Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 9, 2015
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
Articles
Highlights / Catch Notes
Income Tax
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Interest expenditure which is otherwise allowable deduction u/s 36(1)(iii) but deffered as per the provisions of section 43B cannot be disallowed because of the reason that the payment is not in cash but by issuance of share capital. - AT
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Accrual of income - brokerage on new issue of shares (IPO) - double taxation - all the income earned at the first stage has to be treated as income of the assessee company. The doctrine of overriding title cannot be applied to the case of the assessee company. - AT
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Penalty under section 271D for violation of provisions of section 269SS - Amounts towards share application money during the year were some times returned to the said person and only net amount of outstanding amount at the end of the year was transferred by a journal entry. - No penalty - AT
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Advance for the sale of property - receipt cannot be brought to tax in the hands of assessee as (a) he is not owner of the property (b) he was not trading in the said property (c) it is not received in the year under consideration. - AT
Customs
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Imposition of penalty - Unlawful import of goods - proceedings under tax legislation such as the FCRA or the Customs Act do not require the prosecution to discharge the criminal-law burden of proof beyond reasonable doubt. - HC
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When a consumer imports or purchases goods for industrial use, which in this case, since the process amounts to manufacture it can be said as industrial use, such purchase/imports are exempt from the provisions of LM (PC) Rules - stay granted - AT
Wealth-tax
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Levy Penalty - even in response to notices issued by the AO for the second time u/s 17, the assessee did not disclose the value of motor cars by filing fresh returns of income and instead filed a letter stating that returns of wealth already filed by it may be treated as returns filed in response to the said notices - penalty confirmed - AT
Service Tax
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Liability to pay service tax in respect of 24 flats handed over to the land owner - If there is no monetary consideration in the transaction, then Section 65 of the Finance Act, 1994 provides for various methods for valuation - prima facie case is against the assessee - HC
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Levy of service tax on construction for Hospital - merely because the hospitals were constructed for the charitable organisations do not make the hospitals per se non-commercial. Indeed these hospitals are not non-commercial and charge the patients for the medical services. - AT
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Cenvat Credit - whether Life insurance company can utilize input Credit available with them for payment of service tax against agency commission - held Yes - AT
Central Excise
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Denial of rebate claim - export of exempted goods - non-observance of the conditions prescribed in the notifications mentioned above, would result in denial of the rebate - AT
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CENVAT Credit - Inputs used in the manufacture of exempted goods or exempted services - manpower also consumed for the purpose of handling waste and compost etc. is an essential part of manufacture of the product being excisable goods, etc. and accordingly, the same is fully allowable. - AT
Case Laws:
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Income Tax
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2015 (2) TMI 257
Eligibility to deduction under Section 80IB(10) - Assessee is not a developer, but only a builder - Held that:- For the purpose of claiming deduction, it is not necessary that the assessee, who is engaged in the business of developing and construction of housing project, should be the owner of the land. See CIT Chennai. Versus M/s. Ceebros Property Development (P) Ltd [2012 (12) TMI 296 - MADRAS HIGH COURT] - Decided in favour of assessee. Car park area exclusion from built up area of the residential unit for the purpose of computing deduction under Section 80IB(10) - Held that:- there is no justification in including the car park in the definition of the built-up area of the residential unit for the purpose of determining the maximum built-up area. In such view of the matter, we are inclined to accept the reasoning of the Commissioner of Income Tax (Appeals) drawing support from the Tamil Nadu Apartment Ownership Act, 1994, which was confirmed by the Tribunal. Accordingly, the second substantial question of law is answered against the Revenue and in favour of the assessee.- Decided in favour of assessee.
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2015 (2) TMI 256
Addition to income - survey operation under Section 133A - Held that:- In the present case, the admitted facts are that during the survey, a Director of the assessee - who was duly authorized to make a statement about the materials and the undisclosed income, did so on 20.11.2007. The Company did not retract it immediately or any time before the show cause was issued to it. For the first time, in reply to the show cause notice it faintly urged that the statement was not voluntary and sought to retract it. The reply, a copy of which has been placed on record, undoubtedly makes reference to some previous letter retracting the statement. Learned counsel urged that that letter was written on 21.12.2007. However, the actual reply to the show cause notice is silent as to the date. This itself casts doubt as to whether the retraction was in fact made or was claimed as an afterthought. Furthermore, this Court is of the opinion that in the circumstances of the case both the CIT (A) and ITAT were correct in adding back the amount of ₹ 63,33,260/- after adjusting the expenditure indicated. The explanation given by the assessee, in the course of the appellate proceedings, that the surrender was in respect of a certain portion of the receipt which had remained undisclosed or that some parts of it were supported by the books, is nowhere borne out as a matter of fact, in any of the contentions raised by it before the lower authorities. For these reasons, this Court is of the opinion that no substantial question of law arises - Decided against assessee.
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2015 (2) TMI 255
Levy of additional tax on prima facie adjustment u/s 143(1) - Retrospectivity v/s prospectivity - Judgment of Associated Power Company Limited [1995 (11) TMI 5 - SUPREME Court] questioned as retrospective - Whether additional tax is leviable even if the liability to pay tax as per the decision of the Apex Court in case of Associated Power Company Limited accrued after filing of the return of Income Tax but before last date of filing of the Income Tax return? - Held that:- It is settled legal position that any judgment of the Apex Court interpreting a particular provision would have its applicability for the prospective effect unless it is expressly made retrospective in the said decision. The reference may be made to the decision of the Apex Court in case of Ashok Kumar Gupta and another V/s. State of U.P. and others reported in (1997 (3) TMI 602 - SUPREME COURT). Our answer to the question is to be in negative.
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2015 (2) TMI 254
Income from undisclosed sources - assessee's entitlement to the benefit of Section 44AF as had voluntarily disclosed receiving Rs. 16,07,240/- during the course of the assessment - assessee urged that the AO made no effort to discern as to the character of the amounts and that some of them at least constituted expenses - Held that:- In the present case the assessee had sought the benefit of Section 44AF but the revenue found later that the amounts deposited in its account were far and excessive than what was disclosed. That the assessee did not dispute the deposit of ₹ 16 lacs ipso facto would not absolve him from failing to disclosed it in the first instance. The same reasoning would apply for the other amount of ₹ 31,29,880/-. So far as the assessee’s explanation that some of the entries pertained to expenditure goes, the AO observed that the assessee did not maintain any books of accounts and produced any supporting document. His evidence was endorsed by the CIT (A). The CIT(A), however, took note of all the circumstances and confined the relief to the extent that the assessee had sought and justified. The ITAT’s decision, which has merely stated the CIT(A)’s finding and does not contain any reasoning, appears to be guided by the decision on the assessment of other years. Furthermore, the ITAT was conscious of the fact that this decision favouring the assessee was perhaps unsupportable in law, as is evident from its observation in para 8 that the impugned order would not be quoted as a precedent. ITAT’s order cannot be sustained. It is accordingly set aside. The question of law is answered in favour of the Revenue.
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2015 (2) TMI 253
Provisions made on account of warranty - contingent liability - ITAT deleted addition - Held that:- The warranty stood attached to the sale price of the product. It was held that warranty provisions had to be recognized because the assessee therein had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of the obligation. Therefore, the assessee therein had incurred a liability during the assessment year which was entitled to deduction u/s.37 of the Income-tax Act, 1961. See M/s. Rotork Controls India (P) Ltd. Versus CIT, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] - Decided in favour of the Assessee.
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2015 (2) TMI 252
Recovery of dues - Demand notice from the petitioner-Bank - there is outstanding amount of ₹ 41 lacs from the respondent No.4 and the respondent No.4 has several fixed deposits with the petitioner-bank which comes to ₹ 31 lacs and if we include the interest on the said fixed deposits, it comes to ₹ 40 lacs - Held that:- Petitioner-Bank has paid an amount of ₹ 58,54,700/- to the IT Department on 25.03.2005 towards the outstanding tax dues of respondent no.4. The petitioner-Bank has further paid an amount of ₹ 58,37,991/- to the IT Department on 19.11.2012 towards the outstanding tax dues of respondent no.4. Admittedly, the amount paid by the petitioner-Bank (in liquidation) to the IT Department were not belonging to the petitioner- Bank but, it belonged to respondent no.4, who was the depositor of the Bank. The said amounts have been appropriated by the IT Department towards the outstanding tax demand due and payable by respondent no.4. From the above set of facts, it is evident that the petitioner-Bank has already released proportionate amount deposited by respondent no.4 in favour of the IT Department. As per the further affidavit filed by respondent no.1, respondent no.4 is still in arrears of tax demand to the tune of ₹ 43,85,806/- as on 31.03.2013. If that be so, then the same is to be recovered from respondent no.4 and not from the petitioner-Bank. Hence, the impugned Notice deserves to be quashed and set aside. The impugned Notice dated 25.07.2005 issued by respondent no.1 to respondent no.2 is quashed and set aside. It is, however, clarified that if any tax demand is due and payable by respondent no.4 herein, it shall be open to the IT Department to initiate necessary proceedings for recovering the same from the personal properties of respondent no.4. - Decided against revenue.
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2015 (2) TMI 251
Interest payable u/s 43B disallowed - whether the conversion of interest payable into share capital under the restricting of loan would be treated as payment of interest for the purpose of section 43B(d) or not - Held that:- Interest expenditure which is otherwise allowable deduction u/s 36(1)(iii) but deffered as per the provisions of section 43B cannot be disallowed because of the reason that the payment is not in cash but by issuance of share capital. The amount of 8.82 crore was incorrectly assumed by the CIT(A) because the Assessing Officer has disallowed a sum of ₹ 8.82 crore on account of write back off restructured settlement amount which was already disallowed by the assessee in the computation of income. Apart from the said disallowance, the Assessing Officer has also disallowed a sum of ₹ 14 crore u/s 43B on account of conversion of interest payable into shares issued to IDBI. We find that these two amounts of disallowance are separate and distinct and there is no confusion or ambiguity in the order of Assessing Officer. The Assessing Officer took the business income as loss of ₹ 8.04 crore prior to the deduction of ₹ 14 crore. Therefore, the said amount was not allowed in the computation of total income by the Assessing Officer. Hence, we find that the CIT(A) has misunderstood the computation of total income in the assessment order. Accordingly, we set aside the direction given by the CIT(A) directing AO to make the disallowances of the sum of ₹ 14 crores as the same is factually incorrect. In view of the above finding we set aside the orders of authorities below on this issue and allow the claim of the assessee regarding the interest payable of ₹ 14 crore u/s 43 B. - Decided in favour of assessee.
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2015 (2) TMI 250
Accrual of income - brokerage on new issue of shares (IPO) - double taxation - addition to income to to the tune of ₹ 12,95,636.08, on account of brokerage on new issue of shares - Held that:- The assessee company is a Member of the DSE having membership no.D-201. It is also allotted IPO Broker Code no.5/0201/4. The undisputed fact is that the initial public offer (IPO) business is done in the name of assessee company, by virtue of its Membership and registrations. Thus all the income earned at the first stage has to be treated as income of the assessee company. The doctrine of overriding title cannot, in our view, be applied to the case of the assessee company. Undisputed fact is that M/s Prasad & Co. has done the IPO business and the assessee company had no active role whatsoever in such business, except that of lending the use of its Membership and registration. The income from IPOs as well as the expenditure on the same, is undisputedly incurred by M/s Prasad & Co. The arrangement has not been disputed by the AO. It is a fact that the entire income has been accounted for by the partnership firm M/s Prasad & Co. Thus the entire amount transferred by the assessee company to M/s Prasad & Co. should have been allowed as expenditure of the assessee company. The First Appellate Authority has recognised this fact that the assessee could have claimed expenses to the extent of the amount payable to M/s Prasad & Co. While observing so, he chose to uphold the illegal action of the AO in bringing the tax to gross receipts. When the assessee has not received any income from this activity, tax is levied on gross receipts, on a hypothetical basis. This is against the provisions of the Income Tax Act. Same income is sought to be taxed twice. This should not have been done. Thus we direct the AO to grant deduction of ₹ 12,95,636/- from the income assessed in the hands of the assessee as no income that arises from the business of IPO can be brought to tax in the hands of the assessee company for the reason that it has not earned or derived any income from such activity. - Decided partly in favour of assessee.
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2015 (2) TMI 249
Disallowance of interest expenses - CIT(A) deleted addition of ₹ 16,03,831/- out of interest expenses - Held that:- AO has given finding that the assessee had given a total loans and advances amounting to ₹ 1,60,90,948/- on which the assessee has not charged interest on some of the advances. Moreover, the finding that the assessee was having sufficient interest-free funds is also not correct. It is pointed out by the AO that the advance given to M/s. M.P.Builders in connection with advance for capital goods. Similarly, other advances are amounting to ₹ 93,42,143/- on which no break-up is given. Under these facts, we are of the considered view that the ld.CIT(A) was not justified in deleting the disallowances, therefore, the order of the ld.CIT(A) on this issue is set aside and the disallowances made by the AO are hereby confirmed. - Decided in favour of Revenue. Addition made on account of discrepancy in AIR - CIT(A) deleted addition - Held that:- Ld.CIT(A) while deleting the addition as it was incumbent upon the assessee to reconcile the discrepancy, if any. We find that the assessee has grossly failed to do so, therefore, the order of the ld.CIT(A) is set aside and the finding of the AO is confirmed. - Decided in favour of Revenue. Disallowance of PF and ESI expenses u/s.43B - Held that:- Following the judgement of CIT vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] wherein considering section 36(1)(va) of the Income Tax Act, 1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees’ account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va). Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees’ contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees’ accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees’ contribution to the employees’ account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. - Decided in favour of revenue.
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2015 (2) TMI 248
Addition u/s 50C - CIT(A) deleted the addition - Held that:- While holding that the transaction was sale of a capital asset, the Assessing Officer did not apply the relevant provisions to calculate the assessable capital gains income. Instead, he picked up the solitary provision of section 50C of the Act and tinkered with total consideration on the ground that the stamp duty valuation was higher than the stated consideration by a sum of ₹ 1,23,600/-. The discussion made by the CIT(A) demonstrates that if the provisions of the Chapter IV-E relating to the taxability of income from capital gains are applied to the present case, the resultant tax payable would be lower than what has been returned by the assessee. The aforesaid factual matrix has not been controverted by the Revenue before us and therefore, we affirm the order of the CIT(A) in deleting the addition of ₹ 1,23,600/- made by the Assessing Officer. - Decided against revenue. Interest on advances for non-business purposes - CIT(A) deleted the addition - Held that:-no reason to interfere with the conclusion drawn by the CIT(A). The finding of the CIT(A) is that assessee was possessing sufficient interest-free funds of its own, which were generated in the course of relevant financial year apart from the substantial share-holder funds which covered the impugned interest-free advances and therefore a presumption has to be drawn that such interest-free advances have been made out of interestfree funds available with the assessee. Factually speaking, the aforesaid finding of the CIT(A) has not been assailed before us on the basis of any cogent material or evidence. Since the aforesaid finding is not in dispute, then the ratio of the judgement of the Hon’ble Bombay High Court in the case of Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) is clearly attracted and the disallowance of ₹ 15,21,946/- made by the Assessing Officer has been rightly deleted by the CIT(A). The investment in non-interest bearing advances/shares has been made out of own funds and hence the disallowance u/s 14A is not justified. - Decided against revenue.
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2015 (2) TMI 247
Formula for computation of the deduction under Section 10-A - if once the expenditure is excluded from export turnover, it is to be excluded from total turnover as well - Held that:- Parity of constituents between the export turnover and total turnover needs to be maintained while computing deduction u/s 10A of the Act. Also considering case of Gem Plus Jewellery (2010 (6) TMI 65 - BOMBAY HIGH COURT ), we direct the A.O. to exclude amounts from total turn over which are excluded from the export turnover to maintain the parity. - Decided in favour of assessee. Non-granting of TDS and advance tax and levy of adjusting interest under 244A of the Act - Held that:- As seen from the Form 26AS as well as the claims made by assessee in the return of income, assessee did claim TDS of ₹ 8,65,898 and advance tax of ₹ 1,89,00,000 totaling to ₹ 1,97,65,898. However, A.O. allowed amount of ₹ 1,73,51,992. Since the claim of assessee was also supported by Form 26AS maintained by department, we direct the A.O. to give credit accordingly and re-workout the tax computations.- Decided in favour of assessee. Interest adjustment under section 244A of the Act - Held that:- contention of assessee that no such interest was granted to assessee and therefore, adjustment of the same is not correct. This requires detailed verification by A.O. As no discussion was made in the order, we are unable to examine the contentions. We deem it fit to restore the issue to the file of A.O. to verify and give opportunity to assessee to explain, before adjusting any interest if any granted to assessee earlier. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 246
Disallowance under section 40(a)(ia) and u/s 40(a)(iii) - Held that:- Only disallowance can be made out of the amounts claimed in the P & L account. Coming to the issue of quantum for disallowance as rightly admitted by Ld. Counsel, the amounts added to the work in progress in earlier year without TDS were also part of the project expenses debited to P & L account during the year. Therefore, whatever is the amount included in the total project cost without making TDS up to the end of the year should be considered for disallowance proportionately at 2.16%. Total amount that should be considered for proportionate disallowance under section 40(a)(ia), being the amount included in the project cost was submitted by assessee as extracted above. AO directed to examine the same and then disallow the proportionate 2.16% under section 40(a)(ia) as in earlier year as per directions of ITAT on this issue. Decided partly in favour of assessee for statistical purposes.
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2015 (2) TMI 245
Penalty under section 271D - book entries to share application money account - Held that:- As seen from the transactions based on the ledger account, an amount of ₹ 12,95,490 was paid for the purpose of salaries and benefits every month and an amount of ₹ 3,41,000 was paid towards deposit and orchestra equipment. Hence, to that extent, it can be concluded that the amounts are advanced for business exigencies of assessee company. Amounts towards share application money during the year were some times returned to the said person and only net amount of outstanding amount at the end of the year was transferred by a journal entry. Considering the nature of the transactions, we are of the opinion that there was a reasonable cause on the part of assessee for obtaining amounts from Mr. K.V. Sreerama Murthy which are subsequently considered as share application money. In view of the provisions of section 273B of the I.T. Act, there no scope for levy of penalty under section 271D. - Decided in favour of assessee.
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2015 (2) TMI 244
Advance for the sale of property - income receipt in current year - Held that:- Receipt of ₹ 20 lakhs as on 14.11.2005 pertains to A.Y. 2006-07 and not to A.Y. 2007-08. In case, assessee could not furnish evidence of return of cash that can only go against assessee to certain extent, but amount received as on 14.11.2005 cannot be the income in A.Y. 2007-08, just because cash component was not accounted for as noted by A.O. Looking at any way, amount of ₹ 20 lakhs cannot be brought to tax in the hands of assessee as (a) he is not owner of the property (b) he was not trading in the said property (c) it is not received in the year under consideration. Therefore, we are unable to uphold the order of the authorities. Allowing the grounds raised by assessee, we delete the addition of ₹ 20 lakhs made in the hands of assessee. - Decided in favour of assessee.
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2015 (2) TMI 243
Validity of proceedings initiated u/s. 153C - CIT(A) set aside the proceedings - Held that:- In the course of present proceedings, learned D.R. was asked to furnish the evidence if any, of incriminating material relating to assessees so that proceedings under section 153C could be initiated. Learned D.R. however, produced the assessment records and copy of the appraisal report for perusal of the Bench being confidential in nature. After seeing the assessment records/order sheets and copy of the appraisal report presented before us, we confirm the finding of Ld. CIT(A) that there is no incriminating material at all in these cases for initiating the proceedings under section 153C against the assessees. Consequently, without going into the legal principles with which we also agree, we hold that proceedings initiated by A.O. are ab initio void for lack of jurisdiction. Moreover, even for making additions to the return of income on estimated basis, there is no basis at all. - decided against revenue.
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Customs
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2015 (2) TMI 264
Penalty u/s 112 - Application of Section 129E - Held that:- Present is a case where penalty has been levied under the order as quoted above. First circumstance in which reference to duty and interest and the factum that goods are not under the control of Customs Authority was not attracted in the present case. A plain reading of section 129E clearly attracts the facts of the present case. The judgment of the Apex Court in Bhavya Apparels [2007 (9) TMI 274 - SUPREME COURT OF INDIA] was a case in which there was payment of duty as well, which facts have already been noted. - Single Judge in the impugned judgment had relied on the above judgment of Apex Court where as in the present case, order was only with regard to payment of penalty. There was no payment of duty involved. When the payment of duty is not involved, the question as to goods were in custody of the department looses its significance. Hence on the above facts the conclusion of the learned Single Judge cannot be sustained. We however, looking into the facts of the present case that the writ petitioner has deposited an amount of ₹ 10,000/-, though belatedly, which was directed by the Appellate Tribunal, and appeal has been reconstituted. We do not find it a fit case where this court may interfere with the discretion exercised by the learned Single Judge by directing reconstitution of the appeal and re-hearing the appeal. - Petition disposed of.
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2015 (2) TMI 263
Imposition of penalty - appellant contended that order of penalty was based entirely on his retracted confession - Seizure of goods - Unlawful import of goods - non production of relevant documents - Held that:- The orders of the Commissioner (Preventive) and the CESTAT, in our opinion, are entirely in accordance with the law declared by the Supreme Court. Both the appellant and Sanjay Maheshwari retracted their confessional statements to the customs officer. In the polyester goods case, it was found that the appellant’s confessional statement was extracted under duress, and because there was no other corroborative evidence, he was exonerated. In the Chinese silk case, which is before us, this conclusion was accepted by the Commissioner (Preventive), who then went on to examine the corroborative evidence present. One important piece of corroborative evidence was the confessional statement of Sanjay Maheshwari with respect to which, on an analysis of the facts and circumstances of the case, the Commissioner found that there was no proof of duress, and that consequently, the retraction was invalid. We find no fault with the manner in which the Commissioner appreciated the evidence before him. The appellant was permitted to cross examine Sanjay Maheshwari, which he did, extensively. In this connection, it was urged that the said individual had admitted not having met the appellant at all and consequently his deposition could hardly have implicated the former. While this is correct, yet that admission is to be viewed in the context. Sanjay Maheshwari also stated that though he had not met the appellant, he had conversed with him. Court notes that proceedings under tax legislation such as the FCRA or the Customs Act do not require the prosecution to discharge the criminal-law burden of proof beyond reasonable doubt. Under such proceedings, a balance of probabilities is satisfactory. - It is not the task of this Court, exercising its appellate power in cases involving substantial questions of law, to review or secondguess (or even third guess, at times) the factual findings based on evidence considered by the lower authorities, but only to correct an order if it is based on irrelevant or manifestly incorrect construction of the facts or if based on mis-appreciation of law or on non-application of mind. In the present case, this Court sees no reason to interfere with the concurrent findings of the Commissioner (Preventive) and the CESTAT which are both reasoned, correctly stating the law, and citing relevant evidence and reasoning in order to arrive at their conclusions. - Decided against Assessee.
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2015 (2) TMI 262
Provisional release of the seized goods imported on certain conditions - Held that:- Neither Section 18 or Section 110A provides that security of provisional assessment of release of the goods shall necessarily means on such conditions. The terms and condition are required to maintain a balance between the prejudice being caused to the appellant and securing the interest of Revenue adequately. For provisional release, Customs (Provisional Duty Assessment) Regulations, 2011 provides condition for allowing provisional release and Regulation 2 provides for conditions of provisional release - At this stage, it cannot be decided that the appellant has resorted to undervaluation or not. Or the Revenue is correct to assess provisionally on the basis of the Load Port invoice. Therefore, the determination of value would be done at the time of final assessment/adjudication. In these circumstances, directing to execute bank guarantee or revenue deposit, for redemption fine or fine in the facts and circumstances is harsh. Therefore, impugned order is modified to the extent that the impugned goods be allowed to release provisionally on execution of provisional duty cum provisional release bond equal to the re-determined value as per Annexure and on payment of duty on declared value plus 20% of the duty on differential amount - The impugned goods to be released within 7 days after compliance of the above said conditions The order is modified accordingly - Appeal disposed of.
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2015 (2) TMI 261
Waiver of pre deposit - Levy of CVD on MRP Baasis - Held that:- There is no doubt that the goods have been imported in packaged form as per the statements recorded from the officers of the company and such goods also have the logo of the supplier. However, the goods are not sold as such. The appellants completely reopened the package, tested the components, repacked the same, relabelled the same and affixed their own logo. These activities amount to manufacture. When a consumer imports or purchases goods for industrial use, which in this case, since the process amounts to manufacture it can be said as industrial use, such purchase/imports are exempt from the provisions of LM (PC) Rules. In this case, appellants had imported packaged commodities as an industrial consumer. Therefore, prima facie on merits, we find that the appellants have made out a case in their favour. We also take notice of the fact that the entire demand is beyond the normal period of limitation and this is another ground which supports the case of appellant. Accordingly there shall be waiver of pre-deposit and stay against recovery of the entire dues during the pendency of appeal - Stay granted.
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FEMA
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2015 (2) TMI 260
Quashment of the detention order passed under Section 3(1) (i) & 3 (1) (iii) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 against Mr. Rameshwar Sharma (detenue), the petitioner’s husband, and a direction to set at liberty the detenue from detention - Held that:- In the matter at hand, after the alleged seizure of red sanders from possession and custody of the detenue on 28/29.09.2013, and conduct of investigation, the complaint was filed under Section 132 and 135 of the Customs Act on 28.11.2013. Thus, the investigation was complete by the said date. Further, the show cause notice under the Customs Act was issued to the detenue on 24.03.2014, which clearly establishes that the material evidence required for passing of the detention order was available with the Detaining Authority. However, inspite of the same, the detention order was not passed till 25.07.2014. The detention order was passed after a delay of about 8 months, which has defeated the purpose of the detention as it was to prevent the detenue from acting in a prejudicial manner by indulging in the prohibited trade. Thus, the live link had already broken by the time the detention order was passed belatedly on 25.07.2014. There is no satisfactory or convincing explanation brought on record by the respondents to explain the aforesaid delay. It is evident from the facts of the case that the detenue informed the sponsoring authority about his illness, and that he was confined to his bed on 05.08.2014 and, thereafter, made regular correspondence with the sponsoring authority. Again, he personally appeared before the Sponsoring Authority on 14.08.2014. The above circumstances clearly establish the availability of the detenue at his residence and on one occasion, even before the Sponsoring Authority. Despite this the detention order was not served upon the detenue. The respondents have not disclosed any attempt made to serve the detention order soon after it had been made. It is not the respondents case that the detenue was avoiding service of the detention order. - Detention order quashed - Decided in favour of appellant.
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Service Tax
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2015 (2) TMI 274
Waiver of pre deposit - Construction of Residential Complex service - contravention of the provisions of Section 68 of Chapter V of Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994 - Held that:- Tribunal on a consideration of Rule 3 of the Service Tax (Determination of Value) Rules, 2006, which provides the manner of determination of value in respect of taxable service, namely, the service defined under Section 65(105)(zzzh) of the Finance Act, 1994 came to hold that the value of taxable service should be equivalent to the gross amount charged by the service provider to provide similar service to any other person, that is to say, the value of taxable service rendered in relation to the flats sold to independent persons. Accordingly, the Tribunal held that the appellant has failed to make out a prima facie case for waiver of pre-deposit of entire amount of duty along with interest and penalty and directed to make a pre-deposit of ₹ 12.00 lakhs. In view of the specific admission by the appellant before the Adjudicating Authority that the services rendered by the appellant would fall under Section 65(105)(zzzh) of the Finance Act, 1994. Notification No.29 of 2007 dated 22nd May, 2007 relates to taxable service falling under Section 65(105)(zzzza) of the Finance Act, 1994. Even otherwise, the language of Section 65(105)(zzzh) and the nature of the services provided by the appellant is construction of flat to the land owner and the transfer of land is only for the purpose of providing such taxable service, we fail to understand as to how the appellant would say that there is no liability to pay service tax in respect of 24 flats handed over to the land owner after rendering taxable service as defined under Section 65(105)(zzzh) of the Finance, 1994. If there is no monetary consideration in the transaction, then Section 65 of the Finance Act, 1994 provides for various methods for valuation. Hence, it is for the appellant to establish that his plea that the value of the land should be taken into consideration is a matter for the Tribunal to decide on merits at the time of hearing of the appeal. - Tribunal is justified in ordering pre-deposit of ₹ 12.00 lakhs as against the demand of ₹ 27.00 lakhs in an admitted case of the appellant providing taxable service, more so, in a case where the appellant failed to pay service tax in respect of even the admitted tax. - No substantial question of law arises - Decided against the assessee.
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2015 (2) TMI 273
Valuation - Commercial or Industrial Construction Service (CICS) and Construction of Complex Service (CCS) - inclusion of value of free servcies - benefit of Notification No.1/2006-ST claiming abatement of 67% and while availing of the Composition Scheme to pay service tax under Works Contract Service - Held that:- As regards disallowance of abatement of 67% under Notification Nos.15/2004-ST, 18/2005-ST and 1/2006-ST on the ground that the value of free supplies was not included in the gross amount charged, the Larger Bench of the Tribunal in the case of Bhayana Builders [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] has held that the value of free supplies by the service recipient to service provider is not required to be included in the gross amount charged for the purpose of availing the benefit of the aforesaid Notifications. For 67% abatement under the aforesaid Notifications (except Notification No.1/2006-ST) only credit of input and capital goods is not permissible. Thus there is variance between the Show Cause Notice and the adjudication order with regard to whether the appellants took CENVAT credit of only input services or both inputs and input services (and also capital goods) which needs to be reconciled. But even with the classification of the impugned service under works contract service w.e.f. 01.06.2007, the appellants will not be eligible for the compositional scheme to pay service tax under works contract service in respect of on-going projects for which service tax had been paid during the period prior to 01.06.2007. It has been so held upto the level of the Supreme Court in the case of Nagarjuna Construction Co. Ltd. Vs. GoI [2012 (11) TMI 404 - SUPREME COURT]. - However, that would not disqualify the appellants from claiming the benefit under Rule 2A of Service Tax (Determination of Value) Rules, 2006 or any other exemption Notification provided they satisfy the conditions and establish their eligibility. Levy of service tax on construction of flats made for Delhi Development Authority (DDA), buildings constructed for BSNL, Reliance or Municipal Corporation - Held the activities are taxable. Levy of service tax on construction for Hospital - A claim has been made that the buildings made for the said hospitals is outside the purview of CICS on the ground that they were made for the charitable organisations - Held that:- There is no ambiguity that charitable organisation is not prevented from carrying out commercial activity; the only condition is that the profit so generated has to flow back into the organisation towards fulfilment of its charitable purposes. Thus, merely because the hospitals were constructed for the charitable organisations do not make the hospitals per se non-commercial. Indeed these hospitals are not non-commercial and charge the patients for the medical services. Suo moto adjustment of tax - Held that:- It is evident that adjudicating authority has simply declared the impugned credit to be inadmissible without analysing as to how that is so. - there is no elucidation as to how the said suo moto adjustment is in violation of the said Service Tax Rules. - Matter remanded back - Opportunity of being heard is to be given to assessee before de novo adjudication.
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2015 (2) TMI 272
Cenvat Credit - whether Life insurance company can utilize input Credit available with them for payment of service tax against agency commission - whether the appellant can utilize CENVAT credit in excess of 20% of the service tax payable- Held that:- only change in the legal provision is the omission of Explanation under Rule 2(p). An Explanation only clarified the position. By omission of the explanation, the meaning does not undergo any change. Therefore, both prior to 19.4.2006 as also w.e.f. 19.4.2006, the meaning of the expression ‘output service', ‘provider of taxable service' and ‘person liable for paying service tax' remain the same. Since in the case of Insurance Auxiliary Service, the liability to pay Service Tax is on the service recipient in terms of Rule 2 (1)(d)(iii) of the Service Tax Rules, 1994, the appellants are the providers of the output service as defined in law. Therefore, the appellants are entitled to avail CENVAT Credit on the input services used for providing the output service. Consequently, there is no bar in utilization of CENVAT Credit for payment of Service Tax on Insurance Auxiliary Service by the appellants. There is no one to one correlation required between the input service and the output service under the CENVAT Credit Scheme and, therefore, the demands confirmed against the appellants for recovery of CENVAT Credit availed by them for discharging Service Tax liability on Insurance Auxiliary Service is clearly unsustainable - Following decision of assessee's own previous case [2014 (4) TMI 637 - CESTAT MUMBAI] - Insurance Auxiliary Service falls under sub-clause (zy), which is specified in sub-rule (5) of Rule 6. That being the position, the cap of 20% fixed under Rule 6(3)(c) would not apply to Insurance Auxiliary Service at all and the entire Service Tax Credit can be utilized for discharge of Service Tax. Decided in favour of assessee.
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2015 (2) TMI 271
Refund of cenvat creidt under Notification No. 5/2006 CE(NT) dt. 14.3.2006 - Denial of admissibility of CENVAT Credit on input services - Held that:- It is strange that the ground of appeal stats that the use of input services has not been examined by the adjudicating authority when the matter has been discussed very clearly by the Commissioner (Appeals). It would serve no purpose to remand the impugned order in such circumstances. However, on merits, we have seen the list of above services and we find absolutely no ground to reject the admissibility of cenvat credit on them. All these input services do have a nexus with the business of providing output services by the respondent. Cenvat credit on inadmissible input services must obviously be deducted, but in the present case all the input services are used for providing output services. Therefore this objection has no relevance. The second amount which is sought to be deducted is the input credit on account of domestic service tax liability. We find no logic in deducting this amount. The formula does not allow for such deduction and by its very nature, the formula has already factored this amount in the manner it has been formulated. If Revenue's contention is accepted, the word "Total" in the formula would become irrelevant. Therefore, the grounds of appeal relating to this order-in-appeal are rejected and the impugned order-in-appeal is upheld. In exactly similar cases of this very respondent for different periods, the adjudicating authority has sanctioned refund claims without raising any objection. The Ld. A.R. inform us that the two orders-in-original have been passed by different authorities. We note from the records as shown to us by both sides and as agreed by the Ld. Counsel, in this case certain records namely Balance Sheet and Profit and Loss Account had not been submitted to the adjudicating authority. We are not very clear as to what the adjudicating authority wants to examine from these Accounts but, at the same time, in our view these accounts could indicate the export turnover of services which the adjudicating authority may have liked to correlate with the Service Tax returns where such turnover figures ought to have been given. - matter remanded back - Decided partly in favour of Revenue.
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Central Excise
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2015 (2) TMI 269
Invocation of extended period of limitation - Suppression of facts - Clearance of goods without payment of duty - goods were sold without mentioning the description of the fabrics on the invoices but only indicating sort numbers - Imposition of penalty - Held that:- Appellants are manufacturers of grey cotton fabrics other than Denim fabrics falling under Chapter Heading 5207.20 attracting "Nil" rate of duty. Investigation also revealed that the appellants have manufactured and processed Denim Fabrics and cleared the same to M/s.KGDL . It is noticed that the appellants adopted two methods. On the one hand, they have received the yarn from KGDL and manufactured grey denim fabrics on job work basis and returned the same to M/s.KGDL who is the principal manufacturer. They have also manufactured Denim Fabrics on their own account wherein they have purchased the yarn, manufactured the Denim Fabric and sold to KGDL on principal to principal basis. The adjudicating authority has already dropped the demand on denim fabrics manufactured and cleared on job work basis and confirmed the demand in respect of yarn manufactured by the appellants on their own account and sold to KGDL. The veracity of these documents need to be verified along with the original records available with the department so as to arrive at a conclusion whether there is any suppression of facts or extended period can be invoked in this case for demanding duty or whether there is wilful suppression of facts. Therefore, we are of the considered view that the original authority should verify the original documents, including letters as indicated above, and also to take into consideration the directions of the Hon'ble High Court by its order dt. 8.4.2014 and examine the issue in the light of the above directions and pass fresh orders on the duty confirmed by invoking extended period under proviso to Section 11 AC of the Act. Accordingly, we set aside the impugned order in so far as that portion of order confirming the duty demand and imposition of penalty on the appellants No.1 & 2 as well as on Shri M. Thiagarajan, Managing Director of PML (Appellant No.3). - Matter remanded back - Decided in favour of assessee.
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2015 (2) TMI 268
Disallowance of Cenvat credit - various items of iron and steel and also the items of Copper and Aluminium which had been used for various purposes in the manufacturing plant - Commissioner allowed partial credit and disallowed partial holding that items have been used mainly as supporting structures - Held that:- As regards the structural steel items which have been used for transmission towers for transmission of electricity from the power plant to the manufacturing plant, in view of the judgment of the Tribunal in the case of Sanghi Industries ltd. vs Commissioner of Central Excise Rajkot reported in [2006 (4) TMI 422 - CESTAT, NEW DELHI] , Cenvat credit would be admissible. As regards, the Cenvat credit in respect of the items of heading 7402, 7407 and 7606, these are aluminium, copper or cathode plates used in the cell house for electrolysis and the same would be admissible for Cenvat credit in view of the judgments of the Tribunal in the cases of Cominco Binani Zinc Ltd. vs CCE Reported in [1990 (1) TMI 184 - CEGAT, MADRAS ]; CCE Baroda vs. Atul Products Ltd. reported in [1997 (12) TMI 637 - CEGAT BOMBAY] & CCE Kochi vs Travancore cochin Chemicals Ltd. reported in [1994 (9) TMI 206 - CEGAT, MADRAS]. - appellant have prima facie case in their favour. Therefore, the requirement of pre-deposit of Cenvat credit demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed - Stay granted.
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2015 (2) TMI 267
Denial of rebate claim - export of exempted goods - Prescribed procedure for export not followed - Notification no.41/2001-CE(NT) dated 26.06.2001 read with Notification No. 42/2001-CE (NT) dated 26.06.2001 - Held that:- Appellant had manufactured stainless steel utensils from duty paid stainless steel flats. Stainless steel utensils, during the period of dispute, were fully exempt from duty and for this reason, the appellant were not registered with Central Excise Registration. Rule 18 of the Central Excise Rules provides for rebate of central excise duty paid on the materials used in manufacture or processing of the finished goods exported out of India subject to the conditions to be specified and procedure followed as notified by the Government. The Notification No.41/2001-CE (NT) dated 26.06.2001 issued under Rule 18 of the Central Excise Rules, 2001 prescribes the necessary conditions for the purpose of input duty ratio and also the procedure to be followed in this regard. - The Notification no.42/2001-CE dated 26.06.2001 prescribes the detailed procedure for export of the goods under claim for rebate. In this case, admittedly, neither the necessary declaration describing the export product and the materials to be used with input-output ratio was made to the jurisdictional Asstt./Dy. Commissioner and, therefore, the jurisdictional Central Excise Authorities had not opportunity to verify the input output ratio. Besides this, it is not possible to verify as to whether the appellant procured the inputs directly from a manufacturer or from a dealer registered. Even the clearance of the export consignments was admittedly, not under ARE-2 and therefore, there is no question of procedure as prescribed under Notification No.42/2001-CE being followed. As regards the appellant's plea that standard input-output ratio for stainless steel utensils prescribed in the Exim Policy could be adopted for the purpose of rebate under Rule 18 of the Rules, this plea cannot be accepted, as the condition for rebate as prescribed in the Notification no.41/2001-CE(NT) requires input-output ratio to be declared to the jurisdictional central excise authorities and its verification, which has not been done in this case. In fact, if the appellant s plea is accepted, the Notifications nos.41/2001-CE (NT) dated 26.06.2001 read with Notification no.42/2001-CE (NT) dated 26.06.2001 would become redundant, while the very purpose of this notification is to avoid administrative inconvenience and prevent the mis-use of this facility by the assessee. We, therefore, hold that the judgements of the Apex Court in the case of Indian Aluminium Company [1991 (9) TMI 162 - SUPREME COURT OF INDIA] and Eagle Flask Industries Ltd. [2004 (9) TMI 102 - SUPREME COURT OF INDIA] are squarely applicable to the facts of this case and as such, non-observance of the conditions prescribed in the notifications mentioned above, would result in denial of the rebate. - No infirmity in impugned order - Decided against assessee.
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2015 (2) TMI 266
Benefit of Cenvat Credit - Captive consumption of electricity - Held that:- Appellant company had wheeled out a portion of the electricity to their sister unit viz., Ashoka Spintex for manufacturing of the excisable goods. The Hon ble Supreme Court directed the Adjudicating Authority to calculate and charge duty or reverse credit to the extent the electricity cleared at a price to their sister company. Assessee has shown the amount in their books of accounts for clearance of electricity to the other units. - Adjudicating Authority confirmed the demand of cenvat credit on the basis of the Chartered Engineers certificate dtd 21.12.2009, of the appellants own evidence. In view of the decision of Tribunal in the case of Modern Food Industries Ltd (1988 (7) TMI 190 - CEGAT, NEW DELHI) the transfer of the amount of their sister unit by book adjustment would be treated as amount charged to the other unit. In our considered view, the Adjudicating Authority rightly confirmed the reversal of credit. The case of SRF Ltd (2014 (2) TMI 280 - MADRAS HIGH COURT) relied upon by the Ld Advocate would not be applicable in the present case. In that case, the Hon ble High Court remanded the matter to the Tribunal for factual adjudication. In the present case the Hon ble Supreme Court remanded the matter to the Adjudicating Authority with certain directions on factual basis. So, the order of recovery of Cenvat Credit as held by the Adjudicating Authority is sustainable. - we upheld adjudication order to the extent of recovery of cenvat credit. In so far as, the order of the recovery of interest, the matter is remanded to Adjudicating Authority to decide afresh, after considering the facts and the case laws relied upon by them - Appeal disposed of.
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2015 (2) TMI 265
Disallowance of CENVAT Credit - Manpower Recruitment Services - Inputs used in the manufacture of exempted goods or exempted services - Held that:- In view of the ruling of the Hon'ble Madras High Court in the case of Eid Parry (I) Ltd. (2013 (3) TMI 366 - MADRAS HIGH COURT), I hold that there is no infirmity in the order of Commissioner (Appeals) and he has rightly held that manpower also consumed for the purpose of handling waste and compost etc. is an essential part of manufacture of the product being excisable goods, etc. and accordingly, the same is fully allowable. - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (2) TMI 270
Advantage of section 4BB of the U.P. Trade Tax Act, 1948 - Entitlement for credit of tax - Held that:- Section 86 of the Uttar Pradesh Reorganisation Act conveyed that creation of the State of Uttarakhand by carving out a part of the State of Uttar Pradesh shall not be deemed to have affected any change in the territories, to which U.P. Trade Tax Act, 1948 extends or applies and territorial references in the U.P. Trade Tax Act, 1948 to the State of Uttar Pradesh shall, until otherwise provided by a competent Legislature or other competent authority, be construed as meaning the territories within the existing State of Uttar Pradesh before the appointed day, i.e., before creation of the State of Uttarakhand. - conclusion would be that the State mentioned in section 4BB of the U.P. Trade Tax Act, 1948 shall mean the territories of the State of Uttar Pradesh as well as the territories of the State of Uttarakhand until such time, the competent Legislature of the State of Uttar Pradesh or of the State of Uttarakhand decides otherwise. That was not done until March 23, 2002. Therefore, until March 23, 2002, purchases made in any part of the State of Uttar Pradesh as it stood before the creation of the State of Uttarakhand would come within the meaning of purchases made inside the State as mentioned in section 4BB of the Act. In the event, purchases were made on or after March 23, 2002, the same will have a different effect. We, accordingly, permit only that effect to be ascertained by the assessing officer in accordance with law. - revision application is disposed of.
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Wealth tax
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2015 (2) TMI 258
Penalty u/s 18(1)(c) of the Wealth Tax Act, 1957 - concealment of value of property - Held that:- the fact that the value declared by the assessee of its Mumbai property was accepted by the AO in the assessments originally completed u/s 16(3) read with section 17 of the Act, again goes to show that the method adopted by the assessee to value its Mumbai property was a plausible one and although the same turned out to be a mistaken one, the facts and circumstances of the case show that the claim of the assessee was bonafide. In our opinion, the mistake on the part of the assessee in declaring the value of its Mumbai property for wealth tax purpose, thus, cannot be equated with concealment of particulars of its assets by the assessee or furnishing of inaccurate particulars of such assets so as to attract penalty u/s 18(1)(c) of the W.T. Act. assessee or furnishing of inaccurate particulars of such assets so as to attract penalty u/s 18(1)(c) of the W.T. Act. - Decided in favor of assessee. Penalty for not disclosing the value of motor cars - Held that:- It is also pertinent to note here that even in response to notices issued by the AO for the second time u/s 17, the assessee did not disclose the value of motor cars by filing fresh returns of income and instead filed a letter stating that returns of wealth already filed by it may be treated as returns filed in response to the said notices. As such, considering all the facts of the case and the conduct of the assessee, we are of the view that the non-disclosure of the value of motor cars in the returns of wealth for both the years under consideration, clearly amounts to concealment of particulars of its assets by the assessee attracting penalty u/s 18(1)(c) of the Act. - penalty imposed by the AO u/s 18(1)(c) is sustained only to the extent it is in respect of addition made to the wealth of the assessee for both the years under consideration on account of value of motor cars. - Decided against the assessee.
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Indian Laws
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2015 (2) TMI 259
Denial of right to information - Denial on the ground that under the Act, right to information is provided only to a citizen and not to a group of citizens - Held that:- It cannot be denied that the appellants before the Commission individually being citizens of India were entitled to invoke the jurisdiction of the authorities under the Act for seeking information. Merely because more than one citizen had sought information by filing a joint application when their cause of action is same, it cannot be rejected holding that the same was filed by group of persons. The ultimate object is to avoid multiplicity. In case more than one individual can file separate application for same relief, they can always file a joint application. - Accordingly, the order passed by the Commission rejecting the appeal holding the same to be not maintainable cannot be sustained and is set aside. However, the matter need not be remanded back for the reason that effective relief has already been granted to the petitioners and the respondents have undertaken to supply them copy of the rules and the petitioners are not entitled to any further information - Decided in favour of appellant.
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