefore, once the Assessing Officer excluded the freight and insurance charges from the export turnover the same shall also be excluded from the total turnover. Therefore, the orders of the lower authorities are set aside and the Assessing Officer is directed to exclude the insurance and freight charges from the total turnover also. Exclusion of 90% of interest, agency commission, rent and miscellaneous income from the profits of business while computing deduction u/s 80HHC - Held that:- The profit of the business has to be computed under the provisions of the Income-tax Act, 1961, therefore, the expenditure incurred by the assessee has to be excluded and what is included is the net income and not the gross income. This Tribunal is of the considered opinion that what is to be excluded under Explanation (baa) of sec. 80HHC is net income included in the profit. Therefore, the orders of the lower authorities are modified and the Assessing Officer is directed to exclude 90% of the net receipt like interest, agency commission, rent etc from the profit of the assessee while computing deduction u/s 80HHC of the Act.
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Customs
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2016 (2) TMI 312
Offences under Sections 132, 135 and 135A of the Customs Act, 1962 - wrongful availing duty drawback - application for regular bail - Held that:- applicant is behind the bar since 05.10.2015 and the investigation is almost over qua the present applicants. - The applicant shall pay an amount of ₹ 60 Lakh - this is a fit case to exercise the discretion to enlarge the applicant on bail. Hence, the application is allowed and the applicant is ordered to be released on bail in connection with the offence registered under the Customs Act.
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2016 (2) TMI 311
Levy of penalties under the Customs Act for the alleged acts of smuggling of cigarettes - Held that:- With respect to petitioner No.1-Krishna Clearing, we are not inclined to entertain this petition in view of availability of alternative statutory remedy. We would relegate petitioner No.1 to such remedy before the Tribunal. With respect to rest of the petitioners, facts are not serious in dispute. The Commissioner having dropped the show cause notice proceedings qua these petitioners, the Department had not appealed against such order in their cases. The Departmental appeal was confined only to Krishna Clearing. The Commissioner (Appeals) in absence of other noticees could not have disturbed the order of Commissioner. Firstly, without any appeal being filed by the Department, it is questionable whether the Commissioner could have taken such a step. Secondly, in any case, without any notice, the other noticees had earned the verdict of dropping the proceedings. The appellate Commissioner could not have disturbed such order which would be plainly opposed to the principles of natural justice
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2016 (2) TMI 310
Illegal acquisition of foreign currency - Both the notices, however, placed sufficient evidence in support of the lawful acquisition of 1000 Euros each for authorized dealer. As regards 110 Euros, in his opinion, were lying unspent from their previous foreign visit. - These lawfully acquired 2110 Euros, were, however, used to conceal the 34000 Euros. - Held that:- It is not in dispute that foreign currency possessed by the petitioner consisted of Euros 23195 and Euros totalling Euros 36120. Considering the provisions of the Customs and FEMA Act, the Appellate Authority, i.e. Commissioner of Customs (Appeals) upheld the petitioner’s contention that foreign currency is not declared to be “prohibited goods” under provisions of either of above Acts, accordingly vide order dated 17.10.2007 directed the respondent department to release entirety of above described foreign currency to the petitioner. Thus, if the Department has accepted the contention of the petitioner in adjudication proceedings and released the foreign currency in his favour, then he cannot be held liable under Section 132 of the Customs Act. - Decided in favor of petitioners.
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2016 (2) TMI 309
Mis-declaration of goods and value thereof - period of limitation - relevant date - principles of res judicata - import of low/high carbon steel wire rods and electrolytes zinc free of duty under the Duty Exemption Entitlement Certificate (DEEC) Scheme by mis-declaring and undervaluing the goods and then disposing of the said imported goods in the local market for profit instead of using them in the manufacture of steel wire ropes for export. Held that:- In the present case the relevant date for the purpose of limitation would be the clearance of the B/E in question. The earliest of the B/Es forming the subject matter of the second SCN is 12th March 1987 and the second SCN was issued on 11th March 1992 which was within five years from the date of such B/E. The date of clearance of the consignment with reference to that B/E was obviously on a date after the date of such B/E. The contention of learned counsel for the Petitioners that the limitation for the purpose of Section 28 (4) of the Act for issuance of SCN will begin to run from the date of knowledge of the mis-declaration or undervaluation of the goods is contrary to the express language of clause (a) of Explanation 1 which makes it clear that limitation begins to run from the 'relevant date' which in the present case will be the date on which the goods were cleared by the Customs. Further, there can be no manner of doubt that the subject matter of the two SCNs were two different sets of B/Es. Each B/E is separately assessed at the time of clearance of the imported goods. The B/Es mentioned in the first SCN are not the ones mentioned in the second SCN and vice versa. Therefore, the question of applicability of the principle of res judicata does not arise. Demand with levy of penalty confirmed - writ petitions dismissed - Decided against the appellant.
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Corporate Laws
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2016 (2) TMI 280
Scheme of Amalgamation - Scheme of arrangement is in the interest of the shareholders and creditors of all the companies as well as in the public interest, therefore, the same deserves to be sanctioned. It is, however, directed that the petitioners shall preserve their books of Accounts, papers and records and shall not dispose of the records without the prior permission of the Central Government under Section 396A of the Companies Act, 1956. The petitioner shall further ensure statutory compliance of all applicable laws. On the sanctioning of the Scheme of Amalgamation, the petitioner Companies shall not be absolved of any of their statutory liabilities.
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2016 (2) TMI 279
Scheme of Amalgamation - Held that:- Taking into account the contentions raised in the affidavits and counter affidavits and the judgment cited at the Bar, this Court is satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs no longer survive. This Court is of the view that the present Scheme of Arrangement is in the interest of the shareholders and creditors of all the companies as well as in the public interest therefore, it deserves to be sanctioned. Hence, the following order: The prayers in terms of paragraph 16(a) of the Company Petition No. 352 of 2015, and paragraph 15(a) of Company Petition No. 353 of 2015 are hereby granted.
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Service Tax
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2016 (2) TMI 316
Cenvat Credit - scope of capital goods and input services for providing output services being General insurance services - credit of duty of excise paid on furniture and fixture - Revenue is of the view that they could not have availed CENVAT credit on Furniture and Fittings as they were not capital goods and on the "Outdoor Catering Services" it was not related to the services rendered by them which are taxable. Held that:- appellant is eligible to avail CENVAT credit to the extent of service tax paid by the canteen contractor and is not eligible to avail CENVAT credit of the service tax paid on the value of the services utilized by the employees of the appellant. Furniture and Fittings are nothing but tables and chairs which were procured by appellant during the relevant period. It is a common knowledge that any insurance company is required to have chairs and tables to render services to their clients. In our considered view, the said tables and chairs are used for rendering services of general insurance, accordingly, the appeal filed by the appellant on this issue needs to be allowed and we do so. Appellant is eligible to avail the CENVAT credit of excise duty paid on Furniture and Fittings and also the service tax paid on canteen services as indicated herein above. - Decided in favor of assessee.
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2016 (2) TMI 315
Wavier of pre-deposit - Demand of service tax on advance received as per the balance sheet - Rate of composition tax on works contract - The appellant has contended that (i) It opted for Composition scheme for Works Contract Services when the rate of tax was 2%, and therefore the same rate should continue for the entire period of the contract - Held that:- While the demands under Show cause dated 21/10/2012 and 19/10/2012 are prima facie not barred by time limit, the appellant has raised the contention with regard to time bar in respect of the show cause notice dated 17/4/2012 which requires detailed analysis which can be taken up only at the time of final hearing. We are however prima facie not with the appellant on the proposition that once composition scheme is opted, the rate of tax thereunder as applicable on the date of opting for the composition scheme is locked for the entire period of implementation of the works contract. - Prima facie case is not favor of assessee - Stay granted partly.
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2016 (2) TMI 314
Waiver of pre-deposit - Nature / type of payment made by the assessee - whether the amount of ₹ 82,82,956/- has been paid towards their routine service tax liability or reversal of CENVAT Credit towards their liability under Rule 6(3) of CENVAT Credit Rules, 2004 - Commissioner did not accept the said payment as reversal of credit observing that the said e-payment was in discharge of their liability towards service tax in providing taxable service and in their ST-3 Return, they had never been claimed that the said payment was in discharge of their liability for availing CENVAT Credit on input services used for both dutiable and exempted products. Held that:- Considering the fact that the applicant has reversed an amount of approximately ₹ 19.00 Lakhs, it would be appropriate to direct the applicant to deposit an amount of ₹ 50.00 Lakhs keeping in view the interest of Revenue and also in the interest of justice. Consequently,, the applicant is directed to deposit ₹ 50.00 Lakhs (Rupees Fifty Lakhs) within eight weeks from today and on deposit of the said amount, balance dues adjudged would stand waived and its recovery stayed during the pendency of the appeal. - Stay granted partly.
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2016 (2) TMI 313
Refund of unutilized cenvat credit - export of services - distinguish between the refund claims as those prior to registration and those post-registration - Held that:- In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. - Refund allowed.
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2016 (2) TMI 289
Valuation - repair and maintenance activities - demands have been raised on the material components utilized in repair and maintenance work of LPG cylinders carried out by the appellant holding the same to be consumables, thereby not having any element of deemed transferred of property in the same. - Held that:- the issue is no longer res-integra. It has been explained in the decision by the Apex Court that service tax and sales tax are mutually exclusive. Further following the ruling of the Apex Court in the case of Pro Lab and others (supra) and Balaji Tirupati Enterprises (All-HC)), we hold that the ld. Commissioner is in error in Levying tax on the material component involved in repair and maintenance of the cylinders carried out by the appellant. Thus, the impugned order is set aside - Decided in favor of assessee.
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Central Excise
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2016 (2) TMI 288
Demand of Interest - Refund by taking credit of the amount in their cenvat account and thereby taking a suo motto refund of pre-deposit - Held that:- As per the appellate order dated 22.6.2007 the pre-deposit amount has to be refunded to the respondent. The act of the respondents in taking refund of the amount by crediting the amount in their cenvat credit account, is only a procedural lapse. After taking credit, the respondents have declared the same in their ER-1 returns of July, 2007 itself. Moreover, they sent a letter dated 22.2.2008 along with copy of appellate order and requested for permission to utilize the credit, besides their request to issue formal order of sanctioning refund. All these establish that there was no suppression or pre-meditated act to evade payment of duty. The right of the party to get refund of pre-deposit cannot be denied on account of a procedural lapse. The Assistant Commissioner in any case ought to have considered the letter dated 22.2.2008 as an application for refund. As the amount is payable/refundable to the respondents w.e.f.22.6.2007, do not find any ground to demand interest on the very same amount alleging that the respondents took credit irregularly. The impugned order calls for no interference. - Decided in favour of assessee
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2016 (2) TMI 287
Ineligible CENVAT Credit availed on capital goods - various machinery and items purchased and used in setting up of thermal power plant in their factory.- Held that:- The appellants purchased capital goods, paid for the same and received under due documents in their premises. The supplier had another set of contracts for designing, erection, commissioning and civil/structural works. On all these service contracts, the contractor has paid service tax as applicable on full value. The question of examining the valuation of service contracts for the purpose of determining the eligibility of CENVAT Credit on capital goods for the appellant does not arise. There is no composite contract in the construction of thermal power plant. This has no capital goods which were purchased by the appellant were used by the contractor in the construction of thermal power plant has no consequence to the appellants eligibility to the CENVAT Credit. As discussed earlier the impugned order proceeded on propositions not even contemplated in the demand. On Careful analysis of the facts relevant to the case, we find that the impugned order is not legally sustainable and accordingly set aside the same - Decided in favour of assessee.
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2016 (2) TMI 286
Discharge of duty liability from August, 1997 to March, 2000 based upon the annual capacity of production - whether the demand raised by the show caused notice consequent to the determination of production capacity are correct or otherwise? - Held that:- It can be seen from the reproduced letter that Commissioner of Central Excise, Goa had finally determined the annual capacity of production. It is also to be noted that this letter is dated 13.03.2000, issued well after the judgment of the Hon'ble High Court of Bombay (judgment dated 31/03/1998). There is no dispute as to the contents of the above said letter and appellant has also not disputed the fact of receipt of said letter. If that be so, we find that the case of the appellant that the annual capacity of production has not determined finally is factually incorrect. Secondly, on specific query raised from the bench, it was informed that the appellant has not challenged this order dated 13.03.2000 which fixed the annual capacity of production of the appellant. It is settled law that, an order, which is appealable is not appealed against, it attains finality and binds a person against whom said order is issued. In the absence of any challenge and appeal to final determination of the production capacity, we find the efforts of the appellant to contest the findings in the impugned order are incorrect and cannot carry their case any further. Thirdly, we find that the omission of section 3A from the Central Excise Tariff Act from 1.3.2001, may not have much consequence on the case in hand, in as much that production capacity was finally determined in March 2000, which remained in challenge, the appellant should have discharged the duty liability based upon such annual capacity of production as determined by the learned Commissioner. In the absence of such discharge of duty liability the lower authorities were left with no choice but to issue show cause notices for recovery of the duty liability for the period in question. It can be said that these show cause notices in fasten of any new liability of the appellant to get attracted under the mischief of proceeding imitated after the omission of the provisions of section 3A from the Central Excise Act 1944. Fourthly, as argued by the appellant that the show cause notice invokes the determination as done by the learned Commissioner by a letter and does not invoke the letter dated 13.3.2000, hence the demands are incorrect, do not appeal to us, in as much the said letter dated 13.3.2000, which finally fixed the annual production capacity was in continuance of the letter dated 26.09.1997, hence the preposition of the learned counsel needs to be rejected. If there is a confirmation of the provisional fixation of the annual production capacity, whether the show cause notice invokes of the provisional determination or otherwise, also in the absence of any challenge to the annual production capacity finally determined, the duty liability along with interest arises as also the penal provisions which are invoked in this case. - Decided against assessee
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2016 (2) TMI 285
Demand of of interest and penalty - Extended period of limitation invoked - Held that:- In absence of any such voluntary payment, recovery of the unpaid duty would not have been possible. In that view of the matter, we do not find the case would fall under sub-section (2B) of Section 11A of the Act. Sub-section (2B) of Section 11A of the Act applies in a case where there is voluntary payment of unpaid duty before issuance of show cause notice under sub-section (1) of Section 11A. When the provision refers to show cause notice, it means a show cause notice which could have been validly issued and surely not a notice which had become time-barred. If by efflux of time and in absence of availability of extended period of limitation, such show cause notice itself had become time-barred, any payment made voluntarily by the manufacturer cannot be viewed as one made under sub-section (2B) of Section 11A of the Act. In the present case, we have already held that time for issuing such a notice was one year, which period had already expired. Accepting the stand of the Department that even in such a case once the payment of duty is made, interest liability would follow would bring about an incongruent situation. The recovery of the unpaid or short paid duty would become time-barred. If the manufacturer does not pay it voluntarily, it would not be possible for the Department to recover the same. But if he does it voluntarily despite completion of period of limitation, he would, further be saddled with the liability to pay statutory interest. Surely, this was not the intention of the Legislature while sub-section (2B) was introduced in Section 11A of the Act. Thus we hold that the impugned order is unsustainable and liable to be set aside
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2016 (2) TMI 284
Sales tax permissible for deduction for valuation under Central Excise Law - Held that:- In the present case, we find the whole issue cropped up during the course of scrutiny of purchase invoices by the audit party and certain ledger accounts maintained by the appellants. It is not disputed that the present demand arose because of the difference between the sales tax amount collected by the appellant from the buyer and actually paid to the State Government. This is as per a incentive scheme announced by the State. All these transactions are duly accounted for and maintained. As already stated there is a clear possibility of bonafide doubt regarding the quantum of deduction of sales tax in view of different interpretations prevalent during the time. The Tribunal in the case of Indian Oil Corporation Ltd. vs. CCE, Ahmedabad reported in ( 2013 (9) TMI 310 - CESTAT AHMEDABAD ), in a matter involving Central Excise duty consequent on re-calculation of sales tax, held that the issue involved bonafide dispute as requires interpretation of valuation provisions and no extended period can be invoked. Considering the above discussion, we are of the opinion that while the appellants are liable to pay the Central Excise duty as per the valuation determined in the impugned order the demand for extended period cannot be sustained. Accordingly, the penalty on the appellants is also set aside. As such, the appeal is partly allowed in the above terms.
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2016 (2) TMI 283
Manufacture - whether the items i.e. impure dowtherm diphyl; old and damaged PTA scrap, wash water - 50% concentration of lactum, old and used sludge oil; old and used all types of oil, spin finish oil and old assorted bearings cleared from the factory premises of the assessee are liable to duty? - Held that:- It is on record that the items on which duty demands are made are arising during the course of manufacture of the final products for the period in question. It is also undisputed that the assessee-appellant is clearing the products on commercial invoices and gets some consideration for the said items. At the outset, on perusal of the items which are cleared from the factory premises, description as per the annexure to the show cause notices, it may be seen that they are either used, old or damaged wash water, old and used sludge oil and old assorted bearings. The description itself would indicate that these products are not manufactured nor they are associate product and therefore cannot be said to be distinct products as contended by the learned Departmental Representative. There is nothing on record to indicate that these items, which were sought to be considered as distinct product, were being manufactured in the appellant's factory premises. Secondly, as find, arising out of the very same audit objection, another show cause notice was issued demanding duty on the used/waste MEG/TEG that arises during the course of manufacture in the factory premises of the appellant and the said demand was set aside by the first appellate authority; Revenue's appeal before the Tribunal [2008 (7) TMI 677 - CESTAT, MUMBAI], was rejected by an order dated 23/07/2008 (wherein I was one of the Member) holding that these items (used MEG) is not a manufactured product for demand of duty. In the case in hand, undoubtedly there is nothing on record to show that these products, which arise during the process of manufacture, are manufactured products. - Decided in favour of assessee
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CST, VAT & Sales Tax
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2016 (2) TMI 282
Doctrine of promissory estoppel - Continuity of exemption after migration from sales tax regime to VAT regime - tax holiday of ten years - KST to KVAT - exemption from CST - Information Technology Policy of the State Government - It is true that in the notification dated 21.8.1997 issued under the KST Act, there was a specific condition that if the Unit (exercising the option for tax exemption) collects any tax, it shall become ineligible for tax exemption. But the same was applicable only up to 1.4.2005. If such condition was to continue after 1.4.2005, then the procedure for grant of exemption, which was provided in the notification dated 18.4.2005 under the KVAT Act, which was that the output tax is to be collected and input tax is to be deducted, and net tax has to be paid, then only the net tax paid would be refunded, would clearly mean that after 1.4.2005, the condition of ineligibility of the unit if it collects tax, had been done away with. The notification providing for such ineligibility was under the KST Act, which was followed in the case of CST Act up to 31.3.2005. When the subsequent notification dated 18.4.2005 (effective from 1.4.2005) issued under the KVAT Act itself provides for collection of tax, and such benefit of exemption is granted for Karnataka Value Added Tax even when the assessee collects tax, then the same cannot be denied to the same assessee under the CST Act, as admittedly, the procedure provided under the general sales tax law of the State (which presently would be KVAT Act), would be applicable for the purpose of Central Sales Tax, but the substantive provisions of the CST Act were to be followed. The present is a case where the benefit has been for encouraging new industries. It is settled law that a beneficial legislation or notification, has to be liberally interpreted. - The law is thus clear that once an assessee is found entitled to grant of exemption, the procedure for the same is to be construed liberally in favour of, and for the benefit of the assessee. In the present case, the petitioner is admittedly eligible for grant of exemption. As such, the petitioner cannot be denied the benefit on technical grounds. - Decided in favor of assessee.
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2016 (2) TMI 281
Challenge to the recovery notice - order of attachment - sale of goods without billing came to light during raid at godowns - Held that:- When the investigation is yet not completed and assessment to be made at a later point of time, it would not be appropriate on our part to make any conclusive observations with respect to the rival contentions. In view of the prima facie materials at the command of the department, it is not possible to direct lifting of the seals on the godown without further conditions. At the same time, the estimate of the department on possible duty and penalty liability is also based on 150% penalty which is maximum imposable under the statute and not necessarily always imposed at such maximum rate. In that view of the matter, on some further conditions, the seals on the godowns can be lifted. - Upon the two undertakings being filed and postdated further cheques being issued by the petitioner, seizure of the stock would be lifted. The department shall remove the seals on the godowns.
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Wealth tax
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2016 (2) TMI 290
Reassessment - Inclusion of land in the wealth tax assessment - Appellant contended that land in question was not permitted for construction and a civil suit was also pending before the Sub-court - Held that:- , merely because a civil suit is pending on the basis of the amount due to the said Smt V. Kamalam and other creditors, it cannot be said that the assessee has not acquired any title over the said land in question. Therefore, this Tribunal is of the considered opinion that the market value of the land has to be ascertained after taking into consideration the pendency of the civil suit. Since the suit is pending, the value may not be alike freehold land. The pendency of the civil suit would definitely reduce the market price of the land in the open market. Therefore, this Tribunal is of the considered opinion that the land in question is an asset within the meaning of sec. 2(ea) of the Wealth-tax Act and it has to be assessed accordingly under the Wealth-tax Act. - Decided partly in favor of assessee.
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