Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 2, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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TDS u/s 194H - no tax was required to be deducted at source on these discount to MRP given by the assessee company to the distributors at the time of sale of drugs-medicine to the distributors. - AT
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Ascertaining income - assessments u/s 153A after search - the incriminating material should considered in totality and when assessee has submitted copious accounts for incriminating material it cannot be discarded summarily as done by ld. AO. - AT
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Registration granted U/s 12AA withdrawn - change of accounting policy - A change in the method of accounting should not be rejected for reasons that it would result in bringing into accounts in one year the losses of several years - AT
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Disallowance out of interest expenses @ 3% u/s 40A(2)(b) - it was observed that as assessee company and parent company both were taxed at marginal rate and therefore it cannot be said that service charges paid to parent company are unreasonable so as to evade tax - AT
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Addition of sundry creditors - Assessee has given the details about the PAN of that particular creditor and also made TDS payment - Merely because confirmation has not been received from the creditor, addition cannot be made - AT
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Non compete fee receipt - long term capital gain or business income - the amount of ₹ 39,35,00,000/- received by the assessee company as non compete fee, is a component attributable in a negative / restrictive covenant and as such, is a capital receipt - taxable as LTCG - AT
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Penalty u/s 271(1)(c) - assessee did not establish the nexus between the borrowed funds and the investment so made with a clear intention to conceal the income by furnishing inaccurate particulars of such income, therefore, in our view, penalty was rightly imposed - AT
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Addition on account of unexplained jewellery - the gold jewellery possessed by the female members and minor children of the assessee's joint family and this quantity is well within the total limit of jewellery as per the CBDT instruction - No addition - AT
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Penalty u/s 272B - default in quoting Permanent account number - TDS return - valid/missing PANs have been mad good by filing correct statement well before the issue of final penalty notice - No penalty - AT
Customs
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Conversion of Shipping Bill under DEEC Scheme to Drawback Scheme to avail export benefit - No question of law regarding the permissibility of conversion of advance licenses into a drawback facility in present facts has been specifically raised - No relief - HC
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Levy of penalty on G-cardholder of M/s. Quick Clear Agency, holder of CHA licence - involvement in smuggling of goods - the penalty imposed by the adjudicating authority is not unreasonable or arbitrary. - AT
Corporate Law
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The question, whether the petitioners can be said to be Directors of the subject company is doubtful and without the petitioners / applicants having a clear right to act as Directors and which is being opposed, the question of the petitioners / applicants incurring any disqualification or liability under Section 162 of the Act also, would not arise. - HC
Wealth-tax
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Levy of penalty - concealment of wealth - delayed filing of wealth tax return beyond all times allowed - non-filing of wealth tax return in time - The returns filed by the assessees have been accepted without making any addition - No penalty can be levied - AT
Service Tax
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Taxability of services - Nature of activity - transfer of right to use goods - effective control and possession of the subject System stands transferred to the Customer - The activity proposed to be undertaken by applicant is not liable to Service Tax - AAR
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Nature of agreement - sales agreement or service agreement - activity: "proposed IDEAS Oman will be selling educational books and printed manuals for onward sale to organizations in India via Creative Problem Solving India, Mumbai" - Not liable to service tax - AAR
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Cenvat Credit - input services - Service Tax paid on commission amount paid to dealers/stockist - nexus with manufacturing activity - Payment to the agents appointed by the appellant would not be eligible for cenvat credit - HC
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Renting of immovable property on profit sharing basis - demand of service tax on renting including on notional interest received on the security deposit made with the appellants. - appellant is not liable to pay service tax under the renting of immovable property service. - AT
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Nature of activity of repair and maintenance of the equipments so that the same can be re-used without requiring replacement - The activity is not amounting to manufacture - Cenvat Credit of excise duty paid on inputs is eligible while paying service tax on inspection, Certification and engineering services etc - AAR
Central Excise
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Cenvat Credit - eligible inputs - rails and other track materials, namely, sleepers, paints and crossings etc. - adopting the principle of certainty & consistency in tax matters, in our view, the Appellants are eligible to credit on rails and railway track materials. - AT
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Dutiability and classification of Polyester Sewing Thread - The dutiability does not arise by virtue of the fact the definition of Sewing Thread was provided for in certain headings, but by virtue of the fact that the process of making Sewing Thread out of single thread/yarn is basically a process of manufacture under Section 2(f) - AT
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Refund of unutilised Cenvat credit - refund claim denied on the ground that in terms of Rule 11(2) of Cenvat Credit Rules, 2004, unutilised credit would lapse on closure of the unit - ER return submitted by the appellant along with refund application is sufficient to grant refund to the appellant - AT
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Gas filing activity - whether the activity undertaken by the appellant amounts to manufacture? - Gas is already marketable in its original form and the activity undertaken by the appellant does not render the gas marketable which is already marketable - demand of duty set aside - AT
VAT
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Nature of assessment - best judgment assessment or not - the entries in the books of account varying with returns filed are relied upon and then the assessment has been completed. - cannot be held as best judgement assessment - levy of penalty deleted - HC
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Levy of penalty for non-maintenance of complete and true accounts - sale of motor vehicles from another state - According to the Intelligence Officer, the sales were concluded at Kozhikode and hence the vehicles should have been registered within the State of Kerala. - Mere doubt cannot create any liability - No penalty - SC
Case Laws:
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Income Tax
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2016 (1) TMI 1087
TDS u/s 194H - whether relationship between the assessee and distributors is in the nature of principal to principal and not that of principal to agent? - Held that:- As observed that the assessee company is raising sale invoice’s on the distributor M/s Rudra Pharma Distributors Limited which are placed on the paper book filed by the assessee company while the ledger account showing invoices raised and payments received from distributor M/s Rudra Pharma Distributors Limited by the assessee company is also placed in the paper book filed by the assessee company at page 36 to 51. We have also observed that the said distributor M/s Rudra Pharma Distributors Limited is registered with VAT authorities and is raising its invoices (including VAT) to their customers , whereby all the above facts clearly reflects that the distributors is buying the products from the assessee company and then selling the same in its own right with all risks and rewards of ownership got vested in the said distributors on the delivery of goods by carrier to the said distributor which is also supported by the clause 5 of the distribution agreement dated 01-07-2001. Thus, we, therefore, hold that the assessee company has paid discount to MRP to the distributors at the time of sale of the said goods/products i.e. drugs-medicine which in our considered view is not covered u/s 194H of the Act and no tax was required to be deducted at source on these discount to MRP given by the assessee company to the distributors at the time of sale of drugs-medicine to the distributors. - Decided in favour of assessee. Non deduction of tax at source @10% u/s 194J of the Act on payment of Director’s sitting fee - Held that:- The amendment to the Section 194J(1) of the Act by insertion of subsection (ba) to Section 194J(1) of the Act has caste an additional burden on the taxpayer with respect to deduction of tax at source on remuneration,fee or commission to Director other than salary which as per memorandum to Finance Bill 2012 was not existing as per specific provisions of the Act prior to the aforesaid amendments and the amendments to Section 194J(1) of the Act by insertion of sub-section (ba) to Section 194J(1) of the Act were made effective from 01-07-2012, which in our considered view is prospective in nature to be applicable only from 01-07-2012 as it has caste an additional burden on the tax-payer by way of deduction of tax at source on remuneration , fees or commission to directors other than the salary for which tax is to be deducted at source under Section 192 of the Act. Since the instant appeal is for the assessment year 2009-10 which is prior to the assessment year 2013-14, we hold that no tax was deductible at source on payment of Directors sitting fee paid by the assessee company to its Directors u/s 194J of the Act and the assessee company could not be held as ‘assessee in default’ u/s 201(1) and 201(1A) of the Act - Decided in favour of assessee.
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2016 (1) TMI 1086
Penalty order u/s 271(1)(c) - Income from house property - Held that:- Section 271(1)(c) refers to imposition of penalty if the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. Examining the facts of the case of assessee in this aspect we find that income from house property was certainly disclosed by the assessee in its return of income on estimate basis because the house property was not rented during the year and assessee has disclosed his income at ₹ 500/-. The AO further estimated this income at ₹ 27,500/- and finally ld. CIT(A) reduced the addition from ₹ 27,500/- to ₹ 1,900/-. Certainly there was no deliberate concealment on the part of the assessee and the addition confirmed is only on the basis of estimate arrived at by taking value from other sources, which in this case was the municipal ratable value and certainly such type of addition do not come under the clutches of section 271(1)(c) of the Act. We, therefore, delete the penalty u/s 271(1)(c) of the Act calculated on the sustained concealed income of ₹ 1,900/-. - Decided in favour of assessee Short term capital loss on sale of car - Held that:- From going through the facts and judicial pronouncement we find that assessee was possessing only one car and the same was sold during the financial year 2000-01. There was no other asset in the block of asset relating to motor car and, therefore, after deduction of sale value from the purchase value there arose a short term capital loss. There is no dispute on the part of the Revenue on the value of purchased car and sale value of car. Assessee has claimed the short term capital loss at ₹ 3,21,440/- against the business income. Certainly all the facts relating to these transactions of purchase and sale of car were duly disclosed in the books of account of the assessee and the addition made by the Assessing Officer was on account of merely wrong claim made by the assessee. Penalty u/s 271(1)(c) of the Act is imposable where the assessee has concealed particulars of his income or furnished inaccurate particulars of such income. Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT ) has held that mere making a claim which is not sustainable in law in itself will not amount to furnishing of inaccurate particulars regarding income of the assessee. - Decided in favour of assessee
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2016 (1) TMI 1085
Validity of assessments u/s 153A - Held that:- Original notice was issued u/s 153A and there as neither any warrant or search on assessee. Similarly while issuing notice u/s 153C no satisfaction in this behalf in the case of Modi group nor there was any assessment in the case of Shri Govind Dev as the 153A proceedings were dropped in that case. The satisfaction recorded by AO initiating 153C is silent regarding the pending proceeding initiated u/s 153A by notice dtd. 29.12.2009 in the case of the assessee. The proceedings though purported to be initiated u/s 153C the assessments are completed u/s 153A rws 143(3) as evidenced by the respective orders of ld. AO and CIT(A). This leads to a legal situation where during the pendency of 153A proceedings notice u/s 153C is issued. To further confound the situation the proceedings are purported to be continued u/s 153C but the assessments are completed u/s 153A despite consciously dropping the notice u/s 153A. We find merit in the argument of ld. Counsel that assessments u/s 153A and 153C are independent and mutually exclusive, an assessment cannot be framed in continuation of both notices and similarly cannot be concluded u/s 153A if proceedings are undertaken u/s 153C. In view of the facts, circumstances and judicial precedents cited above we hold that impugned assessments are untenable and bad in law.- Decided in favour of assessee Trading addition - Held that:- Trading results of the assessee’s business were already subject matter of appeals, there was no search on his show room, and therefore, no incriminating material was found. By estimating the GP from regular business ld AO has reviewed settled position without any incriminating material in this behalf, which is not permissible in search assessments. In view thereof we delete the additions made in respect of estimation of GP from regular business.- Decided in favour of assessee Income declared from unaccounted business - Held that:- It has not been disputed that assessee filed complete record of year wise and transaction wise accounts of material found in the locker. No adverse comments have been offered by ld. AO in this behalf. Regarding comparatively lesser GP from unaccounted business than regular business assessee offered proper reasons which have not been even considered by AO. The GP has been enhanced not based on any objective considerations but by summarily relying on estimated GP of regular business. In our considered view the incriminating material should considered in totality and when assessee has submitted copious accounts for incriminating material it cannot be discarded summarily as done by ld. AO. Since there is no rebuttal in respects of accounts of unaccounted income furnished by the assessee, the profits declared deserve to be accepted in given facts and circumstances. Similarly it is not disputed that value of stock of jewelry found from locker was taken by ld. AO on market price whereas as per settled accounting principles same should have been valued at cost. Consequently valuation adopted by assessee is to be adopted. Thus the additions in question deserve to be deleted on merits also. - Decided in favour of assessee
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2016 (1) TMI 1084
Eligibilty to claim deduction u/s 10A - Set off loss of eligible unit against the business income of the assessee rejected - Held that:- In the circular no. 7/DV/2013 [FILE NO.279/MISC./M-116/2012-ITJ], DATED 16-7-2013 at para No. one that it has been brought to the notice of the Board that the provisions of 10A/10AA/10B/10BA of the Income-tax Act, with regard to applicability of Chapter IV of the Act and set off and carry forward of losses, are being interpreted differently by the Officers of the Department as well as by different High Courts. Therefore, it cannot be said that circular is against the provision of the law merely because different high courts have interpreted the law differently. It is apparent that this circular is issued with an intention to clarify anomaly in law and its interpretation. Undoubtedly circular is beneficial to the assessee as it sets certain controversy involved therein to rest. Therefore we are of the opinion that this issue now should be decided in view of the above circular where in it is provided that If after aggregation of income in accordance with the provisions of sections 70 and 71 of the Act, the resultant amount is a loss (pertaining to assessment year 2001-02 and any subsequent year) from eligible unit it shall be eligible for carry forward and set off in accordance with the provisions of section 72 of the Act. Therefore, according to us assesse’s claim deserves to be considered favourably in view of the beneficial circular issued by CBDT. However at the time of making assessment AO was not having the privilege of this circular , we set aside this matter to the file of with direction to grant benefit of deduction of set off of losses of STPI unit of ₹ 54, 90, 557/- against the profit of non - STPI unit in accordance with this circular. Non deduction of tds on expenses of the FTS - disallowance u/s 40a (i) - withholding of tax - Held that:- The sum is not chargeable to tax in India according to the domestic tax laws and consequently there is no withholding tax liability in case of such payments, we do not wish to address the alternative arguments of the AR of the assessee regarding non-taxability of such sum in accordance with the provision of Article 12 (6) of the indo Japan DTAA. - Decided in favour of assessee
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2016 (1) TMI 1083
Accountability of project income - CIT(A) accounted for its income on project completion method - Held that:- We are in agreement with the findings of the CIT(A) that the project was completed in the assessment year 2005-06 and the assessee had rightly accounted for its income on project completion method in the said year and not in AY 2004-05. Enhancement of assessment on the basis of fair market price - Held that:- The order of CIT(A) enhancing the assessment by ₹ 5,30,80,200/- on the basis of fair market price of ₹ 8,990/-per sq.ft. on estimated basis when the actual sales deeds were on records, appears to be not correct and based on surmises and conjectures. The CIT(A) overlooked the fact that the assessee as per the terms of MOI dated 14.07.2001 took over the liabilities and commitments of the original owners towards the 4 original purchasers to whom the sale of flats were to be made at ₹ 3,000/- per Sq. fts as referred to in table A. The assessee was under contractual obligation to sell the flats to the original purchasers at the price agreed to by the original owners. Neither the AO nor the CIT(A) brought any materials on records to show that the assessee received more than what had been shown in the sale deeds. The Ld CIT(A) also failed to bring any cogent materials on records for enhancing the assessement. No defects were pointed out in the records maintained by the assessee and therefore the invoking the provisions of section 145(3) of the Act to estimate the income is wrong and the decisions relied on by the CIT(A) are not applicable to the assessee’s case as the guess work in estimation can only be made when there defects in the records maintained by the assessee and it is not possible to arrive at the correct income by the AO on the basis of the said records. Further ,we also find force in the arguments of the ld authorized representative that the provision of section 50C are not applicable for ascertaining the full value of consideration in respect of business assets i.e inventories as the said provisions deals with ascertaining the full value of consideration in case of capital assets for the purpose of capital gain. Further our attention was drawn to the newly inserted section 43CA of the act which deals with ascertaining the full value of consideration in case of assets other than capital assets but the said section is applicable w.e.f. 2014-15. After taking into accounts all the facts, arguments of both the parties and records before us, we are of the considered view that the order passed by the ld.CIT(A) suffered from several infirmities and cannot be sustained. We therefore delete the enhancement of assessment of ₹ 5,30,80,200/- by the CIT(A) by allowing the appeal of the assessee - Decided in favour of assessee.
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2016 (1) TMI 1082
Registration granted U/s 12AA withdrawn - assessee is not entitled exemption U/s 11,12 and 13 - change of accounting policy - Held that:- The assessee has been granted registration by the order of the Coordinate Bench wherein the coordinate Bench has held that the assessee’s activities are charitable and are not covered U/s 2(15) of the Act. Therefore, the Assessing Officer is directed to give benefit of Section 11 and 12 of the Act to the assessee. The income of the assessee is to be assessed on the real income basis which has been accrued to the assessee during the year under consideration. The appellant had changed method of accounting during the year under consideration but the same has been found more accurate and scientific to determine the assessee’s income. Therefore, change of accounting is bonafide and same cannot be rejected on the ground that the assessee had claimed more expenses during the year under consideration. The case law relied by the assessee is squarely applicable. A change in the method of accounting should not be rejected for reasons that it would result in bringing into accounts in one year the losses of several years as held in the case of CIT Vs. Eastern Bengal Jute Trading Co. Ltd. (1978 (1) TMI 72 - CALCUTTA High Court ) Accordingly change of the accounting policy is allowed. The assessee has claimed depreciation on fixed assets which is also allowable as held by the various courts in case of Trust where the assessee first made income for application of acquiring of assets and thereafter claiming depreciation on it. - Decided in favour of assessee
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2016 (1) TMI 1081
Addition as Long Term Capital Gain - Held that:- A perusal of the agreements would show that nowhere in the agreement it has been stated that the consideration paid by M/s. DEN Network is in respect of the three components as stated by assessee, and no such bifurcation has been given in any of the agreements placed on record by the assessee. On the contrary a perusal of Share Purchase Agreement would show that M/s. DEN Network has purchased 10 equity shares of M/s. Manoranjan Satellite Pvt. Ltd. at a premium of ₹ 2,49,900/- per share. Thus, the intrinsic value calculated by the assessee for determining the value of shares of the said company for transfer on the same date does not hold ground. If the cost of shares at which M/s. DEN Network purchased the shares of M/s. Manoranjan Satellite Pvt. Ltd. is applied to the shares transferred by the assessee, it would give more realistic results 25,00,000/10 x 253 = ₹ 6,32,50,000/-. In so far as the payment towards transfer of fixed asset is concerned, a perusal of asset transfer agreement at pages 32 to 35 of the paper book would show that the assessee had transferred the assets of the proprietorship firm to M/s. Manoranjan Satellite Pvt. Ltd. for a consideration of ₹ 9 lacs in compliance of the JV agreement. Thus, the consideration received by assessee on transfer of shares from M/s. DEN Network does not include consideration for transfer of assets. After thoroughly examining the documents on record, we are not convinced with the arguments of the ld. AR of the assessee on the bifurcation of consideration or that the assessee is not liable for Long Term Capital Gain on transfer of shares in the impugned assessment year. In our considered view that the assessee has rightly disclosed in principle the Long Term Capital Gain from sale of share in the impugned assessment year (subject to the computation of correct amount of Long Term Capital Gain). - Decided against assessee
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2016 (1) TMI 1080
Disallowance u/s 14A r.w.r. 8-D - Held that:- There is no dispute to the fact that own funds were invested by the assessee in earning the dividend income of ₹ 57,975/- and suo-moto disallowance of ₹ 8,895/-, towards expenses to earn the exempt income. So far as applicability of Rule-8D is concerned, since, assessment year involved is 2011-12, therefore, Rule-8D will be applicable. However, since, no borrowed funds were utilized for making the investment and the assessee suo-moto made the disallowance, we find merit in the appeal of the assessee, therefore, the amount disallowable as per Rule-8D can be ₹ 1,27,601/- against the calculation of ₹ 2,31,140/- , thus, the addition is restricted to ₹ 1,03,539/- (Rs.2,31,140-1,27,301) - Decided partly in favour of assessee
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2016 (1) TMI 1079
Change in method of accounting for the excise duty from exclusive method to inclusive method - old brought forward CENVAT credit balance from the sales in the name of changing the method of accounting to comply with the provisions of section 145A - Held that:- Prior period accumulation has to be given credit during the year, when purchases and sales are accounted with or without excise duty, and if such exercise is carried out there would be difference in profits. So far as the amount of ₹ 81,09,050/- which the AO held it to be a notional duty, the Ld. CIT(A) on a correct appreciation of facts has given correct finding, which can not be interfered with as the total excise duty payable on the sale during the year was at ₹ 1,51,44,409/- and after reducing the opening credit of ₹ 70,35,659/- the balance remaining payable on the sale was ₹ 81,09,750/-. This was further reduced from the amount of the excise duty paid on inputs during the year for sales aggregating to ₹ 1,96,74,139/-. The balance remaining on current purchases is ₹ 1,15,47,370/- and this has been duly accounted for in the manner provided u/s 145A in this year. The Ld. CIT(A) already given relief on account excise portion of the opening stock of ₹ 30,60,519/- as it was part of the brought forward MODVAT credit of ₹ 70,50,659/-. However, the sum of ₹ 39,74,140/- which has been confirmed by the CIT(A) cannot be upheld in principle because these are accrual over the years and when there is change in the method of accounting in the assessment year 2005-06, the entire amount gets due in this year which has to be allowed. However such an allowance is subject to limited verification by the AO, whether the assessee has forgone the MODVAT credit as per Excise law and rules and instead availed the benefit under the Income-tax Act in this year and further if the said amount has already subjected to tax in the earlier years in a way that the assessee had not claimed the benefit of excise duty on this amount in the earlier year and hence relief has to be given in this year. Thus, with this limited direction of verification the issue raised vide revenue’s ground are treated as dismissed whereas the amount of ₹ 39,74,140/- as confirmed by the CIT(A) is treated as partly allowed for statistical purposes. Deduction u/s 80IB - Held that:- As pointed by Ld. Counsel right from assessment years 2001-02 to 2004-05, assessee has been allowed deduction u/s 80IB continuously in 3 years by the department even when, the assessee’s case has been assessed under scrutiny proceedings u/s 143(3). If similar facts are permeating in this year also, then as a matter of consistency different view cannot be taken in this year. The fundamental aspect of allowing deduction u/s 80IB has been examined and granted earlier, then without any change in the material facts a different view should not be taken. Accordingly, we hold that, the activities carried out by the assessee amounts to manufacturing and accordingly, the assessee is entitled for claim of deduction u/s 80IB. Thus, the ground raised by the assessee is allowed.
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2016 (1) TMI 1078
Disallowance out of interest expenses @ 3% u/s 40A(2)(b) - Held that:- The decision of Hon’ble Gujarat High Court in the case of Principal CIT vs. Gujarat Gas financial Services Ltd. (2015 (7) TMI 743 - GUJARAT HIGH COURT) wherein it has been held that in a situation when the Assessing Officer found that assessee was using some space of the parent company and, therefore, initiated proceedings u/s 40A(2)(b) and deducted and remitted rent of space from services charges it was observed that as assessee company and parent company both were taxed at marginal rate and therefore it cannot be said that service charges paid to parent company are unreasonable so as to evade tax and, therefore Revenue could not point out that assessee evaded payment of tax and it was held that invocation of section 40A(2)(b) was not valid. Thus considering the relation transactions entered into by the assessee company with its director, K.K. Bansal and its sister concern Mahavir Rolling Mills were normal business transactions and did not reflect any intention of the assessee to will-fully evade tax by paying higher rate of interest and therefore, we delete the addition made by Assessing Officer - Decided in favour of assessee Deemed dividend u/s. 2(22)(e) - Held that:- As the assessee company is not a share holder in Mahavir Rolling Mills Pvt. Ltd., therefore, no addition could be made u/s 2(22)(e) of the Act, as deemed dividend and accordingly, we find no reason to interfere with the order of ld. CIT(A). We uphold the same - Decided in favour of assessee
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2016 (1) TMI 1077
Addition on account of house property income - CIT(A) deleted the addition - Held that:- The assessee has produced all the information and all the relevant documents before the Assessing Officer related to the property and established that the assessee was using the said property as its business office. Therefore, the CIT (A) has rightly deleted the addition made by the Assessing Officer. - Decided against revenue Addition of sundry creditors - Held that:- When the Assessing Officer has accepted one of the creditors because his confirmation has been produced before the Assessing Officer and rejecting the other creditor because his confirmation was not there is not proper as the Assessee has given the details about the PAN of that particular creditor and also made TDS payment. The Assessing Officer has also not taken any steps to enquire into the creditor. Therefore that cannot be the whole and sole criteria for rejecting the assessee’s contention that he is sundry creditor. The assessee was not in a position to file confirmation but he has given all the relevant details as relates to the assessee’s details of the creditor in respect of giving PAN No to the Assessing Officer as well as given the details as to how the creditors are on account of freight paid the same was even from ledger account of R. K. Jindal and thus nearly not finding confirmation will not amount to be adding the same addition by the Assessing Officer. In view of this, the assessee has established its case properly before the Assessing Officer as well as before the CIT (A). - Decided against revenue
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2016 (1) TMI 1076
Addition under section 35(2AB) - CIT(A) deleted the addition - Held that:- When the Assessing Officer has specifically not denied that the amount has been spent for R&D and has failed to appreciate the documentary evidence brought on record, the deduction should not have been disallowed by deciding the issue summarily. More so, assessee has brought on record details of revenue and capital expenditure incurred on R&D during the previous year relevant to the year under assessment, which has been duly certified by the Assessing Officer himself in sub-para 6 of para 6 of the assessment order. The Assessing Officer, without returning any finding on the revenue and capital nature of expenditure, certified report of tax auditors certifying the amount of R&D expenditure, proceeded to disallowed the deduction u/s 35(2AB). CIT(A) during appellate proceedings, has also not preferred to call upon any remand report from the Assessing Officer regarding his opinion that details of revenue and capital expenditure incurred on R&D during the relevant period and report of tax auditors certifying the amount of R&D expenditure rather proceeded to delete the addition by allowing deduction u/s 35(2AB) of the Act. Even the Assessing Officer has himself admitted that the assessee has approved R&D centre to carry out the R&D activities. So, we are of the view that the matter is required to be restored to the Assessing Officer to decide afresh after providing opportunity or being heard to the parties on ground No.1. - Decided in favour of the assessee for statistical purpose. Addition made under section 14A read with Rule 8D - CIT(A) deleted the addition - Held that:- CIT(A) while passing the impugned order, thrashed the law on the subject thread bare but has assumed the powers of Assessing Officer in deciding the matter and proceeded to partly allow the appeal of the assessee except for disallowance of ₹ 20,24, 169/- against ₹ 1,02,73,361/- made by the Assessing Officer. Ld. CIT(A) has not preferred to call for any remand report directing the Assessing Officer to record his satisfaction and cogent reasons before invoking the provisions contained u/s 14A read with Rule 8D of I. T Rules. So, we are of the considered view that the matter is required to be restored to the file of Ld. CIT(A) to decide afresh after providing opportunity of being heard to the parties. Ascertained liability as allowable expenditure u/s 37( 1) - Held that:- The estimate of warranty made by the assessee on the basis of past history cannot be treated as a provision for any ascertained liability and allowed the provision for warranty as deduction. Following the law laid down in the case entitled Rotork Controls India Pvt. Ltd. Vs CIT, (2009 (5) TMI 16 - SUPREME COURT OF INDIA ), decision of coordinate bench in the assessee's own case, we find that there is no infirmity or perversity in the findings returned by Ld. CIT(A) in allowing the ascertained liability as allowable expenditure u/s 3 7( 1) of the Act. - Decided in favour of the assessee Non compete fee receipt - long term capital gain or business income - Held that:- Cursory look at the operative clauses of the agreement entered into between the assessee and AB Volvo and VECE apparently proved that there was a negative/restrictive covenant between the assessee company and M/s. AB Volvo that assessee company shall not carry out and be engaged and carry the interest in development/manufacture/sale/distribution/provision of aforesaid services and track of the business or induce, attempt to induce, engage or employ, or solicit or contact with a view to the engagement or employment by any person, any employee, officer or manager of, or any person who has been an employee during the terms of agreement. It is a complete embargo on the assessee company. Following the law laid down in the judgement of ONGC Ltd. VSs CIT & Another, Civil [2015 (7) TMI 91 - SUPREME COURT] we are of the considered view that the amount of ₹ 39,35,00,000/- received by the assessee company as non compete fee, is a component attributable in a negative / restrictive covenant and as such, is a capital receipt as has been held by Ld. CIT(A) vide impugned order. So, finding no illegality or perversity in the findings of Ld. CIT(A) - Decided against the Revenue.
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2016 (1) TMI 1075
Reopening of assessment - applicability of Article 8(1) of DTAA between India and Netherlands - Held that:- Assuming of jurisdiction by the Assessing Officer in this case, is bad in law for the reasons inter alia that when the assessee has specifically claimed exemption of its entire income for taxation U/S 90 of the 1. T. Act read with Article 8 of DTAA between India and Netherlands by giving a note on the original income tax return, there was no tangible material with the Assessing Officer to reopen the assessment. Apart from note given on the original return of income by the assessee, no tangible material has been brought on record by the Assessing Officer to reopen the assessment; that Ld. CIT(A) has lost sight of the fact that the Assessing Officer has no jurisdiction to reopen the assessment without bringing on record any tangible material and as such, findings of Ld. CIT(A) are not sustainable in the eyes of law. Further the Assessing Officer has proceeded for reassessment of the case without issuing a notice U/S 143(2) of the Act and Ld. CIT(A) has also lost sight of this fact while passing the impugned order. In the light of factual matrix discussed in the preceding paragraphs, it is proved on record that the Assessing Officer does not have jurisdiction to reopen the assessment - Decided in favour of the assessee. Services rendered in the nature of technical and professional - whether the same are covered under Article 12 of DTAA between India and Netherlands - whether the service rendered is also covered u/s 9(J)(vii)? - Held that:- The Coordinate Bench in assessee's own case, in the light of the provisions contained under DTAA came to the conclusion that ground handling services and technical services rendered by another airline at Indian airport, would be considered a part of operation of aircraft in the international traffic. The aforesaid decision of the coordinate bench squarely applies to the facts and circumstances of the present case. Ld. D.R. has failed to bring on record any reason to deviate from the order passed by the Tribunal in assessee's own case in the subsequent year.
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2016 (1) TMI 1074
Addition on the basis of papers seized from the assessee’s premises - Held that:- In view of the documentary evidence, there is no justification for making addition in respect of entries reflected in the books of account of Tropical and given by cheque by Mr. Shashank Patel and his family members. Receipt of the amount by Tropical Investment and Securities Pvt. Ltd. through cheque from Shashank Patel and his family members, cannot be treated as income of the assessee. The fact that Tropical Investment and Securities Pvt. Ltd. was also assessee with the same assessing officer, has not been denied anywhere. All the above facts were brought to the notice of the AO along with the confirmations, however, the AO had brushed aside the same. Accordingly, we direct the AO to delete the addition of ₹ 1,30,00,000/- (Rs.1,20,00,000+Rs.10,00,000/--), being amount received by Tropical Investment and Securities Pvt. Ltd. through account payee cheques from Shashank Patel and his family members. In respect of balance amount alleged to be received from Shashank Patel in cash has not been enquired by the AO. In the interest of justice and fair-Play the balance addition of ₹ 3,14,16,332/- is restored back to the file of the AO for deciding afresh after making full enquiry from Shashank Patel and M/s Tropical Investment and Securities Pvt. Ltd.. We direct accordingly. - Decided in favour of assessee in part
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2016 (1) TMI 1073
Registration under section 12AA denied - Held that:- Applying the ratio of Hon’ble Supreme Court Ahmedabad Rana Cast Association vs. CIT (1971 (9) TMI 8 - SUPREME Court), the decision of the Co-ordinate Bench in the case of Shree Vasupujya Swam Jain Derasar Trust vs. CIT, Valsad (2010 (8) TMI 937 - ITAT AHMEDABAD ) and the decision of co-ordinate Bench in the case of Shri Sayla Sukhadiya Parivar Trust vs.CIT(Exemption) (2015 (9) TMI 600 - ITAT AHMEDABAD), to the facts of the case of assessee, wherein the trust is formed mainly for the benefit of a particular community i.e. Shri Ranpariya Solanki Sukhadiya Parivar Trust but the type of activities which the trust is running are for general public also i.e. for charity, medical relief and promotion of educational activities, we are of the view that the trust is serving charitable activities. Accordingly in our considered view it will be just and in the interest of justice to restore the matter back to the ld. CIT(E) with the directions to re-examine the matter in the light of various decisions mentioned above as well as the objects of the trust stipulated in the trust deed so as to satisfy himself about the genuineness of objects of the trust and its activities and pass appropriate orders in accordance with law after allowing reasonable and proper opportunity of hearing to the assessee before adjudicating the issue. - Decided in favour of assessee for statistical purposes.
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2016 (1) TMI 1072
Penalty u/s 271(1)(c) - no nexus between borrowed funds and the investment made by the assessee and further huge interest expenditure was disallowed by the Assessing Officer - CIT(A) deleted the addition - Held that:- Section 36(1)(iii) has to be read on its own terms as it is a code by itself. All that section requires is that the assessee must borrow capital for business purposes, carried out by the assessee in the year of account. Unlike section 37, which expressly excludes an expense of capital nature, section 36(1)(iii) emphasizes the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital. Where the money borrowed had been utilized for the business purposes as also earning income under the residuary head “income from other sources” the interest paid on the money so borrowed should be bifurcated proportionately between the “business income” and “other source of income” H.K (Investment) Company pvt. Ltd. vs CIT (1993 (12) TMI 19 - GUJARAT High Court ). The totality of facts clearly indicates that the assessee did not establish the nexus between the borrowed funds and the investment so made with a clear intention to conceal the income by furnishing inaccurate particulars of such income, therefore, in our view, penalty was rightly imposed by the Assessing Officer. The stand of the Revenue is further fortified by the fact that even the assessee did not file appeal against the disallowance of huge interest expenditure while deciding the quantum addition and accepted the same. - Decided against assessee.
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2016 (1) TMI 1071
Validity of reopening of assessment - non taking permission from the Joint/Additional Commissioner in terms of Section 151(2) - Held that:- In the present case, admittedly the AO was not sure as to whether scrutiny assessment was passed in this case or not which is clear from his report furnished to the ld. CIT(A) for obtaining his permission/sanction. The ld. CIT(A) on perusing the record found that no order u/s 143(3) of the Act was passed in the assessee’s case for the year under consideration and thereafter, he quashed the assessment by following the judgment of the Hon’ble Jurisdictional High Court in the case of CIT Vs SPL’s Siddhartha Ltd. [2011 (9) TMI 640 - DELHI HIGH COURT ] In the present case also the AO had not taken the permission from the Joint/Additional Commissioner in terms of Section 151(2) of the Act. Therefore, reassessment framed without proper permission from the competent authority was rightly quashed by the ld. CIT(A). We do not see any infirmity in the impugned order, accordingly do not see any merit in this appeal of the department. - Decided in favour of assessee
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2016 (1) TMI 1070
Addition on account of unexplained jewellery out of the jewellery found at the time of search - CIT(A) deleted the addition - Held that:- Gold jewellery found to the extent of limit mentioned in the circular is treated as explained and this can be clearly applied on the assessee's case, wherein no specific deduction of gold jewellery possessed by family members and grand children was given by the Assessing Officer from the total gold jewellery found at the time of search and seizure operation and differential gold jewellery of 1924.22 gr. is the gold jewellery possessed by the female members and minor children of the assessee's joint family and this quantity of 1924.22 gr. is well within the total limit of jewellery at 2100 gr. as per the CBDT instruction no.1916 dated 11.05.1994. Therefore by respectfully following the decision of Hon'ble Jurisdictional High Court in case of CIT vs. Ratanlal Vyaparilal Jain (2010 (7) TMI 769 - Gujarat High Court) and in view of our discussions made above, we find no infirmity in the order of the CIT(A) so as to warrant interference and accordingly, the grounds taken by the Revenue are rejected. - Decided against revenue
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2016 (1) TMI 1069
Penalty u/s 272B - default in quoting Permanent account number - TDS return - Penalty for failure to comply with the provisions of section 139A - CIT(A) deleted the penalty - Held that:- The assessee quoted the PAN numbers which were provided by the deductees, so if there was any mistake in the PAN numbers that was not on account of the assessee and moreover the mistake was rectified when the correct PAN numbers were furnished by the deductees and this fact has been appreciated by the ld. CIT(A) who categorically stated that since the valid/missing PANs have been made good by filing correct statement well before the issue of final penalty notice. The said observation of the ld. CIT(A) was not rebutted. We, therefore, do not see any infirmity in the impugned order of the ld. CIT(A) and accordingly do not see any merit in these appeals of the department. - Decided in favour of assessee
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Customs
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2016 (1) TMI 1052
Conversion of Shipping Bill under DEEC Scheme to Drawback Scheme to avail export benefit - The CESTAT in the impugned order mentions that the Commissioner denied the conversion as CBEC Circular No. 4 of 2004 dated 16.01.2004 permitted such conversion only when benefit under Duty Exemption Entitlement Certificate Scheme (DEEC Scheme) is denied by DGFT/ Ministry of Commerce or Customs Authorities. Held that:- May be, the Appellant had two advance licenses which must be putting normally under an obligation to use raw material to be imported duty free on its basis towards the manufacture of finished product to be exported. If the raw material is not imported, there is probably no loss to the appellant. No arguments to show any such deprivation or injury are advanced. Question of drawback will also arise, if there is actual import of material & then an export of finished product manufactured using that material. Other two ARE1 in respect of Export 3 & 4 are not produced. If the drawback in all three ARE1 was restricted to the excise portion of finished product only, then said proportionate drawback or rebate could have been received back in cash on same lines as per rebate cheque for ₹ 2,32,848/dated 27.8.2002. It may not have been necessary to seek any advance license against it. No rebate is perhaps possible for imported raw material used to manufacture exported finished products. All these facts could have been verified from the terms of the documents had the appellant produced the advance licenses on record. We feel that here when the facts are not clear, this aspect can not be gone into. The Appellant ought to have raised a specific question of law on such facts. No question of law regarding the permissibility of conversion of advance licenses into a drawback facility in present facts has been specifically raised. - Appellants have failed to raise any substantial question of law in this Appeal. - Appeal dimissed - Decided against the assessee.
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2016 (1) TMI 1051
Fraudulent claim of export incentive schemes viz. DEPB, DEEC and rebate - Department's case is that these companies have claimed to have exported various chemicals, pesticides and dyes, however in fact there was no export of the declared chemicals/dyes/pesticides and the goods declared in the shipping bills have not been exported and in their place some unknown chemicals were exported. Held that:- At the time of hearing, the plea taken by the Ld. Counsels is that duty liability cannot be fixed jointly and severally on the exporters as well as the importers. - Therefore we order remand of these cases for fresh adjudication by the Commissioner for fixing the duty liability appropriately. Needless to say, the appellants will be afforded an opportunity of personal hearing and the principles of natural justice will be followed. Confiscation and redemption - Held that:- it is a settled position in law that goods which are not available cannot be confiscated and redeemed. The Commissioner will no doubt consider this aspect legally. At this stage, we do not make any observation on the applicability of extended time period under Section 28 (1) of the Customs Act. However this matter shall also be considered by the Commissioner after fixing the duty liability. Imposition of penalties on the High Sea Sellers. - varying amounts of penalty imposed on the various high sea sellers depending on their role in availment of Cenvat Credit on the goods sold by them on high sea basis. - The contention of the counsels is that penalty cannot be imposed on the appellants under Rule 26 as they have not dealt with excisable goods. - Held that:- the goods which are still on high seas cannot be held to be liable to confiscation in terms of Rule 25 above. It has not been shown, in terms of the above Rule that the High Sea Sellers have contravened any provisions of Central Excise Rules with intent to evade payment of Central Excise duty when the goods are still on High seas. It cannot be held that because the goods will be diverted and not used by the companies after clearance from Customs, the offence already stands committed on the sale of the goods on High seas. - the question of imposition of penalty under Rule 26 of the Central Excise provisions on goods on high seas does not arise. Levy of penalties on the indigenous suppliers - Held that:- the supplier has certainly knowingly removed the excisable goods in contravention of the Rules. This act of theirs facilitated the fraudulent availment of Cenvat credit by the consignee. Therefore the indigenous suppliers are liable to penalty under Rule 26. We uphold the order of Commissioner imposing penalties on the indigenous suppliers. The penalties against appellant officers are also set aside.
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2016 (1) TMI 1050
Levy of penalty on G-cardholder of M/s. Quick Clear Agency, holder of CHA licence - involvement in smuggling of goods - appellant contended that he was compelled to give statement under Section 108 of the Customs Act, 1962 which he retracted. He had nothing to do with the smuggling of the impugned goods. - Held that:- a bald retraction without any evidence of threat or coercion does not take away the evidentiary value of a statement recorded under Section 108 Customs Act, 1962. Having regard to the nature of impugned goods and in view of the fact that their value, we are of the view that the penalty imposed by the adjudicating authority is not unreasonable or arbitrary. - Levy of penalty confirmed - Decided against the appellant.
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2016 (1) TMI 1049
Import of Slurry Seal Machine - Claim of exemption - It was fitted/mounted on a truck having Left Hand Drive and speedometer showing the speed up to 140 KMPH. Accordingly the Custom department proposed the classification under CTH 87059000 as against the appellant’s claim in the Bill of Entry No. 892599 under CTH 84791000. - The appellant waived the show cause notice but requested to personal hearing. However, they agitated the matter before Adjudicating Authority. Held that:- Without going into the issue of classification, we find that a irrespective classification of the import goods whether under CTH 8479 or 8705, the exemption Notification 21/2002 is admissible only if the goods appearing in the list 18 of Notification No. 021/2002-Cus dated 01-03-2002 (Sr. No. 230). However, the Ld. Adjudicating Authority has not decided this issue that if the goods classified under Chapter 8705 whether the exemption is available to the subject imported goods. We find that the goods imported is “Slurry Seal Machine” used for construction of road by operation of paving of the material on the road. There is no dispute that “Slurry Seal Machine” is mentioned in list 18 of Notification No. 021/2002-Cus dated 01-03-2002 (Sr. No. 230). The matter deserves to be reconsidered. - Matter remanded back.
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2016 (1) TMI 1048
Demand of duty with interest against where appellant imported capital goods under EPCG license, however failed to fulfill the export obligations. - Held that:- In view of the undisputed position, we are of the considered view that demand confirmed, upheld and encased through bank guarantee is legal and proper and the same is maintained. As regard the interest, the Adjudicating Authority is directed to verify the rate of interest applicable during the period from the date of import till the appropriation of bank guarantee i.e. the date of recovery of custom duty and accordingly the interest should be re-quantified. - Decided against the assessee.
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2016 (1) TMI 1034
Verification of documents submitted by the appellant - confiscation of goods - High Court [2015 (4) TMI 954 - DELHI HIGH COURT] has held that revenue is entitled to very the records - Apex Court dismissed the appeal by the observing that, the authorities concerned while passing any orders will not be influenced by the observations made by the High Court.
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Corporate Laws
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2016 (1) TMI 1044
Disqualification or liability under Section 162 to act as an Director - Held that:- Section 167(3) of the Act is not and could not have been intended to provide for a mode of appointment of a Director, contrary to the provisions elsewhere in the statute. A promoter, desirous of appointing a Director in the company, will have to propose the same either to the Board of Directors, if permitted to appoint an additional Director or if only the shareholders have reserved to themselves the right to appoint a Director, to the shareholders in the meeting of the shareholders to be held. Section 167(3) of the Act cannot be interpreted as entitling each and every promoter of a company, upon contingencies mentioned therein having occurred, to appoint a Director. The appointment has to be made by following the procedure elsewhere provided in the statute for appointment of a Director and thus the contention of the petitioners / applicants that they as promoters have a special right under Section 167(3) of the Act to appoint a Director de hors the opinion of the other shareholders / promoters, cannot be accepted. The petitioners / applicants are required to follow the procedure ordinarily provided for appointment of a Director and which procedure admittedly has not been followed. Moreover, from the order dated 20th October, 2010 of the CLB, it is evident that as of today, the petitioners / applicants stand restrained from writing any letters to the prejudice of the subject company. It can safely be assumed that the said order has been made assuming the petitioners / applicants to be not in control and management of the subject company. As far as the argument of the counsel for the petitioners / applicants, of petitioners suffering a disability unless permitted to act so is concerned, the same is also subject to the petitioners / applicants being accepted as of today as Directors. The question, whether the petitioners can be said to be Directors of the subject company is doubtful and without the petitioners / applicants having a clear right to act as Directors and which is being opposed, the question of the petitioners / applicants incurring any disqualification or liability under Section 162 of the Act also, would not arise. The application is thus dismissed with liberty to the petitioners / applicants to apply to the CLB for the same reliefs.
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Service Tax
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2016 (1) TMI 1066
Taxability of services - Nature of activity - transfer of right to use goods - effective control and possession of the subject System stands transferred to the Customer - services for the provision of automated, online ID and 2D bar code printing system, labeling application system, aggregation system and dispatch system in accordance with ESCIMS standard operating procedures for distilleries, breweries and wineries. - to provide for a System comprising of a complete set of various machines/ equipments which are installed and commissioned by the applicant as per ESCIMS. Customer is responsible for the operational maintenance of all 4 sub-systems of main Systems i.e. printing, labelling, aggregation and dispatching, as also daily maintenance, whereas SICPA is to look after other than daily maintenance. In nut-shell, Schedule 6 to the Agreement makes it clear that operation and operational maintenance of the System is the responsibility of the customer. Revenue has not explained as to how the cost of consumables etc. paid by the customer to the applicant as fees, would not transfer the right to use the System to the Customer and effective control will remain with SICPA/applicant. It is observed from perusal of scope of the Agreement that it also involves supply of consumables, which constitute a part of value/consideration. Further, transfer of right to use goods, shall not include service(s). In view of above, contention of Revenue is not tenable. The phrase "grant of license to use the System on a non-exclusive basis" (clause 2.1.2 to the Agreement) is used for the reason that the proprietary / intellectual property used in the System is utilized by the applicant in other similarly placed transaction with other customers. However, the use of System by the customer is on exclusive basis. The activity proposed to be undertaken by applicant is not liable to Service Tax under the provisions of the Finance Act, 1994. - Decided in favor of assessee.
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2016 (1) TMI 1065
Nature of agreement - sales agreement or service agreement - activity: "proposed IDEAS Oman will be selling educational books and printed manuals for onward sale to organizations in India via Creative Problem Solving India, Mumbai" - applicant stresses on the wording of the proposed activity which is purely a selling activity - Held that:- The clause is more than clear that the Distributor would have to bear apart from the price of the books, the shipping, handling, rush, and other charges. We do not see as to how this amounts to any ‘service’ particularly by IDEAS to the Distributor applicant. It is clear that the Distributor applicant has not asked any question about whether there is any service provided by IDEAS to the Distributor. The question is very simple and clear as to whether the sale of the books to the Indian entities involves any ‘service’ and would attract the service tax liability. The answer is clearly in negative. - Demand set aside - Decided in favor of assessee.
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2016 (1) TMI 1064
Tribunal dismissed the appeal for non-compliance of the conditional order of stay. - appellant contended that the Tribunal is not justified in passing the impugned order, when, prima facie, the demand itself is not justified, by virtue of the Board's Circular, dated 06.08.2008. - Demand of services tax on loading or unloading activities being provided in relation to GTA service Held that:- Despite the request being made, seeking modification of the order of stay, the Tribunal did not consider the same, but only extended the time. When the CENVAT credit was available with the Revenue, which would safeguard the interest, insistence upon the further deposit would cause undue hardship to the appellant and as such, the appellant has established a prima facie case for their claim of waiver of pre-deposit. Though complete waiver cannot be granted, having regard to the demand made by the Department, the Tribunal should have considered the reduction of pre-deposit already ordered, having regard to the availability of CENVAT credit to the extent of ₹ 77,00,000/-. But that has not been done. The appellant shall deposit a sum of ₹ 10,00,000/- (Rupees ten lakhs only) to the credit of the second respondent within a period of four weeks from the date of receipt of a copy of this judgment - on such deposit being made, the Tribunal shall take the appeal - Decided in favor of assessee
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2016 (1) TMI 1063
Cenvat Credit - input services - Service Tax paid on commission amount paid to dealers/stockist - nexus with manufacturing activity - Whether the activities undertaken by the service provider were in nature of sales promotion activity? - Held that:- predominantly the entire agreement was one in the nature of appointing a partnership firm as stockist of the appellant company who would upon being supplied the goods in question would store the same and dispose of in the market at agreed rates upon which would receive certain commission. - A fleeting reference to attempt to sales promotion would not change the very basic nature of agreement and the relations between the appellant and the stockist converting the stockist as sales promotion agent. Payment to the agents appointed by the appellant would not be eligible for cenvat credit. - Decided against the assessee.
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2016 (1) TMI 1062
Renting of immovable property on profit sharing basis - demand of service tax on renting including on notional interest received on the security deposit made with the appellants. - Held that:- As the issue has already been settled in appellants own case for earlier period, that the appellant is not liable to pay service tax under the category of renting of immovable property service as leasing out the property to Hotel under the deemed provision of section 65 (105)(zzz) of the Finance Act, 1994. Therefore, we hold that appellant is not liable to pay service tax under the renting of immovable property service. - Further, appellant are not liable to pay service tax on the notional interest accrued on the security deposit. - Demand set aside - Decided in favor of assessee.
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2016 (1) TMI 1053
Manufacturing activity or service - repair and maintenance of the equipments so that the same can be re-used without requiring replacement - The equipments repaired are generally 3-7 years old or are damaged due to transportation or due to fire / floods / rains or are not working efficiently due to any technical defect etc. - Held that:- The activity of repair and maintenance proposed to be undertaken by the applicant will not amount to manufacture within the meaning of section 2(f) of the Central Excise Act, 1944. Eligibility to avail CENVAT credit of Excise Duty - parts and spares used for the replacement of the defective ones and Service Tax paid on inspection, certification, engineering services etc. for the aforesaid repair and maintenance activities and claim set off against the output service tax paid for rendering of passive infrastructure services by the Applicant to its customers - Held that:- The applicant is eligible to avail Cenvat Credit of Excise Duty under the Central Excise Act, 1944 / Additional Duty of Excise under Section 3(1) of the Customs Tariff Act, 1975 paid on parts and spares used for their replacement of the defective ones and Service Tax paid on inspection, Certification and engineering services etc. for the aforesaid repair and maintenance activities and claim set off against the output service tax paid for rendering of passive infrastructure service by the applicant to its customers.
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Central Excise
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2016 (1) TMI 1061
Manufacture and clandestine clearance of goods - MS rounds, bars etc. falling under chapter 7214.90 of CETA - hole issue of manufacture and clandestine removal of excisable goods appears to have emanated from the search of bill traders/agents premises - higher consumption of electricity - Held that:- Revenue failed to prove its case - No evidence has been established by Revenue to prove the clandestine manufacture and removal. Therefore merely on the weighment slips from the weighbridge owner and statements and private worksheets of the Bill traders, it cannot be inferred that quantity shown in the weighment slips are actually received by the appellants used in the manufacture of goods and clandestinely as there is no evidence of any records brought out on receipt of the raw materials inside the factory or any evidence of clearance of finished goods from the factory or any documentary proof of receipt of the finished goods by the buyer having received the goods without cover of invoices or any payment particulars of sale and receipt of goods. No evidence advanced by Revenue to connect these weighment slips with either supplier / buyer or to the assessees or to the transporter or to sale proceeds etc. Therefore the burden of proof is on the Revenue to discharge onus and as already discussed in the preceeding paragraphs the revenue has not proved in this case. Further, mere electricity consumption cannot be the only basis for determining duty liability. The demand of central excise duty proposed in then SCN's on clandestine manufacturer and removal has been made only based on assumption and theoretical calculation without any corroborative evidence. - Central Excise duty demanded in the 3 SCNs on excisable goods clandestinely manufactured and cleared by the respondents is not sustainable. - Decided in favor of assessee.
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2016 (1) TMI 1060
100% EOU - diversion of duty free material - Notification No.52/2003-Cus, dated 31.03.2003 - Whether non-accountal in statutory records but accountal in gate register and Form IV, etc. could be considered as due compliance for accountal of duty free receipts of goods and not liable to imposition of redemption fine and penalty - third member decision. Held that:- As the entire Show Cause Notice is predicated upon the appellant having violated the said Rule 7(b), jurisprudentially Show Cause Notice is not sustainable and the lower authorities have travelled somewhat beyond the Show Cause Notice by involving condition 3(b) of Notification No.52/2003-Cus, which is not permitted for them to do. As has been brought out, the goods had arrived just a few days before the visit of the central excise officers, and re-warehousing was not complete and therefore the appellant's contention that the goods were not entered in the re-warehousing register as re-warehousing had not been completed is not unreasonable. However, it comes out that the goods were not only entered in the gate register as noted by the ld. Member (Technical) but also entered in the raw-material register. In addition, the goods were actually duly found in the factory and it is not a case that there was any shortage noticed. It is also to be noted that these goods are imported only after a certificate authorising their import is given by a central excise officer and thus, the central excise officers are in the know of the duty free imports authorised by them for the 100% EOU. Impugned order is set aside and the appeal is allowed with consequential relief to the appellant. - Decided in favor of assessee.
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2016 (1) TMI 1059
Cenvat Credit - eligible inputs - rails and other track materials, namely, sleepers, paints and crossings etc. - Revenue contended that the goods in question do not merit inclusion in the category of ‘inputs’ as the same do not go into the mainstream of the process of manufacture either directly or indirectly, nor included in the list of goods mentioned in the definition of Rule 2(g) of CENVAT Credit Rules, 2002. Held that:- Since the department has accepted the admissibility of CENVAT Credit on rails and railway track materials involving the same assesse i.e. M/s SAIL, for subsequent period under the CCR,2004 and identical issue is also involved in M/s Tata Steel's case, therefore, adopting the principle of certainty & consistency in tax matters, in our view, the Appellants are eligible to credit on rails and railway track materials. Consequently, the discussion on the applicability of the said judgment to the present CENVAT Credit Rules, 2004 and other contentions raised in these Appeals would become more of academic in nature rather than resolving the dispute, hence not resorted to. - Credit allowed - Decided in favor of assessee.
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2016 (1) TMI 1058
Dutiability and classification of Polyester Sewing Thread - Held that:- The Polyester Sewing Thread is distinctly known in the market and the yarn purchased by the appellant apparently cannot be marketed or used as the Sewing Thread. The Original Authority held that “the only processes adopted by the assessee are dyeing and rewinding of the yarn on cones. Obviously this is not manufactured”. How appellants came to the conclusion that the process does not amount to manufacture is not clear. The learned Commissioner (Appeals) while setting aside the order-in-original has categorically observed that a commercially different commodity that is Sewing Thread came into existence by applying the process of dyeing and rewinding of multifold or cabled yarn. We find that there is no material now before us to arrive at a different conclusion. We also find that the issue of dutiability of Sewing Thread was examined and clarified by the Board vide Circular No. 168/2/96-CX., dated 23-1-1996. The Board clarified that the argument that there was a definition of Sewing Thread for all the headings except Heading No. 55.04 for the tariff is not really relevant so far as the dutiability of Sewing Thread is concerned. The dutiability does not arise by virtue of the fact the definition of Sewing Thread was provided for in certain headings, but by virtue of the fact that the process of making Sewing Thread out of single thread/yarn is basically a process of manufacture under Section 2(f). In view of the above discussion, we find that there is no ground to interfere with the findings of the learned Commissioner (Appeals) and accordingly we dismiss the appeal. - Decided against the assessee.
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2016 (1) TMI 1057
Refund of unutilised Cenvat credit - refund claim denied on the ground that in terms of Rule 11(2) of Cenvat Credit Rules, 2004, unutilised credit would lapse on closure of the unit - Held that:- Admittedly, in the present case the appellant has closed its unit and filed ER return claiming refund of unutilised Cenvat credit which he is entitled to as per Rule 5 of the Cenvat Credit Rules, 2004. The rejection of refund claim by the ld. Commissioner is on account of misinterpretation of the rules governing the refund. The ER return submitted by the appellant along with refund application is sufficient to grant refund to the appellant. The judgments cited at the bar by the ld. counsel for the appellant are fully applicable in the facts and circumstances of this case. In view of the facts and circumstances enumerated, set aside the impugned order and direct the respondent to grant refund within a period of two months from the receipt of the certified copy of the order. - Decided in favour of assessee.
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2016 (1) TMI 1056
Rectification of mistake - Eligibility for Cenvat Credit on insurance services and taxi services provided for staff and employees and also services of repair and maintenance of vehicle - Held that:- There was no dispute whether the services were availed for staff and employees. Needless to say that no evidence has to be adduced for facts which are not in dispute. It apparently appears that the Tribunal has erred in recording a finding of fact. Rule 2 (l) does not say that the services availed in order to be eligible for credit should be services under statutory obligation. In this regard cannot agree with the submissions of the learned DR that the appellant in effect is seeking review of the Final Order and that there is no error apparent on the face of record. The error pointed out by the appellant, strikes on mere looking of the records and the Final Order. It does not require any long drawn process of arguments. Whether the mistake is apparent or not depends on the facts and circumstances of each case. The error pointed out by the appellants is manifest on the face of records and for the same, the decision relied by the DR is not applicable to the facts herein. The Tribunal being the ultimate fact finding forum, a patent error on finding of fact which has formed the basis of the decision in the appeal does call for rectification. It is also pointed out that the issue of limitation though raised was not considered at all.The ROM application is allowed accordingly.
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2016 (1) TMI 1055
Gas filing activity - Demand on duty - whether the activity undertaken by the appellant amounts to manufacture? - marketability - Held that:- As seen that in the case of Shivam Industries (2012 (12) TMI 341 - CESTAT, NEW DELHI) this Tribunal has observed that the adoption of any other treatment rendered the product marketable to the consumer. Admittedly, in this case the consumers are Vanaspati manufacturers who are industrial users or manufacturers. Therefore, the same will not term as consumer. In fact, they are the processors of the goods. In the case in hand, as the buyer are not consumer as per Chapter Note 9 of Chapter 28 of CETA, 1985. Further, we also hold that the gas is already marketable in its original form and the activity undertaken by the appellant does not render the gas marketable which is already marketable. Therefore, we hold that the activity undertaken by the appellant does not amount to manufacture. Consequently, the appellant are not liable to pay duty. - Decided in favour of assessee.
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2016 (1) TMI 1054
Recovery of transport charges separately by way of debit notes - whether amount to declaring transport charges separately or not? - Held that:- In view of the admitted fact that the appellant assessee have recovered transport charges by separate transport bills/debit notes, which is of even date as the date of invoice and all other details given in the debit notes like, place of delivery, name of the party, name of the goods, quantity etc. can be correlated to the excise invoice, we hold that the same is to be read together with Excise invoice and in the facts, we hold that the assessee have separately displayed the transport charges. In this view of the matter, learned Commissioner (Appeals) has erred in holding that the transport charges are includible in the transaction value. We further hold that the includability of transport charges arise only in the case when transport charges are included in the sale of the goods. Accordingly, we allow the appeal with consequential benefit. The impugned order is set aside.
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2016 (1) TMI 1041
Modvat credit was taken in the manufacture of household goods which were cleared under Notification 4/97 - appeal against the decision of tribunal in [2004 (6) TMI 566 - CESTAT, MUMBAI] - None appears for the appellant(s). - The civil appeals are dismissed for non-prosecution.
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2016 (1) TMI 1040
Manufacture - whether the tarpaulin made-ups which are prepared after cutting and stitching the tarpaulin fabric and fixing the eye-lets would involve the process of manufacture - Revenue appeal against the decision of tribunal in [2005 (1) TMI 8 - CESTAT, CHENNAI] - appeals are squarely covered by the Judgment of this Court in Commissioner of C. Ex., Chennai-II v. Tarpaulin International reported in [2010 (8) TMI 2 - SUPREME COURT] - These appeals are, accordingly, dismissed.
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2016 (1) TMI 1039
SSI Exemption - Brand name - Revenue appeal against the decision of tribunal in [2005 (7) TMI 405 - CESTAT, MUMBAI] - As the tax effect is negligible, we are not inclined to entertain this appeal. - Appeal dismissed
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2016 (1) TMI 1038
Medicament - Cenvat/Modvat - Word and Phrases - appeal against the decision of tribunal in [2005 (8) TMI 507 - CESTAT, MUMBAI] - Nobody appears on behalf of the appellant. Same was the position on the earlier dates as well. - The appeal stands dismissed for non-prosecution.
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2016 (1) TMI 1037
Clubbing of clearances for the purpose of SSI Exemption - Company controlled by family members - Dummy units - appeal against the decision of tribunal in [2013 (11) TMI 1019 - CESTAT NEW DELHI] - we do not see any good ground to interfere with the judgment(s) and order(s) passed by the Customs, Excise and Service Tax Appellate Tribunal. Accordingly, the Civil Appeals are dismissed.
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2016 (1) TMI 1036
Manufacture - process of sterilization of medical equipments - change in the character of the final product - Revenue appeal against the decision of tribunal in [2004 (7) TMI 228 - CESTAT, NEW DELHI] - matter is squarely covered by a recent judgment of this Court in ‘M/s. Servo-Med Industries Pvt. Ltd. v. Commissioner of Central Excise, Mumbai’ [2015 (5) TMI 292 - SUPREME COURT] - Appeal dismissed.
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2016 (1) TMI 1035
Classification of parboiling and drying plant and machinery - appeal against the decision of tribunal in [2005 (7) TMI 649 - CESTAT MUMBAI] - tax effect in the present case is negligible. Accordingly, the civil appeal is dismissed on this ground alone.
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CST, VAT & Sales Tax
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2016 (1) TMI 1047
Nature of assessment - best judgment assessment or not - Levy of penalty - Assessment made under Sub section (3) of Section 33 of Maharashtra Sales Tax Act, 1959 - Held that:- The order of assessment, looks into the books of account produced by the assessee, draws various transactions from it and ultimately works out tax at ₹ 34,575.85. The tax has been worked out on the basis of books of account of assessee after he produced the same in response to notice of department and, therefore, it is not best judgment assessment. Perusal of order of the sales tax officer dated 5.8.1980 does not show that it is in exercise of best judgment that the assessment has been done. On the contrary, the entries in the books of account varying with returns filed are relied upon and then the assessment has been completed. No provision has been pointed out to this Court which prohibits the department from looking into the returns which are filed belatedly i.e. after prescribed date. The provisions of Explanations I and II of Section 36(2)(c) of the said Act are no doubt mutually exclusive, but then that does mean that the provisions of Sections 33(3) and 33(5) of the said Act are also mutually exclusive. If the return is filed belatedly and it does not give correct and complete figures, the provisions of Section 33(3) of the said Act can be applied by the department to such return. Levy of penalty confirmed - Decided in favor of revenue.
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2016 (1) TMI 1046
Levy of penalty for non-maintenance of complete and true accounts - sale of motor vehicles from another state - According to the Intelligence Officer, the sales were concluded at Kozhikode and hence the vehicles should have been registered within the State of Kerala. Therefore, by showing the sales at Mahe the respondent had failed to maintain true and complete accounts as an assessee under the KGST Act and had evaded payment of tax to the tune of ₹ 86 lakhs and odd during the relevant period. - Kerala General Sales Tax Act (KGST) - Revenue submitted that as per Explanation under Section 45 of the KGST Act, the burden is on the assessee to show that penalty is not liable to be imposed on him. Held that:- In the light of circumstances governing motor vehicles which may safely be gathered even from the Motor Vehicles Act and the Rules, it is obvious that the seller or the manufacturer/dealer is bound to transport the motor vehicle to the office of registering authority and only when it reaches there safe and sound, in accordance with the statutory provisions governing motor vehicles it can be said to be in a deliverable state and only then the property in such a motor vehicle can pass to the buyer once he has been given notice that the motor vehicle is fit and ready for his lawful possession and registration. The allegations and facts made or noted by the Intelligence Officer no doubt create some doubts but they do not lead to a conclusive inference that the sales under controversy had taken place at Kozhikode, Kerala. To the contrary, in view of propositions of law discussed hereinbefore, the judgment of the High Court gets reinforced and deserves affirmation. - Decided against the revenue.
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2016 (1) TMI 1045
Demand of VAT on the material consumed in the job work - deemed sale - use of chemicals, fat liquors, dyes, syntans, sodium bicarbonate etc. for cleaning, washing and drying the leather. - Haryana Value Added Tax Act, 2003 (HVAT) - Held that:- In the present case, no additional excise duty was leviable. The issue was how much chemical was transferred in processing of hides and skins as no chemical gets attached to the leather. The appeals of textile industry with regard to quantum of tax to be levied on dyes and chemicals are pending before the Tribunal. The present appeals have been wrongly disposed of by the Tribunal following its earlier decision in M/s Northern India Textiles Processors Association's case - Matter remanded back to tribunal.
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Wealth tax
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2016 (1) TMI 1068
Levy of penalty - concealment of wealth - delayed filing of wealth tax return beyond all times allowed - non-filing of wealth tax return in time - no addition whatsoever has been made to the wealth returned by the assessee - Held that:- the return filed by the assessee was voluntary. After receipt of the return, notice under section 17 has been issued to regularize the said return. There is no material on record to show that any action under section Wealth Tax Act was contemplated against the assessee prior to filing of the return by the assessee, The returns filed by the assessees have been accepted without making any addition. Considering these facts and circumstances of the case, we are of the opinion that Ld. CIT(A) has committed an error in confirming levy of concealment penalty which according to the facts of the case cannot be held to be justified. Levy of penalty deleted - Decided in favor of assessee.
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2016 (1) TMI 1067
Inclusion of industrial plots and building - wealth tax assessment - Held that:- the assessee has contended that in the Asstt.Year 2005-06, the ld.AO has included the value of the industrial plot in the net assessable wealth of the assessee under erroneous interpretation of the provisions. This addition has been deleted by the ld.CWT(A) vide order dated 20.12.2011 in Appeal No.CWT(A)/XI/32/ ACWT Cir.5/10-11. The ld.AO after taking note of the submissions did not assign any cogent reason to include value of the asset in the net assessable wealth. He determined the value of the asset on rent capitalization method. On appeal, the ld.CWT(A) has followed the outcome of the Asstt.Year 2005-06 and deleted the addition. - Order of CWT(A) sustained - Decided against the revenue.
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Indian Laws
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2016 (1) TMI 1043
Eviction of tenant from mortgaged property - validity of lease - Since he defaulted in discharging the debt, the Bank resorted to the measures under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The common case of the petitioners is that the Bank has no right to evict them as it deliberately suppressed the fact of their possession as tenants. Claiming that they have no other effective alternative remedy, as no right is provided for the action initiated under Section 14 of the Act, they approached this Court for the aforesaid relief under Article 226 of the Constitution of India. Held that:- We would like to observe that M/s. ITCS International Private Limited, said to be the lessee under the rental agreement, dated 14-03-2014, Medexpress (Clinics & Diagnostics), said to be the lessee under the rental agreement, dated 06-02-2013, and Movie Rainbow Web Services India (Private) Limited, said to be the lessee under the rental agreement, dated 03-09-2014, are not the petitioners herein. The petitioner Nos.2 and 4 in their individual capacity joined the other petitioners though, they were shown representing Medexpress (Clinics & Diagnostics) and Movie Rainbow Web Services India (Private) Limited in the respective rental agreements. We are of the considered view that since the rental agreements were unregistered, they cannot be construed as valid, and, therefore, no obligation was cast on the authorized officer to move the learned CMM requesting to issue notice to the petitioners herein. Hence, we are of the considered view that the impugned orders passed by the learned CMM do not suffer from any illegality or infirmity warranting interference. Thus, the writ petition is devoid of merit.
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2016 (1) TMI 1042
Challenge to foreign awards - International commercial arbitrations - Scope of agreement executed outside India - Held that:- It is clear that the law applicable to arbitration agreement in the present case is English Law. Once it is found that the law governing the arbitration agreement is English Law, Part I of the Indian Arbitration Act stands impliedly excluded. - the applications filed by the appellant under Section 34 of the Indian Act are not maintainable against the two foreign awards dated 10.11.2002 and 12.11.2002 between the appellant and the respondent. - Decided against the appellant.
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