Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 12, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Non-inclusion of demurrage charges – Valuation of closing stock – determination of correct profit would require proper valuation of inventories, both as at the beginning as well as the end of the relevant accounting period - AT
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Addition u/s 68 - proper action is required to be taken in the hands of the persons in whose accounts the credit is appearing instead of invoking the provisions of Section 68 in the case of the company-assessee - AT
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Loss from derivative transactions - Section 43(5) has no application to FIIs in respect of “securities” as defined in Explanation to sec. 115AD, income from whose transfer is considered as short term or long term capital gains - AT
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Once inclusion of income from the transfer of securities is held to be falling only under the head “Capital gains“, it cannot be considered as `Business income”, whether speculative or non- speculative - AT
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Reduction in commission paid to family members - the payment of commission has been made merely to reduce the taxable income and not for the purpose of business of the assessee - disallowance to the extent to 20% confirmed - AT
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Valuation of cost of acquisition of FSI and TDR – mere granting permission to allow the use of FSI/ TDR did not involve payment of any amount - provisions of section 48 cannot be applied - transfer cannot be subjected to tax under capital gain - AT
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Gross receipts having exceeded the stipulated monitory limit provided in the second proviso to section 2(15), the assessee is not entitled to claim exemption in this year but that fact alone cannot make the Trust non-genuine for the purpose of invoking section 12AA(3) - AT
Customs
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Without completing the enquiry, the charges against CHA could not be confirmed - his licence has been suspended for a period of more than 10 months or so - there is no need to continue with the suspension - AT
Indian Laws
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Complain under Consumer Protection Act, 1986 - Mere existence of an arbitration agreement, assuming there is one between the petitioner and respondent No. 2, would not bar the maintainability of a consumer claim - HC
Service Tax
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Taxability of Reimbursement of the expenses on advertisement and road show being organized recovered from the supplier of goods - they will be treated as having provided the sales promotion service to them - service tax levied - AT
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Short-payment of service tax on the basis of difference between the gross taxable value shown in the ST-3 Returns and receipts shown in the Balance Sheet - stay granted partly - AT
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GTA or C&F Agent - Initial service of temporary storage of the vehicles at or near railway sidings, which is eventually for a few days subject to availability of the rail rakes, will not render the appellant to fall under the category of ‘Clearing & Forwarding Agent' - AT
Central Excise
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Suo motu correction of the credit entry - all that the respondent did was to correct the arithmetical error by making necessary entries in the register even before filing the form at the end of the month - self credit entry allowed - HC
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Refund - Whether reduction in gauge by way of cold rolling process will amount to manufacture or not - held that the activity is manufacturing activity - claim of refund rejected - AT
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100% EOU - Clearance of Capital goods to another EOU - appellant has not produced the original copy of the re-warehousing certificate -stay granted - AT
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Cenvat Credit - Job Work - no reason for not permitting the appellant to clear the finished goods manufactured at the job worker’s premises under the provisions of Rule 4(6) of the Cenvat Credit Rules, 2004 - AT
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Exemption from declaring MRP on Cement Bags - It cannot be said that the depot of the manufacturer is a different entity and therefore the appellant is not eligible for the benefit of Sl. No. 1C of the notification 4/2006 CE - AT
VAT
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Local sale or Inter state sale - movement of goods outside the state but delivery of goods in the same state i.e. Chenna - no material to show that the movement of goods to Andaman without any break for anyone to take delivery in Chennai - HC
Case Laws:
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Income Tax
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2014 (3) TMI 341
Collection of tax at source u/s 206C - Interpretation of Bagasses as per section 206(C) - Whteher Bagasses is covered under the definition of scraps as per section 206(C) and assessee liable to collect tax at source - Held that:- No doubt, the Inspecting Officer during the course of inspection has noticed that there are some discrepancies in collecting tax at source u/s 206C of the Act ( sale of Molasses & Bagasses) and the AO called the explanation from the assessee . The assessee i.e. Person Responsible for deducting tax at source has given his explanation that Molasses and Bagasse and Bagasse generated during the manufacturing process could not be termed as scrap for the purpose of section 206C since it is a by-product of the process of manufacture. Therefore, Molasses and Bagasses are different from scrap and did not fall within the definition of scrap as per Explanation (b) to Section 206C of the Act - Decided against Revenue.
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2014 (3) TMI 333
Non-inclusion of demurrage charges – Valuation of closing stock – Charges to be included as an element of cost u/s 145A of the Act or not – Held that:- The AO having adopted the same method of valuation for the closing stock, i.e., as for the opening stock, being in fact consistently followed, the question of validity of the revision by the assessee arose for consideration – Relying upon Commissioner of Income-Tax Versus British Paints India Limited [1990 (12) TMI 2 - SUPREME Court] - determination of correct profit would require proper valuation of inventories, both as at the beginning as well as the end of the relevant accounting period - This is also in essence the rule of the non obstante provision of section 145A, since statutorily mandated. The issue is legal, and goes to the root of the matter - The same would accordingly get decided on the basis of legal precedents, including an analysis - The issue arising directly out of our decision validating the change by the assessee, having not been dealt with by the CIT(A) - who in fact approved the change in the first instance, with no specific arguments in the matter having also been made – thus, the matter remitted back to the CIT(A) for adjudication – Decided in favour of Revenue.
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2014 (3) TMI 332
Addition made as cessation of liability u/s 41(1) of the Act – Held that:- The appellant has tried to demonstrate that in subsequent year the requisite entry in the books of account have been made but that was being a capital receipt - the amount was transferred to capital reserve account – Relying upon Shri Vishnu Anant Mahajan Versus ACIT Baroda [2012 (6) TMI 297 - ITAT, Ahmedabad] and CIT Vs. Sugauli Sugar Works Pvt. Ltd. [1999 (2) TMI 5 - SUPREME Court] - a unilateral action in writing off the liability do not amount to remission or cessation of liability - the AO has unilaterally acted and considered that the liability in question had ceased to exist - On both the counts that the liability being capital in nature cannot be taxed in the hands of the assessee – the order of the CIT(A) set aside – Decided in favour of Assessee. Addition made u/s 68 of the Act – Unexplained cash credits – Held that:- In a situation when the directors are subject to tax and filing the returns of income in their independent capacity - the requisite inquiry should have been made in their respective hands – the decision in Commissioner Of Income Tax Versus Steller Investment Ltd. [2000 (7) TMI 76 - SUPREME Court] followed - part relief given by the learned CIT(A) was not in line with the several judgments passed in this regard that the proper action is required to be taken in the hands of the persons in whose accounts the credit is appearing instead of invoking the provisions of Section 68 in the case of the company-assessee – thus, the addition made is directed to be set aside – Decided in favour of Assessee.
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2014 (3) TMI 331
Loss from derivative transactions - Capital loss or business loss - Held that:- The decision in Platinum Asset Management Ltd. Versus Dy. Director of Income Tax (International Taxation) [2013 (12) TMI 478 - ITAT MUMBAI] followed - Income arising to a FII from the transfer of `securities” as specified in Explanation (b) to sec. 115AD can only be considered as short-term or long-term capital gain - It is impermissible to consider such income as falling under the head "Profits and gains of business or profession" - income arising from the transfer of securities shall be charged to tax under the head "capital gains" alone - Once inclusion of such income from the transfer of securities is held to be falling only under the head "Capital gains", it cannot be considered as `Business income”, whether speculative or non- speculative - Sec. 43(5) has no application to FIIs in respect of “securities” as defined in Explanation to sec. 115AD, income from whose transfer is considered as short term or long term capital gains - It is a well settled legal position that specific provisions override the general provisions - Thus, the income arising from the transaction in derivatives by the assessee, being FII, cannot be treated as business profit or loss but the same has to be capital gain or loss - Decided in favour of assessee.
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2014 (3) TMI 330
Share trading transaction - Nature of income - Income from Business & Profession OR Capital gain – Held that:- CIT(A) set aside the order of the AO on the issue and held that the income from sale of shares held as investment gives rise to long term capital gains/short term capital gains and the same should not be treated as income from business - Revenue submitted that the assessee was engaged in trading activity – but no material was placed to controvert the findings of the CIT(A) - Repetitive nature of transactions, i.e. sale of shares and again repurchase on the next day, was not proved - the assessee dealt with limited number of stocks and most of the transactions have taken place in April, May and June, 2005 - It is also not in dispute that the assessee held shares of Crance Soft, Vlmta Lab and Yuken India for more than two years and they were shown in the books as investments – thus, the gross receipts should not be taken as the sole criterion to come to the conclusion that the assessee carried on trading activity - Since the revenue was not able to controvert the findings of the CIT(A) – there is no reason to interfere in the order of the CIT(A) – Decided against Revenue.
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2014 (3) TMI 329
Validity of revision order - Power of CIT to invoke revision proceedings u/s 263 of the Act – Deduction u/s 80P(2)(c) of the Act - Held that:- The decision in Grasim Industries Ltd. V CIT [2010 (2) TMI 4 - BOMBAY HIGH COURT] followed - Section 263 of the Act empowers the Commissioner to call for and examine the record of any proceedings under the Act - if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. As decided in Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME Court] - the provision “cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer” and “it is only when an order is erroneous that the section will be attracted” - an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous - An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category - the assessing officer has given a categorical finding that the assessee is not a cooperative bank – thus, in that case the assessee would be eligible for deduction u/s 80P(2)(c) - the revision order passed by CIT does not fall within the mandate of the provisions of sec. 263 of the Act – the order of the CIT(A) set aside – Decided in favour of Assessee.
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2014 (3) TMI 328
Deduction u/s 80IB of the Act – Limit of exemption for SSI unit – Held that:- The decision in ACIT, Mehsana Circle, Mehsana Versus M/s. Olympic Laminates Pvt. Ltd.[2014 (3) TMI 98 - ITAT AHMEDABAD] followed – The limit of investment in plant and machinery to SSI unit is of Rs. 5 crores and not Rs. 1 crore as per provisions of Industries (Development and Regulation) Act, 1951 applicable to the assessee-company as small scale industries as provided in Micro to the Small and Medium Enterprises Development Act, 2006 – the assessee's investment in plant and machinery is below the limit of Rs. 5 crores – thus, there is no need to interfere with the order in holding that assessee was entitled for deduction u/s 80IB of the Act – Decided against Revenue.
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2014 (3) TMI 327
Entitlement for deduction u/s 80HHC of the Act – Interest receipt out of export business – Held that:- If the interest income is earned from the TDR/FDR deposits kept as margin money towards bank guarantee in the course of export business, the same is to be considered as income from business – also, if the interest income is received from the deposits made by the assessee which are inextricably linked to the business of the assessee, such interest income cannot be treated as income from other sources - 90% of the net interest which has been assessed under the head 'income from business' of the assessee has to be deducted in terms of Explanation (baa) to section 80HHC for determining the profit of business – Relying upon ACG Associates Capsules Pvt. Ltd. Vs. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - as such the Explanation (baa) to section 80HHC applicable to this part of income –thus, the AO is directed to recompute deduction u/s 80HHC – Decided in favour of Assessee. Computation of deduction u/s 80HHC of the Act – Interest income to be part of total turnover or not – Held that:- The interest income is to be considered as business income subject to application of Explanation (baa) to section 80HHC – thus, the AO is directed to recompute deduction u/s 80HHC of the Act – Decided in favour of Assessee. Computation of deduction u/s 80HHC of the Act – conversion charges - Held that:- The decision in ACIT Vs. Bio-tech Medicals, Hyderabad [2008 (3) TMI 365 - ITAT HYDERABAD-B ] followed - conversion charges to be considered as derived from the industrial undertaking of the assessee - processing charges received by the assessee being an independent income, 90% had to be reduced from this income but the same being an important component of business profits, had to be included in the total turnover as per the formula given in 80HHC of the Act –thus, the AO is directed to consider the conversion charges as an independent income and exclude 90% thereof from the gross total income in terms of Explanation (baa) to section 80HHC of the Act, so as to arrive at business profits – Decided partly in favour of Assessee. Exchange fluctuation – If it is received in the end of the FY corresponding to the sales effected during the FY on export of exports, it should be considered as business income of the assessee, which is an integral part of the export and it cannot be separated from the export proceeds simply on the ground that increase in the rate subsequent to sale but prior to realization – the decision in Bench of Tribunal, Bombay in the case of ACIT Vs. Prakash I. Shah [2008 (8) TMI 387 - ITAT BOMBAY-K ] followed – it should be considered part of the total turnover of the assessee Decided in favour of Assessee. Insurance claim - If it is received on the trading assets, the same is to be considered as part of the turnover of the assessee - On the other hand, if it is received on the fixed assets, it cannot form part of the turnover of the assessee – thus, the AO is directed to verify the claim – Decided in favour of Assessee. Write off of credit balances – If it is having direct link with the business operation of the assessee, the same is to be considered as income from business - Before the AO, nothing has been brought on record about the nature of credit balance – thus, the matter is remitted back to the AO to verify whether it has nexus with the business operation of the assessee and if it has already taken into computation of income under the head 'business income', the claim of assessee has to be allowed so as to grant deduction u/s 80HHC of the Act. Nature of Consultation fee paid – Capital OR Revenue – Held that:- Though the claim of ₹ 2.00 lakh is relevant to AY under consideration, however, bill issued by Sri Ganesh from M/s Q Pharma Consulting India shows that only ₹ 1 lakh is relating to AY under consideration and balance ₹ 1 lakh not deductible during the year consideration - The CIT(A) allowed the amount relevant to AY under consideration – thus, there was no infirmity in the order of the CIT(A) – Decided against Assessee. Business Receipt u/s 28(iiib) of the Act - Deductibility of Modvat credit from raw material consumption account- Held that:- Excise duty refund does not fall u/s 28(iiib) of the Act as it related to the Modvat credits returned from the excise duty payments on exports and it was later on refunded – thus, it is neither an incentive nor a rebate and the central excise duty what has paid by the assessee - there is no question of excluding 90% receipts by invoking Explanation (baa) to section 80HHC of the – thus, the order of the CIT(A) set aside – Decided in favour of Assessee. Disallowance of interest – Advance paid – Held that:- The decision in S.A. Builders Ltd. Vs. CIT(A) and Another, [2006 (12) TMI 82 - SUPREME COURT ] as long as the interest free loans are given to sister concerns as a measure of commercial expediency, disallowance cannot be resorted only on the ground that the loans have been utilized by the sister concerns for its business purposes - What is to be actually seen is commercial expediency of having advanced the loans and it is immaterial whether or not the loans so advanced is used for the purposes of the business of the assessee or for the purposes of business of the assessee's sister concerns – thus, the order of the CIT(A) set aside – Decided in favour of Assessee. Disallowance of interest – Held that:- The investments made by the assessee are not for the purpose of the assessee's business – thus, lower authorities have justified in disallowing the interest on the investments made by the assessee – the order of the CIT(A) upheld – Decided against Assessee. Disallowance of deduction u/s 80 HHC of the Act – DEPB benefits – Held that:- The assessee having satisfied conditions laid down therein the rate of draw back credit attributable to the Customs Duty was higher than the rate of credit allowable under the DEPB Scheme – thus, the AO is directed to recompute the deduction u/s 80 HHC of the Act – Decided in favour of Assessee. Addition on account of excise duty on closing stock u/s 43B of the Act - Held that:- The decision in ACIT Vs. Torrent Cables Ltd. [2012 (11) TMI 190 - SUPREME COURT] followed - the assessee followed the net method for valuing the closing stock and included excise duty at the time of removal of goods - the excise duty is to be excluded at the time of valuing closing stock at the end of the accounting period – thus, the order of the CIT(A) upheld – Decided against Revenue.
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2014 (3) TMI 326
Genuineness of the Transaction - Creditworthiness of Dr Brijendra Singhal - Held that:- The loan of Rs. 8.00 lacs duly stands proved - The statement of the assessee recorded by the AO confirmed the loan - The statement who is brother-in-law of the assessee also confirmed the advance of the loan - There is a natural love and affection between such relations and at the behest, anybody like sister and brother-in-law would help in Indian society - mental condition of the father of the assessee was not good state and therefore, he was not aware of this loan. Dr Brijendra Singhal is a NRI and he has explained his source of income and he has also mentioned his bank account and his NRI account through which the amount is routed – there was no force in the revenue’s contention that why should the brother-in-law would give a loan of Rs. 8.00 lacs and would not demand it back – the amount of loan stand thoroughly proved on record and nothing more is required to prove this loan – Decided in favour of Assessee.
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2014 (3) TMI 325
Deletion made u/s 41(1)(a) of the Act – Cessation of liability – Held that:- There is no infirmity in the order of CIT(A) as assessee has not written off the said amount in its books of account - M/s Perfect Engineering Works has confirmed having to receive the amount from the – thus, the liability has not ceased to exist – thus, the provisions of section 41(1)(a) of the Act does not apply - Since no evidence was filed, the plea of the revenue cannot be accepted – Decided against Revenue. Reduction in commission paid to family members – Held that:- The assessee could not file any evidence of rendering services by the family members of the assessee against which the assessee has made said payment - AO is justified to state that the payment of commission by the assessee to his wife, two daughters-in-law, grandson, granddaughters and son of the assessee Sunil Kakkad (HUF) is for business purposes – the contention of the revenue is accepted that without stating any reason CIT(A) has stated that disallowance be restricted to 20% being excessive payment of commission by the assessee - There is no details as to the rate on which the assessee had made payment of commission to his family members - the payment of commission to his family members has been made merely to reduce the taxable income and the said payment is not for the purpose of business of the assessee – thus, the order of the CIT(A) set aside – Decided in favour of Revenue. Deletion of disallowance out of daily wages and contract charges – Held that:- The AO is justified to make an adhoc disallowance of 5% out of the claim of assessee as entire expenditure was not subject to verification, that the said payment were made in cash against self made vouchers – the order of the CIT(A) set aside – Decided in favour of Revenue. Deletion of disallowance out of telephone expenses on account of personal use – Held that:- The AO as well as CIT(A) have made adhoc disallowance on account of personal use of telephone – thus, there is no reason to interfere with the order of the CIT(A) restricting the disallowance on account of personal use of Telephone by assessee as made by AO – Decided against Revenue.
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2014 (3) TMI 324
Valuation of cost of acquisition of FSI and TDR – Held that:- The decision in Land Breez Co. Operative Hosing Society Ltd. Versus Income-tax Officer, Ward-19(3) (2) [2013 (2) TMI 177 - ITAT MUMBAI ] followed - TDR available under development control regulation of Greater Mumbai, 1991 amounts to transfer of capital assets and that since no cost of acquisition can be ascribed to such a right computational provisions of section 48 cannot be applied, that such transfer cannot be subjected to tax under capital gain - no capital gain can be charged on transfer of additional FSI for sale consideration, as it had no cost of acquisition - in absence of any evidence that the assessee-society had paid/contributed any sum towards purchase of TDR/FSI no amount could be attributed towards cost of acquisition and that mere granting permission to allow the use of FSI/ TDR did not involve payment of any amount. The transfer of TDR amounts to transfer of a capital asset, however, the same cannot be subjected to tax under the head "Capital Gain" for the reason that there is no cost of acquisition in acquiring the right which has been transferred and computational mode given in section 48, therefore, taxing under the head capital gain by the AO cannot be sustained - – Decided against Revenue.
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2014 (3) TMI 323
Reduction made on unaccounted stock – Held that:- The stock belonging to BDC was claimed by it in the return filed by it and same was assessed in its hands – thus, there is no reason to hold that stock belonging to BDC was not lying at the business premises of the assessee –Revenue could not controvert the findings given by the FAA - AO had made no inquiry about the claim made by the assessee , though documentary evidences were produced by the assessee – thus, the order of the FAA does not suffer from any factual or legal infirmity. The fact that goods having tag price of 1.01 Crores were sold for Rs. 52.4 lakhs clearly shows that assessee was offering hefty discount to the customers - FAA has held that adopting the tag price as base price for calculating the value of stock was not proper as it would give absurd results – thus, no fault can be found in his observations - cash sales do not prove that transactions entered in to by the assessee were not genuine - FAA has found that in the case under consideration cash sales were more than the cheque- sales – thus, genuineness of the cash sales has rightly been accepted by the FAA - FAA had committed no mistake in accepting the submission of the assessee that tag price could not be taken as base price for arriving at difference in stock – Decided against Revenue. Additions sustained by FAA - Method of valuation of stock - Goods belonging to BDC were lying at the business premises of the assessee – Held that:- FAA has to follow the same rules which an AO is supposed to follow - addition has been sustained, though partially, by making general observations - He adopted GP@50%, as against the 42% shown by the asessee for computing the difference, but basis for rejecting the gross profit rate of the is missing in his order - for adopting the selling price of the stock, found during survey, at 70 % of the tag price of and 50% of GP - FAA has not given any reasons - if he had evidence of excess stock, he should have confronted the asessee with evidences – the order of the FAA set aside – Decided in favour of Assessee.
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2014 (3) TMI 322
Disallowance of business expenditure – Held that:- The finding of the CIT(A) is that the expenditure claimed by the assessee relates to disputes raised by the assessee with regard to the amounts due on the contracts executed - Such expenditure as long as it is in connection with the business activity of the assessee, has to be allowed, as held by the CIT(A), irrespective of whether the assessee is actually continuing with the taking up of new contracts or executing them regularly – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue. Unexplained cash deposits in the bank accounts – Held that:- The CIT(A) after analyzing the receipts and payments account and on verification from computation statement filed with the return of income, which were found to be supported by entries in the cash book, came to the conclusion that there was no warrant for any addition on account of deposits in the bank accounts - out of total deposits of Rs.1,29,500, which was wrongly taken as Rs.10,29,500 by the Assessing Officer, deposit of Rs.99,500 in ABN Amro Bank was through cheques and not cash as evident from the bank statement – revenue could not brought anything contrary – thus, the order of the CIT(A) upheld – Decided against Revenue. Addition made on account of investment in shares – Held that:- The reason for making the impugned addition is that the investment in question does not appear in the balance sheet and the MOU does not appear to be genuine - the so called investment in shares have been derived by the assessee by virtue of the transaction in terms of the MOU, and not on account of any cash outflow from the assessee's end - In the absence of any fund flow in the process of acquiring shares, the question of any unexplained investment does not arise - When the acquisition of shares by the assessee is not disputed, one has to accept the genuineness of the MOU, since allotment of shares was result of the arrangement in terms of the MOU only – the order of the CIT(A) upheld – Decided against Revenue. Addition made on treating part of the agricultural income disclosed by the assessee treating as income from other sources – Held that:- There was no infirmity in the reasoning given by the CIT(A) for accepting the agricultural income claimed by the assessee - The factum of agricultural activity is proved by the proved acts of supply of raw-material to M/s. Yeturi Bio- tech P. Ltd. - Bills for the supply of such raw-material to the said company are also produced in the paper-book filed - it is Aloe leaves which is claimed to be the agricultural produce of the assessee - It is the claim of the assessee that M/s. Yeturi Bio-tech P. Ltd., has been floated by the family of the assessee and it is in primitive stages of its business activity – thus, it is quite possible that the assessee is actively concentrating on agricultural activity and growth of Aloe leaves in the yeas under consideration, since it is the raw material for the company floated – Decided against Revenue.
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2014 (3) TMI 321
Validity of assessment made u/s 153A of the Act – No incriminating material found during the search action u/s 132 of the Act – Held that:- The decision in The ACIT Cent. Cir. 33, Mumbai Versus Shri Jayendra P. Jhaveri [2014 (2) TMI 1131 - ITAT MUMBAI] followed - the return was processed u/s. 143(1) of the Act but the same has attained finality due to the expiry of limitation period of twelve months from the end of the month in which the return was filed - the assessment is deemed to be completed and not pending on the date of search - no incriminating material was found from the premises of the assessee during the search u/s. 132 of the Act. In Jai Steel (India) v. ACIT [2013 (6) TMI 161 - RAJASTHAN HIGH COURT] it has been held that in case nothing incriminating is found on account of search or requisition, the question of reassessment of the concluded assessment does not arise - it is not open to the assessee to seek deduction or claim expenditure which has not been claimed in the original and already concluded assessment, in the case of assessment u/s. 153A in pursuance of search action - reassessments made by the AO u/s 153A in the case in which the assessments have already been concluded, without any incriminating material being found during the search action conducted u/s 132 of the Act, are liable set aside – thus, the additions made by the AO in assessments proceedings u/s 153A also set aside – Decided in favour of Assessee.
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2014 (3) TMI 320
Cancellation of registration u/s 12AA(3) of the Act - Whether there was any change in the status of the Trust or not – assessee contented that the DIT (Exemption) should have fulfilled the requirements of section 12AA(3) before cancelling the registration granted to the appellant earlier under section 12A of the I.T. Act and he has not considered the provisions of section 11(1)(b) of the I.T. Act properly - Held that:- On a conjoint reading of the first proviso with second proviso to section 2(15) of the Act, a Trust can be denied exemption in the year where the gross receipts exceed the limit prescribed in the second proviso to section 2(15) and in all other years income from such activities should be considered for the benefits under section 2(15) if it is within the limit provided - thus, the denial/ cancellation of registration is not in accordance with law - the gross receipts having exceeded the stipulated monitory limit provided in the second proviso to section 2(15) of the Act, the assessee is not entitled to claim exemption in this year but that fact alone cannot make the Trust non-genuine for the purpose of invoking section 12AA(3) of the Act – thus, the order passed by the DIT (Exemption) set aside – Decided in favour of Assessee.
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Customs
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2014 (3) TMI 319
Condonation of delay - dispatch of an appeal to Tribunal through Courier - Held that:- appellant undoubtedly has forwarded the papers to their advocates in Ahmedabad for filing appeal before the Tribunal. On perusal of the leter written by the Advocate to whom the papers were forwarded, we find that the Ld. Advocate has specifically stated that the courier agency engaged by him to dispatch the appeal, to Tribunal had given the consignment slip, but unable to trace the proof of delivery; he has shut down the practice and no papers are available with him. Director of the Company has filed an affidavit, fairly detailed one, in support of the application for condonation of delay. Though there is a considerable delay in filing appeal, the delay can be condoned due to the reasons that the appellant counsel error in not filing appeal in time should not come in the way for rendering justice, but the main appellant needs be saddled with a cost, which we fix as Rs.5000/- - Delay condoned.
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2014 (3) TMI 317
Suspension of CHA licence in respect of Bombay Shipping Agency vide order was continued pending enquiry against CHA under Regulation 22 of the CHALR, 2004 - Changes in FOB value and unit price - Violation of Regulation 13(b), 13(d) and 13(o) of CHALR, 2004 - Sub letting of license - Held that:- There is no evidence available on record, at this stage, to show the involvement of Shri Deepak Joshi in undertaking any transaction in respect of the export consignments within the Customs area. Only if the services have been used within the Customs area without proper authorisation from the Customs, the allegation can sustain and it is premature at this stage to come to any conclusion in this regard. The use of a person for transacting the business should be in the Customs station. If the services of a person has been availed outside the Customs station, violation of Regulation 13(b) would not arise at all. The violation of Regulation 13(d) of not advising the client to comply with the provisions of the Act and not bringing the matter to the notice of the Dy. Commissioner of Customs also do not appear to be sustainable because, in the present case, the appellant had taken the permission of the apprising officer of the Customs before the documents were handed over to the CWC for amendment of the shipping bills. Even though the apprising officer is not the proper officer to allow such amendment, nothing prevented the said officer in directing the appellant-CHA to approach the Dy. Commissioner/Asstt. Commissioner (Docks), as the case may be. It is not the case that the transaction was not brought to the notice of the Customs at all. Without completing the enquiry, the charges against the appellant could not be confirmed. In view of the fact that the appellant has an unblemished track record and also considering the fact that his licence has been suspended for a period of more than 10 months or so, we are of the view that there is no need to continue with the suspension - Accordingly, we revoke the suspension of the CHA licence done by the impugned order. The Customs is at liberty to conduct the enquiry against the appellant-CHA in terms of Regulation 22 of the CHALR, 2004 and to take appropriate action in accordance with law on completion of such enquiry - Decided in favour of appellants.
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Service Tax
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2014 (3) TMI 339
Taxability of Reimbursement of the expenses on advertisement and road show being organized recovered from the supplier of goods - Held that:- Respondent during the period of dispute had arranged advertisements and had organized road shows for promoting the sales of the cars being manufactured by M/s Hindustan Motors. This activity of the respondent is covered by the definition of Business Auxiliary Service as given in Section 65 (19) of the Finance Act, 1994. The debit notes issued by the respondent to M/s Hindustan Motors show the total charges for road shows/advertisements at various places and also mention the 50% share of M/s Hindustan Motors. Though the sales promotion activity being undertaken by the respondent may have benefited both respondent as well as M/s Hindustan Motors and satisfied the need of their respective business, to the extent the respondent have recovered expenses from M/s Hindustan Motors, they will be treated as having provided the sales promotion service to them and M/s Hindustan Motors is to be treated as their client and, hence, on the amount being charged by them from M/s Hindustan Motors, service tax would be attracted - there is no relationship of principal and client between the respondent and M/s Hindustan Motors is not correct - Decided in favour of Revenue.
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2014 (3) TMI 338
Waiver of predeposit of service tax - short-payment of service tax on the basis of difference between the gross taxable value shown in the ST-3 Returns and receipts shown in the Balance Sheet - Penalty u/s 76, 77 & 78 - Burden of proof - Held that:- the burden lies on the assessee to explain to the Department adducing proper evidences to justify that the differential receipts between the amount shown in the Balance Sheet and ST-3 Returns, are not related to taxable services - Applicants are not able to make a prima-facie case for total waiver of dues adjudged. Consequently, taking into consideration the financial hardship, interest of Revenue and principles laid down by disposing stay petition by the Hon'ble Supreme Court and the Hon'ble High Courts, we direct the Applicant to deposit 25% of the service tax within a period of eight weeks - Conditional stay granted.
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2014 (3) TMI 337
Denial of refund claim - Notification 41/07 - Refund claim denied by the lower authorities on the premise that these refund orders are not in accordance with Notification 41/07 - Held that:- appellant have availed the services namely Technical Testing & Analysis Charges, CHA service, Banking and Financial services. It is also not disputed that service tax has been paid by the appellant and appellant have complied with the condition of Notification 41/07. Therefore, in the light of the above said circular, appellants are entitled for the claim - Decided in favour of assessee.
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2014 (3) TMI 336
Clearing & Forwarding Agency Service - Imposition of interest and penalty - Held that:- it is evident that the appellant is rendering freight forwarding service. Freight forwarding is distinct and different from “Clearing & Forwarding Agency Service” as defined in law - services rendered by the appellant do not come under the category of “Clearing & Forwarding Agency Service” - Decided in favour of assessee.
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2014 (3) TMI 335
Clearing and Forwarding Agent Service - Penalty under Section 75A, 76, 77 & 78 - Appellant contends that they are simply doing transportation work and unlike clearing and forwarding agent. They are not involved in storing of goods on behalf of the principal and thereafter forwarding them from time to time as per the direction of the principal - Interpretation of Clearing and Forwarding Agent Service - Held that:- While arriving at this conclusion, we also go by the trade understanding based on sheer common sense, which is often uncommon. Because a buyer buys only rice and not wheat in a grocery shop, which claims to sell "wheat and rice", the shop cannot cease to be a shop selling "wheat and rice". In the same way, rendering only "forwarding" service cannot make the appellant cease to be a "Clearing and Forwarding Agent", so as to save him from the tax. Some customers may want only clearing operations, while some forwarding, and others both. The expression "clearing and forwarding operations" is a compendious expression of nature of services offered, any of which will bring the service providers in the tax net of this category. Moreover, in the process of forwarding operations - clearance stages may arise such as at octroi posts or subsequent transits - appellant is engaged in providing transport service as transporter and the initial service of temporary storage of the vehicles at or near railway sidings, which is eventually for a few days subject to availability of the rail rakes, will not render the appellant to fall under the category of ‘Clearing & Forwarding Agent' - Following decision of MEDPRO PHARMA PVT. LTD. Versus COMMISSIONER OF C. EX., CHENNAI [2006 (6) TMI 2 - CESTAT, NEW DELHI] - Decided in favour of assessee.
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Central Excise
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2014 (3) TMI 316
Suo motu correction of the credit entry resulting into double payment of duty - Respondent corrected the same by making necessary entry in the closing balance of Cenvat credit in the Cenvat Register - Held that:- In so far as the finding of the Tribunal that basic excise duty of ₹ 3.58 lacs was already paid by the respondent earlier and it was repaid while depositing the differential VAT duty was concerned, the Department has not raised any serious objection either in this tax appeal or before us through oral submissions. We therefore proceed on such basis. That being the situation, all that the respondent did was to correct the arithmetical error by making necessary entries in the register even before filing the form at the end of the month before the Excise Authorities. In the present case, when we find that there was nothing to be adjudicated upon, the mistaken double payment of excise duty made and when the amount is also not very large, we would not like to interfere with the judgment of the Tribunal keeping the larger question of suo motu claim of refund open. In the case of Visakhapatnam Steel Plant v. Commissioner of C.Ex., [2002 (3) TMI 169 - CEGAT, BANGALORE], Bangalore Bench of the Tribunal was of the opinion that correction of errors and omissions in the entries would not require permission of the Department. - Decided against Revenue.
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2014 (3) TMI 315
Denial of refund claim - Whether reduction in gauge by way of cold rolling process will amount to manufacture or not - Held that:- appellant’s refund claim was based on the ground that the process of conversion of SS Hot rolled patta patti into SS Cold rolled patta patti does not amount to manufacture - reducing the gauge and hardening the strips amounts to manufacture and also that S.S.patta/patties are distinct marketable commodity - product S.S. patta/patties were being manufactured from S.S.flats - conversion of S.S.flats into S.S.patta/patties amounts to manufacture and the appellants have correctly paid the duty. As such, no refund is admissible to them - Following decision of Indian Strips vs. CCE, Ahmedabad [2004 (3) TMI 230 - CESTAT, MUMBAI] - Decided against assessee.
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2014 (3) TMI 314
Rectification of mistake - Excess availment of credit has happened due to an act of inadvertence by the excise clerk - Held that:- applicants have taken excess credit 62 times during the period in dispute. In view of this it cannot be said that it is an inadvertent mistake on the part of the excise clerk - Rectification denied.
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2014 (3) TMI 313
Availment of CENVAT Credit - Goods Transport Agency service - Held that:- up to the period 31.03.2008 the assessee is entitled to take input service credit on Goods Transport Agency service - Following decision of COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others [2011 (3) TMI 248 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2014 (3) TMI 312
100% EOU - Clearance of Capital goods to another EOU - appellant has not produced the original copy of the re-warehousing certificate - Held that:- As per Rule 20 of the Central Excise Rules, 2002 if the consignor failed to produce re-warehousing certificate in case liability of duty cast on the consignee and not on the consignor. Admittedly, appellant is a consignor. Further in the case of Skyron Overseas (2009 (10) TMI 372 - CESTAT, AHMEDABAD) the facts were that the assessee was 100% EOU engaging in the manufacture of yarn. They cleared two consignments to another EOU. The show-cause notice came to be issued to them as they failed to produce re-warehousing certificate therefore they have to pay the duty - appellant are not liable to pay duty as it is not in dispute that the goods have not been supplied to another EOU - Following decision of SKYRON OVERSEAS Versus COMMISSIONER OF C. EX., SURAT [2009 (10) TMI 372 - CESTAT, AHMEDABAD] - Stay granted.
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2014 (3) TMI 311
Denial of CENVAT Credit - supporting structures were purchased by the respondent as part of sugar plant - Held that:- in the case of India Cements Ltd. (2013 (5) TMI 403 - CESTAT CHENNAI) the issue came before this Tribunal wherein this Tribunal has held that as these structures were purchased as part of the plant are entitled for CENVAT credit. In this case CENVAT credit to tune of ₹ 8,31,627/- were taken by the respondent for cane carrier, cane unloader, gantry girder assembly, centrifugal machinery, boiler, sugar mill, juice tank, sugar storage bins. These items cannot be terms as supporting structures, therefore, credit cannot be denied. Further the credit has been taken for structure and part of sugar machinery and equipment to the tune of ₹ 6,21,000/-. No where it is coming from the facts that these structure are supporting structure for erection of plant and machinery at the site of the respondent - Decided against Revenue.
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2014 (3) TMI 310
Reversal of credit equivalent to CENVAT credit - Held that:- on clearance of the capital goods after put to use the credit is allowed on reversal on the transaction value - Following decision in in Cummins India Ltd. [2007 (3) TMI 589 - CESTAT, MUMBAI] and Commissioner Central Excise Commissionerate Versus M/s Raghav Alloys Ltd. [2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT] - Decided in favour of assessee.
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2014 (3) TMI 309
Availment of CENVAT Credit - Nexus with capital goods - steel items, in question, have been used for repair and maintenance of the boiler ducting work, water weighting scale and centrifugal machine casing replacement, replacement of pan shell, repair of sugar graders, etc - Held that:- items, in question, have been used for repair and maintenance of the various parts of the sugar mill’s machinery viz. boiler ducting work, water weighting scale and centrifugal machine casing replacement, replacement of pan shell, repair of sugar graders and repair worn out platforms, etc. - items used for repair and maintenance of the plant and machinery are eligible for Cenvat credit. Since repair and maintenance is essential for smooth running of the plant and machinery and without regular repairing and maintenance of the plant and machinery, smooth manufacturing operations are not possible, the items used for repair and maintenance of the plant and machinery have to be treated as the items used in or in relation to the manufacture of the final products and would be eligible for Cenvat credit - Decided against Revenue.
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2014 (3) TMI 308
Cenvat Credit - Job Work - Application seeking removal of goods from the premises of Job Worker's premises on payment of duty was rejected - Rule 4(6) of the Cenvat Credit Rules, 2002 - conversion of zinc hydroxide into zinc oxide - Held that:- such an action on the part of the department seems to be erroneous inasmuch as if the assessee is being granted permission from 2003 to 2008 and nothing found against the assessee as to mis-utilisation of such permission, they are also no findings as to the fact, that accounting of the goods cleared from the assessee’s factory were in accordance with law and the final products cleared from the job worker’s premise being correct - rejection of such permission seems to be contrary. Any item/goods in which is consumed for manufacturing of further final product, on which the duty liability is discharged, can also be considered as an intermediate product or partially processed input - no reason for not permitting the appellant to clear the finished goods manufactured at the job worker’s premises under the provisions of Rule 4(6) of the Cenvat Credit Rules, 2004 which was granted to the appellant from the year 2003 to 2008 - Decided in favour of assessee.
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2014 (3) TMI 307
Exemption from declaring MRP on Cement Bags - Procurement of Cement from depot - Notification No. 4/2006-C.E., dated 1-3-2006 - Held that:- Depot cannot be considered as manufacturer is not correct. According to the Rule 2(a) under SWM Rules, the requirement is that the industrial consumer should have purchased the commodity from the manufacturer. It cannot be said that the depot of the manufacturer is a different entity and therefore the appellant is not eligible for the benefit of Sl. No. 1C of the notification - rate of duty has to be determined under Sl. No. 1C of Notification No. 4/2006-C.E., dated 1-3-2006 - Following decision of MADRAS CEMENTS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, TRICHY [2008 (12) TMI 562 - CESTAT, CHENNAI] - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (3) TMI 340
Classification of sale - Local sale or Inter state sale - movement of goods outside the state but delivery of goods in the same state i.e. Chennai - Penalty u/s 16(2) - Whether in the facts and circumstances of the case, the Sales Tax Appellate Tribunal erred in stating that in the absence of a specific order, there cannot be an inter-State sale as contemplated under Section 3(a) of the Act - Held that:- A perusal of the order of the Tribunal shows that there are no materials to support the case of the assessee that the sales was an inter-state-sale. The Tribunal pointed out that the authorised representative of the assessee conceded that there was no agreement providing for movement of goods to Andaman pursuant to the sale or as an incident of sale. In the absence of any agreement as well as in the absence of material to show that the movement of goods to Andaman without any break for anyone to take delivery in Chennai, the sales had to be treated as local sales - turnover was assessable under the Tamil Nadu General Sales Tax Act. Except for revising the assessment for the assessment years relating to 1988-89 and 1989-90, there are no materials to show that there was wilful non disclosure to invoke Section 16(2) of the Tamil Nadu General Sales Tax Act. In fact, the order of the Appellate Assistant Commissioner records the finding that the turnover is found in the books of accounts and there was no mala fide intention on the part of the assessee - Decided partly in favour of assessee.
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Indian Laws
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2014 (3) TMI 334
Complain under Consumer Protection Act, 1986 - Power of District Consumer Dispute Redressal Forum to entertain the complaint against the telecom companies - Whether the Bharti Airtel Limited and one Mr. Bhupender Kumar, Territory Sales Manager, Bharti Airtel Services Limited are telegraph authorities - Held that:- impugned order dated 22-9-2010 passed by the State Commission cannot be sustained, as it erroneously holds that the consumer complaint of the petitioner was barred by Section 7B of the Indian Telegraph Act. It is clear that the respondent No. 2 is not a telegraph authority. The bar under Section 7B, if at all, could have applied, had the dispute arisen between the petitioner and a telegraph authority, which the respondent No. 2 is not. Merely because respondent No. 2 is a licensee under Section 4 of the Indian Telegraph Act, it does not confer on it the status of a telegraph authority. If the intendment of Director General of Posts & Telegraph were to confer the status of the Telegraph Authority upon the licensees under Section 4, the Director General of Posts & Telegraph, which comes under the Central Government could have issued the requisite notification under Section 3(6) of the Indian Telegraph Act, which has not been done. The Supreme Court has given a broad interpretation to Section 3 of the Consumer Protection Act, in the light of the clear expression used by the Parliament, which states that the Consumer Protection Act shall be in addition to and not in derogation of the provision of any other law for the time being in force. Mere existence of an arbitration agreement, assuming there is one between the petitioner and respondent No. 2, would not bar the maintainability of a consumer claim, as held by the Supreme Court in Secretary, Thirumurugan Cooperative Agricultural Credit Society (2003 (12) TMI 617 - SUPREME COURT) and Fair Air Engineers (P) Ltd. v. N.K. Modi, [1996 (8) TMI 510 - SUPREME COURT] Petitioner’s consumer claim is maintainable before the District Forum. The District Forum is, therefore, directed to entertain and consider the said claim on its merits. Decided in favor of petitioner.
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