Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 27, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Additional depreciation on diagnostic/service equipments claimed as a deduction u/s. 32(1)(iia) - assessee is eligible for additional depreciation on vaporizers u/s. 32(1)(iia) - AT
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TDS u/s 195 - charter payments (hire charges) to Foreign Shipping Companies - the amount paid by the assessee to the FSC on time charter agreement would not amount to ‘royalty’ neither under Explanation 2 or under section 9(1)(b)(ii) or under the DTAA and in this case only section 172 applies - No TDS liability - AT
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Deduction u/s 80IB - The assessee-firm was not manufacturing proto-type of jewellery. It has produced variety of items containing numerous designs, shape, size and specification. It is not feasible or possible to maintain any quantitative records on daily basis - Benefit of exemption allowed - AT
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Unaccounted cash for the purchase of property - in the absence of any other corroborative evidence to establish a direct nexus, it cannot be said that the notings in the loose paper are genuine - No additions - AT
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Penalty u/s. 271(1)(c) - unexplained cash deposited in bank - revised return of income filled - penalty levied u/s 271(1)(c) cannot be sustained as the assessee had came forward with an explanation which is a reasonable and bonafide explanation - AT
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Depreciation on computer systems on the WDV @60% - display system - AO has reduced the depreciation rate claimed at 60% to 15% - Since assessee was already getting depreciation at 60%, on the principles of consistency depreciation 60% is to be allowed in the impugned assessment years as well. - AT
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TPA - ALP - Corporate Guarantee given by the assessee being a domestic transaction is outside the purview of TP provisions is claimed to be covered in favour of the assessee and against Revenue - AT
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Disallowance of special discount - same is not claimed by filing revised return and claimed by way of a letter during the course of assessment proceedings - the action of the assessing officer in not allowing the claim of the assessee is not correct - AT
Service Tax
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Adjustment of excess service tax paid in advance - the intention of paying advance should be made clear immediately after the payment - it can be seen that the said Service Tax has not been paid as advance on his self assessment - Rule 6(1A) is not applicable - benefit of Rule 6(4B) has been allowed by Commissioner (Appeals) - No interference - AT
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Refund claim - whether the refund of rebate of the tax paid on input services is to be allowed to respondent or otherwise? - In the absence of any time limit in the notification, reliance on provisions of Section 11B to reject the refund claims as time barred seems to be incorrect. - AT
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100% EOU - Refund claim - rejection on the ground that the appellants are only registered under the taxable category of Information Technology Service and are not eligible for refund in respect of BPO services for which they are not registered - denial of refund of Cenvat credit is not justified - AT
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VCES Scheme - petitioner submitted a declaration form in which he had wrongly declared that no inquiry or investigation or audit is pending against him which is a basic disqualification to avail the benefit of the Scheme, therefore, by virtue of Section 106 the declaration submitted by the petitioner was liable to be rejected - HC
Central Excise
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SSI Exemption - use of brand name of others - Kanachur is the name of the village and cannot be appropriated as a brand name - also, the proprietor of the appellant was earlier the partner in M/s. Kanachur Boards who were using a similar brand name - benefit of exemption allowed - AT
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CENVAT credit - the apex court in its various decisions has excluded only things of the type such as building or tree which get fixed to the earth - both blast furnace and coke oven batteries cannot be considered to be in the same category as building or tree - credit allowed as capital goods - AT
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The appellant had claimed that even if the lessor had availed depreciation, the CENVAT credit cannot be denied on such capital goods in the hands of lessee. The argument is fallacious inasmuch as the credit is allowed on the capital goods and not on qua manufacturer or lessor of the capital goods - AT
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Personal penalty on the Director - from the evidences as recorded and analysed in the impugned order, the role of the Director has not been specifically discussed and brought out the fact that non-payment of duty was at his instance. In these circumstances, the personal penalty on the Director is unwarranted and accordingly set aside. - AT
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CENVAT credit - duty paying documents - the irregularity, if at all, was procedural and when it was further found that the records were available for the Revenue to verify the correctness, the Tribunal, rightly did not disentitle the assessee from the entire Cenvat credit availed for payment of duty - AT
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Valuation - packing charges - the assessee has under obligation to refund the amount of packing, which is not in dispute in the present case - the packing charge of ₹ 2 per kg collected by the appellant from their customer is not includible in the assessable value - AT
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Valuation - freight - there is no doubt that even though the freight was paid by M/s TISCO, since invoice does not show freight separately, the freight is deemed to be included in the invoice value - AT
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Valuation - inclusion of notional interest - The respondent paid the duty on the sale price of M/s. MFIL, which includes all the expenditure and profits of respondent as well as of M/s. MFIL. Therefore in such situation nothing left to be further included in the sale value - AT
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Manufacture of readymade garments - except the part of the embroidery process, which was carried through pedal operated machine, most of the processes such as painting/ornamentation was done manually. Hence the goods is correctly classifiable as handicrafts - AT
VAT
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Questions framed by the tribunal to by answered by the High Court - though it is a mixed question and could not have been entertained in appeal unless a foundation was laid for the same before the Assessing Officer and the First Appellate Authority, that objection is rejected and the question is entertained - HC
Case Laws:
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Income Tax
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2017 (2) TMI 1108
Penalty levied u/s 271(1)(c) - assessee has wrongly claimed deduction u/s 80IB - Held that:- Where there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false, there is no question of inviting penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to inaccurate particulars. In the present case, the assessee had given reason for claiming deduction u/s 80IB. The assessee had correctly disclosed the quantum of investment in plant and machinery in the return of income. The conduct of the assessee clearly show the bona-fide belief that the assessee had about its eligibility for claiming deduction u/s 80IB of the Act. Although vide subsequent notification dated 10.12.1999, the assessee ceased to be SSI undertaking. The assessee had made full disclosure of income in return of income, as well as before the Assessing Officer at the time of assessment proceedings. Therefore, in our considered opinion, it is not a case which would attract levy of penalty. We concur with the findings of Commissioner of Income Tax (Appeals) in deleting the penalty. - Decided in favour of assessee.
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2017 (2) TMI 1107
Reopening of assessment - sanction received from the Commissioner - reasons for the notice under section 154 relied upon - Held that:- The first aspect is the date on which the reasons were recorded, which is given in the copy of reasons filed on record, which is dated 04-09-2014, for which the sanction was received from the Administrative Commissioner on 11-08-2014. As is the requirement under section 151 of the Act, the reasons ought to be recorded first for reopening the assessment and thereafter the sanction is to be received from the Commissioner and on receipt of such sanction the notice is to be issued u/s 148. The same has not been followed in this case. The said initiation of reassessment proceedings is incorrect as the same is without the sanction of Administrative Commissioner and hence cannot be upheld. The second aspect is for issuing the said notice under section 148 of the Act. The satisfaction of the Assessing Officer that there is escapement of income in the hands of the assessee is of the Assessing Officer himself and not of any other party as pointed out in the paras hereinabove. The basis for recording the reasons for reopening the assessment is the audit objection raised in the case of assessee. The Assessing Officer while passing assessment order dated 23-03-2015 categorically admits that “however consequent upon audit objections by the internal audit party vide their audit query dated 02-02-2012, the case was reopened u/s 148 after obtaining prior approval of the Commissioner of Income-tax-II, Nashik.” where the initiation of reassessment proceedings are on the basis of audit objection and not on the basis of independent satisfaction of Assessing Officer and hence not valid, is the issue before us. The reassessment proceedings initiated in the case are without any jurisdiction as the Assessing Officer had no occasion to believe that there was escapement of income in the hands of the assessee and hence no merit in recording of reasons for reopening the assessment under section 147 and issue of notice under section 148 of the Act and thereafter completion of assessment under section 143(3) r.w.s.147 of the Act. Hon’ble High Court of Calcutta in the case of Berger Paints India Ltd. Vs. ACIT [2009 (8) TMI 557 - CALCUTTA HIGH COURT] on such issue held that where the reasons quoted for reopening the assessment were practically the same as the reasons for the notice under section 154 of the Act for rectification of the alleged mistakes and where rectification notice had been dropped by the same Assessing Officer, he could not again start reassessment proceedings on the basis of same reasons. - Decided in favour of assessee.
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2017 (2) TMI 1106
Additions on account of Keyman Insurance Policy on account of disallowance of commission under Section 40A(2)(a) and 40A(2)(b) - Held that:- Tribunal has taken into account the position of two Directors and they were certain key-persons keeping in view Sec.40(2) and has arrived arrived at a conclusion that the Insurance Policy could not have been rejected in the manner and method it has been rejected and he has upheld the view taken by the CIT(A). This Court is of the considered opinion that the findings of fact arrived at by the Income Tax Appellate Tribunal are purely findings of facts and no substantial question of law arises in the present case. In absence of any substantial question of law, the question of interference by this court in the peculiar facts and circumstances of the case, does not arise.
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2017 (2) TMI 1105
Exemption u/s. 11 - assessee was registered as a Charitable Organization with DIT (Exemption), Mumbai, u/s. 12A and also with Charity Commissioner of Mumbai and was running a hospital and medical research centre - Held that:- It is noted that Ld. CIT(A) has reversed the order of the AO and allowed the relief of the assessee relying upon his own order for earlier year and decision of Hon’ble Bombay High Court in the case of Baun Foundation Trust [2012 (4) TMI 172 - BOMBAY HIGH COURT] while deciding this issue, Ld. CIT(A) has not discussed at all actual facts of the case as were involved in the year before us. Therefore, we find it appropriate to send this appeal back to the file of Ld. CIT(A) who shall decide this appeal afresh after taking into account fact of this case more specifically on those issues as were raised by the Ld. DR before us. He shall also take into account, the decision relied upon by the Ld. Counsel before us, and adequate opportunity of hearing shall be given to the assessee to file written submissions and evidences before passing the appeal order. Ld. CIT(A) shall take into account entire material as may be placed on record by the assessee and shall pass detailed and well reasoned order after discussing facts of this case as well as applicable legal position. The assessee shall be free to raise all the legal and factual issues as may be considered appropriate. With these directions this appeal is sent back to the file of Ld. CIT(A). - Decided in favour of Revenue for statistical purposes.
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2017 (2) TMI 1104
Penalty u/s 271(1)(c) - addition on bogus purchases - Held that:- The basis adopted by the Assessing Officer for making addition or disallowance may or may not be justified as far as legality of the addition made in the quantum proceedings is concerned, but for levy of penalty these basis are indeed insufficient and not tenable in the eyes of Law. It is well established law that parameters for making the addition/disallowances are a different from levy of the penalty u/s 271 (1) (c) of the Act. There may be cases where claim of the assessee may remain unproved during the course of assessment proceedings for want of substantiation, but for the purpose of levy of penalty the AO is required to ‘disprove’ the claim of assessee. The AO must show that the claim of the assessee is bogus or false. In the facts of this as were brought before us, in our opinion, the claim of the assessee was not proved as bogus or false. The AO levied the penalty merely on the basis of his allegations which were unsupported with any cogent material or evidences. We find that in the facts as have been brought out before us, the case of the assessee should not have been visited with levy of penalty. The assessee brought on record all the primary evidences as could have been adduced by the him, but AO did not place on record even a single piece of evidence to controvert or negate the evidences brought on record by the assessee. Thus, the peculiar facts of this case do not permit the AO to levy penalty on the assessee. - Decided in favour of assessee.
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2017 (2) TMI 1103
Disallowance under Section 54B - whether as fund was flown from the account of assessee, it makes no difference if the assessee does not include his own name? - Held that:- The Tribunal while dismissing the appeal of the Revenue has corectly held that the assessee has purchased the agricultural land and, therefore, the order passed by the Income Tax Appellate Tribunal is just and proper. It is not the case of the revenue that from the sale proceeds of the agricultural land earlier owned by the assessee, the land in question was purchased for any other purpose than the agricultural purpose. Undisputedly, the purchased land is being used by the assessee only for agricultural purpose and merely because in the sale deed his name was not written the ITAT has rightly come to the conclusion that it does not make any difference because the purchased land is being used by the assessee for agricultural purposes. It is not the case of the revenue that the said land is being used exclusively by someone else. See Commissioner of Income Tax, Ludhiana-I Versus Shri Gurnam Singh [2008 (4) TMI 28 - PUNJAB AND HARYANA HIGH COURT] - Decided against revenue.
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2017 (2) TMI 1102
Revision u/s 263 - irregular capital assets - Held that:- The A.O. while examining the facts as provided by the assessee found them to be correct. One fact, which came to light was that there was a change in the constitution of the firm in the second period i.e. from 01.11.2002 to 31.03.2003 and upon examining them also the facts have been found to be correct in respect of the fixed assets. The Tribunal further records that no defects were pointed out either by the A.O. or by the CIT while examining the books of account of the assessee. The Tribunal has, therefore, come to the conclusion that two essential ingredients of Section 263 of the Act are not attracted in the present case (A) no error has been found in the decision taken by the A.O. and (B) no prejudice to the revenue has been found in respect of the books of account of the assessee. Insofar as the capital assets of the assessee are concerned, the details with regard to the capital assets and his partners have also been examined and no irregularity was found in that also. Thus the provisions of Section 263 of the Act are not attracted in the present case. The Tribunal has taken the correct view. The questions of law are, therefore, answered in favour of the assessee and against the department.
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2017 (2) TMI 1101
Income arising on sale purchase of shares - ‘income from business’ OR "Capital gain" - Held that:- Assessee has always disclosed the amount of shares as part of ‘investments’ and the resultant gain on sale of shares was assessed as‘income from capital gains’. The claim of assessee has always been accepted as such except in this year. Further, Ld. CIT(A) has held that the holding period of the shares even in those cases where short term capital gain has been earned was like 117 days, 300 days, 344 days and 144 days etc. AO has discussed in the Assessment order at page 12 about only part of the transactions wherein shares were held for only few days. It was shown that the gains/loss incurred on such shares constituted for not more than one-third of the total amount of short term capital gain disclosed by the assessee in its return of income. Thus the gain earned by the assessee has rightly been shown as ‘income from capital gains’. The findings recorded by Ld. CIT(A) are well reasoned and correct in view of the facts of this case as well as under the law. - Decided against revenue
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2017 (2) TMI 1100
Additional depreciation on diagnostic/service equipments claimed as a deduction u/s. 32 (1) (iia) - Held that:- Section 32(1)(iia) does not state that setting up of a new machinery or a plant, which was acquired and installed after 31.03.2005, should have an operational connectivity to the article or thing that was already being manufactured by the assesse. Therefore, the reasoning of the Ld. AO that the vaporizers, has nothing to do with the manufacturing of articles etc., is totally not germane to the specific provision contained in section 32 (1) (iia) of the Act. In the light of the above that discussion, we hold that the assessee is eligible for additional depreciation on vaporizers u/s. 32(1) (iia) of the Act. - Decided in favour of assessee
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2017 (2) TMI 1099
TDS u/s 195 - Non deduction TDs on remitting charter payments (hire charges) to Foreign Shipping Companies - whether payment made for using ship on time chartered basis to non-resident shipping company amounts to ‘royalty’ since ship is equipment? - question of invoking sec.172 - DTAA - Held that:- In this case, the requisite approvals have to be obtained from Maritime Authorities to hold and operate the vessels. It is not the case that anybody or everybody can operate a vessel. The powers of charterer (in this case this assessee) under the time charter agreement is extremely limited like the charterer cannot dry-dock the vessel and the vessel is operated by its Captain/Master and its crews, who are appointed by the ship owner and not by the charterer (the assessee). There is a distinction between ‘letting the asset’ and ‘use of asset’ by the owner for providing services. The payment made for the use of asset by owner for the purposes cannot be tantamount to a ‘royalty’. In this case, the consideration is not for use of the ship only, but also for the services of moving the goods by a fully manned ship. In the decision of Asia Satellite Telecommunications Co. Ltd. (2011 (1) TMI 47 - DELHI HIGH COURT ) the payment so made by the assessee cannot be treated as royalty for he use of industrial or commercial or scientific use of the equipment. The Id. CIT(A) should have appreciated that the case has only booked the freight space in the ship (time charter) and has not taken the vessel on hire, it is done under what is called “bare boat charter. Therefore, the payment made in this case would not constitute ‘royalty’ paid for the use of industrial, or commercial, or scientific equipments. The essence of the time charter agreement executed between the parties speaks clearly that the asessee can utilize the space in the vessel and not that the assessee is authorized to operate or exercise control over the vessel. In the case of CBDT vs. Chowgule & Co. Ltd. [1991 (6) TMI 53 - KARNATAKA High Court] and in the case of Kar and Lima Lettoa & Co. Ld. Vs. UOI [1967 (11) TMI 27 - GOA High Court] has held that section 172 is a complete code by itself. Thus, the amount paid by the assessee to the FSC on time charter agreement would not amount to ‘royalty’ neither under Explanation 2 or under section 9(1)(b)(ii) or under the DTAA and in this case only section 172 applies. This, no tax is needed to be deducted at source under section 195 as the amount paid does not amount to ‘royalty’. Therefore, the disallowance under section 40(a)(i) for non-deduction at source on the amount paid to FSC for the time charter hire is erroneous. - Decided in favour of assessee.
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2017 (2) TMI 1098
Bifurcation via statutory disallowances under section 14A , 36(1)(va) and disallowance of claim under section 80IA - Held that:- The first two items of the table i.e. ₹ 25,98,406/- and ₹ 17,476/- have been added by the Assessing Officer to the total income of the assessee separately and, hence, no such addition could be made as a part of additional income declared. Further, the Assessing Officer himself has stated that the statutory disallowance cannot form part of the declaration and, hence, he has rejected such break-up. Here, we are in agreement with the view of the Assessing Officer that statutory disallowance cannot form part of adhoc declaration. However, the correctness of the addition on account of adhoc declaration has to be examined on the strength of its own merit, accordingly we confirm the addition of ₹ 1,99,850/-, ₹ 5,17,000/-, ₹ 23,42,900/- and ₹ 3,88,377/-. The last amount of the table being ₹ 2,39,35,991/- being disallowance of the part of the claim u/s. 80IA(4) of the Act is again a statutory disallowance and cannot form part of disclosure. In any case, the issue of disallowance of the claim u/s. 80IA(4) of the Act is subject-matter of Departmental appeal before us.By following the order of Tribunal in assessee s own case, we have deleted the disallowance of deduction claimed u/s.80IA(4). Thus, the ad hoc addition of ₹ 3 crores (and for that matter the adhoc addition of ₹ 1 crore) cannot be supported by any figures mentioned in Annexure A-2 or Annexure A-3. As Board itself is of the view that in the absence of credible evidence the confessional statement would not serve any useful purpose. In fact going further i.e. from 10.03.2003 onwards, the Board mandatorily directed the officers that while recording statement, no attempt should be made to obtain confession as to the undisclosed income. Therefore, in the present case not only the recording of confessional statement but making the addition solely on the basis of the statement is against the binding instructions of the CBDT. In view of the above discussion, we confirm the addition of ₹ 1,99,850/- ₹ 5,17,000/-, ₹ 23,42,900/- and ₹ 3,88,377/- out of the total addition made by AO.
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2017 (2) TMI 1097
Deduction u/s 80IB - ground of the assessee for claiming the deduction was that it had started production in AY 2004-05. AY 2006-07 is the third year - Held that:- Deduction under section 80IB was granted in Asstt.Year 2005-06 in a scrutiny assessment. CIT(A) while considering this aspect made reference to the decision in the case of Saurashtra Cement & Chemical Industries Ltd. vs. CIT (1979 (2) TMI 21 - GUJARAT High Court) and has observed that without disturbing relief granted in the earlier years, the AO cannot examine the question again and decide to withhold or withdraw the relief which has already been granted in the earlier year. We are conscious of the fact that assessment in Asstt.Year 2005-06 was reopened and in re-assessment, this deduction was denied. But it is pertinent to note that assessment was reopened for the reasons that deduction in A.Y.2006-07 was denied to the assessee. It was not reopened that something new was found and came to the possession of the AO. He has re-appreciated these very circumstance on the strength of the finding recorded in Asstt.Year 2006-07. The assessee has demonstrated that electricity consumption was very less on this machinery and maximum work was manual. This aspect has been highlighted before the AO in the explanation of the assessee and also before the CIT(A). The ld.AO failed to appreciate this peculiar nature of the assessee’s business. The explanation of the assessee is being noticed by us in page 11 of this order. This explanation justifies the consumption of low electricity. This fact can be cross verified with the letter of machinery manufacturer at page no.27 of the paper book. The second reason assigned by the AO is that the assessee failed to give capacity of manufacturing of goods of each machine. In this connection, it was pointed by the assessee that major work was manual and number of art jewelleries was solely not depended upon machinery though assistance of machinery was required. As far as objection of the AO with regard nonproduction of day-today production register is concerned, it was pointed out by the assessee that in this line of business it was not possible to maintain such details. The assessee-firm was not manufacturing proto-type of jewellery. It has produced variety of items containing numerous designs, shape, size and specification. It is not feasible or possible to maintain any quantitative records on daily basis. With regard to non-production of challans and transport bills are concerned, the assessee pointed out to the AO that jewellery by its nature is a very small item and it is not being transported through transporter. These items were carried out by its employees or by the purchasers. Help of transporter would not be required in this line of business. It is also pertinent to observe that the AO wants to prove certain negative facts, i.e. to demonstrate how 12 persons can produce jewellery having value of ₹ 3.18 crores. Now, it is very difficult situation for any assessee to explain. The assessee has submitted all its details and pointed out how it has produced. Before the ld.CIT(A) detailed written submissions were made which have been noticed exhaustively, and thereby the ld.CIT(A) has accepted the claim of the assessee. After going through the detailed finding of the ld.CIT(A) we do not see any reason to interfere in it. Accordingly, all the appeals of the Revenue are dismissed.
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2017 (2) TMI 1096
Unexplained cash credits u/s. 68 - Held that:- No hesitation in holding that the assessee has successfully discharged the initial onus cast upon it by the provisions of Section 68 of the Act. We, therefore, do not find any merit in the impugned additions made by the A.O. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the addition Disallowance of interest paid to the cash creditors on the ground that the cash credits were held as non genuine - Held that:- Since, we have directed the A.O. to delete the additions made on account of unexplained cash credits, there remains no reason why the interest paid on such cash credits should be disallowed. We, therefore, direct the A.O. to allow the claim of interest paid to such cash creditors. This ground is also allowed in favour of assessee.
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2017 (2) TMI 1095
Allowability of deduction u/s 80IB - AO denied the benefit of deduction on the ground that assessee’s eligible unit was formed by transfer of plant & machinery which was previously used and it was not new plant & machinery - Held that:- The requisite finding of fact to decide the issue before us is conspicuously missing; therefore we send the matter to the file of the AO. The assessee shall submit all the requisite details and evidences to show compliance of all the conditions of section 10B including the condition of old plant and machinery being less than 20%. The AO shall take into account the facts of the case and also judgements placed by both the sides before us to decide whether the assessee would be eligible to claim the deduction in A.Y. 2006-07 (third year of formation of unit) particularly when all the conditions were not fulfilled in AY 2003-04, being first year of the formation. The assessee shall be free to raise all the legal and factual issues in this regard. With these directions, all the grounds are sent back to the file of the AO and may be treated as allowed, for statistical purposes.
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2017 (2) TMI 1094
Addition u/s 14A qua expenses relatable to exempt income - Held that:- This issue is settled by Income Tax Settlement Commission in its order vide settlement application No.MH/MUCC-4/118/2012-13/IT for the A.Y. 2008-09, the year under consideration, and restricted the disallowance at ₹ 4,24,76,189/-. We direct the AO to adopt the Income as directed by the Income Tax Settlement Commission. This issue of assessee’s appeal is partly allowed. Non-deduction of TDS u/s 40a(ia) - Held that:- Income Tax Settlement Commission has directed that no disallowance on the issue of non-deduction of TDS on income capitalized also short- term and / or non-deduction of TDS on payment made to group entities be not disallowed by invoking the provision of section 40a (ia) of the Act. - Decided in favour of assessee Reduce the value of investment reflected in the balance sheet of the assessee to the extent of brokerage expenses - Held that:- We remand this issue back to the file of the AO with direction to verify whether this amount of ₹ 66.90 loss being brokerage on which TDS is not effected has been capitalized or not. In case these amounts are capitalized and not claimed in the P & L account, the disallowance cannot be made by invoking the provisions of Section 40a(ia) of the Act. In case these are claimed then the assessee is liable to deduct TDS and amount is to be disallowed in the absence of TDS. In term of the above, the issue is remanded back to the file of the AO for verification of the AO.
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2017 (2) TMI 1093
Unaccounted cash for the purchase of property - notings in the loose paper relied upon - Held that:- CIT(A) has rightly concluded that on the examination of the copy of seized documents as provided together with the facts of the case and also considering the glaring mis-matches, there was an absence of independent, reliable, corroborative evidence and therefore it was rightly held by Ld. CIT(A) that the said document, in any manner cannot be held as genuine and reliable to hold that the assessee has paid unaccounted cash for the purchase of property. We are also of the considered view that in the absence of any other corroborative evidence to establish a direct nexus, it cannot be said that the notings in the loose paper are genuine and hence by virtue of said document, the AO could not have hold that undisclosed cash payment of ₹ 1,60,90,191/- has been made by the assessee with his wife. Moreover the Coordinate Bench of ITAT has already adjudicated this issue. No new circumstances or arguments have been brought on record before us by the learned DR in order to controvert or rebut the findings recorded by the learned CIT (A). Moreover, there are no reason for us to deviate from the findings recorded by the learned CIT (A). - Decided against revenue.
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2017 (2) TMI 1092
Taxability of the lease rental income - “Profits and gains of business or profession” or “Income from other sources” - Held that:- It is the claim of the assessee that the income from lease rental should have been taxed under the head “Profit and gains of business or profession”. Subsequent conduct of the assessee prompts us to dismiss this grievance of the assessee because in subsequent years, the assessee itself has shown the lease rental income under head “Income from other sources”. Therefore, without going into the merits of this claim of the assessee and considering the subsequent conduct of the assessee, this grievance of the assessee is also dismissed. Allowability of depreciation, additional depreciation and carry forward of unabsorbed depreciation - Held that:- Coming back to the allowability of depreciation from the income taxed under the head “Income from other sources” in the light of the afore-stated discussions, in our considered opinion, the A.O. ought to have allowed depreciation as per the provisions of the law. Section 32 (1) (iia) contains the provisions for the allowability of additional depreciation. As mentioned elsewhere, u/s. 57(ii) deductions are allowed as provided in Sections 30, 31 & 32 of the Act and since the legislature has not specified any provision in respect of any sub-clause in these sections, all the deductions provided in these sections have to be allowed accordingly.. We accordingly held that the assessee is entitled for additional depreciation and the A.O. is directed accordingly. Unabsorbed depreciation - The definitions of "actualcost" and "written down value" in Section 43. We accept the submissions made on behalf of the assessee that if the unabsorbed depreciation is not allowed to be deducted, the assets which remain the same whether used in business and yielding income from the business or whether they are let out and earn income from other sources, there will be an anomaly as the same assets would have different written down values and different rates of depreciation for the purpose of deductions under Section 57 than that which would be computed if the assets earn business income. Reading the relevant sections, it appears that the scheme of the Act is that the written down value and actual cost for the purpose of sections 32and 57 are meant to be one and the same.We accordingly direct the A.O. to allow the unabsorbed depreciation to be carried forward as per the provisions of the law. Deductions of interest on prorata basis - We find that in A.Y. 2006-06, the assessee has done the business for some part of the year which income has been taxed under the head “Profits and gains of business or profession”. In our considered opinion, the interest should have been allowed on pro rata basis. We accordingly direct the A.O. to deduct interest proportionately from the income taxed under the head “Profits and gains of business or profession” and “Income from other sources”. Invoking the provisions of Section 38(2) of the Act while dismissing the claim of deductions from the head “Income from other sources” - Held that:- Since the assessee has let out its entire premises lock, stock and barrel to Arvind Mills Ltd., in our considered opinion, the provisions of Section 38(2) do not apply on the facts of the case.
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2017 (2) TMI 1091
Penalty u/s. 271(1)(c) - disallowance of expenditure - Held that:- The levy of penalty on the mere disallowance of expenditure cannot be sustained. AO has not made out a case of concealment or furnishing of inaccurate particulars in the order. Just because assessee has not produced the books of account and expenditure claim is unverifiable, it cannot be stated that assessee has concealed particulars of income or furnished inaccurate particulars. As seen from the order, AO has not disallowed any specific expenditure, but made a roundsum disallowance of ₹ 10 Lakhs. He did not even bother to name the nature of expenditure disallowed. In these circumstances, the mere disallowance of expenditure does not attract levy of penalty. Assessee claimed before the AO that the notice does not specify the nature of offence calling for penalty. Assessee has raised an additional ground contesting that the notice issued does not specify whether the proceedings were initiated for ‘concealment of penalty’ or ‘for furnishing inaccurate particulars’. The copy of the notice placed on record do indicate that it is a printed proforma, without striking-off the relevant columns and simply signed by the AO which was served on assessee. On similar facts, the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that the practice of the department sending a printed form where all the grounds mentioned in 271 are mentioned would not satisfy the requirement of law when the consequence of assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 10% to 300% of tax liability. As the said provisions have to be held to be strictly construed, notice u/s. 274 should satisfy the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended, if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on assessee. - Decided in favour of assessee
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2017 (2) TMI 1090
Penalty u/s. 271(1)(c) - unexplained cash deposited in bank - revised return of income filled - suo moto disclosures - Held that:- The assessee in the instant case came forward and filed so called revised return of income on 28-02-2011 albeit beyond stipulated time u/s 139(5) of the Act of 1961 which expired on 31-03-2007 but before issuance of notice u/s 148 of the Act by the Revenue in the month of March 2012 as well the assessee filed affidavit dated 21-03-2011 explaining facts and circumstances under which the said cash of ₹ 1,50,000/- was deposited in his bank account which was not included in the return of income filed with the Revenue which shows and proves bona-fide conduct of the assessee . The assessee had submitted that the said receipt of ₹ 1,50,000/- which was deposited in cash in Bank account with Union Bank of India, Shahad was advised to be tax-free by his tax-expert Advocate for last thirty years. It is also submitted that the assessee being not highly educated person trusted the said advocate tax-expert and did not included the said receipt of ₹ 1,50,000/- in the return of income filed with the Revenue. The assessee had also filed an affidavit dated 21-03-2011 explaining the facts and circumstances wherein the said income was not included as income in the return of income originally filed with the Revenue. Revenue could not controvert the contents of the affidavit filed by the assessee to prove that the said affidavit had a false or untrue averments made by the assessee. Thus penalty levied u/s 271(1)(c) cannot be sustained as the assessee had came forward with an explanation which is a reasonable and bonafide explanation complying with the mandate of Section 271(1)(c) read with explanation 1 and hence penalty levied is hereby ordered to be deleted. - Decided in favour of assessee.
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2017 (2) TMI 1089
Exemption u/s 11 on sale of mutual funds - whether there is no violation of the provision of section 11(5) of the Act for making this investment and moreover profit derived from sale of mutual fund and dividend income, which are shown as surplus and are carried over in the balance sheet, is again reinvested into the specified mode of investment i.e. mutual funds as per section 11(5) of the Act and claimed the same as deemed application of income u/s 11(2)? - Held that:- The assessee is running a school and existing solely for the purpose of education. Due to the reasons of subsidized fee structure expenditures on the education activities always exceed receipts by way of fees from the students. The assessee trust is eligible for the deemed exemption of 15% of the Income during the year under the provisions of sec. 11(1a) of the Act. The assessee is also eligible for the specific accumulation of income under the provisions of sub-section (2) of sec. 11 of the Act. The specific accumulation is for the purpose of having an independent building premise as currently the trust is running the school in the lease premises and there is an existing dispute with the owner of the property in respect of lease premises. The fact that assessee is eligible for the accumulation u/s 11(la) of the Act. We are of the view that under the provisions of sub-sec. of sec. 11 of the Act, there is no lower limit for the lock-in period nor there is stipulation that investments so made cannot be reshuffled during the outer limit of five years’ period. In this context, the AO's observation that one set of mutual funds were divested of within the period of sixty days is untenable. The most importantly during the year, the assessee trust have reshuffled one set of investments only with the purpose of safeguarding interest of the trust and in the view of the apprehension, that value of the mutual fund was fast declining. By doing so, the trustees of the trust have acted, in the best and paramount interests of the trust and not for the purpose of any benefit or a pecuniary gain to any person specified under sub-sec. 3 of sec. 11 of the Act. Again by doing so, the trust have not violated any stipulation or conditions, as a matter of fact there is no stipulation u/s 11(5) of the Act placing restriction on the reshuffle of specified investment. The assessee trust is being assessed to tax for the several year and enjoying benefit of exemption u/s 11 and 12 of the Act and this position has been continuously accepted by the department in the form of assessments/acceptance of the return of income. Moreover, the facts of the case are exactly identical to the facts of the preceding assessment years, hence, according to us the principle of rules of consistency shall apply as laid down by the Supreme Court of India in the case of Radha Soami Satsang Vs. CIT (1991 (11) TMI 2 - SUPREME Court ). - Decided in favour of assessee.
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2017 (2) TMI 1088
Penalty u/s 271(1)(c) - additions on the basis of the ‘material’ gathered by the department during the course of the survey proceedings - non submission of incriminating material - Held that:- The estimation of the income of the assessee firm was duly justified, but then in light of the fact that the lower authorities till date had failed to place on record any such incriminating material gathered during the course of the survey proceedings, which could establish beyond any scope of doubt the ‘concealment of income’ on the part of the assessee, and therein irrebutably prove that the ‘financial statements’ of the assessee firm so filed with the department were far from the true state of affairs, the levy of penalty u/s 271(1)(c) cannot be justified. We are rather surprised to find that despite tall claims that substantial corroborative evidence in the nature of incriminating documents was unearthed by the department during the course of the survey proceedings and Xerox copies of the same had been obtained during the course of the said proceedings, the A.O however only during the course of the original assessment proceedings had only referred to and acted upon a set of 4 documents which were obtained by the survey officials during the course of the survey proceedings for justifying the addition of ₹ 15 lac in A.Y. 1997-98 and ₹ 20 lac in A.Y. 1998-99, which too were undisputedly found to be relatable to the period relevant to A.Y. 1999-2000. We are unable to understand that despite specific directions by the Tribunal to the A.O to make additions on the basis of the ‘material’ gathered by the department during the course of the survey proceedings, what stopped him from so doing. We are of the considered view that such failure on the part of the lower authorities to make and support additions in the hands of the assessee by placing on record ‘material’ obtained during the course of the survey proceedings, can logically only be explained for the reason that there is no such incriminating material pertaining to the year under consideration lying available with the department. We are thus of the considered view that in the backdrop of the aforesaid facts, though on the basis of the conduct of the assessee an estimated addition was justifiably called for and as such made in its hands, but falling short of any such corroborative material which could inescapably and rather irrebutably prove the factum of concealment of income on the part of the assessee firm, the levy of penalty under Sec. 271(1)(c) as regards the said addition which is solely based on a simpliciter estimation of the income of the assessee by the CIT(A), cannot be justified. A perusal of the order of the CIT(A) reveals beyond any scope of doubt that the assessee had only brought to the notice of the CIT(A) the said serious infirmity in the penalty order of the A.O, but had at no stage given up its main contention that no penalty u/s 271(1)(C) was called for in its case. Thus in totality of the facts of the present case, we are of the considered view that the penalty imposed in the hands of the assessee u/s 271(1)(c) cannot be sustained, and therefore set aside the same. The penalty imposed in the hands of the assessee under Sec. 271(1)(c) is thus vacated. - Decided in favour of assessee
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2017 (2) TMI 1087
Reopening of assessment - addition invoking the provisions of Section 40(b) - remuneration paid to partner - Held that:- Any further disallowance made by the AO is not sustainable. First of all, the partnership deed specifies the manner in which the remuneration has to be paid to working partners. AO in the assessment order u/s. 143(3) has examined the claim and disallowed the amount paid to nonworking partner. Thus, the issue presently considered is change of opinion by the same officer. In fact, the circular relied on by the AO was issued way back on 25-03-1996 and has to be very much in the knowledge of the AO when assessment was completed in December 2011. Thus, the reopening and disallowance of the amount is not permissible on these facts. - Decided in favour of assessee.
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2017 (2) TMI 1086
Depreciation on computer systems on the WDV @60% - display system - AO has reduced the depreciation rate claimed at 60% to 15% - Held that:- If the depreciation was allowed at 60%, categorising such equipment as ‘computer systems’ in earlier years on 2008-09 and 2009-10, AO cannot re-classify them in the ‘block of assets’ concept in a later year. He is bound to grant depreciation at 60% only. Apart from that even though the assets involved is a display system, which can be categorised as a ‘computer monitor’ as the results are projected on the big screen in the race course ground. These are part of the display system controlled by computers. In view of that, we find merit in assessee’s contentions. Following the precedence on the issue, as relied on by assessee in various cases, we uphold assessee’s contentions that the display system was entitled for depreciation at 60%. If at all Revenue want to examine the Rate of depreciation, the same could have been examined in AY. 2008-09 i.e., when the said asset was purchased and included in the block of the assets. Since assessee was already getting depreciation at 60%, on the principles of consistency depreciation 60% is to be allowed in the impugned assessment years as well. In view of that, AO is directed to grant depreciation at 60% on the WDV as claimed. Grounds of assessee are allowed.
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2017 (2) TMI 1085
TPA - CIT-A applying Arm’s Length Price @ LIBOR + about 2% (assessee’s appeal in AY 2006-07) and reducing the ALP adjustment of LIBOR+ about 0.75% - Held that:- The correspondence in question is with the assessee’s banker, i.e. State Bank of India, through which the remittance to M/s. Rubamin FZE, UAE was made alongwith RBI approval. Therefore, the document assumes a regulatory character which is in the files of the schedule bank and RBI. The assessee contends that the other copious evidence did not earlier satisfy the TPO about the business exigencies of advancing the loans; hence the additional evidence. A catena of judgments is available by now wherein the LIBOR+ and varying degree of incremental value has been adopted, which is evident from the fact that ld. CIT(A) has adopted a rate of LIBOR+ 2% in AY 2006-07 and 0.75% in AY 2007-08. In the entirety of facts and circumstances, we are inclined to admit the additional evidence and acceding to the alternate request of the ld. DR to remit the issue back to the ld. TPO to decide the same de-novo in view of above observations, for which the assessee has no objection. Allowability of deduction u/s 80IB on the amount of sales tax subsidy - Held that:- Once the sales tax subsidy is held to be Revenue in nature, the same amount becomes the income of the assessee’s industrial undertaking; consequently, deduction u/s 80IB is to be allowed in favour of the assessee. Respectfully following the Hon’ble Supreme Court judgments in the case of M/s. Shree Balaji Alloys [2016 (4) TMI 1161 - SUPREME COURT] & M/s. Meghalaya Steel Ltd (2016 (3) TMI 375 - SUPREME COURT ) this ground of the assessee is allowed. Corporate Guarantee given by the assessee being a domestic transaction is outside the purview of TP provisions is claimed to be covered in favour of the assessee and against Revenue in the case of Micro Inks Limited vs. ACIT, reported in [2015 (12) TMI 143 - ITAT AHMEDABAD] wherein held he issuance of corporate guarantees were in the nature of shareholder activities- as was the uncontroverted claim of the assessee, and, as such, could not be included in the 'provision for services' under the definition of 'international transaction' under section 92 B of the Act.
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2017 (2) TMI 1084
Estimation of gross profit on bogus purchases - rejection of books of accounts - Held that:- Once the rejection of books of accounts are accepted by assessee, the CIT(A) has no option but to estimate profit because the Revenue has not doubted the sales. We also find that the assessee could file the details of purchase and sales i.e. bills and vouchers but could not submit stocks statements. Even parties are not verifiable being Hawala dealers. In such circumstances, only profit rate is to be estimated, which CIT(A) has rightly estimated. However, the rate of profit is a little on lower side reasons being the assessee himself declare profit on the disclosed purchases and sales at 7.87%. But assessee made purchases of these items from Grey market and for that he has saved sale tax, octori tax and other benefits. We are of the view that a reasonable estimate should be made and according to us 10% of profit will made the end of justice. Accordingly, we are directed the AO to apply profit rate of 10% and accordingly assess the income. We directed the AO accordingly and appeal of Revenue is partly allowed.
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2017 (2) TMI 1083
Trading addition - Held that:- We find that during the assessment proceedings, the assessee had not provided quantitative details of opening and closing stock and purchase and sales. From the nature of activity of the assessee, we find that maintenance of day to day stock register is quite difficult in this case. Though the quantitative details of opening and closing stock, purchase and sales help the Assessing Officer to determine the true income but in the absence of such records the best way out to determine the income of assessee is to compare the results with the earlier years as well as with the persons dealing in similar items of trade. The Assessing Officer in this case has compared the G.P rate declared by M/s Jagat Singh & Sons, which were not confronted to assessee. The Ld. AR has further submitted that a trader situated next door to him had declared a lower G.P rate which has not been considered by the Assessing Officer. In view of the above facts and circumstances, we deem it appropriate to remit the issue back to the Assessing Officer who should confront the trading results of M/s Jagat Singh and Sons to the assessee and should also consider the trading results of M/s S H Traders, and after examination of the trading results of these persons should calculate the income by applying the appropriate rate. Needless to say that assessee will be provided sufficient opportunity of being heard. - Decided in favour of assessee for statistical purposes.
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2017 (2) TMI 1082
Disallowance of special discount - same is not claimed by filing revised return and claimed by way of a letter during the course of assessment proceedings - Held that:- The jurisdictional High Court in the case of CIT Vs Pruthvi Brokers and Share Holders Pvt. Ltd (2012 (7) TMI 158 - BOMBAY HIGH COURT ) after considering the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd [2006 (3) TMI 75 - SUPREME Court] held that assessee is entitled to raise not merely additional legal submissions before Appellate Authorities, but is also entitled to raise additional claims before them. Therefore, in view of this decision, the Ld. CIT (Appeals) should not have rejected the claim of the assessee on the ground that the assessee made its claim not in the revised return but in the course of assessment proceedings. He should have entertained the claim even though the assessee made such claim in the course of assessment proceedings. We find that the assessing officer while allowing the claim for deduction of special discount has examined the stand of the assessee and accepted in so far as the special discount. However, he has denied the rest of the amount only on the ground that this amount, since not claimed in the revised return, the same is not allowable. In our opinion, the action of the assessing officer in not allowing the claim of the assessee is not correct. Therefore, we direct the assessing officer to allow the claim of the assessee.
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2017 (2) TMI 1081
Penalty u/s 271(1)(c) - Disallowance u/s 14A r.w. Rule 8D - assessee while making alternative submission conceded the disallowance as the dividend income of the assessee falls under one head of income and the expenses claimed by the assessee were related with the another head of the income - Held that:- We have seen that the assessee has merely claimed the expenses which were not allowable under one head of the income. There is no concealment of income or furnishing of inaccurate particular. It is settled law that in all cases mere disallowance of claim of expenses would not automatically lead to levy of penalty u/s 271(1)(c) of the Act. We may also refer that penalty proceeding are distinct from assessment proceeding. We may note that assessee has made such a claim which was ultimately not allowed. The AO has not brought any new material which may suggest that assessee has concealed any part of his assessable income. The AO has not brought on record as to what facts were unearthed by him which may suggest that the assessee concealed its income. Thus, as per our considered opinion, there was no concealment of income on the part of assessee. Thus, the appeal of the assessee and the penalty levied by AO is deleted. - Decided in favour of assessee
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2017 (2) TMI 1080
Penalty u/s 271(1)(c) - inflation of expenses - addition on the bass of survey - Held that:- There can hardly be any dispute that quantum and penalty are two distinct and independent proceedings wherein each and every disallowance or addition does not necessarily result in penal action under the provisions of the Act. It has already come on record that the impugned additional income is in fact on account of alleged inflation of various heads of expenses in assessee’s construction activity. The department has very much seen assessee’s books in the course of assessment completed after its disclosure in question. It however does not even refer to a single evidence to support its prima facie opinion of inflation of expenses. Something further surprises us is that all the above heads of inflated expenses involve precise round figures which have nowhere been tallied with the actual ones in books of accounts. The Revenue strongly rests its case on assessee’s partners survey disclosure of ₹ 1.3crores and payment of taxes thereupon. It however fails to rebut Board’s circular itself dated 10.03.2003 that no significance is attached to such survey statement in absence of any corresponding evidence being collected. - Decided in favour of assessee
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Customs
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2017 (2) TMI 1057
Detention order - Held that: - even on the basis of preponderance of probability the allegation of import of Ball Bearings in the guise of Borax Decahydrate in the past consignments is not established and that all allegations leveled against Shri Pradeep Ambre are baseless and unfounded - the detention order dated 11th August, 2005, was even otherwise improper and unjustified in view of the factual position - petition allowed - decided in favor of petitioner.
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2017 (2) TMI 1056
Jurisdiction of Commissioner of Customs (Imports) to issue SCN - time limitation - the petitoner has approached the court at its own leisure, whether the delay on the part of petitioner can be condoned?- Held that: - the mere fact that the petitioner approached this Court not too early in the point of time would not disentitle him from claiming reliefs sought in the instant writ petitions - More so, as the petitioner, was at liberty to challenge either the issuance of SCN or, wait till the time a final order was passed. The final order of revocation was passed on 09.02.2015. Insofar as the delay between the date when the revocation order was passed and the writ petitions were presented, the delay has been sought to be explained by the petitioner by taking the stand that the matter was being handled by his Manager who had left his services and therefore, the petitioner was unable to approach the Court with due expedition. This stand is supported by an affidavit which has not been rebutted by the respondent - the stand of the petitioner will have to be accepted, qua, the delay - SCN quashed - petition allowed - decided in favor of petitioner.
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2017 (2) TMI 1055
Rectification of mistake - non-appearance of applicant - ex-parte order - Benefit of N/N. 21/2002 - Held that: - this Tribunal cannot re-consider and re-decide the same appeal under the guise of rectification of mistake, which would be in the category of review of its own order, when the said power of review has not been provided to this Tribunal - In this regard, the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Belapur, Mumbai vs. RDC Concrete (India) P. Ltd [2011 (8) TMI 25 - SUPREME COURT OF INDIA], has held that power to rectify a mistake should be exercised when the mistake is a patent one and should be quite obvious, placing reliance in the case of T.S. Balram v. M/s. Volkart Brothers [1971 (8) TMI 3 - SUPREME Court] - ROM filed by the applicant lack in sufficient force and merit - ROM dismissed.
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Corporate Laws
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2017 (2) TMI 1052
Scheme of Amalgamation - Held that:- It has been stated in the present application that no proceedings, as on date of filing of the present application, under Sections 235 to 251 of the Act or the applicable provisions of the Companies Act, 2013 are pending against the Applicant Companies. The Board of Directors of the Applicant Companies in their separate meetings held on 25.05.2016 and 03.06.2016 have unanimously approved the proposed scheme. Copies of the resolutions passed at the meetings of the Board of Directors of the Applicant Companies have been placed on record. Each of the Applicant Companies has 03 equity shareholders. All the equity shareholders of the Applicant Companies have given their written consent/NOC to the proposed scheme. Their written consent/NOC has been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meeting of the equity shareholders of the Applicant Companies to consider and, if thought fit, approve, with or without modification, the proposed scheme is dispensed with. There are no secured and unsecured creditors of the Transferor Companies; therefore the question of requirement of convening meetings thereof does not arise. The Transferee Company has 05 secured creditors. All the secured creditors of the Transferee Company have given their written consent/NOC to the proposed scheme. Their written consent/NOC has been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meeting of the secured creditors of the Transferee Company to consider and, if thought fit, approve, with or without modification, the proposed scheme is dispensed with. The Transferee Company has 62 unsecured creditors. 59 out of the 62 unsecured creditors (representing 85% of unsecured debt) of the Transferee Company have given their written consent/NOC to the proposed scheme. Their written consent/NOC has been placed on record. They have been examined and found in order. The requirement of convening the meeting of the unsecured creditors of the Transferee Company to consider and, if thought fit, approve, with or without modification, the proposed scheme is dispensed with.
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2017 (2) TMI 1051
Scheme of Amalgamation - Held that:- Considering the approval accorded by the members and creditors of the Petitioner Companies to the proposed scheme; the report filed by the Official Liquidator & the Affidavit filed by the RD, both not having raised any objection to the proposed scheme; there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme under the provisions of the Act. The Petitioner Companies shall comply with all the statutory requirements, in accordance with law. Upon the sanction becoming effective from the appointed date of the proposed scheme, the Transferor Company shall stand dissolved without undergoing the process of winding up. A certified copy of the order, sanctioning the proposed scheme, be filed with the ROC, within thirty (30) days of its receipt.
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2017 (2) TMI 1050
Restoration of the name of the Petitioner Company - Held that:- The Annual Returns and Balance Sheets of the Petitioner Company from the year 1996 till date, have been filed by the Petitioner Company as annexures to the present Petition. Further, an Affidavit-cum-Undertaking, dated 24.10.2016, has been filed by Mr. Naveen Agarwal, Director of the Petitioner Company wherein he has undertaken to file all the statutory documents, required to be filed under the mandate of the provisions of the Act, from the year 1995 onwards till date, with the Respondent, within a period of 6 weeks from the date of restoration of the name of the Petitioner Company in the Register of Companies maintained by the Respondent. In view of the foregoing, upon considering the facts and circumstances of the present case and in light of the settled position of law, I am of the view that it would be just and proper to order restoration of the name of the Petitioner Company in the Register of Companies maintained by the Respondent.
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Service Tax
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2017 (2) TMI 1079
Adjustment of excess service tax paid in advance - Rule 6(1A) applicable or not? - Held that: - provisions of Rule 6(1A) intend to permit assessee to pay Service Tax in advance. It is not permitted the assessee to deem anything wrongly paid as a result of self assessment as advance. That is the reason that the provisions require that the intention of paying advance should be made clear immediately after the payment - it can be seen that the said Service Tax has not been paid as advance on his self assessment - Rule 6(1A) is not applicable to the current dispute. It is seen that benefit of Rule 6(4B) has been allowed by Commissioner (Appeals) in the impugned order. Appeal disposed off - decided partly in favor of appellant.
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2017 (2) TMI 1078
Refund claim - whether the refund of rebate of the tax paid on input services is to be allowed to respondent or otherwise? Held that: - rebate claims are filed as per N/N. 11/2005-ST dated 19th April 2005. The said notification is issued in exercise of the powers conferred by Rule 5 of the Export of Service Rules, 2005. The said notification does not specify any time limit for fling rebate claims. In the absence of any time limit in the notification, reliance on provisions of Section 11B to reject the refund claims as time barred seems to be incorrect. Similar issue of rejection of rebate claims under N/N. 19/2004-CE dated 6th September 2004, was contested before Apex Court in the case of Dorcas Market Makers Pvt Ltd [2015 (4) TMI 118 - MADRAS HIGH COURT] which was dismissed by Apex Court holding that in the absence of any prescription of time limit in notification, the rebate claims cannot be rejected under Section 11B. Appeal rejected - decided against Revenue.
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2017 (2) TMI 1077
Levy of penalty - Prayer for monthly payment of tax - Held that: - the appellants have not challenged the demand, interest and penalty. The only ground given is that due to poor financial condition, they should be allowed to pay on monthly installment basis. As rightly pointed out by the Ld. AR, there are no provisions in the Finance Act, 1994 for such a facility - The appellants have also not pointed out any legal provisions allowing payment on monthly installment basis. As for Section 80 of the FA, 1994, the appellants have not given reasonable cause in their pleading and simply reproduced Section 80. In the absence of a reasonable cause, the benefit of Section 80 ibid cannot be considered. Appeal dismissed - decided against appellant.
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2017 (2) TMI 1076
Refund claim - rejection on the ground of time limitation as well as the period involved in this case is prior to the issuance of notification - N/N. 11/2007-ST - Held that: - in the refund claims, appellant had not mentioned anything about claiming exemption under N/N. 11/2007-ST. We find that first appellate authority has erroneously recorded the findings on the extending benefit of notification. Provisions of Section 11B Clause (B) (ec) cannot be applied in this case as Section 11B has to be read holistically; which would mean that every refund claim filed has to be considered in terms of provisions and this refund claims of appellant being not in dispute before any higher judicial authority, Section 11B Clause (B) (ec) will not get attracted - refund claims are time barred. Appeal rejected - decided against appellant.
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2017 (2) TMI 1075
100% EOU - Refund claim - rejection on the ground that the appellants are only registered under the taxable category of Information Technology Service and are not eligible for refund in respect of BPO services for which they are not registered - Rule 4A of Service Tax Rules, 1994 read with Sub-Rules (1) and (2) of Rule 9 of the Cenvat Credit Rules, 2004 - Held that: - as per the Rules and the Notification No. 05/2006, dated 14-3-2006 it is not required to be registered under any specific category for claiming the refund as long as the service provider is registered with the Department - The appellants are into the business of IT and IT Enabled services and are not engaged in the business of Call centres, telecasters and customer care service, etc. They only provided technical online services based on the requirement of their client which would fall in the category of ‘Information Technology Services’ for which they are already registered - Therefore, denial of refund of Cenvat credit is not justified. The other ground on which refund of Cenvat credit of ₹ 20,600/- is rejected because the invoice issued by BSNL is not in conformity with Rule 4A and Rule 9 of Cenvat Credit Rules, 2004 is also not justified - This rejection is not justified as the invoice contained all the details except the Service Tax Registration number of BSNL is not mentioned which according to me is only an inadvertent error as the Service Tax Registration number is mentioned in the invoice raised by BSNL for telephone connection. Refund allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1074
VCES Scheme - rejection on the ground that petitioner filed the VCES declaration despite knowing the fact that the SCN to them has been issued for the Works Contract service and by virtue of Section 106(1) of the Finance Act, 2013 - Held that: - petitioner submitted a declaration form in which he had wrongly declared that no inquiry or investigation or audit is pending against him which is a basic disqualification to avail the benefit of the Scheme, therefore, by virtue of Section 106 the declaration submitted by the petitioner was liable to be rejected - appeal dismissed - decided against appellant.
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Central Excise
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2017 (2) TMI 1073
CENVAT credit - transfer of credit - denial on the ground that Credit availed on the capital Goods at their new factory premises, however, the capital goods continued to be remain in the old factory premises - Rule 10 of the CCR 2004 - Held that: - as per the provisions of the 10(1), the transfer of Cenvat credit is available only if the manufacturer shifts his factory to another site - However, the appellant have themselves stated that they have continued manufacturing activity at old premises, solely for them; that the old premises was engaged in doing jobs works for the new premises. In this context the appellant plea regarding shifting of their factory to the new premises is not acceptable as manufacturing activity is carried out independently at both the premises - denial of credit justified. CENVAT credit - Input Services - maintenance of Wind Mills outside the factory premises - Held that: - the issue has been settled by the Larger, Bench of the Tribunal in the case of Parry Engg & Electronics Pvt. Ltd. Vs. CCE & ST, Ahmedabad-I, II &III [2016 (1) TMI 546 - CESTAT AHMEDABAD], where it was held that credit is eligible on maintenance or repair services of Windmills, located away from the factory - credit allowed. Penalty u/r 15 read with Sec. 11AC is accordingly, reduced to the extent of inadmissible of Cenvat Credit on Capital goods - benefit of discharging 25% of the penalty is extended to the appellant subject to the fulfilment of conditions laid down under the said provisions. Appeal disposed off - decided partly in favor of appellant.
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2017 (2) TMI 1072
SSI Exemption - use of brand name of others - denial on the ground that appellant found to be clearing the goods with the brand name Kanachur, which did not belong to them - The appellant has claimed that their unit is situated in a rural area, in the village of Permannur which is outside limits of Mangalore City Municipal Corporation. Accordingly, they have claimed that they will be entitled to the SSI notification even if it is considered that they have cleared the goods bearing the brand name of another person. Held that: - Kanachur is the name of the village and cannot be appropriated as a brand name - also, the proprietor of the appellant was earlier the partner in M/s. Kanachur Boards who were using a similar brand name - the Revenue authorities have not brought anything on record to establish that the appellant is not authorised to use the said brand name. Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1071
CENVAT credit - blast furnace - coke oven plant - whether these manufacturing facilities are to be considered as immovable property or as capital goods? - Held that: - Both blast furnace and coke oven batteries are, without doubt, huge structures whose size is required to cater to the size of operation in a steel plant. The sheer size also indicates that these manufacturing facilities cannot be suspended in mid-air and will need to be adequately supported by means of civil foundation and other civil structures. Consequently, both these facilities get supported and embedded to the ground for the purposes of safety and smooth operational efficiency - the apex court in its various decisions has excluded only things of the type such as building or tree which get fixed to the earth - both blast furnace and coke oven batteries cannot be considered to be in the same category as building or tree - it emerges that both manufacturing facilities are to be considered as capital goods. The credit cannot be denied on the ground that duty paid documents are more than a year old. Since there is no time limit provided for taking CENVAT credit under CCR, the same cannot be denied on the ground of delay. The appellants are rightly entitled for capital goods credit on various structural steel items used for setting up the blast furnace as well as coke oven batteries - appeal allowed - decided in favor of appellants.
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2017 (2) TMI 1070
CENVAT credit - whether the appellants are eligible to CENVAT credit on the goods received from M/s B.G. India Energy Services Pvt. Ltd. (known as M/s Gujarat Gas Co. Ltd.) under lease arrangement? - Held that: - the credit cannot be admissible on such capital goods on which depreciation has been claimed u/s 32 of the Income Tax Act, 1961. It is the capital goods which is eligible to depreciation and alternatively CENVAT Credit. The appellant had claimed that even if the lessor had availed depreciation, the CENVAT credit cannot be denied on such capital goods in the hands of lessee. The argument is fallacious inasmuch as the credit is allowed on the capital goods and not on qua manufacturer or lessor of the capital goods. Extended period of limitation - Held that: - the appellant has failed to establish that all the facts were communicated to the Department in 2008 and not suppressed - extended period of limitation has correctly invoked and the demand is not barred by limitation as claimed by the Appellant. Appeal dismissed - decided against appellant.
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2017 (2) TMI 1069
Imposition of penalty u/s 11AC of CEA,1944 against the appellant company - personal penalty u/r 26 of CER, 2002 on the Director - benefit of 25% of penalty u/s 11AC - clearance goods wrongly availing the benefit of Notification at NIL rate, by classifying the goods as Agricultural machineries - Cotton Ginning Machineries falling under Chapter 84, 85 of CETA, 1985 - Held that: - all the facts necessary in the clearance of goods as agricultural machinery had not been disclosed at the time of its removal from the factory. I find the Ld. Commissioner (Appeals) has recorded reasons in justifying the demand as well as imposition of penalty under Section 11AC of the Central Excise Act, 1944 on the Appellant Company. Hence, the same do not call for interference - from the evidences as recorded and analysed in the impugned order, the role of the Director has not been specifically discussed and brought out the fact that non-payment of duty was at his instance. In these circumstances, the personal penalty on the Director is unwarranted and accordingly set aside. As far as Revenue's Appeal is concerned of reduction of penalty to 25%, the issue is no more res-integra and settled by the Hon’ble Gujrat High Court in the case of Commissioner of Central Excise,Surat-I Vs. Krishnaram Dyeing & Finishing Works [2013 (8) TMI 539 - GUJARAT HIGH COURT] - the benefit to discharge 25% of the penalty imposed u/s 11AC of CEA,1944 has been rightly extended to the Appellant by the Ld. Commissioner(Appeals). Appeal disposed off - decided partly in favor of appellants and Revenue's claim rejected.
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2017 (2) TMI 1068
Benefit of N/N. 217/86 dated 1.3.1986 and N/N. 281/86 dated 24.4.1986 - manufacture of measuring and checking instruments, appliances and machinery, checking templates, gauges falling under Chapter Heading 9031 or unloading machinery, lifting tackles, trolleys carriers, conveyors falling under sub-heading 8428.00 of the Central Excise Tariff Act, 1985 - Held that: - on the identical issue, in the appellants own case TATA ENGINEERING & LOCOMOTIVE CO. LTD. Versus COLLECTOR OF C. EX., PUNE [2006 (9) TMI 185 - SUPREME COURT OF INDIA], the Hon'ble Supreme Court allowed the exemption Notification No. 217/86 and 81/86 - it was held in the case on similar issue, that the appellant is entitled for the exemption N/N. 217/86 and 281/86 - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1067
CENVAT credit - Inter-unit transfer - clandestine removal - whether CENVAT credit can be denied on the ground that the dough was cleared clandestinely without payment of duty from one unit to another of the same company? - Held that: - the Appellant has remitted the duty and is thus entitled to the credit claimed. The embargo in terms of Rule 9(b) of the CENVAT Credit Rules 2004 is not attracted in the facts and circumstances - Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1066
100% EOU - CENVAT credit - demand on the ground that excess credit availed on education cess and SHEC - Held that: - in the judgement of Tribunal in the case of M/s Emcure Pharmaceuticals Ltd [2008 (1) TMI 147 - CESTAT, MUMBAI], it has been categorically observed that the respondent are eligible to avail CENVAT credit on Education Cess and Secondary Higher Education Cess, after interpreting the relevant Rule 3 (7) (a) of CCR, 2004 - credit allowed - appeal dismissed - decided against Revenue.
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2017 (2) TMI 1065
Benefit of N/N. 64/95 dated 16.03.1995 - denial on the ground that the exemption was available only to system and sub-system of launch vehicles and sub-system satellite project while the appellants were not manufacturing the same but were manufacturing cables which were neither the system nor sub-system of launch vehicles and/or satellite - Time limitation - Held that: - if at all the department had opinion that the exemption notification is not applicable to the appellant they could have very well initiated the action by issuing show-cause notice within a period of one year from the relevant date, which the department failed to do so - There is no suppression of fact on the part of the appellant therefore, the demand invoking the proviso to Section 11A(1) could not have been made - appeal is allowed on the ground of limitation, without going into merit of the case.
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2017 (2) TMI 1064
Valuation - demand on the ground that the value of the comparable goods is more than the value at which the appellants have cleared the goods to AWCICL - Held that: - the sale transaction to the independent buyer is a vital factor to arrive at the correct assessable value. Since this aspect has not been looked into by both the lower authorities, obviously because the appellants also have not submitted the details to lower authorities. Therefore, the matter needs to be remanded to the original authorities - appeal allowed by way of remand.
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2017 (2) TMI 1063
CENVAT credit - input services - insurance on plant & machinery - Company vehicle insurance - Repair & Maintenance, compliance of Regulatory bodies - Inspection and Testing - erection & Commissioning of Fire equipment - Rent-a-cab service for the employees - Held that: - most of the services on which credit availed are held to be ‘Input Service’ as defined under Rule 2(l) of CCR 2004, in the various decisions, hence eligible to Cenvat Credit. Repair and Maintenance Service - Held that: - service being undertaken at the residential premises is not admissible to credit in view of the judgment of the Hon’ble Gujarat High Court in the case of CC Vs Gujarat Heavy Chemicals [2011 (5) TMI 132 - GUJARAT HIGH COURT]. Since, major portion of the credit availed is held to be admissible, penalty confirmed on the Appellant is set aside. Appeal disposed off - decided partly in favor of appellants.
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2017 (2) TMI 1062
CENVAT credit - duty paying documents - denial of credit on the ground that the input service invoices were in the name of their Head Office, at Mumbai, which was not registered as an Input Service distributor - Held that: - the issue is covered by the decision of Hon’ble Gujarat High Court in the case of Dashion Ltd [2016 (2) TMI 183 - GUJARAT HIGH COURT], where it was held that when it was found that full records were maintained and the irregularity, if at all, was procedural and when it was further found that the records were available for the Revenue to verify the correctness, the Tribunal, rightly did not disentitle the assessee from the entire Cenvat credit availed for payment of duty - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1061
Valuation - packing charges - durable and returnable packaging - Held that: - it is settled law that packing cost of durable and returnable packing is not includible in the assessable value. The terms regarding charges of ₹ 2 per kg and refund of the same in the event of return of metal barrels by the customer are known to the customer - it is been settled position that even though physically the durable and returnable packing is not returned still cost of the same cannot be included in the assessable value. The only requirement is that there should be a condition between the manufacturer, supplier and the customer that if the durable and returnable packing is returned, the assessee has under obligation to refund the amount of packing, which is not in dispute in the present case - the packing charge of ₹ 2 per kg collected by the appellant from their customer is not includible in the assessable value - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1060
Valuation - freight - job work - Held that: - except conversion charges all the elements including freight stand included in the value of the raw material cost. Therefore, the said price is clearly landed price of the raw material in the hands of respondent. For, this reason also, no further addition is required to be made such as freight in the assessable value of the respondent s product - there is no doubt that even though the freight was paid by M/s TISCO, since invoice does not show freight separately, the freight is deemed to be included in the invoice value. Therefore, the proposal to add the freight amount over and above the invoice value of the raw material is not based on evidence - appeal dismissed - decided against Revenue.
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2017 (2) TMI 1059
Valuation - inclusion of notional interest in assessable value - the respondents have paid duty on the ultimate sales price to its dealers/customers - Held that: - the notional interest can only be added, in case the respondent valued their goods on cost construction method or if the goods is sold by the respondent to M/s. MFIL at a price lower than the price at which M/s. MFIL sold the vehicle - The present case does not fall under any of these two categories. The respondent paid the duty on the sale price of M/s. MFIL, which includes all the expenditure and profits of respondent as well as of M/s. MFIL. Therefore in such situation nothing left to be further included in the sale value of the M/s. MFIL on which the excise duty was discharged. Notional interest need not be included in assessable value - appeal dismissed - decided against Revenue.
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2017 (2) TMI 1058
Benefit of N/N. 76/1986-CE dated 10.2.1986 - manufacture of readymade garments falling under Chapter 6201 of Central Excise Tariff Act, 1985 - denial on the ground that for the manufacture of readymade garments machines were used - whether the goods can be classified as handicrafts or not so as to avail benefit of Notification - Held that: - The Hon'ble Supreme Court in the case of Louis Shoppe [1995 (3) TMI 108 - SUPREME COURT OF INDIA] has held that even if some machine is used in the process, the goods would still be treated as handicrafts and that handmade readymade garments would be treated as handicraft and accordingly eligible for exemption under N/N. 76/86. Board s Circular No. 773/6/04-CX dated 28.1.2004, clarified that classifying the goods as handicraft one or more of the process such as hand painting or hand printing or handicrafts Tie and Dye or handicrafts Batik, embroidered or crocheted ornamentation, appliqui work of sequins, glass or wooden beads, shells, mirrors or Ornamental motifs of textiles and other materials, extra warp/wept ornamentation of cotton, silk, zari (metal thread in Gold/Silver) wool or any other fibre yarn can be carried out. In the facts of the present case, except the part of the embroidery process, which was carried through pedal operated machine, most of the processes such as painting/ornamentation was done manually. Hence the goods is correctly classifiable as handicrafts - benefit allowed - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (2) TMI 1054
Questions framed by the tribunal to by answered by the High Court - Tribunal jurisdiction to frame the question in reference application - question of law or facts - Held that: - hen an objection was raised by the dealer that a certain question is being entertained by the Tribunal for the first time, though it is a mixed question and could not have been entertained in appeal unless a foundation was laid for the same before the Assessing Officer and the First Appellate Authority, that objection is rejected and the question is entertained. After that question is answered in the judgment on the substantive appeals, the Tribunal does not feel that the same needs to be referred further for opinion and answer of this Court. The Revenue's request to forward it and purporting to be arising out of a ground of classification of goods, therefore, was termed as not giving rise to any question of law. It is forwarded at the instance of the Revenue and the Revenue does not desire to give any assistance to the Court or seek an answer or opinion of this Court on this question. Though it is stated to be of law and termed as such by the Tribunal, we have no alternative but to return this Reference unanswered - reference returned unanswered.
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2017 (2) TMI 1053
Building of storage terminals for the benefit of NOCL - the agreement required the petitioner to design; to provide engineering; to procure the requisite construction materials; and to erect the terminal - whether the agreement entered into between the petitioner and NOCL is, in the nature of works contract? - maintainability of petition on the ground of alternate remedy - Held that: - the fact that time was spent by the petitioner in prosecuting the writ petitions in this court would have to be taken into account, if, appeal(s) are preferred by the petitioner, vis-a-vis, the impugned orders. In this regard, the petitioner can have recourse to, if not Section 14 of the Limitation Act, 1963, surely, to the principles analogous to the said provision - Section 14 of the 1963 Act, applies to quasi judicial authorities. The writ petitions dismissed, giving liberty to the petitioner to approach the concerned statutory authority by way of the remedy available under the statute - decided against petitioner.
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Indian Laws
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2017 (2) TMI 1049
Scope for registration of the Reference sought for by the respondent No. 1 company under the provisions of the SICA - Power and jurisdiction of the Registrar and Secretary to refuse registration of the application for reference made by the respondent company - Held that:- When the Regulations framed under the statute vests in the Registrar or the Secretary of the Board the power to “scrutinize” an application prior to registration thereof and thereafter to register and place the same before the Bench, we do not see how such power of scrutiny can be understood to be vesting in any of the said authorities the power to adjudicate the question as to whether a company is an industrial company within the meaning of Section 3(e) read with 3(f) and 3(n) of the SICA. A claim to come within the ambit of the aforesaid provisions of the SICA i.e. to be an industrial company, more often than not, would be a contentious issue. In the present case, it certainly was. The specific stand of the respondent No. 1 company in this regard need not detain the Court save and except to state that by a detailed description of the manufacturing process the respondent No. 1 company had sought to contend that it is an industrial company. Surely, the rejection of the above stand could have been made only by a process of adjudication which power and jurisdiction clearly and undoubtedly is vested by the SICA and the Regulations framed thereunder in a Bench of the Board and not in authorities like the Registrar and the Secretary. The High Court, in view of what has been discussed above, was correct in coming to the conclusion that the refusal of registration of the reference sought by the respondent Company by the Registrar, Secretary/Chairman of the Board was non-est in law. The reference must, therefore, understood to be pending before the Board on the relevant date attracting the provisions of Section 252 of the Insolvency and Bankruptcy Code. Whether the reference before the Board stood foreclosed by the order of winding up of the respondent Company and the appointment of liquidator was answered in the negative by HC relying on Real Value Appliances Ltd. (1998 (5) TMI 334 - SUPREME COURT OF INDIA ). The core principles laid down in the said decisions of the Court, namely, that immediately on registration of a reference under Section 15 of the erstwhile SICA, the enquiry under Section 16 is deemed to have commenced and that the winding up proceedings against a company stood terminated only after orders under Section 481 of the Companies Act, 1956, are passed, will have to be noticed to adjudge the correctness of the said view of the High Court. In any event, the aforesaid question becomes redundant in view of our conclusion that the reference sought by the respondent Company must be deemed to have been pending on the date of commencement of the Insolvency and Bankruptcy Code, particularly, Section 252 thereof (effective 1.11.2016). We, therefore, dispose of the appeal by holding that it would still be open to the respondent Company to seek its remedies under the provisions of Section 252 of the Code read with what is laid down in Sections 13, 14, 20 and 25. We make it clear that we should not be understood to have expressed any opinion on the scope and meaning of the said or any other provisions of the Code and the adjudicating authority i.e. National Company Law Tribunal would be free and, in fact, required to decide on the said questions in such manner as may be considered appropriate.
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