Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 18, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Highlights / Catch Notes
Income Tax
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MAT - Book profit adjustments - though actual payment of gratuity may be made at a later point of time upon periodical release of the employees from service, it is provision having been made on actuarial basis it cannot be stated to be an uncertained liability - HC
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Where the nature of transactions have been accepted in the past, the CIT could have had no occasion to take recourse to revisionary powers u/s 263 on the fundamental aspect of the transactions in issue on which a view has been taken in earlier years - AT
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Invocation of the provisions of section 50C - The expression “assessable“ has inserted into the statute for perspective application w.e.f 1.10.2009 - Not applicable for the AY 2007-08 and 2008-09 - AT
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Deduction allowable u/s 10B - calculation as given by the assessee has no merit considering that the net profit as per tax audit report for the entire business activity is 6.14% and on the other hand, the profit from actual manufacturing activity will be 20.70%. - AT
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Additional Depreciation - new machinery or plant in question were not acquired after 31st day of March, 2005 - the court interprets a law and cannot legislate - decided against assessee - AT
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Condonation of in filling of appeal before Tribunal - sufficient cause should be understood in pragmatic and practical manner - The cause shown by the assessee was genuine and bonafide. - HC
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Penalty u/s 272B – Wrong quoting of PAN in TDS return - Revised PAN and Revised statement (Form 26G) filed - sufficient compliance with the provisions of section 139A - No penalty - HC
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Charitable purpose u/s 2(15) - Income from printing and publishing of newspapers - if there be any ambiguity in the language employed, the provision must be construed in a manner that benefits the assessee - HC
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Disallowance u/s 40A(3) – Rule 6DD – Staggered the payment - It is very clear that the assessee consciously split up the payments in whole of the year, which is impracticable, illogical - AT
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Attachment order of 11 bank accounts - attachment order lifted and stay granted subject to payment of Rs.2.10 crores by 15.03.2013 - HC
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Conversion of shares from stock-in-trade to investments - Once the shares were held as investments, the gains arising out of the sale of investment were to be assessed under the head capital gains and not under the head business profits. - HC
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Corporate membership fee paid to Golf Club - Such expenses are for running the business with a view to produce the benefits to the assessee. - it cannot be treated as capital asset - HC
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Method of accounting following consistently should not be disturbed because it was incorrect unless it could be shown that change in the method of accounting would result in gain for the Revenue - HC
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TDS u/s 194J - purchase and sale of rights in satellite and movies - the payments made would fall within the definition of “royalty“ - TDS to be deducted u/s 194J - AT
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Status of assessee – Merely accruing of income jointly to more persons than one would not constitute thereon an association of persons. Unless the associates have done some acts or performed some operations together - HC
Indian Laws
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Mere non-payment of duties is not collusion or willful misstatement or suppression of facts - Article
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REMEDY AGAINST C.B.E& C CIRCULAR DATED 01.01.2013 - Article
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Condonation of delay - the delay is inordinate no reason worth the name on the record given by the applicant for holding that there had been sufficient cause for the delay - no ground to condone - HC
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Debts Recovery Tribunals (DRTs) at Chandigarh - all the proposals and measures agreed upon by the Union of India in response to the suggestions made for working of Tribunals shall be implemented expeditiously within a suitable time frame - SC
Service Tax
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As the appellant had discharged the Service Tax liability on being pointed out & is not contesting the Service Tax liability and interest thereof the lower authorities should not have issued the show cause notice as provisions of Section 73 (3) may apply in this case. - AT
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Ropeway services - By providing the facility of transportation from Mansa Devi to Chandi Devi and vice versa, assessee did not carry out tour operation. - no service tax liability - HC
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Constitutional validity of Section 67 - Security Agency – The ‘Master and Servant relationship is between the Security Agency and the Security Personnel engaged and not between the Service Receivers and the Security Personnel. - HC
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Supply of water supply to SEZ on behalf of State Government - Government of Rajasthan could not be treated as a developer of SEZ or a contractor. - AT
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Rebate claim of service tax - any condition imposed by the notification must be capable of being complied with. If it is impossible of compliance, then there is no purpose behind it. - HC
Case Laws:
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Income Tax
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2013 (2) TMI 387
Jurisdiction power u/s 263 by CIT(A) - No investigation was carried out by the AO to establish the name and address, genuineness and creditworthiness of the actual subscribers to such FCCBs in terms of Section 68 - Held that:- As DR could not bring to notice any statutory requirement or guideline issued by the RBI or any other Government authority fastening obligation on the assessee to maintain a record of the actual subscribers and recording their names instead of DB HK, who actually signed subscription agreement with the assessee the assessee was only required to prove the identity, capacity and creditworthiness of DB HK who subscribed to its full issue of FCCB (some part directly and some part through its own customers), which is not in doubt. The fact that the assessee received the amount of subscription of Bonds from DB HK has not been denied by CIT. The further fact that Global certificate in respect of Bonds was issued in favour of DB HK and upon conversion of such Bonds, some of the shares were issued in favour of DB HK and remaining in favour of other international financial institutions has also not been disputed by the CIT. Thus the assessee adequately discharged the onus cast upon it in terms of section 68. In view of these facts, CIT was not justified in putting obligation on the assessee to prove the identity, capacity and creditworthiness of the actual subscribers, which fact was beyond its reach at the relevant time. There is no reference whatsoever to the non-examination by the AO of the compliance or otherwise of the RBI guidelines in respect of FCCB issues, therefore, held that the CIT was not justified in holding the assessment order to be erroneous and prejudicial to the interests of the Revenue on this issue. Applicability of sections 60 to 63 - Out of the proceeds of the said FCCB funds granting of interest free funds would be deemed to be transfer of an asset and AO failed to club such interest income with the assessee’s total income - Held that:- The question as to whether income earned by the borrower from the interest free loan advanced by the lender be clubbed in the hands of the lender, is definitely debatable and not conclusive. The scope of proceedings u/s 263 is restricted to revising an order which is erroneous and prejudicial to the interests of the Revenue. An order cannot be said to be erroneous when the AO followed one of the legally sustainable view out of the two views available on the point. The CIT can not call an assessment order to be erroneous simply because he is inclined to follow the other legally sustainable view in preference to the one followed by the AO. As decided in Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME COURT] where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. Thus from the above discussion it is axiomatic that no revision can be done on a debatable issue. Thus this point is to be left here by holding that this aspect cannot be taken out from the realm of “debatable issue” and hence there can be no revision of the assessment order on this point.CIT was not justified in holding the assessment order to be erroneous and prejudicial to the interests of the Revenue on this issue. Mark to market losses (MTM) as on the reporting day were notional losses and hence contingent in nature not allowable for set off against the total income & AO was wrong in allowing such set off - Held that:- It is a case of overall gain on derivatives due to change in the market rate as at the end of the year and not that of the loss. Thus it becomes manifest that on this count, the assessee offered for taxation the said sum and did not claim deduction for loss. This fact finds prominence in the impugned order as well. Despite that, the CIT has held that the component of forex loss on derivatives was not eligible for deduction. There is no doubt that the CBDT Instruction provides that no deduction can be allowed on account of forex losses. Such Instruction has been obviously issued after the judgment in the case of Woodward Governor (2009 (4) TMI 4 - SUPREME COURT) and restricts itself to the disallowability of loss on account of currency derivatives. Going by this Instruction, it becomes patent that such forex loss is no more deductible. Thus failure to understand the logic of the view that the forex loss be ignored but the forex gain on derivatives be taxed. Any profit and loss from an item cannot go in the opposite directions. It cannot be accepted that the deduction claimed by the assessee towards loss due to foreign exchange fluctuation in foreign currency transactions in derivatives should be considered as contingent and hence ignored but the gain due to such foreign exchange fluctuations in foreign currency transactions on derivatives should be assessed to tax. Both the loss / gain assume the same character of either contingent or non-contingent. Thus when there is a net gain of Rs.21.89 crores, which the assessee included in its total income, failure to appreciate the reason for charging the gross gain of forex derivatives to tax but ignoring the loss on account of such forex derivatives. As the ultimate net figure on account of forex derivatives in the given facts and circumstances of the case is that of gain which was offered for taxation, it is manifest that the assessment order in accepting said figure of gain as chargeable to tax, cannot be described as prejudicial to the interests of the revenue. CIT was not justified in holding the assessment order to be erroneous and prejudicial to the interests of the Revenue on this issue.
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2013 (2) TMI 380
Charitable Trust - Income from printing and publishing of newspapers - Whether the object of the assessee trust is encompassed under the expression 'charitable purpose' falling within the ambit of Section 2(15) - Property held under Trust Held that:- Following the decision in case of Thanthi Trust (2001 (1) TMI 80 - SUPREME COURT) that the business income of a trust or institution to be exempt is that the business should be incidental to the attainment of the objectives of the trust or institution. A business whose income is utilized by the trust or the institution for the purposes of achieving the objectives of the trust or the institution is, surely, a business which is incidental to the attainment of the objectives of the trust. In any event, if there be any ambiguity in the language employed, the provision must be construed in a manner that benefits the assessee. The Trust, therefore, is entitled to the benefit of Section 11 for the A.Y. 1992-93 and thereafter. It is, we should add, not in dispute that the income of its newspaper business has been employed to achieve its objectives of education and relief to the poor and that it has maintained separate books of account in respect thereof - In favour of assessee Violation of the provisions of Section 13(3) - Any part of income or any property of the trust or the institution is applied directly or indirectly for the benefit of any person referred to in sub-section (3) of Section 13 – Certain payment were made to persons as defined in Section 13(3) - Held that:- Tribunal while reversing these findings had not recorded any definite and clear finding relating to violation of the provisions of Section 13(3). The matter, thus, requires to be remanded to the Tribunal to re-adjudicate the claim of the assessee for exemption of income u/s 11 - Remand back to AO
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2013 (2) TMI 379
Jurisdiction of AO to pass assessment order - The return was filed with the ACIT, Circle-1 - Notice u/s. 143(2)/142(1) were issued by the ACIT - Subsequently, the case was transferred and commenced by the ACIT, Circle-1, Jodhpur – Held that:- the Addl. CIT, Range-1, Jodhpur was having proper jurisdiction over the case of the assessee to pass the assessment order in the matter. There is compliance of section 127 of the IT Act in the matter and the assessee has not raised any objection of jurisdiction within the period of limitation as provided u/s. 124(3) of the Act. Therefore, the objection of the assessee has been rightly rejected. In favour of revenue Disallowance u/s 40A(3) – Rule 6DD – Staggered the payment - Cash payment of expenditure in excess of Rs. 20,000 - Payment, which has been staggered over a period of time - Purchase of agricultural land in cash - The assessee is dealing in Real Estate and land purchased is stock in trade – The assessee has credited the whole amount in the account of the parties - Staggered the payment almost every day at less than Rs. 20,000/- in a day - Credit balance was carried forward in the next year. Held that:- It is very clear that the assessee consciously split up the payments in whole of the year, which is impracticable, illogical as noted above and it was done just to circumvent the provisions of law. There was no justification for the assessee to split up the transactions of crores of rupees in small payments of Rs. 15,000/- to Rs. 20,000/- everyday. Whatever plea was taken before the authorities below was not supported by any evidence. Therefore, the assessee failed to prove any business expediency or other facts for making staggered payments in cash. The assessee deliberately and consciously split up the payments in part so as to circumvent the provisions of law. In favour of revenue
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2013 (2) TMI 378
Attachment order of 11 bank accounts - assessee failed to comply directions given under partial stay allowed directed to pay a sum of Rs.15 crores for first installment - Held that:- The petitioner has already filed an appeal which is pending before the CIT (Appeals). After hearing the counsel for the parties it would appropriate to direct the CIT(Appeals) to dispose of the appeal by 31.03.2013 & also direct that the attachment order be lifted by the respondents subject to the petitioner paying a sum of Rs.2.10 crores by 15.03.2013, which would bring it in-line with the schedule of payment directed under the order dated 14.12.2012. In case the said payment is made, the balance amount shall remain stayed till orders are passed by the CIT(Appeals) in the appeal.
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2013 (2) TMI 377
Disallowance u/s.14A - Held that:- As Tribunal remitted the matter to the file of AO for computing the disallowance in accordance with the judgment Godrej Boyce Mfg Co. Ltd (2010 (8) TMI 77 - BOMBAY HIGH COURT) the matter passed by CIT(A) ceased to be operative who directed the AO to re-compute the disallowance u/s.14A by applying Rule 8D the consequential order passed by the AO giving effect to such in-operative order of CIT(A), in has been rightly set aside by CIT(A). It is obvious that there can be only one proceeding for one case. When the AO is ceased of the matter for computing the disallowance u/s.14A, as per the order passed by the Tribunal, there can be no question of continuing with any other proceedings - appeal filed by the revenue is dismissed. Penalty u/s.271(1)(c) pursuant to disallowance u/s.14A - Held that:- As the original disallowance made by the AO has been restored by the Tribunal to the file of AO the instant penalty should also be consequently restored - set aside the impugned order and remit the matter to the file of AO for considering the question of penalty afresh -appeal of revenue allowed for statistical purposes.
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2013 (2) TMI 376
Difference between purchase price of shares and market value of shares as on date of conversion of shares from stock-in-trade to investments - Tribunal treated it as business income and difference between sale price of share and market value of shares, as on date of conversion as 'capital gains' ? - Held that:- It is not in dispute that the conversion of its stock in trade into investment was accepted by the Department in assessment years 2003-04 and 2005-06. Also that the shares which were sold and gains from such sales were offered under the head capital gains from the date of conversion from stock in trade into investments and prior thereto as business profits. Further in its books of accounts the respondent-assessee showed the shares on which tax is levied under the head capital gain as investments. Further the fact that the assessee was trading in the shares would not estop the assessee from dealing in shares as investment and offer the gain for tax under the head capital gains. Thus, it is open to the trader to hold shares as stock in trade as well as investments. Once the finding of fact is recorded that the shares sold were held by assessee as investments, the gains arising out of the sale of investment were to be assessed under the head capital gains and not under the head business profits. No question of law arises for our consideration.
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2013 (2) TMI 375
Corporate membership fee paid to Golf Club - Capital v/s Revenue expenditure - Held that:- The nature of the expenditure incurred by the assessee cannot be said to be a capital expenditure. The corporate membership of Rs.6 lacs was for a limited period of 5 years. The corporate membership was obtained for running the business with a view to produce profit. Such membership does not bring into existence an asset or an advantage for the enduring benefit of the business. It is an expenditure incurred for the period of membership and is not long lasting. By subscribing to the membership of a club, no capital asset is created or comes into existence. By such membership, a privilege to use facilities of a club alone, are conferred on the assessee and that too for a limited period. Such expenses are for running the business with a view to produce the benefits to the assessee. Consequently, it cannot be treated as capital asset - in favour of assessee.
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2013 (2) TMI 374
Disallowance of expenditure incurred for performing the Akhand Path - assessee was following mixed system of accounting - ITAT deleted the addition - Held that:- CIT (A) as well as the Tribunal have returned the findings of fact relying upon the judgment of CIT v. Realest & Services Ltd. (2008 (5) TMI 6 - SUPREME COURT) that method of accounting following consistently should not be disturbed because it was incorrect unless it could be shown that change in the method of accounting would result in gain for the Revenue. Both has recorded finding that no useful purpose will be served by changing the method when net result of excluding the receipts pertaining to paths performed in the earlier years would be reduction of the income of the present assessment year without adding to the income to the same or larger extent in the income for paths booked in the subsequent years. No substantial question of law arises for consideration by this Court.
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2013 (2) TMI 373
TDS u/s 194J - Disallowance u/s 40(a)(ia) - assessee, engaged in purchase and sale of rights in satellite and movies - as per AO agreements were only for assignment of rights and not for sale of right to assessee therefore there was no sale of rights to the assessee, thus Section 194J was applicable since payments were in the nature of royalty - CIT (Appeals) deleted the addition - Held that:- Section 194J of the Act clearly mentions that it is incumbent on a person making payments for professional service, technical service and royalty, to deduct tax at source. Thus, the consideration for transfer of all or any rights in respect of any copyright, including copyright for films and video tapes, used in connection with television or tapes, would fall within the definition of "royalty". What is excluded are consideration for sale, distribution and exhibition of cinematographic films. What the assessee paid here was not consideration for sale, distribution or exhibition of cinematographic films. Assessee did not purchase the cinematographic films as such through the transactions. Assessee had only received right for satellite broadcasting. The definition also does not say that it would apply only if the rights are considered only for a definite period. Even if the transfer of rights is perpetual or even if the transfer is only a part of the rights, as long as transfer is of any right relatable to a copyright of a film or video tape, which is to be used in connection with television or tapes, the consideration paid would be royalty only. Thus, the impugned transaction, would fall within the definition of "royalty". Thus the payments made would fall within the definition of "royalty" and the assessee was duty bound under Section 194J to deduct tax at source on the payments effected. Such deduction having not been made, rigours of Section 40(a)(ia) stood attracted. The additional ground raised by the assessee that the rigours of Section 40(a)(ia) are attracted only on amounts standing payable at the end of the relevant previous year, is justified in view of the decision of Special Bench of this Tribunal in the case of Merilyn Shipping & Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] - allow appeal of the Revenue, but at the same time, remit the issue back to the file of the A.O. for applying Section 40(a)(ia) in the view of Merilyn Shipping & Transport's case (supra).
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2013 (2) TMI 372
Disallowance u/s 40(a)(ia) - Assessee is engaged in transport contract - Assessee contended that the provisions of section 40(a)(ia) is restricted to amounts that are payable if they are outstanding as on the last day of the accounting year – Held that:- Following the decision in case of Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) that the word “payable” used in section 40(a)(ia) is applicable only to expenditure which is payable as on March 31 of every year and cannot be invoked to disallow the amounts which have already been paid during the previous year, without deducting TDS. It is not clear neither from the assessment order nor from the CIT(A)’s order, that the amounts that were payable in the months of January and February, 2009, are paid before the year ending 31/3/2009. What is remaining as payable as on the last day of the accounting year alone calls for disallowance by invoking the provisions of section 40(a)(ia). To decide accordingly appeal Remand back to AO
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2013 (2) TMI 371
Status of assessee – Whether the rental income from plinth is assessable as income of A.O.P. or is assessable as individual income of the co-owners - Land in the names of all the 5 owners - Inherited from their forefathers - Rent received from letting out the plinths would fall under 'Income from other sources' or 'Income from House property' Held that:- Following the decision in case of Gowardhan Das And Sons (2006 (9) TMI 134 - PUNJAB AND HARYANA HIGH COURT) wherein it has been held that the income from rental of plinths is to be assessed under 'Income from other sources' and not 'Income from House property' In order to assess individuals to be forming 'association of persons', the individual co-owners should have joined their resources and thereafter acquired property in the name of association of persons and the property should have been commonly managed, only then it could be assessed in the hands of 'associations of persons' Merely accruing of income jointly to more persons than one would not constitute thereon an association of persons. Unless the associates have done some acts or performed some operations together, which have helped to produce the income in question and have resulted in that income, they cannot be termed as association of persons. The co-owners had inherited property from their ancestors and there was nothing to show that they had acted as association of persons. The income was, thus, to be assessed in the status of 'individual'. In favour of assessee
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Customs
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2013 (2) TMI 369
Dishonour of cheques for insufficiency of funds - respondent complained outstanding interest which is due along with the balance amount - Held that:- In view of the consensus arrived at between the parties and keeping in view the law laid down in the matter of Damodar S. Prabhu (2010 (5) TMI 380 - SUPREME COURT OF INDIA), all the four criminal revisions are allowed. However, without prejudice to the rights of the respondent to recover the amount of interest and/or any other amount. Impugned judgments and orders of sentence are set aside and all the four criminal complaints filed by the complainant are quashed, subject to deposit of 15% of the total cheques amount of Rs.70,63,421/- i.e. Rs.10,59,513/- with the State Legal Services Authority, Punjab within one month from today and if not paid then same shall be recovered as arrears of land revenue and the petitioner will have to serve the remaining part of the sentence.
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2013 (2) TMI 368
Unjust enrichment - Consumer welfare fund - Whether the assessee have proved that the duty burden was passed on by the assessee to the consumers or not - Assessee imported raw petroleum coke - Paid cess u/s 7 of the Coal Mines (Conservation and Development) Act, 1974 – Held that:- The assessee were only relying on the Chartered Accountant's certificate which was considered by the authorities below and it was held that the certificate did not indicate the basis on which the certification has been made and hence questioning the veracity of the certificate. Undisputedly, the burden to prove that the amount paid as cess (Customs duty) was not passed on to the consumers was on the appellants which they have failed to discharge satisfactorily. In favour of revenue
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Corporate Laws
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2013 (2) TMI 367
Oppression and mismanagement - petition filed by minority group shareholders seeking to restrain appellants from holding extraordinary meeting for deletion of article 57 of Articles of Association - That EOGM was not convened but later was conducted and resolution for deletion of article 57 was passed - Respondents sought to amend company petition to introduce a challenge to conduct of EOGM deleting article 57 - CLB by impugned order permitted amendment of company petition - Petition filed by the respondent No. 2 under sections 397 and 398 itself became infructuous as the cause of action had ceased to exist - Whether CLB rightly exercised its direction in allowing amendment to petition filed under sections 397 and 398? – Held that:- On perusal of the impugned order passed by the CLB allowing company application filed by respondent Nos. 1 to 3 seeking amendment to company petition, it is clear that the CLB has rendered a finding that the application for amendment was allowed for determination of the issues between the parties and for the purpose of framing issues for avoiding multiplicity of litigations. The CLB stated that the proposed amendment will not in any way fundamentally change the nature and character of the applicants case in the company petition and no prejudice would be caused to the appellants if the amendments were allowed for proper, effective and just adjudication of the matter. The CLB has permitted the appellants to file counter affidavits within three weeks on receipt of the amended company petition. The CLB has also rendered a finding that the company petition filed by the respondent Nos. 1 to 3 has not become infructuous. Company petition fairly depicts that the challenge in the said petition was not restricted to the extraordinary general meeting dated 10-11-2010 but was also against any such meeting in future that might be held for same or similar purposes. By application for amendment filed by the respondent Nos. 1 to 3 the applicants had prayed for amendment of the petition under sections 397 and 398 and to bring on record the subsequent events and development during the pendency of the company petition. It is not in dispute that the company petition is pending before CLB. The CLB has exercised its discretionary power to allow the amendment to the petition filed under sections 397 and 398 by permitting the original applicants to place on record subsequent events so as to avoid multiplicity of litigation and has rendered finding that the amendment would not constitutionally or fundamentally change the nature and character of the applicant's case in company petition and that no prejudice would be caused to the appellants.Thus amendment as allowed by the CLB is upheld as no prejudice would be caused to the appellants in any manner.
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2013 (2) TMI 366
Disputes arose between the family members led to the filing of Company Petition - VKS Group is aggrieved by the impugned order of CLB inasmuch as it has not granted them the relief of payment of salary till 15th July 2011, i.e, the date on which they ceased to be the shareholders in TOCL and TAIL - as against over Rs.1.12 crores claimed by the VKS Group the CLB has directed the BKS Group to pay the two Directors only Rs.50 lakhs - Held that:- By order passed at the instance of BKS Group, the CLB has held that nothing is payable by either group to the other. Both the BKS and the VKS Groups appear to have accepted the said order as neither has challenged it. The order dated 16th September 2011 passed by the CLB should be held to have merged with the subsequent order dated 18th October 2011. The BKS Group at the stage of filing the application for clarification did not question the order dated 16th September 2011 to the extent it required them to pay the VKS Group Rs. 50 lakhs. The BKS Group only sought a clarification that in view of the liability of the VKS Group to pay it a like sum, the BKS Group owed nothing to the VKS Group. Therefore, having invited the order dated 18th October 2011 of the CLB on its application, and not questioning the said order, the BKS Group is estopped from challenging the order dated 16th September 2011 which has merged with the subsequent order dated 18th October 2011 of the CLB. As far as VKS Group is concerned, it is in a position where it has to pay nothing to the BKS Group as a result of the order dated 18th October 2011 which it has accepted. It has also thereby implicitly accepted that it owes the BKS Group Rs. 50 lakhs. It has thereby accepted that after adjustment of the said sum, the BKS Group owes the VKS Group nothing. Thus with the order dated 18th October 2011 of the CLB attaining finality, the challenge by both the VKS and BKS Groups to the impugned order dated 16th September 2011 of the CLB has been rendered infructuous. Both groups have accepted that neither owes the other anything after the order dated 18th October 2011 of the CLB. Consequently, there is no necessity for the Court to examine the correctness of the impugned order dated 16th September 2011 of the CLB.
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Service Tax
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2013 (2) TMI 385
Rebate claim of service tax - whether the filing of the declaration in terms of notification No.12/2005 dated 19.04.2005 on 05.02.2007, after the date of the export of the services amounted to non-compliance with the condition disentitling the appellant from the rebate claims? - assessee rendering of IT-enabled services - Held that:- There is a good deal of force in what the appellant says as any condition imposed by the notification must be capable of being complied with. If it is impossible of compliance, then there is no purpose behind it. The appellant is in the business of rendering IT-enabled services such as technical support services, customer-care services, back-office services etc. which are considered to be “business auxillary services” under the Finance Act, 1994 for the purpose of levy of service tax. The nature of the services is such that they are rendered on a continuous basis without any commencement or terminal points, it is a seamless service involving attending to cross-border telephone calls in respect of the products or services of multinational corporations. The appellant’s unit in Okhla is one of those places which are popularly known as “Call Centres” – business process outsourcing (BPO) centres. The mainstay of the call centres is a sophisticated computer system and a technically strong and sophisticated international telephone network. Thus the very bedrock of the business is the attending of calls and given that they are received on a continuous basis, it difficult to conceive of any possibility as to how the appellant could not only determine the date of export but also anticipate the call so that the declaration could be filed “prior” to the date of export. In addition to this practically impossible situation, the appellant is also required by the procedure laid out in the notification to describe, value and specify the amount of service tax and cess payable on input services actually required to be used in providing taxable service to be exported. With the possible exception of the description, unable to appreciate how the service-exporter will be in a position to value and specify the amount of service tax/cess payable on the input services actually required to be used in providing the exported service. An estimate is ruled out by the use of the word “actually required”, and unless what was actually required is known, it is impossible to value and specify the amount of service tax or cess payable on the input services. That will be known only when the bill or invoice for the input-services is received by the appellant. The bill or invoice is received after the calls are attended to. Thus, it seems that in the very nature of things, and considering the peculiar features of the appellant’s business, it is difficult to comply with the requirement “prior” to the date of the export. Thus having regard to the nature of the business and its peculiar features – which are not in dispute – the description, value and the amount of service tax and cess payable on input-services actually required to be used in providing the taxable service to be exported are not determinable prior to the date of export but are determinable only after the export and if, further, such particulars are furnished to the service tax authorities within a reasonable time along with the necessary documentary evidence so that their accuracy and genuineness may be examined, and if those particulars are not found to be incorrect or false or unauthenticated or unsupported by documentary evidence, it cannot be said that the object and purpose of the requirement stand frustrated. In the present case, no irregularity or inaccuracy or falsity in the figures furnished by the appellant both on 05.02.2007 and in the rebate claims has been alleged. Moreover, it appears somewhat strange that none of the authorities below has demonstrated as to how the appellant could have complied with the requirement prior to the date of the export of the IT-enabled services - Thus allow the appeal and direct the respondents to allow the rebate claims - in favour of assessee.
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2013 (2) TMI 384
Demand of service tax and Penalty - Correction in the order of Tribunal - CESTAT set aside the demand of tax as barred by limitation - assessee had paid the requisite amount of service tax before the show cause notice was issued - revenue contested that only challenge against the order of adjudication was in respect of demand of interest and penalties therefore, only such amount could be set aside & not tax - Held that:- No substantial question of law arises as it is an inadvertent mistake in the order passed by the Tribunal as by mistake the word “tax” has been used in the impugned order, whereas it should have been interest which has led Revenue to frame the said question. The order of the Tribunal shall be read as the setting aside of interest and penalty alone. Admissibility of Cenvat Credit of tax paid on input services used in providing exempted output services - Held that:- As the extended period of limitation was not available so as to contend that the credit of inputs service tax is not admissible to the assessee. Once the proceedings have been initiated after the expiry of one year, then the benefit of input credit could not be denied to the assessee - appeal in favour of assessee.
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2013 (2) TMI 383
Refund claim rejected - non producing bill, challan or invoices in original - Held that:- The matter needs to be factually verified as there is a claim of the chartered accountant that they will be able to produce the evidence regarding the receipt of the services and payment made for such services, thus appellant should be given a chance to produce the same before the lower authorities for substantiating his claim of refund of the service tax paid by him for the export of goods - in favour of assessee by way of remand.
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2013 (2) TMI 382
Refund claim rejected - no nexus shown as regards the use of input services for providing output services - Held that:- As per FAA appellant's output services Information Technology Software Services can use the input services like rent services, band with services, security services, office cleaning services, operation services, travelling services, maintenance services etc. on which objection was raised. To that extent FAA held in the favour of the assessee and as on today there being no appeal from Revenue, the impugned order to that extent is upheld. Non production of documentary evidence and non production of certificate of the chartered accountant indicating the nexus of the input services for providing the output services - Held that:- This is the rectifiable error which can be rectified. As chartered accountant claims that they will be able to produce such documentary evidence it is deem fit to remand the matter back to the adjudicating authority to reconsider the issue of refund claims on the point of production of documentary evidences and also a certificate from the chartered accountant - in favour of assessee by way of remand.
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Central Excise
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2013 (2) TMI 365
Concealment and subsequent levy of penalties - complaint filed and summoning orders - Held that:- The assessment order which formed the basis of the registration of the complaint against the petitioners has been set aside in appeal vide order dated 18.5.2005 in these circumstances, continuation of criminal proceedings against the petitioners, on the basis of assessment order, which has already been set aside, would be nothing but an abuse of process of law. Once the finding of concealment and subsequent levy of penalties under section 271(1)(c) of the Act has been struck down by the Tribunal, AO has no other alternative except to correct his order under section 154 of the Act as per the directions of the Tribunal. See K.C.Builders and another versus ACIT [2004 (1) TMI 7 - SUPREME COURT]. Thus Complaint dated 7.7.2000 as well as subsequent proceedings arising therefrom including summoning order quashed.
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2013 (2) TMI 364
Penalty reduces - revenue appeal against reduction - Held that:- Second proviso to Section 35B (1) of Central Excise Act, 1944 empowers the Tribunal not to entertain any appeal if it is less than Rs. 50,000/-. Thus Revenue's appeal needs to be dismissed as in the extreme case, penalty that can be imposed is Rs. 34,791/- which was imposed by the adjudicating authority - dismiss the revenue appeal without going into merits of the case.
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2013 (2) TMI 363
Notice for recovery - Challenge the Circular No. 967/01/2013-CX dated 1.1.2013 - Held that:- An appeal has been filed before the CESTAT along with the stay application, but no hearing has been granted so far & in the meanwhile, recovery notice has been issued. Let notices be issued to the respondents to show cause as to why this petition be not admitted and finally disposed at this stage. Notices of the stay application be also issued. Notices be made returnable on 06.02.2013 and be given ' Dasti ' to the learned counsel for the petitioner, if so desired. Pendency of this writ petition or passing of this order shall not be of any impediment in the Appellate Authority considering the stay application/s moved by the petitioner; and for that matter, the petitioner shall be under an obligation to attend the date of hearing, if at all fixed by the Appellate Authority for consideration of the stay application & shall be under an obligation to abide by the order finally passed by the Appellate Authority on the prayer for interim relief in the appeal.
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2013 (2) TMI 362
Input service credit on garden maintenance service, rent paid for the office in Delhi and insurance premium paid on their employees medical claim denied - Held that:- As decided in Ultratech Cement Ltd.(2010 (10) TMI 13 - BOMBAY HIGH COURT) any service which has nexus with the business activity of the appellant who is a manufacturer of excisable goods or providing taxable services, is entitled to take input service credit on the above services, therefore, the issue is no more res intgra - set aside order of denial - in favour of assessee.
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2013 (2) TMI 361
Demand of duty - treating the waste and scrap cleared by the applicants is of capital goods - assessee seeking waiver of predeposit, interest and penalty - Held that:- Applicants availed credit on the capital goods and cleared the waste and scrap of such capital goods. Keeping this in view it is not a fit case for total waiver of duty. The applicants are directed to deposit total amount of Rs.4.5 lakhs within a period of eight weeks. On deposit of the aforesaid amount, pre-deposit of the remaining dues is waived and recovery thereof is stayed during the pendency of the appeals.
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CST, VAT & Sales Tax
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2013 (2) TMI 386
Liability towards the tax and interest - KGST Act - assessee contested against the order of fastening liability without notice to him - Held that:- As huge liability is sought to be fastened on the petitioner and the petitioner did not have an opportunity to file his reply or contradict the allegations against him he should be given an opportunity to file his objections to the pre-assessment notice. Order affixing liability will stand set aside & petitioner will appear before the 1st respondent on or before 2/2/2013.
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Indian Laws
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2013 (2) TMI 381
Directions relating to provision for adequate space for the smooth functioning of the Debts Recovery Tribunals (the DRTs) at Chandigarh & to frame Rules for recruitment/ appointment of the Presiding Officer & the Recovery Officers - A Bench of the DRT was established at Chandigarh by the Union of India (UOI) vide notification dated 24-3-2000 in a rented building & subsequently, a second Bench of the DRT was established, which was supposed to function from another premises - Two Benches of DRT, functioning from same premises - Whether Union of India was to be directed to provide adequate space for smooth functioning of the Debt Recovery Tribunals? - Held that:- Having taken note of the urgent need to address the abject conditions prevailing in the Tribunals, the UOI, has agreed to provide adequate infrastructure to DRTs/DRATs. Consider the feasibility of establishing more DRTs/DRATs and redefining the jurisdiction of some DRTs on the basis of data showing pendency of cases and existing workload of all the DRTs and DRATs. Fill all anticipated vacancies for the posts of senior officers, as and when they arise, with candidates who have already been selected according to the stipulated rules. Extend the facility of General Pool of Accommodation of the type entitled to Group A officers up to April 2013 to the Presiding Officers. In the meantime, the Ministry of Finance and Ministry of Urban Development will examine all issues to finalize modalities for either buying or construction of flats/houses for use of the members of the Tribunals. Further, in case this proposal does not materialize, then the possibility of hiring accommodation shall be considered at the appropriate stage. Implement the 'e-DRT project' to automate and improve DRT services by building IT systems as expeditiously as possible. Carry out the recruitment of Recovery Officers by promotion, failing which, by deputation, in accordance with the eligibility criteria as defined in the recruitment rules of each DRT. Keeping in mind the profile of the post of a Recovery Officer, it may not be possible to appoint judicial officers of a rank below that of an Additional District and Sessions Judge. However, the Union of India shall give preference to only those candidates who either have legal experience or hold a degree in law. Further, with respect to improving the selection procedure of Recovery Officers, the Departmental Promotion Committee (DPC), provided for in the recruitment rules, shall be expanded to include the Presiding Officer of any DRT as a member of the DPC to take part in the selection of the Recovery Officers. At the same time, the level of representation of the Reserve Bank of India in the DPC will also be raised from the rank of Deputy Legal Advisor to Joint Legal Advisor, RBI. Hold regular training programmes for Recovery Officers/ Assistant Registrars/Registrars to give them minimum working knowledge of the procedures followed in DRTs, the provisions of the RDDBFI Act, the SARFAESI Act, the Rules made thereunder, and the provisions of Schedules II and III of the Income-tax Act, 1961. All the High Courts shall keep a close watch on the functioning of DRTs and DRAT, which fall within their respective jurisdictions. The High Courts shall ensure a smooth, efficient and transparent working of the said Tribunals as through the timely and appropriate superintendence of the High Courts, the Tribunals shall adhere to the rigour of appropriate standards indispensable to the fair and efficient administration of justice. Thus it is directed that all the aforementioned proposals and measures agreed upon by the Union of India in response to the suggestions made for working of Tribunals shall be implemented expeditiously within a suitable time frame.
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2013 (2) TMI 370
E-auction method for sale of chrome ore and chrome ore concentrates to seven enlisted empanelled buyers - petitioner No.1 claims to be a producer of Friable Chrome Ore and Chrome Concentrate & Respondent No.6/Union of India constituted, designated and nominated respondent No.1/MMTC as the sole canalizing agency under the Export & Import Policy - petitioner no. 1 questined mode and manner in which respondent No.1 seeks to work out its role as a canalizing agency in terms of the export and import policy. - Held that:- The petitioner No.1 had a grievance with the earlier policy enlisting seven (7) buyers. It is the petitioners who proposed that global tender would be the answer. Such a course of action was accepted by respondent No.1. Of course, petitioners submits that the proposal for the global tender through e-process was not accompanied with suggestions or a consent on the part of the petitioners qua clauses (a) to (d) of condition (i) but what consider is whether the conditions so imposed can be said to be so arbitrary or illegal that no reasonable person could come to the conclusion of framing such a policy (Wednesbury‟s principle) or that the terms & conditions have been tailor made to suit a particular person/entity [Decision Oriented Systematic Analysis (DOSA)]. It is true that respondent No.1 holds a dual obligation arising from the role it performs, i.e., the first one arising from the process culminating in the contract with the buyer and the second one when those offers are put to the sellers. In order to safeguard its commercial interests, insofar as the contract with the buyer is concerned, clauses (a) to (d) of condition (i) have been inserted as part of “Technical Bid”. No doubt clauses (g) & (h) of condition (i) also seek to safeguard the interest of respondent No.1 but then it cannot be said that respondent No.1 is devoid of the authority of creating additional assurances to safeguard its commercial interests as is sought to be done by clauses (a) to (d) of condition (i). There is also force in the contention of respondents 1 to 5 that petitioner No.1 cannot really make a grievance as a seller as it is the buyers who can be aggrieved by the terms & conditions. It cannot be that a proxy battle can be fought by petitioner No.1. Of course interest of petitioner No.1 is to safeguard its economic interest but that cannot be at the cost of compromising the financial interest of respondent No.1 as a canalizing agent who has taken steps to safeguard those interests. Thus respondent No.1 acted within its domain to lay down terms & conditions for safeguarding its interest qua independent contracts with the buyers and sellers separately. No exercise of jurisdiction under Article 226 of the Constitution of India required.
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