Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 20, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Admission of the application u/s 245R(2) - proposed setting up of the subsidiary and the partnership firm - “Transaction“ or “proposed transaction“ are not the same as mere intention - application not admitted - AAR
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Exemption claimed u/s 10B of the Act – If the assessee is not entitled to deduction under one section, his claim for deduction under another section of the Act should be considered - AT
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Revision u/s 263 - any loss of revenue as a consequence of an order passed by the Assessing Officer cannot be treated as prejudicial to the interests of revenue - AT
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Income from leasing the hotel was income from business and not income from house property - AT
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The interest paid by the Indian branch of the assessee-bank to its head office and other branches outside India is not chargeable to tax in India - TDS u/s 195 would not be attracted - AT
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Penalty u/s 221(1) - The assessee has been paying said liability in installments and in the process, it is possible that assessee may have forgotten to make the payment of self-assessment tax - penalty waived - AT
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Capital Asset u/a 2(14) - agriculture land or not - If any suspicion crept into the mind of the Assessing Officer, nothing prevented him to get the report from Sarpanch, neibours of the impugned land or the revenue Patwari but that was not done by him - AT
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Merit of additions u/s 68 and Section 2(22)(e) - The addition made is on account of gift which is nothing but loan taken by the assessee which was converted into gift during the year - No addition - AT
Customs
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If the Commissioner is competent to adjudicate certain issues, merely because the noticee in such case may lose one stage of appeal would not render the action of the Commissioner per se without jurisdiction - HC
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Denial of refund claim - there is no evidence brought on record that assessments made on the bills of entry of the appellant were contested by filing appeals before the appropriate appellate authority - refund denied - AT
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Condonation of delay - There cannot be presumption of deliberate delay on account of culpable negligence or mala fide. But reasons of delay explained must be acceptable to law. - AT
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Retraction of statement - Retraction was an afterthought. Had the Carrier given the statement under Section 108 of the Act under coercion he would have made complaint before the Chief Judicial Magistrate. - HC
Service Tax
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Cenvat Credit - input services - Although the appellant has taken registration in the name of Vishal Devgan, all the activities have been performed by Ajay Devgan - credit allowed subject to verification - AT
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Revenue seeking adjournment - Revenue will be seeking adjournments in almost all Service Tax matters which will certainly be detrimental to its interest and the Revenue's case will go unrepresented. - AT
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Levy of penalty - renting of immovable property - retrospective amendment - Appellant cannot be held guilty of any malafide, so as to impose penalty upon him. - penalty set aside - AT
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Levy of service tax - It is a settled position of law that when the new entry is created so as to bring the activity under the category of taxable service, it is implied that the said activity was not taxable prior to inception of the new entry. - AT
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CENVAT credit - The petition for amalgamation was pending before the Hon’ble High Court and as such, it cannot be said that there was any suppression or mis-statement on the part of the appellant to irregularly avail the credit with any malafide intention - AT
Central Excise
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Removal of Inputs as such - reversal of cenvat credit under Rule 3(5) on input services - Recovery of service tax in terms of Rule 3(5) not justified - AT
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Cenvat credit - Job Work - Capital Goods - Although the capital goods could not be returned “as such“ after the usage, in that circumstances also the credit cannot be denied - AT
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Whether activities such as affixing of warranty stickers and chassis number stickers of the fully finished imported already branded VCD/DVD/Multi players of Heading 85.21 amounts to manufacture - Held no - AT
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Duty demand - Clandestine removal - Revenue has prima facie proved preponderance of probability is in their favour and it is a fit case where some pre-deposit has to be ordered - AT
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Valuation - inclusion of Cash discount - the assessable value shown in the Central Excise invoice was 4% less than the assessable value shown in the commercial invoices for the same goods - prima facie case is against the assessee - AT
VAT
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Whether equipment used during surgery amount to sale or not - The fact that in the bill raised on the patient, the hospital recovers, apart from the cost of the surgery, charges towards drugs and other consumables would not render the transaction of the implantation of a stent or valve a 'sale' - HC
Case Laws:
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Income Tax
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2014 (2) TMI 751
Income from undisclosed sources u/s 68 of the Act – Share application money – Held that:- In the remand report, the Commissioner (Appeals) had been informed that the bank statements sought for were given in respect of a limited period - the bank statements of the three companies for the same period were sought -These established a clear pattern - The accounts did not disclose large volume of transactions - All these cash deposits were made into accounts the same day or on proximate days, and the pay orders given to apply to the shares were issued from a far-off bank branch in NOIDA - These, together with the share applicants’ lack of resources and the woefully inadequate share capital, as well as the authorized and subscribed share capital of the assessee showed that the transaction claimed to have resulted in receipt of share money was dubious. The decision in CIT v. Lovely Exports Pvt. Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] followed - the assessee is under an obligation to dispel any doubts regarding the genuineness of an investor and the genuineness of the transaction - though the assessee furnished particulars relating to three share applicants, the further inquiry made by the AO raised more questions than answers - The share applicants’ lack of resources, the assessee’s position vis-à-vis share amounts received and its commercial condition all pointed to the amount received by it falling within the mischief of Section 68 as unexplained amounts - Decided against Assessee.
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2014 (2) TMI 750
Penalty u/s 271(1)(c) of the Act – Applicability of CIT Vs. Prithiipal [2000 (7) TMI 75 - SUPREME Court] – Held that:- The decision in Commissioner Of Income Tax Vs. Gold Coin Health Food Pvt. Ltd. [2008 (8) TMI 5 - SUPREME COURT] followed – Explanation 4(a) to Section 271(1)(c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. The circular dated 24.7.1976 clarified that in a case where on setting off the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable – the Tribunal was not justified in relying on the judgment of CIT Vs. Prithiipal [2000 (7) TMI 75 - SUPREME Court] - The Explanation 4 (a) to Section 271 (1) (c) was calarificatory in nature hence, penalty was rightly imposed by the assessing officer – Decided in favour of Revenue.
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2014 (2) TMI 749
Admission of the application u/s 245R(2) of the Act - proposed setting up of the subsidiary and the partnership firm - Allowability of deduction u/s 80IA(4)(i) of the Act – Held that:- The applicant Umesh H Ashar is an individual whereas the statement of facts mentions the applicant as a company registered in UAE - There is no transaction or proposed transaction with the Indian companies mentioned - In order to bring in the question within the scope of section 245N of the Act, there has to be either a transaction undertaken or proposed transaction to be undertaken by the non-resident applicant - This is not the case in the present application - "Transaction" or "proposed transaction" are not the same as mere intention. The applicant intends to invest in a 100 per cent subsidiary company in India which in turn intends to set up a consortium by way of partnership firm with the Indian company and the partnership firm propose to acquire the undertaking of the Indian company which is stated to be eligible for deduction u/s 80IA of the Income-tax Act, 1961 - the 100 per cent subsidiary company has to exist in reality and the partnership firm has to be set up in order to make transaction or proposed transaction of the applicant with the Indian company/subsidiary - The question relates to proposed setting up of the subsidiary and the partnership firm with the Indian company and as to whether the subsidiary or the partnership firm will be eligible to 100 per cent deduction u/s 80IA of the Income-tax Act - the questions posed do not fall under the purview of the Authority – thus, the application is not admitted – Decided against Applicant.
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2014 (2) TMI 748
Admission of the application under Section 245R(2) of the Act - Whether the amounts received/receivable for offshore supply of Equipments & Materials is liable to tax in India under the provisions of the Income-tax Act, 1961 and/ or the DTAA between India and Korea – Held that:- Relying upon Hyosung Corporation, Korea Versus CIT-DR (AAR) and ADIT, (IT) Delhi [2013 (8) TMI 487 - AUTHORITY FOR ADVANCE RULINGS] - Only when the issues are shown in the return and notice under section 143(2) is issued, the question raised in the application will be considered as pending for adjudication before the Income-tax Authorities - without issuance of the notice, the Assessing Officer does not have jurisdiction to examine and adjudicate the issues raised in the question - Pending proceeding in general and question already pending for adjudication are not the same - the Income-tax Authority assumes jurisdiction to adjudicate the issues that may consist of issues raised in the questions before this Authority - The question cannot be said to be already pending for adjudication before the Income-tax authority unless notice u/s 143(2) is issued before the application is filed - though return of income was filed before filing of the application before the Authority, notice u/s 143(2) was issued after the application was filed – thus, the question cannot be said to be already pending before the Income-tax Authority irrespective of the notice u/s 143(2) being issued subsequently within the prescribed time limit under the Act - The application is admitted u/s 245R(2) of the Act – Decided in favour of Applicant.
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2014 (2) TMI 747
Admission of the application under Section 245R(2) of the Act - Whether the amounts received/receivable for offshore supply of Equipments & Materials is liable to tax in India under the provisions of the Income-tax Act, 1961 and/ or the DTAA between India and Korea – Held that:- Relying upon Hyosung Corporation, Korea Versus CIT-DR (AAR) and ADIT, (IT) Delhi [2013 (8) TMI 487 - AUTHORITY FOR ADVANCE RULINGS] - Only when the issues are shown in the return and notice under section 143(2) is issued, the question raised in the application will be considered as pending for adjudication before the Income-tax Authorities - without issuance of the notice, the Assessing Officer does not have jurisdiction to examine and adjudicate the issues raised in the question - Pending proceeding in general and question already pending for adjudication are not the same - the Income-tax Authority assumes jurisdiction to adjudicate the issues that may consist of issues raised in the questions before this Authority - The question cannot be said to be already pending for adjudication before the Income-tax authority unless notice u/s 143(2) is issued before the application is filed - though return of income was filed before filing of the application before the Authority, notice u/s 143(2) was issued after the application was filed – thus, the question cannot be said to be already pending before the Income-tax Authority irrespective of the notice u/s 143(2) being issued subsequently within the prescribed time limit under the Act - The application is admitted u/s 245R(2) of the Act – Decided in favour of Applicant.
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2014 (2) TMI 746
Disallowance of sales promotion expenses – Held that:- The CIT(A) has confirmed the disallowance to the extent of Rs.2,51,259/- No evidence has been brought on record to show that the amount claimed to have been incurred through the Managing Director is supported by any evidence and what is the nature of expenditure in front of Tribunal – there is no reason to interfere in the findings of CIT(A) - It was the duty of the assessee to bring the evidence on record regarding the expenses incurred along with the nature of such expenses. Mere this narration that cash paid to Managing Director as per supporting attached, without bringing any supporting on record, the expenses claimed cannot be allowed – Decided against Assessee. Disallowance of Travelling expenses of MD’s wife – Held that:- Merely because Mrs. Kirti Sabharwal happens to be wife of the MD of the assessee company, the expenditure incurred on behalf of her cannot be disallowed when she had undertaken the tour of Singapore to attend the International Trade Fair 2003 - the expense incurred by MD is being allowed by the Assessing Officer –the expenses incurred for the same purpose of another Director Mrs. Kirti Sabharwal cannot be disallowed – Thus, the disallowance set aside - Decided in favour of Assessee. Adhoc disallowance of Running and Maintenance of Vehicles – Legal & Professional Charges - Held that:- The order of the CIT(A) cannot be sustained - there was no force in this reasoning given by CIT(A) because the assessee is a private limited company - even if some expenditure is incurred for the personal benefit of the Director or employee of the company, then such expenses can be considered as perquisite in the hands of the concerned Director/employee but in the hands of the assessee company, the same is allowable as business expenditure - neither the Assessing Officer nor the learned CIT(A) has recorded any specific finding regarding any particular expenses being not for business purpose - The details of the expenses incurred are available and these are all small expenses paid to various advocates - without pointing out even a single expense of non business purpose, such ad hoc disallowance is not justified – the disallowance is set aside - Decided in favour of Assessee.
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2014 (2) TMI 745
Application u/s 254(2) of the Act – Disallowance u/s 14A of the Act – Computation of book profits u/s 115JB of the Act – Held that:- The matter is principally and primarily factual - the legal mandate for the adjustment, which could though only extend to the expenditure actually incurred and booked in accounts, being provided by Explanation 1(f) to section 115JB of the Act - The tribunal was of the view that the adjustment was against the dividend income – thus, there is no basis for cancellation or for even a case for restoration of the matter to the assessing authority as having been made out – thus, there was no merit in the assessee's application – Decided against Assessee.
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2014 (2) TMI 744
Nature of Profit - Whether the profit on sale of this property is business profit or capital gain – Held that:- The basis adopted by the CIT(A) for holding that the profit on sale of land in question is assessable as business profit is not proper - Since the land in question was acquired by originally seven persons and later by five persons and these persons are not doing business together, it shows that atleast this property was not acquired by these persons as a business asset and the same was acquired as a capital asset for earning capital gain – thus, the order of the CIT(A) reversed and the matter remitted back to the AO. Treatment of profits - Whether the profit on sale of land is to be distributed among the five co-owners in whose name the land was registered in equal proportion – Held that:- From the combined reading of the purchase-deed and rectification-deed it has to be held that the property was jointly held by five persons including these two persons - any agreement of these persons with two other persons for share of profit on sale of the land in question can be only out of post tax profit and not pre-tax profit - when the property is jointly owned by these five persons and sold by these five persons, profit on such sale has to be assessed equally in the hands of these five persons and after paying tax thereon as per law they can deal with the money remaining with them after such payment of tax in the manner they like but for the purpose of taxation of the profit on sale of the property - no deduction can be allowed on account of any payment to outsider because for the purpose of computing capital gain, only allowable deduction is cost of the property and cost of improvement and cost of transfer and no other deduction is allowable - Even if such profit is assessable is business income, then also from the sale proceeds, one can get deduction on account of cost of purchase and expenses incurred for that business and no deduction is allowable in respect of any payment which is given to outsiders as share of profit – the order of the CIT(A) set aside and the matter remitted back to the AO – Decided in favour of Revenue.
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2014 (2) TMI 743
Interest paid to Head Office allowed – Held that:- As decided in assessee’s own case, The interest income received from Head Office is not chargeable to tax being it is an income to self - the interest paid by the Assessee Branch PE in India to Head Office is also not to be allowed as deduction – Decided in favour of Revenue. Disallowance of Deduction u/s 37 of the Act – Disallowance made u/s 40(a)(i) of the Act – Payment made to NOSTRO – Held that:- The travelling expenses incurred by the Head Office on travelling of its own staff and directly in connection with India branches is allowable u/s. 37(1) of the Act and section 44C is not applicable to it – Relying upon CIT vs. Emirates Commercial Bank Ltd. [2003 (4) TMI 2 - BOMBAY HIGH COURT] - Revenue could not controvert the fact – Decided against Revenue. Claim of bad debt of the amount – Held that:- The claim of bad debts has been allowed in earlier assessment year 1995-96 and consequently the order of the ld. CIT(A) is to be reversed and confirm the action of Assessing Officer – Decided in favour of Revenue. Applicability of Section 14A of the Act – Interest received from the head office – Held that:- The interest income received from head Office does not give rise to income - the expenditure incurred by the Assessee in relation to such income cannot be allowed – the additional groud taken by the department is to be allowed in favour of the department and against the Assessee and that the provisions of section 14A are applicable on the exempt interest income earned from Head Office/overseas branches – Decided in favour of Revenue.
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2014 (2) TMI 742
Exemption claimed u/s 10B of the Act – Held that:- The decision in CIT vs. Valiant Communications [2012 (11) TMI 382 - ITAT DELHI] followed - the undertaking which has not been approved as a 100% EOU, by the Board appointed by the Government, as required under section 10B, the assessee will not be entitled to deduction under section 10B - Deduction for export of software is available under section 10A, 10B and 80HHE - If the assessee is not entitled to deduction under one section, his claim for deduction under another section of the Act should be considered - the claim of the assessee for deduction under section 10A requires to be examined in accordance with law – thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (2) TMI 741
Allowability of deduction u/s 36(1)(vii) of the Act – Bad debts written off – Held that:- If the bad debts and advances written off are only provisions but are not actually written off in the books of accounts then no deduction can be allowed - assessee contended that the bad debts and advances are actually written off in the books of accounts of the assessee - the matter remitted back to the file of the Assessing Officer for verification as to whether the bad debts and advances were actually written off in the accounts of the debtors appearing in the books of account of the assessee - If on verification, it is found to be actually written off and it is not simply a provision made then the deduction u/s 36(1)(vii) can be allowed – Decided in favour of Assessee. Jurisdiction u/s 263 of the Act to revise the order – Held that:- Though the CIT (A) has issued a show cause notice for enhancement of income in respect of deduction claimed with regard to Redundant Animation Projects WIP and Redundant Software WIP but the same was not decided by the CIT (A) when the CIT invoked jurisdiction u/s 263 and finally passed the order - the CIT was competent to invoke the jurisdiction u/s 263 of the Act - The restriction for invoking the jurisdiction u/s 263 of the Act would only apply to such issues which were subject matter of appeal before the CIT (A) and decided in appeal order – here, the assessee has not been able to prove that the issue in dispute was decided by the CIT (A) before the revision order was passed. Survey u/s 133A of the Act - Non consideration of claim - Deduction on account of Redundant Animation Projects WIP and Redundant Software WIP – Applicability of time-limit for filing return of income u/s 139(5) of the Act – Held that:- The claim made in the revised return should not have been considered by the Assessing Officer as it was filed beyond the time prescribed u/s 139(5) does not hold much water – Relying upon Malabar Industries vs. CIT [2000 (2) TMI 10 - SUPREME Court] any loss of revenue as a consequence of an order passed by the Assessing Officer cannot be treated as prejudicial to the interests of revenue - the Assessing Officer has taken the decision in compliance with the directions of the Income-tax Appellate Tribunal with regard to the claim made in the revised return in respect of Redundant Animation Projects WIP and Redundant Software WIP by holding it to be a revenue expenditure - Only because the view adopted by the Assessing Officer is not acceptable to the CIT, according to whom it is capital in nature, it cannot be said that the assessment order is erroneous and prejudicial to the interests of revenue – it cannot be said to be erroneous and prejudicial to the interests of revenue - exercise of jurisdiction u/s 263 of the Act cannot be sustained – Decided in favour of Assessee.
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2014 (2) TMI 740
Deduction of business income – Claim u/s 80IB(10) of the Act – Held that:- The decision in M/s FORTALEZA DEVELOPERS Versus THE COMMISSIONER OF INCOME TAX 15, MUMBAI [2012 (12) TMI 693 - ITAT MUMBAI] followed - The assessment order is neither erroneous nor prejudicial to the interest of revenue on account of allocation of profit between members as per accounts of the assessee as allocation of profit in the accounts of the assessee is in accordance with clause-7 of the agreement and manner of allocation of profit in the account cannot alter the quantum of deduction available to AOP under section 80IB(10) - The quantum of deduction under section 80 IB (10) will depend on the income earned from eligible project - The quantum of deduction will not depend upon the mode of distribution of shares amongst the members of AOP as income of AOP is taxable at maximum marginal rate - thus, the manner in which the AOP distribute its project has no bearing over eligible quantum of deduction u/s 80IB (10) as the eligible quantum will be gross receipts from the project reduced by expenses incurred on the project – Decided in favour of Assessee. Deduction u/s. 80IB(10) of the Act allowed in contravention - Area of the flats exceeds the area qualified for exemption - Held that:- The decision in M/s FORTALEZA DEVELOPERS Versus THE COMMISSIONER OF INCOME TAX 15, MUMBAI [2012 (12) TMI 693 - ITAT MUMBAI] followed - The project has been sanctioned and the completion certificate has been issued as per the sanctioned plant which is for the residential flats having less than 1500 sq.ft, then even if the assessee has received the consideration for more than 1500 sq.ft in some of the flats, which would not constitute violation of conditions as prescribed u/s 80IB(10)(c) because the built up area is less than 1500 sq.ft. - each of the flats have been constructed as per the building plan duly approved by the local authorities and also completed as per the completion certificate, wherein the built up area of each flats has been shown less than 1500 sq.ft, then receiving the consideration by the assessee for more than 1500 sq.ft showing as saleable area of the flats would not enhance the built up area of the flats/residential units as per the sanctioned plant and completion certificate – there was no error in the order of the CIT(A). Disallowance of deduction u/s 80IB(10) of the Act - Commercial project in contravention of provisions of sec. 80IB(10)(d) – Held that:- As per the pre- amended provisions of sec. 80IB(10), there is no such condition of commercial area in the project; therefore, once a project has been approved prior to 1.4.2005 by the Municipal Authorities, then in the absence of any such condition in the provisions of sec. 80IB(10) as exits at the relevant point of time, the subsequent amendment w.e.f 1.4.2005 cannot be applied with retrospective effect - When the amendment itself takes effect from 1.4.2005, then it cannot be presumed to be applied from retrospective effect - Relying upon Saroj Sales Organisation vs ITO [2008 (1) TMI 420 - ITAT BOMBAY-E] - the build up area of each flat was less than 1500 square feet and further the commercial project was found a separate project - the issue of deduction u/s 80IB in favour of the assessee and against the revenue.
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2014 (2) TMI 739
Disallowance of interest u/s 36(1)(iii) of the Act – Held that:- The decision in Plaza Hotels Pvt. Ltd. Versus JCIT (OSD), Range 8(2), Mumbai [2014 (1) TMI 1275 - ITAT MUMBAI] followed - there is no question of doubting that the it was not for the purpose of business - the entire interest paid by the assessee was for commercial purposes – matter remitted back to the AO for fresh adjudication. Taxability of Management fees received – Income from house property or business income – Held that:- The decision in CIT Vs. Mohiddin Hotels Pvt. Ltd. [2005 (9) TMI 46 - BOMBAY High CourT ] followed - the assessee has given hotel on lease for exploiting business asset and, therefore, the Tribunal was correct in holding that the income from leasing the hotel was income from business - the receipt from M/s KHIL on account of leasing the hotel was business receipt - There is no dispute that the assessee is owner of the hotel given on lease to M/s KHIL - All the licenses and permissions are in the name of assessee - This is also a fact that the assessee was running its hotel itself before giving to M/s KHIL – thus, the receipts received from KHIL are business receipt – Thus, the AO is directed to treat the business receipt against income from property – Decided in favour of Assessee.
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2014 (2) TMI 738
Disallowance u/s 40(a)(ia) of the Act – TDS not deducted u/s 194C of the Act – Held that:- Section 40(a)(ia) provides that in case of any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor for carrying out any work on which tax is deductible at source and such tax has not been deducted or after deduction has not been paid before the due date, such amounts shall not be deducted in computing the income chargeable under the head "Profits and Gains of Business or Profession" irrespective of the provisions contained in Sections 30 to 38 of the Act - the disallowance under section 40(a)(ia) is attracted in respect of amounts out of which tax is deductible at source and such tax is either not deducted or after deduction is not paid before the specified date - the disallowance u/s 40(a)(ia) can be made irrespective of the provisions contained in sections 30-38 of the Income-tax Act - The scope of disallowance contemplated by section 40 covers all those expenses which are specifically enumerated - The expenses claimed by the assessee as deduction are specified in section 40(a)(ia) and therefore they are well within the scope of disallowance contemplated by section 40(a)(ia) irrespective of their eligibility for deduction under sections 30 to 38. The case of the assessee is fully covered by the provisions of section 194C(2) - The goods received by the assessee from consignors for their carriage were sent through truck owners hired by the assessee - There was no privity of direct contract between the truck owners hired by the assessee and the consignors - It was the assessee's responsibility to transport the goods received from them for which purpose the assessee hired the services of the truck owners, obviously as sub-contractors - The assessee was required to deduct tax at source out of payments made by him to such truck owners/drivers in terms of section 194C(2) but he did not do so and hence the provisions of section 40(a)(ia) were rightly invoked by the AO for making the impugned disallowance – relying upon Shree Choudhary Transport Co. v. ITO [2009 (5) TMI 865 - RAJASTHAN HIGH COURT] – thus, the order passed by the CIT(A) is not sustainable in law – Decided in favour of Revenue.
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2014 (2) TMI 737
Liability to tax u/s 9(1)(vii) of the Act r.w Article 12 of India-Switzerland Tax Treaty - Revenues earned considered as Fees for Technical Fees (FTS) – Held that:- The decision in eBay International AG Versus Assistant Director of Income-tax, Range - 3(2) [2012 (9) TMI 807 - ITAT MUMBAI] followed - The Tribunal after considering the modus operandi of the transactions undertaken through the websites operated by the assessee has held fees accrued to the assessee on successful completion of the transactions between the buyer and seller cannot be described as FTS as the assessee has no role to play in effecting sales - That it is in the nature of business profits – Decided in favour of Assessee. Permanent Establishment in India - Attribution of profits – Held that:- The decision in eBay International AG Versus Assistant Director of Income-tax, Range - 3(2) [2012 (9) TMI 807 - ITAT MUMBAI] followed - The Tribunal in view of the above has held that though eBay India and eBay Motors are dependent agents of the assessee, but do not constitute 'dependent agent PEs' of the assessee in terms of Article 5 of the DTA - these concerns cannot be treated as the PEs of the assessee in terms of Article 5(2)(a) of the DTA - Since the assessee has no PE as per Article 5 of the DTA, there can be no question of computing business profits of the assessee as per Article 7 of the DTA in relation to the revenue generated from India – the business profit of the assessee which has been held to be business profit of the assessee but it cannot be taxed in India as the assessee has no PEs' as per Article 5 of the DTA – Decided in favour of Assessee. Non granting of credit for taxes deducted at source – Availability of credit of taxes u/s 199 of the Act – Held that:- The decision in Escorts Ltd. v. Dy. CIT [2007 (5) TMI 362 - ITAT DELHI] followed – Decided in favour of Assessee. Levy of interest u/s 234B of the Act – Held that:- The decision in DIT (International Taxation) Vs. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] followed - when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee – thus, the assessee is not liable for payment of any advance tax and hence no interest u/s. 234B of the Act is attracted – Decided in favour of Assessee.
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2014 (2) TMI 736
Disallowance for payment made to the Head Office Held that:- The certificate issued by Ernest and Young had been issued for the information of and assistance to the Bank's management in connection with the review by 'local tax authorities' - It was 'not to be used', circulated quoted or otherwise referred to 'for any other purposes' - FAA has not inquired in to the relevance of the said certificate as per the Indian tax laws - Assessee itself has disallowed an expenditure incurred under the head for the year under consideration and similar expenditure in subsequent years has been allowed by the AO - if any payment is only reimbursement it cannot be taxed-but if profit is embedded in it same has to be taxed the matter needs further verification thus, the matter remitted back to the FAA for fresh adjudication Decided partly in favour of Assessee. Disallowance of interest paid to Head Office Held that:- The decision in M/s. Sumitomo Mitsui Banking Corporation, C/o. BSR Co., Chartered Accountants, KPMG Versus The Deputy Director of Income Tax (IT), Range 2(1), 2012 (8) TMI 450 - ITAT, MUMBAI] followed - interest paid to the head office of the assessee-bank by its Indian branch which constitutes its permanent establishment in India is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit attributable to the permanent establishment which is taxable in India - the interest paid by the Indian branch of the assessee-bank to its head office and other branches outside India is not chargeable to tax in India, it follows that the provisions of section 195 would not be attracted and there being no failure to deduct tax at source from the said payment of interest made by the permanent establishment, the question of disallowance of the said interest by invoking the provisions of section 40(a)(i) does not arise thus, the order of the FAA reversed - Decided in favour of Assessee.
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2014 (2) TMI 735
Penalty u/s 221(1) of the Act – non-payment of self assessment tax while filing return - Held that:- The decision in Hindustan Steel Limited Versus State Of Orissa[1969 (8) TMI 31 - SUPREME Court] Followed - levy of penalty is not justified - Provisions of section 221(1) are not absolute as the words used in the provisions is not "shall" but "may"- This give a discretion to the authority vested with the power of levy of penalty not to levy penalty also - The assessee was saddled with a tax liability of more than Rs.55.00 lacs in respect of earlier years in view of retrospective amendment into the statute - The assessee has been paying said liability in installments and in the process, it is possible that assessee may have forgotten to make the payment of self-assessment tax which was paid immediately when the fact regarding non-payment came to the notice of the assessee – thus, it cannot be said that the assessee's act was deliberate in defiance of law or assessee is guilty of a conduct which is contumacious or dishonest - assessee is not liable for penalty to be levied under section 221(1) of the Act – Decided in favour of Assessee.
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2014 (2) TMI 734
Penalty u/s 271 (1) (c) of the Act – Applicability of Section 271AAA of the Act – Held that:- The previous year for both the years have ended before the date of search and the due date for filing the return of income u/s 139 (1) has also expired before the date of search - the return of income was filed on 07.07.2008 and both these dates are falling prior to the date of search i.e. 15.10.2008 - none of these two previous years is a specified previous year - the provisions of section 271AAA (1) are not applicable in these two cases - No other argument was advanced by the learned AR of the assessee to contend that there is no concealment except this that penalty is not leviable in terms of sub section (2) & (3) of section 271AAA – thus, the order of the CIT(A) set aside and the matter should remit back to the AO for fresh adjudication about the penalty to enable the assessee to make his submissions on applicability of the provisions of section 271 (1) (c) of the I. T. Act – Decided in favour of Assessee.
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2014 (2) TMI 733
Deletion made under the head LTCG – Income from sale of land - agriculture land – Exemption u/s 10(37) of the Act allowed – Held that:- The Tribunal was therefore justified in holding that distance of 2 kms from the municipal limits of city of Khanna has to be reckoned for the purposes of s. 2(14)(iii) by measuring the same as per the road distance and not as per straight line distance on a horizontal plane or as per crow’s flight – Relying upon Laukik Developers v. Dy. CIT [2006 (7) TMI 534 - ITAT MUMBAI] - the report of the Tehsildar having certified that the assessee’s land was 8 kms away from the municipal limit, the land constituted agricultural land entitling the assessee to exemption u/s 54B of the Act. Capital Asset u/a 2(14) of the Act – Held that:- The revenue record issued by Tehsildar is more authentic document in which it has been clearly mentioned that various crops were grown by the assessee which is further supported by an affidavit of the assessee which has not been found untrue - No evidence has been brought on record by the Assessing Officer evidencing that no crops were grown by the assessee - If any suspicion crept into the mind of the Assessing Officer, nothing prevented him to get the report from Sarpanch, neibours of the impugned land or the revenue Patwari but that was not done by him - The conclusion drawn in the order clearly indicates that the impugned land is situated clearly beyond 8 kms from the municipality - the land would not fall within the definition of capital asset as mentioned in sec. 2(14) of the Act – Decided against Revenue.
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2014 (2) TMI 732
Reopening of the assessment u/s 147 of the Act – Disallowance made u/s 14A of the Act – held that:- Original assessment was completed u/s 143(3) and then again assessment order was made u/s 143(3) read with section 263 - the Assessing Officer had enquired about the rent receipts and had required the assessee to submit the name and addresses of tenants from whom rent was received - the assessee had submitted the complete details of rent received vide reply dated 27.9.2004 - The break up of rent is also available - From the break up it is found that the amount of Rs. 24,68,000/- has been reflected in this break up - The Assessing Officer during original assessment proceedings has treated an amount of Rs. 11,05,55,980/- as income from other sources instead of income from house property on the basis that the property was not owned by the assessee - The amount thus disallowed as income from house property consisted of property at DLF Centre as is apparent from the records where the detail of other property i.e. of Shri Ram School is also placed – thus, there was no failure on the part of assessee and therefore reopening on the basis of first reason was not justified. The assessee had furnished the break up of interest and dividend income - The assessee had received dividend income only from one company i.e. DLF Power Ltd. – thus, this information was also before the Assessing Officer before passing of the original assessment order as the assessee had submitted complete particulars to him and no further enquiries were sought by the Assessing Officer - Therefore, the reopening on account of second reason was also not justified as the full material facts were before Assessing Officer and there was no failure on its part – there was no infirmity in the order of the CIT(A) – decided against Revenue.
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2014 (2) TMI 731
Legality of Addition made u/s 153A of the Act – Held that:- The assessment had been processed under section 143(1) and no notice under section 143(2) had been issued - The decision in Alcargo Global Logistics Ltd. v. Dy. CIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)] followed - provisions of section 153A come into operation if a search or requisition is initiated after 31.5.2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search – thus, the AO had no jurisdiction to make addition under section 153A - The addition made is therefore deleted on the legal ground. Merit of additions u/s 68 and Section 2(22)(e) of the Act – Held that:- The addition made is on account of gift which is nothing but loan taken by the assessee which was converted into gift during the year - Thus source of gift was loan which the AO himself has admitted had been taken by the assessee in the year prior to 2000 - addition if any could have been made in the year of loan - CIT(A) rightly held that the current year profit has to be excluded - there is no case for any addition under section 2(22)(e) –Decided in favour of Assessee.
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Customs
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2014 (2) TMI 730
Jurisdiction of Commissioner of Customs - Classification of goods - Bituminous coal or steam coal - Held that:- The notice as reproduced hereinabove, first and foremost proposes to adopt certain classification which, in the opinion of the department, would be correct for the imported goods rejecting the classification canvassed by the petitioner. It is in this context that in para 24(1) of the notice calls upon the petitioner show cause why the classification of the imported goods under heading 27011920 should not be rejected and why the same should not be re-classified under the heading 27011200 of the First Schedule to the Customs Tariff Act, 1975. Further proposals are only consequential in nature and includes proposal for adopting correct classification and quantifying the differential customs duty on 37000 MT of coal imported by the petitioner. Proposal is also for recovery of the differential customs duty with interest - this is not a case where recovery of duty under section 28 of the Act is preceded the finalisation of the classification. As a matter of fact, the very notice issued is for finalization of the classification on the basis of the proposal and the prima facie opinion of the department rejecting the classification presented by the petitioner. - same is not without jurisdiction. Appellant contended that if the adjudication were to be undertaken by the Commissioner, the petitioner would lose its valuable right to appeal. - If the Commissioner under the provisions of the Act and the Rules framed thereunder is competent to adjudicate certain issues, merely because the noticee in such case may lose one stage of appeal would not render the action of the Commissioner per se without jurisdiction. - Decided against assessee.
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2014 (2) TMI 729
Denial of refund claim - Assessments made on the bills of entry were not challenged by the appellant - Unjust enrichment - Held that:- Once an Order of Assessment is passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an Appeal that Order stands. So long as the Order of Assessment stands the duty would be payable as per that Order of Assessment. A refund claim is not an Appeal proceeding. The Officer considering a refund claim cannot sit in Appeal over an assessment made by a competent Officer. The Officer considering the refund claim cannot also review an assessment order - there is no evidence brought on record that assessments made on the bills of entry of the appellant were contested by filing appeals before the appropriate appellate authority, or that appellant asked for any appellate order on the assessments made on the bills of entry - Decided against assessee.
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2014 (2) TMI 728
Condonation of delay - application for condonation of delay was without mentioning number of days of delay and that remained blank - That was notarized leaving the age of the deponent also blank. When such defect was pointed out, the appellant came up filing an application on 01/10/2012 stating that inadvertently the number of days of delay not mentioned in Para 3 of the application was 3 days and age of the appellant inadvertently skipped was 52 years. The application so filed was not verified by an affidavit for which again on 11.07.2013, the appellant filed an affidavit without explaining the number of days of delay - Held that:- Prima facie, it appears that arrest of the appellant along with the abettor Moolchand Sharma does not show that the appellant was an innocent and unaware of the status of adjudication. He had painted a gloomy picture to gain misplaced sympathy - Merely stating that the appellant received the impugned order late for reasons attributable to him, he is not absolved of his obligation to adhere to the limitation prescribed by law. Laxity does not add to longevity of a remedy which exhaust with the passage of time following doctrine of resjudicata. Casual approach of appellant shows its scanty regard to law. Had there been bonafide, the appellant would have pursued its right without painting a gloomy picture and abusing the process of law. There cannot be presumption of deliberate delay on account of culpable negligence or mala fide. But reasons of delay explained must be acceptable to law. The appellant failed to satisfy to law that it had made every effort to come out with clean hands to seek condonation of delay ascertaining status of adjudication after completion of hearing. When his associate Shri Mool Chand Sharma suffering penalty in the deal of mis-declared import in the self same adjudication came in appeal duly to Tribunal - Condonation denied.
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2014 (2) TMI 727
Quantum of punishment - whether Assistant Collector of Customs (P) could prefer an Appeal against inadequacy sentence - Held that:- The Code of Criminal Procedure does not contemplate an Appeal being filed unless specifically provided in the Code. Section 377 of the Code of Criminal Procedure provides for Appeal by the State or Union Government against sentence. Sub-section (2) provides that in case of conviction on a prosecution launched by an agency employed to make investigation under the Central Government, the Central Government may direct the learned Spl. P.P. to prefer an Appeal - Following decision of Assistant Collector of Central Excise, Madras v. V. Krishnamoorthy [1997 (2) TMI 103 - SUPREME COURT OF INDIA] - Decided against appellant.
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2014 (2) TMI 726
Smuggling of goods - Burden to prove smuggling - Retraction of statement - Tribunal shifted the onus of proof upon the Customs Department - Held that:- Owner did submit before the Customs authorities that he had procured the seized gold from his customers at Raxaul. However, he failed to prove the statement. Section 123 of the Act, inter alia, provides that the burden of proof that the seized goods are not the smuggled goods lies on the person who claims to be the owner of the goods seized. Thus, the burden to prove that the seized gold was not smuggled lay upon the Owner. The Tribunal has erred in shifting the onus of proof upon the Customs Department. The Tribunal has also erred in holding that the statement given under Section 108 of the Act once retracted was not admissible in evidence, particularly because before the Carrier was produced before the Chief Judicial Magistrate he was in custody of the Customs officials for more than 24 hours. The Tribunal, however, has overlooked the fact that the Carrier, when produced before the Chief Judicial Magistrate on 24th April 1996, did not complain of atrocity, duress or coercion. Retraction was an afterthought. Had the Carrier given the statement under Section 108 of the Act under coercion he would have made complaint before the Chief Judicial Magistrate. Although, the Tribunal did find that there was some tampering of marks and numbers on the gold bars seized from the Carrier, the Tribunal erred in holding that mere tampering of marks and numbers did not prove that the gold bars were of foreign origin. The fact that there was tampering of the marks and numbers of the seized gold bars coupled with the fact that the Owner thereof could not disclose the source of acquisition should necessarily lead to an inference that the seized gold bars were of foreign origin, smuggled into the territory of India - Decided in favour of Revenue.
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Corporate Laws
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2014 (2) TMI 762
Whether the Company Law Board could vacate the interim order suo moto without any application making such prayer being filed by the respondent. - alienating the assets of the company. - Held that:- no infirmity in the approach adopted by the Company Law Board. The interim order was passed on a concession made by the learned counsel for the respondent on the first date. Subsequently, the case of the respondent was brought before the Company Law Board by way of an application challenging the maintainability of the petition. The case of the respondent was noted and on consideration of the same the Company Law Board concluded that an interim injunction was not warranted in the facts of the case. The contention that the Company Law Board did not consider the merits of the case is ex-facie erroneous as the impugned order does indicate that the Company Law Board has considered the contentions of the petitioner as well as the averments made by the respondent and arrived at its conclusion. Appellant claimed that respondent get his signature for transfer of shares forcible by injected him with some drugs and also held a gun to him. - Appellant lodged an FIR - Held that:- While it is correct that a pendency of a criminal complaint does not divest the jurisdiction of civil courts, it would be erroneous to contend that the outcome of a criminal proceeding regarding the same subject facts ought to be ignored by a civil court. The decision of the police authorities and the Chief Judicial Magistrate does not fetter the Company Law Board and the Board is empowered to evaluate all material and evidence to determine whether the alleged transfer of shares by the appellant and the change in the constitution of the Board of Directors are valid or not. However, the fact that the FIR filed by the appellant has been closed would certainly be a relevant fact to be considered by the Company Law Board. The present appeal is without merits and is, accordingly, dismissed.
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FEMA
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2014 (2) TMI 763
Levy of penalty for contravention of Section 8(3)(4) Foreign Exchange Regulation Act, 1973 (FERA) - respondent-Company had acquired foreign exchange for importing P.P. Dyed Chips. - goods imported by the Company were pigment preparations. - price of pigment preparation could be higher than the price of PP Dyed Chips. - Held that:- it would be difficult to dispute that pigment preparations are a product altogether different from PP Dyed Chips. Pigment preparations, it appears to me are the colouring substance whereas PP Dyed Chips are polypropylene chips which have been subjected to dyeing using a colouring substance for the purpose. Had PP Dyed Chips and pigment preparation being one and the same product there could be no reason for the respondents to place order for PP Dyed Chips instead of pigment preparations. The foreign exchange utilised by the respondents for importing PP Dyed Chips was to the extent of ₹ 87,58,617/-. Considering the value of the goods imported by them, neither penalty imposed upon the Company nor the penalty imposed on its Managing Director, Mr. G.P. Poddar and the Executive Director Mr. A.K. MIttal can be said to be excessive. If at all, the penalty imposed upon them was on the lower side. Therefore, there is no scope for reducing the penalty. - Decided against the appellant.
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Service Tax
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2014 (2) TMI 761
Cenvat Credit - service tax obtained registration in different name - Input services - Nexus with business - Held that:- it is not disputed that Vishal Devgan is known as Ajay Devgan. Although the appellant has taken registration in the name of Vishal Devgan, all the activities have been performed by Ajay Devgan. This fact can be verified by the authorities concerned. Further, all these services have been availed by the appellant at the registered office. Therefore, the input service credit taken on Professional Landscape Design service is entitled as input service credit as same has been taken in respect of the business premises which is related to the activity of the appellant. - credit allowed subject to verification - Decided in favor of assessee.
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2014 (2) TMI 760
Revenue seeking adjournment - Most of the Service Tax matters involve revenue of more than Rs.1 crore. It is also informed that instructions are being sought even for stay matters where the Service Tax demand involved is Rs.1 crore and above. This would imply that except for a handful of cases, the Revenue will be seeking adjournments in almost all Service Tax matters which will certainly be detrimental to its interest and the Revenue's case will go unrepresented. In this scenario, it is imperative that appropriate and expedite decision is taken by the CBEC, so that Revenue is effectively represented. The Registry is directed to mark a copy of this order to the Chief Commissioner of Service Tax, Mumbai, the Chief Commissioner (AR), CESTAT, New Delhi and also to the Member (Service Tax)/Member (L&J), CBE & C for appropriate action.
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2014 (2) TMI 759
Levy of penalty - renting of immovable property - Held that:- In terms of the Hon’ble Delhi High Court decision in the case of M/s. Home Solution Retail India [2009 (4) TMI 14 - DELHI HIGH COURT], it was held that the service of renting of immovable property by itself cannot be regarded as service. Subsequently, there was retrospective amendment introduced with effect from 01.06.2007 by Finance Act, 2010 and the renting of immovable property was made taxable service undo the effect of judgment of the Hon’ble Delhi High Court. Appellant cannot be held guilty of any malafide, so as to impose penalty upon him. - penalty set aside - Decided in favor of assessee.
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2014 (2) TMI 758
Classification - Levy of service tax on advertisements being flashed on the web site without any creative work involved - Business Auxiliary Services (BAS) - Held that:- As per the appeal memorandum, service is classifiable under “sale of advertising space and time”. However, the appeal memorandum seeks to classify the said services under BAS prior to 01/05/2006. This contention of the Revenue is contradictory. If the service is classifiable under “sale of advertising space and time” with effect from 01/05/2006 which is a totally different service and which has not been carved out of BAS, the Revenue cannot contend that the same should be classified under BAS prior to 01/05/2006 - It is a settled position of law that when the new entry is created so as to bring the activity under the category of taxable service, it is implied that the said activity was not taxable prior to inception of the new entry. - No demand - decided against the revenue.
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2014 (2) TMI 757
Waiver of pre-deposit - Commercial and industrial service - construction of schools, hostels, hospitals - Held that:- some of the works executed by the petitioner during the period such as towards house construction or repairs of residential flats may perhaps fall outside the scope of CICS. - petitioner failed to discharge its obligations as an assessee by responding truly and fairly to the show cause notice by filing adequate pleadings supported by the evidentiary material, indicating and supporting its claim for exclusion from the liability to service tax for having provided CICS. - say granted partly.
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2014 (2) TMI 756
Demand of service tax - Tax not paid on freight charges - Held that:- It is seen that they discharged service tax liability on the same mode of transport exceeding Rs.1,500. Prima facie, the contention of the learned counsel that the tax is not payable as it was discharged by the individual truck operators between Rs.750 and Rs.1,500 is not acceptable. The contention of the learned counsel regarding the demand is barred by limitation would be looked into at the time of hearing of the appeal in detail. In view of the above, the applicant is directed to deposit Rs.12,00,000 within a period of six weeks and report compliance on 1.5.2013. Upon such deposit, predeposit of the balance dues stands waived and recovery stayed till the disposal of the appeal - Decided against assessee.
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2014 (2) TMI 755
Waiver of pre deposit - Service Tax liability - Held that:- Appellant has provided the services on which the Service Tax liability has not been discharged - Prima facie case not in favour of assessee - Conditional stay granted.
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2014 (2) TMI 754
Waiver of pre-deposit of Service Tax - Penalty u/s 77 & 78 - Demand of differential amount of Service Tax - Bar of limitation - Held that:- appellant had been filing the Service Tax returns to the lower authorities regularly. The said Service Tax returns were scrutinized by the authorities on 17.01.2008, there was a demand of short payment of Rs.87,740/-, which was immediately replied and the clarification was given by the appellant on 15.02.2008. We find that the show cause notice is issued on 02.03.2010 without giving any reasoning why there is so much time gap between 15.02.2008 to 02.03.2010 to issue the show cause notice to the appellant. In our considered view, the appellant has discharged the Service Tax liability as per law understood by him. If the authorities were of the view that he should have discharged more Service Tax liability and short paid the same, they could have called for the records within the period of limitation - Stay granted.
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2014 (2) TMI 753
CENVAT credit - Receipt of royalty - extended period of limitation - Appellant had availed the credit of service tax paid by M/s. Ghari Industries on the franchisee services provided by them. The said payment was made during the period when the application for amalgamation of the two units was pending before the Allahabad High Court. - Held that:- Admittedly, during that period, the service receiver was entitled to the credit of service tax paid by M/s. Ghari Detergent (P) Ltd. The subsequent orders of the Hon’ble Allahabad High Court allowing the amalgamation of the two units from the date of the application will not affect the appellants entitlement to the credit inasmuch as the service tax stands paid by M/s. Ghari Detergent (P) Ltd. during the same period. If the Revenues contention is accepted, then there was no requirement for payment of service tax by M/s. Ghari Industries. Revenue is silent about the service tax paid by M/s. Ghari Industries - Demand is barred by limitation. The petition for amalgamation was pending before the Hon’ble High Court and as such, it cannot be said that there was any suppression or mis-statement on the part of the appellant to irregularly avail the credit with any malafide intention. As such, we are of the view that the demand raised by invoking the longer limitation period of doubt is not prima facie justified - Decided in favour of assessee.
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2014 (2) TMI 752
CENVAT Credit - Availment of Credit in respect of structural items such as MS channels, beams etc. which were admittedly used for fabricating structural support to machinery in the cement factory - Held that:- Appellant has not been able to establish that the above structural items were components/spares/accessories of any capital goods. On the other hand, the appellant admitted before the lower appellate authority that they had used the above structural items to fabricate structural support to machinery - no prima facie case for waiver of predeposit - Conditional stay granted.
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Central Excise
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2014 (2) TMI 725
Denial of refund claim - unjust enrichment - Refund of the excess differential amount - Whether the respondent assessee has indeed recovered the excess amount from the consumers - Held that:- there was no question of assessee having recovered the excess amount from the consumers. This is so because, the assessee throughout asserted, that so far as Tyre Cord Fabrics are concerned, the duty payable was under Heading No.59.02 of the classification effective from 01.08.1986 whereunder only basic excise duty was payable. In view of the above, it is obvious that the assessee did not recover any duty from the consumers under Heading No.59.09 at least till the show cause notice was issued on 25.02.1993. Accordingly, whatever amount was recovered from the assessee by the appellants, could not have been been required to be refunded to the consumers - Following decision in ommissioner of Central Excise, Hyderabad vs I.T.C.Ltd. [2004 (12) TMI 90 - SUPREME COURT OF INDIA] - Decided against Revenue.
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2014 (2) TMI 724
Removal of Inputs as such - reversal of cenvat credit under Rule 3(5) - Recovery of service tax - Held that:- Rule 3(5) of Cenvat credit Rules, 2004 not indicates for payment of equal amount in respect of credit on input service - Well settled that while interpreting statute no addition or subtraction can be made and words therein be given their plain meaning- No provision for payment of credit on input service- Reversal of credit in respect of GTA service not justified - no reasons to interfere in the impugned order of Commissioner (Appeals) - Following decision of Bansal Alloys & Metals vs. CCE [2009 (9) TMI 514 - CESTAT, NEW DELHI] - Decided against Revenue.
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2014 (2) TMI 723
Cenvat credit - Job Work - Tools and tips not received back as such from the Job Worker within 180 - Capital Goods - Commissioner allowed credit - Held that:- In the show-cause notice (itself) these tools and tips has been held as 'capital gods'. Therefore, the revenue cannot be said, at this stage, that these tools and tips are not capital goods. As these tools and tips are capital goods and there is no bar under the Central Excise Acts or Rules that the capital goods cannot be sent to the job-worker. Therefore, the capital goods used in the factory of the job-worker are entitled for credit to the respondent. Although the capital goods could not be returned "as such" after the usage, in that circumstances also the credit cannot be denied. Further, there is no bar on the respondent to take away 50% of the CENVAT credit in the year of procurement of the capital goods and the remaining 50% in the subsequent year although they were in the possession of the job-workers. There is no bar in taking 50% of the CENVAT credit in the subsequent year as they are components of the capital goods and are covered under Rule 4(2)(b) of CENVAT Credit Rules, 2004 - Decided against Revenue.
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2014 (2) TMI 722
Availability of Cenvat credit of duty paid - Credit claimed on capital goods - Whether duty paid on welding electrodes are used in the factory of appellant for repair and maintenance of plant and machinery is eligible for Cenvat credit - Held that:- Cenvat credit can be availed on welding electrodes which are used for maintenance of plant and machinery - impugned order is accordingly set aside and appeal allowed with consequential relief - Decided in favour of assessee.
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2014 (2) TMI 721
Denial of CENVAT Credit - Cenvat Credit denied on the ground that the activity of cutting and slitting did not amount to manufacture - Commissioner dropped the demand holding that the activity of cutting and slitting amounts to manufacture and therefore the appellant is rightly eligible for the Cenvat Credit taken - Held that:- In view of Notification NO. 24/2002-CE dated 19/04/2012, the respondent herein is not required to reverse the Cenvat Credit taken of the excise duty or CVD paid on the materials procured by them for undertaking the job-work on which they have discharged excise duty liability. The demand is also for the period up to 15/03/2012. Thus, the appellant has satisfied the conditions “(a) & (b)” specified in the said Notification. As regards the condition (c), the Ld. Counsel for the respondent submits that the appellant has not made any refund claim. Subject to verification of this claim by the department, the benefit of Notification No. 24/2012-CE is available to the appellant. Consequently, the question of demanding duty amounting to Rs. 1,54,33,170/- would not arise at all - Decided against Revenue.
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2014 (2) TMI 720
Manufacture - Labeling of imported good - Whether activities such as affixing of warranty stickers and chassis number stickers of the fully finished imported already branded VCD/DVD/Multi players of Heading 85.21 amounts to manufacture or not in terms of Section 2 (f) (iii) of the Central Excise Act, 1944 - Invocation of extended period - Held that:- Only requirement of making these goods as manufactured in terms of section 2f(ii) is that labeling of containers amounts to manufacture but in the case of appellants labeling / branding is already done at the time of import and sticker of MRP are also affixed at that time. It is further noticed that it is not the case of the department that the appellants are packing or repacking. We have also examined that it is not the case of the department that the import of the goods were in bulk and the same had been put in some containers. We have also examined the aspect of 'that any other treatment' and find that has to be something as defined in section 2f. Once the goods at the time of clearance at the Customs department have undergone requirement of goods manufactured with MRP price having been affixed and goods having been duly cleared by the customs, there is no cause for asking duty on the same product merely because sticker of warranty and the chassis number have been pasted on these containers - Decided in favour of assessee.
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2014 (2) TMI 719
Duty demand - Clandestine removal based on evidence produced by the Revenue - Held that:- steel units engaged in the manufacture of MS ingots are using electricity as one of major raw materials which is controlled by the Electricity Board situated in their respective jurisdiction. Accounting of electricity is very proper and main indicator of production of steel ingots. Normal electricity consumption for production one MT of M.S. ingot usually ranges between 700 to 870 units. Details in para 6 supra indicate the fact. We have noticed wide variation of consumption of electricity showing consumption of unit ranges 773 to 1752. For a unit to be economically viable, it is understood that each manufacturer will take abundant precaution that no loss of power due to wide fluctuation in consumption occurs otherwise cost of finished goods becomes so high that there are losses. Continued higher consumption in almost all the months (sample details in para 3) is clear indicative of motive of the appellants to suppress the production. Tribunal has taken into account all the factors which prima facie points out towards suppression of production. It is also observed that when department has discharged initial burden of proof showing excess consumption of electricity later the appellant have no valid explanation to justify the excess consumption of electricity. Mere fluctuation in the electricity supply or the quantity of raw materials etc. are not reasons will make such large variation of consumption of electricity. The appellants pleading that there is no evidence of unaccounted procurement of raw materials and unaccounted sale of finished goods, transportation of these goods are not sustainable because the person, who indulged in the clandestine removal of goods, he will not keep the records thereof. Revenue has prima facie proved preponderance of probability is in their favour and it is a fit case where some pre-deposit has to be ordered for hearing their appeals. Accordingly, we order that pre-deposit of Rs.1.50 crore will be made by the appellants within twelve weeks from today as a condition to hear their appeals. Subject to above deposit, pre-deposit of balance amount of dues and entire amount of penalty imposed on both appellants shall stand waived and its recovery stayed during pendency of the appeals - Conditional stay granted.
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2014 (2) TMI 718
Determination of excess stock - Confiscation of the excess stock with option to be redeemed on payment of redemption fine - Penalty under Rule 25 of Central Excise Rules on each of the appellant company as well as its Director/ Manager - Held that:- excess stock in Shivangi Estates Ltd.’s case is 25% as against the RG-1 Register balance 54.285 MT, the stock determined average basis was found to be 68.118 MT. Excess to the extent of 25%, in my prima facie view, is not possible on account of determination the weight on average basis. Therefore, in this case M/s. Shivangi Estates Ltd., prima facie that there was excess un-accounted stock and hence confiscation of the excess stock and imposition of penalty of this amount appears to be justified. In other three cases the alleged excess is less than 5% and in my prima facie view variation between the actual weight and the weight ascertained on average basis to this extent is possible. Therefore in these cases, the allegation of non-accounted of finished goods does not appear to be sustainable. Conditional stay granted.
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2014 (2) TMI 717
Valuation - inclusion of Cash discount - the assessable value shown in the Central Excise invoice was 4% less than the assessable value shown in the commercial invoices for the same goods - Held that:- full amount of value including 4% discount was charged from the buyer in the commercial invoices. During hearing they could not satisfy that in such situation where full value has been realized by them by way of commercial invoice and later records have been scored out by getting debit notes issued and resultantly paying no duty on the same. No reconciliation relating to differential value found in the trial balance including the value of the availed cash discount could not be proved by any evidence. It is explicitly clear that invoices issued under Rule 11 do not indicate the value of offered/availed cash discounts and where the cash discount has been availed of by the buyers, the value of a availed cash discount cannot form the part of the value of commercial invoices, issued simultaneously for the purpose of computation of value of total sales. Hence, the question of inclusion of value of availed cash discount in the differential value found in the trial balance does not arise. - Valuation provisions are very clear that cash discount is admissible discount if it fulfils the policy requirement of the company and uniformly given to all the buyers. However, lack of any evidence in their favour, we find the preponderance of probability is in favour of the Revenue - Conditional stay granted.
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2014 (2) TMI 716
Rectification of mistake - High Court of Chhattisgarh directed Tribunal to decide the case of the appellant keeping in view the law laid down by Apex Court in the case of CCE, Chandigarh vs. Doaba Steel Rolling Mills reported in [2011 (7) TMI 10 - SUPREME COURT OF INDIA] - appellant submits that the ratio of Doaba Steel Rolling Mills case is not applicable to the appellant s case - Held that:- Court cannot be faulted when both sides fail to bring the material fact and evidence not considered in the course of hearing to give rise to the error in law. It is settled law that an order passed by a court or Tribunal is conclusive in so far as the facts and conclusion recorded therein. The mistake in the order sought to be rectified is not specifically brought to scrutiny showing that such mistake is apparent from record and is a rectifiable mistake - Had there been any fact recorded and law was not rightly applied there to reach to a conclusion, that could have been appreciated to be a case of rectifiable mistake. But that is not the case here. Further, Tribunal has no power of review in absence of statutory provision in that regard. Appellant was well aware that Tribunal has no power of review. But it opted to withdraw its appeal before Hon’ble High Court to seek review remedy before Tribunal. On the facts and in the circumstances it is difficult to agree that Tribunal committed any error of law when no rectifiable mistake is apparent from the face of the record. It is accordingly difficult for us to act as a review court which is not the mandate of the statute for which it has become impracticable to redress the grievance of the appellant - Decided against assessee.
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CST, VAT & Sales Tax
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2014 (2) TMI 765
Whether equipment used during surgery amount to sale or not - Levy of Value Added Tax (UP VAT / Sales Tax) on stents and valves used by the petitioner as an intrinsic and integral element in the performance of a heart procedure at a super-speciality hospital. - Forty-sixth Amendment to the constitution - sale or works contract - Held that:- this is not a case where the petitioner is contending that the sale of medicines at the pharmacy in the hospital is not assessable to tax. The only issue is as to whether the definition of the expression 'sale' in Section 2 (ac) of the Act is attracted where a stent or valve is implanted in a patient in the course of a surgical procedure. Plainly, in our opinion, there is no element of sale. The fact that in the bill which is raised on the patient, the hospital recovers, apart from the cost of the surgery, charges towards drugs and other consumables would not render the transaction of the implantation of a stent or valve a 'sale' within the meaning of Section 2 (ac) of the Act. - Decided in favor of assessee.
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2014 (2) TMI 764
Whether on oxygen IP (Indian Pharmacopoeia) the tax under the U.P. Trade Tax Act, 1948 is to levy under Entry "Medicine and Pharmaceutical Preparation" or under Entry "Oxygen and other gases - Held that:- oxygen (IP) is fully covered by Entry 26 of the notification dated 15.1.2000 i.e. "medicines and pharmaceutical preparation" and shall not be covered by Entry 47 of the notification dated 29.1.2001 which relates to '"oxygen and other gases". The oxygen (IP) i.e. medicinal oxygen being a drug fully covered by Entry 26 of the notification dated 15.1.2000 cannot be included in the general entry i.e. Entry 47 of the notification dated 29.1.2001. It is relevant to note that in Entry 47 there is an exclusion clause which excludes "such other gases as are included in any other notification issued under the Uttar Pradesh Trade Tax Act, 1948". The tax liability on oxygen (IP) i.e. medicinal oxygen, was only 8% and the assessment orders were correctly passed levying tax liability at the rate of 8% insofar as on oxygen (IP) is concerned and at the rate of 12% insofar as oxygen for industrial use is concerned. - Decided in favor of assessee. Reassessment proceedings - Held that:- We proceed with the assumption that respondents could have initiated the reassessment proceedings there being doubt regarding levying of tax on oxygen (IP) i.e. medicinal oxygen but we having already held that tax liability on oxygen (IP)/medicinal oxygen was only 8% which was rightly levied in the assessment order, the order granting permission for reassessment proceedings and the reassessment orders are unsustainable.
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