Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 10, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
Highlights / Catch Notes
Income Tax
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Computation of LTCG - fair market value as on 1.4.1981 - When there is no material available on record, which could clearly establish the FMV of the land, in that locality, one has to go by a reasonable estimate - AT
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Depreciation - Once the boiler was already used, it cannot be said that it was not ready for use - Passive use of the boiler, argument by the assessee has to be accepted - AT
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Penalty Second notice issued u/s 158BFA(2) does not confer any power to Revenue to Denovo penalty proceedings against the assessee - The statutory time limit cannot be enlarged with the issuance of fresh notice - AT
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Claim of exemption u/s 11 - AOs observations that assessee changed the memorandum of association so that fresh registration is required does not hold good where the objects remains same - AT
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Disallowance of the claim of depreciation on fixed assets Land, taken on lease from OMC on the ground that the rate of depreciation so claimed is lower than the provision u/s 32(1)(ii) - claim allowed - AT
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Disallowance of contribution afforastation funds - Amount paid to the DFO for mining operation Hlaim of the assessee to allow the same as revenue expenditure - AT
Customs
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Redemption fine and penalty - since the goods under export having been proved to be basmati rice, the charges of mis-declaration of goods under export, which was the basis for investigation is vitiated - AT
Service Tax
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Notification No. 8/2005-ST provides that in the case of service undertaken by way of job-work and the goods are returned to the original supplier for further manufacture, the benefit of the said exemption would apply. - AT
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Demand of service tax without calculating tax liability under various services - it is bounden duty of the adjudicating authority to come to a conclusion as to exact amount of tax liability on individual service, if any - AT
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For the period prior to Budget 2004, the activity undertaken by the respondents cannot be classified as Consulting Engineers Service especially when Survey and Exploration of Minerals Service has not been carved out of Consulting Engineers Service - AT
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Classification of service - supply of know-how by way of patents, trade secrets, processes, etc. - s not exigible to service tax under the category of Consulting Engineers Service - AT
Central Excise
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Availment of suo moto credit - Payment by making cash payment in PLA under reverse charge - early ST was paid using cenvat credit - credit allowed - AT
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Continuance of proceedings after death or adjudication as an insolvent of a party to the appeal or application - company under liquidation - appeal abated in terms of Rule 22 of the CESTAT Procedure Rules. - AT
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Dutiability of 'sugar syrup', an intermediate product manufactured and captively consumed by the applicants in the manufacture of their final product - stay granted partly. - AT
Case Laws:
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Income Tax
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2014 (3) TMI 264
Liability towards Interest expenditure Held that:- The decision in Hitesh S. Mehta Versus DCIT Central Circle- 23, Mumbai [2013 (10) TMI 1065 - ITAT MUMBAI] followed - The findings in respect of rejection/reliability of the books of accounts and the proposed adjudication of the CIT(A) in view of the direction may have direct impact on the issue of the impugned liability thus, the matter remitted back to the CIT(A) for fresh adjudication Decided in favour of Assessee. Admission of additional grounds Held that:- The decision in Hitesh S. Mehta Versus DCIT Central Circle- 23, Mumbai [2013 (10) TMI 1065 - ITAT MUMBAI] followed - The CIT(A) ought to have appreciated that the assets under consideration and the consequential income belongs to hence, the income assessed by the Assessing Officer ought to have been taxed in the hands of Shri Harshad S. Mehta and not in the hands of the appellant - the ground is legal ground, which does not require any new facts to be brought on record relying upon National Thermal Power Co. Ltd. Vs. CIT [1996 (12) TMI 7 - SUPREME Court] - the legal ground can be admitted, if no new facts are to be brought on record thus, no direction is to be required to be given to the AO in this respect because if the Hon'ble Apex Court decides that all the income belongs to Shri Harshad S. Mehta, then the income has to be assessed in the hands of Shri Harshad S. Mehta, not in the hands of any other person Decided against Assessee. Deletion of interest charged u/s 234A, 234B & 234C of the Act Held that:- The decision in CIT vs. Divine Holdings Pvt. Ltd. [2012 (4) TMI 100 - BOMBAY HIGH COURT] followed - no reduction or waiver of interest shall be ordered unless the assessee files a return of income for the relevant Assessment Year and pays the entire income tax due on the income as assessed - levy of interest u/s. 234A, 234B and 234C is mandatory Decided in favour of Revenue.
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2014 (3) TMI 263
Determination of fair market value of the property for the purpose of computation of capital gains Held that:- The assessee has not been able to submit any evidence or any material to show that the FMV adopted by him, is the actual market value of the land as on 1.4.1981 - The assessee has not brought on record any comparable instances of sale of property in that locality, to show that the FMV adopted by him was the actual market value - In the absence of any material to substantiate its claim, the FMV cannot be accepted - When there is no material available on record, which could clearly establish the FMV of the land, in that locality, one has to go by a reasonable estimate thus, the FMV adopted by the CIT(A) is fair and reasonable and needs no interference Decided against Assessee. Source of funds - Availability of funds not accepted by the CIT(A) Addition restricted to 50% - Held that:- Assessee claimed that the investment was made by him out of the sale proceeds from sale of gold jewellery, as well as salary income - It is quite evident from the order of the CIT(A) that he does not dispute the fact that the assessees explanation with regard to availability of fund from sale of gold jewellery cannot be rejected outright - CIT(A) has come to a conclusion that the savings from salary income itself would be sufficient to invest in the property at Noida, there is no reason why she should have disallowed 50% of the amount of investment claimed thus, the disallowance made by the CIT(A) cannot be sustained, when she is satisfied that there was availability of fund with the assessee to make investment the entire addition made by the Assessing Officer is set aside Decided in favour of Assessee. Estimation of agricultural income Held that:- CIT(A) held that the assessee himself has categorically stated that the agricultural income per year would be around Rs.3,000 per acre, and for five acres it would be Rs.15,000 - Considering this and the agricultural income disclosed for earlier and subsequent years, the same for the assessment year has been estimated at Rs.20,000 - In the absence of any material to the contrary brought on record by the assessee there is no infirmity in the orders of the Revenue authorities on the issue Decided against Assessee. Restriction of the addition to 50% - Unexplained investment in property Held that:- CIT(A) restricted the disallowance to 50% of the investment claimed, by merely observing that the Assessing Officer has mentioned about discrepancies in the statement made by the assessee during the assessment proceedings - The CIT(A) having accepted the fact the assessees wife has received 150 tolas of gold jewellery, there is no reason why she should not have accepted the claim of the assessee in relation to the entire investment instead of restricting it to 50% - having accepted the source of funds, viz. sale of 150 tolas of gold, the entire investment should be treated as having been explained thus, the order of the CIT(A) modified Decided in favour of Assessee.
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2014 (3) TMI 262
Cost of construction adopted by the CIT (A) Held that:- The assessee has not maintained any accounts with regard to cost of construction of the property - He has not been able to establish by bringing evidence on record the cost of construction at Rs.250 adopted by him - the Assessing Officer cannot rely upon some media advertisement to determine the cost of construction - neither the assessee nor revenue could demonstrate that the cost of construction adopted by the assessee and Assessing Officer was on the basis of any substantive evidence - the claim of the assessee and conclusion of the Assessing Officer cannot be accepted - when there is no material on record to determine the cost of construction then it has to be arrived at on a reasonable basis - As can be seen from the observation made by the CIT (A), she has adopted the cost of construction on the basis of SROs estimate which at least has some basis - the conclusion arrived at by the CIT (A) is fair and reasonable and needs no interference the order of the CIT(A) upheld Decided against Assessee.
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2014 (3) TMI 261
Addition u/s 68 of the Act Cash deposit out of undisclosed sources of income No documentary evidences furnished - Held that:- The decision in Shri Manan Jain Versus ITO [2014 (2) TMI 1019 - ITAT DELHI] followed The assessee has claimed that there was planning to purchase the land jointly with his father Shri Subhash Chand Jain for group housing complex at G.T. Road, Sonepat, Haryana - Assessee had not filed any documentary evidence in this regard. Assessees claim that the amount was withdrawn for initial payments to land owners though Satbir Singh with whom the assessee was negotiating to purchase the land but assessee failed to produce the same - It is claimed that agreements to sell were prepared with respect of the deal with the intended sellers - no evidence was filed in this regard. The assessee also claims that he came to know at later stage that the land, which was intended to be purchased, was already identified by the HUDA for the purposes of housing complex for M/s. Omaxe Limited - None of the claims of the assessee as made in letter are substantiated by any documentary evidence - Even the concerned persons with whom the transaction were made or negotiated were not produced thus, the claim of assessee that cash withdrawal was not utilized for other purposes have remained unproved - Primary onus is on assessee to substantiate the claim of failure of land deals due to which cash remained unutilized - Assessee had not discharged onus by filing any evidence either documentary or oral in this regard - thus, the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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2014 (3) TMI 260
Disallowance under section 14A of the Act Held that:- The Assessee has not placed any material to demonstrate the number of transactions and the details of receipt of exempt income - The Assessee has also not been able to demonstrate that no administrative expenses at all have been incurred for earning the exempt income - CIT(A) while deleting the disallowance has not given any detailed finding but by passing a very cryptic order has summarily upheld the disallowance - It is a settled law that the principle of res judicata is not applicable in income tax matters and each assessment year is separate unit of assessment thus, the disallowance is restricted to a sum instead made by the AO Decided partly in favour of Assessee. Depreciation on lease hold land Held that:- The Decision in Torrent Power Ltd., Torrent House Versus Assistant Commissioner of Income Tax [2014 (2) TMI 1020 - ITAT AHMEDABAD] followed - Merely because the deed was registered the transaction in question would not assume a different character - By obtaining the land on lease the assessee has acquired a facility to carry on business by paying nominal lease rent, therefore, lease rent paid was held allowable as Revenue expenditure - The matter remitted back to the AO for examination of the facts Decided in favuor of Assessee. Disallowance of fees paid for new project at Bhuvneshwar Held that:- Assessee submitted that the expenditure was incurred for the study relating to possible expansion of project in the same line of business and the expenditure has neither brought into existence any new asset nor has resulted into any benefit of enduring nature to the Assessee and the project could not materialize and abandoned but, no tangible material has been placed on record before us by Assessee in support of the contentions - report which the Assessee had received from Ernst and Young was also not placed on record thus, the order of A.O. upholding the disallowance needs to be upheld and that of CIT(A) on the ground set aside Decided against Revenue.
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2014 (3) TMI 259
Deletion made u/s 40A(3) of the Act Whether the assessees case falls under exception contained in Rule 6DD(b) of the I.T Rules Held that:- CIT(A) held that the Rule 6DD(b), would not hold water in so far as exemption provided is in Rule 6DD - The various clauses of the said Rule would have to be considered - Even otherwise, the said Rule is not exhaustive The decision M/s. Amrai Pachwai & C.S Shop Vs. DCIT, Cir-1, Durgapur [2014 (2) TMI 979 - ITAT KOLKATA] followed - The State Government has closed its doors in so far as the local treasury is concerned and the payment for the purchase of country spirit or country liquor has to be made to the warehouse, run by the government - This shows that any payment made to the warehouse, which is under the direct control of the state government, is a payment made directly to the government. Once, this is accepted then the provisions of Rule 6DD(b) of the I.T Rules 1962 which clearly spells out that the payment made to the government in legal tender under the rules framed by the Government, is exempted from the rigours of section 40A(3) of the Act - the payments made by the assessee for purchase of country spirit and country liquor is to the government as per the notification issued by the government and is in legal tender specified by the notification - the payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant is protected by the exemption in terms of Rule 6DD(b) of the I.T Rules 1962 thus, the finding of the CIT(A) on the issue stands confirmed Decided against Revenue.
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2014 (3) TMI 258
Jurisdiction of the AO Direction to make inquiry Held that:- The decision in ITO Vs Surjeet Singh & Sons (HUF) [2014 (2) TMI 977 - ITAT DELHI] followed - Assessee contended that the CIT(A) has, in fact, enabled the A.O. to make such inquiry as he deems fit to verify the cash statement to be produced by the assessee - The CIT(A) has deleted the addition made by the AO and it is not a case of setting aside the assessment and remitting the matter to the A.O - the directions given by the CIT(A) were not required to be given and the same are liable to be expunged thus, the order of CIT(A) upheld to the extents it was accepted by ITAT and dismiss the appeal of the Revenue while accepting the Cross objection of the assessee and direction of Ld. CIT(A) is expunged Decided against Revenue.
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2014 (3) TMI 257
Allowability of claim of deduction u/s 10A of the Act Held that:- The decision in ITO, W-10(1), Hyderabad Versus M/s. Intrack Inc Ranigunj Circle, Secunderabad[2014 (2) TMI 884 - ITAT HYDERABAD] followed the assessee was not eligible for deduction under section 10B and therefore, made an alternate claim for deduction under section 10A for which it was eligible - Assessee also filed relevant auditor certificate and complied with the provisions - AO should not have denied the claim when assessee is otherwise eligible - assessee is eligible for deduction under section 10A, has complied with the requirements of filing Form 50F before the A.O. during the assessment thus, the AO is directed to allow the deduction under section 10A after verifying the quantification of the amount and compliance with the provisions of Law and after giving a reasonable opportunity of being heard to the assessee as directed by the CIT(A) Decided against Revenue.
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2014 (3) TMI 256
Deduction u/s 10A of the Act Exclusion from export turnover Business of software development services - As decided in CIT vs. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] whatever is the amount arrived at as export turnover for numerator, the same should be included in the total turnover which is denominator in the calculation for deduction u/s 10A of the Act. Exclusion of communication charges and insurance charges Held that:- For the purpose of inclusion in the profit the receipt should have an element of turnover and profit - whatever is not included in the export turnover cannot form part of total turnover also - The expenditure which was excluded by the Assessing Officer while computing the "export turnover" does not have the element of turnover thus, it cannot be included in the total turnover also there is no justification for inclusion of the expenditure which is excluded from export turnover, in the total turnover - Export proceeds not received within six months are also to be excluded from the total turnover on the same principle - Decided in favour of Assessee.
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2014 (3) TMI 255
Deletion made u/s 14A of the Act Held that:- Rule 8D(1) specifically states that determination of disallowance under Sub-Rule (2) can be done only when Assessing Officer is not satisfied with the correctness of the claim of expenditure made by the assessee - Such a satisfaction has to be an objective one based on cogent reason Relying upon REI AGRO LTD, KOLKATA Versus DCIT CENTRAL CIRCLE-XXVII, KOL [2013 (9) TMI 156 - ITAT KOLKATA] - CIT(Appeals) was justified in holding that Assessing Officer could not have applied Rule 8D(2)(iii) of the Act and made a disallowance of ½ percent of average value of investment -CIT(Appeals) was justified in deleting such disallowance there is no reason to interfere with the order of CIT(Appeals) Decided against Revenue. Deletion of disallowance of interest expenditure Held that:- There is nothing on record to show that during the relevant previous year assessee was doing any business as a builder - to fasten a completed contract method of accounting on an assessee who is not doing any construction or undertaking any project work, will not be appropriate - It cannot be said that the loan raised by assessee from ICICI Bank, which was utilized for paying advances for acquiring built up spaces, was in relation to extension of an existing business. Business of assessee was real estate and the assesese's intention was to trade in constructed spaces - It never contemplated to use such constructed spaces for its own use the decision Commissioner of Income-Tax Versus Lokhandwala Construction Inds. Ltd. [2003 (1) TMI 93 - BOMBAY High Court] followed - As long as the payment of advance was not for acquisition of fixed assets but only for acquiring stock-in-trade, assessee was entitled for deduction under section 36(1)(iii) of the Act thus, the CIT(Appeals) was justified in deleting the addition made by the Assessing Officer Decided against Revenue. Deletion of disallowance of processing charges on loan Held that:- Since loan raised from State Bank of India was used by the assessee for financing its stock - processing charges incurred for raising such loan was an allowable expenditure there is no reason to interfere with the order of CIT(Appeals) Decided against Revenue. Disallowance of depreciation on a boiler Held that:- The boiler on which depreciation was not allowed, was one which was leased out by the assessee in earlier years, income from which was admitted - Thus the boiler was already part of the block of assets of the assessee - Once a machinery is becomes the part of a block, it looses its separate identity - Depreciation is granted on block of assets as stipulated in section 36(1)(ii) - Once the boiler was already used, it cannot be said that it was not ready for use - Passive use of the boiler, argument by the assessee has to be accepted thus, the disallowance was not in accordance with law Decided in favour of Assessee. Valuation made u/s 50C of the Act Valuation of LTCG on transfer of assets Held that:- Revenue has not rebutted the submission of the assessee that it had objected to the adoption of value assessed by the Stamp Valuation Authority before the Assessing Officer - There is no case for the Revenue that the value assessed by the Stamp Valuation Authority was subject to any dispute in any appeal, revision or reference the Assessing Officer was obliged to refer the valuation to a Valuation Officer in accordance with sub-section (2) of section 50C of the Act - the matter requires a fresh look by the Assessing Officer - Assessing Officer shall refer the valuation to the Departmental Valuation Officer order set aside and the matter remitted back to the AO for fresh consideration Decided in favour of Assessee.
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2014 (3) TMI 254
Disallowance of tax on Brand Usage Royalty Held that:- The decision in Johnson & Johnson Ltd. Versus Assistant Commissioner of Income-tax [2014 (2) TMI 978 - ITAT MUMBAI] followed - The CIT(A) erred in ignoring the copy of draft brand usage royalty agreement which was submitted by the assessee alongwith application to RBI - If the assessee which carries on a business find that it is commercially expedient to incur certain expenditure directly or indirectly, it would be open to such an assessee to do so notwithstanding the fact that a formal deed does not precede the incurring of such expenditure - there is no merit in the enhancement made by the CIT(A) thus, the AO is directed to delete the addition made by the CIT(A) Decided in favour of Assessee. Disallowance of service tax Held that:- The decision in Johnson & Johnson Limited Versus Commissioner of Income Tax-LTU [2014 (2) TMI 555 - ITAT MUMBAI] followed - the taxes were liability of the assessee- company under the terms of agreements and accordingly disallowance made by AO were deleted - liability of payment of service tax is of recipient of services and since assessee is the receiver of services, it is the liability of the assessee company to bear service tax Decided in favour of Assessee. Disallowance of technical know-how royalty payment on traded goods Restriction of technical know-how royalty to 1% in respect of manufactured goods - Held that:- The decision in Johnson & Johnson Limited Versus Commissioner of Income Tax-LTU [2014 (2) TMI 555 - ITAT MUMBAI] followed - Royalty payments has been approved by RBI and therefore deserves to be allowed - as the payments have been made in the light of the agreement with J&J US and as per the approval/guidelines of the RBI, there is no reason to disallow the tax and R&D Cess paid on technical royalty - the AO is directed to delete the addition made Decided in favour of Assessee. Disallowance of tax and R&D Cess paid on technical know-how royalty Held that:- The decision in Johnson & Johnson Ltd. Versus Assistant Commissioner of Income-tax [2014 (2) TMI 978 - ITAT MUMBAI] followed - Royalty payments has been approved by RBI and therefore deserves to be allowed - as the payments have been made in the light of the agreement with J&J US and as per the approval/guidelines of the RBI, there is no reason to disallow the tax and R&D Cess paid on technical royalty - the AO is directed to delete the addition made Decided in favour of Assessee. Disallowance of service tax paid on know-how royalty Held that:- The decision in Johnson & Johnson Limited Versus Commissioner of Income Tax-LTU [2014 (2) TMI 555 - ITAT MUMBAI] followed - the disallowance made by TPO on account of cess service tax is not justified Decided in favour of Assessee. Advertising, marketing and promotion (AMP) expenditure Held that:- The assessee reiterated that AMP expenditure is not an international transaction - The additional supporting documents need to be verified by the TPO the matter remitted back to the TPO - The TPO is directed to decide this issue denovo after considering the documents filed by the assessee and after giving reasonable opportunity of being heard to the assessee Decided in favour of Assessee. Disallowance of expenditure incurred on production of advertisement films Held that:- The decision in Johnson & Johnson Limited Versus Commissioner of Income Tax-LTU [2014 (2) TMI 555 - ITAT MUMBAI] followed - the expenditure on production of advertisement films is revenue in nature - the expenditure on production of advertisement films is revenue in nature and accordingly direct the AO to delete the same Decided in favour of Assessee. Adjustments made u/s. 145A of the Act Held that:- The decision in Johnson & Johnson Limited Versus Commissioner of Income Tax-LTU [2014 (2) TMI 555 - ITAT MUMBAI] followed the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee. Reserve for cash discount of the previous year written back during the current year Held that:- The decision in ADDL COMMISSIONER OF INCOME TAX Versus M/s JOHNSON & JOHNSON LTD [2013 (6) TMI 286 - ITAT MUMBAI] followed - reserves which were not allowed in the earlier assessment year was written back during the current year thus, the matter remitted back to the AO to decide the alternative grievance of the assessee Decided in favour of Assessee. Disallowance of 1% of travelling expenditure Held that:- The decision in Johnson & Johnson Limited Versus Commissioner of Income Tax-LTU [2014 (2) TMI 555 - ITAT MUMBAI] followed the adhoc disallowance deleted on travelling expenses Decided in favour of Assessee. Disallowance of depreciation claimed on testing equipments Held that:- The decision in Johnson & Johnson Limited Versus Commissioner of Income Tax-LTU [2014 (2) TMI 555 - ITAT MUMBAI] followed - the claim of depreciation on the testing equipments allowed thus, the AO is directed to allow the claim of depreciation on testing equipments Decided in favour of Assessee. Short grant of credit for TDS Held that:- The issue needs verification at the assessment stage thus, the AO is directed to verify the TDS certificates and then allow the correct claim as per the provisions of the law Decided in favour of Assessee.
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2014 (3) TMI 253
Validity of order of Penalty Bar of limitation Notice issued beyond Prescribed time Held that:- According to section 158BFA(3) shows that penalty proceedings should be completed within the financial year or within six months from the end of the month in which the proceedings are initiated, whichever is later - After issuance of notice u/s.158BFA(2) on 29-10-2004, the Revenue has not taken any action within the time limit prescribed under the Act for levy of penalty against the assessee - The assessee filed an appeal before the CIT(Appeals) much after the period of expiry of limitation - The Revenue was under no obligation to wait for the assessee to file an appeal against assessment order after the limitation period was over. After issuance of notice, the Revenue ought to have completed penalty proceedings within the period prescribed under the Act without waiting for the assessee to file appeal against the assessment order beyond the period of limitation - The second notice issued u/s.158BFA(2) does not confer any power to Revenue to Denovo penalty proceedings against the assessee - The Act specifically provides for the time limit within which order imposing penalty has to be passed - The statutory time limit cannot be enlarged with the issuance of fresh notice Revenue failed to complete penalty proceedings within the statutory time frame thus, the penalty order dated 23-10-2009 is bad in law thus, the order set aside Decided in favour of Assessee.
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2014 (3) TMI 252
Penalty u/s 271(1)(c) of the Act Disallowance of interest and dividend income u/s 36(1)(vii) of the Act - Disallowance of depreciation on leased assets - Held that:- The issue of allowability of deduction on dividend and interest income earned from the long term finances under section 36(1)(viii) of the Act is a debatable one and there are plethora of decisions that penalty cannot be levied on case where two view possible - merely an addition has been confirmed in the quantum proceedings, the penalty does not become automatically leviable The decision in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] followed when the assessee furnishes all the details of its expenditure as well as its income in the return of income, which details, in themselves, are not found to be inaccurate or nor can be viewed as the concealment of income on its part - It is up to the authorities to accept its claim in the return or not - Mere rejection of claim will not amount to furnishing of inaccurate particulars or concealment of income and hence, no penalty can be levied under section 271(1)(c) of the Act thus, the case of the assessee does not attract the provisions of section 271(1)(c) of the Act and therefore the penalty levied/confirmed on this count stands deleted. With regard to disallowance of depreciation on the sale and lease back transaction has given the relief to the assessee with regard to leasing of assets to Maharashtra Esters and Keytones Pvt. Ltd. and allowed depreciation thus, the penalty on account of the disallowance set aside - Allowability of depreciation on asset given on lease to Konkan Railway Corp. Ltd. and Andhra Pradesh State Electricity Board has been remitted back to the AO and directed to examine the issue of sale and lease back agreement - When the said issue has been restored to the file of the AO, thus, the penalty on this aspect should also be remitted to AO for fresh adjudication - Decided in favour of Assessee.
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2014 (3) TMI 251
Retrospective/retroactive application of section 10(26AAB) income of an agricultural produce market committee or board - Held that:- The decision in Commissioner of Income-tax Versus Agriculture Market Committee [2011 (3) TMI 751 - Andhra Pradesh High Court] followed - the provisions of sec. 10(26AAB) of the Act inserted by the Finance Act 2008 w.e.f. 1.4.2009 shall have prospective operation and accordingly - the said provisions cannot be applied retrospectively from 1.4.2003 - the exemption was to be granted to AMCs prior to 1.4.03 as a local authority and after 1.4.09 u/s 10(26AAB) - the assessee's contention that they are eligible for exemption u/s 11 are to be accepted thus, the matter remitted back to the AO for fresh adjudication. Claim of exemption u/s 11 of the Act - Whether the direction may be given to the CIT to grant Registration u/s 12A and Exemption u/s 11(1) & 11(2) of Act Held that:- Income of the AMC from different sources i.e. license fees, market fees, losses, etc. which is derived with a profit motive has been considered - license fee is to be considered as income of Assessee - Assessee's claim for exemption has to be considered with reference to the provisions of section 11of the Act - the entire assessment has to be reconsidered afresh in the light of the various decisions of the Hon'ble High Court and Tribunal on this issue - The issue of claim of exemption u/s 11 of the Act and taxation of various incomes and its application has to be re-examined by the AO in the light of the facts of the case and law on the issue the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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2014 (3) TMI 250
Claim of exemption u/s 11 of the Act AO rejected the claim of exemption u/s 10(23C) of the Act Held that:- The income from rent is rightly noted by the CIT (A) that it cannot be assessed as business income as it becomes income from house property only thus, the of CIT (A) that assessee is in the business and using the Trust for its commercial activity is not correct - as seen from the annual report placed on record, assessee had receipts of training centre receipts from State Government in addition to general donations, dividends, interests and compensation service charges - Since there is no change in the object of assessee and as assessee continue to involve itself in charitable purpose for the help of physically handicapped persons and was receiving grant in aid from Govt. of Maharashtra the AOs observations that assessee changed the memorandum of association so that fresh registration is required does not hold good thus, the order of the CIT(A) upheld Decided against Revenue.
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2014 (3) TMI 249
Disallowance of depreciation u/s 32 - claim of lower rate of depreciation activity of mining and processing of Iron Ores etc - A.O disallowed the claim of depreciation on fixed assets Land, taken on lease from OMC on the ground that the rate of depreciation so claimed is lower than the provision under Sec.32(1)(ii) - Held that:- The contention of the assessee is upheld for the simple reason that the denial of claim of depreciation has been made on misinterpretation of law and the applicability - Explanation to Section 32(1)(ii) leans in favour of the assessee to the extent that it is the actual action of put to use which entitles the assessee to claim depreciation - all expenses are incurred for the purpose of business and are incidental to the holding of rights were claimed u/s.32(1)(ii) being the license to carry out the mining therefore could not be denied insofar as the Government and the lessee are in control of the asset - The definition of depreciation has been misconstrued for the purpose of allowing deduction by the Assessing Officer and the CIT(A) in holding a view on the promulgation of Section 32(1)(ii) with effect from the year 1998-99 which has been further amended w.e.f. Assessment Year 2003-04 thus, the assessee is entitled to depreciation as charged to the P & L account in accordance with its business exigencies Decided in favour of Assessee.
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2014 (3) TMI 248
Disallowance of contribution afforastation funds - revenue or capital expenditure - Amount paid to the DFO for mining operation Held that:- The assessee is not acquiring any asset nor enduring benefit but is having only a right to work of mining in the land given to him for a specific period on lease thus, the amount is practically a revenue expenditure incurred by the assessee while doing his trade of mining operation thus, the claim of the assessee to allow the same as revenue expenditure is very much within the provisions of the Act thus, the order of the CIT(A) set aside and the AO is directed to allowe the expenditure as revenue expenditure Decided in favour of Assessee.
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2014 (3) TMI 240
HC dismissed the petition against the decision of AAR in view of separate judgment passed in NETAPP B V Vs. The Authority for Advance Rulings & Ors. of [2012 (8) TMI 739 - DELHI HIGH COURT] upholding the decision of AAR wherein AR rejected the application on the ground that case is pending, and observed that, the argument that the AAR erred in not following a so called past practice is unpersuasive as no practice, without its roots in the law, but based on an unchallenged understanding can be pursued, holding otherwise would be creating an estoppel against a statute - thus AAR was correct in rejecting the application for ruling.
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Customs
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2014 (3) TMI 247
Return of sale proceeds of the said confiscated gold to the appellant in terms of earlier decision of tribunal [2010 (10) TMI 650 - CESTAT, MUMBAI] - Held that:- even though the Tribunal passed the order as early as 28/10/2010 the department has approached the hon'ble High Court of Bombay only in August 2012 i.e. almost after a gap of two years. The appeal is yet to be admitted and the current status is pre-admission. Even after the filing of the appeal, 1½ years have passed and the department has not initiated any action either to get the order of the Tribunal stayed or the matter decided in their favour. This shows complete inertia on the part of the department in pursuing the matter to its logical conclusion. Department directed to comply with the order dated 28/10/2010 within a period of one month from today or get direction from the hon'ble High Court against the order of this Tribunal. If no order is received in favour of the Revenue from the hon'ble High Court, the direction of the Tribunal should be complied in toto and action taken accordingly.
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2014 (3) TMI 246
Redemption fine and penalty - allegation of export of non-basmati rice by mis-declaring the same as Basmati rice - Held that:- , the Division Bench of this Tribunal in M/s M.K.Shipping Services [2012 (11) TMI 531 - CESTAT, MUMBAI] after considering the facts and circumstances has found that from a copy of the report obtained by the appellant from the Revenue under RTI Act, it is evident that the export was made of rice-milled basmati rice'. Further, test report was not considered either by the enquiry authority or by the adjudicating authority. Further, since the goods under export having been proved to be basmati rice, the charges of mis-declaration of goods under export, which was the basis for investigation is vitiated and accordingly, it is held that there is no case of mis-declaration made out. It is just and proper that these appeals have to be allowed in favour of the appellants and accordingly, the order of confiscation is set aside as well as the penalty imposed on the appellant firm and penalty imposed on Shri Santosh Chawla, Manager of the Exporting firm as well as the penalty imposed on CHA Shri Mukesh D Thakkar are set aside. - Decided in favor of assessee.
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2014 (3) TMI 245
Denial of refund claim - Maintainability of refund claim u/s 27 - parts of power driven pumps utilized by the factory within the factory premises - Held that:- Undisputedly there was no lis between the respondent and the Revenue at the time of payment of duty and this will not deprive the respondent of his right to file refund claim based on a subsequent clarificatory Notification. Hence the question of filing appeal against the order of assessment does not arise - both power driven pumps as well as parts of power driven pumps used for manufacturing pumps within the factory were exempted from payment of excise duty. We are also satisfied that notifications were rescinded and consolidated notification was issued on March 1, 1994 with a view to reduce number of notifications. No demand hence could have been made against the appellant in respect of parts of power driven pumps by issuing show cause notices. In view of the consistent policy of the Government of exempting parts of power driven pumps utilized by the factory within the factory premises, it could not be said that while issuing notification No. 46/94 of March, 1, 1994, the exemption in respect of said item which was operative was either withdrawn or revoked. The action was taken only with a view to rescinding several notifications and by issuing a composite notification. The policy remained as it was and in view of demand being made by the Department, a representation was made by the industries and on being satisfied, the Central Government issued a clarificatory notification No. 95/94 on April, 25, 1994. It was not a new notification granting exemption for the first in respect of parts of power driven pumps to be used in the factory for manufacture of pumps but clarified the position and made the position explicit which was implicit - Following decision of PRIYA BLUE INDUSTRIES LTD. Versus COMMISSIONER OF CUSTOMS (PREVENTIVE) [2004 (9) TMI 105 - SUPREME COURT OF INDIA ] - Decided against Revenue.
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Service Tax
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2014 (3) TMI 270
Benefit of Notification No. 8/2005-ST dated 1.3.2005 - Cutting and slitting of coils - Job Work - Whether this activity amounts to manufacture or not - Held that:- The activity undertaken by the appellant is only slitting/cutting of length of HR/CR coils of stainless steel. The Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Traders Association - [2003 (11) TMI 107 - HIGH COURT OF DELHI] held that the cutting and slitting of coils would not amount to manufacture. Therefore, the contention of the appellant that cutting and slitting of HR/CR coils would amount to manufacture is no longer sustainable in view of the decisions cited supra. However, the contention of the appellant that it is only an intermediate process and the goods after slitting/cutting were used in further manufacture of SS pipes/tubes on which duty liability is discharged, merits consideration. Notification No. 8/2005-ST provides that in the case of service undertaken by way of job-work and the goods are returned to the original supplier for further manufacture, the benefit of the said exemption would apply. This aspect has not been examined by the adjudicating authority at all - Matter remanded back - Decided in favour of assessee.
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2014 (3) TMI 269
Waiver of pre-deposit of Service Tax - Penalty u/s 77 & 78 - commercial or industrial construction service - Cargo handling service - Held that:- It is the claim of the Appellant that services under the said category, during the relevant period, had been rendered to various Government agencies, for which they were not required to pay any Service Tax. In support, the Appellant has referred to and relied upon the Board's Circular No.116/10/09-ST dated 15.09.2009. It is the grievance of the department that since the Appellant could not produce relevant work orders, invoices/bills, the claim of the, Appellant could not be examined. However, prima facie we find from the enclosures submitted along with the Appeal Memorandum that the Appellant were in correspondence with the department from time to time in submitting the requisite documents - Following decision of Commissioner of Central Excise, Ranchi vs. Modi Construction Company [2011 (4) TMI 598 - JHARKHAND HIGH COURT] - Matter remanded back subject to pre-deposit of Rs. 50 Lakhs. Regarding cargo handling service - Held that:- The activity of cargo handling within the factory premises, prima facie, is covered by the judgement of this Tribunal in the case of Modi Construction Co. which has been later upheld by the Hon'ble Jharkhand High Court. - since we are remanding the major portion of the demand we also expect that the Ld.Commissioner to examine this issue also in the light of the aforesaid judgements. - Matter remanded back subject to pre-deposit in part.
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2014 (3) TMI 268
Demand of service tax - Adjudicating authority did not calculate tax liability under various services - Adjudicating authority in the order potion has confirmed demand of Rs. 1,09,68,041/- as an amount liable to be paid by the appellant under Section 73 of the Finance Act, 1994. As against the confirmed demand, the adjudicating authority in order-in-original has specifically recorded that service tax has been demanded on various services; as enumerated herein earlier. If that be so, it is bounden duty of the adjudicating authority to come to a conclusion as to exact amount of tax liability on individual service, if any, rendered by the appellant after examining the records. In our view, the issue needs reconsideration by the adjudicating authority to come to the conclusion and work out the service tax liability under individual service - Decided in favour of assessee by way of remand.
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2014 (3) TMI 267
Demand of service tax - Consulting Engineers Service - Operation and maintenance of windmills - Held that:- What the appellant has performed is operation and maintenance of windmills and not rendering any advice, consultancy or technical assistance in any field of engineering, which is the criterion for classifying the service under the category of Consulting Engineers Service. Such executory services does not come under the purview of Consulting Engineers Service - Decided in favour of assessee.
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2014 (3) TMI 266
Classification of service - Consulting Engineers Service or Survey and Exploration of Minerals Service - Held that:- From the findings of the adjudicating authority, it is evident that no service relating to advice, consultancy or technical assistance had been rendered by the respondents. Further, Survey and Exploration of Minerals were brought under the tax net in budget 2004. Section 65(104a) defines Survey and Exploration of Minerals means geological, geophysical or other prospecting surface or sub-surface surveying or map making survey in relation to location or exploration of deposits of mineral, oil and gas. Section 65(105)(zzv) defined taxable service as any service provided or to be provided to any person, by any person, in relation to survey and exploration of mineral. When the activity undertaken by the respondents are considered in the light of these definitions, it is clear that such activity would merit classification under Survey and Exploration of Minerals. It is a well settled position in law that when an activity is covered under a specific entry, which came later, then service tax cannot be demanded on the same activity under a different category for the prior period. For the period prior to Budget 2004, the activity undertaken by the respondents cannot be classified as Consulting Engineers Service especially when Survey and Exploration of Minerals Service has not been carved out of Consulting Engineers Service - Decided against Revenue.
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2014 (3) TMI 265
Classification of service - Consulting Engineers Service - supply of know-how by way of patents, trade secrets, processes, etc. - Held that:- Consulting Engineers Service relates to rendering of advice, consultancy or technical assistance in any branch of engineering to a client by a consulting engineer or an engineering firm. The said service does not, in any way, relate to supply of technical know-how which the respondent has undertaken in the present case. They have supplied to the client in India know-how by way of patents, trade secrets, processes, etc. so that the recipient in India can undertake manufacture of licensed products. In consideration thereof, royalties/licence fees had been paid by the recipient to the service provider. This activity, by no stretch of imagination, can be considered as coming within the purview of Consulting Engineers Service - activities undertaken by the respondent in the case is not exigible to service tax under the category of Consulting Engineers Service - Decided against Revenue.
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Central Excise
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2014 (3) TMI 244
Availment of suo moto credit - Payment by making cash payment in PLA under reverse charge - early ST was paid using cenvat credit - Lower authority has dis-allowed such credit on the ground that the appellant should have applied for refund of service tax paid by them as per the provision under section 11B of the central excise act 1994 - both the authorities below have relied on Larger Bench decisions of BDH Industries case [2008 (7) TMI 78 - CESTAT MUMBAI] to deny the benefit. - Held that:- factually there is no dispute that under reverse charge mechanism appellant discharged the Service Tax liability by debit in Cenvat account. There is no dispute that the credit balance in Cenvat account during the material period was an eligible credit to appellant - Following decision in the case of Sopariwala Exports Pvt Ltd - [2013 (5) TMI 430 - CESTAT AHMEDABAD] - and M/s. ICMC Corporation Ltd. Versus The Customs, Excise and Service Tax Appellate Tribunal [2014 (1) TMI 1473 - MADRAS HIGH COURT] - Decided in favour of assessee.
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2014 (3) TMI 243
Waiver of pre-deposit of Cenvat credit - the only ground on which the cenvat credit was denied to the applicant, was that initially, the goods were not duty paid and hence, when it was returned to the factory, after rejection, it cannot be admissible to cenvat credit under Rule 16 of the Central Excise Rules, 2002 - applicant had, after initial export of the goods, received back the rejected goods and paid CVD at the time of its re-import and availed CENVAT Credit of the CVD paid on the rejected goods, under Rule 16 - Held that:- On a preliminary analysis of Rule 16 of the Central Excise Rules, 2002, prima facie, we are of the view that any goods on which duty has been paid at the time of removal when brought back to the factory for processes mentioned therein, would be eligible to cenvat credit. In these circumstances, we are of the opinion that the applicant is not able to make out a prima facie case for total waiver of the dues adjudged - Conditional stay granted.
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2014 (3) TMI 242
Continuance of proceedings after death or adjudication as an insolvent of a party to the appeal or application - company under liquidation - Rule 22 of the CESTAT Procedure Rule - Held that:- when an appeal or an application is filed by a company and same is being wound up, the appeal or application shall abate unless an application is made for continuance of such proceedings by or against the successor in interest, the executor, administrator, receiver, liquidator or other legal representative of the appellant or applicant or respondent, as the case may be. In this case, from the order of Honble Allahabad High Court, it is clear that the appellant company is being wound up and official liquidator has been appointed. But, since no application for continuance of the proceedings has not been received from the official liquidator in accordance with the Rule 22 of the CESTAT Procedure Rules, all these appeals, stay applications and miscellaneous applications filed by the appellant company M/s DSM Sugar shall be treated as abated in terms of Rule 22 of the CESTAT Procedure Rules. The department can present its claim of Revenue against the appellant before the official liquidator and the official liquidator, is also, at liberty to file applications before this Tribunal for restoration of the appeals and stay applications and their continuance.
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2014 (3) TMI 239
Denial of the benefit of Cenvat credit in respect of roll bearings - Requisite particulars not mentioned in invoices - Held that:- There is no dispute about the receipt of the goods by the appellants under the cover of invoices and on payment as regards payment of duty - I have seen the invoices wherein the total duty paid by the supplier of the goods stand duly mentioned. On an objection raised by the department, an additional certificate stand given by their sister unit giving only details. The defects pointed out by the Revenue are rectifiable defects and stand rectified by the appellants, in which case the benefit of Cenvat credit and could not be denied to them - Decided in favour of assessee.
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2014 (3) TMI 238
Denial of CENVAT Credit - Violation of Rule 3(7)(a) of the CENVAT Credit Rules, 2004 - Notification No.23/2003-CE dated 31.3.2003 - Held that:- there is a factual dispute on the availment of the credit on the basis of some invoices wherein the applicant's contention that EOU has paid the duty under Sl. No. 2 of the said Notification which is required to be examined by the original authority - Accordingly, the order passed by the Commissioner (Appeals) insofar as the denial of credit on CVD and education cess and SHE cess on CVD is set aside and the matter is remanded to the original authority to decide afresh after considering the submissions of the appellant - Decided in favour of assessee.
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2014 (3) TMI 237
Waiver of pre-deposit of duty - Dutiability of 'sugar syrup', an intermediate product manufactured and captively consumed by the applicants in the manufacture of their final products - Exempted vide Notification No.3/2007-CE, [S.No.18A], dated 01.03.2007 - Held that:- in the Sugar Invert Syrup, sugar content has nearly 80% by weight. This syrup has shelf life and is marketable and hence dutiable also. The Sugar Invert Syrup is not immediately consumed but and is retained for manufacture later - Assessee directed to make pre deposit - Conditional stay granted.
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2014 (3) TMI 236
Modification of stay order - Violation of principle of natural justice - reversal of cenvat credit on used capital goods sold as scrap - Held that:- Tribunal on this issue granted unconditional stay in appellants own case. - appellant filed modification of stay order passed by the Commissioner (Appeals) which was not considered by him and the appeal was dismissed automatically. In view of that, it is appropriate to set aside the impugned order and remand the matter back to the Commissioner (Appeals) to decide the stay application after considering the case law submitted by the appellant - Decided in favour of assessee.
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2014 (3) TMI 235
Waiver of pre deposit - Cenvat credit on the bottles used for marketing soft drinks which get destroyed in the manufacturing process or transport of the goods - Held that:- Commissioner (Appeals) has asked for pre-deposit on an issue which is already decided in favour of the assessee [2008 (12) TMI 568 - CESTAT, NEW DELHI]. In such a situation, Commissioner (Appeals) should have exercised the discretion vested upon him under section 35F of the Central Excise Act more judiciously. In such cases, litigants have no option other than to agitate the matter at higher levels which is being done in the present proceeding. I am of the view that this is a case where there was no justification to call for any pre-deposit for hearing the appeal before Commissioner (Appeals). - stat granted.
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2014 (3) TMI 234
Denial of credit on rent-a-cab service - Held that:- rent-a-cab service was used for providing rent-a-cabs to the staffs/workers to reach the factory premises - However, fact was not examined by both the authorities below and there is no submission in this regard. However, to meet the ends of justice, the respondents should be given opportunity to place these facts before the original authority - matter is remanded back to the original authority to decide afresh - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (3) TMI 272
Levy of Tax U/s-7A - Imposition of penalty - Discrepancy in stock - Held that:- order of the Joint Commissioner does not warrant any interference. It is seen that based on the results obtained in the inspection of the place of business, the Assessing Officer made a best assessment. The Appellate Assistant Commissioner deleted the additions and penalty which was suo motu reviewed by the Joint Commissioner after calling for objections from the assessee. The Joint Commissioner, finding contradictions in the statement of the assessee at the time of inspection and the reply to the pre-assessment notice, rightly imposed further addition towards probable omission and confirmed the levy of penalty in respect of stock variation - Decided against assessee.
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2014 (3) TMI 271
Input-tax credit - Reduction of tax credit by 4% on goods purchased under circumstances specified in three sub-clauses of clause (b) of sub-section (3) of section 11- Assessee purchasing furnace oil, natural gas and light diesel oil for manufacturing activity and transferring manufactured goods to branches outside state - Gujarat value added tax act, 2003 (1 of 2005), s. 11(3)(b)(i), (ii),(iii) - Held that:- reduction of tax credit under section 11(3)(b) would in no case exceed four per cent If the interpretation put forth by the State is accepted, a dealer who has availed of tax credit of four per cent would end up surrendering credit by 8 per cent or may be in a given case by 12 per cent. Surely, the Legislature could never have intended the reduction to exceed the tax credit itself. In the present case, this is precisely what would happen if the interpretation of the State is accepted. We have noticed that the furnace oil invites tax at the rate of four per cent. The tax credit thus available to the respondent as a dealer would be limited to such amount. If such tax credit available to the respondent is reduced by eight per cent, it would bring about a situation where credit available is four per cent and what is reduced is eight per cent. Surely, the Legislature never envisaged any such situation while framing section 11(3)(b) of the VAT Act - Following decision in the case of Reliance Industries Limited [2014 (2) TMI 815 - GUJARAT HIGH COURT] - Decided against Revenue.
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2014 (3) TMI 241
Validity of Assessment Rejection of accounts - Estimation of Turnover - Best Judgment U. P. Trade Tax Act, 1948 Section 7(3) - Held that:- while the Appellate Authority proceeded on the basis that the daily sale was ₹ 3,500/-, the Tribunal held that the daily sale was ₹ 10,000/-. Tribunal, ultimately, assessed the taxable turnover at ₹ 27.75 lacs. Apart from the finding that on 14th April, 2004, revisionist assessee had sold ₹ 3,000/- worth of food from morning till 6:50 PM, there was nothing else available for the Assessing Authority or the Appellate Authority or the Tribunal to reasonably assess the turnover for the said financial year. In addition to that, the fact remains that the turnovers for the subsequent years were accepted at substantially low figures - Therefore, neither the assessment by the original Authority, nor the assessments by the Appellate Authority or by the Tribunal are sustainable. They are, accordingly, quashed. The matter is remitted back to the Assessing Authority to make a fair assessment on the basis of materials available on record - Decided in favour of assessee.
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