Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 20, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Transaction of shares - Capital gain v/s business income - use of funds from business accounts for personal purposes or vice versa cannot alter the nature of investment - AT
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Borrowed service rendered by the Appellant - India-Greece Tax Treaty -Admittedly the assessee does not have PE in India the same cannot be held to be taxed in India as per the express provision of Article 3 - AT
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Depreciation claim - Manner in which option to be exercised under Rule 5(1A) - Since the returns are filed in accordance with section 139(1) and the form prescribed therein make a provision for exercising an option in respect of the claim of depreciation, no separate procedure is required - HC
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Extension of the Income-tax Act, 1961, to the State of Sikkim with effect from April 1, 1990 - whether the Sikkim State Income-tax Manual, 1948, stands repealed and the assessments made thereunder for the accounting years 1996-97 to 2004-05 (assessment years 1997-98 to 2005-06) would be without authority of law ? - Held Yes - HC
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Transmission charges - TDS u/s 194C or 194J - the agreement of supply of gas by GAIL to the assessee, in the instant case, is a simpliciter transaction of sale and purchase and cannot be termed to be an agreement for work/providing of technical services. - HC
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Status of a person - Mere employee or a partner - The absence of a partnership deed recording the appellant as a partner, is irrelevant, as the firm bears Baldev Singh's name and is based in Samrala - HC
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Rectification of mistake u/s 154 of the Income-tax Act - A debatable issue cannot be said to be rectifiable. Thus the assessee was not entitled to interest under section 214 as the issue was debatable. - HC
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Transfer of assessments from Patiala to Ghaziabad u/s 127 - The fact that the other assessees have already been assessed at Ghaziabad renders imperative that the petitioners are also assessed at Ghaziabad. - HC
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Accelerated depreciation at the rate of 50% for new commercial vehicles acquired on or after 1.1.2009, but before the 1.10.2009, and put to use before the 1.10.2009 - There is No violation of fundamental rights of the petitioner under article 14 of the Constitution of India - HC
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Disallowance u/s 14A read with Rule 8D - AO cannot by recording general observations, particularly where the assessee has denied using interest bearing funds, proceed to infer that interest bearing income must has been used to earn exempted income - HC
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Once permission is obtained and the unit is started in software technology park, after the aforesaid date, the assessee is entitled to the benefit u/s 10A of the Act. Customs bonding is not a requirement or a condition precedent for granting exemption u/s 10A.- HC
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Exemption under section 10B - the view taken by the learned Tribunal that the assessee could get the advantage even without the requisite approval is altogether bad, therefore, set aside - HC
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Exemption/approval to the petitioner society u/s 10(23C)(vi) denied - there was no stipulation in the trust deed regarding utilization of the funds of the trust in the event of the dissolution/winding up of the society - defect is curable - HC
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Survey u/s 133A - whether survey ultra vires? - If at all the petitioner would contend that the survey conducted is not sustainable, then the same should be raised before the authority concerned, while challenging the assessment proceedings passed consequent upon the survey. - HC
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Sale consideration for the purpose of computation of capital gain - transfer of reversionary rights in land / TDR - sale value of the consideration taken by the stamp valuation authority was the right amount for the purpose of calculation of long-term capital gain. - AT
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If on the date of making of reference to the TPO, the assessment proceedings u/s 143 of the Act had come to an end and the proceedings for assessment stood terminated, there was no occasion for the Assessing Officer to have made a reference to the TPO for determination of arm's length price of the international transactions in terms of section 92CA - AT
Customs
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Refund claim - Unjust enrichment - payment of duty under protest - the undepreciated amount of duty and interest lying in the books of account is admissible for refund to the appellant as incidence of which has not been passed on to any other person. - AT
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Levy of anti dumping duty - Misdeclaration of goods - it cannot be said that the respondent alone was negligent and not the department. Further, no goods have been seized or confiscated - levy of fine and penalty dropped - AT
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Imposition of penalty on shipping agency - Mens rea - irrespective of any reason, if directions provided in the circular is not complied with, whether intentional or unintentional, shipping line is bound to face the consequences. - AT
Service Tax
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Utilisation of Cenvat credit for payment u/s 73A(2) - Amount collected in the name of service tax on non taxable activity - the discharge of the liability u/s 73A(2) utilising cenvat credit was improper and illegal - AT
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Works Contract Service - demand of service tax from principal contractor whereas work was executed by the sub-contractor under the 'back to back basis' agreements - prima facie case is in favor of assessee - AT
Central Excise
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Job work - Reversal of Cenvat credit related to inputs contained in waste and scraps - Not received from Job workers - Waste and scrap are not manufactured goods whether they are generated at the premises of the principal manufacturer or at the premises of job-worker - no demand - AT
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Area bases exemption - Compounded levy scheme for induction furnace units - Once it is accepted that the increase in the capacity of crucible was achieved by increase in its height, the benefit of exemption under Notification No. 50/03-CE cannot be denied - AT
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Cenvat credit on inputs used in goods which lost in fire - the intent of the rule makers was not to disallow credit merely because a contingency over which the assessee had no control takes place - HC
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Condonation of delay - when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. - HC
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If the duty has been deposited by an assessee even before adjudication, such deposits have to be held as deposit of the demands confirmed in the adjudication order. - AT
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An assessee who is working under the Central Excise, is expected to be knowledge of the basic fact that one product cannot be held to be falling under two different headings and cannot be allowed to adopt two different classifications in respect of the same product - AT
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Manufacture - Excise duty liability on Fabrication of pipes - prima facie the appellant have manufactured the pipes in question. - AT
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Valuation of goods - area based exemption - inclusion of transport charges - it is evident that the ownership of the goods remained with the appellants upto the place of delivery at the buyers premises - payment of duty and claim of refund is correct - AT
VAT
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Levy of VAT on rent as right to use - leasing of machinery and vehicles - Levy and point of tax - right to use accrues in favour of the lessee when he pays rental regularly and in terms of the agreement. - HC
Case Laws:
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Income Tax
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2015 (2) TMI 685
Transaction of shares - Capital gain v/s business income - CIT(A) upheld the short term capital gain of ₹ 8,88,153/- as business income - Held that:- The assessee had explained regarding fund transfer between the two bank accounts. We do not find anything wrong if an assessee transfers his funds from business account to his personal account and from his personal accounts to his business accounts as the case may be unless assessee had borrowed funds but in the present case, it is not that the assessee was using borrowed funds. As regards the allegation of A.O. regarding holding period of shares, we find that this observation is also baseless as when assessee holds some shares for investment purposes and declares his intention of investment by classifying as investment then the income has to be assessed as capital gain either as long term capital gain or short term capital gain depending upon holding period of shares. Ld. CIT(A) on the one hand has arrived at the decision and has allowed part relief by treating a part of income as long term capital gain on the basis of holding period which exceeded one year. Therefore there is no justification in not allowing the balance part of same investment as short term capital gain on the basis that holding period was less than an year. The Ld. CIT(A) has distinguished the facts of present case with earlier years on irrelevant considerations as none of the circumstances as explained by Ld. CIT(A) can be applied to hold the capital gains earned by assessee as business income. The pledging of shares held for investment purposes cannot alter the nature of investment as in that case, even land mortgaged by a person to secure credit facilities from a bank will change the nature of land to business purposes from investment purposes. Similarly, use of funds from business accounts for personal purposes or vice versa cannot alter the nature of investment. - Decided in favour of assessee.
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2015 (2) TMI 684
Exemption under section 11 denied - CIT(A) held that proviso to section 2(15) became applicable, because the transaction entered into by the assessee was outside the scope and object of the trust as it became profit motive - Held that:- CIT(A) while holding the transaction entered into by the assessee was outside the scope and object of the trust did not give any reason, that how in the current year, the objects were alienated. If at all some juggle was done with the objects, it was done in 1984 and not in the year under consideration. CIT(A) to gain some brownie points, the CIT(A) went beyond and in complete disregard to the provisions of section 251(2), by not allowing the assessee to even know about the enhancement being contemplated by him. This, in our opinion made the addition, consequence of enhancement, by way of denying the exemption under section 11, fallacious. Even if we accept the arguments of the DR that the CIT(A) was exercising his coterminous powers on the issue of allowance of exemption under section 11, even then the argument of the DR deserves to be rejected, because, the statute itself has given the safe guard under section 251(2), as mentioned earlier. In such a case, accepting or sustaining the order of the CIT(A) in denying the exemption under section 11, would amount to injustice to the assessee. - addition on account of section 41(1) is concerned, we set aside the order of CIT(A) and direct the AO to delete the addition made under section 41(1) - Decided in favour of assessee. Disallowance of depreciation - Held that:- Depreciation cannot be denied. Respectfully, therefore, following the decisions of Hon’ble Bombay High Court in the case of DIT (Ex) vs Framjee Cawasjee Institute [1992 (7) TMI 331 - BOMBAY HIGH COURT] wherein held that Depreciation on depreciable assets had to be taken into account in computing income of trust although the amount spent on acquiring such assets had been treated as application of income of trust in the year in which assets were acquired, we set aside the order of the CIT(A) and direct the AO to allow the rightful claim of depreciation. - Decided in favour of assessee.
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2015 (2) TMI 683
Borrowed service rendered by the Appellant - taxability in India as FTS or not? - India-Greece Tax Treaty - Held that:- In this case the assessee has earned income by rendering the services in the course of its business and therefore, it is nothing but business profit which is covered under Article 3. Admittedly the assessee does not have PE in India the same cannot be held to be taxed in India as per the express provision of Article 3. Thus we hold that the fees received by the assessee cannot be taxed in India as FTS. - Decided in favour of assessee. Interest u/s 234B - Held that:- As admitted by both the parties that this issue is no longer res-integra in view of the decision of Hon'ble jurisdictional High Court in the case of DIT v. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT].- Decided in favour of assessee. Interest u/s 234D - Held that:- This matter is restored back to the file of the AO, as the assessee has claimed in its ground of appeal that no refund has been granted to the assessee. This fact needs to be verified by the AO and appropriate relief may be given, if admissible in law. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 682
Rectification of mistake - as per assessee a mistake apparent from the record has crept in the order dated 22.08.2014 as the principal submissions of the applicant that having regard to the arbitration award dated 11.04.13, the matter should have been restored to the lower authorities for decision afresh after making a serious attempt to seek compliance from Mr. Karm Sheel Oberoi in terms of the arbitration award, have been overlooked by the Tribunal while deciding the appeals of the assessee Held that:- This Tribunal has decided the matter on merits as was deemed to be justified to the prudence of the Members of the Tribunal. Neither any new fact nor any law has been brought by the ld. counsel for the assessee before us, which may be said to be escaped the attention of the Tribunal while deciding the appeal of the assessee on merits vide impugned order. Even the scope of provisions of section 254(2) is very limited and this Tribunal has got no authority to recall or review its entire order passed on merits of the case. If the assessee has any grievance against the impugned order, proper course to agitate the same is by filing an appeal before the next appellate authority i.e. the Hon’ble High Court, but, not with the present application under section 254(2) of the Income Tax Act. The Ld. A.R. has not got any right to dictate or contend that why the order has not been passed or relief has not been granted in accordance with his wishes. Since there was no mistake apparent on the record, it was advised to the Ld. A.R. that such type of frivolous applications should be avoided as it not only wastes the precious time of the litigants but also of this Tribunal and also results in financial burden upon the parties. Neither the Ld. A.R. could point out any mistake apparent on the record dated 22.08.2014 nor the Ld. A.R. could not satisfactorily explain as to why a cost should not be imposed for moving such type of frivolous application. Hence we deem it proper to impose a cost of ₹ 10,000/- each on the assessee for moving the above stated two miscellaneous applications. Decided against assessee.
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2015 (2) TMI 681
Registration u/s 12AA rejected - Held that:- The activities of the trust was not carried out in accordance with the object of the trust. The assessee trust administer and manage the so-called medical college in a commercial manner with profit motive. The assessee trust gone to the extent of entering into agreement for offering employment and admission for medical education and collects money. It is to be remembered that admission in any educational institution including medical college has to be made only on merit basis. Therefore, entering into agreement for admission in medical college after collecting money is not only inhuman but also against the scheme of the Constitution as held by the Apex Court in Miss Mohini Jain's case (1992 (7) TMI 330 - SUPREME COURT). This Tribunal is of the considered opinion that there is no genuineness in the activity of the assessee trust and it exist only for profit motive to administer and manage the medical college in a commercial manner, therefore, it is not entitled for registration as a charitable institution u/s 12AA of the Act. - Decided against assessee.
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2015 (2) TMI 680
Depreciation claim - Manner in which option to be exercised under Rule 5(1A) - return of income filed by the assessee under section 139(1) of the Income-tax Act claiming depreciation can be treated as exercising of option before the due date as prescribed in the second proviso to rule 5(1A) of the Income-tax Rules as held by tribunal - Held that:- A reading of the decision of CIT v. Vijaya Hirasa Kalamkar (HUF) [1992 (9) TMI 4 - BOMBAY High Court] makes it clear that if the the option in terms of the second proviso to rule 5(1A) of the Income-tax Rules at the time of furnishing of return of income, it will suffice and no separate letter or request or intimation with regard to of exercise of option is required. Since the returns are filed in accordance with section 139(1) of the Income-tax Act and the form prescribed therein make a provision for exercising an option in respect of the claim of depreciation, no separate procedure is required, as contended by the Department. We are in agreement with the reasoning of the Tribunal.- Decided in favour of the assessee.
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2015 (2) TMI 679
Block assessment - Scope and effect of sections 158BC and 158BD - Held that:- The Supreme Court in Asst. CIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] clearly specifies that section 158BC prescribes the procedure for making block assessment of the searched person and section 158BD enables assessment of any person, other than the searched person. In this case, we have no hesitation to hold that searched person is M/s. Harbour Syndicate and, therefore, as far as M/s. Harbour Syndicate is concerned, the Assessing Officer was justified in issuing notice under section 158BC and in respect of V. H. Yahiya, the Assessing Officer was justified in issuing notice under section 158BD. The question of law raised in this regard is answered in favour of the Revenue. In the light of the above discussion, we are of the view that the order of remittance by the Tribunal is justified though not for the reasons stated in the Tribunal's order. The Assessing Officer was justified in invoking sections 158BC and 158BD in the respective cases and, therefore, the matter requires to be considered on the merits by the Commissioner of Income- tax (Appeals). Having formed such an opinion, these appeals are liable to be dismissed and, accordingly, we dismiss the appeals.
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2015 (2) TMI 678
Extension of the Income-tax Act, 1961, to the State of Sikkim with effect from April 1, 1990 - whether the Sikkim State Income-tax Manual, 1948, stands repealed and the assessments made thereunder for the accounting years 1996-97 to 2004-05 (assessment years 1997-98 to 2005-06) would be without authority of law ? - Held that:- In the instant case, as already held that the Sikkim State Income- tax Manual, 1948, stood repealed after extension of the Income-tax Act, 1961, in the State of Sikkim with effect from April 1, 1990. The petitioner has come claiming its rights as an assessee under the Income-tax Act, 1961. Therefore, any adverse plea like it was not an assessee under this Act or that the Income-tax Act, 1961, was not applicable to the petitioner, being a plea relating to the statute would not operate as estoppel against it and the arguments advanced by the Additional Advocate General is to be rejected. It is, thus, clear from the material placed before us that, firstly, the petitioner approached this court by filing writ petition, saying that the Income- tax Act, 1961, was not applicable, but, the said writ petition was withdrawn with liberty to approach to the competent authority/forum and, thereafter, the petitioner succumbed to the Income-tax authorities under the Income- tax Act, 1961, and presently, various proceedings are pending before the appropriate forums under the said Act. The petitioner has also claimed the refund of ₹ 76,63,655 together with interest till the date of realisation. During the course of arguments, Mr. Pal, on instructions, fairly conceded that the previous interest or the interest pendentelite on the said amount may not be awarded to the petitioner but the State may be directed to refund this amount within the time-frame prescribed by this court. We allow this writ petition and record our findings that after extension of the Income-tax Act, 1961, to the State of Sikkim with effect from April 1,1990, the Sikkim State Income-tax Manual, 1948, stands repealed and the assessments made thereunder for the accounting years 1996-97 to 2004-05 (assessment years 1997-98 to 2005- 06) are without authority of law, non-est and nullity.Consequently, the impugned order dated July 7, 2006 (annexure P6), demand notice dated July 7, 2006 (annexure P7) and the other consequential orders/memos thereto are quashed. The State-respondents are directed to refund a sum of ₹ 76,53,655 to the petitioner within a period of 90 (ninety) days from today, failing which this amount shall carry interest at 6 per cent. per annum from the date commencing after completion of 90 (ninety) days till realization. - Decided in favour of assessee.
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2015 (2) TMI 677
Transmission charges - TDS under section 194C and section 194J - whether it is in the nature of sale or contract in between the respondent-assessee and the Gas Authority of India Ltd ("GAIL") - Held that:- Tribunal committed no error in coming to the conclusion that the case was not covered under section 194C/194J of the Act. It may be that the transportation component of gas was paid separately by the assessee to GAIL. Here also the transportation charges did not depend on the consumption of quantity of gas but was of fixed monthly charges to be borne by the assessee as part of the agreement between the parties. The ownership of the gas vested in GAIL till it was transported and delivered to the assessee's premises at the outlet of the gas metering station. The pipeline was laid down by GAIL and was permitted to be utilised for further onward transportation of gas to other consumers. The circular of the Central Board of Direct Taxes, which has been referred by the Income-tax Appellate Tribunal, bearing No. 13 of 2006, dated December 13, 2006 (supra), in our view, also clarifies the situation envisaged in the present case and considering the circular as well as the facts available on record, we have no hesitation in holding that the agreement of supply of gas by GAIL to the assessee, in the instant case, is a simpliciter transaction of sale and purchase and cannot be termed to be an agreement for work/providing of technical services. The ITAT has rightly come to the conclusion and, in our view, it is based on appreciation of evidence and facts and no question much less substantial question of law can be said to emerge out of the said order of the Income- tax Appellate Tribunal - Decided in favour of assessee.
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2015 (2) TMI 676
Status of a person - Mere employee or a partner - Baldev Singh was a partner of M/s Baldev Singh & Co.? - liquor trade vends - it was contended that the mere fact that Baldev Singh may have signed certain documents during auction proceedings, on behalf of the firm does not raise inference that Baldev Singh was a partner - Held that:- In the liquor trade vends are taken on benami names but in the absence of any evidence that Baldev Singh was a mere employee, whose name was used or any evidence that Baldev Singh was an employee of Pritam Singh, cannot discard the record pertaining to auction of liquor vends particularly as it is signed by Baldev Singh. The onus to prove his status as an employee lay upon Baldev Singh, to rebutt the presumption that arises against him from his signatures appearing on all relevant documents pertaining to the allotment of vends. Apart from his bald statement that he was a mere employee or the assertion that he lent his name to Pritam Singh, there is no evidence to support these assertions. The absence of a partnership deed recording the appellant as a partner, is irrelevant, as the firm bears Baldev Singh's name and is based in Samrala. Baldev Singh is a resident of Samrala. All relevant documents pertaining to the auction of liquor vends are signed by the appellant. Baldev Singh has, admittedly, participated in the auction, was allotted liquor vends, has signed all relevant documents and does not deny that he participated in the business, though, allegedly as an employee. The onus to prove this fact having not been discharged, we cannot speculate merely on the basis of malpractices is the liquor business to accept his submissions. The fact that Pritam Singh may not have been called as a witness or examined or did not make this allegation in his initial statement, is also irrelevant as Baldev Singh has admitted his signatures on all relevant documents executed at the time of allotment of the vends and has failed to adduce evidence in support of his plea that he was a mere employee and also renders irrelevant the principle that statement of one cannot be read against another to prove a partnership. As earlier order passed by the CIT(A) which was reversed by the ITAT, by remanding the matter to the Assessing Officer Baldev Singh accepted this order, participated in proceedings before the Assessing Officer and filed a response to queries raised after the record of the Excise and Taxation Department after was summoned and, therefore, cannot turn the clock back by challenging this order. It would also be appropriate to point out that the earlier order passed by the CIT(A) was set aside as relevant record pertaining to liquor vends had not been requisitioned. The Assessing Officer requisitioned the record of the Excise Department and upon finding that all relevant documents were signed by Baldev Singh, held that Baldev Singh was a partner of Baldev Singh & Co. - Decided against the appellant.
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2015 (2) TMI 675
Rectification of mistake - whether on an application under section 154 of the Income-tax Act interest under section 214 of the Income-tax Act could be granted on advance tax payments, made after the prescribed dates but within the financial year? - Held that:- On a perusal of section 210 r.w.s 211 it is clear that the due dates are prescribed to mean that advance tax is required to be paid by an assessee within the prescribed dates and credit is given of the amount paid as advance tax. Tax can be paid up to the end of the financial year, i.e., 31st March and is also to be treated as an advance tax. Any tax paid after 31st March shall be self-assessment tax. The controversy in the present matter is narrow and we are required to answer the question of allowance of interest under section 214 in a case where the instalment of advance tax though paid after the due date but before the close of the financial year, i.e., March 31, 1975. It is true that majority of the judgments have held that interest in a case like this would be allowed under section 214, however, we are considering the case with regard to an application having been moved under section 154. If we peruse the phraseology of section 154, then it is clear that only a mistake apparent on the face of record can be said to be rectifiable. A debatable issue cannot be said to be rectifiable. Thus the assessee was not entitled to interest under section 214 as the issue was debatable. - Decided in favour of the Revenue.
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2015 (2) TMI 674
Transfer of assessments from Patiala to Ghaziabad - Held that:- The power to transfer an assessment is administrative in nature. An order passed under section 127 of the Act would, therefore, fall for judicial review only where it has violated statutory safeguards provided by Section 127 of the Act or the order has been passed without assigning any reasons or is mala fide or arbitrary. A perusal of the impugned order reveals that clear and cogent reasons, have been assigned for retransfer of the assessments from Patiala to Ghaziabad, which are preceded by a credible process of reasoning, a just and fair consideration of the objections thereby negating arguments as to a mala fide or perverse exercise of jurisdiction. An argument raised by counsel for the petitioners that as assessments were initially centralised at Patiala, their re-transfer to Ghaziabad is a review of the earlier order must necessarily be rejected. We are unable to read into Section 127 of the Act any impediment prohibiting the re-transfer of an assessment. The fact that the other assessees have already been assessed at Ghaziabad renders imperative that the petitioners are also assessed at Ghaziabad. - Decided against assessee.
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2015 (2) TMI 673
Accelerated depreciation at the rate of 50% for new commercial vehicles acquired on or after the 1st day of January, 2009, but before the 1st day of October, 2009, and put to use before the first day of October, 2009, for the purposes of business or profession - exhibit P10 notification dated April 21, 2009 challenged - Held that:- Benefit of enhanced depreciation was introduced initially through exhibit P9 notification with effect from April 1, 2009. The said benefit was continued till September 30, 2009, through exhibit P10 notification. In so far as the benefit of enhanced/accelerated depreciation was conferred taking into account the policy decision of the Union Government to stimulate the country's economy, it cannot be viewed as a situation similar to the introduction of a new rate of tax during the middle of an assessment year. exhibits P9 and P10 notifications were issued in response to a situation that called for incentives so as to boost the economy that was facing recessionary trends. The measures introduced in the Income-tax Rules to further the policy decision of the Union Government, cannot be seen as akin to the introduction of a new rate of tax, for the purposes of mounting a challenge against the same as arbitrary. Thus, do not find any merit in the challenge against exhibit P10 notification on the ground that the same offends the fundamental rights of the petitioner under article 14 of the Constitution of India. Resultantly, the writ petition fails, and is accordingly dismissed. - Decided against assessee.
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2015 (2) TMI 672
Disallowance u/s 14A read with Rule 8D - interest on loans, on investments earning tax free income in the form of dividend - ITAT confirming the order of CIT(A) deleting the disallowance - Held that:- Section 14A of the Act requires the Assessing Officer to record satisfaction that interest bearing funds have been used to earn tax free income. The satisfaction to be recorded must be based upon credible and relevant evidence. The onus, therefore, to prove that interest bearing funds were used, lies squarely on the shoulders of the revenue. Assessing Officer, however, cannot, by recording general observations, particularly where the assessee has denied using interest bearing funds, proceed to infer that interest bearing income must has been used to earn exempted income. Section 14A of the Act, being in the nature of an exception, has to be construed strictly and only where the Assessing Officer records satisfaction, on the basis of clear and cogent material, shall an order be passed under Section 14A of the Act, disallowing such a claim. As there is no tangible material on record that could have enabled the Assessing Officer to record satisfaction in terms of Section 14A of the Act, findings recorded by the CIT(A) and the ITAT that the Assessing Officer has failed to discharge this onus are neither perverse nor arbitrary and, therefore, do not call for interference. - Decided in favour of assessee.
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2015 (2) TMI 671
Registration under section 12AA denied - Tribunal allowed the claim - Held that:- Object of section 12AA is to examine the genuineness of the objects of the trust but not the income of the trust for charitable or religious purpose. The Commissioner cannot sit in the chair of the Assessing Officer to look into the amount spent on charitable activities at the time of creation of the trust. The stage for reviewing the application of income has not arrived at when such trust or institution files application for registration of the trust/society. The only thing to be looked into at the time of granting of registration is that the object of the trust for which it was formed have to be seen and examined, the Commissioner of Income-tax's satisfaction about the genuineness of the activities of the trust is not a criteria as the trust is yet to commence activities. Asking about charitable activities at the nascent stage would amount to putting a cart before the horse. Tribunal rightly directed the Commissioner for granting registration under section 12AA of the Act. - Decided in favour of assessee.
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2015 (2) TMI 670
Entitlement to claim deduction under section 10A - assessee failing to satisfy the conditions stipulated in the STPI Scheme which stipulated commencement of units from a particular date when the assessee's unit had already commenced much before obtaining the licence for the bonded warehouse - Held that:- The conditions stipulated in the permission granted by the STPI is the units shall be customs bonded. The benefit of such customs bonding is that the assessee would be entitled to the benefit of customs duty and excise duty. It has nothing to do with the grant of exemption under section 10A of the Income-tax Act. To be eligible for exemption under section 10A, the conditions stipulated in sub-section (2)(i) of section 10A has to be fulfilled, i.e., the assessee has to begin manufacturing the products on or after the first day of April, 1994, in any electronic hardware technology park. In order to start the unit in software technology park, the permission is required. Once permission is obtained and the unit is started in software technology park, after the aforesaid date, the assessee is entitled to the benefit under section 10A of the Act. Customs bonding is not a requirement or a condition precedent for granting exemption under section 10A. As is clear from the facts set out above, both the appellate authorities were justified in granting relief to the assessee. Therefore, we do not see any merit in this appeal. - Decided in favour of the assessee
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2015 (2) TMI 669
Penalty under section 271(1)(c) - ssessee filed the return of income without computing the correct tax liability under section 115JB read with section 10(38) - ITAT deleted penalty - Held that:- Vide the Finance Act, 2006, a proviso was inserted in section 10(38) of the Act, with effect from April 1, 2007, and prior to the insertion of the aforesaid proviso under section 10(38) of the Act, the long-term capital gains on shares was not required to be included while determining the book profits under section 115JB of the Act. According to it, the long-term capital gains on shares is to be included while determining the book profits. It was for the first time that for the assessment year 2007-08 onwards, the aforesaid provision became applicable. The plea of the assessee regarding the bona fides has been accepted by the Tribunal. There is nothing to doubt the veracity of the aforesaid findings recorded by the Tribunal. - Decided in favour of assessee.
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2015 (2) TMI 668
Exemption under section 10B - revenue challenged the tribunal order allowing the claim of exemption ignoring that the assessee does not admittedly have approval as 100 per cent. export oriented undertaking - Held that:- Revenue is right in contending that the learned Tribunal could not have rewritten the law nor could have accepted anything in lieu of what was required by the statute. Therefore, the view taken by the learned Tribunal that the assessee could get the advantage even without the requisite approval is altogether bad, therefore, set aside. - Decided in favour of revenue.
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2015 (2) TMI 667
Exemption/approval to the petitioner society under section 10(23C)(vi) denied - there was no stipulation in the trust deed regarding utilization of the funds of the trust in the event of the dissolution/winding up of the society - Held that:- It was not shown by the respondent that any money had ever been diverted to any other trust and it did not carry on any activity for which the society had been constituted. The defect, as pointed out by the Director General of Income-tax, was curable as the utilisation of the funds in the event of dissolution or winding up of the society was an event which was yet to take place and the defect pointed out by the Director General was cured prior thereto. Moreover, there was no allegation of utilization of funds in violation of the trust deed of the petitioner. In such a situation, declining approval/exemption to the petitioner under section 10(23C)(vi) of the Act was unjustified. - Decided in favour of assessee.
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2015 (2) TMI 666
Disallowanc on account of bad debts - ITAT deleted the addition - Held that:- Tribunal correctly in view of the decision of TRF Ltd. vs. CIT [2010 (2) TMI 211 - SUPREME COURT ] has held against the revenue. - Decided in favor of assessee. Disallowance on account of interest expenditure u/s 14A r.w.r. 8D - ITAT deleted the addition - Held that:- As relying on case of CIT vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) wherein held that if there were funds available both interestfee and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interestfree fund generated or available with the company, if the interestfree funds were sufficient to meet the investments. Thus no reason to interfere in the said issue when both the Authorities have concurrently held that there were sufficient funds available with the company and they held in favour of the assessee. - Decided in favor of assessee.
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2015 (2) TMI 665
Permission to raise additional grounds - whether the additional grounds were held to be clarificatory in nature and by way of amplification of the existing grounds? - Held that:- The additional grounds raised by the Revenue were rightly taken into consideration as part of the grounds already raised by the Revenue. Consequently, the questions of law framed by the Tribunal are answered in affirmative holding that the Tribunal was rightly held in ground Nos.3 and 4 are wide enough to include additional grounds regarding weighted deduction, which are clarificatory in nature. - Decided in favour of revenue.
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2015 (2) TMI 664
Survey u/s 133A - whether survey ultra vires? - Held that:- In the light of the statement made in the counter affidavit filed by the respondent, this Court is not inclined to grant the relief sought for herein. If at all the petitioner would contend that the survey conducted is not sustainable under the provisions of the Act, then the same should be raised before the authority concerned, while challenging the assessment proceedings passed consequent upon the survey. At this stage, the learned standing counsel for the respondent submitted that the assessment proceedings was completed and the same was challenged by the petitioner by way of appeal and the appeal was partly allowed and no tax was demanded. However, the learned counsel for the petitioner reports no instruction in this regard. Be that as it may, going by the facts stated by the petitioner and the averments made in the counter affidavit, the relief sought for in this writ petition cannot be granted. - Decided against assessee.
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2015 (2) TMI 663
Adoption of the sale consideration for the purpose of computation of capital gain - transfer of reversionary rights in land - as per assessee sale consideration cannot be taken more than the actual sale consideration shown in the transfer deed, i.e., a sum of ₹ 41.51 crores - also if the sale consideration is taken as valuation done by the stamp valuation authorities then there is a mistake in calculation of sale consideration as TDR value has been taken at 100 per cent - Held that:- According to the provisions of section 50C the assessee cannot obtain the benefit as provided in sub-section (2) of section 50C as neither of the conditions described in sub-section (2) has been fulfilled by the assessee. Thus neither the Assessing Officer nor the learned Commissioner of Income-tax (Appeals) could adopt sale consideration of the property any amount less than the value adopted or assessed by the stamp valuation authority as section 50C does not recognise such curtailment of the sale consideration in any manner. Therefore, we confirm the findings of the learned Commissioner of Income-tax (Appeals) that the sale value of the consideration taken by the stamp valuation authority was the right amount for the purpose of calculation of long-term capital gain.There is no force in the contention of AR regarding mistake having been committed by the stamp valuation authority in taking the value of TDR and it has been clearly described in the order of the learned Commissioner of Income-tax (Appeals) that the value of TDR also has been taken at 60 per cent. and it has not been taken at 100 per cent - Decided against assessee. Adoption of fair market value while computing the long-term capital gains - CIT(A) confirming the adoption of fair market value as on April 1, 1981 instead of ₹ 5,62,50,775 in respect of the appellant's rights in land at Juhu - Held that:- This issue is squarely covered in favour of the assessee by the decision of of CIT v. Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT] and direct the Assessing Officer to adopt fair market value of the impugned property as on April 1, 1981, at ₹ 5,62,50,775 as per valuation submitted by the assessee of the Registered Valuer - Decided in favour of assessee. Applicability of provisions of section 50C - Held that:- Section 50C is a deeming provision and is applicable if the condition laid down therein are fulfilled. It has already been held that section 50C(1) is applicable and the assessee has not made out any case for applicability of sub-section (2) of section 50C. Decided against assessee.
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2015 (2) TMI 662
Reopening of assessment - return of income filed by the assessee included international transactions entered with the associated enterprise was not picked up for a scrutiny assessment within the stipulated period - illegality or irregularity in making of a reference to the TPO u/s 92CA - Held that:- In the present case, as dealing with assessment year 2007-08 and assessee filed its return of income on 05.11.2007. In terms of clause (ii) to sub-section (2) of section 143 of the Act, as it stood at the relevant point of time, notice u/s 143(2) of the Act in order to subject the return of income to scrutiny assessment, should have been issued within this six months from the end of the relevant assessment year i.e. upto 30.09.2008. There is no dispute that no such notice has been issued within the above stipulated period. A consequence of the aforesaid situation is that the return of income filed by the assessee on 05.11.2007 became final as no scrutiny proceedings were started within the period stipulated in law. The aforesaid position is also reinforced by the CBDT Circular No.549 dated 31.10.1989. As per the CBDT, if, after furnishing return of income, an assessee does not receive a notice u/s 143(2) of the Act from the Department within period stipulated in the proviso to section 143(2) of the Act, it follows that the return filed by the assessee has become final and no scrutiny proceedings should be started in respect of that return. If on the date of making of reference to the TPO, the assessment proceedings u/s 143 of the Act had come to an end and the proceedings for assessment stood terminated, there was no occasion for the Assessing Officer to have made a reference to the TPO for determination of arm's length price of the international transactions in terms of section 92CA of the Act. We have already inferred in the earlier paras that under the provisions of section 92CA of the Act, a reference to the TPO for computation of arm's length price in relation to international transactions is permissible only in the course of the assessment proceedings. Thus it has to be inferred that when the Assessing Officer made reference to the TPO on 14.09.2009 for determination of arm's length price in relation to an international transaction, there was no assessment proceedings pending, and therefore it was an invalid reference. Consequently, the subsequent order passed by the TPO on 29.10.2010 (supra) determining the adjustment of ₹ 2,49,48,811/- to the international transaction is a nullity in law and void ab initio. As a consequence, we conclude by holding that the reasons recorded by the Assessing Officer in the present case do not meet with the requirements of section 147 of the Act and therefore the Assessing Officer had no jurisdiction to issue notice u/s 148 of the Act dated 14.01.2011. As a consequence, the subsequent assessment order passed u/s 143(3) r.w.s. 147 and 144C(13) of the Act is liable to be quashed. We hold so. - Decided in favour of assessee.
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Customs
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2015 (2) TMI 694
Penalty u/s 114(iii) - Confiscation of goods - Held that:- It is the shipping agency who is supposed to perform the job of loading of export consignments to the vessel who in the present case is M/s. Zim Integrated Shipping Services India (P) Ltd. The said shipping line was appointed by the foreign consignee M/s. Hanesbrands Inc. USA and payment for the same was also made by the said consignee. It is observed that as regards the shipping line is concerned they are not the authorised agent of exporter. Moreover, nothing was brought on record either in the show-cause notice or in the impugned order that the exporter is involved in the mistake of sailing of the vessel carried out by shipping line. It is also fact that whatsoever mistake has occurred there is no gain flowing to the exporter. It is only a procedural lapse which even does not involve any Revenue. In the same impugned order, the penalty was also imposed on the shipping line and the CHA who were directly involved in the job of loading of vessel and sailing thereof in the port area. Similar issue earlier came up before this Bench of this Tribunal in the case of Emirates Shipping Agencies (I) Pvt. Ltd. [2009 (3) TMI 395 - CESTAT, MUMBAI] and Mohini Organics Pvt. Ltd. cited [2009 (2) TMI 184 - CESTAT, MUMBAI]. - Following the case laws of Bombay High Court in Kusters Calico Machinery Ltd. (2010 (3) TMI 474 - BOMBAY HIGH COURT), I am of the view that the penalty on the exporter is not warranted - Decided in favour of assessee.
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2015 (2) TMI 693
Refund claim - Unjust enrichment - payment of duty under protest - Refund sanctioned but directed to credit the same to consumer welfare fund - appellant paid in pursuance to the ‘Less Charge Demand Notice' and appellant has succeeded in the adjudication and as consequential relief they became entitled for the refund. - Held that:- It is clear that the provision of unjust enrichment is undoubtedly applicable on the refund of the appellant. This position has been settled in Apex Court judgment in the case of Sahakari Khand Udyog (2005 (3) TMI 116 - SUPREME COURT OF INDIA). - In the present case it is observed that out of total amount of refund of ₹ 1,16,16,072/- the appellant has been reducing the depreciation. It is obvious that the depreciated amount is booked as expenditure in the profit and loss account and the same is deemed to be passed on to any other person, therefore the undepreciated amount of duty and interest lying in the books of account is admissible for refund to the appellant as incidence of which has not been passed on to any other person. Appellant is entitled for refund of undepreciated amount of duty and interest. However, the appellant is directed to produce the documentary evidence with regard to the depreciated amount of duty and interest, as at the time of release of the refund the amount. Needless to say that the release of the refund shall be subject to the condition that the appellant shall make suitable accounting of undepreciated duty and interest by deducting the same from account head of fixed assets and documentary evidence to this effect shall be submitted to the sanctioning authority - Decided partly in favour of assessee.
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2015 (2) TMI 692
Levy of anti dumping duty - Misdeclaration of goods - Imposition of redemption fine and penalty - Held that:- Appellant has discharged the anti-dumping duty liability in terms of the aforesaid notification, when it was pointed out along with interest. I have also perused the bill of entry concerning the impugned transaction. In the said bill of entry, the importer had declared country of origin as Turkey and the port of export as Iran. Thus, there is no misdeclaration on the part of the respondent importer with respect to the impugned transaction. It is true that the respondent did not discharge the anti-dumping duty liability. The customs authorities also validated the transaction without noticing the mistake committed by the importer and therefore, it cannot be said that the respondent alone was negligent and not the department. Further, no goods have been seized or confiscated. The law does not provide for imposition of fine on a consignment which has already been cleared and not available for confiscation and therefore, imposition of redemption fine by the original authority on the importer is clearly unsustainable in law and therefore, the appellate authority was right in dropping the demand of fine. As regards the imposition of penalty, the appellate authority has rightly observed that there was no malafide on the part of the importer and it was only an inadvertent error. Section 111 (m) of the Customs Act applies only when there is a misdeclaration of any material particulars. In the present case, the appellant has not misdeclared any material particulars and therefore, the provisions of Section 111 (m) are not attracted in the fact of the case. Consequently, the liability to confiscation also does not arise and therefore, imposition of penalty on the appellant is also not warranted. Therefore, the lower appellate authority is absolutely correct in setting aside the imposition of fine and penalty. - No reason to interfere with the order passed by the lower appellate authority - Decided against Revenue.
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2015 (2) TMI 691
Valuation of goods - Determination of transactional value - Influence on transactional value - Held that:- Lower appellate authority has not given any reasoning as to why the transaction value cannot be accepted. The only reason given is that Rule 12 provides for rejection of transaction value involving special discounts limited to exclusive agents. The learned lower appellate authority has ignored the fact that Rule 12 does not provide for a method of valuation as explicitly stated therein. It only mentions the circumstances under which transaction value can be rejected. Once the transaction value is rejected, then the value has to be determined sequentially following Rules 4 to 8 of CVR, 2007 which the appellate authority has failed to do. Since there are no contemporaneous imports of similar or identical goods, the assessing authority has determined the value adopting the deductive method under Rule 7 and found the transaction value to be acceptable. There is no rebuttal by the appellate authority as to why this conclusion drawn by the assessing authority is wrong and therefore, the reasoning adopted by the lower appellate authority is completely mis-placed. In the facts of the present case, there is no allegation of any flow back or payment of any additional consideration by the appellant to the foreign supplier. In the absence of any positive evidence, the argument that transaction value cannot be accepted has to be rejected. The ratio of the decisions of this Tribunal in the case of Rehau Polymers Pvt. Ltd., (2014 (6) TMI 265 - CESTAT MUMBAI) would also apply. In view of the above, we set aside the impugned order and allow the appeal by restoring the previous order of the assessing officer wherein it has been held that the transaction value has not been influenced by the relationship between the foreign supplier and the Indian importer. - Decided in favour of assessee.
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2015 (2) TMI 690
Imposition of penalty on shipping agency - Mens rea - Non compliance of circular No.56/2004 cus dated 18/10/2004 - appellant submits that there is no mistake on their part as appellants have declared the correct description in IGM on the basis of import documents. - Held that:- Appellant have not verified the correctness of the inspection report which was supposed to be issued by M/s Moody International Certification (India), which is specified agency as provided under the Handbook of Procedure, 2009. However, inspection report issued by the M/s Moody International Certification Tehran, which is not specified agency for carrying out pre-inspection of consignment of Heavy Melting scrap. On going through circular of 56/2004, it can be seen that the whole procedure and precautions was specified particularly in respect of melting scrap which has specific objective to avoid the casualties due to explosion of the explosive contained in the heavy melting scrap. The circular was issued after serious accident took place, wherein due to explosion 10 persons were died. So it is very obvious that precautions prescribed with the sole objective of saving of human lives. Therefore, heavy responsibility have been casted on the agency involved in importation and clearance of consignments of heavy melting scrap. In the present case the submission of the appellant that merely because of similar name of the pre-inspection agency, mistake has occurred on their part cannot accepted. Shipping line is duty bound to ensure that every consignment of metal scrap in shredded, compressed to loose form is accompanied by such a pre-shipment inspection certificate before it is loaded on the ship and failure of the such compliance, panel action was proposed. - mens rea is not required, in failure of such compliance. I am of the view that irrespective of any reason, if directions provided in the circular is not complied with, whether intentional or unintentional, shipping line is bound to face the consequences. As regard penalty on Shri Joy Francis, since he is directly involved in documentation as authorized by the shipping line, he is also equally responsible for the lapses made by his employer i.e. M/s. Cosco (I) Pvt. Ltd. In view of the above discussion, I am of the considered view that the penalties were correctly and legally imposed upon both the appellants - Decided against assessees.
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Corporate Laws
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2015 (2) TMI 689
Proposed scheme of arrangement with creditors- Application filed under section 391 of the Act- Valuation issue- Unsecured creditors- Held that:-From the narration of facts and the contentions which have been highlighted, it is clear that two facts are beyond dispute. First, the appellant stands registered as a secured creditor of the respondent company on the record of the Registrar of Companies under the Act; and second, the arbitral tribunal has passed an award on the basis of consent and it has the status of a decree which is executable in law. We will be failing in our duty if we do not advert to the issue that the appellant shall remain as a secured creditor, for it was registered as such under the Registrar of Companies. The formalities for creating the charge having duly followed, the Division Bench has referred to the Form No. 8 and 13 and also adverted to the power of Registrar to make entries of satisfaction and release, as provided under Sections 138 and 139 of the Act. It has also expressed the view that in the absence of any proceeding, the status of the company as a secured creditor continues. After registration of the deed of hypothecation, if a condition subsequent is not satisfied, that would be in a different realm altogether. In any case, the finding has been recorded that the respondent was not at fault and, in any case, that would not change the status of the appellant as a secured creditor. In view of the aforesaid analysis, we are of the considered opinion that the appellant cannot be treated as an unsecured creditor and it is not permissible for him to put forth a stand that it would not be bound by the Scheme that has been approved by the learned Company Judge. Decided against appellant.
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2015 (2) TMI 686
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002-The Constitutional validity of the amendment of the definition of the expression 'non-performing asset' under Section 2(1) (o)- under the amended definition, such a classification of the account of a borrower by the CREDITOR is required to be made in accordance with the directions or guidelines issued by an "authority or body either established or constituted or appointed by any law for the time being in force", in all those cases where the CREDITOR is either administered or regulated by such an authority (hereinafter referred to as the "REGULATOR"). If the CREDITOR is not administered or regulated by any such REGULATOR then the CREDITOR is required to classify the account of a borrower as NPA in accordance with the guidelines and directions issued by the Reserve Bank of India. Held that- We are of the firm opinion that it is not necessary that legislature should define every expression it employs in a statute. If such a process is insisted upon, legislative activity and consequentially governance comes to a standstill. It has been the practice of the legislative bodies following the British parliamentary practice to define certain words employed in any given statute for a proper appreciation of or the understanding of the scheme and purport of the Act. But if a statute does not contain the definition of a particular expression employed in it, it becomes the duty of the courts to expound the meaning of the undefined expressions in accordance with the well established rules of statutory interpretation. Therefore, in our opinion, the function of prescribing the norms for classifying a borrower's account as a NPA is not an essential legislative function. The laying down of such norms requires a constant and close monitoring of the financial system demanding considerable amount of expertise in the areas of public finance, banking etc., and the norms may require a periodic revision. All that activity involves too much of detail and promptitude of action. Therefore, the submission that the amendment of the definition of the expression 'non-performing asset' under Section 2(1) (o) is bad on account of excessive delegation of essential legislative function, in our view, is untenable and is required to be rejected. - Coming to the submission that by authorizing different REGULATORS to prescribe different norms for the identification of a NPA with reference to different CREDITORS amount to unreasonable classification is also required to be rejected for the reason that all the CREDITORS do not form a uniform/homogenous class. Appeal of the borrowers dismissed.
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Service Tax
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2015 (2) TMI 710
Service tax under GTA services - Notification No. 34/2004-S.T. dated 03.12.2004 - Goods sent by through Auto, Car, Taxi, etc. - Held that:- On going through the said orders of the authorities below, I find that the Assistant Commissioner has examined the entire facts and details and has also held that service tax demanded in the show-cause notice was deposited by the assessee, after availing the abatement of 75% in terms of Notification No. 34/2004-S.T dated 3.12.2004. As against the said order, the observations made by the appellate authority are cryptic and not arising out of the impugned order of the Assistant Commissioner. The Commissioner (Appeals) has not referred to any of the issues on merits and has simpliciter observed that the order of the Assistant Commissioner is not correct. As regards the penalty, I find merits in the findings of the original adjudicating authority that inasmuch as the most of the cases, the freight charges involved is less than ₹ 750/- (Rupees Seven hundred fifty only) and the goods were being transported through taxi, car, auto etc. and in most of the cases, transporters were themselves paying service tax, non-payment of service tax to a small amount cannot be held attributable to any malafide on the part of the appellant so as to invoke the penalty provisions.In view of above, I find no merits in the order of the Commissioner (Appeals). Decided in favour of appellant.
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2015 (2) TMI 709
Utilisation of Cenvat credit for payment under Sec.73A(2) - Amount collected in the name of service tax on non taxable activity - Sponsorship of sporting events - Held that:- It is in this factual and legal scenario, the question whether the appellant could have utilised cenvat credit for payment of the amount envisaged in Section 73A (2) has to be considered. The said section envisaged that “where any person who has collected any amount, which is not required to be collected from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government.” Further Rule 3 of the Cenvat Credit rules, 2004 did not provide for utilisation of cenvat credit for payment of the amount specified in section 73A (2) of the Finance Act, 1994 or section 11D of the Central Excise Act, 1944. Since in the present case, the appellant was not a provider of any output service, he could not have taken any cenvat credit on the input or input services. Further he could not have utilised the credit for payment of the amount envisaged under section 73A(2). Thus, the discharge of the liability under section 73A(2) utilising cenvat credit was improper and illegal. Consequently, the demand of the department for payment of the liability under section 73A(2) of the Finance Act, 1994, in cash, is correct in law and cannot be faulted. As a consequence, the appellant is also liable to pay interest for the default period during which the amount was not made good in cash. The last issue for consideration is whether the appellant is liable to any penalty. Since the issue related to interpretation of law and there was no intention to evade or avoid payment of tax, there is no warrant to impose any penalty and accordingly, we set aside the penalty imposed on the appellant.Since the appellant has subsequently paid the amount in cash, the appellant would be entitled to restoration of credit which was debited from the cenvat account subject to the condition that the appellant does not claim any refund of the amount paid in cash. Decided against the appellant.
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2015 (2) TMI 708
Waiver of pre-deposit - Works Contract Service - demand of service tax from principal contractor whereas work was executed by the sub-contractor under the 'back to back basis' agreements - Held that:- Reliance for this contention is placed on the decision of the Supreme Court in Larsen & Tourbo Ltd. & Ors [2008 (8) TMI 21 - SUPREME COURT]. The Supreme Court clarified that in a construction works contract, the property used in the construction of a building/project passes from the builder to the owner of the land on which the building is constructed when the goods or materials used are incorporated in the building and that is so, even if there is no privity of contract between the contractee and the sub-contractor, since the deemed transfer of property in goods is based on the principle of accretion of property in goods. On the basis of the law declared by Hon'ble Supreme Court supra, it prima facie appears that no 'works contract service' was provided by the appellant to the Government of Andhra Pradesh since it was the sub-contractors who transferred the property in goods to the State Government by the process accretion of such goods into the property of State Government, during execution of works contract by the sub-contractors. - stay granted.
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2015 (2) TMI 707
Delay in filing of appeal - Sufficient reason for causing the delay - Held that:- Considering the submissions made by both the sides, we find that the appeal has been filed within the condonable period of delay and the reasons causing the delay have also been explained to the satisfaction of this Bench. Decided in favour of appellant.
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2015 (2) TMI 706
Service tax on builders - Construction of residential complex services - Commercial and industrial construction services - setting aside assessment order - Held that:- Learned Advocate Shri Bhoot as also learned Advocate Shri Mirza have their respective contention on paragraph no. 3 of Circular No. 108/02/2009-ST dated 29/01/2009. However, impugned order does not consider the fact whether the petitioner had during relevant period executed any sale deed or not. If concept of 'self service' is attracted in case of petitioner, the petitioner may not be liable to pay any tax under the head service tax. Similarly other factors taken note of in paragraph 3 of circular need to be looked into by the assessing authority. Advocate Shri Mirza submitted that this circular issued in 2009 cannot be corelated with facts looked into the impugned order. We find that the circular only recognizes legal position and does not lay down any new law. It explains and interprets an existing provision. The contention that it cannot operate retrospectively is erroneous. It is interpretation of legal position and it can always be applied to the facts and events at hand. The impugned order does not show any consideration of any sale deed executed by petitioner in favour of its customers or clients. There is no application of mind as required in paragraph no. 3 of CBEC circular (supra). As such, it can be seen that said order of assessment is incomplete. Current demand and assessment order set aside. - Matter remanded back to deal with assessment proceedings before competent officer. - Writ petition is partly allowed in favour of assessee.
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Central Excise
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2015 (2) TMI 704
SSI exemption in case of use of brand name of others - Cross examination of the dealers - Held that:- The allegation of duty evasion against M/s Green Malleables and the linked question of imposition of penalty on M/s Green Marketers is based on the allegation that during period from 01/01/2000 to 23/05/2000 M/s Green Malleables were using the brand name NN belonging to M/s Green Engineering Corporation on pipe fittings manufactured and cleared by them. The main evidence in this regard is the statements of certain dealers. Beside this, the Department also relies upon the fact that during the period of dispute M/s Green Marketers has not purchased any pipe fittings from M/s Green Engineering Corporation and that in January 2000, M/s Green Engineering Corporation had shifted some of their operations casting and annealing to M/s Green Malleables and that the brand name NN is affixed at the casting stage only. In our view merely because during January 2000, the casting and annealing operations were shifted by M/s Green Engineering Corporation to M/s Green Malleables, it cannot be presumed that during that period M/s Green Malleables had also started using the brand name NN on the products manufactured in their factory. In our view the main evidence in support of the Department’s allegation is the statement of certain dealers that during the period of dispute they were purchasing the pipe fittings from M/s Green Malleables which were bearing the brand name NN. In our view, while relying upon the statements of these dealers in support of the allegation of duty evasion against M/s Green Malleables, in terms of the provisions of Section 9D (2) readwith Section 9D (1) the cross examination of those persons would be mandatory, for which, in this case, the request had also been made and which has not been allowed. In view of this, we hold that the impugned order is not sustainable. - matter remanded back - Decided in favour of appellant.
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2015 (2) TMI 703
Job work - Reversal of Cenvat credit related to inputs contained in waste and scraps - Not received from Job workers - Held that:- Waste and scrap are not manufactured goods whether they are generated at the premises of the principal manufacturer or at the premises of job-worker and accordingly, the legislature have consciously not made any provisions for reversal of any credit taken on duty paid inputs in case of clearance of waste and scrap and/or, there non-return from the job worker's premises under the Central Excise Rules, 2002 read with Cenvat Credit Rules, 2002/2004.Decided in favour of appellant.
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2015 (2) TMI 702
Area bases exemption - Compounded levy scheme for induction furnace units- Notification No. 50/03-CE- Held that- There is no dispute about the fact that the appellants unit was in existence much before the issue of exemption Notification No. 50/03-CE and was in existence when the compounded levy scheme for induction furnace units had been notified under Section 3A of the Central Excise Act, 1944. From the findings of the Commissioner in para 4.2 of the order dated 20th August 2008 it is clear that during 1997, the capacity of the crucible of the appellant unit had been determined as 3 M.T. vide order No. 53/IFU/ACP/2000 dated 31/7/2000 and on this basis the Commissioner has given a finding in absence of any evidence documentary or otherwise, regarding expansion of installed capacity before 07/1/03, it can be presumed that the production capacity was 3 M.T. before the specified date i.e. before 07/1/03. The only basis for denial of the exemption benefit is that this production capacity has not been achieved by some additional machinery and in this regard the Commissioner has rejected the appellant’s claim regarding purchase of some additional machinery and equipment on the ground that the claimed purchase of machinery/equipment by the appellant from outside the State of Uttaranchal is not recorded in the register maintained at the Commercial Tax Department check post. However, this finding of the Commissioner is contrary to the order dated 24/3/07 of the Deputy Commissioner, Uttaranchal Commercial Tax Department under Rule 41 (8)/Section 9 (2) of the Uttaranchal General Sales Tax Act. On going through this order, it is clear that the Commercial Tax Department has accepted the appellant’s claim regarding purchase of components of furnace from outside the state and has decided to impose penalty only on the ground that the procedure prescribed in this regard was not followed. In this order, the Deputy Commissioner has clearly mentioned that the purchases of the assessee have been found recorded in their books of accounts. In view of this, the ground on which the Commissioner has rejected the appellant’s claim regarding purchase of the induction furnace components is not correct. Moreover, it is also seen that the increase in the capacity had been achieved by increasing the height of the crucible and this fact has not been disputed. Once it is accepted that the increase in the capacity of crucible was achieved by increase in its height, in view of the judgment of Hon’ble Uttarakhand High Court in the case of Uttaranchal Iron & Ispat Ltd.[2008 (5) TMI 91 - CESTAT NEW DELHI], the benefit of exemption under Notification No. 50/03-CE cannot be denied. Decided in favour of appellant.
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2015 (2) TMI 701
Cenvat credit on inputs used in goods which lost in fire - Rule 57A of Central Excise Rules,1944 - Held that:- Mr. Motwani's reliance on Rule 57A is also well placed inasmuch as what the legislature at that time envisaged was that so long as the goods styled as inputs have been brought in for the purpose of usage in or in relation to the manufacture of the said final products, the credit can be claimed and in terms of the Central Excise Rules, 1944, as applicable. There was nothing in the Rules which would mandate that the credit of duty can be claimed and in relation to such inputs only if there is emergence of a final product or that the manufacture of the final product is complete. Had that been the intent, the words "goods used in or in relation of the manufacture of the said final products" would not have appeared in sub-rule (1) of Rule 57A . Their plain meaning enables us to agree with the Tribunal that the intent of the rule makers was not to disallow credit merely because a contingency over which the assessee had no control takes place. In the present case, none could have predicted a fire occurring in the manufacturing plant of the assessee. That the fire occurred and at the relevant time but the goods were already utilized in the process of manufacturing of the final product, then the credit paid on those goods was admissible. There is no dispute about these facts, including the fire. In the circumstances, the Tribunal took the view that the language of the Rule does not permit it to agree with the Revenue and deny the credit. The same view was take in the case of Indchem Electroncis [2002 (9) TMI 195 - CEGAT, CHENNAI] and which also upheld by supreme court by order no. [2003 (4) TMI 556 - Supreme Court of India]. Decided against revenue.
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2015 (2) TMI 700
Delay in presenting the appeal - Sufficient cause - Condonation of delay - Held that:- From a perusal of the documents available on record, it is clear that the delay of 29 days which has occurred is purely administrative in nature, as has been stated by the Department before the Tribunal. The finding of the Tribunal that the appellant has not shown sufficient cause, which prevented them in filing the appeal, does not merit acceptance in view of the decision of the Supreme Court in Mst. Katiji & Ors.[1987 (2) TMI 61 - SUPREME Court], wherein the Supreme Court has held that the expression sufficient cause employed by the Legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends of justice. Further, the Supreme Court also held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. Guidelines to be provided while deciding matters relating to condonation of delay in judgment of supreme court in Esha Bhattacharjee [2015 (1) TMI 1053 - SUPREME COURT] can be invoked for deciding the present appeal. Delay condoned. Decided in favour of revenue.
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2015 (2) TMI 699
Adjustment of duty deposited before adjudication with the demand confirmed in the order in original - Commissioner (Appeals) denied such adjustment / appropriation - Held that:- If an assessee has admitted his duty liability and has deposited the amount after issuance of show cause notice, the same has to be treated as deposit towards confirmed demand of duty. We really fail to understand and appreciate the observation made by the Commissioner (Appeals) that there is no provision under Central Excise law to make payment of duty by way of adjustment. If the duty has been deposited by an assessee even before adjudication, such deposits have to be held as deposit of the demands confirmed in the adjudication order. Accordingly, we direct the lower authority to verify the fact of duty deposits made by the appellant and treat the same towards confirmed duty in the present impugned order - Matter remanded back - Decided in favour of assessee.
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2015 (2) TMI 698
Denial of cenvat credit - During the course of adjudication, the appellant took a categorical stand that most of the iron and steel items were used in fabrication of capital goods or for repair and maintenance, in which case, they would be entitled to the benefit of cenvat credit.- Held that:- Dy. Commissioner having jurisdiction over the appellant’s factory submitted a report under the cover of his letter dated 29.01.2014. The said report is a detailed report, taking into consideration the various items in question and reporting that most of the items have either been used in fabrication of capital goods or for repair and maintenance , whereas it is not possible to find out in respect of the certain items. The report also concluded that the assessee had not availed the credit on a large quantity of iron and steel items and as such, it can be safely concluded that quantity which have been used for civil and structural purposes. - Surprisingly the said report of the Dy. Commissioner, which was sought by the Commissioner himself, stands fully ignored by him while passing the present impugned order. For the reasons best known to him, the adjudicating authority has completely shut his eyes towards the said report. If the said report of the Dy. Commissioner was not to be taken into consideration by the adjudicating authority, we really fail to understand and appreciate as to why the report was called for. Probably the said report has not been referred to by him as the same is in favour of the assessee, to the major extent. Such an action, on the part of the adjudicating authority, cannot be appreciated inasmuch as the same reflects upon the biased & premature determination of their adjudication. Having said so, we deem it fit to set aside the impugned order and remand the matter to the Commissioner for fresh decision in the light of the report dated 29.01.2014 of the Dy. Commissioner - Decided in favour of assessee.
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2015 (2) TMI 697
Benefit of Notification No. 6/06-CE dated 01/03/06 - Classification of packing machines used for packing of various dairy products - Change in classification after introduction of Notification - Held that:- Appellant have given half description in the said returns, it is also a fact that the Revenue has never questioned the said assessee as regards the full description of their product. We also note that the appellants prior to introduction of the notification were classifying the goods under heading 84.22 and it is only on the introduction of the notification, they switch the classification to 84.34, in respect of goods supplied to dairy owners. Thereafter they continued to adopt two different classifications for the same very product, dependent upon the purchaser of the said goods. An assessee who is working under the Central Excise, is expected to be knowledge of the basic fact that one product cannot be held to be falling under two different headings and cannot be allowed to adopt two different classifications in respect of the same product. This, read with the insufficient description of the goods in the monthly/quarterly returns, read with the fact of shifting of classification, with the introduction of the notification, leads us to believe, at this prima facie stage that this was done with an intention to claim the non-available benefit of Notification No. 6/06 and as a modus operandi. - Partial stay granted.
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2015 (2) TMI 696
Waiver of pre deposit - Excise duty liability on Fabrication of pipes - Held that:- Appellants have admittedly fabricated the pipes in question. This fact is not being denied by them and it also stands admitted that after the decision of Larger Bench in the case of Mahindra & Mahindra Ltd [2005 (11) TMI 103 - CESTAT, NEW DELHI] the fabrication of iron and steel structural has been held to be a manufacturing activity. However, they have submitted that such manufacturing was taking place out of the material supplied by M/s Simplex Infrastructure and as such appellants cannot be held to be manufacturer. We do not find any prima facie merits in the above contention of the appellant. It is well settled law that the one who manufactures is the manufacturer. Such manufacture may be out of the raw materials supplied by others and by using the machines and capital goods given by the principal manufacturers. As such, at this prima facie stage, we are of the view that the appellant have manufactured the pipes in question. Entire demand is not barred by limitation and the said question, being a mixed question of fact, can only be entertained at the disposal of the final appeal. Inasmuch as In the present case, by taking note of the contentions of both the sides including the fact of payment of duty by the appellant's sister concern at Vishakhapatnam we are of the view that a prima facie it may not be a case of demand being barred by limitations. - in case the demand is confirmed against them, they would be entitled to the benefit of the Cenvat Credit of duty paid on the steels. Though, such cenvat credit would be available only after verification of the invoices etc. but at this interim stage, we accept the appellant's statement that such credit would be to the tune of around 1.37 crores. We agree that the issue in the present appeal is determination of the appellants central excise duty Liability and not going into the fact of excess or less payment of Service Tax. After taking into account the prima facie merits, limitation and the availability of Cenvat Credit as also the fact that the appellant has not pleaded any financial hardship duly supported by the documentary evidences, we deem it fit to direct the M/s Kaakteeya Fabs Private Ltd. to deposit an amount of ₹ 50 lakhs within as period of 12 weeks from today. Partial stay granted.
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2015 (2) TMI 695
Valuation of goods - refund under area based exemption - inclusion of transport charges - Benefit of Notification No.56/2002-CE dated 4.11.2002 - Held that:- Sale is on FOR destination basis and the destination is the buyer s premises. The cost of transportation is included in the assessable value and the transit insurance has also been taken by the appellants in their name for safe transport of the goods. Thus, it is evident that the ownership of the goods remained with the appellants upto the place of delivery at the buyers premises. In other words, the point of sale is the buyers premises. In these circumstances the place of removal, as per definition in section 4 of the Central Excise Act, 1944 becomes the buyers premises, as that is the place or premises from where the excisable goods were sold after the clearance from the factory from where such goods were removed. That being the case, the freight charges are clearly includible in the assessable value. Therefore, duty paid by them on the impugned goods on value inclusive of the freight charges has been correctly paid and consequently the impugned refund (self-credit) thereof under notification No. 56/2002-CE has also been correctly taken. The decision of the Chattisgarh High Court in the case of Ultratech Cement Ltd. Vs. CCE Raipur : [2014 (8) TMI 788 - CHHATTISGARH HIGH COURT] is also in harmony with the view taken by Punjab & Haryana High Court (2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT) in this regard. In the wake of the foregoing analysis and judicial precedents, the judgement of CESTAT in case of Aditya Birla Insulators Ltd. Vs. Commissioner, Central Excise, Kolkata-IV:[2008 (4) TMI 48 - CESTAT, KOLKATA] holding a contrary view clearly stands over-ruled. Thus, the appellants rightly included the cost of transportation in the assessable value. This issue having thus been settled in the appellants favour, the duty was correctly paid and hence the impugned refund correctly taken. Extended period has also been invoked in respect of the Order-in-Original dated 31.12.2012. In this regard, we find that it has not been brought out as to what which was required to be brought to the notice of the Department as per any provision law was not brought to the department’s notice. The appellants had been filing their ER-1 returns showing all the details required to be shown therein. It has been held by Supreme Court in the case of Commr. Vs. Champhar Drugs Liniments: [1989 (2) TMI 116 - SUPREME COURT OF INDIA] that something positive other than mere inaction or failure on the assessee s part or conscious withholding of information when assessee knew otherwise is required for invoking extended period. In case of Gopal Zarda Udyog vs. CCE, Delhi, Supreme Court observed that mere failure or negligence on the part of the manufacturer does not attract the extended period. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (2) TMI 705
Levy of VAT on rent as right to use - leasing of machinery and vehicles - Levy and point of tax - Whether in view of Sections 105 and 106 read with Section 3 of the Delhi Value Added Tax Act, 2004, lease rentals paid on or after 1st April, 2005 can be taxed under the aforesaid Act even when the lease agreement was executed between the parties on or before 31st March, 2005? - Held that:- Principle of ultra vires would not be applicable when challenge made is that one provision of the Act is ultra vires of another. Thus, constitutional validity of Section 3, or for that matter Section 2(n) of Act, 2002, was not challenged and even the doctrine of reading down was not relied. The High Court observed that in terms of the two provisions, lease instalments paid after 15th September, 2004 would be subject to tax even when the agreements were prior in point of time. The term 'sale' as defined in Section 2(n) of Act 2000, it was distinguished, would include deferred payment, i.e. when payment is staggered and not at one time. In such cases, right to use accrues in favour of the lessee when he pays rental regularly and in terms of the agreement. In this context, reference was also made to clause 29A inserted to Article 366 which treats certain transactions as sale by deeming effect. Thus, the said decisions support and affirm our reasoning. The term 'sale' as defined in Section 2(1)(zc) clause (vi) would include transfer of right to use goods. Section 2(1)(zm) defines 'turnover' to be aggregate of the 'sale price' which as per clause (zd)(iii) to Section 2(1) means valuable consideration or hire purchase amount received or receivable for such transfer irrespective of whether or not the rights to use goods is for specified period. Rule 4 of the DVAT Rules, 2004, in clause (b) stipulates that in case of transfer of right to use goods, not being hire purchase agreement or instalment sale agreement, is the proportion or sale price, i.e. lease rental due and payable during the relevant tax period. - Decided against the assessee. The date or time of payment may be different and subsequent to the taxable event, i.e., the date on which transfer of right to use goods is made. In Bombay Tyre International Limited (1983 (10) TMI 51 - SUPREME COURT OF INDIA), the Supreme Court held that levy of tax in our country has a status of constitutional concept, but the point of collection, i.e., time of collection would depend upon the statute. The statute could, therefore, declare the point at which the tax is to be collected, which need not synchronise with the taxable event and can be different in point of time. They do not relate to power and authority of taxation under the Act. They relate to the right of a State to tax, without violating and breaching the limitation and restriction not to tax the inter-State sales. It is in this context it has been held that the levy of tax is not on use of goods, but on transfer of right to use goods. Right to use goods is the resultant effect of transfer of right to use goods and in the context of sub-clause (d) to clause 29A of Article 366 for the purpose of deciding which State and whether a particular State has the right to tax the said transfer, observations have been made. The aforesaid legal position becomes clear from the decision of the Supreme Court in the case of Bharat Sanchar Nigam Limited and Another versus Union of India and Others, [2006 (3) TMI 1 - Supreme court]. Levy of penalty - Held that:- there is merit in the contention of the appellant that there is inherent contradiction in the order passed by the Tribunal. - enalty can only be imposed under the said provision when it is established that the return filed by the assessee is false, misleading or deceptive in material particulars or the assessee omits from a return any matter or thing without which return is false, misleading or deceptive in a material particular. - Tribunal was not right in directing levy of penalty @ 20% under Section 86(10) of the Act, after recording the finding that the appellant assessee had a reasonable cause - levy of penalty waived.
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Indian Laws
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2015 (2) TMI 688
Section 11(6) of the Arbitration and Conciliation Act, 1996- Appointment of sole arbitrator- Compensation for extended stay & additional works- A reading of the affidavits filed by the respondent indicate that insofar as the claim for extended stay compensation is concerned, the respondent contend that the said claim does not give rise to any arbitrable issue inasmuch as under clause 42.1.1 the bidder is required to mention the rate for extended stay compensation per month in the “Priced Part”. Under Clause 42.1.2 in case the bidder did not indicate such rate it is to be presumed that no extended stay compensation is required to be paid. Under clause 42.1.4 it was expressly mentioned that “Bidder to note that in case they don't indicate the rate for extended stay compensation as per proforma, provisions of clause No.42.0 will not be applicable to them”. According to the respondent in the relevant proforma relating to “Compensation for Extended Stay”, the petitioner had mentioned/quoted “NIL”. Insofar as the claim of payments for additional works is concerned, according to the respondent, clause 91.0 of the GCC deals with such claims. Clauses 91.1 and 91.2 contemplate that such claims will be verified by the Engineer-in-charge whose decision will be final. The respondent further states that the claims made by the petitioner for additional costs had been rejected by the Engineer-in-charge and in terms of clause 91.2 of the GCC such a decision(s) must be construed to be final and binding between the parties and therefore would stand excluded from arbitration. In the present case, admittedly, the petitioner had quoted “NIL” against compensation for extended stay in its bid. If that is so, it must be understood that the petitioner had agreed to forego its claim to extended stay compensation in the event the period of performance of the contract is to be extended as had happened in the present case. This position was conveyed to the petitioner by the letter of acceptance dated 13th December, 2010. The petitioner did not raise any objection on the aforesaid score. If the petitioner had voluntarily and consciously agreed to the above situation, it will be difficult to accept the contrary position that has sought to be now adopted by seeking to claim extended stay compensation which was earlier agreed to be foregone. - The second issue i.e. claim for payment of additional works however would stand on a different footing. Clause 91.1 and 91.2 contemplate the making/raising of claims by the contractor for additional works and consideration thereof by the Engineer-in-chief. The decision of the Engineer-in-chief is final and binding. The finality attached to such a decision cannot be an unilateral act beyond the pale of further scrutiny. Such a view would negate the arbitration clause in the agreement. Justifiability of such a decision though stated to be final, must, be subject to a process of enquiry/adjudication which the parties in the present case have agreed would be by way of arbitration. Accordingly, the claims made by the petitioner for payment of additional works under both the contracts are referred to arbitration by Shri Justice M.M. Kumar, Chief Justice (Retd.), Jammu & Kashmir High Court, who is hereby appointed as the sole arbitrator. Arbitration petition partly allowed.
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2015 (2) TMI 687
Delay in providing information sought under RTI Act - Reference to third party - Held that:- in view of the above orders of the Commission, Shri K.L. Das should not have treated the same as third party information and should not have proceeded further to obtain consent of Shri Karira under Section 11. - The Nodal CPIO was directed to circulate the position to all the CPIOs in the Commission for their guidance. - The appellant was also aggrieved that the information sought in respect of the appeals and complaints mentioned at (A)(iii) and (A)(iv) of the RTI application was not provided by Shri Mohapatra, CPIO as he has not allowed the inspection of the concerned files. Shri Mohapatra, CPIO has already replied that both the files are available in the erstwhile Registry of IC(AD) now transferred to Registry of IC(YA). Inspection can be done by the RTI applicant with prior appointment. The CPIO, who is looking after the Registry of IC(YA) is directed to provide inspection of the files to the appellant within 15 working days from date of receipt of this order. - Appeal disposed of.
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