Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 27, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Revenue authorities cannot change the character of receipt from General Reserve to share premium Reserve and tax the same u/s 56(1) - AT
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Penalty 271(1)(c) - Whether or not a person has acted bona fide reflects the state of his mind in respect of his conduct, and, therefore, the assessee has his inherent limitations in establishing this aspect of the manner. - AT
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Deduction u/s. 80IB(10) - AO has proceeded on surmises that assessee was increasing the profits of 80IB(10) units and decreasing the profits of non-80IB units to gain tax advantage. There is no basis whatsoever for this assumption of the AO. - AT
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The residential and commercial plots allotted to the appellant in lieu of in lieu of the acquisition - assessee has sold converted plots in the same financial year - AO concluded short term capital gain on the basis of reserve rate is justified - AT
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Discounting the maturity value of loan portfolio on assignment to commercial banks - amount of discounted future interest received by assessee during the year is taxable in the year - AT
Customs
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Classification - import of Inca Inchi Oil in soft vegetarian Gel Capsules - merely because a product possess certain natural properties, it cannot be said to fall under the classification of medicaments - AT
Service Tax
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Classification of services - supply of tangible goods for use of service or transport of passengers by air service - charter hiring of helicopters - demand of service tax confirmed but the benefit of period of limitation extended - AT
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Classification of service - providing audio-conferencing services and web-conferencing services - argument that the service is classifiable under Business Support Service is not acceptable - prima facie covered as Telecommunication services - stay granted - AT
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Denial of exemption from service tax - even subcontractor cannot be directed to pay service tax when the taxability of the construction is non commercial in nature being not taxable - AT
Central Excise
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Recall of final order - Ex-parte order passed - Wrong Date of hearing noted down mistakenly - assessee should not be made to suffer for any failure on the part of the Advocate - AT
VAT
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Classification of Pressure cooker under Assam Value Added Tax Act, 2003 - it does not come within the ambit of Entry No.6 of Part-A General of the Second Schedule - taxable as 12.5% as residual entry - HC
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Deferment & Exemption from sales tax - Mode of computation of notional sale tax liability - The proviso cannot whether by interpretation or by reference to the presumption be assigned the status of a taxing provision rendering an assessee liable for a taxing event which is exempted - HC
Case Laws:
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Income Tax
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2015 (2) TMI 975
Disallowance of interest paid - CIT(A) deleting the addition - Held that:- As found from record that interest was paid by assessee in respect of term loan taken for purchase of immovable properties, which was utilized for the purpose of business. We found that the property was used for running of pre-schooling business by the assessee. As per the finding recorded by the CIT(A), the term loan was taken against mortgage of immovable properties which are used by assessee for the purpose of pre-schooling business, assessee was eligible for deduction of interest u/s.36(1)(iii). The findings recorded by CIT(A) have not been controverted. - Decided against revenue. Disallowance of foreign traveling expenses - CIT(A) deleting the addition - Held that:- Foreign travelling undertaken by assessee to various schools was in connection with pre-schooling business, significant expansion of the assessee’s pre-schooling business, introduction of private equity therein. A categorical finding recorded by CIT(A) to the effect that foreign travelling expenses were incurred wholly and exclusively for the purpose of assessee’s business which has not been controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the disallowance of travelling expenses. - Decided against revenue. Share transactions - Capital gain or business transaction - CIT(A) in respect of delivery based transactions of shares which were held as investment held that the gains so arose on sale of shares was liable to be taxed as capital gain tax - CIT(A) has also confirmed AO’s action with regard to loss of ₹ 59,64,109/- and treated the same as business loss instead of capital loss - Held that:- After analyzing the entire set of transactions the CIT(A) recorded detailed finding and reached to the conclusion that out of ₹ 1,01,89,029/- the assessee’s profit of ₹ 80,51,168/- was liable to be taxed as capital gain and balance as business income. The short term capital loss of ₹ 1,22,76,554/- was not accepted by the CIT(A) and he confirmed the action of the AO for treating the same as business loss. The CIT(A) has also directed the proportionate effect of interest pertaining to earning of short term capital gain as claimed in the profit and loss account is to be disallowed while working out the business income. After analyzing the series of transaction, the CIT(A) held that business income of ₹ 1,12,79,891/- from derivative transactions and ₹ 80,10,911/- shall be separately assessed in addition to the business income from delivery based share transaction. Thus, the CIT(A) has directed the AO to rework sale of shares held as investment by the assessee under the head short term capital gain and balance was directed to be assessed as business income. The detailed findings recorded by the CIT(A) are as per materials on record, has not been controverted by department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the order of CIT(A). - Decided against revenue.
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2015 (2) TMI 952
Unaccounted cash credit - addition u/s 68 - CIT (A) deleted the additions - Held that:- The initial onus to show the genuineness and identity of transaction and the credit worthiness of the party is no doubt upon the assessee. Once that is done in the form of prima facie credible material, the AO has to then exert himself/herself to quote relevant material to disprove that onus and discharge the burden placed upon the Revenue. In this case, this procedure was clearly not adopted in respect of the sum of ₹ 20,37,05,000/-. As far as the amount of ₹ 4,32,07,394/- is concerned, it reflected a solitary transaction which too was done in the course of the banking channels. The ITR and the concerned balance sheets etc. of the said company were placed on record and considered by the CIT (A) - though not by the AO. The amounts were reflected in the balance sheets. In these circumstances, the finding of fact arrived at by the CIT (A) and the ITAT cannot be considered unreasonable. - Decided in favour of assessee.
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2015 (2) TMI 951
Non deduction of TDS - assesse in default - initiation of proceedings against the assessee in default who does not deduct tax as held by revenue - whether proceeding under Section 201 is barred by time? - Held that:- Ruling of this Court as to the period of limitation, i.e., Commissioner of Income Tax v. NHK Japan Broadcasting Corporation, (2008 (4) TMI 182 - DELHI HIGH COURT) and CIT Vs. Hutchison Essar Telecome Ltd. (2010 (4) TMI 45 - DELHI HIGH COURT) concludes the issue wherein ruled that the foundational requisite for initiation of proceedings under Section 201 is a period of four years if no limitation is prescribed. An added reason why the submission of the Revenue is unacceptable is that had the Parliament indeed intended to overrule or set aside the reasoning in NHK Japan (supra), it would have, like other instances and more specifically in the case of Section 201 (1A), brought in a retrospective amendment, nullifying the precedent itself. That it chose to bring Section 201 (3) in the first instance in 2010 and later in 2014 fortifies the reasoning of the Court. - Decided against the Revenue. Deemed dividend - Merits the applicability of Section 2 (22) (e) - Held that:- If a person is a registered shareholder but not the beneficial shareholder then the provision of section 2 (22) (e) will not apply. Similarly, if a person is a beneficial shareholder but not a registered shareholder then also the first limb of the provisions of section 2 (22) (e) will not apply. Concededly in the present case the individual Harjit Kaur was not a shareholder of the present assessee but rather the shareholder of another concern which held shares in assessee company. is, therefore, clear that in the absence of any finding that Harjit Kaur owned the shares in terms of Section 201A or was beneficial owner in terms of such provision - on both counts - the findings being adverse to the Revenue - Decided against the Revenue.
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2015 (2) TMI 950
Deduction u/s. 36(1)(viii) - revision u/s 263 - ITAT allowing deduction following the decision in the case of Union Bank of India v/s. ACIT [2012 (6) TMI 500 - ITAT MUMBAI] - whether financial corporation are separate and distinct entities different from scheduled banks which are covered by the provisions of Banking Regulation Act as held by revenue? - Held that:- When Revenue challenges the order of the Tribunal which in turn relies upon another decision rendered by it on the same issue, then in cases where the Revenue has accepted the order by not preferring any Appeal against the earlier order, the Revenue should not challenge the subsequent order on the same issue. In case an appeal is preferred from the subsequent order, then the Memo of appeal must indicate the reasons as to why an appeal is being preferred in later case when no appeal was preferred from the earlier order of the Tribunal which has merely been followed in the later case. In any case, the Officer concerned must atleast file an Affidavit before the matter comes up for admission, pointing out distinguishing features in the present case from the earlier case, warranting a different view in case the appeal is being pressed. The absence of this being indicative of nonapplication of mind, does undoubtedly give an opportunity to the Revenue to arbitrarily pick and chose the orders of the Tribunal which they would challenge in the Appeal before the this Court. Uniformity in treatment at the hands of law is a basic premise of Rule of Law. In the facts of the present case, there is no occasion for the CIT to exercise his powers under Section 263 of the Act as the view taken by the Assessing Officer granting deduction under Section 36(1)(viii) to the Respondent Assesseee was a possible view. This possible view is further fortified by the decision of the Tribunal in Union Bank of India (supra) which has also been accepted by the Revenue. Even Explanation to Section 36(1)(viii) of the Act as existing at the relevant time, a Financial Corporation has been defined to include a Public Company and the Government Company.- Decided in favour of assessee.
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2015 (2) TMI 949
Gain arising out of share transaction - short term and long term capital gains or business income - Held that:- The issue of taxability of gain arising out of share transaction as short term and long term capital gains and not as business income, is covered in favour of the assessee as relying on assessee's own case for AY 2005-2006 [2015 (2) TMI 934 - ITAT AHMEDABAD] wherein held that the profits on share transaction were assessable as long term and short term capital gain and not as business income. - Decided against revenue.
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2015 (2) TMI 948
Non deduction of TDS - assesse in default - ITAT affirmed an order of the CIT (Appeals) as proceeding under Section 201 is barred by time - Held that:- Ruling of this Court as to the period of limitation, i.e., Commissioner of Income Tax v. NHK Japan Broadcasting Corporation, (2008 (4) TMI 182 - DELHI HIGH COURT) and CIT Vs. Hutchison Essar Telecome Ltd. (2010 (4) TMI 45 - DELHI HIGH COURT) concludes the issue wherein ruled that the foundational requisite for initiation of proceedings under Section 201 is a period of four years if no limitation is prescribed. An added reason why the submission of the Revenue is unacceptable is that had the Parliament indeed intended to overrule or set aside the reasoning in NHK Japan (supra), it would have, like other instances and more specifically in the case of Section 201 (1A), brought in a retrospective amendment, nullifying the precedent itself. That it chose to bring Section 201 (3) in the first instance in 2010 and later in 2014 fortifies the reasoning of the Court. - Decided against the Revenue.
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2015 (2) TMI 947
Disallowance of employees' contributions to ESI and PF - whether amounts of ₹ 1,14,309 and ₹ 17,137 towards Provident fund and ESI respectively to the account of the employees before the due date for filing of return of income and the same should be allowed under section 43B - Held that:- There is no dispute with regard to the delay in the remittance of the above amounts to the concerned authorities by the assessee, but it is the contention of the assessee that since such remittances have been made before the filing of the return of income, it is an allowable expenditure and no addition is called for. See CIT V/s. Sabari Enterprises [2007 (7) TMI 169 - KARNATAKA HIGH COURT] & CIT V/s. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] - Decided in favour of assessee. Disallowance u/s. 40(a)(ia) - Non deduction of TDS on payments to contractors - CIT(A) deleted the disallowance - Held that:- As decided in DCIT vs. M/s. Liquidz India Pvt. Ltd [2015 (2) TMI 890 - ITAT HYDERABAD] the impugned amendment to section 40(a)(ia) permits remittance of TDS to the Central Government account on or before the due date of filing return of income u/s. 139(1) of the Act is retrospective in nature. Thus as the assessee having deposited TDS amount before the due date of filing the return u/s. 139(1) no disallowance can be made by invoking the provisions contained u/s. 40(a)(ia) of the Act - Decided in favour of assessee. Estimated profit on cancelled sales and sales returns - Held that:- The internal control system in the bills do not permit any corrections and the only way is to cancel and enter again. The bills have to be cancelled in case the bills which are entered in one firm's name are going to another concern's name due to technical snag. Sometimes, the quantities were entered wrongly and the invoices have to be prepared again reflecting the correct quantities. Name of the dealer/customer if entered wrongly is to be rectified for preparing the invoice in the correct name. in the absence of any evidence to prove that the assessee had tampered the bills to suppress gross sales the contentions of Revenue cannot be accepted. Further, the assessee has prepared the reconciliation and table the CIT(A) has stated as follows: "Further, the appellant had also produced before the AO, copies-of individual cancelled bills along with copies of sales bills in support of the reconciliation statement. The very same reconciliation statement along with party-wise break up for cancelled bills which are filed before me are verified. The AO's rejection of appellant's explanation in this regard is not based on sound footing. - Decided in favour of assessee.
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2015 (2) TMI 946
Unexplained investment - block assessment - addition of ₹ 11 lacs on unexplained investment in Himmatpur land u/s 69 - assessee relying on the ancestral “Bahi” for explaining the cash payment of ₹ 11 lakhs to Kulanand Bhartiyaya on different dates paying from money accumulated out of agricultural income of assessee’s father HUF named and styled of Durga Singh and Sons HUF - Held that:- The assessee has placed on record to show that there was a HUF and such HUF had agricultural income as is evidenced by certificates issued by Patwari. Such income according to the Officer has been utilized for expenses of the family members though there is no evidence to that effect despite fresh innings having been granted to the Assessing Officer, yet it would be reasonable to appropriate percentage of such income towards the expenditure. We therefore find force in the contention of the appellant that monies was available for investment by the appellant out of the funds available with the HUF after appropriating 15% of the said receipt towards expenditure. We find from the details on record that agricultural income as per the certificates of Patwari for financial year 1986-87 upto financial year 1994-95 aggregates to ₹ 8,41,600/- and thus, out of the said sum an amount of ₹ 7,15,360/- can reasonably be assumed to be available with the appellant for investment for purchase of land from one Shri Kulanand Bhartiya. Accordingly, addition made of ₹ 7,15,360/- is deleted and balance sum of ₹ 3,84,640/- is upheld. - Decided partly in favour of assessee. Unaccounted cash - addition of ₹ 32,69,744/- out of the cash found as a result of search of ₹ 39,00,000/- - Held that:- Assessee had placed on record evidence in the shape of statement of Shri Mohan Singh Rawat, affidavit of Shri Govind Sharma to establish that there was refund by Shri Kulanand Bharatiya to the appellant of ₹ 11 lacs. The statement being relied upon by the revenue of Shri Kulanand Bharatiya was not confronted to the assessee despite his repeated request and accordingly, we hold that such a statement has to be excluded as such. In view of the above, we hold that sum of ₹ 11 lacs is also available as evidence with the appellant to explain the source of availability of cash on the date of search with the appellant. Accordingly, the appellant is entitled to the benefit of ₹ 11 lacs and ₹ 1,23,250/- (85% of ₹ 1,45,000/-) being the agricultural income for the financial year 1995-96. Thus, the assessee is entitled to total benefit of ₹ 12,23,250/-. Accordingly, assessee is entitled to a relief of ₹ 31,73,250/-. The Assessing Officer has made addition of ₹ 32,69,744/- and if the amounts as stated above of ₹ 31,73,250/- is excluded, the balance sum of ₹ 96,494 /- is sustained and assessee is entitled to a relief of ₹ 31,73,250 /-. - Decided partly in favour of assessee.
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2015 (2) TMI 945
Reopening of assessment - Under assessment of income under section 143(3) with reference to the intimation under section 143(1) - Treating business income as short-term capital gains - Held that:- Merely because material lies embedded in the material or evidence produced by the assessee, which the Assessing Officer could have uncovered but did not uncover that is not a good ground to cancel the reassessment proceedings. The Assessing Officer could have found the truth, but he did not, does not preclude the Assessing Officer from exercising the power of re-assessment to bring to tax the escaped income. In the present case, as seen from the reasons recorded, there is a prima facie escapement of income. Hence, the Assessing Officer after recording the reasons, issued notice to the assessee under section 148 of the Act. We do not find any infirmity in the order of the lower authorities to reopen the assessment. - Decided in favour of revenue Source of income - Sale of shares - business income or capital gains - Held that:- In the light of the various parameters and the decision of the Andhra Pradesh High Court in the case of P. V. S. Raju v. Addl. CIT [2011 (7) TMI 818 - Andhra Pradesh High Court ] and on perusal of the statements incorporated by the Assessing Officer in the assessment order, we find that the assessees have made several transactions of purchase of shares during the relevant year under consideration, and if there high volume, frequency and regularity of the activity carried on by the assessees in a systematic manner, it would partake of the character of business activities carried on by the assessee in shares, and it cannot be said that the assessees have merely made investments in shares. - Decided in favour of assessee Diminution in the value of shares - assessee made an alternative claim that in the event of the Tribunal confirming the action of the Assessing Officer, reduction in market value of shares has to be allowed as deduction - Held that:- Claim of the assessee is appropriate. However, we make it clear that the shares are to be valued at market price or cost, whichever is less. Accordingly, while passing a consequential order, the Assessing Officer shall consider the same and decide the issue accordingly. - Decided partly in favour of assessee for statistical purposes. Expenses to be allowed under business - Held that:- AO is required to consider what are the expenses relating to the sale transactions to be allowed while computing the income of the assessee, if it is not allowed already. - Decided in favour of assessee for statistical purposes. Disallowance under section 40(a)(ia) - Held that:- This ssue is squarely covered by the order of the Special Bench of the Tribunal, Mumbai in the case of Bharati Shipyard Ltd. v. Deputy CIT [2011 (9) TMI 258 - ITAT MUMBAI] wherein held that the disallowance under section 40(a)(ia) of the Act cannot be made invoking retrospective amendment. - Decided in favour of assessee
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2015 (2) TMI 944
Transfer Pricing Adjustment - selection of comparable - Held that:- For exclusion of Kals Information System Ltd. the said concern is engaged in development and sale of software product, etc., which is distinct from the software development services rendered by the assessee to its associated enterprise. Thus, we are inclined to uphold the plea of the assessee that the M/s Kals Information System Ltd. (applications software segment) is functionally incomparable to the assessee. - Decided in favour of assessee. For exclusion of M/s. FCS Software Solutions Limited the application support services and infrastructure management services, which constitute 11% and 15% respectively of the total income, are IT enabled services and not linked to the software development services. Once the segment of application support and infrastructure management services are removed along with the exclusion of E-learning and Digital consulting segment, then the income of the said concern from software development services falls below 75% of its total income and therefore, it deserves to be excluded even on the basis of the filter applied by the TPO. - Decided in favour of assessee. For inclusion of CG-VAK Software Systems Limited (Software Services Segment) the said concern cannot be excluded merely because of incurrence of loss in this year, especially when the said loss has not been established to be an abnormal business condition and more so in the context that the said concern is not denied to be functionally comparable to the assessee. Therefore, on this aspect, we uphold the plea of the assessee for including the said concern in the final set of comparables in order to determine the arm's length price of the international transaction. - Decided in favour of assessee. For inclusion of M/s. Thinksoft Global Services Limited The argument being set up by the lower authorities that the ‘Verification’ and ‘Validation’ are steps to test the efficiency of the software, but not a part of software development, in our view is a hairsplitting argument, which is not justified in the context of the present comparability analysis. Ostensibly, ‘Verification’ and ‘Validation’ are broadly speaking, a part and parcel of the process of software development. Therefore, on this aspect, we are unable to uphold the action of lower authorities in excluding the said concern from the final set of comparables. - Decided in favour of assessee. For exclusion of M/s. Maars Software International Limited TPO justifiably excluded the said concern because it is only the information available in public domain, which can be the basis to effectuate comparable analysis. The assertions in the Directors report, which do not find any contradiction in the other financial statements accompanying such Directors report, have to be relied upon. Thus, on this point itself, we find no merit in the plea of the assessee for including the said concern in the final set of comparables. - Decided in favour of revenue. For exclusion of Akshy Software Technologies Limited TPO was justified in excluding Akshy Software Technologies Limited from the final set of comparables as the business model of the assessee i.e. provision of off-shore services to its associated enterprise stands on a different footing than the on-site services being rendered by Akshy Software Technologies Limited. The assertions of the assessee that its arrangement with associated enterprise does not rule out provision of on-site services does not distract from the fact that the tested transactions undertaken by the assessee involve off-shore rendering of services, which is incomparable to the on-site services being rendered by Akshy Software Technologies Limited to its clients abroad. - Decided in favour of revenue. For exclusion of M/s. R.S. Software (India) Limited the said concern was predominantly an on-site service provider and therefore, it was excludible. Secondly, the TPO also correctly observed that the said concern was engaged in research and development work as mentioned in its Annual accounts. We hereby affirm the stand of the TPO in rejecting M/s. R.S. Software (India) Limited from the final set of comparables.- Decided in favour of revenue. Exclusion of comparable applying a Turnover filter - while in the show-cause notice the TPO had proposed to consider Persistent Systems Ltd., Mindtree Ltd. (IT Services), Larsen & Turbo Infotech Ltd. and Sasken Communication Technologies Ltd. (Telecom Services Segment) as comparables whereas in the subsequent order passed u/s 92CA(3) the TPO has excluded the same by applying a Turnover filter, whereby the concerns with sales/turnover in excess of ₹ 200 crores have been excluded - Held that:- In the present case it is axiomatic that so far as the issue of the adoption of Turnover filter of ₹ 200 crores to exclude the aforesaid four concerns in concerned, the same has been adopted by the TPO without giving the assessee any opportunity of being heard and therefore in our view the matter ought to be remanded back to the AO/TPO for consideration afresh. - Decided in favour of assessee for statical purposes.
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2015 (2) TMI 943
Unexplained money - sale of plots - Held that:- From the record we found that during the course of survey, the assessee was found to be in receipt of “on money” in respect of sale of industrial plot of land. On the basis of seized material, the A.O. computed the on money received by the assessee amounting to ₹ 1,50,000/- per guntha. The statement of the assessee was also recorded where he agreed for receipt of “on money” which has not been accounted for in the regular books of account. In the statement, the assessee also surrendered cash component of ₹ 1,21,24,500/- as additional income in addition to its regular income shown in the books of account. On the basis of the impounded documents, Proprietor Shri Aslam Chand Khan had agreed that ₹ 1.5 lacs in the above noting indicates the cash component received over and above the registration charges from individuals to whom the land was sold. Even before the ld. CIT(A), full opportunity was given to the assessee, however, nothing was brought on record by the assessee with regard to the actual receipt of on money. The ld. CIT(A) has also dealt with the assessee’s contention regarding projections and not actual, after recording detailed finding and the ld. CIT(A) reached to the conclusion that note book contained the details of actual and it is not projections as claimed by the assessee. The ld. CIT(A) has also dealt with various judicial pronouncements in support of his contention that mere retraction of the statement by filing the affidavit is not an acceptable evidence in the eyes of law. The ld. CIT(A) has dealt with each and every objection of the assessee with regard to the findings recorded by the A.O. and after considering the same, he confirmed the findings recorded by the A.O. to the effect that the assessee has actually received on money which was over and above the amounts in the books of account. No reason to interfere with the findings recorded by the lower authorities with respect to the addition of ₹ 1,21,24,500/- on account of on money received on sale of plots which has not been accounted for in the books of account. - Decided against assessee.
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2015 (2) TMI 942
Pre commencement expenditure disallowed - Held that:- It is an un-denied fact that the assessee company was incorporated in 2008 and in the interim period the business was dormant but the assessee had advanced its funds to acquired certain real estate for development. To come to a conclusion that expense shall be allowed only when there is corresponding income, is only a wishful thinking by the revenue authorities. The revenue authorities could not at any stage derail the assessee’s argument that the business had been set-up. The phrase set-up has been distinguished from the phrase start up by various fora in various judicial decisions. Thus the amount of ₹ 28,89,560/- deserves to be allowed as revenue expense, as the assessee had already undertaken the course of business. - Decided in favour of assessee. General Reserve held as share premium amount by the revenue authorities - whether share premium is an amount which could be brought to tax as canvassed by the revenue authorities or independently, it is an item in the capital field, which otherwise would not be taxable? - Held that:- Simply going with the facts of the case, the revenue authorities could not have brought to tax the amount in question, because, the income so disputed never belonged to the assessee, as the assessee did not exist at the time, when the income was actually generated. It changed hands, it went to individual persons, named earlier. The amount actually came into the account books of the assessee as per the order consequential to the scheme approved by the Hon’ble Bombay High Court. Undisputedly it was a case of amalgamation, wherein, as seen from the order of Hon’ble Bombay High Court, the amounts collected as share premium by those three companies were ordered to be brought into the books of the assessee either as General Reserve or as Goodwill. This amount was shown by the assessee company in the General Reserve. The receipt in the hands of the assessee shown as General reverse could not be brought to tax. This for two reasons (a) the receipt does not carry the character of income under any provision of the Act, and (b) it became a receipt in the hand of the assessee on a specific direction of Hon’ble Bombay High Court, relevant portion, as extracted earlier in the order. Thus revenue authorities cannot change the character of receipt from General Reserve to share premium Reserve and tax the same u/s 56(1). - Decided in favour of assessee.
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2015 (2) TMI 941
Penalty 271(1)(c) - Held that:- The assessee's contention that the entire purchases as had been made had been recorded in the primary and final books, such as stock and ledger books have not been negated or controverted by the revenue authorities and even by the DR. The assessee had also shown the evidence of movement of goods in and out of the warehouse and goods transport receipts. These evidences bore the character of bonafide conduct of business by the assessee. The revenue authorities therefore, clearly erred in holding the issue against the assessee, even on an assumption. Whether or not a person has acted bona fide reflects the state of his mind in respect of his conduct, and, therefore, the assessee has his inherent limitations in establishing this aspect of the manner. It was in this regard that the higher judicial fora has tried to keep mens rea outside the perimeters for sustaining the penalty under normal business conduct or explanations of the assessee. All that the assessee can do, is to explain the circumstances in which he has acted in a particular manner and set out the related facts. This gets proved in favour of the assessee, when the AO writes in the assessment order, “on careful perusal of all submissions, it cannot be denied that purchases have not been made”. Hence The assessee’s explanation regarding bona fides of claim did not suffer from any apparent in consistencies or factual errors and it was quite in line with human probabilities and market trends, therefore, there was no good reason to reject the explanation and proceed to initiate and levy of penalty under section 271(1)(c). Thus explaining as to where the penalty is to be levied and to be deleted, we are of the view that the years under consideration, the revenue authorities erred in initiating penalty proceeding and levying of penalty. - Decided in favour of assessee.
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2015 (2) TMI 940
Deduction u/s. 80IB(10) denied - According to the AO, development of the land is carried out by the sister company and not by the assessee - CIT(A) directed the AO to allow deduction u/s. 80IB(10) on a sum of ₹ 1,15,18,769 - Held that:- The entire profit earned by a developer was part and parcel of the over all profits derived from the housing project. We are, therefore, of the considered view that the exclusion of the profit on the sale of land on a sole ground that the assessee had shown the profits separately and the same would not relate to the assessee was misconceived and, thus, exclusion of the profit on sale of land was rather unjustified. - Decided in favour of assessee. Deduction allowed u/s. 80IB(10) of the Act by the CIT(A) viz., a sum of ₹ 3,50,92,256 - AO was of the view that assessee allocated COH expenses in such a way that less COH is shown in projects eligible for deduction u/s. 80IB(10) and more expenses are shown in the projects not eligible for deduction u/s. 80IB(10) of the Act. This, according to the AO, would reduce the total income in respect of profits of the assessee derived from projects which are not eligible for deduction u/s. 80IB(10) - Held that:- We are of the view that the order of CIT(Appeals) does not call for any interference. As rightly observed by him, in para 4.10 of the order of assessment, the AO has given no basis for allocating COH at 4% as against 3.27% adopted by the assessee. The AO’s conclusion is that allocation of COH at 3.27% is very low compared to the turnover of assessee. He has also given no basis for adopting 4%. As rightly observed by the CIT(Appeals), the AO has proceeded on surmises that assessee was increasing the profits of 80IB(10) units and decreasing the profits of non-80IB units to gain tax advantage. There is no basis whatsoever for this assumption of the AO. There is no dispute also that allocation of COH based on turnover will result in distortion of profits of 80IB(10) units and non-80IB(10) units. - Decided in favour of assessee. Computation of book profits u/s. 115JB - whether amount of expenditure relatable to any income to which section 10 applies, should be added to the profit as per the P&L account? - Held that:- In the issue of reducing/excluding the share of profits from the profit as per the P&L account, in view of clause (ii) to Expanation (1) to section 115JB(2) of the Act, viz., the amount of income to which any of the provisions of section 10, we are of the opinion that the contentions put forth by the assessee that it is not fair to deny the Assessee a relief purely on technicalities, when otherwise, the Assessee was entitled to the same.are acceptable. In this regard, we are also of the view that decision rendered by the Bangalore Bench of the Tribunal n the case of Sri Lakhan Singh v. ACIT, [2013 (2) TMI 319 - ITAT BANGALORE] referred to by the ld. counsel for the assessee clearly supports the stand taken by the assessee. - Decided in favour of assessee. Whether Sec. 14A of the Act read with Rule 8D of the rules can be imported into the provisions of clause (f) to Explanation (1) to section 115JB? - Held that:- There is no difference between the expression "expenditure relatable" and the expression "expenditure incurred by the Assessee in relation to". Both the expressions mean that whatever expenditure are incurred to earn income which does not form part of the total income under the Act, both direct and indirect expenditure, have to be disallowed. There is no basis for the argument u/s. 115JB of the Act, it is only direct expenses that are contemplated as capable of being added to the profits as per P&L account under clause (f) to Expln.1 below Sec.115JB(2) of the Act. The quantum of expenditure disallowed by the AO by invoking the provisions of Sec.14A of the Act while computing total income under the normal provisions of the Act has not been challenged by the Assessee and the said disallowance has been accepted by the Assessee. In such circumstances, we do not see any reason why the same disallowance cannot be adopted while arriving at the book profits u/s.115JB (2) of the Act read with Explanation 1(f) thereto. In our view the CIT(A) has fallen into an error in coming to a conclusion contrary. - Decided in favour of revenue.
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2015 (2) TMI 939
Capital gain determination - compulsory acquisition - in lieu of the acquisition of land, certain area of residential and commercial plots allotted to assessee - assessee has sold converted plots in the same financial year just after taking the possession and allotment of the said land - agriculture land or not - As per assessee’s submission, the land was agricultural land and was purchased on 21/04/2005, which was acquired by the JDA and in lieu of it, residential and commercial plots were allotted on 22/05/2008, thus period of holding was more than three years. - whether date of transfer of immovable property in the case of compulsory acquisition will be the date when final award was given to the assessee and not the date when the assessee extinguished her rights in the property by accepting terms of acquisition and made unconditional surrender of her rights in the land in pursuance of notification for acquisition of land? Held that:- For determining whether the assessee was using the agricultural land for agriculture purposes during the period of two years immediately preceding the date of transfer, the date of transfer is material effect. When the assessee relinquished their rights in land on 30/5/2006, the assessee has not completed two years and has not used the agricultural land for agriculture purposes. It is a fact that the compulsory acquisition proceedings were completed on 29/12/2007 and when award was passed by the Land Acquisition Officer U/s 12(2) of the Act. The assessee was allotted residential and commercial plot on 21/8/2008 at village Khatwada, Tehsil- Sanganer, district- Jaipur. The assessee received the compensation on 21/8/2008. The learned Assessing Officer has adopted the reserve rate fixed for residential plot @ 2800 per sq. mt and ₹ 5600 per sq.mt for commercial plot on the basis of reserve rate fixed by the JDA for villages Jhai, Khatwada, Bagru, Khurd, Palri and Bhambhoria. The residential and commercial plots allotted to the appellant in the area of Khatwara. Therefore, the Assessing Officer concluded short term capital gain on the basis of reserve rate is justified. The learned CIT(A) was not justified by holding that agricultural land was not a capital asset on the basis of certificate issued by the Tehsildar, Tehsil- Sanganer, that land was situated in village Khatwada, which was beyond 8 K.M. from the municipal limit. - Decided in favour of revenue.
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2015 (2) TMI 938
Revision u/s 263 - AO has failed to disallow/make addition on account of commission to foreign agents - Held that:- Detailed explanation furnished by the assessee was examined by the Assessing Officer before accepting the claim of the assessee. Moreover, on this issue there are series of orders of the Tribunal and the judgment of the jurisdictional High court, in which it has been held that TDS is not required to be deducted on the payment of commission to foreign agent. In the light of these facts, we are of the view that this issue was duly examined by the Assessing Officer. Therefore, the order of the Assessing Officer cannot be held to be erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry - Decided in favour of assessee. AO failure to inquire into the source of the additional capital brought by the partners - Held that:- In the instant case, undisputedly the Assessing Officer has raised queries through questionnaire and in response thereto the assessee has filed reply furnishing complete details which were duly examined by the Assessing Officer before accepting the claim of the assessee. There is nothing on record to establish that the assessment order on this issue is erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry. Therefore, we find no merit in the order of the ld. Commissioner of Income-tax in this regard, as the Assessing Officer has made enquiry on the issue of additional capital brought by the partners.- Decided in favour of assessee. Unsecured loans not verifiable - Held that:- In this regard, the Assessing Officer has issued questionnaire and through query No.8, the assessee was asked to furnish details of unsecured credit along with address, PAN, address of the Assessing Officer, confirmations and copy of income-tax returns. In response thereto the assessee has furnished requisite information vide reply dated 28.7.2011.Therefore, it can be presumed that the Assessing Officer has made proper verification of the information furnished before him before accepting the claim of the assessee. Since the Assessing Officer has made necessary enquiry on the issues, the order of the Assessing Officer cannot be called to be erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry. - Decided in favour of assessee. AO failure to make enquiries in respect of payments made to the persons covered by section 40A(2)(b) - Held that:- Assessing Officer has made query through questionnaire dated 12.7.201 vide query No.25 which is available of the compilation of the assessee and the query was duly replied by the assessee vide reply dated 28.7.2011. Therefore, with regard to this issue, it can be held that the Assessing Officer has applied his mind to the information furnished before him and the assessment order cannot be held to be erroneous and prejudicial to the interest of the Revenue. - Decided in favour of assessee. Closing stock wrongly valued - Held that:- The assessee has furnished relevant information pursuant to the query raised by the Assessing Officer. Therefore, it can be presumed that the Assessing Officer has applied his mind to the information furnished before him before accepting the claim. As held in the foregoing paragraphs that the Assessing Officer is not required to record reasons and findings on each and every issue, on which he is satisfied with the explanations of the assessee and the ld. Commissioner of Income-tax cannot set aside the order of the Assessing Officer only for the simple reason that the finding of the Assessing Officer is not acceptable to him - Revision order u/s 263 setaside - Decided in favour of assessee.
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2015 (2) TMI 937
Amount received by discounting the maturity value of loan portfolio on assignment to commercial banks - treated as income during the year - Held that:- Principles of bill discounting and accounting entries are similar to the portfolio sale/securitization of loan portfolios, being the method involved being same, we uphold the orders of AO and CIT(A) on the issue. In fact, both Assessing Officer and CIT(A) analyzed the accounting principles, agreements and came to conclusion that the amounts have accrued at the time of sale of portfolio. We affirm the same and hold that the amount of ₹ 13,09,44,315/- being the amount of discounted future interest received by assessee during the year is taxable in the year. Accordingly, we uphold the orders of Assessing Officer and reject the ground of assessee. - Decided in favour of revenue. Disallowance being value of Employees Stock Option granted and opted by the employees - whether it as not business expenditure but a notional capital expenditure - Held that:- As decided in Biocon Ltd., Vs. DCIT [2013 (8) TMI 629 - ITAT BANGALORE] the difference (discount) between the market price of the shares and their issue price is "expenditure" in the hands of the assessee because it is a substitute to giving direct incentive in cash for availing the services of the employees. There is no difference between a case where the company issues shares to the public at market price and pays a part of the premium to the employees for their services and another where the shares are directly issued to employees at a reduced rate. In both situations, the employees stand compensated for their effort. By undertaking to issue shares at a discount, the company does not pay anything to its employees but incurs the obligation of issuing shares at a discounted price at a future date. This is nothing but "expenditure" u/s 37(1). The obligation to issue shares at a discounted premium does not arise at the stage the options are granted. It arises at the stage that the options are vested in the employees. The amount deductible has to be determined based on the period and percentage of vesting under the ESOP scheme. On facts, the assessee's method of claiming a larger deduction in the first year defies logic. As the options vest equally over a period of four years, the deduction ought to be claimed in four equal installments on a straight line basis. AO directed to work out the deduction keeping in mind the principle laid down - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 936
Deduction claimed u/s 80-IA - profits derived from the business of windmill - as per the Revenue, the losses incurred by the assessee for A.Y. 2002-03 and 2003-04 from the activity of windmill have to be reduced from the current year’s profits of the windmill activity in order to compute the amount eligible for deduction u/s 80-IA - Held that:- Assessee is eligible for claim of deduction u/s 80-IA of the Act for the year under consideration in a manner whereby the initial assessment year referred to in section 80-IA(5) of the Act is to be taken as the A.Y. 2004-05 and not the A.Y. 2002-03 as canvassed by the Revenue. Resultantly, we therefore, set aside the order of the CIT(A) and direct the Assessing Officer to recompute and allow the deduction to the assessee u/s 80-IA of the Act as above. - Decided in favour of assessee.
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2015 (2) TMI 935
Unaccounted cash credit - addition u/s 68 made by observing that commodity profit earned by eight family members is income from undisclosed sources of the assessee - Held that:- When loans have been taken from the family members and which have been routed through bank by most of such family members, they cannot be added as cash credits unless it is found as a fact that such bank accounts are benami of the assessee. In case before us, it cannot be alleged that bank account of various family members are benami of the assessee because loans have been taken from such family members for last many years and which have been shown as opening balance and have been accepted by the Department. We would like to point out that it was strongly contended by the ld. counsel of the assessee that similar profits were received by the same family members in the earlier years, therefore, even in this year without pointing out any defect in such amounts or without recording the finding of such profit was bogus, same could not have been addedto the income of the assessee. Thus additions deleted - Decided in favour of assessee. Unaccounted loan - CIT(A) confirmed addition on amount received from Shri Vijay Kumar s/o of the Proprietor, despite confirmation and source of source of Shri Vijay Kumar explained during the course of assessment - Held that:- Burden casted on the assessee to prove the identity of creditor, genuineness of the transaction and credit worthiness of the person giving loan, is proved then such loans should have been accepted. Therefore, the addition is not justified and accordingly we set aside the order of the ld. CIT(A) and delete the addition. - Decided in favour of assessee.
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Customs
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2015 (2) TMI 957
Import of Non-Alloy Steel slabs - benefit of Customs Notification No. 21/2002-Cus. dated 1.3.2002 (Sl. No. 190B) - Mis-declaration of goods - NML vide their report dated 27.10.2004 had opined that the samples are not prime quality and can be considered as "Non-Alloy Steel slabs non-prime" - appellant requested to retest of the samples, which was rejected by the Department - Held that:- Adjudicating authority examined the MSME test report dated 21.4.2009 as per direction of the Hon'ble High Court and observed that the report of MSME mentioned, the goods are of uniform size and shape whereas, as seen from the factual data presented, there is a huge heterogeneity in the dimensions of the consignment. The findings of the report and the conclusion are not in tandem. The adjudicating authority reproduced "observed value" of MSME Report in the adjudication order. On perusal of the MSME Testing Report, we find that the "observed value" as reproduced in the adjudication order is incomplete. The adjudicating authority observed that NML is a specialized agency dealing with metals and therefore, it has accepted the conclusions given by them. It is further observed that its materials evaluation and characterization facilities compare with the best in the world. We are concerned with the particular test report NML and MSME and therefore we would not like to express any opinion on the competency of expert opinion of NML and MSME. In this context, it may be referred that the Tribunal in the case of Sabari Exim Pvt. Ltd. (2004 (10) TMI 460 - CESTAT, CHENNAI) rejected NML report and accepted imported non-alloy steel blooms as prime quality on the basis of report of other agency, imported in December 2002 and extended the benefit of exemption Notification No. 21/2002-Cus. Apart from that, as contended by the appellant, the Department released the goods in respect of six Bills of Entry on the basis of the same MSME Report. After examining MSME Report as per order of the High Court, we are of the view that MSME report should be accepted, wherein it has been opined that the goods in question are of prime chemistry and meet the quality requirements of prime quality. Accordingly, the demand of duty, penalty and confiscation of goods and imposition of penalty are not sustainable. So, we set aside the impugned order - Decided in favour of assessee.
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2015 (2) TMI 956
Imposition of penalty under Regulation 12(8) of the Handling of Cargo in Customs Area Regulation, 2009 - contravention of Regulations 6(2), 6(1)(k) and 6(1)(q) read with Section 141 (2) of the Customs Act, 1962 - Held that:- Regulation 12(8) providing for penalty does not say that penalty is imposable on each of the contraventions. It merely says that if the Customs cargo services provider contravenes any of the provisions of the Regulations, he is liable to penalty to the extent of ₹ 50,000/-. If the intention of the legislature was to provide for imposition of penalty for each of the contravention, the legislature would have said so specifically. In the absence of any such specification in the provisions, the contention of the Revenue in this regard cannot be accepted and would amount to adding words which the legislature has not done. As per the principles of statutory interpretation, addition or deletion of words to the language employed by the legislature is not permissible. Therefore, imposition of penalty of more than ₹ 50,000/- is not permitted under the law. As regards the penalty imposed under Section 117, the said provision would apply only if there is no other penalty provide for violations of the provisions of the Handling of Cargo in Customs Area Regulations. Penalty is specified under Regulation 12(8). That being the position, the question of imposition of penalty under Section 117 would not arise at all. Therefore, the penalty imposed under Section 117 is clearly unsustainable in law. Maximum penalty that can be imposed for contravention of the Handling of Cargo in Customs Area Regulation is only ₹ 50,000/-. In the present case, the gravity of the offence committed is serious i.e. mis-use of the container for smuggling of red sanders and the facts of the case are not in dispute. In the facts and circumstances of the case, the maximum, penalty of ₹ 50,000/- is justifiable. Accordingly, I reduce the penalty imposed on the appellant from ₹ 1.5 lakhs to ₹ 50,000/- in terms of the provisions of the Handling of Cargo in Customs Area Regulations, 2009 and set aside the penalty of ₹ 1 lakh imposed under Section 117 of the Customs Act, 1962. - Decided partly in favour of assessee.
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2015 (2) TMI 955
Valuation of goods - Inclusion of amount of royalty on the imported goods - Held that:- There is a contradiction in the stand taken by the Customs as far as inclusion of royalty on the goods imported. On the one hand it is held that if the foreign supplier is not related, royalty is not includable whereas if the foreign supplier is related royalty is includable. Rule 10 of the Customs Valuation Rule, 2007 does not make any distinction on the basis of relationship between the parties for its application and the said Rule applies uniformly irrespective of whether the supplier and the importer are related or not. Further Rule 10 (1) (c) specifically excludes the charges for the right to reproduce the imported goods in the country of importation as per the interpretative notes given in the schedule thereto. The World Customs Organization has also interpreted the term "right to reproduce the imported goods" as reproduced in para 2 above and as can be seen from the clarification given by the WCO, it would also include animal or plant species which are reproduced from the imported goods. More or less identical matter was considered by this Tribunal this Tribunal came to the conclusion that royalty paid for the reproduction of imported seeds in India cannot be added to the assessable value of the seeds. The same ration would also apply to the facts of the present case. - royalty paid by the appellants herein for the reproduction of the imported clumps in India cannot be added to the value of the clumps - Decided in favour of assessee.
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2015 (2) TMI 954
Classification of goods - import of Inca Inchi Oil in soft vegetarian Gel Capsules - Classification under CETH 15159091 or under CTH 3004 - claim of the appellant that these are "Extra Virgin Vegetable Oil (Inca Inchi) meriting classification under CETH 15159091 - Held that:- Product merit classification under CTH 3004 as P or P medicaments. Therefore, the onus of proving classification under the said heading lies on the Revenue. The Revenue has not even got the product tested by the Drugs Control authorities to come to the conclusion that the product has therapeutic or prophylactic properties or have been prepared or made so as to have these properties. On the contrary, we find that the product description on the packaging itself, clearly indicates that the product does not have any medicinal use and is not intended to diagnose, treat, cure or prevent any disease. The product has natural ingredients such as, vitamins "A" & "D" and omega 3, 6 & 9 which has antioxidant properties. There are many products which are naturally occurring which have therapeutic or prophylactic properties. For example products like neem, turmeric, basil leaves, etc, all have medicinal value but nobody considers them medicaments, when they are used as such, without subjecting to any chemical modification. In fact many of these items are used in daily cooking also. Therefore, merely because a product possess certain natural properties, it cannot be said to fall under the classification of medicaments. - the product merits classification under CTH 151590 - Following decision of Banner Pharmacaps (I) Pvt. Ltd. vs. CCE, Bangalore [2004 (12) TMI 203 - CESTAT, BANGALORE] - Decided in favour of assessee.
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Service Tax
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2015 (2) TMI 974
Classification of services - supply of tangible goods for use of service or transport of passengers by air service - Extended period of limitation - Levy of penalty - Held that:- From the preamble of the contract entered into by the appellant with M/s. ONGC, it is seen that ONGC was interested in charter hiring of helicopters for offshore operations being carried out by them and the appellant agreed to provide the required services against the corporation's order in this regard. - t the services rendered by the appellant in charter hire of helicopters to various corporate for offshore operations is classifiable under "supply of tangible goods for use" service. - Demand of service tax confirmed. The appellant has raised a point that the consideration received should be treated as cum tax and the amount so received shall be apportioned between the taxable value and the service tax. There is merit in this argument. If the appellant has not charged service tax separately and the amounts received included all taxes, the appellant would be definitely eligible for cum tax benefits. However, this benefit will not accrue where the appellant has collected service tax from the customers separately. Once the demand for service tax is confirmed, interest liability is automatic and consequential. Accordingly, we confirm the liability to pay interest on the delayed payment of service tax by the appellant under the provisions of section 75 of the Finance Act, 1994. Cenvat Credit - Held that:- There is a denial of Cenvat credit to the extent of ₹ 2,33,09,951/- which was taken by the appellant but not utilized. The credit has been denied on account of non-production of duty paying documents for the credit availed during 16/05/2008 to 31/03/2009. Rule 9(9) of Cenvat Credit Rules also envisages that the provider of output services availing Cenvat credit shall submit half yearly returns in the form specified and the appellant has failed to comply with the requirements. Therefore, the availment of credit without the duty paying documents and without filing the prescribed return is not in accordance with the law and accordingly, the appellants are not eligible for the credit. Therefore, denial of credit is justified. The appellant is also liable to pay interest on the credit taken though not availed, in view of the decision of the Hon'ble Apex Court in the case of Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - Supreme Court]. Extended period of limitation - Imposition of penalty - Difference of opinion - Majority order - Whether the appellant is liable to penalty under the provisions of Sections 76 & 78 of the Finance Act, 1994 - Held that:- Immediately after the introduction of service tax under the category of ‘supply of tangible goods', the appellant had taken the registration on 2nd July 2008. Thus the facts that they were under the said business was not only informed to the department but they also took registration for the same. Under the circumstances, it cannot be said that there was any suppression of facts. In view of the fact that the appellant has taken the registration as early as on 2 nd July 2008, the appellant has also billed to their customers for the service tax element and on being raising dispute about the levy by few customers, the appellant took the legal opinion on 22nd October 2008 and also the fact that when the Revenue started investigation, they started paying the service tax and the first payment was made on 22nd January 2009, in my view, the ingredients to impose penalty under Section 78 for the period 16 th May 2006 to March 2009 are missing. Under the circumstances, in my view, penalty under Section 78 imposed in the first show cause notice is not sustainable. I also note that initially the show cause notice proposed penalties both under Sections 76 and 78, but in the impugned order, penalty under Section 76 has not been imposed in view of the fact that the penalty was imposed under Section 78 and the Revenue has not come in appeal against the said order. Therefore, non-imposition of penalty under Section 76 has reached finality as far as the first show cause notice is concerned. While there can be arguments or reasons for the period upto March 2009 for failure to pay the duty, there does not seem to be any valid ground for non-payment of duty after April 2009. In view of the said position, in my considered view, penalty for the period April 2009 to March 2011 cannot be waived under Section 80 of the Finance Act. Imposition of penalties on the appellant under Section 76 & 77 of the Finance Act, 1994 for the default in payment of service tax and for non-compliance of statutory provisions relating to the service tax is upheld. However, we set aside the penalties imposed under Section 78 of the Finance Act, 1994. The penalty of ₹ 2,000/- imposed under Rule 15(3) of the Cenvat Credit Rules, 2004 is also upheld. - Decided partly in favour of assessee.
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2015 (2) TMI 973
Waiver of pre deposit - Classification of service - Telecommunication service or Business Support Service - appellant is engaged in the provision of audio-conferencing services and web-conferencing services to its customers located both in India and abroad - Held that:- Appellant was engaged in gathering the messages from senders and transmitted through cellular agencies. Therefore the issue before the Tribunal was not the services rendered by a Telecommunication service provider but a sms service provider who used the service of Telecommunication service to send the messages. - just because the foreign service provider has not been licensed by Indian Telegraph Authority and therefore he is not providing Telecommunication Service at all. The correct way of interpretation is to say that he is providing Telecommunication service but the Indian definition of Telecommunication service does not include services provided by services providers who are not licensed by Indian Telegraph Authority. We are unable to accept the theory that the service itself comes under a different category in such a situation. When the definition of Telecommunication service under Section 65(109a) clearly covers the activities undertaken by the appellants and clearly covered by the Telecommunication services, to take a stand that it has to be classified under Business Support Service which does not cover these activities is not correct. In any case a more specific heading which covers the issue is always to be preferred to the one which is general in nature. That being the position, the argument that the service is classifiable under Business Support Service is not acceptable. - appellant has made out a case for complete waiver. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal.- Stay granted.
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2015 (2) TMI 972
Valuation - inclusion of value of material - authorised service station for Maruti cars - Board's Circular no. 96/7/2007-ST dated 23/08/2007 - Held that:- Appellant are charging handling charges whenever automobile parts are sold either independently or part of the service and repair of automobiles. In both the situations, invoices are issued for the sale of the goods as well as for collection of service charges for the services rendered. Handling charges were incurred in connection with the procurement of the goods and are included in the value of the goods sold and sales tax/VAT liability is discharged on the value inclusive of the handling charges. Therefore, we do not understand how service tax levy would apply especially when the goods are subject to sales tax/VAT on a value inclusive of handling charges. It is not in dispute that the handling charges are incurred in connection with the procurement of the parts. If that be so they will obviously form part of the value of the goods when they are subsequently sold. - Section 67 of the Finance Act, 1994 mandate levy of Service Tax on a value or consideration received for rendering the services. Therefore, any consideration received for supply of goods is not covered within the scope of section 67. The decisions of the Tribunal in the case of Ketan Motors Ltd. [2014 (3) TMI 226 - CESTAT MUMBAI] and Dynamic Motors cited [2011 (11) TMI 308 - CESTAT, NEW DELHI] also support this view. - Accordingly, the impugned order is clearly unsustainable in law and, therefore, the same is set aside - Decided in favour of assessee.
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2015 (2) TMI 971
Denial of exemption from service tax - Whether sub-contractors engaged for building residential complexes for Delhi Police could be considered for receiving services on behalf Govt. of India and no service tax liability could be fastened on them - Held that:- Commissioner (Appeals) has distinguished that Govt. of India enterprise cannot be equated with any Govt. Department which were on behalf of Government of India or President of India. He also come to conclusion that appellant had entered into contract of service with M/s HPL and referred the construction service with M/s HPL and not to Delhi Police rightly and being a sub-contractor they were liable to pay the service tax. - it is seen that major beneficiary of contractor or residential complex is the Delhi Police (Govt. of India) and M/s HPL is only the contractor executing agency who have provided the service to the Delhi Police through sub- contractor. They have further got the work done from the appellants who were connected as a sub-contractor. I find that intention of the Government is not to levy service tax on the service received by the Government of India through contractor or subcontractor. I have also examined the exemption. If sub-contractor is directed to pay the service tax which have ultimately to be utilizes by the Delhi Police (Govt. of India) only on technicality that a sub-contractor is involved in the construction of building, will ipso facto take away the exemption granted to the Government of India. Further use of housing complex for non-commercial use and will not come under the service leviable to service tax. In this regard definition of the service of commercial and industrial construction service became taxable as per the Section 65 (25b) in 2004. However, the definition and scope of service was changed by Finance Act, 2005 and revised definition is reproduced for appreciation. Building has been got constructed by the Government of India for their own use as residential complexes for Delhi Police, it does not result in construction for commercial purposes further construction by Government for non-commercial purpose was not taxable, however construction by the Government for commercial activities such as civil body construction for shops or commercial complexes laying in the nature of commercial activity were taxable. - merely because the construction has been get done from the contractor/sub-contractor, it will not change the nature or the activity from non-commercial to commercial. Once it comes out that Government has undertaken a project which is non-commercial in nature and not taxable, service received on this account by the Government would not come under the taxability. - even subcontractor cannot be directed to pay service tax when the taxability of the construction is non commercial in nature being not taxable. - Decided in favour of assessee.
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2015 (2) TMI 970
Helicopter Chartering service - Supply of tangible Goods for Use services or Air Transport of Passengers services - Held that:- We have carefully considered the rival submissions. In the present case the appellant has been discharging service tax liability under the category of 'Air Transport of Passenger' since 2010. Whether operating helicopter on charter basis for transport of passengers would merit classification under 'Air Transport of Passenger Service' or under the category of 'Supply of Tangible Goods for Use' is a complicated and contentious issue. There can be arguments for classification under either of the category with equal force. Therefore, considering the fact that the appellant has paid a sum of about ₹ 37 crores as against the demand of about ₹ 67 crores, we consider the same to be sufficient for the purpose of hearing of the appeal. - Stay granted.
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Central Excise
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2015 (2) TMI 967
Recall of final order - Ex-parte order passed - Wrong Date of hearing noted down mistakenly - Held that:- Matter had been decided ex parte and the Revenue's appeal has been allowed following the Apex Court's judgment in the case of Ind -Swift Laboratories (2011 (2) TMI 6 - Supreme Court), subsequently, it has been found that interpreting the above judgement , Hon'ble Karnataka High Court in the case of CCE , Bangalore Vs. Bill Forge Pvt. Ltd. (2011 (4) TMI 969 - KARNATAKA HIGH COURT) has held that in the cases where the cenvat credit has been taken wrongly but the same had not been utilized, there would not be interest liability and that interest liability would arise only in the cases where the wrongly taken cenvat credit had also been utilized. It is seen that same view had been taken by the Hon'ble Madras High Court in the case of M/s. Strategic Engg . (P) Ltd. (2014 (11) TMI 89 - MADRAS HIGH COURT) . It is also seen that the judgment of the Karnataka High Court in the case of M/ s.Bill Forge Pvt. Ltd. (supra) has been followed by this Tribunal in the case [2014 (7) TMI 849 - CESTAT NEW DELHI]. According to the respondent, their case is covered by the above mentioned judgements of the Hon'ble Karnataka High Court and Madras High Court as in their case, there was no utilization of the wrongly availed cenvat credit. Since at the time of hearing of this matter on 23.12.2013, Revenue's appeal was disposed of ex parte and decided in the Revenue's favour , as there was nobody representing the respondent, the above mentioned judgements of the High Courts; which were favourable to the Respondent could not be considered. In my view, as held by the Tribunal in the case of Hindustan Ferro and Industries Ltd. (2009 (9) TMI 772 - CESTAT NEW DELHI), the assessee should not be made to suffer for any failure on the part of the Advocate. The Final Order dated 23.12.2013 therefore needs to be recalled and the matter needs to be re-heard on the question as to whether the judgements of Hon'ble Madras High Court and Karnataka High Courts are applicable to the facts of this case. - Order recalled.
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2015 (2) TMI 966
Maintainability of appeal - Denial of rebate claim - SEZ - Held that:- issue relates to the sanction of rebate claims on TMT bars supplied to SEZ. The adjudicating authority has sanctioned the rebate claim of ₹ 16,98,128/- on the duty paid on the goods supplied to SEZ units. Whereas, the Commissioner (Appeals) allowed the Revenue appeal and set aside the order of the adjudicating authority, in terms of first proviso (b) to Section 35 B (1) of the Central Excise Act, 1944 and no appeal shall lie before the Tribunal against the order passed by the Commissioner (Appeals), if the order relates to rebate of duty of excise on goods exported. Since, the appeal filed by the appellant relates to rebate of duty, it is outside the powers vested by this Tribunal under the Act. Accordingly, the appeal is dismissed under the first proviso to Section 35 B (1) of the Central Excise Act, 1944 and the appellant is at liberty to file appeal before the Government of India, Revision Authority. - Decided against assesse.
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2015 (2) TMI 965
Waiver of predeposit of duty - Denial of CENVAT Credit - Insurance service and various other services - Held that:- Out of the total credit disallowed, ₹ 4,21,458/- relates to insurance service. I find that that insurance service not only relates to the employees but also to the plant, machinery and stocks. The credit disallowed in respect of payroll services is about ₹ 50,341/- and the credit of ₹ 14,673/- is towards photocopier service and towards travel agency service the credit disallowed is ₹ 39,623/-. I find that the applicant has made out a prima facie case for waiver of predeposit except for corporate membership services and photocopier services. Accordingly, I direct the applicant to predeposit a sum of ₹ 30,000/- within a period of four weeks - Upon such deposit, predeposit of the balance dues stands waived and recovery thereof stayed during the pendency of the appeal. - Partial stay granted.
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2015 (2) TMI 964
CENVAT Credit - Notification No.214/86-CE - Denial of the credit on the ground that credit taken on inputs used for job work done for other unit is not admissible and confirmed the demand along with interest and imposed penalty - Held that:- Considering the Tribunal's Larger Bench decision in the case of Sterlite Industries (2004 (12) TMI 108 - CESTAT, MUMBAI) and the Hon'ble High Court's judgement in the case of Hwashin Automotive India Pvt. Ltd. (2014 (9) TMI 444 - Madras High Court), I find that appellants have made out a prima facie case for waiver of dues arising out of the impugned order. Accordingly, the predeposit of duty along with interest and penalty is waived and its recovery is stayed during pendency of the appeal - Stay granted.
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2015 (2) TMI 963
Waiver of pre deposit - duty on breakages of bottles while handling - Held that:- Appellants are manufacturer of aerated waters as seen from para-14 of the OIO, it is stated that percentage of breakages was 0.45% which is well below the limit of 0.5% prescribed by the Board's circular dt. 8.9.1971 and 17.9.1975. The adjudicating authority has demanded duty only on the ground that the appellants have not followed the remission procedures. Following the ratio of judgement of the Hon'ble Allahabad High Court in Hindustan Coca-Cola Beverages Pvt. Ltd. (2013 (4) TMI 83 - ALLAHABAD HIGH COURT) and also Tribunal's decision (2009 (7) TMI 1135 - CESTAT NEW DELHI), I find that appellants have made out a prima facie case for waiver of predeposit. In view of the above discussion, I waive the requirement of predeposit of duty, interest and penalty and stay its recovery till disposal of appeal. - Stay granted.
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2015 (2) TMI 962
Denial of CENVAT Credit - Outdoor Catering Services and Clearing & Forwarding services - Held that:- major amount of the total demand of input credit relates to outdoor catering services and the amount involved on this count is ₹ 1,86,466 and in respect of C&F services the amount in dispute is ₹ 13352/-. On a query from the Bench as to whether the appellant has collected from the employees towards catering services, the learned advocate submitted that this aspect was not part of the SCN. However, he submits that he will file the supporting documents at the time of hearing the appeal to establish if any charges are reimbursed towards catering services. The appellants are eligible for cenvat credit if employees are more than 250 and if they have not reimbursed the catering charges from the employees. Since the appellant is not able to produce any evidence to prove reimbursement charges has not been collected from employees, prima facie, the appellant has not made out a case for waiver of entire amount of duty along with interest and penalty. The plea of the appellant for production of supporting documents in respect of reimbursement of catering charges would be examined at the time of appeal hearing. Accordingly, I direct the appellant to make a predeposit of ₹ 35,000 within 4 weeks - Partial stay granted.
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2015 (2) TMI 961
CENVAT Credit - appellants have distributed the credit of the service availed prior to April 2011 therefore, it was of the view of the lower authorities that from April 2011 the appellants are not entitled to take CENVAT Credit on these goods - Held that:- The issue of availment of service prior to April 2011 is not in dispute. Therefore, I hold that as per Rule 6(5) of Cenvat Credit Rules, 2004, during the relevant time, the appellants are entitled to take CENVAT Credit on inputs service namely security service. It is immaterial whether the same is taken later on as held in the Circular No. 943/04/2011-CX dated 29.04.2011. In these circumstances, I hold the appellants are entitled to take CENVAT Credit and are not required to reverse the amount equivalent to 5%/10% of the value of the exempted goods. - Decided in favour of assessee.
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2015 (2) TMI 960
Waiver of pre deposit - Disallowance of cenvat credit availed as input credit on outward transportation upto the buyer's premises - Held that:- On a perusal of copies of purchase orders, invoices submitted by the appellant along with appeal papers and the contract it is stated that "door delivery" to the buyers premises. The appellants have discharged duty on the total value of the goods inclusive of freight and insurance. Considering the decisions of Hon'ble High Court and the Tribunal (2013 (12) TMI 1025 - CALCUTTA HIGH COURT) and [2007 (7) TMI 19 - CESTAT, CHENNAI], I find that prima facie the appellants have made out a case for waiver of predeposit and stay. Accordingly, predeposit of dues arising from the impugned order is waived and its recovery is stayed till disposal of the appeals. - Stay granted.
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2015 (2) TMI 959
CENVAT Credit - Whether the appellant is entitled to take Cenvat Credit on outward Transportation Service was dealt by the various Hon'ble High Courts and in the majority of the High Court decision it was held that Cenvat credit is available on Outward Transportation Service prior to 01.04.2008 - Held that:- Issue came up before the Hon'ble High Court of Gujarat in Ellora Time Ltd. [2014 (3) TMI 567 - GUJARAT HIGH COURT] wherein again it was held that Cenvat Credit on the above said service is available prior to 01.04.2008. In the light of the majority decision of the Hon'ble High Court I am of the view that the appellant is entitled to get Cenvat Credit on Outward Transportation Service in the light of the larger bench decision in ABB Ltd [2009 (5) TMI 48 - CESTAT, BANGALORE]. - Decided in favour of assessee.
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2015 (2) TMI 958
CENVAT credit on supplementary invoices issued by job workers - Suppression of fact- Denial of Cenvat Credit- Held that:- Commissioner (Appeals) have relied upon the order passed by the learned Commissioner (Appeals) in the case of job workers wherein the learned Commissioner (Appeals) held that the job workers have not suppressed the facts and the allegation of suppression was discharged. In these circumstances when the complete finding is on record and nothing contrary has been proved by the Revenue, in these circumstances the impugned order has not infirmity which requires no intervention. The same is upheld - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (2) TMI 969
Classification of Pressure cooker under Assam Value Added Tax Act, 2003 - Aluminium utensil- covered in Second schedule or Not an Aluminium utensil- covered under residual fifth schedule - Penalty due to consequential assessment - Held that:- The reasoning given by the Commissioner is a plausible one and appeals to the Court. This position has been further explained in the affidavit filed by the Commissioner. It is stated that pressure cookers have valves made of steel, rubber gasket and also have rubber insulating materials. Pressure cooker is not made solely of aluminium so as to qualify for inclusion in Entry No. 6 of Part-A General of the Second Schedule. In common parlance, pressure cookers are not understood as mere utensils, but contrived appliances meant for domestic use. To fall within the sweep of Entry No. 6, the item must not only be a utensil, but must be aluminium or enamelled utensil. The affidavit has stated that in other States where tax on pressure cooker is levied at the rate of 4%, the description in the entry is "utensils of all kinds including pressure cookers except made of precious metals" We agree with the stand taken by the Commissioner of Taxes in the aforesaid affidavit. Whether pressure cooker falls within the sweep of Entry No.6 of Part-A General of Second Schedule or not will have to be determined keeping in mind the legislative intent expressed through the words in the entry. When the description of the entry is aluminium utensils and enamelled utensils, the legislative intent is quite clear that to come within the sweep of Entry No.6, the good in question has to be an aluminium utensil and enamelled utensil. Had the Legislature intended to give the benefit of the entry to goods, such as pressure cooker, it would have been clearly mentioned in the entry itself. We cannot go beyond the description of the goods under Entry No.6 as given in the statute. As is well accepted, a taxing statute has to be strictly construed. The order imposing penalty, the reasons for imposition of penalty as well as the quantum of penalty must be discernible.This will reflect application of mind by the authority imposing the penalty and also allow the higher authorities to examine the reasons assigned for imposition of penalty in the event of appeal or revision. The order of penalty must indicate that all relevant factors were taken into consideration before imposing penalty. The discretionary power to impose penalty must be exercised in a reasonable and rational manner, otherwise it would be arbitrary and capricious. Penalty set aside. - Decided in favour of appellant. Having regard to the classification, we are of the clear opinion that the view taken by the Revenue that pressure cooker does not come within the ambit of Entry No.6 of Part-A General of the Second Schedule to the VAT Act appears to be the correct view and we see no reason to interfere with the decision taken by the revenue authorities in this regard. - Decided against the appellants.
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2015 (2) TMI 968
Deferment & Exemption from sales tax - Mode of computation of notional sale tax liability - Whether Rule 2 (xxi) (ii) of the Rules which provides for calculation of "notional sale tax liability" by including branch transfers, fastens a liability to pay tax on branch transfers or merely provides a methodology for calculating notional tax liability for the purpose of achieving the amount of deferred tax - Held that:- Admittedly, branch transfers outside the State of Punjab are exempted from the payment of sales tax. The State of Punjab has from time to time, notified schemes for deferment and exemption from payment of sales tax and for the said purpose, has enacted Section 10-A of the 1948 Act. A perusal of Section 10-A of the 1948 Act, reveals that the State Government may defer the payment of "tax due" if it is necessary or expedient to do so in the interest of industrial development subject to such conditions as may be prescribed. Admittedly, branch transfers outside the State of Punjab are not exigible to sales tax. A taxing statute imposes tax by enacting a taxing provision that sets out the taxing event. The exigibility of a transaction to tax must flow from the statute and, therefore, requires legislature to enact a specific provision setting out the contours of the event/transaction that would invite tax. If liability to pay tax is not set out in the parent statute, a rule, a policy, an instruction or a clarification cannot whether by intent or by interpretation, be used to impose a tax. The words "subject to such conditions" used in Section 10-A of the Act while referring to the deferment, cannot be construed to confer power to prescribe a fresh tax by way of a rule. It would also be appropriate to point out that the words "and liable to tax" used in the explanation and the words "on the presumption that these transactions are exigible to tax under the aforesaid Act" used do not lend themselves to an interpretation that raises them to the status of a charging provision thereby imposing a fresh charge or tax rendering an assessee exigible to a tax that is not imposed by the parent statue. It is, therefore, apparent that Rule 2(xxi) of the Rules is a provision that aids and assists the assessee and the State in calculating notional tax liability for deferment and empowers the State Government while calculating the limit of deferment to include sale tax on branch transfers outside the State of Punjab on a presumption that they shall be deemed to be taxable but only for the purpose of calculating the quantum of deferred tax achieved by the assessee. The proviso cannot whether by interpretation or by reference to the presumption be assigned the status of a taxing provision rendering an assessee liable for a taxing event which is exempted under the parent statute i.e. the 1948 Act. Consequently, we allow the writ petition as well as the appeal, set aside the impugned orders and remit the matter to the assessing officer to decide the matter afresh and in accordance with law. - Decided in favour of assessee.
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Indian Laws
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2015 (2) TMI 953
Violation of The All India Services (Conduct) Rules, 1968 - Rejection of Enquiry report - Power of state to Second enquiry and appoint a Board of Enquiry - Rule 8(3) of the All India Services (Discipline and Appeal) Rules, 1969 - Held that:- All the parties - the appellant, the respondents and the Central Administrative Tribunal and the High Court proceeded on the basis that the IMPUGNED order constituting a two member Enquiry Board under Rule 8(3) of the DISCIPLINE Rules is an order constituting such a Board under the provisions of the Public Servants (Inquiries) Act, 1850. We do not see any basis for such a conclusion. The IMPUGNED order nowhere refers to the Public Servants (Inquiries) Act, nor there is anything in Rule 8(3) which suggests that whenever a multi-member Board is appointed as an Enquiring Authority, such a Board could be appointed only under provisions of the Public Servants (Inquiries) Act. The language of Rule 8(2) is wide enough to enable the disciplinary authority to appoint either a single member Enquiring Authority or a multi-member Board to inquire into the misconduct of a delinquent officer. The issue is not really whether the Enquiring Authority should be a single member or a multi member body, but whether a second inquiry such as the one under challenge is permissible. A Constitution Bench of this Court in K.R. Deb [1971 (4) TMI 94 - SUPREME COURT], examined the question in the context of Rule 15(1) of the Central Civil Services (Classification, Control and Appeal) Rules, 1957. It was held that there is no provision in Rule 15 for completely setting aside previous inquiries on the ground that the report of the Inquiring Officer or Officers does not appeal to the Disciplinary Authority. The Disciplinary Authority has enough powers to reconsider the evidence itself and come to its own conclusion under Rule 9. The scheme of Rule 8 of the DISCIPLINE Rules and Rule 15 of the Central Civil Services (Classification, Control and Appeal) Rules, 1965 are similar. Therefore, the principle laid down in Deb’s case [1971 (4) TMI 94 - SUPREME COURT], in our opinion, would squarely apply to the case on hand. We are at a loss to comprehend how the filing of the writ petition containing allegations that the Government of India is lax in discharging its constitutional obligations of establishing the rule of law can be said to amount to either failure to maintain absolute integrity and devotion to duty or of indulging in conduct unbecoming of a member of the service. Even otherwise, the IMPUGNED order, in our opinion is wholly untenable. The purpose behind the proceedings appears calculated to harass the appellant since he dared to point out certain aspects of mal-administration in the Government of India. The whole attempt appears to be to suppress any probe into the question of black money by whatever means fair or foul. The present impugned proceedings are nothing but a part of the strategy to intimidate not only the appellant but also to send a signal to others who might dare in future to expose any mal-administration. The right to judicial remedies for the redressal of either personal or public grievances is a constitutional right of the subjects (both citizens and non-citizens) of this country. Employees of the State cannot become members of a different and inferior class to whom such right is not available. The appeal is allowed. The judgment under appeal is set-aside. Consequently, the O.A. stands allowed as prayed for. The respondents are liable jointly and severally to pay costs to the appellant which is quantified at ₹ 5,00,000/- (rupees five lakhs). – Decided in favour of appellant.
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