Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 12, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Computation of MAT u/s 15JB - Book Profit - Once it is realized that the assessee had correctly debited the profit and loss account for the loss arising out of the transfer of investment division, there remains no difficulty in realizing that the CIT proceeded on a wrong premise which was responsible for exercise of jurisdiction under Section 263 which he would not have done if he had realized the correct position - HC
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Reopening of assessment - The ITAT observed that “just one unrealistic and absurd figure of net profit is taken out from the print out of the rough document from the CPU/hard disk and adopted for assessment of total income. Such an approach cannot be approved - the view taken by the ITAT is a plausible one and cannot be said to suffer from any perversity warranting interference. - HC
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The addition cannot be sustained only on the basis of admission during the course of survey. - sec.133A does not empower IT authority to examine any person on oath, hence any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition. - AT
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Addition made on account of bad debt - It is nothing but the assessee is trying to enjoy the benefit of section 36(1)(vii) of the Act through back door, which is not permissible under law. As per agreement for sale, it is only a money diversion from the accounts of MAX VALUE HOUSING to purchase the land by the individual Mr. M. Khadeer Ahmed and not for the assessee firm. Therefore, any loss incurred by the individual partner, he has to bear the same in view of the terms of partnership deed, so agreed upon by the partners of firm while executing the partnership deed - AT
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Disallowance of labour welfare expenses - The Government also recognizes the need and importance of Corporate Social Responsibility to be discharged by the Corporate houses. - the expenditure has to be allowed. - AT
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Addition u/s. 69B - unexplained investment in residential bungalows - the opinion of the DVO per se was not an information and could not be relied upon without books of account, being rejected. Since the books of account had not been rejected in the present case, no addition to be made - AT
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Obviously, when the assessee is using patents/trademarks of its parent company, it will have to pay royalty for the same which cannot be disallowed, unless it is not at arm’s length price. - AT
Customs
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Import of coking coal of Chinese origin - it is found that presence of ash content is more than what is declared by the appellant which results in denial of exemption under the Customs Notification No. 21/2002. - AT
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Re-export of entire goods - Prohibition on import of goods - Goods involves Toxic and Hazardous Contamination - the portion of goods which contains the bar codes or stickers needs to be segregated and re-exported and the balance portion to be cleared on payment of reduced redemption fine and penalty. - AT
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Classification - Epoxy, parts of Hydro Electric Generator - the goods imported under the Bills of Entries are epoxy stator coils solely designed for power generators for Hydro Power Project and rightly classifiable under 8503 and not under 8544 - AT
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The classification and assessment of imported goods as "Plant Bio-Fertilizer" was done based on the Test Reports and goods were cleared during the relevant period, so, the question of alleging misdeclaration or suppression of facts by the appellant does not arise. - AT
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Classification - Amezcua Chi Pendant - As, the 'Chi Pendant' is not an artificial jewellery worn by any person of any age. Therefore, the imported goods cannot be classified under Chapter 71 as Imitation Jewellery/Articles of Jewellery - AT
Corporate Law
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Buy-back of shares - calculation - where the audited accounts are more than six months old, the calculations with reference to buy back shall be on the basis of un-audited accounts not older than six months from the date of offer document which are subjected to limited review by the auditors of the company
Indian Laws
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Offense punishable under Section 138 of the Negotiable Instruments Act - it is very difficult for the Court to take a view that a partnership firm for the purpose of Section 138 read with Section 141 of the Act is not a legal entity, and therefore, it need not be made an accused in the complaint. - The prosecution launched against only one of the partners of the partnership firm, without joining the partnership firm, cannot be maintainable. - HC
Service Tax
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Imposition of Service tax under Business Auxiliary Service - the amount collected as extra charges for RTO registration is not covered under support services of business and commerce - AT
Central Excise
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Sanction of a part of the refund amount by way of credit in the cenvat account - granting refund and crediting it to the modvat account will not in effect allow the appellant to utilize the fund which was collected and kept by the Government in excess of legal due - refund allowed in cash - AT
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Whether the appellant are entitle for the Cenvat Credit in respect of the service tax paid by the job worker? - for the purpose of limitation in taking the credit, the period of litigation in the present case shall stand excluded - AT
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Whether Due Drop Process on Fabrics will amount to manufacture - It is seen that the Ministry in its wisdom, has accepted the merits of the case and has exempted the process of Dew Drop from levy of Central Excise duty. The demand of Central Excise duty on the process of Dew Drop for the period August 2000 to December 2000 on the Appellant cannot be sustained. - AT
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CENVAT credit of service tax paid under 'Rent a Cab' service on account of engaging cabs for transport of children of staff members from resident to school and back - rent a cab service availed for transportation of children of employees from colony to school and back is not an input service in terms of Rule 2(l) of CCR, 2004 - AT
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Penalty under Section 11AC - The partner of the partnership firm had already paid the duty before issue of the show cause notice in order to avoid legal proceedings. In such situation, imposition of separate penalty on the partner of the firm is not justified. - AT
Case Laws:
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Income Tax
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2016 (3) TMI 329
Cash payments made for purchase of property taxed as undisclosed income - Held that:- There was a clear admission on the part of the Assessee that the payment of ₹ 60 lacs were from the sale of undisclosed stock. The statement was reiterated again after the search on 24th February, 1999 and it is difficult to contemplate that the letter dated 5th February, 1999 and the statement recorded on 24th February, 1999, which were much after the search, were not made voluntarily and of free will. In our view, the only inescapable conclusion that can be drawn from the surrounding facts is that the Assessee would not have disclosed the cash payments admittedly made by the Assessee and such payments were his undisclosed income. The Assessee had subsequently claimed that he had paid a sum of ₹ 12.9 lacs in cash which was withdrawn from his proprietorship concern. He further explained that a sum of ₹ 4 lacs had been withdrawn from the bank accounts on 26th November, 1998 and 7th December, 1998. The balance amount was paid out of the sales made in cash. The AO had disbelieved the aforesaid explanation as the withdrawals from the bank was much prior to the date of payment to Sh. Arvind Seth and there was no explanation for withdrawing cash in tranches and keeping the funds idle. In respect of the sales made in cash, the enquiries made by the AO revealed that cash sales of ₹ 6,16,586/- were booked in January 1999 in addition to receipts of ₹ 2,10,854/- described as 'sales realisation'. On enquiries, the AO found that the Assessee had failed to prove the said sales as there was no evidence of availability of stocks for sale and no purchases had been shown for making such sales. Further considering that the returns filed by the Assessee for the block period returned income only in the range of ₹ 18,210/- in the year 1989 to ₹ 77,440/- in the year 1999-2000, the withdrawals claimed by the Assessee were rightly disbelieved by the AO. Similarly, the claim that the Assessee's wife had contributed ₹ 10.15 lacs in cash was also not accepted as no source for such cash could be identified. The AO noted that the Assessee's wife had shown a capital of ₹ 5,57,420/-. For AY 1998-99, she had claimed to have received ₹ 60,000/- as salary and ₹ 32,550/- as petty gifts. During the AY 1999-2000, the Assessee's wife claimed to have income from other sources amounting to ₹ 9,05,000/-. The source of such income was not disclosed and it was the Assessee's case that source of such money was not required to be disclosed. In absence of any satisfactory explanation as to the source of ₹ 14 lacs which was admittedly paid by the Assessee, the same would also be liable to be taxed in his hands. - Decided against assessee
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2016 (3) TMI 328
Reopening of assessment - sanction u/s.151(2) from the competent authority - whether the Additional C.I.T. while according his approval u/s.151(2) of the Act did not apply his mind and mechanically granted sanction? - Held that:- In the instant case the assessee has not even contended that the reasons recorded by the assessing officer were irrelevant and as such he had no reason to believe that any income chargeable to tax had escaped assessment. In R.P. Bhatt (1986 (12) TMI 372 - SUPREME COURT) the Apex Court relied on judgment rendered by a Constitutional Bench in the case of Som Datt Datta v. Union of India [1968 (9) TMI 113 - SUPREME COURT OF INDIA ] wherein their lordships held that apart from any requirement imposed by the statute or statutory rule either expressly or by necessary implication, there is no legal obligation that the statutory tribunal should give reasons for its decision. There is also no general principle or any rule of natural justice that a statutory tribunal should always and in every case give reasons in support of its decision. - Decided in favour of the revenue.
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2016 (3) TMI 327
Revision u/s 263 - Computation of MAT u/s 15JB - Book Profit - loss of an amount on account of transfer of investment division of the assessee - CIT was of the opinion that the loss could not have been debited to the P/L account and the amount was required to be added back for computation of book profit under Section 115JB - ITAT held that the loss on account of transfer of investment division of the assessee could not be adjusted in Section 115JB of the Act although this loss is booked in the Profit and Loss Account - Held that:- The disclosure made in the financial statements is in pursuance of the requirement of Clause- 25 quoted above and is also in pursuance of Clause 2(b) of Part II of Schedule VI to the Companies Act, 1956 which is not to be construed as any qualification indicating any inaccuracy in the accounts. There was, thus no mistake on the part of the assessee in debiting the loss to the profit and loss account. Once it is realized that the assessee had correctly debited the profit and loss account for the loss arising out of the transfer of investment division, there remains no difficulty in realizing that the CIT proceeded on a wrong premise which was responsible for exercise of jurisdiction under Section 263 which he would not have done if he had realized the correct position Had it not been a case of section 115JB the capital loss incurred on transfer of investments would have been dealt as follows: 1. Under section 70(2) short term capital loss would be set off against either short term or long term capital gain. 2. Under section 70(3) long term capital loss would be set off against long term capital gain only. 3. Under section 71(3) if the net result of computation under the head “Capital gain” is a loss then such loss cannot be set off against income under any other head. 4. Under section 74(1)(a) short term capital loss would be carried forward to the following assessment year and be set off against either short term or long term capital gain. 5. Under section 74(1)(b) long term capital loss would be carried forward to the following assessment year and be set off against long term capital gain only. In that view of the matter, the only conclusion which can be arrived at is that the order passed by the learned Tribunal is unexceptionable. - Decided against revenue
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2016 (3) TMI 326
Addition u/s 68 - accumulation of capital in the books of the petitioner - ITAT reversing the order of CIT(A) in deleting the addition - Held that:- From the order of the CIT(A) it is evident that each donor had offered an explanation supported by documentary evidence. Furthermore a donor cannot be expected to disclose or answer any question which was not specifically put to him in the course of proceedings u/s.131. The inspector deputed by the assessing officer had full opportunity to make inquiry and the assessee should not suffer on account of a lapse on the part of the inspector. It is no doubt true that in an appeal against the order of the CIT(A) the Tribunal being the final fact finding authority has full power to review the evidence and to reach its own independent conclusion. Nevertheless while reversing the order of the CIT(A) the Tribunal is duty bound to examine and discuss the reasons given by the CIT(A) to hold one way or the other and then to dispel those reasons. If the Tribunal fails to make such an exercise the judgment will suffer from serious infirmity We are thus clearly of the opinion that the Tribunal fell into an error in interfering with the order of the CIT(A) without first dislodging the reasons given by him. Assuming that another view was possible, that itself would be no ground to interfere with the order of the CIT(A) unless it is shown that the appreciation of evidence by the CIT(A) was either perverse or untenable and that in holding in favour of the assessee the CIT(A) either ignored material evidence or that the view taken by him was patently untenable. - Decided in favour of assessee
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2016 (3) TMI 325
Determination of agriculture income - Interpretation of Section 33AB and Rule 8 of the Income Tax Rules - allowance under Section 33AB from the composite income - applicability of deduction under Section 33AB while computing the income derived from sale of tea grown and manufactured by the seller - Held that:- Deduction u/s.33AB of the Act is to be allowed from the total composite income derived from growing and manufacturing tea and only after such deduction is made, Rule 8(1) of the Income Tax Rules, 1962 shall be applied to apportion the resultant income into 60% agricultural income, not taxable under the Act and balance 40% which is taxable under the Act. In that view of the matter the question formulated above is answered in the affirmative and in favour of the assessee.
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2016 (3) TMI 324
Reopening of assessment - difference between the closing stock as shown in the books of accounts produced and in the account as shown in the document recovered from the CPU - whether figures obtained from the hard disk of the CPU must be given credence over the figures in the books of accounts produced before the AO and in particular the stock register maintained by the Assessee - Held that:- ITAT has given cogent reasons as to why the case of the Revenue cannot be accepted. Inter alia, it is pointed out that no evidence was found which could substantiate the Revenue's contention that there were either purchases or sales outside the books of accounts. There was no evidence that the Assessee maintained parallel books of accounts. The contention of the Revenue that the difference in the figures of closing stock as on 31st March 2011 and the opening stock as on 1st April 2011 were due to unaccounted sales was rejected as being absurd. The ITAT observed that “just one unrealistic and absurd figure of net profit is taken out from the print out of the rough document from the CPU/hard disk and adopted for assessment of total income. Such an approach cannot be approved - Decided against revenue
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2016 (3) TMI 323
Penalty u/s 271 - Held that:- It may be true that the assessing officer did not accept the explanation offered by the assessee and made additions which the latter did not challenge in appeal but it is also true that the learned Tribunal in paragraph 5 of its judgement quoted above opined that "since the matter is subjudice it is not a realized or realizable income in the hands of the assessee". In that view of the matter even the first condition was not satisfied. As regards the second condition there is concurrent finding of the CIT(A) and the Tribunal that the explanation was bona fide. This finding is not under challenge before us. It is not even alleged that the assessee failed to prove that all the facts relating to and material to the computation of his total income were not disclosed by him. Thus, the requirements appearing from the explanation remain unfulfilled. As a result Section 271(1)(c) cannot operate against the assessee. Therefore, the assessee cannot be held to have furnished inaccurate particulars or concealed particulars of his income. Hence, the imposition of penalty under Section 271(1)(c) was rightly set aside both by CIT(A) and the learned Tribunal. - Decided in favour of assessee
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2016 (3) TMI 322
Eligibility of deduction to the assessee under sec. 80P(2)(a)(i) - Held that:- Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act after following the decision of the Hon'ble Bombay High Court at Panaji in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. Vs. ACIT [2015 (6) TMI 573 - BOMBAY HIGH COURT ] wherein held contention of Ms. Dessai, learned Counsel for the revenue that the appellant is not entitled to the benefit of Section 80P(2)(a)(i) of the Act in view of the fact that it deals with non-members cannot be upheld. This for the reason that Section 80P(1) of the Act restricts the benefits of deduction of income of co-operative society to the extent it is earned by providing credit facilities to its members. As at the time when effect has been given to the order of this Court, the authorities under Act would restrict the benefit of deduction under Section 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. - Decided in favour of assessee.
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2016 (3) TMI 321
Addition on the basis of admission during the course of survey - Held that:- In the present case, it is an admitted fact that the assessee retracted the statement recorded u/s.133A of the Act vide its letter dated 1.4.2009 stating that the Income-tax team visited the assessee’s residence, when he was conducting pooja on 13th day of death ceremony of his grand father and he was also starting abroad on the same day. He required to proceed to abroad at 3.30 P.M. and he was in tension by the disturbance of the Income-tax team at the time of pooja. Therefore, he wanted to get rid of the Income-tax team and agreed to offer ₹ 30 lakhs as income. Later, he came to know that in a confused state of mind, he was wrongly offered ₹ 30 lakhs as income and he filed a letter to the Income-tax Officer to withdraw the offer. In our opinion, the addition cannot be sustained only on the basis of admission during the course of survey. This plea of the ld. AR is supported by the judgment of the Supreme Court in the case of CIT v. S. Khader Khan Son (2013 (6) TMI 305 - SUPREME COURT ), wherein the judgment of the Jurisdictional High Court in the case of CIT v. S. Khader Khan Son (2007 (7) TMI 182 - MADRAS HIGH COURT) has been confirmed, by observing that sec.133A does not empower IT authority to examine any person on oath, hence any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition. - Decided in favour of assessee Addition u/s 40A - AO identified the parties i.e. Shri Dhakshinamoorthy and Ramanathan, to whom the payments were made by the assessee in violation of sec.40A(3) - Held that:- Regarding the identity of the recipients, there is no dispute. The amount of ₹ 1,00,000/- to be considered as agricultural produce in their hands and sec.40A(3) does not apply. The contention of the ld. AR is that these two parties are cultivators. They are not only agriculturists but also traders. Being so, he relied on the decision of the Tribunal in the case of Keerthi Agro Mills (P) Ltd. (2015 (5) TMI 1014 - ITAT COCHIN) is not appropriate. In that case, there was a payment of ₹ 23,17,32,420/-, which is purchases of paddy by cash payment in respect of 14,744 parties. The assessee has never given the name and address of the parties and not produced the parties before the assessing authority. Identity was also not proved and the enquiry could never progress into the next level, where whether the occupation of these persons was farming or not. The AO considered 75% of ₹ 23,17,32,420/- and disallowance was worked out at ₹ 17,37,99,315/- by invoking the provisions of sec.40A(3) of the Act. However, in the present case, the parties are identified and the amounts are also quantified. Being so, the ratio of the above decision of the Tribunal cannot be applied. More so, occupation of Shri Dhakshinamoorthy and Shri Ramanathan is not solely agricultural produce and they are trading also. There is no dispute in this fact and the provisions of Rule 6DD cannot be applied - Decided against assessee
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2016 (3) TMI 320
Denial of the claims for relief under S.80IB(10) - built up area of each residential unit exceeded 1,500 sq. ft. - Held that:- Built-up area includes portico and balcony also and in this case it exceeds 1500 sq. ft. per residential unit. Accordingly the assessee is dis entitled for the benefit u/s. 80IB of the Act - Decided against assessee Disallowance in terms of S.14A - claim of the assessees that there is no income earned by the assessee which did not form part of the total income returned and no investment has been made from out of the borrowed funds that borrowals have been made by the assessee for specific purposes, such as working capital requirements, CIT(A) deleted the disallowance - Held that:- CIT(A) taken note of the borrowals made by the assessee and founds pecific projects etc., and utilised for those specific purposes. In the absence of any material brought on record, to controvert the findings of the CIT(A) on factual aspects, as rightly held by the CIT(A) interest relatable to such loans cannot be attributed to the investments yielding interest-free income. The observation of the CIT(A) that unless nexus between the borrowals made by an assessee and the investments yielding exempt income made by the assessee is established, no disallowance under S.14A read with Rule 8D can be made is in consonance with the settled position of law laid down inter-alia in CIT V/s. SBI DHFL Ltd. (2015 (11) TMI 399 - BOMBAY HIGH COURT ) and CIT V/s. Hero Cycles Ltd. (2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT) relied upon by the learned counsel for the assessees in the written submissions field before us and other case-law discussed by the CIT(A) in the impugned orders, besides consistent with the view taken by the coordinate benches of the Tribunal in similar matters. In this view of the matter, we find no infirmity in the impugned orders of the CIT(A) on this issue. - Decided against revenue
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2016 (3) TMI 319
Provision for gratuity & bonus - Held that:- As explained by learned Authorized Representative both provision for gratuity and bonus are statutory obligation which has been incurred by the assessee and since the assessee is following mercantile system of accounting the same has to be charged to the profit and loss account of the assessee during the relevant previous year in which such obligation has resulted. The learned Commissioner of Income Tax (Appeals) after placing reliance on the decisions cited by the learned Authorized Representative in the case of M/s. Echjay Forgings Pvt. Ltd. (2001 (2) TMI 56 - BOMBAY High Court) and in the case of Apollo Tyres Ltd. Vs. CIT (2002 (5) TMI 5 - SUPREME Court ) has allowed the appeal of the assessee. Therefore, we do not find it necessary to interfere with the order of the learned Commissioner of Income Tax (Appeals) on this issue. - Decided against revenue Insurance claim received - Held that:- The assessee had received ₹ 1,40,29,209/- from the insurance company towards loss of its assets. The written down value of these assets which works out to ₹ 27,44,739/- has to be necessarily reduced from the amount of ₹ 1,40,29,209/- to compute the net income received from such claim which only is to be credited to the profit & loss account of the assessee. Accordingly, the assessee has rightly reduced such amount and the balance amount of ₹ 1,12,84,470/- is credited to its profit and loss account which is in order. Therefore, we do not find it necessary to interfere with the orders of learned Commissioner of Income Tax (Appeals) on this issue.- Decided against revenue
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2016 (3) TMI 318
Addition made on account of bad debt - under section 36(2) [section 36(1)(vii) – SIC] or as business loss under section 28 - Held that:- if at all any loss incurred by the partner of the firm Mr. Khadeer Ahmed towards any transaction, then, he has to bear the loss and not by the assessee firm. General authorization given in the partnership deed to carry out “any other activity” is no longer res integra in the absence of specific authorization is required in acquisition of capital assset when lakhs of rupees involved. So much so, when lakhs of rupees of public are involved, it is the duty of the assessee to get legal entity before entering into any transaction for acquisition of any property. It is a layman statement that the assessee has committed a mistake, out of which, it has incurred the loss, which cannot be accepted in the present case. Since there is no iota of evidence that the assessee firm was involved in the above transaction having paid advance for the purpose of purchase of land, it cannot be said that any loss incurred in the course of business is a business loss or business expenditure. It is nothing but the assessee is trying to enjoy the benefit of section 36(1)(vii) of the Act through back door, which is not permissible under law. As per agreement for sale, it is only a money diversion from the accounts of MAX VALUE HOUSING to purchase the land by the individual Mr. M. Khadeer Ahmed and not for the assessee firm. Therefore, any loss incurred by the individual partner, he has to bear the same in view of the terms of partnership deed, so agreed upon by the partners of firm while executing the partnership deed. Thus, the claim has no locus standi, as stated to have been a business loss of the assessee firm. Under the above facts and circumstances, we reverse the order of the ld. CIT(A) and restore that of the Assessing Officer. - Decided in favour of revenue
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2016 (3) TMI 317
Disallowance of labour welfare expenses - Held that:- The said expenditure has been incurred towards Corporate Social Responsibility. The said expenditure incurred by the assessee has not been disputed by the Department. The only objection raised is that it is not on account of business expediency. The Corporate Social Responsibility discharged by the assessee shows its sensitivity towards the society at large. Such expenditures need not be measured in the terms of business expediency. The Companies Act, 2013 mandates the companies to contribute 2% of the profit towards Corporate Social Responsibility. The Government also recognizes the need and importance of Corporate Social Responsibility to be discharged by the Corporate houses. Thus, we are of the considered view that the expenditure has to be allowed. - Decided in favour of assessee
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2016 (3) TMI 316
Addition u/s. 69B - unexplained investment in residential bungalows - Held that:- Admittedly, the Assessing Officer has not rejected the books of account in the case of assessee though the Assessing Officer notes that the cost of construction is reflected in the books of account. In this regard, we find support from the ratio laid down by the Hon’ble Delhi High Court in CIT Vs. Bajranglal Bansal reported (2010 (8) TMI 65 - DELHI HIGH COURT) for the proposition that the opinion of the DVO per se was not an information and could not be relied upon without books of account, being rejected. Since the books of account had not been rejected in the present case and following the said principle, we reverse the order of CIT(A) in this regard and we direct the Assessing Officer to delete the additions - Decided in favour of assessee.
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2016 (3) TMI 315
TDS u/s.194-H - disallowance u/s 40(a)(ia) of Credit Card Charges - whether the said charges are in the nature of "Commission or brokerage" and payment/credit thereof is liable for TDS? - Held that:- Respectfully following the decision of the co-ordinate Bench of the Mumbai Tribunal in the case of Jet Airways India Ltd. (2014 (9) TMI 650 - ITAT MUMBAI) which is later on again followed by Mumbai Tribunal in the case of Jet Airways India Limited for succeeding assessment year i.e. 2010-11 [2013 (8) TMI 586 - ITAT MUMBAI] whereby it was held that the credit card commission to the banks are in the nature of normal bank charges and are not in the nature of commission within the meaning of Section 194H of the Act, and therefore no tax is required to be deducted at source on the same u/s 194H. We hereby uphold and sustain the orders of the CIT(A) ordering deletion of the addition made by the AO u/s 40(a)(ia) for non-deduction of tax at source u/s 194H - Decided in favour of assessee
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2016 (3) TMI 314
Disallowance u/s 14A - Held that:- Section 14A of the Act stipulate for disallowance of said expenditure which are incurred in relation to earning of exempt income while Rule 8D of Income Tax Rules, 1962 is a machinery provision which provides for method of computing disallowance u/s 14A of the Act . We have observed that there was a closing balance of ₹ 10.13 crores in the mutual fund as on 31-3-2010 while the average investment held by the assessee company in Mutual Fund during the previous year was ₹ 6.33 crores. The assessee company also submitted that no borrowed funds have been utilized for earning the investment. In our considered view, the authorities below have rightly applied the Rule 8D of Income Tax Rules, 1962 in the instant case as the relevant assessment year is 2010-11 while Rule 8D of Income Tax Rules , 1962 is applicable from the assessment year 2008-09 , keeping in view the peculiar facts and circumstances of the case which we have discussed hereinabove in this order. - Decided against assessee Disallowance of claim of service charges u/s 40A(2)(a) and 37(1) - Held that:- As submitted by the assessee company, Shri Ubhayakar was providing services to both the companies. The assessee company was debiting 90% of salary of Sh Ubhayakar till 30-04-2008 to M/s Pidilite Industries Ltd. i.e. prior to transfer of employees w.e.f. 01-05-2008 in pursuance of demerger of the manufacturing unit of the assessee company w.e.f 01-04-2007 which was approved by Hon’ble High Court w.e.f 18.01.2008. Shri Ubhayakar was transferred to M/s Pidilite Industries Ltd. w.e.f 01-05-2008 and M/s Pidilite Industries Ltd. started debiting 10% of the salary on which due services taxes have also been paid to the Government. From the facts and circumstances of the case emanating from the record, this practice was continuing earlier also and was accepted by the Revenue in the preceding assessment years also . The assessee company has placed on record the debit notes so raised for earlier year’s also which is placed in paper book page 20-26, which are accepted by the Revenue for earlier years. The principles of consistency has to be followed as laid down by Hon’ble Supreme Court in the case of Radhasoami Satsang (1991 (11) TMI 2 - SUPREME Court ) although we are aware that principles of res-judicata are not strictly applicable to income tax proceedings. In view of our above discussions and reasoning, the addition made by the AO and as confirmed by the CIT(A) by disallowing expenditure towards salary of Sh Ubhayakar being 10% of the total salary being debited to the assessee company, is hereby deleted and we allow the appeal of the assessee company. - Decided in favour of assessee
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2016 (3) TMI 313
Deemed dividend u/s 2(22)(e) - Held that:- Respectfully following the decision of the co-ordinate bench of this Tribunal in the assessee’s own case for Asst. year 2010-11 wherein the ratio of the decision of the Hon’ble Bombay High Court in the case of Universal Medicare Pvt. Ltd. (2010 (3) TMI 323 - BOMBAY HIGH COURT ) was followed, we set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the addition of ₹ 26,21,073/- made in the hands of the assessee on the ground that such dividend could not be taxed in the hands of the assessee as it was not a shareholder in M/s. Tainwala Holdings Pvt. Ltd..- Decided in favour of assessee
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2016 (3) TMI 312
Disallowance u/s 14A r.w. Rule 8D - Held that:- Hon'ble Jurisdictional High Court in the case of CIT v. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT ] has laid down the proposition that, if the assessee's capital, profits, reserves and surplus and current account deposits are higher than the investments in tax free securities, then it would be presumed that the investments made by the assessee would be out of interest free funds available with the assessee. Respectfully following the decision of the Hon‟ble Bombay High Court in the case of HDFC Bank Ltd. (supra) and of the co-ordinate bench in the case of Centrum Direct Ltd. [2016 (3) TMI 233 - ITAT MUMBAI], we concur with the contention of the assessee that no disallowance of interest can be made u/s 14A r.w. Rule 8D of the Act. - Decided in favour of assessee
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2016 (3) TMI 311
TDS u/s 194I - non deduction of TDS - Held that:- For the purpose of deduction of tax at source under provision of section 194I of the Act the annual rent has paid or credited to one person has to ₹ 1,80,000/- whereas in the case before us the rent per person was only paid of ₹ 1,20,000/- which is below the limit specified in this section. In view of these facts , the provision of section 194I are not applicable in the present case and the disallowance made by the AO by applying the provision of section 40(a)(ia) of the Act cannot be sustained. We, therefore, delete the addition - Decided in favour of assessee
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2016 (3) TMI 310
Addition on unexplained difference in the value of sales - Held that:- There is no dispute on the fact that the assessee credited a sum of ₹ 24.78 crore to its Trading account as Sales and Service charges. The case of the AO is that certain items, as listed on page 9 of the assessment order totaling ₹ 6.15 crore, were not included by the assessee in the figure of total sales, which position has not been accepted by the ld.CIT(A). We have perused break-up of total Sales with Commission, a copy of which is available on pages 37-46 of the paper book. The thirteen items as noticed by the AO are, in fact, appearing in such break-up of total turnover of ₹ 24.78 crore along with the amount of commission on such sales, which matches with the amount credited to the Trading account. Once these 13 items totalling sale of ₹ 6.15 crore stand included in the figure of total turnover as per the Trading account, there can be no question of making any further addition on the same score. We, therefore, uphold the impugned order in deleting this disallowance. - Decided in favour of assessee Disallowance on account of unexplained commission payment where corresponding sales had not been credited by the assessee to the Trading and Profit & Loss Account - Held that:- It is seen from break-up of total turnover and total commission, as discussed supra, that there is complete detail of commission on sales to the tune of ₹ 1,27,77,515/- which figure matches with the amount of deduction claimed by the assessee in its Profit & Loss Account. All the 13 items of sales totaling ₹ 6.15 crore have been found to be present in such break-up of turnover as has been noticed while disposing of ground No.1. It is further noted that simultaneous with the amount of turnover, there is debit for commission in respect of these 13 items as well, which is part and parcel of total commission claimed by the assessee as deduction for a sum of ₹ 1.27 crore. Under these circumstances, we find no reason to interfere with the impugned order deleting disallowance of commission - Decided in favour of assessee Disallowance towards technical fee payment - non deduction of tds - Held that:- On a specific query, no Agreement, between the assessee and parent company evidencing the nature of work done and remuneration for such technical assistance was placed on record. In the absence of any such Agreement, it is difficult to understand the nature of work for which the assessee made the payment and also its quantification. We, therefore, set aside the impugned order on this issue and remit the matter to the file of AO for deciding this point afresh in the light of the material placed or to be further placed by the assessee in support of technical fee paid to its parent company and also the relevant Agreement. In so far as the AO’s finding about the applicability of section 40(a)(ia) is concerned, we find that the same is not correct inasmuch as the assessee did deduct tax at source from payments made to its parent company. This issue is, therefore, sent back to the file of AO for a fresh decision as discussed hereinabove. - Decided in favour of assessee for statistical purposes. Disallowance on account of royalty payment made by the assessee - disallowance by applying section 40(a)(ia) - Applicability of section 2(22)(e)Held that:- We find that the assessee entered into an Agreement with its sister concern for the use of patent/brand in lieu of which it started making payment of royalty at the stipulated rate. Under similar circumstances, such royalty payment made by the assessee to its sister concern came to be accepted and allowed as deduction by the Revenue in earlier years. Even the Transfer Pricing Officer found such payment to be at arm’s length. The viewpoint of the AO in lifting the corporate veil by treating royalty payment to its sister concern as payment to self, has absolutely no basis as both are independent entities and the factum of user of patent/trademark etc. has not been denied by the AO. Obviously, when the assessee is using patents/trademarks of its parent company, it will have to pay royalty for the same which cannot be disallowed, unless it is not at arm’s length price. We, therefore, uphold the impugned order on this score. As regards the applicability of section 2(22)(e), we find that the same is again without any bedrock. The ingredients of this provision are not applicable to the relevant fact situation obtaining in this case. The assessee obtained the use of patent/trademark/brand name and in a quid pro quo paid royalty to its parent concern. Similarly, the viewpoint of the AO in sustaining disallowance by applying section 40(a)(ia) of the Act is again unsustainable because the assessee did deduct tax at source before making the payment. We, therefore, approve the view taken by the CIT(A) in deleting this disallowance. - Decided in favour of assessee
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Customs
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2016 (3) TMI 298
Import of coking coal of Chinese origin - Denial of exemption under the Customs Notification No. 21/2002 - Ash content in imported coking oil found more than the declared one - Held that:- sample was drawn in presence of the authorized representative of the importer/CHA (who did not object about the method of sampling) and on testing the sample, the Chemical Examiner, Central Excise & Customs, Regional Laboratory, Vadodara, certified that the ash content is 15.1%. Also the testing was done as per the prescribed method. Therefore, it is found that presence of ash content is more than what is declared by the appellant which results in denial of exemption under the Customs Notification No. 21/2002. - Decided against the appellant
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2016 (3) TMI 297
Re-export of entire goods - Prohibition on import of goods - Goods involves Toxic and Hazardous Contamination - Held that:- the goods are free from Toxic and Hazardous Contamination results in no absolute prohibition for import of the goods and hence the goods are eligible to be cleared from customs charge, on payment of redemption fine in lieu of confiscation. Therefore, the entire goods are not liable to be re-exported. Payment of Redemption Fine and Penalty - Plastic scraps imported with and without Bar codes - Held that:- the imported goods are not put to any use whatsoever and are virgin new material, as per the certificates of the manufacturer suppliers submitted alongwith the consignment at the time of customs clearance. Also the appellants have drawn sample on their own from the consignment and sent the same to CIPET, Chennai, who certified the goods to be plastic scrap virgin. Therefore, the portion of goods which contains the bar codes or stickers needs to be segregated and re-exported and the balance portion to be cleared on payment of reduced redemption fine and penalty. - Decided partly in favour of appellant
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2016 (3) TMI 296
Classification - Epoxy, parts of Hydro Electric Generator - Goods imported for use at Sharavathy Hydro electric Power Generating Station project- Held that: the Bills of Entry, literature, catalogue and schematic/sketch diagrams enclosed with the appeal paper book, described the goods as epoxy insulated single turn half coils wave stator winding and its spares and accessories. Also, in the copy of the original catalogue of both Hitachi, Japan and General Electric Canada INC, the goods have been described as CGE advanced insulation system. Therefore, when the principal supplier has clearly certified that these spare epoxy coils and accessories are specially made for the generators at Sharavathy Power Generating station and can be used only for the above generating units and not elsewhere, the goods imported under the Bills of Entries are epoxy stator coils solely designed for power generators for Hydro Power Project and rightly classifiable under 8503 and not under 8544. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 295
Extended period of limitation - Classification of goods - Plant Bio Fertilizer or Pesticides - Goods imported and declared as Bio-Fertilizer alleged as misdeclaration and suppression of facts to evade customs duty. - Held that:- the composition of the imported goods is a mixture containing matrine (oxymatrine) 0.36%, Nitrogen 2369.9 5g/g, Phosphorous 1389.3 5g/g and Potassium 18491 5g/g, Magnesium 858 5g/g , Manganese 10.2 5g/g and also contains Iron, Zinc, Copper, Calcium, Silicon and other minerals. The classification and assessment of imported goods as "Plant Bio-Fertilizer" was done based on the Test Reports and goods were cleared during the relevant period, so, the question of alleging misdeclaration or suppression of facts by the appellant does not arise. The revenue has not adduced any evidence that the said goods imported as "Bio-Fertilizer" were sold or marketed as "Pesticides" as no farmer or cultivator will ever buy the product which is described as "Bio-Fertilizer" but use it for "Pesticides" purpose. Therefore, in the absence of any evidence contrary to the declared goods cleared in the past by the appellants, it cannot be said that the appellants have suppressed the facts or misdeclared the goods merely based on the report of live consignment and on the basis of the CRCL report of Customs the goods were rightly classified as “Plant Bio-Fertilizer”. Confiscation and Imposition of Redemption fine in respect of live consignment - Sections 111 (d), (m) and (o) of the Customs Act, 1962 read with Section 3 (3) of the Foreign Trade (Development and Regulation) Act 1992 and Section 17 of the Insecticides Act, 1968 - Held that: based on the test reports, the adjudicating authority classified the goods as Pesticides and the appellants have not contested the classification of the goods covered in the live consignment. As the import of Pesticides are prohibited under Section 17 (1) (a) of Insecticides Act, 1968 and the appellants have not obtained registration from the Central Insecticide Board (CIB) for the import of Pesticides, therefore, the goods are liable to be confiscated under Section 111 (d) of Customs Act, 1962. Also as the goods are not re-exported and they have abandoned the goods and the goods are still with Customs custody , the goods are allowed for re-export on imposition of Redemption fine of ₹ 5 Lakh. Confiscation and Confirmation of Differential duty - In respect of past 16 consignment - Held that:- by following the Hon’ble Supreme Court decision in the case of Sab Nife Power Systems Ltd. [1999 (12) TMI 410 - CEGAT, MADRAS], the goods imported in the past were correctly and fully declared in the Bill of Entries as per the invoice and as per the analysis certificate of the supplier which is confirmed by the CRCL test report and there is no misdeclaration or suppression with intent to evade duty. Therefore, there is no requirement of re-classification of the goods for the past 16 consignments and demand of differential duty under Section 28 of the Customs Act. Imposition of penalty - Under Section 112(a) of the Customs Act, 1962 for live consignment and under Section 114/114A ibid for the past consignment - Held that: the penalty to be imposed on the importer and its Managing Partner under Section 112(a) ibid and not to be imposed under Section 114/114A ibid. - Decided partly in favour of appellant
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2016 (3) TMI 294
Classification - Amezcua Chi Pendant - Whether goods imported is classifiable under Chapter Heading 71179090 as Imitation Jewellery or under Chapter Heading 70189090 as Articles of Glass - Held that:- the imported goods is a circular glass piece fitted with stainless steel bezel. It is an advanced mineral-based round glass made from high temperature "Nano-Engineered Glass" and it has positive energy field. By wearing this, it makes it a person balanced and harmonized and it neutralizes the negative effects of Electrosmog which is the result of Electromagnetic fields created by cell phones, microwave ovens etc. Also the primary function of the imported goods is not as artificial jewellery but sold to only through multi-level marketing on one-to-one basis. As, the 'Chi Pendant' is not an artificial jewellery worn by any person of any age. Therefore, the imported goods cannot be classified under Chapter 71 as Imitation Jewellery/Articles of Jewellery and differential duty of demanded on account of change of classification and rate of duty is upheld. Valuation - Rejection of transaction value declared and enhanced the same - Redetermination under Rule 9 of CVR, 2007 - Held that:- the imported goods is specialized articles of glass and cannot be compared with high value imported watches. The Product Launch Proposal Form (PLPF) of watches of the supplier is only intended for how the pricing should be done in the subsequent retail sale through multi-level marketing pattern but in the absence of PLPF for Amezcua Chi Pendant , the PLPF of Quranos watches and Retrograde watches cannot be adopted for determining the value under Rule 9. By relying on the decision of Hon'ble Supreme Court in Eicher Tractors Ltd. Vs CC [2000 (11) TMI 139 - SUPREME COURT OF INDIA] and CC Vs Ferodo India Pvt. Ltd [2008 (2) TMI 12 - Supreme Court], it is not the case of inclusion of royalty and knowhow but the enhancement of value under Rule 9 of CVR and the L.A has loaded the price by adopting the PLPF cost sheets of Quranos watches and La Retrograde watches. Therefore, declared value is accepted as transaction value and should not be enhanced under Rule 9 ibid. Also demand of differential duty on enhanced value is set aside. Confiscation - Misclassification of goods - Redemption fine - Held that:- imported goods required to be confiscated to the extent of misclassification of goods. Redemption fine to be reduced from ₹ 60,00,000/- to ₹ 5,00,000/- (Rupees Five lakhs only). Imposition of penalty - Held that:- penalty imposed on the appellant-company under Section 112(a) reduced from ₹ 30 lakhs to ₹ 7,00,000/- (Rupees Seven lakhs only). Penalty imposed on Shri Suresh Thimiri, CEO-Director reduced from ₹ 30 lakhs to ₹ 3,00,000/- (Rupees Three lakhs only). Penalty imposed under Section 114AA on both the appellants are set aside. - Decided partly in favour of appellant
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Corporate Laws
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2016 (3) TMI 293
Scheme of Amalgamation - Held that:- the observations made by the Regional Director and the Official Liquidator stand substantially addressed and hence, there does not appear to be any impediment to the grant of sanction to the Scheme of Amalgamation, inasmuch as from the material on record and on a perusal of the Scheme, the Scheme appears to be fair and reasonable and does not appear to be violative of any provisions of law, nor contrary to the public policy. As noticed earlier, none has come forward to oppose the Scheme. All requisite statutory compliances have also been substantially fulfilled. This Court is, therefore, satisfied that the Scheme of Arrangement in the nature of Amalgamation amongst the petitionerCompanies and their respective shareholders and creditors deserves to be granted. The Scheme of Amalgamation is hereby sanctioned. The same shall be binding upon all the Equity Shareholders, Secured Creditors, Unsecured Creditors of the petitionerCompanies and all other agencies, departments and authorities of the Central, State and any other local authorities. It is ordered that as required under Section 396A of the Companies Act, 1956, the Transferor Company shall not dispose of or destroy their books of accounts and other connected papers without the prior consent of the Central Government and shall preserve the same.The petitionerCompanies are directed to file a copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically, along with EForm INC 28 as per the relevant provisions of the Companies Act.
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2016 (3) TMI 292
Scheme of Amalgamation - Held that:- The Official Liquidator has filed separate reports both, dated 23.2.2016, in cases of both the Transferor Companies. The reports confirm that the affairs of the Transferor companies are not conducted in a manner prejudicial to the interest of their members or to the public interest. The Official Liquidator has, however, requested this Court to direct the petitioners to preserve their books of accounts, papers and records and not to dispose of the records without the prior permission of the Central Government u/s. 396A of the Companies Act,1956. Having heard Mr. Navin K Pahwa, learned Counsel for the petitioner companies, Mr. Kshitij Amin, learned Central Government Standing Counsel for Mr. Devang Vyas, learned Assistant Solicitor General of India, for the Regional Director and upon perusal of the reports of the Official Liquidator and the Regional Director and having considered the Scheme of Amalgamation together with the relevant documents on record, this Court considers it appropriate to grant sanction to the present Scheme of Amalgamation.
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2016 (3) TMI 291
Dissolution of the Company as prayed by Official liquidator - Held that:- It is stated by the Official Liquidator, that proper Books of Accounts, as required have been maintained before and after liquidation of the Company. Hence, nothing objectionable has been noticed while scrutinizing the records submitted to the Office of the Official Liquidator. Therefore, the directions as sought may be granted. Having heard learned counsel for the official Liquidator and the respondent Voluntary Liquidator, and as no objection has been raised by any person or authority, this Court is of the view that the prayer made by the Official Liquidator for dissolution of the Company, is required to be granted.
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Service Tax
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2016 (3) TMI 309
Liability of Service Tax - Advisory Services & Consulting Services in relation to Merger & Acquisitions for the period prior 16.07.2001 - Whether these services comes under Management Consultant Services and Banking & other Financial Services - Held that: the services as rendered by the appellant, would not fall under Management consultancy Services, as there services rendered by the appellant may not get covered even as per CBEC Circular dated 26.07.2001. Also by relying on the decisions taken in the case of DSP Merrill Lynch Limited [2016 (2) TMI 221 - CESTAT MUMBAI] and Indian National Shipowners Association [2009 (3) TMI 29 - BOMBAY HIGH COURT], the taxability of Merger & Acquisitions is covered under Banking and Financial Services, w.e.f. 16.07.2001. Therefore, the Service tax liability in the facts of this case is w.e.f. 16.07.2001 only and not prior to that date. - Decided in favour of assessee
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2016 (3) TMI 308
Imposition of Service tax under Business Auxiliary Service - Amount retained on fees charged for RTO registration - Held that:- by following the decision of the Tribunal in case of Wonder Cars Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-I [2016 (1) TMI 738 - CESTAT MUMBAI] the amount collected as extra charges for RTO registration is not covered under support services of business and commerce”. Therefore, service tax cannot be imposed. Imposition of penalty - Held that: as the appellant had discharged his Service tax liability and interest thereon, Section 80 of the Finance Act, 1994 is invoked penalties cannot be imposed. - Decided in favour of assessee.
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2016 (3) TMI 307
Liability to pay penalty under Section 78 of the Finance Act, 1994 - where service tax and interest has been paid - revenue neutral exercise - Held that:- there cannot be any wilful intention to evade service tax because had the appellant knew that they are liable to pay, then they would have paid and claimed cenvat credit being manufacturer and it would have been a revenue neutral situation. Also the appellant paid the service tax - Therefore by relying on the decision of the Tribunal in the case of Dineshchandra R. Agarwal Infracon Pvt. Ltd. vs. CCE, Ahmedabad [2009 (10) TMI 395 - CESTAT, AHMEDABAD], HP State Forest Corpn. Ltd. vs. CCE, Chandigarh [2008 (7) TMI 350 - CESTAT NEW DELHI], Samtel Colour Ltd. vs. CCE, Jaipur [2007 (8) TMI 336 - CESTAT, NEW DELHI], Marudhamalai Murugan Industries (P) Ltd. vs. CCE, Salem [2009 (1) TMI 73 - CESTAT, CHENNAI], once the service tax and interest are paid, no penalty can be imposed. Invokation of extended period of limitation - Intention to evade payment of Service tax - Held that:- when the appellant can take credit and utilize it further for the payment of tax, naturally they would not get any benefit by not paying such a tax and attract penal provisions of the law, so, there can not be any intention to evade tax. Therefore, as the appellant peis not disputing the liability to tax and they have paid the service tax along with interest uptodate, therefore extended period of limitation cannot be invoked. - Decided in favour of appellant
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Central Excise
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2016 (3) TMI 306
Penalty on act of omission and commission - CENVAT Credit on the basis of invoices issued by the appellant under which no goods were supplied - Held that:- The facts that the statements were claimed to have been retracted almost 16 days after they were recorded is a clear indication that such retractions was merely an afterthought. If the statement had been recorded under duress, the retraction would have followed immediately. Indeed, there is no basis/ ground mentioned in the appeal to infer that the statements were not voluntary. A bald retraction so late thus doesn't take away evidentiary value of the said statements. In the case of Vinod Solanki Vs. G.O.I (2008 (12) TMI 31 - SUPREME COURT ), held that mere retraction of confession is not sufficient to make confessional statement irrelevant. It has been held by Supreme Court in the case of K.I. Pavunny Vs. Astt Collector Cochin [1997 (2) TMI 97 - SUPREME COURT OF INDIA ] that confessional statement, if found voluntarily, can form the sole basis for conviction. Needless to say that rigor of evidence required for imposition of penalty is less than that required for conviction as for penalty the principle adopted in "preponderance of probability" while for conviction it is beyond “reasonable doubt”. In the present case, the statements are also corroborated by the evidence in the form of vehicle numbers belonging to vehicles which could not transport such goods in such quantities and also the shortage noticed at the end of the person who took credit on the basis of the aforesaid 23 invoices. - Decided against assessee
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2016 (3) TMI 305
Interest on delayed payment of interest - Held that:- Regarding the interest, we find that for the first time the legal provision for payment of interest on refund was introduced in the law only on 26.05.1995 through Finance Act, 1995. In the absence of any provision prior to that date the appellants plea for payment of interest for the prior period cannot be sustained. Similarly, we find that there is no provision for payment of interest on interest in the Central Excise Act or Rules made there under Sanction of a part of the refund amount by way of credit in the cenvat account - Held that:- We find that the appellants have made out a case in their favour. It is seen that in the impugned order, the ld. Commissioner (Appeals) also categorically recorded that refund of duty paid through modvat account is to be given in cash only, when the assessee concerned is not in a position to utilize the credit. We find in the present case the appellants are operating under small scale exemption scheme and it is recorded that in the end of the year they are reversing the available credit in their books in order to avail SSI exemption. Considering this position, granting refund and crediting it to the modvat account will not in effect allow the appellant to utilize the fund which was collected and kept by the Government in excess of legal due. Under these circumstances, we find the refund sanctioned already is to be given in cash and to that extent, we modify the impugned order and dispose of the present appeal.
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2016 (3) TMI 304
Entitlement to refund - proof of incidence of refund amount - whether the appellant are entitle for the Cenvat Credit in respect of the service tax paid by the job worker? - Held that:- As per the order dt. 30.7.2010 the appellant is entitled to take the credit. Thus the appellant is not required to pursue the refund application as they have been granted the relief under the said order dt. 30.7.2010 itself. The appellant have not taken the credit for the reason that they were pursuing this refund matter right from show cause notice stage till this appeal stage. The appellant is entitled to take the credit in terms of the adjudication order dt. 30.7.2010. Also hold that for the purpose of limitation in taking the credit, the period of litigation in the present case shall stand excluded. In view of my above observation, the present appeal is dismissed as withdrawn.
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2016 (3) TMI 303
Cenvat Credit as per Notification no. 35/2003-CE (NT) - extended period of limitation invoked - reversal of cenvat credit - penalty imposed - Held that:- There is no suppression of any fact or any willful misstatement made by the appellant so as to justify invoking the extended period of limitation, and further the appellant has admitted his mistake and reversed the Cenvat Credit. Further, the contention of the appellant that notification clarifying the earlier notification was not published when he availed the Cenvat Credit; this may be a bonafide mistake on account of which he has availed Cenvat Credit. Therefore, in such a situation, the appellant is not liable to penalty. But the appellant is certainly liable to pay interest on the said amount as per the rate applicable under the provisions of the Section 11AB of the Central Excise Act, 1944. Therefore, partly allow the appeal by setting aside the penalty imposed on the appellant and hold that the appellant is liable to pay interest from the date he availed the Cenvat Credit till he reversed the same as per the provisions of Section 11AB of the Central Excise Act. - Decided partly in favour of assessee
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2016 (3) TMI 302
Payment of duty through Cenvat account - Held that:- It is a fact that the show-cause notice, Order-in-Original and Order-in-Appeal are based on the violation of Rule 8(3A) of the Central Excise Rules, 2002 which require the payment of duty only through account current in case of violation of payment of duty in time as prescribed in Rule 8. As submitted by the ld. Counsel for the appellant that this Rule 8(3A) has been struck down by Hon'ble High Court of Gujarat, Madras and Punjab & Haryana in various judgments, no duty and penalty can be imposed as observed in the case of Shreeji Surface Coatings P. Ltd. (2014 (12) TMI 656 - GUJARAT HIGH COURT ). Since the rule under which the entire proceedings have been initiated have been declared unconstitutional, no liability arises under the said Rules. Therefore, keeping in view the law laid down by the Hon'ble High Court of Gujarat, Madras and Punjab & Haryana, set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any. SEE Indsur Global Ltd. [2014 (12) TMI 585 - GUJARAT HIGH COURT ], Malladi Drugs & Pharmaceuticals P. Ltd. (2015 (5) TMI 603 - MADRAS HIGH COURT ), A.R. Metallurgicals P. Ltd. (2015 (5) TMI 661 - MADRAS HIGH COURT ) and Sandley Inds. (2015 (10) TMI 2455 - PUNJAB & HARYANA HIGH COURT )
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2016 (3) TMI 301
Due Drop Process on Fabrics - Manufacture - duty demand - whether Due Drop Process on Fabrics will amount to manufacture and whether the Appellant's belief that it did not amount to manufacture is “bonafide belief” - Held that:- Dew Drop Process was brought into the country in August 2000 from Korea. As gone through the write-up on the process of Dew Drop as well as the Certificate submitted by the Appellant in Appeal Memorandum which is from Dr.R.S. Gandhi, Textile Technologist and ex-Director (Mantra) (Man-made Textile Research Association), Surat. We find that the process does not have a long lasting effect and does not amount to transformation of the fabrics. It is more in the nature of enhancing the attributes or attractiveness of the fabrics. The effect also gets washed away by 3-4 simple washes. Under these circumstances, we can not find any fault with the Appellants having a bonafide belief that during the relevant period the process did not amount to manufacture and that they are not liable to Central Excise duty. It is also observed that the Department noticed the alleged duty evasion in January 2001, yet they issued the Show Cause Notice only on 01.04.2005, after almost 4= years. It is also noticed that the South Gujarat Due Drop Processors Association had also taken up the matter with the Ministry of Finance and Ministry of Textiles that the process of Dew Drop does not amount to manufacture and Central Excise duty is not leviable on the same. It is seen that the Ministry in its wisdom, has accepted the merits of the case and has exempted the process of Dew Drop from levy of Central Excise duty. The demand of Central Excise duty on the process of Dew Drop for the period August 2000 to December 2000 on the Appellant cannot be sustained. - Decided in favour of assessee
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2016 (3) TMI 300
CENVAT credit of service tax paid under 'Rent a Cab' service on account of engaging cabs for transport of children of staff members from resident to school and back - Held that:- To call the activity of transportation of staff children from the colony to the school and back as an activity relating to business is devoid of any logic, reason or rationale. The judgement of CESTAT in the appellant's own case (2012 (12) TMI 228 - CESTAT NEW DELHI) cited by the appellant allowed such credit on the ground that the cost of the said service was included in the cost of production as per CAS-4 standards. That in my view is not a valid ground for treating the impugned service as input service because "input service" has been clearly defined in Rule 2(l) of CENVAT Credit Rules, 2004 and if every service which forms part of cost of production (CAS-4) is to be treated as service in relation to activities relating to business, then there was no need to define input service in the manner it has been done. Indeed the said ground would render several words of the definition redundant. It is settled law that statute should be so interpreted as not to render, to the extent possible, the words used by legislature redundant. The said judgement of CESTAT is a Single Member judgement. On the other hand, the Division Bench judgement of CESTAT in the appellant's own case (supra) cited by ld. Departmental Representative has clearly held that rent a cab service availed for transportation of children of employees from colony to school and back is not an input service in terms of Rule 2(l) of CCR, 2004. It is obvious that CESTAT Division Bench decision would prevail over the Single Member CESTAT decision. I however note that the issue involved was interpretation of CENVAT Credit Rules and the Division Bench in the said judgement waived penalty on that account. Accordingly, waiver of penalty in the present case is also justified, more so in the light of the fact that the Single Member Bench CESTAT judgement decided the issue in favour of the appellant.
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2016 (3) TMI 299
Penalty under Section 11AC - Held that:- The demand of duty alongwith interest and penalty on the assessee is upheld as the appellants are not contesting. As the assessee already paid penalty 25% of the duty alongwith the entire amount of duty and interest before issuance of show cause notice, they are entitled the option as provided under Section 11AC of the Act 1944 and there is no need to pay the balance amount of penalty subject to verification of deposit of ₹ 17,72,000.00, which may be adjusted against the duty. The partner of the partnership firm had already paid the duty before issue of the show cause notice in order to avoid legal proceedings. In such situation, imposition of separate penalty on the partner of the firm is not justified.
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CST, VAT & Sales Tax
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2016 (3) TMI 332
Rate of sales tax / VAT on roofing tiles as well as decorative roofing tiles. - classification - AO was of the opinion that the item in question would not be treated as “roofing tiles”, but comes within the description of “other tiles” - Held that:- Once determination is held in favour of the assessee, no further inquiry which is not germane to the issue would be permissible. We are , thus, of the opinion that the goods manufactured by the appellant are covered by sub-entry (iii) of Entry 8 Part ‘T’ of the Second Schedule on which only 5% sales tax is payable and not 15% as held by the authorities below. - Decided in favor of assessee.
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2016 (3) TMI 331
Validity of sales tax assessment - Assessing Officer sent notices after the expiry of three years - powers under sub-section (10) of Section 11 of Punjab General Sales Tax Act, 1948 - Held that:- there would be no question of extending the time for assessment when the assessment has already become time barred. A valuable right has also accrued in favour of the assessee when the period of limitation expires. If the Commissioner is permitted to grant the extension even after the expiry of original period of limitation prescribed under the Act, it will give him right to exercise such a power at any time even much after the last date of assessment. In the instant appeals itself, when the last dates of assessment were 30th April, 2004, 30th April, 2005, 30th April, 2006 and 30th April, 2007, order extending the time under Section 11(10) of the Act were passed on August 17, 2007, August 17, 2007, August 17, 2007 and May 25, 2007 respectively. Thus, for the Assessment Year 2000-2001, order of extension is passed more than three years after the last date and for the Assessment Year 2001-2002, it is more than two years after the last date. Such a situation cannot be countenanced as rightly held by the High Court. When the last date of assessment in respect of these Assessment Years expired, it vested a valuable right in the assessee which cannot be lightly taken away. As a consequence, sub-section (11) of Section 10 has to be interpreted in the manner which is equitable to both the parties. Therefore, the only way to interpret the same is that by holding that power to extend the time is to be exercised before the normal period of assessment expires. - Decided against the revenue.
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2016 (3) TMI 330
Classification of goods - sale of electronic goods (survey instruments) - rate of sales tax 3% or 16% - Held that:- Part-B of the Schedule covers various kinds of goods such as agricultural products, vegetable oils, kerosene, aluminium domestic utensils, raw wool, hosiery goods, gold and silver articles, cycles, tractors, different electronic items, television sets, gramophones, all chargeable at the rate of 3%. In this background, Entry 50 of Part-B is meant to accommodate only such left over electronic system, apparatus etc. which are not specified elsewhere in the Schedule and are therefore chargeable at the rate of 3%. Clearly, if specified elsewhere and chargeable at a different rate, they cannot be included under Entry 50. This conclusion is further strengthened by a look at some of the entries in Part-F, just preceding Entry 14. Entries 10, 11, 12 and 13 cover goods chargeable at the rate of 16%, such as typewriters, teleprinters, tabulating, calculating machines and duplicating machines etc. In all these four entries there is a specific exclusion of electronic variety of these machines - the conclusion is obvious that even electronic survey instruments are covered by Entry No. 14 in Part-F of the First Schedule of the Act. - Decided in favor of revenue. Levy of penalty - Section 12 of Tamil Nadu General Sales Tax Act, 1959 - Held that:- the return submitted by the appellant was on account of bona fide belief in correctness of appellant’s stand that the goods in question were chargeable only at the rate of 3%. In our considered view, in the facts of the case it would not be proper to hold that the appellant had submitted a return which was incorrect to its knowledge or belief. Only after the outcome of the legal dispute by virtue of this judgment, the authorities can be justified in holding henceforth that the return was incorrect. In such a situation it would not be just and proper exercise of discretion to hold the appellant guilty of submitting incorrect return so as to attract penalty for the same. Hence, in the peculiar facts of the case and in the interest of justice, we set aside the balance dues of penalty. - However, the penalty already paid by the appellant shall not be refunded and the same may be retained by the respondent authorities by way of cost of this protracted litigation. - Decided partly in favor of assessee.
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Indian Laws
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2016 (3) TMI 290
Offense punishable under Section 138 of the Negotiable Instruments Act - Held that:- Legislature has already made it clear that the company includes any body corporate which includes a firm or other association of individuals and director in relation to a firm means a partner in the firm. On this count also, when Section 141 of the Negotiable Instruments Act and explanation thereto does not make any distinction between the company and the partnership firm, there is absolutely no reason to draw such distinction while making applicable the law laid down by the Apex Court in Aneeta Hada (2012 (5) TMI 83 - SUPREME COURT OF INDIA ) to the partnership firm merely because in that judgment the Apex Court was considering the eventuality of nonjoining of the company. The basic premise of holding either the director or the partner liable for prosecution being the same that of the vicarious liability. Therefore, once the company is held to be an essential party and that arraigning of a company as an accused is imperative for prosecution under Section 141 of the Negotiable Instruments Act, it necessarily follows that arraigning of a partnership firm is also imperative for prosecution against the partners under Section 141 of the Negotiable Instruments Act. The prosecution launched against only one of the partners of the partnership firm, without joining the partnership firm, cannot be maintainable. In view of the specific provisions of the Act itself, it is very difficult for the Court to take a view that a partnership firm for the purpose of Section 138 read with Section 141 of the Act is not a legal entity, and therefore, it need not be made an accused in the complaint. The decisions relied upon by the learned counsel appearing for the petitioner are of no avail in any manner. Power to proceed against other persons appearing to be guilty of offence - Will the situation be saved by virtue of Section 319 of the Cr.P.C., which is sought to be invoked in the present case?- Held that:- By virtue of a legal fiction, it cannot be said that on the date of filing of the complaint, the Court was justified in taking cognizance and issue process against the partners in the absence of the legal entity and no fault could be found so far as the legality and validity of the cognizance is concerned. The legal fiction is altogether for a different purpose and it should not be brought in aid of curing a serious defect or infirmity in the complaint or the order taking cognizance. When Subsection (4)(b) of Section 319 of the Code says that it will be presumed that the newly added person had been an accused person when the Court took cognizance of the complaint upon which the inquiry or trial was commenced, the same indicates that the Court is not empowered to take cognizance of any fresh offence if any accused is impleaded by invoking Section 319 and the newly added accused could be tried only for the offence already taken cognizance against the other accused. The policy of the Code is that the offence can be taken cognizance of once only and not repeatedly upon discovery of further particulars. In a given case, the complainant may not even know the names and other particulars of the offenders, and it would, therefore, be sufficient for him to lodge a complaint making the persons who are known as the accused. When such a trial proceeds against the known accused, if the evidence led in trial discloses offences committed by other persons who could be tried along with the accused, then there need not be a fresh complaint and fresh order of cognizance against those persons. I reiterate that the complaint was liable to be dismissed on the very first day of its presentation and no process could have been issued against the partners in the absence of the partnership firm. Thus that the application under Section 319 of the Cr.P.C. is not maintainable, and the Court below rightly rejected the same.
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